def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
Cooper Industries PLC
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Fee paid previously with preliminary materials. |
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule and the date of its
filing. |
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Form, Schedule or Registration Statement No.: |
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Date Filed: |
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March 12, 2010
Fellow Shareholder:
We cordially invite you to attend the Annual Meeting of Cooper Industries shareholders. The
meeting will be held on Tuesday, April 27, 2010, at 11:30 a.m. in the 54th Floor
conference room, Chase Tower, 600 Travis, Houston, Texas.
The notice of meeting and proxy statement following this letter describe the business to be
conducted at the meeting, including the election of four directors.
This year, we elected to furnish proxy materials to shareholders on the Internet pursuant to rules
adopted by the Securities and Exchange Commission. We are pleased to take advantage of these rules
and believe that they enable us to provide you with the information you need, while making delivery
more efficient, more cost effective and more environmentally friendly. In accordance with these
rules, we have sent a Notice of Internet Availability of Proxy Materials to each of our
shareholders, except certain shareholders including those who previously elected to receive printed
copies of all future proxy materials.
Your vote is important. Please take a moment now to vote your proxy over the Internet, by telephone
or if this proxy statement was mailed to you by signing, dating and returning your proxy card in
the envelope provided, even if you plan to attend the meeting. The Notice of Annual Meeting on the
inside cover of this proxy statement includes instructions on how to vote your shares.
The Board of Directors appreciates and encourages shareholder participation. Thank you for your
continued support.
Sincerely,
Kirk S. Hachigian
Chairman, President and
Chief Executive Officer
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
COOPER INDUSTRIES PLC
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TIME
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11:30 a.m. on Tuesday, April 27, 2010. |
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PLACE
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Chase Tower, 54th Floor, 600 Travis, Houston, Texas.
Free parking is available at J.P. Morgan Chase Center, which is located at
601 Travis. You can obtain directions to attend the Annual Meeting on our
website at www.cooperindustries.com in the Investors section under the
Annual Meeting tab. |
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ITEMS OF BUSINESS
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1. Elect the following directors whose terms
expire at the 2010 Annual Meeting of
Shareholders in accordance with the Articles
of Association of Cooper Industries plc
(Cooper or the Company) and, being
eligible, offer themselves for re-election
for the term expiring at the 2013 Annual
Meeting of Shareholders: Stephen G. Butler,
Dan F. Smith, Gerald B. Smith and Mark S.
Thompson. |
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2. Consider the Companys Irish
Statutory Accounts for the year ended December 31, 2009 and the
related reports of the directors and auditors. |
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3. Appoint Ernst & Young as our
independent auditors for the year ending December 31, 2010 and
authorize the Audit Committee of the Board of Directors to set
their remuneration. |
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4. Authorize any subsidiary of the
Company to make market purchases of Company shares. |
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5. Authorize the reissue price range
of treasury shares. |
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6. Consider and act on any other
matters to come properly before the meeting or any adjournment
thereof. |
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Proposal 5 is a special resolution requiring the approval of not less
than 75% of the votes cast at the meeting. Proposals 1 to 4
(inclusive) are ordinary resolutions requiring a simple majority of
the votes cast. |
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RECORD DATE
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Holders of ordinary shares of record at the close of business on February 26, 2010, may vote at the
meeting. |
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FINANCIAL STATEMENTS
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Our audited financial statements for the year ended December 31, 2009 and the related Managements
Discussion and Analysis of Financial Condition and Results of Operations are included in our Form 10-K,
which is contained in the Annual Report that accompanies this proxy statement. In addition, our Irish
Statutory Accounts for the year ended December 31, 2009 and the related reports of the directors and
auditors are included in materials that accompany this proxy statement. |
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VOTING YOUR PROXY
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Shareholders can vote by one of the following methods: |
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1. CALL 1-800-690-6903 to vote by
telephone anytime up to 11:59 p.m. Eastern Standard time in the
U.S. on April 26, 2010; OR |
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2. GO TO THE WEBSITE: www.proxyvote.com to vote over the Internet anytime up
to 11:59 p.m. Eastern Standard time in the U.S. on April 26,
2010; OR |
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3. IF PRINTED PROXY MATERIALS WERE
MAILED TO YOU, MARK, SIGN, DATE AND RETURN your proxy card in
the enclosed postage-paid envelope. If you are voting by
telephone or the Internet, please do not mail your proxy card. |
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INTERNET AVAILABILITY
OF PROXY MATERIALS
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Important Notice Regarding the Availability of Proxy Materials for the
Shareholder Meeting to be held on April 27, 2010. The proxy statement, Annual Report to Shareholders and
our Irish Statutory Accounts are also available at www.proxyvote.com |
By order of the Board of Directors:
Terrance V. Helz
Associate General Counsel and Secretary
March 12, 2010
Registered Office:
5 Fitzwilliam Square
Dublin 2, Ireland
YOUR VOTE IS IMPORTANT. TO ENSURE YOUR REPRESENTATION AT THE MEETING, PLEASE
SUBMIT YOUR PROXY AS PROMPTLY AS POSSIBLE. IF YOU ARE A SHAREHOLDER WHO IS
ENTITLED TO ATTEND THE MEETING AND VOTE, THEN YOU ARE ALSO ENTITLED TO
APPOINT A PROXY OR PROXIES TO ATTEND AND VOTE ON YOUR BEHALF. THIS PROXY IS
NOT REQUIRED TO BE A SHAREHOLDER OF THE COMPANY. IF YOU ATTEND THE MEETING,
YOU MAY VOTE IN PERSON BY FOLLOWING THE INSTRUCTIONS IN THE ATTACHED PROXY
STATEMENT, EVEN IF YOU HAVE RETURNED A PROXY.
TABLE OF CONTENTS
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PROXY STATEMENT
The Board of Directors of Cooper Industries plc (Cooper) is soliciting your proxy to vote
at our 2010 Annual Meeting of Shareholders on April 27, 2010. This booklet contains information
about the items being voted on at the Annual Meeting and information about Cooper. The proxy
materials are being sent to our shareholders on or about March 12, 2010.
QUESTIONS AND ANSWERS
Why did I receive a Notice of Internet Availability of Proxy Materials in the mail regarding the
Internet availability of proxy materials instead of a full set of printed proxy materials?
Pursuant to the rules adopted by the United States Securities and Exchange Commission (SEC),
we have elected to provide access to our proxy materials over the Internet to our shareholders.
Accordingly, we have sent a Notice of Internet Availability of Proxy Materials to all our
shareholders as of the record date, except certain shareholders including those who previously
signed up to receive all future proxy materials in printed form. The notice contains instructions
on how to access our proxy materials over the Internet as well as on how to request a printed copy.
If you received such a notice, you will not receive a printed copy of our proxy materials unless
you request one.
In addition, by following the instructions in the Notice of Internet Availability of Proxy
Materials, you may request to receive proxy materials in printed form by mail or electronically by
email on an ongoing basis. Choosing to receive your future proxy materials by email will save us
the cost of printing and mailing documents to you and will reduce the impact of our annual meetings
on the environment. If you choose to receive future proxy materials by email, you will receive an
email next year with instructions containing a link to those materials and a link to the proxy
voting site. Your election to receive proxy materials by email will remain in effect until you
terminate it.
Certain shareholders, including those who previously signed up to receive all future proxy
materials in printed form, are receiving paper copies of our proxy statement, Annual Report, and
Irish Statutory Accounts by mail and will not receive a Notice of Internet Availability of Proxy
Materials.
What may I vote on?
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The election of four nominees to serve on our Board of Directors; |
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Consider Coopers Irish Statutory Accounts for the year ended December 31, 2009 and the
related reports of the directors and auditors; |
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The appointment of Ernst & Young as our independent auditors for the year ending
December 31, 2010 and authorization of the Audit Committee of the Board of Directors to set
their remuneration; |
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Authorization for any Cooper subsidiaries to make market purchases of Cooper shares;
and |
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Authorization of the reissue price range of treasury shares in off-market transactions. |
How does the Board recommend I vote on the proposals?
The Board recommends voting FOR each of the proposals described in the item immediately above.
Who is entitled to vote?
Holders of shares as of the close of business on February 26, 2010 may vote at the Annual
Meeting.
1
How do I vote?
We request that you vote your shares as promptly as possible. You may vote your shares by means
of a proxy using one of the following methods of voting if you have shares registered in your
own name:
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electronically using the Internet, |
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by telephone, or |
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if this proxy statement was mailed to you, by signing and dating the enclosed proxy card
and returning it in the prepaid envelope. |
The instructions for these three methods are contained on the Notice of Annual Meeting which
immediately follows the cover page of this proxy statement and also on the proxy card. If you
return your signed proxy card but do not mark the boxes showing how you wish to vote, your
shares will be voted as recommended by the Board of Directors. The giving of such proxy does not
affect your right to vote in person if you attend the meeting.
If your shares are not registered in your name and you hold Cooper shares through a broker, bank
or other agent, you may appoint proxies and vote as provided by that bank, broker or other
agent. You may also vote your shares in person at the Annual Meeting, but you must request a
legal proxy to do so. To request a legal proxy, please follow the instructions at
www.proxyvote.com or request a paper copy of the proxy materials. If your shares are not
registered in your name and you plan to attend the Annual Meeting and vote your shares in
person, you should contact your broker or agent in whose name your shares are registered to
obtain a proxy executed in your favor and bring it to the Annual Meeting in order to vote.
Can I revoke my proxy card?
Whichever voting method you use, you have the right to revoke your proxy at any time before the
meeting by:
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filing with Coopers Corporate Secretary an instrument revoking your proxy; |
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attending the meeting and giving notice of revocation; or |
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submitting a later-dated proxy by any of the three voting methods described above. |
Is my vote confidential?
Proxy cards, proxies delivered by Internet or telephone, ballots and voting tabulations that
identify individual shareholders are mailed or returned directly to an independent inspector of
election and handled in a manner that protects your voting privacy. The independent inspector of
election will count the votes. We have adopted a confidential voting policy which provides that
your vote will not be disclosed except: (1) to respond to written comments on the proxy card;
(2) as required by law; or (3) in other limited circumstances, such as a proxy contest in
opposition to the Board.
What shares are included on my proxy card?
The shares listed on your Notice of Internet Availability of Proxy Materials and your proxy card
represent ALL of your record shares, including the following, as applicable:
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shares held in the Cooper Dividend Reinvestment and Stock Purchase Plan; |
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shares held in custody for your account by State Street Bank, as Trustee of the Cooper
Industries Retirement Savings and Stock Ownership Plan (CO-SAV); and |
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shares held in a book-entry account at Computershare Trust Company, N.A., Coopers
transfer agent, including shares acquired through Coopers Employee Stock Purchase Plan. |
If you do not properly submit your proxy by one of the three methods described above or attend
and vote in person, your shares (except for CO-SAV) will not be voted. See the question below
for an explanation of the voting procedure for CO-SAV shares.
If you hold shares in a broker account, you will receive a separate proxy card and instructions
from your broker.
2
How is Cooper Stock in CO-SAV voted?
If you hold shares through CO-SAV, you must instruct the CO-SAV Trustee, State Street Bank, how
to vote your shares. If you do not properly submit your proxy by one of the three methods
described above (or if you submit your proxy with an unclear voting designation, or with no
voting designation at all), then the Trustee will vote the shares in your CO-SAV account in
proportion to the way the other CO-SAV participants voted their shares. The Trustee will also
vote ordinary shares not yet allocated to participants accounts in proportion to the way that
CO-SAV participants voted their shares. CO-SAV votes receive the same confidentiality as all
other shares voted.
How many shares can vote?
As of the February 26, 2010 record date, 167,324,086 ordinary shares were issued and
outstanding. These are the only securities entitled to vote. Each holder of shares is entitled
to one vote for each share held. Shares held by Cooper as treasury shares do not vote.
What vote is required for approval?
Provided a quorum is present, the election of a director, the consideration of Coopers Irish
Statutory Accounts, the appointment of the independent auditors and authorization for the
Companys subsidiaries to make market purchases of Cooper shares are ordinary resolutions
requiring a majority of the votes cast. Authorization of the reissue price range treasury
shares in off-market transactions is a special resolution that requires the approval of at least
75% of the votes cast.
Abstentions and broker nonvotes will not be considered votes properly cast at the Annual
Meeting. Because approval of all the proposals is based on the votes properly cast at the
Annual Meeting, abstentions and broker nonvotes will not have any effect on the outcome of
voting on these proposals.
What is a quorum?
A quorum is a majority of the issued and outstanding shares. Shareholders may represent their
shares by attending the meeting or their shares may be represented at the meeting by proxy.
There must be a quorum for the meeting to be held. If you submit a valid proxy by any of the
described methods, even if you abstain from voting, then you will be considered part of the
quorum. Abstentions and broker nonvotes are considered present for purposes of determining a
quorum.
Who can attend the Annual Meeting?
If you own Cooper shares on February 26, 2010, you may attend the Annual Meeting. Please
indicate on your proxy if you plan to attend. If your shares are held through a broker and you
would like to attend, please write to Terrance V. Helz, Associate General Counsel and Secretary,
Cooper Industries plc, 600 Travis, Suite 5600, Houston, Texas 77002, or bring proof of ownership
to the meeting.
How will voting on any other business be conducted?
Although we do not know of any other business to be considered at the 2010 Annual Meeting, if
any other business is properly presented at the Annual Meeting, your proxy will be voted as
determined by the persons voting the proxies.
3
When are the shareholder proposals for the 2011 Annual Meeting due?
All shareholder proposals must be submitted in writing to Terrance V. Helz, Associate General
Counsel and Secretary, Cooper Industries plc, 5 Fitzwilliam Square, Dublin 2, Ireland. Any
shareholder who intends to present a proposal at the 2011 Annual Meeting of Shareholders must
deliver the proposal to us so that it is received no later than November 12, 2010, to have the
proposal included in our proxy materials for that meeting. Shareholder proposals must also meet
other requirements of the Securities and Exchange Act of 1934 to be eligible for inclusion. If a
shareholder proposal is received after January 26, 2011, the persons voting the proxies may vote
in their discretion on such proposal as to all the shares for which they have received proxies
for the 2011 Annual Meeting of Shareholders.
What are the costs of this proxy solicitation?
We have retained Georgeson, Inc. to assist in the distribution of proxy materials and
solicitation of votes for a fee of $16,000, plus out-of-pocket expenses. We also reimburse
brokerage houses and other custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses of forwarding proxy and solicitation materials to shareholders. Our
directors, officers and employees may also solicit proxies without additional compensation by
letter, telephone or otherwise. We will bear all expenses of solicitation.
4
COOPER STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of February 26, 2010, there were 18,947 registered holders of Cooper shares. We know of no
person who was the beneficial owner of more than five percent of the outstanding shares of our
voting securities as of that date, other than the following which have filed statements of
ownership on Schedule 13G with the Securities and Exchange Commission.
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Amount and Nature |
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Name and Address of Beneficial Owner |
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Ownership |
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Class(5) |
Ordinary shares |
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FMR LLC
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15,082,449 |
(1) |
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9.01 |
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82 Devonshire Street
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Boston, MA 02109 |
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Ordinary shares |
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Vanguard Windsor Funds
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13,760,600 |
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8.22 |
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Vanguard Windsor II Fund
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100 Vanguard Boulevard
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Malvern, PA 19355 |
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Ordinary shares |
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AXA Financial, Inc.
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13,623,674 |
(3) |
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8.14 |
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1290 Avenue of the Americas
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New York, New York 10104 |
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Ordinary shares |
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Barrow, Hanley, Mewhinney & Strauss
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12,731,588 |
(4) |
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7.60 |
% |
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2200 Ross Avenue, 31st Floor
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Dallas, TX 75201-2761 |
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Based on Schedule 13G filed February 16, 2010, jointly on behalf of Edward C.
Johnson 3rd, FMR LLC, and its subsidiaries and affiliates, Fidelity Management &
Research Company (Fidelity), FIL Limited and Strategic Advisors, Inc. The shares are
beneficially owned as follows: Fidelity 14,679,299 shares; FIL Limited 121,382 shares; and
Strategic Advisors, Inc. 281,768 shares. The Fidelity Funds Board of Trustees has sole
voting power over the shares that are beneficially owned by the Fidelity Funds, and Edward C.
Johnson 3rd and FMR LLC, through control of Fidelity and the Fidelity Funds, each
has sole dispositive power over the 14,679,299 shares owned by the Fidelity Funds. Edward C.
Johnson 3rd and FMR LLC, through control of FMR LLC subsidiaries including
Strategic Advisors, Inc., each has sole dispositive power and sole power to vote or direct the
voting of the shares beneficially owned by such affiliated companies. FIL Limited has sole
dispositive and voting power over 121,382 shares. The address of Fidelity and Strategic
Advisors, Inc. is 82 Devonshire Street, Boston, MA 02109. The address of FIL Limited is
Pembroke Hall, 42 Crow Lane, Hamilton, Bermuda. |
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Based on Schedule 13G filed February 4, 2010 by Vanguard Windsor Funds Vanguard Windsor II
Fund, which has sole voting power over 13,760,600 shares. |
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Based on Schedule 13G dated February 12, 2010 filed jointly on behalf of AXA Financial, Inc.,
AXA, and two French mutual insurance companies (AXA Assurances I.A.R.D. Mutuelle, AXA
Assurances Vie Mutuelle) as a group and their subsidiaries. Individually and as a group, the
French mutual insurance companies, AXA Financial, Inc. and AXA have sole voting power over
10,151,764 shares and sole dispositive power over 13,623,674 shares. The shares are
beneficially owned directly by subsidiaries of AXA Financial, Inc. as follows: Alliance
Bernstein L.P. 13,534,174 shares; and AXA Equitable Life Insurance Company 89,500 shares.
The addresses of the joint filers are: AXA Assurances I.A.R.D. Mutuelle and AXA Assurances Vie
Mutuelle, 26 rue Drouot, 75009 Paris, France; and AXA, 25 Avenue Matignon, 75008 Paris,
France. |
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Based on Schedule 13G filed February 9, 2010 by Barrow, Hanley, Mewhinney & Strauss, Inc.,
which has sole dispositive power over 12,731,588 shares, sole voting power over 245,100 shares
and shared voting power over 12,486,488 shares. |
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Calculated on the basis of 167,316,595 shares that are issued and outstanding as of
December 31, 2009. |
5
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes. Each class is elected for a term of
three years, so that the term of one class of directors expires at every meeting.
The Board of Directors has nominated four persons for election as directors in the class whose
term will expire at the Annual Meeting in 2013. The nominees are: Stephen G. Butler, Dan F. Smith,
Gerald B. Smith and Mark S. Thompson. All of the nominees are current members of the class whose
term expires at the meeting.
NOMINEES FOR TERMS EXPIRING IN 2013
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STEPHEN G. BUTLER
Chairman Committee on
Nominations and Corporate
Governance
Member Audit Committee
Director since 2002
Age: 62
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Mr. Butler served as Chairman and
Chief Executive of the accounting
firm, KPMG LLP, from 1996 until
June 2002, when he retired. He is
also a director of ConAgra Foods,
Inc. and Ford Motor Company. |
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DAN F. SMITH
Chairman Management
Development and
Compensation Committee
Member Executive Committee
Director since 1998
Age 63
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Mr. Smith currently serves as
Chairman of the Board of Kraton
Performance Polymers Inc., a
company providing polymer
solutions. He was appointed
Chairman of the Board of Valerus
Compression Services, a privately
held natural gas services
company, in December 2009. He
previously served as President
and Chief Executive Officer of
Lyondell Chemical Company, a
petrochemicals and refining
operations company, until
December 2007 when Lyondell
Chemical Company became a
subsidiary of Lyondell Basell
Industries AF S.C.A. He is a
former director of Lyondell
Chemical Company. |
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GERALD B. SMITH
Presiding Non-Management
Director
Member Executive Committee,
Committee on Nominations
and Corporate Governance and
Management Development and
Compensation Committee
Director since 2000
Age: 59
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|
Mr. Smith is Chairman and Chief
Executive Officer of Smith Graham
& Company, an investment
management firm that he founded
in 1990. He is also a director of
The Charles Schwab Family of
Funds, ONEOK Inc. and ONEOK
Partners, L.P. |
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MARK S. THOMPSON
Member Committee on Nominations and
Corporate Governance
Director since 2007
Age: 53
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Dr. Thompson has served as
Chairman, President and Chief
Executive Officer of Fairchild
Semiconductor International,
Inc., a company providing
semiconductor solutions, since
May 2008 and as President and
Chief Executive Officer since
April 2005. He previously served
as Executive Vice President,
Manufacturing and Technology
Group, since December 2004. Prior
to joining Fairchild
Semiconductor, he was President
and Chief Executive Officer of
Big Bear Networks, Inc., a
company providing optoelectronic
network solutions, since August
2001. He is also a director of
American Science and Engineering,
Inc. and Fairchild Semiconductor
International, Inc. |
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE FOR EACH OF THE ABOVE NOMINEES
6
PRESENT DIRECTORS WHOSE TERMS EXPIRE IN 2011
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ROBERT M. DEVLIN
Member Executive Committee and
Management Development and Compensation
Committee
Director since 1997
Age 69
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Mr. Devlin is Chairman of Curragh
Capital Partners, a private
equity firm. He is a principal
owner and director of Forethought
Financial Group, Inc., a life
insurance and financial services
company. He is also a director of
Discover Financial Services and
LKQ Corporation. |
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LINDA A. HILL
Member Management Development and
Compensation Committee
Director since 1994
Age 53
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Ms. Hill is a Professor at the
Harvard Business School. She
joined the faculty of Harvard
Business School in 1984 as an
Assistant Professor in
organizational behavior and human
resource management. She was
named Associate Professor in
1991, Professor in 1995 and the
Wallace Brett Donham Professor of
Business Administration in 1997.
She is also a director of State
Street Corporation. |
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JAMES J. POSTL
Chairman Audit Committee
Director since 2003
Age: 64
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Mr. Postl served as President and
Chief Executive Officer of
Pennzoil Quaker State Company, a
petroleum products company, from
May 2000 until October 2002 when
he retired. He joined Pennzoil in
October 1998 as President and
Chief Operating Officer. He is
also a director of Pulte Homes,
Inc., the American Balanced Fund,
International Growth and Income
Fund and the Income Fund of
America. He is a former director
of AutoZone, Inc., Centex
Corporation and Northwest
Airlines. |
7
PRESENT DIRECTORS WHOSE TERMS EXPIRE IN 2012
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IVOR J. EVANS
Member Committee on Nominations and
Corporate Governance and Management
Development and Compensation Committee
Director since 2003
Age: 67
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Mr. Evans is an operating partner
of Thayer Capital Partners, a
private equity firm. He previously
served as Vice Chairman of Union
Pacific Corporation and its
principal operating company, Union
Pacific Railroad Company, a rail
carrier and transportation
company, until February 2005. He
is also a director of
ArvinMeritor, Inc., Spirit
Aerosystems Holdings, Inc., and
Textron Inc. He is a former
director of Suntron Corporation
and Union Pacific Corporation. |
KIRK S. HACHIGIAN
Chairman Executive Committee
Director since 2004
Age: 50
|
|
Mr. Hachigian is Chairman,
President and Chief Executive
Officer of Cooper Industries plc.
He was named Chairman in February
2006, President and Chief
Executive Officer in May 2005. He
previously held various executive
positions with Cooper since
joining the Company in April 2001.
Prior to joining Cooper, Mr.
Hachigian was an executive with
General Electric Corporation where
he held a series of assignments
with progressive responsibilities,
including international
assignments in Asia and Mexico.
He is also a director of PACCAR
Inc. He is a former director of
American Standard Companies, Inc.
and Trane Inc. |
LAWRENCE D. KINGSLEY
Member Audit Committee
Director since 2007
Age: 47
|
|
Mr. Kingsley is Chairman,
President and Chief Executive
Officer of IDEX Corporation, an
engineered industrial products
company. He was named Chairman in
April 2006, President and Chief
Executive Officer in March 2005
and Chief Operating Officer in
August 2004. He previously held
various executive positions with
Danaher Corporation, a
manufacturer of industrial and
consumer products, serving as
Corporate Vice President and Group
Executive for the Sensors and
Controls business from March 2004
to August 2004; President,
Industrial Controls Group from
April 2002 to July 2004; and
President, Motion Group, Special
Purpose Systems from January 2001
to March 2002. He is also a
director of IDEX Corporation. |
JAMES R. WILSON
Member Audit Committee
Director since 1997
Age 69
|
|
Mr. Wilson served as Chairman,
President and Chief Executive
Officer of Cordant Technologies
Inc. from 1995 until 2000, when he
retired. He is a former director
of Goodrich Corporation. |
8
INFORMATION ABOUT MANAGEMENT
Executive Officers
The table below contains certain information as of March 1, 2010 with respect to Coopers
present executive officers. All executive officers are elected to terms that expire at the
organizational meeting of the Board of Directors, which follows the Annual Meeting of Shareholders.
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Years |
|
Executive |
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of |
|
Officer |
Name |
|
Position |
|
Age |
|
Service |
|
Since |
Kirk S. Hachigian
|
|
Chairman, President and Chief Executive
Officer
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50 |
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9 |
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2001 |
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Terry A. Klebe
|
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Senior Vice President and Chief Financial
Officer
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55 |
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15 |
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1995 |
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Neil A. Schrimsher
|
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Executive Vice President, Cooper
Connection and President, Cooper Lighting
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45 |
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4 |
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2008 |
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C. Thomas OGrady
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Senior Vice President, Business Development
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58 |
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5 |
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2005 |
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Bruce M. Taten
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Senior Vice President, General Counsel and
Chief Compliance Officer
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54 |
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2 |
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2008 |
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James P. Williams
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Senior Vice President, Human Resources
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47 |
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4 |
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2006 |
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Grant L. Gawronski
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President, Cooper Crouse-Hinds
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47 |
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7 |
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2003 |
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Rick L. Johnson
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Vice President, Controller and Chief
Accounting Officer
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57 |
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4 |
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2008 |
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Ivo Jurek
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President, Cooper Bussmann
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45 |
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3 |
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2009 |
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Kevin C. Kissling
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President, Cooper B-Line
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48 |
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7 |
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2008 |
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David L. Pawl
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President, Cooper Wiring Devices
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61 |
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4 |
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2008 |
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Michael A. Stoessl
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Group President, Cooper Power Systems
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46 |
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7 |
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2006 |
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Robert L. Taylor
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Chief Marketing Officer
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45 |
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5 |
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2008 |
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Laura K. Ulz
|
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Vice President, Operations and President,
Cooper Tools
|
|
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47 |
|
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3 |
|
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2007 |
|
All of the executive officers have been employed by Cooper in management positions for five
years or more, except Bruce M. Taten, James P. Williams, Rick L. Johnson, Ivo Jurek, David L. Pawl,
Neil A. Schrimsher and Laura K. Ulz.
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|
Neil A. Schrimsher joined Cooper as President, Cooper Lighting in 2006 and was also
appointed as Executive Vice President, Cooper Connection in 2010. Prior to joining Cooper,
he served as Vice President, Power Distribution & Controls with Siemens Energy &
Automation, Inc. (electrical, engineering and automation products and services). He joined
Siemens in 2001 as Vice President of the Residential Infrastructure Division. |
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Bruce M. Taten joined Cooper in 2008 from Nabors Industries (oil and gas) where he
served as Vice President and General Counsel since 2002. |
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James P. Williams joined Cooper in 2006 from Danaher Corporation (industrial and
consumer products) where he was most recently Corporate Vice President Human Resources. |
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Rick L. Johnson joined Cooper in 2005 as Vice President, Finance for Cooper
Crouse-Hinds. He was appointed Corporate Controller in 2007 and Vice President, Controller
and Chief Accounting Officer in 2008. Previously, he was Senior Vice President and Chief
Financial Officer for Impulse Wear, Inc. (sportswear) and prior to that he served as Vice
President of Finance for the Tyco Electrical and Metal Products division. |
9
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Ivo Jurek joined Cooper in 2007 as Vice President/General Manager for the Cooper Electronic
Technologies business while also serving as managing director for Cooper Bussmanns Asia
Pacific region. He was appointed as President, Cooper Bussmann in January 2009. Prior to
joining Cooper, he spent 10 years with International Rectifer Corporation where he held
significant general management positions in their automotive and electronic motion systems
businesses. |
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David L. Pawl joined Cooper in 2006 as President, Cooper Wheelock and subsequently
served as Corporate Vice President Operations before being appointed as President, Cooper
Wiring Devices. Prior to joining Cooper, he spent 26 years with General Electric
(industrial, technology and services conglomerate), most recently as President GE Quartz. |
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Laura K. Ulz joined Cooper in 2007 as Vice President, Operations and was also appointed
President, Cooper Tools in 2010. Prior to joining Cooper Ms. Ulz worked for Honeywell
International (aerospace, automation and controls, specialty materials and transportation
systems) where she most recently served as Vice President, Operations for Honeywells
Environmental and Combustion Controls business. Ms. Ulz joined Honeywell in 1989 and held
various positions with increasing levels of responsibility including engineering, quality,
process excellence, automation and manufacturing. |
Securities Ownership of Officers and Directors
As of February 16, 2010, each director, nominee and executive officer named in the Summary
Compensation Table beneficially owned the number of Cooper shares listed in the following table.
Each of the named individuals owned less than 1%, and all directors and executive officers as a
group beneficially owned 2.3% of Coopers publicly held outstanding ordinary shares as of that
date.
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|
Number of Shares |
Name of Beneficial Owner |
|
Beneficially Owned(1) |
Stephen G. Butler |
|
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60,581 |
(2) |
Robert M. Devlin |
|
|
86,349 |
(2)(4) |
Ivor J. Evans |
|
|
54,051 |
(2) |
Kirk S. Hachigian |
|
|
1,592,200 |
|
Linda A. Hill |
|
|
56,597 |
(2) |
Lawrence D. Kingsley |
|
|
16,711 |
(2) |
James J. Postl |
|
|
53,869 |
(2) |
Dan F. Smith |
|
|
76,025 |
(2) |
Gerald B. Smith |
|
|
49,009 |
(2) |
Mark S. Thompson |
|
|
16,859 |
(2) |
James R. Wilson |
|
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62,231 |
(2) |
Terry A. Klebe |
|
|
564,991 |
(3) |
Neil A. Schrimsher |
|
|
115,492 |
|
Michael A. Stoessl |
|
|
227,328 |
|
Bruce M. Taten |
|
|
35,713 |
|
All Directors and Executive Officers as a Group |
|
|
3,948,848 |
(2)(3)(4) |
|
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|
(1) |
|
Includes shares held by executive officers in Coopers Retirement Savings and Stock Ownership
Plan. Also includes shares issuable upon the exercise of options granted under either the
Stock Incentive Plan or the Directors Stock Plan that are exercisable (or vest) within a
period of 60 days from February 27, 2010, as follows: Mr. Butler 20,000 shares; Mr. Devlin
22,000 shares; Mr. Evans 20,000 shares; Mr. Hachigian 1,115,983 shares; Ms. Hill 26,000
shares; Mr. Kingsley 4,000 shares; Mr. Postl 16,000 shares; Mr. D. Smith 16,000 shares;
Mr. G. Smith 24,000 shares; Mr. Thompson 4,000 shares; Mr. Wilson 12,000 shares; Mr.
Klebe 348,468 shares; Mr. Schrimsher 83,000 shares; Mr. Stoessl 128,268 shares; and Mr.
Taten 23,833 shares and all directors and executive officers as a group 2,472,347 shares.
None of the shares beneficially owned by the directors and executive officers have been
pledged as security. |
|
(2) |
|
Includes shares the receipt of which has been deferred by the directors under the Directors
Stock Plan and the Directors Retainer Fee Stock Plan, as follows: Mr. Butler 25,641 shares;
Mr. Devlin 21,151 shares; Mr. Evans 32,253 shares; Ms. Hill 23,399 shares; Mr. Kingsley
8,592 shares; Mr. Postl 36,071 shares; Mr. D. Smith 56,627 shares; Mr. G. Smith 17,601
shares; Mr. Thompson 8,592 shares; and Mr. Wilson 41,581 shares. |
10
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|
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(3) |
|
Includes shares the receipt of which has been deferred pursuant to the Stock Incentive Plan
and the Management Annual Incentive Plan, as follows: Mr. Klebe 28,992 shares and all
executive officers as a group 28,992. |
|
(4) |
|
Includes 21,000 shares held by the Devlin Foundation for which Mr. Devlin serves as trustee. |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (Exchange Act), requires
executive officers, directors and persons who beneficially own more than 10% of Coopers shares to
file initial reports of ownership and reports of changes in ownership with the SEC and the NYSE.
SEC regulations require executive officers, directors and greater than 10% beneficial owners to
furnish Cooper with copies of all Section 16(a) forms they file.
Based solely on a review of those forms furnished to Cooper and written representations from
the executive officers and directors, Cooper believes its executive officers and directors complied
with all applicable Section 16(a) filing requirements during the fiscal year ended December 31,
2009.
CORPORATE GOVERNANCE
Meetings of the Cooper Board and its Committees
Our Board of Directors held five meetings during 2009. All of the directors attended 75% or
more of the meetings of the Board and the Committees of the Board on which they served. Also,
Coopers policy is to encourage all Board members to attend the Annual Meeting of Shareholders.
All of the directors except one attended the 2009 Annual Meeting of Shareholders. Mr. Gerald B.
Smith, as Presiding Non-Management Director, presides over the Board in the absence of the
Chairman and in Board sessions held without management directors. The other responsibilities of
the presiding non-management director are described below under the subheading Board Leadership
Structure and Risk Oversight. Coopers Corporate Governance Principles and the charters of the
Audit Committee, Management Development and Compensation Committee and Committee on Nominations
and Corporate Governance are available on Coopers website at www.cooperindustries.com in
the Investors section under the Corporate Governance tab. Executive sessions of the
non-management directors are held at every regularly scheduled meeting of the Board and at the
regular meetings of the key Board Committees.
Director Independence
Under the NYSE listing standards, in order to consider a director to be independent, the
Board must determine that he or she has no material relationship with Cooper other than as
director. The standards specify the criteria for determining whether directors are independent
and contain guidelines for directors and their immediate family members with respect to employment
or affiliation with Cooper or its independent public accountants. In addition to the NYSEs
standards for independence, categorical standards have been adopted by the Board to assist it in
making independence determinations. Our categorical standards provide that a director will still
be deemed independent if the director serves as an executive officer, director or trustee of a
charitable organization and Coopers discretionary annual contributions to such organization are
less than the greater of $1 million or 2% of such organizations total annual charitable receipts.
A copy of Coopers director independence standards is set forth under the caption Director
Independence Standards on Coopers website at www.cooperindustries.com in the Investors Section
under the Corporate Governance tab.
The Board has determined that all directors, nominees and committee members, except for Kirk
S. Hachigian, have no direct or indirect material relationship with Cooper and are independent
under the applicable listing standards of the New York Stock Exchange and the categorical
standards that have been adopted by the Board. Specifically, the Board determined that
Messrs. Dan Smith and Thompson have no relationship with Cooper other than being a director,
nominee and/or shareholder. Ms. Hill and Messrs. Devlin, Kingsley, Postl, Gerald Smith and Wilson
serve as a director or trustee of charitable organizations to which Cooper made contributions in
2009. Mr. Butler serves as a director of Ford Motor Company to which Cooper has sold products
within the last three years. Also, Mr. Evans is a director of Spirit Aerosystems Holdings, Inc.,
Textron Inc. and ArvinMeritor, Inc. and within the last three years Cooper has sold products to
these companies. The Board determined that none of these relationships impair a directors
independence either because of the type of affiliation between the director and the other entity
or because the amounts involved were within the applicable thresholds for independence standards.
Mr. Hachigian is not an independent director because of his service as an executive officer of
Cooper and not because of any other transactions or relationships.
11
Audit Committee
The Audit Committee, which consists of all independent directors, held eight meetings during
2009. The Board has determined that Mr. James J. Postl qualifies as an audit committee financial
expert under the federal securities laws. The Committees principal responsibilities are to:
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Oversee the integrity of Coopers consolidated financial statements, system of
internal controls, and compliance with legal and regulatory requirements. |
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Select, determine the compensation of, evaluate and, when appropriate, replace the
independent auditor, and pre-approve audit and permitted non-audit services. |
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Oversee the qualifications and independence of the independent auditor and the
performance of Coopers internal auditor and independent auditor. |
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After review, recommend to the Board the acceptance and inclusion of the annual audited
consolidated financial statements in Coopers Annual Report on Form 10-K. |
Executive Committee
The Executive Committee, which is authorized to act on behalf of the full Board between
regular meetings of the Board, held two meetings in 2009.
Management Development and Compensation Committee
The Management Development and Compensation Committee, which consists of all independent
directors, held seven meetings during 2009. The Committees principal responsibilities are to:
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Establish corporate compensation policies, including determining base salary and annual
and long-term incentive awards for executive officers and other key employees. |
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Establish specific performance goals and objectives to be used to evaluate performance
over a given period. |
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Evaluate the performance of executive officers and other key employees to determine
whether performance goals and objectives have been attained and awards have been earned. |
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Determine stock option and long-term performance share grants to employees. |
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Review compliance with stock ownership guidelines for executive officers and other key
employees. |
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Review succession planning and executive development. |
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Review pension plan asset management. |
For a detailed description of the Committees processes and procedures for consideration and
determination of executive compensation, including the role of executive officers and compensation
consultants in recommending the amount and form of executive compensation, see Compensation
Discussion and Analysis beginning on page 17.
Committee on Nominations and Corporate Governance
The Committee on Nominations and Corporate Governance, which consists of all independent
directors, held four meetings in 2009. The Committees principal responsibilities are to:
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Recommend nominees for election to the Board and Committee assignments. |
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Review and recommend action on shareholder proposals. |
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Review corporate governance principles and oversee the operation, governance and
compensation of the Board. |
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Oversee the annual evaluation of the Board and its Committees. |
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Consider shareholder recommendations for nominees for election to the Board. |
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Review any related party transactions involving Cooper directors. |
12
Board Leadership Structure and Risk Oversight
Cooper uses a traditional U.S. board leadership structure, under which our Chief Executive
Officer (CEO) also serves as Chairman of our Board of Directors. We believe that having a
combined Chairman/CEO, independent directors with strong leadership experience, an independent
Presiding Non-Management Director who serves as our lead director and independent Board Committees
provides the right form of leadership for our Company. We also believe that this structure
provides effective oversight of the risk management function by allocating responsibility for
overseeing risk management among the full Board and its key Committees.
Having our current leader of the Company serve as both CEO and Chairman of the Board
demonstrates to employees, shareholders and other stakeholders of the Company that the Company is
under strong leadership with a single person setting the tone and having primary responsibility for
managing our operations. Having a single leader for both the Company and the Board is efficient
and effective by eliminating the potential for confusion or duplication of efforts and provides
clear leadership for our Company. Our current CEO and Chairman, Mr. Hachigian, has a deep
understanding of Cooper and each of its component businesses including manufacturing, business
processes, domestic and international markets, distribution channels and talent development.
Mr. Hachigian has extensive manufacturing/operations experience. He joined Cooper in 2001 as
Executive Vice President responsible for Coopers five electrical divisions, which represented over
50% of the Companys revenues. In 2003, he was appointed Chief Operating Officer and in 2004 he
was named President and joined Coopers Board of Directors. In 2005, he was appointed Chief
Executive Officer and became Chairman in 2006. Mr. Hachigian has worked in the electrical industry
throughout his career. His experience also includes a strategic role at Bain & Company; sales,
marketing and general management positions at Oak Industries; and eight years in key management
roles at General Electric. While at General Electric, he spent two years in Mexico and three years
in Asia. He currently serves on the boards of PACCAR Inc., the Houston Branch of the Federal
Reserve Bank of Dallas, the National Electrical Manufacturers Association and the National
Association of Manufacturers and formerly served on the board of American Standard.
Based on Mr. Hachigians deep understanding of Coopers business and his involvement in the
day-to-day operations of the Company, he is in the best position to serve as Chairman to identify
for the Board the challenges and issues that the Company faces. Cooper and its shareholders have
been well served by this leadership structure. Coopers total shareholder returns including
dividends have exceeded the performance of the S&P 500 and the average return for Coopers
15-company peer group over one-, five-, and ten-year time periods.
The strong leadership experience of our independent directors supports effective leadership of
Coopers Board. Of the ten independent directors currently serving on our Board, seven are
currently serving or have served as CEO and Chairman (or Vice Chairman) of other public companies.
Of our three independent directors who have not served as a CEO of a public company, one director
served as Chairman and CEO of a leading global accounting firm and one was founder and is Chairman
and CEO of an investment management firm. Accordingly, our independent directors have strong
leadership experience and are familiar with board processes. The Board, through its key
Committees, which consist of all independent directors, oversees the Companys financial reporting,
corporate governance and executive compensation. The Board also reviews and approves the budget,
capital structure including dividend policy and share repurchase programs, and corporate strategy
including significant merger and acquisition transactions. As part of the strategic planning
process, the Board reviews annual strategy presentations by each of the Companys eight divisions
and visits Cooper operating sites.
Cooper has a strong corporate governance structure that ensures independent discussion,
evaluation of, and communication with and access to, senior management. All of our key standing
Committees are composed solely of independent directors, which provides independent oversight of
management. Also, our Corporate Governance Principles provide that our independent directors will
meet in executive session at each Board meeting.
Our Corporate Governance Principles also require the appointment of an independent director to
serve as our lead or Presiding Non-Management Director. The responsibilities of the Presiding
Non-Management Director include the following:
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Preside over Board meetings in the absence of the Chairman, including executive sessions
of the independent directors. |
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Has authority to call meetings of the independent directors, preside over such meetings
and, with input from other directors, prepare agendas for these meetings. |
13
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Provide feedback to the Chairman/CEO regarding issues arising in executive sessions of
independent directors and serve as non-exclusive channel of communication between the
Chairman/CEO and independent directors. |
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Together with the Chairman/CEO, and with input from other directors, collaborate on the
preparation of Board agendas. Consult with the Chairman and other Board members regarding
Board and meeting schedules. |
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Monitor significant developments between Board meetings and assure the Board is informed
and engaged as appropriate. |
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Take the lead in assuring that the Board carries out its responsibilities if the CEO is
incapacitated or in other crisis situations. |
We believe that our Presiding Non-Management Director, Gerald B. Smith, has been effective at
enhancing the overall independent functioning of the Board.
The Board allocates responsibility for overseeing risk management for the Company among the
full Board and its key Committees. The full Board oversees significant risks relating to
operations, strategy and finance. In addition, each of our Board Committees considers risks within
its area of responsibilities. The Audit Committee is primarily responsible for overseeing matters
involving major financial risk exposures to Cooper and actions management is taking to monitor such
risk exposures. This includes risks relating to financial reporting and internal controls;
litigation; environmental, health and safety matters; tax matters; liability insurance programs;
and Coopers corporate compliance program, including compliance with legal and regulatory
requirements and Coopers Code of Ethics and Business Conduct. The Management Development and
Compensation (MD&C) Committee is primarily responsible for overseeing risks that may be
implicated by our executive compensation program and risks relating to the administration and
management of Coopers retirement and welfare plans. In setting compensation, the MD&C Committee
strives to create incentives that encourage appropriate risk taking behavior consistent with the
Companys business strategy. Finally, the Committee on Nominations and Corporate Governance is
primarily responsible for risks that may be implicated by the continued effective functioning of
the Board and the Companys corporate governance practices.
Majority Vote for Election of Directors
Director nominees are elected by the affirmative vote of a majority of the votes cast by
shareholders at the Annual Meeting. Any nominee for director who does not receive a majority of
the votes cast is not elected to the Board. Coopers articles of association provide that if,
at any Annual Meeting of the shareholders, the number of directors is reduced below the minimum
seven directors as prescribed by the articles of association because of the failure of any
director nominees to be elected, then in those circumstances, the nominee or nominees who
receive the highest number of votes in favor of election shall be elected in order to maintain
such prescribed minimum number of directors and each such director shall remain a director
(subject to the provisions of the Irish Companies Act and the articles) only until the
conclusion of the next Annual Meeting unless such director is elected by the shareholders during
such meeting.
Shareholder Recommendations for Potential Director Nominees
Shareholders who submit recommendations for potential nominees for election to the Board must
submit such recommendations in writing to Terrance V. Helz, Associate General Counsel and
Secretary, Cooper Industries plc, 5 Fitzwilliam Square, Dublin 2, Ireland. The Committee on
Nominations and Corporate Governance will evaluate any recommendations received from shareholders
in the same manner that potential nominees suggested by Board members, management or other parties
are evaluated.
Qualifications of and Selection Process for Directors
The current criteria for selecting new directors as set forth in the charter of the Committee
on Nominations and Corporate Governance do not include specific minimum qualifications, but include
criteria relating to a candidates business experience and accomplishments, lack of conflicts of
interest, ability to commit the time to serve effectively, personal characteristics, the Boards
needs for a diversity of backgrounds and skills, and other pertinent considerations. When searching
for new Board candidates, the Committee on Nominations and Corporate Governance also considers
other diversity characteristics such as race, gender and national origin. The Committee on
Nominations and Corporate Governance periodically reviews the appropriate skills, experience,
perspectives and characteristics required of Board members or candidates in the context of the
perceived needs of the Board at the time. The Committee generally uses a third-party search firm to
assist in identifying potential Board candidates
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and/or in assessing and evaluating candidates
based on the criteria noted above. The Committee then identifies and recommends to the Board
qualified candidates for nomination and the full Board makes a final determination.
The following is a summary of the particular experience, qualifications, attributes or skills
that qualify our current directors and nominees to serve as a director of the Company. We believe
that Coopers Board is comprised of
individuals having backgrounds and skills that are important for Coopers business and its key
initiatives, including manufacturing/operations, finance, marketing, international experience,
human resources and logistics as well as experience in Coopers target markets such as commercial
and industrial, petrochemicals, electronics, construction, consumer, utility, aerospace and
automotive. A brief description of the directors recent business experience as well as other
directorships held by each director in other public companies is set forth in the Election of
Directors section of this proxy at pages 6 to 8. In addition, the following highlights the
specific experience, qualifications, attributes and skills that have led the Committee on
Nominations and Corporate Governance to conclude that such individuals have appropriate
qualifications to serve on our Board.
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Kirk S. Hachigian, Coopers Chairman and CEO, demonstrates strong leadership and a deep
understanding of the Company, including manufacturing, business processes, domestic and
international markets, distribution channels and talent development. Mr. Hachigian has
extensive manufacturing/operations experience. He joined Cooper in 2001 as Executive Vice
President responsible for Coopers five electrical divisions, which represented over 50% of
the Companys revenues. In 2003, he was appointed Chief Operating Officer and in 2004 he
was named President and joined Coopers Board of Directors. In 2005, he was appointed
Chief Executive Officer and became Chairman in 2006. Mr. Hachigian has worked in the
electrical industry throughout his career. His experience also includes a strategic role
at Bain & Company; sales, marketing and general management positions at Oak Industries; and
eight years in key management roles at General Electric. While at General Electric, he
spent two years in Mexico and three years in Asia. He currently serves on the boards of
PACCAR Inc., the Houston Branch of the Federal Reserve Bank of Dallas, the National
Electrical Manufacturers Association and the National Association of Manufacturers and
formerly served on the board of American Standard. |
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Stephen G. Butler has expertise in accounting and finance and knowledge of a wide range
of U.S. and international business practices based on a 34-year career with KPMG, a global
accounting and tax firm, including serving as Chairman of KPMG International, which
operates in over 100 countries. He also has significant experience in operations,
marketing and human resources through serving as managing partner of several KPMG offices
and ultimately serving as Chairman and CEO of KPMG-USA; and valuable insights to the
automotive and consumer markets based on his directorships at Ford Motor Company and
ConAgra. |
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Robert M. Devlin has expertise in marketing and finance and knowledge of consumer
markets based on his experience in diversified financial service organizations, including
serving as Chairman and CEO of American General Corporation as well as holding various
marketing positions at Mutual of New York. He also has significant experience in mergers
and acquisitions, corporate finance and cost reduction and containment as Chairman of a
private equity firm; and valuable insights to the automotive market based on his
directorship at LKQ Corporation. |
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Ivor J. Evans has expertise in manufacturing/operations including experience in the
electrical industry through various executive positions at Emerson Electric Co., which is
one of Coopers peer companies. He also has extensive experience in transportation and
logistics based on his service as Vice Chairman, President and Chief Operating Officer of
Union Pacific Corporation and its principal operating company, Union Pacific Railroad
Company; significant experience in mergers and acquisitions, corporate finance and cost
reduction and containment serving as operating partner of a private equity firm; and
valuable insights to compensation and corporate governance best practices. |
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Linda A. Hill has expertise in human resource management and organizational behavior
including valuable knowledge of corporate governance, talent management, implementation of
global strategies and innovation through her position as a Professor at the Harvard
Business School and serving as a consultant for numerous Fortune 500 corporations and other
organizations. |
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Lawrence D. Kingsley has expertise in manufacturing/operations including products for
industrial and commercial markets through various executive positions including serving as
Chairman, President and CEO of IDEX Corporation as well as holding key executive positions
at Danaher Corporation, which is one of Coopers peer companies. He also has significant
experience with international operations and markets having operated global businesses with
operations in North America, Europe, Asia and Middle East as well as valuable experience in
mergers and acquisitions and marketing. |
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James J. Postl has expertise in marketing and international operations and extensive
experience in petrochemical and consumer markets through various executive positions
including serving as President and CEO of Pennzoil Quaker State Company and Nabisco
International and President of Nabisco Biscuit |
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Co. He also has valuable knowledge in
strategic planning and human resources through various executive positions and valuable
insights to the housing construction market based on his directorship with Pulte Homes. |
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Dan F. Smith has expertise in manufacturing/operations and extensive experience in
petrochemical markets through various executive positions with Lyondell Chemical Company
including serving as its Chairman and CEO, its Chief Operating Officer and Senior Vice
President of Manufacturing as well as serving in various
management positions with Atlantic Richfield Company. He also has expertise in finance
through service as a Chief Financial Officer of a large public company and valuable
knowledge of compensation and corporate governance best practices. |
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Gerald B. Smith has expertise in finance, portfolio management and marketing through
executive positions in the financial services industry including being founder, Chairman
and CEO of the investment management firm, Smith Graham & Company. He also has valuable
insights to the energy markets through his directorships at ONEOK, Inc. and ONEOK Partners
L.P. |
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Mark S. Thompson has expertise in manufacturing/operations in the electronics industry
through various executive positions including serving as Chairman, President and CEO of
Fairchild Semiconductor International, Inc., President of Big Bear Networks, Inc. and key
management positions at Tyco Electronics. He also has expertise in product innovation and
high technology development including electronic systems and component expertise as well as
significant experience with international operations and markets having managed
international operations in Asia. |
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James R. Wilson has expertise in manufacturing/operations including serving as Chairman,
President and CEO of Cordant Technologies, a global manufacturer of high tech aerospace and
industrial products. He also has expertise in finance through serving as a Chief Financial
Officer for several large public companies; as well as valuable insights to the aerospace
industry through directorships with several other large public reporting companies. |
Methods for Communicating with Non-Management Directors
Anyone who has a concern about Coopers conduct, including any concerns about Coopers
accounting, financial reporting, internal controls or auditing matters, and who wishes to make
such concerns known to the non-management directors as a group may submit such concerns in
writing at the following address: Board of Directors, c/o Senior Vice President, General Counsel
and Chief Compliance Officer, Cooper Industries plc, 5 Fitzwilliam Square, Dublin 2, Ireland.
All such concerns shall be promptly forwarded to the Presiding Non-Management Director and any
concerns about accounting, financial reporting, internal controls and auditing matters also shall
be promptly forwarded to the Chairman of the Audit Committee. Such concerns shall be
simultaneously reviewed and addressed by the Senior Vice President, General Counsel and Chief
Compliance Officer, or his designee, in the same way that similar concerns are addressed by
Cooper.
Code of Ethics and Business Conduct
Cooper has adopted a Code of Ethics and Business Conduct that applies to its directors,
officers and employees including our Chief Executive Officer, Chief Financial Officer, and Chief
Accounting Officer. Coopers Code of Ethics and Business Conduct also applies to its directors,
officers and employees and is available on the Companys website at
www.cooperindustries.com in the Investors section under the Corporate Governance tab
and is available in print form to any shareholder who requests it. Cooper intends to satisfy
the disclosure requirement under Item 5.05 of Form 8-K by posting on Coopers website at the
Internet address noted in the previous sentence any amendments to, or waivers from, a provision
of its Code of Ethics and Business Conduct that applies to its directors or executive officers.
TRANSACTIONS WITH RELATED PERSONS
The Board of Directors has adopted a written policy which provides that the Audit Committee
shall review related party transactions involving executive officers and the Committee on
Nominations and Corporate Governance will review related party transactions involving directors
or director nominees. The policy provides that any related party transaction may be entered into
or continued only if the Board of Directors, acting through its Audit Committee or its Committee
on Nominations and Corporate Governance, determines that the related party transaction in
question is in, or is not inconsistent with, the best interests of Cooper and its shareholders.
For purposes of this policy, a related party transaction is a transaction or an arrangement in
which Cooper or one of its subsidiaries participates and the amount involved exceeds $10,000,
and in which any related party has a direct or indirect material interest. Related parties
include executive officers, directors, director nominees, beneficial owners of more than 5% of
Coopers voting securities, immediate family members of any of the
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foregoing persons, and any
firm, corporation or other entity in which any of the foregoing persons is employed and in which
such person has 5% or greater beneficial ownership interest.
Item 404(a) of SEC Regulation S-K requires disclosure of various transactions with related
persons since the beginning of the last fiscal year, or that are currently proposed, and in
which the Company was or is to be a
participant and any related person had or will have a direct or indirect material interest in
the transaction. No transactions occurred in the last fiscal year or are currently proposed that
require disclosure under this regulation.
EXECUTIVE MANAGEMENT COMPENSATION
COMPENSATION COMMITTEE REPORT
The Management Development and Compensation Committee (the Committee) has reviewed and
discussed with management the Compensation Discussion and Analysis set forth below. Based on
its review and discussions, the Committee recommended to the Board of Directors that the
Compensation Discussion and Analysis be included in Coopers Proxy Statement and incorporated by
reference into the Companys Annual Report on Form 10-K for the year ended December 31, 2009.
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Dan F. Smith, Chairman
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Linda A. Hill |
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Robert M. Devlin
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Gerald B. Smith |
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Ivor J. Evans |
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COMPENSATION DISCUSSION AND ANALYSIS
Overview of Executive Compensation Program
The Committee, composed entirely of independent directors, administers Coopers executive
compensation program. The role of the Committee includes establishing and overseeing compensation
and benefit programs for our executive officers including the Chief Executive Officer (CEO), the
other executive officers listed in the Summary Compensation Table (the Named Executives) and
other key executives. The Committee also evaluates the performance of the CEO and reviews the
performance of our other executive officers and key executives every year. Based upon these
performance evaluations and applicable survey data provided by compensation consultants, the
Committee establishes compensation for the CEO and other executives. The Committee reviews
management performance, succession planning and executive development on a regular and ongoing
basis with formal reviews conducted at least annually. Elements of our executive compensation
program include:
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employee benefits and executive perquisites. |
In establishing and overseeing the program, the Committees goal is to ensure that we can
attract and retain superior management talent critical to our long-term success. To ensure that
executive compensation is aligned with the performance of Cooper and the interests of its
shareholders, a significant portion of compensation available to executives is linked directly with
financial results and other factors that influence shareholder value.
Our Senior Vice President, Human Resources works with internal resources and the Companys
compensation consultants to design compensation programs, implement Committee decisions and
recommend amendments to existing, or the adoption of new compensation and benefit programs and
plans applicable to executive officers and other key executives as well as prepare necessary
materials for the Committees review as part of its decision-making process. The CEO makes
recommendations to the Committee regarding total compensation to be paid to Coopers executive
officers other than himself, including salary, annual bonus, long-term equity-based incentive
awards, and employee benefits and executive perquisites. These recommendations are developed in
conjunction with the Senior Vice President, Human Resources utilizing data from compensation
consultants regarding competitive position of the compensation provided to each executive officer,
their individual performance and Company performance. The Committee reviews these recommendations
and determines, in its discretion, whether any adjustments are appropriate based on the above
criteria.
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Decisions impacting the CEOs compensation are determined solely by the Committee acting
independently and without specific recommendations being made by management. Management routinely
provides the Committee with current and historical information relative to the CEOs compensation,
results of performance pay plans, and external data that the Committee may consider in reaching
decisions about whether to make changes in the level or mix of the CEOs compensation arrangements.
External data is generally provided directly to the Committee by a compensation consultant. The
outside consultant is available for direct discussion with the Committee Chairman or the full
Committee, if so requested by the Committee Chairman. At the beginning of each fiscal year, the
CEO submits his personal fiscal year goals and the Committee and Board discuss the goals with the
CEO. The goals are then adopted with revisions as may be appropriate. At mid-year, the CEO and
Board discuss progress to-date on the CEOs goals. Following completion of the fiscal year, the
Committee and Board conduct an evaluation of the CEOs performance for the fiscal year including
the achievement of personal goals. Based on this evaluation, the Committee determines the CEOs
base salary, annual cash bonus opportunity and long-term equity-based incentive awards taking into
consideration applicable survey data and the analysis of the compensation consultant.
Committee meetings are frequently attended by the CEO and regularly attended by the Senior
Vice President, Human Resources, who is responsible for leading some of the discussions regarding
the Companys compensation programs. The Committee also regularly meets in executive session
without any members of management.
The Company historically has engaged Frederick W. Cook & Co. to provide advice relating to the
competitive position, value and design of our long-term incentive compensation programs. At the
Committees request, in September 2009, the Company also engaged Towers Watson to conduct a
comprehensive analysis of the competitive position, value and design of all components comprising
Coopers executive compensation program, including base salaries, short-term and long-term
incentive compensation plans, performance goals, and retirement benefits. Towers Watson reviewed
and discussed the results of its analysis with the Committee and the Company. Towers Watson
concluded that Coopers executive compensation program provides competitive compensation and
generally is aligned with Coopers executive compensation philosophy. Towers Watson recommended
revising performance-based share awards that are part of the long-term incentive compensation plan
by including additional performance metrics to further align this program with managements key
business objective of generating cash flow and with Coopers performance relative to its peer group
companies based on total shareholder returns. These recommended changes to the performance-based
share awards will be implemented in connection with awards granted in 2010. Management also
retained Mercer Consulting in 2009 to conduct an analysis of Coopers executive retirement program
including the Supplemental Executive Retirement Plan. Management provided the Committee with the
results of the Mercer analysis, which showed that Cooper trailed competitive practices of its peer
companies. The Committee will consider the results of the Mercer study in setting 2010
contribution rates to the Supplemental Executive Retirement Plan.
Under its charter, the Committee also may retain an executive compensation consultant to
provide independent advice and counsel directly to the Committee. In recent years, the Committee
engaged Pearl Meyer to conduct an independent evaluation of Coopers executive compensation program
to provide advice to the Committee on compensation issues. The Committee did not engage Pearl
Meyer for any assignments in 2009.
Compensation Philosophy and Objectives
Our executive compensation philosophy is to provide key executives with appropriate and
competitive pay opportunities with actual pay outcomes that reward superior corporate and
individual performance. The ultimate goal of our program is to increase shareholder value by
providing executives with appropriate incentives to achieve our business objectives. The
Committees policy is to compensate and reward executives based on the combination of some or all
of the following factors, depending on the executives responsibilities: corporate performance,
business unit performance and individual performance. The Committee evaluates corporate performance
and business unit performance by reviewing the extent to which Cooper has accomplished strategic
business objectives, such as earnings and cash flow. The Committee evaluates individual performance
by comparing actual accomplishments to the objectives established for the individual under Coopers
Management Development and Planning Program. The Committee determines increases in base salary and
annual cash incentive awards based on actual accomplishments during the performance period and
determines long-term incentive awards based on our sustained earnings per share performance
compared to performance goals over a multi-year performance cycle. Beginning with
performance-based share awards to be granted in 2010, two additional performance metrics will be
used under the long-term incentive program: (1) cash conversion, to further align incentives with
strategic business objectives; and (2) a modifier to increase or decrease share awards based on
Coopers performance relative to its 15-company peer group as measured by total shareholder
returns.
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The Committee believes that compensation to executives should be aligned closely with Coopers
performance on both a short-term and long-term basis. As a result, a major portion of compensation
to each executive officer is at risk and tied directly to the attainment of financial performance
goals. The executive compensation program is also designed to drive continuous improvements in
financial performance by providing enhanced compensation as results improve and exceed budgeted
levels. Although a major portion of compensation to Coopers executive officers is
performance-based, the Committee also believes it prudent to provide competitive base salaries and
benefits in order to attract and retain the management talent necessary to achieve our strategic
long-term objectives. The Committee also supports executive retention by using continued service
as a significant determinant of total pay opportunity. Key elements of compensation that are
service-related include stock options, which generally vest over a three year period, long-term
equity incentives which typically pay out in three years, and the Supplemental Executive Retirement
Plan.
Additional details on each element of Coopers compensation program are outlined below.
Base Salaries
The base salary range for each executive officer, including the CEO and other Named
Executives, is established annually using survey data provided by the Hay Group. The Committee
then determines any adjustments to the executives base salary, considering individual performance,
position in the salary range, and the competitiveness of the base salary. Under a policy adopted
by the Committee, base salaries for executive officers at Cooper are intended to approximate the
average of the Hay Group Total Compensation Survey (the Hay Survey). In 2009 the Hay Survey
included 420 industrial companies with revenues in excess of $1 billion. In the Hay Survey, Cooper
benchmarks the compensation for each position to a group of companies that have the same position
with a comparable rating under the Hay System. The Committee believes that the Hay Survey includes
companies which may compete for Coopers top management talent and using this broad group of
industrial companies for market-referencing of base salary levels is appropriate. During 2009 the
salary ranges and actual salaries for Coopers executive officers approximated the Hay Survey
average. Appendix A lists the industrial companies from the Hay Survey that were used to benchmark
the compensation of the CEO and other Named Executives.
In light of the global economic downturn in the latter part of 2008 Cooper took various cost
control measures relating to executive compensation including imposing a salary freeze. In 2009
there was no increase in the base salary of any Named Executive or, subject to two exceptions, any
other executive officer.
Annual Incentive Compensation
Annual incentive compensation awards are available to executive officers, including the CEO
and other Named Executives, under the terms of the Management Annual Incentive Plan (the Bonus
Plan). The Bonus Plan links incentive compensation opportunity to achievement of our short-term
business objectives and shareholders interests as a whole. The Bonus Plan was initially approved
by shareholders in 1996. In 2006 shareholders approved amendments which, among other things,
extended the term of the Plan until March 1, 2011.
Under the Bonus Plan, the Committee must establish performance measures and goals within 90
days of the beginning of each year. Generally, annual performance goals are set at the Committees
February meeting. For the last several years, including fiscal year 2009, the Committee has adopted
two separate performance measures for the purpose of determining bonuses. These measures are
earnings per share and free cash flow. Earnings per share was selected because it is a generally
accepted measure of a companys performance that can be compared to results in prior periods and at
peer companies. Free cash flow is defined as net cash provided by operating activities, less
capital expenditures, plus proceeds from sales of property, plant and equipment. Free cash flow is
an indication of earnings quality as it measures the degree to which Coopers net income translates
to cash flow. The Committee believes that both earnings per share and free cash flow are highly
regarded measures by financial analysts who monitor Coopers performance so linking bonus pay
directly to these financial results aligns management interests with those of our shareholders.
For fiscal year 2009, 50% of the bonus opportunity for executive officers was based on
earnings per share and 50% was based on free cash flow on a Company-wide basis. For 2007 and 2008,
the relative weight of the performance goals was 75% on earnings per share and 25% on free cash
flow. The Committee approved changing the relative weight of the performance goals in 2009 in
order to emphasize the importance of cash and effective management of the Companys balance sheet
during a recessionary environment. The bonus opportunity for executives at operating divisions
takes financial performance of the relevant business unit into account. For 2007 and 2008, 50% of
the bonus opportunity was based on earnings before taxes and operating cash flow of the relevant
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business unit. In 2009, the
bonus opportunity for executives at operating divisions was based on earnings per share and cash
flow performance on a Company-wide basis as described above, however, the Committee may adjust the
bonus amount actually awarded to such executives by a discretionary amount based on the relevant
business units financial performance.
When it selects performance measures, the Committee also establishes a threshold performance
goal that must be achieved to earn any bonus under the Bonus Plan and establishes a goal which, if
achieved, will earn a maximum bonus opportunity. At Cooper, maximum bonus opportunity for executive
officers is a multiple of the executives salary midpoint. For fiscal year 2009 maximum bonus
opportunities for the CEO and other Named Executives range from 110% to 250% depending on their
position. The Committee generally sets maximum bonus opportunity each November for the upcoming
year based upon the salary midpoint, the competitive compensation review and the advice of our
executive compensation consultants. To earn maximum bonus opportunity, financial results must
exceed our operating plan by a significant amount.
In establishing the maximum performance goals under the Bonus Plan, the Committees objective
is to provide our executive officers with a strong financial incentive to achieve results well in
excess of the annual operating budget and expectations. Because such results cannot be achieved
each year, the Committee also establishes performance goals for results above threshold but below
the maximum to provide increased compensation to executives at all levels of performance in order
to drive the executives to achieve better than expected results.
The Committee has established four performance goals used for the determination of bonus
opportunity under the Bonus Plan: threshold, good, target and maximum. No bonus is available if
financial results do not achieve the threshold performance goal. For achieving threshold
performance, executive officers can earn 25% of their maximum bonus opportunity. As performance
improves, additional bonus opportunity is earned with 50% of the maximum bonus opportunity
available for good performance and 75% of maximum bonus opportunity is earned at the target
performance level. For fiscal year 2009 the Committee approved performance goals for maximum bonus
opportunity of earnings per share from continuing operations of $3.00 and free cash flow of 120% of
income from continuing operations. These performance goals represent an increase of 15% in earnings
compared to the budgeted earnings per share from continuing operations for fiscal 2009. The
Committee believes that achievement of such stretch performance goals on an annual basis will
translate into significant shareholder value. Accordingly, under the Bonus Plan, the Committee has
provided Coopers executive officers with a significant financial incentive to achieve such
results.
In February of each year, the Committee meets to review the Companys financial results for
the previous year and determines the degree to which performance goals have been achieved prior to
the payment of any bonus awards. Under the Bonus Plan, the Committee has discretion to adjust the
method of calculating the attainment of performance goals in recognition of extraordinary or
non-recurring items, changes in tax laws or accounting policies, charges related to restructured or
discontinued operations, and other unusual or non-recurring items.
Under the Bonus Plan, when the Committee determines the degree to which performance goals have
been achieved, earned bonus opportunity for each executive officer can be calculated. The Committee
then reviews the individual performance of each executive officer as compared to pre-established
objectives for the year. Based upon this evaluation and the executive officers competitive
position, the Committee then approves a bonus award to each executive officer.
In February 2010 the Committee reviewed results under the Bonus Plan for 2009 and determined
earned bonus opportunity to be at 76% of the maximum performance level. The Committee then awarded
bonuses to the Named Executives under the Bonus Plan at an average of 70% of the maximum
performance level, which takes into account an evaluation of individual performance as well as the
financial performance of the relevant business unit for Named Executives at operating divisions.
The determination of earned bonus opportunity was based on good earnings per share performance and
excellent cash flow performance despite a severe global economic downturn. Earnings per share from
continuing operations of $2.52 excluded the impact of income tax adjustments and restructuring and
impairment charges. Taking these adjustments into account, the audited financial statements
reflect earnings per share from continuing operations in 2009 of $2.46. Coopers audited financial
statements for 2009 reflect free cash flow of $633 million. In determining awards under the Bonus
Plan for 2009, the Committee used free cash flow of $716 million, which excludes the impact of cash
paid for a discretionary tax deposit. Free cash flow of $716 million significantly exceeded income
from continuing operations and the free cash flow goal established by the Committee in February
2009 for an award at the maximum level.
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In determining awards under the Bonus Plan for 2009, the Committee credited management with:
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Coopers total shareholder returns exceeding performance of the S&P 500 and the average
return for Coopers peer group over one-, five- and ten- year time periods, |
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excellent cash flow performance accomplished through operating efficiencies and
effective management of working capital, |
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preserving Coopers capital structure and liquidity during a severe economic and credit
crisis to maintain strong financial flexibility, |
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prompt implementation of cost-reduction and other measures to achieve favorable
operating margins despite the global economic downturn, |
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significant progress on all five key business initiatives including customer loyalty,
innovation, operational excellence, talent development and globalization, |
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completion of several strategic acquisitions to build key growth platforms, |
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achievement of key innovation initiatives including delivery of innovative new products
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reincorporating Cooper in Ireland to preserve our global competitive position. |
The Committee also approved supplemental bonus awards outside the Bonus Plan for Messrs.
Hachigian and Klebe for fiscal year 2009 to recognize their leadership roles in promptly responding
to the global economic downturn by effectively managing working capital and implementing cost
reduction and other measures to maintain profitability and preserve Coopers capital structure and
liquidity during a severe economic and credit crisis and to recognize their personal contributions
to the achievement of other strategic initiatives.
Long-Term Equity-Based Incentive Compensation
The Committee provides equity incentives to executive officers which are tied to Coopers
long-term performance in order to link the executives interests to those of our shareholders and
to encourage stock ownership by executives. The Committee balances the goals of rewarding past
performance, driving future performance, and retention in determining the amount and form of these
incentives.
The Amended and Restated Stock Incentive Plan (Stock Plan), which was most recently approved
by our shareholders in April 2008 provides for the granting of stock options, performance-based
share awards and restricted stock units to Named Executives and other key executives. The Committee
believes that the stock options, performance-based share awards and restricted stock units granted
under the Stock Plan place a significant amount of the executives compensation at risk and
provides a significant link between the compensation of the Named Executives and other key
executives on the one hand and Coopers long-term goals and shareholders interests on the other.
Annual grants of equity-based incentive awards to our executive officers consist principally
of stock options and performance share awards. Such awards generally are made by the Committee at
its February meeting. Generally, our executive officers, including the CEO and other Named
Executives, receive annual equity awards having a value consisting of approximately half stock
options and half performance share awards. Details on these equity awards are outlined below. The
value of the equity award is targeted at a percentage of the executives base salary, depending
upon the individuals position and responsibilities. In 2009 the Committee granted long-term
equity awards with lower grant values compared to prior years because of the uncertain economic and
market conditions. Actual awards to executives may be adjusted by the Committee to reflect
individual performance and potential, prior equity awards and total compensation to the individual.
Such adjustments may result in an increase or decrease in equity awards granted to an individual.
At the Committees request, in September 2009 management engaged Towers Watson to conduct a
comprehensive analysis of Coopers executive compensation program. Towers Watson concluded that
Coopers practice of using a combination of stock options and performance shares in its equity
program is appropriate. Towers Watson noted that the use of multiple long-term incentive vehicles
is generally aligned with Coopers peer group and general industry and provides incentives to
achieve multiple objectives that promote Coopers strategy and shareholders interests.
21
Stock Options
As part of the executive compensation program, the Committee annually grants stock options to
executive officers and other key executives. Stock options are priced on the day of the Committee
meeting at the fair market value of the stock as required by the Stock Plan. Coopers practice for
many years has been to grant stock options at the February Committee meeting, which is after the
prior fiscal years financial results have been released to the public. The Committee approves all
stock option grants and the grants are made on the day the Committee meets. The Board and the
Committee meeting dates are set at least two years in advance. Stock options are granted at other
times during the year only in conjunction with the hiring, promotion or special retention of
employees and then only as approved by the Committee and pursuant to the terms of the Stock Plan.
Stock options granted under the Stock Plan vest ratably on the first, second and third
anniversaries of the grant date so the options are fully exercisable after three years. Stock
options granted in 2009 are available for exercise for seven years from the grant date. Because
stock options are issued at fair market value, they will only have value if the market price of
Cooper shares increases after the grant date. Outstanding options are forfeited when active service
ends except in the event of death, disability or retirement.
Performance-based Share Awards
The Committee annually grants performance-based share awards to Coopers executive officers
and other key executives. Through these awards, executives can earn Cooper shares based on
achievement of performance goals set by the Committee. In establishing performance goals and
awarding performance shares the Committees objective is to provide executive officers with a
financial incentive to improve financial results on a long-term, continuous basis and to align
management interests with those of shareholders. Historically, performance goals have been based
upon cumulative earnings per share growth over a three-year performance period beginning in the
year of the grant and concluding three years later. For the performance period beginning January
1, 2007 and ending December 31, 2009, the Committee determined that average annual earnings per
share growth of at least 4% is required before any award is earned and at least 16% is required for
a payout at the maximum level. For the performance period beginning on January 1, 2008 and ending
on December 31, 2010, the Committee determined that average earnings per share growth of at least
4% is required before any award is earned and at least 14% is required for a payout at the maximum
level.
Because of substantial economic uncertainties resulting from the global economic crisis, the
performance-based share awards granted in 2009 provided a reduced level of opportunity compared to
prior years in order to control costs. Also, awards were based on a one-year financial metric but
require satisfaction of a three-year cliff vesting period. The Committee decided to change the
design of the long-term equity based program in 2009 after conferring with Frederic W. Cook & Co.,
who indicated that many companies were taking similar actions because of the uncertain economic
environment. The change in the design of performance-based share awards granted in 2009 addressed
the difficulty of setting a meaningful three-year financial target because of the substantial
economic uncertainty, volatility and unpredictable timing of an economic recovery. Changing the
design of the performance-based share awards also addressed the need for additional retention
enhancements to mitigate the risk that other companies would hire key executives at Cooper in light
of the substantial decline in outstanding equity opportunity values among key executives. The
Committee determined that the one-year financial metric would be based on achieving a net debt to
EBITDA ratio of two or less to drive maintaining a strong balance sheet and liquidity during the
economic crisis. Failure to achieve this ratio would result in 100% forfeiture of the potential
awards. In February 2010 the Committee determined that Cooper achieved the performance criteria
for the performance shares granted in 2009.
The Company is seeing signs that the global economy is beginning to stabilize. Accordingly,
in 2010 the Company plans to return to the model of basing performance share awards on a three-year
performance metric beginning in the year of grant. Also, in addition to earnings growth,
performance metrics will include cash conversion to further align incentives with key business
objectives and will include a modifier to adjust awards based on Coopers performance relative to
its 15-company peer group as measured by total shareholder returns.
Under the Stock Plan, the Committee cannot award performance-based shares unless the
performance goals are achieved. The Committee may make adjustments in calculating attainment of
performance goals in recognition of extraordinary or non-recurring items, including charges related
to restructured or discontinued operations, changes in accounting policies or tax laws, and other
unusual or other non-recurring items separately identified in Coopers financial statements.
Discretionary adjustments by the Committee must be consistent with Section 162(m) of the Internal
Revenue Code such that all stock awards are considered performance-based compensation.
22
In February 2010 the Committee determined that Cooper had achieved annual earnings per share
growth over the three-year period beginning on January 1, 2007 and ending on December 31, 2009 of
9% thereby achieving an award at 56.1% of the maximum level. In determining annual earnings per
share growth for the three-year period, in 2009 net charges of $.06 related to restructuring
charges and benefits from income tax adjustments were excluded, earnings per share of $.04 in 2008
related to a discontinued operations gain net of unusual items were excluded and earnings per share
of $.59 in 2007 related to income tax adjustments, income from Belden Corporation and legal matters
concerning discontinued operations were excluded. Based on the satisfaction of the performance
goals, the Named Executives earned the following performance shares for the 2007 2009 performance
period: K.S. Hachigian 84,823 shares; T.A. Klebe 18,176 shares; M.A. Stoessl 8,527 shares; and
N.A. Schrimsher 7,181 shares. In addition to the performance shares, participants in the 2007
2009 performance period received a payment of $2.84 for each performance share earned, which
represents dividend equivalents on the earned shares over the three-year performance period.
Restricted Stock Units
Although stock options and performance-based share awards are the principal means of providing
long-term equity-based compensation to our key executives, from time to time, the Committee also
grants restricted stock units to executive officers and other key management employees. Vesting of
restricted stock units is time-based. The vesting period varies depending on the award. Coopers
current practice is generally to set a five-year vesting period. Generally, we grant restricted
stock units to ensure we retain certain key management employees and for the purpose of attracting
new executives, including replacing equity compensation forfeited by new executives upon
resignation from their prior employer. Depending on the specific award, dividend equivalents are
payable on restricted stock units either on the dividend payment date or upon the date when the
restrictions lapse. Dividend equivalents are calculated based on the same dividend rate that
applies to our outstanding common shares. In February 2007 in consideration of the superior
financial results achieved and the successful implementation of the strategic initiatives under the
CEOs leadership, the Committee granted the CEO restricted stock units of 40,000 shares (adjusted
for the two-for-one stock split in March 2007) to secure retaining his future services. These
restricted stock units vest in February 2012.
Benefits and Executive Perquisites
The Committee believes that attracting and retaining superior management talent requires an
executive compensation program that is competitive in all respects with the programs provided at
similar companies. In addition to salaries, incentive bonus and stock awards, competitive executive
compensation programs include retirement and welfare benefits and reasonable executive perquisites.
At Cooper, executive officers participate in the same retirement and welfare benefit plans as all
salaried employees. We also provide executive officers a perquisite program with a set annual
amount approved by the Committee that is paid to the executive and can be used at the individual
executives discretion. The Committee annually reviews the amount of the executive perquisites
payment.
Retirement Benefits
Prior to January 1, 2007, executive officers residing in the United States participated in
several retirement plans sponsored by Cooper including: the Cooper Salaried Employees Retirement
Plan (Cooper Pension Plan); the Cooper Industries Supplemental Excess Defined Benefit Plan
(Supplemental Pension Plan); the Cooper Retirement Savings and Stock Ownership Plan (Cooper
Savings Plan) and the Cooper Industries Supplemental Excess Defined Contribution Plan
(Supplemental Savings Plan). Executive officers participated in these retirement plans on the
same basis and under the same terms and conditions as other salaried employees who reside in the
United States and are assigned to Coopers United States business units.
|
|
|
Under the Cooper Pension Plan, Cooper credited the individuals plan account with
four percent of each years total compensation up to the Social Security wage base for
the year, plus eight percent of each years total compensation that exceeds the Social
Security wage base. The participant receives interest on all amounts credited to their
account until the participant begins to receive benefit payments. The interest credit
rate was 5.25% for 2007, 3.5% for 2008 and 1.25% for 2009. |
|
|
|
|
The Supplemental Pension Plan is an unfunded, nonqualified plan that provides to
certain employees, including certain Named Executives, Cooper Pension Plan benefits
that cannot be paid from a qualified, defined benefit plan because of Internal Revenue
Code restrictions. The amounts credited to a participants account in the Supplemental
Pension Plan receive interest credits at the same rate as under the Cooper Pension
Plan. |
23
|
|
|
Under the Cooper Savings Plan, which is a qualified 401(k) Savings Plan,
participants may elect to contribute a percentage of each years compensation on a
pre-tax basis to a plan account. Company
matching contributions are made in Cooper shares. Contributions to the Cooper Savings
Plan are
subject to annual limits established under the Internal Revenue Code. In 2009, an
individual employees contributions to the Cooper Savings Plan were limited to $16,500
(or $22,000 if the participant was at least 50 years old). |
|
|
|
|
The Supplemental Savings Plan is an unfunded, non-qualified plan that provides
certain employees, including the Named Executives, Cooper Savings Plan benefits that
cannot be provided through a qualified 401(k) Savings Plan because of Internal Revenue
Code restrictions and limitations. Participants in the Supplemental Savings Plan must
make contributions to the Cooper Savings Plan until reaching annual contribution limits
established under the Internal Revenue Code. Subsequent contributions by the
participant and the related Company matching contribution in the calendar year are then
credited to the individuals account in the Supplemental Savings Plan. Employee and
Company matching contributions to the Supplemental Savings Plan are fully vested
immediately. Participants receive interest credits on all amounts credited to their
account based on the average prime rate. |
Effective January 1, 2007 the Company made significant changes to its retirement benefits
program. These changes impacted all members of Coopers salaried workforce in the United States
including the Named Executives. The retirement modifications involve cessation of accruals or a
freeze of benefits under three of Coopers four retirement plans, i.e. the Cooper Pension Plan,
the Supplemental Pension Plan and the Supplemental Savings Plan. To offset this benefit reduction,
Cooper increased its matching contribution to the Cooper Savings Plan to 100% of the first 6%
contributed by an employee and added a basic 3% company contribution to all participant accounts.
The basic 3% company contribution is 25% vested after two years, 50% vested after three years, 75%
vested after four years and fully vested after five years. In June 2009 the Company reduced its
matching contribution from 100% to 50% of the first 6% contributed by an employee.
The decision to freeze the Cooper Pension Plan, the Supplemental Pension Plan and the
Supplemental Savings Plan also adversely impacted Coopers executive officers including the Named
Executives. A portion of this adverse impact was offset by improvements in Company matching
contributions to the Cooper Savings Plan as described above. To offset the remainder of the
benefit reduction, the Committee created a new Supplemental Executive Retirement Plan (SERP)
under which the individuals account is credited with a designated contribution percentage of
their total compensation for the prior year. The Committee approves the SERP contribution
percentage for all executive officers annually. Benefits under the SERP are subject to a
five-year vesting requirement.
Because of the cessation of accruals under the Cooper Pension Plan, the Supplemental Pension
Plan and the Supplemental Savings Plan, participants will not receive any additional benefit
credits under these plans effective January 1, 2007. Individual plan accounts will continue to
receive interest credits in accordance with prior practice until the participant elects to
commence benefits in accordance with plan terms and conditions.
Executive officers, including the Named Executives, are also eligible to participate in the
Salary Deferral Plan, which permits the participant to defer up to 50% of their base salary.
Cooper does not match employee deferrals and the employees total annual compensation is reduced
by the amount of other contributions to the Salary Deferral Plan for the purpose of determining
compensation under the Cooper Savings Plan. Salary deferrals under the Plan are credited with
interest at the average prime rate.
Welfare Benefits
All executive officers, including the Named Executives, are eligible to participate in the
Companys welfare benefits plans including: medical, dental, life insurance, short-term
disability, and long-term disability. Executives participate in these plans on the same basis and
subject to the same costs, terms and conditions as other salaried employees at their assigned
location.
Perquisites
Before 2008 Cooper provided a taxable allowance for senior management for financial
counseling services, which included tax preparation and estate planning services, and the cost of
electronic communication devices. The amount of the taxable allowance was $25,000 for the Chairman
and CEO and up to $10,000 for other senior management including the other Named Executives. Before
2008, executives also received gross-up payments equal to the taxes payable on the costs covered
by the allowance.
24
Beginning in 2008 Cooper changed its executive perquisites program to eliminate the allowance
for financial counseling services and electronic communication devices. In lieu of this
allowance, a set annual amount approved by the Committee is paid to the executive and can be used
at the individual executives discretion. The annual payment does not qualify for a tax gross-up.
For 2009, the amount of the perquisite payment for the Chairman and CEO was $50,000 and up to
$25,000 for other senior management including the other Named Executives. Generally, Cooper does
not provide country club memberships to its executives, except in limited circumstances Cooper has
paid the initiation fee for a club membership as a perquisite for certain executives. There were
no exceptions to this policy in 2009. In addition, the Chairman and CEO (and other senior
executives upon approval of the Chairman and CEO) may use the Company plane for personal purposes.
Impact of Economic and Credit Crisis on Compensation Practices
In light of the impact of the severe economic and credit crisis that developed in the latter
part of 2008 the Company took the following measures relating to executive compensation to control
costs while driving financial performance and retaining the management talent necessary to achieve
strategic goals.
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Imposed a salary freeze in 2009. |
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|
Reduced the Companys matching contribution to the Cooper Savings Plan from 6% to
3%. |
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|
With regard to 2009 annual incentive compensation, the Committee approved changing
the relative weight on 2009 performance goals to 50% earnings per share and 50% free
cash flow in order to emphasize the importance of cash and effective management of the
Companys balance sheet during a recessionary environment. (In 2008 the relative
weight of the 2008 performance goals was 75% on earnings per share and 25% on free
cash flow). |
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|
Although the global economic downturn depressed the stock prices of many public
companies including Cooper, we did not reprice or exchange any underwater stock
options. |
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|
Performance share awards granted in 2009 provided a reduced level of award
opportunity. Also, establishing meaningful performance goals for the three-year
performance period beginning on January 1, 2009 and ending on December 31, 2011 would
have been difficult in light of the economic uncertainty and volatility resulting from
the global economic crisis. Accordingly, performance share awards were based on a
discrete financial metric over a one-year period, but require an additional two-year
service vesting period as a retention incentive for executives. Beginning in 2010,
Cooper plans to return to its prior model of basing performance shares on a three-year
performance period and include additional performance metrics to further align the
program with key objectives and shareholders interests. |
Stock Ownership Guidelines and Retention Requirements
All executive officers are subject to Stock Ownership Guidelines and Retention Requirements
under which they must acquire Cooper shares valued at a multiple of their base salary as follows:
|
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|
|
Position |
|
Salary Multiple |
CEO |
|
|
5.0x |
|
Senior or Executive Vice Presidents |
|
|
3.5x |
|
Other Officers and Division Presidents |
|
|
2.0x |
|
Executives subject to the Stock Ownership Guidelines have five years from appointment to their
executive position to comply and are expected to make regular progress towards that goal. To ensure
this occurs, executive officers must retain a portion of stock acquired as a result of an equity
grant from Cooper for a prescribed length of time.
|
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|
Executives not yet in full compliance with Stock Ownership Guidelines must retain
75% of net shares (shares remaining after acquisition costs and payment of taxes)
until they own sufficient shares to meet the Ownership Guidelines. |
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|
Other executives are required to retain 25% of net shares for at least one year
after acquisition. |
The Committee believes that these Stock Ownership Guidelines and Retention Requirements are
an important component of the equity-based incentive compensation program because it ensures that
executive officers have a significant and ongoing financial stake in Coopers long-term
performance. At its April 2009 meeting, the Committee reviewed the status of covered executives
relative to compliance with the Stock Ownership Guidelines
25
and Retention
Requirements and determined that all the Named Executives are in compliance or are making
satisfactory progress within the five-year period to achieve compliance.
Tax Implications of Executive Compensation
Section 162(m) of the Internal Revenue Code imposes a limit, with certain exceptions, on the
amount that a publicly held corporation may deduct in any year for the compensation paid to its CEO
and three other most highly compensated officers other than the CFO. The Committee believes that
the annual incentive bonuses paid pursuant to the Bonus Plan and the awards and options granted
pursuant to the Stock Plan will qualify as performance-based compensation and will meet the
requirements of the current tax law and Internal Revenue Service regulations so as to preserve the
tax deductibility of the executive compensation paid pursuant to such plans. However, we may from
time to time pay compensation to our senior executives that may not be deductible, including
discretionary bonuses or other types of compensation outside our plans.
Although the Committee generally attempts to structure executive compensation to preserve tax
deductibility, the Committee also believes that there are circumstances where, in the judgment of
the Committee and consistent with the overall compensation objectives and philosophy discussed
above, the interests of Cooper and its shareholders are best served by maintaining flexibility in
the way compensation is provided even though the compensation may not be fully deductible.
26
2009 SUMMARY COMPENSATION
The following table presents information relating to the compensation earned by the CEO and
other Named Executives for services rendered to Cooper.
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Change in |
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Pension |
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Value and |
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Non- |
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Non- |
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Equity |
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qualified |
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Incentive |
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Deferred |
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Plan |
|
Compen- |
|
All Other |
|
|
|
|
|
|
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|
|
|
|
|
Stock |
|
Option |
|
Compen- |
|
sation |
|
Compen- |
|
|
Name and |
|
|
|
|
|
Salary |
|
Bonus(5) |
|
Awards(1) |
|
Awards(1) |
|
sation(5) |
|
Earnings(6) |
|
sation(7)(8) |
|
Total |
Principal Position |
|
Year |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
|
(a) |
|
(b) |
|
(c) |
|
(d) |
|
(e) |
|
(f) |
|
(g) |
|
(h) |
|
(i) |
|
(i) |
|
Hachigian, K.S. |
|
|
2009 |
|
|
$ |
1,200,000 |
|
|
$ |
270,400 |
|
|
$ |
3,065,518 |
(2) |
|
$ |
2,856,767 |
|
|
$ |
2,279,600 |
|
|
$ |
3,191 |
|
|
$ |
1,080,768 |
|
|
$ |
10,756,244 |
|
Chairman, President |
|
|
2008 |
|
|
|
1,166,667 |
|
|
|
0 |
|
|
|
7,117,810 |
(3) |
|
|
2,635,735 |
|
|
|
2,500,000 |
|
|
|
4,212 |
|
|
|
1,135,341 |
|
|
|
14,559,765 |
|
and Chief Executive |
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|
2007 |
|
|
|
1,083,333 |
|
|
|
161,200 |
|
|
|
8,765,086 |
(4) |
|
|
2,649,808 |
|
|
|
2,838,800 |
|
|
|
27,814 |
|
|
|
836,035 |
|
|
|
16,362,076 |
|
Officer |
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Klebe, T.A. |
|
|
2009 |
|
|
|
565,000 |
|
|
|
97,800 |
|
|
|
606,690 |
(2) |
|
|
565,496 |
|
|
|
652,200 |
|
|
|
10,157 |
|
|
|
271,868 |
|
|
|
2,769,211 |
|
Senior Vice |
|
|
2008 |
|
|
|
553,333 |
|
|
|
0 |
|
|
|
1,492,530 |
(3) |
|
|
552,866 |
|
|
|
800,000 |
|
|
|
1,559 |
|
|
|
261,676 |
|
|
|
3,661,964 |
|
President and Chief |
|
|
2007 |
|
|
|
522,500 |
|
|
|
37,900 |
|
|
|
1,485,297 |
(4) |
|
|
567,816 |
|
|
|
812,100 |
|
|
|
44,702 |
|
|
|
241,942 |
|
|
|
3,712,257 |
|
Financial Officer |
|
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|
|
Stoessl, M.A. |
|
|
2009 |
|
|
|
410,000 |
|
|
|
0 |
|
|
|
325,013 |
(2) |
|
|
302,945 |
|
|
|
320,000 |
|
|
|
2,067 |
|
|
|
173,300 |
|
|
|
1,533,325 |
|
Group President, |
|
|
2008 |
|
|
|
402,833 |
|
|
|
0 |
|
|
|
795,780 |
(3) |
|
|
294,862 |
|
|
|
320,000 |
|
|
|
751 |
|
|
|
172,800 |
|
|
|
1,987,026 |
|
Cooper Power |
|
|
2007 |
|
|
|
383,875 |
|
|
|
0 |
|
|
|
696,806 |
(4) |
|
|
264,981 |
|
|
|
466,000 |
|
|
|
14,505 |
|
|
|
167,723 |
|
|
|
1,993,890 |
|
Systems |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schrimsher, N.A. |
|
|
2009 |
|
|
|
400,000 |
|
|
|
0 |
|
|
|
325,013 |
(2) |
|
|
302,945 |
|
|
|
335,000 |
|
|
|
423 |
|
|
|
132,370 |
|
|
|
1,495,751 |
|
Executive Vice
President, Cooper
Connection and
President, Cooper
Lighting |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taten, B.M. |
|
|
2009 |
|
|
|
400,000 |
|
|
|
0 |
|
|
|
343,213 |
(2) |
|
|
319,775 |
|
|
|
325,000 |
|
|
|
0 |
|
|
|
93,623 |
|
|
|
1,481,611 |
|
Senior Vice
President, General
Counsel and Chief
Compliance Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The amounts shown in columns (e) and (f) above is the aggregate grant date fair value
related to the stock and option awards computed in accordance with FASB ASC Topic 718. See
Coopers Annual Reports for the years ended December 31, 2007-2009 for a description of the
valuations per FASB ASC Topic 718. The awards consist of stock options, performance shares and
restricted stock units granted to the Named Executives under the Amended and Restated Stock
Incentive Plan. |
|
(2) |
|
Represents the performance-based share awards for the three-year period beginning on January
1, 2009. In February 2010, the Management Development and Compensation Committee determined
that Cooper achieved the one-year performance criteria. The earned awards require an
additional two-year vesting period that expires in February 2012. |
|
(3) |
|
Represents the performance-based share grants for the performance period beginning on January
1, 2008 and ending on December 31, 2010. The value of the awards shown in the table above
assumes payout at the maximum level of performance. For purposes of determining compensation
expense under FASB ASC Topic 718, management has estimated that all of the performance-based
share grants for this three-year period will be |
27
|
|
|
|
|
forfeited. If these estimated forfeitures were taken into account in determining the value of these grants
at December 31, 2009, the respective values for these performance share grants would be zero as
compared to the amounts shown in column (e) above. |
|
(4) |
|
Represents the performance-based share grants for the performance period beginning on January
1, 2007 and ending December 31, 2009. The amount for K.S. Hachigian also includes a grant date
fair value of $1,833,700 relating to a grant of 40,000 restricted stock units. The grant date
fair value of the awards shown in the table above assumes payout at the maximum level of
performance. In February 2010, the Management Development and Compensation Committee of the
Board of Directors determined that Cooper achieved the performance objectives at 56.1% of the
maximum level. If these forfeitures were taken into account in determining the value of these
grants based on the closing market price for Cooper stock of $42.64 per share at December 31,
2009, the respective values of these performance share and restricted stock unit grants would
be as follows as compared to the amounts shown in column (e) above: K.S. Hachigian
$5,322,453; T.A. Klebe $775,025; and M.A. Stoessl $363,591. For a more detailed
discussion see Compensation Discussion and Analysis Performance-based Share Awards. |
|
(5) |
|
The amounts shown in column (g) represent annual incentive bonuses earned by the Named
Executives under the Management Annual Incentive Plan or Bonus Plan. The amounts shown in
column (d) represent supplemental bonuses paid outside the Bonus Plan for 2007 and 2009. See
Compensation Discussion and Analysis Annual Incentive Compensation for further details. |
|
(6) |
|
The amounts shown in column (h) represent the change in the actuarial present value of
accumulated benefits under the Cooper Pension Plan, which has been frozen. For 2008 the
amounts shown represent above-market earnings under the Supplemental Executive Retirement Plan
and do not reflect the following decreases in the actuarial present value of the Named
Executives accumulated benefit under the Cooper Pension Plan: K.S. Hachigian $17,189; T.A.
Klebe $44,400; and M.A. Stoessl $11,945. The decrease in compensation from 2007 to 2008
relating to the change in pension values is attributable to a reduction in the assumed rate of
interest earnings to be credited to the account balance of each Named Executive and an
increase in the discount rate. |
|
(7) |
|
The breakdown of All Other Compensation is set forth in the table below. The dividend
equivalents represent amounts paid on restricted stock units and earned performance shares. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental |
|
|
|
|
|
|
|
|
|
Personal |
|
|
|
|
|
|
|
|
|
|
Contributions to |
|
Defined |
|
|
|
|
|
|
|
|
|
Use of |
|
|
|
|
|
|
Dividend |
|
Cooper Savings |
|
Contribution |
|
|
|
|
|
Tax Gross-Up |
|
Company |
Name |
|
Year |
|
Equivalents |
|
Plan |
|
Plans |
|
Perquisites(8) |
|
Payments(8) |
|
Aircraft(8) |
|
Hachigian, K.S. |
|
|
2009 |
|
|
$ |
432,160 |
|
|
$ |
22,050 |
|
|
$ |
435,000 |
|
|
$ |
53,637 |
|
|
$ |
10,343 |
|
|
$ |
127,578 |
|
|
|
|
2008 |
|
|
|
409,600 |
|
|
|
20,700 |
|
|
|
425,333 |
|
|
|
50,000 |
|
|
|
16,532 |
|
|
|
213,176 |
|
|
|
|
2007 |
|
|
|
170,588 |
|
|
|
20,250 |
|
|
|
473,667 |
|
|
|
3,685 |
|
|
|
2,114 |
|
|
|
165,731 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Klebe, T.A. |
|
|
2009 |
|
|
|
89,681 |
|
|
|
22,050 |
|
|
|
131,500 |
|
|
|
28,637 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
2008 |
|
|
|
80,643 |
|
|
|
20,700 |
|
|
|
135,333 |
|
|
|
25,000 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
2007 |
|
|
|
84,492 |
|
|
|
20,250 |
|
|
|
137,200 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stoessl, M.A. |
|
|
2009 |
|
|
|
61,280 |
|
|
|
22,050 |
|
|
|
64,970 |
|
|
|
25,000 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
2008 |
|
|
|
61,888 |
|
|
|
20,700 |
|
|
|
64,332 |
|
|
|
25,500 |
|
|
|
380 |
|
|
|
0 |
|
|
|
|
2007 |
|
|
|
54,668 |
|
|
|
20,250 |
|
|
|
75,639 |
|
|
|
9,750 |
|
|
|
7,416 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schrimsher, N.A. |
|
|
2009 |
|
|
|
20,640 |
|
|
|
22,050 |
|
|
|
64,680 |
|
|
|
25,000 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taten, B.M. |
|
|
2009 |
|
|
|
0 |
|
|
|
7,350 |
|
|
|
58,000 |
|
|
|
28,273 |
|
|
|
0 |
|
|
|
0 |
|
28
(8) |
|
Perquisites and other personal benefits included in column (i) are valued on the basis of
the aggregate incremental cost to Cooper. Before 2008, Cooper provided the Named Executives
with a perquisite allowance to cover financial counseling, tax preparation and similar
services the value of which is based on the actual cost of such services charged by a third
party. The Named Executives also received tax gross-up payments on the costs covered by the
allowance. In 2008, the perquisite allowance for such services and the related tax gross-up
were eliminated. (The tax gross-up payments for Mr. Stoessl relates to perquisites provided
in 2007 under the prior program that were not submitted for reimbursement by the Named
Executive until 2008.) In lieu of the perquisite allowance, the CEO now receives a set annual
allowance of $50,000 and the other Named Executives receive a set annual allowance of $25,000
to be used at their discretion. Certain executives also received paid parking as a
perquisite. For personal use of Coopers aircraft, the value takes into account incremental
operating costs including fuel, landing fees, crew travel expenses and catering. Because our
aircraft is used primarily for business travel, we do not include fixed costs that do not
change based on usage such as salaries and benefits of flight crews, taxes, depreciation and
insurance. The CEO only receives tax gross-up payments on the value of the personal use of
company aircraft in limited circumstances when personal use also advances Coopers business
interest such as when the CEO uses company aircraft to attend Board meetings of other
companies or organizations and when the CEOs spouse accompanies him on occasional business
functions that spouses are expected to attend. |
29
2009 GRANTS OF PLAN-BASED AWARDS
The following table includes information regarding stock option grants made to the Named
Executives in the last fiscal year including the number of shares subject to the stock options, the
exercise price and the grant date fair value of the stock options. The table also includes
information regarding potential future payouts under Coopers non-equity and equity incentive
plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All |
|
All other Option |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
Awards: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
Number |
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts Under |
|
Estimated Future |
|
Awards: |
|
of |
|
Exercise |
|
|
|
|
|
|
|
|
Non-Equity Incentive Plan |
|
Payouts Under Equity |
|
Number |
|
Securities |
|
or Base |
|
Grant Date |
|
|
|
|
|
|
Awards(1) |
|
Incentive Plan Awards(2) |
|
of Shares |
|
Under- |
|
Price of |
|
Fair Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thres- |
|
|
|
|
|
Maxi- |
|
of Stock |
|
lying |
|
Option |
|
of Stock |
|
|
Grant |
|
Thres- |
|
Target(3) |
|
Maxi- |
|
hold |
|
Target |
|
mum |
|
or Units |
|
Options |
|
Awards |
|
and Option |
Name |
|
Date |
|
hold ($) |
|
($) |
|
mum ($) |
|
(#) |
|
(#) |
|
(#) |
|
(#) |
|
(#) |
|
($/Sh)(4) |
|
Awards(5) |
|
(a) |
|
(b) |
|
(c) |
|
(d) |
|
(e) |
|
(f) |
|
(g) |
|
(h) |
|
(i) |
|
(j) |
|
(k) |
|
(l) |
|
Hachigian, K.S. |
|
|
2/8/09 |
|
|
$ |
749,900 |
|
|
$ |
2,249,600 |
|
|
$ |
2,999,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
|
2/8/09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106,110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3,065,518 |
|
|
|
|
2/8/09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
424,350 |
|
|
$ |
28.89 |
|
|
$ |
2,856,767 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Klebe, T.A. |
|
|
2/8/09 |
|
|
$ |
214,600 |
|
|
$ |
643,700 |
|
|
$ |
858,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
|
2/8/09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
606,690 |
|
|
|
|
2/8/09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84,000 |
|
|
$ |
28.89 |
|
|
$ |
565,496 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stoessl, M.A. |
|
|
2/8/09 |
|
|
$ |
126,600 |
|
|
$ |
379,900 |
|
|
$ |
506,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
|
2/8/09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
325,013 |
|
|
|
|
2/8/09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000 |
|
|
$ |
28.89 |
|
|
$ |
302,945 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schrimsher, N.A. |
|
|
2/8/09 |
|
|
$ |
116,100 |
|
|
$ |
348,200 |
|
|
$ |
464,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
|
2/8/09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
325,013 |
|
|
|
|
2/8/09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000 |
|
|
$ |
28.89 |
|
|
$ |
302,945 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taten, B.M. |
|
|
2/8/09 |
|
|
$ |
125,800 |
|
|
$ |
377,500 |
|
|
$ |
503,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
|
2/8/09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,880 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
343,213 |
|
|
|
|
2/8/09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,500 |
|
|
$ |
28.89 |
|
|
$ |
319,775 |
|
|
|
|
(1) |
|
Represents annual incentive compensation bonus opportunities for fiscal year 2009
available to Named Executives under the terms of the Management Annual Incentive Plan or
Bonus Plan. For fiscal year 2009, earnings per share from continuing operations of $3.00 and
free cash flow of 120% of income from continuing operations is required for performance at the
maximum level with 50% of the bonus opportunity based on earnings per share and 50% based on
free cash flow. The actual awards earned by the Named Executives for fiscal year 2009 are set
forth in column (g) of the Summary Compensation Table. See Compensation Discussion and
Analysis Annual Incentive Compensation for further details. |
|
(2) |
|
Represents long-term incentive awards granted in 2009 to the Named Executives under the
Amended and Restated Stock Incentive Plan or Stock Plan. These performancebased share
awards may be earned based on achieving a net-debt to EBITDA ratio of two or less for fiscal
year 2009 to drive maintaining a strong balance sheet and liquidity during the economic
crisis. Failure to achieve this ratio will result in 100% forfeiture of the potential awards.
Any award earned also requires satisfaction of a three-year vesting period that expires in
February 2012. Upon distribution of any performance shares earned by the executive, Cooper
shall pay the executive an amount in cash equal to the aggregate amount of cash dividends the
executive would have received had the executive been the record owner of the earned
performance shares over the performance period. Dividend equivalents are calculated based on
the same dividend rate that applies to Coopers outstanding ordinary shares. See Compensation
Discussion and Analysis Performance-based Share Awards for further details. |
30
|
|
|
(3) |
|
Cooper bases its target performance level on stretch performance goals that provide a
bonus opportunity at approximately 75% of the maximum bonus opportunity. |
|
(4) |
|
The exercise price of each option is equal to the fair market value of Coopers ordinary
shares on the date of the grant, which is the closing price on the grant date. The options
become one-third exercisable one year after the grant date, two-thirds exercisable two years
after the grant date, and fully exercisable three years after the grant date. |
|
(5) |
|
The grant date fair value of the stock option awards is $6.7321 per share. The grant date
fair value of the performance-based shares is $28.89 per share. The grant date fair value for
the performance-based share awards assumes payout at the single level payout for satisfying
the performance criteria. See Coopers Annual Report for the year ended December 31, 2009 for
a description of the valuations under FASB ASC Topic 718. |
31
OUTSTANDING EQUITY AWARDS AT 2009 FISCAL YEAR-END(1)
The following table shows outstanding stock option awards classified as exercisable and
unexercisable as of December 31, 2009 for each Named Executive. The table also shows unvested and
unearned stock awards (both time-based awards and performance-contingent) assuming a market value
of $42.64 a share (the closing market price of Coopers stock on December 31, 2009).
|
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Option Awards |
|
Stock Awards |
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Equity |
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Incentive |
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Plan |
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Awards: |
|
Equity Incentive |
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|
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Number |
|
Market |
|
Number of |
|
Plan Awards: |
|
|
Number of |
|
Number of |
|
|
|
|
|
|
|
|
|
of Shares |
|
Value of |
|
Unearned |
|
Market or Payout |
|
|
Securities |
|
Securities |
|
|
|
|
|
|
|
|
|
or Units |
|
Shares or |
|
Shares Units |
|
Value of |
|
|
Underlying |
|
Underlying |
|
|
|
|
|
|
|
|
|
of Stock |
|
Units of |
|
or Other |
|
Unearned Shares, |
|
|
Unexercised |
|
Unexercised |
|
Option |
|
Option |
|
That |
|
Stock That |
|
Rights That |
|
Units or Other |
|
|
Options (#) |
|
Options (#) |
|
Exercise |
|
Expiration |
|
Have Not |
|
Have Not |
|
Have Not |
|
Rights that Have |
Name |
|
Exercisable |
|
Unexercisable |
|
Price ($) |
|
Date |
|
Vested(#) |
|
Vested ($) |
|
Vested (#) |
|
Not Vested ($) |
|
(a) |
|
(b)(2) |
|
(c)(2) |
|
(e)(4) |
|
(f) |
|
(g) |
|
(h) |
|
(i) |
|
(j) |
|
Hachigian, K.S. |
|
|
95,000 |
|
|
|
0 |
|
|
$ |
35.47 |
|
|
|
2/08/2012 |
|
|
|
40,000 |
(5) |
|
$ |
1,705,600 |
|
|
|
161,000 |
(7) |
|
$ |
6,865,040 |
(7) |
|
|
|
105,000 |
|
|
|
0 |
|
|
$ |
32.74 |
|
|
|
4/25/2012 |
|
|
|
84,823 |
(6) |
|
$ |
3,616,853 |
|
|
|
|
|
|
|
|
|
|
|
|
280,000 |
(3) |
|
|
0 |
|
|
$ |
41.19 |
|
|
|
2/13/2013 |
|
|
|
106,110 |
(8) |
|
$ |
4,524,530 |
|
|
|
|
|
|
|
|
|
|
|
|
186,666 |
|
|
|
93,334 |
|
|
$ |
47.16 |
|
|
|
2/16/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
107,266 |
|
|
|
214,534 |
|
|
$ |
44.21 |
|
|
|
2/11/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
424,350 |
|
|
$ |
28.89 |
|
|
|
2/08/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Klebe, T.A. |
|
|
93,868 |
|
|
|
0 |
|
|
$ |
17.61 |
|
|
|
2/29/2012 |
|
|
|
18,176 |
(6) |
|
$ |
775,025 |
|
|
|
33,760 |
(7) |
|
$ |
1,439,526 |
(7) |
|
|
|
60,800 |
|
|
|
0 |
|
|
$ |
35.47 |
|
|
|
2/08/2012 |
|
|
|
21,000 |
(8) |
|
$ |
895,440 |
|
|
|
|
|
|
|
|
|
|
|
|
60,800 |
|
|
|
0 |
|
|
$ |
41.19 |
|
|
|
2/13/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000 |
|
|
|
20,000 |
|
|
$ |
47.16 |
|
|
|
2/16/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,500 |
|
|
|
45,000 |
|
|
$ |
44.21 |
|
|
|
2/11/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
84,000 |
|
|
$ |
28.89 |
|
|
|
2/08/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stoessl, M.A. |
|
|
1,268 |
|
|
|
0 |
|
|
$ |
14.73 |
|
|
|
8/06/2012 |
|
|
|
20,000 |
(5) |
|
$ |
852,800 |
|
|
|
18,000 |
(7) |
|
$ |
767,520 |
(7) |
|
|
|
32,000 |
|
|
|
0 |
|
|
$ |
35.47 |
|
|
|
2/08/2012 |
|
|
|
8,527 |
(6) |
|
$ |
363,591 |
|
|
|
|
|
|
|
|
|
|
|
|
28,000 |
|
|
|
0 |
|
|
$ |
41.19 |
|
|
|
2/13/2013 |
|
|
|
11,250 |
(8) |
|
$ |
479,700 |
|
|
|
|
|
|
|
|
|
|
|
|
18,666 |
|
|
|
9,334 |
|
|
$ |
47.16 |
|
|
|
2/16/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,000 |
|
|
|
24,000 |
|
|
$ |
44.21 |
|
|
|
2/11/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
45,000 |
|
|
$ |
28.89 |
|
|
|
2/08/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schrimsher, N.A. |
|
|
20,000 |
|
|
|
0 |
|
|
$ |
46.78 |
|
|
|
5/22/2013 |
|
|
|
15,000 |
(5) |
|
$ |
639,600 |
|
|
|
18,000 |
(7) |
|
$ |
767,520 |
(7) |
|
|
|
16,000 |
|
|
|
8,000 |
|
|
$ |
47.16 |
|
|
|
2/16/2014 |
|
|
|
7,181 |
(6) |
|
$ |
306,198 |
|
|
|
|
|
|
|
|
|
|
|
|
12.000 |
|
|
|
24,000 |
|
|
$ |
44.21 |
|
|
|
2/11/2015 |
|
|
|
11,250 |
(8) |
|
$ |
479,700 |
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
45,000 |
|
|
$ |
28.89 |
|
|
|
2/08/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taten, B.M. |
|
|
8,000 |
|
|
|
16,000 |
|
|
$ |
28.60 |
|
|
|
11/10/2015 |
|
|
|
10,000 |
(5) |
|
$ |
426,400 |
|
|
|
12,000 |
(7) |
|
$ |
511,680 |
(7) |
|
|
|
0 |
|
|
|
47,500 |
|
|
$ |
28.89 |
|
|
|
2/08/2016 |
|
|
|
11,880 |
(8) |
|
$ |
506,563 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Column (d) Equity Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options has been omitted since there are no items to report. |
|
(2) |
|
Options become one-third exercisable one year after the grant date, two-thirds exercisable
two years after the grant date, and fully exercisable three years after the grant date. |
|
(3) |
|
The 280,000 stock options were granted to Mr. Hachigian in 2006 to recognize his new position
as Coopers Chairman, CEO and President. |
|
(4) |
|
The exercise price of each option is equal to the fair market value of Coopers ordinary
shares on the date of grant of the options, which is the average of the high and low sales
price on the grant date for grants prior to 2007 and the closing price for grants in 2007 and
thereafter. |
|
(5) |
|
Represents restricted stock units granted to the Named Executive. In February 2007, Mr.
Hachigian received a grant of 40,000 restricted stock units which vest in February 2012. In
February 2005, Mr. Stoessl received a grant of 20,000 restricted stock units which vest in
February 2010. In February 2008, Mr. Schrimsher received a grant of 15,000 restricted stock
units which vest in February 2013. In November 2008, Mr. Taten received a grant of 10,000
restricted stock units which vest in November 2013. The restricted stock units granted to
Mr. Taten replace equity compensation forfeited upon his resignation from his prior employer.
Depending on
the specific award, dividend equivalents are payable on restricted stock units either on the
dividend payment |
32
|
|
|
|
|
date or upon the date when the stock restrictions lapse. Dividend equivalents are calculated
based on the same
dividend rate that applies to Coopers outstanding ordinary shares. |
|
(6) |
|
Represents the earned performance-based share awards for the three-year performance period
beginning on January 1, 2007 and ending on December 31, 2009. In February 2010, the Management
Development and Compensation Committee of the Board of Directors determined that Cooper
achieved the performance objectives at 56.1% of the maximum level. These performance shares
vested on February 14, 2010. See Compensation Discussion and Analysis Performance-based
Share Awards for further details. |
|
(7) |
|
Represents the performance-based share grants for the performance period beginning on January
1, 2008 and ending on December 31, 2010. The value of the awards shown in the table above
assumes payout at the maximum level of performance. For purposes of determining compensation
expense under FASB ASC Topic 718, management has estimated that all of the performance-based
share grants for this three-year period will be forfeited. If these estimated forfeitures
were taken into account in determining the value of these grants at December 31, 2008, the
respective values for these performance share grants would be zero as compared to the amounts
shown in column (j) above. |
|
(8) |
|
Represents the performance-based share awards for the three-year period beginning on January
1, 2009. In February 2010, the Management Development and Compensation Committee determined
that Cooper achieved the one-year performance criteria. The earned awards also require
satisfaction of an additional two-year service vesting period that expires in February 2012. |
33
2009 OPTION EXERCISES AND STOCK VESTED
The following table sets forth information regarding options and stock awards exercised and
vested, respectively, during 2009 for the Named Executives.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
Stock Awards |
|
|
Number of Shares |
|
Value Realized on |
|
Number of Shares |
|
Value Realized on |
Name |
|
Acquired on Exercise (#) |
|
Exercise ($) |
|
Acquired on Vesting (#) |
|
Vesting ($) |
(a) |
|
(b) |
|
(c) |
|
(d) |
|
(e) |
|
Hachigian, K.S. |
|
|
280,000 |
|
|
$ |
5,523,926 |
|
|
|
152,000 |
(1) |
|
$ |
4,391,280 |
|
Klebe, T.A. |
|
|
142,800 |
|
|
$ |
2,677,736 |
|
|
|
34,760 |
(1) |
|
$ |
1,004,216 |
|
Stoessl, M.A. |
|
|
18,668 |
|
|
$ |
296,340 |
|
|
|
16,000 |
(1) |
|
$ |
462,240 |
|
Schrimsher, N.A. |
|
|
0 |
|
|
|
0 |
|
|
|
8,000 |
|
|
$ |
226,320 |
|
Taten, B.M. |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
(1) |
|
Amount shown represents performance-based share awards for the three-year performance
period beginning on January 1, 2006 and ending on December 31, 2008, which vested on
February 8, 2009. |
34
2009 PENSION BENEFITS
The following table discloses the years of credited service of the actuarial present value of
the accrued benefits for, and payments during the last fiscal year to each of the Named Executives
under the Cooper Pension Plan and Supplemental Excess Defined Benefit Plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number |
|
Present |
|
|
|
|
|
|
|
|
of Years |
|
Value of |
|
Payments |
|
|
|
|
|
|
Credited |
|
Accumulated |
|
During Last |
|
|
|
|
|
|
Service |
|
Benefit(2) |
|
Fiscal Year |
Name |
|
Plan Name(1) |
|
(#) |
|
($) |
|
($) |
(a) |
|
(b) |
|
(c) |
|
(d) |
|
(e) |
|
Hachigian, K.S. |
|
Cooper Pension Plan |
|
|
5.7 |
|
|
$ |
73,996 |
|
|
$ |
0 |
|
Klebe, T.A. |
|
Cooper Pension Plan |
|
|
11.7 |
|
|
|
209,900 |
|
|
|
0 |
|
Stoessl, M.A. |
|
Cooper Pension Plan |
|
|
4.4 |
|
|
|
48,748 |
|
|
|
0 |
|
Schrimsher, N.A. |
|
Cooper Pension Plan |
|
|
1.0 |
|
|
|
9,670 |
|
|
|
0 |
|
Taten, B.M. |
|
Cooper Pension Plan |
|
|
|
|
|
|
0 |
|
|
|
0 |
|
|
|
|
(1) |
|
See Compensation Discussion and Analysis Retirement Benefits for a discussion of the
terms of the Cooper Pension Plan. |
|
(2) |
|
The present value of the accumulated pension benefits is computed on the same basis and using
the same assumptions that Cooper uses for financial statement reporting purposes. For further
details, see Note 14 -Pension and Other Postretirement Benefits to Coopers consolidated
financial statements as set forth in Coopers Annual Report on Form 10-K for the period ended
December 31, 2009. |
35
2009 NONQUALIFIED DEFERRED COMPENSATION
Various Cooper executives, including the Named Executives, may elect to defer all or a portion
of the annual incentive awards earned under the Bonus Plan and stock awards earned under the Stock
Plan. Any cash deferrals are credited annually with interest at the average prime rate. Any stock
deferrals are credited with dividend equivalents at the same rate as dividends are paid on Cooper
ordinary shares. Deferrals under the Bonus Plan and Stock Plan are unfunded deferred compensation
arrangements. Amounts credited to an executives deferred compensation account are distributed
either as a lump sum payment or in installments based on deferral elections made by the executive
in accordance with Section 409A of the Internal Revenue Code.
Executives also earn deferred compensation under the Supplemental Executive Retirement Plan
and Salary Deferral Plan and continue to receive interest credits on account balances under the
Supplemental Savings Plan, which was frozen effective December 31, 2006. See Compensation
Discussion and Analysis Retirement Benefits for further details regarding these plans.
The following table discloses contributions, earnings and balances for each of the Named
Executives under the nonqualified deferred compensation arrangements discussed above.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate |
|
|
Executive |
|
Registrant |
|
Aggregate |
|
Aggregate |
|
Balance at |
|
|
Contributions |
|
Contributions |
|
Earnings in |
|
Withdrawals/ |
|
Last Fiscal |
|
|
in Last Fiscal |
|
in Last Fiscal |
|
Last Fiscal |
|
Distributions |
|
Year End |
Name |
|
Year ($) |
|
Year ($) |
|
Year ($) |
|
($) |
|
($) |
(a) |
|
(b) |
|
(c) |
|
(d) |
|
(e) |
|
(f) |
Hachigian, K.S. |
|
$ |
0 |
|
|
$ |
425,333 |
|
|
$ |
85,895 |
|
|
$ |
0 |
|
|
$ |
2,829,087 |
|
Klebe, T.A. |
|
|
0 |
|
|
|
135,333 |
|
|
|
542,702 |
(1) |
|
|
494,346 |
|
|
|
5,119,012 |
|
Stoessl, M.A. |
|
|
82,000 |
|
|
|
64,332 |
|
|
|
28,425 |
|
|
|
0 |
|
|
|
960,722 |
|
Schrimsher, N.A. |
|
|
40,000 |
|
|
|
63,155 |
|
|
|
8,094 |
|
|
|
0 |
|
|
|
292,766 |
|
Taten, B.M. |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
(1) |
|
Aggregate earnings in the last fiscal year includes appreciation in the value of Cooper
ordinary shares relating to earned stock awards that were deferred by Mr. Klebe. |
36
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Change in Control Arrangements
Management Continuity Agreements
Cooper has Management Continuity Agreements with the Named Executives and certain other key
executives. The purpose of the agreements is to encourage the executives to carry out their duties
when there is a possibility of a change in control of Cooper. The agreements are not ordinary
employment agreements and do not provide any assurance of continued employment.
If, during the two-year period following a change in control, Cooper or its successor
terminates the executives employment other than for cause or the executive voluntarily
terminates employment for good reason (as such terms are defined in the agreements), the
executive shall receive:
|
|
|
A lump-sum cash payment equal to a multiple (3x in the case of the Chief Executive
Officer and Senior and Executive Vice Presidents and 2x in the case of the other key
executives) of the sum of the executives salary and bonus under the Management Annual
Incentive Plan. For purposes of the lump sum cash payment, the bonus amount is based on the
higher of: (1) the average annual bonus earned with respect to the prior three fiscal
years, or (2) the target annual bonus under the Management Annual Incentive Plan for the
fiscal year in which the date of termination occurs or, if higher, the fiscal year of the
change in control. |
|
|
|
|
The continuation of life, disability, accident and health insurance benefits for the
number of years equal to the multiplier used to calculate the lump-sum severance payment,
provided that health insurance benefits may be provided for up to an additional five years
if such benefits are not available through another employer and the executive is under age
65. |
|
|
|
|
A pro rata payment of his or her target bonus for the year of termination. |
|
|
|
|
A lump sum payment equal to the incremental benefits and contributions that the
executive would have received under Coopers various retirement and savings plans for the
number of years equal to their multiplier, taking into account the severance benefits
received by the executive. |
|
|
|
|
Outplacement services for up to one year. |
|
|
|
|
A tax gross-up of any excise tax due under the Internal Revenue Code for these types of
agreements. |
Stock Incentive Plan
As described above under the caption Long-Term Equity Based Incentive Compensation, the
Named Executives have been granted stock options, restricted stock units and performance-based
share awards under the Stock Incentive Plan. This Plan provides that upon a change in control of
Cooper:
|
|
|
All options will be canceled and Cooper will make a cash payment to the Named Executives
equal to the difference in the fair market value of Cooper ordinary shares (or the highest
price actually paid for the stock in connection with the change in control, if higher) and
the option price. |
|
|
|
|
All outstanding performance shares will be deemed earned at the target level, all
restrictions will lapse on any outstanding restricted stock units, and the Named Executives
shall receive such form of consideration as they would have received had they been the
owner of record of the performance shares and the shares representing restricted stock
units at the time of the change in control plus a cash payment for any accrued dividends on
the performance shares and restricted stock units. |
2009 Potential Payments Upon Change In Control
The following table shows potential payments if, during the two-year period following a change
in control, a Named Executive is terminated (other than for cause) or voluntarily terminates
employment for good reason. The amounts shown assume that the termination was effective on
December 31, 2009, and are estimates that reflect the amounts that would be paid and the
incremental value of benefits that would be enhanced through accelerated vesting of options and
stock awards. The value of equity awards is based on Coopers closing market price of $42.64 on
December 31, 2009. As discussed above, outstanding option and stock awards are paid out upon a
change in control regardless of whether the Named Executive is terminated or voluntarily terminates
employment following the change in control. Also, in addition
to the amounts shown in the table below, the Named Executives would be
37
entitled to any vested
benefits including outstanding vested options and other awards shown in the Outstanding Equity
Awards at Fiscal-Year-End table, pension benefits reflected in the Pension Benefits Table and
balances under nonqualified deferred compensation plans shown in the Nonqualified Deferred
Compensation Table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement |
|
Welfare |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Savings |
|
Benefits |
|
|
|
|
|
|
Cash |
|
Pro rata |
|
Option |
|
Stock |
|
Plan |
|
and Out- |
|
Tax |
|
|
|
|
Severance(1) |
|
Bonus(2) |
|
Awards(3) |
|
Awards(4) |
|
Contributions(5) |
|
placement(6) |
|
Gross-up |
|
Total |
Name |
|
(a) |
|
(b) |
|
(c) |
|
(d) |
|
(e) |
|
(f) |
|
(g) |
|
(h) |
|
Hachigian, K.S. |
|
$ |
11,600,000 |
|
|
$ |
2,249,600 |
|
|
$ |
5,834,813 |
|
|
$ |
16,883,952 |
|
|
$ |
1,389,699 |
|
|
$ |
179,550 |
|
|
$ |
10,471,696 |
|
|
$ |
48,609,310 |
|
Klebe, T.A. |
|
|
4,145,000 |
|
|
|
643,700 |
|
|
|
1,155,000 |
|
|
|
3,151,889 |
|
|
|
458,601 |
|
|
|
181,620 |
|
|
|
0 |
|
|
|
9,735,810 |
|
Stoessl, M.A. |
|
|
1,610,667 |
|
|
|
379,900 |
|
|
|
618,750 |
|
|
|
2,464,862 |
|
|
|
172,750 |
|
|
|
138,248 |
|
|
|
0 |
|
|
|
5,385,177 |
|
Schrimsher, N.A. |
|
|
1,496,400 |
|
|
|
348,200 |
|
|
|
618,750 |
|
|
|
2,199,798 |
|
|
|
161,084 |
|
|
|
137,678 |
|
|
|
1,502,967 |
|
|
|
6,464,877 |
|
Taten, B.M. |
|
|
2,337,000 |
|
|
|
379,000 |
|
|
|
877,765 |
|
|
|
1,225,183 |
|
|
|
231,060 |
|
|
|
162,648 |
|
|
|
1,670,289 |
|
|
|
6,882,945 |
|
|
|
|
(1) |
|
Amounts shown in column (a) represent a cash payment equal to a multiple (3X in the case
of Messrs. Hachigian, Klebe and Taten and 2X in the case of Messrs. Stoessl and Schrimsher) of
the Named Executives salary and annual incentive bonus. |
|
(2) |
|
Amounts shown in column (b) represent payment of the Named Executives pro rata target bonus
for the year of termination. Because the termination is assumed to be effective on
December 31, 2009, the amounts shown represent the target bonus for the full year. |
|
(3) |
|
Amounts shown for option awards in column (c) represent the value of unvested options that
would accelerate upon a change of control based on the difference between the closing price of
Coopers common stock at the end of fiscal 2009 and the exercise price of the respective
options. |
|
(4) |
|
Amounts shown for stock awards in column (d) represent the value of unvested performance
share awards at the target performance level and unvested restricted stock units, the vesting
of which would accelerate upon a change of control based on the closing price of Coopers
common stock at the end of fiscal year 2009. |
|
(5) |
|
Amounts shown in column (e) represent additional credits the Named Executives would have
received under the Retirement Savings and Stock Ownership Plan and Supplemental Executive
Retirement Plan for the number of years equal to the multiplier used to calculate the cash
severance. |
|
(6) |
|
Amounts shown in column (f) represent the value of life insurance for the severance period,
continued health insurance benefits for eight years in the case of Messrs. Hachigian, Klebe
and Taten and seven years in the case of Messrs. Stoessl and Schrimsher, plus $10,000 which
represents the value of outplacement services for one year. |
Potential Payments Upon Involuntary Termination
The Committee determines the severance provided to the Chief Executive Officer upon the
involuntary termination of employment of such officer. Upon involuntary termination of other
executives including the Named Executives, Coopers policy is to provide a severance payment equal
to the executives base salary for a period up to one year for senior executives with five or more
years of continuous service and for up to nine months for senior executives with less than five
years of continuous service. Also, depending on the circumstances and termination date, the Named
Executive may receive a payout of the performance-based share awards not to exceed an amount based
on the performance level actually achieved for the performance cycle. In the case of the Named
Executives other than the Chief Executive Officer, the cash severance and value of performance
share awards including accrued dividend equivalents for the 2007-2009 performance cycle is as
follows: T.A. Klebe $565,000 and $619,997; M.A. Stoessl $410,000 and $290,863; N.A. Schrimsher
- $300,000 and $244,937; and B.M. Taten $300,000 and $0. A Named Executive will generally
forfeit other unvested equity awards including stock options, restricted stock units and
performance share awards for performance cycles that end after the year of termination.
38
Potential Payments Upon Resignation or Retirement
Upon voluntary resignation, a Named Executive would forfeit, as of the termination date, all
outstanding annual cash incentive awards and equity awards including stock options, performance
shares and restricted stock units. The Named Executive would be entitled to any pension benefits
and nonqualified deferred compensation that are vested as of the termination date.
Upon retirement, a Named Executive would forfeit all outstanding annual cash incentive awards,
performance share awards and restricted stock units. Any stock options granted more than one year
before the retirement date would continue to vest and would be exercisable following retirement for
a period of five years or the expiration date of the option, whichever is earlier. The Named
Executive would also be entitled to any pension benefits and nonqualified deferred compensation
that are vested as of the retirement date.
2009 EQUITY COMPENSATION PLAN INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of securities remaining |
|
|
Number of securities to be |
|
Weighted-average exercise |
|
available for future issuance |
|
|
issued upon exercise of |
|
price of outstanding |
|
under equity compensation plans |
|
|
outstanding options, |
|
options, warrants and |
|
(excluding securities reflected in |
|
|
warrants and rights |
|
rights |
|
column (a)) |
|
|
(a) |
|
(b) |
|
(c) |
|
Equity
compensation plans
approved by
security holders |
|
|
11,064,354 |
(1) |
|
$ |
36.23 |
(2) |
|
|
7,269,229 |
(3) |
Equity compensation plans
not approved by
security holders |
|
|
0 |
|
|
|
N/A |
|
|
|
|
|
Total |
|
|
11,064,354 |
|
|
|
36.23 |
|
|
|
7,269,229 |
|
|
|
|
(1) |
|
Consists of: (a) 10,624,131 shares to be issued under the Stock Incentive Plan (including
8,762,584 outstanding stock options, 1,340,810 performance-based share awards that are
issuable to the extent established performance goals are achieved and service-based forfeiture
restrictions are satisfied, 477,751 unvested restricted stock units and 42,986 shares earned
the receipt of which has been deferred); (b) 3,396 shares earned under the Management Annual
Incentive Plan the receipt of which has been deferred; (c) 164,000 outstanding stock options
and 201,352 shares earned but deferred under the Director Stock Plan; and (d) 71,475 shares
earned but deferred under the Directors Retainer Fee Stock Plan. |
|
(2) |
|
Weighted average exercise price of outstanding options excludes the performance-based share
awards, restricted stock units, and shares earned but deferred that are referred to in note 1
above. |
|
(3) |
|
Consists of shares available for issuance under Cooper plans as follows: Stock Incentive Plan
6,012,942 shares; Management Annual Incentive Plan 951,102 shares; Directors Stock Plan
220,340 shares; and Directors Retainer Fee Stock Plan 84,845 shares. |
39
2009 DIRECTORS COMPENSATION
A director who is also a Cooper employee receives no additional compensation for serving on
the Board. Annual compensation for non-employee directors is comprised of cash and equity
compensation. Cash compensation consists of an annual retainers for serving on the Board and Board
Committees, and supplemental retainers for the chairs of Board committees and the Presiding
Non-Management Director. Prior to April 2008 annual equity compensation consisted of a stock
award, restricted stock units and stock options. Effective as of April 2008 the Board approved
eliminating stock option grants. Each of these components is described in more detail below. The
total 2009 compensation of our non-employee directors is shown in the following table:
DIRECTORS COMPENSATION TABLE (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Pension |
|
|
|
|
|
|
Fees |
|
|
|
|
|
|
|
|
|
Value and |
|
|
|
|
|
|
Earned |
|
|
|
|
|
|
|
|
|
Nonqualified |
|
|
|
|
|
|
or Paid |
|
Stock |
|
Option |
|
Compensation |
|
All Other |
|
Deferred |
Name |
|
in Cash(2) |
|
Awards(3) |
|
Awards(4) |
|
Earnings |
|
Compensation(6) |
|
Total |
(a) |
|
(b) |
|
(c) |
|
(d) |
|
(f) |
|
(g) |
|
(h) |
|
Stephen G. Butler |
|
$ |
82,500 |
|
|
$ |
175,000 |
|
|
|
0 |
|
|
|
|
|
|
$ |
5,000 |
|
|
$ |
262,500 |
|
Robert M. Devlin |
|
|
61,000 |
|
|
|
175,000 |
|
|
|
0 |
|
|
|
|
|
|
|
5,000 |
|
|
|
241,000 |
|
Ivor J. Evans |
|
|
72,000 |
|
|
|
175,000 |
|
|
|
0 |
|
|
|
|
|
|
|
5,000 |
|
|
|
252,000 |
|
Linda A. Hill |
|
|
61,000 |
|
|
|
175,000 |
|
|
|
0 |
|
|
$ |
9,662 |
(5) |
|
|
5,000 |
|
|
|
250,662 |
|
Lawrence D. Kingsley |
|
|
64,000 |
|
|
|
175,000 |
|
|
|
0 |
|
|
|
|
|
|
|
5,000 |
|
|
|
244,000 |
|
James J. Postl |
|
|
77,500 |
|
|
|
175,000 |
|
|
|
0 |
|
|
|
|
|
|
|
5,000 |
|
|
|
257,500 |
|
Dan F. Smith |
|
|
71,000 |
|
|
|
175,000 |
|
|
|
0 |
|
|
|
|
|
|
|
5,000 |
|
|
|
251,000 |
|
Gerald B. Smith |
|
|
85,000 |
|
|
|
175,000 |
|
|
|
0 |
|
|
|
|
|
|
|
5,000 |
|
|
|
265,000 |
|
Mark S. Thompson |
|
|
61,000 |
|
|
|
175,000 |
|
|
|
0 |
|
|
|
|
|
|
|
3,500 |
|
|
|
239,500 |
|
James R. Wilson |
|
|
67,000 |
|
|
|
175,000 |
|
|
|
0 |
|
|
|
|
|
|
|
5,000 |
|
|
|
247,000 |
|
|
|
|
(1) |
|
Column (e) Non-Equity Incentive Plan Compensation has been omitted since there are no
amounts to report. |
|
(2) |
|
Includes cash compensation earned by directors during the fiscal year. The following
directors elected to receive stock in lieu of cash and have deferred the receipt of the shares
pursuant to the Directors Retainer Fee Stock Plan: J. Postl ($18,250) and D. Smith
($17,750). The amount of these deferrals is included in column (b) above. |
|
(3) |
|
The amounts shown in columns (c) above is the aggregate grant date fair value related to
restricted stock units and stock awards computed in accordance with FASB ASC Topic 718. See
Coopers Annual Report for the year ended December 31, 2009 for a description of the
valuations. Pursuant to the Directors Stock Plan, on the date of the Annual Meeting of
Shareholders each non-employee director receives equity compensation with a grant date fair
value that is fixed at $175,000 and is delivered in the following proportions: restricted
stock units two-thirds (equivalent to $116,667) and stock awards one-third (equivalent to
$58,333). For 2009, each non-employee director received 3,596 restricted stock units and
1,798 shares for the stock awards based on Coopers stock price of $32.44 per share, which is
the closing price on the grant date. As of December 31, 2009, the aggregate number of
deferred stock awards and restricted stock units outstanding, including accrued dividend
equivalent shares, are: S. Butler 25,492 shares; R. Devlin 21,029 shares; I. Evans
32,066 shares; L. Hill 23,263 shares; L. Kingsley 8,542 shares; J. Postl 35,862 shares;
D. Smith 56,300 shares; G. Smith 17,499 shares; M. Thompson 8,542 shares and J. Wilson
44,232 shares. |
|
(4) |
|
Non-employee directors did not receive any stock option grants in 2009. As of December 31,
2009, the aggregate number of stock options outstanding from stock option grants in prior
years are: S. Butler 20,000; R. Devlin 22,000; I. Evans 20,000; L. Hill 26,000; L.
Kingsley 4,000; J. Postl 16,000; D. Smith 16,000; G. Smith 24,000; M. Thompson
4,000; and J. Wilson 12,000. |
|
(5) |
|
Represents the aggregate change in the actuarial present value of an annual benefit to be
received upon retirement from the Board pursuant to the Directors Retirement Plan. The Plan
was terminated in April 1996 and benefits earned were grandfathered. |
|
(6) |
|
Includes matching contributions made to charitable institutions by Cooper Industries
Foundation on behalf of the director. |
40
Cash Compensation
Non-employee directors receive an annual Board retainer of $55,000. Committee members are
paid the following annual retainers in lieu of meeting attendance fees: $12,000 to each member of
the Audit committee and $6,000 to each member of the Management Development and Compensation
Committee and Committee on Nominations and Corporate Governance. In addition, the Presiding
Non-Management Director and Chair of the Audit Committee each receive a supplemental annual
retainer of $15,000 and the Chair of the Management Development and Compensation Committee and
Committee on Nominations and Corporate Governance each receive a supplemental annual retainer of
$10,000.
Stock Awards
Under the Directors Stock Plan, which was most recently approved by shareholders in April
2006, each non-employee director receives equity compensation with an aggregate value that is fixed
at $175,000 and delivered in the following proportions: restricted stock units two-thirds
(equivalent to $116,667) and stock awards (equivalent to $58,333). Restricted stock units
represent one ordinary share each. Restricted stock units are credited to a deferred share account
and the account is credited with the amount of dividends that would have been paid on an equal
number of outstanding shares and the dividend equivalents are used to purchase additional
restricted stock units based on the current fair market value of Coopers ordinary shares. Upon a
directors cessation of service on the Board, restricted stock units are converted into ordinary
shares and are distributed to the director in accordance with the directors payment election. Each
newly elected or appointed non-employee director receives, upon election or appointment, a pro-rata
stock and restricted stock unit award according to the time remaining before the next annual
meeting date.
Option Awards
Effective in 2008 the Board approved eliminating stock option grants to non-employee
directors. Stock options that were previously granted to non-employee directors vest on the third
anniversary of the grant date and have a ten-year term. As of December 31, 2009 options for 164,000
shares were outstanding under the Directors Stock Plan.
Directors Retirement Plan
Prior to February 1996 under the Cooper Industries Inc. Directors Retirement Plan, any
director with at least 10 years of service as a director (counting a fractional year as a full
year), or any director who retired in accordance with the Boards director tenure policy, was
entitled to receive a benefit amount equal to the annual basic retainer for non-employee directors
in effect at the time of retirement, exclusive of any special compensation for services as a
committee chairman or attendance at meetings. The benefit amount was payable for the number of
years in which the director served on the Board (counting a fractional year as a full year) with
payment to cease with the death of the retired director. In February 1996 the Board terminated the
retirement plan and no additional benefits have accrued after April 30, 1996. However, any benefits
accrued under the plan at that time were grandfathered. Ms. Hill is the only current director who
is eligible to receive benefits under the Directors Retirement Plan.
Other Benefits
We also provide non-employee directors with travel accident coverage of $500,000 and offer a
matching gift program for contributions made by directors to a broad range of educational, health,
welfare and cultural organizations up to a maximum match of $5,000 per year.
Stock Ownership Guidelines
The Board has established a stock ownership guideline of three times the annual retainer for
each director.
41
AUDIT COMMITTEE REPORT
The Audit Committee operates under a written charter adopted by the Board. The charter is
available on our website as www.cooperindustries.com in the Investors section under the
Corporate Governance tab. The Audit Committee is responsible for the oversight of the integrity
of Coopers consolidated financial statements, Coopers system of internal controls over financial
reporting, the qualifications and independence of Coopers independent registered public accounting
firm (independent auditor), the performance of Coopers internal auditor and independent auditor
and Coopers compliance with legal and regulatory requirements. Subject to approval by the
shareholders, we have the sole authority and responsibility to select, determine the compensation
of, evaluate and, when appropriate, replace Coopers independent auditor. The Board has determined
that each Committee member is independent under applicable independence standards of the NYSE and
Securities Exchange Act of 1934, as amended.
The Committee serves in an oversight capacity and is not part of Coopers managerial or
operational decision-making process. Management is responsible for the financial reporting
process, including the system of internal controls, for the preparation of consolidated financial
statements in accordance with accounting principles generally accepted in the United States (GAAP)
and for the report on Coopers internal control over financial reporting. Coopers independent
auditor, Ernst & Young LLP (Ernst & Young), is responsible for auditing those financial statements,
expressing an opinion as to their conformity with GAAP and expressing an opinion on the
effectiveness of Coopers internal control over financial reporting. Our responsibility is to
oversee the financial reporting process and to review and discuss managements report on Coopers
internal control over financial reporting. We rely, without independent verification, on the
information provided to us and on the representations made by management, the internal auditor and
the independent auditor.
We held eight meetings during 2009. The Committee, among other things:
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Reviewed and discussed Coopers quarterly earnings releases, Quarterly Reports on
Form 10-Q and Annual Report on Form 10-K, including the consolidated financial
statements; |
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Reviewed and discussed the major financial risk exposures of Cooper and its business
units, as appropriate; |
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Reviewed and discussed the annual plan and the scope of work of the internal auditor
for 2009 and summaries of the significant reports to management by the internal
auditor; |
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Reviewed and discussed the annual plan and scope of work of the independent auditor; |
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Reviewed and discussed reports from management on Coopers compliance with
applicable legal and regulatory requirements; and |
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Met with Ernst & Young and the internal auditor in executive sessions. |
We reviewed and discussed with management, the internal auditor and Ernst & Young: the audited
consolidated financial statements for the year ended December 31, 2009, the critical accounting
policies that are set forth in Coopers Annual Report on Form 10-K, managements annual report on
Coopers internal control over financial reporting and Ernst & Youngs opinion on the effectiveness
of the internal control over financial reporting.
We discussed with Ernst & Young matters that independent registered public accounting firms
must discuss with audit committees under generally accepted auditing standards and standards of the
Public Company Accounting Oversight Board, including, among other things, matters related to the
conduct of the audit of Coopers consolidated financial statements and the matters required to be
discussed by Statement on Auditing Standards No. 61, as modified or superseded (Communications with
Audit Committees). This review included a discussion with management and the independent auditor
of the quality (not merely the acceptability) of Coopers accounting principles, the reasonableness
of significant estimates and judgments, and the disclosures in Coopers consolidated financial
statements, including the disclosures related to critical accounting policies.
Ernst & Young also provided to the Committee the written disclosures and the letter required
by the Public Company Accounting Oversight Board regarding the independent auditors communications
with the Audit Committee. Ernst & Young represented that it is independent from Cooper and we
discussed with Ernst & Young their independence from Cooper, and considered if services they
provided to Cooper beyond those rendered in connection with their audit of Coopers annual
consolidated financial statements included in its annual report on Form 10-K, reviews of Coopers
interim condensed consolidated financial statements included in its Quarterly Reports on Form 10-Q,
and their opinion on the effectiveness of Coopers internal control over financial reporting were
compatible with maintaining their independence. We also reviewed and preapproved, among other
things, the
42
audit, audit-related and tax services performed by Ernst & Young. We received regular updates
on the amount of fees and scope of audit, audit-related, and tax services provided.
Based on our review and these meetings, discussions and reports discussed above, and subject
to the limitations on our role and responsibilities referred to above and in the Audit Committee
charter, we recommended to the Board that Coopers audited consolidated financial statements for
the year ended December 31, 2009 be included in Coopers Annual Report on Form 10-K. We also
selected Ernst & Young as Coopers independent auditor for the year ended December 31, 2010 and are
presenting the selection to the shareholders for approval.
Respectfully submitted,
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James J. Postl, Chairman
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Lawrence D. Kingsley |
Stephen G. Butler
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James R. Wilson |
RELATIONSHIP WITH INDEPENDENT AUDITORS
The Audit Committee appoints, subject to shareholder approval, our independent auditors for
each year. During the year ended December 31, 2009, Ernst & Young LLP was employed principally to
perform the annual audit and to render other services. Fees paid to Ernst & Young LLP for each of
the last two fiscal years are listed in the following table.
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Year Ended December 31 |
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2009 |
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4,348,000 |
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176,000 |
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744,000 |
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0 |
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3,911,000 |
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592,000 |
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1,292,000 |
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Audit fees include fees for the audit and quarterly reviews of the consolidated financial
statements, the internal control audit pursuant to Section 404 of the Sarbanes-Oxley Act, statutory
audits of Cooper and its subsidiaries required by governmental or regulatory bodies, comfort
letters, consents, assistance with and review of documents filed with the SEC and accounting and
financial reporting consultations and research work necessary to comply with generally accepted
accounting principles. Audit-related fees principally include fees for merger and acquisition
assistance and pension and benefit plan audits. Tax fees primarily include fees for tax compliance
such as tax return preparation for international subsidiaries, and tax planning and advice relating
to tax audits, internal reorganizations and international operations. In 2009, tax compliance fees
were $400,000 and fees for tax planning and advice were $344,000. In 2008, tax compliance fees
were $482,000 and fees for tax planning and advice were $810,000. The Audit Committee has
considered the compatibility of non-audit services with the auditors independence.
The Audit Committee has adopted procedures for pre-approving all audit and non-audit services
provided by independent auditors. These procedures include reviewing a budget for audit and
permitted non-audit services. The budget includes a description of, and a budgeted amount for,
particular categories of non-audit services that are anticipated at the time the budget is
submitted. Audit Committee approval is required to exceed the budget amount for any particular
category of non-audit services and to engage the independent auditor for any non-audit services not
included in the budget. The Committee may delegate pre-approval authority to one or more members of
the Committee. The Audit Committee periodically monitors the services rendered and actual fees paid
to the independent auditors to ensure that such services are within the parameters approved by the
Committee. No non-audit services were rendered pursuant to the de minimis safe harbor exception to
the pre-approval requirements under Section 10A of the Securities Exchange Act of 1934.
Representatives of Ernst & Young LLP will be available to answer questions and discuss matters
pertaining to the reports of the independent auditors contained in the financial statements
included in Coopers Annual Report on Form 10-K for the fiscal year ended December 31, 2009.
Representatives of Ernst & Young LLP will have the opportunity to make a statement, if they desire
to do so.
43
ANNUAL REPORT ON FORM 10-K
If you received a printed copy of the proxy materials, a copy of the Annual Report on Form
10-K for the fiscal year ended December 31, 2009 as filed with the Securities and Exchange
Commission was sent to you with this proxy statement. It is also available at the Investor Center
tab on our website (www.cooperindustries.com) or may be obtained upon request and without charge,
by writing to:
Director, Investor Relations
Cooper Industries plc
P.O. Box 4446
Houston, Texas 77210
INCORPORATION BY REFERENCE
To the extent that this Proxy Statement is incorporated by reference into any other filings by
Cooper under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, the sections of this Proxy Statement entitled Compensation Committee Report, and Audit
Committee Report (to the extent permitted by the rules of the Securities and Exchange Commission)
as well as the annexes to this Proxy Statement, will not be deemed incorporated unless specifically
provided otherwise in such filing. Information contained on or connected to our website is not
incorporated by reference into this Proxy Statement and should not be considered part of this Proxy
Statement or any other filing that we make with the Securities and Exchange Commission.
44
PROPOSAL 2
CONSIDER THE COMPANYS IRISH STATUTORY ACCOUNTS
AND THE REPORTS OF THE DIRECTORS AND AUDITORS THEREON
We refer to our financial statements for the fiscal year ended December 31, 2009 prepared in
accordance with Irish law as our Irish Statutory Accounts. The Irish Statutory Accounts and
related reports, which are being provided to our shareholders along with this proxy statement, are
being presented to the shareholders at the Annual General Meeting to provide the shareholders an
opportunity to consider the Irish Statutory Accounts and the reports of the directors and auditors
thereon and ask any relevant and appropriate questions of the representative of our independent
auditor in attendance at the Annual General Meeting. The Board of Directors approved the Irish
Statutory Accounts on March 2, 2010.
Please note that a vote FOR or AGAINST this proposal will have no effect on the approval
of the Irish Statutory Accounts by the Board of Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 2.
45
PROPOSAL 3
APPOINTMENT OF INDEPENDENT AUDITORS
Shareholders are being asked to appoint our independent auditors and to authorize our Audit
Committee to set the auditors remuneration. The Audit Committee has tentatively selected Ernst &
Young LLP as independent auditors to audit our consolidated financial statements for the fiscal
year ending December 31, 2010 and has also tentatively selected Ernst & Young as independent
auditors of the Companys Irish Statutory Accounts. The Board of Directors is asking shareholders
to approve such appointment and authorize our Audit Committee to set the auditors remuneration.
Ernst & Young LLP acted as independent auditors for the 2009 fiscal year. Information
pertaining to the services rendered by Ernst & Young LLP is included under the caption
Relationship with Independent Auditors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 3.
46
PROPOSAL 4
TO AUTHORIZE ANY SUBSIDIARY OF THE COMPANY
TO MAKE MARKET PURCHASES OF COMPANY SHARES
Under Irish law, no subsidiary of the Company may make market purchases of the Companys
shares without shareholder approval. Accordingly, shareholders are being asked to authorize any
subsidiaries of the Company to make market purchases of the Companys shares. The maximum number
of shares authorized to be acquired by any subsidiaries pursuant to this resolution and including
any shares to be purchased by the Company by way of redemption shall not exceed the remaining
authorization under the Companys current share repurchase program, as previously approved by the
Companys Board of Directors. As of January 31, 2010, the remaining authorization under the
current share repurchase program was 12,173,035 shares plus a number of shares determined on an
annual basis that the Company expects to issue under its equity compensation plans, matched savings
plan and dividend reinvestment plan in order to offset the dilution that results from issuing
shares under these plans. If adopted, this authority will expire on the close of business on
October 27, 2011 unless previously varied, revoked or renewed by an ordinary resolution of
shareholders. We expect to propose renewal of this authorization at subsequent Annual General
Meetings. Such purchases would be made only at price levels set forth in the resolution below,
after taking into account the Companys overall financial position.
In order for any Cooper subsidiaries to make market purchases of the Companys ordinary
shares, such shares must be purchased on a recognized stock exchange. The New York Stock
Exchange, on which the Companys ordinary shares are listed, is not currently specified as a
recognized stock exchange for this purpose by Irish law. We understand, however, that it is likely
that the Irish authorities will take appropriate steps in the near future to add the New York Stock
Exchange to the list of recognized stock exchanges. Therefore, this general authority, if approved
by our shareholders, will become effective from the later of (a) the date of passing of the
authorizing resolution; and (b) the date on which the New York Stock Exchange becomes a recognized
stock exchange for these purposes.
Resolution
The text of the resolution, which, if thought fit, will be passed as an ordinary resolution at
the Annual General Meeting, is as follows:
RESOLVED, that any subsidiary of the Company (as defined by Section 155 of the Companies Act
1963) is hereby generally authorized to make market purchases (as defined by section 212 of the
Companies Act 1990) of ordinary shares in the Company (shares) on such terms and conditions
and in such manner as the Board of Directors of the Company may determine from time to time, but
subject to the provisions of the Companies Act 1990 and to the following provisions:
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The maximum number of shares authorized to be acquired by any subsidiaries of the
Company pursuant to this resolution and including any shares to be purchased by the
Company by way of redemption shall not exceed the remaining authorization under the
Companys current share repurchase program. |
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The maximum price to be paid for any ordinary share shall be an amount equal to 115% of
the closing price on the New York Stock Exchange for the ordinary shares on the trading day
preceding the day on which the relevant share is purchased by the relevant subsidiary of
the Company. |
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The minimum price to be paid for any ordinary share shall be the nominal value for that
share. |
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This general authority will be effective from the occurrence of the later of the
following: (i) the date of passing of this resolution and (ii) the New York Stock Exchange
becoming a recognized stock exchange within the meaning of Section 3(2), and for the
purpose of Section 212(1)(b), of the Companies Act 1990. |
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This general authority is to expire eighteen months from the date of the passing of
this resolution, unless previously varied, revoked or renewed by ordinary resolution in
accordance with the provisions of section 215 of the Companies Act 1990. Any such
subsidiary may, before such expiry, enter into a contract for the purchase of shares which
would or might be executed wholly or partly after such expiry and may complete any such
contract as if the authority conferred hereby had not expired. |
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 4.
47
PROPOSAL 5
TO AUTHORIZE THE REISSUE PRICE RANGE OF TREASURY SHARES
The Company may, from time to time, reissue shares purchased or redeemed by it and not
cancelled (treasury shares). Under Irish company law, we are required to seek shareholder
approval of a price range in which we may reissue such shares out of treasury in off-market
transactions. Accordingly, we are asking our shareholders to approve a special resolution
authorizing the Company to reissue treasury shares at a price not less than the low trading price
and not more than the high trading price as reported on the New York Stock Exchange on the
reissuance date (unless such treasury shares are issued to satisfy an obligation under an employee
share plan in which case the shares may be issued for nominal or par value). If adopted, this
authority would expire on the close of business on October 27, 2011 unless previously varied,
revoked or renewed by a special resolution of shareholders. We expect to propose renewal of this
authorization at subsequent Annual General Meetings.
Special Resolution
The text of the special resolution, which, if thought fit, will be passed as a special
resolution at the Annual General meeting is as follows:
RESOLVED, that, for purposes of Section 209 of the Companies Act 1990, the reissue price at
which any treasury shares (as defined by such Section 209) held by the Company may be
reissued off-market shall be as follows:
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the maximum price at which a treasury share may be reissued off-market shall be
an amount equal to the high trading price per ordinary share of the Company as reported
on the New York Stock Exchange on the trading day of the proposed reissuance date; and |
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the minimum price at which a treasury share may be reissued off-market shall be
the nominal or par value of the share where such a share is required to satisfy an
obligation under an employee share plan operated by the Company or, in all other cases,
an amount equal to the low trading price per ordinary share of the Company as reported
on the New York Stock Exchange on the trading day of the proposed reissuance date. |
FURTHER RESOLVED, that this authority to reissue treasury shares shall expire on the date
eighteen months from the date of passing this resolution, unless previously varied or
renewed in accordance with the provisions of Section 209 of the Companies Act 1990.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 5.
48
APPENDIX A
List of Benchmark Companies for Executive Compensation
In the Hay Group Total Compensation Survey, Cooper benchmarks the compensation for each
position to a group of industrial companies that have the same position with a comparable rating
under the Hay Survey. The following industrial companies were used to benchmark the compensation
of the CEO and other Named Executives.
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AES Corporation
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Hormel Foods Corporation |
Aetna, Inc.
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J.M. Huber Corporation |
Air Products
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Illinois Tool Works, Inc. |
Americas Styrenics LLC
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Ineos |
Amway / Alticor
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Kaiser Foundation Health Plan |
AnnTaylor Stores Corporation
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Kohls Corporation |
Aramark Limited
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Kinder Morgan |
Ashland, Inc.
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KV Pharmaceutical Company |
Ball Corporation
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Lowes Companies, Inc. |
BASF Corporation
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LOreal USA |
Best Buy Co. Inc.
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Lubrizol Corporation |
Burger King Holdings, Inc.
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Medco Health Solutions Inc. |
Caterpillar Inc.
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Molson Coors Brewing Company |
Celanese Corporation
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Macys, Inc. |
Charming Shoppes, Inc.
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Metso Corporation |
Chevron Phillips Chemical Company LLC
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Nestle USA |
CHS Inc.
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NewMarket Corporation |
Cognis GmbH
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PPG Industries, Inc. |
Comcast Corporation
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RGA Reinsurance Group of America, Incorporated |
Coty Inc.
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Rockwell Collins, Inc. |
Deere & Company
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Safeway Inc. |
DineEquity Inc. Applebees
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Staples, Inc. |
Dominion Resources Inc.
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Solvay America |
Dow Chemical Company
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Sonic Corporation |
Eastman Chemical Company
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Suez Energy |
Eaton Corporation
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TJX Companies, Inc. |
FedEx Corporation
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Tate & Lyle Americas |
Goodrich Corporation
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Tyco International, Ltd |
Harris Teeter
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Union Pacific Corporation |
Hexion Specialty Chemicals, Inc.
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Watson Pharmaceuticals, Inc. |
Home Depot, Inc.
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WellPoint, Inc. |
49
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COOPER INDUSTRIES PLC 600 TRAVIS, SUITE 5600 HOUSTON, TX 77002 ATTN: CORPORATE SECRETARY
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VOTE BY
INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for
electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date
or meeting date. Have your proxy card in hand when you access the web site and follow the instructions
to obtain your records and to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our
company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards
and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please
follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive
or access proxy materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone
to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date.
Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return
it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
If you transmit your voting instructions by
the Internet or by Telephone, you do NOT need to mail back your proxy card.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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M20793-P92400
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KEEP THIS PORTION FOR YOUR RECORDS |
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DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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COOPER INDUSTRIES PLC |
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The Board of Directors recommends that you vote FOR each of the Director Nominees and FOR items 2, 3, 4 and 5.
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1. |
Election of Directors |
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1a. Stephen G. Butler |
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1b. Dan F. Smith |
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1c. Gerald B. Smith |
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1d. Mark S. Thompson |
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To consider the Company's Irish Statutory Accounts and the related reports of the directors and auditors.
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Appoint Ernst & Young as our independent auditors for the year ending 12/31/2010 and authorize the
Audit Committee to set their remuneration.
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Authorize any subsidiary of the Company to make market purchases of Company shares.
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Authorize the reissue price range of treasury shares.
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For address changes and/or comments, please check this box and write them on the back where indicated. o |
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Please indicate if you plan to attend this meeting. |
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Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor,
administrator, or other fiduciary, please give full title as such. Joint owners should each
sign personally. All holders must sign. If a corporation
or partnership, please sign in full corporate or partnership name, by authorized officer. |
The shares represented by this proxy, when properly executed, will be voted in the
manner directed herein by the undersigned Shareholder(s). If no direction is made, this proxy will
be voted FOR items 1, 2, 3, 4 and 5. If any other matters come before the meeting, the person
named in this proxy will vote in their discretion.
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Signature
[PLEASE SIGN WITHIN BOX]
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Signature (Joint Owners)
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:The
Notice and Proxy Statement, Annual Report including 10-K and Irish Statutory Accounts including
related reports are available at www.proxyvote.com.
M20794-P92400
COOPER INDUSTRIES PLC
THIS PROXY IS SOLICTED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL GENERAL MEETING OF SHAREHOLDERS
APRIL 27, 2010
The shareholder(s) hereby appoint(s) Bruce M. Taten and Terrance V. Helz, or either of
them, as proxies, each with the power to appoint his substitute, and hereby authorizes them to
represent and to vote, as designated on the reverse side of this ballot, all of the ordinary shares
of Cooper Industries PLC that the shareholder(s) is/are entitled to vote at the Annual General
Meeting of Shareholders to be held at 11:30 a.m., Central Time on April 27, 2010, at Cooper
Industries, 54th Floor Conference Room, Chase Tower, 600 Travis, Houston, TX 77002, and any
adjournemnt or postponement thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE SHAREHOLDER(S). IF NO
SUCH DIRECTIONS ARE MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES LISTED ON THE
REVERSE SIDE FOR THE BOARD OF DIRECTORS AND FOR ITEMS 2, 3, 4 AND 5.
This card also constitutes voting instructions for any shares held for the shareholder in
Coopers Dividend Reinvestment and Stock Purchase Plan and the Cooper Industries Retirement Savings
and Stock Ownership Plan, as well as any shares acquired through Coopers Employee Stock Purchase
Plan that are being held in a book-entry account at Computershare Trust Company, N.A. as described
in the Notice of Meeting and Proxy Statement.
IF YOU ARE NOT VOTING ON THE INTERNET OR BY TELEPHONE, PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
CARD PROMPTLY USING THE ENCLOSED REPLY ENVELOPE
(If you noted any Address Change/Comments above, please mark corresponding box on the reverse side.)
Continued and to be signed on reverse side