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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Date Filed: |
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March 21, 2011
Fellow Shareholder:
We cordially invite you to attend the Annual Meeting of Cooper Industries shareholders. The
meeting will be held on Monday, May 2, 2011, at 11:30 a.m. at The Merrion Hotel in Dublin, Ireland.
The notice of meeting and proxy statement following this letter describe the business to be
conducted at the meeting including the election of three 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 a limited number of 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 Monday, May 2, 2011. |
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PLACE
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The 2011 Annual Meeting of Shareholders of Cooper Industries plc (Cooper or the Company) will be held at The Merrion
Hotel, 22-24 Upper Merrion Street, Dublin, Ireland. 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. To elect the three directors named in the proxy statement to serve until our 2014 Annual Meeting; |
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2. To consider the Companys Irish
Statutory Accounts for the year ended December 31, 2010 and the
related reports of the directors and auditors; |
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3. To ratify the appointment of
Ernst & Young LLP as our independent auditors for the year
ending December 31, 2011 and authorize the Audit Committee of
the Board of Directors to set their remuneration; |
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4. To consider the 2011 Omnibus
Incentive Compensation Plan; |
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5. To hold an advisory vote on
executive compensation; |
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6. To hold an advisory vote on the
frequency of the advisory vote on executive compensation; |
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7. To authorize any subsidiary of
the Company to make market purchases of Company shares; |
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8. To authorize the reissue price
range of treasury shares; and |
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9. To transact any other business as
may properly before the meeting or any postponement or
adjournment thereof. |
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Proposal 8 is a special resolution requiring the approval of not less
than 75% of the votes cast at the meeting. The other proposals are
ordinary resolutions requiring a simple majority of the votes cast,
other than Proposal 6 which will be determined by a plurality 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 March 4, 2011, 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, 2010 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, 2010 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 May 1, 2011; 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 May 1, 2011; 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 May 2, 2011. 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 21, 2011
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 2011 Annual Meeting of Shareholders on May 2, 2011. 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 21, 2011.
QUESTIONS AND ANSWERS
Why am I receiving these materials?
Cooper has made these materials available to you on the Internet or, upon your request, has
delivered printed versions of these materials to you by mail, in connection with Coopers
solicitation of proxies for use at the Annual
Meeting to be held on Monday, May 2, 2011 at 11:30 a.m. local time, at the Merrion Hotel, 22-24
Upper Merrion Street, Dublin, Ireland and at any postponement or adjournment thereof. These
materials were first sent or given to shareholders on March 21, 2011. You are invited to attend
the Annual Meeting and vote upon the proposals described in this Proxy Statement.
What may I vote on?
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The election of three nominees to serve on our Board of Directors; |
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Consideration of Coopers Irish Statutory Accounts for the year ended December 31, 2010
and related reports of the directors and auditors; |
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Ratification of the appointment of Ernst & Young LLP as our independent auditors for the
year ending December 31, 2011 and authorization of the Audit Committee of the Board of
Directors to set their remuneration; |
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Consideration of the 2011 Omnibus Incentive Compensation Plan; |
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An advisory vote on executive compensation; |
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An advisory vote on the frequency of advisory votes on executive compensation; |
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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. |
How does the Board recommend I vote on proposals?
The Board recommends a vote FOR each of the proposals described in the item immediately above,
other than the proposal relating to the frequency of advisory votes on executive compensation. For
that proposal, the Board recommends that future advisory votes on executive compensation occur
every three years.
Who is entitled to vote:
Each share of Coopers common stock has one vote on each matter. Only shareholders of record
as of the close of business on March 4, 2011 are entitled to receive notice of, attend and to 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 you are a shareholder of record, you may vote in person at the Annual Meeting. If your
shares are not registered in your name, you may also vote your shares in person at the Annual
Meeting, but you must request a legal proxy to do so. Please contact your broker or agent in
whose name your shares are registered for instructions regarding obtaining a legal proxy. If you
hold Cooper shares through a broker, bank or other agent, you may appoint proxies and vote as
provided by that bank, broker or agent.
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 instructions, ballots and voting tabulations that identify individual shareholders are
handled in a manner that protects your voting privacy. Your vote will not be disclosed either
within the Company or to third parties, except: (1) to respond to written comments on the proxy
card; (2) as required by law; (3) to allow for the tabulation and certification of votes; or (4) 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); |
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shares held in custody for your account by Fidelity Management Trust Company, as Trustee
of the Apex Tool 401(k) Savings Plan (Apex Savings Plan); and |
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shares held in a book-entry account at Computershare Trust Company, N.A., Coopers
transfer agent. |
2
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 below for an
explanation of the voting procedure for shares held in CO-SAV and the Apex Savings Plan.
If you hold shares in a broker account, you will receive a separate proxy card and instructions
from your broker.
How is Cooper Stock in CO-SAV and the Apex Savings Plan 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 votes 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.
If you hold shares through the Apex Savings Plan, you must instruct the Trustee, Fidelity
Management Trust Company, how to vote your shares. If you do not properly submit your proxy by one
of the three voting methods described above (or if you submit your proxy with an unclear voting
designation, or with no voting designation at all), then your shares will not be voted.
How many shares can vote?
As of March 4, 2011 record date, 164,874,327 ordinary shares were issued and outstanding.
These are the only securities entitled to 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, the consideration of the 2011
Omnibus Incentive Compensation Plan, and the 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 is a special resolution that requires the
approval of at least 75% of the votes cast.
Although the shareholder votes on executive compensation and the frequency of the advisory
vote on executive compensation are nonbinding on Cooper or the Board of Directors, the opinion of
our shareholders is valued by Cooper management and the Board. The advisory vote regarding
executive compensation will be considered approved if the votes cast in favor of the proposal
exceed the votes cast against the proposal. The option on the frequency (one, two or three years)
of the advisory vote on executive compensation that receives the most votes from our shareholders
will be considered as the shareholders recommendation as to the frequency of future advisory votes
on executive compensation.
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 any
of these proposals.
What is the quorum requirement for the Annual Meeting?
The holders of a majority of the shares entitled vote at the Annual Meeting must be present at
the Annual Meeting for the transaction of business. This is called a quorum. Shareholders may
represent their shares by attending the meeting or their shares may be represented at the meeting
by proxy. If you submit a valid proxy by any of the described methods, even if you abstain from
voting, then your shares will be counted for purposes of determining if there is a quorum.
Abstentions and broker nonvotes are considered present for purposes of determining a quorum. If a
quorum is not present, the Annual Meeting will be adjourned until a quorum is obtained.
3
Who can attend the Annual Meeting?
Attendance at the Annual Meeting is limited to shareholders. If you own Cooper shares on
March 4, 2011, 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. Each shareholder may be
asked to provide a valid picture identification, such as a drivers license or passport and proof
of ownership as of the Record Date. The use of cell phones, smartphones, pagers, recording and
photographic equipment is not permitted in the meeting rooms at the Annual Meeting.
How will voting on any other business be conducted?
Although we do not know of any other business to be considered at the 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.
What is the deadline to propose actions for consideration at the 2012 Annual Meeting of
shareholders?
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 and must be
received no later than November 22, 2011. Shareholder proposals must also meet all other
requirements of the Securities and Exchange Act of 1934 to be eligible for inclusion. If a
shareholder proposal is received after February 5, 2012, 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
2012 Annual Meeting of Shareholders.
Who will serve as the inspector of election?
A representative of Broadridge Financial Solutions will serve as the inspector of election.
Where can I find the voting results of the Annual Meeting?
The preliminary voting results will be announced at the Annual Meeting. The final voting
results will be tallied by the inspector of election and published in Coopers Current Report on
Form 8-K, which the company is required to file with the SEC within four business days following
the Annual Meeting.
Who is paying for the costs of this proxy solicitation?
Cooper is paying the costs of solicitation of proxies. 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.
4
COOPER STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of March 4, 2011, there were 17,824 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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Percent |
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of Beneficial |
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Title and Class |
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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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Barrow, Hanley, Mewhinney & Strauss |
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12,087,388 |
(1) |
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7.36 |
% |
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2200 Ross Avenue, 31st Floor |
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Dallas, Texas 75201-2761 |
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Ordinary shares |
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Vanguard Windsor Funds |
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11,476,088 |
(2) |
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6.99 |
% |
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Vanguard Windsor II Fund
100 Vanguard Boulevard
Malvern, Pennsylvania 19355 |
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Ordinary shares |
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Alliance Bernstein L.P. |
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10,444,542 |
(3) |
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6.36 |
% |
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1345 Avenue of the Americas
New York, New York 10105 |
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Ordinary shares |
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FMR LLC |
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8,699,251 |
(4) |
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5.30 |
% |
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82 Devonshire Street
Boston, Massachusetts 02109 |
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Based on Schedule 13G filed February 11, 2011 by Barrow, Hanley, Mewhinney & Strauss, Inc.,
which has sole dispositive power over 12,087,388 shares, sole voting power over 218,300 shares
and shared voting power over 11,869,088 shares. |
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Based on Schedule 13G filed February 10, 2011 by
Vanguard Windsor Funds Vanguard II fund,
which has sole voting power over 11,476,088 shares. |
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Based on Schedule 13G filed February 9, 2011, Alliance Bernstein has sole voting power over
8,695,673 shares, shared voting power over 12,680 shares, sole dispositive over 10,412,557
shares and shared dispositive power over 31,985 shares. |
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Based on Schedule 13G filed February 14, 2011, jointly on behalf of Edward C. Johnson
3rd, FMR LLC, and its subsidiaries and affiliates, Fidelity Management and Research
Company (Fidelity), and Strategic Advisors, Inc. The shares are beneficially owned as
follows: Fidelity 8,612,859 shares and Strategic Advisors,
Inc. 86,392 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 8,612,859 shares
owned by the Fidelity funds. Edward C. Johnson 3rd and FMR LLC, through control of
FMR LLC subsidiaries including Strategic Advisors, Inc., each had sole dispositive power and
sole power to vote or direct the voting of the shares beneficially owned by Strategic
Advisors, Inc. The address of Fidelity and Strategic Advisors, Inc. is 82 Devonshire Street,
Boston, MA 02109. |
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Calculated on the basis of 164,130,802 shares that are issued and outstanding as of December
31, 2010. |
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 three persons for election as directors in the class
whose term will expire at the Annual Meeting in 2014. The nominees are: Linda A. Hill, James J.
Postl and Mark S. Thompson. All of the nominees are current members of the class whose term
expires at the meeting. Robert M. Devlin is a director whose term also expires at the 2011 Annual
Meeting. Mr. Devlin is not standing for re-election because he is retiring at the April 2011 Board
meeting in accordance with the Board of Directors tenure policy, which requires that a
non-employee director shall retire from the Board effective as of the next regular Board meeting
following the date he or she reaches age 70. In February 2011 Mr. James R. Wilson also retired
from Coopers Board in accordance with the director tenure policy. Due to the retirements of
Messrs. Devlin and Wilson, the Board has approved reducing the number of directors from 11 to 9.
The Board also approved moving Mr. Mark Thompson from the class of directors whose term expires in
2013 to the class whose term expires at the 2011 Annual Meeting to maintain the number of directors
in each class as nearly equal as possible in accordance with Coopers Memorandum and Articles of
Incorporation.
NOMINEES WHOSE TERMS EXPIRE IN 2014
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LINDA A. HILL
Member Management Development and
Compensation Committee
Director since 1994
Age 54
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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
Member Executive Committee
Director since 2003
Age: 65
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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 Group,
Inc., the American Balanced
Fund, International Growth and
Income Fund and the Income Fund
of America. He is a former
director of Centex Corporation
and Northwest Airlines. |
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MARK S. THOMPSON
Member Committee on Nominations and Corporate
Governance
Director since 2007
Age: 54
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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 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
CONTINUING DIRECTORS WHOSE TERMS EXPIRE IN 2012
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IVOR J. EVANS
Chairman Management Development and
Compensation Committee
Member Committee on Nominations and Corporate
Governance and Executive
Committee
Director since 2003
Age: 68
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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., Roadrunner
Transportation Systems, Inc.,
Spirit Aerosystems Holdings,
Inc., and Textron Inc. He is
a former director of Suntron
Corporation. |
KIRK S. HACHIGIAN
Chairman Executive Committee
Director since 2004
Age: 51
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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. 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: 48
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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 is also a
director of IDEX Corporation. |
7
CONTINUING DIRECTORS WHOSE TERMS EXPIRE IN 2013
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STEPHEN G. BUTLER
Chairman Committee on
Nominations and Corporate
Governance
Member Audit Committee and
Executive Committee
Director since 2002
Age: 63
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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
Member Management
Development and Compensation
Committee
Director since 1998
Age 64
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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
also 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 and 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: 60
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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. |
8
INFORMATION ABOUT MANAGEMENT
Executive Officers
The
table below contains certain information as of March 1, 2011 with respect to Coopers
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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51 |
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10 |
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2001 |
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David A. Barta |
|
Senior Vice President and Chief Financial Officer |
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48 |
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1 |
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2010 |
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Terry A. Klebe |
|
Vice Chairman |
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56 |
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16 |
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1995 |
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Neil A. Schrimsher |
|
Executive Vice President and President, Cooper Wiring Devices |
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46 |
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5 |
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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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59 |
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6 |
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2005 |
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Bruce M. Taten |
|
Senior Vice President, General Counsel and Chief Compliance Officer |
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55 |
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3 |
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2008 |
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R. Mark Eubanks |
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President, Cooper Lighting |
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38 |
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4 |
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2011 |
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Grant L. Gawronski |
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President, Cooper Crouse-Hinds |
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48 |
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8 |
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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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58 |
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5 |
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2008 |
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Ivo Jurek |
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President, Cooper Bussmann |
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46 |
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4 |
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2009 |
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Kevin C. Kissling |
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President, Cooper B-Line |
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49 |
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8 |
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2008 |
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Heath B. Monesmith |
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Vice President, Human Resources |
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40 |
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4 |
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2011 |
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Michael A. Stoessl |
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Group President, Cooper Power Systems |
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47 |
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8 |
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2006 |
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Robert L. Taylor |
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Chief Marketing Officer |
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46 |
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6 |
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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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48 |
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4 |
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2007 |
|
All of the executive officers have been employed by Cooper in management positions for five
years or more, except David A. Barta, Bruce M. Taten, Ivo Jurek, Laura K. Ulz, Heath B. Monesmith
and R. Mark Eubanks.
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David A. Barta joined Cooper in May 2010 from Regal-Beloit Corporation (electrical and
mechanical motion control products) where he served as Vice President, Chief Financial
Officer since 2004. |
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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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R. Mark Eubanks joined Cooper in June 2006 as Director, Business Development for Cooper
Wiring Devices. He was appointed Vice President and General Manager, Architectural
Lighting Control Products, Cooper Lighting in 2007 and Vice President and General Manager,
Cooper Lighting in 2010. |
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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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Heath B. Monesmith joined Cooper in June 2006 as Senior Counsel, Litigation and was
appointed Associate General Counsel in 2009. Prior to joining Cooper, he was a partner at
Kirkpatrick & Lockhart Nicholson Graham LLP. |
9
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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. |
Securities Ownership of Officers and Directors
As of February 16, 2011, 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 2.1% of Coopers publicly held outstanding ordinary shares as of that
date.
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|
Number of Shares |
Number of Beneficial Owners |
|
Beneficially Owned(1) |
Stephen G. Butler |
|
|
64,726 |
(2) |
Robert M. Devlin |
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90,396 |
(2)(4) |
Ivor J. Evans |
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|
58,342 |
(2) |
Kirk S. Hachigian |
|
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1,623,305 |
|
Linda A. Hill |
|
|
50,693 |
(2) |
Lawrence D. Kingsley |
|
|
20,481 |
(2) |
James J. Postl |
|
|
58,245 |
(2) |
Dan F. Smith |
|
|
80,853 |
(2) |
Gerald B. Smith |
|
|
52,977 |
(2) |
Mark S. Thompson |
|
|
20,629 |
(2) |
Terry A. Klebe |
|
|
394,375 |
(3) |
David A. Barta |
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|
0 |
|
Neil A. Schrimsher |
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153,371 |
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Michael A. Stoessl |
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202,739 |
|
Bruce M. Taten |
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43,727 |
|
All Directors and Executive
Officers as a Group |
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3,599,186 |
(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 16, 2011, as follows: Mr. Butler 20,000 shares; Mr. Devlin
22,000 shares; Mr. Evans 20,000 shares; Mr. Hachigian 1,261,700 shares; Ms. Hill
16,000 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. Klebe
261,833 shares; Mr. Schrimsher 120,666 shares; Mr. Stoessl 103,400 shares; and Mr. Taten
31,833 shares and all directors and executive officers as a group 2,420,975 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 28,606
shares; Mr. Devlin 24,018 shares; Mr. Evans 35,364 shares; Ms. Hill 26,315 shares;
Mr. Kingsley 11,182 shares; Mr. Postl 39,267 shares; Mr. D. Smith 60,275 shares; Mr.
G. Smith 20,389 shares; and Mr. Thompson 11,182 shares. |
|
(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. |
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(4) |
|
Includes 21,000 shares held by the Devlin Foundation for which Mr. Devlin serves as trustee. |
10
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 by 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,
2010, with the exception of a late filing on Form 4 relating to a transaction by Kevin Kissling,
President of Cooper B-Line, on March 3, 2010, that was filed on January 28, 2011 and a transaction
by Robert Taylor, Chief Marketing Officer, on November 5, 2010 that was filed on December 16, 2010.
CORPORATE GOVERNANCE
Meetings of the Cooper Board and its Committees
Our Board of Directors held four meetings during 2010. 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 Messrs. Devlin and Evans attended the 2010 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, Committee on
Nominations and Corporate Governance and Executive Committee 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. Kingsley, Dan
Smith and Thompson have no relationship with Cooper other than being a director, nominee and/or
shareholder. 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. and ArvinMeritor, Inc. to which Cooper sold products within the last three years and
Mr. Gerald Smith serves as a director of Oneok Partners, L.P. to which Cooper sold products in
2010.
Ms. Hill and Messrs. Devlin, Postl and Gerald Smith serve as a director or trustee of
charitable organizations to which Cooper made contributions in 2010. As part of Coopers director
compensation program, Cooper provides non-management directors a matching gift program for
contributions made by directors to charitable organizations up to a maximum $5,000 per year. These
matching contributions are nondiscretionary on Coopers part. The contributions made to charitable
organizations for which Ms. Hill and Messrs. Devlin and Gerald Smith serve as a
11
director or trustee
are director matching contributions of $5,000 or less. Director matching contributions were also
made to an organization for which Mr. Postl serves on the board. Cooper has a long-standing
history of making contributions to certain charitable organizations in the Houston area where
Cooper maintains its administrative headquarters. Mr. Postl is a well known executive in the
Houston area and coincidentally serves as a director of several of these organizations.
Specifically, in 2010, Cooper contributed $85,000 to the Houston Chapter of the American Heart
Association, $30,000 to Rice University and affiliated organizations, $8,000 to the Society of the
Performing Arts and $3,500 to The Houston Area Womens Center. Finally, Mr. Postl sits on the
board of the United Way of Greater Houston. Cooper contributed approximately $409,000 to the
United Way, of which approximately $94,000 went to United Way of Greater Houston. The
contributions made to the United Way are matching contributions made by Cooper employees and are
non-discretionary on Coopers part. Cooper has a long-standing history of making contributions to
all these organizations and the contributions are not connected to Mr. Postls directorships with
these organizations.
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.
Audit Committee
The Audit Committee, which consists of all independent directors, held nine meetings during
2010. 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 one meeting in 2010.
Management Development and Compensation Committee
The Management Development and Compensation Committee, which consists of all independent
directors, held four meetings during 2010. 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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Oversee 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 18.
12
Committee on Nominations and Corporate Governance
The Committee on Nominations and Corporate Governance, which consists of all independent
directors, held four meetings in 2010. 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. |
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.
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 is a member of the Business Roundtable. The Board believes that having Mr.
Hachigian serve as both CEO and Chairman and Mr. Gerald Smith serving as Lead Director provides the
most effective leadership structure for the Company at the present time, because of Mr. Hachigians
deep understanding of Coopers business, his leadership abilities, his industry knowledge, his
strategic insights, and his ability to leverage the experience and perspectives of the independent
directors. The board believes that 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-,
two-, three-, four-, five-, and ten-year time periods.
The strong leadership experience of our independent directors supports effective leadership of
Coopers Board. Of the eight independent directors currently serving on our Board, five 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 seven 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.
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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. |
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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 very 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 certain Cooper 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.
Compensation-Related Risks
Cooper assesses risks relating to our compensation programs, including our executive
compensation program, and does not believe that the risks arising from our compensation policies
and practices are reasonably likely to have a material adverse effect on Cooper. In reaching
this conclusion, management considered various attributes of our compensation programs,
including:
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The use of financial performance measures that provide appropriate incentives to
achieve key business objectives and align managements interests with those of our
shareholders; |
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The balance between annual and longer-term performance opportunities; |
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The ability of the Boards Management Development and Compensation Committee to
consider individual performance factors in determining actual compensation payouts; |
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Our strong internal controls environment that mitigates the risk that financial
performance measures will be misstated; and |
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Stock ownership and retention guidelines that align executives interests with those
of our shareholders. |
Management has discussed its assessment of compensation-related risks with the Boards
Management Development and Compensation Committee, who concurs with the conclusion reached by
senior management.
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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 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 Companies and Trane. |
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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 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 Group. |
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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. |
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
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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 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 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, 2010.
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Ivor J. Evans, Chairman
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Dan F. Smith |
Robert M. Devlin
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Gerald B. Smith |
Linda A. Hill |
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COMPENSATION DISCUSSION AND ANALYSIS
Executive Summary
Our executive compensation philosophy is to provide key executives with competitive pay
opportunities and with actual pay outcomes that reward superior corporate and individual
performance. Our executive compensation program is designed to attract, motivate and retain
individuals with the skills required to formulate and drive Coopers strategic direction and
achieve annual and longer-term performance goals necessary to create shareholder value. The
program seeks to align executive compensation with shareholder value through a combination of base
pay, annual incentives and long-term incentives. Our executive officers fiscal 2010 compensation
consisted primarily of the following components (in addition to the retirement, health and welfare
plans and perquisites that are discussed in the Compensation Discussion and Analysis below).
Summary of Fiscal 2010 Executive Compensation
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Annual Compensation |
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Fiscal 2010 Actions |
Component |
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Key Features |
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Purpose |
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Base Salary
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Fixed annual cash amount.
Base pay increases
considered on a calendar
year basis to align
within the median range
of our comparator group.
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Provide
competitive, fixed
amount of
compensation to
attract and retain
exceptional
executive talent.
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Continued salary freeze for Named
Executives (other than a promotional
increase and a salary adjustment to better
align with competitive practice). |
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Annual Incentive Compensation
(Cash Incentive Award)
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Committee determines
funding level of award
pool by evaluating
Company performance
against pre-established,
short-term financial
goals based on EPS and
free cash flow.
Individual executive
performance evaluated
against key business
priorities and
performance of their
respective business
units.
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Motivate and reward
our executives to
lead their
organizations to
achieve key
short-term business
objectives as well
as individual
goals.
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Maximum bonus opportunity earned based on
adjusted EPS from continuing operations
growing approximately 27% and free cash
flow of approximately 113% of income from
continuing operations. Taking other
factors into account including business
unit and individual performance, actual
payouts to the Named Executives under the
Bonus Plan were at an average 93% of the
maximum performance level. The Committee
also approved discretionary bonuses for
certain Named Executives in recognition of
superior individual performance. |
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Long-Term Incentive Compensation
Awarded value delivered through
grants of stock options,
performance-based share awards
and restricted stock units.
Generally annual equity awards
have a value consisting of
approximately 50% stock options
and 50% performance shares.
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Stock options vest in
one-third increments
over three-year service
period.
Performance Shares award
for 2008-2010
performance cycle based
on average EPS growth
over a three-year
period.
Restricted Stock Units
Time-based vesting
generally over a
five-year period.
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Stock options
support our growth
strategy, provide a
link between executive officers
compensation and
our stock price;
encourage stock
ownership by
executives; and
serve as a retention tool.
Motivate our
executives to lead
their organizations
to achieve
longer-term
financial goals
that are expected
to lead to
increased
shareowner value;
encourage stock
ownership by
executives;
three-year
performance period
serves as an
additional
retention tool.
Additional
long-term incentive
to recognize
superior
performance
rendered and to
attract and retain
exceptional talent.
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Cooper stock price appreciated 37% in 2010.
No pay-out earned for 2008-2010
performance cycle due to negative impact
of severe economic downturn that developed
in latter part of 2008.
CEO granted RSUs in recognition of his
leadership achieving superior long-term
financial results, successfully
implementing strategic initiatives and
increasing shareholder value. These RSUs
vest in 2016, 2017 and 2018.
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We believe that our executive compensation program is reasonable, competitive and strongly
focused on pay-for-performance principles. Our strong focus on pay-for-performance has served our
shareholders well over the years. As noted below, Coopers total shareholder returns have exceeded
the returns of the S&P 500 and the average returns of our 15 company peer group over the last 1-,
2-, 3-, 4-, 5-, and 10-year periods.
Compound Annual Return
For Annual Periods Ending December 31
In recognition of the superior long-term financial results and increase in shareholder value
achieved and a successful implementation of strategic initiatives under the CEOs leadership, in
2010 the Committee granted the CEO restricted stock units for 152,256 shares. These restricted
stock units vest 50,752 each in June 2016, 2017 and 2018.
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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base salary; |
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annual cash incentive opportunity; |
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long-term equity-based incentive awards; and |
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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 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 Vice President, Human Resources utilizing data from compensation consultants
regarding competitive
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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.
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 provided to the Committee is generally prepared 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. 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 regularly attended by the CEO and the 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. The
Committee approved implementing the recommended changes to the performance-based share awards 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 considered
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 2010.
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 granted in 2010, two additional performance metrics are used under
the long-term incentive program: (1) cash conversion, to further align incentives with strategic
business
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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.
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, restricted stock units which typically
vest over a five year period 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 2010 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 2010 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 were no increases in the base salary of any Named Executive or, subject to two exceptions,
any other executive officer. In 2010 Cooper continued to impose a salary freeze on its executive
officers subject to limited exceptions such as promotional increases and adjustments to bring
compensation in line with competitive practice.
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.
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 2010 the Committee has adopted
two separate performance measures for the purpose of determining bonuses. These measures are
earnings per share and conversion of continuing income to 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. The conversion of continuing income to 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.
21
For fiscal year 2010, 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. 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 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 2010 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 2010 the Committee approved performance goals for maximum bonus
opportunity of earnings per share from continuing operations of $2.90 and free cash flow of 110% of
income from continuing operations. These performance goals represent an increase of 15% in
earnings compared to earnings per share from continuing operations for fiscal 2009 excluding the
impact of income tax adjustments and restructuring and impairment charges. 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 2011 the Committee reviewed results under the Bonus Plan for 2010 and determined
earned bonus opportunity to be at the maximum performance level. The Committee then awarded
bonuses to the Named Executives under the Bonus Plan at an average of 93% 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.
Earnings per share from continuing operations of $3.20, which excludes the impact of the loss on
the formation of the joint venture for Coopers Tools business, represents a 27% increase in
earnings compared to the 2009 earnings level approved by the Committee. Taking these adjustments
into account, the audited financial statements reflect earnings per share from continuing
operations in 2010 of $2.64. Coopers audited financial statements for 2010 reflect free cash flow
of $606.6 million, which the Committee used to determine awards under the Bonus Plan for 2010.
Free cash flow of $606.6 million exceeded income from continuing operations and the free cash flow
goal established by the Committee in February 2010 for an award at the maximum level.
22
In determining awards under the Bonus Plan for 2010, the Committee credited management with:
|
|
|
Coopers total shareholder returns exceeding performance of the S&P 500 and the average
return for Coopers peer group over one-, two-, three-, four-, five- and ten- year time
periods, |
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|
excellent cash flow performance accomplished through operating efficiencies and
effective management of working capital with free cash flow exceeding recurring income for
the tenth consecutive year, |
|
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|
successful formation of a joint venture for Coopers Tools business, |
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maintaining strong financial flexibility by successfully issuing $500 million of public
debt at very favorable interest rates, |
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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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achievement of record cost productivity and employee safety levels, |
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completion of five strategic acquisitions to build key growth platforms, and |
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achievement of key innovation initiatives including delivery of innovative new products. |
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.
In conjunction with the 2011 Annual Shareholders Meeting, management is submitting for
shareholder approval a new equity incentive plan to replace the Stock Plan. The new equity
incentive plan is intended to modernize the terms of the Stock Plan, including flexibility to
provide additional types of awards to plan participants.
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. 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.
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 to executives and a pool of shares for option grants to other key employees 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.
23
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 2010 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, 2008 and ending December 31, 2010, the Committee determined that average annual 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. The onset of the global economic downturn in the latter part of
2008 negatively impacted our earnings performance during the 2008- 2010 performance cycle. In
February 2011 the Committee determined there would be no pay-out under the 2008-2010 performance
cycle resulting in 100% forfeiture of the potential awards because annual earnings per share growth
was below the threshold performance level to earn an award.
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.
Due to signs that the global economy was beginning to stabilize, in 2010 the Company returned
to the model of basing performance share awards on a three-year performance metric beginning in the
year of grant. Based on the recommendation of Towers Perrin, the Committee also decided to add two
performance measures. In addition to earnings growth, performance metrics include free cash flow
to further align incentives with key business objectives and include a modifier to adjust awards
based on Coopers performance relative to its 15-company peer group as measured by total
shareholder returns. For the performance period beginning January 1, 2010 and ending December 31,
2012, the Committee determined that 50% of the award opportunity would be based on earnings with
average annual earnings per share growth of at least 6% before any award is earned and at least 12%
for a payout at the maximum level. The 50% balance of the award opportunity would be based on the
conversion of continuing income to free cash flow with a free cash flow rate of at least 80% of
income from continuing operations before any award is earned and at least 110% for a payout at the
maximum level. The amount of the award opportunity earned based on earnings per share growth and
free cash flow would then be increased 10% if our total shareholder return ranks in the top third
of our peer group or decreased 10% if total shareholder return ranks in the bottom third of our
peer group.
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 to Named Executives are considered performance-based
compensation.
24
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 November 2010 in recognition of the superior
long-term financial results and increase in shareholder value achieved and the successful
implementation of the strategic initiatives under the CEOs leadership, the Committee granted the
CEO restricted stock units for 152,256 shares. These restricted stock units vest 50,752 each in
June 2016, 2017 and 2018.
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, a qualified
401(k) savings 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.
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. Cooper still maintains the
Cooper Savings Plan to which it currently makes a basic 3% company contribution to all participant
accounts plus a matching contribution of 50% of the first 6% contributed by an employee. 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.
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. To offset this 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
25
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.
In November 2010 the Committee approved Cooper entering into a Benefits Continuation Agreement
with Mr. Hachigian, the Companys Chairman and Chief Executive Officer. The Agreement includes
provisions permitting Mr. Hachigian and his family to remain eligible to participate (at their
expense) in Coopers medical benefits programs in certain circumstances following Mr. Hachigians
death, disability, qualifying retirement, or termination without cause. The Agreement further
provides that certain unvested equity wards will vest upon Mr. Hachigians death, disability,
qualifying retirement, or termination without cause. A qualifying retirement means retirement
any time after June 29, 2015 with at least one year advance notice provided to the Board of
Directors.
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
A set annual amount approved by the Committee is paid to the executive and can be used at the
individual executives discretion. For 2010 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 2010. 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.
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.
|
|
|
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. |
|
|
|
|
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 2010 meeting, the Committee reviewed the status of covered executives
relative to compliance with the Stock Ownership Guidelines 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.
26
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. Although the
Committee considers the deductibility of awards as one factor in determining executive
compensation, the Committee also looks at other factors in making its decisions as noted above and
retains the flexibility to grant awards it determines to be consistent with the Companys goals for
its executive compensation program even if the award is not deductible by the Company for tax
purposes.
27
2010 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- |
|
Non- |
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Equity |
|
qualified |
|
|
|
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|
|
|
|
|
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|
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Incentive |
|
Deferred |
|
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|
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|
|
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|
|
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|
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|
|
|
|
|
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|
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|
|
|
|
Plan |
|
Compen- |
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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) |
|
(j) |
|
Hachigian, K.S. |
|
|
2010 |
|
|
$ |
1,200,000 |
|
|
$ |
1,000,500 |
|
|
$ |
15,347,083 |
(2) |
|
$ |
3,246,687 |
|
|
$ |
2,999,500 |
|
|
$ |
4,805 |
|
|
$ |
1,277,938 |
|
|
$ |
25,076,513 |
|
Chairman, President |
|
|
2009 |
|
|
|
1,200,000 |
|
|
|
270,400 |
|
|
|
3,065,518 |
(3) |
|
|
2,856,767 |
|
|
|
2,279,600 |
|
|
|
3,191 |
|
|
|
1,080,768 |
|
|
|
10,756,244 |
|
and Chief Executive |
|
|
2008 |
|
|
|
1,166,667 |
|
|
|
0 |
|
|
|
7,117,810 |
(4) |
|
|
2,635,735 |
|
|
|
2,500,000 |
|
|
|
4,212 |
|
|
|
1,135,341 |
|
|
|
14,559,765 |
|
Officer |
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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|
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|
|
|
Barta, David A. |
|
|
2010 |
|
|
|
281,250 |
|
|
|
50,400 |
|
|
|
2,926,612 |
(2) |
|
|
501,685 |
|
|
|
649,600 |
|
|
|
0 |
|
|
|
254,644 |
|
|
|
4,664,191 |
|
Senior Vice
President and Chief
Financial Officer |
|
|
|
|
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|
|
|
|
|
|
|
|
Klebe, T.A. |
|
|
2010 |
|
|
|
565,000 |
|
|
|
41,800 |
|
|
|
1,309,950 |
(2) |
|
|
586,858 |
|
|
|
858,200 |
|
|
|
13,751 |
|
|
|
296,249 |
|
|
|
3,671,808 |
|
Vice Chairman |
|
|
2009 |
|
|
|
565,000 |
|
|
|
97,800 |
|
|
|
606,690 |
(3) |
|
|
565,496 |
|
|
|
652,200 |
|
|
|
10,157 |
|
|
|
271,868 |
|
|
|
2,769,211 |
|
|
|
|
2008 |
|
|
|
553,333 |
|
|
|
0 |
|
|
|
1,492,530 |
(4) |
|
|
552,866 |
|
|
|
800,000 |
|
|
|
1,559 |
|
|
|
261,676 |
|
|
|
3,661,964 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taten, B.M. |
|
|
2010 |
|
|
|
413,333 |
|
|
|
0 |
|
|
|
796,928 |
(2) |
|
|
357,024 |
|
|
|
475,000 |
|
|
|
0 |
|
|
|
133,340 |
|
|
|
2,175,625 |
|
Senior Vice President, |
|
|
2009 |
|
|
|
400,000 |
|
|
|
0 |
|
|
|
343,213 |
(3) |
|
|
319,775 |
|
|
|
325,000 |
|
|
|
0 |
|
|
|
93,623 |
|
|
|
1,481,611 |
|
General Counsel and
Chief Compliance
Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schrimsher, N.A. |
|
|
2010 |
|
|
|
433,333 |
|
|
|
0 |
|
|
|
796,928 |
(2) |
|
|
357,024 |
|
|
|
400,000 |
|
|
|
638 |
|
|
|
151,934 |
|
|
|
2,139,857 |
|
Executive Vice |
|
|
2009 |
|
|
|
400,000 |
|
|
|
0 |
|
|
|
325,013 |
(3) |
|
|
302,945 |
|
|
|
335,000 |
|
|
|
423 |
|
|
|
132,370 |
|
|
|
1,495,751 |
|
President, Cooper
Connection and
President, Cooper
Wiring Devices |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stoessl, M.A. |
|
|
2010 |
|
|
|
410,000 |
|
|
|
0 |
|
|
|
702,293 |
(2) |
|
|
314,627 |
|
|
|
450,000 |
|
|
|
3,141 |
|
|
|
161,744 |
|
|
|
2,041,805 |
|
Group President, |
|
|
2009 |
|
|
|
410,000 |
|
|
|
0 |
|
|
|
325,013 |
(3) |
|
|
302,945 |
|
|
|
320,000 |
|
|
|
2,067 |
|
|
|
173,300 |
|
|
|
1,533,355 |
|
Cooper Power
Systems |
|
|
2008 |
|
|
|
402,833 |
|
|
|
0 |
|
|
|
795,780 |
(4) |
|
|
294,862 |
|
|
|
320,000 |
|
|
|
751 |
|
|
|
172,800 |
|
|
|
1,987,026 |
|
|
|
|
(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, 2008-2010 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 grants for the performance period beginning on January
1, 2010 and ending December 31, 2012. The grant date fair value of the awards included in the
table above assumes payout at the maximum level of performance. For a more detailed
discussion see Compensation Discussion and Analysis Performance-based Share Awards. The
amount for K.S. Hachigian also includes a grant date fair value of $8,100,019 relating to a
grant of 152,256 restricted stock units. These restricted stock units were granted to Mr.
Hachigian as a retention incentive in recognition of his leadership achieving superior
long-term financial results, successfully implementing strategic initiatives and increasing
shareholder value. These restricted stock units vest 50,752 units each June 2016, 2017 and
2018. The amount for D.A. Barta also includes a grant date fair value of $1,957,600, relating
to a grant of 40,000 |
28
|
|
|
|
|
restricted stock units that vest 30,000 units in 2013 and 10,000 units in
2015. These restricted stock units were granted to Mr. Barta to replace equity compensation
forfeited upon resignation from his prior employer. |
|
(3) |
|
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. |
|
(4) |
|
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. In February 2011 the Management
Development and Compensation Committee of the Board of Directors determined that the
performance objectives were not achieved and all of the performance-based share grants for
this three-year period are forfeited. If these forfeitures were taken into account in
determining the value of these grants at December 31, 2010, the respective values for these
performance share grants would be zero as compared to the amounts shown in column (e) above. |
|
(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. 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. |
|
(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. |
|
|
2010 |
|
|
|
283,297 |
|
|
|
13,600 |
|
|
|
832,000 |
|
|
|
53,364 |
|
|
|
2,810 |
|
|
|
92,867 |
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barta, D.A. |
|
|
2010 |
|
|
|
0 |
|
|
|
7,350 |
|
|
|
137,375 |
|
|
|
99,186 |
|
|
|
10,733 |
|
|
|
0 |
|
|
Klebe, T.A. |
|
|
2010 |
|
|
|
51,620 |
|
|
|
10,892 |
|
|
|
205,100 |
|
|
|
28,637 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
2009 |
|
|
|
89,681 |
|
|
|
22,050 |
|
|
|
131,500 |
|
|
|
28,637 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
2008 |
|
|
|
80,643 |
|
|
|
20,700 |
|
|
|
135,333 |
|
|
|
25,000 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taten, B.M. |
|
|
2010 |
|
|
|
0 |
|
|
|
7,350 |
|
|
|
97,717 |
|
|
|
28,273 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
2009 |
|
|
|
0 |
|
|
|
7,350 |
|
|
|
58,000 |
|
|
|
28,273 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schrimsher, N.A. |
|
|
2010 |
|
|
|
20,394 |
|
|
|
14,267 |
|
|
|
91,667 |
|
|
|
25,606 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
2009 |
|
|
|
20,640 |
|
|
|
22,050 |
|
|
|
64,680 |
|
|
|
25,000 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stoessl, M.A. |
|
|
2010 |
|
|
|
29,271 |
|
|
|
12,927 |
|
|
|
94,600 |
|
|
|
25,000 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
2009 |
|
|
|
61,280 |
|
|
|
22,050 |
|
|
|
64,970 |
|
|
|
25,000 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
2008 |
|
|
|
61,888 |
|
|
|
20,700 |
|
|
|
64,332 |
|
|
|
25,500 |
|
|
|
380 |
|
|
|
0 |
|
|
|
|
(8) |
|
Perquisites and other personal benefits included in column (i) are valued on the basis of the
aggregate incremental cost to Cooper. The CEO receives a set annual perquisite 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. The perquisite amount shown for Mr. Barta includes a signing bonus of
$60,000 and a relocation allowance of $26,394. The tax gross-up payment for Mr. Barta
represents a gross-up on the taxable portion of his relocation allowance. |
29
2010 GRANTS OF PLAN-BASED AWARDS
The following table includes information regarding stock option grants made to the Named
Executives in the last fiscal year including the number of shares subject to the stock options, the
exercise price and the grant date fair value of the stock options. The table also includes
information regarding potential future payouts under Coopers non-equity and equity incentive
plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All |
|
Option |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
Awards: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future |
|
Stock |
|
Number |
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts Under |
|
Payouts Under Equity |
|
Awards: |
|
of |
|
Exercise |
|
|
|
|
|
|
|
|
Non-Equity Incentive Plan |
|
Incentive Plan |
|
Number |
|
Securities |
|
or Base |
|
Grant Date |
|
|
|
|
|
|
Awards(1) |
|
Awards(2) |
|
of Shares |
|
Under- |
|
Price of |
|
Fair Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thres- |
|
|
|
|
|
Maxi- |
|
of Stock |
|
lying |
|
Option |
|
of Stock |
|
|
Grant |
|
Thres- |
|
Target(3) |
|
Maxi- |
|
hold |
|
Target |
|
mum |
|
or Units |
|
Options |
|
Awards |
|
and Option |
Name |
|
Date |
|
hold ($) |
|
($) |
|
mum ($) |
|
(#) |
|
(#) |
|
(#) |
|
(#)(4) |
|
(#) |
|
($/Sh)(5) |
|
Awards(6) |
(a) |
|
(b) |
|
(c) |
|
(d) |
|
(e) |
|
(f) |
|
(g) |
|
(h) |
|
(i) |
|
(j) |
|
(k) |
|
(l) |
Hachigian, K.S. |
|
|
2/14/10 |
|
|
$ |
749,900 |
|
|
$ |
2,249,600 |
|
|
$ |
2,999,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
|
2/14/10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
160,050 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
7,247,064 |
|
|
|
|
2/14/10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
291,000 |
|
|
$ |
43.78 |
|
|
$ |
3,246,687 |
|
|
|
|
11/02/10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
152,256 |
|
|
|
|
|
|
|
|
|
|
$ |
8,100,019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barta, D.A. |
|
|
5/17/10 |
|
|
$ |
162,400 |
|
|
$ |
487,200 |
|
|
$ |
649,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
$ |
1,957,600 |
|
|
|
|
5/17/10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
969,012 |
|
|
|
|
5/17/10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,000 |
|
|
$ |
48.94 |
|
|
$ |
501,685 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Klebe, T.A. |
|
|
2/14/10 |
|
|
$ |
214,600 |
|
|
$ |
643,700 |
|
|
$ |
858,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
|
2/14/10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,930 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,309,950 |
|
|
|
|
2/14/10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,600 |
|
|
$ |
43.78 |
|
|
$ |
586,858 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taten, B.M. |
|
|
2/14/10 |
|
|
$ |
126,300 |
|
|
$ |
379,000 |
|
|
$ |
505,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
|
2/14/10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
796,928 |
|
|
|
|
2/14/10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,000 |
|
|
$ |
43.78 |
|
|
$ |
357,024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schrimsher, N.A. |
|
|
2/14/10 |
|
|
$ |
144,700 |
|
|
$ |
434,200 |
|
|
$ |
578,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
|
2/14/10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
796,928 |
|
|
|
|
2/14/10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,000 |
|
|
$ |
43.78 |
|
|
$ |
357,024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stoessl, M.A. |
|
|
2/14/10 |
|
|
$ |
126,600 |
|
|
$ |
379,900 |
|
|
$ |
506,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
|
2/14/10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
702,292 |
|
|
|
|
2/14/10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,200 |
|
|
$ |
43.78 |
|
|
$ |
314,627 |
|
|
|
|
(1) |
|
Represents annual incentive compensation bonus opportunities for fiscal year 2010 available
to Named Executives under the terms of the Management Annual Incentive Plan or Bonus Plan.
For fiscal year 2010 earnings per share from continuing operations of $2.90 and free cash flow
of 110% 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 2010 are set forth in column
(g) of the Summary Compensation Table. See Compensation
Discussion and Analysis Annual
Incentive Compensation for further details. |
30
|
|
|
(2) |
|
Represents long-term incentive awards granted in 2010 to the Named Executives under the
Amended and Restated Stock Incentive Plan or Stock Plan.
These performancebased share
awards may be earned based on achievement of performance goals over a three-year period
commencing on January 1, 2010 and ending on December 31, 2012. Average annual earnings per
share growth of 12% and free cash flow of 110% of income from continuing operations is
required for performance at the maximum level with 50% of the award opportunity based on
earnings per share and 50% based on free cash flow. The amount of the award opportunity
earned based on earnings per share growth and free cash flow would then be increased 10% if
our total shareholder return ranks in the top third of our peer group or decreased 10% if
total shareholder return ranks in the bottom third of our peer group. Upon distribution of
the 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. |
|
(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) |
|
Represents restricted stock units granted to the Named Executive. In November 2010 Mr.
Hachigian received a grant of 152,256 restricted stock units as a retention incentive in
recognition of his leadership achieving superior long-term financial results, successfully
implementing strategic initiatives and increasing shareholder value. These restricted stock
units vest 50,752 units each June 2016, 2017 and 2018. Mr. Barta received a grant of 40,000
restricted stock units that vest 30,000 units in February 2013 and 10,000 units in February
2015. These restricted stock units were granted to Mr. Barta to replace equity compensation
forfeited upon resignation from his prior employer. |
|
(5) |
|
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. |
|
(6) |
|
The grant date fair value of the stock option awards for February 2010 is $11.157 per share
and the grant date fair value of the performance-based shares for February 2010 is $43.78 per
share. The grant date fair value of the stock option awards for May 2010 is $13.9356 per
share. The grant date fair value of the performance-based shares for May 2010 is $48.94 per
share. The grant date fair value for the performance-based share awards assumes payout at the
maximum performance level. See Coopers Annual Report for the year ended December 31, 2010
for a description under FASB ASC Topic 718. |
31
OUTSTANDING EQUITY AWARDS AT 2010 FISCAL YEAR-END(1)
The following table shows outstanding stock option awards classified as exercisable and
unexercisable as of December 31, 2010 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 $58.29 a share (the closing market price of Coopers stock on December 31, 2010).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
Stock Awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards: |
|
Equity Incentive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number |
|
Market |
|
Number of |
|
Plan Awards: |
|
|
Number of |
|
Number of |
|
|
|
|
|
|
|
|
|
of Shares |
|
Value of |
|
Unearned |
|
Market or Payout |
|
|
Securities |
|
Securities |
|
|
|
|
|
|
|
|
|
or Units |
|
Shares or |
|
Shares, Units |
|
Value of |
|
|
Underlying |
|
Underlying |
|
|
|
|
|
|
|
|
|
of Stock |
|
Units of |
|
or Other |
|
Unearned Shares, |
|
|
Unexercised |
|
Unexercised |
|
Option |
|
Option |
|
That |
|
Stock That |
|
Rights That |
|
Units or Other |
|
|
Options (#) |
|
Options (#) |
|
Exercise |
|
Expiration |
|
Have Not |
|
Have Not |
|
Have Not |
|
Rights that Have |
Name |
|
Exercisable |
|
Unexercisable |
|
Price ($) |
|
Date |
|
Vested (#) |
|
Vested ($) |
|
Vested (#) |
|
Not Vested ($) |
(a) |
|
(b)(2) |
|
(c)(2) |
|
(e)(4) |
|
(f) |
|
(g) |
|
(h) |
|
(i) |
|
(j) |
|
Hachigian, K.S. |
|
|
280,000 |
(3) |
|
|
0 |
|
|
$ |
41.19 |
|
|
|
2/13/2013 |
|
|
|
40,000 |
(5) |
|
$ |
2,331,600 |
|
|
|
161,000 |
(7) |
|
$ |
9,384,690 |
(7) |
|
|
|
280,000 |
|
|
|
0 |
|
|
$ |
47.16 |
|
|
|
2/16/2014 |
|
|
|
152,256 |
(5) |
|
$ |
8,875,002 |
|
|
|
160,050 |
(8) |
|
$ |
9,329,314 |
|
|
|
|
214,533 |
|
|
|
107,267 |
|
|
$ |
44.21 |
|
|
|
2/11/2015 |
|
|
|
106,110 |
(6) |
|
$ |
6,185,151 |
|
|
|
|
|
|
|
|
|
|
|
|
141,450 |
|
|
|
282,900 |
|
|
$ |
28.89 |
|
|
|
2/08/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
291,000 |
|
|
$ |
43.78 |
|
|
|
2/14/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barta, D.A. |
|
|
0 |
|
|
|
36,000 |
|
|
$ |
48.94 |
|
|
|
5/17/2017 |
|
|
|
40,000 |
(5) |
|
$ |
2,331,600 |
|
|
|
19,800 |
(8) |
|
$ |
1,154,142 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Klebe, T.A. |
|
|
60,800 |
|
|
|
0 |
|
|
$ |
41.19 |
|
|
|
2/13/2013 |
|
|
|
21,000 |
(6) |
|
$ |
1,224,090 |
|
|
|
33,760 |
(7) |
|
$ |
1,967,870 |
(7) |
|
|
|
60,000 |
|
|
|
0 |
|
|
$ |
47.16 |
|
|
|
2/16/2014 |
|
|
|
|
|
|
|
|
|
|
|
28,930 |
(8) |
|
$ |
1,686,329 |
|
|
|
|
45,000 |
|
|
|
22,500 |
|
|
$ |
44.21 |
|
|
|
2/11/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,000 |
|
|
|
56,000 |
|
|
$ |
28.89 |
|
|
|
2/08/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
52,600 |
|
|
$ |
43.78 |
|
|
|
2/14/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taten, B.M. |
|
|
16,000 |
|
|
|
8,000 |
|
|
$ |
28.60 |
|
|
|
11/10/2015 |
|
|
|
10,000 |
(5) |
|
$ |
582,900 |
|
|
|
12,000 |
(7) |
|
$ |
699,480 |
(7) |
|
|
|
15,833 |
|
|
|
31,667 |
|
|
$ |
28.89 |
|
|
|
2/08/2016 |
|
|
|
11,880 |
(6) |
|
$ |
692,485 |
|
|
|
17,600 |
(8) |
|
$ |
1,025,904 |
|
|
|
|
0 |
|
|
|
32,000 |
|
|
$ |
43.78 |
|
|
|
2/14/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schrimsher, N.A. |
|
|
20,000 |
|
|
|
0 |
|
|
$ |
46.78 |
|
|
|
5/22/2013 |
|
|
|
15,000 |
(5) |
|
$ |
874,350 |
|
|
|
18,000 |
(7) |
|
$ |
1,049,220 |
(7) |
|
|
|
24,000 |
|
|
|
0 |
|
|
$ |
47.16 |
|
|
|
2/16/2014 |
|
|
|
11,250 |
(6) |
|
$ |
655,762 |
|
|
|
17,600 |
(8) |
|
$ |
1,025,904 |
|
|
|
|
24,000 |
|
|
|
12,000 |
|
|
$ |
44.21 |
|
|
|
2/11/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000 |
|
|
|
30,000 |
|
|
$ |
28.89 |
|
|
|
2/08/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
32,000 |
|
|
$ |
43.78 |
|
|
|
2/14/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stoessl, M.A. |
|
|
28,000 |
|
|
|
0 |
|
|
$ |
47.16 |
|
|
|
2/16/2014 |
|
|
|
11,250 |
(6) |
|
$ |
655,762 |
|
|
|
18,000 |
(7) |
|
$ |
1,049,220 |
|
|
|
|
24,000 |
|
|
|
12,000 |
|
|
$ |
44.21 |
|
|
|
2/11/2015 |
|
|
|
|
|
|
|
|
|
|
|
15,510 |
(8) |
|
$ |
904,078 |
|
|
|
|
15,000 |
|
|
|
30,000 |
|
|
$ |
28.89 |
|
|
|
2/08/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
28,200 |
|
|
$ |
43.78 |
|
|
|
2/14/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
November 2010 Mr. Hachigian received a grant of 152,256 restricted stock units (which vest
50,752 units each June 2016, 2017 and 2018) as a retention incentive in recognition of the
superior long-term financial results and increase in shareholder value achieved and the
successful implementation of the strategic initiatives under the CEOs leadership. In May
2010, Mr. Barta received a grant of 40,000 restricted stock units that vest 30,000 units in
February 2013 and 10,000 units in February 2015. 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 Messrs. Barta and Taten replaced equity compensation |
32
|
|
|
|
|
forfeited upon resignations from their prior employers. 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 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, 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. |
|
(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. In February 2011 the Management
Development and Compensation Committee determined that the performance objectives were not
achieved and all of the performance-based share grants for this three-year period are
forfeited. If these forfeitures were taken into account in determining the value of these
grants at December 31, 2010, 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 grants for the performance period beginning on January
1, 2010 and ending on December 31, 2012. The value of the awards shown in the table above
assumes payout at the maximum level of performance. For a more detailed discussion see
Compensation Discussion and Analysis Performance-based Share Awards. |
33
2010 OPTION EXERCISES AND STOCK VESTED
The following table sets forth information regarding options and stock awards exercised and
vested, respectively, during 2010 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. |
|
|
200,000 |
|
|
$ |
3,901,975 |
|
|
|
84,823 |
(1) |
|
$ |
3,713,551 |
|
Barta, D.A. |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
Klebe, T.A. |
|
|
154,668 |
|
|
$ |
4,089,833 |
|
|
|
18,176 |
(1) |
|
$ |
795,745 |
|
Taten, B.M. |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
Schrimsher, N.A. |
|
|
0 |
|
|
|
0 |
|
|
|
7,181 |
(1) |
|
$ |
314,384 |
|
Stoessl, M.A. |
|
|
61,268 |
|
|
$ |
1,032,134 |
|
|
|
28,527 |
(1)(2) |
|
$ |
1,221,612 |
|
|
|
|
(1) |
|
Amount shown represents performance-based share awards for the three-year performance period
beginning on January 1, 2007 and ending on December 31, 2009, which vested on February 14,
2010. |
|
(2) |
|
Amount shown also includes 20,000 restricted stock units that vested during 2010 for the
Named Executive. |
34
2010 PENSION BENEFITS
The following table discloses the years of credited service and 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 Pension Plan. 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) and the
Supplemental Pension 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 were 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
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 the Internal Revenue Code restrictions.
Effective January 1, 2007, Cooper decided to freeze the benefits and cease accruals under
the Cooper Pension Plan and the Supplemental Pension Plan. Because of the cessation of accruals
under these plans, the participants will not receive any additional benefit credits. Individual
plan accounts will continue to receive interest credits on their account balance. For 2010 the
interest credit rate was 0.5%.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number |
|
Present |
|
|
|
|
|
|
of Years |
|
Value of |
|
Payments |
|
|
|
|
Credited |
|
Accumulated |
|
During Last |
|
|
|
|
Service |
|
Benefit(1) |
|
Fiscal Year |
Name |
|
Plan Name |
|
(#) |
|
($) |
|
($) |
(a) |
|
(b) |
|
(c) |
|
(d) |
|
(e) |
|
Hachigian, K.S. |
|
Cooper Pension Plan |
|
|
5.7 |
|
|
$ |
78,800 |
|
|
$ |
0 |
|
Barta, D.A. |
|
Cooper Pension Plan |
|
|
|
|
|
|
0 |
|
|
|
0 |
|
Klebe, T.A. |
|
Cooper Pension Plan |
|
|
11.7 |
|
|
|
223,651 |
|
|
|
0 |
|
Taten, B.M. |
|
Cooper Pension Plan |
|
|
|
|
|
|
0 |
|
|
|
0 |
|
Schrimsher, N.A. |
|
Cooper Pension Plan |
|
|
1.0 |
|
|
|
10,308 |
|
|
|
0 |
|
Stoessl, M.A. |
|
Cooper Pension Plan |
|
|
4.4 |
|
|
|
51,889 |
|
|
|
0 |
|
|
|
|
(1) |
|
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 17 -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, 2010. |
35
2010 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 |
|
|
$ |
435,000 |
|
|
$ |
103,180 |
|
|
$ |
0 |
|
|
$ |
3,367,267 |
|
Barta, D.A. |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
Klebe, T.A. |
|
|
0 |
|
|
|
131,500 |
|
|
|
614,663 |
(1) |
|
$ |
0 |
|
|
|
5,865,177 |
|
Taten, B.M. |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
Schrimsher, N.A. |
|
|
0 |
|
|
|
64,680 |
|
|
|
11,185 |
|
|
$ |
0 |
|
|
|
368,632 |
|
Stoessl, M.A. |
|
|
82,000 |
|
|
|
64,970 |
|
|
|
34,188 |
|
|
$ |
0 |
|
|
|
1,141,880 |
|
|
|
|
(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 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:
|
|
|
Unless the Boards Management Development and Compensation Committee decides to make an
equitable adjustment or substitution of stock options, 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. |
37
2010 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, 2010, 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 $58.29 on
December 31, 2010. As discussed above, outstanding stock options may be 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 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. |
|
$ |
11,650,000 |
|
|
$ |
2,249,600 |
|
|
$ |
14,049,985 |
|
|
$ |
31,542,750 |
|
|
$ |
1,908,099 |
|
|
$ |
149,936 |
|
|
$ |
15,468,187 |
|
|
$ |
77,018,557 |
|
Barta, D.A. |
|
|
2,811,600 |
|
|
|
487,200 |
|
|
|
336,600 |
|
|
|
3,165,495 |
|
|
|
437,724 |
|
|
|
135,104 |
|
|
|
2,260,098 |
|
|
|
9,633,821 |
|
Klebe, T.A. |
|
|
4,095,000 |
|
|
|
643,700 |
|
|
|
2,726,426 |
|
|
|
3,992,732 |
|
|
|
617,400 |
|
|
|
154,386 |
|
|
|
0 |
|
|
|
12,229,644 |
|
Taten, B.M. |
|
|
2,396,925 |
|
|
|
379,000 |
|
|
|
1,632,840 |
|
|
|
2,588,166 |
|
|
|
307,761 |
|
|
|
136,426 |
|
|
|
2,224,428 |
|
|
|
9,665,546 |
|
Schrimsher, N.A. |
|
|
1,748,350 |
|
|
|
434,200 |
|
|
|
1,515,280 |
|
|
|
3,140,648 |
|
|
|
221,718 |
|
|
|
116,743 |
|
|
|
1,937,015 |
|
|
|
9,113,954 |
|
Stoessl, M.A. |
|
|
1,579,750 |
|
|
|
379,875 |
|
|
|
1,460,142 |
|
|
|
2,135,495 |
|
|
|
203,172 |
|
|
|
117,134 |
|
|
|
0 |
|
|
|
5,875,568 |
|
|
|
|
(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. Schrimsher and Stoessl) 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, 2010, 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 2010 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 2010. |
|
(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. Schrimsher and Stoessl, plus $10,000 which
represents the value of outplacement services for one year. |
Potential Payments Upon Involuntary Termination
A Benefits Continuation Agreement with the Companys Chief Executive Officer provides that
upon termination of the Chief Executive Officer without cause, all stock options, restricted stock
(other than the retention awards that vest in June 2016, 2017 and 2018) and any awards outstanding
under the companys long-term incentive programs shall become immediately and fully vested and Mr.
Hachigian and his family shall remain eligible to participate (at their expense) in Coopers
medical benefits program for a period of three years. 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
38
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 performance cycle is as follows: D.A. Barta $337,500; T.A.
Klebe $565,000; B.M. Taten $315,000 N.A. Schrimsher - $440,000; and M.A. Stoessl $410,000.
There would be no payout of performance share awards under the 2008-2010 performance cycle based on
actual performance. 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.
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.
A Benefits Continuation Agreement with the Companys Chief Executive Officer provides that
upon a qualifying retirement, all stock options, restricted stock units (other than the retention
awards that vest in June 2016, 2017 and 2018) and any awards outstanding under the Companys
long-term incentive programs shall become immediately and fully vested. The Agreement also
provides that Mr. Hachigian and his family shall remain eligible to participate (at their expense)
in Coopers medical benefits program until Mr. Hachigian or his spouse, as applicable, have
equivalent coverage under a medical benefits program of a subsequent employer or death, or in the
case of their children, until they attain age 26. A qualifying retirement means retirement at
any time after June 29, 2015, with at least one year advance notice provided to the Board of
Directors. Upon retirement of other Named Executives, 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.
2010 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 |
|
|
9,934,842 |
(1) |
|
$ |
38.73 |
(2) |
|
|
5,544,167 |
(3) |
Equity compensation plans not approved by security holders |
|
|
0 |
|
|
|
N/A |
|
|
|
|
|
Total |
|
|
9,934,842 |
|
|
|
38.73 |
|
|
|
5,544,167 |
|
|
|
|
(1) |
|
Consists of: (a) 9,477,202 shares to be issued under the Stock Incentive Plan (including
7,543,617 outstanding stock options, 1,310,624 performance-based share awards that are
issuable to the extent established performance goals are achieved and service-based forfeiture
restrictions are satisfied, 587,931 unvested restricted stock units and 35,030 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) 154,000 outstanding stock options
and 230,065 shares earned but deferred under the Director Stock Plan; and (d) 70,179 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
4,330,005 shares; Management Annual Incentive Plan 951,102 shares; Directors Stock Plan
179,827 shares; and Directors Retainer Fee Stock Plan
83,233 shares. |
39
2010 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 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. Each of these components is described in more detail below. The total
2010 compensation of our non-employee directors is shown in the following table:
DIRECTORS COMPENSATION TABLE (1)
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Change in Pension |
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Fees |
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Value and |
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Earned |
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Nonqualified |
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or Paid |
|
Stock |
|
Option |
|
Compensation |
|
All Other |
|
Deferred |
Name |
|
in Cash |
|
Awards(2) |
|
Awards(3) |
|
Earnings |
|
Compensation(5) |
|
Total |
(a) |
|
(b) |
|
(c) |
|
(d) |
|
(f) |
|
(g) |
|
(h) |
Stephen G. Butler |
|
$ |
83,000 |
|
|
$ |
175,000 |
|
|
|
0 |
|
|
|
|
|
|
$ |
5,000 |
|
|
$ |
263,000 |
|
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 |
|
|
$ |
7,965 |
(4) |
|
|
5,000 |
|
|
|
248,965 |
|
Lawrence D. Kingsley |
|
|
67,000 |
|
|
|
175,000 |
|
|
|
0 |
|
|
|
|
|
|
|
5,000 |
|
|
|
247,000 |
|
James J. Postl |
|
|
82,000 |
|
|
|
175,000 |
|
|
|
0 |
|
|
|
|
|
|
|
5,000 |
|
|
|
262,000 |
|
Dan F. Smith |
|
|
66,000 |
|
|
|
175,000 |
|
|
|
0 |
|
|
|
|
|
|
|
0 |
|
|
|
241,000 |
|
Gerald B. Smith |
|
|
82,000 |
|
|
|
175,000 |
|
|
|
0 |
|
|
|
|
|
|
|
36,957 |
|
|
|
293,957 |
|
Mark S. Thompson |
|
|
61,000 |
|
|
|
175,000 |
|
|
|
0 |
|
|
|
|
|
|
|
5,000 |
|
|
|
241,000 |
|
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) |
|
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.
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 2010 each non-employee director received 2,362 restricted stock units and 1,180 shares for
the stock awards based on Coopers stock price of $49.40 per share, which is the closing price
on the grant date. As of December 31, 2010, the aggregate number of deferred stock awards and
restricted stock units outstanding, including accrued dividend equivalent shares, are: S.
Butler 28,474 shares; R. Devlin 23,907 shares; I. Evans
35,201 shares; L. Hill
26,194 shares; L. Kingsley 11,130 shares; J. Postl
39,086 shares; D. Smith 59,998
shares; G. Smith 20,295 shares; M. Thompson 11,130
shares and J. Wilson 44,691
shares. |
|
(3) |
|
As of April 2008 the Board approved eliminating stock option grants to non-employee
directors. As of December 31, 2010, 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 16,000; 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. |
|
(4) |
|
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. |
|
(5) |
|
Includes $5,000 matching contributions made to charitable institutions by Cooper Industries
Foundation on behalf of the director. For Mr. Gerald Smith the amount also includes $31,957
which represents the value of Cooper products received by Mr. Smith based on Coopers
materials and production costs for the products. |
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, 2010 options for
154,000 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 at 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 nine meetings during 2010. 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
2010 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; |
|
|
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|
Reviewed, made technical amendments to, and approved the Committees charter; and |
|
|
|
|
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, 2010, 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 PCAOB AU 380 (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 applicable requirements of the PCAOB and represented that it is independent from Cooper. 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
audit, audit-related and tax and other services performed by Ernst & Young. We received
regular updates on the amount of fees and scope of audit, audit-related, and tax services provided.
42
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, 2010 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, 2011 and are
presenting the selection to the shareholders for approval.
Respectfully submitted,
|
|
|
|
|
James J. Postl, Chairman
|
|
Stephen G. Butler
|
|
Lawrence D. Kingsley |
RELATIONSHIP WITH INDEPENDENT AUDITORS
The Audit Committee appoints, subject to shareholder approval, our independent auditors for
each year. During the year ended December 31, 2010, 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31 |
|
Audit Fees |
|
Audit-Related Fees |
|
Tax Fees |
|
All Other Fees |
2010 |
|
$ |
4,190,000 |
|
|
$ |
447,000 |
|
|
$ |
612,000 |
|
|
$ |
0 |
|
2009 |
|
|
4,348,000 |
|
|
|
176,000 |
|
|
|
744,000 |
|
|
|
0 |
|
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 2010 tax compliance fees
were $400,000 and fees for tax planning and advice were $212,000. In 2009 tax compliance fees were
$400,000 and fees for tax planning and advice were $344,000. 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, 2010.
Representatives of Ernst & Young LLP will have the opportunity to make a statement, if they desire
to do so, and will be available to respond to appropriate questions.
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, 2010 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:
Vice President, Investor Relations
Cooper Industries plc
5 Fitzwilliam Square
Dublin 2, Ireland
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, 2010 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 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 Meeting. The Board of Directors approved the Irish Statutory
Accounts on March 1, 2011.
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.
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, 2011 and has also tentatively selected Ernst & Young as independent
auditors of the Companys Irish Statutory Accounts. The Board of Directors is asking shareholders
to ratify such appointment and authorize our Audit Committee to set the auditors remuneration.
Ernst & Young LLP acted as independent auditors for the 2010 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.
45
PROPOSAL 4
APPROVAL OF 2011 OMNIBUS INCENTIVE COMPENSATION PLAN
We currently provide stock-based compensation to our officers and employees under the Cooper
Industries plc Amended and Restated Stock Incentive Plan (as amended and restated September 8, 2009
and as further amended February 13, 2010), which we refer to as the Prior Stock Plan. The Prior
Stock Plan is intended to promote our long-term success and increase shareholder value by linking
executive compensation to the achievement of our long-term business objectives and shareholders
interest as a whole. We also maintain the Cooper Industries Amended and Restated Management Annual
Incentive Plan (the Bonus Plan), an incentive plan for senior executives designed to link
executive compensation to the achievement of our short-term business objectives and shareholders
interests as a whole.
The Board believes that the Prior Stock Plan and the Bonus Plan have contributed significantly
to our success by enabling us to attract and retain the services of talented and experienced
officers and employees. Because our success is largely dependent upon the judgment, interest and
special efforts of these individuals, we want to continue to provide an executive compensation
program that provides annual cash incentive opportunities and longer-term stock-based incentive
awards to recruit, motivate and retain these individuals. Accordingly, on February 15, 2011, at
the recommendation of the Boards Management Development and Compensation Committee (the
Committee) the Board adopted, subject to shareholder approval, the Cooper Industries plc 2011
Omnibus Incentive Compensation Plan, which we refer to as the 2011 Incentive Plan.
The 2011 Incentive Plan is intended to promote our long-term success and achievement of both
our short- and long-term business objectives and increase shareholder value by attracting,
motivating, and retaining non-employee directors, officers and employees. To achieve this purpose,
the 2011 Incentive Plan allows the flexibility to grant or award stock options, stock appreciation
rights, restricted stock awards, restricted stock units, performance unit awards, performance share
awards, other stock-based awards, cash-based awards and dividend equivalents to eligible
individuals. No awards have been made under the 2011 Incentive Plan. If our shareholders approve
the 2011 Incentive Plan:
|
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|
the shares that are currently available for issue under the Prior Stock Plan and Bonus
Plan shall be transferred to and be available for issuance under the 2011 Incentive Plan; |
|
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|
|
no additional grants or awards will be made under the Prior Stock Plan and the Bonus
Plan in the future; and |
|
|
|
|
the awards outstanding under the Prior Stock Plan and the Bonus Plan will remain in
effect in accordance with their terms. |
A summary of the principal features of the 2011 Incentive Plan is set forth below, but is
qualified in its entirety by reference to the full text of the 2011 Incentive Plan, which is
attached as Appendix B to this proxy statement.
Plan Administration
The 2011 Incentive Plan is administered by the Committee, which consists entirely of
independent directors. The Committee has authority to select participants to whom awards will be
made, determine the type, amount and terms of any award, adopt administrative policies and
otherwise interpret and carry out the Plan. Within the limitations of the Plan and applicable law,
the Committee may delegate its responsibilities under the Plan to persons selected by it. The Plan
prohibits the repricing of stock options.
Shares Subject to the 2011 Incentive Plan and Other Cooper Equity Plans
A total of 10,600,000 shares would be available for delivery under the 2011 Incentive Plan.
This includes:
|
|
|
6,659,040 newly authorized shares; |
|
|
|
|
2,989,858 shares available for issuance under the Prior Stock Plan that was previously
approved by our shareholders, but not subject to any outstanding awards under the Prior
Stock Plan as of February 18, 2011; and |
|
|
|
|
951,102 shares available for issuance under the Bonus Plan that was previously approved
by our shareholders, but not subject to any outstanding awards under the Bonus Plan as of
February 18, 2011. |
46
In addition, up to 10,125,486 shares that were previously approved by our shareholders and are
subject to outstanding awards under the Prior Stock Plan (including 8,155,839 outstanding stock
options, 748,349 outstanding restricted stock units and 1,221,298 shares reserved for performance
share awards) that are forfeited or are otherwise settled or terminated without a distribution of
shares on or after February 18, 2011, would be available for delivery under the 2011 Incentive
Plan. Of the total number of shares being submitted for shareholder approval at the 2011 Annual
Meeting, no more than 30% of such shares are available for restricted stock, restricted stock
units, performance shares, performance units, cash-based awards, stock bonus awards and dividend
equivalents. Shares available for awards are subject to adjustment for any stock split, stock
dividend or other change in Coopers ordinary shares. The shares that may be issued under the 2011
Incentive Plan will be either authorized and unissued shares or previously issued shares that have
been reacquired by Cooper or its subsidiaries.
Any shares subject to an award that is forfeited, terminated, cancelled or otherwise expires
or is settled for cash will be available for future awards under the 2011 Incentive Plan. Shares
used to pay the exercise price or required tax withholding (whether by delivery or withholding of
shares) shall reduce the number of shares available for delivery under 2011 Incentive Plan. Upon
the exercise of an SAR, the total number of shares subject to such exercise shall reduce the number
of shares available for delivery under the 2011 Incentive Plan. Shares that are repurchased by the
Company using proceeds from the exercise of stock options shall not increase the shares available
for delivery under the Plan. If we acquire or combine with another company, any awards that may be
granted under the 2011 Incentive Plan in substitution or exchange for outstanding stock options or
other awards of that other company will not reduce the shares available for issuance under the 2011
Incentive Plan. On February 18, 2011, the closing price of our ordinary shares on the NYSE was
$65.73.
Following is a breakdown as of February 18, 2011 of: (1) the shares subject to outstanding
awards under the Prior Stock Plan that will remain under the Prior Stock Plan (unless such awards
are forfeited or are otherwise settled or terminated without a distribution of shares), (2) shares
subject to outstanding awards under the Bonus Plan that will remain
under the Bonus Plan, and (3) shares subject to other equity plans of Cooper.
|
|
|
Prior Stock Plan 8,155,839 shares are subject to outstanding stock options; 1,221,298
shares are subject to outstanding performance share awards for current performance periods;
748,349 shares are subject to outstanding restricted stock unit awards; and 35,030 shares
are earned the receipt of which has been deferred. |
|
|
|
|
Bonus Plan 3,396 shares earned but deferred. |
|
|
|
|
Directors Stock Plan 154,000 outstanding stock options; 230,991 shares earned but
deferred; and 179,827 shares remaining available for future issuance. |
|
|
|
|
Directors Retainer Fee Stock Plan 67,532 shares earned but deferred and 83,233
shares remaining available for future issuance. |
There are 8,309,839 outstanding stock options under all Coopers equity compensation plans as
of February 18, 2011 with a weighted average exercise price of $43.34 and a weighted average
remaining term of 4.62 years.
Eligibility
The Committee may grant awards under the 2011 Incentive Plan to our employees and non-employee
directors. However, only our employees will be eligible to receive incentive stock options under
the 2011 Incentive Plan.
Stock Options
A stock option is the right to purchase a specified number of ordinary shares in the future at
a specified exercise price and subject to the other terms and conditions specified in the option
agreement and the 2011 Incentive Plan. Stock options granted under the 2011 Incentive Plan will be
either incentive stock options, which may be eligible for special tax treatment under the Code,
or options other than incentive stock options, referred to as nonqualified stock options. The
exercise price of each option is set by the Committee, but cannot be less than 100% of the fair
market value of our ordinary shares at the time of grant (or, in the case of an incentive stock
option granted to a 10% or more stockholder of the Company, 110% of that fair market value). The
fair market value of our shares means the closing price of our ordinary shares on the NYSE on the
option grant date. Options will become exercisable and expire at the times and on the terms
established by the Committee provided that no stock options can be exercised later than the tenth
anniversary of the grant date. The exercise price of any stock options granted under the 2011
Incentive Plan may be paid by cash, shares, or a combination thereof according to the award
agreement.
47
Stock Appreciation Rights
Stock appreciation rights, or SARs, may be granted under the 2011 Incentive Plan alone or
contemporaneously with stock options granted under the Plan. SARs are awards that, upon their
exercise, give the holder a right to receive an amount equal to: (1) the number of shares for which
the SAR is exercised, multiplied by (2) the excess of the fair market value of a share on the
exercise date over the grant price of the SAR. The grant price of a SAR cannot be less than 100%
of the fair market value of our ordinary shares on the grant date of such SAR. A SAR may be
settled in cash, shares or a combination of cash and shares according to the award agreement. SARs
will become exercisable and expire at the times and on the terms established by the Committee,
provided that no SARs can be exercised later than the tenth anniversary of the grant date.
However, a SAR granted with an option, referred to as tandem SARs, will no longer be exercisable
and will terminate when the related option is exercised. Likewise, the related option will no
longer be exercisable to the extent that the holder exercises the related SAR.
Restricted Stock and Restricted Stock Units
Restricted stock awards are ordinary shares that are awarded to a participant subject to the
satisfaction of the terms and conditions established by the Committee. Until the applicable
restrictions lapse, shares of restricted stock are subject to forfeiture and may not be sold,
assigned, pledged or otherwise disposed of by the participant who holds those shares. Restricted
stock units are denominated in units of our ordinary shares, except that no shares are actually
issued to the participant on the grant date. When a restricted stock unit award vests, the
participant is entitled to receive shares of our stock, a cash payment based on the value of the
shares or a combination of shares and cash according to the award agreement. Awards of restricted
stock and restricted stock units are subject to such terms, conditions or restrictions as the
Committee deems appropriate including, but not limited to, restrictions on transferability,
requirements of continued employment, individual performance or Coopers financial performance.
The Committee establishes the period of vesting and forfeiture restrictions at the time of grant,
except in the event of a Change in Control or, as determined by the Committee, in the event of the
participants retirement, death or disability. A recipient of restricted stock will have the
rights of a shareholder during the restriction period, including the right to receive any
dividends, which may be subject to the same restrictions as the restricted stock, unless the
Committee provides otherwise in the grant agreement. A recipient of restricted stock units will
have none of the rights of a shareholder such as voting rights unless and until shares are actually
delivered to the recipient, although the Committee may grant recipients of restricted stock units
the right to receive dividend equivalents.
Performance Units, Performance Shares and Cash-based Awards
Performance units, performance shares and cash-based awards granted to a participant are
amounts credited to a bookkeeping account established for the participant. A performance unit is a
fixed or variable dollar denominated unit with a value determined by the Committee. The value of a
performance share is based on the value of our ordinary shares. A cash-based award has a value
that is established by the Committee at the time of its grant. Whether a performance unit,
performance share or cash-based award actually will result in a payment to a participant depends
upon the extent to which performance goals or other conditions established by the Committee are
satisfied. After a performance unit, performance share or cash-based award has vested, the
participant will be entitled to receive a payout of cash, shares or a combination thereof according
to the award agreement.
Stock Bonus Awards
The Committee may grant to participants other stock-based awards under the 2011 Incentive
Plan, which are valued by reference to, or otherwise based on, our ordinary shares. Stock bonus
awards shall be subject to such terms and conditions as the Committee shall determine including
performance goals. Such awards can be made to pay all or a portion of a participants salary or
bonus or be in addition to a participants salary or bonus. Stock bonus awards may be paid in
shares, cash or a combination of shares and cash according to the award agreement. The terms and
conditions, including vesting conditions, of other stock-based awards will be established by the
Committee when the award is made.
Dividend Equivalents
The Committee may provide for the payment of dividend equivalents with respect to shares
subject to an award that have not actually been issued under that award. Dividend equivalents may
be credited as of the dividend payment dates during the period between the grant date of the award
and the date the award becomes payable. Dividend equivalents may be paid in cash or additional shares of our stock and subject to such
limitations and restrictions as the Committee may determine. Dividend equivalents shall only be
paid when, and only to the extent the underlying award vests or is exercised.
48
Performance-Based Awards
Performance shares, performance units, cash-based awards, restricted stock awards, restricted
stock units, and other stock-based awards subject to performance conditions may, in the Committees
discretion, be structured to qualify as performance-based compensation that is exempt from the
deduction limitations of Section 162(m) of the Code, as described under Certain Federal Income Tax
Consequences below. Awards intended to satisfy this exemption must be conditioned on the
achievement of objectively determinable performance goals based on one or more of the performance
measures listed below, determined in relation to Cooper or its subsidiaries or any of their
business units, divisions, services or products, or in comparison to a designated group of other
companies or index:
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earnings or income, including operating income or profit or earnings before or after
taxes and net interest, |
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earnings per share (basic or diluted) or earnings growth, |
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book or market value per share, |
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revenue, |
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debt ratios, |
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return on assets (gross or net), return on investment, return on capital, return on
equity or return on revenues, |
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working capital, cash flow, cash flow return on investment (discounted or otherwise),
net cash provided by operations or cash flow in excess of cost of capital, |
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implementation or completion of critical projects or processes, |
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execution of assignments directly related to an individual participant, |
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economic value created, |
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total stockholders equity, |
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operating margin or profit margin, |
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ratio of certain compensation and benefits expenses to revenues or net revenues, |
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stock price appreciation or total stockholder return, |
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cost targets, reductions and savings, productivity and efficiencies, and |
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strategic business criteria, consisting of one or more objectives based on meeting
specified market penetration, geographic business expansion, market share, customer
satisfaction, employee satisfaction, human resources management, supervision of litigation,
information technology, and goals relating to acquisitions, divestitures, joint ventures
and similar transactions and budget comparisons, |
Each performance-based award specifies the amount payable, or the formula for determining the
amount payable, upon achievement of applicable performance targets. Performance goals may be
different for each performance period and for each participant for the same period. The Committee
is authorized to adjust the method of calculating attainment of performance goals in recognition of
nonrecurring items, changes in tax laws or rates, accounting policies or generally accepted
accounting principles, and changes related to restructured or discontinued operations or
acquisitions and may modify performance results upon which awards are based to offset any
unintended results arising from events not anticipated when the goals were established, provided
the adjustment is permitted by Section 162(m) of the Code.
Clawback of Awards
If Cooper is required to prepare an accounting restatement due to Coopers material
noncompliance with any financial reporting requirement under the federal securities laws, Cooper
will seek to recover from any current or former executive officer of the Company any payment in
settlement of an award earned or accrued during the three-year period preceding the date on which
Cooper is required to prepare an accounting restatement payment. The amount to be recovered from
the executive officer will be based on the excess, if any, of the compensation paid to the
executive officer under the award based on the erroneous data over the compensation that would have
been paid to the executive officer under the award if the financial accounting statements had been
as presented in the restatement.
Deferrals of Awards
The Committee may, to the extent permitted by law, require or allow participants to defer
receipt of all or part of any cash or shares subject to their awards under the terms of any Cooper
deferred compensation plan or other terms set by the Committee.
49
Transferability of Awards
Options, SARs, unvested restricted stock, and other awards under the 2011 Incentive Plan may
not be sold or otherwise transferred except (1) by will or the laws of descent and distribution or
(2) by gift or other transfer (other than an incentive stock option unless permitted by the Code)
to any trust or estate in which the original participant or such participants spouse or other
immediate relative has a substantial beneficial interest, or to a spouse or other immediate
relative (subject to Rule 16b-3 of the Exchange Act).
Change in Control
The occurrence of a Change in Control will not of itself result in accelerating the
exercisability or vesting or lapse of any restrictions applicable to any outstanding award to the
extent the Board or Committee determines that such outstanding award will be honored or assumed or
an alternative award substituted therefor. If the Board or Committee does not make this
determination then, upon a Change in Control as defined in the 2011 Incentive Plan, all outstanding
awards will vest automatically, all forfeiture restrictions will lapse and all performance-based
awards will be deemed earned at the target performance goal level (unless actual performance
exceeds the target). Additionally, upon a Change in Control, Cooper will cancel all options and
SARs and make a payment to each participant with an outstanding option or SAR equal to the
difference between the option or grant price and the fair market value of Cooper ordinary shares
(or the highest price actually paid for the shares in connection with the Change in Control, if
higher). Each share of restricted stock, restricted stock unit or other award denominated in
shares shall be cancelled in exchange for a payment equal to the Change in Control price multiplied
by the number of shares covered by the award. Each award not denominated in shares shall be
cancelled in exchange for a payment equal to the full amount of the award or the amount deemed
earned. Payments of any such amounts upon a Change in Control shall be made in cash or, if
determined by the Committee, in securities of the new employer. Also, in the event of a corporate
merger, consolidation, recapitalization, exchange of shares or reorganization, the Board of
Directors shall be authorized to issue or assume stock options by means of a substitution of new
options for previously issued options or an assumption of previously issued options, in lieu of
making a cash payment.
Under certain circumstances, an accelerated vesting or the cash out of stock options, or an
accelerated lapse of restrictions on other awards, in connection with a Change in Control might be
deemed an excess parachute payment under Section 280G of the Code. To the extent payments are
considered to be excess parachute payments, the participant may be subject to an excise tax and
Cooper may be denied a tax deduction. In such cases, the participant may disclaim any entitlement
to any payment or benefit under the 2011 Incentive Plan that would constitute such excess
parachute payment.
Amendment, Suspension and Termination
The Board of Directors may amend, suspend or terminate the 2011 Incentive Plan at any time,
except that no amendment may impair the rights of any participant without such participants
consent and no amendment will be effective prior to approval by Coopers shareholders to the extent
such approval is required by law or pursuant to Section 162(m) of the Code or Rule 16b-3 issued
under the Exchange Act to preserve the applicability of any exemption provided by such rules to any
award then outstanding.
Duration of Plan
The 2011 Incentive Plan will become effective on the date it is approved by our shareholders.
Subject to earlier termination of the 2011 Incentive Plan pursuant to the above, the Plan will
terminate no later than ten years after the date the Plan is approved by our shareholders. After
the termination date, no future awards may be granted, but previously granted awards will remain
outstanding in accordance with their applicable terms and conditions.
Certain Federal Income Tax Consequences
The following is a brief summary of certain significant United States federal income tax
consequences under the Code, as in effect on the date of this summary, applicable to Cooper and
plan participants in connection with awards under the 2011 Incentive Plan. This summary assumes
that all awards will be exempt from, or comply with, the rules under Section 409A of the Code
regarding nonqualified deferred compensation. If an award constitutes nonqualified deferred
compensation and fails to comply with Section 409A, the award will be subject to immediate taxation
and tax penalties in the year the award vests. This summary is not intended to be exhaustive, and,
among other things, does not describe state, local or non-United States tax consequences, or the
effect of gift, estate or inheritance taxes. References to the Company in this summary of tax
consequences mean Cooper Industries plc, or any subsidiary or affiliate of Cooper Industries plc
that employs or receives the services of a recipient of an award under the 2011 Incentive Plan, as
the case may be.
50
Stock Options
The grant of stock options under the 2011 Incentive Plan will not result in taxable income to
the recipient of the options or an income tax deduction for the Company. However, the transfer of
shares to an option holder upon exercise of his or her option may or may not give rise to taxable
income to the option holder and a tax deduction for the Company depending upon whether such option
is a nonqualified stock option or an incentive stock option.
The exercise of a nonqualified stock option by an option holder generally results in immediate
recognition of taxable ordinary income by the option holder and a corresponding tax deduction for
the Company in the amount by which the fair market value of the shares purchased, on the date of
such exercise, exceeds the aggregate exercise price paid. Any appreciation or depreciation in the
fair market value of those shares after the exercise date will generally result in a capital gain
or loss to the holder at the time he or she disposes of those shares.
The exercise of an incentive stock option by the option holder is exempt from income tax,
although not from the alternative minimum tax, and does not result in a tax deduction for the
Company if the holder has been an employee of the Company at all times beginning with the option
grant date and ending three months before the date the holder exercises the option (or twelve
months in the case of termination of employment due to disability). If the option holder has not
been so employed during that time, the holder will be taxed as described above for nonqualified
stock options. If the option holder disposes of the shares purchased more than two years after the
option was granted and more than one year after the option was exercised, then the option holder
will recognize any gain or loss upon disposition of those shares as capital gain or loss. However,
if the option holder disposes of the shares prior to satisfying these holding periods (known as a
disqualifying disposition), the option holder will be obligated to report as taxable ordinary
income for the year in which that disposition occurs the excess, with certain adjustments, of the
fair market value of the shares disposed of, on the date the incentive stock option was exercised,
over the exercise price paid for those shares. The Company would be entitled to a tax deduction
equal to the amount of ordinary income reported by the option holder. Any additional gain realized
by the option holder on the disqualifying disposition would be capital gain. If the total amount
realized in a disqualifying disposition is less than the fair market value of the shares on the
exercise date of the incentive stock option, the difference would be a capital loss for the holder.
SARS
The granting of SARs does not result in taxable income to the recipient of a SAR or a tax
deduction for the Company. Upon exercise of a SAR, the amount of any cash the participant receives
(before applicable tax withholdings) and the fair market value as of the exercise date of any
shares received are taxable to the participant as ordinary income and deductible by the Company.
Restricted Stock and Restricted Stock Units
A participant will not recognize any taxable income upon the award of shares of restricted
stock which are not transferable and are subject to a substantial risk of forfeiture. Dividends
paid with respect to restricted stock prior to the lapse of restrictions applicable to that stock
will be taxable as compensation income to the participant. Generally, the participant will
recognize taxable ordinary income at the first time those shares become transferable or are no
longer subject to a substantial risk of forfeiture, in an amount equal to the fair market value of
those shares when the restrictions lapse. However, a participant may elect to recognize taxable
ordinary income upon the award date of restricted stock based on the fair market value of the
shares subject to the award on the award date. If a participant makes that election, any dividends
paid with respect to that restricted stock will not be treated as compensation income, but rather
as dividend income, and the participant will not recognize additional taxable income when the
restrictions applicable to his or her restricted stock award lapse. Assuming compliance with the
applicable tax withholding and reporting requirements, the Company will be entitled to a tax
deduction equal to the amount of ordinary income recognized by a participant in connection with his
or her restricted stock award in the Companys taxable year in which that participant recognizes
that ordinary income.
The granting of restricted stock units does not result in taxable income to the recipient of a
restricted stock unit or a tax deduction for the Company. The amount of cash paid (before
applicable tax withholdings) or the then-current fair market value of the share received upon
settlement of the restricted stock units is taxable to the recipient as ordinary income and
deductible by the Company.
51
Performance Units, Performance Shares, Other Stock-Based Awards, Cash Awards and Dividend
Equivalents
The granting of a performance unit, performance share, cash-based award, other stock-based
award or dividend equivalent right generally should not result in the recognition of taxable income
by the recipient or a tax deduction by the Company. The payment or settlement of a performance
unit, performance share, cash-based award, other stock-based award or dividend equivalent right
should generally result in immediate recognition of taxable ordinary income by the recipient equal
to the amount of any cash received (before applicable tax withholding) or the then-current fair
market value of the shares received, and a corresponding tax deduction by the Company. If the
shares covered by the award are not transferable and subject to a substantial risk of forfeiture,
the tax consequences to the participant and the Company will be similar to the tax consequences of
restricted stock awards, described above. If the award consists of unrestricted shares of stock,
the recipient of those shares will immediately recognize taxable ordinary income equal to the fair
market value of those shares on the date of the award, and the Company will be entitled to a
corresponding tax deduction.
Section 162(m)
Under Section 162(m) of the Code, the Company may be limited as to federal income tax
deductions to the extent that total annual compensation in excess of $1 million is paid to our
Chief Executive Officer or any one of our three highest paid executive officers, other than the
Chief Executive Officer or Chief Financial Officer, who are employed by us on the last day of our
taxable year. However, certain performance-based compensation the material terms of which are
disclosed to and approved by our shareholders is not subject to this deduction limitation. The
2011 Incentive Plan has been structured with the intention that compensation resulting from stock
options and SARs granted under the 2011 Incentive Plan will be qualified performance-based
compensation and, assuming the plan is approved by the shareholders, deductible without regard to
the limitations otherwise imposed by Section 162(m) of the Code. The 2011 Incentive Plan allows
the Committee discretion to award restricted stock, restricted stock units, performance shares,
performance units, cash-based awards and other stock-based awards that are intended to be qualified
performance-based compensation, as described under Performance-Based Awards above.
Under certain circumstances, accelerated vesting, exercise or payment of awards under the 2011
Incentive Plan in connection with a change of control might be deemed an excess parachute
payment for purposes of the golden parachute payment provisions of Section 280G of the Code. To
the extent it is so considered, the participant holding the award would be subject to an excise tax
equal to 20% of the amount of the excess parachute payment, and the Company would be denied a tax
deduction for the excess parachute payment.
New Plan Benefits
As of February 18, 2011, there were approximately 600 employees and 9 non-employee directors
who would be eligible to receive awards under the 2011 Incentive Plan. No awards will be granted
under the 2011 Incentive Plan unless the Plan is approved by our shareholders. Because it will be
within the Committees discretion to determine which employees and directors will receive awards
under the 2011 Incentive Plan and the types and amounts of those awards, it is not possible at
present to specify the benefits that would be received under the 2011 Incentive Plan by directors,
executive officers and other employees if the 2011 Incentive Plan is approved by the shareholders.
In addition, the benefits or amounts that would have been received by, or allocated to, those
persons for the last completed fiscal year if the 2011 Incentive Plan had been in effect cannot be
determined.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE
2011 OMNIBUS INCENTIVE COMPENSATION PLAN
52
PROPOSAL 5
APPROVAL OF THE ADVISORY VOTE ON EXECUTIVE COMPENSATION
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act enacted in July 2010 (the
Dodd-Frank Act), our shareholders are entitled to vote at the Annual Meeting to approve the
compensation of the Companys Named Executives, as disclosed in this proxy statement. Pursuant to
the Dodd-Frank Act, the shareholder vote on executive compensation is an advisory vote only, and it
is not binding on Cooper or the Board of Directors. Although the vote is non-binding, the
Management Development and Compensation Committee and the Board value the opinions of our
shareholders and will consider the outcome of the vote when making future compensation decisions.
We urge you to consider the various matters regarding our executive compensation program as
described more fully in the Compensation Discussion and Analysis section beginning at page 18 of
this proxy statement. Coopers executive compensation program is designed to attract, motivate and
retain individuals with the skills required to formulate and drive Coopers strategic direction and
achieve annual and long-term performance goals necessary to create shareholder value. The program
seeks to align executive compensation with shareholder value on an annual and long-term basis
through a combination of base pay, annual incentives and long-term incentives.
We believe that our executive compensation program is reasonable, competitive and strongly
focused on pay-for-performance principles. We emphasize compensation opportunities that reward our
executives when they deliver targeted financial results. The compensation of our Named Executives
varies depending on the achievement of pre-established performance goals, both individual and
corporate. Our strong focus on pay-for-performance has served our shareholders well over the
years. As noted on page 19 of this proxy statement, Coopers total shareholder returns have
exceeded the returns of the S&P 500 and the average returns of our 15 company peer group over the
last one-, two-, three-, four-, five-, and ten-year periods.
Our executive compensation program is aligned with driving long-term shareholder value and
provides flexibility to address different economic conditions. In light of the impact of the
severe economic and credit crisis that developed in the latter part of 2008, certain financial
targets were not achieved and the Company took various measures relating to executive compensation
to control costs while driving financial performance and retaining the management talent necessary
to achieve strategic goals as follows:
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Imposed a salary freeze in 2009 and 2010, with limited exceptions based on promotional
increases and a competitive pay adjustment. |
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There was no payout of performance-based share awards under the 2008-2010 performance
cycle due to the negative impact that the economic downturn had on our earnings
performance. |
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Reduced the Companys matching contribution to the Cooper Savings Plan from 6% to 3%. |
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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. |
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Fiscal year 2010 accomplishments include: |
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Coopers stock appreciated 37% and total shareholder return was approximately 40% in
2010, |
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Excellent cash flow performance accomplished through operating efficiencies and
effective management of working capital with free cash flow exceeding recurring income for
the tenth consecutive year, |
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Successful formation of a joint venture for Coopers Tools business, |
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Maintaining strong financial flexibility by successfully issuing $500 million of public
debt at very favorable interest rates, |
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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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Achievement of record cost productivity and employee safety levels, |
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Completion of five strategic acquisitions to build key growth platforms, and |
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Achievement of key innovation initiatives including delivery of innovative new products. |
53
Cooper also has several governance programs and practices in place to align executive
compensation with shareholder interests and mitigate risks in its executive compensation program.
These programs and practices include:
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Incentive plans that discourage undue risk and align rewards with short- and long-term
business objectives and shareholders interests as a whole; |
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Stock ownership and retention guidelines that ensure Cooper executives have a meaningful
ownership interest in the Company; and |
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Inclusion of a clawback policy in the Cooper Industries plc 2011 Omnibus Incentive
Compensation Plan. |
For the reasons discussed above, the Board of Directors unanimously recommends that the
shareholders vote in favor of the following resolution:
RESOLVED, that the Companys shareholders approve, on an advisory basis, the compensation of
the Named Executives, as disclosed in the Companys proxy statement for the 2011 Annual Meeting of
Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange
Commission, including the Compensation Discussion and Analysis, the 2010 Summary Compensation Table
and the other related tables and disclosure.
THE BOARD RECOMMENDS A VOTE FOR THE ADVISORY RESOLUTION
APPROVING THE COMPANYS EXECUTIVE COMPENSATION
54
PROPOSAL 6
RECOMMENDATION ON FREQUENCY OF SHAREHOLDER
ADVISORY VOTE ON EXECUTIVE COMPENSATION
Under the Dodd-Frank Act, our shareholders are entitled to vote at the Annual Meeting
regarding whether the shareholder vote to approve the compensation of the Named Executives (as
described in Proposal 5 of this proxy statement) should occur every one, two or three years.
Shareholders also have the option to abstain from voting on the matter. Pursuant to the Dodd-Frank
Act, the shareholder vote on the frequency of the shareholder vote to approve executive
compensation is an advisory vote only, and it is not binding on Cooper or the Board of Directors.
Although the vote is non-binding, the Management Development and Compensation Committee and the
Board of Directors value the opinions of our shareholders and will consider the outcome of the vote
when determining the frequency of the shareholder vote on executive compensation.
The Board of Directors has determined that an advisory shareholder vote on executive
compensation every three years is the best approach for the Company and its shareholders for a
number of reasons, including the following:
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Our compensation programs are designed to reward and incentivize long-term performance
and a three-year voting cycle corresponds with the three-year performance period under our
long-term incentive awards; |
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A three-year voting cycle fosters a long-term view of our executive compensation
program. We encourage our shareholders to evaluate our executive compensation program over
a multi-year horizon and to review our Named Executives compensation over the past three
fiscal years consistent with the reporting of such compensation in the Summary Compensation
Table in proxy statements; |
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Because our executive compensation program has typically not changed materially from
year-to-year and is designed to operate over the long-term and to enhance long-term
performance, we are concerned that an annual advisory vote on executive compensation could
lead to a near-term perspective inappropriately bearing on our executive compensation
program; |
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A three-year cycle will provide investors with sufficient time to evaluate the
effectiveness of Coopers short-term and long-term incentive programs, compensation
strategies and Company performance; and |
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A three-year cycle provides the Board of Directors and the Management Development and
Compensation Committee with sufficient time to thoughtfully evaluate and respond to
shareholder input and effectively implement any desired changes to Coopers executive
compensation program. |
The following resolution will be submitted for a shareholder vote at the 2011 Annual Meeting:
RESOLVED, that the Companys shareholders recommend, on an advisory basis, whether the
shareholder vote on the compensation of the Companys Named Executives listed in the annual proxy
statement should occur every one, two or three years.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR FUTURE
ADVISORY VOTES ON EXECUTIVE COMPENSATION TO OCCUR EVERY THREE YEARS.
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PROPOSAL 7
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, 2011, the remaining authorization under the
current share repurchase program was 8,728,735 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
November 2, 2012 unless previously varied, revoked or renewed by an ordinary resolution of
shareholders. Such purchases would be made only at price levels set forth in the resolution below,
after taking into account the Companys overall financial position.
Resolution
The text of the resolution, which, if thought fit, will be passed as an ordinary resolution at
the Annual 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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(c) |
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The minimum price to be paid for any ordinary share shall be the nominal value for that
share. |
|
|
(d) |
|
This general authority will be effective from the date of passing of this resolution
and expire eighteen months thereafter, 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 7.
56
PROPOSAL 8
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 November 2, 2012 unless previously varied,
revoked or renewed by a special resolution of shareholders. We expect to propose renewal of this
authorization at subsequent Annual Meetings.
Special Resolution
The text of the special resolution, which, if thought fit, will be passed as a special
resolution at the Annual 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:
|
(a) |
|
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 |
|
|
(b) |
|
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 8.
57
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.
|
|
|
AES Corporation
|
|
Hormel Foods Corporation |
Aetna, Inc.
|
|
J.M. Huber Corporation |
Air Products
|
|
Illinois Tool Works, Inc. |
Americas Styrenics LLC
|
|
Ineos |
Amway / Alticor
|
|
Kaiser Foundation Health Plan |
AnnTaylor Stores Corporation
|
|
Kohls Corporation |
Aramark Limited
|
|
Kinder Morgan |
Ashland, Inc.
|
|
KV Pharmaceutical Company |
Ball Corporation
|
|
Lowes Companies, Inc. |
BASF Corporation
|
|
LOreal USA |
Best Buy Co. Inc.
|
|
Lubrizol Corporation |
Burger King Holdings, Inc.
|
|
Medco Health Solutions Inc. |
Caterpillar Inc.
|
|
Molson Coors Brewing Company |
Celanese Corporation
|
|
Macys, Inc. |
Charming Shoppes, Inc.
|
|
Metso Corporation |
Chevron Phillips Chemical Company LLC
|
|
Nestle USA |
CHS Inc.
|
|
NewMarket Corporation |
Cognis GmbH
|
|
PPG Industries, Inc. |
Comcast Corporation
|
|
RGA Reinsurance Group of America, Incorporated |
Coty Inc.
|
|
Rockwell Collins, Inc. |
Deere & Company
|
|
Safeway Inc. |
DineEquity Inc. Applebees
|
|
Staples, Inc. |
Dominion Resources Inc.
|
|
Solvay America |
Dow Chemical Company
|
|
Sonic Corporation |
Eastman Chemical Company
|
|
Suez Energy |
Eaton Corporation
|
|
TJX Companies, Inc. |
FedEx Corporation
|
|
Tate & Lyle Americas |
Goodrich Corporation
|
|
Tyco International, Ltd |
Harris Teeter
|
|
Union Pacific Corporation |
Hexion Specialty Chemicals, Inc.
|
|
Watson Pharmaceuticals, Inc. |
Home Depot, Inc.
|
|
WellPoint, Inc. |
58
APPENDIX B
Cooper Industries plc 2011 Omnibus Incentive Compensation Plan
Cooper Industries plc (CBE) has adopted the Cooper Industries plc 2011 Omnibus Incentive
Compensation Plan (the Plan) for the benefit of non-employee directors, officers, and
eligible employees of CBE, Cooper US, Inc. (the Company), and any other Subsidiaries and
Affiliates (as each such term is defined below) as follows:
ARTICLE I.
ESTABLISHMENT; PURPOSES; AND DURATION
1.1. Establishment of the Plan. CBE hereby establishes this omnibus incentive
compensation plan to be known as the Cooper Industries plc 2011 Omnibus Incentive Compensation
Plan, as set forth in this document. The Plan permits the grant of Nonqualified Stock Options,
Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units,
Performance Shares, Performance Units, Cash-Based Awards and Stock Bonus Awards. Following
adoption of the Plan by the Board of Directors, the Plan shall become effective upon the date on
which the Plan is approved by the stockholders of CBE (the Effective Date), which
approval must occur within the period ending twelve (12) months after the date the Plan is adopted
by the Board. The Plan shall remain in effect as provided in Section 1.3.
1.2. Purposes of the Plan. The purposes of the Plan are to provide additional
incentives to non-employee directors, officers and eligible employees of CBE and its Subsidiaries
and Affiliates whose substantial contributions are essential to the continued growth and success of
the business of CBE and its Subsidiaries and Affiliates, in order to strengthen their commitment to
CBE and its Subsidiaries and Affiliates, and to attract and retain competent and dedicated
individuals whose efforts will result in the long-term growth and profitability of CBE and to
further align the interests of such non-employee directors, officers, and employees with the
interests of the stockholders of the CBE. To accomplish such purposes, the Plan provides that the
Committee may grant Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights,
Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards
and Stock Bonus Awards.
1.3. Duration of the Plan. The Plan shall commence on the Effective Date and shall
remain in effect, subject to the right of the Board of Directors to amend or terminate the Plan at
any time pursuant to Article XVI, until all Shares subject to it shall have been delivered, and any
restrictions on such Shares have lapsed, pursuant to the Plans provisions. However, in no event
may an Award be granted under the Plan on or after ten years from the Effective Date.
ARTICLE II.
DEFINITIONS
Certain terms used herein have the definitions given to them in the first instance in which
they are used. In addition, for purposes of the Plan, the following terms are defined as set forth
below:
2.1. Affiliate means any entity other than CBE that is affiliated with CBE through
stock or equity ownership or otherwise in which CBE has at least a 50% equity interest and is
designated as an Affiliate for purposes of the Plan by the Committee.
2.2. Applicable Exchange means the New York Stock Exchange or such other securities
exchange as may at the applicable time be the principal market for the Common Stock.
2.3. Award means, individually or collectively, a grant under the Plan of
Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock
Awards, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards, Stock
Bonus Awards and Dividend Equivalents.
2.4. Award Agreement means either: (a) a written agreement entered into by a
Participant and CBE, a Subsidiary or Affiliate setting forth the terms and provisions applicable to
an Award granted under the Plan, or (b) a written or electronic statement issued by CBE, a
Subsidiary or Affiliate to a Participant describing the terms
59
and provisions of such Award, including any amendment or modification thereof. The Committee may
provide for the use of electronic, internet or other non-paper Award Agreements, and the use of
electronic, internet or other non-paper means for the acceptance thereof and actions thereunder by
a Participant.
2.5. Board or Board of Directors means the Board of Directors of CBE.
2.6. Cash-Based Award means an Award, whose value is determined by the Committee,
granted to a Participant, as described in Article IX.
2.7. Cause means, unless otherwise provided in an Award Agreement, (A) commission of
(1) a felony (or its equivalent in a non-United States jurisdiction) or (2) other conduct of a
criminal nature that has or is likely to have a material adverse effect on the reputation or
standing in the community of CBE or a Subsidiary or Affiliate or that legally prohibits the
Participant from working for CBE or any Subsidiary or Affiliate; (B) breach by the Participant of a
regulatory rule that adversely affects the Participants ability to perform the Participants
duties to CBE and the Subsidiaries and Affiliates; (C) dishonesty in the course of fulfilling the
Participants employment duties; (D) deliberate failure on the part of the Participant (1) to
perform the Participants principal employment duties, (2) to comply with the policies of CBE or
any Subsidiary or Affiliate in any material respect, or (3) to follow specific reasonable
directions received from CBE or any Subsidiary or Affiliate; or (E) before a Change in Control,
such other events as shall be determined by the Committee and set forth in a Participants Award
Agreement. Any determination by the Committee as to whether Cause exists shall be subject to
de novo review.
2.8 CBE means Cooper Industries plc, an Irish company, or any successor to Cooper
Industries plc that becomes the ultimate parent company of the Cooper Industries group of
companies.
2.9. Change in Control means the occurrence of any of the following:
(a) any individual, group or entity (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Exchange Act) (a Person) becomes the beneficial owner (within the meaning of Rule
13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of CBE (not
including in the securities beneficially owned by such Person any securities acquired
directly from CBE or its Affiliates) representing 25% or more of the combined voting power
of CBEs then outstanding securities, excluding any Person who becomes such a beneficial
owner in connection with a transaction described in clause (i) of paragraph (c) below; or
(b) the following individuals cease for any reason to constitute a majority of the
number of directors then serving on the Board: individuals who, on the date hereof,
constitute the Board and any new director (other than a director whose initial assumption of
office is in connection with an actual or threatened election contest, including but not
limited to a consent solicitation, relating to the election of directors of CBE) whose
appointment or election by the Board or nomination for election by CBEs shareholders was
approved or recommended by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors on the date hereof or whose appointment, election or
nomination for election was previously so approved or recommended; or
(c) there is consummated a merger or consolidation of CBE or any direct or indirect
subsidiary of CBE with any other corporation, other than (i) a merger or consolidation which
results in the directors of CBE immediately prior to such merger or consolidation continuing
to constitute at least a majority of the board of directors of CBE, the surviving entity or
any parent thereof, or (ii) a merger or consolidation effected to implement a
recapitalization of CBE (or similar transaction) in which no Person is or becomes the
beneficial owner, directly or indirectly, of securities of CBE (not including in the
securities beneficially owned by such Person any securities acquired directly from CBE or
its Affiliates) representing 25% or more of the combined voting power of CBEs then
outstanding securities; or
(d) the shareholders of CBE approve a plan of complete liquidation or dissolution of
CBE or there is consummated an agreement for the sale or disposition by CBE of all or
substantially all of CBEs assets, other than a sale or disposition by CBE of all or
substantially all of CBEs assets to an entity, at least
60
60% of the combined voting power of the voting securities of which are owned by
shareholders of CBE in substantially the same proportions as their ownership of CBE
immediately prior to such sale.
2.10. Change in Control Price means the price per share offered in respect of the
Common Stock in conjunction with any transaction resulting in a Change in Control on a
fully-diluted basis (as determined by the Board or the Committee as constituted before the Change
in Control, if any part of the offered price is payable other than in cash) or, in the case of a
Change in Control occurring solely by reason of a change in the composition of the Board, the
highest Fair Market Value of a Share on any of the 30 trading days immediately preceding the date
on which a Change in Control occurs.
2.11. Code means the Internal Revenue Code of 1986, as it may be amended from time
to time, including rules and regulations promulgated thereunder and successor provisions and rules
and regulations thereto.
2.12. Committee means the Management, Development and Compensation Committee of the
Board of Directors or a subcommittee thereof, or such other committee designated by the Board to
administer the Plan.
2.13. Common Stock means an ordinary share, par value $0.01 per share, of CBE.
2.14. Covered Employee means any Participant who the Committee determines is at the
Grant Date of an Award granted to such Participant, or may be as of the end of the taxable year in
which CBE or a Subsidiary or Affiliate would claim a tax deduction in connection with such Award, a
covered employee within the meaning of Section 162(m) of the Code, and successor provisions.
2.15. Director means any individual who is a member of the board of directors of
CBE.
2.16. Disability means (i) Disability as defined in the applicable Award Agreement
to which the Participant is a party, or (ii) if the Award Agreement does not define Disability,
(A) permanent and total disability as determined under CBEs or a Subsidiarys or Affiliates,
long-term disability plan applicable to the Participant, or (B) if there is no such plan applicable
to the Participant, disability as determined by the Committee.
2.17. Disaffiliation means a subsidiarys or affiliates ceasing to be a subsidiary
or affiliate of CBE for any reason (including as a result of a public offering, or a spin-off or
sale by CBE, of the stock of the subsidiary or affiliate of CBE) or a sale of a division of CBE or
a subsidiary or affiliate of CBE.
2.18. Dividend Equivalents means the equivalent value (in cash or Shares) of
dividends that would otherwise be paid on the Shares subject to an Award but that have not been
issued or delivered, as described in Article XI.
2.19. Effective Date shall have the meaning ascribed to such term in Section 1.1.
2.20. Eligible Individual means any Employee or Non-Employee Director and any
prospective Employee who has accepted an offer of employment from CBE or any Subsidiary or
Affiliate.
2.21. Employee means any person designated as an employee of CBE, a Subsidiary
and/or an Affiliate on the payroll records thereof. An Employee shall not include any individual
during any period he or she is classified or treated by CBE, a Subsidiary or an Affiliate as an
independent contractor, a consultant, or any employee of an employment, consulting, or temporary
agency or any other entity other than CBE, a Subsidiary and/or an Affiliate without regard to
whether such individual is subsequently determined to have been, or is subsequently retroactively
reclassified as a common-law employee of CBE, a Subsidiary and/or an Affiliate during such period.
For the avoidance of doubt, a Director who would otherwise be an Employee within the meaning of
this Section 2.19 shall be considered an Employee for purposes of the Plan.
2.22. Exchange Act means the Securities Exchange Act of 1934, as it may be amended
from time to time, including the rules and regulations promulgated thereunder and successor
provisions and rules and regulations thereto.
61
2.23. Fair Market Value means, if the Common Stock is listed on a national
securities exchange, as of any given date, the closing price for the Common Stock on such date on
the Applicable Exchange, or if Shares were not traded on the Applicable Exchange on such
measurement date, then on the next preceding date on which Shares are traded, all as reported by
such source as the Committee may select. If the Common Stock is not listed on a national
securities exchange, Fair Market Value shall be determined by the Committee in its good faith
discretion.
2.24. Fiscal Year means the calendar year, or such other consecutive twelve-month
period as the Committee may select.
2.25. Freestanding SAR means an SAR that is granted independently of any Options, as
described in Article VII.
2.26. Good Reason means, unless otherwise provided in an Award Agreement, (A) a
material reduction by CBE, a Subsidiary or an Affiliate in the Participants rate of annual base
salary from that in effect immediately prior to the Change in Control; (B) a material reduction by
CBE, a Subsidiary or Affiliate in the Participants annual target bonus opportunity from that in
effect immediately prior to the Change in Control; or (C) CBE, a Subsidiary or an Affiliate
requires the Participant to change the Participants principal location of work to a location that
is in excess of fifty (50) miles from the location thereof immediately prior to the Change in
Control. Notwithstanding the foregoing, a Termination of a Participant for Good Reason shall not
have occurred unless (i) the Participant gives written notice to the Company, a Subsidiary or an
Affiliate, as applicable, of Termination within thirty (30) days after the Participant first
becomes aware of the occurrence of the circumstances constituting Good Reason, specifying in
reasonable detail the circumstances constituting Good Reason, and (ii) CBE, the Subsidiary or the
Affiliate, as the case may be, has failed within thirty (30) days after receipt of such notice to
cure the circumstances constituting Good Reason.
2.27. Grant Date means (a) the date on which the Committee (or its designee) by
resolution, written consent or other appropriate action selects an Eligible Individual to receive a
grant of an Award, determines the number of Shares or other amount to be subject to such Award and,
if applicable, determines the Option Price or Grant Price of such Award, or (b) such later date as
the Committee (or such designee) shall provide in such resolution, consent or action.
2.28. Grant Price means the price established as of the Grant Date of an SAR
pursuant to Article VII used to determine whether there is any payment due upon exercise of the
SAR.
2.29. Incentive Stock Option or ISO means a right to purchase Shares under
the Plan in accordance with the terms and conditions set forth in Article VI and which is
designated as an Incentive Stock Option and which is intended to meet the requirements of Section
422 of the Code.
2.30. Insider means an individual who is, on the relevant date, an officer, director
or ten percent (10%) beneficial owner (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of any class of CBEs equity securities that is registered pursuant to Section 12 of
the Exchange Act, as determined by the Committee in accordance with Section 16 of the Exchange Act.
2.31. New Employer means, after a Change in Control, a Participants employer, or
any direct or indirect parent or any direct or indirect majority-owned subsidiary of such employer.
2.32. Non-Employee Director means a Director who is not an Employee.
2.33. Nonqualified Stock Option or NQSO means a right to purchase Shares
under the Plan in accordance with the terms and conditions set forth in Article VI and which is not
intended to meet the requirements of Section 422 of the Code or otherwise does not meet such
requirements.
2.34. Notice means notice provided by a Participant to the Company in a manner
prescribed by the Committee.
62
2.35. Option or Stock Option means an Incentive Stock Option or a
Nonqualified Stock Option, as described in Article VI.
2.36. Option Price means the price at which a Share may be purchased by a
Participant pursuant to an Option.
2.37. Participant means any eligible individual as set forth in Article V who holds
one or more outstanding Awards.
2.38. Performance-Based Compensation means compensation under an Award that is
intended to satisfy the requirements of Code Section 162(m) for certain performance-based
compensation paid to Covered Employees. Notwithstanding the foregoing, nothing in the Plan shall
be construed to mean that an Award which does not satisfy the requirements for performance-based
compensation under Code Section 162(m) does not constitute performance-based compensation for any
other purpose, such as Code Section 409A.
2.39. Performance Measure means any performance criteria or measures as described in
Section 12.1 on which the performance goals described in Article XII are based and which are
approved by the Companys shareholders pursuant to the Plan in order to qualify certain Awards as
Performance-Based Compensation in accordance with Article XII.
2.40. Performance Period means the period of time during which the performance goals
must be met in order to determine the degree of payout and/or vesting with respect to, or the
amount or entitlement to, an Award.
2.41. Performance Share means an Award granted pursuant to Article IX of contractual
right to receive a payment equal to (a) the Fair Market Value of a Share on a date specified by the
Committee to the extent applicable performance goals are achieved in accordance with Article IX, or
(b) the Change in Control Price in accordance with Article XV.
2.42. Performance Unit means a fixed or variable dollar denominated unit granted
pursuant to Article IX, the value of which is determined by the Committee, payable, in whole or in
part, to the extent applicable performance goals are achieved over a specified period in accordance
with Article IX.
2.43. Period of Restriction means the period during which Shares of Restricted Stock
or Restricted Stock Units are subject to a substantial risk of forfeiture, and, in the case of
Restricted Stock, the transfer of Shares of Restricted Stock is limited in some way, as provided in
Article VIII.
2.44. Restricted Stock means an Award granted to a Participant, subject to the
Period of Restriction, pursuant to Article VIII.
2.45. Restricted Stock Unit means an Award, whose value is equal to a Share, granted
to a Participant, subject to the Period of Restriction, pursuant to Article VIII.
2.46. Retirement means (i) Retirement as defined in the applicable Award Agreement
to which the Participant is a party, or (ii) if the Award Agreement does not define Retirement,
retirement from active employment with CBE, a Subsidiary or an Affiliate, as determined by the
Committee.
2.47. Rule 16b-3 means Rule 16b-3 under the Exchange Act, or any successor rule, as
the same may be amended from time to time.
2.48. SEC means the Securities and Exchange Commission.
2.49. Securities Act means the Securities Act of 1933, as it may be amended from
time to time, including the rules and regulations promulgated thereunder and successor provisions
and rules and regulations thereto.
63
2.50. Share means a share of Common Stock (including any new, additional or
different stock or securities resulting from any change in corporate capitalization as listed in
Section 4.4).
2.51. Stock Appreciation Right or SAR means an Award, granted alone (a
Freestanding SAR) or in connection with a related Option (a Tandem SAR),
designated as an SAR, pursuant to the terms of Article VII.
2.52. Stock Bonus Award means an equity-based or equity-related Award described in
Section 10.1, granted in accordance with the terms and conditions set forth in Article X.
2.53. Subsidiary means any present or future corporation which is or would be a
subsidiary corporation of CBE as the term is defined in Section 424(f) of the Code.
2.54. Substitute Awards means Awards granted or Shares issued by CBE in assumption
of, or in substitution or exchange for, options or other awards previously granted, or the right or
obligation to grant future options or other awards, by a company acquired by CBE, a Subsidiary
and/or an Affiliate or with which CBE, a Subsidiary and/or an Affiliate combines, or otherwise in
connection with any merger, consolidation, acquisition of property or stock, or reorganization
involving CBE, a Subsidiary or an Affiliate, including a transaction described in Code Section
424(a).
2.55. Termination means the termination of the applicable Participants employment
with, or performance of services for, CBE or any Affiliate or Subsidiary under any circumstances.
A Participant employed by, or performing services for, a Subsidiary or Affiliate or a division of
CBE or of a Subsidiary or Affiliate shall be deemed to incur a Termination if such Subsidiary,
Affiliate or division ceases to be a Subsidiary or Affiliate or such a division, as the case may
be, and the Participant does not immediately thereafter become an employee of, or service provider
for, CBE or another Subsidiary or Affiliate.
ARTICLE III.
ADMINISTRATION
3.1. General. The Committee shall have exclusive authority to operate, manage and
administer the Plan in accordance with its terms and conditions. Notwithstanding the foregoing, in
its absolute discretion, the Board may at any time and from time to time exercise any and all
rights, duties and responsibilities of the Committee under the Plan, including establishing
procedures to be followed by the Committee, but excluding matters which under any applicable law,
regulation or rule, including any exemptive rule under Section 16 of the Exchange Act (including
Rule 16b-3), are required to be determined in the sole discretion of the Committee. If and to the
extent that the Committee does not exist or cannot function, the Board may take any action under
the Plan that would otherwise be the responsibility of the Committee, subject to the limitations
set forth in the immediately preceding sentence.
3.2. Authority of the Committee. The Committee shall have full discretionary
authority to grant, pursuant to the terms of the Plan, Awards to those individuals who are eligible
to receive Awards under the Plan. Except as limited by law or by the Certificate of Incorporation
or Memorandum and Articles of Association of CBE, and subject to the provisions herein, the
Committee shall have full power, in accordance with the other terms and provisions of the Plan, to:
(a) select Eligible Individuals who may receive Awards under the Plan and become
Participants;
(b) determine eligibility for participation in the Plan and decide all questions
concerning eligibility for, and the amount of, Awards under the Plan;
(c) determine the sizes and types of Awards;
64
(d) determine the terms and conditions of Awards, including the Option Prices of
Options and the Grant Prices of SARs; provided that the Committee shall not permit the
repricing of Options or SARs;
(e) grant Awards as an alternative to, or as the form of payment for grants or rights
earned or payable under, other bonus or compensation plans, arrangements or policies of CBE
or a Subsidiary or Affiliate;
(f) grant Substitute Awards on such terms and conditions as the Committee may
prescribe, subject to compliance with the ISO rules under Code Section 422 and the
nonqualified deferred compensation rules under Code Section 409A, where applicable;
(g) make all determinations under the Plan concerning Termination of any Participants
employment or service with the Company or a Subsidiary or Affiliate, including whether such
Termination occurs by reason of Cause, Good Reason, Disability, Retirement or in connection
with a Change in Control, and whether a leave constitutes a Termination;
(h) determine whether a Change in Control shall have occurred;
(i) construe and interpret the Plan and any agreement or instrument entered into under
the Plan, including any Award Agreement;
(j) establish and administer any terms, conditions, restrictions, limitations,
forfeiture, vesting or exercise schedule, and other provisions of or relating to any Award;
(k) establish and administer any performance goals in connection with any Awards,
including related Performance Measures or other performance criteria and applicable
Performance Periods, determine the extent to which any performance goals and/or other terms
and conditions of an Award are attained or are not attained, and certify whether, and to
what extent, any such performance goals and other material terms applicable to Awards
intended to qualify as Performance-Based Compensation were in fact satisfied;
(l) make adjustments in the performance goals of an Award other than with respect to
Performance-Based Compensation if inconsistent with Code Section 162(m);
(m) construe any ambiguous provisions, correct any defects, supply any omissions and
reconcile any inconsistencies in the Plan and/or any Award Agreement or any other
instrument relating to any Awards;
(n) establish, adopt, amend, waive and/or rescind rules, regulations, procedures,
guidelines, forms and/or instruments for the Plans operation or administration;
(o) make all valuation determinations relating to Awards and the payment or settlement
thereof;
(p) grant waivers of terms, conditions, restrictions and limitations under the Plan or
applicable to any Award, or accelerate the vesting or exercisability of any Award;
(q) amend or adjust the terms and conditions of any outstanding Award and/or adjust
the number and/or class of shares of stock subject to any outstanding Award;
(r) at any time and from time to time after the granting of an Award, specify such
additional terms, conditions and restrictions with respect to such Award as may be deemed
necessary or appropriate to ensure compliance with any and all applicable laws or rules,
including terms, restrictions and conditions for compliance with applicable securities laws
or listing rules, methods of withholding or
65
providing for the payment of required taxes and restrictions regarding a Participants
ability to exercise Options through a cashless (broker-assisted) exercise;
(s) establish any blackout period that the Committee in its sole discretion deems
necessary or advisable;
(t) exercise all such other authorities, take all such other actions and make all such
other determinations as it deems necessary or advisable for the proper operation and/or
administration of the Plan;
(u) determine on the Grant Date whether the Award is intended or not intended to
satisfy the requirements of Code Section 162(m) and so note in the applicable Award
Agreement; and
(v) notwithstanding any provisions in the Plan, no action shall be taken which will
prevent Awards hereunder (i) that are intended to provide Performance-Based Compensation
from doing so, or (ii) that are intended to comply with the requirements of Code Section
409A from doing so.
3.3. Award Agreements. The Committee shall, subject to applicable laws and rules,
determine the date an Award is granted. Each Award shall be evidenced by an Award Agreement;
however, two or more Awards granted to a single Participant may be combined in a single
Award Agreement. An Award Agreement shall not be a precondition to the granting of an Award;
provided, however, that (a) the Committee may, but need not, require as a condition
to any Award Agreements effectiveness, that such Award Agreement be executed on behalf of CBE, a
Subsidiary or Affiliate and/or by the Participant to whom the Award evidenced thereby shall have
been granted (including by electronic signature or other electronic indication of acceptance), and
such executed Award Agreement be delivered to CBE, a Subsidiary or Affiliate and (b) no person
shall have any rights under any Award unless and until the Participant to whom such Award shall
have been granted has complied with the applicable terms and conditions of the Award. The
Committee shall prescribe the form of all Award Agreements, and, subject to the terms and
conditions of the Plan, shall determine the content of all Award Agreements. Subject to the other
provisions of the Plan, any Award Agreement may be supplemented or amended in writing from time to
time as approved by the Committee; provided that the terms and conditions of any such Award
Agreement as supplemented or amended are not inconsistent with the provisions of the Plan. In the
event of any dispute or discrepancy concerning the terms of an Award, the records of the Committee
or its designee shall be determinative.
3.4. Discretionary Authority; Decisions Binding. The Committee shall have full
discretionary authority in all matters related to the discharge of its responsibilities and the
exercise of its authority under the Plan. All determinations, decisions, actions and
interpretations by the Committee with respect to the Plan and any Award Agreement, and all related
orders and resolutions of the Committee shall be final, conclusive and binding on all Participants,
CBE and its stockholders, and any Subsidiary or Affiliate and all persons having or claiming to
have any right or interest in or under the Plan and/or any Award Agreement. The Committee shall
consider such factors as it deems relevant to making or taking such decisions, determinations,
actions and interpretations, including the recommendations or advice of any Director or officer or
Employee of the Company or CBE, any director, officer or Employee of a Subsidiary or Affiliate and
such attorneys, consultants and accountants as the Committee may select. A Participant or other
holder of an Award may contest a decision or action by the Committee with respect to such person or
Award only on the grounds that such decision or action was arbitrary or capricious or was unlawful,
and any review of such decision or action shall be limited to determining whether the Committees
decision or action was arbitrary or capricious or was unlawful.
3.5. Attorneys; Consultants. The Committee may consult with counsel who may be
counsel to CBE. The Committee may employ such other attorneys and/or consultants, accountants,
appraisers, brokers, agents and other persons, any of whom may be an Eligible Individual, as the
Committee deems necessary or appropriate. The Committee, CBE, its Subsidiaries or Affiliates and
their respective officers and Directors shall be entitled to rely upon the advice, opinions or
valuations of any such persons. The Committee shall not incur any liability for any action taken
in good faith in reliance upon the advice of such counsel or other persons.
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3.6. Delegation of Administration. Except to the extent prohibited by applicable law,
including any applicable exemptive rule under Section 16 of the Exchange Act (including Rule
16b-3), or the applicable rules of a stock exchange, the Committee may, in its discretion, allocate
all or any portion of its responsibilities and powers under this Article III to any one or more of
its members and/or delegate all or any part of its responsibilities and powers under this Article
III to any person or persons selected by it; provided, however, that the Committee
may not delegate to any executive officer of the Company or an Affiliate, or a committee that
includes any such executive officer, the Committees authority to grant Awards, or the Committees
authority otherwise concerning Awards, awarded to executive officers of the Company or an
Affiliate. Any such authority delegated or allocated by the Committee under this Section 3.6 shall
be exercised in accordance with the terms and conditions of the Plan and any rules, regulations or
administrative guidelines that may from time to time be established by the Committee, and any such
allocation or delegation may be revoked by the Committee at any time.
ARTICLE IV.
SHARES SUBJECT TO THE PLAN
4.1. Number of Shares Available for Grants. The shares of stock subject to Awards
granted under the Plan shall be Shares. Such Shares subject to the Plan may be either authorized
and unissued shares (which will not be subject to preemptive rights) or previously issued shares
acquired by CBE or its Subsidiaries or Affiliates. Subject to adjustment as provided in Section
4.4, the total number of Shares that may be delivered pursuant to Awards under the Plan shall be
10,600,000 Shares, which includes (a) 2,989,858 Shares available for issuance under the Cooper
Industries plc Amended and Restated Stock Incentive Plan (as amended and restated September 8,
2009, and as further amended as of February 13, 2010) (the Prior Stock Plan), as
previously approved by the stockholders of CBE, but not subject to any outstanding awards under the
Prior Stock Plan as of February 18, 2011, and (b) 951,102 Shares available for issuance under the
Cooper Industries Amended and Restated Management Annual Incentive Plan (the Prior Bonus Plan),
as previously approved by the stockholders of CBE, but not subject to outstanding awards under the
Prior Bonus Plan. In addition, up to 10,125,486 Shares subject to outstanding awards under the
Prior Stock Plan as of February 18, 2011 may be delivered pursuant to Awards under the Plan, to the
extent that on or after such date any such awards under the Prior Stock Plan are forfeited or
settled or terminate without a distribution of Shares (whether or not cash, other awards or other
property is distributed with respect to such awards under the Prior Stock Plan). From and after
the Effective Date, no further grants or awards shall be made under the Prior Stock Plan or Prior
Bonus Plan; however, grants or awards made under the Prior Stock Plan and Prior Bonus Plan before
the Effective Date shall continue in effect in accordance with their terms. Of the total number of
Shares that are available for issuance under the Plan, no more than thirty percent (30%) of the
shares are available for Restricted Stock Awards, Restricted Stock Units, Performance Shares,
Performance Units, Cash-Based Awards, Stock Bonus Awards and Dividend Equivalents.
4.2. Rules for Calculating Shares Delivered. Subject to, in the case of ISOs, any
limitations applicable thereto under the Code, if (a) any Shares are subject to an Option, SAR, or
other Award which for any reason expires or is terminated or canceled without having been fully
exercised or satisfied, or are subject to any Restricted Stock Award (including any Shares subject
to a Participants Restricted Stock Award that are repurchased by CBE at the Participants cost),
Restricted Stock Unit Award or other Award granted under the Plan which are forfeited, or (b) any
Award based on Shares is settled for cash, expires or otherwise terminates without the issuance of
such Shares, the Shares subject to such Award shall, to the extent of any such expiration,
termination, cancellation, forfeiture or cash settlement, be available for delivery in connection
with future Awards under the Plan. Any Shares delivered under the Plan upon exercise or
satisfaction of Substitute Awards shall not reduce the Shares available for delivery under the
Plan; provided, however, that the total number of Shares that may be delivered
pursuant to Incentive Stock Options granted under the Plan shall be the number of Shares set forth
in Section 4.1, as adjusted pursuant to this Section 4.2, but without application of the foregoing
provisions of this sentence. If the Option Price of any Option and/or tax withholding obligations
relating to any Award (or any award under the Prior Stock Plan or Prior Bonus Plan) are satisfied
by delivering Shares to the Company (by either actual delivery or by attestation), the number of
such Shares so delivered or attested to shall be deemed delivered for purposes of the limits set
forth in Section 4.1. To the extent any Shares subject to an Award (or any award under the Prior
Stock Plan or Prior Bonus Plan) are withheld to satisfy the Option Price (in the case of an Option)
and/or the tax withholding obligations relating to such Award (or award under the Prior Stock Plan
or Prior Bonus Plan), such Shares shall be deemed to have been delivered for purposes of the limits
set forth in Section 4.1. Upon the exercise of a SAR, the total number of Shares subject to such
exercise shall reduce the number of Shares available for delivery under the Plan.
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Shares that are repurchased by the Company using proceeds from the exercise of Options shall
not increase the Shares available for delivery under the Plan.
4.3.
Award Limits. The following limits shall apply to grants of all Awards under the Plan:
(a) Options: The maximum aggregate number of Shares that may be subject to
Options granted in any Fiscal Year to any one Participant shall be 1,000,000 Shares.
(b) SARs: The maximum aggregate number of Shares that may be subject to Stock
Appreciation Rights granted in any Fiscal Year to any one Participant shall be 1,000,000
Shares. Any Shares covered by Options which include Tandem SARs granted to one Participant
in any Fiscal Year shall reduce this limit on the number of Shares subject to SARs that can
be granted to such Participant in such Fiscal Year.
(c) Restricted Stock and Restricted Stock Units: The maximum aggregate number
of Shares that may be subject to all Awards of Restricted Stock and Restricted Stock Units
granted in any Fiscal Year to any one Participant shall be 1,000,000 Shares.
(d) Performance Shares: The maximum aggregate grant with respect to Awards of
Performance Shares granted in any Fiscal Year to any one Participant shall be 1,000,000
Shares.
(e) Performance Units: The maximum aggregate amount awarded with respect to
Performance Units made in any Fiscal Year to any one Participant shall not exceed $15
million.
(f) Cash-Based Awards: The maximum aggregate amount awarded with respect to
Cash-Based Awards made in any Fiscal Year to any one Participant shall not exceed $15
million.
(g) Other Stock Bonus Awards: The maximum aggregate grant with respect to
Stock Bonus Awards made in any Fiscal Year to any one Participant shall be 1,000,000 Shares
(or cash amounts based on the Fair Market Value of such number of Shares on the Grant Date).
To the extent required by Section 162(m) of the Code, Shares subject to Options or SARs which are
canceled shall continue to be counted against the limits set forth in paragraphs (a) and (b)
immediately preceding.
4.4. Adjustment Provisions. In the event of a stock dividend, stock split, reverse
stock split, share combination or exchange, or recapitalization or similar event affecting the
capital structure of CBE (each a Share Change), or a merger, amalgamation, consolidation,
acquisition of property or shares, separation, spin-off, split-up, other distribution of stock or
property (including any extraordinary cash or stock dividend), reorganization, stock rights
offering, liquidation, Disaffiliation, or similar event affecting CBE or any subsidiary of CBE
(each, a Corporate Transaction), the Committee or the Board shall make such substitutions
or adjustments as it deems appropriate and equitable to (A) the aggregate number, class and kind of
Shares or other securities reserved for issuance and delivery under the Plan, (B) the number, class
and kind of Shares or other securities subject to outstanding Awards; (C) the Option Price, Grant
Price or other price of securities subject to outstanding Options, Stock Appreciation Rights and,
to the extent applicable, other Awards; and (D) the Award limits set forth in Section 4.3;
provided, however, that the number of Shares subject to any Award shall always be a
whole number. In the case of Corporate Transactions, such adjustments may include, without
limitation, (1) the cancellation of outstanding Awards in exchange for payments of cash, property
or a combination thereof having an aggregate value equal to the value of such Awards, as determined
by the Committee or the Board in its discretion (it being understood that in the case of a
Corporate Transaction with respect to which holders of Common Stock receive consideration other
than publicly traded equity securities of the ultimate surviving entity, any such determination by
the Committee that the value of an Option or Stock Appreciation Right shall for this purpose be
deemed to be equal to the excess, if any, of the value of the consideration being paid for each
Share pursuant to such Corporate Transaction over the exercise price of such Option or Stock
Appreciation Right shall conclusively be deemed valid);
(2) the substitution of other property (including, without limitation, cash or other
securities of CBE and securities of entities other than CBE) for the Shares subject to outstanding
Awards; and (3) in connection with any Disaffiliation,
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arranging for the assumption of Awards, or
replacement of Awards with new awards based on other property or other securities (including other
securities of CBE and securities of entities other than CBE), by the affected subsidiary,
affiliate, or division or by the entity that controls such subsidiary, affiliate, or division
following such Disaffiliation (as well as any corresponding adjustments to Awards that remain based
upon CBE securities). The Committee shall also make appropriate adjustments and modifications in
the terms of any outstanding Awards to reflect, or related to, any such events, adjustments,
substitutions or changes, including modifications of performance goals and changes in the length of
Performance Periods, subject to the requirements of Article XII in the case of Awards intended to
qualify as Performance-Based Compensation. The Committee shall determine any adjustment,
substitution or change pursuant to this Section 4.4 (a) with respect to an Award that provides for
Performance-Based Compensation consistent with the intent that such Award qualify for the
performance-based compensation exception under Section 162(m) of the Code, and (b) after taking
into account, among other things, to the extent applicable, the provisions of the Code applicable
to Incentive Stock Options and the provisions of Section 409A of the Code. All determinations of
the Committee as to adjustments, substitutions and changes, if any, under this Section 4.4 shall be
conclusive and binding on the Participants.
4.5. No Limitation on Corporate Actions. The existence of the Plan and any Awards
granted hereunder shall not affect in any way the right or power of CBE, any Subsidiary or any
Affiliate to make or authorize any adjustment, recapitalization, reorganization or other change in
its capital structure or business structure, any merger or consolidation, any issuance of debt,
preferred or prior preference stock ahead of or affecting the Shares, additional shares of capital
stock or other securities or subscription rights thereto, any dissolution or liquidation, any sale
or transfer of all or part of its assets or business or any other corporate act or proceeding.
ARTICLE V.
ELIGIBILITY AND PARTICIPATION
5.1. Eligibility. Eligible Individuals shall be eligible to become Participants and
receive Awards in accordance with the terms and conditions of the Plan, subject to the limitations
on the granting of ISOs set forth in Section 6.9(a).
5.2. Actual Participation. Subject to the provisions of the Plan, the Committee may,
from time to time, select Participants from all Eligible Individuals and shall determine the nature
and amount of each Award.
ARTICLE VI.
STOCK OPTIONS
6.1. Grant of Options. Subject to the terms and provisions of the Plan, Options may
be granted to Participants in such number (subject to Article IV), and upon such terms, and at any
time and from time to time as shall be determined by the Committee. The Committee may grant an
Option or provide for the grant of an Option, either from time to time in the discretion of the
Committee or automatically upon the occurrence of specified events, including the achievement of
performance goals, the satisfaction of an event or condition within the control of the recipient of
the Option or within the control of others.
6.2. Award Agreement. Each Option grant shall be evidenced by an Award Agreement that
shall specify the Option Price, the maximum duration of the Option, the number of Shares to which
the Option pertains, the conditions upon which the Option shall become exercisable and such other
provisions as the Committee shall determine, which are not inconsistent with the terms of the Plan.
The Award Agreement also shall specify whether the Option is intended to be an ISO or an NQSO. To
the extent that any Option does not qualify as an ISO (whether because of its provisions or the
time or manner of its exercise or otherwise), such Option, or the portion thereof which does not so
qualify, shall constitute a separate NQSO.
6.3. Option Price. The Option Price for each Option shall be determined by the
Committee and set forth in the Award Agreement; provided that, subject to Section 6.9(c),
the Option Price of an Option shall be not less than one hundred percent (100%) of the Fair Market
Value of a Share on the Grant Date of such Option; provided further, that
Substitute Awards or Awards granted in connection with an adjustment provided for in
Section 4.4, in the form of stock options, shall have an Option Price per Share that is
intended to maintain the economic value of the Award that was replaced or adjusted, as determined
by the Committee.
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6.4. Duration of Options. Each Option granted to a Participant shall expire at such
time as the Committee shall determine as of the Grant Date and set forth in the Award Agreement;
provided, however, that no Stock Option shall be exercisable later than the tenth
(10th) anniversary of its Grant Date.
6.5. Exercise of Options. Options shall be exercisable at such times and be subject
to such restrictions and conditions as the Committee shall in each instance determine and set forth
in the Award Agreement, which need not be the same for each grant or for each Option or
Participant. An Award Agreement may provide that the period of time over which an Option other
than an ISO may be exercised shall be automatically extended if on the scheduled expiration date of
such Option the Participants exercise of such Option would violate an applicable law;
provided, however, that during such extended exercise period the Option may only be
exercised to the extent the Option was exercisable in accordance with its terms immediately prior
to such scheduled expiration date; provided further, however, that such
extended exercise period shall end not later than thirty (30) days after the exercise of such
Option first would no longer violate such law.
6.6. Payment. Options shall be exercised by the delivery of a written notice of
exercise to the Company, in a form specified or accepted by the Committee, or by complying with any
alternative exercise procedures that may be authorized by the Committee, setting forth the number
of Shares with respect to which the Option is to be exercised, accompanied by full payment for such
Shares, which shall include applicable taxes, if any, in accordance with Article XVII. The Option
Price upon exercise of any Option shall be payable to the Company in full by certified or bank
check or such other instrument as the Committee may accept. If approved by the Committee, and
subject to any such terms, conditions and limitations as the Committee may prescribe and to the
extent permitted by applicable law, payment of the Option Price, in full or in part, may also be
made as follows:
(a) Payment may be made, in whole or in part, in the form of unrestricted and
unencumbered Shares (by actual delivery of such Shares or by attestation) already owned by
the Participant exercising such Option, or by such Participant and his or her spouse jointly
(based on the Fair Market Value of the Common Stock on the date the Option is exercised);
provided, however, that, in the case of an Incentive Stock Option, the right
to make a payment in the form of such already owned Shares may be authorized only as of the
Grant Date of such Incentive Stock Option and provided further that such
already owned Shares must have been either held by the Participant for at least six (6)
months at the time of exercise or purchased on the open market.
(b) Payment may be made by delivering a properly executed exercise notice to the
Company, together with a copy of irrevocable instructions to a broker to deliver promptly to
the Company the amount of sale or loan proceeds necessary to pay the Option Price, and, if
requested, the amount of any federal, state, local or non-United States withholding taxes.
To facilitate the foregoing, the Company may, to the extent permitted by applicable law,
enter into agreements for coordinated procedures with one or more brokerage firms.
(c) Payment may be made by instructing the Committee to withhold a number of Shares
otherwise deliverable to the Participant pursuant to the Option having an aggregate Fair
Market Value on the date of exercise equal to the product of: (i) Option Price multiplied
by (ii) the number of Shares in respect of which the Option shall have been exercised.
(d) Payment may be made by any other method approved or accepted by the Committee in
its discretion.
Subject to any governing rules or regulations, as soon as practicable after receipt of a written
notification of exercise and full payment in accordance with the preceding provisions of this
Section 6.6 and satisfaction of tax obligations in accordance with Article XVII, CBE shall deliver
to the Participant exercising an Option, in the Participants name, evidence of book entry Shares,
in an appropriate amount based upon the number of Shares purchased under the Option, subject to
Section 20.9. Unless otherwise determined by the Committee, all payments under all of the methods
described above shall be paid in United States dollars.
6.7. Rights as a Stockholder. No Participant or other person shall become the
beneficial owner of any Shares subject to an Option, nor have any rights to dividends or other
rights of a stockholder with respect to any
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such Shares, until the Participant has actually
received such Shares following exercise of his or her Option in accordance with the provisions of
the Plan and the applicable Award Agreement.
6.8. Termination of Employment or Service. The Committee may establish and set forth
in the applicable Award Agreement the terms and conditions on which an Option shall remain
exercisable, if at all, upon a Termination of the Participant. The Committee may waive or modify
these provisions at any time. To the extent that a Participant is not entitled to exercise an
Option at the date of his or her Termination, or if the Participant (or other person entitled to
exercise the Option) does not exercise the Option to the extent so entitled within the time
specified in the Award Agreement or below (as applicable), effective as of the date of such
Termination, the Option shall terminate and the Shares underlying the unexercised portion of the
Option shall revert to the Plan and become available for future Awards. In no event may an Option
be exercised after the expiration date of such Option specified in the applicable Award Agreement,
except as provided in the last sentence of Section 6.5. Subject to the last sentence of this
Section 6.8, a Participants Option shall be forfeited immediately upon his or her Termination,
except as set forth below:
(a) Death. Upon a Participants Termination by reason of death, all
outstanding Options held by such Participant become exercisable immediately and such
Options may be exercised at any time until the earlier of (A) the fifth anniversary of the
date of such death and (B) the expiration date of such Option specified in the applicable
Award Agreement.
(b) Disability. Upon a Participants Termination by reason of Disability
after the expiration of one year from the Grant Date, all such outstanding Options held by
such Participant become exercisable immediately and such Options may be exercised at any
time until the earlier of (A) the first anniversary of such Termination and (B) the
expiration date of such Option specified in the applicable Award Agreement.
(c) Retirement. Upon a Participants Termination by reason of Retirement
after the expiration of one year from the Grant Date, all such Options shall continue to
vest over the period specified in the applicable Award Agreement and the Participant may
exercise any such vested Options at any time until the earlier of (A) the fifth (5th)
anniversary of such Termination and (B) the expiration date of such Option specified in the
applicable Award Agreement.
(d) Death after Retirement. Notwithstanding the above provisions of this
Section 6.8, if a Participant dies after such Participants Retirement, but while his or
her Option remains exercisable as set forth above, all such outstanding Options become
exercisable immediately and such options may be exercised at any time until the earlier of
(1) the fifth anniversary of the date of such death and (2) the expiration date of such
Option specified in the applicable Award Agreement.
Notwithstanding the foregoing provisions of this Section 6.8, the Committee shall have the power,
in its discretion, to apply different rules concerning the consequences of a Termination;
provided, however, that such rules shall be set forth in the applicable Award
Agreement.
6.9. Limitations on Incentive Stock Options.
(a) General. No ISO shall be granted to any Eligible Individual who is not an
Employee of the Company or a Subsidiary on the Grant Date of such Option. Any ISO granted
under the Plan shall contain such terms and conditions, consistent with the Plan, as the
Committee may determine to be necessary to qualify such Option as an incentive stock
option under Section 422 of the Code. Any ISO granted under the Plan may be modified by
the Committee to disqualify such Option from treatment as an incentive stock option under
Section 422 of the Code.
(b) $100,000 Per Year Limitation. Notwithstanding any intent to grant ISOs,
an Option granted under the Plan will not be considered an ISO to the extent that it,
together with any other
incentive stock options (within the meaning of Section 422 of the Code, but without
regard to subsection (d) of such Section) under the Plan and any other incentive stock
option plans of CBE, any
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Subsidiary and any parent corporation of CBE within the meaning
of Section 424(e) of the Code, are exercisable for the first time by any Participant during
any calendar year with respect to Shares having an aggregate Fair Market Value in excess of
$100,000 (or such other limit as may be required by the Code) as of the Grant Date of the
Option with respect to such Shares. The rule set forth in the preceding sentence shall be
applied by taking Options into account in the order in which they were granted.
(c) Options Granted to Certain Stockholders. No ISO shall be granted to an
individual otherwise eligible to participate in the Plan who owns (within the meaning of
Section 424(d) of the Code), at the Grant Date of such Option is granted, more than ten
percent (10%) of the total combined voting power of all classes of stock of CBE or a
Subsidiary or any parent corporation of CBE within the meaning of Section 424(e) of the
Code. This restriction does not apply if at the Grant Date of such ISO the Option Price of
the ISO is at least 110% of the Fair Market Value of a Share on the Grant Date such ISO,
and the ISO by its terms is not exercisable after the expiration of five years from such
Grant Date.
ARTICLE VII.
STOCK APPRECIATION RIGHTS
7.1. Grant of SARs. Subject to the terms and conditions of the Plan, SARs may be
granted to Participants at any time and from time to time as shall be determined by the Committee.
The Committee may grant an SAR (a) in connection with, and at the Grant Date of, a related Option
(a Tandem SAR), or (b) independent of, and unrelated to, an Option (a Freestanding SAR). The
Committee shall have complete discretion in determining the number of Shares to which a SAR
pertains (subject to Article IV) and, consistent with the provisions of the Plan, in determining
the terms and conditions pertaining to any SAR.
7.2. Grant Price. The Grant Price for each SAR shall be determined by the Committee
and set forth in the Award Agreement, subject to the limitations of this Section 7.2. The Grant
Price for each Freestanding SAR shall be not less than one hundred percent (100%) of the Fair
Market Value of a Share on the Grant Date of such Freestanding SAR, except in the case of
Substitute Awards or Awards granted in connection with an adjustment provided for in Section 4.4.
The Grant Price of a Tandem SAR shall be equal to the Option Price of the related Option.
7.3. Exercise of Tandem SARs. Tandem SARs may be exercised for all or part of the
Shares subject to the related Option upon the surrender of the right to exercise the equivalent
portion of the related Option. A Tandem SAR shall be exercisable only when and to the extent the
related Option is exercisable and may be exercised only with respect to the Shares for which the
related Option is then exercisable. A Tandem SAR shall entitle a Participant to elect, in the
manner set forth in the Plan and the applicable Award Agreement, in lieu of exercising his or her
unexercised related Option for all or a portion of the Shares for which such Option is then
exercisable pursuant to its terms, to surrender such Option to CBE with respect to any or all of
such Shares and to receive from the Company in exchange therefor a payment described in Section
7.7. An Option with respect to which a Participant has elected to exercise a Tandem SAR shall, to
the extent of the Shares covered by such exercise, be canceled automatically and surrendered to
CBE. Such Option shall thereafter remain exercisable according to its terms only with respect to
the number of Shares as to which it would otherwise be exercisable, less the number of Shares with
respect to which such Tandem SAR has been so exercised. Notwithstanding any other provision of the
Plan to the contrary, with respect to a Tandem SAR granted in connection with an ISO: (a) the
Tandem SAR will expire no later than the expiration of the related ISO; (b) the value of the
payment with respect to the Tandem SAR may not exceed the difference between the Fair Market Value
of the Shares subject to the related ISO at the time the Tandem SAR is exercised and the Option
Price of the related ISO; and (c) the Tandem SAR may be exercised only when the Fair Market Value
of the Shares subject to the ISO exceeds the Option Price of the ISO.
7.4. Exercise of Freestanding SARs. Freestanding SARs may be exercised upon whatever
terms and conditions the Committee, in its sole discretion, in accordance with the Plan, determines
and sets forth in the Award Agreement. An Agreement may provide that the period of time over which
a Freestanding SAR may be exercised shall be automatically extended if on the scheduled expiration
date of such SAR the Participants exercise of such SAR would violate an applicable law;
provided, however, that during such extended exercise period the SAR may
only be exercised to the extent the SAR was exercisable in accordance with its terms
immediately prior to such
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scheduled expiration date; provided further,
however, that such extended exercise period shall end not later than thirty (30) days after
the exercise of such SAR first would no longer violate such law.
7.5. Award Agreement. Each SAR grant shall be evidenced by an Award Agreement that
shall specify the number of Shares to which the SAR pertains, the Grant Price, the term of the SAR,
and such other terms and conditions as the Committee shall determine in accordance with the Plan.
7.6. Term of SARs. The term of a SAR granted under the Plan shall be determined by
the Committee, in its sole discretion; provided, however, that the term of any
Tandem SAR shall be the same as the related Option and no SAR shall be exercisable later than the
10th anniversary of its grant date.
7.7. Payment of SAR Amount. An election to exercise SARs shall be deemed to have been
made on the date of Notice of such election to the Company. As soon as practicable following such
Notice, the Participant shall be entitled to receive payment from the Company in an amount
determined by multiplying:
(a) The excess of the Fair Market Value of a Share on the date of exercise over the
Grant Price of the SAR; by
(b) The number of Shares with respect to which the SAR is exercised.
Notwithstanding the foregoing provisions of this Section 7.7 to the contrary, the Committee
may establish and set forth in the applicable Award Agreement a maximum amount per Share that will
be payable upon the exercise of a SAR. At the discretion of the Committee, such payment upon
exercise of a SAR shall be in cash, in Shares of equivalent Fair Market Value, or in some
combination thereof.
7.8. Rights as a Stockholder. A Participant receiving a SAR shall have the rights of
a stockholder only as to Shares, if any, actually issued to such Participant upon satisfaction or
achievement of the terms and conditions of the Award, and in accordance with the provisions of the
Plan and the applicable Award Agreement, and not with respect to Shares to which such Award relates
but which are not actually issued to such Participant.
7.9. Termination of Employment or Service. The Committee may establish and set forth
in the applicable Award Agreement the terms and conditions under which a SAR shall remain
exercisable, if at all, upon a Termination of the Participant; provided, however,
that in no event may a SAR be exercised after the expiration date of such SAR specified in the
applicable Award Agreement, except as provided in the last sentence of Section 6.5 (in the case of
Tandem SARs) or in the last sentence of Section 7.4 (in the case of Freestanding SARs). The
provisions of Section 6.8 above shall apply to any SAR if the Award Agreement evidencing such SAR
does not specify the terms and conditions upon which such SAR shall be forfeited or be exercisable
or terminate upon, or after, a Termination of the Participant.
ARTICLE VIII.
RESTRICTED STOCK AND RESTRICTED STOCK UNITS
8.1. Awards of Restricted Stock and Restricted Stock Units. Subject to the terms and
provisions of the Plan, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock and/or Restricted Stock Units to Participants in such amounts as the Committee
shall determine. Subject to the terms and conditions of this Article VIII and the Award Agreement,
upon creation of a book entry evidencing a Participants ownership of Shares of Restricted Stock,
pursuant to Section 8.6, the Participant shall have all of the rights of a stockholder with respect
to such Shares, subject to the terms and restrictions set forth in this Article VIII or the
applicable Award Agreement or as determined by the Committee. Restricted Stock Units shall be
similar to Restricted Stock, except no Shares are actually awarded to a Participant who is granted
Restricted Stock Units on the Grant Date thereof, and such Participant shall have no rights of a
stockholder with respect to such Restricted Stock Units.
8.2. Award Agreement. Each Restricted Stock and/or Restricted Stock Unit Award shall
be evidenced by an Award Agreement that shall specify the Period of Restriction, the number of
Shares of Restricted Stock or the
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number of Restricted Stock Units granted, and such other provisions as the Committee shall
determine in accordance with the Plan.
8.3. Nontransferability of Restricted Stock. Except as provided in this Article VIII,
Shares of Restricted Stock may not be sold, transferred, pledged, assigned, encumbered, alienated,
hypothecated or otherwise disposed of until the end of the applicable Period of Restriction
established by the Committee and specified in the Restricted Stock Award Agreement.
8.4. Period of Restriction and Other Restrictions. The Period of Restriction shall
lapse based on a Participants continuing service or employment with CBE, a Subsidiary or an
Affiliate, the achievement of performance goals, the satisfaction of other conditions or
restrictions or upon the occurrence of other events, in each case, as determined by the Committee,
at its discretion, and stated in the Award Agreement.
8.5. Delivery of Shares, Payment of Restricted Stock Units. Subject to Section 20.9,
after the last day of the Period of Restriction applicable to a Participants Shares of Restricted
Stock, and after all conditions and restrictions applicable to such Shares of Restricted Stock have
been satisfied or lapse (including satisfaction of any applicable withholding tax obligations),
pursuant to the applicable Award Agreement, such Shares of Restricted Stock shall become freely
transferable by such Participant. After the last day of the Period of Restriction applicable to a
Participants Restricted Stock Units, and after all conditions and restrictions applicable to
Restricted Stock Units have been satisfied or lapse (including satisfaction of any applicable
withholding tax obligations), pursuant to the applicable Award Agreement, such Restricted Stock
Units shall be settled by delivery of Shares to the Participant.
8.6. Forms of Restricted Stock Awards. Each Participant who receives an Award of
Shares of Restricted Stock shall receive book entry Shares (i.e., a computerized or manual entry)
in the records of CBE or its transfer agent in the name of the Participant who has received the
Award. Such records of CBE or such agent shall, absent manifest error, be binding on all
Participants who receive Restricted Stock Awards. The use of book entries to evidence the
ownership of Shares of Restricted Stock, in accordance with this Section 8.6, shall not affect the
rights of Participants as owners of the Shares of Restricted Stock awarded to them, nor affect the
restrictions applicable to such Shares under the Award Agreement or the Plan, including the Period
of Restriction.
8.7. Voting Rights. Unless otherwise determined by the Committee and set forth in a
Participants Award Agreement, to the extent permitted or required by law, as determined by the
Committee, Participants holding Shares of Restricted Stock shall be granted the right to exercise
full voting rights with respect to those Shares during the Period of Restriction. A Participant
shall have no voting rights with respect to any Restricted Stock Units.
8.8. Dividends and Other Distributions. During the Period of Restriction,
Participants holding Shares of Restricted Stock shall be credited with any cash dividends paid with
respect to such Shares while they are so held, and such dividends shall be paid to the Participants
if and when their rights vest at the end of the Period of Restriction. Except as set forth in the
Award Agreement, in the event of (a) any adjustment as provided in Section 4.4, or (b) any shares
or securities are received as a dividend, or an extraordinary dividend is paid in cash, on Shares
of Restricted Stock, any new or additional Shares or securities or any extraordinary dividends paid
in cash received by a recipient of Restricted Stock shall be subject to the same terms and
conditions, including the Period of Restriction, as relate to the original Shares of Restricted
Stock.
8.9. Termination of Employment or Service. Except as otherwise provided in this
Section 8.9, during the Period of Restriction, any Restricted Stock Units and/or Shares of
Restricted Stock held by a Participant shall be forfeited and revert to CBE (or, if Shares of
Restricted Stock were sold to the Participant, the Participant shall be required to resell such
Shares to CBE at cost) upon the Participants Termination or the failure to meet or satisfy any
applicable performance goals or other terms, conditions and restrictions to the extent set forth in
the applicable Award Agreement. Each applicable Award Agreement shall set forth the extent to
which, if any, the Participant shall have the right to retain Restricted Stock Units and/or Shares
of Restricted Stock, then subject to the Period of Restriction, following such Participants
Termination. Such provisions shall be determined in the sole discretion of the Committee, shall be
included in the applicable Award Agreement, need not be uniform among all such Awards issued
pursuant to the Plan, and may reflect distinctions based on the reasons for, or circumstances of,
such Termination.
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ARTICLE IX.
PERFORMANCE SHARES, PERFORMANCE UNITS, AND CASH-BASED AWARDS
9.1. Grant of Performance Shares, Performance Units and Cash-Based Awards. Subject to
the terms of the Plan, Performance Shares, Performance Units, and/or Cash-Based Awards may be
granted to Participants in such amounts and upon such terms, and at any time and from time to time,
as shall be determined by the Committee, in accordance with the Plan. A Performance Share,
Performance Unit or Cash-Based Award entitles the Participant who receives such Award to receive
Shares or cash upon the attainment of applicable performance goals for the applicable Performance
Period, and/or satisfaction of other terms and conditions, in each case determined by the
Committee, and which may be set forth in the Award Agreement. Such entitlements of a Participant
with respect to his or her outstanding Performance Share, Performance Unit or Cash-Based Award
shall be reflected by a bookkeeping entry in the records of CBE, unless otherwise provided by the
Award Agreement. The terms and conditions of such Awards shall be consistent with the Plan and set
forth in the Award Agreement and need not be uniform among all such Awards or all Participants
receiving such Awards.
9.2. Earned Performance Shares, Performance Units and Cash-Based Awards. Performance
Shares, Performance Units and Cash-Based Awards shall become earned, in whole or in part, based
upon the attainment of performance goals specified by the Committee and/or the occurrence of any
event or events and/or satisfaction of such terms and conditions, including a Change in Control, as
the Committee shall determine, either at or after the Grant Date. The Committee shall determine
the extent to which any applicable performance goals and/or other terms and conditions of a
Performance Unit, Performance Share or Cash-Based Award are attained or not attained following
conclusion of the applicable Performance Period. The Committee may, in its discretion, waive any
such performance goals and/or other terms and conditions relating to any such Award, subject to
Section 12.3.
9.3. Form and Timing of Payment of Performance Units, Performance Shares and Cash-Based
Awards. Payment of earned Performance Units, Performance Shares and Cash-Based Awards shall be
as determined by the Committee and as set forth in the Award Agreement. Subject to the terms of
the Plan, the Committee, in its sole discretion, may pay earned Performance Units, Performance
Shares and Cash-Based Awards in the form of cash or in Shares (or in a combination thereof) which
have an aggregate Fair Market Value equal to the value of the earned Performance Units, Performance
Shares or Cash-Based Awards following conclusion of the Performance Period and the Committees
determination of attainment of applicable performance goals and/or other terms and conditions in
accordance with Section 9.2. Such Shares may be granted subject to any restrictions that may be
imposed by the Committee, including a Period of Restriction or mandatory deferral. The
determination of the Committee with respect to the form of payment of such Awards shall be set
forth in the Award Agreement pertaining to the grant of the Award.
9.4. Rights as a Stockholder. A Participant receiving a Performance Unit, Performance
Share or Cash-Based Award shall have the rights of a stockholder only as to Shares, if any,
actually received by the Participant upon satisfaction or achievement of the terms and conditions
of such Award and not with respect to Shares subject to the Award but not actually issued to such
Participant.
9.5. Termination of Employment or Service. Each Award Agreement shall set forth the
extent to which the Participant shall have the right to retain Performance Units, Performance
Shares and/or Cash-Based Awards following such Participants Termination. Such provisions shall be
determined in the sole discretion of the Committee, shall be included in the applicable Award
Agreement, need not be uniform among all such Awards issued pursuant to the Plan, and may reflect
distinctions based on the reasons for Termination.
ARTICLE X.
STOCK BONUS AWARDS
10.1. Stock Bonus Awards. The Committee may grant types of equity-based or
equity-related Awards not otherwise described by the terms of the Plan (including the grant or
offer for sale of unrestricted Shares), in such amounts (subject to Article IV) and subject to such
terms and conditions, as the Committee shall determine. More specifically, grants of equity-based
or equity-related Awards can be made to pay all or a portion of a Participants salary or bonus or
in addition to a Participants salary or bonus. Such Stock Bonus Awards may involve the transfer
of actual Shares to Participants, or payment in cash or otherwise of amounts based on the value of
Shares and may
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include Awards designed to comply with or take advantage of the applicable local laws of
jurisdictions other than the United States.
10.2. Value of Stock Bonus Awards. Each Stock Bonus Award shall be expressed in terms
of Shares or units based on Shares, as determined by the Committee. The Committee may establish
performance goals in its discretion, and any such performance goals shall be set forth in the
applicable Award Agreement. If the Committee exercises its discretion to establish performance
goals, the number and/or value of Stock Bonus Awards that will be paid out to the Participant will
depend on the extent to which such performance goals are met.
10.3. Payment of Stock Bonus Awards. Payment, if any, with respect to a Stock Bonus
Award shall be made in accordance with the terms of the Award, as set forth in the Award Agreement,
in cash, Shares or a combination of cash and Shares, as the Committee determines.
10.4. Termination of Employment or Service. The Committee shall determine the extent
to which the Participant shall have the right to receive Stock Bonus Awards following the
Participants Termination. Such provisions shall be determined in the sole discretion of the
Committee, such provisions may be included in the applicable Award Agreement, but need not be
uniform among all Stock Bonus Awards issued pursuant to the Plan, and may reflect distinctions
based on the reasons for Termination.
ARTICLE XI.
DIVIDEND EQUIVALENTS
11.1. Dividend Equivalents. Unless otherwise provided by the Committee, no adjustment
shall be made in the Shares issuable or taken into account under Awards on account of cash
dividends that may be paid or other rights that may be issued to the holders of Shares prior to
issuance of such Shares under such Award. The Committee may grant Dividend Equivalents based on
the dividends declared on Shares that are subject to any Award, including any Award the payment or
settlement of which is deferred pursuant to Section 20.6. Dividend Equivalents may be credited as
of the dividend payment dates, during the period between the Grant Date of the Award and the date
the Award becomes payable or terminates or expires. Dividend Equivalents may be subject to any
limitations and/or restrictions determined by the Committee. Dividend Equivalents shall be
converted to cash or additional Shares by such formula and at such time, and shall be paid at such
times, as may be determined by the Committee. Notwithstanding the foregoing, Dividend Equivalents
shall not be payable until, and only to the extent, the underlying Award vests or is exercised.
ARTICLE XII.
PERFORMANCE MEASURES
12.1. Performance Measures.
The objective performance goals upon which the granting, payment and/or vesting of Awards that
are intended to qualify as Performance-Based Compensation may occur shall be based on any one or
more of the following Performance Measures selected by the Committee:
(a) earnings or income, including operating income or profit or earnings before or
after taxes and net interest;
(b) earnings per Share (basic or diluted) or earnings growth;
(c) book or market value per Share;
(d) revenue;
(e) debt ratios;
(f) total stockholders equity;
(g) return on assets (gross or net), return on investment, return on capital, return
on equity, or return on revenues;
(h) working capital, cash flow, cash flow return on investment (discounted or
otherwise), net cash provided by operations, or cash flow in excess of cost of capital;
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(i) implementation or completion of critical projects or processes;
(j) execution of assignments directly related to an individual Participant;
(k) ratio of compensation and benefits expenses to total revenues or net revenues;
(l) economic value created;
(m) operating margin or profit margin;
(n) Common Stock price appreciation or total stockholder return;
(o) cost targets, reductions and savings, productivity and efficiencies; and
(p) strategic business criteria, consisting of one or more objectives based on meeting
specified market penetration, market share, geographic business expansion, customer
satisfaction, employee satisfaction, human resources management, supervision of litigation,
information technology, and goals relating to acquisitions, divestitures, joint ventures
and similar transactions and budget comparisons.
Such performance goals shall be established by the Committee within the time period prescribed by,
and shall otherwise comply with the requirements of, Code Section 162(m)(4)(C), or any successor
provision thereto, and the regulations thereunder, for Performance-Based Compensation, and may be
set forth in the applicable Award Agreement. Any Performance Measures may be used to measure the
performance of CBE, Subsidiaries and/or any Affiliates or any business unit, division, service or
product of CBE, its Affiliates, and/or Subsidiaries or any combination thereof, over such period or
periods, as the Committee may deem appropriate, or any of the above Performance Measures as
compared to the performance of one or more comparator companies, or published or special index that
the Committee, in its sole discretion, deems appropriate, or the Committee may select any relevant
Performance Measure as compared to any stock market index or indices, growth rates or trends.
12.2. Evaluation of Performance.
Notwithstanding any other provision of the Plan, payment or vesting of any such Award that is
intended to qualify as Performance-Based Compensation shall not be made until the Committee
certifies in writing that the applicable performance goals and any other material terms of such
Award were in fact satisfied, except as otherwise provided in Section 12.3. The Committee may
provide in the Award Agreement with respect to any such Award that any evaluation of performance
shall include or exclude any of the following events that occur during a Performance Period: (a)
gains or losses on sales or dispositions, (b) asset write-downs, (c) changes in tax law or rate,
including the impact on deferred tax liabilities, (d) the cumulative effect of changes in
accounting principles or changes in accounting policies, (e) extraordinary items described in
Accounting Principles Board Opinion No. 30 and/or in managements discussion and analysis of
financial performance appearing in CBEs Annual Report on Form 10-K, (f) acquisitions occurring
after the start of a Performance Period or unbudgeted costs incurred related to future
acquisitions, (g) operations discontinued, divested or restructured, including severance costs, (h)
gains or losses on refinancing or extinguishment of debt, (i) foreign exchange gains and losses and
(j) restatement of prior period financial results that is not due to CBEs material noncompliance
with any financial reporting requirement under the federal securities laws, (k) any other unusual,
nonrecurring gain or loss that is separately identified and quantified in CBEs financial
statements or in managements discussion and analysis of financial performance appearing in CBEs
Annual Report on Form 10-K, and (l) any similar event or condition specified in such Award
Agreement. To the extent such inclusions or exclusions affect Awards to Covered Employees, they
shall be prescribed in a form that meets the requirements of Code Section 162(m) for deductibility.
12.3.
Adjustment of Performance-Based Compensation.
Notwithstanding any provision of the Plan to the contrary, with respect to any Award that is
intended to qualify as Performance-Based Compensation, (a) the Committee may adjust downwards, but
not upwards, any amount payable, or other benefits granted, issued, retained and/or vested pursuant
to such an Award on
account of satisfaction of the applicable performance goals on the basis of such further
considerations as the Committee in its discretion shall determine, and (b) the Committee may not
waive the achievement of the applicable performance goals, except in the case of the Participants
death or disability or a Change in Control.
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12.4.
Committee Discretion. In the event that applicable tax and/or securities laws change to permit Committee discretion
to alter the governing Performance Measures without obtaining shareholder approval of such changes,
the Committee shall have sole discretion to make such changes without obtaining shareholder
approval. In addition, in the event that the Committee determines that it is advisable to grant
Awards that shall not qualify as Performance-Based Compensation, the Committee may make such grants
without satisfying the requirements of Code Section 162(m) and base vesting of such Awards on
performance measures other than those set forth in Section 12.1.
ARTICLE XIII.
TRANSFERABILITY OF AWARDS; BENEFICIARY DESIGNATION
13.1. Transferability of Incentive Stock Options. No ISO or Tandem SAR granted in
connection with an ISO may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than (i) by will or by the laws of descent and distribution, (ii) to the extent
permitted by the Code, by gift or other transfer to any trust or estate in which the original ISO
recipient or such recipients spouse or other immediate relative has a substantial beneficial
interest, or to a spouse or other immediate relative, provided that any such transfer is permitted
subject to Rule 16b-3 issued pursuant to the Exchange Act as in effect when such transfer occurs
and the Board does not rescind this provision prior to such transfer; or (iii) in accordance with
Section 13.3. No ISO or Tandem SAR shall be transferable pursuant to a domestic relations order or
similar order. Further, all ISOs and Tandem SARs granted in connection with ISOs granted to a
Participant shall be exercisable during his or her lifetime only by such Participant.
13.2. All Other Awards. Except as otherwise provided in Section 8.5 or Section 13.3
or a Participants Award Agreement or otherwise determined at any time by the Committee, no Award
granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than (i) by will or by the laws of descent and distribution or (ii) by gift or
other transfer to any trust or estate in which the original Award recipient or such recipients
spouse or other immediate relative has a substantial beneficial interest, or to a spouse or other
immediate relative, provided that any such transfer is permitted subject to Rule 16b-3 issued
pursuant to the Exchange Act as in effect when such transfer occurs and the Board does not rescind
this provision prior to such transfer; provided that the Committee may permit further
transferability, on a general or a specific basis, and may impose conditions and limitations on any
permitted transferability, subject to Section 13.1 and any applicable Period of Restriction;
provided further, however, that no Award may be transferred for value or
other consideration without first obtaining approval thereof by the stockholders of CBE and no
Award shall be transferable pursuant to a domestic relations order or similar order. Further,
except as otherwise provided in a Participants Award Agreement or otherwise determined at any time
by the Committee, or unless the Committee decides to permit further transferability, subject to
Section 13.1 and any applicable Period of Restriction, all Awards granted to a Participant under
the Plan, and all rights with respect to such Awards, shall be exercisable or available during his
or her lifetime only by or to such Participant. With respect to those Awards, if any, that are
permitted to be transferred to another individual, references in the Plan to exercise or payment
related to such Awards by or to the Participant shall be deemed to include, as determined by the
Committee, the Participants permitted transferee. In the event any Award is exercised by or
otherwise paid to the executors, administrators, heirs or distributees of the estate of a deceased
Participant, or such a Participants beneficiary, or the transferee of an Award, in any such case,
pursuant to the terms and conditions of the Plan and the applicable Agreement and in accordance
with such terms and conditions as may be specified from time to time by the Committee, CBE shall be
under no obligation to issue Shares thereunder unless and until CBE is satisfied, as determined in
the discretion of the Committee, that the person or persons exercising such Award, or to receive
such payment, are the duly appointed legal representative of the deceased Participants estate or
the proper legatees or distributees thereof or the named beneficiary of such Participant, or the
valid transferee of such Award, as applicable. Any purported assignment, transfer or encumbrance
of an Award that does not comply with this Section 13.2 shall be void and unenforceable against
CBE.
13.3. Beneficiary Designation. Each Participant may, from time to time, name any
beneficiary or beneficiaries who shall be permitted to exercise his or her Option or SAR or to whom
any benefit under the Plan is to be paid in case of the Participants
death before he or she fully
exercises his or her Option or SAR or receives any or all of such benefit. Each such designation
shall revoke all prior designations by the same Participant, shall be in a form prescribed by the
Committee, and will be effective only when filed by the Participant in writing with the Committee
during the Participants lifetime. In the absence of any such beneficiary designation, a
Participants
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unexercised Option or SAR, or amounts due but remaining unpaid to such Participant,
at the Participants death, shall be exercised or paid as designated by the Participant by will or
by the laws of descent and distribution.
ARTICLE XIV.
RIGHTS OF PARTICIPANTS
14.1. Rights or Claims. No person shall have any rights or claims under the Plan
except in accordance with the provisions of the Plan and any applicable Award Agreement. The
liability of CBE and any Subsidiary or Affiliate under the Plan is limited to the obligations
expressly set forth in the Plan, and no term or provision of the Plan may be construed to impose
any further or additional duties, obligations, or costs on CBE, any Subsidiary or any Affiliate
thereof or the Board or the Committee not expressly set forth in the Plan. The grant of an Award
under the Plan shall not confer any rights upon the Participant holding such Award other than such
terms, and subject to such conditions, as are specified in the Plan as being applicable to such
type of Award, or to all Awards, or as are expressly set forth in the Award Agreement evidencing
such Award. Without limiting the generality of the foregoing, neither the existence of the Plan
nor anything contained in the Plan or in any Award Agreement shall be deemed to:
(a) Give any Eligible Individual the right to be retained in the service of CBE, an
Affiliate and/or a Subsidiary, whether in any particular position, at any particular rate of
compensation, for any particular period of time or otherwise;
(b) Restrict in any way the right of CBE, an Affiliate and/or a Subsidiary to
terminate, change or modify any Eligible Individuals employment or service at any time
with or without Cause;
(c) Confer on any Eligible Individual any right of continued relationship with CBE, an
Affiliate and/or a Subsidiary, or alter any relationship between them, including any right
of CBE or an Affiliate or Subsidiary to terminate, change or modify its relationship with an
Eligible Individual;
(d) Constitute a contract of employment or service between CBE or any Affiliate or
Subsidiary and any Eligible Individual, nor shall it constitute a right to remain in the
employ or service of CBE or any Affiliate or Subsidiary ;
(e) Give any Eligible Individual the right to receive any bonus, whether payable in
cash or in Shares, or in any combination thereof, from CBE, an Affiliate and/or a
Subsidiary, nor be construed as limiting in any way the right of CBE, an Affiliate and/or a
Subsidiary to determine, in its sole discretion, whether or not it shall pay any Eligible
Individual bonuses, and, if so paid, the amount thereof and the manner of such payment; or
(f) Give any Participant any rights whatsoever with respect to an Award except as
specifically provided in the Plan and the Award Agreement.
14.2. Adoption of the Plan. The adoption of the Plan shall not be deemed to give any
Eligible Individual or any other individual any right to be selected as a Participant or to be
granted an Award, or, having been so selected, to be selected to receive a future Award.
14.3. Vesting. Notwithstanding any other provision of the Plan, a Participants right
or entitlement to exercise or otherwise vest in any Award not exercisable or vested at the Grant
Date thereof shall only result from continued services as a Non-Employee Director or continued
employment, as the case may be, with CBE or any Subsidiary or Affiliate, or satisfaction of any
other performance goals or other conditions or restrictions applicable,
by its terms, to such Award, except, in each such case, as the Committee may, in its
discretion, expressly determine otherwise.
14.4. No Effects on Benefits; No Damages. A Participant shall, by participating in
the Plan, waive any and all rights to compensation or damages in consequence of Termination of such
Participant for any reason whatsoever, whether lawfully or otherwise, insofar as those rights arise
or may arise from such Participant ceasing to
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have rights under the Plan as a result of such
Termination, or from the loss or diminution in value of such rights or entitlements, including by
reason of the operation of the terms of the Plan or the provisions of any statute or law relating
to taxation. No claim or entitlement to compensation or damages arises from the termination of the
Plan or diminution in value of any Award or Shares purchased or otherwise received under the Plan.
14.5. One or More Types of Awards. A particular type of Award may be granted to a
Participant either alone or in addition to other Awards under the Plan.
ARTICLE XV.
CHANGE IN CONTROL
15.1. Alternative Awards. The occurrence of a Change in Control will not itself
result in the cancellation, acceleration of exercisability or vesting, lapse of any Period of
Restriction or settlement or other payment with respect to any outstanding Award to the extent that
the Board or the Committee determines in its discretion, prior to such Change in Control, that such
outstanding Award shall be honored or assumed, or new rights substituted therefor (such honored,
assumed or substituted Award being hereinafter referred to as an Alternative Award) by
the New Employer, provided that any Alternative Award must:
(a) be based on securities that are traded on an established United States securities
market, or which will be so traded within sixty (60) days following the Change in Control;
(b) provide the Participant (or each Participant in a class of Participants) with
rights and entitlements substantially equivalent to or better than the rights, terms and
conditions applicable under such Award, including an identical or better exercise or vesting
schedule and identical or better timing and methods of payment;
(c) have substantially equivalent economic value to such Award immediately prior to the
Change in Control (as determined by the Board or the Committee (as constituted prior to the
Change in Control), in its discretion);
(d) have terms and conditions which provide that if the Participant incurs a
Termination by the New Employer under any circumstances other than involuntary Termination
for Cause or resignation without Good Reason within one (1) year following the Change in
Control, (i) any conditions on a Participants rights under, or any restrictions on transfer
or exercisability applicable to, such Alternative Award shall be waived or shall lapse in
full, and such Alternative Award shall become fully vested and exercisable, as the case may
be, and (ii) to the extent applicable, each such Alternative Award outstanding as of the
date of such Termination may thereafter be exercised until the later of (A) the last date on
which such Award would have been exercisable in the absence of this Section 15.1, and (B)
the earlier of (I) the third anniversary of such Change in Control and (II) expiration of
the term of such Award; and
(e) not subject the Participant to the assessment of additional taxes or interest under
Section 409A of the Code.
15.2 Accelerated Vesting and Payment.
(a) In the event Section 15.1 does not apply, upon a Change in Control, (i) all
outstanding Awards shall become fully vested, nonforfeitable and, to the extent applicable,
exercisable immediately prior to the Change in Control; (ii) the Board or the Committee (as
constituted prior the Change in Control) shall provide that in connection with the Change in
Control (A) each outstanding Option and Stock
Appreciation Right shall be cancelled in exchange for an amount (payable in accordance
with Section 15.2(b)) equal to the excess, if any, of the Fair Market Value of the Common
Stock on the date of the Change in Control over the Option Price or Grant Price applicable
to such Option or Stock Appreciation Right, (B) each Share of Restricted Stock, each
Restricted Stock Unit and each other Award denominated in Shares shall be cancelled in
exchange for an amount (payable in accordance with Section 15.2(b)) equal to the Change in
Control Price multiplied by the number of Shares covered by such Award, (C) each Award
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not
denominated in Shares shall be cancelled in exchange for the full amount of such Award
(payable in accordance with Section 15.2(b)), and (D) any Award the payment or settlement of
which was deferred under Section 20.6 or otherwise shall be cancelled in exchange for the
full amount of such deferred Award (payable in accordance with Section 15.2(b)); (iii) the
performance goals applicable to any outstanding Awards of Performance Shares, Performance
Units, Cash-Based Awards and other Awards shall be deemed to have been attained at the
target level (unless actual performance exceeds the target, in which case actual performance
shall be used) for the entire applicable Performance Period then outstanding; and (iv) the
Board or the Committee (as constituted prior the Change in Control) may, in addition to the
consequences otherwise set forth in this Section 15.2(a), make adjustments and / or
settlements of outstanding Awards as it deems appropriate and consistent with the Plans
purposes.
(b) Payments. Payment of any amounts in accordance with this Section 15.2
shall be made in cash or, if determined by the Board or the Committee (as constituted prior
to the Change in Control), in securities of the New Employer that are traded on an
established United States securities market, or which will be so traded within sixty (60)
days following the Change in Control, having an aggregate fair market value (as determined
by such Board or Committee) equal to such amount or in a combination of such securities and
cash. All amounts payable hereunder shall be payable in full, as soon as reasonably
practicable, but in no event later than ten (10) business days, following the Change in
Control.
15.3 Certain Terminations Prior to Change in Control. Any Participant who incurs a
Termination under any circumstances other than involuntary Termination for Cause or resignation
without Good Reason on or after the date on which the Company entered into an agreement in
principle the consummation of which would constitute a Change in Control, but prior to such
consummation, and such Change in Control actually occurs, shall be treated, solely for purposes of
the Plan (including this Article XV), as continuing in the Companys, or the applicable
Subsidiarys or Affiliates, employment or service until the occurrence of such Change in Control
and to have been Terminated under such circumstances immediately thereafter.
15.4 No Implied Rights; Other Limitations. No Participant shall have any right to
prevent the consummation of any of the acts described in Section 4.4 or 15.1 affecting the number
of Shares available to, or other entitlement of, such Participant under the Plan or such
Participants Award. Any actions or determinations of the Committee under this Article XV need not
be uniform as to all outstanding Awards, nor treat all Participants identically. Notwithstanding
the adjustments described in Section 15.1, in no event may any ISO be exercised after ten (10)
years from the Grant Date thereof, and any changes to ISOs pursuant to this Article XV shall,
unless the Committee determines otherwise, only be effective to the extent such adjustments or
changes do not cause a modification (within the meaning of Section 424(h)(3) of the Code) of such
ISOs or adversely affect the tax status of such ISOs.
15.5 Termination, Amendment, and Modifications of Change in Control Provisions.
Notwithstanding any other provision of the Plan (but subject to the limitations of the last
sentence of Section 16.1 and Section 16.2) or any Award Agreement provision, the provisions of this
Article XV may not be terminated, amended, or modified on or after the date of a Change in Control
to materially impair any Participants Award theretofore granted and then outstanding under the
Plan without the prior written consent of such Participant.
15.6 Excess Parachute Payments. It is recognized that under certain circumstances:
(a) payments or benefits provided to a Participant might give rise to an excess parachute payment
within the meaning of Section 280G of the Code; and (b) it might be beneficial to a Participant to
disclaim some portion of the payment or benefit in order to avoid such excess parachute payment
and thereby avoid the imposition of an excise tax resulting therefrom; and (c) under such
circumstances it would not be to the disadvantage of the Company or CBE to permit the Participant
to disclaim any such payment or benefit in order to avoid the excess parachute payment and the
excise tax resulting therefrom.
Accordingly, the Participant may, at the Participants option, exercisable at any time or from
time to time, disclaim any entitlement to any portion of the payment or benefits arising under this
Plan which would constitute excess parachute payments, and it shall be the Participants choice
as to which payments or benefits shall be so surrendered, if and to the extent that the Participant
exercises such option, so as to avoid excess parachute payments provided, however, that
Participant must first surrender payments or benefits that are payable in the same
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calendar year as
the event giving rise to such excess parachute payment and, if additional payments or benefits
are surrendered, must then surrender payments or benefits that are payable in the immediately
succeeding calendar year and provided further that no payment or benefit that is surrendered shall
affect the amount of payment or benefit payable in a subsequent calendar year.
ARTICLE XVI.
AMENDMENT, MODIFICATION, AND TERMINATION
16.1. Amendment, Modification, and Termination. The Board may, at any time and with
or without prior notice, amend, alter, suspend, or terminate the Plan, and the Committee may, to
the extent permitted by the Plan, amend the terms of any Award theretofore granted, including any
Award Agreement, in each case, retroactively or prospectively; provided, however,
that no such amendment, alteration, suspension, or termination of the Plan shall be made which,
without first obtaining approval of the stockholders of CBE (where such approval is necessary to
satisfy (i) the then-applicable requirements of Rule 16b-3, (ii) any requirements under the Code
relating to ISOs, or (iii) any applicable law, regulation or rule (including the applicable
regulations and rules of the SEC and any national securities exchange)), would:
(a) except as is provided in Section 4.4, increase the maximum number of Shares which
may be sold or awarded under the Plan or increase the maximum limitations set forth in
Section 4.3;
(b) except as is provided in Section 4.4, decrease the minimum Option Price or Grant
Price requirements of Sections 6.3 and 7.2, respectively;
(c) change the class of persons eligible to receive Awards under the Plan;
(d) change the Performance Measures set forth in Section 12.1;
(e) extend the duration of the Plan or the maximum period during which Options or SARs
may be exercised under Section 6.4 or 7.6, as applicable; or
(f) otherwise require stockholder approval to comply with any applicable law,
regulation or rule (including the applicable regulations and rules of the SEC and any
national securities exchange).
In addition, (A) no such amendment, alteration, suspension or termination of the Plan or any Award
theretofore granted, including any Award Agreement, shall be made which would materially impair the
previously accrued rights of a Participant under any outstanding Award without the written consent
of such Participant, provided, however, that the Board may amend or alter the Plan
and the Committee may amend or alter any Award, including any Agreement, either retroactively or
prospectively, without the consent of the applicable Participant, (x) so as to preserve or come
within any exemptions from liability under Section 16(b) of the Exchange Act, pursuant to the rules
and releases promulgated by the SEC (including Rule 16b-3), and/or so that any Award that is
intended to qualify as Performance-Based Compensation shall qualify for the performance-based
compensation exception under Code Section 162(m) (or any successor provision), or (y) if the Board
or the Committee determines in its discretion that such amendment or alteration either (I) is
required or advisable for CBE, the Company, the Plan or the Award to satisfy, comply with or meet
the requirements of any law, regulation, rule or accounting standard or (II) is not reasonably
likely to significantly diminish the benefits provided under such Award, or that such diminishment
has been or will be adequately compensated, and (B) except in connection with a Share Change or
Corporate Transaction or as otherwise provided in Section 4.4, but notwithstanding any other
provisions of the Plan, neither the Board nor the Committee may take any action: (1) to amend the
terms of an outstanding Option or SAR to reduce the Option Price or Grant Price thereof, cancel an
Option or SAR and replace it with a new Option or SAR with a lower Option Price or Grant Price, or
that has an economic effect that is the same as any such reduction or
cancellation; or (2) to cancel an outstanding Option or SAR in exchange for the grant of another
type of Award, without, in each such case, first obtaining approval of the stockholders of CBE of
such action.
16.2. Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring
Events. The Board or the Committee shall make such adjustments in the terms and conditions of,
and the criteria included in, Awards as the Board or the Committee deems appropriate and equitable
in recognition of unusual or nonrecurring
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events (including the events described in Section 4.4)
affecting CBE or its Subsidiaries or Affiliates or the financial statements of CBE or its
Subsidiaries or Affiliates or of changes in applicable laws, regulations, rules or accounting
principles. The Committee shall determine any adjustment pursuant to this Section 16.2 (a) with
respect to an Award that provides for Performance-Based Compensation consistent with the intent
that such Award qualify for the performance-based compensation exception under Section 162(m) of
the Code, and (b) after taking into account, among other things, to the extent applicable, the
provisions of the Code applicable to Incentive Stock Options and the provisions of Section 409A of
the Code. The determination of the Committee as to the foregoing adjustments, if any, shall be
conclusive and binding on Participants under the Plan.
ARTICLE XVII.
TAX WITHHOLDING AND OTHER TAX MATTERS
17.1. Tax Withholding. CBE and/or any Subsidiary or Affiliate are authorized to
withhold from any Award granted or payment due under the Plan the amount of all federal, state,
local and non-United States taxes due in respect of such Award or payment and take any such other
action as may be necessary or appropriate, as determined by the Committee, to satisfy all
obligations for the payment of such taxes. No later than the date as of which an amount first
becomes includible in the gross income or wages of a Participant for federal, state, local, or
non-U.S. tax purposes with respect to any Award, such Participant shall pay to the Company, or make
arrangements satisfactory to the Committee regarding the payment of, any federal, state, local or
non-U.S. taxes or social security (or similar) contributions of any kind required by law to be
withheld with respect to such amount. The obligations of CBE under the Plan shall be conditional
on such payment or satisfactory arrangements (as determined by the Committee in its discretion),
and CBE and the Subsidiaries and Affiliates shall, to the extent permitted by law, have the right
to deduct any such taxes from any payment otherwise due to such Participant, whether or not under
the Plan.
17.2. Withholding or Tendering Shares. Without limiting the generality of Section
17.1, subject to any applicable laws, the Committee may in its discretion permit a Participant to
satisfy or arrange to satisfy, in whole or in part, the tax obligations incident to an Award by:
(a) electing to have CBE withhold Shares or other property otherwise deliverable to such
Participant pursuant to his or her Award (provided, however, that the amount of any
Shares so withheld shall not exceed the amount necessary to satisfy required federal, state, local
and non-United States withholding obligations using the minimum statutory withholding rates for
federal, state, local and/or non-U.S. tax purposes, including payroll taxes, that are applicable to
supplemental taxable income) and/or (b) tendering to CBE Shares already owned by such Participant
(or by such Participant and his or her spouse jointly) and either held by the Participant for at
least six (6) months at the time of exercise or purchased on the open market, based, in each case,
on the Fair Market Value of the Common Stock on the payment date as determined by the Committee.
All such elections shall be irrevocable, made in writing, signed by the Participant, and shall be
subject to any restrictions or limitations that the Committee, in its sole discretion, deems
appropriate. The Committee may establish such procedures as it deems appropriate, including making
irrevocable elections, for settlement of withholding obligations with Common Stock.
17.3. Restrictions. The satisfaction of tax obligations pursuant to this Article XVI
shall be subject to such restrictions as the Committee may impose, including any restrictions
required by applicable law or the rules and regulations of the SEC, and shall be construed
consistent with an intent to comply with any such applicable laws, rule and regulations.
17.4. Special ISO Obligations. The Committee may require a Participant to give prompt
written notice to CBE concerning any disposition of Shares received upon the exercise of an ISO
within: (i) two (2) years from the Grant Date of such ISO to such Participant or (ii) one (1) year
from the transfer of such Shares to such Participant or (iii) such other period as the Committee
may from time to time determine. The Committee may direct that a
Participant with respect to an ISO undertake in the applicable Award Agreement to give such
written notice described in the preceding sentence, at such time and containing such information as
the Committee may prescribe.
17.5. Section 83(b) Election. If a Participant makes an election under Section 83(b)
of the Code to be taxed with respect to an Award as of the date of transfer of Shares rather than
as of the date or dates upon which the Participant would otherwise be taxable under Section 83(a)
of the Code, such Participant shall deliver a copy of such election to the Company upon or prior to
the filing such election with the Internal Revenue Service. Neither CBE
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nor any Subsidiary or
Affiliate shall have any liability or responsibility relating to or arising out of the filing or
not filing of any such election or any defects in its construction.
17.6. No Guarantee of Favorable Tax Treatment. Although CBE intends to administer the
Plan so that Awards will be exempt from, or will comply with, the requirements of Code Section
409A, CBE does not warrant that any Award under the Plan will qualify for favorable tax treatment
under Code Section 409A or any other provision of federal, state, local, or non-United States law.
CBE shall not be liable to any Participant for any tax, interest, or penalties the Participant
might owe as a result of the grant, holding, vesting, exercise, or payment of any Award under the
Plan.
17.7. Nonqualified Deferred Compensation.
(a) It is the intention of CBE that no Award shall be deferred compensation subject to
Code Section 409A unless and to the extent that the Committee specifically determines
otherwise as provided in paragraph (b) of this Section 17.7, and the Plan and the terms and
conditions of all Awards shall be interpreted and administered accordingly.
(b) The terms and conditions governing any Awards that the Committee determines will be
subject to Section 409A of the Code, including any rules for payment, including elective or
mandatory deferral of the payment or delivery of cash or Shares pursuant thereto, and any
rules regarding treatment of such Awards in the event of a Change in Control, shall be set
forth in the applicable Award Agreement and shall be intended to comply in all respects with
Section 409A of the Code, and the Plan and the terms and conditions of such Awards shall be
interpreted and administered accordingly.
(c) The Committee shall not extend the period to exercise an Option or Stock
Appreciation Right to the extent that such extension would cause the Option or Stock
Appreciation Right to become subject to Code Section 409A.
(d) Unless the Committee provides otherwise in an Award Agreement, each Restricted
Stock Unit, Performance Unit, Performance Share, Cash-Based Award and/or Stock Bonus Award
shall be paid in full to the Participant no later than the fifteenth day of the third month
after the end of the first calendar year in which such Award is no longer subject to a
substantial risk of forfeiture within the meaning of Code Section 409A. If the Committee
provides in an Award Agreement that a Restricted Stock Unit, Performance Unit, Performance
Share, Cash-Based Award or Stock Bonus Award is intended to be subject to Code Section 409A,
the Award Agreement shall include terms that are intended to comply in all respects with
Code Section 409A.
(e) No Dividend Equivalents shall relate to Shares underlying an Option or SAR unless
such Dividend Equivalent rights are explicitly set forth as a separate arrangement and do
not cause any such Option or SAR to be subject to Code Section 409A.
(f) Notwithstanding any other provision of the Plan or an Award Agreement to the
contrary, no event or condition shall constitute a Change in Control with respect to an
Award to the extent that, if it were, a 20% additional income tax would be imposed under
Section 409A of the Code on the Participant who holds such Award; provided that, in
such a case, the event or condition shall continue to constitute a Change in Control to the
maximum extent possible (for example, if applicable, in respect of vesting without an
acceleration of payment of such an Award) without causing the imposition of such 20% tax.
ARTICLE XVIII.
LIMITS OF LIABILITY; INDEMNIFICATION
18.1. Limits of Liability. Any liability of CBE or a Subsidiary or Affiliate to any Participant with respect to any Award
shall be based solely upon contractual obligations created by the Plan and the Award Agreement.
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(a) None of CBE, any Subsidiary, any Affiliate, any member of the Board or the
Committee or any other person participating in any determination of any question under the
Plan, or in the interpretation, administration or application of the Plan, shall have any
liability, in the absence of bad faith, to any party for any action taken or not taken in
connection with the Plan, except as may expressly be provided by statute.
(b) Each member of the Committee, while serving as such, shall be considered to be
acting in his or her capacity as a director of CBE. Members of the Board of Directors and
members of the Committee acting under the Plan shall be fully protected in relying in good
faith upon the advice of counsel and shall incur no liability except for gross negligence or
willful misconduct in the performance of their duties.
(c) CBE shall not be liable to a Participant or any other person as to: (i) the
non-issuance of Shares as to which CBE has been unable to obtain from any regulatory body
having relevant jurisdiction the authority deemed by the Committee or CBEs counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, and (ii) any tax
consequence expected, but not realized, by any Participant or other person due to the
receipt, exercise or settlement of any Option or other Award.
18.2. Indemnification. Subject to the requirements of Delaware law, each individual
who is or shall have been a member of the Committee or of the Board, or an officer of CBE or its
Subsidiaries and Affiliates to whom authority was delegated in accordance with Article III, shall
be indemnified and held harmless by the Company against and from any loss, cost, liability, or
expense that may be imposed upon or reasonably incurred by him or her in connection with or
resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which
he or she may be involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him or her in settlement thereof, with the Companys
approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or
proceeding against him or her, provided he or she shall give the Company an opportunity, at
its own expense, to handle and defend the same before he or she undertakes to handle and defend it
on his or her own behalf, unless such loss, cost, liability, or expense is a result of the
individuals own willful misconduct or except as provided by statute. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to which such
individual may be entitled under the Companys Certificate of Incorporation or By-Laws, as a matter
of law, or otherwise, or any power that CBE may have to indemnify or hold harmless such individual.
ARTICLE XIX.
SUCCESSORS
19.1. General. All obligations of CBE and the Company under the Plan with respect to
Awards granted hereunder shall be binding on successors, whether the existence of such successor is
the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or
substantially all of the business and/or assets of CBE or the Company.
ARTICLE XX.
MISCELLANEOUS
20.1. Drafting Context; Captions. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall include the
singular and the singular shall include the plural. The words Article, Section, and
paragraph herein shall refer to provisions of the Plan, unless expressly
indicated otherwise. The words include, includes, and including herein shall be deemed
to be followed by without limitation whether or not they are in fact followed by such words or
words of similar import, unless the context otherwise requires. The headings and captions
appearing herein are inserted only as a matter of convenience. They do not define, limit, construe,
or describe the scope or intent of the provisions of the Plan.
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20.2. Forfeiture Events.
(a) Notwithstanding any provision of the Plan to the contrary, the Committee shall
have the authority to determine (and may so provide in any Agreement) that a Participants
(including his or her estates, beneficiarys or transferees) rights (including the right
to exercise any Option or SAR), payments and benefits with respect to any Award shall be
subject to reduction, cancellation, forfeiture or recoupment (to the extent permitted by
applicable law) in the event of the Participants Termination for Cause; serious
misconduct; violation of CBEs or a Subsidiarys or Affiliates policies; breach of
fiduciary duty; unauthorized disclosure of any trade secret or confidential information of
CBE or a Subsidiary or Affiliate; breach of applicable noncompetition, nonsolicitation,
confidentiality or other restrictive covenants; or other conduct or activity that is in
competition with the business of CBE or any Subsidiary or Affiliate, or otherwise
detrimental to the business, reputation or interests of CBE and/or any Subsidiary or
Affiliate; or upon the occurrence of certain events specified in the applicable Award
Agreement (in any such case, whether or not the Participant is then an Employee or
Non-Employee Director). The determination of whether a Participants conduct, activities
or circumstances are described in the immediately preceding sentence shall be made by the
Committee in its discretion, and pending any such determination, the Committee shall have
the authority to suspend the exercise, payment, delivery or settlement of all or any
portion of such Participants outstanding Awards pending an investigation of the matter.
(b) If CBE is required to prepare an accounting restatement due to CBEs material
noncompliance (as determined by CBE) with any financial reporting requirement under the
federal securities laws, CBE will seek to recover from any current or former executive
officer of the Company any payment in settlement of an Award earned or accrued during the
three-year period preceding the date on which CBE is required to prepare an accounting
restatement payment. The amount to be recovered from the executive officer will be based
on the excess, if any, of the compensation paid to the executive officer under the Award
based on the erroneous data over the compensation that would have been paid to the
executive officer under the Award if the financial accounting statements had been as
presented in the restatement. For purposes of this policy, the definition of executive
officer, the date on which CBE is required to prepare an accounting restatement and the
amount to be recovered shall be determined by the Committee acting in its sole discretion.
The Committee shall have the sole discretion to interpret the terms of this policy and to
apply this policy to a particular situation. The Board may amend this policy from time to
time in its discretion and shall amend this policy to the extent deemed necessary or
appropriate to reflect the regulations to be adopted by the Securities and Exchange
Commission under Section 10D(b)(2) of the Securities and Exchange Act of 1934, as amended,
any rules or standards adopted by a national securities exchange, any related guidance from
a governmental agency which has jurisdiction over the administration of such provision, any
judicial interpretation of such provision and any changes in applicable law.
20.3. Severability. In the event any provision of the Plan shall be held illegal or
invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the
Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not
been included.
20.4. Transfer, Leave of Absence. For purposes of the Plan, a transfer of an Eligible
Individual from CBE to an Affiliate or Subsidiary (or, for purposes of any ISO granted under the
Plan, only a Subsidiary), or vice versa, or from one Affiliate or Subsidiary to another (or in the
case of an ISO, only from one Subsidiary to another), and a leave of absence, duly authorized in
writing by CBE or a Subsidiary or Affiliate, shall not be deemed a Termination of the Eligible
Individual for purposes of the Plan or with respect to any Award (in the case of ISOs, to the
extent permitted by the Code).
20.5. Exercise and Payment of Awards. An Award shall be deemed exercised or claimed
when the Secretary of CBE or any other CBE official or other person designated by the Committee for
such purpose receives appropriate written notice from a Participant, in form acceptable to the
Committee, together with payment of the applicable Option Price, Grant Price or other purchase
price, if any, and compliance with Article XVI, in accordance with the Plan and such Participants
Award Agreement.
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20.6. Deferrals. Subject to applicable law, the Committee may from time to time
establish procedures pursuant to which a Participant may defer on an elective or mandatory basis
receipt of all or a portion of the cash or Shares subject to an Award on such terms and conditions
as the Committee shall determine, including those of any deferred compensation plan of CBE or any
Subsidiary or Affiliate specified by the Committee for such purpose.
20.7. No Effect on Other Plans. Neither the adoption of the Plan nor anything
contained herein shall affect any other compensation or incentive plans or arrangements of CBE or
any Subsidiary or Affiliate, or prevent or limit the right of CBE or any Subsidiary or Affiliate to
establish any other forms of incentives or compensation for their directors, officers, eligible
employees or consultants or grant or assume options or other rights otherwise than under the Plan.
20.8. Section 16 of Exchange Act and Section 162(m) of the Code. The provisions and
operation of the Plan are intended to ensure that no transaction under the Plan is subject to (and
not exempt from) the short-swing profit recovery rules of Section 16(b) of the Exchange Act.
Unless otherwise stated in the Award Agreement, notwithstanding any other provision of the Plan,
any Award granted to an Insider shall be subject to any additional limitations set forth in any
applicable exemptive rule under Section 16(b) of the Exchange Act (including Rule 16b-3) that are
requirements for the application of such exemptive rule, and the Plan and the Award Agreement shall
be deemed amended to the extent necessary to conform to such limitations. Furthermore,
notwithstanding any other provision of the Plan or an Award Agreement, any Award to a Covered
Employee that is intended to qualify as Performance-Based Compensation shall be subject to any
applicable limitations set forth in Code Section 162(m) or any regulations or rulings issued
thereunder (including any amendment to the foregoing) that are requirements for qualification as
other performance-based compensation as described in Code Section
(m)(4)(C), and the Plan and the Award Agreement shall be deemed amended to the extent
necessary to conform to such requirements and no action of the Committee that would cause such
Award not to so qualify shall be effective.
20.9. Requirements of Law; Limitations on Awards.
(a) The granting of Awards and the issuance of Shares under the Plan shall be subject
to all applicable laws, rules, and regulations, and to such approvals by any governmental
agencies or national securities exchanges as may be required.
(b) If at any time the Committee shall determine, in its discretion, that the listing,
registration and/or qualification of Shares upon any securities exchange or under any
state, federal or non-United States law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in connection with, the
sale or purchase of Shares hereunder, the Company shall have no obligation to allow the
grant, exercise or payment of any Award, or to issue or deliver evidence of title for
Shares issued under the Plan, in whole or in part, unless and until such listing,
registration, qualification, consent and/or approval shall have been effected or obtained,
or otherwise provided for, free of any conditions not acceptable to the Committee.
(c) If at any time counsel to CBE shall be of the opinion that any sale or delivery of
Shares pursuant to an Award is or may be in the circumstances unlawful or result in the
imposition of excise taxes on CBE or any Subsidiary or Affiliate under the statutes, rules
or regulations of any applicable jurisdiction, CBE shall have no obligation to make such
sale or delivery, or to make any application or to effect or to maintain any qualification
or registration under the Securities Act, or otherwise with respect to Shares or Awards and
the right to exercise or payment of any Option or Award shall be suspended until, in the
opinion of such counsel, such sale or delivery shall be lawful or will not result in the
imposition of excise taxes on CBE or any Subsidiary or Affiliate.
(d) Upon termination of any period of suspension under this Section 20.9, any Award
affected by such suspension which shall not then have expired or terminated shall be
reinstated as to all Shares available before such suspension and as to the Shares which
would otherwise have become available during the period of such suspension, but no
suspension shall extend the term of any Award.
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(e) The Committee may require each person receiving Shares in connection with any
Award under the Plan to represent and agree with CBE in writing that such person is
acquiring such Shares for investment without a view to the distribution thereof, and/or
provide such other representations and agreements as the Committee may prescribe. The
Committee, in its absolute discretion, may impose such restrictions on the ownership and
transferability of the Shares purchasable or otherwise receivable by any person under any
Award as it deems appropriate. Any such restrictions shall be set forth in the applicable
Award Agreement, and the certificates evidencing such shares may include any legend that
the Committee deems appropriate to reflect any such restrictions.
(f) An Award and any Shares received upon the exercise or payment of an Award shall be
subject to such other transfer and/or ownership restrictions and/or legending requirements
as the Committee may establish in its discretion and may be referred to on the certificates
evidencing such Shares, including restrictions under applicable federal securities laws,
under the requirements of any stock exchange or market upon which such Shares are then
listed and/or traded, and under any blue sky or state securities laws applicable to such
Shares.
20.10. Participants Deemed to Accept Plan. By accepting any benefit under the Plan,
each Participant and each person claiming under or through any such Participant shall be
conclusively deemed to have indicated their acceptance and ratification of, and consent to, all of
the terms and conditions of the Plan and any action taken under the Plan by the Board, the
Committee or CBE, in any case in accordance with the terms and conditions of the Plan.
20.11. Governing Law. The Plan and each Award Agreement shall be governed by the laws
of the State of Delaware, excluding any conflicts or choice of law rule or principle that might
otherwise refer construction or interpretation of the Plan to the substantive law of another
jurisdiction. Unless otherwise provided in the Award Agreement, Participants are deemed to submit
to the exclusive jurisdiction and venue of the federal or state courts of the State of Delaware, to
resolve any and all issues that may arise out of or relate to the Plan or any related Award
Agreement.
20.12. Plan Unfunded. The Plan shall be unfunded. Neither CBE nor the Company shall
be required to establish any special or separate fund or to make any other segregation of assets to
assure the issuance of Shares or the payment of cash upon exercise or payment of any Award.
Proceeds from the sale of Shares pursuant to Options or other Awards granted under the Plan shall
constitute general funds of CBE and the Company, as the case may be.
20.13. Administration Costs. The Company shall bear all costs and expenses incurred
in administering the Plan, including expenses of issuing Shares pursuant to any Options or other
Awards granted hereunder.
20.14. No Fractional Shares. No fractional Shares shall be issued upon the exercise
or payment of an Option or other Award. The Committee may, in its discretion, pay cash in lieu of
fractional shares or require that fractional shares be forfeited.
20.15. Subsidiary or Affiliate Eligible Individuals. In the case of a grant of an
Award to any Eligible Individual of a Subsidiary or Affiliate, CBE may, if the Committee so
directs, issue or transfer the Shares, if any, covered by the Award to such Subsidiary or
Affiliate, for such lawful consideration as the Committee may specify, upon the condition or
understanding that such Subsidiary or Affiliate will transfer such Shares to such Eligible
Individual in accordance with the terms and conditions of such Award and those of the Plan. The
Committee may also adopt procedures regarding treatment of any Shares so transferred to a
Subsidiary or Affiliate that are subsequently forfeited or canceled.
20.16. Data Protection. By participating in the Plan, each Participant consents to
the collection, processing, transmission and storage by CBE and the Company, in any form
whatsoever, of any data of a
professional or personal nature which is necessary for the purposes of administering the Plan.
CBE and the Company may share such information with any Subsidiary or Affiliate, any trustee, its
registrars, brokers, other third-party administrator or any person who obtains control of CBE or
any Subsidiary or Affiliate or any division respectively thereof.
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20.17. Right of Offset. CBE and the Subsidiaries and Affiliates shall have the right
to offset against the obligations to make payment or issue any Shares to any Participant under the
Plan, any outstanding amounts (including travel and entertainment advance balances, loans, tax
withholding amounts paid by the employer or amounts repayable to the Company or any Subsidiary or
Affiliate pursuant to tax equalization, housing, automobile or other employee programs) such
Participant then owes to CBE or any Subsidiary or Affiliate and any amounts the Committee otherwise
deems appropriate pursuant to any tax equalization policy or agreement.
20.18. Participants Based Outside of the United States. The Committee may grant
Awards to Eligible Individuals who are non-United States nationals, or who reside outside the
United States or who are not compensated from a payroll maintained in the United States or who are
otherwise subject to (or could cause the Company to be subject to) legal or regulatory provisions
of countries or jurisdictions outside the United States, on such terms and conditions different
from those specified in the Plan as may, in the judgment of the Committee, be necessary or
desirable to foster and promote achievement of the purposes of the Plan and comply with such legal
or regulatory provisions, and, in furtherance of such purposes, the Committee may make or establish
such modifications, amendments, procedures or subplans as may be necessary or advisable to comply
with such legal or regulatory requirements (including triggering a public offering or to maximize
tax efficiency).
89
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COOPER INDUSTRIES PLC 600 TRAVIS, SUITE 5600 ATTN: CORPORATE SECRETARY HOUSTON, TX 77002-1001
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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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M32628-P08649
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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 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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Nominees: |
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1a. Linda A. Hill |
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1b. James J. Postl |
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1c. Mark S. Thompson |
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Abstain |
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2. |
To receive and consider the Companys Irish Statutory Accounts and the related reports of the directors and auditors;
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o |
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3. |
Appoint Ernst & Young LLP as our independent auditors for the year ending 12/31/2011;
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4. |
To approve the 2011 Omnibus Incentive Compensation Plan;
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5. |
To approve on an advisory basis, the compensation of the Companys named executive officers;
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The Board of Directors recommends you vote for 3 years on the following proposal: |
3 Years |
2 Years |
1 Year |
Abstain |
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6. |
To recommend on an advisory basis the frequency of the advisory vote on executive compensation;
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The Board of Directors recommends you vote FOR the following proposals: |
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Abstain |
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7. |
To authorize any subsidiary of the Company to make market purchases of Company shares; and
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8. |
To 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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Yes |
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No |
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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.
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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.
M32628-P08649
COOPER INDUSTRIES PLC
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL GENERAL MEETING OF SHAREHOLDERS
MAY 2, 2011
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., on May 2, 2011 at The Merrion Hotel, 22-24 Upper Merrion
Street, Dublin, Ireland, and any adjournment 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, FOR ITEMS 2, 3, 4, 5, 7 and 8, AND FOR THREE YEARS FOR
ITEM 6.
This card also constitutes voting instructions for any shares held for the shareholder in
Coopers Dividend Reinvestment and Stock Purchase Plan, the Cooper Industries Retirement Savings
and Stock Ownership Plan, and the Apex Tool 401(k) Savings Plan 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
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Address Changes/Comments:
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(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)
Continued and to be signed on reverse side