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. )
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Filed by the Registrant þ |
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Filed by a Party other than the Registrant
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Check the appropriate box: |
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o 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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þ Definitive Proxy Statement |
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o Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
Cooper Industries, Ltd.
(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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þ 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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1) Title of each class of securities to which transaction applies: |
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2) Aggregate number of securities to which transaction applies: |
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): |
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4) Proposed maximum aggregate value of transaction: |
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o Fee paid previously with preliminary materials. |
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o 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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1) Amount Previously Paid: |
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2) Form, Schedule or Registration Statement No.: |
March 13, 2008
Dear Shareholder:
On behalf of the Board of Directors, I cordially invite you to attend the Annual Meeting of Cooper
Industries shareholders. The meeting will be held on Tuesday, April 29, 2008, at 11:00 a.m. in the
54th floor conference room, Chase Tower, 600 Travis, Houston, Texas.
The notice of meeting and proxy statement following this letter describe the business to be
conducted at the meeting, including the election of three directors.
Your vote is important. Please take a moment now to vote your proxy over the Internet, by telephone
or by signing, dating and returning your proxy card in the envelope provided, even if you plan to
attend the meeting. Your proxy card and the Notice of Annual Meeting on the inside cover of this
proxy statement include instructions on how to vote your shares. If you elected to receive your
proxy statement electronically, you will not receive a proxy card and must vote via the Internet or
by telephone. If you have Internet access, we encourage you to vote over the Internet. It is
convenient for you and saves your company significant postage and processing costs.
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 MEETING OF SHAREHOLDERS
COOPER INDUSTRIES, LTD.
P.O. Box 4446
Houston, Texas 77210
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TIME
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11:00 a.m. on Tuesday, April 29, 2008. |
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PLACE
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Chase Tower, 54th floor, 600 Travis,
Houston, Texas. Free parking is available at the J.P.
Morgan Chase Center, which is located at 601 Travis.
You can obtain directions
to attend the Annual Meeting at
www.cooperindustries.com/common/investorcenter/. |
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ITEMS OF BUSINESS
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1. Elect three directors for
the term expiring at the
2011 Annual Meeting of
Shareholders. |
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2. Appoint Ernst & Young LLP as our
independent auditors for the year ending December 31, 2008 and
authorize the Audit Committee of the Board of Directors to
determine their remuneration. |
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3. Approve the Amended and Restated
Stock Incentive Plan. |
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4. If presented at the meeting,
consider and vote upon a shareholder proposal requesting Cooper
to implement a code of conduct based on international labor
organization human rights standards. |
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5. Consider any other matters to come
properly before the meeting or any adjournment thereof. |
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RECORD DATE
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Holders of Class A common shares of record at the
close of business on February 29, 2008, 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, 2007, 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. |
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VOTING YOUR PROXY
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In order to avoid additional soliciting expense to
Cooper, please vote your proxy as soon as
possible, even if you plan to attend the meeting.
Shareholders of record can vote by one of the
following methods: |
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1. CALL 1-800-652-8683 from the U.S.,
Canada and Puerto Rico (this call is free) or from all other
countries dial the international access code plus 1-781-575-2300
to vote by telephone anytime up to 12:00 midnight Eastern
Standard time on April 28, 2008 OR |
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2. GO TO THE WEBSITE: www.envisionreports.com/cbe to vote over the Internet
anytime up to 12:00 midnight Eastern Standard time on April 28,
2008; OR |
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3. MARK, SIGN, DATE AND RETURN your
proxy card in the enclosed postage-paid envelope. If you are
voting by telephone or the Internet, please do not mail your
proxy card. |
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INTERNET AVAILABILITY
OF PROXY MATERIALS
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Important Notice Regarding the Availability of Proxy Materials for the
Shareholder Meeting to be held on April 29, 2008. The proxy statement and Annual Report to Shareholders
are also available at www.edocumentview.com/cbe. |
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By order of the Board of Directors: |
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![(-S- Terrance V. Helz)](h54137dh5413714.gif) |
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Terrance V. Helz |
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Associate General Counsel and Secretary |
Houston, Texas
March 13, 2008
TABLE OF CONTENTS
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A-1 |
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PROXY STATEMENT
The Board of Directors of Cooper Industries, Ltd. (Cooper) is soliciting your proxy to vote
at our 2008 Annual Meeting of Shareholders on April 29, 2008. This booklet contains information
about the items being voted on at the Annual Meeting and information about Cooper.
QUESTIONS AND ANSWERS
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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The appointment of Ernst & Young LLP as our independent auditors for the year ending
December 31, 2008 and authorization of the Audit Committee of the Board of Directors to
determine their remuneration; |
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The approval of the Amended and Restated Stock Incentive Plan; and |
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If presented, a shareholder proposal requesting Cooper to implement a code of conduct
based on international labor organization human rights standards. |
How does the Board recommend I vote on the proposals?
The Board recommends voting:
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FOR each of the nominees for the Board of Directors; |
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FOR the appointment of Ernst & Young LLP as our independent auditors; |
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FOR approval of the Amended and Restated Stock Incentive Plan; and |
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AGAINST the shareholder proposal requesting Cooper to implement a code of conduct based
on international labor organization human rights standards. |
Who is entitled to vote?
Holders of Class A common shares as of the close of business on February 29, 2008 may vote at
the Annual Meeting.
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 three 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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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 enclosed 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 hold Cooper shares through a broker or bank, you may also be eligible to vote using the
Internet or by telephone if your broker or bank participates in the proxy voting program
provided by Broadridge Financial Solutions.
1
Can I revoke my proxy card?
Whichever voting method you use, you have the right to revoke your proxy at any time before the
meeting by:
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filing with Coopers Corporate Secretary an instrument revoking your proxy; |
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attending the meeting and giving notice of revocation; or |
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submitting a later-dated proxy by any of the three voting methods described above. |
Is my vote confidential?
Proxy cards, proxies delivered by Internet or telephone, ballots and voting tabulations that
identify individual shareholders are mailed or returned directly to an independent inspector of
election and handled in a manner that protects your voting privacy. The independent inspector of
election will count the votes. We have adopted a confidential voting policy which provides that
your vote will not be disclosed except: (1) to respond to written comments on the proxy card;
(2) as required by law; or (3) in other limited circumstances, such as a proxy contest in
opposition to the Board.
What shares are included on my proxy card?
The shares listed on your 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 Investors Bank and Trust Company, as Trustee
of the Cooper Industries Retirement Savings and Stock Ownership Plan (CO-SAV); and |
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shares held in a book-entry account at Computershare Trust Company, N.A., Coopers
transfer agent, including shares acquired through Coopers Employee Stock Purchase Plan. |
If you do not properly submit your proxy by one of the three methods described above, your
shares (except for CO-SAV) will not be voted. See the question below for an explanation of the
voting procedure for CO-SAV shares. If you hold shares in a broker account, you will receive a
separate proxy card and instructions from your broker.
How is Cooper Stock in CO-SAV voted?
If you hold Cooper Class A common shares through CO-SAV, you must instruct the CO-SAV Trustee,
Investors Bank and Trust Company, how to vote your shares. If you do not properly submit your
proxy by one of the three methods described above (or if you submit your proxy with an unclear
voting designation, or with no voting designation at all), then the Trustee will vote the shares
in your CO-SAV account in proportion to the way the other CO-SAV participants voted their
shares. The Trustee will also vote Class A common shares not yet allocated to participants
accounts in proportion to the way that CO-SAV participants voted their shares. CO-SAV votes
receive the same confidentiality as all other shares voted.
How many shares can vote?
As of the February 29, 2008 record date, 203,418,784 Class A common shares were issued and
outstanding. These are the only securities entitled to vote. Each holder of Class A common
shares is entitled to one vote for each share held. Certain wholly-owned subsidiaries of Cooper
held 26,958,369 Class A common shares on February 29, 2008. A voting agreement requires that the
Class A common shares held by the Cooper subsidiaries will be voted (or abstained from voting)
in the same proportion as the Class A common shares held by other shareholders. As a result, the
voting of shares held by Cooper subsidiaries does not dilute the voting power of other
shareholders. Cooper also has 109,620,258 Class B common shares outstanding as of the record
date that are held by a Cooper subsidiary. The Class B common shares have no vote on the
matters presented at this meeting. The Class B common shares are convertible into Class A common
shares on a one-to-one basis in the following circumstances: (1) as consideration for any
acquisition by Cooper of the stock or assets of a third party, and (2) to satisfy obligations
under Coopers equity plans to issue Class A common shares to plan participants.
2
What vote is required for approval?
Provided a quorum is present, the election of a director requires a plurality of the votes cast
by shareholders represented in person or by proxy and entitled to vote at the meeting. The
appointment of the independent auditors, the approval of the Amended and Restated Stock
Incentive Plan, and the shareholder proposal require the affirmative vote of a majority of the
shares represented in person or by proxy at the meeting and entitled to vote on such matters.
Abstentions have the same effect as a vote against the proposal. Broker nonvotes are not counted
for purposes of voting, but are counted for purposes of a quorum.
What is a quorum?
A quorum is a majority of the issued and outstanding Class A common shares. Shareholders may
represent their shares by attending the meeting or their shares may be represented at the
meeting by proxy. There must be a quorum for the meeting to be held. If you submit a valid proxy
by any of the described methods, even if you abstain from voting, then you will be considered
part of the quorum.
Who can attend the Annual Meeting?
If you own Cooper shares on February 29, 2008, 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, Ltd., 600 Travis, Suite 5600, Houston, Texas 77002, or bring proof of
ownership to the meeting.
How will voting on any other business be conducted?
Although we do not know of any other business to be considered at the 2008 Annual Meeting, if
any other business is presented at the Annual Meeting, your proxy will be voted as determined by
the persons voting the proxies.
When are the shareholder proposals for the 2009 Annual Meeting due?
All shareholder proposals must be submitted in writing to Terrance V. Helz, Associate General
Counsel and Secretary, Cooper Industries, Ltd., 600 Travis, Suite 5600, Houston, Texas 77002.
Any shareholder who intends to present a proposal at the 2009 Annual Meeting of Shareholders
must deliver the proposal to us so that it is received no later than November 14, 2008, to have
the proposal included in our proxy materials for that meeting. Shareholder proposals must also
meet other requirements of the Securities and Exchange Act of 1934 to be eligible for inclusion.
If a shareholder proposal is received after January 28, 2009, 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 2009 Annual Meeting of Shareholders.
What are the costs of this proxy solicitation?
We have retained Georgeson, Inc. to assist in the distribution of proxy materials and
solicitation of votes for a fee of $16,000, plus out-of-pocket expenses. We also reimburse
brokerage houses and other custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses of forwarding proxy and solicitation materials to shareholders. Our
directors, officers and employees may also solicit proxies without additional compensation by
letter, telephone or otherwise. We will bear all expenses of solicitation.
3
COOPER STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of February 29, 2008, there were 20,739 registered holders of Class A common shares. We
know of no person who was the beneficial owner of more than five percent of the outstanding shares
of any class of 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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of Beneficial |
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Title
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Name and Address of Beneficial Owner |
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Ownership |
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Class(4) |
Class A common shares |
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FMR LLC |
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24,588,947 |
(1) |
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13.70 |
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82 Devonshire Street |
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Boston, MA 02109
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Class A common shares |
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Barrow, Hanley, Mewhinney &
Strauss, Inc. |
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11,574,600 |
(2) |
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6.44 |
% |
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2200 Ross Avenue, 31st Floor |
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Dallas, TX 75201-2761
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Class A common shares |
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Vanguard Windsor Funds |
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11,257,600 |
(3) |
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6.27 |
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Vanguard Windsor II Fund |
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100 Vanguard Boulevard |
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Malvern, PA 19355 |
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(1) |
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Based on Schedule 13G filed February 14, 2008, jointly on behalf of Edward C.
Johnson 3rd, FMR LLC, and its subsidiaries and affiliates, Fidelity Management &
Research Company (Fidelity), Fidelity International Limited, Pyramis Global Advisors Trust
Company and Strategic Advisors, Inc. The shares are beneficially owned as follows: Fidelity
23,556,400 shares (including 12,846,841 held by Fidelity Contrafund); Fidelity International
Limited 314,862 shares; Pyramis Global Advisors Trust Company 433,858 shares; and
Strategic Advisors, Inc. 284,037 shares. The Fidelity Funds Board of Trustees has sole
voting power over the shares that are beneficially owned by Fidelity, and Edward C.
Johnson 3rd and FMR LLC, through control of Fidelity and the Fidelity Funds, each
has sole dispositive power over the 23,556,400 shares owned by the Fidelity Funds. Edward C.
Johnson 3rd and FMR LLC, through control of Pyramis Global Advisors Trust Company,
each has the sole dispositive power over 433,858 shares and the sole voting power over 311,658
shares. Edward C. Johnson 3rd and FMR LLC, through control of FMR LLC
subsidiaries, each has sole voting power and sole dispositive power over the shares
beneficially owned by Strategic Advisors, Inc. Fidelity International Limited has sole
dispositive power over 314,862 shares and sole voting power over 298,852 shares. The address
of Fidelity and Strategic Advisors, Inc. is 82 Devonshire Street, Boston, MA 02109. The
address of Fidelity International Limited is Pembroke Hall, 42 Crow Lane, Hamilton, Bermuda
and the address of Pyramis Global Advisors Trust Company is 53 State Street, Boston, MA 02109. |
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Based on Schedule 13G filed February 13, 2008 by Barrow, Hanley, Mewhinney & Strauss, Inc.,
which has shared voting power and sole dispositive power over 11,574,600 shares. |
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Based on Schedule 13G filed February 27, 2008 by Vanguard Windsor Funds Vanguard Windsor II
Fund, which has sole voting power over 11,257,600 shares. |
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Calculated on the basis of 179,453,923 Class A common shares that are publicly held as of
December 31, 2007 and excludes the Class A common shares held by Cooper subsidiaries. |
4
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 in April 2011. The nominees are: Robert M. Devlin, Linda A. Hill and James
J. Postl. All of the nominees are current members of the class whose term expires at the meeting.
If any nominee becomes unable to serve as a director, an event not now anticipated, it is
intended that the shares represented by proxies will be voted for the election of a substitute
nominated by the Board of Directors. Following is certain information with respect to the persons
nominated as directors and the current directors who will continue as directors after the Annual
Meeting.
NOMINEES FOR TERMS EXPIRING IN 2011
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ROBERT
M. DEVLIN
Member
Executive Committee and Management Development and Compensation Committee
Director since 1997
Age 67 |
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Mr. Devlin is Chairman of Curragh
Capital Partners, a private equity
firm. He is a principal owner and
director of Forethought Financial
Group, Inc., a life insurance and
financial services company, and a
senior advisor to Lazard, Inc.
investment banking firm. He is also
a director of Discover Financial
Services and LKQ Corporation. |
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LINDA A. HILL
Member
Management Development and Compensation Committee
Director since 1994
Age 51
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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
Member Audit
Committee and
Committee on Nominations and
Corporate Governance
Director since 2003
Age 62
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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
Centex Corporation, Northwest
Airlines Corp. and the American
Balanced Fund. |
5
PRESENT DIRECTORS WHOSE TERMS EXPIRE IN 2009
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IVOR J. EVANS
Chairman Committee on Nominations and
Corporate Governance
Member Management Development and
Compensation Committee
Director since 2003
Age 65
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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 was named Vice Chairman in
January 2004 and previously
served as President and Chief
Operating Officer of Union
Pacific Railroad Company since
1998. He is also a director of
ArvinMeritor, Inc., Spirit
Aerosystems Holdings, Inc., and
Textron Inc. |
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KIRK S. HACHIGIAN
Chairman Executive Committee
Director since 2004
Age 48
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Mr. Hachigian is Chairman,
President and Chief Executive
Officer of Cooper Industries,
Ltd. He was named Chairman in
February 2006, President and
Chief Executive Officer in May
2005, President and Chief
Operating Officer in August
2004, Chief Operating Officer
in December 2003, Executive
Vice President and Chief
Operating Officer, Electrical
Products in December 2002, and
Executive Vice President,
Operations in April 2001. He is
also a director of Trane, Inc. |
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LAWRENCE D. KINGSLEY
Member Management Development and
Compensation
Committee
Director since 2007
Age 45
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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
previously held various
executive positions with
Danaher Corporation, a
manufacturer of industrial and
consumer products, serving as
Corporate Vice President and
Group Executive for the Sensors
and Controls business from
March 2004 to August 2004;
President, Industrial Controls
Group from April 2002 to July
2004; and President, Motion
Group, Special Purpose Systems
from January 2001 to March
2002. He is also a director of
IDEX Corporation. |
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JAMES R. WILSON
Member Audit Committee
Director since 1997
Age 67
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Mr. Wilson served as Chairman,
President and Chief Executive
Officer of Cordant Technologies
Inc. from 1995 until 2000, when
he retired. |
6
PRESENT DIRECTORS WHOSE TERMS EXPIRE IN 2010
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STEPHEN G. BUTLER
Chairman Audit Committee
Director since 2002
Age 60
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Mr. Butler served as Chairman
and Chief Executive of the
accounting firm, KPMG LLP, from
1996 until June 2002, when he
retired. He is also a director
of ConAgra Foods, Inc. and Ford
Motor Company. |
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DAN F. SMITH
Chairman
Management Development and
Compensation Committee
Member Executive Committee
Director since 1998
Age 61
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Mr. Smith served as President
and Chief Executive Officer of
Lyondell Chemical Company, a
petrochemicals and refining
operations company, from 1996
until January 2008 when Lyondell
Chemical Company became a
subsidiary of Lyondell Basell
Industries AF S.C.A. From
November 1988 until December
2007, he served as a member of
the Board of Lyondell Chemical
Company and served as the
Boards Chairman from May 2007
until December 2007. From 1997
until January 2008, he also
served as Chief Executive
Officer and a member of the
Partnership Governance Committee
of Equistar Chemicals, LP. He
also has served as the Chief
Executive Officer of Millennium
Chemicals Inc. from December
2004 until January 2008.
Equistar Chemicals, LP and
Millennium Chemicals Inc. are
wholly owned subsidiaries of
Lyondell. |
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GERALD B. SMITH
Deputy Chairman and Presiding
Non-Management Director
Member Audit Committee, Committee on
Nominations and Corporate Governance and
Executive Committee
Director since 2000
Age 57
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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 and Chairman of the Audit
Committee of ONEOK Partners,
L.P. |
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MARK S. THOMPSON
Member
Committee on Nominations and
Corporate Governance
Director since 2007
Age 51
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Dr. Thompson has served as
President and Chief Executive
Officer of Fairchild
Semiconductor International,
Inc., a company providing
semiconductor solutions, since
April 2005. He previously served
as Executive Vice President,
Manufacturing and Technology
Group, since December 2004.
Prior to joining Fairchild
Semiconductor, he was President
and Chief Executive Officer of
Big Bear Networks, Inc., a
company providing optoelectronic
network solutions, since August
2001. Previously, he was Vice
President and General Manager of
Tyco Electronics Power
Components Division. He is also
a director of American Science
and Engineering, Inc. and
Fairchild Semiconductor
International, Inc. |
7
INFORMATION ABOUT MANAGEMENT
Executive Officers
The table below contains certain information as of March 1, 2008 with respect to Coopers
present executive officers. All executive officers are elected to terms that expire at the
organizational meeting of the Board of Directors, which follows the Annual Meeting of Shareholders.
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Years |
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of |
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Officer |
Name |
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Position |
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Age |
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Service |
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Since |
Kirk S. Hachigian |
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Chairman, President and Chief Executive Officer |
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48 |
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7 |
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2001 |
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Terry A. Klebe |
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Senior Vice President and Chief Financial Officer |
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53 |
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13 |
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1995 |
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Kevin M. McDonald |
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Senior Vice President, General Counsel and Chief Compliance Officer |
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41 |
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2 |
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2006 |
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C. Thomas OGrady |
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Senior Vice President, Business Development |
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56 |
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3 |
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2005 |
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James P. Williams |
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Senior Vice President, Human Resources |
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45 |
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2 |
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2006 |
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Grant L. Gawronski |
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Vice President, International Operations |
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45 |
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5 |
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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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55 |
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2 |
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2008 |
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Gary A. Masse |
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Group President, Cooper Tools |
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45 |
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2 |
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2006 |
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James T. Pendley |
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Chief Marketing Officer |
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36 |
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2 |
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2006 |
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Michael A. Stoessl |
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Group President, Cooper Power Systems |
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44 |
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5 |
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2006 |
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Laura K. Ulz |
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Vice President, Operations |
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45 |
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1 |
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2007 |
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All of the executive officers have been employed by Cooper in management positions for five
years or more, except Kevin M. McDonald, C. Thomas OGrady, James P. Williams, Rick L. Johnson,
Gary A. Masse, James T. Pendley and Laura K. Ulz.
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Kevin M. McDonald joined Cooper from Anadarko Petroleum Corporation where he served as
Associate General Counsel. Previously, he was Managing Counsel Litigation and Senior
Litigation Counsel at Valero Energy Corporation since 2002 and was with Fulbright &
Jaworski LLP for nine years. |
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C. Thomas OGrady joined Cooper from Roper Industries where he served as Vice President,
Mergers and Acquisitions since 2001. Previously, Mr. OGrady worked for FMC Corporation as
Corporate Director of Acquisitions. |
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James P. Williams joined Cooper from Danaher Corporation, where he was most recently
Corporate Vice President Human Resources. Prior to Danaher, Mr. Williams spent 10 years
with Honeywell (Allied Signal), where he was responsible for organizational and leadership
development, change management, and learning and staffing across all functions of the
company. |
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Rick L. Johnson joined Cooper in 2005 as Vice President, Finance for Cooper
Crouse-Hinds. He was appointed Corporate Controller in 2007 and Vice President, Controller
and Chief Accounting Officer in 2008. Previously, he was Senior Vice President and Chief
Financial Officer for Impulse Wear, Inc. and prior to that he served as Vice President of
Finance for the Tyco Electrical and Metal Products division. |
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Gary A. Masse joined Cooper after nine years with Danaher Corporation where he most
recently served as Vice President and Group Executive of Gilbarco-Veeder Root after holding
executive positions in several other units of Danaher. Earlier in his career, Mr. Masse
spent 12 years in operating and management positions with General Electric. |
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James T. Pendley joined Cooper following a twelve-year tenure with Black & Decker
Corporation where he most recently served as Vice President and General Manager of Black &
Deckers Kwikset Locks Division. He also spent several years in Europe with Black &
Deckers Power Tools and Accessories Group. |
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Laura K. Ulz joined Cooper from Honeywell International where she most recently served
as Vice President, Operations for Honeywells Environmental and Combustion Controls
business. Ms. Ulz joined Honeywell in |
8
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1989 and held various positions with increasing levels of responsibility including
engineering, quality, process excellence, automation and manufacturing. |
Securities Ownership of Officers and Directors
As of March 1, 2008, each director, nominee and executive officer named in the Summary
Compensation Table beneficially owned the number of Cooper Class A common 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 1.3% of Coopers outstanding Class A common shares as of
that date.
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Number of Shares |
Name of Beneficial Owner |
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Beneficially Owned(1) |
Stephen G. Butler |
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41,374 |
(2) |
Robert M. Devlin |
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75,977 |
(2) (4) |
Ivor J. Evans |
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35,096 |
(2) |
Kirk S. Hachigian |
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978,855 |
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Linda A. Hill |
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38,100 |
(2) |
Lawrence D. Kingsley |
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3,023 |
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James J. Postl |
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32,752 |
(2) |
Dan F. Smith |
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53,829 |
(2) |
Gerald B. Smith |
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30,706 |
(2) |
Mark S. Thompson |
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3,031 |
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James R. Wilson |
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42,523 |
(2) |
Terry A. Klebe |
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558,132 |
(3) |
Gary A. Masse |
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36,690 |
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C. Thomas OGrady |
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100,253 |
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Michael A. Stoessl |
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138,418 |
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All Directors and Executive Officers as a Group |
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2,319,109 |
(2)(3) (4) |
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(1) |
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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 29, 2008, as follows: Mr. Butler 12,000 shares; Mr. Devlin
22,000 shares; Mr. Evans 12,000 shares; Mr. Hachigian 759,999 shares; Ms. Hill 18,000
shares; Mr. Postl 8,000 shares; Mr. D. Smith 8,000 shares; Mr. G. Smith 16,000 shares;
Mr. Wilson 4,000 shares; Mr. Klebe 397,401 shares; Mr. Masse 25,332 shares; Mr. OGrady
71,999 shares; Mr. Stoessl 79,935 shares; and all directors and executive officers as a
group 1,541,531 shares. None of the shares beneficially owned by the directors and executive
officers have been pledged as security. |
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(2) |
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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 18,133 shares;
Mr. Devlin 12,577 shares; Mr. Evans 23,096 shares; Ms. Hill 14,700 shares; Mr. Kingsley
2,023 shares; Mr. Postl 24,752 shares; Mr. D. Smith 44,229 shares; Mr. G. Smith 10,536
shares; Mr. Thompson 2,023 shares; and Mr. Wilson 36,461 shares. |
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(3) |
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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 43,992 shares and all
executive officers as a group 46,702. |
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(4) |
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Includes 21,000 shares held by the Devlin Foundation for which Mr. Devlin serves as trustee. |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (Exchange Act), requires
executive officers, directors and persons who beneficially own more than 10% of Coopers Class A
common 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 the Company with copies of all Section 16(a) forms they file.
9
Based solely on a review of those forms furnished to the Company and written representations
from the executive officers and directors, the Company believes its executive officers and
directors complied with all applicable Section 16(a) filing requirements during the fiscal year
ended December 31, 2007 with the exception of one late filing on Form 4 relating to one transaction
for Gerald B. Smith, a director, filed on January 29, 2008 rather than September 17, 2007.
CORPORATE GOVERNANCE
Meetings of the Cooper Board and its Committees
Our Board of Directors held six meetings during 2007. 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 attended the 2007 Annual Meeting of Shareholders. Mr. Gerald B. Smith, as
Deputy Chairman and presiding non-management director, presides over the Board in the absence of
the Chairman and in Board sessions held without management directors. The responsibilities of the
presiding non-management director also include serving as a non-exclusive channel of communication
between the Chairman/Chief Executive Officer and the non-management directors and, with input from
other directors, collaborating with the Chairman/Chief Executive Officer on the preparation of
Board agendas. Coopers Corporate Governance Principles and the charters of the Audit Committee,
Management Development and Compensation Committee and Committee on Nominations and Corporate
Governance are available on Coopers website at www.cooperindustries.com/common/governance
or are available in print to any shareholder who requests it. 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
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 to assist it in making determinations of
independence. Specifically, the Board determined that Messrs. Dan Smith and Wilson have no
relationship with Cooper other than being a director, nominee and/or shareholder. Messrs. Butler,
Devlin, Evans, Kingsley, Postl, Gerald Smith, Thompson and Ms. Hill have immaterial relationships
with Cooper. Ms. Hill and Messrs. Devlin, Kingsley, Postl and Gerald Smith serve as an executive
officer, director or trustee of charitable organizations to which Cooper made contributions in
2007. Mr. Butler serves as a director of Ford Motor Company to which Cooper has sold products
within the last three years. Also, Mr. Evans is a director of Spirit Aerosystems Holdings, Inc.,
Textron Inc. and ArvinMeritor, Inc. and within the last three years Cooper has sold products to or
purchased products from these companies. Mr. Thompson serves as the chief executive officer of
Fairchild Semiconductor International, which has sold products to Cooper within the last three
years. The Board determined that none of these relationships are material because they fall
within the categorical standards, which are available on Coopers website at
www.cooperindustries.com/common/governance/board.cfm. Mr. Hachigian is not an independent
director due to his service as an executive officer of Cooper and not due to any other
transactions or relationships.
Audit Committee
The Audit Committee, which consists of all independent directors, held eight meetings during
2007. The Board has determined that Mr. Stephen G. Butler qualifies as an audit committee
financial expert under the federal securities laws. The Committees principal responsibilities
are to:
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Confer with management and the independent auditors regarding financial reporting
issues and practices. |
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Review SEC filings, including the annual financial statements and the annual report
on Form 10-K. |
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Appoint, subject to shareholder approval, the independent auditors and review the
auditors independence, scope of annual audit and audit results. |
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Review the internal audit program and the corporate compliance program including
compliance with Coopers Code of Ethics and Business Conduct. |
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Review the accounting principles and policies of Cooper. |
10
Executive Committee
The Executive Committee, which is authorized to act on behalf of the full Board between
regular meetings of the Board, held no meetings in 2007.
Management Development and Compensation Committee
The Management Development and Compensation Committee, which consists of all independent
directors, held four meetings during 2007. The Committees principal responsibilities are to:
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Establish corporate compensation policies, including determining base salary and annual
and long-term incentive awards for executive officers and other key employees. |
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Establish specific performance goals and objectives to be used to evaluate performance
over a given period. |
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Evaluate the performance of executive officers and other key employees to determine
whether performance goals and objectives have been attained and awards have been earned. |
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Determine stock option and long-term performance share grants to employees. |
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Review compliance with stock ownership guidelines for executive officers and other key
employees. |
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Review succession planning and executive development. |
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Review pension plan asset management. |
For a detailed description of the Committees processes and procedures for consideration and
determination of executive compensation, including the role of executive officers and compensation
consultants in recommending the amount and form of executive compensation, see Compensation
Discussion and Analysis beginning on page 13.
Committee on Nominations and Corporate Governance
The Committee on Nominations and Corporate Governance, which consists of all independent
directors, held four meetings in 2007. 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. |
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, Ltd., 600 Travis, Suite 5600, Houston, Texas 77002. 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 New Directors
The Boards current criteria for selecting new directors 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. 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. The Committee then identifies and recommends to the Board
qualified candidates for nomination and the full Board makes a final determination.
11
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, Ltd., 600 Travis, Suite 5600, Houston, Texas
77002-1001. All such concerns shall be promptly forwarded to the presiding non-management
director and any concerns about accounting, financial reporting, internal controls and auditing
matters also shall be promptly forwarded to the Chairman of the Audit Committee. Such concerns
shall be simultaneously reviewed and addressed by the Senior Vice President, General Counsel and
Chief Compliance Officer, or his designee, in the same way that similar concerns are addressed by
Cooper.
Code of Ethics and Business Conduct
Cooper has adopted a Code of Ethics and Business Conduct that applies to its 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/common/governance or is
available in print 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
We recognize that related party transactions may present potential for actual conflicts of
interests and may create the appearance that Company decisions are based on considerations other
than the best interests of Cooper and its stockholders. 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 stockholders. 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 Securities and Exchange Commission 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.
12
EXECUTIVE MANAGEMENT COMPENSATION
COMPENSATION COMMITTEE REPORT
The Management Development and Compensation Committee (the Committee) is composed of five
independent directors and acts under a written charter adopted by the Board of Directors. A
primary purpose of the Committee is to discharge the responsibilities of the Board of Directors
relating to the compensation of the Companys executive management. The Committee has reviewed
and discussed with management the Compensation Discussion and Analysis set forth below. Based on
its review, the related discussions and such other matters deemed relevant and appropriate by
the Committee, the Committee has recommended to the Board of Directors that the Compensation
Discussion and Analysis be included in Coopers Proxy Statement relating to Coopers 2008 Annual
Meeting of Shareholders.
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Dan F. Smith, Chairman
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Linda A. Hill |
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Robert M. Devlin
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Lawrence D. Kingsley |
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Ivor J. Evans |
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COMPENSATION DISCUSSION AND ANALYSIS
The following discussion and analysis, particularly the sections regarding target performance
levels for our annual and long-term incentive compensation, contains statements regarding future
company performance targets and goals. These targets and goals are disclosed in the limited
context of our compensation programs and should not be interpreted as managements expectations or
estimates of results or other guidance. We specifically caution stockholders not to apply these
statements to other contexts.
Oversight 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, the Committee establishes compensation for the CEO, other executive
officers and key 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: base salary; annual incentive
bonus; long-term equity-based incentive awards; and 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.
Compensation Consultants
Our Human Resources Department supports the Committee in its work. In performing its duties
relating to the development and administration of our executive compensation program, Human
Resources management and the Committee also receive advice and counsel from Frederick W. Cook &
Co., an executive compensation consulting firm. This advice and counsel relates to the competitive
position, value and design of our short-term and long-term incentive compensation plans,
performance goals and rewards available at various levels of performance. Frederick W. Cook & Co.
provides such services to management and the Committee periodically throughout the year.
Under its charter, the Committee also may retain an executive compensation consultant to
provide independent advice and counsel directly to the Committee. In early 2005, the Committee
retained the services of Pearl Meyer & Partners for this purpose. In August 2005, Pearl Meyer
conducted an independent evaluation of Coopers executive compensation program and concluded that
the program was reasonable and provided competitive compensation with appropriate performance-based
incentives to achieve the Companys strategic objectives. In late 2005 and early 2006, Pearl Meyer
also provided the Committee with advice on compensation issues related to the retirement of our
former
13
Chairman and CEO and the appointment of our current Chairman and CEO. In 2007, Pearl Meyer
provided advice on redesigning elements of Coopers executive compensation program including
improving administrative procedures and developing plans to grant cash bonuses and equity awards to
selected non-executive employees who are top performers and high potential employees. Other than
the services provided by Frederick W. Cook & Co. and Pearl Meyer relating to the evaluation, design
and compilation of data related to Coopers executive compensation program, Cooper does not utilize
the services of these consultants for other matters.
Compensation Philosophy and Objectives
The Committees policy is to compensate and reward executive officers and other key 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.
The Committee believes that compensation to executive officers 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 incentivize
continuous improvements in financial performance by providing enhanced compensation as results
improve and exceed budgeted levels. While 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-based include stock options that generally vest over a seven year period, long-term
equity incentives that pay out in three years, and the Supplemental Executive Retirement Plan.
Based on these philosophies and objectives, the Committee believes that Coopers executive
compensation program should consist of the following elements:
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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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Benefits and executive perquisites. |
In determining the compensation of the Named Executives and other senior executives including
the amount of base salary, annual cash bonus opportunity, long-term equity-based incentive awards
and other benefits, the Committee considers external surveys for benchmarking data, analysis by
Frederick W. Cook & Co. regarding competitive position, and individual performance. For executive
positions below the CEO, the Committee also considers recommendations from the CEO based on the
CEOs assessment of the executives performance including the achievement of personal goals and
objectives, and the Committee modifies such recommendations as the Committee deems appropriate in
light of the external surveys and analysis of the compensation consultant.
At the beginning of each fiscal year, the CEO submits his personal fiscal year goals and the
Committee and Board discuss the goals with the CEO. The goals are then adopted with revisions as
may be appropriate. At mid-year, the CEO and Board discuss progress to-date on the CEOs goals.
Following completion of the fiscal year, the Committee and Board conduct an evaluation of the CEOs
performance for the fiscal year including the achievement of personal goals. Based on this
evaluation, the Committee determines the CEOs base salary, annual cash bonus opportunity and
long-term equity-based incentive awards taking into consideration applicable benchmarking data and
the analysis of the compensation consultant.
Additional details on each element of Coopers compensation program are outlined below.
14
Base Salaries
The base salary range and salary midpoint for each executive officer, including the CEO and
other Named Executives, is established annually using the Hay Group Job Evaluation System. This
salary range takes into account individual duties, responsibilities, scope of control and
accountability for each position. The Committee also considers the competitiveness of the base
salary and salary midpoint because the Committee believes salary is critical to Coopers success to
attract and retain top management talent. Under a policy adopted by the Committee, actual salaries
for executive officers at Cooper are intended to approximate the average of the Hay Group Total
Compensation Survey (the Hay Survey). In 2007, the Hay Survey included 365 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 who may compete for
Coopers top management talent and using this broad group of industrial companies to establish base
salary levels is more appropriate than using a small group, such as the peer group used in the
share performance graph in the Companys Annual Report, because it reduces the effect any one
company may have on the average. The Committee verifies the data in the Hay Survey through use of a
separate compensation survey compiled by Hewitt Associates. This survey, called the Total
Compensation Measurement, includes 428 companies with median revenues of approximately $5.2
billion. In the Total Compensation Measurement Survey, Cooper focuses its benchmarking data on a
group of 68 comparable industrial companies based on their revenue range. During 2007, the salary
ranges and actual salaries for Coopers executive officers approximated the Hay Survey average.
The Committee approves all increases in base salary for Coopers executive officers in
advance. The Committee reviews salaries of executive officers annually and awards increases, as
appropriate. In determining the amount of salary increases, the Committee considers individual
performance, position in the salary range and competitive position. In February 2007, the Committee
approved increasing Mr. Hachigians base salary from $1,000,000 to $1,100,000, which approximates
the Hay Survey average, in recognition of his performance and continued leadership. The Committee
also approved increases in base salaries for the other Named Executives ranging from 5%-8%, with
new base salary levels that approximate the Hay Survey average. Base salaries for all Named
Executives for 2007 are shown in column (c) of the Summary Compensation Table.
Annual Incentive Compensation
Annual incentive compensation bonus awards are available to executive officers, including the
CEO and other Named Executives, under the terms of the Management Annual Incentive Plan (the Bonus
Plan). The Bonus Plan links incentive compensation opportunity to achievement of our short-term
business objectives and shareholders interests as a whole. The Bonus Plan was initially approved
by shareholders in 1996. In 2006, shareholders approved amendments to extend the term of the Plan
until March 1, 2011 and to increase the maximum annual award that may be granted from $2.5 million
to $3.0 million.
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 2007, the Committee has adopted
two separate performance measures for the purpose of determining bonuses. These measures are
earnings per share and free cash flow. Earnings per share was selected because it is a generally
accepted measure of a companys performance that can be compared to results in prior periods and at
peer companies. Free cash flow is an indication of earnings quality as it measures the degree to
which Coopers net income translates to cash flow. For fiscal year 2007, 75% of the bonus
opportunity for executive officers was based on earnings per share and the balance is based on free
cash flow. For executives at operating divisions, a portion of their bonus opportunity is based on
financial performance of the relevant business unit and the balance on the financial performance of
Cooper on a Company-wide basis. 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
stockholders.
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 2007, 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
15
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 incentivize 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. At Cooper, target performance generally requires earnings per share growth of
12-14% compared to the prior year and free cash flow equal to Coopers income from continuing
operations. For fiscal year 2007, the Committee approved performance goals for maximum bonus
opportunity of earnings per share from continuing operations of $3.00 and free cash flow of $561
million. These performance goals represent an increase of 16% in earnings compared to reported
earnings per share from continuing operations of $2.58 for fiscal 2006 and free cash flow in excess
of income from continuing operations. 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 order to ensure that bonuses available to executive officers at Cooper are reasonable,
competitive and provide appropriate financial incentives at all performance levels, the Committee
has established benchmarks allowing a comparison with compensation provided by other companies as
reported in the Hay Survey. This data compares total cash compensation at Cooper (base salary plus
annual incentive bonus) at various performance levels with compensation provided at competitive
industrial companies. In November 2006, an analysis of Hay Survey data indicated that bonus
opportunity provided under Coopers Bonus Plan approximated the competitive benchmarks established
by the Committee at the good performance level, but fell short of the competitive benchmarks for
performance at the maximum level. Accordingly, effective for fiscal year 2007, the Committee
increased maximum bonus opportunities for certain executive officers including the CEO and Named
Executive Officers.
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 separately identified in
financial statements.
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 determining
actual awards to the CEO and other Named Executives under the Bonus Plan, the Committee has
discretion to reduce the bonus, but may not increase the award above the individuals earned bonus
opportunity based on the pre-established performance goals and Coopers financial results. The
Committee may pay awards earned in cash or Cooper Class A common shares or a combination of cash
and shares. Subject to the Committees approval, a participant in the Bonus Plan may request to
have all or a portion of the bonus award paid in the form of Cooper common shares.
16
In February 2008, the Committee reviewed results under the Bonus Plan for 2007 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 87% of individual bonus opportunity,
which takes into account an evaluation of individual performance as well as the financial
performance of the relevant business unit for Named Executives at operating divisions. The
determination of earned bonus opportunity at the maximum performance level was based on excellent
earnings per share growth and strong cash flow performance. Earnings per share from continuing
operations rose 22% to $3.14 per share in 2007, compared with $2.58 per share for 2006. Earnings
per share from continuing operations of $3.14 excluded the impact of income tax adjustments, income
from Belden Corporation, and legal matters related to discontinued operations. Taking these
adjustments into account, the audited financial statements reflect earnings per share from
continuing operations in 2007 of $3.73. Free cash flow of $681.6 million exceeded income from
continuing operations (excluding the impact of the income tax adjustments). The Committee credited
management with:
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Achieving strong earnings growth through a combination of strategic growth initiatives
including growth in international markets, |
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completion of 13 strategic acquisitions to build key growth platforms, |
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strong productivity and pricing execution that contributed to increased margins, |
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stringent cost controls despite challenges presented by highly competitive market
conditions and increases in energy, commodity and raw material costs, |
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strong cash flow performance accomplished through operating efficiencies and effective
management of working capital, |
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delivery of innovative new products, and |
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improvements in service levels and ease of doing business with Cooper. |
The Committee also approved supplemental bonus awards outside the Bonus Plan for Messrs.
Hachigian and Klebe for fiscal year 2007 to recognize their leadership roles in achieving record
earnings and strong cash flow that significantly exceeded maximum performance levels under the
Bonus Plan and their personal contributions to the achievement of other strategic initiatives and
objectives. In addition to the achievements noted in the previous paragraph, the Committee
credited Mr. Hachigian for his leadership in doing the following:
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increasing international revenues 22% which now comprise 34% of Coopers total revenues; |
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implementing lean tools and sales and operations planning to drive operational
excellence; |
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expanding Coopers technology into new and adjacent sectors including lighting and
architectural controls, LED, utility automation and emergency notification; |
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designing and implementing a Cooper brand strategy; and |
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improving the management development process. |
Long-Term Equity-Based Incentive Compensation
The Committee provides stock incentives to executive officers that 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 Amended and Restated Stock Incentive Plan (Stock Plan), which was most recently approved
by our shareholders in April 2004, provides for the granting of stock options, performance-based
share awards and restricted stock units to the Named Executives and other key managers. The
Committee believes that the stock options, performance-based share awards and restricted stock
units granted under the Stock Plan provide 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.
Since 2003, annual grants of equity-based incentive awards to our executive officers have
principally consisted of stock options and performance share awards. Such awards are generally made
by the Committee at its February meeting. Generally, our executive officers, including the CEO and
other Named Executives, receive annual grants of equity awards with a competitive value consisting
of approximately half stock options and half performance share awards. Details on these equity
awards are outlined below. The annual value of such awards is determined by Frederick W. Cook &
Co., Coopers executive compensation consultant. Frederick W. Cook & Co. makes this determination
after evaluation of competitive equity award values at similar industrial companies. While
Frederick W. Cook & Co. advises Cooper on the value of competitive equity awards, actual awards to
executives may be adjusted to reflect individual performance, 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.
17
The independent compensation consultant retained by the Committee also reviews proposed equity
awards from time to time. In August 2005, Pearl Meyer conducted an independent evaluation of
Coopers executive compensation program including the long-term equity-based incentive program.
Pearl Meyer concluded that Coopers long-term equity program was progressive, well-designed and
fully aligned with Coopers strategy and shareholders interests. Pearl Meyer recommended that
Cooper continue its practice of using a combination of stock options and performance shares in its
equity program which rewards improved financial performance and appreciation in the price of Cooper
stock.
Stock Options
As part of the executive compensation program, the Committee annually grants stock options to
executive officers and other key management employees. 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. Prior to
2007, the Stock Plan defined fair market value as the average of the high and low sales price of
a share of Cooper common stock on the grant date. In 2007, the Committee approved an amendment to
the Stock Plan to determine the exercise price of stock options based on the closing price on the
New York Stock Exchange on the date of the grant. This change, which will apply to stock option
grants in 2007 and future years, was made solely for the purpose of conforming Coopers practice
under the Stock Plan with reporting requirements recently issued by the Securities and Exchange
Commission.
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 are final and audited and have
been released to the public. The Committee approves all stock option grants and the grants are made
on the day the Committee meets. The Board and the Committee meeting dates are set at least two
years in advance. At times when Cooper planned to release non-public material information, the
Committee has deferred granting stock options until after its February meeting pending the public
release of such information. Stock options are granted at other times during the year only in
conjunction with the hiring or promotion of employees and then only as approved by the Committee
and pursuant to the terms of the Stock Plan.
Stock options granted under the Stock Plan vest ratably on the first, second and third
anniversaries of the grant date so the options are fully exercisable after three years. Stock
options granted in 2007 are available for exercise for seven years from the grant date. Since stock
options are issued at fair market value, they will only have value if the market price of Cooper
common stock increases after the grant date. Outstanding options are forfeited when active service
ends except in the event of death, disability or retirement.
The number of shares of stock underlying options granted to each of the Named Executives in
2007 is shown in column (j) of the Grant of Plan-Based Awards Table. The number of shares, option
exercise prices, and expiration dates relating to all outstanding stock options that are held by
each of the Named Executives as of December 31, 2007, are shown in columns (b) through (f) of the
Outstanding Equity Awards at Fiscal Year-End Table. Information relating to options exercised
during the year for each Named Executive is shown in columns (b) and (c) of the Option Exercises
and Stock Vested Table.
Performance-based Share Awards
Annually since 2003, the Committee has granted performance-based share awards to Coopers
executive officers and other key executives. Through these awards, executives can earn shares of
Cooper common stock 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. Performance goals are based upon
average annual earnings per share growth over a three-year performance period beginning in the year
of the grant and concluding three years later. The Committee has determined that average annual
earnings per share growth over the three-year performance period of at least 4% is required before
any award is earned and at least 16% is required for a payout at the maximum level. These
performance goals apply to the performance period beginning on January 1, 2005 and ending on
December 31, 2007 and to the three-year performance periods ending in 2008 and 2009.
Under the Stock Plan, the Committee cannot award performance-based shares unless the
performance goals are achieved. The Committee does have discretion to make adjustments in
calculating attainment of performance goals in recognition of extraordinary or non-recurring items,
including charges related to restructured or discontinued operations, changes in accounting
policies or tax laws, and other unusual or other non-recurring items separately identified in
Coopers financial statements. Discretionary adjustments by the Committee must be consistent with
Section 162(m) of the Internal Revenue Code such that all stock awards are considered
performance-based compensation.
18
In February 2008, the Committee determined that Cooper had achieved annual earnings per share
growth over the three-year period beginning on January 1, 2005 and ending on December 31, 2007 of
19.7% (excluding $.59 of earnings per share in 2007 related to income tax adjustments, income from
Belden Corporation and legal matters concerning discontinued operations) thereby fulfilling the
performance goals established by the Committee in February 2005 for an award at the maximum level.
Based on the satisfaction of the performance goals, the Named Executives earned the following
performance shares for the 2005 2007 performance period: K.S. Hachigian 160,000 shares; T.A.
Klebe 34,760 shares; C.T. OGrady 21,680 shares; M.A. Stoessl 18,400 shares; and G.A. Masse 16,000
shares. The award for Mr. Hachigan includes a supplemental grant of 105,720 performance share
awards in recognition of his promotion to CEO in 2005. Based on the terms of the Stock Plan, these
performance share awards were adjusted to reflect the change in Coopers capital structure
resulting from the two-for-one stock split in March 2007. In addition to the performance shares,
participants in the 2005 2007 performance period received a payment of $2.32 for each
performance share earned, which represents dividend equivalents on the earned shares over the
three-year performance period.
Restricted Stock Units
Although stock options and performance-based share awards are currently the principal means of
providing long-term equity-based compensation to our executives and key management employees, 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, but generally ranges from three to five years in order to fully vest in
restricted stock unit awards. Generally, we grant restricted stock units to ensure we retain
certain key management employees and for the purpose of attracting new executives, including
replacing equity compensation forfeited by new executives upon resignation from their prior
employer. Depending on the specific award, dividend equivalents are payable on restricted stock
units either on the dividend payment date or upon the date when the restrictions lapse. Dividend
equivalents are calculated based on the same dividend rate that applies to our outstanding common
shares. In February 2007, in consideration of the superior financial results achieved and the
successful implementation of the strategic initiatives under the CEOs leadership, the Committee
granted the CEO restricted stock units for 40,000 shares (adjusted for the two-for-one stock split
in March 2007) to secure retaining his future services. These restricted stock units vest in
February 2012.
Benefits and Executive Perquisites
The Committee believes that attracting and retaining superior management talent requires an
executive compensation program that is competitive in all respects with the programs provided at
similar companies. In addition to salaries, incentive bonus and stock awards, competitive executive
compensation programs include retirement and welfare benefits and reasonable executive perquisites.
At Cooper, executive officers participate in the same retirement and welfare benefit plans as all
salaried employees. We also provide certain perquisites to executive officers, subject to an annual
allowance approved by the Committee. The Committee reviews actual spending on executive perquisites
annually. Coopers executive compensation consultant, Frederick W. Cook & Co., has reviewed our
benefit and executive perquisite program and determined it to be reasonable and competitive
overall.
Retirement Benefits
Prior to January 1, 2007, executive officers residing in the United States participated in
several retirement plans sponsored by Cooper including: the Cooper Salaried Employees Retirement
Plan (Cooper Pension Plan); the Cooper Industries Supplemental Excess Defined Benefit Plan
(Supplemental Pension Plan); the Cooper Retirement Savings and Stock Ownership Plan (Cooper
Savings Plan) and the Cooper Industries Supplemental Excess Defined Contribution Plan
(Supplemental Savings Plan). Executive officers participate in these retirement plans on the same
basis and under the same terms and conditions as other salaried employees who reside in the United
States and are assigned to Coopers United States business units.
Under the Cooper Pension Plan, Cooper credited the individuals plan account with four percent
of each years total compensation up to the Social Security wage base for the year, plus eight
percent of each years total compensation that exceeds the Social Security wage base. For this
purpose, total compensation is cash remuneration paid by Cooper to or for the benefit of a
participant of the Cooper Pension Plan for services rendered while an employee. For the Named
Executives, the total compensation is shown in columns (c) and (g) of the Summary Compensation
Table. However, neither performance-based share awards nor deferred compensation is included in
total compensation for purposes of the Cooper Pension Plan. The participant receives interest
credits on all amounts credited to their account until the participant begins to receive benefit
payments. The Cooper Pension Plan interest credit rate was 4.5% for 2006 and 5.25% for 2007.
Benefits under the Cooper Pension Plan are one-third vested after three years, two-thirds vested
after
19
four years and fully vested after five years of service. The participant may elect to receive
benefits at retirement at age 55 or thereafter in the form of an escalating annuity, a level
annuity with or without survivorship benefits or a lump-sum payment.
The Supplemental Pension Plan is an unfunded, nonqualified plan that provides to certain
employees, including the Named Executives, Cooper Pension Plan benefits that cannot be paid from a
qualified, defined benefit plan because of Internal Revenue Code restrictions. The Supplemental
Pension Plan also provides benefits equal to what would have been paid under the Cooper Pension
Plan on amounts of deferred compensation had those amounts not been deferred. The amounts credited
to a participants account in the Supplemental Pension Plan receive interest credits at the same
rate as under the Cooper Pension Plan. Vesting of plan benefits, eligibility for retirement and
other benefit payment options with the Supplemental Pension Plan are the same as under the Cooper
Pension Plan.
Under the Cooper Savings Plan, which is a qualified 401(k) Savings Plan, participants may
elect to contribute up to 100% of each years compensation on a pre-tax basis to a plan account and
direct those funds to be invested in up to seven funds. Prior to January 1, 2007, on employee
contributions of up to 6% of each years total compensation, Cooper made a matching contribution of
100% of the first 3% of the employee contribution and 50% of the next 3% the employee contributes.
Company matching contributions are made in common shares of Cooper stock. Contributions to the
Cooper Savings Plan are subject to annual limits established under the Internal Revenue Code. In
2007, an individual employees contributions to the Cooper Savings Plan were limited to $15,500 (or
$20,500 if the participant was at least 50 years old). Employee and Company matching contributions
are fully vested immediately. Participants may receive distribution of their Cooper Savings Plan
accounts any time after they cease service with the Company.
The Supplemental Savings Plan is an unfunded, non-qualified plan that provides certain
employees, including the Named Executives, Cooper Savings Plan benefits that cannot be provided
through a qualified 401(k) Savings Plan because of Internal Revenue Code restrictions and
limitations. Participants in the Supplemental Savings Plan must make contributions to the Cooper
Savings Plan until reaching annual contribution limits established under the Internal Revenue Code.
Subsequent contributions by the participant and the related company matching contribution in the
calendar year are then credited to the individuals account in the Supplemental Savings Plan.
Employee and company matching contributions to the Supplemental Savings Plan are fully vested
immediately. Participants receive interest credits on all amounts credited to their account based
on the average prime rate. Amounts credited to their account are distributed either as a lump sum
payment or in installments based on deferral elections made by the executive under Section 409A of
the Internal Revenue Code.
In July 2006, the Company announced significant changes to its retirement benefits program
effective January 1, 2007. These changes impacted all members of Coopers salaried workforce in
the United States including the Named Executives. The retirement modifications involve cessation
of accruals or a freeze of benefits under three of Coopers four retirement plans, i.e. the
Cooper Pension Plan, the Supplemental Pension Plan and the Supplemental Savings Plan. To offset
this benefit reduction, Cooper increased its matching contribution to the Cooper Savings Plan to
100% of the first 6% contributed by an employee and added a basic 3% company contribution to all
participant accounts. The basic 3% company contribution is 25% vested after two years, 50% vested
after three years, 75% vested after four years and fully vested after five years. For individuals
with annual compensation below a certain level, modifications to the Cooper Savings Plan caused
their net retirement benefits to increase. For other employees, who would realize a decrease in
their net retirement benefits as a result of the modifications to the retirement plans, Cooper
provided a special salary increase or buy-out to offset the decrease in Coopers contribution to
the retirement program caused by the freeze in the three plans effective December 31, 2006.
The decision to freeze the Cooper Pension Plan, the Supplemental Pension Plan and the
Supplemental Savings Plan also adversely impacted Coopers executive officers including the Named
Executives. A portion of this adverse impact was offset by improvements in company matching
contributions to the Cooper Savings Plan as described above. To offset the remainder of the
benefit reduction, rather than provide a special salary increase, 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. For 2007,
the contribution percentage was determined based on the amount that retirement benefits to these
executives was reduced as a result of the freeze of prior benefit plans.
Benefits under the SERP are subject to a five-year vesting requirement. Participants may
elect to commence benefit payment at retirement at age 55 or thereafter, with those benefits paid
in accordance with an election made by the participant in accordance with Section 409A of the
Internal Revenue Code.
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Due to 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.
Effective January 1, 2007, the Company introduced a new Salary Deferral Plan. Executive
officers, including the Named Executives, are eligible to participate in the Salary Deferral Plan,
which permits the participant to defer up to 50% of their base salary. Cooper does not match
employee deferrals and the employees total annual compensation is reduced by the amount of other
contributions to the Salary Deferral Plan for the purpose of determining compensation under the
Cooper Savings Plan. Salary deferrals under the Plan are credited with interest at the average
prime rate.
Welfare Benefits
All executive officers, including the Named Executives, are eligible for welfare benefits
from Cooper 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
Cooper provides a taxable allowance for senior management for financial counseling services,
which may include tax preparation and estate planning services. The amount of the taxable
allowance is up to $25,000 for the Chairman and CEO and up to $10,000 for other senior management
including the other Named Executives. Executives also receive gross-up payments equal to the taxes
payable on the services covered by the allowance. 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 2007. 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 common stock valued at a multiple of their base salary as
follows:
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Position |
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Salary Multiple |
CEO |
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5.0x |
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Senior or Executive Vice Presidents |
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3.5x |
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Other Officers and Division Presidents |
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2.0x |
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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 are also subject to Stock Retention Requirements and must
retain a portion of stock acquired as a result of an equity grant from Cooper for a prescribed
length of time.
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Executives not yet in full compliance with Stock Ownership Guidelines must retain
75% of net shares (shares remaining after acquisition costs and payment of taxes)
until they own sufficient shares to meet the Ownership Guidelines. |
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Other executives are required to retain 25% of net shares for at least one year
after acquisition. |
The Committee believes that these Stock Ownership Guidelines and Retention Requirements are
an important component of the equity-based incentive compensation program since it ensures that
executive officers have a significant and ongoing financial stake in Coopers long-term
performance. Coopers insider trading policies provide that all executives who are subject to the
Stock Ownership Guidelines and Retention Requirements are prohibited from engaging in a short sale
of Cooper stock to hedge the economic risk of owning Cooper stock and are directed to refrain from
dealing in puts, calls, and similar derivatives on Cooper stock because of the appearance of
speculating in Coopers stock. At its February 2008 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
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Executives are currently in compliance or are making satisfactory progress within the
five-year period to achieve compliance.
Tax Implications of Executive Compensation
Section 162(m) of the Internal Revenue Code imposes a limit, with certain exceptions, on the
amount that a publicly held corporation may deduct in any year for the compensation paid to its CEO
and three other most highly compensated officers other than the CFO. The Committee believes that
the annual incentive bonuses paid pursuant to the Bonus Plan and the awards and options granted
pursuant to the Stock Plan will qualify as performance-based compensation and will meet the
requirements of the current tax law and Internal Revenue Service regulations so as to preserve the
tax deductibility of the executive compensation paid pursuant to such plans. However, we may from
time to time pay compensation to our senior executives that may not be deductible, including
discretionary bonuses or other types of compensation outside our plans.
Although the Committee generally attempts to structure executive compensation to preserve tax
deductibility, the Committee also believes that there are circumstances where, in the judgment of
the Committee and consistent with the overall compensation objectives and philosophy discussed
above, the interests of Cooper and its shareholders are best served by maintaining flexibility in
the way compensation is provided even though the compensation may not be fully deductible.
22
SUMMARY COMPENSATION
The following table presents information relating to the compensation earned by the CEO and
other Named Executives for services rendered to Cooper.
SUMMARY COMPENSATION TABLE
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Change in |
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Pension |
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Value and |
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Non- |
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Non- |
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Equity |
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qualified |
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Incentive |
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Deferred |
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Plan |
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Compen- |
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All Other |
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|
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Stock |
|
Option |
|
Compen- |
|
sation |
|
Compen- |
|
|
Name and |
|
|
|
|
|
Salary |
|
Bonus(2) |
|
Awards(1) |
|
Awards(1) |
|
sation(2) |
|
Earnings(3) |
|
sation(5) |
|
Total(6) |
Principal Position |
|
Year |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
|
(a) |
|
(b) |
|
(c) |
|
(d) |
|
(e) |
|
(f) |
|
(g) |
|
(h) |
|
(i) |
|
(i) |
Hachigian, K.S. |
|
|
2007 |
|
|
$ |
1,083,333 |
|
|
$ |
161,200 |
|
|
$ |
6,397,901 |
|
|
$ |
2,089,406 |
|
|
$ |
2,838,800 |
|
|
$ |
27,814 |
|
|
$ |
836,035 |
(4) |
|
$ |
13,434,489 |
|
Chairman, |
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
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|
President and Chief |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
Executive Officer |
|
|
2006 |
|
|
|
975,000 |
|
|
|
315,800 |
|
|
|
4,518,222 |
|
|
|
1,465,631 |
|
|
|
2,184,200 |
|
|
|
156,099 |
|
|
|
393,785 |
|
|
|
10,008,737 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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|
|
|
|
|
|
|
Klebe, T.A. |
|
|
2007 |
|
|
|
522,500 |
|
|
|
37,900 |
|
|
|
1,367,756 |
|
|
|
518,510 |
|
|
|
812,100 |
|
|
|
44,702 |
|
|
|
241,942 |
(4) |
|
|
3,545,410 |
|
Senior Vice |
|
|
|
|
|
|
|
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|
|
|
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|
President and Chief
|
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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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|
|
|
|
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|
Financial Officer
|
|
|
2006 |
|
|
|
491,500 |
|
|
|
204,000 |
|
|
|
1,246,480 |
|
|
|
478,801 |
|
|
|
596,000 |
|
|
|
69,699 |
|
|
|
126,178 |
|
|
|
3,212,658 |
|
|
OGrady, C.T. |
|
|
2007 |
|
|
|
327,600 |
|
|
|
0 |
|
|
|
1,028,121 |
|
|
|
334,593 |
|
|
|
400,000 |
|
|
|
3,070 |
|
|
|
109,491 |
(4) |
|
|
2,202,875 |
|
Senior Vice |
|
|
|
|
|
|
|
|
|
|
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|
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|
President, Business
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
2006 |
|
|
|
307,500 |
|
|
|
0 |
|
|
|
820,388 |
|
|
|
240,188 |
|
|
|
320,000 |
|
|
|
35,309 |
|
|
|
59,633 |
|
|
|
1,783,018 |
|
|
Stoessl, M.A. |
|
|
2007 |
|
|
|
383,875 |
|
|
|
0 |
|
|
|
803,849 |
|
|
|
251,466 |
|
|
|
466,000 |
|
|
|
14,505 |
|
|
|
167,723 |
(4) |
|
|
2,087,418 |
|
Group President, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
Cooper Power
Systems
|
|
|
2006 |
|
|
|
368,333 |
|
|
|
30,000 |
|
|
|
742,836 |
|
|
|
233,452 |
|
|
|
370,000 |
|
|
|
29,995 |
|
|
|
106,481 |
|
|
|
1,881,097 |
|
|
Masse, G.A. Group |
|
|
2007 |
|
|
|
364,583 |
|
|
|
0 |
|
|
|
954,971 |
|
|
|
137,675 |
|
|
|
150,000 |
|
|
|
1,542 |
|
|
|
88,911 |
(4) |
|
|
1,697,682 |
|
President, Cooper Tools |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
(1) |
|
The amounts shown in columns (e) and (f) above is the compensation expense related to the
stock and option awards included in Coopers financial statements per FAS 123(R), adjusted to
reflect actual rather than estimated forfeitures for awards with service-based vesting
conditions. See Coopers Annual Report for the year ended December 31, 2007 for a description
of the FAS 123(R) valuations. 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. The compensation expense for the stock and option awards differs from the 2007
grant date fair values for these awards as shown in the Grant of Plan-Based Awards table
because the compensation expense for the stock and option awards is recognized over the
requisite service or vesting periods and includes the values for awards granted in fiscal 2007
and prior fiscal years. |
|
(2) |
|
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. |
|
(3) |
|
The amounts shown in column (h) represent the aggregate change during 2007 in the actuarial
present value of the Named Executives accumulated benefit under the Cooper Pension Plan and
above-market earnings under the Supplemental Executive Retirement Plan (SERP) and the Salary
Deferral Plan, as follows: K.S. Hachigian $16,556 and $11,258; T.A. Klebe $38,840 and $5,862;
C.T. OGrady $1,591 and $1,479; M.A. Stoessl $11,613 and $2,892; and G.A. Masse $1,040 and
$502. The amounts show in column (h) do not reflect the following decreases in the actuarial
present value of the Named Executives accumulated benefit under the Supplemental Excess
Defined Benefit Plan which was frozen and the account balances transferred to the SERP: K.S.
Hachigian $343,229; T.A. Klebe $227,309; C.T. OGrady $21,420; M.A. Stoessl $56,539; and G.A.
Masse $5,990. The decrease in compensation from 2006 to 2007 relating to the change in
pension values is attributable to |
23
|
|
|
|
|
the decision to freeze the Cooper Pension effective December 31, 2006 and transfer accumulated benefits
under the Supplemental Excess Defined Benefit Plan to the SERP. |
|
(4) |
|
The breakdown of All Other Compensation for 2007 is set forth in the table below. The
dividend equivalents represent amounts paid on restricted stock units and earned performance
shares. |
|
|
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|
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|
|
|
|
|
|
|
|
|
Contributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental |
|
Financial |
|
|
|
|
|
Personal |
|
|
|
|
|
|
|
|
|
|
Contributions to |
|
Defined |
|
Counseling, Tax |
|
|
|
|
|
Use of |
|
|
|
|
|
|
Dividend |
|
Cooper Savings |
|
Contribution |
|
and Other |
|
Tax Gross- |
|
Company |
Name |
|
Year |
|
Equivalents |
|
Plan |
|
Plans |
|
Services |
|
Up Payments |
|
Aircraft |
Hachigian, K.S. |
|
|
2007 |
|
|
$ |
170,588 |
|
|
$ |
20,250 |
|
|
$ |
473,667 |
|
|
$ |
3,685 |
|
|
$ |
2,114 |
|
|
$ |
165,731 |
|
|
|
|
2006 |
|
|
|
144,828 |
|
|
|
9,750 |
|
|
|
129,375 |
|
|
|
6,084 |
|
|
|
3,489 |
|
|
|
100,259 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Klebe, T.A. |
|
|
2007 |
|
|
|
84,492 |
|
|
|
20,250 |
|
|
|
137,200 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
2006 |
|
|
|
68,300 |
|
|
|
6,882 |
|
|
|
50,996 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OGrady, C.T. |
|
|
2007 |
|
|
|
20,970 |
|
|
|
20,250 |
|
|
|
61,118 |
|
|
|
5,261 |
|
|
|
1,892 |
|
|
|
0 |
|
|
|
|
2006 |
|
|
|
15,540 |
|
|
|
8,438 |
|
|
|
23,400 |
|
|
|
5,471 |
|
|
|
2,065 |
|
|
|
4,719 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stoessl, M.A. |
|
|
2007 |
|
|
|
54,668 |
|
|
|
20,250 |
|
|
|
75,639 |
|
|
|
9,750 |
|
|
|
7,416 |
|
|
|
0 |
|
|
|
|
2006 |
|
|
|
63,150 |
|
|
|
7,906 |
|
|
|
30,319 |
|
|
|
2,900 |
|
|
|
2,206 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Masse, G.A. |
|
|
2007 |
|
|
|
16,675 |
|
|
|
20,250 |
|
|
|
44,769 |
|
|
|
4,875 |
|
|
|
2,342 |
|
|
|
0 |
|
|
|
|
|
|
The increase in All Other Compensation from 2006 to 2007 is principally attributable to
contributions made to the SERP in 2007, which replaced benefits lost due to the decision to
freeze benefits under the Cooper Pension Plan, the Supplemental Pension Plan and the
Supplemental Savings Plan. |
|
(5) |
|
Perquisites and other personal benefits included in column (i) are valued on the basis of the
aggregate incremental cost to Cooper. For financial counseling, tax preparation services and
other items covered by the annual perquisite allowance provided to Named Executives, the value
represents the actual cost of such services or items charged by a third party. 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. |
|
(6) |
|
The amount of salary and bonus in proportion to total compensation is designed to maintain an
executive compensation program that is competitive with other industrial companies and to
align the compensation of executive officers with Coopers performance on both a short-term
and long-term basis and with the interests of our shareholders. See Compensation Discussion
and Analysis for further details. |
24
GRANT 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. The number of shares subject to equity awards and the exercise price for option awards shown
in the following table have been proportionately adjusted to reflect the two-for-one stock split
that was completed in March 2007.
GRANT OF PLAN-BASED AWARDS TABLE
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All |
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Other |
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All |
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Option |
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Other |
|
|
Awards: |
|
|
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Stock |
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Number |
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|
Grant |
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|
Estimated Future |
|
|
Awards: |
|
|
of |
|
|
Exercise |
|
|
Date Fair |
|
|
|
|
|
|
|
Estimated Future Payouts |
|
|
Payouts Under Equity |
|
|
Number |
|
|
Securities |
|
|
or Base |
|
|
Value of |
|
|
|
|
|
|
|
Under Non-Equity Incentive |
|
|
Incentive Plan Awards(2) |
|
|
of Shares |
|
|
Under- |
|
|
Price of |
|
|
Stock |
|
|
|
|
|
|
|
Plan Awards(1) |
|
|
|
|
|
|
|
|
|
|
Maxi- |
|
|
of Stock |
|
|
lying |
|
|
Option |
|
|
and |
|
|
Grant |
|
|
Thresh- |
|
Target(3) |
|
Maxi- |
|
|
Thresh- |
|
Target(3) |
|
mum |
|
|
or Units |
|
|
Option |
|
|
Awards |
|
|
Option |
Name |
|
Date |
|
|
old ($) |
|
($) |
|
mum ($) |
|
|
old (#) |
|
(#) |
|
(#) |
|
|
(#)(4) |
|
|
(#) |
|
|
($/Sh)(5) |
|
|
Awards(6) |
(a) |
|
(b) |
|
|
(c) |
|
(d) |
|
(e) |
|
|
(f) |
|
(g) |
|
(h) |
|
|
(i) |
|
|
(j) |
|
|
(k) |
|
|
(l) |
Hachigian, K.S. |
|
|
2/13/07 |
|
|
|
$ |
709,700 |
|
|
$ |
2,129,100 |
|
|
$ |
2,838,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,833,700 |
|
|
|
|
2/13/07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,800 |
|
|
|
113,400 |
|
|
|
151,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
6,931,386 |
|
|
|
|
2/16/07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
280,000 |
|
|
|
$ |
47.16 |
|
|
|
$ |
2,649,808 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Klebe, T.A. |
|
|
2/13/07 |
|
|
|
$ |
203,000 |
|
|
$ |
609,100 |
|
|
$ |
812,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
|
2/13/07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,100 |
|
|
|
24,300 |
|
|
|
32,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,485,297 |
|
|
|
|
2/16/07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
|
60,000 |
|
|
|
$ |
47.16 |
|
|
|
$ |
567,816 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OGrady, C.T. |
|
|
2/13/07 |
|
|
|
$ |
100,300 |
|
|
$ |
300,800 |
|
|
$ |
401,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
550,110 |
|
|
|
|
2/13/07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,100 |
|
|
|
12,300 |
|
|
|
16,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
751,817 |
|
|
|
|
2/16/07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000 |
|
|
|
$ |
47.16 |
|
|
|
$ |
283,908 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stoessl, M.A. |
|
|
2/13/07 |
|
|
|
$ |
116,600 |
|
|
$ |
349,700 |
|
|
$ |
466,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
|
2/13/07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,800 |
|
|
|
11,400 |
|
|
|
15,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
696,806 |
|
|
|
|
2/16/07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
|
28,000 |
|
|
|
$ |
47.16 |
|
|
|
$ |
264,981 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Masse, G.A. |
|
|
2/13/07 |
|
|
|
$ |
110,300 |
|
|
$ |
330,800 |
|
|
$ |
441,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
916,850 |
|
|
|
|
2/13/07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,500 |
|
|
|
10,500 |
|
|
|
14,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
641,795 |
|
|
|
|
2/16/07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,000 |
|
|
|
$ |
47.16 |
|
|
|
$ |
246,054 |
|
|
|
|
(1) |
|
Represents annual incentive compensation bonus opportunities for fiscal year 2007 available
to Named Executives under the terms of the Management Annual Incentive Plan or Bonus Plan.
For fiscal year 2007, earnings per share of $3.00 and free cash flow of $561 million is
required for performance at the maximum level with 75% of the bonus opportunity based on
earnings per share and the balance based on free cash flow. The actual awards earned by the
Named Executives for fiscal year 2007 are set forth in column (g) of the Summary Compensation
Table. See Compensation Discussion and Analysis Annual Incentive Compensation for further
details. |
|
(2) |
|
Represents long-term incentive awards granted in 2007 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 January 1, 2007 and ending on December 31, 2009. Performance goals are based upon
average annual earnings per share growth over the performance period. Average |
25
|
|
|
|
|
annual earnings
per share growth over the three-year performance period of at least 4% is required before any
award is earned and at least 16% is required for a payout at the maximum level. Upon
distribution of any performance shares earned by the executive, Cooper shall pay the executive
an amount in cash equal to the aggregate amount of cash dividends the executive would have
received had the executive been the record owner of the earned performance shares over the
performance period. Dividend equivalents are calculated based on the same
dividend rate that applies to Coopers outstanding common shares. See Compensation Discussion
and Analysis Performance-based Share Awards for further details. |
|
(3) |
|
As discussed in the Compensation Discussion and Analysis, Cooper bases its target
performance level on stretch performance goals that provide a bonus opportunity at
approximately 75% of the maximum bonus opportunity. Other companies typically set their target
performance level based on expected or budgeted performance that provide a bonus opportunity
at 50% of the maximum performance. |
|
(4) |
|
Represents restricted stock units granted to the Named Executive. In February 2007, Mr.
Hachigian received a grant of 40,000 restricted stock units that vest in February 2012, Mr.
OGrady received a grant of 12,000 restricted stock units that vest 6,000 units each in
February 2010 and 2012, and Mr. Masse received a grant of 20,000 restricted stock units that
vest 10,000 units each in February 2009 and 2011. |
|
(5) |
|
The exercise price of each option is equal to the fair market value of Coopers Class A
common 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 is $9.4636 per share. The grant date
fair value of the performance-based shares is $45.8425 per share. The grant date fair value
for the performance-based share awards assumes payout at the maximum level of performance. See
Coopers Annual Report for the year ended December 31, 2007 for a description of the FAS
123(R) valuations. |
26
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table shows outstanding stock option awards classified as exercisable and
unexercisable as of December 31, 2007 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 $52.88 a share (the closing market price of Coopers stock on December 31, 2007). The number of
shares and option exercise prices subject to option and stock awards shown in the following table
have been proportionately adjusted to reflect the two-for-one stock split that was completed in
March 2007.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
Stock Awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive |
|
Incentive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan |
|
Plan Awards: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards: |
|
Market or |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number |
|
Market |
|
Number of |
|
Payout Value |
|
|
Number of |
|
Number of |
|
|
|
|
|
|
|
|
|
|
of Shares |
|
Value of |
|
Unearned |
|
of Unearned |
|
|
Securities |
|
Securities |
|
|
|
|
|
|
|
|
|
|
or Units |
|
Shares or |
|
Shares Units |
|
Shares, Units |
|
|
Underlying |
|
Underlying |
|
|
|
|
|
|
|
|
|
|
of Stock |
|
Units of |
|
or Other |
|
or Other |
|
|
Unexercised |
|
Unexercised |
|
Option |
|
Option |
|
|
That |
|
Stock That |
|
Rights That |
|
Rights that |
|
|
Options (#) |
|
Options (#) |
|
Exercise |
|
Expiration |
|
|
Have Not |
|
Have Not |
|
Have Not |
|
Have Not |
Name |
|
Exercisable |
|
Unexercisable |
|
Price ($) |
|
Date |
|
|
Vested(#) |
|
Vested ($) |
|
Vested (#) |
|
Vested ($) |
(a) |
|
(b)(2) |
|
(c)(2) |
|
(e)(4) |
|
(f) |
|
|
(g) |
|
(h) |
|
(i) |
|
(j) |
Hachigian, K.S. |
|
|
180,000 |
|
|
|
0 |
|
|
$ |
17.61 |
|
|
|
2/29/2012 |
|
|
|
|
160,000 |
(5) |
|
$ |
8,460,800 |
|
|
|
152,000 |
(7) |
|
$ |
8,037,760 |
|
|
|
|
100,000 |
|
|
|
0 |
|
|
$ |
27.82 |
|
|
|
2/10/2011 |
|
|
|
|
40,000 |
(6) |
|
$ |
2,115,200 |
|
|
|
151,200 |
(8) |
|
$ |
7,995,456 |
|
|
|
|
63,333 |
|
|
|
31,667 |
|
|
$ |
35.47 |
|
|
|
2/08/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,000 |
|
|
|
35,000 |
|
|
$ |
32.74 |
|
|
|
4/25/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93,333 |
|
|
|
186,667 |
(3) |
|
$ |
41.19 |
|
|
|
2/13/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
280,000 |
|
|
$ |
47.16 |
|
|
|
2/16/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Klebe, T.A. |
|
|
19,400 |
|
|
|
0 |
|
|
$ |
21.74 |
|
|
|
2/09/2009 |
|
|
|
|
34,760 |
(5) |
|
$ |
1,838,109 |
|
|
|
34,760 |
(7) |
|
$ |
1,838,109 |
|
|
|
|
20,000 |
|
|
|
0 |
|
|
$ |
21.57 |
|
|
|
2/09/2009 |
|
|
|
|
|
|
|
|
|
|
|
|
32,400 |
(8) |
|
$ |
1,713,312 |
|
|
|
|
40,000 |
|
|
|
0 |
|
|
$ |
18.97 |
|
|
|
2/08/2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,800 |
|
|
|
0 |
|
|
$ |
23.05 |
|
|
|
2/13/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93,868 |
|
|
|
0 |
|
|
$ |
17.61 |
|
|
|
2/29/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000 |
|
|
|
0 |
|
|
$ |
27.82 |
|
|
|
2/10/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,533 |
|
|
|
20,267 |
|
|
$ |
35.47 |
|
|
|
2/08/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,266 |
|
|
|
40,534 |
|
|
$ |
41.19 |
|
|
|
2/13/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
60,000 |
|
|
$ |
47.16 |
|
|
|
2/16/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OGrady, C.T. |
|
|
36,666 |
|
|
|
18,334 |
|
|
$ |
34.39 |
|
|
|
5/23/2012 |
|
|
|
|
21,680 |
(5) |
|
$ |
1,146,438 |
|
|
|
20,000 |
(7) |
|
$ |
1,057,600 |
|
|
|
|
12,666 |
|
|
|
25,334 |
|
|
$ |
41.19 |
|
|
|
2/13/2013 |
|
|
|
|
12,000 |
(6) |
|
$ |
634,560 |
|
|
|
16,400 |
(8) |
|
$ |
867,232 |
|
|
|
|
0 |
|
|
|
30,000 |
|
|
$ |
47.16 |
|
|
|
2/16/2014 |
|
|
|
|
12,000 |
(6) |
|
$ |
634,560 |
|
|
|
|
|
|
|
|
|
Stoessl, M.A. |
|
|
1,268 |
|
|
|
0 |
|
|
$ |
14.73 |
|
|
|
8/06/2012 |
|
|
|
|
18,400 |
(5) |
|
$ |
972,992 |
|
|
|
16,000 |
(7) |
|
$ |
846,080 |
|
|
|
|
18,668 |
|
|
|
0 |
|
|
$ |
27.82 |
|
|
|
2/10/2011 |
|
|
|
|
20,000 |
(6) |
|
$ |
1,057,600 |
|
|
|
15,200 |
(8) |
|
$ |
803,776 |
|
|
|
|
21,333 |
|
|
|
10,667 |
|
|
$ |
35.47 |
|
|
|
2/08/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,333 |
|
|
|
18,667 |
|
|
$ |
41.19 |
|
|
|
2/13/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
28,000 |
|
|
$ |
47.16 |
|
|
|
2/16/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Masse, G.A. |
|
|
8,333 |
|
|
|
16,667 |
|
|
$ |
41.19 |
|
|
|
2/13/2013 |
|
|
|
|
16,000 |
(5) |
|
$ |
846,080 |
|
|
|
14,000 |
(7) |
|
$ |
740,320 |
|
|
|
|
0 |
|
|
|
26,000 |
|
|
$ |
47.16 |
|
|
|
2/16/2014 |
|
|
|
|
25,000 |
(6) |
|
$ |
1,322,000 |
|
|
|
14,000 |
(8) |
|
$ |
740,320 |
|
|
|
|
(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. |
27
|
|
|
(4) |
|
The exercise price of each option is equal to the fair market value of Coopers Class A
common 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 the earned performance-based share awards for the three-year performance period
beginning on January 1, 2005 and ending on December 31, 2007. The award for Mr. Hachigian
includes a supplemental grant of 105,720 performance share awards in recognition of his
promotion to CEO in 2005. In February 2008, the Management Development and Compensation
Committee of the Board of Directors determined that Cooper achieved the performance objectives
at the maximum level. These performance shares vested on February 11, 2008. See Compensation
Discussion and Analysis Performance-based Share Awards for further details. |
|
(6) |
|
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, Mr.
Masse received a grant of 20,000 restricted stock units which vest 10,000 units each in
February 2009 and 2011, and Mr. OGrady received a grant of 12,000 restricted stock units
which vest 6,000 units each in February 2010 and 2012. In February 2006, Mr. Masse received a
grant of 5,000 restricted stock units which vest in January 2011. In February 2005, Mr.
Stoessl received a grant of 20,000 restricted stock units which vest in February 2010. In May
2005, Cooper granted Mr. OGrady 24,000 restricted stock units which vest 6,000 units each in
June 2006, 2007, 2008 and 2009. The restricted stock units granted in May 2005 to Mr. OGrady
replace equity compensation forfeited upon his resignation from his prior employer. Depending
on the specific award, dividend equivalents are payable on restricted stock units either on
the dividend payment 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 common shares. |
|
(7) |
|
Represents the performance-based share awards for the performance period beginning on January
1, 2006 and ending December 31, 2008. The value of the awards assumes payout at the maximum
level of performance. For a more detailed discussion see Compensation Discussion and Analysis
- Performance-based Share Awards. |
|
(8) |
|
Represents the performance-based share awards for the performance period beginning on January
1, 2007 and ending on December 31, 2009. The value of the awards assumes payout at the maximum
level of performance. |
28
OPTION EXERCISES AND STOCK VESTED
The following table sets forth information regarding options and stock awards exercised and
vested, respectively, during 2007 for the Named Executives. The number of shares subject to the
option and stock awards as shown in the table have been proportionately adjusted to reflect the
two-for-one stock split that was completed in March 2007.
OPTION EXERCISES AND STOCK VESTED TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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. |
|
|
17,200 |
|
|
$ |
598,170 |
|
|
|
|
61,600 |
(1) |
|
$ |
2,901,360 |
|
|
|
|
84,809 |
|
|
$ |
3,005,936 |
|
|
|
|
|
|
|
|
|
|
|
|
|
135,107 |
|
|
$ |
4,698,657 |
|
|
|
|
|
|
|
|
|
|
|
|
|
42,884 |
|
|
$ |
1,488,229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
90,000 |
|
|
$ |
2,388,591 |
|
|
|
|
|
|
|
|
|
|
Klebe, T.A. |
|
|
60,000 |
|
|
$ |
1,677,474 |
|
|
|
|
37,400 |
(1) |
|
$ |
1,761,540 |
|
OGrady, C.T. |
|
|
0 |
|
|
|
0 |
|
|
|
|
6,000 |
(2) |
|
$ |
322,980 |
|
Stoessl, M.A. |
|
|
3,500 |
|
|
$ |
129,175 |
|
|
|
|
17,600 |
(1) |
|
$ |
828,960 |
|
|
|
|
13,334 |
|
|
$ |
439,782 |
|
|
|
|
|
|
|
|
|
|
Masse, G.A. |
|
|
0 |
|
|
|
0 |
|
|
|
|
0 |
|
|
|
0 |
|
|
|
|
(1) |
|
Amount shown represents performance-based share awards for the three-year performance period
beginning on January 1, 2004 and ending on December 31, 2006, which vested on February 15,
2007. |
|
(2) |
|
Amount shown represents restricted stock units that vested during 2007 for the Named Executive. |
29
PENSION BENEFITS
The following table discloses the years of credited service of the actuarial present value of
the accrued benefits for, and payments during the last fiscal year to each of the Named Executives
under the Cooper Pension Plan and Supplemental Excess Defined Benefit Plan.
PENSION BENEFITS TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number |
|
Present |
|
|
|
|
|
|
of Years |
|
Value of |
|
Payments |
|
|
|
|
Credited |
|
Accumulated |
|
During Last |
|
|
|
|
Service |
|
Benefit(2) |
|
Fiscal Year |
Name |
|
Plan Name(1) |
|
(#) |
|
($) |
|
($) |
(a) |
|
(b) |
|
(c) |
|
(d) |
|
(e) |
|
Hachigian, K.S. |
|
Cooper Pension Plan |
|
|
6.7 |
|
|
$ |
87,994 |
|
|
$ |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Excess Defined |
|
|
|
|
|
|
0 |
(3) |
|
|
0 |
|
|
|
Benefit Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Klebe, T.A. |
|
Cooper Pension Plan |
|
|
12.7 |
|
|
|
244,143 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Excess Defined |
|
|
|
|
|
|
0 |
(3) |
|
|
0 |
|
|
|
Benefit Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OGracy, C.T. |
|
Cooper Pension Plan |
|
|
2.6 |
|
|
|
25,897 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Excess Defined |
|
|
|
|
|
|
0 |
(3) |
|
|
0 |
|
|
|
Benefit Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stoessl, M.A. |
|
Cooper Pension Plan |
|
|
5.4 |
|
|
|
58,635 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Excess Defined |
|
|
|
|
|
|
0 |
(3) |
|
|
0 |
|
|
|
Benefit Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Masse, G.A. |
|
Cooper Pension Plan |
|
|
2.0 |
|
|
|
11,264 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Excess Defined |
|
|
|
|
|
|
0 |
(3) |
|
|
0 |
|
|
|
Benefit Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
See Compensation Discussion and Analysis Retirement Benefits for a discussion of the
terms of the Cooper Pension Plan and Cooper Industries Supplemental Excess Defined Benefit
Plan. |
|
(2) |
|
The present value of the accumulated pension benefits is computed on the same basis and using
the same assumptions that Cooper uses for financial statement reporting purposes. For further
details, see Note 13 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, 2007. |
|
(3) |
|
The Supplemental Excess Defined Benefit Plan was frozen effective December 31, 2006 and in
March 2007 the following account balances for the Named Executives were transferred to the
newly-created Supplemental Executive Retirement Plan, a defined contribution plan: K.S.
Hachigian $700,949; T.A. Klebe $365,025; C.T. OGrady $51,754; M.A. Stoessl $121,173; and G.A.
Masse $31,244. |
30
NONQUALIFIED DEFERRED COMPENSATION
Various Cooper executives, including the Named Executives, may elect to defer all or a portion
of the annual incentive awards earned under the Bonus Plan and stock awards earned under the Stock
Plan. Under the Bonus Plan, an executive may also elect to receive all or a portion of the annual
incentive award in Cooper Class A common shares instead of cash. Any cash deferrals are credited
annually with interest at the average prime rate. Any stock deferrals are credited with dividend
equivalents at the same rate as dividends are paid on Cooper Class A common shares. Deferrals under
the Bonus Plan and Stock Plan are unfunded deferred compensation arrangements. Amounts credited to
an executives deferred compensation account are distributed either as a lump sum payment or in
installments based on deferral elections made by the executive in accordance with Section 409A of
the Internal Revenue Code.
Executives also earn deferred compensation under the Supplemental Executive Retirement Plan
and Salary Deferral Plan and continue to receive interest credits on account balances under the
Supplemental Savings Plan, which was frozen effective December 31, 2006. See Compensation
Discussion and Analysis Retirement Benefits for further details regarding these plans.
The following table discloses contributions, earnings and balances for each of the Named
Executives under the nonqualified deferred compensation arrangements discussed above.
NONQUALIFIED DEFERRED COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate |
|
|
Executive |
|
Registrant |
|
Aggregate |
|
Aggregate |
|
Balance at |
|
|
Contributions |
|
Contributions |
|
Earnings in |
|
Withdrawals/ |
|
Last Fiscal |
|
|
in Last Fiscal |
|
in Last Fiscal |
|
Last Fiscal |
|
Distributions |
|
Year End |
Name |
|
Year ($) |
|
Year ($) |
|
Year ($) |
|
($) |
|
($) |
(a) |
|
(b) |
|
(c) |
|
(d) |
|
(e) |
|
(f) |
Hachigian, K.S. |
|
$ |
0 |
|
|
$ |
700,949 |
(1) |
|
$ |
116,162 |
|
|
$ |
0 |
|
|
$ |
1,728,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Klebe, T.A. |
|
|
0 |
|
|
|
365,025 |
(1) |
|
|
593,434 |
(2) |
|
|
0 |
|
|
|
5,576,473 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OGrady, C.T. |
|
|
209,140 |
|
|
|
51,754 |
(1) |
|
|
17,833 |
|
|
|
0 |
|
|
|
431,205 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stoessl, M.A. |
|
|
57,851 |
|
|
|
121,173 |
(1) |
|
|
42,377 |
|
|
|
0 |
|
|
|
611,148 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Masse, G.A. |
|
|
0 |
|
|
|
33,025 |
(1) |
|
|
3,007 |
|
|
|
0 |
|
|
|
48,429 |
|
|
|
|
(1) |
|
Registrant contributions include the following account balances for the Named Executives that
were transferred from the Supplemental Excess Defined Benefit Plan to the newly-created
Supplemental Executive Retirement Plan, a defined contribution plan: K.S. Hachigian $700,949;
T.A. Klebe $365,025; C.T. OGrady $51,754; M.A. Stoessl $121,173; and G.A. Masse $31,244. |
|
(2) |
|
Aggregate earnings in the last fiscal year includes appreciation in the value of Cooper Class
A common shares relating to earned stock awards that were deferred by Mr. Klebe. |
31
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, Chief Operating Officer and Senior and Executive Vice Presidents and 2x in the
case of the other key executives) of the sum of the executives salary and bonus under the
Management Annual Incentive Plan. For purposes of the lump sum cash payment, the bonus
amount is based on the higher of: (1) the average annual bonus earned with respect to the
prior three fiscal years, or (2) the target annual bonus 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. |
Management Annual Incentive Plan
The Named Executives participate in the Management Annual Incentive Plan, which provides an
annual bonus opportunity and is designed to tie annual incentive compensation to overall corporate
and individual performance. Under the Plan, which is administered by the Management Development and
Compensation Committee of the Board (the Committee), bonuses are based upon performance goals set
by the Committee in February of the bonus year. The Committee may make the award in cash or stock
or a combination of both. The Plan provides that upon a change in control of Cooper, all
outstanding awards will be deemed earned on a pro rata basis at the target level and will be paid
in cash to each eligible executive.
Stock Incentive Plan
The Named Executives have been granted stock options, restricted stock units and
performance-based share awards under the Stock Incentive Plan (Stock Plan). Options granted under
the Stock Plan vest over a period of three years. Options granted prior to February 11, 2003 have a
10-year term. Options granted on February 11, 2003 have a 5-year term. Options granted on February
10, 2004 and thereafter have a 7-year term. The Committee has discretion under the Plan to grant
options with a term of up to ten years. Restricted stock units vest pursuant to schedules approved
by the Committee. Upon vesting, the restrictions on the stock units lapse and the holder is issued
one unrestricted Class A common share per restricted stock unit. 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. Performance-based share awards granted under the Stock
Plan may be earned based on achievement over a specified period of performance goals established by
the Committee. At the end of the performance period, performance shares earned, if any, are issued
and cash equal to the dividends on the performance shares is paid.
32
The Stock Plan provides that upon a change in control of Cooper:
|
|
|
All options will be canceled and Cooper will make a cash payment to the Named Executives
equal to the difference in the fair market value of Cooper Class A common 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. |
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, 2007, 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 $52.88 on
December 31, 2007. As discussed above, outstanding option and stock awards are paid out upon a
change in control regardless of whether the Named Executive is terminated or voluntarily terminates
employment following the change in control. Also, in addition to the amounts shown in the table
below, the Named Executives would be 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. |
|
$ |
9,687,300 |
|
|
$ |
2,129,100 |
|
|
$ |
5,041,513 |
|
|
$ |
20,485,712 |
|
|
$ |
1,184,478 |
|
|
$ |
122,660 |
|
|
$ |
13,731,731 |
|
|
$ |
52,382,494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Klebe, T.A. |
|
|
3,640,000 |
|
|
|
609,100 |
|
|
|
1,170,150 |
|
|
|
4,043,205 |
|
|
|
424,749 |
|
|
|
123,269 |
|
|
|
3,370,354 |
|
|
|
13,380,827 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OGrady, C.T. |
|
|
1,923,000 |
|
|
|
300,800 |
|
|
|
806,855 |
|
|
|
3,626,510 |
|
|
|
248,269 |
|
|
|
110,657 |
|
|
|
2,179,198 |
|
|
|
9,195,289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stoessl, M.A. |
|
|
1,476,400 |
|
|
|
349,700 |
|
|
|
564,208 |
|
|
|
2,993,008 |
|
|
|
171,900 |
|
|
|
89,006 |
|
|
|
1,900,754 |
|
|
|
7,544,976 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Masse, G.A. |
|
|
1,396,600 |
|
|
|
330,800 |
|
|
|
343,683 |
|
|
|
3,067,040 |
|
|
|
173,268 |
|
|
|
89,362 |
|
|
|
2,018,709 |
|
|
|
7,419,462 |
|
|
|
|
(1) |
|
Amounts shown in column (a) represent a cash payment equal to a multiple (3X in the case of
Messrs. Hachigian, Klebe and OGrady, and 2X in the case of Messrs. Stoessl and Masse) 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, 2007, 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 2007 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 2007. |
|
(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. In addition, the amounts for Messrs. OGrady and Masse include accelerated vesting
of accrued benefits under the Cooper Pension Plan. |
33
|
|
|
(6) |
|
Amounts shown in column (f) represent the value of life insurance for the severance period,
continued health insurance benefits for eight years, plus $10,000 which represents the value
of outplacement services for one year. |
Potential Payments Upon Involuntary Termination
The Committee determines the severance provided to the Chief Executive Officer upon the
involuntary termination of employment of such officer. Upon involuntary termination of other
executives including the Named Executives, Coopers policy is to provide a severance payment equal
to the executives base salary for a period up to one year for senior executives with five or more
years of continuous service and for up to nine months for senior executives with less than five
years of continuous service. Also, depending on the circumstances and termination date, the Named
Executive may receive a payout of the performance-based share awards not to exceed an amount based
on the performance level actually achieved for the performance cycle. In the case of the Named
Executives other than the Chief Executive Officer, the cash severance and value of performance
share awards for the 2005-2007 performance cycle is as follows: T.A. Klebe $530,000 and
$1,838,109; C.T. OGrady $255,150 and $1,146,438; M.A. Stoessl $388,500 and $972,992; and G.A.
Masse $275,625 and $846,080. 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.
Upon retirement, a Named Executive would forfeit all outstanding annual cash incentive awards,
performance share awards and restricted stock units. Any stock options granted more than one year
before the retirement date would continue to vest and would be exercisable following retirement for
a period of five years or the expiration date of the option, whichever is earlier. The Named
Executive would also be entitled to any pension benefits and nonqualified deferred compensation
that are vested as of the retirement date.
34
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 |
|
|
9,258,721 |
(1) |
|
$ |
34.81 |
(2) |
|
|
6,648,411 |
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation
plans not approved
by security holders |
|
|
0 |
|
|
|
N/A |
|
|
|
494,680 |
(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
9,258,721 |
|
|
$ |
34.81 |
|
|
|
7,143,091 |
|
|
|
|
(1) |
|
Consists of: (a) 8,887,035 shares to be issued under the Stock Incentive Plan (including
6,780,641 outstanding stock options, 1,521,994 performance-based share awards that are
issuable to the extent established performance goals are achieved and service-based forfeiture
restrictions are satisfied, 488,250 unvested restricted stock units and 96,150 shares earned
the receipt of which has been deferred); (b) 10,648 shares earned under the Management Annual
Incentive Plan the receipt of which has been deferred; (c) 172,000 outstanding stock options
and 122,031 shares earned but deferred under the Director Stock Plan; and (d) 67,007 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
3,341,124 shares; Management Annual Incentive Plan 951,102 shares; Directors Stock Plan
322, 069 shares; Directors Retainer Fee Stock Plan 93,231 shares; and Employee Stock
Purchase Plan 1,940,885 shares. There has been no offering outstanding under the Employee
Stock Purchase Plan since 2003. |
|
(4) |
|
Consists of shares available for issuance under the Cooper (UK 2002) Employee Share Purchase
Plan, which was approved by the Board of Directors on August 6, 2002. The exercise price for
options granted under the plan is 85% of the market price of Cooper Class A common shares on
the grant date. The plan allows Cooper employees residing in the United Kingdom to apply
payroll deductions to the purchase of shares by exercising options granted under the plan.
There has been no offering outstanding under this plan since 2002. |
35
DIRECTORS COMPENSATION
A director who is also a Cooper employee receives no additional compensation for serving on
the Board. Annual compensation for non-employee directors is comprised of cash and equity
compensation. Cash compensation consists of an annual retainer, supplemental retainers for the
chairs of Board committees and the presiding non-management director, and meeting fees. Annual
equity compensation consists of a stock award, restricted stock units and stock options. Each of
these components is described in more detail below. The total 2007 compensation of our non-employee
directors is shown in the following table:
DIRECTORS COMPENSATION TABLE (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Pension |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and |
|
|
|
|
|
|
Fees |
|
|
|
|
|
|
|
|
|
Nonqualified |
|
|
|
|
|
|
Earned |
|
|
|
|
|
|
|
|
|
Deferred |
|
|
|
|
|
|
or Paid |
|
Stock |
|
Option |
|
Compensation |
|
All Other |
|
|
Name |
|
in Cash(2) |
|
Awards(3)(4) |
|
Awards(3) (5) |
|
Earnings |
|
Compensation(7) |
|
Total |
(a) |
|
(b) |
|
(c) |
|
(d) |
|
(f) |
|
(g) |
|
(h) |
|
Stephen G. Butler |
|
$ |
87,000 |
|
|
$ |
146,259 |
|
|
$ |
42,597 |
|
|
|
|
|
|
$ |
5,000 |
|
|
$ |
280,856 |
|
Robert M. Devlin |
|
|
68,000 |
|
|
|
146,259 |
|
|
|
42,597 |
|
|
|
|
|
|
|
5,000 |
|
|
|
261,856 |
|
Ivor J. Evans |
|
|
79,000 |
|
|
|
146,259 |
|
|
|
42,597 |
|
|
|
|
|
|
|
5,000 |
|
|
|
272,856 |
|
Linda A. Hill |
|
|
68,000 |
|
|
|
146,259 |
|
|
|
42,597 |
|
|
$ |
2,360 |
(6) |
|
|
5,000 |
|
|
|
264,216 |
|
Lawrence D. Kingsley |
|
|
47,250 |
|
|
|
117,054 |
|
|
|
9,078 |
|
|
|
|
|
|
|
5,000 |
|
|
|
178,382 |
|
James J. Postl |
|
|
75,000 |
|
|
|
146,259 |
|
|
|
42,597 |
|
|
|
|
|
|
|
5,000 |
|
|
|
268,856 |
|
Dan F. Smith |
|
|
69,500 |
|
|
|
146,259 |
|
|
|
42,597 |
|
|
|
|
|
|
|
5,000 |
|
|
|
263,356 |
|
Gerald B. Smith |
|
|
84,500 |
|
|
|
146,259 |
|
|
|
42,597 |
|
|
|
|
|
|
|
5,000 |
|
|
|
278,356 |
|
Mark S. Thompson |
|
|
48,750 |
|
|
|
117,054 |
|
|
|
9,078 |
|
|
|
|
|
|
|
1,000 |
|
|
|
175,882 |
|
James R. Wilson |
|
|
80,000 |
|
|
|
146,259 |
|
|
|
42,597 |
|
|
|
|
|
|
|
5,000 |
|
|
|
273,856 |
|
|
|
|
(1) |
|
Column (e) Non-Equity Incentive Plan Compensation has been omitted since there are no
amounts to report. |
|
(2) |
|
Includes cash compensation earned by directors during the fiscal year. The following
directors have elected to receive stock in lieu of cash and have deferred the receipt of the
shares pursuant to the Directors Retainer Fee Stock Plan: S. Butler, J. Postl and D. Smith. |
|
(3) |
|
The amounts shown in columns (c) and (d) above reflect the compensation cost included in
Coopers financial statements for fiscal year 2007 per FAS 123(R) related to the stock and
option awards. See Coopers Annual Report for the year ended December 31, 2007 for a
description of the FAS 123(R) valuations. The compensation cost for the stock and option
awards differs from the 2007 grant date fair values for these awards as shown in footnotes
(4) and (5) below because the compensation cost for the stock options and restricted stock
units is amortized over the respective vesting periods and includes a portion of the values
for awards granted before 2007. |
|
(4) |
|
Pursuant to the Directors Stock Plan, each non-employee director receives an annual stock
award of 1,000 shares and 2,000 restricted stock units on the date of the Annual Meeting of
Shareholders. For 2007, for each non-employee director the grant date fair value of the annual
stock award is $49,390 and the grant date fair value of the restricted stock units is $98,780
based on Coopers stock price of $49.39 per share, which is the closing price on the grant
date. As of December 31, 2007, the aggregate number of deferred stock awards and restricted
stock units outstanding, including accrued dividend equivalent shares, are: S. Butler
13,571 shares; R. Devlin 12,526 shares; I. Evans 15,740 shares; L. Hill 14,641 shares;
L. Kingsley 2,015 shares; J. Postl 14,894 shares; D. Smith 18,068 shares; G. Smith
10,493 shares; M. Thompson 2,015 shares and J. Wilson 18,068 shares. |
|
(5) |
|
Pursuant to the Directors Stock Plan, each non-employee director receives an annual grant of
stock options for 4,000 shares on the date of the Annual Meeting of Shareholders. For 2007,
the grant date fair value of the stock option award granted to each non-employee director is
$39,510. The fair value was estimated on the stock option grant date using the Black Scholes -
Merton option pricing model and assumes a dividend yield of 1.7%, risk-free interest rate of
4.467%, an expected stock price volatility of 19% based on implied volatilities from traded
options on Cooper stock, historical volatility of Cooper stock and other factors, and an
expected option life based on historical experience of 4.5 years. While we believe these
assumptions are reasonable, the reader is cautioned not to infer a forecast of earnings or
dividends either from the models use or from the values adopted for the models |
36
|
|
|
|
|
assumptions. Any future values realized will ultimately depend upon the excess of the stock
price on the date the option is exercised over the exercise price. As of December 31, 2007, the
aggregate number of stock options outstanding are: S. Butler 20,000; R. Devlin 30,000; I.
Evans 20,000; L. Hill 26,000; L. Kingsley 4,000; J. Postl 16,000; D. Smith 16,000;
G. Smith 24,000; M. Thompson 4,000; and J. Wilson 12,000. |
|
(6) |
|
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 of 1996 and benefits earned were grandfathered. |
|
(7) |
|
Includes matching contributions made to charitable institutions by Cooper Industries
Foundation on behalf of the director. |
Cash Compensation
Non-employee directors receive an annual cash retainer of $45,000. The presiding
non-management director and Audit Committee chairman each receive a supplemental annual retainer of
$15,000 and each non-employee chairman of the other Board committees receive a supplemental annual
retainer of $10,000. In addition, non-employee directors are paid meeting attendance fees of $2,000
for regular Board meetings, $1,500 for regular committee meetings and $2,000 for special Board or
committee meetings.
In lieu of receiving the annual retainers and meeting fees in cash, each non-employee director
may elect, under the Directors Deferred Compensation Plan, to defer receipt of such cash amounts
until a date determined by the director or until retirement from the Board. Deferred cash
compensation earns interest at a market rate. Alternatively, each non-employee director may elect
to receive all or a portion of the annual retainer fees and meeting fees in Cooper Class A common
shares instead of cash, under the Directors Retainer Fee Stock Plan, which was approved by
shareholders in April 1998. The Directors Retainer Fee Stock Plan also provides that each
non-employee director may elect to defer the receipt of all or a portion of the shares of Cooper
stock otherwise payable under the plan. Deferred compensation in the form of Cooper shares 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 deferred shares based on the
current fair market value of Coopers Class A common shares.
Stock Awards
Under the Directors Stock Plan which was most recently approved by shareholders in April
2006, each non-employee director receives an annual stock award of 1,000 Cooper Class A common
shares and 2,000 restricted stock units on each annual meeting date. Pursuant to the terms of
the Plan, the number of shares subject to the annual awards of stock and restricted stock units
was proportionately adjusted to reflect the two-for-one stock split that was completed in March
2007. Restricted stock units represent one Class A common share each and vest during the year
following grant on a pro-rata basis depending on the number of regularly scheduled Board
meetings during the year. 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 Class A common shares.
Upon a directors cessation of service on the Board, restricted stock units are converted into
Class A common 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. Each non-employee director may elect under the Directors
Stock Plan to defer receipt of all or a portion of the Class A common shares payable under the
plan until a date determined by the director or until retirement from the Board.
Option Awards
Each non-employee director receives an annual stock option grant for 4,000 shares at fair
market value under the Directors Stock Plan. Pursuant to the terms of the Plan, the number of
shares subject to the annual stock option grant was proportionately adjusted to reflect the
two-for-one stock split that was completed in March 2007. The option vests on the third
anniversary of the grant date and has a ten-year term. As of December 31, 2007 options for 172,000
shares were outstanding under the Directors Stock Plan.
37
Changes to Directors Compensation Program
In November 2007, the Board of Directors approved changes to the directors compensation
program which will become effective as of the date of the 2008 Annual Shareholders Meeting. As
revised, non-employee directors will receive an annual cash retainer of $55,000 and Committee
members will be paid the following annual retainers in lieu of meeting attendance fees: $12,000 to
members of the Audit Committee and $6,000 to members of the Management Development and Compensation
Committee and Committee on Nominations and Corporate Governance. The aggregate value of equity
compensation granted annually to directors will be fixed at $175,000 and delivered in the following
proportions: restricted stock units two-thirds (equivalent to $116,667) and stock awards
one-third (equivalent to $58,333). Stock option grants will be eliminated. There will be no
change in the supplemental annual retainers of $15,000 paid to the presiding non-management
director and Audit Committee chairman and $10,000 paid to each non-employee chairman of the other
Board committees.
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.
38
AUDIT COMMITTEE REPORT
The Audit Committee is composed of four independent directors and acts under a written charter
adopted by the Board of Directors. Coopers management is responsible for the quality and integrity
of the Companys financial reporting process including the systems of internal controls, and the
preparation of the Companys financial statements. The independent auditors, Ernst & Young LLP, are
responsible for auditing those financial statements and for expressing an opinion on the conformity
of the financial statements with U.S. generally accepted accounting principles. Ernst & Young LLP
is also responsible for expressing an opinion on the effectiveness of Coopers internal control
over financial reporting. The Audit Committee is responsible for monitoring and reviewing these
processes on behalf of the Board of Directors, and for appointing the independent auditors, subject
to shareholder approval.
It is not the Audit Committees duty or responsibility to conduct auditing or accounting
reviews and procedures. Therefore, the Audit Committee has relied on managements representation
that the financial statements have been prepared in accordance with generally accepted accounting
principles and managements assessment that Coopers internal control over financial reporting is
effective and on the opinions of the independent auditors included in their report on Coopers
financial statements and their report on internal control over financial reporting.
In fulfilling its oversight responsibilities, the Audit Committee has reviewed and discussed
the audited financial statements for the year ended December 31, 2007, with Coopers management and
representatives of the independent auditors. The Audit Committee discussed with the independent
auditors the matters required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as amended, SEC rules and other professional standards. In
addition, the Audit Committee discussed with the independent auditors their independence from
Cooper and its management, and received the written disclosures and the letter from the independent
auditors required by Independence Standards Board Standard No. 1, Independence Discussions with
Audit Committees.
In reliance on its review of the audited financial statements and the discussions referred to
above, the Audit Committee has recommended to the Board of Directors that the audited financial
statements be included in Coopers Annual Report on Form 10-K for the year ended December 31, 2007,
for filing with the Securities and Exchange Commission.
|
|
|
|
|
|
|
Stephen G. Butler, Chairman
|
|
Gerald B. Smith |
|
|
James J. Postl
|
|
James R. Wilson |
RELATIONSHIP WITH INDEPENDENT AUDITORS
The Audit Committee appoints, subject to shareholder approval, our independent auditors for
each year. During the year ended December 31, 2007, 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 |
2007 |
|
|
4,116,000 |
|
|
|
996,000 |
|
|
|
1,041,000 |
|
|
$ |
0 |
|
2006 |
|
|
3,681,000 |
|
|
|
714,000 |
|
|
|
743,000 |
|
|
|
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 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 auditing standards.
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 2007, tax compliance fees were $684,000
and fees for tax planning and advice were $357,000. In 2006, tax compliance fees were $557,000 and
fees for tax planning and advice were $186,000. 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
39
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 present at the meeting and 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, 2007. Representatives of Ernst & Young LLP will have the opportunity
to make a statement, if they desire to do so.
ANNUAL REPORT ON FORM 10-K
A copy of the Annual Report on Form 10-K for the fiscal year ended December 31, 2007 as filed
with the Securities and Exchange Commission is included in the Annual Report sent to you with this
proxy statement. It is also available at the Investor Center tab on our website
(www.cooperindustries.com) or may be obtained upon request and without charge, by writing
to:
Director, Investor Relations
Cooper Industries, Ltd.
P.O. Box 4446
Houston, Texas 77210
INCORPORATION BY REFERENCE
To the extent that this Proxy Statement is incorporated by reference into any other filing 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.
40
PROPOSAL 2
APPOINTMENT OF INDEPENDENT AUDITORS
Under Section 89 of the Companies Act, 1981 of Bermuda, our shareholders have the authority to
appoint our independent auditors and to authorize our Audit Committee to determine 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,
2008. The Board of Directors is asking shareholders to approve such appointment and authorize our
Audit Committee to determine the auditors remuneration.
Ernst & Young LLP acted as independent auditors for the 2007 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 recommends a vote FOR Proposal 2.
41
PROPOSAL 3
APPROVAL OF THE AMENDED AND RESTATED
STOCK INCENTIVE PLAN
The Board of Directors has adopted, and the shareholders are being asked to approve the Cooper
Industries Amended and Restated Stock Incentive Plan dated February 12, 2008 (the Plan), which is
attached to this proxy statement as Appendix A. Shareholder approval of the Plan is necessary:
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to increase by 7 million the number of authorized shares available under the Plan, |
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to extend the term of the Plan from November 7, 2010 to November 7, 2015, and |
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to ensure that awards under the Plan will continue to constitute tax deductible
performance-based compensation under Section 162(m) of the Internal Revenue Code (the
Code). |
The Plan is also being amended:
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to extend the minimum vesting period for restricted stock or restricted stock units
from one to three years; |
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to limit the circumstances when awards can be accelerated under the Plan; |
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to limit the circumstances when shares can be recycled under the Plan to awards that
are forfeited or otherwise terminated or expire unexercised, and |
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to adjust certain provisions to reflect the two-for-one stock split that was
completed in March 2007. |
Following the Boards approval of equity compensation awards granted in February 2008 under
the Plan, there were:
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8,394,352 shares subject to outstanding stock options (with a weighted average
exercise price of $37.23 and a weighted average remaining term of 4.96 years); |
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1,628,480 shares subject to outstanding performance share awards for current
performance periods; |
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571,900 shares subject to outstanding restricted stock unit awards; |
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43,306 shares earned the receipt of which has been deferred; and |
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832,054 shares remaining available for future grants, all of which would be
available for grants of full value awards in the form of performance share grants or
grants of restricted stock units. |
A total of 2,111,576 shares have been issued for performance share awards earned under the Plan for
prior performance periods and 944,650 shares have been issued for restricted stock units upon the
lapse of forfeiture restrictions. The number of shares shown for outstanding awards, shares issued
under the Plan and shares remaining available for future grants as shown above have been
proportionately adjusted to reflect the change in Coopers capital structure resulting from the
two-for-one stock split in March 2007. The Board believes that the total number of shares reserved
for issuance under the Plan should be increased by 7 million shares (of which 2.1 million shares
would be available for full value awards) to ensure that sufficient shares are available under the
Plan to reward and motivate existing employees and attract new employees. This would increase the
number of shares available for future grants under the Plan from 832,054 to 7,832,054 shares. The
Board believes that the future success of Cooper is dependent upon the quality and continuity of
management, and that the compensation programs provided by the Plan are important to attracting and
retaining individuals of superior ability and in motivating their efforts on behalf of Cooper.
In addition to the information relating to outstanding equity awards and shares remaining
available for future grants under the Plan as set forth above, following is the information for
other active equity plans at Cooper:
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Directors Stock Plan 172,000 outstanding stock options (with a weighted average
exercise price of $35.44 and a weighted average remaining term of 6.91 years), 122,529
shares earned but deferred, and 321,571 shares remaining available for future issuance. |
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Directors Retainer Fee Stock Plan 66,001 shares earned but deferred, and 92,201
shares remaining available for future issuance. |
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Management Annual Incentive Plan 3,396 shares earned but deferred, and 951,102 shares
remaining available for future issuance. |
42
Description of the Plan
The Plan was initially approved by the shareholders at the 1996 Annual Meeting and an amended
Plan was approved by shareholders at the 2001 and 2004 Annual Meetings. In August 2006, the
Management Development and Compensation Committee approved technical changes to clarify equitable
substitutions or proportional adjustments of the shares reserved for issuance under the Plan or
issuable upon exercise or vesting of outstanding awards due to a stock split, stock dividend,
reorganization, merger or similar changes in Coopers capital structure. The Plan is intended to
advance Coopers interests by providing financial incentives that correspond to Coopers
performance and shareholder value and giving executives and key employees an opportunity to acquire
a proprietary interest in Cooper. A summary of the essential features of the Plan is provided
below, but is qualified in its entirety by reference to the full text of the Plan.
Eligibility
Officers and key employees of Cooper, its subsidiaries and affiliates are eligible to receive
awards. There are approximately 500 persons currently eligible to participate in the Plan,
including the executives named in the Summary Compensation Table.
Plan Administration
The Plan is administered by the Management Development and Compensation Committee (the
Committee) of the Board of Directors. The Committee 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. The Committee may not take any action that would prevent awards granted under the Plan
from meeting the requirements for exemption from Section 16(b) of the Securities Exchange Act of
1934 (Exchange Act) or prevent awards from constituting performance-based compensation, within
the meaning of Section 162(m) of the Code. The plan prohibits the repricing of stock options by
any method, including by cancellation and reissuance.
Awards
Awards under the Plan may be in the form of stock options (either incentive stock options
within the meaning of Section 422 of the Code or nonstatutory stock options), restricted stock or
restricted stock units and performance-based share awards.
Stock options are exercisable in whole or in such installments and at such times and upon such
terms as the Committee determines, provided that no stock options will be exercisable more than 10
years after grant. The exercise price of any option may not be less than the fair market value of
a Class A common share on the date of grant. Participants may pay the exercise price of a stock
option in cash, Class A common shares, a combination thereof or such other consideration as the
Committee may deem appropriate.
Restricted stock or restricted stock units may be awarded in such numbers and at such times as
the Committee determines. Awards 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 the financial performance of
Cooper. The Committee establishes the period of vesting and forfeiture restrictions at the time of
grant, provided that the period of vesting will be at least three years from the date of grant,
except in the event of a Change in Control. The Committee may grant to a participant to whom
restricted stock or restricted stock units have been awarded all or any of the rights of a
shareholder with respect to such restricted stock, including dividends or dividend equivalents and
voting rights.
The Committee may grant an award of performance shares to participants as of the first day of
each performance period established by the Committee, which must be at least one year.
Performance goals are established by the Committee not later than 90 days after the commencement of
the applicable performance period. At the end of the period, the performance shares are converted
into Class A common shares, cash or a combination thereof and distributed based upon attainment of
the performance goals. Upon issuance of performance shares, Cooper pays to the participant an
amount equal to the aggregate amount of dividends that the participant would have received had the
participant owned the shares during the performance period.
43
Performance criteria used to establish performance goals include one or any combination of the
following: (1) Coopers return on equity, assets, capital or investment; (2) pre-tax or after-tax
profit levels of Cooper, any subsidiary or business segment; (3) cash flow or similar measure; (4)
total shareholder return; (5) changes in the market price of the Class A common shares; or (6)
market share. Performance goals specify achievement targets for each applicable performance
criterion, including a threshold level below which no award will be payable. Each 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, accounting policies or generally accepted accounting principles, and changes related to
restructured or discontinued operations 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.
Shares Subject To Plan
Since the Plans inception in 1996, the aggregate number of Class A common shares available
for awards granted under the Plan is 41 million, including 7 million shares being submitted for
shareholder approval at the 2008 Annual Meeting. Of the 34 million shares previously approved by
shareholders, 832,054 shares remain available for future grants following the Boards approval of
equity compensation awards granted in February 2008. Of the 7 million shares being submitted for
shareholder approval at the 2008 Annual Meeting, no more than 2.1 million are available for
restricted stock (or restricted stock units) and performance shares. Shares available for awards
are subject to adjustment for any stock split, stock dividend or other change in Coopers
outstanding Class A common shares. Shares available for issuance under the Plan may be authorized
but unissued Class A common shares, outstanding Class A common shares held by Cooper subsidiaries
or Class B common shares convertible into Class A common shares for issuance under the Plan.
Shares related to awards that are forfeited or expire unexercised become available for future
awards. If an award is exchanged for cash or other property of comparable value, the Class A
common shares related to the award is deducted from the shares available for future awards.
No participant who is an executive officer may receive awards of stock options in excess of
3,000,000 shares in a continuous five-year period. No participant who is an executive officer may
receive awards of restricted stock (or restricted stock units) and performance shares in excess of
the greater of 250,000 shares per calendar year or a total of 1,000,000 shares in a continuous
four-year period.
The closing price of Coopers Class A common shares on the New York Stock Exchange on February
29, 2008, was $41.93 per share.
Change in Control
Immediately upon a Change in Control, as defined in the Plan, all outstanding awards will vest
automatically, all forfeiture restrictions will lapse and all performance shares will be deemed
earned at the target performance goal level. Additionally, upon a Change in Control, Cooper will
cancel all options and make a cash payment to each participant with an outstanding option equal to
the difference in the fair market value of Cooper Class A common shares (or the highest price
actually paid for the stock in connection with the change in control, if higher) and the option
price. 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 Plan that would constitute such excess parachute payment.
44
Amendment, Suspension and Termination
The Board of Directors may amend, suspend or terminate the 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. Subject to earlier termination pursuant to the above, the Plan will terminate
on November 7, 2015. After that date, no future awards may be granted, but previously granted
awards will remain outstanding in accordance with their applicable terms and conditions.
Nontransferability of Options
Awards granted under the Plan are not transferable or assignable other than (1) by will or the
laws of descent and distribution, (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), or (3) pursuant
to a qualified domestic relations order.
Deferrals
The Committee may require or permit participants to defer the receipt of any award. It also
may provide that deferred amounts be credited with interest or with dividend equivalents where the
deferral amount is denominated in shares.
Certain Federal Income Tax Consequences
The following summary generally describes the principal federal income tax consequences under
current tax laws of certain events under the Plan. The summary is general in nature and is not
intended to cover all tax consequences that may apply to a particular participant or to Cooper, nor
does it describe foreign, state or local tax consequences.
Incentive Stock Options
No income results to a participant upon the grant or exercise of an incentive stock option
(ISO) provided that (1) there is no disposition of stock received upon exercise of an ISO within
two years from the date the ISO is granted or within one year from the date the ISO is exercised
(the ISO holding periods); and (2) the participant is an employee of Cooper or a subsidiary of
Cooper at all times during the period commencing on the date of grant and ending on the date three
months (or one year in the case of a participant who is totally and permanently disabled) prior to
the date of exercise.
In the event of a disposition of stock received upon exercise of an ISO after the ISO holding
periods have been satisfied, any gain or loss, equal to the difference between the amount realized
upon such disposition and the option price, generally will be taxable as long-term capital gain or
loss. In the event of a disposition of stock received upon exercise of an ISO prior to the
expiration of the ISO holding periods, the participant will recognize ordinary income equal to the
excess of the fair market value of such stock at the time of exercise (or the amount realized upon
such disposition, if less) over the option price. If the amount realized upon such disqualifying
disposition exceeds the fair market value of such stock at the time of exercise, the excess will be
taxable as long-term or short-term capital gain, depending on the participants holding period.
No deduction is allowable to Cooper upon the grant or exercise of an ISO. In the event that a
participant recognizes ordinary income as a result of a disposition of stock received upon exercise
of an ISO prior to the expiration of the ISO holding periods, Cooper generally will be entitled to
a deduction in an amount equal to the ordinary income recognized by the participant.
Certain additional special rules may apply if the exercise price for an option is paid for
with shares previously owned by the participant rather than in cash.
45
Nonstatutory Stock Options
No income is recognized upon the grant of a nonstatutory stock option to a participant. The
participant recognizes ordinary income upon exercise of the nonstatutory stock option equal to the
excess of the fair market value of the stock on the date of exercise over the option price. Such
ordinary income is subject to withholding. The participants tax basis in these shares will be
their fair market value when purchased. On subsequent sale of such shares, gain or loss will be
recognized in an amount equal to the difference between the tax basis and the amount realized on
such sale. If the participant is subject to the provisions of Section 16(b) of the Exchange Act
regarding short-swing purchases and sales, the participant may not be required to recognize income
upon the exercise of the nonstatutory stock option, but generally may recognize ordinary income six
months thereafter in an amount equal to the excess of the fair market value of the stock received
upon exercise of the stock option at that time over the option price.
Certain additional special rules may apply if the exercise price for an option is paid for
with shares previously owned by the participant rather than in cash.
Restricted Stock and Restricted Stock Units
A participant generally will not recognize taxable income upon the grant of restricted stock
or restricted stock units, and the recognition of any income will be postponed until the time that
the restrictions on the shares or units lapse, at which time the participant will recognize
ordinary income equal to the fair market value of the stock at the time that such restrictions
lapse. A participant may elect to be taxed at the time of the grant of restricted stock or
restricted stock units and, if this election is made, the participant will recognize ordinary
income equal to the fair market value of the restricted stock or restricted stock units at the time
of grant determined without regard to any of the restrictions thereon.
Performance Shares
When performance shares are earned and stock is issued, a participant will realize ordinary
income equal to the fair market value of the performance shares. If a participant is subject to
the provisions of Section 16(b) of the Exchange Act regarding short-swing purchases and sales, the
participant may not be required to recognize income upon receipt of performance shares, but
generally may recognize ordinary income six months thereafter in an amount equal to the fair market
value of the performance shares at that time.
Dividend Equivalents
A participant realizes ordinary income upon the receipt of dividend equivalents in an amount
equal to any cash received.
Deductibility by Cooper
The Company generally will be entitled to a deduction equal to the ordinary income recognized
by the participant in the same taxable year in which the participant recognizes ordinary income
with respect to nonstatutory stock options, restricted stock or restricted stock units, performance
shares and dividend equivalent payments.
The benefits that have been received under the Plan in 2007 are disclosed in the Grant of
Plan-Based Awards Table on page 25 of this proxy statement.
46
On February 11, 2008 the Committee granted awards of stock options, performance shares and
restricted stock units under the Plan. The following table provides information as to the awards
granted.
2008 STOCK INCENTIVE PLAN AWARDS
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Performance-Share |
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Restricted |
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Stock Options |
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Awards |
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Stock Units |
Name And Position |
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# Shares (1) |
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# Shares (2) |
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# Shares (3) |
Hachigian, K.S. Chairman, President and Chief Executive
Officer |
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321,800 |
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161,000 |
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0 |
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Klebe, T.A. Senior Vice President and
Chief Financial Officer |
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67,500 |
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33,760 |
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0 |
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OGrady, C.T. Senior Vice President, Business
Development |
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36,000 |
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18,000 |
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0 |
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Stoessl, M.A. Group President, Cooper Power
Systems |
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36,000 |
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18,000 |
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0 |
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Masse, G.A. Group President, Cooper Tools |
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26,000 |
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13,000 |
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0 |
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All Current Executive Officers as a Group
(including those named above) |
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621,300 |
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310,780 |
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10,000 |
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All Employees as a Group (excluding
Current Executive Officers) |
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1,228,300 |
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253,680 |
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73,650 |
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(1) |
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The option exercise price per share is $44.21, the closing sales price of Coopers Class A
common shares on the date of grant. Options expire 7 years from the date of grant and become
one-third exercisable after one year, two-thirds exercisable after two years and fully
exercisable after three years from the date of grant. An optionee may make lifetime transfers
of nonqualified stock options to certain family members and trusts. |
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(2) |
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The performance-share awards may be earned based on achievement of performance goals over a
three-year period commencing January 1, 2008 and ending on December 31, 2010. The performance
goals are based on compound growth in earnings per share over the performance period, with a
threshold of 4% compound growth before any awards are earned. The table shows the maximum
number of performance shares that may be earned. At least 14% compound growth in earnings per
share must be achieved for a payout at the maximum level shown in the table. The awards, to
the extent earned, will be distributed in shares of Cooper Class A common shares, or at the
executives election as approved by the Management Development and Compensation Committee, all
or a portion of the earned award may be paid in cash. |
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(3) |
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Vesting of the restricted stock units is time-based. The vesting of period varies depending
on the award, but ranges from 3 to 5 years in order to fully vest. Dividend equivalents,
calculated based on the same dividend rate that applies to our outstanding shares, are payable
either upon the dividend payment date upon the date when the restrictions lapse depending on
the terms of the specific award. |
The Board of Directors recommends a vote FOR approval of the Amended and Restated Stock
Incentive Plan.
47
PROPOSAL 4
SHAREHOLDER PROPOSAL RELATING TO INTERNATIONAL
LABOR ORGANIZATION HUMAN RIGHTS STANDARDS
The New York City Teachers Retirement System, owner of 5,650 Cooper Class A common shares,
the New York City Employees Retirement System, owner of 10,517 Cooper Class A common shares, the
New York City Fire Department Pension Fund, owner of 5,000 Cooper Class A common shares, the New
York City Police Pension Fund, owner of 10,500 Cooper Class A common shares, and the New York City
Board of Education Retirement System, owner of 1,600 Cooper Class A common shares, through their
custodian and trustee, The Office of the Comptroller of New York City, 1 Centre Street, New York,
N.Y. 1007-2341, have informed us that they intend to present the following proposal at the meeting.
Other shareholders who are co-filers of the following resolution are: Benedictine Sisters, P.O. Box
28037, San Antonio, Texas 78228, owner of 240 Cooper Class A common shares; Domini Social
Investments LLC, 536 Broadway, 7th Floor, New York, New York 10012-3915, owner of 2,386
Cooper Class A common shares; and the Sisters of Charity of Saint Elizabeth, P.O. Box 476, Convent
Station, New Jersey 07961-0476, owner of 200 Cooper Class A common shares.
GLOBAL HUMAN RIGHTS STANDARDS
Whereas, Cooper Industries, Ltd. currently has extensive overseas operations, and
Whereas, reports of human rights abuses in the overseas subsidiaries and suppliers of U.S.-based
corporations has led to an increased public awareness of the problems of child labor,
sweatshop conditions, and the denial of labor rights in U.S. corporate overseas operations,
and
Whereas, corporate violations of human rights in these overseas operations can lead to negative
publicity, public protests, and a loss of consumer confidence which can have a negative impact
on shareholder value, and
Whereas, a number of corporations have implemented independent monitoring programs with respected
human rights and religious organizations to strengthen compliance with international human
rights norms in subsidiary and supplier factories, and
Whereas, many of these programs incorporate the conventions of the International Labor Organization
(ILO) on workplace human rights, and United Nations Norms on the Responsibilities of
Transnational Corporations with Regard to Human Rights (UN Norms), which include the
following principles:
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All workers have the right to form and join trade unions and to bargain
collectively. (ILO Conventions 87 and 98; UN Norms, section D9). |
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2. |
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Workers representatives shall not be the subject of discrimination and shall
have access to all workplaces necessary to enable them to carry out their
representation functions. (ILO Convention 135; UN Norms, section D9). |
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3. |
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There shall be no discrimination or intimidation in employment. Equality of
opportunity and treatment shall be provided regardless of race, color, sex,
religion, political opinion, age, nationality, social origin or other
distinguishing characteristics. (ILO Conventions 100 and 111; UN Norms, section
B2). |
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4. |
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Employment shall be freely chosen. There shall be no use of force, including
bonded or prison labor. (ILO Conventions 29 and 105; UN Norms, section D5). |
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5. |
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There shall be no use of child labor. (ILO Convention 138; UN Norms, section
D6), and |
48
Whereas, independent monitoring of corporate adherence to these internationally recognized
principles is essential if consumer and investor confidence in our companys commitment to
human rights is to be maintained.
Therefore, be it resolved that the shareholders request that the company commit itself to the
implementation of a code of conduct based on the aforementioned ILO human rights standards and
the United Nations Norms on the Responsibilities of Transnational Corporations with Regard to
Human Rights, by its international suppliers and in its own international production
facilities, and commit to a program of outside, independent monitoring of compliance with
these standards.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends a vote AGAINST Proposal 4.
Cooper has a long-standing and well-recognized record to support workplace human rights
wherever Cooper does business worldwide. Coopers Code of Ethics and Business Conduct (Code),
initially developed in 1961, has been translated into seven languages and distributed to all
employees worldwide. The Code is available on the Companys website at
www.cooperindustries.com/common/governance. The Code and Coopers human resources policies
and programs are based on the principle that all employees must be treated with dignity and
respect. Coopers existing policies and practices already address the concerns expressed in the
above proposal and ensure compliance with global human rights standards. Specifically, the Code and
existing policies and practices address the following matters:
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Coopers Code provides that employees are free to select collective bargaining
representation. |
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The Code also provides that where trade unions are present, Cooper will deal with them
fairly and conduct negotiations in a purposeful and non-adversarial manner. Accordingly,
worker representatives shall not be the subject of discrimination and shall have access to
all workplaces necessary to enable them to carry out their representation functions. |
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Coopers policy concerning equal employment opportunities provides individuals full
equality of opportunity without regard to an individuals race, color, religion, sex, age,
national origin, or mental or physical disability. |
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Cooper prohibits the use of forced labor and child labor. Cooper does not employ any
person younger than 16 years of age. |
Cooper enforces its Code and other policies affecting workplace human rights through a
well-developed compliance program. Coopers compliance function, which is headed by an executive
officer, oversees the worldwide distribution of the Code, compliance with its standards and
enforcement efforts. The compliance program includes a hotline that Cooper employees and others are
encouraged to use to report potential violations of the Code. Anyone contacting the hotline may
provide his or her name or report anonymously. Each report is investigated and actions are taken as
needed to address any violations and to prevent reoccurrence.
In addition, compliance procedures include auditing programs to periodically review Company
facilities worldwide for compliance with local law and Coopers standards concerning workers
health and safety. In light of the Companys well-developed compliance process, Cooper management
believes that the outside monitoring advocated by the proponent is unnecessary and that workplace
standards are better served by Coopers commitment to continuously improve and devote resources to
its internal programs that are dedicated to achieving the same goals.
For these reasons, the Board of Directors recommends a vote AGAINST Proposal 4.
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APPENDIX A
COOPER INDUSTRIES
AMENDED AND RESTATED
STOCK INCENTIVE PLAN
(Amended and Restated February 12, 2008)
I. Purpose of the Plan
The Cooper Industries Stock Incentive Plan is intended to provide Cooper US, Inc. (the
Company) and its affiliates a means by which such companies can engender and sustain a sense of
proprietorship and personal commitment on the part of the executives, managers and other key
employees in the continued growth, development and financial success of the publicly-traded parent,
Cooper Industries, Ltd. (CBE) and encourage them to remain with and devote their best efforts to
the business of the Company and its affiliates, thereby advancing the interests of the Company, its
affiliates and CBE shareholders. Accordingly, the Company may award to certain employees shares of
the Common Stock of CBE, on the terms and conditions established herein.
II. Definitions
2.1 Award means any form of Stock Option, Restricted Stock or Performance Share granted
under the Plan, whether singly or in combination, to a Participant by the Committee pursuant to
such terms, conditions, restrictions and limitations, if any, as the Committee may establish by the
Award Agreement or otherwise.
2.2 Award Agreement means a written agreement with respect to an Award between the Company
and a Participant establishing the terms, conditions, restrictions and limitations applicable to an
Award. To the extent an Award Agreement is inconsistent with the terms of the Plan, the Plan shall
govern the rights of the Participant thereunder.
2.3 Board shall mean the Board of Directors of CBE.
2.4 A Change in Control shall be deemed to have occurred if the event set forth in any one
of the following paragraphs shall have occurred:
(1) any Person is or becomes the Beneficial Owner, directly or indirectly, of
CBE securities (not including in the securities beneficially owned by such Person or
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 (3) below; or
(2) the following individuals cease for any reason to constitute a majority of
the number of directors then serving: individuals who on the date
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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 stockholders 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
(3) 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 CBE securities (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
(4) the stockholders 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% of the
combined voting power of the voting securities of which are owned by stockholders of
CBE in substantially the same proportions as their ownership of CBE immediately
prior to such sale.
For purposes of this Section 2.4, Affiliate shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the Exchange Act; Beneficial Owner shall have the meaning
set forth in Rule 13d-3 under the Exchange Act; and Person shall have the meaning given in
Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof, except that such term shall not include (i) CBE or any of its subsidiaries, (ii) a
trustee or other fiduciary holding securities under an employee benefit plan of CBE or any
of its subsidiaries, (iii) an underwriter temporarily holding securities pursuant to an
offering of such securities, (iv) a corporation owned, directly or indirectly, by the
shareholders of CBE in substantially the same proportions as their ownership of stock of CBE
or (v) any individual, entity or group whose ownership of securities of CBE is reported on
Schedule 13G pursuant to Rule 13d-1 promulgated under the Exchange Act (but only for so long
as such ownership is so reported).
2.5 Change in Control Price means the higher of (i) the Fair Market Value on the date of
determination of the Change in Control, or (ii) the highest price per share actually paid for the
Common Stock in connection with the Change in Control of CBE.
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2.6 Code means the Internal Revenue Code of 1986, as amended from time to time.
2.7 Commission shall mean the Securities and Exchange Commission.
2.8 Committee means the Management Development and Compensation Committee of the Board, or
such other committee designated by the Board to administer the Plan, provided that the Committee
shall consist of three or more persons, each of whom is an outside director within the meaning of
Section 162(m) of the Code and a disinterested person within the meaning of Rule 16b-3 under the
Exchange Act.
2.9 Common Stock or Shares shall mean the Class A common shares, par value $0.01 a share,
of CBE and other such securities of CBE as the Committee may from time to time determine.
2.10 Dividend Equivalent shall mean any right granted pursuant to Section X hereof.
2.11 Exchange Act means the Securities Exchange Act of 1934, as amended.
2.12 Executive Officer means an executive officer as defined in Rule 3b-7 promulgated under
the Exchange Act.
2.13 Fair Market Value of a share of Common Stock, as of any date, means the closing sales
price of a share of Common Stock as reported on the Stock Exchange on the applicable date, or if no
sales of Common Stock were made on the Stock Exchange on that date, the closing sales price as
reported on the Stock Exchange for the preceding day on which sales of Common Stock were made.
2.14 Incentive Stock Option shall mean an option granted under Section VII hereof that is
intended to meet the requirements of Section 422 of the Code or any successor provision thereto.
2.15 Nonstatutory Stock Option shall mean an option granted under Section VII hereof that is
not intended to be an Incentive Stock Option.
2.16 Option shall mean any right granted to a Participant under the Plan allowing such
Participant to purchase Shares at such prices and during such Period or Periods as the Committee
shall determine.
2.17 Participant means an officer or key employee of the Company or its affiliates who is
selected by the Committee to participate in the Plan.
2.18 Performance Goals or Targets in respect to Awards of Performance Shares are defined
as the performance criterion or criteria established by the Committee, pursuant to Section 9.3
hereof.
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2.19 Performance Period shall mean that period established by the Committee at the time any
Performance Shares are granted, provided that a Performance Period shall be a minimum of one year.
2.20 Performance Share shall mean any grant pursuant to Section IX hereof of a unit valued
by reference to a designated number of Shares, which value may be paid to the Participant by
delivery of such property as the Committee shall determine, including cash, Shares or any
combination thereof, upon achievement of such Performance Goals during the Performance Period as
the Committee shall establish at the time of such grant or thereafter, or as a reward to recognize
significant personal contributions to Company initiatives under the Cooper Star Program as approved
by the Committee.
2.21 Plan shall mean the Cooper Industries Amended and Restated Stock Incentive Plan (dated
November 7, 1995, as amended and restated February 9, 2005).
2.22 Restricted Stock shall mean any Shares issued pursuant to Section VIII (or any
restricted stock units granted pursuant to Section VIII that are valued by reference to a
designated number of Shares) and which are subject to such terms, conditions and restrictions as
the Committee deems appropriate, including but not limited to restrictions on transferability,
which restrictions may lapse separately or in combination at such time or times, in installments or
otherwise, as the Committee may deem appropriate.
2.23 Section 162(m) means Section 162(m) of the Code and the regulations promulgated
thereunder.
2.24 Stock Exchange means the New York Stock Exchange, Inc. (NYSE) or, if the Common Stock
is no longer included on the NYSE, then such other market price reporting system on which the
Common Stock is traded or quoted.
2.25 Voting Stock means securities entitled to vote in an election of Directors of CBE.
III. Administration
3.1 The Plan shall be administered by the Committee.
3.2 Subject to the provisions of the Plan, the Committee shall have the authority in its sole
discretion to administer the Plan and to exercise all the powers and authorities either
specifically granted to it under the Plan or necessary or advisable in the administration of the
Plan, including, without limitation, the authority to select the Participants; to determine the
type of Awards to be made to Participants; to determine the Shares subject to any Award and the
terms, conditions and restrictions relating to any Award; to determine whether, to what extent and
under what circumstances any Award may be settled, cancelled, forfeited, exchanged, or surrendered;
to waive or modify any condition applicable to an Award (other than a Performance Share Award to
Executive Officers if inconsistent with Section 162(m)); to make adjustments in the performance
goals of an Award (i) in recognition of unusual or nonrecurring events affecting
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CBE or the financial statements of CBE (with respect to Awards made to Executive Officers, to
the extent in accordance with Section 162(m), if applicable) or (ii) in response to changes in
applicable laws, regulations, or accounting principles; to interpret the Plan; to establish, amend
or rescind any administrative policies; to determine the terms and provisions of any agreements
entered into hereunder; and to make all other determinations necessary or advisable for the
administration of the Plan. The Committee may correct any defect, supply any omission or reconcile
any inconsistency in the Plan or in any Award in the manner and to the extent it shall deem
desirable to carry it into effect. The determinations of the Committee in the administration of
the Plan, as described herein, shall be final and conclusive: provided, however, that no action
shall be taken which will prevent Awards granted under the Plan from meeting the requirements for
exemption from Section 16(b) of the Exchange Act, or subsequent comparable statute, as set forth in
Rule 16b-3 under the Exchange Act or any subsequent comparable rule; and, provided further, that no
action shall be taken which will prevent Awards hereunder that are intended to provide
performance-based compensation, within the meaning of Section 162(m), from doing so.
3.3 In order to enable Participants who are foreign nationals or employed outside the United
States, or both, to receive Awards under the Plan, the Committee may adopt such amendments,
subplans and the like as are necessary or advisable, in the opinion of the Committee, to effectuate
the purposes of the Plan.
3.4 Notwithstanding the powers and authorities of the Committee set forth in this Section III:
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the Committee shall not permit the repricing of Stock Options by any method, including
by cancellation and reissuance, and |
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the Committee may only accelerate the vesting or exercisability of an Award: (i) upon
termination of employment by a Participant subject to the limitations set forth in Section
XII or (ii) upon the death, disability or retirement of a Participant or a Change in
Control. |
IV. Eligibility
Any key employee of the Company or any of its subsidiaries or affiliates is eligible to
receive one or more Awards under the Plan.
V. Shares Subject to the Plan
5.1 There shall be available for Awards granted wholly or partly in Common Stock (including
rights or options which may be exercised for or settled in Common Stock) during the term of this
Plan since its inception in 1996 an aggregate of 41,000,000 shares of Common Stock, subject to the
adjustments provided for in Section XIV hereof. The 41,000,000 Shares available for Awards consist
of 34,000,000 Shares (adjusted to reflect the two-for-one stock split completed in March 2007)
previously approved by the Company and CBE shareholders and 7,000,000 Shares being submitted for
approval by shareholders at the 2008 Annual Meeting. Of
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the 7,000,000 Shares being submitted for shareholder approval at the 2008 Annual Meeting, no
more than 2,100,000 Shares are available for Restricted Stock and Performance Shares.
5.2 Shares of Common Stock available for issuance under the Plan may be authorized and
unissued Shares, outstanding CBE Class A common shares held by the Company, or CBE Class B common
shares convertible into Class A common shares for issuance under the Plan, as the Company and CBE
may from time to time determine. The Board of Directors and the appropriate officers of CBE shall
from time to time take whatever actions are necessary to file required documents with governmental
authorities and the Stock Exchange to make shares of Common Stock available for issuance pursuant
to Awards. Common Stock related to Awards that are forfeited or otherwise terminated, or expire
unexercised, shall immediately become available for Awards hereunder. If an Award is exchanged for
cash or other property of comparable value, the Common Stock related to the Award will be deducted
from the Shares available for Awards hereunder. Any Shares issued by CBE in respect of the
assumption or substitution of outstanding awards from a corporation or other business entity
acquired by CBE shall not reduce the number of Shares available for Awards under this Plan. The
Committee may from time to time adopt and observe such procedures concerning the counting of shares
against the Plan maximum as it may deem appropriate under Rule 16b-3 issued pursuant to the
Exchange Act.
5.3 The number of shares of Common Stock subject to Awards granted under the Plan to any
individual who is an Executive Officer shall not exceed the limits set forth below:
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Stock Options a total of 3,000,000 Shares in a continuous five (5) year
period. |
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Restricted Stock and Performance Shares the greater of 250,000 Shares per
calendar year or a total of 1,000,000 Shares in a continuous four (4) year period. |
Determinations under the preceding sentence shall be made in a manner that is consistent with
Section 162(m).
VI. Awards
Awards under the Plan may consist of: Stock Options (either Incentive Stock Options within the
meaning of Section 422 of the Code or Nonstatutory Stock Options), Restricted Stock, or Performance
Shares. Awards of Performance Shares and Restricted Stock may provide the Participant with
dividends or Dividend Equivalents and voting rights prior to vesting (whether based on a period of
time or based on attainment of specified performance conditions). The terms, conditions and
restrictions of each Award shall be set forth in an Award Agreement.
VII. Stock Options
7.1 Grants. Awards may be granted in the form of Stock Options. Stock Options may be
Incentive Stock Options within the meaning of Section 422 of the Code or Nonqualified Stock Options
or a combination of both, or any particular type of tax-advantaged option authorized by the Code
from time to time, and approved by the Committee.
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7.2 Terms and Conditions of Options. A Stock Option shall be exercisable in whole or in such
installments and at such times and upon such terms as may be determined by the Committee: provided,
however, that no Stock Option shall be exercisable more than 10 years after the date of grant
thereof. The option exercise price shall be established by the Committee, but such price shall not
be less than the Fair Market Value on the date of the Stock Options grant, subject to adjustment
as provided in Section XIV hereof.
7.3 Restrictions Relating to Incentive Stock Options. Stock Options issued in the form of
Incentive Stock Options shall, in addition to being subject to all applicable terms, conditions,
restrictions and limitations established by the Committee, comply with Section 422 of the Code.
Incentive Stock Options shall be granted only to key employees of the Company and its subsidiaries
within the meaning of Section 424 of the Code.
7.4 Payment. Upon exercise, a Participant may pay the option exercise price of a Stock Option
in cash or Shares, or a combination of cash and Shares, or such other consideration as the
Committee may deem appropriate. The Committee shall establish appropriate methods for accepting
Common Stock and may impose such conditions as it deems appropriate on the use of Common Stock to
exercise a Stock Option.
7.5 Additional Terms and Conditions. The Committee may, by way of the Award Agreement or
otherwise, establish such other terms, conditions or restrictions, if any, on any Stock Option
Award, provided they are not inconsistent with the Plan. The Committee may condition the vesting
of Stock Options on the achievement of financial performance criteria established by the Committee
at the time of grant.
VIII. Restricted Stock Awards
8.1 Grants. Awards may be granted in the form of Restricted Stock (Restricted Stock
Awards). Restricted Stock Awards shall be awarded in such numbers and at such times as the
Committee shall determine.
8.2 Award Restrictions. Restricted Stock Awards shall be 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 the financial
performance of CBE. The period of vesting and the forfeiture restrictions shall be established by
the Committee at the time of grant, provided that the period of vesting shall be at least three
years from the date of grant, except as provided in Section XVIII.
8.3 Rights as Shareholders. The Committee may, in its discretion, grant to the Participant to
whom such Restricted Stock has been awarded, all or any of the rights of a shareholder with respect
to such shares of Restricted Stock, including the right to receive dividends or Dividend
Equivalents.
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8.4 Evidence of Award. Any Restricted Stock Award granted under the Plan may be evidenced in
such manner as the Committee deems appropriate, including, without limitation, book entry
registration or issuance of a stock certificate or certificates.
IX. Performance Share Awards
9.1 Grants. Awards may be granted in the form of Performance Shares.
9.2 Performance Shares. The Committee may grant an Award of Performance Shares to
Participants as of the first day of each Performance Period. Performance Goals will be established
by the Committee not later than 90 days after the commencement of the Performance Period relating
to the specific Award. At the end of the Performance Period, the Performance Shares shall be
converted into Common Stock (or cash or a combination of Common Stock and cash, as determined by
the Award Agreement) and distributed to Participants based upon such entitlement. The Committee
may also grant Performance Shares as a reward to employees to recognize significant personal
contributions to Company initiatives under the Cooper Star Program. Award payment in respect of
Performance Shares made in cash rather than the issuance of Common Stock shall not, by reason of
such payment in cash, result in additional Shares being available for reissuance pursuant to
Section V hereof.
9.3 Performance Criteria. Notwithstanding anything to the contrary contained in this Section
IX, Performance Share Awards shall be made to Executive Officers only in compliance with Section
162(m). Performance criteria used to establish Performance Goals for Performance Share Awards
granted to Executive Officers must include one or any combination of the following: (i) CBEs
return on equity, assets, capital or investment; (ii) pre-tax or after-tax profit levels expressed
in earnings per share of CBE or any subsidiary or business segment of CBE; (iii) cash flow or
similar measure; (iv) total shareholder return; (v) change in the market price of the Common Stock;
or (vi) market share. The Performance Goals established by the Committee for each Performance
Share Award will specify achievement targets with respect to each applicable performance criterion
(including a threshold level of performance below which no amount will become payable with respect
to such Award). To the extent applicable, any such Performance Goals shall be determined in
accordance with generally accepted accounting principles. Each Award will specify the amount
payable, or the formula for determining the amount payable, upon achievement of the various
applicable Performance Targets. The Performance Goals established by the Committee may be (but
need not be) different for each Performance Period and different Performance Goals may be
applicable for Awards to different Executive Officers in the same Performance Period. Payment
shall be made with respect to a Performance Share Award to an Executive Officer only after the
attainment of the applicable Performance Goals has been certified in writing by the Committee.
9.4 Adjustments. The Committee shall be authorized to make adjustments in the method of
calculating attainment of Performance Goals in recognition of: (i) extraordinary or non-recurring
items; (ii) changes in tax laws; (iii) changes in generally accepted accounting principles or
changes in accounting policies; (iv) charges related to restructured or discontinued operations;
(v) restatement of prior period financial results; and (vi) any other unusual, non-recurring gain
or loss that is separately identified and quantified in CBEs financial statements.
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Notwithstanding the foregoing, the Committee may, at its sole discretion, modify the
performance results upon which Awards are based under the Plan, to offset any unintended result(s)
arising from events not anticipated when the Performance Goals were established, provided, that
such adjustment is permitted by Section 162(m).
9.5 Additional Terms and Conditions. The Committee may, by way of the Award Agreement or
otherwise, determine the manner of payment of Awards of Performance Shares and other terms,
conditions or restrictions, if any, on any Award of Performance Shares, provided they are
consistent with the Plan.
X. Dividends
Upon issuance of Performance Shares earned under the Plan, the Company also shall pay to the
Participant an amount equal to the aggregate amount of dividends that the Participant would have
received had the Participant been the owner of record of such earned Performance Shares during the
Performance Period. Upon the grant of restricted stock units, the Committee may, in its
discretion, provide for the accrual or payment of dividends that the Participant would have
received had the Participant been the owner of record of the underlying Shares during the vesting
period.
XI. Deferrals and Settlements
The Committee may require or permit Participants to elect to defer the issuance of Shares or
the settlement of Awards in cash as set out in any Award Agreement or under such administrative
policies as it may establish under the Plan. It also may provide that deferred settlements include
the payment or crediting of interest on the deferral amounts, or the payment or crediting of
Dividend Equivalents where the deferral amounts are denominated in Shares.
XII. Termination of Employment
Upon the termination of employment by a Participant, any unexercised, deferred or unpaid
Awards shall be treated as provided in the specific Award Agreement evidencing the Award, except
that the Committee may, in its discretion:
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accelerate the vesting or exercisability of an Award provided the aggregate number of
Shares relating to such accelerated Awards does not exceed 350,000 Shares plus 5% of any
additional Shares authorized under the Plan after the date of the 2008 Annual Shareholders
Meeting, |
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eliminate or make less restrictive any restrictions contained in an Award, or |
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waive any restriction or other provision of this Plan or an Award or otherwise amend or
modify the Award in any manner that is either: (i) not adverse to such Participant; or (ii)
consented to by such Participant. |
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XIII. Transferability and Exercisability
Awards granted under the Plan shall not be transferable or assignable other than: (i) by will
or the laws of descent and distribution; (ii) by gift or other transfer of an Award (other than an
Incentive Stock Option unless permitted by the Code) 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; or (iii) pursuant to a
qualified domestic relations order (as defined by the Code). However, any Award so transferred
shall continue to be subject to all the terms and conditions contained in the Award Agreement.
XIV. Adjustments
14.1 The existence of outstanding Awards shall not affect in any manner the right or power of
CBE or its shareholders to make or authorize: (i) any adjustments, recapitalizations,
reorganizations or other changes in the capital stock of CBE or its business; (ii) any merger or
consolidation of CBE; (iii) any issuance of bonds, debentures, preferred or prior preference stock
(whether or not such issue is prior to, on a parity with or junior to the Common Stock); (iv) the
dissolution or liquidation of CBE, or any sale or transfer of all or any part of its assets or
business; or (v) any other corporate act or proceeding of any kind, whether or not of a character
similar to that of the acts or proceedings enumerated above.
14.2 If there is a change in the number of outstanding Shares of Common Stock by reason of any
stock dividend, stock split or reverse stock split, recapitalization, reclassification,
reorganization, merger, consolidation, combination or exchange of Shares, or similar corporate
change, an equitable substitution or proportionate adjustment shall be made to: (i) the aggregate
number of Shares available for issuance under the Plan; (ii) the number of Shares subject to
outstanding Awards granted under the Plan; (iii) the Option exercise price per Share; (iv) the
number of deferred Shares credited to a Participants account pursuant to Section XI; and (v) the
limit on the number of shares subject to Awards pursuant to Section 5.3 hereof.
XV. Withholding Taxes
The Company shall have the right to deduct from any payment to be made pursuant to the Plan
the amount of any taxes required by law to be withheld therefrom, or to require a Participant to
pay to the Company such amount required to be withheld prior to the issuance or delivery of any
shares of Common Stock or the payment of cash under the Plan. The Committee may, in its
discretion, permit a Participant to elect to satisfy such withholding obligation by (i) having the
Company retain the number of shares of Common Stock, or (ii) tendering the number of shares of
Common Stock, in either case, whose Fair Market Value equals the amount required to be withheld.
Any fraction of a share of Common Stock required to satisfy such obligation shall be disregarded
and the amount due shall instead be paid in cash, to or by the Participant, as the case may be.
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XVI. Regulatory Approvals and Listings
Notwithstanding anything contained in this Plan to the contrary, the Company shall have no
obligation to issue or deliver certificates evidencing Shares under this Plan prior to: (i) the
obtaining of any approval from any governmental agency which the Company shall, in its sole
discretion, determine to be necessary or advisable; (ii) the listing of such Shares on the Stock
Exchange; and (iii) the completion of any registration or other qualification of the Shares under
any state or federal law or ruling of any governmental body which the Company shall, in its sole
discretion, determine to be necessary or advisable.
XVII. No Right to Continued Employment or Grants
No person shall have any claim or right to be granted an Award, and the grant of an Award
shall not be construed as giving a Participant the right to be retained in the employ of the
Company or its subsidiaries or affiliates. Further, the Company and its subsidiaries and
affiliates expressly reserve the right at any time to terminate the employment of any Participant
free from any liability, or any claim under the Plan, except as provided herein or in any Award
Agreement entered into hereunder.
XVIII. Change in Control
18.1 Vesting and Deferral.
(i) Vesting. Immediately upon a Change in Control, all outstanding Awards
shall vest automatically, all forfeiture restrictions shall lapse and all
Performance Share Awards shall be deemed earned at the commendable Performance Goal
level.
(ii) Deferral. In connection with a Change in Control, the Committee may
permit Participants to change a prior deferral election with respect to amounts
deferred pursuant to Article XI of the Plan, under such administrative policies as
the Committee may establish under the Plan, which policies shall not be inconsistent
with the provisions of Article XI of the Plan. Accounts denominated in cash
immediately prior to a Change in Control shall continue to be denominated in cash
following a Change in Control. Accounts denominated in Shares immediately prior to
a Change in Control shall, following such Change in Control, be denominated in (a)
such form of consideration as the Participant would have received had the
Participant been the owner of record of such Shares at the time of such Change in
Control, in the case of a Change in Control With Consideration and (b) Shares, in
the case of a Change in Control Without Consideration.
(iii) Definitions. Change in Control With Consideration shall mean a Change in
Control in which Shares are exchanged or surrendered for shares, cash or other property.
Change in Control Without Consideration shall mean a Change in Control
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pursuant to which Shares are not exchanged or surrendered for shares, cash or other
property.
18.2 Payment and Rollover.
(i) Payment of Deferral Accounts. In the absence of a timely deferral election
(or redeferral election, as the case may be) by a Participant, the Company shall,
within 10 days after the occurrence of a Change in Control, (a) issue, or cause to
be issued, for any Shares credited to a Participants deferral account, (1) such
form of consideration as the Participant would have received had the Participant
been the owner of record of such Shares at the time of such Change in Control, in
the case of a Change in Control With Consideration and (2) Shares, in the case of a
Change in Control Without Consideration and (b) make, or cause to be made, a cash
lump sum payment to the Participant for any deferred cash Awards and any accrued
interest and Dividend Equivalents.
(ii) Payment of Restricted Stock Awards and Performance Share Awards. With
respect to outstanding Restricted Stock Awards and Performance Share Awards deemed
earned pursuant to Section 18.1 of the Plan, the Company shall, within 10 days after
the occurrence of a Change in Control, (a) issue or cause to be issued, for any
Shares covered by such Awards, (i) such form of consideration as the Participant
would have received had the Participant been the owner of record of such Shares at
the time of such Change in Control, in the case of a Change in Control With
Consideration and (ii) Shares, in the case of a Change in Control Without
Consideration and (b) make, or cause to be made, a lump sum cash payment to the
Participant for any accrued interest and Dividend Equivalents.
(iii) Stock Option Rollover or Cash-Out. With respect to outstanding Stock
Options which have vested pursuant to Section 18.1 of the Plan, unless the Committee has
determined to make an equitable adjustment or substitution of such Stock Options pursuant to
Section 14.2 of the Plan as a result of the Change in Control, upon a Change in Control the
Company shall cancel such Stock Options and, within 10 days thereafter, the Company shall
make or cause to be made a cash payment to each holder thereof in an amount equal to the
excess, if any, of the Change in Control Price over the option exercise price, multiplied by
the number of Shares subject to such Stock Option.
18.3 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.
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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.
18.4 The granting of Awards under the Plan shall in no way affect the right of the Company or
CBE to adjust, reclassify, reorganize or otherwise change its capital or business structures or to
merge, consolidate, dissolve, liquidate, sell or transfer all or any portion of its business or
assets.
XIX. Amendment, Modification, Suspension
or Termination
The Board may amend, modify, suspend or terminate (individually or in the aggregate, a
Change) this Plan for any purpose except that: (i) no Change that would impair the rights of any
Participant under any Award previously granted to such Participant shall be made without such
Participants consent, (ii) no Change shall be effective prior to approval by CBEs shareholders to
the extent such approval is required: (a) pursuant to Rule 16b-3 in order to preserve the
applicability of any exemption provided by such rule to any Award then outstanding (unless the
holder of such Award consents); (b) pursuant to Section 162(m) of the Code; or (c) otherwise
required by applicable legal requirements including applicable requirements of the Stock Exchange
on which CBE is listed and (iii) following a Change in Control, the terms and conditions of
deferrals under the Plan may not be changed to the detriment of any Participant without such
Participants written consent.
XX. Governing Law
The validity, construction and effect of the Plan and any actions taken or relating to the
Plan shall be determined in accordance with the laws of the State of Ohio and applicable Federal
law.
XXI. Rights as Shareholder
Except as otherwise provided in the Award Agreement, a Participant shall have no rights as a
shareholder until he or she becomes the holder of record.
XXII. Other Benefit and Compensation Programs
Unless otherwise specifically provided to the contrary in the relevant plan, program or
practice, settlements of Awards received by Participants under the Plan shall not be deemed a part
of a Participants regular, recurring compensation for purposes of calculating payments or benefits
from any Company or CBE benefit plan, program or practice or any severance pay law of any country.
Further, the Company and CBE may adopt other compensation programs, plans or arrangements as it
deems appropriate or necessary.
A-13
XXIII. Unfunded Plan
Unless otherwise determined by the Committee, the Plan shall be unfunded and shall not create
(or be construed to create) a trust or a separate fund or funds. The Plan shall not establish any
fiduciary relationship between the Company and any Participant or other person. To the extent any
person holds any rights by virtue of an Award granted under the Plan, such rights (unless otherwise
determined by the Committee) shall be no greater than the rights of an unsecured general creditor
of the Company.
XXIV. Use of Proceeds
The cash proceeds received by the Company from the issuance of Shares pursuant to Awards under
the Plan shall constitute general funds of the Company.
XXV. Successors and Assigns
The Plan shall be binding on all successors and assigns of a Participant, including, without
limitation, the estate of such Participant and the executor, administrator or trustee of such
estate, or any receiver or trustee in bankruptcy or representative of the Participants creditors.
XXVI. Effective Date
This Plan shall be effective as of the date it is approved by the Board of Directors of CBE.
Notwithstanding the foregoing, the authorization of an additional 7,000,000 Shares available for
Awards under the Plan and the extension of the Plans term to November 7, 2015 is expressly
conditioned upon approval by CBEs shareholders at the 2008 Annual Meeting. If the shareholders of
CBE shall fail to approve the authorization of such additional Shares and extension of the Plans
term, any grants of Awards hereunder shall be null and void to the extent the Awards are made from
such additional Shares. Subject to earlier termination pursuant to Section XIX, the term of the
Plan is extended from November 7, 2010 to November 7, 2015. After termination of the Plan, no
future Awards may be granted but previously granted Awards shall remain outstanding in accordance
with their applicable terms and conditions and the terms and conditions of the Plan.
XXVII. Interpretation
The Plan as applicable to certain employees is designed and intended to comply with Rule 16b-3
promulgated under the Exchange Act and with Section 162(m) of the Code, and all provisions hereof
shall be construed in a manner to so comply with respect to such employees.
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Electronic Voting Instructions
You can vote by Internet or telephone!
Available 24 hours a day, 7 days a
week!
Instead of mailing your proxy, you may choose one of the two voting
methods outlined below to vote your proxy.
VALIDATION
DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
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Proxies submitted by the Internet or telephone must be received by
12:00 midnight, New York time, on April 28, 2008.
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Vote by
Internet Log
on to the Internet and go to www.envisionreports.com/cbe Follow the steps outlined on the secured website. |
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Vote by
telephone Call toll free 1-800-652-VOTE (8683) within the United
States, Canada &
Puerto Rico any time on a touch tone
telephone. There is NO CHARGE to you for the call.
Outside the US, Canada & Puerto Rico, call
1-781-575-2300 on a touch tone telephone.
Standard rates will apply.
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Using a black ink pen, mark your votes with an X as shown in
this example. Please do not write outside the designated areas.
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Follow the instructions provided by the recorded message. |
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Annual Meeting Proxy Card |
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IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE,
FOLD ALONG THE PERFORATION, DETACH AND RETURN
THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. ▼
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A
Election of Directors The Board of Directors recommends a vote FOR all the nominees.
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01 R.M. Devlin
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02 L.A. Hill
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03 J.J. Postl |
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B
Proposals The Board of Directors recommends a vote FOR Proposals 2 and 3, and AGAINST Proposal 4.
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Appoint Ernst & Young LLP as independent auditors for the
year ending 12/31/2008.
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Shareholder proposal requesting Cooper to implement a
code of conduct based on international labor organization
human rights standards.
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Approve the Amended and Restated Stock Incentive Plan.
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C Non-Voting
Items |
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Change of Address
Please print new address below.
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Meeting Attendance |
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Mark box to the right if
you plan to attend the
Annual Meeting. |
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Authorized
Signatures
This section must be completed for your vote to be counted.
Date and Sign Below
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Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.
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Date (mm/dd/yyyy) Please print date below.
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Signature 2 Please keep signature within the box. |
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HOW TO RECEIVE YOUR ANNUAL REPORT AND PROXY STATEMENT ON-LINE
You may receive future Cooper Industries, Ltd. annual reports and proxy statements on-line on the
Internet by submitting your consent to Cooper. This will save Cooper postage and printing expenses
and make information available to you faster. If you have already consented to receive future
annual reports and proxy statements on-line, no action is necessary because your consent remains
effective until you change or revoke your consent.
Most shareholders can elect to view future proxy statements and annual reports over the Internet
instead of receiving paper copies in the mail. If you are a registered shareholder and you wish to
consent to Internet delivery of future annual reports and proxy statements, follow the instructions
set forth below.
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Log onto the Internet and go to the website: http://www.computershare.com/us/ecomms (If you
are voting your shares this year using the Internet, you can link to this website directly
from the website where you vote your shares.) |
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Follow the instructions provided. |
If you are not a registered shareholder and you wish to consent to Internet delivery of future
annual reports and proxy statements, please contact the bank, broker or other holder of record
through which you hold your shares and inquire about the availability of such option for you.
If you consent, when Coopers 2008 Annual Report and the Proxy Statement for the 2009 Annual
Meeting of Shareholders become available, you will be notified by e-mail on how to access them on
the Internet.
If you do elect to receive your Cooper materials via the Internet, you can still request paper
copies by contacting Cooper Industries, Ltd. at 600 Travis, Suite 5600, Houston, Texas 77002-1001,
Attn: Investor Relations. Also, you may change or revoke your consent at any time by going to the
above website and following the applicable instructions.
Telephone and Internet proxy voting is permitted under the laws of the jurisdiction in which
Cooper is incorporated. Your telephone or Internet vote authorizes the proxies named on the proxy
card to vote your shares in the same manner as if you marked, signed, and returned your proxy
card.
▼IF
YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.▼
Proxy Cooper Industries, Ltd.
Proxy for Annual Meeting of Shareholders
April 29, 2008
Solicited on Behalf of the Board of Directors
The undersigned shareholder of Cooper Industries, Ltd. (Cooper) appoints Kevin M. McDonald and Terrance V. Helz, or either of them, proxies, with full power of substitution, to vote all shares of stock that the shareholder would be entitled to vote if present at the Annual Meeting of Shareholders of Cooper on Tuesday, April 29, 2008, at 11:00 a.m. (Central Time) in the 54th floor
conference room, Chase Tower, 600 Travis Street, Houston, Texas, and at any adjournments or postponements thereof, with all powers the shareholder would possess if present. The shareholder hereby revokes any proxies previously given with respect to such meeting. You can obtain directions to attend the Annual Meeting at www.cooperindustries.com/common/investorcenter/.
THIS PROXY WILL BE VOTED AS SPECIFIED ON THE REVERSE SIDE, BUT IF NO SPECIFICATION IS MADE, IT WILL BE VOTED FOR THE NOMINEES FOR DIRECTOR (ROBERT M. DEVLIN, LINDA A. HILL AND JAMES J. POSTL), FOR PROPOSALS 2 AND 3, AGAINST PROPOSAL 4, AND IN THE DISCRETION OF THE PROXIES ON OTHER MATTERS AS MAY COME BEFORE THE MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
This card also constitutes voting instructions for any shares held for the shareholder in Coopers Dividend Reinvestment and Stock Purchase Plan and the Cooper Industries Retirement Savings and Stock Ownership Plan, as well as any shares acquired through Coopers Employee Stock Purchase Plan that are being held in a book-entry account at Computershare Trust Company, N.A., as described in the Notice of Meeting and Proxy Statement.
INTERNET AVAILABILITY OF PROXY MATERIALS
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be held April 29, 2008. The proxy statement and Annual Report to Shareholders are also available at www.edocumentview.com/cbe.
(Please
date and sign on the reverse side)