<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 1-1175
Cooper Industries, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Ohio 31-4156620
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
600 Travis, Suite 5800, Houston, Texas 77002
(Address of Principal Executive Offices) (Zip Code)
713/209-8400
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- -------------------
Common Stock, $5 par value The New York Stock Exchange
Pacific Exchange
Rights to Purchase Preferred Stock The New York Stock Exchange
Pacific Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X]
The aggregate value of the registrant's voting stock held by
non-affiliates of the registrant as of March 2, 1998 was $6,770,704,943.
Number of shares outstanding of registrant's Common Stock as of
March 2, 1998 - 120,485,314
DOCUMENTS INCORPORATED BY REFERENCE
Cooper Industries, Inc. Proxy Statement for the Annual Meeting of Shareholders
to be held on April 28, 1998 (Part I Item 1, Part II - Items 6, 7, 7A and 8,
Part III - Items 10, 11 and 12 and Part IV - Item 14(a)(1))
<PAGE> 2
PART I
ITEM 1. BUSINESS; ITEM 2. PROPERTIES
GENERAL
The terms "Cooper" or "Company" refer to the registrant, Cooper
Industries, Inc. Cooper was incorporated under the laws of the State of Ohio on
January 8, 1919.
The Company's businesses operate in three business segments: Electrical
Products, Tools & Hardware and Automotive Products.
Cooper manufactures, markets and sells its products and provides
services throughout the world. Cooper has manufacturing facilities in 22
countries and currently employs approximately 41,200 people. On December 31,
1997, the plants and other facilities used by Cooper throughout the world
contained an aggregate of approximately 29,557,000 square feet of space, of
which approximately 79 percent was owned and 21 percent was leased. The charts
on the next page show the number of employees, square footage of facilities
owned and leased and location of manufacturing facilities for each industry
segment. Cooper believes its facilities are adequate and suitable for its
current and anticipated level of operations. Certain equipment and production
facilities have been financed by industrial revenue bonds issued by local
government authorities and are subject to security arrangements customary in
such financings.
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<PAGE> 3
<TABLE>
<CAPTION>
Square Footage of
Number and Nature of Facilities Plants and Facilities
----------------------------------------- -------------------------
Number of
Segment Employees Manufacturing Warehouse Sales Other Owned Leased
- ------- --------- ------------- --------- ----- ----- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Electrical 19,000 72 11 87 7 10,509,000 1,496,000
Products
Tools & Hardware 6,900 27 8 3 1 4,642,000 804,000
Automotive 15,000 48 13 13 6 8,166,000 3,789,000
Products
Other 300 -- -- -- 1 -- 151,000
------ --- -- --- -- ---------- ---------
Total 41,200 147 32 103 15 23,317,000 6,240,000
====== === == === == ========== =========
</TABLE>
<TABLE>
<CAPTION>
Manufacturing Plant Locations
-----------------------------
Europe
United South United (Other
Segment States Canada Mexico America Kingdom Than UK) Australia Other
- ------- ------ ------ ------ ------- ------- -------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Electrical Products 35 2 5 3 11 12 3 1
Tools & Hardware 16 - 2 2 1 4 2 -
Automotive Products 33 2 2 1 1 5 1 3
--- --- --- --- --- --- --- ---
Total 84 4 9 6 13 21 6 4
</TABLE>
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<PAGE> 4
Operations in the United States are conducted by unincorporated divisions
and wholly-owned subsidiaries of the Company, organized by the three business
segments. Activities outside the United States contribute significantly to the
revenues and operating earnings of all segments of Cooper. These activities are
conducted in major commercial countries by wholly-owned subsidiaries and
jointly-owned companies, the management of which is structured through the
Company's three business segments. As a result of these international
operations, sales and distribution networks are maintained throughout most of
the industrialized world. Cooper believes that generally there are no
substantial differences in the business risks associated with these
international operations compared with domestic activities, although Cooper is
subject to certain political and economic uncertainties encountered in
activities outside the United States, including trade barriers, restrictions on
foreign exchange and currency fluctuations. As the U.S. dollar strengthens
against foreign currencies at a rate greater than inflation in those countries,
the Company may experience lower segment revenues and operating earnings. The
five countries in which the Company generates the most international revenues
are Canada, Germany, Italy, Mexico and the United Kingdom. The Company has
leveraged its operations to reduce the impact of currency fluctuations on net
income to the extent practicable. The Company has several small joint ventures
with operations in China. Investments in China are subject to greater risks
related to economic and political uncertainties as compared to most countries
where the Company has operations. Exhibit 21.0 contains a list of Cooper's
subsidiaries.
Data with respect to Cooper's industry segments, domestic and international
operations and export sales are contained in Note 15 of the Notes to
Consolidated Financial Statements, incorporated herein by reference to pages
A-32 through A-34 of Appendix A to the Cooper Proxy Statement for the 1998
Annual Meeting of Shareholders. A discussion of acquisitions and divestitures is
included in Notes 3, 7, 17 and 18 of the Notes to Consolidated Financial
Statements, incorporated herein by reference to pages A-21, A-23 through A-25,
and A-36 of Appendix A to the Cooper Proxy Statement for the 1998 Annual Meeting
of Shareholders.
With its three business segments, Cooper serves four major markets:
industrial, construction, electrical power distribution and automotive. Markets
for Cooper's products and services are worldwide, though the United States is
the largest market. Within the United States, there is no material geographic
concentration by state or region. Most operating units experience significant
competition from both larger and smaller companies with the key competitive
factors being price, quality, brand name and availability. Cooper believes that
it is among the leading manufacturers in the world of electrical distribution
equipment; hazardous duty electrical equipment; emergency lighting; lighting
fixtures and fuses; nonpower hand tools; industrial power tools; chain products;
automotive and heavy-duty brake products; and automotive lamps, wire sets, spark
plugs, wiper blades, steering, suspension and driveline products; and aviation
ignition components.
Cooper's research and development activities are for purposes of improving
existing products and services and originating new products. During 1997,
approximately $61 million was spent for research and development activities as
compared with approximately $57 million in 1996 and $46 million in 1995. Cooper
obtains and holds patents on products and designs in the United States and many
foreign countries where operations are conducted. Although in the aggregate
Cooper's patents are important in the operation of its businesses, the loss by
expiration or otherwise of any one patent or group of patents would not
materially affect its business.
-4-
<PAGE> 5
Cooper does not presently anticipate that compliance with currently
applicable environmental regulations and controls will significantly change its
competitive position, capital spending or earnings during 1998. Cooper has been
a party to administrative and legal proceedings with governmental agencies that
have arisen under statutory provisions regulating the discharge or potential
discharge of material into the environment. Orders and decrees consented to by
Cooper have contained agreed-upon timetables for fulfilling reporting or
remediation obligations or maintaining specified air and water discharge levels
in connection with permits for the operations of various plants. Cooper believes
it is in compliance with the orders and decrees and such compliance is not
material to the business or financial condition of Cooper. For additional
information concerning the Company's accruals for environmental liabilities, see
Note 7 of the Notes to Consolidated Financial Statements, incorporated herein by
reference to pages A- 23 through A-25 of Appendix A to the Cooper Proxy
Statement for the 1998 Annual Meeting of Shareholders.
Approximately 58 percent of the United States hourly production work force
of Cooper is employed in 69 manufacturing facilities, distribution centers and
warehouses not covered by labor agreements. Numerous agreements covering
approximately 42 percent of the hourly production employees exist with 34
bargaining units at 35 operations in the United States. Forty-eight
international operations also have agreements with various unions. During 1997,
new agreements were concluded covering hourly production employees at 10
operations in the United States. Cooper considers its employee relations to be
excellent.
Sales backlog at December 31, 1997 was approximately $447 million
(excluding December 1997 acquisitions), all of which is for delivery during
1998, compared with backlog of approximately $456 million (excluding the Kirsch
window treatment operation divested in May of 1997) at December 31, 1996.
The following describes the business conducted by each of the Company's
business segments. Additional information regarding the products, markets and
distribution methods for each segment is set forth on the table at the end of
this Item. Information concerning market conditions, as well as information
concerning revenues and operating earnings for each segment is incorporated
herein by reference to pages A-1 through A-12 of Appendix A to the Cooper Proxy
Statement for the 1998 Annual Meeting of Shareholders.
Electrical Products
The Electrical Products segment manufactures, markets and sells electrical
and circuit protection products, including fittings, enclosures, plugs,
receptacles, lighting fixtures, fuses, emergency lighting, fire detection
systems and security products for use in residential, commercial and industrial
construction, maintenance and repair applications. The segment also
manufactures, markets and sells products for use by utilities and in industry
for electrical power transmission and distribution, including distribution
switchgear, transformers, transformer terminations and accessories, capacitors,
voltage regulators, surge arresters, pole line hardware and other related power
systems components.
The principal raw material requirements include copper, tin, lead,
plastics, insulating materials, pig iron, aluminum ingots, steel, aluminum and
brass. These raw materials are available from and supplied by numerous sources
located in the United States and abroad.
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<PAGE> 6
Demand for Electrical Products follows general economic conditions and is
generally sensitive to activity in the construction market, industrial
production levels and spending by utilities for replacements, expansions and
efficiency improvements. The segment's product lines are marketed directly to
original equipment manufacturers and utilities and through major distributor
chains and thousands of independent distributors to a variety of end users.
Tools & Hardware
The Tools & Hardware segment manufactures, markets and sells hand tools and
chain and clamp products for industrial, construction and consumer markets; and
air-powered and electric tools for general industry, primarily automotive and
aerospace manufacturers.
The principal raw material requirements include rolled coiled steel, wood,
plastic pellets, flat and bar stock steel, brass, copper, tin plate, fiberglass,
aluminum, iron castings and plastic sheet. These materials are available from
and supplied by numerous sources in the United States and abroad.
Demand for nonpowered hand tools, chain and clamp products and industrial
power tools is driven by employment levels and industrial activity in major
industrial countries and consumer spending. In addition, demand for industrial
power tools is influenced by automotive and aerospace production. The segment's
products are sold by a company salesforce, independent distributors and
retailers.
In May 1997, the Company completed the sale of its Kirsch window treatment
operation (drapery hardware and custom window coverings) to Newell Co.
In March 1998, the Company completed the acquisition of the INTOOL division
of Global Industrial Technologies, Inc. INTOOL manufactures and sells pneumatic
and electric industrial tools and assembly equipment used in industrial,
automotive, aerospace and energy markets.
Automotive Products
The Automotive Products segment manufactures, markets and sells automotive
and heavy-duty brakes, automotive lights, wire and cable, spark plugs, glow
plugs, windshield wipers, steering, suspension and driveline products and
other products for the automotive aftermarket; brake products, lights, spark
plugs, glow plugs, ignition coils and windshield wipers for original
equipment manufacturers; and aviation ignition components.
The principal raw material requirements include steel, iron, nickel, glass,
steel wool, fiberglass, carbon, aluminum, aluminum oxide, zinc, copper, rubber,
plastic and chemicals. The materials are available from and supplied by numerous
sources in the United States and abroad.
Demand for automotive aftermarket products is driven by the age and number
of vehicles on the road and the number of vehicle miles driven. Weather
conditions may affect consumer demand on a year-to-year basis for certain
replacement parts such as wiper blades. Demand for automotive products sold
to original equipment manufacturers is driven by the number of vehicles
produced. The segment's products are sold through distributors and
wholesalers to aftermarket outlets and directly to original equipment
manufacturers, retailers, mass merchandisers and national repair shop networks.
-6-
<PAGE> 7
In July 1997, the Company signed a letter of intent to exchange the
temperature control business of its Automotive Products segment for the brake
products business of Standard Motor Products, Inc. The transaction closed as of
March 28, 1998.
-7-
<PAGE> 8
PRODUCTS, MARKETS AND DISTRIBUTION METHODS BY SEGMENT
ELECTRICAL PRODUCTS
MAJOR PRODUCTS AND BRANDS
ARROW HART wiring devices.
BLESSING ELECTRONICS emergency lighting and power systems.
BUSS electrical and electronic fuses.
CAM-LOK electrical connectors.
COILTRONICS inductors and transformers.
COOPER POWER SYSTEMS distribution transformers, power capacitors, voltage
regulators, surge arresters and pole line hardware.
CROUSE-HINDS and CEAG electrical construction materials.
ELECTROMEC DIN style fuses.
FAIL-SAFE high abuse, clean room and vandal-resistant lighting fixtures.
FULLEON and NUGELEC fire alarms.
HALO recessed and track lighting fixtures.
IRIS lighting systems.
KARP, EDISON, MERCURY and B&S electrical fuses.
KEARNEY fuses, connectors, tools and switches.
KYLE distribution switchgear.
LUMINOX emergency lighting and fire detection systems.
MAGNUM terminal strips and disconnect blocks.
MCGRAW-EDISON and LUMARK indoor and outdoor lighting.
MENVIER-AMBERLEC central battery systems.
METALUX fluorescent lighting.
MWS modular wiring systems.
MYERS electrical hubs.
NOVA reclosers, sectionalizers and switches.
RTE transformer components, cable accessories and fuses.
SCANTRONIC security products.
SURE-LITES and ATLITE exit and emergency lighting.
SURGX ESD protection devices.
THEPITT electrical outlet and switch boxes.
VISTRAL low-profile emergency lights.
TOOLS & HARDWARE
MAJOR PRODUCTS AND BRANDS
APEX screwdriver bits, impact sockets and universal
ASSEMBLY SYSTEMS, BUCKEYE, DGD, DOLER, DOTCO GARDNER-DENVER and RECOULES
industrial power tools and assembly equipment.
CAMPBELL chain products.
CRESCENT pliers and wrenches.
DIAMOND farrier tools and horseshoes.
EREM precision cutters and tweezers.
LUFKIN measuring tapes.
MASTER POWER industrial air tools.
NICHOLSON files and saws.
PLUMB hammers.
STUHR finishing tools.
UTICA torque measuring and controls.
WELLER soldering equipment and torches.
WISS and H.K. PORTER cutting products.
XCELITE screwdrivers and nutdrivers.
AUTOMOTIVE PRODUCTS
MAJOR PRODUCTS AND BRANDS
ABEX, LEE, GIBSON and WAGNER brake components, including friction material,
hyddraulics, drums, rotors and hardware.
ANCO and CHAMPION windshield wiper products.
CHAMPION/POWER PATH ignition wire and battery cables.
CHAMPION spark plugs and igniters.
MOOG steering and suspension components.
PRECISION universal joints.
WAGNER, ZANXX and BLAZER lighting products.
-8-
<PAGE> 9
PRODUCTS, MARKETS AND DISTRIBUTION METHODS BY SEGMENT (CONT'D.)
ELECTRICAL PRODUCTS
MAJOR MARKETS
Fuses are sold to end-users in the construction, industrial, automotive and
consumer markets and to manufacturers in the electrical, electronic and
automotive industries. Lighting fixtures are utilized in residential
construction, industrial and commercial building complexes, shopping centers,
parking lots and sports facilities. Electrical power products are used in the
utility and industrial markets. Electrical construction materials are used in
commercial, residential and industrial projects, by utilities and wastewater
treatment plants and in the process and energy industries. Fire detection and
security systems are installed in commercial and industrial applications.
PRINCIPAL DISTRIBUTION METHODS
Through distributors for use in general construction, plant maintenance,
utilities, process and energy applications, shopping centers, parking lots,
sports facilities, and data processing and telecommunications systems; through
distributors and direct to manufacturers for use in electronic equipment for
consumer, industrial, government and military applications; and direct to
original equipment manufacturers of appliances, tools, machinery and electronic
equipment.
TOOLS AND HARDWARE
MAJOR MARKETS
Power tools are used by general industrial manufacturers, particularly durable
goods producers and original equipment manufacturers. Hand tools are used in a
variety of industrial, electronics, agricultural, construction and consumer
applications.
PRINCIPAL DISTRIBUTION METHODS
Through distributors and agents to general industry, particularly automotive,
appliance and aircraft maintenance; through distributors and wholesalers to
hardware stores, home centers, lumberyards, department stores and mass
merchandisers; and direct to original equipment manufacturers, home centers,
specialty stores, department stores, mass merchandisers and hardware outlets.
AUTOMOTIVE PRODUCTS
MAJOR MARKETS
Under-hood parts serve as replacement parts in the automotive, industrial, small
engine, recreational marine and aviation aftermarkets and as original equipment
for manufacturers of cars, light- and heavy-duty trucks and their service
networks. Under-car parts serve as replacement parts in the automotive and
light- and heavy-duty truck aftermarkets.
PRINCIPAL DISTRIBUTION METHODS
Replacement parts--to professional service technicians and repair garages
through warehouse distributors and jobbers; to do-it-yourself customers through
warehouse distributors and jobbers, retailers and mass merchandisers; and to
national repair shop networks. Original equipment parts--to original equipment
manufacturers and through their respective service networks.
Brand names that appear in bold type are registered trademarks of Cooper
Industries, Inc. or its subsidiaries, except Assembly Systems, AtLite, B&S,
Fail-Safe, Iris, Kearney, MWS, Myers, NOVA, Recoules, Stuhr and Thepitt, which
are unregistered trademarks. Gardner-Denver and SurgX are registered trademarks
of Gardner Denver Machinery Inc. and SurgX Corporation, respectively, and are
used by Cooper Industries under license.
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<PAGE> 10
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to various suits, legal proceedings and claims
that arise in the normal course of business. While it is not feasible to predict
the outcome of these matters with certainty, management is of the opinion that
their ultimate disposition should not have a material adverse effect on the
Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year covered by this report, no
matters were submitted to a vote of the shareholders.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock (symbol - CBE) is listed on the New York
Stock Exchange and the Pacific Exchange. Options for the Company's Common Stock
are listed on the American Stock Exchange.
As of March 2, 1998 there were 31,310 record holders of the Company's
Common Stock.
The high and low quarterly sales price for the past two years of the
Company's Common Stock, as reported by Dow Jones & Company, Inc., are as
follows:
<TABLE>
<CAPTION>
Quarter
------- -------- ------- --------
1 2 3 4
------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
1997 High $47.000 $53.750 $58.625 $55.875
Low 40.000 41.375 49.375 44.500
1996 High 39.875 44.625 43.375 44.125
Low 34.125 37.625 36.125 38.375
</TABLE>
Annual cash dividends declared on the Company's Common Stock during 1997 and
1996 were $1.32 a share ($.33 a quarter). On February 11, 1998, the Board of
Directors declared a quarterly dividend of $.33 a share, which will be paid
April 1, 1998 to shareholders of record on March 2, 1998.
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<PAGE> 11
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected historical financial data for Cooper for
each of the five years in the period ended December 31, 1997. The selected
historical financial information shown below has been derived from Cooper's
audited consolidated financial statements. This information should be read in
conjunction with Cooper's consolidated financial statements and notes thereto
incorporated herein by reference to pages A-13 through A-38 of Appendix A to the
Cooper Proxy Statement for the 1998 Annual Meeting of Shareholders.
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------------------------
1997(1) 1996 1995 1994 1993
--------- --------- --------- --------- ---------
(in millions, except per share data)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues $ 5,288.8 $ 5,283.7 $ 4,810.9 $ 4,512.5 $ 4,725.5
--------- --------- --------- --------- ---------
Income from continuing operations $ 394.6 $ 315.4 $ 280.6 $ 292.8 $ 299.0
Income from discontinued operations,
net of taxes -- -- -- .3 68.1
Charge for discontinued operations -- -- (186.6) (313.0) --
--------- --------- --------- --------- ---------
Net income (loss) $ 394.6 $ 315.4 $ 94.0 $ (19.9) $ 367.1
========= ========= ========= ========= =========
PER COMMON SHARE DATA:
Basic -
Income from continuing operations $ 3.36 $ 2.94 $2.52 $ 2.10 $ 2.15
Income (loss) from discontinued operations -- -- (1.67) (2.74) .60
--------- --------- --------- --------- ---------
Net income (loss) $ 3.36 $ 2.94 $ .85 $ (.64) $ 2.75
========= ========= ========= ========= =========
Diluted -
Income from continuing operations $ 3.26 $ 2.77 $ 2.41 $ 2.10 $ 2.15
--------- --------- --------- --------- ---------
Net income (loss) $ 3.26 $ 2.77 $ .96 $ (.64) $ 2.75
========= ========= ========= ========= =========
BALANCE SHEET DATA (at the end of period):
Total assets $ 6,052.5 $ 5,950.4 $ 6,063.9 $ 6,400.7 $ 6,361.7
Long-term debt 1,272.2 1,737.7 1,865.3 1,361.9 883.4
Shareholders' equity 2,576.6 1,890.2 1,716.4 2,741.1 3,009.6
CASH DIVIDENDS PER COMMON SHARE: $ 1.32 $ 1.32 $ 1.32 $ 1.32 $ 1.32
</TABLE>
- ---------------
(1) Includes the results of the Kirsch window treatment operation for
the five-month period ended May 30, 1997, which was sold to Newell
Co. on May 30, 1997.
- ---------------
In the fourth quarter of 1997, Cooper adopted Statement of Financial
Accounting Standards No. 128, Earnings Per Share. All prior period net income
(loss) per Common share data has been restated in connection with the adoption
of the new Standard. For additional information concerning the year-to-year
comparability of the financial information set forth in the preceding table, see
(i) Notes 1, 2, 3, 8, 9 and 18 of the Notes to Consolidated Financial Statements
and (ii) Management's Discussion and Analysis of Financial Condition and Results
of Operations, incorporated herein by reference to pages A-19 through A-21, A-25
through A-26, A-36 and A-1 through A-12 of Appendix A to the Cooper Proxy
Statement for the 1998 Annual Meeting of Shareholders.
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<PAGE> 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Incorporated by reference to pages A-1 through A-12 of Appendix A to the
Cooper Proxy Statement for the 1998 Annual Meeting of Shareholders.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Incorporated by reference to "Interest Rate and Foreign Currency Risk" on
pages A-11 through A-12 of Appendix A to the Cooper Proxy Statement for the 1998
Annual Meeting of Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by reference to pages A-13 through A-38 of Appendix A to the
Cooper Proxy Statement for the 1998 Annual Meeting of Shareholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference to pages 3 through 7 of the Cooper Proxy
Statement for the 1998 Annual Meeting of Shareholders.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference to pages 10 through 19 of the Cooper Proxy
Statement for the 1998 Annual Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference to pages 2 and 8 of the Cooper Proxy Statement
for the 1998 Annual Meeting of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
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<PAGE> 13
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements and Other Financial Data (incorporated by
reference to the pages shown below in Appendix A to the Cooper Proxy
Statement for the 1998 Annual Meeting of Shareholders).
<TABLE>
<CAPTION>
Page No.
<S> <C>
Report of Management......................................... A-13
Report of Independent Auditors............................... A-14
Cooper Industries, Inc.:
Consolidated Income Statements for each of
the three years in the period ended
December 31, 1997..................................... A-15
Consolidated Balance Sheets as of
December 31, 1997 and 1996............................ A-16
Consolidated Statements of Cash Flows for each
of the three years in the period ended
December 31, 1997..................................... A-17
Consolidated Statements of Shareholders' Equity
for each of the three years in the period ended
December 31, 1997..................................... A-18
Notes to Consolidated Financial Statements............ A-19
through
A-38
</TABLE>
Financial information with respect to subsidiaries not consolidated
and 50 percent or less owned entities accounted for by the equity
method has not been included since in the aggregate such subsidiaries
and investments do not constitute a significant subsidiary.
2. Financial Statement Schedules
Financial statement schedules are not included in this Form 10-K
Annual Report because they are not applicable or the required
information is shown in the financial statements or notes thereto.
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<PAGE> 14
3. Exhibits
3.1 Twenty-Seventh Amended Articles of Incorporation of Cooper
Industries, Inc. (incorporated herein by reference to
Exhibit 3.1 of the Company's Form 8-K dated August 5, 1997).
3.2 Code of Regulations (By-Laws), as amended, of Cooper
Industries, Inc.
4.1 Rights Agreement, dated as of August 5, 1997, between the
Company and First Chicago Trust Company of New York, as
Rights Agent (incorporated herein by reference to Exhibit
4.1 to the Company's Registration Statement on Form 8-A
dated August 14, 1997).
10.1 1989 Director Stock Option Plan (incorporated herein by
reference to Exhibit 28.1 to Registration Statement No.
2-33-29302).
10.2 Cooper Industries, Inc. Directors Deferred Compensation
Plan.
10.3 Cooper Industries, Inc. Directors Retirement Plan.
10.4 Cooper Industries, Inc. Executive Restricted Stock Incentive
Plan.
10.5 Cooper Industries, Inc. Supplemental Excess Defined Benefit
Plan.
10.6 Cooper Industries, Inc. Supplemental Excess Defined
Contribution Plan.
10.7 Management Incentive Compensation Deferral Plan.
10.8 Crouse-Hinds Company Officers' Disability and Supplemental
Pension Plan.
10.9 Cooper Industries, Inc. 1986 Stock Option Plan.
10.10 Form of Incentive Stock Option Agreement for Cooper
Industries, Inc. 1986 Stock Option Plan.
10.11 Form of Nonqualified Stock Option Agreement for Cooper
Industries, Inc. 1986 Stock option Plan.
10.12 Cooper Industries, Inc. Stock Incentive Plan (incorporated
herein by reference to Exhibit I to the Company's Proxy
Statement for the Annual Meeting of Shareholders held April
30, 1996.)
10.13 Form of Incentive Stock Option Agreement for Cooper
Industries, Inc. Stock Incentive Plan.
10.14 Form of Nonqualified Stock Option Agreement for Cooper
Industries, Inc. Stock Incentive Plan.
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<PAGE> 15
10.15 Form of Cooper Industries, Inc. Executive Stock Incentive
Agreement (incorporated herein by reference to Exhibit
10.12 of the Company's Form 10-K for the year ended
December 31, 1995).
10.16 Cooper Industries, Inc. Management Annual Incentive Plan
and amendment thereto (incorporated herein by reference to
Exhibits B and C to the Company's Proxy Statement for the
Annual Meeting of Shareholders to be held April 28, 1998).
10.17 Cooper Industries, Inc. Directors' Stock Plan
(incorporated herein by reference to Exhibit III to the
Company's Proxy Statement for the Annual Meeting of
Shareholders held April 30, 1996).
10.18 Form of Directors' Nonqualified Stock Option Agreement for
Directors' Stock Plan.
10.19 Cooper Industries, Inc. Directors' Retainer Fee Stock Plan
(incorporated herein by referenced to Exhibit A to the
Company's Proxy Statement for the Annual Meeting of
Shareholders to be held on April 28, 1998).
12.0 Computation of Ratios of Earnings to Fixed Charges for the
Calendar years 1993 through 1997.
13.0 Text of Appendix A to Cooper Industries, Inc. Proxy
Statement for the Annual Meeting of Shareholders to be
held April 28, 1998.
21.0 List of Cooper Industries, Inc. Subsidiaries.
23.0 Consent of Ernst & Young LLP.
24.0 Powers of Attorney from members of the Board of Directors
of Cooper Industries, Inc.
Cooper will furnish to the Commission supplementally upon request a
copy of any instrument with respect to long-term debt of the Company.
Copies of the above Exhibits are available to shareholders of record
at a charge of $.25 per page, minimum order of $10.00. Direct
requests to:
Cooper Industries, Inc.
Attn: Corporate Secretary
P.O. Box 4446
Houston, Texas 77210
(b) Reports on Form 8-K. During the last quarter of 1997, the Company
filed a report on Form 8-K dated October 23, 1997, which included a
copy of a press release containing the Company's financial results
for the quarter ended September 30, 1997.
-15-
<PAGE> 16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
COOPER INDUSTRIES, INC.
Date: March 30, 1998 By /s/H. JOHN RILEY, JR.
----------------------- -------------------------------
(H. John Riley, Jr., Chairman,
President and Chief Executive
Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/H. JOHN RILEY, JR. Chairman, President and Chief March 30, 1998
- ------------------------------------------ Executive Officer (Principal
(H. John Riley, Jr.) Executive Officer and Director)
/s/D. BRADLEY MCWILLIAMS Senior Vice President and March 30, 1998
- ------------------------------------------ Chief Financial Officer
(D. Bradley McWilliams)
/s/TERRY A. KLEBE Vice President and Controller March 30, 1998
- ------------------------------------------ (Principal Accounting Officer)
(Terry A. Klebe)
*HAROLD S. HOOK Director March 30, 1998
- ------------------------------------------
(Harold S. Hook)
*LINDA A. HILL Director March 30, 1998
- ------------------------------------------
(Linda A. Hill)
*CONSTANTINE S. NICANDROS Director March 30, 1998
- ------------------------------------------
(Constantine S. Nicandros)
*JOHN D. ONG Director March 30, 1998
- ------------------------------------------
(John D. Ong)
*SIR RALPH H. ROBINS Director March 30, 1998
- ------------------------------------------
(Sir Ralph H. Robins)
*JAMES R. WILSON Director March 30, 1998
- ------------------------------------------
(James R. Wilson)
* By /s/DIANE K. SCHUMACHER
- ------------------------------------------
(Diane K. Schumacher, as Attorney-In-Fact
for each of the persons indicated)
</TABLE>
-16-
<PAGE> 17
Cooper Industries, Inc.
1997 Annual Report on Form 10-K
Cross Reference Sheet
<TABLE>
<CAPTION>
Page Reference
Page Reference in Incorporated
Item No. and Description in Form 10-K in 10-K Proxy Statement
- ------------------------------------- -------------- -------------------
<S> <C> <C> <C>
Item 1. Business 2 through 9 A-1 through A-12
A-21
A-23 through A-25
A-32 through A-34
A-36
Item 2. Properties 2 through 9 -
Item 3. Legal Proceedings 10 -
Item 4. Submission of Matters to a Vote of 10 -
Security Holders
Item 5. Market for Registrant's Common Equity and 10 -
Related Stockholder Matters
Item 6. Selected Financial Data 11 A-13 through A-38
Item 7. Management's Discussion and Analysis of 12 A-1 through A-12
Financial Condition and Results of
Operations
Item 7A. Quantitative and Qualitative Disclosures 12 A-11 through A-12
About Market Risk
Item 8. Financial Statements and Supplementary 12 A-13 through A-38
Data
Item 9. Changes in and Disagreements with 12 -
Accountants on Accounting and Financial
Disclosure
Item 10. Directors and Executive Officers of the 12 3 through 7
Registrant
Item 11. Executive Compensation 12 10 through 19
Item 12. Security Ownership of Certain Beneficial 12 2,8
Owners and Management
Item 13. Certain Relationships and Related 12 -
Transactions
Item 14. Exhibits, Financial Statement Schedules, 13 through 15 A-13 through A-38
and Reports on Form 8-K
</TABLE>
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
3.1 Twenty-Seventh Amended Articles of Incorporation of Cooper
Industries, Inc. (incorporated herein by reference to
Exhibit 3.1 of the Company's Form 8-K dated August 5, 1997).
3.2 Code of Regulations (By-Laws), as amended, of Cooper
Industries, Inc.
4.1 Rights Agreement, dated as of August 5, 1997, between the
Company and First Chicago Trust Company of New York, as
Rights Agent (incorporated herein by reference to Exhibit
4.1 to the Company's Registration Statement on Form 8-A
dated August 14, 1997).
10.1 1989 Director Stock Option Plan (incorporated herein by
reference to Exhibit 28.1 to Registration Statement No.
2-33-29302).
10.2 Cooper Industries, Inc. Directors Deferred Compensation
Plan.
10.3 Cooper Industries, Inc. Directors Retirement Plan.
10.4 Cooper Industries, Inc. Executive Restricted Stock Incentive
Plan.
10.5 Cooper Industries, Inc. Supplemental Excess Defined Benefit
Plan.
10.6 Cooper Industries, Inc. Supplemental Excess Defined
Contribution Plan.
10.7 Management Incentive Compensation Deferral Plan.
10.8 Crouse-Hinds Company Officers' Disability and Supplemental
Pension Plan.
10.9 Cooper Industries, Inc. 1986 Stock Option Plan.
10.10 Form of Incentive Stock Option Agreement for Cooper
Industries, Inc. 1986 Stock Option Plan.
10.11 Form of Nonqualified Stock Option Agreement for Cooper
Industries, Inc. 1986 Stock option Plan.
10.12 Cooper Industries, Inc. Stock Incentive Plan (incorporated
herein by reference to Exhibit I to the Company's Proxy
Statement for the Annual Meeting of Shareholders held April
30, 1996.)
10.13 Form of Incentive Stock Option Agreement for Cooper
Industries, Inc. Stock Incentive Plan.
10.14 Form of Nonqualified Stock Option Agreement for Cooper
Industries, Inc. Stock Incentive Plan.
</TABLE>
<PAGE> 19
<TABLE>
<S> <C>
10.15 Form of Cooper Industries, Inc. Executive Stock Incentive
Agreement (incorporated herein by reference to Exhibit
10.12 of the Company's Form 10-K for the year ended
December 31, 1995).
10.16 Cooper Industries, Inc. Management Annual Incentive Plan
and amendment thereto (incorporated herein by reference to
Exhibits B and C to the Company's Proxy Statement for the
Annual Meeting of Shareholders to be held April 28, 1998).
10.17 Cooper Industries, Inc. Directors' Stock Plan
(incorporated herein by reference to Exhibit III to the
Company's Proxy Statement for the Annual Meeting of
Shareholders held April 30, 1996).
10.18 Form of Directors' Nonqualified Stock Option Agreement for
Directors' Stock Plan.
10.19 Cooper Industries, Inc. Directors' Retainer Fee Stock Plan
(incorporated herein by referenced to Exhibit A to the
Company's Proxy Statement for the Annual Meeting of
Shareholders to be held on April 28, 1998).
12.0 Computation of Ratios of Earnings to Fixed Charges for the
Calendar years 1993 through 1997.
13.0 Text of Appendix A to Cooper Industries, Inc. Proxy
Statement for the Annual Meeting of Shareholders to be
held April 28, 1998.
21.0 List of Cooper Industries, Inc. Subsidiaries.
23.0 Consent of Ernst & Young LLP.
24.0 Powers of Attorney from members of the Board of Directors
of Cooper Industries, Inc.
27 Financial Data Schedule (incorporated herein by
referenced to Exhibit 27 to the Company's Proxy
Statement for the Annual Meeting of Shareholders to
be held on April 28, 1998).
</TABLE>
<PAGE> 1
EXHIBIT 3.2
AMENDED
REGULATIONS
OF
COOPER INDUSTRIES, INC.
AS ADOPTED APRIL 26, 1988
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1. 1. Annual Meeting.
The annual meeting of the shareholders of the Company for the election of
directors and the transacting of such other business as shall be specified in
the notice of the meeting shall be held on the last Tuesday in April of each
year or on such other date as the directors may determine.
SECTION 1.2. Special Meetings.
Special meetings of the shareholders may be called at any time by the
Chairman of the Board, the President, or by a Vice President, or by action of
the directors at a meeting, or by a writing signed by a majority of the
directors in office, or by shareholders holding twenty-five percent or more of
the outstanding shares entitled to vote thereat, or by such shareholders and in
such manner as the Articles of Incorporation may provide.
SECTION 1.3. Place of Meetings.
All meetings of the shareholders shall be held at the principal office of
the Company in the City of Mount Vernon, Ohio, or at such other place in or
outside the State of Ohio, and at such time as may be designated by the Chairman
of the Board or the President and specified in the notice of meeting.
SECTION 1.4. Notice of Meetings.
Written notice of each annual or special meeting of the shareholders,
stating the time, place, and purposes thereof, shall be given to each
shareholder of record as of the applicable record date who is entitled to vote
thereat, by mailing the same, not less than ten days before the date of the
meeting, to his address as it appears on the records of the Company. Any
shareholder may waive any notice required to be given by law, the Articles, or
the Regulations, and the
<PAGE> 2
attendance of any shareholder at any meeting without protesting, prior to or at
the commencement of the meeting, the lack of proper notice shall be deemed to be
a waiver by him of notice of such meeting.
SECTION 1.5. Quorum.
Unless the Articles of Incorporation otherwise provide, the holders of
shares entitling them to exercise a majority of the voting power of the Company
shall constitute a quorum to hold a meeting of the shareholders; provided that
at any meeting duly called, whether or not a quorum is present, the holders of a
majority of the voting shares represented thereat may adjourn such meeting from
time to time without notice other than by announcement at such meeting.
ARTICLE II
BOARD OF DIRECTORS
SECTION 2.1. Number; Election; Term.
The number of directors shall be not less than nine nor more than fifteen,
as determined by the affirmative vote of a majority of the shares present or
represented and entitled to vote for directors at a duly called and held
meeting. In addition to the authority of the shareholders to fix or change the
number of directors, by a majority vote of the directors in office the directors
of the Corporation may change the number of directors and may fill any
director's office that is created by an increase in the number of directors. No
reduction shall have the effect of shortening the term of any incumbent director
and when so fixed such number shall continue to be the authorized number of
directors until changed by the shareholders or by the directors by vote as
aforesaid. The directors shall be divided into three classes, each class to
consist of three or more directors as determined by the affirmative vote of a
majority of the shares present or represented and entitled to vote for directors
at a duly called and held meeting, but no reduction shall have the effect of
shortening the term of any incumbent director and the number of directors in any
class shall not exceed by more than two the number in any other class. The term
of office of each director shall be until the third Annual Meeting following his
election (but not in excess of 3 years) and until the election and qualification
of his successor. In case of a vacancy among the directors of any class, the
vacancy may be filled for the unexpired term by vote of a majority of the
remaining directors, irrespective of class. During any vacancy in the Board of
Directors, the remaining directors shall have full power to act as the Board of
Directors of the Company. No director shall be removed without an 80% vote of
the voting power of the Corporation in favor of such removal, unless a majority
of the Board of Directors has previously voted in favor of said removal, in
which case the shareholder voting requirements specified under the Ohio General
Corporation Law shall apply.
SECTION 2.2. Quorum.
A majority of the directors in office at the time shall constitute a quorum
for a meeting of the directors; provided that at any meeting duly called,
whether or not a quorum is present, a majority of the directors present may
adjourn such meeting from time to time and place to place
<PAGE> 3
within or without the State of Ohio, without notice other than by announcement
at the meeting. At such meeting of the directors at which a quorum is present,
all questions and business shall be determined by the affirmative vote of not
less than a majority of the directors present.
SECTION 2.3. Organization Meeting.
Immediately after each annual meeting of the shareholders, or special
meeting held in lieu thereof, the directors, if a quorum is present, shall hold
an organization meeting at the place designated by the Chairman of the Board,
the President or a Vice President, for the purpose of electing officers and
transacting any other business. Notice of such meeting need not be given. If for
any reason such organization meeting is not held at such time, a special meeting
for such purpose shall be held as soon thereafter as practicable.
SECTION 2.4. Regular Meetings.
Regular meetings of the directors may be held at such times and places
within or without the State of Ohio as may be provided for in by-laws or
resolutions adopted by the directors and upon such notice, if any, as shall be
so provided for.
SECTION 2.5. Special Meetings.
Special meetings of the directors may be held at any time within or without
the State of Ohio upon call by the Chairman of the Board, the President, a Vice
President, or at least one-third of the directors. Notice of each such meeting
shall be given to each director by letter or telegram or in person not less than
forty-eight hours prior to such meeting; provided, however, that such notice
shall be deemed to have been waived by the directors attending such meeting, and
may be waived in writing or by telegram by any director either before or after
such meeting. Unless otherwise indicated in the notice thereof, any business may
be transacted at any organization, regular, or special meeting.
SECTION 2.6. Compensation.
The directors are authorized to fix a reasonable compensation for directors
and to provide a fee and reimbursement of expenses for attendance at any meeting
of the directors to be paid to each director who is not otherwise a salaried
officer or employee of the Company.
ARTICLE III
COMMITTEES
SECTION 3. 1. The directors at any time may elect from their number an
executive committee and other committees, each of which shall consist of not
less than three directors. Each member of such committee shall hold office at
the pleasure of the directors and may be removed by the directors at any time
with or without cause. Vacancies occurring in the committee may be filled by the
directors. During any vacancy on a committee, the remaining
<PAGE> 4
members shall have full power to act as the committee. Each committee may
prescribe its own rules for calling and holding meetings and its method of
procedure, subject, however, to any rules prescribed by the directors, and, if
no such rules shall have been prescribed, the rules applicable to calling and
holding directors' meetings shall apply to the committee meetings. A quorum for
any meeting of a committee shall consist of not less than a majority of the
members in office at the time and at each meeting of the committee at which a
quorum is present, all questions and business shall be determined by the
affirmative vote of not less than a majority of the members present. Except as
the executive committee's powers and duties may be limited or otherwise
prescribed by the directors, the executive committee, during the intervals
between the meetings of the directors, shall possess and may exercise all of the
powers of the directors in the management and control of the business and
property of the Company; and other committees shall have such powers of the
directors as shall be from time to time delegated to them by the Board of
Directors; provided, however, that no committee shall be empowered to elect
directors to fill vacancies among the directors or on any committee of the
directors. Subject to said exceptions, persons dealing with the Company shall be
entitled to rely upon any action of a committee with the same force and effect
as though such action had been taken by the directors. Subject to the rights of
third persons, any action of a committee shall be subject to revision or
alteration by the directors. The directors are authorized to fix a reasonable
compensation for members of the committees.
ARTICLE IV
OFFICERS
SECTION 4. 1. Officers Designated.
The directors at their organization meeting shall elect a President, one or
more Vice Presidents, a Secretary, a Treasurer, a Controller, and in their
discretion a Chairman of the Board, an Assistant Secretary or Secretaries, an
Assistant Treasurer or Treasurers, and such other officers as the directors may
see fit. The President and the Chairman of the Board shall be, and the other
officers may, but need not be, chosen from among the directors. Any two or more
of such officers other than that of President and Vice President, or Secretary
and Assistant Secretary, or Treasurer and Assistant Treasurer, may be held by
the same person, but no officer shall execute, acknowledge or verify any
instrument in more than one capacity.
SECTION 4.2. Tenure of Office.
The officers of the Company shall hold office until the next organization
meeting of the directors and until their successors are chosen and qualified,
except in case of resignation, death, or removal. The directors may remove any
officer at any time with or without cause by a majority vote of the directors in
office at the time. A vacancy in any office, however created, may be filled by
election by the directors.
<PAGE> 5
SECTION 4.3. Chairman of the Board.
The Chairman of the Board, if any, shall have such powers and duties as
appertain to that office and as may be prescribed by the directors.
SECTION 4.4. President.
The President shall have such powers and duties as appertain to that office
and as may be prescribed by the directors.
SECTION 4.5. Vice Presidents.
The Vice Presidents in the order designated by the directors shall perform
the duties of the President in case of the absence or disability of the latter,
or when circumstances prevent the latter from acting, together with such other
duties as the directors may prescribe. In case the President and such Vice
Presidents are absent or unable to perform their duties, the directors may
appoint a President pro tempore.
SECTION 4.6. Secretary.
The Secretary shall keep the minutes of all meetings of the shareholders
and the directors. He shall keep such books as may be required by the directors,
shall have charge of the seal, minute books and stock books of the Company, and
shall give all notices of meetings of the shareholders and of the directors, and
shall have such other powers and duties as the directors may prescribe.
SECTION 4.7. Treasurer.
The Treasurer shall receive and have in charge all money, bills, notes,
bonds, shares in other corporations and similar property belonging to the
Company, and shall do with the same as may be ordered by the directors. He shall
formulate and administer credit and collection policies and procedures, and
shall represent the Company in its relations with banks and other financial
institutions, subject to instructions from the directors. On the expiration of
his term of office, he shall turn over to his successor, or to the directors,
all property, books, papers, and money of the Company in his hands.
SECTION 4.8. Controller.
The Controller shall be the chief accounting officer of the Company, and
shall supervise the keeping of the financial accounts of the Company.
SECTION 4.9. Other Officers.
The other officers, if any, shall have such powers and duties as the
directors may prescribe.
<PAGE> 6
SECTION 4.10. Change in Power and Duties of Officers.
Anything in this Article IV to the contrary notwithstanding, the Board of
Directors may, from time to time, increase or reduce the powers and duties of
the respective officers of the Company whether or not the same are set forth in
this Code of Regulations and may permanently or temporarily delegate the duties
of any officer to any other officer, agent or employee and may generally control
the action of the officers and require performance of all duties imposed upon
them.
SECTION 4.11. Compensation.
The directors are authorized to determine or to provide the method of
determining the compensation of officers.
SECTION 4.12. Bond.
Any officer, if required by the directors, shall give bond for the faithful
performance of his duties. Any surety on such bond shall be at the expense of
the Company.
SECTION 4.13. Signing Checks and Other Instruments.
The directors are authorized to determine or provide the method of
determining how checks, notes, bills of exchange and similar instruments shall
be signed, countersigned, or endorsed.
SECTION 4.14. Authority to Transfer and Vote Securities.
The Chairman of the Board, the President, the Secretary or the Treasurer of
the Company are each authorized to sign the name of the Company and to perform
all acts necessary to effect a transfer of any shares, bonds, or other evidences
of indebtedness or obligations, subscription rights, warrants, and other
securities of another corporation owned by the Company and to issue the
necessary powers of attorney for the same; and each such officer is authorized
on behalf of the Company to vote such securities, to appoint proxies with
respect thereto, and to execute consents, waivers and releases with respect
thereto, or to cause any such action to be taken.
ARTICLE V
AMENDMENTS
SECTION 5.1. The regulations may be altered, changed, or amended in any
respect, or superseded by new regulations, in whole or in part, by the
affirmative vote of the holders of record of shares entitling them to exercise a
majority of the voting power of the Company with respect thereto at an annual or
special meeting called for such purpose or without a meeting by the written
consent of the holders of record of shares entitling them to exercise two-thirds
of the voting power with respect thereto.
<PAGE> 7
SECTION 5.2. Notwithstanding any other provisions of these Regulations or
any provision of law which might otherwise permit a lesser vote or no vote, but
in addition to any affirmative vote of the holders of any particular class or
series of stock required by law or these Regulations, the affirmative vote of
the holders of at least 80% of the Corporation's voting power shall be required
to alter, amend or repeal Article 11, Section 2.1 of these Regulations.
CERTIFICATE
I hereby certify that the foregoing is a true and correct copy of the
Regulations of Cooper Industries, Inc. at present in force.
IN WITNESS WHEREOF, I have hereunto set my hand as ______________________
Secretary of said Company and have affixed its corporate seal this _______ day
of ___________________, 19_____.
-------------------------------------------------
Secretary of Cooper Industries, Inc.
<PAGE> 1
EXHIBIT 10.2
COOPER INDUSTRIES, INC.
DIRECTORS DEFERRED
COMPENSATION PLAN
<PAGE> 2
COOPER INDUSTRIES, INC.
DIRECTORS DEFERRED
COMPENSATION PLAN
WHEREAS, Cooper Industries, Inc. (hereinafter referred to as the "Company")
has heretofore established a deferred compensation program, known as the
Directors Compensation Deferral Plan, for certain of the members of its Board of
Directors who wish to defer all, or a portion of, the fees payable for services
as a member of such Board of Directors; and
WHEREAS, the Company now desires to restate the aforementioned program to
be known as the Cooper Industries, Inc. Directors Deferred Compensation Plan
(hereinafter referred to as the "Plan");
NOW, THEREFORE, effective as of January 1, 1987, the Plan is amended and
restated as hereinafter set forth.
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. Except as otherwise required by the context, the terms
used in the Plan shall have the meaning hereinafter set forth.
(a) BENEFICIARY. The term "BENEFICIARY" shall mean the person who, in
accordance with the provisions of Article V, shall be entitled to receive a
distribution of a Participant's interest, or portion thereof, under the Plan in
the event a Participant dies prior to receiving distribution of his entire
interest.
(b) BOARD. The term "BOARD" shall mean the Board of Directors of Cooper
Industries, Inc.
(c) CODE. The term "CODE" shall mean the Internal Revenue Code of 1986, as
amended from time to time. Reference to a section of the Code shall include such
section and any comparable section or sections of any future legislation that
amends, supplements, or supersedes such section.
-1-
<PAGE> 3
(d) COMPANY. The term "COMPANY" shall mean Cooper Industries, Inc., an Ohio
corporation, its corporate successors, and the surviving corporation resulting
from any merger of Cooper Industries, Inc. with any other corporation or
corporations.
(e) COMPENSATION. The term "COMPENSATION" shall mean the total fees payable
to a Director during a calendar year from the Company for services as a
Director.
(f) COOPER DEFERRAL PLAN. The term "COOPER DEFERRAL PLAN" shall mean the
Cooper Industries, Inc. Management Incentive Compensation Deferral Plan, as
amended from time to time.
(g) DEFERRED ACCOUNT. The term "DEFERRED ACCOUNT" shall mean the account
established pursuant to Article III to which a Participant's deferred
Compensation and interest deemed to be earned thereon are credited.
(h) DIRECTOR. The term "DIRECTOR" shall mean any member of the Board.
(i) PARTICIPANT. The term "PARTICIPANT" shall mean any eligible Director
who participates in the Plan pursuant to Article II of the Plan.
(j) PLAN. The term "PLAN" shall mean the Cooper Industries, Inc. Directors
Deferred Compensation Plan as herein set forth.
(k) SECRETARY. The term "SECRETARY" shall mean the Secretary of the
Company.
1.2 CONSTRUCTION. Where necessary or appropriate to the meaning hereof, the
singular shall be deemed to include the plural, the plural to include the
singular, the masculine to include the feminine, and the feminine to include the
masculine.
ARTICLE II
ELIGIBILITY FOR PLAN PARTICIPATION
Any Director who is not an employee of the Company or a related corporation
shall become a Participant as of the date he first files a written election, on
a form prescribed by the Secretary, which contains:
(a) his authorization to reduce and defer his Compensation by a specific
percentage or amount;
-2-
<PAGE> 4
(b) the date on which any amounts so reduced and deferred, along with
interest earned thereon pursuant to the provisions of Article III, shall
commence to be paid; and
(c) the manner in which any such deferred amounts with interest shall be
paid to the Participant or a Beneficiary.
A Participant may change or terminate his election to defer Compensation by
written notice delivered to the Secretary. Such change or termination shall
become effective as of the end of the calendar year in which notice of
termination is given with respect to Compensation for subsequent calendar years.
Amounts credited to the Deferred Account of a Participant prior to the effective
date of change or termination shall not be affected thereby and shall be paid in
accordance with the provisions of Article IV.
ARTICLE III
DEFERRED ACCOUNTS AND AMOUNT
OF PLAN BENEFITS
Except as specified in Section 8.3, Compensation deferred at the election
of a Participant shall be held in the general funds of the Company and shall be
credited to a separate Deferred Account established in the name of such
Participant. The funds represented by the Deferred Account of a Participant
shall be deemed to earn interest in the manner and rate set forth in the Cooper
Deferral Plan. The Plan benefit payable to a Participant shall be equal to the
amount credited to such Participant's Deferred Account.
ARTICLE IV
PAYMENT OF PLAN BENEFITS
The benefit set forth in Article III and payable under the Plan shall be
distributed to a Participant in accordance with the terms of his current
election form on file with the Secretary
-3-
<PAGE> 5
pursuant to the provisions of Article II. In the event a Participant dies prior
to distribution of his entire Plan benefit, his remaining interest under the
Plan shall be distributed to his Beneficiary.
ARTICLE V
BENEFICIARIES
5.1 DESIGNATION OF BENEFICIARY. A Participant may designate a Beneficiary
to whom distribution shall be made hereunder in the event such Participant dies
before his interest is distributed to him in full. Any such designation or
change of designation shall be made in writing in the form prescribed by the
Secretary and shall become effective only when filed by the Participant with the
Secretary; provided, however, that any such designation or change of designation
which is received by the Secretary after the death of the Participant or former
Participant shall be disregarded.
5.2 BENEFICIARY IN ABSENCE OF A DESIGNATED BENEFICIARY. In the event that
either no Beneficiary has been designated or no Beneficiary survives such
Participant or former Participant, then the Beneficiary shall be the estate of
such Participant. If any Beneficiary designated pursuant to Section 5.1 dies
after becoming entitled to receive distributions hereunder and before such
distributions are made in full, and if no other person or persons have been
designated to receive the balance of such distributions upon the happening of
such contingency, the estate of such deceased Beneficiary shall become the
Beneficiary as to such balance.
ARTICLE VI
ADMINISTRATIVE PROVISIONS
6.1 ADMINISTRATION. The Plan shall be administered by the Secretary as an
unfunded plan that is not intended to meet the qualification requirements of
Section 401 of the Code.
-4-
<PAGE> 6
6.2 POWERS AND AUTHORITIES OF THE SECRETARY. The Secretary shall have full
power and authority to interpret, construe and administer the Plan and such
interpretations, construction, and actions, including the timing, form, amount,
or recipient of any payment to be made hereunder, shall be binding and
conclusive on all persons for all purposes. The Secretary may delegate any of
his powers, authorities, or responsibilities for the operation and
administration of the Plan to any person or committee so designated in writing
by him and may employ such attorneys, agents, and accountants as he may deem
necessary or advisable to assist him in carrying out his duties hereunder. The
Secretary shall not be liable to any person for any action taken or omitted in
connection with the interpretation and administration of the Plan unless
attributable to his own willful misconduct or lack of good faith.
6.3 INDEMNIFICATION. In addition to whatever rights of indemnification the
Secretary or any other person or persons to whom any power, authority, or
responsibility is delegated under the Plan, may be entitled under the articles
of incorporation, regulations, or by-laws of the Company, under any provision of
law, or under any other agreement, the Company shall satisfy any liability
actually and reasonably incurred by the Secretary or such other person or
persons, including expenses, attorneys' fees, judgments, fines, and amounts paid
in settlement, in connection with any threatened, pending, or completed action,
suit, or proceeding which is related to the exercise or failure to exercise by
the Secretary or such other person or persons of any of the powers, authority,
responsibilities, or discretion under the Plan.
-5-
<PAGE> 7
ARTICLE VII
AMENDMENT AND TERMINATION
The Company reserves the right to amend or terminate the Plan at any time;
provided, however, that no such action shall adversely affect any Participant
who is receiving retirement benefits under the Plan or who has accrued a benefit
under the Plan, unless an equivalent benefit is otherwise provided under another
plan or program sponsored by the Company.
ARTICLE VIII
MISCELLANEOUS
8.1 NON-ALIENATION OF RIGHTS OR BENEFITS. No benefit under the Plan shall
at any time be subject in any manner to alienation or encumbrance. If any
Participant or Beneficiary shall attempt to, or shall, alienate or in any way
encumber his benefits under the Plan, or any part thereof, or if by reason of
his bankruptcy or other event happening at any time any such benefits would
otherwise be received by anyone else or would not be enjoyed by him, his
interest in all such benefits shall automatically terminate and the same shall
be held or applied to or for the benefit of such person, his spouse, children,
or other dependents as the Secretary may select.
8.2 PAYMENT OF BENEFITS TO OTHERS. If any Participant or Beneficiary to
whom a Plan benefit is payable is unable to care for his affairs because of
illness or accident, any payment due (unless prior claim therefor shall have
been made by a duly qualified guardian or other legal representative) may be
paid to the spouse, parent, brother, or sister, or any other individual deemed
by the Secretary to be maintaining or responsible for the maintenance of such
person. Any payment made in accordance with the provisions of this Section 8.2
shall be a complete discharge of any liability of the Plan with respect to the
retirement benefit so paid.
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<PAGE> 8
8.3 FUNDING. In order to provide a source of payment for its obligations
under the Plan, the Company may establish a trust fund. Subject to the
provisions of the trust agreement governing such trust fund, however, the
obligation of the Company under the Plan to provide a Participant or a
Beneficiary with a benefit shall constitute the unsecured promise of the Company
to make payments as provided herein, and no person shall have any interest in,
or a lien or prior claim upon, any property of the Employer.
8.4 CLAIMS OF OTHER PERSONS. The provisions of the Plan shall in no event
be construed as giving any person, firm, or corporation any legal or equitable
right as against the Company, its officers, employees, or Directors, except any
such rights as are specifically provided for in the Plan or are hereafter
created in accordance with the terms and provisions of the Plan.
8.5 SEVERABILITY. The invalidity or unenforceability of any particular
provision of the Plan shall not affect any other provision hereof, and the Plan
shall be construed in all respects as if such invalid or unenforceable provision
were omitted herefrom.
8.6 GOVERNING LAW. The provisions of the Plan shall be governed and
construed in accordance with the laws of the State of Ohio.
* * *
EXECUTED at , this day of
, 1987.
COOPER INDUSTRIES, INC.
By
---------------------------------
Title:
-7-
<PAGE> 1
EXHIBIT 10.3
COOPER INDUSTRIES, INC.
DIRECTORS RETIREMENT
PLAN
<PAGE> 2
COOPER INDUSTRIES, INC.
DIRECTORS RETIREMENT
PLAN
WHEREAS, Cooper Industries, Inc. (hereinafter referred to as the "Company")
has heretofore established a supplemental retirement plan, known as the Restated
Director's Retirement Compensation Plan, for certain of the members of its Board
of Directors; and
WHEREAS, the Company now desires to restate the aforementioned plan to be
known as the Cooper Industries, Inc. Directors Retirement Plan (hereinafter
referred to as the "Plan");
NOW, THEREFORE, effective as of January 1, 1987, the Plan is amended and
restated as hereinafter set forth.
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. Except as otherwise required by the context, the terms
used in the Plan shall have the meaning hereinafter set forth.
(a) BOARD. The term "BOARD" shall mean the Board of Directors of Cooper
Industries, Inc.
(b) CHANGE IN CONTROL. The term "CHANGE IN CONTROL" shall mean the
occurrence of either of the following events:
(1) When any "person" (as such term is used in Sections 13(d)(3)
and 14(d)(2) of the Exchange Act) becomes the "beneficial owner" (as
such term is used in Rule 13d-3 under the Exchange Act) of securities
of the Company representing 20 percent or more of the combined voting
power of the Company's then outstanding securities and exercises, or
indicates intent to exercise, such voting power on any issue contrary
to the recommendations of management; or
(2) When individuals who, at the beginning of any two-year
period, constitute the Board of Directors of the Company cease for any
reason to
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<PAGE> 3
constitute at least three-fourths thereof unless the election, or the
nomination for election by the Company's shareholders, of each new
director was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning of
such period.
(c) CODE. The term "CODE" shall mean the Internal Revenue Code of 1986, as
amended from time to time. Reference to a section of the Code shall include such
section and any comparable section or sections of any future legislation that
amends, supplements, or supersedes such section.
(d) COMPANY. The term "COMPANY" shall mean Cooper Industries, Inc., an Ohio
corporation, its corporate successors, and the surviving corporation resulting
from any merger of Cooper Industries, Inc. with any other corporation or
corporations.
(e) COOPER SALARIED PLAN. The term "COOPER SALARIED PLAN" shall mean the
Salaried Employees' Retirement Plan of Cooper Industries, Inc., as amended from
time to time.
(f) DIRECTOR. The term "DIRECTOR" shall mean any member of the Board.
(g) PARTICIPANT. The term "PARTICIPANT" shall mean any eligible Director
who participates in the Plan pursuant to Article II of the Plan.
(h) PLAN. The term "PLAN" shall mean the Cooper Industries, Inc. Directors
Retirement Plan as herein set forth.
(i) PLANS ADMINISTRATION COMMITTEE. The term "PLANS ADMINISTRATION
COMMITTEE" shall mean the Cooper Industries Plans Administration Committee
established by the Board to oversee the administration of the Company's pension
benefit plans.
(j) SECRETARY. The term "SECRETARY" shall mean the Secretary of the
Company.
(k) TENURE POLICY. The term "TENURE POLICY" shall mean the Directors Tenure
Policy as adopted by the Board on February 17, 1975, and as amended from time to
time.
1.2 CONSTRUCTION. Where necessary or appropriate to the meaning hereof, the
singular shall be deemed to include the plural, the plural to include the
singular, the masculine to include the feminine, and the feminine to include the
masculine.
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<PAGE> 4
ARTICLE II
ELIGIBILITY FOR PLAN PARTICIPATION
Any Director who serves as a Director during at least ten calendar years (a
fractional year shall be counted as a whole year) or who retires in accordance
with the terms of the Tenure Policy, shall automatically become a Participant as
of the date he serves such ten years or so retires. Notwithstanding the
foregoing, in the event of a Change in Control, each Director who is a Director
immediately prior to the Change in Control shall become a Participant on the day
before the date on which the Change in Control is effective.
ARTICLE III
AMOUNT OF PLAN BENEFITS
The amount of the annual benefit payable to a Participant pursuant to
Article IV of the Plan shall be an amount equal to the basic annual retainer
(exclusive any special amounts payable for services as a Committee Chairman or
for attendance at Committee meetings or special Board meetings) payable to an
outside Director as of the date such Participant ceases to be a Director.
ARTICLE IV
PAYMENT OF PLAN BENEFITS
The annual benefit set forth in Article III and payable under the Plan with
respect to the preceding calendar year, shall be paid to a Participant on the
January 2nd immediately following the year in which such Participant ceases to
be a Director and shall continue to be paid each subsequent January 2nd until
the number of calendar years (a fractional year shall be counted as a whole
year) such Participant was a Director of the Company elapses. In lieu of
receiving payment of his benefit under the Plan in such foregoing manner and
form, a Participant may elect to receive
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<PAGE> 5
his Plan benefit in quarterly installments, commencing with the first day of
the calendar year quarter immediately following the date on which such
Participant ceases to be a Director and terminating with the quarter coinciding
with the end of the period equal to the number of years (a fractional year shall
count as a whole year) such Participant was a Director. Notwithstanding the
foregoing provisions, no benefits shall be payable under the Plan for any
period, or part thereof, following the death of a Participant.
ARTICLE V
ADMINISTRATIVE PROVISIONS
5.1 ADMINISTRATION. The Plan shall be administered by the Secretary as an
unfunded plan that is not intended to meet the qualification requirements of
Section 401 of the Code.
5.2 POWERS AND AUTHORITIES OF THE SECRETARY. The Secretary shall have full
power and authority to interpret, construe, and administer the Plan and such
interpretations, construction, and actions, including the timing, form, amount,
or recipient of any payment to be made hereunder, shall be binding and
conclusive on all persons for all purposes. The Secretary may delegate any of
his powers, authorities, or responsibilities for the operation and
administration of the Plan to any person or committee so designated in writing
by him and may employ such attorneys, agents, and accountants as he may deem
necessary or advisable to assist him in carrying out his duties hereunder. The
Secretary shall not be liable to any person for any action taken or omitted in
connection with the interpretation and administration of the Plan unless
attributable to his own willful misconduct or lack of good faith.
5.3 INDEMNIFICATION. In addition to whatever rights of indemnification the
Secretary, a member of the Plans Administration Committee, or any other person
or persons to whom any
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<PAGE> 6
power, authority, or responsibility is delegated under the Plan, may be entitled
under the articles of incorporation, regulations, or by-laws of the Company,
under any provision of law, or under any other agreement, the Company shall
satisfy any liability actually and reasonably incurred by the Secretary, a Plans
Administration Committee member, or such other person or persons, including
expenses, attorneys, fees, judgments, fines, and amounts paid in settlement, in
connection with any threatened, pending, or completed action, suit, or
proceeding which is related to the exercise or failure to exercise by the
Secretary, a Plans Administration Committee member, or such other person or
persons of any of the powers, authority, responsibilities, or discretion under
the Plan.
ARTICLE VI
AMENDMENT AND TERMINATION
The Company reserves the right to amend or terminate the Plan at any time
by action of the Plans Administration Committee; provided, however, that no such
action shall adversely affect any Participant who is receiving retirement
benefits under the Plan or who has accrued a benefit under the Plan, unless an
equivalent benefit is otherwise provided under another plan or program sponsored
by the Company.
ARTICLE VII
MISCELLANEOUS
7.1 NON-ALIENATION OF RETIREMENT RIGHTS OR BENEFITS. No benefit under the
Plan shall at any time be subject in any manner to alienation or encumbrance. If
any Participant or Beneficiary shall attempt to, or shall, alienate or in any
way encumber his benefits under the Plan, or any part thereof, or if by reason
of his bankruptcy or other event happening at any time any
-5-
<PAGE> 7
such benefits would otherwise be received by anyone else or would not be enjoyed
by him, his interest in all such benefits shall automatically terminate and the
same shall be held or applied to or for the benefit of such person, his spouse,
children, or other dependents as the Secretary may select.
7.2 FUNDING. In order to provide a source of payment for its obligations
under the Plan, the Company may establish a trust fund. Subject to the
provisions of the trust agreement governing such trust fund, however, the
obligation of the Company under the Plan to provide a Participant or a
Beneficiary with a benefit shall constitute the unsecured promise of the Company
to make payments as provided herein, and no person shall have any interest in,
or a lien or prior claim upon, any property of the Company.
7.3 CONTROLLING STATUS. No Participant shall be eligible for a benefit
under the Plan unless such Participant is a Participant on the date of his
retirement from the Board.
7.4 CLAIMS OF OTHER PERSONS. The provisions of the Plan shall in no event
be construed as giving any person, firm, or corporation any legal or equitable
right as against the Company, its officers, employees, or Directors, except any
such rights as are specifically provided for in the Plan or are hereafter
created in accordance with the terms and provisions of the Plan.
7.5 SEVERABILITY. The invalidity or unenforceability of any particular
provision of the Plan shall not affect any other provision hereof, and the Plan
shall be construed in all respects as if such invalid or unenforceable provision
were omitted herefrom.
7.6 GOVERNING LAW. The provisions of the Plan shall be governed and
construed in accordance with the laws of the State of Ohio.
-6-
<PAGE> 8
* * *
EXECUTED at , this day of
, 1987.
COOPER INDUSTRIES, INC.
By
-----------------------------
Title:
-7-
<PAGE> 1
EXHIBIT 10.4
COOPER INDUSTRIES, INC.
EXECUTIVE RESTRICTED STOCK INCENTIVE PLAN
(AS AMENDED BY THE BOARD OF DIRECTORS ON FEBRUARY 21, 1990)
1. Purposes of the Plan
The Cooper Industries, Inc. Executive Restricted Stock Incentive Plan (the
"Plan") is intended to provide a means whereby key policy-making employees of
Cooper Industries, Inc., an Ohio corporation (the "Company"), and its
subsidiaries may sustain a sense of proprietorship and personal involvement in
the continued development and financial success of the Company, and to encourage
them to remain with and devote their best efforts to the business of the
Company, thereby advancing the interests of the Company and its shareholders.
Accordingly, the Company may award to certain employees shares of the $5.00 par
value common stock of the Company ("Stock"), on the terms and conditions herein
established.
2. Administration of the Plan
The Plan shall be administered by a committee (the "Committee") of not less
than three directors of the Company who shall be appointed by and serve at the
pleasure of the Board of Directors of the Company. Members of the Committee
shall be "disinterested persons" as such term is defined in the rules
promulgated from time to time under Section 16 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). The Committee shall have sole authority
from time to time to select the employees from among those eligible to whom
shares of Stock shall be awarded under the Plan, to establish the number of such
shares which may be awarded to each such employee and the time when certificates
for such shares shall be issued, and to prescribe the legend to be affixed to
the certificate representing such shares. The Committee is authorized to
interpret the Plan and may from time to time adopt such rules, regulations,
forms and agreements, not inconsistent with the provisions of the Plan, as it
may deem advisable to carry out the Plan. All decisions made by the Committee in
administering the Plan shall be final.
3. Eligibility of Employees
Shares of Stock may be awarded under the Plan only to individuals who are
key employees (including officers and directors who are also key employees) of
the Company or any subsidiary corporation (as defined in section 425 of the
Internal Revenue Code of 1954) of the Company. Shares may be awarded to the same
employee on more than one occasion.
1
<PAGE> 2
4. Shares Subject to the Plan
The aggregate number of shares of Stock which may be awarded to employees
under the Plan shall not exceed 1,200,000 shares of Stock. Such shares may
consist of authorized but unissued shares of Stock or previously issued shares
reacquired by the Company. Any of such shares which remain unissued at the
termination of the Plan shall cease to be subject to the Plan, but until
termination of the Plan, the Company shall at all times make available a
sufficient number of shares to meet the requirements of the Plan. If Restricted
Shares (defined in Paragraph 5) or Unissued Shares (defined in Paragraph 12) are
forfeited to the Company, such shares shall again become available for issuance
under the Plan. The aggregate number of shares which may be awarded under the
Plan may be adjusted to reflect a change in capitalization of the Company, such
as a stock dividend or stock split.
5. Issuance of Shares and Forfeiture Restrictions
Certificates for shares of Stock awarded to an employee under the Plan may
be issued to an employee under this Paragraph 5 from time to time as determined
by the Committee. The shares of Stock so issued to an employee shall not be
sold, exchanged, transferred, pledged, hypothecated or otherwise disposed of,
and in the event of termination of the employee's employment with the Company
for any reason (including death and disability, unless the Committee in its sole
discretion decides to terminate the Forfeiture Restrictions following the death
or disability of such employee) the employee shall be obligated, for no
consideration, to forfeit and surrender such shares (to the extent then subject
to the Forfeiture Restrictions) to the Company. The restrictions against
disposition and the obligations to forfeit and surrender shares to the Company
are herein referred to as the "Forfeiture Restrictions", and the shares which
are then subject to the Forfeiture Restrictions are herein sometimes referred to
as "Restricted Shares". Certificates representing Restricted Shares shall be
appropriately legended to reflect the Forfeiture Restrictions.
6. Lapse of Forfeiture Restrictions and Issuance of Additional Shares
(a) The Forfeiture Restrictions with respect to Restricted Shares and
Unissued Shares shall lapse and be of no further force and effect upon the
expiration of the period of time fixed by the Committee at the time it awards
the shares which are subject to the Forfeiture Restrictions. In addition, upon
such lapse of the Forfeiture Restrictions, the Company shall issue to the
employee an additional number of shares of Stock, not subject to any Forfeiture
Restrictions. The number of such additional shares of Stock shall be determined
in accordance with a table adopted by the Committee at the time it makes an
award of shares which are subject to the Forfeiture Restrictions. Such table
shall relate the number of additional shares to be issued to the employee to the
performance of the Company during a period including the fiscal year of the
Company immediately preceding the award of shares subject to the Forfeiture
Restrictions (the "Base Period") and ending with the fiscal year of the Company
immediately preceding the lapse of the Forfeiture Restrictions; provided that in
the event of a lapse of Forfeiture Restrictions pursuant to
2
<PAGE> 3
Paragraph 7, the period will end on the most recent practicable date preceding
the date a determination is made pursuant to Paragraph 7. (b) The Forfeiture
Restrictions with respect to Restricted Shares and Unissued Shares shall lapse
and be of no further force and effect upon the employee's retirement at or after
reaching age 65. Upon such lapse of Forfeiture Restrictions, the Company shall
issue to such employee any Unissued Shares (the initial grant) and, in the
Committee's discretion, an additional number of shares of Stock based upon the
Company's performance during a period beginning with the Base Period and ending
with the first calendar quarter ending after the date of the employee's
retirement. (c) Upon the issuance of such additional number of shares pursuant
to subparagraphs (a) or (b) of this paragraph 6, the Company shall also pay to
the employee in cash an amount equal to the aggregate amount of the cash
dividends which the employee would have received had he been the owner of record
of such additional number of shares during the period commencing with the date
of award of shares subject to the Forfeiture Restrictions and ending upon the
lapse of the Forfeiture Restrictions with respect to such Shares.
7. Reorganization, Recapitalization and Changes in Control
The Forfeiture Restrictions shall not apply to the transfer of shares
pursuant to a plan of reorganization of the Company, but the stock or securities
received in exchange therefor, and any stock received as a result of a stock
split or stock dividend with respect to shares so transferred shall also be
subject to the Forfeiture Restrictions for all purposes of the Plan.
Notwithstanding the foregoing, if (i) the Company is to be merged into or
consolidated with one or more corporations and the Company is not to be the
surviving corporation, (ii) the Company is to be dissolved and liquidated, (iii)
substantially all of the assets and business of the Company are to be sold, or
(iv) there occurs a "change in control" of the Company, then, on or prior to the
effective date of such merger, consolidation, dissolution and liquidation, or
sale, and in the event of a change in control, at any time prior to or following
the occurrence of such a change in control the Committee may, in its sole
discretion, with respect to any portion of or all grants of Restricted Shares
and Unissued Shares theretofore made and subject to Forfeiture Restrictions (a)
fix a date (which date in the event of a change in control shall be the date of
such change in control) on which date all Forfeiture Restrictions shall lapse
and determine the number of additional shares earned pursuant to Paragraph 6 as
of such date and (b) pay to the employee an amount in cash equal to the fair
market value computed as of such date of all Unissued Shares and additional
shares so determined or issue stock for all Unissued Shares and additional
shares so determined or pay and issue a combination of cash and stock therefor
and shall pay in cash the amount of cash dividends payable with respect to the
additional shares pursuant to Paragraph 6. Paragraph 13 shall have no effect if
Forfeiture Restrictions lapse under this Paragraph 7. For purposes hereof, a
"change in control" of the Company shall be deemed to have occurred if (i) any
"person" as such term is used in Section 13 (d) (3) and 14 (d) (2) of the
Exchange Act is or becomes the "beneficial owner" (as such term is used in Rule
13d-3 issued under the Exchange Act) of securities of the Company representing
20% or more of the combined voting power of the Company's then outstanding
securities or (ii) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board of Directors of the Company
cease for any reason
3
<PAGE> 4
to constitute at least three-fourths thereof unless the election, or the
nomination for election by the Company's shareholders, of each new director was
approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of the period. In the event that a change in
control results in there being fewer than three members of the Committee who
were members prior to the change, members of the Board of Directors who were
members prior to the change and meet the requirements for Committee membership
set forth in Paragraph 2 shall automatically be alternate members of the
Committee to act under this Paragraph 7, and if there are not three such
persons, then the Forfeiture Restrictions automatically shall lapse and
additional shares automatically shall be determined pursuant to Paragraph 6
hereof and an amount in cash equal to the fair market value of all Unissued
Shares, all additional shares and all dividends on additional shares pursuant to
Paragraph 6 shall be paid in cash in full.
8. Term of Plan
The Plan shall be effective upon the date of its last approval by the
shareholders of the Company. Unless sooner terminated under the provisions of
Paragraph 14, no further shares shall be awarded under the Plan after the
expiration of ten years from the effective date of the Plan, and the Plan shall
terminate when the Forfeiture Restrictions on any shares theretofore awarded
under the Plan have lapsed and any additional shares with respect thereto have
been issued under Paragraph 6.
9. Rights as Shareholder
Upon delivery of Restricted Shares to an employee, except for the
Forfeiture Restrictions, such employee shall have all of the rights of a
shareholder of the Company with respect to such Restricted Shares, including the
right to vote such Restricted Shares and to receive all dividends or other
distributions paid with respect to such Restricted Shares.
10. Employment Relationship
An employee shall be considered to be in the employment of the Company as
long as he remains an employee of either the Company or a subsidiary Corporation
of the Company. Any question as to whether and when there has been a termination
of such employment, and the cause of such termination, shall be determined by
the Committee and its determination shall be final. Nothing herein shall confer
on any employee the right to continued employment with the Company or affect the
right of the Company to terminate such employment.
11. Withholding of Tax
To the extent the award or issuance of shares of Stock or the lapse of
Forfeiture Restrictions results in the receipt of compensation by an employee,
the Company (or the employing subsidiary) is authorized to withhold from any
other cash compensation then or thereafter payable to such employee any tax
required to be withheld by reason of the receipt of
4
<PAGE> 5
compensation resulting from the award or issuance of shares or the lapse of
Forfeiture Restrictions.
12. Committee Discretion to Issue Share Certificates
Notwithstanding any other provision hereof, the Committee has the absolute
discretion to determine whether to issue share certificates for shares of Stock
awarded to any employee pursuant to Paragraph 2 of the Plan. Shares of Stock
awarded to an employee pursuant to Paragraph 2 but for which no share
certificates are issued are herein sometimes called "Unissued Shares". An
employee's interest in Unissued Shares shall be subject to the Forfeiture
Restrictions in the same manner as Restricted Shares. The employee will be
entitled to receive share certificates for Unissued Shares on the date upon
which the Forfeiture Restrictions with respect to such shares lapse. In the
event of termination of the employee's employment for any reason, none of the
Unissued Shares shall be issued to the employee, except pursuant to Paragraph
6(b) or in the sole discretion of the Committee following the death or
disability of such employee. Until share certificates with respect to Unissued
Shares are delivered to the employee, the employee will have no rights as a
shareholder of the Company except the employee shall have the right to receive
an amount in cash equal to dividends and other distributions paid with respect
to the Unissued Shares. Notwithstanding the foregoing, Unissued Shares shall be
adjusted from time to time to reflect stock dividends and stock splits.
13. Election to Receive Cash for Shares
Subject to the conditions set forth in this Paragraph 13, each employee who
receives an award of Restricted Shares or Unissued Shares under the Plan shall,
with respect to each such award, have the right to request that he be paid in
cash an amount equal to the fair market value of a portion of the additional
shares he would be entitled to receive pursuant to Paragraph 6. Such request
shall be made by delivering to the Company at the office of its Secretary a
notice setting forth that portion (expressed as a percentage) of additional
shares for which the employee desires to receive cash. Said notice shall be
delivered no later than the date designated by the Committee for this purpose.
The Committee shall consider the employee's request and have absolute discretion
to determine if and to what extent the request shall be approved. In no event
may the employee receive under this Paragraph or Paragraph 6 cash for Restricted
Shares or Unissued Shares or an amount of cash (including the cash otherwise
payable to him pursuant to Paragraph 6) which is greater than 50% of the sum of
(i) the fair market value of the Restricted Shares or Unissued Shares and
additional shares to be received by the employee pursuant to Paragraph 6, and
(ii) the aggregate amount of cash dividends to be received by the employee
pursuant to Paragraph 6. For the purposes of this Paragraph 13, the fair market
value of the Restricted Shares or Unissued Shares and additional shares shall be
the average of the high and low trading prices of the Company's Stock on the New
York Stock Exchange on the date that the Forfeiture Restrictions lapse. To the
extent the employee's request is not approved, he shall nonetheless receive
payment in accordance with Paragraph 6.
5
<PAGE> 6
14. Amendment or Termination of the Plan
The Board of Directors of the Company in its discretion may terminate the
Plan at any time with respect to any Restricted Shares or Unissued Shares which
have not theretofore been issued. The Board of Directors shall have the right to
alter or amend the Plan or any part thereof from time to time; provided, that no
change may be made which would impair the rights of an employee to whom
Restricted Shares or Unissued Shares have theretofore been awarded without the
consent of said employee; and provided, further, that the Board of Directors may
not make any alteration or amendment which would materially increase the
benefits accruing to participants under the Plan, increase the aggregate number
of shares which may be issued under the Plan (other than an increase reflecting
a change in capitalization of the Company), change the class of employees
eligible to receive Stock under the Plan, or extend the term of the Plan,
without the approval of the shareholders of the Company.
15. Election to Defer Shares
Each employee shall have the right to elect to defer the issuance and
receipt of all or a part of any shares to which such employee may become
entitled pursuant to Paragraphs 12 (Unissued Shares) and 6 (additional shares)
until either the employee's termination of employment with the Company or a
calendar year specified by the employee. The dividend equivalent cash payment
pursuant to Paragraph 6 with respect to deferred additional shares and similar
cash dividend equivalents with respect to any deferred Unissued Shares pursuant
to Paragraph 12 shall not be paid on or after the date when the Forfeiture
Restrictions lapse, as provided, but instead shall be credited to the deferral
account of the employee ("Employee Account"). The Employee Account shall be
increased from time to time by the amount of cash dividends which the employee
would have received had he been the owner of record of such deferred shares
during the deferral period with respect to such shares. The balance from time to
time of Employee Account shall bear interest in an amount equal to the average
quarterly prime rate of interest charged by The Chase Manhattan Bank, N.A. The
deferred shares shall be issued in three annual installments unless the
Committee, in its discretion, determines to issue all of such deferred
additional shares on the first installment date. Upon the issuance of any or all
of such shares, the Company shall also pay to the employee in cash the portion
of the Employee Account theretofore credited with respect to such issued shares
together with accrued interest thereon as provided above. If the employee elects
deferral until termination of employment, the first installment shall be made in
January of the year following termination, if such termination is by reason of
disability or retirement, or in the month following termination, if such
termination is for any other reason other than death. If the employee elects
deferral until a specified calendar year, the first installment shall be made in
January of such year or in January of the year following the death of the
employee, whichever is earlier. In the event an employee dies prior to issuance
of any deferred shares or the payment of cash with respect thereto, all such
shares shall be issued, and all such cash payments shall be made, in January of
the year following death to such beneficiary or beneficiaries as such employee
may designate by writing to the Company. A deferral election by an employee
hereunder with respect to Restricted Shares or additional shares issuable by
reason of the grant of Restricted
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<PAGE> 7
Shares must be made in writing to the Company on or before December 31 of the
third calendar year of the forfeiture period related to the grant. The election
to receive cash provided for in Paragraph 13 shall not be available with respect
to shares the receipt of which is deferred under this Paragraph 15.
7
<PAGE> 1
Exhibit 10.5
COOPER INDUSTRIES, INC.
SUPPLEMENTAL EXCESS
DEFINED BENEFIT PLAN
(August 1, 1990 Restatement)
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COOPER INDUSTRIES, INC.
SUPPLEMENTAL EXCESS
DEFINED BENEFIT PLAN
(August 1, 1990 Restatement)
WHEREAS, Cooper Industries, Inc. (thereinafter referred to as the
"Company") maintains the Cooper Industries, Inc. Supplemental Excess Defined
Benefit Plan (hereinafter referred to as the "Plan") for the benefit of a
select group of management employees of the Company and its subsidiaries; and
WHEREAS, Champion Spark Plug Company, which was acquired by, and is a
wholly-owned subsidiary of, the Company, maintains the Excess Benefit Plan for
Participants in the Champion Spark Plug Company Salaried Employees' Retirement
Income Plan (hereinafter referred to as the "Champion Excess Plan") and
Champion Spark Plug Company Supplemental Benefit Plan (hereinafter referred to
as the "Champion Supplemental Plan"); and
WHEREAS, Cameron Iron Works USA, Inc., which maintained the
Restoration of Retirement Income Plan for Certain Participants in the Cameron
Iron Works, Inc. Retirement Plan for Salaried Employees (hereinafter referred
to as the "Cameron Excess Plan"), was merged into the Company; and
WHEREAS, the Company desires to merge the Champion Excess Plan, the
Champion Supplemental Plan, and the Cameron Excess Plan into the Plan;
NOW, THEREFORE, effective as of the close of business on July 31,
1990, the Champion Excess Plan and the Champion Supplemental Plan are hereby
merged into and made part of the Plan, and effective as of the close of
business on August 31, 1990, the Cameron Excess Plan is hereby merged into and
made part of the Plan, and effective as of
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August 1, 1990, the Plan is hereby amended and restated as hereinafter set
forth.
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. Except as otherwise required by the context, the
terms used in the Plan shall have the meaning hereinafter set forth.
(a) BENEFICIARY. The term "BENEFICIARY" shall mean the person who,
in accordance with the provisions of Article V, shall be entitled to receive
distribution hereunder in the event a Participant dies before his interest
under the Plan has been distributed to him in full.
(b) CAMERON EXCESS PLAN. The term "CAMERON EXCESS PLAN" shall
mean the Restoration of Retirement Income Plan for Certain Participants in the
Cameron Iron Works, Inc. Retirement Plan for Salaried Employees as in effect
on August 31, 1990.
(c) CHAMPION EXCESS PLAN. The term "CHAMPION EXCESS PLAN" shall
mean the Excess Benefit Plan for Participants in the Champion Spark Plug
Company Salaried Employees' Retirement Income Plan as in effect on July 31,
1990.
(d) CHAMPION SALARIED PLAN. The term "CHAMPION SALARIED PLAN"
shall mean the Champion Spark Plug Company Salaried Employees' Retirement
Income Plan which was merged with the Cooper Salaried Plan effective July 31,
1990.
(e) CHAMPION SUPPLEMENTAL PLAN. The term "CHAMPION SUPPLEMENTAL
PLAN" shall mean the Champion Spark Plug Company Supplemental Benefit Plan.
(f) CODE. The term "CODE" shall mean the Internal Revenue Code of
1986, as amended from time to time. Reference to a section of the Code shall
include such section and any comparable section or sections of any future
legislation that amends, supplements, or supersedes such section.
(g) COMPANY. The term "COMPANY" shall mean Cooper Industries,
Inc., an Ohio corporation, its corporate successors, and the surviving
corporation resulting from any merger of Cooper Industries, Inc. with any other
corporation or corporations.
(h) COOPER DEFERRAL PLAN. The term "COOPER DEFERRAL PLAN" shall
mean the Cooper Industries, Inc. Management Incentive Compensation Deferral
Plan, as amended from time to time.
(i) COOPER SALARIED PLAN. The term "COOPER SALARIED PLAN" shall
mean the Salaried Employees' Retirement Plan of Cooper Industries, Inc., as
amended from time to
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time.
(j) EMPLOYER. The term "EMPLOYER" shall mean the Company, and/or
McGraw-Edison Company, and/or Champion Spark Plug Company, as well as any
subsidiary of the Company which may adopt the Plan in accordance with the
provisions of Article VIII.
(k) LOCAL ADMINISTRATIVE COMMITTEE. The term "LOCAL
ADMINISTRATIVE COMMITTEE" shall mean tile administrative committee that
administers the Plan as set forth in Article VI.
(1) MCGRAW DEFERRAL PLAN. The term "MCGRAW DEFERRAL PLAN" shall
mean the McGraw-Edison Executive Deferred Compensation Plan or the
McGraw-Edison Supplemental Executive Benefits Plan.
(m) PARTICIPANT. The term "PARTICIPANT" shall mean any employee
of an Employer who is eligible to participate in the Plan pursuant to Article
II of the Plan.
(n) PLAN. The term "PLAN" shall mean the Cooper Industries, Inc.
Supplemental Excess Defined Benefit Plan as set forth herein.
(o) PLANS ADMINISTRATION COMMITTEE. The term "PLANS
ADMINISTRATION COMMITTEE" shall mean the Cooper Industries Plans Administration
Committee established pursuant to the Plans Management Procedure adopted by the
Board of Directors of the Company to administer the Company's employee benefit
plans.
1.2 CONSTRUCTION. Where necessary or appropriate to the meaning
hereof, the singular shall be deemed to include the plural, the plural to
include the singular, the masculine to include the feminine, and the feminine
to include the masculine.
ARTICLE II
ELIGIBILITY FOR PLAN PARTICIPATION
Any select management and highly compensated employee of an Employer:
(i) whose retirement benefits under the Cooper Salaried Plan are
limited by the provisions of Section 415 or Section 401(a)(17)
of the Code; or
(ii) who participates in the Cooper Salaried Plan as well as in the
Cooper Deferral Plan or the McGraw Deferral Plan; or
(iii) whose retirement benefits under the Cooper Salaried Plan are
curtailed by the adoption of Alternative II D pursuant to
provisions of IRS Notice 88-131 and who elects to receive
such curtailed benefits under the Plan rather than under
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the Cooper Salaried Plan;
shall become a Participant in the Plan automatically upon such
limitation, participation, or election. Notwithstanding the
foregoing, any individual who was a participant in the Champion Excess
Plan on July 31, 1990, shall become a Participant as of August 1, 1990
and any individual who was a participant in the Cameron Excess Plan as
of the close of business on August 31, 1990, shall become a
Participant as of September 1, 1990.
ARTICLE III
AMOUNT OF PLAN BENEFITS
Except as set forth below, the supplemental benefit payable to an
eligible Participant under the Plan shall be an amount which when added to the
retirement benefit payable to such Participant under the Cooper Salaried Plan
or, if applicable, the Champion Salaried Plan, equals the retirement benefit
which would have been payable under the Cooper Salaried Plan or, if applicable,
the Champion Salaried Plan to the Participant, if (i) the limitations of
Sections 401(a)(17) and 415 of the Code were not in effect; (ii) the provisions
of Alternative II D were not in effect, provided that the Participant elected
to receive any benefits curtailed due to the adoption of Alternative II D under
the Plan; and/or (iii) the Participant had not deferred any compensation under
the Cooper Deferral Plan or the McGraw Deferral Plan which would have been
considered as compensation for benefit accrual purposes under the Cooper
Salaried Plan and was not so considered due to such deferral.
Notwithstanding the foregoing, the following benefits shall also be
payable under the Plan:
(a) The benefit payable under the Plan to any Participant who
retired or separated from service prior to August 1, 1990 and who was covered
under the Champion Excess Plan on July 31, 1990, shall be the amount which such
Participant was eligible to receive under the terms of the Champion Excess Plan
in effect as of the date of such retirement or separation from service.
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(b) The benefit payable under the Plan to any Participant who was
a participant in the Champion Supplemental Plan on July 31, 1990, shall be an
amount which such Participant would have received (i) under the Champion Spark
Plug Company Salaried Employees' Retirement Income Plan (the "Champion Salaried
Plan") if he was covered under such plan on July 31, 1990 and if all his
service with Champion Spark Plug Company or a predecessor or subsidiary thereof
had been covered under the Champion Salaried Plan, or (ii) under the DeVilbiss
Company Salaried Employees Retirement Plan (the "DeVilbiss Salaried Plan") if
all his service with the Company or a predecessor or subsidiary thereof had
been covered under the DeVilbiss Salaried Plan, or (iii) under the Baron Drawn
Steel Salaried Retirement Plan (the "Baron Salaried Plan") if all his service
with the Company or a predecessor or subsidiary thereof had been covered under
the Baron Salaried Plan; provided, however, that if such a Participant was
covered under more than one of the aforementioned plans, his benefit shall be
determined under the provisions of the plan which would produce the greatest
benefit; and provided further, that the amount of any benefit payable to a
Participant under any plan which is based on service that is used to determine
a benefit hereunder shall reduce such Participant's Plan benefits; and
(c) The benefit payable under the Plan to any Participant who had
retired or separated from service prior to September 1, 1990 and who was
covered under the Cameron Excess Plan on August 31, 1990, shall be the amount
which such Participant was eligible to receive under the terms of the Cameron
Excess Plan in effect as of the date of such retirement or separation from
service;
In addition, notwithstanding the foregoing, in the event that a
Participant who retired or separated from service prior to August 1, 1990 and
who was covered under the Champion Excess Plan on July 31, 1990, engages in
competition with the Company, in the sole judgment of the Plans Administration
Committee, all benefits otherwise payable hereunder to such Participant shall
be forfeited immediately and that no further benefits under the Plan or
otherwise shall be payable or due such Participant. In addition, payments made
to a Participant while such Participant engaged in competition with the Company
shall be refundable to the Company at its request.
ARTICLE IV
PAYMENT OF PLAN BENEFITS
The supplemental benefits determined under Article III shall be paid
to a Participant or his Beneficiary, if applicable, in the same manner and
form as, and coincident with, the payment of the retirement benefits of such
Participant, or Beneficiary, under the Cooper Salaried Plan, utilizing the
factor or conditions applicable to a Participant's or a Beneficiary's
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benefit under the Cooper Salaried Plan. Notwithstanding the foregoing, any
Plan benefit attributable to the curtailment of the Cooper Salaried Plan or, if
applicable, the Champion Salaried Plan due to the adoption of the Alternative
II-D, shall be paid upon the Participant's election to receive such curtailed
benefit from the Plan rather than the Cooper Salaried Plan or the Champion
Salaried Plan. Furthermore, any benefit determined under Article III that is
attributable to the Champion Excess Plan, the Champion Supplemental Plan, or
the Cameron Excess Plan shall be payable to an eligible Participant in the same
manner and form, and coincident with, the benefits such Participant would have
received under the Champion Excess Plan, the Champion Supplemental Plan, or the
Cameron Excess Plan, as the case may be.
ARTICLE V
BENEFICIARIES
In the event a Participant dies before his interest under the Plan has
been distributed to him in full, any remaining interest, or portion thereof,
shall be distributed pursuant to Article IV to his Beneficiary who shall be the
person designated as his beneficiary under the Cooper Salaried Plan, or if such
interest is attributable to the Champion Excess Plan, the Champion Supplemental
Plan, or the Cameron Excess Plan, his Beneficiary shall be his beneficiary
pursuant to the terms of the Champion Excess Plan, the Champion Supplemental
Plan or the Cameron Excess Plan, as the case may be.
ARTICLE VI
ADMINISTRATIVE PROVISIONS
6.1 ADMINISTRATION. The Plan shall be administered by the Local
Administrative
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Committee under the Cooper Salaried Plan which shall administer it in a manner
consistent with the administration of the Cooper Salaried Plan, as from time to
time amended, except that the Plan shall be administered as an unfunded plan
not intended to meet the qualification requirements of Section 401 of the Code.
6.2 POWERS AND AUTHORITIES OF THE COMMITTEE. The Local
Administrative Committee shall have full power and authority to interpret,
construe and administer the Plan and its interpretations and construction
hereof, and actions hereunder, including the timing, form, amount, or recipient
of any payment to be made hereunder, shall be binding and conclusive on all
persons for all purposes. The Local Administrative Committee may delegate any
of its powers, authorities, or responsibilities for the operation and
administration of the Plan to any person or committee so designated in writing
by it and may employ such attorneys, agents, and accountants as it may deem
necessary or advisable to assist it in carrying out its duties hereunder. No
member of the Local Administrative Committee shall be liable to any person for
any action taken or omitted in connection with the interpretation and
administration of the Plan unless attributable to his own willful misconduct or
lack of good faith. Members of the Local Administrative Committee shall not
participate in any action or determination regarding their own benefits, if
any, payable under the Plan.
6.3 INDEMNIFICATION. In addition to whatever rights of
indemnification a member of the Local Administrative Committee or the Plans
Administration Committee, or any other person or persons to whom any power,
authority, or responsibility is delegated pursuant to Section 6.2, may be
entitled under the articles of incorporation, regulations, or by-laws of the
Company, under any provision of law, or under any other agreement, the Company
shall satisfy any liability actually and reasonably incurred by any such member
or such other person
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or persons, including expenses, attorneys' fees, judgments, fines, and amounts
paid in settlement, in connection with any threatened, pending, or completed
action, suit, or proceeding which is related to the exercise or failure to
exercise by such member or such other person or persons of any of the powers,
authority, responsibilities, or discretion provided under the Plan.
ARTICLE VII
AMENDMENT AND TERMINATION
The Company reserves the right to amend or terminate the Plan at any
time by action of the Plans Administration Committee; provided, however, that
no such action shall adversely affect any Participant who is receiving
supplemental benefits under the Plan or who has accrued a supplemental benefit
under the Plan, unless an equivalent benefit is otherwise provided under
another plan or program sponsored by the Company.
ARTICLE VIII
ADOPTION BY SUBSIDIARIES
Any subsidiary of the Company which at the time is not an Employer
may, with the consent of the Company, adopt the Plan and become an Employer
hereunder by causing an appropriate written instrument evidencing such adoption
to be executed pursuant to the authority of its Board of Directors and filed
with the Company.
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ARTICLE IX
MISCELLANEOUS
9.1 Non-Alienation of Retirement Rights or Benefits. No benefit
under the Plan shall at any time be subject in any manner to alienation or
encumbrance. If any Participant or Beneficiary shall attempt to, or shall,
alienate or in any way encumber his rights or benefits under the Plan, or any
part thereof, or if by reason of his bankruptcy or other event happening at any
time any such benefits would otherwise be received by anyone else or would not
be enjoyed by him, his interest in all such benefits shall automatically
terminate and the same shall be held or applied to or for the benefit of such
person, his spouse, children, or other dependents as the Local Administrative
Committee may select.
9.2 PAYMENT OF BENEFITS TO OTHERS. If any Participant or
Beneficiary to whom a retirement benefit is payable is unable to care for his
affairs because of illness or accident, any payment due (unless prior claim
therefor shall have been made by a duly qualified guardian or other legal
representative) may be paid to the spouse, parent, brother, or sister, or any
other individual deemed by the Local Administrative Committee to be maintaining
or responsible for the maintenance of such person. Any payment made in
accordance with the provisions of this Section 9.2 shall be a complete
discharge of any liability of the Plan with respect to the benefit so paid.
9.3 PLAN NON-CONTRACTUAL. Nothing contained herein shall be
construed as a commitment or agreement on the part of any person employed by an
Employer to continue his employment with an Employer, and nothing herein
contained shall be construed as a commitment on the part of an Employer to
continue the employment or the annual rate of compensation of any such person
for any period, and all Participants shall remain subject to
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discharge to the same extent as if the Plan had never been established.
9.4 FUNDING. In order to provide a source of payment for its
obligations under the Plan, the Company may establish a trust fund. Subject to
the provisions of the trust agreement governing such trust fund, the obligation
of an Employer under the Plan to provide a Participant or a Beneficiary with a
benefit constitutes the unsecured promise of such Employer to make payments as
provided herein, and no person shall have any interest in, or a lien or prior
claim upon, any property of the Employer.
9.5 CONTROLLING STATUS. No Participant shall be eligible for a
supplemental retirement benefit under the Plan unless such Participant is a
Participant on the date of his retirement, death, or other termination of
employment.
9.6 CLAIMS OF OTHER PERSONS. The provisions of the Plan shall in
no event be construed as giving any person, firm or corporation any legal or
equitable right as against an Employer, its officers, employees, or directors,
except any such rights as are specifically provided for in the Plan or are
hereafter created in accordance with the terms and provisions of the Plan.
9.7 SEVERABILITY. The invalidity or unenforceability of any
particular provision of the Plan shall not affect any other provision hereof,
and the Plan shall be construed in all respects as if such invalid or
unenforceable provision were omitted herefrom.
9.8 GOVERNING LAW. The provisions of the Plan shall be governed
and construed in accordance with the laws of the State of Ohio.
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* * *
EXECUTED at Houston, TX, this 27th day of February, 1992.
COOPER INDUSTRIES, INC.
By /s/Lawrence H. Polsky
---------------------------------
Title:
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FIRST AMENDMENT
TO THE
COOPER INDUSTRIES, INC.
SUPPLEMENTAL EXCESS DEFINED BENEFIT PLAN
WHEREAS, Cooper Industries, Inc. ("Cooper") maintains the Cooper
Industries, Inc. Supplemental Excess Defined Benefit Plan (the "Plan"), which
is a supplemental retirement plan for the benefit of a select group of
management employees employed by Cooper; and
WHEREAS, Cooper and Belden Wire & Cable Company ("BW&C") entered into
a certain Asset Transfer Agreement on July 26, 1993, under which certain assets
of Cooper were to be transferred to BW&C and in conjunction therewith certain
liabilities under the Plan for employees of BW&C and certain active and former
employees of Cooper were to be transferred and spun-off to by a separate plan
maintained by BW&C known as the Belden Wire & Cable Company Supplemental Excess
Defined Benefit Plan as of August 1, 1993;
NOW, THEREFORE, the Plan is hereby amended, as of August 1, 1993, in
the respects hereinafter set forth to reflect such spin-off.
1. Section 1.1(j) of the Plan is hereby amended by the addition
of the following sentence at the end thereof to provide as follows:
As of August 1, 1993, such term shall not include Belden Wire
& Cable Company.
2. Article II of the Plan is hereby amended by the addition of
the following sentence at the end thereof to provide as follows:
Notwithstanding any other provision of the Plan to the
contrary, as of August 1, 1993, the participation of any
employee of the Belden Wire & Cable Company and any former
employee of the Belden Electrical Wire Products Division of
the Company who was last employed at the Richmond, Indiana
facility, the Clinton, Arkansas facility, the Essex Junction,
Vermont facility, the Franklin, North Carolina facility, the
Monticello, Kentucky facility, the Tompkinsville, Kentucky
<PAGE> 14
facility, or a related sales office shall cease and any such
employee or former employee shall no longer be a Participant
in the Plan.
3. Article III of the Plan is hereby amended by the addition of
the following paragraph at the end thereof to provide as follows:
Notwithstanding any other provision of the Plan to the
contrary, any supplemental benefit credited or payable, as of
August 1, 1993, to a Participant who is an employee of Belden
Wire & Cable Company or a former employee of the Belden
Electrical Wire Products Division of the Company who was last
employed at the Richmond, Indiana facility, the Clinton,
Arkansas facility, the Essex Junction, Vermont facility, the
Franklin, North Carolina facility, the Monticello, Kentucky
facility, the Tompkinsville, Kentucky facility or a related
sales office shall not be credited under the Plan but instead
shall be credited under the Belden Wire & Cable Company
Supplemental Excess Defined Benefits Plan.
4. Article IV of the Plan is hereby amended by the addition of
the following paragraph at the end thereof to provide as follows:
Notwithstanding any other provision of the Plan to the
contrary, any supplemental benefit credited or payable, as of
August 1, 1993, to a Participant who is an employee of Belden
Wire & Cable Company or a former employee of the Belden
Electrical Wire Products Division of the Company who was last
employed at the Richmond, Indiana facility, the Clinton,
Arkansas facility, the Essex Junction, Vermont facility, the
Franklin, North Carolina facility, the Monticello, Kentucky
facility, the Tompkinsville, Kentucky facility or a related
sales office shall not be payable from the Plan but instead
shall be payable from the Belden Wire & Cable Company
Supplemental Excess Defined Benefits Plan.
5. Article VIII of the Plan is hereby amended by the addition of
the following sentence at the end thereof to provide as follows:
As of August 1, 1993, Belden Wire & Cable Company shall no
longer be a participating employer in the Plan.
6. Article IX of the Plan is hereby amended by the addition of
the following Section 9.9 to provide as follows:
9.9 Discontinuance of Coverage and Transfer of
Liabilities with Respect to Belden Employees. As of August 1,
1993, coverage under the Plan is closed to any individual
employed by Belden Wire & Cable Company at the Richmond,
Indiana facility, the Clinton, Arkansas facility, the Essex
Junction, Vermont facility, the Franklin, North Carolina
facility, the Monticello, Kentucky
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facility, the Tompkinsville, Kentucky facility or a related sales
office (a "Belden Employee") and thereafter no Belden Employee shall
become covered by the Plan. Moreover, as of August 1, 1993,
liabilities attributable to Belden Employees and any individual who
terminated employment prior to said date from the Richmond, Indiana
facility, the Clinton, Arkansas facility, the Essex Junction, Vermont
facility, the Franklin, North Carolina facility, the Monticello,
Kentucky facility, the Tompkinsville, Kentucky facility or a related
sales office of the Company or Belden Wire & Cable Company shall be
transferred to and assumed by Belden Wire & Cable Company under the
Belden Wire & Cable Supplemental Excess Defined Benefit Plan to be
held, administered and governed thereunder.
Executed at Houston, Texas this 8th day of September, 1993.
COOPER INDUSTRIES, INC.
By: /s/ Alan E. Riedel
--------------------------
Title:
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SECOND AMENDMENT
TO THE
COOPER INDUSTRIES, INC.
SUPPLEMENTAL EXCESS
DEFINED BENEFIT PLAN
(AUGUST 1, 1990 RESTATEMENT)
WHEREAS, Cooper Industries, Inc. (hereinafter referred to as the
"Company") maintains the Cooper Industries, Inc. Supplemental Excess Defined
Benefit Plan (hereinafter referred to as the "Plan") for the benefit of a
select group of management employees of the Company and its subsidiaries; and
WHEREAS, the Plan was amended and restated as of August 1, 1990; and
WHEREAS, the Company desires to amend the Plan to establish certain
minimum benefits as of December 31, 1993;
NOW, THEREFORE, Article II of the Plan is hereby amended by the
addition thereto of the following provision.
Notwithstanding the foregoing, as of December 31, 1993 the
Participants listed below shall be one hundred percent (100%) vested
in the applicable lump sum amount listed below. Moreover, said
Participants and all other Participants shall be vested in their
benefits under the plan (except for the lump sum amounts listed below)
upon separating from service provided they are vested in benefits
under the Cooper Salaried Plan.
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NAME SOCIAL MINIMUM BENEFIT
SECURITY NUMBER (LUMP SUM)
W.D. BREWER $ 32,000.00
J. BUCKLEY 28,800.00
W. CALLAHAN 61,800.00
J.0. CAMPBELL 8,600.00
T. CAMPBELL 50,600.00
R. CIZIK 3,225,000.00
J. COPPOLA 60,900.00
D.D. CROSS 177,500.00
J. GETHIN 8,000.00
J. GODWIN 28,100.00
K. HARDCASTLE 6,400.00
A. HILL 8,300.00
R. JACKSON 19,300.00
H. LABRUN 16,000.00
R. MATZ 4,200.00
D. MCWILLIAMS 50,900.00
J. MONTER 1,900.00
C. PLESNICHER 31,500.00
L. POLSKY 3,100.00
A.E. RIEDEL 1,355,000.00
J. RILEY 271,900.00
D. SCHUMACHER 1,400.00
M. SEBASTIAN 239,800.00
N. SHAHAN 64,000.00
D. SHELEY 6,800.00
K. STEVENSON 71,100.00
N. TESHOIAN 22,700.00
D. THOMSON 80,500.00
W. TUCK 30,300.00
T. WALL 2,000.00
D. WHITE, JR. 22,600.00
Executed at Houston, Texas this 20th day of December, 1993.
COOPER INDUSTRIES, INC.
By: /s/Carl J. Plesnicher, Jr.
-------------------------------
Title:
<PAGE> 18
THIRD AMENDMENT
TO
COOPER INDUSTRIES, INC.
SUPPLEMENTAL EXCESS
DEFINED BENEFIT PLAN
(AUGUST 1, 1990 RESTATEMENT)
WHEREAS, Cooper Industries, Inc. (hereinafter referred to as
the"Company") maintains the Cooper Industries, Inc Supplemental Excess Defined
Benefit Plan (hereinafter referred to as the "Plan") for the benefit of a
select group of management employees of the Company and its subsidiaries; and
WHEREAS, the Plan was amended and restated as of August 1, 1990; and
WHEREAS, the Plan was amended subsequently on two occasions; and
WHEREAS, the Company desires to amend the Plan again;
NOW, THEREFORE, the Plan is hereby amended, effective as or January 1,
1994, in the manner hereinafter set forth:
1. Section 1.1(j) of the Plan is hereby amended by the addition
of the sentence at the end thereof to provide as follows:
As of January 1, 1994, such term shall not include Gardner
Denver Machinery Inc.
2. Article II of the Plan is hereby amended by the addition of
the sentence at the end thereof to provide as follows:
Notwithstanding any other provision of the Plan to the
contrary, as of January 1, 1994, the participation of any
employee of Gardner Denver Machinery Inc. and any former
employee of the Gardner Denver Division of the Company who was
last employed at the Quincy, Illinois facility, the LaGrange,
Missouri facility, the Compton, California facility, or a
related sales office shall cease and any such employee or
former employee shall not longer be a Participant in the Plan.
3. Article III of the Plan is hereby amended by the addition of
the paragraph at the end thereof to provide as follows:
Notwithstanding any other provision of the Plan to the
contrary, any supplemental benefit credited or payable, as of
January 1, 1994, to a
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Participant who is an employee of Gardner Denver Machinery
Inc. or a former employee of the Gardner Denver Division of
the Company who was last employed at the Quincy, Illinois
facility, the LaGrange, Missouri facility, the Compton,
California facility or a related sales office shall not be so
credited or payable under the Plan but rather shall be
credited and payable under the Gardner Denver Machinery Inc.
Supplemental Excess Defined Benefit Plan.
4. Article IV of the Plan is hereby amended to provide as
follows:
ARTICLE IV
PAYMENT OF PLAN BENEFITS
Except as other provided herein, the supplemental benefits determined
under Article III shall be paid to a Participant or his Beneficiary, if
applicable, in the same manner and form as, and coincident with, the payment of
the retirement benefits of such Participant, or Beneficiary, under the Cooper
Salaried Plan, utilizing the factors or conditions applicable to a
Participant's benefit or a Beneficiary's benefit, as the case may be, under the
Cooper Salaried Plan; provided, however, that benefits payable hereunder to any
Participant whose accrued benefit under the Cooper Salaried Plan is subject to
the tax on excess distributions pursuant to Section 4980A of the Code shall be
paid in any manner and form as benefits under the Cooper Salaried Plan are
payable as of the retirement date of such Participant with no requirement that
benefits payable hereunder be distributed in the same manner, form, or time as
the benefits of such Participant are payable under the Cooper Salaried Plan.
Notwithstanding the foregoing, any benefit determined under Article III that is
attributable to the Champion Excess Plan, the Champion Supplemental Plan, or
the Cameron Excess Plan shall be payable to an eligible Participant in the same
manner and form, and coincident with, the benefits such Participant would have
received under the Champion Excess Plan, the Champion Supplemental Plan, or the
Cameron Excess Plan, as the case may be. Notwithstanding any other provision
of the Plan to the contrary, any supplemental benefit credited or payable: (i)
as of August 1, 1993, to a Participant who is an employee of Belden Wire &
Cable Company or a former employee of the Belden Electrical Wire Products
Division Of the Company who was last employed at the Richmond, Indiana
facility, the Clinton, Arkansas facility, the Essex Junction, Vermont facility,
the Franklin, North Carolina facility, the Monticello, Kentucky facility, the
Tompkinsville, Kentucky facility or a related sales office shall not be payable
from the Plan but instead shall be payable from the Belden Wire & Cable Company
Supplemental Express Defined Benefits Plan and (ii) as of January 1, 1994, to a
Participant who is an employee of Gardner Denver Machinery Inc. or a former
employee of the Gardner Denver Division of the Company who was last employed at
the Quincy, Illinois facility, the LaGrange, Missouri facility, the Compton,
California facility or a related sales office shall not be payable from the
Plan but instead shall be payable from the Gardner Denver Machinery Inc.
Supplemental Excess Defined Benefit Plan.
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<PAGE> 20
5. Article VIII of the Plan is hereby amended by the addition of
the sentence at end thereof to provide as follows:
As of January 1, 1994, Gardner Denver Machinery Inc. shall no
longer be a participating employer in the Plan.
6. Article IX of the Plan is hereby amended by the addition of
the Section 9.10 to provide as follows:
9. 10 Discontinuance of Coverage and Transfer of Liabilities
with Respect to Gardner Denver Employees. As of January 1,
1994, coverage under the Plan is closed to any individual
employed by Gardner Denver Machinery Inc. at the Quincy,
Illinois facility, the LaGrange, Missouri facility, the
Compton, California facility or a related sales office (a
"Gardner Denver Employee") and thereafter no Gardner Denver
Employee shall become covered by the Plan. Moreover, as of
January 1, 1994, liabilities attributable to Gardner Denver
Employees and any individual who terminated employment prior
to said date from the Quincy, Illinois facility, the LaGrange,
Missouri facility, the Compton, California facility or a
related sales office of the Company or Gardner Denver
Machinery Inc. shall be transferred to and assumed by Gardner
Denver Machinery Inc. under the Gardner Denver Machinery Inc.
Supplement Excess Defined Benefit Plan to be held,
administered and governed thereunder.
Executed at Houston, Texas this 28th day of February, 1994.
COOPER INDUSTRIES, INC.
By: /s/Carl J. Plesnicher, Jr.
---------------------------
Title:
-3-
<PAGE> 21
FOURTH AMENDMENT
TO
COOPER INDUSTRIES, INC.
SUPPLEMENTAL EXCESS
DEFINED BENEFIT PLAN
(AUGUST 1, 1990 RESTATEMENT)
WHEREAS, Cooper Industries, Inc. (hereinafter referred to as the
"Company") maintains the Cooper Industries, Inc. Supplemental Excess Defined
Benefit Plan (hereinafter referred to as the "Plan") which is a supplemental
retirement plan for the benefit of a select group of management employees of
the Company and its subsidiaries; and
WHEREAS, the Plan was amended and restated as of August 1, 1990; and
WHEREAS, the Plan was amended subsequently on three occasions; and
WHEREAS, the Company desires to amend the Plan again to provide for
the cessation of active participation in the Plan by employees of Cameron
Forged Products Company as of May 26, 1994;
NOW, THEREFORE, the Plan is hereby amended, effective as of May 26,
1994, in the respects hereinafter set forth.
1. Section 1.1(j) of the Plan is hereby amended by the addition
of a new sentence at the end thereof to provide as follows:
As of May 26, 1994, such term shall not include Cameron Forged
Products Company.
2. Article II of the Plan is hereby amended by the addition of
two sentences at the end thereof to provide as follows:
Notwithstanding any other provision of the Plan to the
contrary, as of May 26, 1994, the active participation of any
employee of Cameron Forged Products Company shall cease and
thereafter no employee of Cameron Forged Products Company
shall become covered by the Plan.
3. Article IV of the Plan is hereby amended by the addition of
the following sentences at the end thereof to provide as follows:
Notwithstanding any provision of the Plan to the contrary, in
no event shall any benefit of a Participant who is employed by
Cameron Forged Products Company, or a successor thereof, be
distributed to such Participant prior to
<PAGE> 22
termination of employment with Cameron Forged Products Company, or
successor thereof, by such Participant.
4. Article VIII of the Plan is hereby amended by the addition of
the sentence at the end thereof to provide as follows:
As of May 26, 1994, the Cameron Forged Products Company shall
no longer be a participating employer in the Plan.
Executed at Houston, Texas this 25th day of May, 1994.
COOPER INDUSTRIES, INC.
By: /s/Carl S. Plesnicher, Jr.
------------------------------
Title: Senior Vice President
Human Resources
-2-
<PAGE> 23
FIFTH AMENDMENT
TO
COOPER INDUSTRIES, INC.
SUPPLEMENTAL EXCESS DEFINED BENEFIT PLAN
(AUGUST 1, 1990 RESTATEMENT)
WHEREAS, Cooper Industries, Inc. (hereinafter referred to as "Cooper")
maintains the Cooper Industries, Inc. Supplemental Excess Defined Benefit Plan
(hereinafter referred to as the "Plan") which is a supplemental retirement plan
for the benefit of a select group of management employees of Cooper and its
subsidiaries; and
WHEREAS, Cooper acquired the stock of Moog Automotive, Inc. on October
1, 1992, and in conjunction therewith assumed the Moog Automotive, Inc.
Executive Supplemental Pension Plan (hereinafter referred to as the "Moog
SERP"); and
WHEREAS, Cooper desires to amend the Plan to reflect the merger of the
Moog SERP into the Plan as of January 1, 1994; and
WHEREAS, Cooper and Cooper Cameron Corporation (hereinafter referred
to as "Cooper Cameron") have determined to transfer and spin-off as of January
1, 1995, certain liabilities under the Plan for employees of Cooper Cameron who
were former employees of Cooper as well as liabilities for certain former
employees of Cooper to a separate plan maintained by Cooper Cameron known as
the Cooper Cameron Corporation Supplemental Excess Defined Benefit Plan;
NOW, THEREFORE, effective as of January 1, 1994, the Plan is hereby
amended in the respects hereinafter set forth to reflect such spin-off.
1. Section 1.1(j) of the Plan is hereby amended to provide as
follows:
(j) Employer. The term "Employer" shall mean the
Company, McGraw-
<PAGE> 24
Edison Company, Champion Spark Plug Company, Cameron Iron
Works, Inc., and Moog Automotive, Inc. as well as any
subsidiary of the Company which may adopt the Plan in
accordance with the provisions of Article VIII.
Notwithstanding the foregoing, effective as of the applicable
date hereinafter set forth, the following subsidiaries shall
not be included as an Employer under the Plan.
Effective Date Subsidiary
-------------- ----------
[S] [C]
August 1, 1993 Belden Wire & Cable Company
January 1, 1994 Gardner Denver Machinery Inc.
May 26, 1994 Cameron Forged Products Company
January 1, 1995 Cooper Cameron Corporation
2. Section 1.1 of the Plan is hereby amended by the addition of a
new paragraph (p) at the end thereto to provide as follows:
(p) Moog SERP. The term "Moog SERP" shall mean the Moog
Automotive, Inc. Executive Supplemental Plan.
3. Article II of the Plan is hereby amended to provide as
follows:
2.1 Eligibility of Active Employees. Any select
management and highly compensated employee of an Employer:
(i) whose retirement benefits under the Cooper
Salaried Plan are limited by the provisions
of Section 415 or Section 401(a)(17) of the
Code; or
(ii) who participates in the Cooper Salaried Plan
as well as in the Cooper Deferral Plan or the
McGraw Deferral Plan;
shall become a Participant in the Plan automatically upon such
limitation or participation.
2.2 Participation of Certain Employees.
Notwithstanding the provisions of Section 2.1, but subject to
the provisions of Section 2.3, individuals who were
participants in a plan set forth below as of the applicable
effective date shall become a Participant in the Plan as of
the applicable participation date set forth below:
Plan
Participation
Plan Effective Date Date
---- -------------- -----------------
Champion Excess Plan July 31, 1990 August 1, 1990
Cameron Excess Plan August 31, 1990 September 1, 1990
Moog SERP December 31, 1993 January 1, 1994
-2-
<PAGE> 25
2.3 Termination of Participation.
Notwithstanding the provisions of Sections 2.1 and
2.2 effective as of the applicable date hereinafter
set forth, Participants last employed at the
following facilities shall cease to be covered by the
Plan.
Employer Facility Effective Date
- -------- -------- --------------
1. Belden Wire & Cable Richmond, Indiana August 1, 1993
Company Clinton, Arkansas
Essex Junction, Vermont
Franklin, North Carolina
Monticello, Kentucky
Tompkinsville, Kentucky
Related Sales Offices
2. Gardner Denver Quincy, Illinois January 1, 1994
Machinery Inc. LaGrange, Missouri
Compton, California
Related Sales offices
3. Cooper Cameron Houston, Texas January 1, 1995
Corporation Berwick, Louisiana
Katy, Texas
Liberty, Texas
Missouri City, Texas
Oklahoma City, Oklahoma
Patterson, Louisiana
Richmond, Texas
Ville Platte, Louisiana
Related Sales and Services
Facilities
4. Cooper Energy Service Mount Vernon, Ohio January 1, 1995
Operations Grove City, Pennsylvania
Springfield, Ohio
Oklahoma City, Oklahoma
Wheat Ridge, Colorado
Alameda, California
Tulsa, Oklahoma
Related Sales Offices
-3-
<PAGE> 26
5. Cooper Turbocompressor Buffalo, New York January 1, 1995
Sales Offices
6. Wheeling Machine Pine Bluff, Arkansas January 1, 1995
Products Company
4. Article III of the Plan is hereby amended to provide as follows:
ARTICLE III
AMOUNT OF PLAN BENEFITS
3.1 Benefit Payable to Active Participants. Except as
set forth below, the supplemental benefit payable to an eligible
Participant under the Plan who is credited with service for benefit
accrual purposes under the Cooper Salaried Plan, shall be an amount
which when added to the retirement benefit payable to such Participant
under the Cooper Salaried Plan equals the retirement benefit which
would have been payable under the Cooper Salaried Plan to the
Participant, if (i) the limitations of Sections 401(a)(17) and 415 of
the Code were not in effect; and/or (ii) the Participant had not
deferred any compensation under the Cooper Deferral Plan or the McGraw
Deferral Plan which would have been considered as compensation for
benefit accrual purposes under the Cooper Salaried Plan and was not so
considered. Notwithstanding the foregoing, in no event shall the
supplemental benefit of a Participant who formerly participated in the
Moog SERP and who is listed below (a "Former Moog SERP Participant")
be less than the amount hereinafter set forth, reduced, however, by
3/12ths of one percent for each month that commencement of benefits
precedes attainment of age 60.
Former Moog
SERP Monthly Single Life Annuity Payable
Participant at or after Age 60
----------- -----------------------------------
L. W. McCurdy $ 2,213.47
J. A. Passante $ 628.67
J. F. Collins $ 698.34
T. M. Smith $ 297.17
J. C. Corey $ 688.81
G. Holler $ 436.97
K. G. Mullen $ 1,020.42
3.2 Benefit Payable to Participants Formerly Covered By
Another Nonqualified Plan. The supplemental benefit payable to a Participant
who was not credited with service for benefit accrual purposes under the Cooper
Salaried Plan
-4-
<PAGE> 27
shall be an amount determined as follows:
(a) The benefit payable under the Plan to any
Participant who retired or separated from service prior to
August 1, 1990, and who was covered under the Champion Excess
Plan on July 31, 1990, shall be the amount which such
Participant was eligible to receive under the terms of the
Champion Excess Plan in effect as of the date of such
retirement or separation from service.
(b) The benefit payable under the Plan to any
Participant who was a Participant in the Champion Supplemental
Plan on July 31, 1990, shall be an amount which such
Participant would have received (i) under the Champion Spark
Plug Company Salaried Employees' Retirement Income Plan (the
"Champion Salaried Plan") if he had been covered under such
plan on July 31, 1990 and if all his service with Champion
Spark Plug Company or a predecessor or subsidiary thereof had
been covered under the Champion Salaried Plan, or (ii) under
the DeVilbiss Company Salaried Employees Retirement Plan (the
"DeVilbiss Salaried Plan") if all his service with the Company
or a predecessor or subsidiary thereof had been covered under
the DeVilbiss Salaried Plan, or (iii) under the Baron Drawn
Steel Salaried Retirement Plan (the "Baron Salaried Plan") if
all his service with the Company or a predecessor or
subsidiary thereof had been covered under the Baron Salaried
Plan; provided, however, that if such a Participant was
covered under more than one of the aforementioned plans, his
benefit shall be determined under the provisions of the plan
which would produce the greatest benefit; and provided
further, that the amount of any benefit payable to a
Participant under any plan which is based on service that is
used to determine a benefit hereunder shall reduce such
Participant's Plan benefits.
(c) The benefit payable under the Plan to any
Participant who had retired or separated from service prior to
September 1, 1990 and who was covered under the Cameron Excess
Plan on August 31, 1990, shall be the amount which such
Participant was eligible to receive under the terms of the
Cameron Excess Plan in effect as of the date of such
retirement or separation from service.
(d) The benefit payable under the Plan to any
Participant who retired or separated from service prior to
October 1, 1992, and who was covered under the Moog SERP on
September 30, 1992, shall be the amount which such Participant
was eligible to receive under the terms of the Moog SERP in
effect as of the date of such retirement or separation from
service.
-5-
<PAGE> 28
3.3 Cessation of Benefits to Certain Participants.
Notwithstanding the foregoing, benefits otherwise payable under the
Plan to certain Participants listed below shall cease as of the
applicable effective date
(a) In the event that a Participant who retired
or separated from service prior to August 1, 1990 and who was
covered under the Champion Excess Plan on July 31, 1990,
engages in competition with the Company, in the sole judgment
of the Plans Administration Committee, all benefits otherwise
payable hereunder to such Participant shall be forfeited
immediately and that no further benefits under the Plan or
otherwise shall be payable or due such Participant. In
addition, payments made to a Participant while such
Participant engaged in competition with the Company shall be
refundable to the Company at its request.
(b) Any supplemental benefit credited or payable
as of January 1, 1995, to a Participant who is an employee of
Cooper Cameron Corporation or a former employee of the Company
who was last employed by the Cooper Tool Oil Division, the
Cooper Energy Services Operations, the Cooper Turbocompressor
Division, or Wheeling Machine Products Company and who was not
employed by the Company on January 1, 1995, shall not be so
credited or payable under the Plan but rather shall be
credited and payable under the Cooper Cameron Corporation
Supplemental Excess Defined Benefit Plan.
5. Article IV of the Plan is hereby amended to provide as
follows:
ARTICLE IV
PAYMENT OF PLAN BENEFITS
Except as specifically provided hereinafter, the supplemental benefits
determined under Article III shall be paid to a Participant or his
Beneficiary, if applicable, in the same manner and form as, and
coincident with, the payment of the retirement benefits of such
Participant, or Beneficiary, under the Cooper Salaried Plan, utilizing
the factor or conditions applicable to the benefit of such Participant
or Beneficiary under the Cooper Salaried Plan. Notwithstanding the
foregoing:
(i) Any supplemental benefit that is determined pursuant to the
provisions of Section 3.2 and that is being paid thereunder to
a Participant who is, or was, not credited with benefit
accrual service under the Cooper Salaried Plan and who is, or
was, eligible to such Plan benefit due to the merger of the
Champion Excess Plan, the Champion Supplemental Plan, the
Cameron
-6-
<PAGE> 29
Excess Plan, or the Moog Automotive, Inc. Executive
Supplemental Plan (a "Merged Plan") into the Plan, shall be
payable to such Participant in the same manner, form, time,
and duration applicable to the benefits of such Participant
under the Merged Plan formerly covering such Participant.
(ii) Any supplemental benefit that is payable to a Participant who
is a Former Moog SERP Participant pursuant to the provisions
of Section 3.1 shall be payable to such Participant either in
a single sum or in the same manner, form, time and duration
applicable to the benefits of such Participant under the Moog
SERP as of December 31, 1993.
(iii) In no event shall any benefit of a Participant who is employed
by Cameron Forged Products Company, or a successor thereof, be
distributed to such Participant prior to his termination of
employment with Cameron Forged Products Company, or successor
thereof.
(iv) Any supplemental benefit credited or payable: (a) as of August
1, 1993, to a Participant who is an employee of Belden Wire &
Cable Company or a former employee of the Belden Electrical
Wire Products Division of the Company who was last employed at
the Richmond, Indiana facility, the Clinton, Arkansas
facility, the Essex Junction, Vermont facility, the Franklin,
North Carolina facility, the Monticello, Kentucky facility,
the Tompkinsville, Kentucky facility or a related sales office
shall not be payable from the Plan but instead shall be
payable from the Belden Wire & Cable Company Supplemental
Excess Defined Benefits Plan; (b) as of January 1, 1994, to a
Participant who is an employee of Gardner Denver Machinery
Inc. or a former employee of the Gardner Denver Division of
the Company who was last employed at the Quincy, Illinois
facility, the LaGrange, Missouri facility, the Compton,
California facility or a related sales office shall not be
payable from the Plan but instead shall be payable from the
Gardner Denver Machinery Inc. Supplemental Excess Defined
Benefit Plan; and (c) as of January 1, 1995, to a Participant
who is an employee of Cooper Cameron Corporation or a former
employee who was last employed by the Cooper Oil Tool
Division, the Cooper Energy Services Operations, the Cooper
Turbocompressor Division, or Wheeling Machine Products
Company, shall not be payable from the Plan but instead shall
be payable from the Cooper Cameron Corporation Supplemental
Excess Defined Benefit Plan.
-7-
<PAGE> 30
6. Article VIII of the Plan is hereby amended provide as follows:
ARTICLE VIII
ADOPTION BY SUBSIDIARIES
Any subsidiary of the Company which at the time is not an
Employer may, with the consent of the Company, adopt the Plan
and become an Employer hereunder. Notwithstanding the
foregoing, effective as of the effective date hereinafter set
forth, the following subsidiaries shall not be included as an
Employer under the Plan.
Effective Date Subsidiary
-------------- ----------
August 1, 1993 Belden Wire & Cable Company
January 1, 1994 Gardner Denver Machinery Inc.
May 26, 1994 Cameron Forged Products Company
January 1, 1995 Cooper Cameron Corporation
7. Article IX of the Plan is hereby amended by the addition of
Section 9.11 at the end thereof to provide as follows:
9.11 Discontinuance of Coverage and Transfer of
Liabilities with Respect to Cooper Cameron Employees. As of
January 1, 1995, coverage under the Plan is closed to any
individual employed by Cooper Cameron Corporation (a "Cooper
Cameron Employee") and thereafter no Cooper Cameron Employee
shall become covered by the Plan. Moreover, as of January 1,
1995, liabilities under any Plan attributable to any
individual employed by Cooper Cameron Employee or any
individual who terminated employment prior to said date from
the Houston, Texas facility, the Berwick, Louisiana plant, the
Katy, Texas plant, the Liberty, Texas plant, the Missouri
City, Texas plant, the Oklahoma City, Oklahoma plant, the
Patterson, Louisiana plant, the Richmond, Texas foundry, the
Ville Platte, Louisiana plant, and the sales and service
locations of the former Cooper Oil Tool Division; the Mount
Vernon, Ohio plant, the Cooper-Bessemer Reciprocating Products
Division facility in Grove City, Pennsylvania, the
Ajax-Superior facility in Springfield, Ohio, the Compressor
Packaging Plant in Oklahoma City, Oklahoma, the Branch Offices
in Oklahoma City, Oklahoma and Wheat Ridge, Colorado, the
Enterprise Engine Services facility in Alameda, California,
the Cooper Bessemer Rotating Products Division plants in Mount
Vernon, Ohio and Tulsa, Oklahoma, and the sales offices of the
former Cooper Energy Services Operations; the Buffalo, New
York facility and sales offices of the former Cooper
Turbocompressor Division; and the Pine Bluff, Arkansas plant
of the former Wheeling Machine Products Company, shall be
transferred to the
-8-
<PAGE> 31
Cooper Cameron Corporation Supplemental Excess Defined Benefit
Plan to be held, administered and governed thereunder.
Executed at Houston, Texas this 28th day of February, 1995.
COOPER INDUSTRIES, INC.
By: /s/Carl J. Plesnicher, Jr.
--------------------------
Title: Senior Vice President
Human Resources
-9-
<PAGE> 1
Exhibit 10.6
COOPER INDUSTRIES, INC.
SUPPLEMENTAL EXCESS
DEFINED CONTRIBUTION PLAN
<PAGE> 2
COOPER INDUSTRIES, INC.
SUPPLEMENTAL EXCESS
DEFINED CONTRIBUTION PLAN
WHEREAS, Cooper Industries, Inc. (hereinafter referred to as the
"Company") desires to establish a supplemental retirement plan for the benefit
of a select group of management employees employed by the Company or a
subsidiary thereof whose benefits under the Cooper Industries, Inc. Employees'
Savings Plan are limited by the provisions of Section 415 of the Internal
Revenue Code of 1986 (hereinafter referred to as the "Code") or are reduced
otherwise due to participation in a deferred compensation program, or who are
subject to a tax on excess distributions under Section 4981 of the Code, as
amended by Section 1133 of the Tax Reform Act of 1986;
NOW, THEREFORE, effective as of January 1, 1987, the Company hereby
establishes the Cooper Industries, Inc. Supplemental Excess Defined
Contribution Plan (hereinafter referred to as the "Plan") to provide benefits
not otherwise provided due to such limitation and excess distribution tax as
hereinafter set forth.
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. Except as otherwise required by the context, the
terms used in the Plan shall have the meaning hereinafter set forth.
(a) BENEFICIARY. The term "BENEFICIARY" shall mean the person who,
in accordance with the provisions of Article VI, shall be entitled to receive
distribution hereunder in the event a Participant dies before his interest
under the Plan has been distributed to him in full.
(b) CODE. The term "CODE" shall mean the Internal Revenue Code of
1986, as amended from time to time. Reference to a section of the Code shall
include such section and any
<PAGE> 3
comparable section or sections of any future legislation that amends,
supplements, or supersedes such section.
(c) COMPANY. The term "COMPANY" shall mean Cooper Industries, Inc.,
an Ohio corporation, its corporate successors, and the surviving corporation
resulting from any merger of Cooper Industries, Inc. with any other corporation
or corporations.
(d) COMPENSATION. The term "COMPENSATION" shall mean the total wages
and salary, including overtime payments, commissions, severance pay, and other
monetary remuneration, if any, which is included in a Participant's gross pay
with respect to a month for services rendered to an Employer, but excluding any
relocation expense reimbursements as well as foreign service premiums and
allowances, plus Basic Contributions made on behalf of such Participant under
the Cooper Savings Plan and Supplemental Basic Contributions credited to such
Participant under Section 3.2 of the Plan.
(e) COOPER DEFERRAL PLAN. The term "COOPER DEFERRAL PLAN" shall mean
the Cooper Industries, Inc. Management Incentive Compensation Deferral Plan, as
amended from time to time.
(f) COOPER SALARIED PLAN. The term "COOPER SALARIED PLAN" shall mean
the Salaried Employees' Retirement Plan of Cooper Industries, Inc., as amended
from time to time.
(g) COOPER SAVINGS PLAN. The term "COOPER SAVINGS PLAN" shall mean
the Cooper Industries, Inc. Employees' Savings Plan, as amended from time to
time.
(h) EMPLOYER. The term "EMPLOYER" shall mean the Company, and/or
McGraw-Edison Company, a wholly-owned subsidiary of the Company, as well as any
subsidiary of the Company which may adopt the Plan in accordance with the
provisions of Article IX.
(i) LOCAL ADMINISTRATIVE COMMITTEE. The term "LOCAL ADMINISTRATIVE
COMMITTEE" shall mean the administrative committee that administers the Plan as
set forth in Article VII.
(j) MCGRAW DEFERRAL PLAN. The term "MCGRAW DEFERRAL PLAN" shall mean
the McGraw-Edison Executive Deferred Compensation Plan or the McGraw Edison
Supplemental Executive Benefits Plan.
(k) PARTICIPANT. The term "PARTICIPANT" shall mean any employee of
an Employer who participates in the Plan pursuant to Article II of the Plan.
(l) PLAN. The term "PLAN" shall mean the Cooper Industries, Inc.
Supplemental Excess Defined Contribution Plan as set forth herein.
-2-
<PAGE> 4
(m) PLANS ADMINISTRATION COMMITTEE. The term "PLANS ADMINISTRATION
COMMITTEE" shall mean the Cooper Industries Plans Administration Committee
established by the Board of Directors of the Company to oversee the
administration of the Company pension benefit plans.
(n) SEPARATE ACCOUNT. The term "SEPARATE ACCOUNT" shall mean each of
the accounts maintained in the name of a Participant pursuant to Section 4.1.
(o) SUPPLEMENTAL BASIC ACCOUNT. The term "SUPPLEMENTAL BASIC
ACCOUNT" shall mean the Separate Account to which Supplemental Basic
Contributions are credited in accordance with the provisions of Sections 3.2
and 4.1.
(p) SUPPLEMENTAL BASIC CONTRIBUTIONS. The term "SUPPLEMENTAL BASIC
CONTRIBUTIONS" shall mean the contributions credited to a Participant under the
Plan pursuant to Section 3.2.
(q) SUPPLEMENTAL MATCHING ACCOUNT. The term "SUPPLEMENTAL MATCHING
ACCOUNT" shall mean the Separate Account to which Supplemental Matching
Contributions are credited in accordance with the provisions of Sections 3.1
and 4.1.
(r) SUPPLEMENTAL MATCHING CONTRIBUTIONS. The term "SUPPLEMENTAL
MATCHING CONTRIBUTIONS" shall mean the Employer contributions credited to a
Participant under the Plan pursuant to Section 3.1.
(s) SUPPLEMENTAL TAX ACCOUNT. The term "SUPPLEMENTAL TAX ACCOUNT"
shall mean the Separate Account to which an amount equal to any excess
distribution tax is credited in accordance with the provisions of Sections 3.3
and 4.1.
(t) SUPPLEMENTAL TAX CONTRIBUTIONS. The term "SUPPLEMENTAL TAX
CONTRIBUTIONS" shall mean the contributions credited to a Participant under the
Plan pursuant to Section 3.3.
1.2 CONSTRUCTION. Where necessary or appropriate to the meaning
hereof, the singular shall be deemed to include the plural, the plural to
include the singular, the masculine to include the feminine, and the feminine
to include the masculine.
ARTICLE II
ELIGIBILITY FOR PLAN PARTICIPATION
Any select management and highly compensated employee of an Employer
(i) whose retirement benefits are limited under the Cooper Savings Plan by the
provisions of Section 415 of
-3-
<PAGE> 5
the Code, (ii) who participates in the Cooper Deferral Plan or the McGraw
Deferral Plan, as well as the Cooper Savings Plan, or (iii) who is subject to
an excess distributions tax with respect to any benefit payable from the Cooper
Salaried Plan and/or the Cooper Savings Plan shall become a Participant in the
Plan automatically upon such limitation, participation, or tax imposition.
ARTICLE III
SUPPLEMENTAL CONTRIBUTIONS
3.1 SUPPLEMENTAL MATCHING CONTRIBUTIONS. As of the last day of each
month, the Supplemental Matching Account of each Participant shall be credited
with Supplemental Matching Contributions equal to the sum of:
(a) the amount with respect to which Matching
Contributions under the Cooper Savings Plan are
limited for such month due to the provisions of
Section 415 of the Code; and
(b) the amount that would have been contributed by an
Employer under the Cooper Savings Plan for such month
if the Participant had not participated in the Cooper
Deferral Plan or the McGraw Deferral Plan and had
made contributions under the Cooper Savings Plan with
respect to the compensation deferred under the Cooper
Deferral Plan or McGraw Deferral Plan in accordance
with his election in effect for such month under the
Cooper Savings Plan and the provisions of the Cooper
Savings Plan in effect for such month without regard
to any limitations imposed by Section 415 of the
Code.
3.2 SUPPLEMENTAL BASIC CONTRIBUTIONS. As of the last day of each
month, the Supplemental Basic Accounts (pre-tax and post-tax) of each
Participant shall be credited with Supplemental Basic Contributions (pre-tax
and post-tax, respectively) equal to the Basic Contributions that would have
been contributed to the Cooper Savings Plan on his behalf for such month except
for the provisions of Section 415 of the Code and that were deferred or
deducted
-4-
<PAGE> 6
from his Compensation in accordance with a duly executed and filed Compensation
reduction or deduction authorization form; provided, however, that in no event
shall Supplemental Basic Contributions when added to the amount of Basic
Contributions of such Participant for such month under the Cooper Savings Plan
exceed six percent of such Participant's Compensation.
3.3 SUPPLEMENTAL TAX CONTRIBUTIONS. In the event a Participant
receives an annuity or single sum distribution from the Cooper Salaried Plan
and/or the Cooper Savings Plan which is subject to an excess distributions tax
under Section 4981 of the Code, as amended by Section 1133 of the Tax Reform
Act of 1986, the Supplemental Tax Account of such Participant shall be credited
with a Supplemental Tax Contribution equal to the pro-rata amount of such tax,
attributable to any such distribution, upon presentation by the Participant to
the Committee of written documentation evidencing payment of such tax.
ARTICLE IV
SEPARATE ACCOUNTS
4.1 TYPES OF SEPARATE ACCOUNTS. Each Participant shall have
established in his name Separate Accounts which shall reflect the type of
contributions as well as interest thereon credited to him pursuant to Article
III and Section 4.2. Such Separate Accounts shall be as follows:
(a) a Supplemental Matching Account which shall reflect
the Supplemental Matching Contributions credited to a
Participant pursuant to Section 3.1 and any interest
credited thereon pursuant to Section 4.2;
(b) a Supplemental Basic Account (pre-tax) which shall
reflect the pre-tax Supplemental Basic Contributions
credited to a Participant pursuant to Section 3.2 and
any interest credited thereon pursuant to Section
4.2;
(c) a Supplemental Basic Account (post-tax) which shall
reflect the post-tax Supplemental Basic Contributions
credited to a Participant pursuant to Section 3.2 and
any interest credited thereon pursuant to Section
4.2; and
-5-
<PAGE> 7
(d) a Supplemental Tax Account which shall reflect the
amount of any Supplemental Tax Contributions credited
to a Participant pursuant to Section 3.3 and any
interest credited thereon pursuant to Section 4.2.
4.2 INTEREST. Each month, the Separate Account of a Participant
shall be deemed to earn, and, as of the last day of such month, shall be
credited with, a rate of interest equal to the average rate earned in the Fixed
Income Fund of the Cooper Savings Plan during such month.
ARTICLE V
DISTRIBUTION
5.1 ELIGIBILITY FOR DISTRIBUTION. The entire balance credited to a
Participant's Supplemental Matching and Supplemental Basic Accounts shall be
distributed to such Participant or his Beneficiary as soon as practicable after
termination of such Participant's employment with the Employers and related
corporations. Any balance credited to a Participant's Supplemental Tax Account
shall be distributed to such Participant or his Beneficiary as soon as
practicable after presentation of documentation evidencing payment of any
excess distributions tax as set forth in Section 3.3.
5.2 METHOD OF DISTRIBUTION. The benefits payable under the Plan from
a Participant's Supplemental Matching and Supplemental Basic Accounts shall be
paid to the same person in the same manner and form as, and coincident with,
the payment of the benefits of such Participant are payable under the Cooper
Savings Plan. The benefits payable under the Plan from a Participant's
Supplemental Tax Account shall be paid in a single sum to such Participant or
his Beneficiary, if applicable.
-6-
<PAGE> 8
ARTICLE VI
BENEFICIARIES
In the event a Participant dies before his interest under the Plan has
been distributed to him in full, any remaining interest shall be distributed
pursuant to Article V to his Beneficiary who shall be the person designated as
his beneficiary under the Cooper Savings Plan.
ARTICLE VII
ADMINISTRATIVE PROVISIONS
7.1 ADMINISTRATION. The Plan shall be administered by the Local
Administrative Committee under the Cooper Savings Plan which shall administer
it in a manner consistent with the administration of the Cooper Savings Plan,
as from time to time amended, except that the Plan shall be administered as an
unfunded plan not intended to meet the qualification requirements of Section
401 of the Code.
7.2 POWERS AND AUTHORITIES OF THE COMMITTEE. The Local
Administrative Committee shall have full power and authority to interpret,
construe and administer the Plan and its interpretations and construction
hereof, and actions hereunder, including the timing, form, amount or recipient
of any payment to be made hereunder, shall be binding and conclusive on all
persons for all purposes. The Local Administrative Committee may delegate any
of its powers, authorities, or responsibilities for the operation and
administration of the Plan to any person or committee so designated in writing
by it and may employ such attorneys, agents, and accountants as it may deem
necessary or advisable to assist it in carrying out its duties hereunder. No
member of the Committee shall be liable to any person for any action taken or
omitted in connection with the interpretation and administration of the Plan
unless attributable to his own willful misconduct
-7-
<PAGE> 9
or lack of good faith. Members of the Committee shall not participate in any
action or determination regarding their own benefits, if any, payable under the
Plan.
7.3 INDEMNIFICATION. In addition to whatever rights of
indemnification a member of the Local Administrative Committee, or any other
person or persons to whom any power, authority, or responsibility is delegated
pursuant to Section 7.2, may be entitled under the articles of incorporation,
regulations, or by-laws of the Company, under any provision of law, or under
any other agreement, the Company shall satisfy any liability actually and
reasonably incurred by any such member of such other person or persons,
including expenses, attorneys' fees, judgments, fines, and amounts paid in
settlement, in connection with any threatened, pending, or completed action,
suit, or proceeding which is related to the exercise or failure to exercise by
such member or such other person or persons of any of the powers, authority,
responsibilities, or discretion provided under the Plan.
ARTICLE VIII
AMENDMENT AND TERMINATION
The Company reserves the right to amend or terminate the Plan at any
time by action of the Plans Administration Committee; provided, however, that
no such action shall adversely affect any Participant who is receiving
supplemental benefits under the Plan or whose Separate Accounts are credited
with any contributions thereto, unless an equivalent benefit is provided under
another plan or program sponsored by an Employer.
-8-
<PAGE> 10
ARTICLE IX
ADOPTION BY SUBSIDIARIES
Any subsidiary of the Company which is not an Employer may, with the
consent of the Company, adopt the Plan and become an Employer hereunder by
causing an appropriate written instrument evidencing such adoption to be
executed pursuant to the authority of its Board of Directors and filed with the
Company.
ARTICLE X
MISCELLANEOUS
10.1 NON-ALIENATION OF BENEFITS. No benefit under the Plan shall at
any time be subject in any manner to alienation or encumbrance. If any
Participant or Beneficiary shall attempt to, or shall, alienate or in any way
encumber his benefits under the Plan, or any part thereof, or if by reason of
his bankruptcy or other event happening at any time any such benefits would
otherwise be received by anyone else or would not be enjoyed by him, his
interest in all such benefits shall automatically terminate and the same shall
be held or applied to or for the benefit of such person, his spouse, children,
or other dependents as the Local Administrative Committee may select.
10.2 PAYMENT OF BENEFITS TO OTHERS. If any Participant or
Beneficiary to whom a benefit is payable is unable to care for his affairs
because of illness or accident, any payment due (unless prior claim therefor
shall have been made by a duly qualified guardian or other legal
representative) may be paid to the spouse, parent, brother, or sister, or any
other individual deemed by the Local Administrative Committee to be maintaining
or responsible for the maintenance of such person. Any payment made in
accordance with the provisions of this Section 10.2 shall be a complete
discharge of any liability of the Plan with respect to the benefit so paid.
-9-
<PAGE> 11
10.3 PLAN NON-CONTRACTUAL. Nothing herein contained shall be
construed as a commitment or agreement on the part of any person employed by an
Employer to continue his employment with an Employer, and nothing herein
contained shall be construed as a commitment on the part of an Employer to
continue the employment or the annual rate of compensation of any such person
for any period, and all Participants shall remain subject to discharge to the
same extent as if the Plan had never been established.
10.4 FUNDING. In order to provide a source of payment for its
obligations under the Plan, the Company may establish a trust fund. Subject to
the provisions of the trust agreement governing such trust fund, the obligation
of an Employer under the Plan to provide a Participant or a Beneficiary with a
benefit constitutes the unsecured promise of such Employer to make payments as
provided herein, and no person shall have any interest in, or a lien or prior
claim upon, any property of the Employer.
10.5 CONTROLLING STATUS. No Participant shall be eligible for a
benefit under the Plan unless such Participant is a Participant on the date of
his retirement, death, or other termination of employment.
10.6 CLAIMS OF OTHER PERSONS. The provisions of the Plan shall in no
event be construed as giving any person, firm or corporation any legal or
equitable right as against an Employer, its officers, employees, or directors,
except any such rights as are specifically provided for in the Plan or are
hereafter created in accordance with the terms and provisions of the Plan.
10.7 SEVERABILITY. The invalidity or unenforceability of any
particular provision of the Plan shall not affect any other provision hereof,
and the Plan shall be construed in all respects as if such invalid or
unenforceable provision were omitted herefrom.
-10-
<PAGE> 12
10.8 GOVERNING LAW. The provisions of the Plan shall be governed and
construed in accordance with the laws of the State of Ohio.
* * *
EXECUTED at Houston, Texas, this 4th day of November, 1987.
COOPER INDUSTRIES, INC.
By Alan E. Riedel
--------------------------
Title:
-11-
<PAGE> 13
FIRST AMENDMENT
TO THE
COOPER INDUSTRIES, INC.
SUPPLEMENTAL EXCESS DEFINED CONTRIBUTION PLAN
WHEREAS, Cooper Industries, Inc. ("Cooper") maintains the Cooper
Industries, Inc. Supplemental Excess Defined Contribution Plan (the "Plan"),
which is a supplemental retirement plan for the benefit of a select group of
management employees employed by Cooper; and
WHEREAS, Cooper and Belden Wire & Cable Company ("BW&C") entered
into a certain Asset Transfer Agreement on July 26, 1993, under which certain
assets of Cooper were transferred to BW&C and in conjunction therewith certain
liabilities under the Plan for employees of BW&C and certain active and former
employees of Cooper were to be transferred and spun-off to a separate plan
maintained by BW&C known as the Belden Wire & Cable Company Supplemental Excess
Defined Contribution Plan as of August 1, 1993;
NOW, THEREFORE, the Plan is hereby amended, as of August 1, 1993, in
the respects hereinafter set forth to reflect such spin-off.
1. Section 1.1(h) of the Plan is hereby amended by the addition of
the following sentence at the end thereof to provide as follows:
As of August 1, 1993, such term shall not include Belden Wire
& Cable Company.
2. Article II of the Plan is hereby amended by the addition of the
following sentence at the end thereof to provide as follows:
Notwithstanding any other provision of the Plan to the
contrary, as of August 1, 1993, the participation of any
employee of the Belden Wire & Cable Company and any former
employee of the Belden Electrical Wire Products Division of
the Company who was last employed at the Richmond, Indiana
facility, the Clinton, Arkansas facility, the Essex Junction,
Vermont facility, the Franklin, North Carolina facility, the
Monticello, Kentucky facility, the Tompkinsville, Kentucky
facility or a related sales office shall cease and any such
employee or former employee shall no longer be a Participant
in the Plan as of such date.
<PAGE> 14
3. Article IX of the Plan is hereby amended by the addition of the
following sentence at the end thereof to provide as follows:
As of August 1, 1993, Belden Wire & Cable Company shall no
longer be a participating employer in the Plan.
4. Article X of the Plan is hereby amended by the addition of the
following Section 10.9 to provide as follows:
10.9 Discontinuance of Coverage and Transfer of
Liabilities with Respect to Belden Employees. As of August
1, 1993, coverage under the Plan is closed to any individual
employed by Belden Wire & Cable Company at the Richmond,
Indiana facility, the Clinton, Arkansas facility, the Essex
Junction, Vermont facility, the Franklin, North Carolina
facility, the Monticello, Kentucky facility, the
Tompkinsville, Kentucky facility or a related sales office (a
"Belden Employee") and thereafter no Belden Employee shall
become covered by the Plan. Moreover, as of August 1, 1993,
liabilities under Plan Accounts of Belden Employees and any
individual who terminated employment prior to said date from
the Richmond, Indiana facility, the Clinton, Arkansas
facility, the Essex Junction, Vermont facility, the Franklin,
North Carolina facility, the Monticello, Kentucky facility,
the Tompkinsville, Kentucky facility or a related sales office
of the Company or Belden Wire & Cable Company shall be
transferred to the Belden Wire & Cable Company Supplemental
Excess Defined Contribution Plan to be held, administered and
governed thereunder.
Executed at Houston, Texas, this 8th day of September, 1993.
COOPER INDUSTRIES, INC.
By: /s/ Alan E. Riedel
--------------------------------
Title:
<PAGE> 15
SECOND AMENDMENT
TO THE
COOPER INDUSTRIES, INC.
SUPPLEMENTAL EXCESS DEFINED CONTRIBUTION PLAN
WHEREAS, Cooper Industries, Inc. (hereinafter referred to as "Cooper")
maintains the Cooper Industries, Inc. Supplemental Excess Defined Contribution
Plan (hereinafter referred to as the "Plan"), which is a supplemental
retirement plan for the benefit of a select group of management employees
employed by Cooper; and
WHEREAS, Cooper and Gardner Denver Machinery, Inc. (hereinafter
referred to as "GDM") determined to transfer and spin-off certain liabilities
under the Plan for employees of GDM and certain active and former employees of
Cooper to a separate plan maintained by GDM known as the Gardner Denver
Machinery, Inc. Supplemental Excess Defined Contribution Plan as of March 1,
1994;
NOW, THEREFORE, the Plan is hereby amended, as of March 1, 1994, in
the respects hereinafter set forth to reflect such spin-off.
1. Section 1.1(h) of the Plan is hereby amended by the addition
of the following sentence at the end thereof:
As of March 1, 1994, such term shall not include Gardner
Denver Machinery, Inc.
2. Article II of the Plan is hereby amended by the addition of
the following sentence at the end thereof:
Notwithstanding any other provision of the Plan to the
contrary, as of March 1, 1994, the participation of any
employee of Gardner Denver Machinery, Inc. and any former
employee of Gardner Denver Division of the Company who was
last employed at the LaGrange, Missouri facility; the Compton,
California facility; the Quincy, Illinois facility; or a
related sales office shall cease and any such employee or
former employee shall no longer be a Participant in the Plan
as of such date.
3. Section 5.2 of the Plan is hereby amended by the addition of
the following at the end thereof:
Notwithstanding the foregoing, benefits payable hereunder to
any Participant whose accrued benefit under the Cooper Savings
Plan is subject to the tax on excess distributions pursuant to
Section 4980A of the Code shall be paid in any manner and form
as benefits under the Cooper Savings Plan are payable as
<PAGE> 16
of the retirement date of such Participant with no requirement
that benefits payable hereunder be distributed in the same
manner, form, or time or to the same beneficiary as the
benefits of such Participant are payable under any other
retirement plan, qualified or nonqualified, maintained by the
Company.
4. Article IX of the Plan is hereby amended by the addition of
the following sentence at the end thereof:
As of March 1, 1994, Gardner Denver Machinery, Inc. shall no
longer be a participating Employer in the Plan.
5. Article X of the Plan is hereby amended by the addition of the
following Section 10.10:
10.10 Discontinuance of Coverage and Transfer of
Liabilities with Respect to Gardner Denver Employees. As of
March 1, 1994, coverage under the Plan is closed to any
individual employed by Gardner Denver Machinery, Inc. at the
Quincy, Illinois facility; the LaGrange, Missouri facility;
the Compton, California facility; or a related sales office (a
"Gardner Denver Employee") and thereafter no Gardner Denver
Employee shall become covered by the Plan. Moreover, as of
March 1, 1994, liabilities under Separate Accounts of Gardner
Denver Employees and any individual who terminated employment
prior to said date from the Quincy, Illinois facility; the
LaGrange, Missouri facility; the Compton, California facility;
or a related sales office of the Company or Gardner Denver
Machinery, Inc. shall be transferred to and assumed by Gardner
Denver Machinery, Inc. Supplemental Excess Defined
Contribution Plan to be held, administered, and governed
thereunder.
Executed at Houston, Texas, this 28th day of February, 1994.
COOPER INDUSTRIES, INC.
By: /s/ Carl J. Plesnicher, Jr.
----------------------------------
Title:
2
<PAGE> 17
THIRD AMENDMENT
TO THE
COOPER INDUSTRIES, INC.
SUPPLEMENTAL EXCESS DEFINED CONTRIBUTION PLAN
WHEREAS, Cooper Industries, Inc. (hereinafter referred to as the
"Company") maintains the Cooper Industries, Inc. Supplemental Excess Defined
Contribution Plan (hereinafter referred to as the "Plan") which is a
supplemental retirement plan for the benefit of a select group of management
employees of the Company and its subsidiaries; and
WHEREAS, the Plan has been amended subsequently on two occasions; and
WHEREAS, the Company desires to amend the Plan again to provide for
the cessation of active participation in the Plan by employees of Cameron
Forged Products Company as of May 26, 1994;
NOW, THEREFORE, the Plan is hereby amended, effective as of May 26,
1994, in the respects hereinafter set forth.
1. Section 1.1(h) of the Plan is hereby amended by the addition
of a new sentence at the end thereof to provide as follows:
As of May 26, 1994, such term shall not include Cameron Forged
Products Company.
2. Article II of the Plan is hereby amended by the addition of
two sentences at the end thereof to provide as follows:
Notwithstanding any other provision of the Plan to the
contrary, as of May 26, 1994, the active participation of any
employee of Cameron Forged Products Company shall cease and no
employee of Cameron Forged Products Company shall become
covered by the Plan on or after such date.
3. Section 5.1 of the Plan is hereby amended by the addition of a
new sentence at the end thereof to provide as follows:
Notwithstanding any provision of the Plan to the contrary, in
no event shall the Separate Accounts of a Participant who is
employed by Cameron Forged Products Company, or a successor
thereof, be distributed to such Participant prior to the
termination of employment with Cameron Forged Products
Company, or successor thereof, by such Participant.
<PAGE> 18
4. Article IX of the Plan is hereby amended by the addition of
the sentence at the end thereof to provide as follows:
As of May 26, 1994, Cameron Forged Products Company shall no
longer be a participating employer in the Plan.
Executed at Houston, Texas, this 25th day of May, 1994.
COOPER INDUSTRIES, INC.
By: /s/ Carl J. Plesnicher, Jr.
-----------------------------------
Title: Senior Vice President
Human Resources
2
<PAGE> 19
FOURTH AMENDMENT
TO THE
COOPER INDUSTRIES, INC.
SUPPLEMENTAL EXCESS DEFINED CONTRIBUTION PLAN
WHEREAS, Cooper Industries, Inc. ("Cooper") maintains the Cooper
Industries, Inc. Supplemental Excess Defined Contribution Plan (the "Plan")
which is a supplemental retirement plan for the benefit of a select group of
management employees employed by Cooper; and
WHEREAS, Cooper and Cooper Cameron Corporation ("Cooper Cameron") have
determined to transfer and spin-off, as of January 1, 1995, certain liabilities
under the Plan for employees of Cooper Cameron who were former employees of
Cooper as well as liabilities for certain former employees of Cooper to a
separate plan maintained by Cooper Cameron known as the Cooper Cameron
Corporation Supplemental Excess Defined Contribution Plan;
NOW, THEREFORE, effective as of January 1, 1995, the Plan is hereby
amended, as of January 1, 1995, in the respects hereinafter set forth to
reflect such spin-off.
1. Section 1.1(h) of the Plan is hereby amended to provide as
follows:
(h) Employer. The term "Employer" shall mean the Company
as well as McGraw Edison Company and any subsidiary of the
Company which may adopt the Plan in accordance with the
provisions of Article IX. Notwithstanding the foregoing,
effective as of the applicable date hereinafter set forth, the
following subsidiaries shall not be included as an Employer
under the Plan.
Effective Date Subsidiary
August 1, 1993 Belden Wire & Cable Company
March 1, 1994 Gardner Denver Machinery Inc.
May 26, 1994 Cameron Forged Products Company
January 1, 1995 Cooper Cameron Corporation
<PAGE> 20
2. Section 1.1 of the Plan is hereby amended by the addition of
two new paragraphs at the end thereof to provide as follows:
(a) Supplemental Post-Tax Account. The term "Supplemental
Post-Tax Account" shall mean the Separate Account in which
Supplemental Post-Tax Contributions are credited in accordance with
the provisions of Sections 3.3 and 4.1 of the Plan.
(b) Supplemental Post-Tax Contributions. The term "Supplemental
Post-Tax Contributions" shall mean the contributions credited to a Participant
under the Plan pursuant to Section 3.3.
3. Article II of the Plan is hereby amended by the addition of
the following sentence at the end thereof to provide as follows:
Notwithstanding any other provision of the Plan to the
contrary, as of January 1, 1995, no employee of the Cooper
Cameron Corporation who was last employed at the Houston,
Texas facility, the Berwick, Louisiana plant, the Katy, Texas
plant, the Liberty, Texas plant, the Missouri City, Texas
plant, the Oklahoma City, Oklahoma plant, the Patterson,
Louisiana plant, the Richmond, Texas foundry, the Ville
Platte, Louisiana plant, and the sales and service locations
of the former Cooper Oil Tool Division; the Mount Vernon, Ohio
plant, the Cooper-Bessemer Reciprocating Products Division
facility in Grove City, Pennsylvania, the Ajax-Superior
facility in Springfield, Ohio, the Compressor Packaging Plant
in Oklahoma City, Oklahoma, the Branch Offices in Oklahoma
City, Oklahoma and Wheat Ridge, Colorado, the Enterprise
Engine Services facility in Alameda, California, the Cooper
Bessemer Rotating Products Division plants in Mount Vernon,
Ohio and Tulsa, Oklahoma, and the sales offices of the former
Cooper Energy Services Operations; the Buffalo, New York
facility and the sales offices of the former Cooper
Turbocompressor Division; and the Pine Bluff, Arkansas plant
of the former Wheeling Machine Products Company, shall be a
Participant in the Plan as of such date.
4. Section 3.1 of the Plan is hereby amended by deleting the
reference to "Section 415" and substituting in place thereof the words
"Sections 401(a)(17) and (415)".
5. Section 3.2 of the Plan is hereby amended to provide as
follows:
3.2 Supplemental Basic Contributions. As of the last day
of each month, the Supplemental Basic Account of each
Participant shall be credited with Supplemental Basic
Contributions equal to the Basic Contributions and
Supplemental Contributions deemed to be Basic Contributions
for purposes of
2
<PAGE> 21
Matching Contributions (if any) that would have been
contributed to the Cooper Savings Plan on his behalf for such
month except for the provisions of Sections 401 (a)(17) and
415 of the Code and that were deferred or deducted from his
Compensation in accordance with a duly executed and filed
Compensation reduction or deduction authorization form;
provided, however, that in no event shall Supplemental Basic
Contributions when added to the amount of Basic Contributions
and Supplemental Contributions deemed to be Basic
Contributions for purposes of Matching Contributions (if any)
for such month under the Cooper Savings Plan exceed six
percent of such Participant's Compensation. Supplemental
Basic Contributions attributable to Basic Contributions and on
and after January 1, 1994, Supplemental Basic Contributions
attributable to Supplemental Contributions deemed to be Basic
Contributions shall be credited to the pre-tax Supplemental
Basic Account of the Participant and prior to January 1, 1994,
Supplemental Basic Contributions attributable to Supplemental
Contributions deemed to be Basic Contributions shall be
credited to the post-tax Supplemental Basic Account of the
Participant.
6. Section 3.3 of the Plan is hereby renumbered as Section 3.4
and a new Section 3.3 is added to provide as follows:
3.3 Supplemental Post-Tax Contributions. As of the last
day of each month, the Supplemental Post-Tax Account of each
Participant shall be credited with Supplemental Post-Tax
Contribution equal to the Supplemental Contributions
(excluding these deemed to be Basic Contributions for purposes
of Matching Contributions) that would have been contributed to
the Cooper Cameron Savings Plan on his behalf for such month
except for the provisions of Sections 401(a)(17) and Section
415 of the Code and that were deducted from his Compensation
in accordance with a duly executed and filed Compensation
deduction authorization form; provided, however, that in no
event shall Supplemental Post-Tax Contributions when added to
Supplemental Contributions (excluding those deemed to be Basic
Contributions for purposes of Matching Contributions) exceed
four percent of such Participant's Compensation.
7. Paragraph (d) of Section 4.1 of the Plan is hereby amended to
provide as follows:
(d) a Supplemental Post-Tax Account which shall reflect the
Supplemental Post-Tax Contributions credited to a Participant
pursuant to Section 3.3 and any interest credited thereon
pursuant to Section 4.2; and
8. Section 4.1 of the Plan is hereby amended by the addition of a
new paragraph
3
<PAGE> 22
(e) at the end thereof to provide as follows:
(e) a Supplemental Tax Account which shall reflect the amount
of any Supplemental Tax Contributions credited to a
Participant pursuant to Section 3.4 and any interest credited
thereon pursuant to Section 4.2.
9. Article IX of the Plan is hereby amended to provide as follows:
ARTICLE IX
ADOPTION BY SUBSIDIARIES
Any subsidiary of the Company which at the time is not an Employer
may, with the consent of the Company, adopt the Plan and become an Employer
hereunder. Notwithstanding the foregoing, effective as of the applicable date
hereinafter set forth, the following subsidiaries shall not be included as an
Employer under the Plan.
Effective Date Subsidiary
August 1, 1993 Belden Wire & Cable Company
March 1, 1994 Gardner Denver Machinery Inc.
May 26, 1994 Cameron Forged Products Company
January 1, 1995 Cooper Cameron Corporation
10. Article X of the Plan is hereby amended by the addition of the
following Section 10.11 to provide as follows:
10.11 Discontinuance of Coverage and Transfer of
Liabilities with Respect to Cooper Cameron Employees. As of
January 1, 1995, coverage under the Plan is closed to any
individual employed by Cooper Cameron Corporation (a "Cooper
Cameron Employee") and thereafter no Cooper Cameron Employee
shall become covered by the Plan. Moreover, as of January 1,
1995, assets and liabilities under any Plan attributable to
any individual employed by Cooper Cameron Corporation or any
individual who terminated employment prior to said date from
the Houston, Texas facility, the Berwick, Louisiana plant, the
Katy, Texas plant, the Liberty, Texas plant, the Missouri
City, Texas plant, the Oklahoma City, Oklahoma plant, the
Patterson, Louisiana plant, the Richmond, Texas foundry, the
Ville Platte, Louisiana plant, and the sales and service
locations of the former Cooper Oil Tool Division; the Mount
Vernon, Ohio plant, the Cooper-Bessemer Reciprocating Products
Division facility in Grove City, Pennsylvania, the
Ajax-Superior facility in Springfield, Ohio, the Compressor
Packaging Plant in Oklahoma City, Oklahoma, the Branch Offices
in Oklahoma City, Oklahoma
4
<PAGE> 23
and Wheat Ridge, Colorado, the Enterprise Engine Services
facility in Alameda, California, the Cooper Bessemer Rotating
Products Division plants in Mount Vernon, Ohio and Tulsa,
Oklahoma, and the sales offices of the former Cooper Energy
Services Operations; Buffalo, New York facility and the sales
offices of the former Cooper Turbocompressor Division; and the
Pine Bluff, Arkansas plant of the former Wheeling Machine
Products Company, shall be transferred to the Cooper Cameron
Corporation Supplemental Excess Defined Contribution Plan to
be held, administered and governed thereunder.
Executed at Houston, Texas, this 28th day of February, 1995.
COOPER INDUSTRIES, INC.
By: /s/ Carl J. Plesnicher, Jr.
-----------------------------------
Title: Senior Vice President
Human Resources
5
<PAGE> 1
Exhibit 10.7
COOPER INDUSTRIES, INC.
MANAGEMENT INCENTIVE COMPENSATION
DEFERRAL PLAN
1. Purposes of the Plan
The Cooper Industries, Inc. Management Incentive Compensation Deferral
Plan (the "Plan") is intended to provide a method for attracting and retaining
key employees of Cooper Industries, Inc., an Ohio corporation (the "Company")
and its subsidiaries, and to encourage them to remain with and devote their best
efforts to the business of the Company, thereby advancing the interests of the
Company and its shareholders.
2. Administration of the Plan
The Plan shall be administered by a committee (the "Committee") of not
less than three directors of the Company who shall be appointed by and serve at
the pleasure of the Board of Directors of the Company. Members of the Committee
shall not be eligible, and shall not have been eligible at any time within one
year prior to their appointment to the Committee, to participate in the Plan or
in any other deferred compensation plan of the Company or any of its affiliates.
The Committee shall have sole authority from time to time to select the
employees eligible to participate in the Plan from among those within the
eligible class described in Subparagraph 3(a). The Committee is authorized to
interpret the Plan and may from time to time adopt such rules and regulations,
consistent with the provisions of the Plan, as it may deem advisable to carry
out the Plan. All decisions made by the Committee shall be final. All expenses
incurred in connection with the administration of the Plan shall be borne by the
Company.
3. Participation in the Plan
(a) Eligible Class. All employees of the Company and its subsidiaries
who are eligible to earn an "Incentive Award" during a calendar year shall be
within the class of employees eligible to participate in the Plan with respect
to that Incentive Award. "Incentive Award" shall mean compensation or bonus
earned by a key employee (including officers and directors who are also key
employees) during and awarded to the employee for a calendar year (the "Award
Year") under the Cooper Industries, Inc. Annual Management Incentive Plan, which
except for participation in this Plan would become payable in one lump sum in
the calendar year next following the Award Year.
<PAGE> 2
(b) Eligible Employees. Those employees within the eligible class
described in Subparagraph (a) above who have been selected for eligibility by
the Committee, from time to time, shall be eligible employees for purposes of
the Plan.
(c) Election to Participate. An eligible employee may elect to become a
participant in the Plan ("Participant") with respect to the Incentive Award to
be earned by such employee during any Award Year by filing with the Committee an
election to defer the receipt of a portion or all of such employee's Incentive
Award for that Award Year. The preceding sentence to the contrary
notwithstanding, with respect to the 1980 Award Year, a Participant may not
elect to defer more than 10/12ths of such Participant's Incentive Award for that
Award Year. The election to participate in the Plan shall specify either (i) the
integral percentage (from 1% to 100%), (ii) a certain dollar amount or (iii) the
amount in excess of a certain dollar amount of the Participant's Incentive Award
for the Award Year which the Participant elects to defer in accordance with the
terms of the Plan. The amount of Incentive Award so deferred for an Award Year
is referred to herein as the "Deferred Compensation" for that Award Year.
(d) Election of Payment of Deferred Compensation. Payment of the
Deferred Compensation for an Award Year shall be made or shall commence on March
l of the calendar year next following the Award Year (the "Designated Date") or
on an anniversary of the Designated Date (the Designated Date and any
anniversary thereof is sometimes referred to as a "Designated Date
Anniversary"). Each Participant who elects to defer an Incentive Award for an
Award Year shall also elect the calendar year in which the payment of the
Deferred Compensation for that Award Year shall be made or shall commence. Any
such calendar year so elected may be either during the Participant's active
employment or after termination of the Participant's employment for any reason
and may be elected either by specifying a particular calendar year or by
selecting a calendar year following the occurrence of a specified event, such as
termination of employment.
The Participant shall receive his Deferred Compensation for an Award
Year either in one lump sum or in installments for a period certain on or
commencing on the Designated Date Anniversary elected by the Participant, the
determination of which shall be in the sole discretion of the Committee and may
be determined by the Committee at any time prior to such Designated Date
Anniversary.
(e) Time of Making Elections. Any election which may be made by a
Participant under this Paragraph 3 must be made not later than December 31 of
the calendar year preceding the Award Year during which the Incentive Award to
which such election relates is earned; provided, that any election with respect
to the Incentive Award earned during the 1980 Award Year must be made not later
than February 29, 1980. All elections shall be made in the manner and form
prescribed by the Committee.
(f) Nature of Elections. Any election which may be made by a
Participant under this Paragraph 3 with respect to the Participant's Incentive
Award for an Award Year shall be
-2-
<PAGE> 3
irrevocable once made. Plan provisions to the contrary not withstanding, any
election which may be made by a Participant under this Paragraph 3 with respect
to the Participant's Incentive Award for an Award Year, unless changed by the
Participant prior to the expiration of the time for making such election with
respect to the Participant's Incentive Awards for each subsequent Award Year,
shall be deemed to have been made with respect to the Participant's Incentive
Awards for each subsequent Award Year, respectively.
4. Crediting of Deferred Compensation
to Plan Accounts
(a) Establishment of Plan Accounts. The Committee shall establish a
"Plan Account" for each Participant in the Plan, and on the Designated Date
following each Award Year the Committee shall credit to the Participant's Plan
Account the Participant's Deferred Compensation for that Award Year.
(b) Crediting of Interest Equivalents. On each anniversary of the
Designated Date on which Deferred Compensation was credited to a Participant's
Plan Account, the Committee shall credit to that Participant's Plan Account as
additional Deferred Compensation a dollar amount equal to simple interest, at a
rate of interest equal to the average of the Chase Manhattan Bank Average
Quarterly Prime Rates for the preceding calendar year, on the Deferred
Compensation (including any interest previously credited pursuant to this
Paragraph) in the Participant's Plan Account on the preceding Designated Date
Anniversary.
5. Payment of Deferred Compensation
Amounts
(a) Payment Generally. Except as otherwise provided in this Paragraph
5, the Deferred Compensation credited to a Participant's Plan Account with
respect to an Award Year shall be paid in cash to the Participant either in one
lump sum or in installments for a period certain, as determined by the
Committee, on or commencing on the Designated Date Anniversary elected by the
Participant. In the event the Participant is to receive the Deferred
Compensation in installments, the amount of each such installment shall be equal
to a fraction of the amount of the Deferred Compensation remaining to be paid
with respect to the Deferred Compensation for that Award Year, the numerator of
which is one and the denominator of which is the number of installments of the
Deferred Compensation for that Award Year remaining to be paid. The installments
of the Deferred Compensation remaining to be paid shall continue to bear
interest with respect to Deferred Compensation as provided in Paragraph 4(b).
(b) Payment of Simultaneous Deferred Compensation Amounts. It is
recognized that a Participant may elect to defer Incentive Awards with respect
to more than one Award Year, so that Deferred Compensation is credited to the
Participant's Plan Account with respect to more than one Award Year and the
payment of Deferred Compensation with respect to more than one
-3-
<PAGE> 4
Award Year may become payable to the Participant in the same year on different
Designated Date Anniversaries.
(c) Termination of Employment. Regardless of the Participant's election
of the Designated Date Anniversary on which payment of the Deferred Compensation
for any Award Year is to be paid or commence, in the event a Participant's
employment with the Company and its subsidiaries terminates prior to the first
Designated Date Anniversary elected by the Participant for any reason (including
death), cash payment of that Deferred Compensation shall be accelerated by being
made on or commencing on the first Designated Date Anniversary following the
Participant's termination of employment, either in one lump sum or in
installments for a period certain, as determined by the Committee.
(d) Hardship. Regardless of the Participant's Designated Date
Anniversary on which payment of the Deferred Compensation for any Award Year is
to be paid or commence, in the event of hardship of the Participant or his
beneficiaries, as determined in the sole discretion of the Committee, cash
payment of that Deferred Compensation shall be accelerated by being made on the
first Designated Date Anniversary following the Committee's determination of
hardship, in one lump sum. For this purpose, hardship shall mean any emergency
or necessity affecting the personal or family affairs of the Participant having
a significant financial effect.
(e) Change in Purpose. Regardless of the Participants' Designated Date
Anniversaries on which payment of Deferred Compensation for Award Years is to be
paid or commence, in the event of a major tax law change or other reason, as
determined in the sole discretion of the Committee, which makes the continued
deferral of Incentive Awards undesirable, cash payment of all of the
Participants' Deferred Compensation shall be accelerated by being made on the
first Designated Date Anniversary following the Committee's determination to
discontinue deferrals, in one lump sum.
(f) Merger or Liquidation. If the Company is to be merged into or
consolidated with one or more corporations and the Company will not be the
surviving corporation, if the Company is to be dissolved and liquidated or if
substantially all of the assets and business of the Company are to be sold, the
Committee or the Board of Directors of the Company may fix a date, on or prior
to the effective date of such merger, consolidation, dissolution and liquidation
or sale, on which all remaining Deferred Compensation then credited to
Participants' Plan Accounts may be paid in cash in one lump sum. For this
purpose, the Company shall not be considered to be the surviving corporation in
a merger the result of which is a change in the ownership of more than 50% of
the outstanding shares of common stock of the Company.
(g) Death of Participant. A Participant, by written instrument filed
with the Committee in such manner and form as it may prescribe, may designate
one or more beneficiaries to receive payment of the Participant's Deferred
Compensation in the event of the death of the Participant. Any such beneficiary
designation may be changed from time to time prior to the death of the
Participant in the absence of a beneficiary designation on file with the
Committee at
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<PAGE> 5
the time of the Participant's death, the Deferred Compensation remaining to be
paid to the Participant shall be paid as it becomes due under the Plan to the
executors or administrator of the Participant's estate.
(h) No Forfeiture of Deferred Compensation. All Deferred Compensation
credited to a Participant's Plan Account shall, in all cases, be nonforfeitable.
(i) Debiting of Plan Accounts. Once an amount of Deferred Compensation
has been paid, such amount shall be debited from the Participant's Plan Account
and shall cease to exist.
6. Prohibition Against Assignment
or Encumbrance
No right, title, interest or benefit hereunder shall ever be liable for
or charged with any of the torts or obligations of a Participant or any person
claiming under a Participant, or be subject to seizure by any creditor of a
Participant or any person claiming under a Participant. Except as provided in
Paragraph 5(g), no Participant or any person claiming under a Participant shall
have the power to anticipate or dispose of any right, title, interest or benefit
hereunder in any manner until the same shall have been actually distributed free
and clear of the terms of the Plan.
7. Nature of the Plan
The Company at its election may fund the payment of Deferred
Compensation under the Plan by setting aside and investing, in an account on the
Company's books, such funds as the Company may from time to time determine.
Neither the establishment of the Plan, the crediting of Deferred Compensation,
nor the setting aside of any funds shall be deemed to create a trust. Legal and
equitable title to any funds set aside pursuant to the Plan shall remain in the
Company, and no Participant shall have any security or other interest in such
funds. Any funds so set aside or acquired shall remain subject to the claims of
the creditors of the Company, present and future.
8. Employment Relationship
A Participant shall be considered to be in the employment of the
Company and its subsidiaries as long as he remains an employee of either the
Company, any subsidiary corporation of the Company, or any corporation to which
substantially all of the assets and business of the Company are transferred. For
this purpose, a subsidiary corporation of the Company is any corporation (other
than the Company) in an unbroken chain of corporations beginning with the
Company if, as of the date such determination is to be made, each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain. Nothing in the adoption of
this Plan nor the crediting of Deferred Compensation shall confer on any
Participant the right to continued employment by the Company or a subsidiary
corporation of the Company, or affect in any way the right of the Company or
such subsidiary to terminate his
-5-
<PAGE> 6
employment at any time. Any question as to whether and when there has been a
termination of a Participant's employment, and the cause of such termination,
shall be determined by the Committee, and its determination shall be final.
9. Effective Date, Amendment and
Termination of Plan
The Plan shall be effective as of January l, 1980. The Committee or the
Board of Directors of the Company may terminate the Plan at any time with
respect to Deferred Compensation which has not theretofore been credited to Plan
Accounts. The Committee or the Board of Directors of the Company shall have the
right to alter or amend the Plan or any part thereof from time to time, except
that neither the Committee nor the Board of Directors of the Company shall make
any alteration or amendment which would impair the rights of a Participant with
respect to Deferred Compensation theretofore credited to that Participant's Plan
Account. If not sooner terminated under the provisions of this Paragraph 9, the
Plan shall terminate as of the date on which all Deferred Compensation
theretofore credited to Plan Accounts has been paid.
10. Laws Governing
This Plan shall be construed in accordance with and governed by the
laws of the State of Texas.
-6-
<PAGE> 7
FIRST AMENDMENT TO THE
MANAGEMENT INCENTIVE COMPENSATION
DEFERRAL PLAN
----------------------------------
WHEREAS, Cooper Industries, Inc. (hereinafter referred to as the
"Company") established the Management Incentive Compensation Deferral Plan
(hereinafter referred to as the "Plan") effective as of January 1, 1980 for the
purpose of providing certain executives an opportunity to defer the payment of
all or any desired portion of any bonus awarded by the Management Development
and Compensation Committee of the Board of Directors (hereinafter referred to as
the "Committee"); and
WHEREAS, the Committee, pursuant to the provisions of Section 9 of the
Plan, has the right to alter or amend the Plan or any part thereof from time to
time, except to the extent that any alteration or amendment would impair the
rights of a Participant with respect to Deferred Compensation theretofore
credited to that Participant's Plan Account; and
WHEREAS, the Committee desires to amend Section 5(f) of the Plan.
NOW THEREFORE, effective as of November 1, 1988, the Plan is hereby
amended as hereinafter set forth.
1. Section 5(f) of the Plan is hereby amended to provide as
follows:
5(f) Change in Control
(1) In the case of Incentive Awards for which
elections were irrevocable as of November 1, 1988, if (i) the Company is to be
merged into or consolidated with one or more corporations and the Company will
not be the surviving corporation, (ii) the Company is to be dissolved and
liquidated, or (iii) substantially all of the assets and business of the Company
are to be sold, then the Committee or the Board of Directors of the Company may
fix a date, on or prior to the effective date of such merger, consolidation,
dissolution and liquidation or sale, on which all remaining Deferred
Compensation then credited to Participants' Plan Accounts may be paid in cash in
one lump sum. For this purpose, the Company shall not be considered to be the
surviving corporation in a merger the result of which is a change in the
ownership of more than 50% of the outstanding shares of common stock of the
Company.
(2) In the case of Incentive Awards for which
elections were not made or irrevocable as of November 1, 1988, if (i) the
Company is to be merged into or consolidated with one or more corporations and
the Company is not to be the surviving corporation, (ii) the Company is to be
dissolved and liquidated, (iii) substantially all of the assets and business of
the Company are to be sold, or (iv) there occurs a "change in control" of the
Company, then the Committee or the Board of Directors of the Company shall fix a
date on or prior to the effective
<PAGE> 8
date of such merger, consolidation, dissolution and liquidation, sale or change
in control, on which all remaining Deferred Compensation then credited to
Participants' Plan Accounts shall be paid in cash in one lump sum.
For purposes hereof, a "change in control of the
Company" shall be deemed to have occurred if (i) any "person", as such term is
used in Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934
(the "Exchange Act") is or becomes the "beneficial owner" (as such term is used
in Rule 13d-3 issued under the Exchange Act), of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities or (ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors cease for any reason to constitute at least three-fourths thereof
unless the election, or the nomination for election by the Company's
shareholders, of each new director was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the beginning of the
period.
(3) For years after 1988, if an event described in
Section 5(f)(2)(i)-(iv) occurs during a year, notwithstanding any election
previously made, no Incentive Award payable for or in that year shall be
deferred. If any amount has been deferred in that year prior to such an event
occurring, the deferral shall terminate and the amount deferred plus interest
shall be paid in cash.
2. All other terms and conditions of the Plan shall remain in full
force and effect and are hereby preserved and ratified.
Executed this 1st day of November, 1988.
COOPER INDUSTRIES, INC.
By /s/John D. Ong
-------------------------------
Chairman, Management Development
and Compensation Committee
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<PAGE> 9
SECOND AMENDMENT TO THE
MANAGEMENT INCENTIVE COMPENSATION
DEFERRAL PLAN
----------------------------------
WHEREAS, Cooper Industries, Inc. (hereinafter referred to as the
"Company") established the Management Incentive Compensation Deferral Plan
(hereinafter referred to as the "Plan") effective as of January 1, 1980, and
amended the Plan effective as of November 1, 1988, for the purpose of providing
certain executives an opportunity to defer the payment of all or any desired
portion of any bonus awarded by the Management Development and Compensation
Committee of the Board of Directors (hereinafter referred to as the
"Committee"); and
WHEREAS, the Committee, pursuant to the provisions of Section 9 of the
Plan, has the right to alter or amend the Plan or any part thereof from time to
time, except to the extent that any alteration or amendment would impair the
rights of a Participant with respect to Deferred Compensation theretofore
credited to that Participant's Plan Account; and
WHEREAS, the Committee desires to amend Sections 2 and 3(b) of the
Plan.
NOW, THEREFORE, effective as of November 5th, 1990, the Plan is
hereby amended as hereinafter set forth.
1. Section 2 of the Plan is hereby amended to provide as follows:
2. Administration of the Plan
The Plan shall be administered by a committee (the "Committee") of not
less than three directors of the Company who shall be appointed by and serve at
the pleasure of the Board of Directors of the Company. Members of the Committee
shall not be eligible, and shall not have been eligible at any time within one
year prior to their appointment to the Committee, to participate in the Plan.
The Committee is authorized to interpret the Plan and may from time to time
adopt such rules and regulations, consistent with the provisions of the Plan, as
it may deem advisable to carry out the Plan. All decisions made by the Committee
shall be final. All expenses incurred in connection with the administration of
the Plan shall be borne by the Company.
2. Section 3(b) of the Plan is hereby amended to provide as
follows:
3(b) Participation in the Plan: Eligible Employees. Those
employees within the eligible class described in subparagraph (a) above who
either are officers of the Company or who have been selected for eligibility by
the Chief Executive Officer of the Company, from time to time, shall be eligible
employees for purposes of the Plan.
-1-
<PAGE> 10
3. All other terms and conditions of the Plan, as amended, shall remain
in full force and effect and are hereby preserved and ratified.
Executed this ______ day of November, 1990.
COOPER INDUSTRIES, INC.
By
------------------------------------
Chairman, Management Development and
Compensation Committee
-2-
<PAGE> 1
EXHIBIT 10.8
CROUSE-HINDS COMPANY
OFFICERS' DISABILITY AND SUPPLEMENTAL PENSION PLAN
In order to provide additional retirement benefits for those key Officers
of Crouse-Hinds Company (the "Company") whose anticipated pension under the
Company's qualified pension plan is deemed not to be commensurate with their
current earnings or responsibilities because of insufficient tenure or
governmental regulations, and in order to provide disability benefits to such
Officers, if necessary, the Board of Directors has authorized the establishment
of this OFFICERS' DISABILITY AND SUPPLEMENTAL PENSION PLAN (the "Plan") to
provide as follows:
1. Eligibility
The Participants in the Plan shall be Officers of the Company elected to
office by the Board of Directors and domiciled in the United States who have
completed at least five (5) years of employment as an Officer of the Company
(hereinafter referred to as "Participants").
2. Normal Retirement
A Participant who retires at any time on or after the last day of the month
in which occurs such Participant's 65th birthday (such Participant's "Normal
Retirement Date") shall be entitled to an annual retirement pension payable
monthly (on the 15th day of each month) in the form of a life annuity equal to
50% of such Participant's final average earnings, reduced in any year by the sum
of (a) any benefit to which such Participant is entitled under the Company's
qualified pension plan and (b) primary Social Security benefits payable to such
Participant.
3. Post-Retirement Death Benefit
In the event of a retired Participant's death, there shall be payable
monthly to such
-1-
<PAGE> 2
Participant's surviving spouse, if any, but only for as long as such spouse
shall remain unmarried, an annual death benefit in the form of a life annuity in
an amount equal to 75% of the annual benefit to which the Participant was
entitled under Paragraph 1 hereof prior to death.
Except in the case of each spouse of an Officer of the Company who was such
a spouse on August 1, 1978, in the event of the Participant's spouse being more
than ten (10) years younger than the Participant, the benefit payable under this
Paragraph shall be actuarially reduced in accordance with the table set forth in
Schedule A annexed hereto.
4. Pre-Retirement Death Benefit
In the event of a Participant's death prior to retirement, there shall be
payable monthly to such Participant's surviving spouse, if any, but only for as
long as such spouse shall remain unmarried, an annual death benefit in the form
of a life annuity equal to 37 1/2% of such Participant's final average earnings,
reduced in any year by the sum of (a) any benefit payable to such spouse under
the Company's qualified pension plan and (b) any Social Security benefit payable
to such spouse an account of such Participant's death.
Except in the case of each spouse of an Officer of the Company who was such
a spouse on August 1, 1978, in the event of the Participant's spouse being more
than ten (10) years younger than the Participant, the benefit payable under this
Paragraph shall be actuarially reduced in accordance with the table set forth in
Schedule A annexed hereto.
5. Cost-of-Living Adjustments
The amount of pension or death benefit payable under Paragraphs 2, 3, and 7
hereof shall be subject to increase by a cost-of-living adjustment on the second
anniversary of the Participant's Normal Retirement Date and at two-year interval
anniversaries thereafter. The amount of death
-2-
<PAGE> 3
benefit payable under Paragraph 4 hereof shall be subject to increase by such an
adjustment on the second anniversary of the Participant's death and at two-year
interval anniversaries thereafter. In each case the amount of the adjustment
shall be related to the amount by which the increase in the CPI in effect at the
applicable two-year anniversary date exceeds 3% per annum in each year since the
earlier of the Participant's death or Normal Retirement Date and shall be
determined by multiplying the pension or death benefit payable hereunder
determined as of the Participant's death or Normal Retirement Date, as the case
may be, by the fraction C where:
---------
A+(.03AxB)
A is the CPI in effect on the earlier of the Participant's death
or Normal Retirement Date;
B is the number of years since the earlier of the Participant's
death or Normal Retirement Date; and
C is the CPI on the applicable two-year anniversary date,
subsequent to the earlier of the Participant's death or Normal
Retirement Date.
6. Disability
In the event a Participant becomes totally disabled, as hereinafter
defined, while actively employed by the Company, such Participant shall be
entitled to receive such Participant's full salary as in effect on the date of
disability for a period of six (6) months, and shall thereafter be entitled to
an annual disability pension equal to 70% of such Participant's annual rate of
compensation as in effect an the date of disability (including in such rate for
this purpose such Participant's base salary rate then in effect and the
annualized rate of any bonus received by such Participant during the year ended
on the date such Participant became totally disabled) until such
-3-
<PAGE> 4
Participant's death or Normal Retirement Date. Should such disabled Participant
die prior to such Participant's Normal Retirement Date, such Participant's
surviving spouse shall receive the annual death benefit described in Paragraph 4
hereof. After such Participant's Normal Retirement Date, such Participant shall
receive the retirement pension described in Paragraph 1 hereof, and, after such
Participant's death following such Participant's Normal Retirement Date, the
surviving spouse of such Participant shall receive the annual death benefit
described in Paragraph 3 hereof. Any disability pension payable hereunder shall
be reduced by the sum of any of the following amounts that may be payable to the
Participant: (a) disability benefits payable under the Company's qualified
pension plan, (b) Workmen's Compensation benefits, (c) Social Security benefits,
and (d) State Disability Funds.
7. Vesting
In the event a Participant's employment by the Company as an Officer
terminates after such Participant has been an Officer of the Company for at
least ten (10) years but prior to such Participant's Normal Retirement Date for
a reason other than such Participant's voluntary termination of employment with
the Company, death, total disability, or discharge by the Company on account of
malfeasance in the performance of such Participant's duties (such malfeasance to
be determined in the sole and uncontrolled discretion of the Board), the
Participant shall be considered a former Participant and shall be entitled to
receive commencing on such former Participant's Normal Retirement Date an annual
retirement pension equal to (i) that amount which is 50% of such former
Participant's final average earnings multiplied by the fraction which is the
number of whole years of such former Participant's service as an Officer of the
Company divided by the number of whole years from the date such Participant
became an Officer
-4-
<PAGE> 5
of the Company to such former Participant's Normal Retirement Date, reduced in
any year by (ii) the sum of (a) any benefit to which such former Participant is
entitled under the Company's qualified pension plan and (b) primary Social
Security benefits payable to such former Participant.
The surviving spouse of such a former Participant shall be entitled after
such former Participant's Normal Retirement Date to an annual death benefit, but
only for so long as such spouse shall remain unmarried, in the form of a life
annuity in an amount equal to 75% of the annual benefit to which such former
Participant was or would have become (had such former Participant not
predeceased such spouse) entitled under this Paragraph 7.
Except in the case of each spouse of an Officer of the Company who was such
a spouse on August 1, 1978 , in the event of the Participant's spouse being more
than ten (10) years younger than the Participant, the benefit payable under this
Paragraph shall be actuarially reduced in accordance with the table set forth in
Schedule A annexed hereto.
8. Certain Definitions
(a) Totally Disabled. A Participant shall be considered as totally disabled
for purposes of the Plan for the first two (2) years of such Participant's
disability if such Participant is unable to perform the duties of such
Participant's own occupation. Such Participant shall be considered as totally
disabled thereafter for purposes of the Plan if such Participant is unable to
perform any and every duty of any occupation for which such Participant is or
may reasonably become qualified by virtue of such Participant's training,
education, or experience.
(b) CPI shall mean the national average Consumer Price Index (1967 = 100%),
all items, as determined by the Bureau of Labor Statistics.
-5-
<PAGE> 6
(c) Final average earnings shall mean the average of the Participant's
basic annual salary and bonuses from the Company during the last five (5) years
of the Participant's employment.
9. Funding
The Company shall not be obligated to fund the benefits provided under the
Plan.
-6-
<PAGE> 7
SCHEDULE A
FACTORS TO BE APPLIED TO EMPLOYEE'S RETIREMENT INCOME TO
DETERMINE INCOME UNDER CONTINGENT ANNUITANT OPTION IF 100% OF
SUCH INCOME IS CONTINUED TO CONTINGENT ANNUITANT
<TABLE>
<CAPTION>
BENEFICIARY'S BENEFICIARY'S
AGE AT AGE AT
PENSIONER'S MALE PENSIONER WHOSE RETIREMENT AGE IS: PENSIONER'S
RETIREMENT RETIREMENT
MALE FEMALE 60 61 62 63 64 65 66 67 MALE FEMALE
- ---- ------ ---- ---- ---- ---- ---- ---- ---- ---- ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
15 21 .622 .606 .591 .574 .558 .541 .525 .508 15 21
16 22 .623 .608 .592 .576 .560 .543 .526 .509 16 22
17 23 .625 .610 .594 .578 .561 .544 .528 .511 17 23
18 24 .627 .611 .596 .579 .563 .546 .529 .512 18 24
19 25 .629 .613 .597 .581 .565 .548 .531 .514 19 25
20 26 .631 .615 .599 .583 .567 .550 .533 .516 20 26
21 27 .633 .617 .601 .585 .568 .552 .535 .518 21 27
22 28 .635 .620 .604 .587 .571 .554 .537 .520 22 28
23 29 .638 .622 .606 .590 .573 .556 .539 .522 23 29
24 30 .640 .624 .608 .592 .575 .558 .541 .524 24 30
25 31 .643 .627 .611 .594 .578 .560 .543 .526 25 31
26 32 .646 .630 .614 .597 .580 .563 .546 .528 26 32
27 33 .649 .633 .616 .600 .583 .566 .548 .531 27 33
28 34 .652 .636 .619 .603 .586 .560 .551 .534 28 34
29 35 .655 .639 .623 .606 .589 .571 .554 .536 29 35
30 36 .658 .642 .626 .609 .592 .574 .557 .539 30 36
31 37 .662 .646 .629 .612 .595 .578 .560 .542 31 37
32 38 .665 .649 .633 .616 .599 .581 .563 .546 32 38
33 39 .669 .653 .637 .620 .602 .505 .567 .549 33 39
34 40 .673 .657 .641 .624 .606 .589 .571 .553 34 40
35 41 .678 .661 .645 .628 .610 .593 .575 .557 35 41
36 42 .682 .666 .649 .632 .615 .597 .579 .561 36 42
37 43 .687 .670 .654 .637 .619 .601 .583 .565 37 43
38 44 .691 .675 .658 .641 .624 .606 .588 .569 38 44
39 45 .696 .680 .663 .646 .629 .611 .592 .574 39 45
40 46 .702 .685 .669 .651 .634 .616 .597 .579 40 46
41 47 .707 .691 .674 .657 .639 .621 .603 .584 41 47
42 48 .713 .696 .680 .662 .645 .626 .608 .589 42 48
43 49 .719 .702 .686 .668 .650 .632 .614 .595 43 49
44 50 .725 .708 .692 .674 .656 .630 .620 .601 44 50
45 51 .731 .715 .698 .681 .663 .644 .626 .607 45 51
------ ------ ------ ------ ------ ------ ------ ------
66 67 68 69 70 71 72 73
<CAPTION>
BENEFICIARY'S BENEFICIARY'S
AGE AT AGE AT
PENSIONER'S MALE PENSIONER WHOSE RETIREMENT AGE IS: PENSIONER'S
RETIREMENT RETIREMENT
MALE FEMALE 68 69 70 71 72 73 74 75 MALE FEMALE
- ---- ------ ---- ---- ---- ---- ---- ---- ---- ---- ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
15 21 .491 .475 .459 .443 .427 .412 .396 .381 15 21
16 22 .493 .476 .460 .444 .428 .413 .398 .382 16 22
17 23 .494 .478 .461 .445 .430 .414 .399 .383 17 23
18 24 .496 .479 .463 .447 .431 .415 .400 .384 18 24
19 25 .497 .481 .464 .448 .432 .417 .401 .386 19 25
20 26 .499 .482 .466 .450 .434 .418 .403 .387 20 26
21 27 .501 .484 .468 .451 .435 .420 .404 .388 21 27
22 28 .503 .486 .469 .453 .437 .421 .406 .390 22 28
23 29 .505 .488 .471 .455 .439 .423 .407 .391 23 29
24 30 .507 .490 .473 .457 .441 .425 .409 .393 24 30
25 31 .509 .492 .475 .459 .443 .427 .411 .395 25 31
26 32 .511 .494 .477 .461 .445 .429 .413 .397 26 32
27 33 .514 .497 .480 .463 .447 .431 .415 .399 27 33
28 34 .516 .499 .482 .466 .449 .433 .417 .401 28 34
29 35 .519 .502 .485 .468 .452 .435 .419 .403 29 35
30 36 .522 .505 .487 .471 .454 .438 .422 .405 30 36
31 37 .525 .508 .490 .473 .457 .441 .424 .408 31 37
32 38 .528 .511 .493 .476 .460 .443 .427 .410 32 38
33 39 .531 .514 .497 .480 .463 .446 .430 .413 33 39
34 40 .535 .517 .500 .483 .466 .449 .433 .416 34 40
35 41 .539 .521 .504 .486 .469 .453 .436 .419 35 41
36 42 .543 .525 .507 .490 .473 .456 .439 .422 36 42
37 43 .547 .529 .511 .494 .477 .460 .443 .426 37 43
38 44 .551 .533 .515 .498 .481 .464 .446 .429 38 44
39 45 .556 .538 .520 .502 .485 .468 .450 .433 39 45
40 46 .561 .542 .524 .507 .489 .472 .455 .437 40 46
41 47 .566 .547 .529 .511 .494 .476 .459 .441 41 47
42 48 .571 .553 .534 .516 .499 .481 .464 .446 42 48
43 49 .577 .558 .540 .522 .504 .486 .469 .451 43 49
44 50 .582 .564 .545 .527 .509 .492 .474 .456 44 50
45 51 .588 .570 .551 .533 .515 .497 .479 .461 45 51
------ ------ ------ ------ ------ ------ ------ ------
74 75 76 77 78 79 80 81
</TABLE>
FEMALE PENSIONER WHOSE RETIREMENT AGE IS:
INTEREST - 5.50%
MORTALITY - 1971 TPF/C FORECAST MORTALITY TABLE
<PAGE> 8
SCHEDULE A
Page Two
FACTORS TO BE APPLIED TO EMPLOYEE'S RETIREMENT INCOME TO
DETERMINE INCOME UNDER CONTINGENT ANNUITANT OPTION IF 100% OF
SUCH INCOME IS CONTINUED TO CONTINGENT ANNUITANT
<TABLE>
<CAPTION>
BENEFICIARY'S BENEFICIARY'S
AGE AT AGE AT
PENSIONER'S MALE PENSIONER WHOSE RETIREMENT AGE IS: PENSIONER'S
RETIREMENT RETIREMENT
MALE FEMALE 60 61 62 63 64 65 66 67 MALE FEMALE
- ---- ------ ---- ---- ---- ---- ---- ---- ---- ---- ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 51 .731 .715 .698 .681 .663 .644 .626 .607 45 51
46 52 .737 .721 .704 .687 .669 .651 .632 .614 46 52
47 53 .744 .728 .711 .694 .676 .658 .639 .620 47 53
48 54 .751 .735 .719 .701 .683 .665 .646 .627 48 54
49 55 .757 .742 .725 .708 .690 .672 .653 .634 49 55
50 56 .764 .749 .732 .715 .697 .679 .660 .642 50 56
51 57 .772 .756 .740 .723 .705 .687 .668 .649 51 57
52 58 .779 .764 .747 .731 .713 .695 .676 .657 52 58
53 59 .786 .771 .755 .738 .721 .703 .684 .665 53 59
54 60 .794 .779 .763 .747 .729 .711 .693 .674 54 60
55 61 .802 .787 .771 .755 .738 .720 .701 .682 55 61
56 62 .809 .795 .779 .763 .746 .729 .710 .691 56 62
57 63 .817 .803 .788 .772 .755 .738 .719 .701 57 63
58 64 .825 .811 .796 .781 .764 .747 .729 .710 58 64
59 65 .833 .820 .805 .790 .773 .756 .738 .720 59 65
60 66 .841 .828 .814 .799 .783 .766 .748 .730 60 66
61 67 .849 .836 .822 .808 .792 .775 .758 .740 61 67
62 68 .857 .844 .831 .817 .801 .785 .768 .751 62 68
63 69 .865 .853 .840 .826 .811 .795 .779 .761 63 69
64 70 .873 .861 .848 .835 .821 .805 .789 .772 64 70
65 71 .880 .869 .857 .844 .830 .815 .799 .783 65 71
66 72 .888 .877 .865 .853 .839 .825 .809 .793 66 72
67 73 .895 .885 .874 .862 .849 .835 .820 .804 67 73
68 74 .902 .892 .882 .870 .858 .844 .830 .815 68 74
69 75 .908 .898 .889 .878 .866 .853 .839 .825 69 75
70 76 .915 .906 .897 .886 .875 .862 .849 .835 70 76
71 77 .821 .913 .904 .894 .883 .871 .858 .845 71 77
72 78 .927 .919 .910 .901 .891 .879 .867 .854 72 78
73 79 .932 .925 .917 .908 .898 .888 .876 .864 73 79
74 80 .937 .931 .923 .915 .906 .895 .884 .873 74 80
75 81 .942 .936 .929 .921 .913 .903 .893 .881 75 81
------ ------ ------ ------ ------ ------ ------ ------
66 67 68 69 70 71 72 73
<CAPTION>
BENEFICIARY'S BENEFICIARY'S
AGE AT AGE AT
PENSIONER'S MALE PENSIONER WHOSE RETIREMENT AGE IS: PENSIONER'S
RETIREMENT RETIREMENT
MALE FEMALE 68 69 70 71 72 73 74 75 MALE FEMALE
- ---- ------ ---- ---- ---- ---- ---- ---- ---- ---- ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 51 .588 .570 .551 .533 .515 .497 .479 .461 45 51
46 52 .595 .576 .557 .539 .521 .503 .485 .466 46 52
47 53 .601 .583 .564 .545 .527 .509 .491 .472 47 53
48 54 .608 .589 .570 .552 .533 .515 .497 .478 48 54
49 55 .615 .596 .577 .559 .540 .522 .503 .484 49 55
50 56 .623 .604 .585 .566 .547 .529 .510 .491 50 56
51 57 .630 .611 .593 .573 .554 .536 .517 .498 51 57
52 58 .638 .619 .600 .581 .562 .543 .524 .505 52 58
53 59 .646 .627 .608 .589 .570 .551 .532 .513 53 59
54 60 .655 .636 .616 .597 .578 .559 .540 .520 54 60
55 61 .663 .644 .625 .606 .587 .568 .548 .527 55 61
56 62 .673 .653 .634 .615 .596 .577 .557 .537 56 62
57 63 .682 .663 .644 .624 .605 .586 .566 .546 57 63
58 64 .692 .673 .653 .634 .615 .596 .575 .556 58 64
59 65 .701 .683 .663 .644 .625 .606 .585 .566 59 65
60 66 .712 .693 .674 .655 .636 .616 .597 .576 60 66
61 67 .722 .704 .685 .666 .647 .627 .607 .587 61 67
62 68 .733 .714 .696 .677 .658 .639 .619 .598 62 68
63 69 .744 .725 .707 .688 .669 .650 .630 .610 63 69
64 70 .755 .737 .718 .700 .681 .662 .643 .622 64 70
65 71 .766 .748 .730 .712 .693 .674 .655 .635 65 71
66 72 .777 .760 .742 .724 .706 .687 .669 .648 66 72
67 73 .788 .771 .754 .736 .718 .700 .681 .661 67 73
68 74 .799 .782 .765 .748 .731 .712 .693 .674 68 74
69 75 .810 .794 .777 .760 .743 .725 .707 .687 69 75
70 76 .820 .805 .789 .772 .755 .738 .720 .700 70 76
71 77 .830 .816 .800 .784 .768 .751 .733 .714 71 77
72 78 .841 .826 .811 .796 .780 .763 .745 .727 72 78
73 79 .850 .837 .822 .807 .792 .775 .758 .740 73 79
74 80 .860 .847 .833 .818 .804 .788 .771 .754 74 80
75 81 .869 .857 .844 .830 .815 .800 .784 .767 75 81
------ ------ ------ ------ ------ ------ ------ ------
74 75 76 77 78 79 80 81
</TABLE>
FEMALE PENSIONER WHOSE RETIREMENT AGE IS:
INTEREST - 5.50%
MORTALITY - 1971 TPF/C FORECAST MORTALITY TABLE
<PAGE> 9
SCHEDULE A
Page 3
<TABLE>
<CAPTION>
BENEFITS WILL BE BENEFITS WILL BE
CHANGED FROM 75% TO CHANGED FROM 37 1/2% TO
THE FOLLOWING THE FOLLOWING
SPOUSE YOUNGER PERCENTAGE WHEN PERCENTAGE WHEN
THAN PARTICIPANT PAYABLE UNDER PAYABLE UNDER
BY (YEARS) PARAGRAPHS 3 & 7 PARAGRAPH 4
------------ ---------------- -----------
<S> <C> <C>
11 66.5 33.25
12 65.8 32.90
13 65.1 32.55
14 64.4 32.20
15 63.8 31.90
16 63.2 31.60
17 62.6 31.30
18 62.1 31.05
19 61.6 30.80
20 61.1 30.55
21 60.6 30.30
22 60.1 30.05
23 59.7 29.85
24 59.3 29.65
25 58.9 29.45
26 58.5 29.25
27 58.1 29.05
28 57.8 28.90
29 57.4 28.70
30 57.1 28.55
31 56.8 28.40
32 56.6 28.30
33 56.3 28.15
34 56.0 28.00
35 55.8 27.90
36 55.6 27.80
37 55.4 27.70
38 55.2 27.60
39 55.0 27.50
40 54.8 27.40
</TABLE>
<PAGE> 10
--------------------------------------------------------
COOPER INDUSTRIES, INC.
PLANS ADMINISTRATION COMMITTEE
--------------------------------------------------------
ACTION IN WRITING CONCERNING
CROUSE-HINDS OFFICERS' SUPPLEMENTAL PENSION PLAN
--------------------------------------------------------
FEBRUARY 23, 1983
WHEREAS, Crouse-Hinds Company ("Crouse-Hinds") became a wholly-owned
subsidiary of Cooper Industries, Inc. ("Company"), effective as of April 29,
1981 ("Acquisition Date");
WHEREAS, immediately prior to the Acquisition Date, Crouse-Hinds maintained
the "Crouse-Hinds Company Officers' Disability and Supplemental Pension Plan"
("Plan") for a select group of its employees;
WHEREAS, upon the Acquisition Date, the Company agreed with Crouse-Hinds
that the Plan would remain in effect in amended form, providing for the
limitation of participation under the Plan to certain named individuals, who
were notified of their participation in the Plan;
WHEREAS, by written action dated November 23, 1982, the Board of Directors
of Crouse-Hinds confirmed the adoption of the Company's Plans Management
Procedure for the management and administration of all employee benefit plans
maintained by it, including the Plan, all effective as of the Acquisition Date;
and
WHEREAS, pursuant to the Company's Plans Management Procedure, the Plans
Administration Committee of the Company ("Committee") is responsible, among
other things, for approving amendments to employee benefit plans, and the
Committee does hereby desire to approve and confirm the amendments implemented
with respect to the Plan as of the Acquisition Date;
NOW, THEREFORE, in consideration of the foregoing, the Committee hereby
adopts the foregoing recitals and the following resolutions, as evidenced by the
signatures of all of its members below:
-1-
<PAGE> 11
RESOLVED, that the Plan, as in effect immediately prior to the Acquisition
Date, is hereby continued in effect from and after such Date subject to its
terms and the further amendatory provisions set forth below:
(1) From and after the Acquisition Date, the only Participants in the Plan
shall be the following named individuals:
F. M. Egan J. W. Perdiue
E. J. Dunphy G. R. Raisbeck
A. O. Halstead H. J. Riley, Jr.
F. F. House R. R. Schlichting
R. K. McCabe P. J. Vassallo
H. H. Meyer, Jr. R. L. Walker, M.D.
E. G. Mogren
Notwithstanding the eligibility provisions of the Plan,
participation in the Plan from and after the Acquisition Date
shall be limited to those individuals listed above, and no new
participants shall become eligible to participate in the Plan
from and after such Date, irrespective of their date of hire or
job position.
(2) Any benefit payable under the Plan with respect to a participant in
the Plan prior to the Acquisition Date, who had terminated employment
or otherwise become eligible for a benefit prior to such Date, shall
be payable in accordance with the terms of the Plan in effect as of
the date of the event giving rise to such benefit.
(3) The participants in the Plan from and after the Acquisition Date shall
be eligible to receive benefits (if any) under the Plan in accordance
with the terms of the Plan, as modified herein or subsequent hereto.
For purposes of determining such participant's eligibility for a
benefit and the amount thereof, the participant's employment with
Cooper Industries, Inc., or any of its affiliated companies, shall be
considered as employment with Crouse-Hinds Company or its successor.
(4) The Plan may be terminated or amended in any respect and at any time
by action of the Plans Administration Committee of Cooper Industries,
Inc. Any such action may provide for a retroactive or prospective
effective date, and may be taken without notice or approval of any
participant in the Plan.
(5) All determinations relating to eligibility for benefits, benefit
calculations, benefit commencement and all other determinations and
interpretations under the Plan shall be made by and in the sole
discretion of the Plans Administration Committee. All actions of such
Committee shall be final and conclusive with respect to any party
making a claim under the Plan.
RESOLVED, that the actions taken by the Committee herein are taken in
confirmation of the actions previously implemented by Crouse-Hinds and the
Company effective as of the Acquisition Date, which actions are hereby approved,
all effective as of the Acquisition Date.
-2-
<PAGE> 12
RESOLVED, that the appropriate officers of Crouse-Hinds and the Company,
and company personnel directed by them, are hereby authorized to do and perform
all such acts and things, and to take all other steps as they, or any of them
may deem necessary, advisable, convenient or proper to carry out and effect the
actions taken herein.
Dated: February 23, 1983 /s/ Roger A. Scott
---------------------------
Roger A. Scott
/s/ Carl J. Plesnicher, Jr.
---------------------------
Carl J. Plesnicher, Jr.
/s/ Laurence H. Polsky
---------------------------
Laurence H. Polsky
/s/ Stephen V. O'Neill
---------------------------
Stephen V. O'Neill
Secretary Approval: /s/DHB
--------
-3-
<PAGE> 1
Exhibit 10.9
COOPER INDUSTRIES, INC.
1986 STOCK OPTION PLAN
1. Purpose of Plan. The purpose of this Plan is to advance the
interests of Cooper Industries, Inc. (the "Company") and its shareholders by
providing a means whereby key employees of the Company and its subsidiaries may
be furnished with an additional incentive by being given an opportunity to
purchase shares of the Company's common stock, par value $5.00 per share
(hereinafter called "shares") pursuant to options granted under this Plan to the
end that the Company may retain present personnel upon whose judgment,
initiative, and efforts the successful conduct and development of the business
of the Company largely depends, and the Company may attract new personnel. The
options granted under this Plan may be either "nonstatutory" options or options
which are intended to qualify as "incentive stock options" under Section 422A of
the Internal Revenue Code of 1954, as amended (the "Code"), or any successor
provision.
2. Shares Subject to the Plan. The aggregate number of shares of the
Company for which options may be granted under this Plan shall be 6,600,000*;
provided, however, that the number of shares reserved for issuance pursuant to
this Plan at the time of any stock split, stock dividend or other change in the
Company's capitalization shall be appropriately adjusted to reflect such stock
dividend, stock split or other change in capitalization. Shares shall be made
available from authorized but unissued or reacquired shares of the Company. Any
shares for which an option is granted hereunder that are released from such
option shall be available for other options to be granted under this Plan.
3. Administration of the Plan. This Plan shall be administered by a
committee of the Board of Directors (the "Committee") consisting of not less
than three directors of the Company who shall be appointed by the Board of
Directors to serve as the Committee at the pleasure of the Board of Directors.
No member of the Committee at the time he exercises discretion in administering
this Plan shall be eligible or shall have been eligible at any time within one
year prior thereto to be allocated stock or to be granted stock options or stock
appreciation rights under this Plan or any other plan of the Company or any of
its affiliates. Any action taken by a majority of the Committee at a meeting or
by a writing signed by all of its members shall constitute action of the
Committee. Subject to the express provisions of this Plan, the Committee shall
have conclusive Authority to construe and interpret this Plan and any stock
option agreement entered into thereunder and establish, amend, and rescind rules
and regulations for its administration and shall have such additional authority
as the Board of Directors may from time to time determine to be necessary or
desirable.
4. Granting of Options. The Committee from time to time shall designate
from among the full-time key employees of the Company or of a subsidiary
corporation (as defined in
*As adjusted for 2 for 1 stock split and increase in Plan shares.
<PAGE> 2
Section 425 of the Code) those employees to whom options shall be granted under
this Plan, the types of options - whether nonstatutory or incentive or both -
and the number of shares which shall be subject to each option so granted. The
Committee also may authorize the granting of options to prospective employees.
In the case of a prospective employee, grant of the option shall be upon the
condition of employment by the Corporation or a subsidiary in a key position,
and the date of the grant of the option shall be the date such employment begins
or such later date as the Committee may have specified when authorizing the
grant. All actions of the Committee under this Paragraph shall be conclusive;
provided, however, the aggregate fair market value (determined as of the date
the option is granted) of the stock with respect to which incentive stock
options become exercisable for the first time by an employee during any calendar
year (under all incentive stock option plans) shall not exceed $100,000.
5. Option Period. No option granted under this Plan shall be exercised
later than five (5) years from the date of grant.
6. Option Price. The option price shall be fixed by the Committee and
set forth in the option agreement, and shall not be less than the fair market
value of the optioned shares on the date the option is granted, which shall be
the date on which the Committee acts on the granting of an option or such later
date as the Committee may specify. The option agreement may provide for the
option price to be payable in cash or previously acquired shares or a
combination of cash and shares and may set forth the method of valuing the
Company's shares for such purpose.
7. Option Agreement. The option agreement in which option rights are
granted to an employee shall be in the applicable form approved by the Committee
and shall be signed on behalf of the Company by an officer of the Company
designated by the Committee for this purpose and shall be dated as of the date
of grant of the option. No option shall be transferable by the optionee except
by will or the laws of descent and distribution, and options may be exercised
during the employee's lifetime only by him.
8. Reorganization and Changes in Control. If (i) the Company is to be
merged into or consolidated with one or more corporations and the Company is not
to be the surviving corporation, (ii) the Company is to be dissolved and
liquidated, (iii) substantially all of the assets and business of the Company
are to be sold, or (iv) there occurs a "change in control" of the Company, then
the Committee may, in its sole discretion, with respect to any or all options
then outstanding under this Plan both (a) at any time on or prior to the
effective date of such merger, consolidation, dissolution and liquidation, or
sale, and, at any time on or after a change in control cause the option or any
portion thereof to become exercisable forthwith in full regardless of any
provisions in the option concerning vesting and (b) at any time during the
20-day period ending on the effective date of such merger, consolidation,
dissolution or sale, or during the 20-day period beginning on the date of a
change in control or, if later, the date the Company has notice thereof, cancel
any option in whole or in part by payment in cash to the optionee of an amount
equal to the excess, but only if the amount is positive, of the fair market
value of the Company's Common Stock on the date of said cancellation over the
option price per share times the number of shares covered by the option or
portion thereof so cancelled. For purposes hereof, a "change in control of the
Company" shall be deemed to have occurred if (i) any "person", as such term is
<PAGE> 3
used in Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934
(the "Exchange Act") is or becomes the "beneficial owner" (as such term is used
in Rule 13d-3 issued under the Exchange Act), of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities or (ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors cease for any reason to constitute at least three-fourths thereof
unless the election, or the nomination for election by the Company's
shareholders, of each new director was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the beginning of the
period. In the event that a change in control results in there being fewer than
three members of the Committee who were members prior to the change, members of
the Board of Directors who were members prior to the change and meet the
requirements of the Committee membership set forth in Paragraph 3 shall
automatically be alternate members of the Committee to act under this Paragraph
8, and if there are not three such persons, then acceleration of vesting of
options as contemplated herein shall occur automatically.
9. Amendment and Termination of Plan. The Company, by action of its
Board of Directors, reserves the right at any time to amend, modify, suspend, or
terminate this Plan, or by action of the Committee with the consent of the
employee to amend, modify or terminate any outstanding option agreement except
that the Company may not, without further shareholder approval, materially
increase the total number of shares for which options may be granted under this
Plan (except increases attributable to the adjustments authorized in Paragraph 2
hereof), materially modify the requirements as to eligibility for participation
in this Plan, or materially increase the benefits accruing to participants under
this Plan.
10. Effective Date of Plan. This Plan shall be effective upon its
adoption by the Board of Directors. This Plan shall be submitted to the
shareholders of the Company for approval within 12 months after its adoption by
the Board of Directors and, if this Plan shall not be approved by the
shareholders within said period, the Plan shall be void and of no effect. Any
options granted under this Plan prior to the date of approval by the
shareholders shall be void if such shareholder approval is not obtained.
11. Expiration of Plan. Options may be granted under this Plan at any
time prior to February 18, 1996, on which date this Plan shall expire but
without affecting any options then outstanding.
<PAGE> 1
Exhibit 10.10
Cooper Industries, Inc.
Incentive Stock Option Agreement
Granted to: _______________________________
Grant Date ________________________________
Number of Shares of Cooper Industries
Common Stock _____________________________
Option Price Per Share ____________________
Employee Number ___________________________
Expiration Date ___________________________
Division __________________________________
This Agreement is made between Cooper Industries, Inc., an Ohio corporation,
having its principal office in Houston, Texas (the "Company"), and the
undersigned, an employee of the Company or a subsidiary of the Company (the
"Employee").
The parties hereto have agreed as follows:
1. Pursuant to the 1986 Stock Option Plan (the "Plan"), the Company grants to
the Employee an incentive stock option to purchase the above stated number of
shares of the Company's Common Stock, par value $5 per share (the "Shares"), at
the price stated above, subject to the following conditions:
(a) The Option rights are exercisable only if and after the Employee shall have
remained in the employ of the Company for one year from the date of grant of
this option (the "Grant Date"), whereupon such rights shall become exercisable
to the extent of only 33 1/3% of the aggregate number of Shares above specified,
which percentage shall increase to 66 2/3% after two years, and 100% after three
years from the Grant Date.
(b) During the lifetime of the Employee, the option rights are exercisable only
by him, and, except as otherwise provided in Sections 2 and 3 below, only if the
Employee has remained continuously in the employ of the Company from the Grant
Date.
(c) The option rights shall expire at the end of the period of five years
commencing with the Grant Date, or upon such earlier expiration or termination
dates as may be provided by Sections 2 and 3 hereof or by cash payments made in
complete or partial cancellation hereof pursuant to Section 8, and such option
rights shall not be exercisable thereafter.
2. If, after the expiration of one year from the Grant Date, the Employee shall
cease to be employed by the Company for any reason other than death, his option
rights shall terminate immediately; provided, however, that (a) if such
cessation of employment is occasioned by retirement in accordance with any
retirement plan of the Company then in effect, then the Employee at any time
following such retirement (but before the Expiration Date) may exercise the
option rights; and (b) if such cessation of employment is occasioned by the
Employee's disability,
<PAGE> 2
then the Employee at any time within one year following such cessation of
employment (but before the Expiration Date) may exercise the option rights to
the extent he was entitled to exercise the same immediately prior to such
cessation of employment, and no more.
3. If, after the expiration of one year from the Grant Date, the Employee shall
die while in the employ of the Company or while retired under Section 2(a), or
shall die within the one-year period available to him upon disability, then
within the year next succeeding hid death (but before the Expiration Date), the
person entitled by will or the applicable laws of descent and distribution may
exercise the option rights to the extent that the Employee was entitled to
exercise the same immediately prior to his death, and no more.
4. The option may be exercised by delivering to the Company at its principal
executive office (directed to the attention of the Secretary, or if he is the
employee concerned, then to the attention of the President or a Vice President)
a written notice, signed by the Employee or a person entitled by will or the
laws of descent and distribution to exercise the option, as the case may be, of
the election to exercise the option and stating the number of Shares in respect
of which it is then being exercised. The option shall be deemed exercised as of
the date the Company receives such notice. Such notice shall, and as an
essential part thereof, be accompanied by the payment of the full purchase price
of the Shares then to be purchased. In the event the option shall be exercised,
as provided herein, by any person other than the Employee, such notice shall be
accompanied by appropriate evidence of the right of such person to exercise the
option. Payment of the full purchase price may be made in (a) cash, (b) shares
of the Company's Common Stock ("Stock"), or (c) any combination of cash and
Stock, provided that any Stock used by the Employee in payment of the purchase
price must have been acquired (whether by purchase, exchange or otherwise) by
the Employee and held for a period of more than six months, and provided further
that the Company reserves the right to prohibit the use of Stock as payment of
the purchase price. Stock used in payment of the purchase price shall be valued
at the average of the high and low trading prices of such Stock on the New York
Stock Exchange or as reported in the consolidated transaction reporting system
for the date of exercise. Upon the proper exercise of the option, the Company
shall issue in the name of the person exercising the option, and deliver to such
person, a certificate for the Shares purchased. The Employee agrees that as
holder of the option he shall have no rights as shareholder in respect of any of
the Shares as to which the option shall not have been effectively exercised as
herein provided and that no rights as a shareholder shall arise in respect of
any Shares as to which the option shall have been duly exercised until and
unless a certificate for such Shares shall have been issued.
5. This option shall not be exercisable if such exercise would violate:
(a) Any applicable state securities law;
(b) Any applicable registration or other requirements under the Securities Act
of 1933, as amended (the "Act"), the Securities Exchange Act of 1934, as
amended, or the listing requirements of any stock exchange; or
(c) Any applicable legal requirement of any other governmental authority.
<PAGE> 3
Furthermore, if a registration statement with respect to the Shares to be issued
upon the exercise of this option is not in effect or if counsel for the Company
deems it necessary or desirable in order to avoid possible violation of the Act,
the Company may require, as a condition to its issuance and delivery of
certificates for the Shares, the delivery to the Company of a commitment in
writing by the person exercising the option that at the time of such exercise it
is his intention to acquire such Shares for his own account for investment only
and not with a view to, or for resale in connection with, the distribution
thereof; that such person understands that the Shares may be "restricted
securities" as defined in Rule 144 issued under the Act; and that any resale,
transfer or other disposition of said Shares will be accomplished only in
compliance with Rule 144, the Act, or other or subsequent applicable rules and
regulations thereunder. The Company may place on the certificates evidencing
such Shares an appropriate legend reflecting the aforesaid commitment and the
Company may refuse to permit transfer of such certificates until it has been
furnished evidence satisfactory to it that no violation of the Act or the rules
and regulations thereunder would be involved in such transfer.
6. In consideration of the granting of this option by the Company, the Employee
agrees that he will remain in the employ of the Company for a period of not less
than one year from the Grant Date unless during said period his employment shall
be terminated on account of incapacity or with the consent of the Company.
Nothing herein contained shall limit or restrict any right which the Company
would otherwise have to terminate the employment of the Employee.
7. This option and the option rights granted hereunder are not assignable or
transferable or subject to any disposition by the Employee otherwise than by
will or by the laws of descent and distribution.
8. Reorganization and Changes in Control. If (i) the Company is to be merged
into or consolidated with one or more corporations and the Company is not to be
the surviving corporation, (ii) the Company is to be dissolved and liquidated,
(iii) substantially all of the assets and business of the Company are to be
sold, or (iv) there occurs a "change in control" of the Company, then the
Committee of the Board of Directors that administers the Plan (the "Committee")
may, in its sole discretion, with respect to any or all options then outstanding
under this Agreement both (a) at any time on or prior to the effective date of
such merger, consolidation, dissolution and liquidation, or sale, and, at any
time on or after a change in control cause the option or any portion thereof to
become exercisable forthwith in full regardless of any provisions in this
Agreement concerning vesting and (b) at any time during the 20-day period ending
on the effective date of such merger, consolidation, dissolution and
liquidation, or sale or during the 20-day period beginning on the date of a
change in control or, if later, the date the Company has notice thereof, cancel
any option in whole or in part by payment in cash to the Employee of an amount
equal to the excess, but only if the amount is positive, of the fair market
value of the Company's Common Stock on the date of said cancellation over the
option price per Share times the number of Shares covered by the option or
portion thereof so cancelled. For purposes hereof, a "change in control" of the
Company shall be as defined in Section 8 of the Plan.
9. For purposes of this Agreement, employment by a parent or subsidiary of or a
successor
<PAGE> 4
to the Company shall be considered employment by the Company.
10. The Committee shall have authority, subject to the express provisions of the
Plan, to construe this Agreement and the Plan, to establish, amend and rescind
rules and regulations relating to the Plan, and to make all other determinations
in the judgment of said Committee necessary or desirable for the administration
of the Plan. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in this Agreement in the manner and
to the extent it shall deem expedient to carry the Plan into effect. All action
by the Committee under the provisions of this paragraph shall be conclusive for
all purposes.
11. The Employee hereby agrees to notify the Company promptly of the
disposition, whether by sale, exchange or otherwise, of any Shares acquired
pursuant to this option within a period of one year from their acquisition. Such
notice shall state the date and manner of disposition and the proceeds, if any,
received by the Employee as a result thereof.
12. Notwithstanding any provisions hereof, this Agreement and the option granted
hereunder shall be subject to all of the provisions of the Plan as are in effect
from time to time, which provisions are incorporated herein by reference.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in duplicate
as of the Grant Date first above written.
Cooper Industries, Inc.
By
--------------------------------------
Employee Signature
-----------------------
Social Security No.
----------------------
Home Address
-----------------------------
-----------------------------------------
-----------------------------------------
<PAGE> 1
Exhibit 10.11
Cooper Industries, Inc.
Nonqualified Stock Option Agreement
Granted to: ______________________________
Grant Date _______________________________
Number of Shares of Cooper Industries
Common Stock ____________________________
Option Price Per Share ___________________
Employee Number __________________________
Expiration Date __________________________
Division _________________________________
This Agreement is made between Cooper Industries, Inc., an Ohio corporation,
having its principal office in Houston, Texas (the "Company"), and the
undersigned, an employee of the Company or a subsidiary of the Company (the
"Employee").
The parties hereto have agreed as follows:
1. Pursuant to the 1986 Stock Option Plan (the "Plan"), the Company grants to
the Employee an incentive stock option to purchase the above stated number of
shares of the Company's Common Stock, par value $5 per share (the "Shares"), at
the price stated above, subject to the following conditions:
(a) The Option rights are exercisable only if and after the Employee shall have
remained in the employ of the Company for one year from the date of grant of
this option (the "Grant Date"), whereupon such rights shall become exercisable
to the extent of only 33 1/3% of the aggregate number of Shares above specified,
which percentage shall increase to 66 2/3% after two years, and 100% after three
years from the Grant Date.
(b) During the lifetime of the Employee, the option rights are exercisable only
by him, and, except as otherwise provided in Sections 2 and 3 below, only if the
Employee has remained continuously in the employ of the Company from the Grant
Date.
(c) The option rights shall expire at the end of the period of five years
commencing with the Grant Date, or upon such earlier expiration or termination
dates as may be provided by Sections 2 and 3 hereof or by cash payments made in
complete or partial cancellation hereof pursuant to Section 8, and such option
rights shall not be exercisable thereafter.
2. If, after the expiration of one year from the Grant Date, the Employee shall
cease to be employed by the Company for any reason other than death, his option
rights shall terminate immediately; provided, however, that (a) if such
cessation of employment is occasioned by retirement in accordance with any
retirement plan of the Company then in effect, then the Employee at any time
following such retirement (but before the Expiration Date) may exercise the
option rights; and (b) if such cessation of employment is occasioned by the
Employee's disability,
<PAGE> 2
then the Employee at any time within one year following such cessation of
employment (but before the Expiration Date) may exercise the option rights to
the extent he was entitled to exercise the same immediately prior to such
cessation of employment, and no more.
3. If, after the expiration of one year from the Grant Date, the Employee shall
die while in the employ of the Company or while retired under Section 2(a), or
shall die within the one-year period available to him upon disability, then
within the year next succeeding hid death (but before the Expiration Date), the
person entitled by will or the applicable laws of descent and distribution may
exercise the option rights to the extent that the Employee was entitled to
exercise the same immediately prior to his death, and no more.
4. The option may be exercised by delivering to the Company at its principal
executive office (directed to the attention of the Secretary, or if he is the
employee concerned, then to the attention of the President or a Vice President)
a written notice, signed by the Employee or a person entitled by will or the
laws of descent and distribution to exercise the option, as the case may be, of
the election to exercise the option and stating the number of Shares in respect
of which it is then being exercised. The option shall be deemed exercised as of
the date the Company receives such notice. Such notice shall, and as an
essential part thereof, be accompanied by the payment of the full purchase price
of the Shares then to be purchased. In the event the option shall be exercised,
as provided herein, by any person other than the Employee, such notice shall be
accompanied by appropriate evidence of the right of such person to exercise the
option. Payment of the full purchase price may be made in (a) cash, (b) shares
of the Company's Common Stock ("Stock"), or (c) any combination of cash and
Stock, provided that any Stock used by the Employee in payment of the purchase
price must have been acquired (whether by purchase, exchange or otherwise) by
the Employee and held for a period of more than six months, and provided further
that the Company reserves the right to prohibit the use of Stock as payment of
the purchase price. Stock used in payment of the purchase price shall be valued
at the average of the high and low trading prices of such Stock on the New York
Stock Exchange or as reported in the consolidated transaction reporting system
for the date of exercise. Upon the proper exercise of the option, the Company
shall issue in the name of the person exercising the option, and deliver to such
person, a certificate for the Shares purchased. The Employee agrees that as
holder of the option he shall have no rights as shareholder in respect of any of
the Shares as to which the option shall not have been effectively exercised as
herein provided and that no rights as a shareholder shall arise in respect of
any Shares as to which the option shall have been duly exercised until and
unless a certificate for such Shares shall have been issued.
5. This option shall not be exercisable if such exercise would violate:
(a) Any applicable state securities law;
(b) Any applicable registration or other requirements under the Securities Act
of 1933, as amended (the "Act"), the Securities Exchange Act of 1934, as
amended, or the listing requirements of any stock exchange; or
(c) Any applicable legal requirement of any other governmental authority.
<PAGE> 3
Furthermore, if a registration statement with respect to the Shares to be issued
upon the exercise of this option is not in effect or if counsel for the Company
deems it necessary or desirable in order to avoid possible violation of the Act,
the Company may require, as a condition to its issuance and delivery of
certificates for the Shares, the delivery to the Company of a commitment in
writing by the person exercising the option that at the time of such exercise it
is his intention to acquire such Shares for his own account for investment only
and not with a view to, or for resale in connection with, the distribution
thereof; that such person understands that the Shares may be "restricted
securities" as defined in Rule 144 issued under the Act; and that any resale,
transfer or other disposition of said Shares will be accomplished only in
compliance with Rule 144, the Act, or other or subsequent applicable rules and
regulations thereunder. The Company may place on the certificates evidencing
such Shares an appropriate legend reflecting the aforesaid commitment and the
Company may refuse to permit transfer of such certificates until it has been
furnished evidence satisfactory to it that no violation of the Act or the rules
and regulations thereunder would be involved in such transfer.
6. In consideration of the granting of this option by the Company, the Employee
agrees that he will remain in the employ of the Company for a period of not less
than one year from the Grant Date unless during said period his employment shall
be terminated on account of incapacity or with the consent of the Company.
Nothing herein contained shall limit or restrict any right which the Company
would otherwise have to terminate the employment of the Employee.
7. This option and the option rights granted hereunder are not assignable or
transferable or subject to any disposition by the Employee otherwise than by
will or by the laws of descent and distribution.
8. Reorganization and Changes in Control. If (i) the Company is to be merged
into or consolidated with one or more corporations and the Company is not to be
the surviving corporation, (ii) the Company is to be dissolved and liquidated,
(iii) substantially all of the assets and business of the Company are to be
sold, or (iv) there occurs a "change in control" of the Company, then the
Committee of the Board of Directors that administers the Plan (the "Committee")
may, in its sole discretion, with respect to any or all options then outstanding
under this Agreement both (a) at any time on or prior to the effective date of
such merger, consolidation, dissolution and liquidation, or sale, and, at any
time on or after a change in control cause the option or any portion thereof to
become exercisable forthwith in full regardless of any provisions in this
Agreement concerning vesting and (b) at any time during the 20-day period ending
on the effective date of such merger, consolidation, dissolution and
liquidation, or sale or during the 20-day period beginning on the date of a
change in control or, if later, the date the Company has notice thereof, cancel
any option in whole or in part by payment in cash to the Employee of an amount
equal to the excess, but only if the amount is positive, of the fair market
value of the Company's Common Stock on the date of said cancellation over the
option price per Share times the number of Shares covered by the option or
portion thereof so cancelled. For purposes hereof, a "change in control" of the
Company shall be as defined in Section 8 of the Plan.
9. For purposes of this Agreement, employment by a parent or subsidiary of or a
successor
<PAGE> 4
to the Company shall be considered employment by the Company.
10. The Committee shall have authority, subject to the express provisions of the
Plan, to construe this Agreement and the Plan, to establish, amend and rescind
rules and regulations relating to the Plan, and to make all other determinations
in the judgment of said Committee necessary or desirable for the administration
of the Plan. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in this Agreement in the manner and
to the extent it shall deem expedient to carry the Plan into effect. All action
by the Committee under the provisions of this paragraph shall be conclusive for
all purposes.
11. Notwithstanding any provisions hereof, this Agreement and the option granted
hereunder shall be subject to all of the provisions of the Plan as are in effect
from time to time, which provisions are incorporated herein by reference.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in duplicate
as of the Grant Date first above written.
Cooper Industries, Inc.
By
-------------------------------------
Employee Signature
---------------------
Social Security No.
---------------------
Home Address
----------------------------
<PAGE> 1
Exhibit 10.13
Cooper Industries, Inc.
Incentive Stock Option Agreement
Granted to: _____________________________
Grant Date ______________________________
Number of Shares Of Cooper Industries
Common Stock _________________________
Option Price Per Share___________________
Employee Number _________________________
Expiration Date__________________________
Division_________________________________
This Agreement is made between Cooper Industries, Inc., an Ohio corporation,
having its principal office in Houston, Texas (the "Company"), and the
undersigned, an employee of the Company or a subsidiary of the Company (the
"Employee"). The parties hereto have agreed as follows:
1. Pursuant to the Cooper Industries, Inc. Stock Incentive Plan (the "Plan"),
the Company grants to the Employee an Incentive Stock Option ("Option") to
purchase the above stated number of shares of the Company's Common Stock, par
value $5 per share (the "Shares"), at the price stated above, subject to the
following conditions:
(a) The Option rights are exercisable only if and after the Employee shall have
remained in the employ of the Company for one year from the date of grant of
this Option (the "Grant Date"). The Option shall become exercisable to the
extent of only 33 1/3% of the aggregate number of Shares above specified, after
one year, 66 2/3% after two years, and 100% after three years from the Grant
Date.
(b) During the lifetime of the Employee, the Option rights are exercisable only
by the Employee, and, except as otherwise provided in Sections 2, 3 and 4 below,
only if the Employee has remained continuously in the employ of the Company from
the Grant Date.
(c) The Option rights shall expire at the end of the period of 10 years
commencing with the Grant Date, or upon such earlier expiration or termination
date as may be provided by Sections 2, 3, 4 or 9 hereof and such Option rights
shall not be exercisable thereafter.
2. If, after the expiration of one year from the Grant Date, the Employee
shall cease to be employed by the Company for any reason other than death,
disability or retirement, the Option rights shall terminate immediately. If
cessation of employment is occasioned by retirement in accordance with any
retirement plan of the Company then in effect, then the Employee may exercise
the Option rights following such retirement for a period of five years after
retirement or until the Expiration Date, whichever is lesser.
<PAGE> 2
3. If, after the expiration of one year from the Grant Date, the Employee
shall cease employment as the direct result of disability (as defined in the
Company's qualified Salaried Pension Plan), all outstanding options granted to
the Employee become exercisable immediately and the Employee may exercise such
outstanding options for a period of one year after the cessation of employment
resulting from disability or until the Expiration Date, whichever is lesser,
irrespective of any restrictions to the contrary contained in Section 1(a)
above.
4. If, after the expiration of one year from the Grant Date, the Employee
shall die while in the employ of the Company, or while retired with exercisable
Options under Section 2, all outstanding options granted to the Employee become
exercisable immediately and the person entitled by will or the applicable laws
of descent and distribution may exercise such outstanding Options for a period
of one year after the date of death or until the Expiration Date, whichever is
lesser, irrespective of any restrictions to the contrary contained in Section
1(a) above.
5. The Option may be exercised by delivering to the Company at its principal
executive office (directed to the attention of the Secretary or Assistant
Secretary) a written notice, signed by the Employee or a person entitled by will
or the laws of descent and distribution to exercise the Option, as the case may
be, of the election to exercise the Option and stating the number of Shares in
respect of which it is then being exercised. The Option shall be deemed
exercised as of the date the Company receives such notice. Such notice shall,
and as an essential part thereof, be accompanied by the payment of the full
purchase price of the Shares then to be purchased. In the event the Option shall
be exercised, as provided herein, by any person other than the Employee, such
notice shall be accompanied by appropriate evidence of the right of such person
to exercise the Option. Payment of the full purchase price may be made in (a)
cash, (b) shares of the Company's Common Stock ("Stock"), or (c) any combination
of cash and Stock, provided that any Stock used by the Employee in payment of
the purchase price must have been acquired (whether by purchase, exchange or
otherwise) by the Employee and held for a period of more than six months, and
provided further that the Company reserves the right to prohibit the use of
Stock as payment of the purchase price. Stock used in payment of the purchase
price shall be valued at the average of the high and low trading prices of such
Stock on the New York Stock Exchange or as reported in the consolidated
transaction reporting system for the date of exercise. Upon the proper exercise
of the Option, the Company shall issue in the name of the person exercising the
Option, and deliver to such person, a certificate for the Shares purchased. The
Employee agrees that as holder of the Option he or she shall have no rights as
shareholder in respect of any of the Shares as to which the Option shall not
have been effectively exercised as herein provided and that no rights as a
shareholder shall arise in respect of any Shares as to which the Option shall
have been duly exercised until and unless a certificate for such Shares shall
have been issued.
6. This Option shall not be exercisable if such exercise would violate:
(a) Any applicable state securities law;
(b) Any applicable registration or other requirements under the Securities Act
of 1933, as amended (the "Act"), the Securities Exchange Act of 1934, as
amended, or the listing
<PAGE> 3
requirements of any stock exchange; or
(c) Any applicable legal requirement of any other governmental authority.
Furthermore, if a registration statement with respect to the Shares to be issued
upon the exercise of this Option is not in effect or if counsel for the Company
deems it necessary or desirable in order to avoid possible violation of the Act,
the Company may require, as a condition to its issuance and delivery of
certificates for the Shares, the delivery to the Company of a written statement
that the Employee is acquiring such Shares for investment only and not with a
view to, or for resale in connection with, the distribution thereof; that such
person understands that the Shares may be "restricted securities" as defined in
Rule 144 issued under the Act; and that any resale, transfer or other
disposition of said Shares will be accomplished only in compliance with Rule
144, the Act, or other or subsequent applicable rules and regulations
thereunder. The Company may place on the certificates evidencing such Shares an
appropriate legend reflecting the aforesaid statement and the Company may refuse
to permit transfer of such certificates until it has been furnished evidence
satisfactory to it that no violation of the Act or the rules and regulations
thereunder would be involved in such transfer.
7. In consideration of the granting of this Option by the Company, the
Employee agrees that he or she will remain in the employ of the Company for a
period of not less than one year from the Grant Date unless during said period
his or her employment shall be terminated on account of incapacity or with the
consent of the Company. Nothing herein contained shall limit or restrict any
right which the Company would otherwise have to terminate the employment of the
Employee.
8. This Option and the Option rights granted hereunder are not assignable or
transferable or subject to any disposition by the Employee otherwise than by
will or by the laws of descent and distribution.
9. In the event of a reorganization, recapitalization or other change in the
capital stock, corporate structure or business of the Company, the Board of
Directors shall make appropriate adjustments to the number of Shares subject to
the Option and the exercise price so as to maintain the proportionate interest
of the Employee and preserve the value of the Option. In the event of a Change
in Control of the Company, outstanding Options shall be settled by a cash
payment in accordance with Section 18.2 of the Plan.
10. For purposes of this Agreement, employment by a parent or subsidiary of or
a successor to the Company shall be considered employment by the Company.
11. The Committee shall have authority, subject to the express provisions of
the Plan, to construe this Agreement and the Plan, to establish, amend and
rescind rules and regulations relating to the Plan, and to make all other
determinations in the judgment of said Committee necessary or desirable for the
administration of the Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in this Agreement in the
manner and to the extent it shall deem expedient to carry the Plan into effect.
All action by the
<PAGE> 4
Committee under the provisions of this paragraph shall be conclusive for all
purposes.
12. The Employee hereby agrees to notify the Company promptly of the
disposition, whether by sale, exchange or otherwise, of any Shares acquired
pursuant to this Option within a period of one year from their acquisition. Such
notice shall state the date and manner of disposition and the proceeds, if any,
received by the Employee as a result thereof.
13. Notwithstanding any provisions hereof, this Agreement and the Option
granted hereunder shall be subject to all of the provisions of the Plan as are
in effect from time to time, which provisions are incorporated herein by
reference.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in duplicate
as of the Grant Date first above written.
Cooper Industries, Inc.
By
-------------------------------------
Employee Signature
---------------------
Social Security No.
---------------------
Home Address
---------------------------
----------------------------------------
----------------------------------------
<PAGE> 1
EXHIBIT 10.14
Cooper Industries, Inc.
Nonqualified Stock Option Agreement
Granted to:
--------------------------------
Grant Date
---------------------------------
Number of Shares of Cooper Industries
Common Stock
------------------------------
Option Price Per Share
---------------------
Employee Number
----------------------------
Expiration Date
----------------------------
Division
-----------------------------------
This Agreement is made between Cooper Industries, Inc., an Ohio corporation,
having its principal office in Houston, Texas (the "Company"), and the
undersigned, an employee of the Company or a subsidiary of the Company (the
"Employee"). The parties hereto have agreed as follows:
1. Pursuant to the Cooper Industries, Inc. Stock Incentive Plan (the
"Plan"), the Company grants to the Employee an Incentive Stock Option ("Option")
to purchase the above stated number of shares of the Company's Common Stock, par
value $5 per share (the "Shares"), at the price stated above, subject to the
following conditions:
(a) The Option rights are exercisable only if and after the Employee shall
have remained in the employ of the Company for one year from the date of grant
of this Option (the "Grant Date"). The Option shall become exercisable to the
extent of only 33 1/3% of the aggregate number of Shares above specified, after
one year, 66 2/3% after two years, and 100% after three years from the Grant
Date.
(b) During the lifetime of the Employee, the Option rights are exercisable
only by the Employee, and, except as otherwise provided in Sections 2, 3 and 4
below, only if the Employee has remained continuously in the employ of the
Company from the Grant Date.
(c) The Option rights shall expire at the end of the period of 10 years
commencing with the Grant Date, or upon such earlier expiration or termination
date as may be provided by Sections 2, 3, 4 or 9 hereof and such Option rights
shall not be exercisable thereafter.
2. If, after the expiration of one year from the Grant Date, the Employee
shall cease to be employed by the Company for any reason other than death,
disability or retirement, the Option rights shall terminate immediately. If
cessation of employment is occasioned by retirement in accordance with any
retirement plan of the Company then in effect, then the Employee may exercise
the Option rights following such retirement for a period of five years after
retirement or until the Expiration Date, whichever is lesser.
<PAGE> 2
3. If, after the expiration of one year from the Grant Date, the Employee
shall cease employment as the direct result of disability (as defined in the
Company's qualified Salaried Pension Plan), all outstanding options granted to
the Employee become exercisable immediately and the Employee may exercise such
outstanding options for a period of one year after the cessation of employment
resulting from disability or until the Expiration Date, whichever is lesser,
irrespective of any restrictions to the contrary contained in Section 1(a)
above.
4. If, after the expiration of one year from the Grant Date, the Employee
shall die while in the employ of the Company, or while retired with exercisable
Options under Section 2, all outstanding options granted to the Employee become
exercisable immediately and the person entitled by will or the applicable laws
of descent and distribution may exercise such outstanding Options for a period
of one year after the date of death or until the Expiration Date, whichever is
lesser, irrespective of any restrictions to the contrary contained in Section
1(a) above.
5. The Option may be exercised by delivering to the Company at its
principal executive office (directed to the attention of the Secretary or
Assistant Secretary) a written notice, signed by the Employee or a person
entitled by will or the laws of descent and distribution to exercise the Option,
as the case may be, of the election to exercise the Option and stating the
number of Shares in respect of which it is then being exercised. The Option
shall be deemed exercised as of the date the Company receives such notice. Such
notice shall, and as an essential part thereof, be accompanied by the payment of
the full purchase price of the Shares then to be purchased. In the event the
Option shall be exercised, as provided herein, by any person other than the
Employee, such notice shall be accompanied by appropriate evidence of the right
of such person to exercise the Option. Payment of the full purchase price may be
made in (a) cash, (b) shares of the Company's Common Stock ("Stock"), or (c) any
combination of cash and Stock, provided that any Stock used by the Employee in
payment of the purchase price must have been acquired (whether by purchase,
exchange or otherwise) by the Employee and held for a period of more than six
months, and provided further that the Company reserves the right to prohibit the
use of Stock as payment of the purchase price. Stock used in payment of the
purchase price shall be valued at the average of the high and low trading prices
of such Stock on the New York Stock Exchange or as reported in the consolidated
transaction reporting system for the date of exercise. Upon the proper exercise
of the Option, the Company shall issue in the name of the person exercising the
Option, and deliver to such person, a certificate for the Shares purchased. The
Employee agrees that as holder of the Option he or she shall have no rights as
shareholder in respect of any of the Shares as to which the Option shall not
have been effectively exercised as herein provided and that no rights as a
shareholder shall arise in respect of any Shares as to which the Option shall
have been duly exercised until and unless a certificate for such Shares shall
have been issued.
6. This Option shall not be exercisable if such exercise would violate:
(a) Any applicable state securities law;
(b) Any applicable registration or other requirements under the Securities
Act of 1933, as amended (the "Act"), the Securities Exchange Act of 1934, as
amended, or the listing requirements of any stock exchange; or
<PAGE> 3
(c) Any applicable legal requirement of any other governmental authority.
Furthermore, if a registration statement with respect to the Shares to be issued
upon the exercise of this Option is not in effect or if counsel for the Company
deems it necessary or desirable in order to avoid possible violation of the Act,
the Company may require, as a condition to its issuance and delivery of
certificates for the Shares, the delivery to the Company of a written statement
that the Employee is acquiring such Shares for investment only and not with a
view to, or for resale in connection with, the distribution thereof; that such
person understands that the Shares may be "restricted securities" as defined in
Rule 144 issued under the Act; and that any resale, transfer or other
disposition of said Shares will be accomplished only in compliance with Rule
144, the Act, or other or subsequent applicable rules and regulations
thereunder. The Company may place on the certificates evidencing such Shares an
appropriate legend reflecting the aforesaid statement and the Company may refuse
to permit transfer of such certificates until it has been furnished evidence
satisfactory to it that no violation of the Act or the rules and regulations
thereunder would be involved in such transfer.
7. In consideration of the granting of this Option by the Company, the
Employee agrees that he or she will remain in the employ of the Company for a
period of not less than one year from the Grant Date unless during said period
his or her employment shall be terminated on account of incapacity or with the
consent of the Company. Nothing herein contained shall limit or restrict any
right which the Company would otherwise have to terminate the employment of the
Employee.
8. This Option and the Option rights granted hereunder are not assignable
or transferable or subject to any disposition by the Employee otherwise than by
will or by the laws of descent and distribution.
9. In the event of a reorganization, recapitalization or other change in
the capital stock, corporate structure or business of the Company, the Board of
Directors shall make appropriate adjustments to the number of Shares subject to
the Option and the exercise price so as to maintain the proportionate interest
of the Employee and preserve the value of the Option. In the event of a Change
in Control of the Company, outstanding Options shall be settled by a cash
payment in accordance with Section 18.2 of the Plan.
10. For purposes of this Agreement, employment by a parent or subsidiary of
or a successor to the Company shall be considered employment by the Company.
11. The Committee shall have authority, subject to the express provisions
of the Plan, to construe this Agreement and the Plan, to establish, amend and
rescind rules and regulations relating to the Plan, and to make all other
determinations in the judgment of said Committee necessary or desirable for the
administration of the Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in this Agreement in the
manner and to the extent it shall deem expedient to carry the Plan into effect.
All action by the Committee under the provisions of this paragraph shall be
conclusive for all purposes.
<PAGE> 4
12. Notwithstanding any provisions hereof, this Agreement and the Option
granted hereunder shall be subject to all of the provisions of the Plan as are
in effect from time to time, which provisions are incorporated herein by
reference.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in duplicate
as of the Grant Date first above written.
Cooper Industries, Inc.
By
--------------------------------------------
Employee Signature
----------------------------
Social Security No.
---------------------------
Home Address
----------------------------------
----------------------------------------------
----------------------------------------------
<PAGE> 1
Exhibit 10.18
Cooper Industries, Inc.
Directors' Nonqualified Stock Option Agreement
Granted to:
-----------------------------
Grant Date
------------------------------
Number of Shares of Cooper Industries
Common Stock
---------------------------
Option Price Per Share
------------------
Social Security Number
------------------
Expiration Date
-------------------------
This agreement is made between Cooper Industries, Inc., an Ohio corporation,
having its principal office in Houston, Texas (the "Company"), and the
undersigned (the "Participant"), a member of the Board of Directors of the
Company (the "Board"). The parties hereto have agreed as follows:
1. Pursuant to the Cooper Industries, Inc. Directors' Stock Plan (the
"Plan"), the Company grants to the Participant, a Nonqualified Stock Option
("Option") to purchase the above stated number of shares of the Company's Common
Stock, par value $5 per share (the "Shares"), at the price stated above, subject
to the terms and conditions set forth below.
2. The Option rights shall become fully exercisable on the third
anniversary of the date of grant of this Option (the "Grant Date"). If, prior to
the third anniversary of the Grant Date, the Participant ceases to be a Director
of the Company for any reason other than death or retirement in accordance with
the retirement policy of the Board, the Option rights shall terminate
immediately.
3. If, prior to the third anniversary of the Grant Date, the Participant
shall die while serving as a member of the Board or retires from the Board in
accordance with the Board's retirement policy, all outstanding Options granted
to the Participant shall become fully exercisable immediately.
4. The duration of the Option rights shall be 10 years from the Grant Date,
provided that after the Participant ceases to be a member of the Board for any
reason, including without limitation death or retirement in accordance with the
Board's retirement policy, all vested Options may be exercised only until the
Expiration Date thereof or for a period of five years, whichever is lesser.
5. During the lifetime of the Participant, the Option rights are
exercisable only by the Participant.
6. The Option may be exercised by delivering to the Company at its
principal executive office (directed to the attention of the Secretary or
Assistant Secretary) a written notice, signed by the Participant or a person
entitled by will or the laws of descent and distribution to exercise the
<PAGE> 2
Option, as the case may be, of the election to exercise the Option and stating
the number of Shares in respect of which it is then being exercised. The Option
shall be deemed exercised as of the date the Company receives such notice. Such
notice shall, and as an essential part thereof, be accompanied by the payment of
the full purchase price of the Shares then to be purchased. In the event the
Option shall be exercised, as provided herein, by any person other than the
Participant, such notice shall be accompanied by appropriate evidence of the
right of such person to exercise the Option. Payment of the full purchase price
may be made in (a) cash, (b) shares of the Company's Common Stock ("Stock"), or
(c) any combination of cash and Stock, provided that any Stock used by the
Participant in payment of the purchase price must have been owned by the
Participant for a period of not less than six months. Stock used in payment of
the purchase price shall be valued at the average of the high and low trading
prices of such Stock on the New York Stock Exchange composite tape for the date
of exercise, provided that if no sales of Stock were made on the New York Stock
Exchange on that date, the Stock shall be valued at the average of the high and
low prices of the Stock as reported on the composite tape for the preceding day
on which sales of the Stock were made. Upon the proper exercise of the Option,
the Company shall issue in the name of the person exercising the Option, and
deliver to such person, a certificate for the Shares purchased. The Participant
agrees that as holder of the Option, he or she shall have no rights as a
shareholder in respect of any of the Shares as to which the Option shall not
have been effectively exercised as herein provided and that no rights as a
shareholder shall arise in respect of any Shares as to which the Option shall
have been duly exercised until and unless a certificate for such Shares shall
have been issued.
7. This Option shall not be exercisable if such exercise would violate:
(a) Any applicable state securities law;
(b) Any applicable registration or other requirements under the Securities
Act of 1933, as amended (the "Act"), the Securities Exchange Act of 1934, as
amended, or the listing requirements of any stock exchange; or
(c) Any applicable legal requirement of any other governmental authority.
Furthermore, if a registration statement with respect to the Shares to be issued
upon the exercise of this Option is not in effect or if counsel for the Company
deems it necessary or desirable in order to avoid possible violation of the Act,
the Company may require, as a condition to its issuance and delivery of
certificates for the Shares, the delivery to the Company of a written statement
that the Participant is acquiring such Shares for investment only and not with a
view to, or for resale in connection with, the distribution thereof; that such
person understands that the Shares may be "restricted securities" as defined in
Rule 144 issued under the Act; and that any resale, transfer or other
disposition of said Shares will be accomplished only in compliance with Rule
144, the Act, or other or subsequent applicable rules and regulations
thereunder. The Company may place on the certificates evidencing such Shares an
appropriate legend reflecting the aforesaid statement and the Company may refuse
to permit transfer of such certificates until it has been furnished evidence
satisfactory to it that no violation of the Act or the rules and regulations
thereunder would be involved in such transfer.
<PAGE> 3
8. Nothing contained herein shall be deemed to confer upon any Participant
any right to continue as a Director of the Company.
9. This Option and the Option rights granted hereunder are not assignable
or transferable or subject to any disposition by the Participant otherwise than
by will or by the laws of descent and distribution.
10. In the event of any change in the number of outstanding shares of the
Company's Stock by reason of any stock dividend, stock split, recapitalization,
merger, consolidation, exchange of shares or other similar corporate change, the
Board shall make appropriate adjustments to the number of Shares subject to the
Option and the exercise price so as to maintain the proportionate interest of
the Participant and preserve the value of the Option. In the event of a Change
in Control (as defined in the Plan) of the Company, all outstanding Options
shall be canceled and shall be settled with a cash payment in accordance with
Section 8 of the Plan.
11. The Board, or a Committee appointed by the Board to act on its behalf
under the Plan, shall have authority, subject to the express provisions of the
Plan, to construe this Agreement and the Plan, to establish, amend and rescind
rules and regulations relating to the Plan, and to make all other determinations
in the judgment of said Board or Committee, necessary or desirable for the
administration of the Plan. The Board or Committee may correct any defect or
supply any omission or reconcile any inconsistency in the Plan or in this
Agreement in the manner and to the extent it shall deem expedient to carry the
Plan into effect. All action by the Board or Committee under the provisions of
this paragraph shall be conclusive for all purposes.
12. Notwithstanding any provisions hereof, this Agreement and the Option
granted hereunder shall be subject to all of the provisions of the Plan as are
in effect from time to time, which provisions are incorporated herein by
reference.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in duplicate
as of the Grant Date first above written.
Cooper Industries, Inc.
By
--------------------------------------------
Participant Signature
-------------------------
Social Security No.
---------------------------
Home Address
----------------------------------
----------------------------------------------
----------------------------------------------
<PAGE> 1
Exhibit 12.0
COOPER INDUSTRIES, INC.
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(Dollar Amounts in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Interest Expense $ 90,400 $ 142,100 $ 151,000 $ 73,300 $ 80,900
Estimated Interest Portion of
Rent Expense (One-Third) 18,755 17,362 16,865 19,289 20,701
--------- --------- --------- --------- ---------
Fixed Charges $ 109,155 $ 159,462 $ 167,865 $ 92,589 $ 101,601
========= ========= ========= ========= =========
Income From Continuing
Operations Before Income Taxes $ 626,700 $ 558,000 $ 478,000 $ 504,700 $ 506,000
Add: Fixed Charges 109,155 159,462 167,865 92,589 101,601
Dividends From Less Than
50% Owned Companies -- 359 968 835 2,395
Less: Equity in Net Income of
Less Than 50% Owned Companies (155) (1,281) (1,000) (1,900) (1,200)
--------- --------- --------- --------- ---------
Earnings Before Fixed Charges $ 735,700 $ 716,540 $ 645,833 $ 596,224 $ 608,796
========= ========= ========= ========= =========
Ratio of Earnings to Fixed Charges 6.7x 4.5x 3.8x 6.4x 6.0x
</TABLE>
<PAGE> 1
EXHIBIT 13.0
APPENDIX A
COOPER INDUSTRIES, INC.
<TABLE>
<S> <C>
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. A-1
Consolidated Financial Statements:
Report of Management...................................... A-13
Report of Independent Auditors............................ A-14
Consolidated Income Statements for the three years ended
December 31, 1997...................................... A-15
Consolidated Balance Sheets as of December 31, 1997 and
1996................................................... A-16
Consolidated Statements of Cash Flows for the three years
ended December 31, 1997................................ A-17
Consolidated Statements of Shareholders' Equity for the
three years ended December 31, 1997.................... A-18
Notes to Consolidated Financial Statements................ A-19
</TABLE>
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Acquisitions and Divestitures During the last three years, Cooper's
continuing operations have completed 18 acquisitions and 3 divestitures. The
acquisitions have been in complementary product lines that enhance areas of
strength, while the dispositions have been of noncore or under-performing
businesses. In 1995, Cooper divested the remaining businesses comprising the
former Petroleum & Industrial Equipment segment through an exchange offer with
shareholders for common stock of Cooper Cameron Corporation ("Cooper Cameron").
On May 30, 1997, Cooper completed the sale of its Kirsch window treatment
division for $216.0 million. For the five months ended May 30, 1997, and the
year ended December 31, 1996, Kirsch had revenues of $97.4 million and $252.9
million, and operating earnings of $4.8 million and $20.0 million, respectively.
Nonrecurring Income and Expenses In the third quarter of 1995, Cooper
began to sell the common shares of Belden Inc. ("Belden") that it retained
following the 1993 initial public offering of Belden's common stock. In 1995,
Cooper recognized gains from the sale of the Belden marketable equity securities
of $.05 per share.
In 1996, Cooper sold the remaining common shares of Belden and all of the
shares of Cooper Cameron retained in the 1995 exchange offer with shareholders.
Also in 1996, Cooper initiated a strategic review of most of its businesses and
operations. Actions resulting from this review included (1) the decision to
retain an investment banking firm to evaluate the possible sale of Kirsch; (2) a
change in the strategic direction of the automotive brake business and the
write-down of long-lived assets and goodwill associated with certain brake
product lines; and (3) nonrecurring charges related primarily to facility
closings and consolidations and resolution of environmental litigation. The 1996
nonrecurring charges, when combined with the realization of gains from the sale
of marketable equity securities, resulted in a net gain of $.05 per share.
On May 30, 1997, Cooper completed the sale of its Kirsch window treatment
division. The sale resulted in a gain of $69.8 million. During 1997, Cooper also
exchanged a portion of its DECSSM (Debt Exchangeable for Common Stock) for
Wyman-Gordon Company ("Wyman-Gordon") common stock and realized a gain of $23.2
million. Cooper incurred charges of $83.9 million for actions management
committed to during 1997 after concluding an evaluation of (1) geographic
manufacturing and distribution facilities within the Tools & Hardware segment,
(2) certain sales, marketing and distribution activities within the Automotive
Products segment and (3) information systems relating to year 2000 compliance
efforts. The 1997 charges included adjustments to the carrying value of assets
of $54.8 million and accruals for continuing obligations for replaced systems
and facility consolidations of $29.1 million. Cooper also recorded a tax benefit
of $6.1 million related to favorable settlements of state income tax issues in
1997. For 1997, the nonrecurring gains, net of the nonrecurring charges, and the
tax benefit increased earnings per share by $.10.
Cooper currently is not considering additional consolidations in the
Electrical Products segment. The Tools & Hardware segment is currently in the
process of consolidating certain international manufacturing and distribution
facilities and the Automotive Products segment is currently in the process of
consolidating sales, marketing and distribution activities. In addition, during
1997, Cooper began negotiations with Standard Motor Products, Inc. ("SMP") to
exchange Cooper's temperature control business for the brake products business
owned by SMP. In December 1997, Cooper received the necessary government
approvals for completion of the transaction with SMP. Closing of the business
exchange is subject to negotiation of a definitive agreement and is currently
anticipated to occur in the first quarter of 1998.
Cooper is continuing to evaluate strategic alternatives related to the
Automotive Products segment. During early 1998, Cooper anticipates completing
the exit of Automotive Products remanufacturing activities and all product lines
included in the temperature control businesses and completing the consolidation
of the Automotive Products sales, marketing and distribution activities.
Adjustments to the carrying value of assets and accruals, noted above, were
recorded for projects committed to by management. Severance and certain other
costs related to projects committed to by management are not expensed until
affected employees are notified. A majority of the consolidations have been
announced and such costs were accrued and expended by the end of 1997. Cash
expenditures related to the payout of accrued severance and other expenditures
related to the committed consolidations in 1998 will not be significant.
However, Cooper could incur additional expenses as the projects are completed,
resulting from consolidation disruptions to operations and additional
consolidation expenses. These additional expenses are currently not anticipated
to be significant to any quarterly period in 1998. In addition, other gains or
charges could be incurred during 1998 as
A-1
<PAGE> 3
management completes its evaluation of strategic alternatives related to the
Automotive Products segment or adds to the strategic projects committed to in
the Tools & Hardware segment.
With the exception of the sale of Kirsch, the actions committed to in 1997
will not have a continuing significant impact on revenues, segment operating
earnings or cash flows. See Notes 2 and 6 of Notes to Consolidated Financial
Statements for additional information on nonrecurring gains and charges.
Capitalization Effective January 1, 1995, Cooper exchanged all of its
outstanding $1.60 Convertible Exchangeable Preferred Stock for $691.2 million of
7.05% Convertible Subordinated Debentures due 2015 and $3.8 million in cash
related to fractional shares. While the exchange increased the debt-to-total
capitalization ratio above Cooper's preferred target, it generated in excess of
$20 million per year of additional net cash flows. During the first half of
1997, Cooper completed calls for redemption of all of its outstanding 7.05%
Convertible Subordinated Debentures with a total of $610 million converted to
approximately 14.8 million shares of Cooper Common stock and approximately $80
million redeemed for cash.
On June 30, 1995, Cooper reduced common shares outstanding by 9.5 million
shares through the completion of the exchange offer with its shareholders for
the common stock of Cooper Cameron. In December 1995, Cooper issued $222.8
million in 6% Exchangeable Notes (DECSSM -- Debt Exchangeable for Common Stock)
due January 1, 1999. The notes are mandatorily exchangeable into shares of
Wyman-Gordon common stock owned by Cooper or, at Cooper's option, into cash in
lieu of shares. The notes are, in effect, a monetization of Cooper's investment
in Wyman-Gordon common stock. In addition, Cooper retained the first 16% of
appreciation in the fair market value of the Wyman-Gordon common stock between
the date of issuance of the notes and their maturity, plus 13.8% of any
additional appreciation beyond the first 16%. During 1997, Cooper exchanged
$33.8 million of its DECS for Wyman-Gordon common stock. At December 31, 1997, a
minimum of $85.4 million after income taxes will be realized as a gain on the
Wyman-Gordon common stock through the DECS monetization. This gain plus any
additional appreciation will be realized upon redemption of the DECS.
During 1997, Cooper purchased approximately 3.6 million shares of its
Common stock for $192 million. This action was taken as part of the remaining
$275 million Common stock repurchase authorization program to maintain Cooper's
debt-to-total capitalization between 35% and 45%.
Cooper has invested $586 million in capital assets related to modernization
and expansion of facilities plus significant amounts related to the integration
of newly acquired businesses and the revitalization of existing ones during the
last three years. More importantly, Cooper today is a much different company
than it was in 1994, and one that is well prepared for the increasingly
competitive global marketplace.
YEAR 2000 INFORMATION SYSTEMS ASSESSMENTS
Many of Cooper's purchased and internally developed information systems
programs were written using two digits rather than four to identify a year. With
the turn of the century, time sensitive software using two digits may not
identify the year 2000, which could result in system failures and
miscalculations disrupting the ability to conduct normal business operations.
Cooper completed an assessment of its major information systems for year 2000
compliance during 1997 and developed detailed plans to resolve all major issues
by the end of 1998. Cooper has nine divisions with multiple hardware platforms
and software products in use. At the time the assessment was completed, several
businesses were, in the normal course, upgrading software and systems to
increase efficiency and customer responsiveness. Therefore, while the assessment
expedited certain systems conversions and upgrades, it did not initiate all of
the actions subsequently described. Cooper also assesses major information
systems of newly acquired businesses for year 2000 compliance as part of its
assessment program.
Four of Cooper's divisions are implementing new enterprise systems with the
remaining divisions revising or upgrading existing software to be year 2000
compliant. One of the divisions implementing a new enterprise system began the
rollout in 1997 with the other three divisions planning the rollouts in the
second and third quarters of 1998. Where possible, businesses have abandoned
home-grown or highly customized applications with purchased, year 2000 compliant
replacements or upgrades. In some situations, operations within a business
abandoned existing software and migrated to consolidated hardware and software
that is year 2000 compliant. Where these solutions were not possible, businesses
have contracted with third parties or committed internal resources to ensure
that all major systems are year 2000 compliant. Cooper believes it was close to
fifty percent complete with its efforts to convert software or install systems
that are year 2000 compliant at the end of 1997. While most efforts are
anticipated to be completed by the end of 1998, it is likely that certain
efforts will be delayed into early 1999.
A-2
<PAGE> 4
Cooper has also initiated formal communications with its significant
suppliers and large customers to determine the potential risk of disruption to
Cooper's operations if these companies fail to remediate year 2000 issues. The
greatest year 2000 compliance risk to Cooper is that implementation of new
enterprise systems will be delayed beyond the anticipated completion dates in
1998 and the severe shortage of qualified information systems personnel, both
internally and externally, could delay compliance efforts.
Cooper's total annual capital investment has not increased significantly
over historical expenditures, although like most companies the investment in
information technology has become a larger percentage of annual capital
expenditures. During the period 1996 through 1998, Cooper estimates that it will
have capital expenditures of close to $100 million on information technology
related to new systems installations. During 1997 and until completion of year
2000 compliance efforts, considerable internal resources are being devoted to
these projects. In addition to the internal resources, Cooper has been
incurring, and anticipates continuing to incur, approximately $2 million of
quarterly expense in its compliance efforts.
The capital expenditures and expenses of the projects, the estimated
percentage of completion to date, and the dates on which Cooper believes it will
complete the year 2000 compliance efforts are based on management's best
estimates, which were derived utilizing numerous assumptions of future events,
including the availability of certain resources, third party modification plans
and other factors. However, there can be no guarantee that these estimates will
be achieved and actual results could differ materially from those anticipated.
RESULTS OF OPERATIONS
The financial information and discussions that follow, along with the
Consolidated Financial Statements and related footnotes, will aid in
understanding Cooper's results of operations as well as its financial position,
cash flows and indebtedness.
REVENUES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1996 1995
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Electrical Products......................................... $2,568.3 $2,407.5 $2,089.7
Tools & Hardware............................................ 749.9 720.1 702.9
Automotive Products......................................... 1,873.2 1,903.2 1,758.8
-------- -------- --------
Continuing Revenues............................... 5,191.4 5,030.8 4,551.4
Kirsch...................................................... 97.4 252.9 259.5
-------- -------- --------
Total Revenues.................................... $5,288.8 $5,283.7 $4,810.9
======== ======== ========
</TABLE>
1997 vs. 1996 Revenues Cooper's 1997 revenues, excluding Kirsch, increased
3% over 1996. Excluding the impact of eight 1997 acquisitions and the carryover
impact of 1996 acquisitions, revenues for 1997 increased 2%. The strengthening
of the U.S. dollar against most of the functional currencies in which
international operations conduct business reduced revenues measured in U.S.
dollars by approximately $80 million or 1.5% compared to 1996. The strong dollar
also had a negative unquantifiable impact on export sales.
The Electrical Products segment contributed close to 50% of Cooper's
continuing revenues in 1997, as revenues increased 7% over 1996. Excluding the
effects of 1997 acquisitions and the carryover impact of 1996 acquisitions,
revenues increased 5%. Revenue growth is attributable to strong sales increases
of distribution and transmission equipment and circuit protection products.
Lighting fixtures also benefited from strong demand in the housing and
nonresidential construction markets. Strong international demand in Mexico and
Canada for construction materials was offset somewhat by a soft European market
and the effects of a strong dollar.
The Tools & Hardware segment made up approximately 14% of Cooper's
continuing revenues in 1997, with revenues increasing 4% over the prior year.
Excluding the carryover impact of 1996 acquisitions, revenues increased 2%
compared to 1996. Sales of domestic hand-held power tools and worldwide assembly
equipment grew to meet continued demand from the automotive and aerospace
industries. Providing a partial offset to this increase was a slight decline in
demand for hand tool products in North America and the effects of a stronger
U.S. dollar against most European currencies.
A-3
<PAGE> 5
The Automotive Products segment contributed 36% of Cooper's continuing
revenues in 1997 with revenues decreasing slightly from the prior year.
Excluding the effects of two small 1997 acquisitions and the carryover impact of
one 1996 acquisition, revenues declined 2% from the prior year. Sales in the
original equipment market improved as vehicle production levels increased on
existing vehicle platform contracts. Sales in the aftermarket were hampered by
weak demand in most product lines. Temperature control product sales and
remanufactured product lines declined due primarily to competitive price
pressures. Wiper volume declined significantly in the first half of 1997 as more
normal winter weather patterns were experienced in 1997 than in 1996.
1996 vs. 1995 Revenues Cooper's 1996 revenues increased 10% over 1995.
Excluding the impact of seven 1996 acquisitions, the carryover impact of 1995
acquisitions (including the CEAG acquisition on December 31, 1995) and one small
1996 divestiture, revenues for 1996 were up 5%.
The Electrical Products segment comprised approximately 46% of Cooper's
total revenues in 1996, as revenues increased 15% over 1995. Excluding the
effects of 1996 acquisitions and the carryover impact of 1995 acquisitions
(including the CEAG acquisition on December 31, 1995), revenues increased 6%.
Sales of electrical construction materials, lighting fixtures and power
distribution products benefited from continued strength in industrial production
and commercial and industrial construction and renovation activity. Strong
international demand for a number of the segment's transformer and power
management products and a recovery from the 1995 economic downturn in Mexico
contributed to the revenue increase. New product introductions also added to
revenues in 1996.
The Tools & Hardware segment, including Kirsch, made up approximately 18%
of Cooper's total revenues in 1996, with revenues increasing slightly over the
1995 level. Excluding the effects of two small 1996 acquisitions, revenues were
flat when compared to 1995. Sales of power tools and assembly equipment
continued to grow to meet demand from the automotive and aircraft assembly
industries, both domestically and internationally. However, slowing demand in
the European markets for hand tools and drapery hardware products and the
disruptions from the implementation of a new hand tools distribution center in
North America offset the revenue gains from power tools and assembly equipment.
The Automotive Products segment contributed approximately 36% of Cooper's
total revenues in 1996, with revenues increasing 8% over 1995. Excluding the
effects of two 1996 acquisitions and carryover impact of one 1995 acquisition,
revenues increased 5% over the prior year. Harsh winter weather and lean
distributor inventories boosted domestic aftermarket demand for wiper blades and
ignition products early in the year. New customers for lighting products and a
partial recovery from the 1995 economic downturn in Mexico also increased
revenues. Product sales in the original equipment market improved as a result of
increased light vehicle production and increased placement of products on new
vehicle platforms. However, a decline in sales of temperature control products,
the result of a mild summer and related product returns; a decline in domestic
sales of heavy duty brake components, the result of decreases in original
equipment production; and lower European aftermarket sales, influenced by weak
economic conditions there, offset some of the gains made in other product
categories.
SEGMENT OPERATING EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1997 1996 1995
------ ------ ------
Reported Segment Operating Earnings: (IN MILLIONS)
<S> <C> <C> <C>
Electrical Products......................................... $445.7 $405.3 $355.5
Tools & Hardware............................................ 77.1 91.4 96.5
Automotive Products......................................... 143.5 87.3 180.7
------ ------ ------
Continuing Segment Operating Earnings............. 666.3 584.0 632.7
Kirsch...................................................... 74.6 20.0 14.7
------ ------ ------
Segment Operating Earnings........................ $740.9 $604.0 $647.4
====== ====== ======
</TABLE>
A-4
<PAGE> 6
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1997 1996 1995
------ ------ ------
Segment Operating Earnings Excluding Nonrecurring Items: (IN MILLIONS)
<S> <C> <C> <C>
Electrical Products......................................... $461.6 $408.3 $355.5
Tools & Hardware............................................ 99.6 91.4 96.5
Automotive Products......................................... 186.9 189.3 180.7
------ ------ ------
Continuing Segment Operating Earnings............. 748.1 689.0 632.7
Kirsch...................................................... 4.8 22.0 14.7
------ ------ ------
Segment Operating Earnings........................ $752.9 $711.0 $647.4
====== ====== ======
</TABLE>
1997 vs. 1996 Segment Operating Earnings Segment operating earnings in
1997 include nonrecurring charges of $81.8 million for adjustments to the
carrying value of assets, accruals for facility consolidations and related
severance and other obligations committed to by management. Reported segment
operating earnings also include a $69.8 million gain on the sale of Kirsch.
Segment operating earnings in 1996 include nonrecurring charges of an $85.3
million write-down of assets in the Automotive Products segment and $21.7
million in other nonrecurring charges related primarily to facility closings and
consolidations. See Nonrecurring Income and Expenses in the Overview section and
Note 2 of Notes to Consolidated Financial Statements. Excluding nonrecurring
items in 1997 and nonrecurring charges of $107 million in 1996, segment
operating earnings increased 6% over 1996. Excluding Kirsch results from both
years, segment operating earnings increased 9% over 1996. Acquisitions
contributed approximately $11 million or 2% of the increase in segment operating
earnings over 1996.
The Electrical Products segment operating earnings, excluding nonrecurring
charges of $15.9 million in 1997 and $3.0 million in 1996, improved 13% over the
prior year and contributed 62% of Cooper's continuing segment operating
earnings. Return on revenues improved in 1997 to 18% from 17% in 1996. The 1997
acquisitions and the carryover impact of 1996 acquisitions contributed
approximately $8 million of the increase in earnings. Excluding this impact and
nonrecurring items, segment operating earnings were up 11% over 1996. This
strong growth in earnings is primarily attributable to cost savings in
transformer products, strong revenue growth in higher margin distribution and
certain transmission equipment and circuit protection products and cost
containment across all businesses. All electrical products businesses had
increases in return on revenues, excluding nonrecurring charges, during 1997.
The Tools & Hardware segment operating earnings, excluding nonrecurring
items of $22.5 million in 1997 and Kirsch, increased 9% from 1996 and
contributed 13% of the continuing segment operating earnings. The incremental
earnings of the carryover impact of two small acquisitions was less than $1.5
million. Return on revenues increased to 13.3%, up .6 percentage points from the
prior year. Increased sales of hand-held power tools and assembly equipment and
leveraging of costs, primarily in the power tools and assembly equipment
businesses, were the primary drivers of the performance. The absence of
implementation costs incurred in the 1996 warehouse and distribution system
conversion at the hand tools operations also contributed to the increase in
return on revenues, partially offset by lower sales volume for hand tools.
The Automotive Products segment operating earnings, excluding nonrecurring
charges of $43.4 million in 1997 and $102.0 million in 1996, decreased 1% from
the prior year. The segment contributed 25% of continuing segment operating
earnings. Without the impact of two acquisitions, operating earnings declined
2%. Return on revenues increased from 9.9% in 1996 to 10.0% in 1997. Lower sales
volume in the domestic aftermarket for most chassis, temperature control and
wiper products, coupled with competitor price pressures, and a weak European
aftermarket for ignition products contributed to the earnings decline. Increased
sales in the original equipment market, lower spending on promotional expenses
and other costs and lower depreciation and amortization due to the 1996
write-down of brake assets provided a partial offset.
1996 vs. 1995 Segment Operating Earnings Segment operating earnings in
1996, excluding nonrecurring charges, included an $85.3 million write-down of
assets in the Automotive Products segment and $21.7 million in other
nonrecurring charges related primarily to facility closings and consolidations.
See Nonrecurring Income and Expense in the Overview section and Note 2 of Notes
to Consolidated Financial Statements. Excluding nonrecurring charges of $107
million, segment operating earnings in 1996 increased 10% over 1995.
Acquisitions contributed approximately $45 million or 7% of the increase in
segment operating earnings over 1995.
The Electrical Products segment operating earnings, excluding nonrecurring
charges, improved 15% from 1995, and contributed 57% of Cooper's total segment
operating earnings. Return on revenues decreased only slightly in 1996
A-5
<PAGE> 7
to 16.8% due to an unfavorable mix of power distribution products and a
proportionately lower contribution of higher-margin fuse products. Excluding
nonrecurring charges, return on revenues declined less than .1 percentage
points. The 1996 acquisitions and the carryover impact of 1995 acquisitions,
including CEAG, added approximately $36 million of incremental earnings to 1996.
Excluding this impact, segment operating earnings were up 4% over 1995. This
resulted from the growth in revenues from improvements in construction markets,
cost reduction efforts and a more favorable product line mix beginning in the
third quarter of 1996.
The Tools & Hardware segment operating earnings, excluding Kirsch, declined
$5.1 million when compared to 1995 with the segment, including Kirsch,
contributing 16% of total segment operating earnings before nonrecurring
charges. The incremental earnings impact from 1996 acquisitions was less than $2
million. Return on revenues, excluding Kirsch, of 12.7% in 1996 was below the
1995 level of 13.7%. The favorable impact from prior cost improvement actions,
including the consolidation of forged hand tools manufacturing, and increased
sales of power assembly tools were offset by implementation costs incurred in
the warehouse and distribution system conversion at the hand tools operations
and the effects of slower European markets. Kirsch results included nonrecurring
expenses of $2 million for legal and other costs related to sales of imported
mini blinds containing lead paint.
The Automotive Products segment operating earnings, before nonrecurring
expenses of $102 million, increased 5% from 1995 and contributed 27% of total
segment operating earnings. Acquisitions provided all of the increase in the
Automotive Products segment operating earnings. Return on revenues, before
nonrecurring expenses, declined from 10.3% in 1995 to 9.9% in 1996. Increased
sales in the North American market for most ignition, wiper, lighting and
steering and suspension products in 1996 contributed to earnings. However, the
North American reduction in production of vehicles utilizing heavy-duty brake
products; continuing severe price competition for brake and temperature control
products and a weak European aftermarket offset the increased sales and related
earnings and contributed to the decline in return on revenues. In addition,
customer changeover costs more than doubled in 1996 as a result of adding two
new large customers and several smaller customers. Price competition continued
in 1996, offsetting many of the efficiency gains achieved through facility
consolidations.
OTHER INCOME AND EXPENSE
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1997 1996 1995
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Segment Operating Earnings(1)............................... $740.9 $604.0 $647.4
Other Income................................................ 14.2 23.0 25.5
Nonrecurring Gains.......................................... 23.2 150.4 11.7
General Corporate Expense................................... (61.2) (77.3) (55.6)
Interest Expense............................................ (90.4) (142.1) (151.0)
------ ------ ------
Income from Continuing Operations before Income Taxes..... $626.7 $558.0 $478.0
====== ====== ======
</TABLE>
- ---------------
(1) Includes nonrecurring gain on sale of Kirsch and nonrecurring charges.
Other Income Other income in 1997 declined compared to 1996 due to the
absence of dividends on marketable equity securities and the utilization of cash
to reduce average debt outstanding.
General Corporate Expense General corporate expenses decreased $16.1
million in 1997 compared to 1996. Excluding nonrecurring charges, general
corporate expenses decreased $7.3 million in 1997 compared to 1996. The 1997 and
1996 expenses included nonrecurring charges of $2.1 million and $10.9 million,
respectively. The 1997 charge relates primarily to information systems and the
1996 charge related primarily to environmental litigation. The remainder of the
decrease was primarily due to lower costs for retirements and severance. General
corporate expenses increased $21.7 million in 1996 compared to 1995. The 1996
general corporate expense includes $10.9 million in nonrecurring expenses
related to environmental litigation. The remainder of the increase from 1995 is
related to costs in connection with the executive incentive plan adopted by
shareholders in 1996 and severance and retirement expenses.
Nonrecurring Gains Nonrecurring gains decreased by $127.2 million in 1997
from 1996. The gain on the exchange of the Wyman-Gordon DECS of $23.2 million
was recognized in 1997 while 1996 included $150.4 million in gains on the sale
of marketable equity securities of Belden and Cooper Cameron. Nonrecurring gains
increased $138.7 million in 1996 from 1995 due to lower gains on sales of
marketable equity securities in 1995.
A-6
<PAGE> 8
Interest Expense Interest expense for 1997 decreased $51.7 million from
1996. The majority of the decrease was due to the conversion during 1997 of $610
million of Cooper's 7.05% Convertible Subordinated Debentures to Cooper Common
stock. Average debt levels in 1997, excluding the $610 million converted debt,
were also lower than 1996 and contributed to the decline in interest expense.
Interest expense decreased $8.9 million in 1996 from the 1995 level. The decline
was driven by lower average interest rates and lower average debt levels.
INCOME FROM CONTINUING OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1997 1996 1995
--------- --------- ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Income from continuing operations before income taxes....... $626.7 $558.0 $478.0
Income taxes................................................ 232.1 242.6 197.4
------ ------ ------
Income from continuing operations........................... $394.6 $315.4 $280.6
====== ====== ======
Diluted earnings per share from continuing operations....... $ 3.26 $ 2.77 $ 2.41
====== ====== ======
</TABLE>
1997 vs. 1996 Income from Continuing Operations Income from continuing
operations before income taxes for 1997, exclusive of 1997 net nonrecurring
gains of $9.1 million and 1996 net nonrecurring gains of $32.5 million,
increased to $617.6 million from $525.5 million, an 18% increase. This increase
was primarily the result of the increased segment earnings and lower interest
expense.
The effective tax rate decreased from 43.5% in 1996 to 37.0% in 1997. The
1996 rate was higher than normal due to the asset write-down which included the
write-off of nondeductible goodwill. Excluding the impact of this write-down,
the effective tax rate was 41.2%. The effective tax rate for 1997 includes $6.1
million related to the favorable settlements of several state income tax issues.
Excluding the 1997 nonrecurring tax benefit, the 1997 effective tax rate was
38%. The rate reduction from 41.2% to 38.0% stems from Cooper's tax planning
efforts, including changing its international tax structure, maximizing tax
incentives for exports and increasing research and development tax credits. In
addition, the impact of nondeductible goodwill on the effective tax rate is
reduced as earnings increase.
Income from continuing operations increased 25% over 1996. The 1997 net
income includes the effect of (1) the redemption and conversion of Cooper's
7.05% Convertible Subordinated Debentures, (2) the purchase of approximately 3.6
million shares of Cooper's Common stock, (3) the absence of the Kirsch business
for seven months of 1997, and (4) a $6.1 million benefit from settlements of
several state income tax matters. Diluted earnings per share from continuing
operations increased 18% from the 1996 level. The lower interest expense in 1997
related to the conversion of $610 million of 7.05% Convertible Subordinated
Debentures to Cooper Common stock, had no effect on diluted earnings per share
as the interest expense is excluded and the equivalent Cooper Common stock are
included in the calculation of diluted earnings per share for both 1997 and
1996.
While the purchase of Cooper Common stock and the impact of the $80 million
of 7.05% Convertible Subordinated Debentures redeemed for cash reduced average
shares utilized in the computation of diluted earnings per share, the funding of
these two items increased interest expense, offsetting most of the benefit on
diluted earnings per share. After considering the impact of additional common
stock equivalents, primarily resulting from an increase in market price of a
share of Cooper Common stock during the year, diluted earnings per share were
not impacted by the net reduction in average shares during 1997. The absence of
the Kirsch operations, net of the effect of lower interest expense resulting
from repaying debt with the net proceeds of the sale, reduced earnings per share
for 1997 by approximately $.05. Earnings per share for 1997 also includes
contributions of $.10 of nonrecurring gains (net of nonrecurring expenses) and
the favorable settlements of several state income tax issues. Earnings per share
for 1996 include a contribution of $.05 per share (net of nonrecurring expenses)
from the sale of marketable equity securities.
1996 vs. 1995 Income from Continuing Operations Income from continuing
operations before income taxes, exclusive of the third quarter 1996 gain of
$107.2 million on the sale of marketable equity securities and the $85.3 million
write-down in the Automotive Products segment, increased 12% to $536.1 million
compared to $478.0 million in 1995. The increase results primarily from the
increase in operating earnings and the reduction in interest expense offset
partially by an increase in general corporate expense.
The effective tax rate increased to 43.5% in 1996 from 41.3% in 1995. The
increase resulted primarily from the asset write-down in the Automotive Products
segment, which included a write-down of goodwill that was not
A-7
<PAGE> 9
deductible for income tax purposes. Excluding the gain on the sale of marketable
equity securities and the nonrecurring write-down, the effective tax rate
decreased from 41.3% in 1995 to 41.2% in 1996.
Income from continuing operations increased 12% due to the factors outlined
above, while diluted earnings per share from continuing operations increased
15%. The full-year impact of the reduction in average shares outstanding
resulting from the Cooper Cameron Exchange Offer completed in mid-year 1995,
accounted for $.09 per share of the earnings per share increase. See Note 18 of
Notes to Consolidated Financial Statements. Both 1996 and 1995 earnings per
share include a net contribution (net of nonrecurring expenses in 1996) of $.05
per share from the sale of marketable equity securities.
PERCENTAGE OF REVENUES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Revenues.................................................... 100.0% 100.0% 100.0%
Cost of Sales............................................... 67.8% 68.2% 68.5%
Selling and Administrative.................................. 17.5% 17.9% 17.5%
</TABLE>
1997 vs. 1996 Percentage of Revenues Cost of sales, as a percentage of
revenues, declined to 67.8% in 1997 from 68.2% in 1996. The decline resulted
primarily from product cost improvements and containments and an overall
favorable mix of higher margin electrical products. Most of the improvement in
cost of sales as a percentage of revenue was in the Electrical Products segment,
with the Tools & Hardware segment, excluding Kirsch, improving to a lesser
extent and the Automotive Products segment being flat with the prior year.
Selling and administrative expenses decreased, as a percentage of revenues, to
17.5% in 1997 from 17.9% in 1996. The inclusion of Kirsch for five months in
1997 and for the full year in 1996, represented .2 percentage points of the
improvement. Each of the segments contributed to the remaining improvement.
Lower general corporate expenses discussed under "General Corporate Expense"
also contributed to the improvement.
1996 vs. 1995 Percentage of Revenues Cost of sales, as a percentage of
revenues, declined to 68.2% from 68.5% in 1995. The improvement in the cost of
sales percentage reflects the continued improvement in operating efficiencies
achieved through manufacturing and distribution improvement programs, the
emphasis beginning in 1995 on top line growth through new products, market
penetration and acquisitions offset in part by disruptions resulting from
consolidations and facility closings and the large increase in transformer
sales, which carry a lower margin. Selling and administrative expense, as a
percentage of revenues, increased to 17.9% in 1996 from 17.5% in 1995. The
increase of .4 percentage points in 1996, is primarily attributable to higher
selling and administrative expenses of the CEAG acquisition, acquired December
31, 1995, the higher corporate general expenses discussed under "General
Corporate Expense", additional investments in personnel and other sales
expenses, primarily in the business comprising the Electrical Products segment,
and high customer changeover expenses in the Automotive Products segment.
DISCONTINUED OPERATIONS
In September 1994, Cooper announced its decision to discontinue its
Petroleum & Industrial Equipment segment through an exchange offer with holders
of Cooper Common stock. On June 30, 1995, Cooper's Common shareholders exchanged
9.5 million shares of their Cooper Common stock for common stock of Cooper
Cameron Corporation, a newly formed company that included all of the assets and
liabilities of the four divisions that comprised Cooper's Petroleum & Industrial
Equipment segment, as well as $375 million of allocated indebtedness. See Note
18 of the Notes to Consolidated Financial Statements for additional information.
In the second quarter of 1995, Cooper recorded a charge of $186.6 million
($1.45 per diluted share) to reflect the actual loss on the split-off of Cooper
Cameron. The charge was composed of the difference between the historical cost
of Cooper's investment in Cooper Cameron remaining after the September 1994
estimated charge and the market value of Cooper Cameron common stock during the
first few days the common stock traded on a national exchange ($162.8 million),
additional Cooper Cameron operating losses during the period October 1, 1994
through June 30, 1995 ($20.3 million) and additional transaction costs ($3.5
million). The additional operating losses and transaction costs resulted
primarily from the delay in completing the exchange transaction and the
recording by Cooper Cameron of a $17 million pretax charge in the second quarter
of 1995 for the write-down of receivables due from customers in Iran.
A-8
<PAGE> 10
Under the provisions of the Asset Transfer Agreement between Cooper and
Cooper Cameron, Cooper Cameron was responsible, other than for certain agreed
amounts of estimated operating losses, for its cash requirements between October
1, 1994 and the expiration date of the Exchange Offer. Other than for income tax
liabilities for periods prior to the completion of the Exchange Offer, Cooper
did not retain any liabilities, contingent or otherwise, with respect to the
discontinued operations.
EARNINGS OUTLOOK
The following sets forth Cooper's general business outlook for 1998, based
on current expectations. The statements are forward looking and actual results
may differ materially. The comparative figures for 1998 include the effects of
acquisitions made during 1997 and exclude 1997 nonrecurring items and the Kirsch
division from the Tools & Hardware segment.
Electrical Products segment revenues are expected to increase by
approximately fifteen percent, Tools & Hardware segment revenues are expected to
increase approximately five percent and Automotive Products segment revenues are
expected to be about the same as 1997 revenues. Cooper expects operating
earnings for the Electrical Products segment to increase by approximately ten to
fifteen percent. Operating earnings for both the Tools & Hardware segment and
the Automotive Products segment are expected to increase by approximately five
to ten percent.
The above statements are forward looking, and actual results may differ
materially. The above statements are based on a number of assumptions, risks and
uncertainties. The primary economic assumptions include, without limitation, (1)
modest growth in the domestic economy; (2) a modest improvement in European
markets; (3) a modest increase in construction spending worldwide; (4) no
significant change in raw material costs; (5) no major customer consolidation in
the automotive aftermarket; and (6) no significant adverse changes in the
relationship of the currencies of Western European countries to the U.S. dollar.
The estimates also assume, without limitation, no significant change in
competitive conditions and such other risk factors as are discussed from time to
time in Cooper's periodic filings with the Securities and Exchange Commission.
PRICING AND VOLUME
In each of Cooper's segments, the nature of many of the products sold is
such that an accurate determination of the changes in unit volume of sales is
neither practical nor, in some cases, meaningful. Each segment produces a family
of products, within which there exist considerable variations in size,
configuration and other characteristics.
It is Cooper's best judgment that, excluding the year-to-year effects of
acquisitions and divestitures, unit volume increased in the Electrical Products
and Tools & Hardware segments but decreased in the Automotive Products segment
in 1997. During 1996, Cooper's best judgment is that unit volume increased in
the Electrical Products and Automotive Products segments and decreased in the
Tools & Hardware segment.
During the three-year period ending in 1997, Cooper was unable to increase
prices to fully offset cost increases in selected product offerings in all
segments. Cooper has been able to control costs through manufacturing
improvements and other actions during this period so that the inability to
increase prices has not significantly affected profitability in the segments.
EFFECT OF INFLATION
During each year, inflation has had a relatively minor effect on Cooper's
results of operations. This is true primarily for three reasons. First, in
recent years, the rate of inflation in Cooper's primary markets has been fairly
low. Second, Cooper makes extensive use of the LIFO method of accounting for
inventories. The LIFO method results in current inventory costs being matched
against current sales dollars, such that inflation affects earnings on a current
basis. Finally, many of the assets and liabilities included in Cooper's
Consolidated Balance Sheets are recorded in connection with business
combinations that are accounted for as purchases. At the time of such
acquisitions, the assets and liabilities are adjusted to fair market value and,
therefore, the cumulative long-term effect of inflation is reduced.
A-9
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
Operating Working Capital
For purposes of this discussion, operating working capital is defined as
receivables and inventories less accounts payable.
In 1997, operating working capital, as reported in the consolidated balance
sheet, increased $31.1 million. Excluding acquisitions consummated in December
1997, operating working capital decreased $19.5 million as a result of a $17.3
million decrease in accounts receivable, a $36.4 million decrease in inventories
and a $34.2 million decrease in accounts payable. Excluding the impact of the
December 1997 acquisitions, operating working capital turns increased from 3.8
to 4.0 turns in 1997, a 5% improvement.
In 1996, operating working capital decreased $58 million as a reduction in
accounts receivable of $33 million and an increase in accounts payable of $32
million contributed to the improvement. Operating working capital turns
increased in excess of 10%.
In 1995, operating working capital decreased $16 million primarily driven
by a reduction of inventories during the year. All three segments contributed to
the reduction of inventory. Management attention was focused in 1995 on reducing
the build up of inventories that occurred in 1994.
Cash Flows
Net cash provided by operating activities in 1997 totaled $494 million.
These funds, along with $216 million in proceeds from the sale of Kirsch and an
increase in debt of $213 million (net of acquisition related assumed debt), were
used to finance net cash outflows for acquisitions of $387 million, capital
expenditures of $196 million, dividends of $157 million and purchases of
Cooper's Common stock of $192 million.
Net cash provided by operating activities in 1996 totaled $562 million. The
cash generated from operating activities, and $259 million provided from the
sales of marketable equity securities and fixed assets, was utilized to finance
net cash flows for acquisitions of $257 million, capital expenditures of $202
million, dividends of $143 million and debt reduction of $227 million.
Net cash flows provided by operating activities in 1995 totaled $550
million. This cash, in addition to $40 million generated by sales of fixed
assets and marketable equity securities, was used to fund capital spending of
$188 million, dividends of $164 million, debt reduction of $186 million and
discontinued operations of $48 million.
In connection with accounting for purchase business combinations, Cooper
records, to the extent appropriate, accruals for the costs of closing duplicate
facilities, severing redundant personnel and integrating the acquired business
into existing Cooper operations. Cash flow from operating activities for each of
the three years in the period ended December 31, 1997, is reduced by the amounts
expended on the various accruals established in connection with each
acquisition. At December 31, 1997, Cooper had accruals totaling $26.0 million
related to these activities. Cooper spent $9.3 million, $24.3 million and $47.0
million in 1997, 1996 and 1995, respectively. Spending in 1998 and future years
is not expected to be at these levels, as most of the major projects related to
earlier acquisitions have been completed and recent acquisitions do not involve
significant restructuring activities. Cooper does not believe that future
spending will impair Cooper's overall financial flexibility. See Note 7 of the
Notes to Consolidated Financial Statements for further information.
Debt
The ratio of debt-to-total capitalization was 36.3%, 50.3% and 54.5% at
year-end 1997, 1996 and 1995, respectively. The 1997 and 1996 debt-to-total
capitalization ratio includes the noncash effect of marking the DECS to market.
The 1997 ratio reflects the conversion of $610 million of 7.05% Convertible
Subordinated Debentures into Cooper Common stock and the subsequent purchase of
$192 million of Cooper Common stock. The 1995 ratio reflected the exchange, on
January 1, 1995, of the $1.60 Convertible Exchangeable Preferred Stock for 7.05%
Convertible Subordinated Debentures and the $614.1 million reduction in
shareholders' equity from the June 30, 1995 exchange of Cooper Common stock for
Cooper Cameron common stock.
During 1996, Cooper filed a shelf registration statement for $300 million
of medium-term notes and issued $50 million of five-year notes at an average
rate of 5.74%. At December 31, 1997, $250 million was available for issuance
under the shelf registration statement.
A-10
<PAGE> 12
During 1997, Cooper called for redemption its 7.05% Convertible
Subordinated Debentures. Cooper retired all $690 million of the debentures. Of
these debentures, a total of $610 million was converted to approximately 14.8
million shares of Cooper Common stock and approximately $80 million was redeemed
for cash.
Cooper has targeted a 35% to 45% debt-to-total capitalization ratio and
intends to utilize cash flows to maintain approximately a minimum of a 35%
debt-to-total capitalization ratio with excess cash utilized to purchase shares
of Cooper's Common stock or fund acquisitions.
Capital Expenditures and Commitments
Capital expenditures on projects to reduce product costs, improve product
quality, increase manufacturing efficiency and operating flexibility, or expand
product capacity were $196 million in 1997, $202 million in 1996 and $188
million in 1995. Projected capital expenditures for 1998 are anticipated to
exceed 1997 expenditures by ten to fifteen percent. The 1998 anticipated capital
spending represents approximately 55% for various cost-reduction and
capacity-maintenance projects, including machinery and equipment modernization
and enhancement and computer hardware and software projects, 14% for capacity
expansion, 9% related to environmental matters and 22% for other items.
Interest Rate and Foreign Currency Risk
Changes in interest rates and foreign currency exchange rates affect
Cooper's earnings and cash flows. In countries where Cooper has significant
investments and where practical, debt is either borrowed in the local functional
currency or foreign currency forward contracts are entered into to, in effect,
exchange U.S. dollar denominated debt into local functional currency debt. While
the purpose of borrowing in local functional currencies is primarily driven by
tax planning considerations, it also reduces the cash flow risk as a significant
portion of cash flows generated by the operations are utilized to pay interest
and principal on the debt. The earnings risk is also reduced since interest
expense is in the same currency as the operating earnings are generated.
Cooper uses forward foreign currency exchange contracts to reduce the risk
associated with changes in the exchange rates for firm commitments and
anticipated sales or purchases where a product is manufactured or purchased in
one country and sold or consumed in the manufacturing process in another
country. Cooper's policy is to hedge firm commitments to eliminate this risk if
natural hedges do not exist. Anticipated sales or purchases are hedged at the
discretion of the operating businesses. Substantially all forward contracts
expire within one year. At December 31, 1997, insignificant amounts of
anticipated sales and purchases were hedged. Cooper believes that the effects of
currency movements on the respective underlying hedged transactions offset any
gain or loss on forward exchange contracts.
The table below provides information about Cooper's financial instruments
at December 31, 1997 that are sensitive to changes in interest rates. The table
presents principal cash flows by expected maturity dates and weighted average
interest rates for debt obligations.
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002 THEREAFTER TOTAL
----- ------ ------ ----- ----- ---------- ------
(IN MILLIONS, WHERE APPLICABLE)
<S> <C> <C> <C> <C> <C> <C> <C>
Long-term debt:
Fixed rate.................. $57.8 $235.7(1) $ 0.5 $50.4 $60.3 $250.0 $654.7
Average interest rate....... 6.0% 6.5% 6.5% 6.6% 6.6% 6.7% 6.0%
Variable rate............... $ 0.5 $ 58.4 $545.4 $ 0.5 $ 0.5 $ 70.5 $675.8
Average interest rate....... 5.8% 5.7% 5.6% 6.1% 6.1% 6.1% 5.8%
</TABLE>
- ---------------
(1)Includes $235.2 of 6.0% DECS which are mandatorily exchangeable into shares
of Wyman-Gordon common stock, or at Cooper's option, into cash in lieu of
shares. Cooper anticipates delivering the Wyman-Gordon common stock upon
redemption of the DECS in 1999.
A-11
<PAGE> 13
The table below provides information about Cooper's financial instruments
at December 31, 1997 in excess of $5 million that are sensitive to foreign
currency exchange rate changes by functional currency. For foreign currency
denominated debt obligations, the table provides principal cash flows, weighted
average interest rates by expected maturity dates and the applicable foreign
currency exchange rate. For foreign currency forward contracts, the table
presents the notional amounts and weighted average exchange rates by contractual
maturity dates. These notional amounts are used to calculate the contractual
payments to be exchanged under the contracts. All amounts are presented in U.S.
dollar equivalents.
<TABLE>
<CAPTION>
1998 2000
------------ ------------
(IN MILLIONS, WHERE APPLICABLE)
<S> <C> <C>
U.S. Dollar Functional Currency
Long-term debt denominated in German Deutschemark........... -- $ 128.3
Average interest rate....................................... -- 4.0%
Foreign currency exchange rate.............................. -- .56
Forward Exchange Contracts:
Sell Pounds Sterling/Buy U.S. Dollars
Notional amount........................................... $ 175.3 --
Average contract rate..................................... 1.66 --
Buy Australian Dollars/Sell U.S. Dollars
Notional amount........................................... $ 7.2 --
Average contract rate..................................... .67 --
Buy Italian Lira/Sell U.S. Dollars
Notional amount........................................... $ 5.4 --
Average contract rate..................................... .00057 --
Pounds Sterling Functional Currency
Forward Exchange Contracts:
Buy U.S. Dollars/Sell Pounds Sterling
Notional amount........................................... $ 5.0 --
Average contract rate..................................... 1.63 --
</TABLE>
See Note 16 of Notes to Consolidated Financial Statements for additional
information regarding the fair value of Cooper's financial instruments.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 Reporting Comprehensive Income ("FAS No.
130") and No. 131 Disclosures About Segments of an Enterprise and Related
Information ("FAS No. 131"). Both FAS No. 130 and FAS No. 131 are effective for
Cooper's calendar year ending December 31, 1998.
FAS No. 130 establishes standards for the reporting and display of
comprehensive income and its components in a full set of financial statements.
Comprehensive income is defined as the change in equity during a period from
transactions and other events and circumstances from non-owner sources. Upon
adopting the new standard in 1998, Cooper will report and display comprehensive
income which includes net income plus non-owner changes in equity such as the
change in foreign currency translation, the minimum pension liability, and
unrealized gains or losses on investments in marketable equity securities.
FAS No. 131 changes the way segment information is presented from an
industry segment approach to a management approach. Under the management
approach, segments are determined based on the operations regularly reviewed by
the chief operating decision maker to make decisions about resources to be
allocated to the segment and assess its performance. FAS No. 131 also allows the
presentation of information on an internally reported basis and changes certain
other disclosures. Cooper is managed in a similar structure to the present
segment disclosures and information reviewed with the Board of Directors and
senior management is in a similar format. Cooper has not presently determined
the extent to which the segment groupings and related disclosures will be
revised when FAS No. 131 is adopted, but does not anticipate major revisions
that would make the information lack all comparability with the current
presentation.
A-12
<PAGE> 14
REPORT OF MANAGEMENT
The management of Cooper Industries is responsible for the preparation,
integrity and fair presentation of the accompanying Consolidated Financial
Statements. Such Consolidated Financial Statements have been prepared in
accordance with generally accepted accounting principles and, as such, include
amounts based on informed estimates and judgments of management. Management also
prepared the other information included in the 1998 Proxy Statement and is
responsible for its accuracy and consistency with the Consolidated Financial
Statements.
The Consolidated Financial Statements have been audited by an independent
accounting firm, Ernst & Young LLP, which was given unrestricted access to all
financial records and related data, including minutes of meetings of
shareholders, the Board of Directors, and committees of the Board. Management
believes that all representations made to the independent auditors during their
audit were valid and appropriate.
Cooper maintains a system of internal control designed to provide
reasonable assurance to Cooper's management and Board of Directors that assets
are safeguarded against loss, that transactions are authorized, executed and
recorded in accordance with management's instructions, and accounting records
are reliable for preparing published financial statements. The system of
internal control includes: a documented organizational structure and division of
responsibility; regular management review of financial performance and internal
control activities; comprehensive written policies and procedures (including a
code of conduct to foster a sound ethical climate) that are communicated
throughout Cooper; and the careful selection, training and development of
employees. Cooper's internal audit department monitors the operation of the
internal control system and reports findings and recommendations to management
and the Audit Committee. Prompt corrective action is taken to address control
deficiencies and other opportunities for improving the internal control system.
The Audit Committee of the Board of Directors, which is composed entirely
of directors who are not officers or employees of Cooper, meets periodically
with management, the independent auditors, and the director of internal audit to
discuss the adequacy of internal control and to review accounting, reporting,
auditing and other internal control matters. The internal and independent
auditors have unrestricted access to the Audit Committee.
<TABLE>
<S> <C> <C>
/s/ H. John Riley, Jr. /s/ D. Bradley McWilliams /s/ Terry A. Klebe
H. John Riley, Jr. D. Bradley McWilliams Terry A. Klebe
Chairman, President and Senior Vice President and Vice President and
Chief Executive Officer Chief Financial Officer Controller
</TABLE>
A-13
<PAGE> 15
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Cooper Industries, Inc.
We have audited the accompanying consolidated balance sheets of Cooper
Industries, Inc. as of December 31, 1997 and 1996, and the related consolidated
income statements, shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Cooper
Industries, Inc. at December 31, 1997 and 1996, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
Houston, Texas
January 23, 1998
A-14
<PAGE> 16
COOPER INDUSTRIES, INC.
CONSOLIDATED INCOME STATEMENTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
-------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Revenues.................................................... $5,288.8 $5,283.7 $4,810.9
Cost of sales............................................... 3,588.3 3,605.7 3,297.5
Selling and administrative expenses......................... 925.3 945.4 841.1
Goodwill amortization....................................... 65.1 65.2 60.8
Nonrecurring gains.......................................... (93.0) (150.4) (11.7)
Nonrecurring charges........................................ 83.9 117.9 --
Other (income) expense, net................................. 2.1 (0.2) (5.8)
Interest expense............................................ 90.4 142.1 151.0
-------- -------- --------
Income from continuing operations before income taxes..... 626.7 558.0 478.0
Income taxes................................................ 232.1 242.6 197.4
-------- -------- --------
Income from continuing operations......................... 394.6 315.4 280.6
Charge for discontinued operations.......................... -- -- (186.6)
-------- -------- --------
Net income........................................ $ 394.6 $ 315.4 $ 94.0
======== ======== ========
Income per Common share
Basic:
Income from continuing operations...................... $ 3.36 $ 2.94 $ 2.52
Charge for discontinued operations..................... -- -- (1.67)
-------- -------- --------
Net income........................................ $ 3.36 $ 2.94 $ 0.85
======== ======== ========
Diluted:
Income from continuing operations...................... $ 3.26 $ 2.77 $ 2.41
Charge for discontinued operations..................... -- -- (1.45)
-------- -------- --------
Net income........................................ $ 3.26 $ 2.77 $ 0.96
======== ======== ========
Cash dividends per Common share............................. $ 1.32 $ 1.32 $ 1.32
======== ======== ========
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
A-15
<PAGE> 17
COOPER INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1996
-------- --------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 30.3 $ 16.1
Receivables................................................. 991.7 959.4
Inventories................................................. 958.2 971.1
Other....................................................... 156.5 151.5
-------- --------
Total current assets.............................. 2,136.7 2,098.1
-------- --------
Property, plant and equipment, less accumulated
depreciation.............................................. 1,198.8 1,241.3
Intangibles, less accumulated amortization.................. 2,389.9 2,154.9
Investments in marketable equity securities................. 274.8 367.1
Deferred income taxes and other assets...................... 52.3 89.0
-------- --------
Total assets...................................... $6,052.5 $5,950.4
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt............................................. $ 139.0 $ 98.2
Accounts payable............................................ 574.5 586.2
Accrued liabilities......................................... 589.5 581.8
Accrued income taxes........................................ 23.8 37.3
Current maturities of long-term debt........................ 58.3 77.8
-------- --------
Total current liabilities......................... 1,385.1 1,381.3
-------- --------
Long-term debt.............................................. 1,272.2 1,737.7
Postretirement benefits other than pensions................. 558.0 606.4
Other long-term liabilities................................. 260.6 334.8
-------- --------
Total liabilities................................. 3,475.9 4,060.2
-------- --------
Common stock, $5.00 par value............................... 615.0 540.2
Capital in excess of par value.............................. 679.8 150.1
Retained earnings........................................... 1,514.5 1,275.3
Common stock held in treasury, at cost...................... (149.7) --
Unearned employee stock ownership plan compensation......... (66.5) (92.9)
Other....................................................... (16.5) 17.5
-------- --------
Total shareholders' equity........................ 2,576.6 1,890.2
-------- --------
Total liabilities and shareholders' equity........ $6,052.5 $5,950.4
======== ========
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
A-16
<PAGE> 18
COOPER INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1997 1996 1995
------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 394.6 $ 315.4 $ 94.0
Charge for discontinued operations........................ -- -- 186.6
------- ------- -------
Income from continuing operations......................... 394.6 315.4 280.6
Adjustments to reconcile to net cash provided by operating
activities:
Depreciation and amortization.......................... 219.6 233.8 218.8
Deferred income taxes.................................. (3.4) 13.3 65.4
Gain on sales of marketable equity securities and DECS
exchange.............................................. (23.2) (150.4) (11.7)
Gain on disposition of business........................ (69.8) -- --
Nonrecurring asset write-down.......................... 54.8 85.3 --
Changes in assets and liabilities:(1)
Receivables.......................................... (31.3) 46.6 (12.1)
Inventories.......................................... (37.1) 3.3 68.2
Accounts payable and accrued liabilities............. 8.0 (1.2) 16.6
Accrued income taxes................................. (15.3) 28.5 (33.2)
Other assets and liabilities, net.................... (2.6) (12.2) (42.3)
------- ------- -------
Net cash provided by operating activities......... 494.3 562.4 550.3
------- ------- -------
Cash flows from investing activities:
Cash paid for acquired businesses......................... (386.5) (257.2) (11.9)
Proceeds from disposition of business..................... 216.0 2.3 --
Capital expenditures...................................... (195.7) (201.9) (188.4)
Proceeds from sales of marketable equity securities....... -- 231.4 14.4
Proceeds from sales of property, plant and equipment...... 8.3 27.6 25.4
------- ------- -------
Net cash used in investing activities............. (357.9) (197.8) (160.5)
------- ------- -------
Cash flows from financing activities:
Proceeds from issuances of debt........................... 564.7 316.0 704.7
Repayments of debt........................................ (351.8) (542.7) (890.3)
Dividends................................................. (157.4) (142.6) (164.0)
Acquisition of treasury shares............................ (191.5) -- --
Activity under employee stock plans and other............. 15.6 1.7 (5.8)
------- ------- -------
Net cash used in financing activities............. (120.4) (367.6) (355.4)
------- ------- -------
Cash flows used by discontinued operations.................. -- -- (47.7)
Effect of exchange rate changes on cash and cash
equivalents............................................... (1.8) 1.4 5.7
------- ------- -------
Increase (decrease) in cash and cash equivalents............ 14.2 (1.6) (7.6)
Cash and cash equivalents, beginning of year................ 16.1 17.7 25.3
------- ------- -------
Cash and cash equivalents, end of year...................... $ 30.3 $ 16.1 $ 17.7
======= ======= =======
</TABLE>
- ---------------
(1)Net of the effects of acquisitions, divestitures and translation.
The Notes to Consolidated Financial Statements are an integral part of
these statements. See Note 17 for information on noncash investing and financing
activities.
A-17
<PAGE> 19
COOPER INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
$1.60
CONVERTIBLE CAPITAL UNEARNED
EXCHANGEABLE IN EXCESS EMPLOYEE STOCK
PREFERRED COMMON OF PAR RETAINED TREASURY OWNERSHIP PLAN
STOCK STOCK VALUE EARNINGS STOCK COMPENSATION OTHER
------------ ------ --------- -------- -------- -------------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1994............. $30.6 $584.6 $1,176.5 $1,153.4 $ -- $(147.4) $ (56.6)
Net income.......................... 94.0
Common stock dividends.............. (148.4)
Exchange of Common stock for Cooper
Cameron common stock............. (47.5) (382.6) 2.6
Redemption of $1.60 Preferred for
7.05% Convertible Subordinated
Debentures....................... (30.6) (664.4)
Stock issued under employee stock
plans............................ 1.8 12.0
Principal payments by ESOP.......... 25.4
Adjustment for minimum pension
liability........................ 8.7
Translation loss.................... (15.0)
Unrealized gain on investments in
marketable equity securities..... 126.8
Reclassification to realized gain... (7.2)
Other activity...................... 0.5 0.1 1.3 (2.2)
----- ------ -------- -------- ------- ------- -------
BALANCE DECEMBER 31, 1995............. -- 539.4 141.6 1,100.3 -- (121.6) 56.7
Net income.......................... 315.4
Common stock dividends.............. (142.6)
Stock issued under employee stock
plans............................ 0.5 4.4
Principal payments by ESOP.......... 28.7
Adjustment for minimum pension
liability........................ (1.5)
Translation loss.................... (4.9)
Unrealized gain on investments in
marketable equity securities..... 60.3
Reclassification to realized gain... (93.2)
Other activity...................... 0.3 4.1 2.2 0.1
----- ------ -------- -------- ------- ------- -------
BALANCE DECEMBER 31, 1996............. -- 540.2 150.1 1,275.3 -- (92.9) 17.5
Net income.......................... 394.6
Common stock dividends.............. (157.4)
Conversion of 7.05% Convertible
Subordinated Debentures.......... 73.9 536.3
Purchase of treasury shares......... (191.5)
Stock issued under employee stock
plans............................ 0.7 (7.5) 40.9
Principal payments by ESOP.......... 26.4
Adjustment for minimum pension
liability........................ 27.6
Translation loss.................... (38.1)
Unrealized loss on investments in
marketable equity securities..... (9.1)
Reclassification to realized gain... (14.4)
Other activity...................... 0.2 0.9 2.0 0.9 --
----- ------ -------- -------- ------- ------- -------
BALANCE DECEMBER 31, 1997............. $ -- $615.0 $ 679.8 $1,514.5 $(149.7) $ (66.5) $ (16.5)(1)
===== ====== ======== ======== ======= ======= =======
</TABLE>
- ---------------
(1)At December 31, 1997, "Other" included the minimum pension liability of
$(20.1) million, net of tax, cumulative translation adjustments of $(107.3)
million and the unrealized gain on Cooper's investment in Wyman-Gordon, net
of the increase in the market value of the DECS, of $110.9 million, net of
tax.
The Notes to Consolidated Financial Statements are an integral part of these
statements.
A-18
<PAGE> 20
COOPER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The Consolidated Financial Statements include the
accounts of Cooper Industries, Inc. ("Cooper") and its majority-owned
subsidiaries. Affiliated companies are accounted for on the equity method where
Cooper owns more than 20% but less than 50% of the affiliate unless significant
economic, political or contractual considerations indicate that the cost method
is appropriate.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH EQUIVALENTS: For purposes of the consolidated statements of cash flows,
Cooper considers all investments purchased with original maturities of three
months or less to be cash equivalents.
INVENTORIES: Inventories are carried at cost or, if lower, net realizable value.
On the basis of current costs, 71% of inventories at December 31, 1997 and 1996
were carried on the last-in, first-out (LIFO) method. The remaining inventories,
which are primarily located outside the United States, are carried on the
first-in, first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated at cost.
Depreciation is provided over the estimated useful lives of the related assets
using primarily the straight-line method. This method is applied to group asset
accounts, which in general have the following lives: buildings -- 10 to 40
years; machinery and equipment -- 3 to 18 years; and tooling, dies, patterns and
other -- 5 to 10 years.
INTANGIBLES: Intangibles consist primarily of goodwill related to purchase
acquisitions. With minor exceptions, the goodwill is being amortized over 40
years from the respective acquisition dates. The carrying value of goodwill is
reviewed at the lowest level feasible whenever there are indications that the
goodwill may be impaired. If this review indicates that goodwill will not be
recoverable, as determined based on undiscounted cash flows over the remaining
amortization periods, the carrying value of the goodwill will be reduced by the
estimated shortfall in discounted cash flows.
INVESTMENTS IN MARKETABLE EQUITY SECURITIES: Marketable equity securities
received or retained in connection with the divestiture of businesses are
reflected as available-for-sale securities and are stated at fair market value
at each balance sheet date, with unrealized gains and losses, net of tax,
reported as a component of shareholders' equity. The cost of securities sold is
determined based on the specific identification method for purposes of recording
realized gains and losses.
DERIVATIVE FINANCIAL INSTRUMENTS: On a recurring basis, foreign currency forward
exchange contracts and commodity contracts are entered into to reduce risks of
adverse changes in foreign exchange rates and commodity prices. All contracts
are hedges of actual or anticipated transactions with the gain or loss on the
contract recognized in the same period and in the same category of income or
expense as the underlying hedged transaction. Cooper does not enter into
speculative derivative transactions or hedges of anticipated transactions unless
there is a high probability the transactions will occur. Due to the short term
of contracts and a restrictive policy, contract terminations or anticipated
transactions that do not occur are rare and insignificant events which are
accounted for through income in the period they occur. As discussed in Note 6,
in December 1995, Cooper hedged its investment in marketable equity securities
of Wyman-Gordon Company ("Wyman-Gordon"). Cooper currently is not a party to any
interest rate swap agreements used to manage its interest rate risk. Cooper's
policy is to recognize the interest rate differential to be received or paid
over the lives of the interest rate swap as an adjustment to interest expense.
COMMON STOCK BASED COMPENSATION: Cooper follows the intrinsic value method of
accounting for stock options and performance-based stock awards as prescribed by
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees.
INCOME PER COMMON SHARE: In the fourth quarter of 1997, Cooper adopted Statement
of Financial Accounting Standards No. 128, Earnings Per Share. The new
accounting standard required all prior periods' income per Common share to be
restated based on a new computational method for average shares outstanding.
Adopting the new standard had no impact on previously reported fully diluted,
currently referred to as diluted, income per Common share from
A-19
<PAGE> 21
COOPER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
continuing operations and increased primary, currently referred to as basic,
income per common share $.01 in each of the years ended December 31, 1996 and
1995. Unlike primary earnings per share, basic earnings per share excludes the
dilutive effects of common stock equivalents. Adopting the new standard also
increased 1995 diluted net income by $.12 per share as the new standard requires
the use of income from continuing operations rather than net income to determine
whether common stock equivalents are antidilutive.
RECLASSIFICATION: Certain amounts in the Consolidated Income Statements for the
years ended December 31, 1996 and 1995 have been reclassified to conform to the
1997 presentation.
NOTE 2: NONRECURRING ITEMS
During 1997, Cooper realized a gain of $69.8 million ($43.3 million after
income taxes) from the sale of Kirsch (See Note 3) and exchanged a portion of
its DECS(SM) (Debt Exchangeable for Common Stock) for Wyman-Gordon common stock
and realized a gain of $23.2 million ($14.4 million after income taxes) (See
Note 6). Cooper also incurred charges of $83.9 million ($52.0 million after
income taxes) for actions management committed to during the period after
concluding an evaluation of (1) geographic manufacturing and distribution
facilities within the Tools & Hardware segment; (2) certain sales, marketing and
distribution activities within the Automotive Products segment; and (3)
information systems relating to year 2000 compliance efforts. The 1997 charges
include adjustments to the carrying value of assets of $54.8 million and
accruals for continuing obligations for replaced systems and facility
consolidations of $29.1 million. The charges decreased operating earnings of the
Electrical Products segment by $15.9 million, Tools & Hardware segment by $22.5
million, and the Automotive Products segment by $43.4 million and increased
general corporate expenses by $2.1 million. The gains, combined with
nonrecurring charges and a $6.1 million income tax benefit related to the
settlements of certain state income tax matters (See Note 11), resulted in a net
$.10 per share of nonrecurring income being recognized in 1997.
Cooper has begun a consolidation of certain international manufacturing and
distribution facilities in the Tools & Hardware segment and the consolidation of
certain sales, marketing and distribution activities in the Automotive Products
segment. Adjustments to the carrying value of assets and accruals were recorded
for projects committed to by management. Severance and certain other costs
related to projects committed to by management are not expensed until the
affected employees are notified. A majority of the consolidations have been
announced and such costs were accrued and expensed during 1997. The remaining
committed but unannounced consolidations are not anticipated to result in
significant additional expenses.
During 1997, Cooper began negotiations with Standard Motor Products, Inc.
("SMP") to exchange Cooper's temperature control business for the brake products
business owned by SMP. In December 1997, Cooper received the necessary
government approval for completion of the transaction with SMP. Closing of the
business exchange is subject to negotiation of a definitive agreement and is
currently anticipated to occur in the first quarter of 1998.
During 1997, Cooper also assessed the impact of existing system
capabilities to function at the turn of the century. Four of Cooper's nine
divisions are implementing new enterprise systems with the remaining divisions
modifying or replacing existing software. Where possible, businesses have
abandoned home-grown or highly customized applications with purchased, year 2000
compliant replacements or upgrades. In some situations, operations within a
business abandoned existing software and migrated to consolidated hardware and
software that is year 2000 compliant. Where these solutions were not possible,
businesses either contracted to third parties or committed internal resources to
ensure that all major systems are year 2000 compliant. Cooper recorded a $43.7
million charge in 1997 primarily related to the adjustment in the carrying value
of abandoned hardware and software. While depreciation and amortization are
reduced by the effect of the write-down, depreciation and amortization of new
systems and equipment, as well as expenses incurred to revise current software
to be year 2000 compliant, and implementation costs of new systems, are likely
to exceed the reduction in depreciation and amortization in most future periods.
During the third quarter of 1996 Cooper completed a strategic review of its
automotive brake business, resulting in a write-down of approximately 21% of the
long-lived assets of the business. The Wagner brake product lines, acquired as
part of the McGraw-Edison acquisition in 1985, were subjected to intense
competitive pricing and anticipated profitability improvements during 1996 were
not being realized. As a result of the review of the Wagner brake products,
Cooper replaced Wagner technology with technology acquired in the 1994
acquisition of Abex Friction Products.
A-20
<PAGE> 22
COOPER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Based on the strategic review, Cooper concluded that the projected undiscounted
cash flows of certain Wagner product lines would not recover the carrying value
of the long-lived assets and goodwill associated with these product lines.
Accordingly, Cooper recorded an $85.3 million write-down, including $31.5
million in goodwill, in the third quarter of 1996. The write-down reduced
depreciation and amortization costs equivalent to approximately $.03 per share
in 1997. Cooper has incurred expenses executing its revised brake strategy,
which have offset some of the benefit of the reduced depreciation and
amortization in 1997.
During 1996, Cooper initiated a strategic review of most of its businesses.
As a result of those actions and certain legal matters, Cooper incurred
nonrecurring charges totaling $32.6 million during 1996. A total of $3.0 million
was incurred in the Electrical Products segment primarily related to a
write-down of property and equipment at a facility; $2.0 million in the Tools &
Hardware segment for legal and other costs related to sales of imported mini
blinds containing lead paint; $16.7 million in the Automotive Products segment
primarily related to costs incurred on facility closings and consolidations; and
$10.9 million of corporate costs primarily related to environmental litigation.
Cooper anticipates future cost savings from the facility closings and
consolidations, however, the amounts are not quantifiable with any degree of
accuracy. The nonrecurring charges of $32.6 million have an insignificant effect
on future earnings and expenditures beyond 1996 are insignificant. During 1996,
Cooper realized $150.4 million in gains on the sale of marketable equity
securities (See Note 6). These gains combined with nonrecurring charges resulted
in a net $.05 per share of nonrecurring income being recognized in 1996. In
1995, Cooper realized a gain of $.05 per share from the sale of marketable
equity securities (See Note 6).
NOTE 3: ACQUISITIONS AND DIVESTITURES
In 1997, Cooper completed one large acquisition, seven small product-line
acquisitions and the divestiture of Kirsch. In December 1997, Cooper acquired
Menvier-Swain Group plc ("Menvier-Swain") for a total cost of approximately
$274.5 million. Menvier-Swain manufactures and markets emergency lighting, fire
detection and security systems primarily in Europe. The seven small product line
acquisitions had an aggregate cost of $184.2 million. A total of $349.3 million
of goodwill was recorded, on a preliminary basis, with respect to the
acquisitions. Five of the small acquisitions and Menvier-Swain were in the
Electrical Products segment, and the other two small acquisitions were in the
Automotive Products segment. On May 30, 1997, Cooper completed the sale of its
Kirsch window treatment division for $216 million. For the five months ended May
30, 1997, and the year ended December 31, 1996, Kirsch had revenues of $97.4
million and $252.9 million, and operating earnings of $4.8 million and $20.0
million, respectively. Kirsch was part of the Tools & Hardware segment.
In 1996, Cooper completed seven small product-line acquisitions and one
small divestiture. The total cost of the acquisitions was approximately $97.4
million. A total of $74.2 million of goodwill was recorded, including 1997
revisions of $.9 million with respect to the acquisitions. Three acquisitions
and the divestiture were in the Electrical Products segment, two were in the
Tools & Hardware segment and two were in the Automotive Products segment.
In 1995, Cooper completed one large acquisition, two small product-line
acquisitions, and the divestiture, through an exchange offer with shareholders,
of Cooper Cameron Corporation ("Cooper Cameron") (See Note 18). Effective
December 31, 1995, Cooper acquired CEAG Sicherheitstechnik GmbH ("CEAG") from
Asea Brown Boveri AG, Mannheim. The total cost of the acquisition, which was
paid on January 5, 1996, was approximately $164 million. CEAG manufactures and
markets explosion proof electrical products and business security and emergency
lighting products. The two small product-line acquisitions had an aggregate cost
of $13.5 million. A total of $139.5 million of goodwill was recorded with
respect to the three acquisitions. One small acquisition was in the Automotive
Products segment and the two other acquisitions were in the Electrical Products
segment.
The acquisitions have been accounted for as purchases and the results of
the acquisitions are included in Cooper's consolidated income statements since
the respective acquisition dates.
A-21
<PAGE> 23
COOPER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4: INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
-------- --------
(IN MILLIONS)
<S> <C> <C>
Raw materials............................................... $ 295.7 $ 302.9
Work-in-process............................................. 178.7 205.2
Finished goods.............................................. 512.1 513.8
Perishable tooling and supplies............................. 54.5 54.2
-------- --------
1,041.0 1,076.1
Excess of current standard costs over LIFO costs............ (82.8) (105.0)
-------- --------
Net Inventories................................... $ 958.2 $ 971.1
======== ========
</TABLE>
NOTE 5: PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLES
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1996
--------- ---------
(IN MILLIONS)
<S> <C> <C>
Property, plant and equipment:
Land and land improvements................................ $ 71.5 $ 82.9
Buildings................................................. 543.4 569.7
Machinery and equipment................................... 1,196.1 1,171.5
Tooling, dies and patterns................................ 189.0 171.0
All other................................................. 263.1 303.0
Construction in progress.................................. 134.8 103.7
--------- ---------
2,397.9 2,401.8
Accumulated depreciation.................................. (1,199.1) (1,160.5)
--------- ---------
$ 1,198.8 $ 1,241.3
========= =========
Intangibles:
Goodwill.................................................. $ 2,906.0 $ 2,614.7
Other..................................................... 17.1 17.8
--------- ---------
2,923.1 2,632.5
Accumulated amortization.................................. (533.2) (477.6)
--------- ---------
$ 2,389.9 $ 2,154.9
========= =========
</TABLE>
NOTE 6: INVESTMENTS IN MARKETABLE EQUITY SECURITIES
At December 31, 1997 and 1996, Cooper's investment in marketable equity
securities consisted of its investment in Wyman-Gordon common stock. During
1996, Cooper sold its remaining common shares of Belden Inc. and all of the
shares of Cooper Cameron common stock (See Note 18). In December 1995, Cooper
issued 16.5 million DECS at $13.50 which, at maturity, are mandatorily
exchangeable into shares of Wyman-Gordon common stock or, at Cooper's option,
into cash in lieu of shares. The number of shares or the amount of cash will be
based on the average market value of Wyman-Gordon common stock on the 20 trading
days prior to maturity on January 1, 1999 (the "WGC Maturity Price"). If the WGC
Maturity Price is greater than or equal to $15.66 per share, each DECS will be
exchangeable at maturity into the equivalent of .862 shares of Wyman-Gordon
common stock. If the WGC Maturity Price is less than or equal to $13.50 per
share, each DECS will be exchangeable at maturity into one Wyman-Gordon share.
If the WGC Maturity Price is between $13.50 and $15.66 per share, each DECS will
be exchangeable into a fraction of shares of Wyman-Gordon common stock between
.862 and 1, based on an exchange ratio. If the DECS are redeemed for cash, the
amount of cash will be equal to the number of Wyman-Gordon shares exchangeable
under the terms of the DECS times the WGC Maturity Price.
A-22
<PAGE> 24
COOPER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The DECS are a hedge of Cooper's investment in Wyman-Gordon common stock
and will result in Cooper realizing a minimum after-tax gain of $85.4 million
upon redemption of the DECS. This unrealized gain, plus any additional
appreciation of the investment in Wyman-Gordon common stock since the issuance
of the DECS, is included in shareholders' equity as an unrealized gain on
investments in marketable equity securities, net of tax. At December 31, 1997
and 1996, Cooper's long-term debt includes an increase in the market value of
Wyman-Gordon common stock related to the DECS of $47.9 million and $93.7
million, respectively. The offset to the debt increase, net of tax, decreased
the unrealized gain on investments in marketable equity securities included in
shareholders' equity. During 1997, Cooper exchanged a portion of the DECS for
Wyman-Gordon common stock and realized a gain of $23.2 million ($14.4 million
after income taxes).
The aggregate fair value of the marketable equity securities was $274.8
million and $367.1 million at December 31, 1997 and 1996, respectively. Gross
unrealized gains on investments in marketable equity securities were $218.5
million ($170.6 million, net of the increase in the fair market value of the
DECS) and $300.8 million ($207.1 million, net of the increase in the fair market
value of the DECS) at December 31, 1997 and 1996, respectively. During 1996 and
1995, marketable equity securities were sold for proceeds of $231.4 million and
$14.4 million, respectively, resulting in realized gains of $150.4 million and
$11.7 million, respectively. Cooper incurred nonrecurring charges during 1996
which, when combined with the gains from the sale of marketable equity
securities, resulted in Cooper realizing $.05 per share in 1996. In 1995, Cooper
realized $.05 per share from the sale of marketable equity securities.
NOTE 7: ACCRUED LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1997 1996
------ ------
(IN MILLIONS)
<S> <C> <C>
Salaries, wages and employee benefit plans.................. $236.8 $201.5
Product and environmental liability accruals................ 77.8 95.0
Commissions and customer incentives......................... 76.3 80.3
Facility integration of acquired businesses................. 26.0 48.0
Other (individual items less than 5% of total current
liabilities).............................................. 172.6 157.0
------ ------
$589.5 $581.8
====== ======
</TABLE>
At December 31, 1997, Cooper had accruals of $28.8 million with respect to
potential product liability claims and $104.9 million with respect to potential
environmental liabilities, including $55.9 million classified as a long-term
liability, based on Cooper's current estimate of the most likely amount of
losses that it believes will be incurred.
The product liability accrual consists of $8.2 million of known claims with
respect to ongoing operations, $12.8 million of known claims for previously
divested operations and $7.8 million which represents an estimate of claims that
have been incurred but not yet reported. While Cooper is generally self-insured
with respect to product liability claims, Cooper has insurance coverage for
individual 1997 claims above $3.0 million. Insurance levels have varied from
year to year.
Environmental remediation costs are accrued based on estimates of known
environmental remediation exposures. Such accruals are adjusted as information
develops or circumstances change. The environmental liability accrual includes
$39.6 million related to sites owned by Cooper and $65.3 million for retained
environmental liabilities related to sites previously owned by Cooper and
third-party sites where Cooper was a contributor. Third-party sites usually
involve multiple contributors where Cooper's liability will be determined based
on an estimate of Cooper's proportionate responsibility for the total cleanup.
The amount actually accrued for such sites is based on these estimates as well
as an assessment of the financial capacity of the other potentially responsible
parties.
It has been Cooper's consistent practice to include the entire product
liability accrual and a significant portion of the environmental liability
accrual as current liabilities, although only approximately 10-20% of the
balance classified as current will be spent on an annual basis. The annual
effect on earnings for product liability is essentially equal to the amounts
disbursed. In the case of environmental liability, the annual expense is
considerably smaller than the disbursements, since the vast majority of Cooper's
environmental liability has been recorded in connection with
A-23
<PAGE> 25
COOPER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
acquired companies. The change in the accrual balances from year to year
reflects the effect of acquisitions and divestitures as well as normal expensing
and funding.
Cooper has not utilized any form of discounting in establishing its product
or environmental liability accruals. While both product liability and
environmental liability accruals involve estimates that can have wide ranges of
potential liability, Cooper has taken a proactive approach and has managed the
costs in both of these areas over the years. Cooper does not believe that the
nature of its products, its production processes, or the materials or other
factors involved in the manufacturing process subject Cooper to unusual risks or
exposures for product or environmental liability. Cooper's greatest exposure to
inaccuracy in its estimates is with respect to the constantly changing
definitions of what constitutes an environmental liability or an acceptable
level of cleanup.
In connection with acquisitions accounted for using the purchase method of
accounting, Cooper records, to the extent appropriate, accruals for the costs of
closing duplicate facilities, severing redundant personnel and integrating the
acquired business into existing Cooper operations. Significant accruals include
plant shut-down and realignment costs, and facility relocations. The following
table summarizes the accrual balances and activity during each of the last three
years:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Activity during each year:
Balance, beginning of year.............. $ 48.0 $ 65.6 $122.3
Spending................................ (9.3) (24.3) (47.0)
Kirsch disposition...................... (0.4) -- --
Reclassifications....................... (15.8) (2.2) (27.8)
Acquisitions -- initial allocation...... 4.7 4.1 .1
Acquisitions -- final allocation
adjustment............................ 1.2 4.9 13.8
Translation............................. (2.4) (0.1) 4.2
------ ------ ------
Balance, end of year.................... $ 26.0 $ 48.0 $ 65.6
====== ====== ======
Balances by category of accrual:
Plant shut-down and realignment......... $ 17.5 $ 37.7 $ 43.2
Other facility relocations and
severance............................. 5.2 6.8 8.5
Other realignment and integration....... 3.3 3.5 13.9
------ ------ ------
$ 26.0 $ 48.0 $ 65.6
====== ====== ======
Balances by acquisition:
Champion................................ $ 1.2 $ 10.4 $ 21.4
Moog Automotive......................... .2 2.5 13.3
Abex Friction Products.................. 9.1 12.4 13.3
Other................................... 15.5 22.7 17.6
------ ------ ------
$ 26.0 $ 48.0 $ 65.6
====== ====== ======
</TABLE>
Plant shut-down and realignment includes the costs to terminate personnel,
shut down the facilities, terminate leases and similar costs. The spending
related primarily to downsizing and consolidating international facilities in
Mexico, Venezuela, Belgium and the United Kingdom totaling $7.7 million and
$26.3 million in 1996 and 1995, respectively. Other facility relocations and
severance include costs to consolidate sales and marketing operations of the
acquired company into Cooper operations, termination costs of redundant
personnel and shut-down costs of redundant warehouses and the acquired
companies' headquarters. Other realignment and integration costs include costs
to liquidate joint ventures, exit product lines and miscellaneous costs.
During the three years ended December 31, 1997, accruals reversed to income
were insignificant. Reclassifications were substantially all related to
termination and other benefit payments due former employees and lease
obligations on closed facilities reclassified to trade accounts payable and
other accrued liabilities. Acquisitions-final allocation adjustment represents
adjustments to goodwill for finalization of the purchase price allocations
recorded in the previous year. Substantially all spending related to these
accruals represented cash outlays by Cooper. The amounts related to
A-24
<PAGE> 26
COOPER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the acquisitions of CEAG on the last business day of 1995, Abex on the last
business day of 1994 and Zanxx in November 1994 were preliminary estimates that
were finalized in the year following the acquisition. The CEAG, Abex and Zanxx
acquisitions had insignificant accruals for terminations and no significant
individual exit plan costs were accrued.
NOTE 8: LONG-TERM DEBT AND OTHER BORROWING ARRANGEMENTS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
-------- --------
(IN MILLIONS)
<S> <C> <C>
3.98%-6.47%* commercial paper and Deutschemark denominated
bank loans maturing at various dates through January
1998...................................................... $ 528.3 $ 151.3
7.05% convertible subordinated debentures, due 2015......... -- 690.4
6.41%-7.99% second series medium-term notes, due through
2010...................................................... 357.6 429.6
6.0% exchangeable notes, due 1999........................... 235.2 316.5
7.19%-7.74%* Pound Sterling bank loans and notes payable
maturing at various dates through 2005.................... 88.2 94.2
5.74% third series medium-term notes, due 2001.............. 50.0 50.0
5.52%* floating-rate ESOP notes, due through 1999........... 16.0 40.5
Other....................................................... 55.2 43.0
-------- --------
1,330.5 1,815.5
Current maturities.......................................... (58.3) (77.8)
-------- --------
Long-term portion........................................... $1,272.2 $1,737.7
======== ========
</TABLE>
- ---------------
* Weighted average interest rates at December 31, 1997. The weighted average
interest rates on commercial paper and bank loans, Pounds Sterling bank loans
and notes and ESOP notes were, 3.35%, 6.42% and 5.12%, respectively at
December 31, 1996.
Cooper has U.S. committed credit facilities of $835 million that expire in
2000, and $315 million that expire in 1998. At December 31, 1997, Cooper had an
effective "shelf" registration statement, which may be used to issue an
additional $250 million of medium-term notes from time to time.
At December 31, 1997, Cooper had $551.7 million of its $1.15 billion U.S.
committed credit facilities available, after considering commercial paper
backup. At December 31, 1996, $1.02 billion of its total $1.22 billion U.S.
committed credit facilities was available after considering commercial paper
backup, and none of its 30 million Pound Sterling credit facility was available.
The 30 million Pound Sterling credit facility expired in 1997 and was not
re-established. The agreements for the credit facilities require that Cooper
maintain certain financial ratios, including a prescribed limit on debt as a
percentage of total capitalization. Retained earnings are unrestricted as to the
payment of dividends, except to the extent that payment would cause a violation
of the prescribed limit on the debt to total capitalization ratio.
Interest rates on Cooper's commercial paper and U.S. bank loans were
generally 2.8% below the U.S. prime rate during 1997 and 1996. Total interest
paid during 1997, 1996 and 1995 was $107 million, $141 million and $134 million,
respectively.
Commercial paper of $400 million and bank loans of $202.7 million were
reclassified to long-term debt at December 31, 1997 and 1996, respectively,
reflecting Cooper's intention to refinance these amounts during the twelve-
month period following the balance sheet date through either continued
short-term borrowing or utilization of available credit facilities.
Effective January 1, 1995, Cooper exchanged all of the outstanding $1.60
Convertible Exchangeable Preferred Stock for $691.2 million of 7.05% Convertible
Subordinated Debentures due 2015 and $3.8 million in cash related to fractional
shares. During 1997, Cooper called for redemption the outstanding debentures
with a total of $610 million converting to approximately 14.8 million shares of
Cooper Common stock and approximately $80 million being redeemed for cash.
A-25
<PAGE> 27
COOPER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In December 1995, Cooper issued $222.8 million in 6% Exchangeable Notes
(DECS) due January 1, 1999. At maturity, the notes are mandatorily exchangeable
into shares of Wyman-Gordon common stock owned by Cooper or, at Cooper's option,
into cash in lieu of shares. During 1997, Cooper exchanged a portion of the DECS
($33.8 million) for Wyman-Gordon common stock (See Note 6). At December 31, 1997
and 1996, Cooper's long-term debt includes $47.9 million and $93.7 million,
respectively, which represents the increase in the market value of the
Wyman-Gordon common stock exchangeable into the DECS. The offset to the debt
increase, net of tax, decreased the unrealized gain on investments in marketable
equity securities, both of which are included in shareholders' equity.
The floating-rate ESOP notes are indebtedness of Cooper's ESOP. Cooper has
guaranteed the payment of the ESOP notes; accordingly, the notes are reported as
Cooper's debt (See Note 14).
Maturities of long-term debt for the five years subsequent to December 31,
1997 are $58.3 million, $294.1 million, $545.9 million, $50.9 million and $60.8
million, respectively. Cooper anticipates delivering Wyman-Gordon common stock
in settlement of the DECS, which represents $235.2 million of the 1999
maturities. The future net minimum lease payments under capital leases and
obligations under operating leases are not significant.
NOTE 9: COMMON AND PREFERRED STOCK
COMMON STOCK
At December 31, 1997, 1996 and 1995, 250,000,000 shares of Common stock
were authorized of which 120,161,446 and 108,038,851 and 107,876,821 shares were
issued and outstanding at December 31, 1997, 1996 and 1995, respectively. During
1997, Cooper issued 14,785,831 shares in exchange for the redemption of the
7.05% Convertible Subordinated Debentures (See Note 8). During the year ended
December 31, 1997, Cooper purchased 3,645,017 shares as treasury stock at an
average price of $52.54 per share and 813,387 of these shares were reissued in
connection with employee stock plans. During 1995, Cooper exchanged 9,500,000
shares of Cooper Common stock for Cooper Cameron common stock (See Note 18). At
December 31, 1997, Cooper had 12,818,206 shares reserved for the Dividend
Reinvestment Plan, grants and exercises of stock options, performance-based
stock awards and subscriptions under the Employee Stock Purchase Plan and other
plans.
Under the terms of the Dividend Reinvestment Plan, any holder of Common
stock may elect to have cash dividends and up to $24,000 per year in cash
payments invested in Common stock without incurring any brokerage commissions or
service charges.
Under a Shareholder Rights Plan adopted by the Board of Directors in 1997,
share purchase Rights were declared as a dividend at the rate of one Right for
each share of Common stock. Each Right entitles the holder to buy one one-
hundredth of a share of Series A Participating Preferred Stock at a purchase
price of $225 per one one-hundredth of a share or, in certain circumstances
Common stock having a value of twice the purchase price. Each Right becomes
exercisable only in certain circumstances constituting a potential change of
control on a basis considered inadequate by the Board of Directors. The Rights
expire August 5, 2007 and, at Cooper's option, may be redeemed prior to
expiration for $.01 per Right.
PREFERRED STOCK
At December 31, 1997 and 1996, Cooper was authorized to issue 1,340,750
shares of Preferred stock with no par value, 10,000,000 shares of $2.00 par
value Preferred stock and 2,821,079 shares of $1.00 par value Preferred stock.
At December 31, 1997 and 1996, no Preferred shares were issued or outstanding.
NOTE 10: STOCK OPTIONS AND EMPLOYEE STOCK PURCHASE PLAN
Under Cooper stock option plans, officers, directors and key employees may
be granted options to purchase Cooper's Common stock at no less than 100% of the
market price on the date the option is granted. Options generally become
exercisable ratably over a three-year period commencing one year from the date
of grant and have a maximum term of ten years. The plans also provide for the
granting of performance-based stock awards to certain key executives.
Cooper follows the intrinsic value method of accounting for stock options
and performance-based stock awards as prescribed by Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees, and related
A-26
<PAGE> 28
COOPER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
interpretations. Accordingly, no compensation expense is recognized under
Cooper's fixed stock option plans or Employee Stock Purchase Plan. Compensation
expense of $8.2 million, $7.1 million and $3.8 million was recognized in the
consolidated income statements during 1997, 1996 and 1995, respectively for the
performance-based stock awards. If compensation expense for stock options and
performance-based stock awards granted under Cooper's stock based compensation
plans during 1997 and 1996 was recognized using the alternative fair value
method of accounting under Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation, net income and earnings per share would
have decreased by approximately 1.2% in both 1997 and 1996. The fair value was
estimated on the date of grant, using the Black-Scholes option-pricing model
with the following weighted average assumptions used for grants in 1997 and
1996, respectively: dividend yield of 2.8% and 3.2%, expected volatility of
20.1% and 20.3%, risk free interest rates of 6.4% and 6.1% and expected lives of
7 years and 6 years.
A summary of the status of Cooper's fixed stock option plans for officers
and employees as of December 31, 1997 and activity during the three years ended
December 31, 1997 is presented below:
<TABLE>
<CAPTION>
1997 1996 1995
-------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year........ 3,189,083 $44.05 2,748,219 $46.48 2,951,660 $49.19
Granted................................. 974,900 $45.06 1,044,000 $39.06 903,700 $39.06
Exercised............................... (491,165) $41.67 (12,679) $39.06 (125,500) $37.75
Canceled................................ (559,741) $50.68 (590,457) $46.68 (981,641) $48.91
--------- --------- ---------
Outstanding at end of year.............. 3,113,077 $43.55 3,189,083 $44.05 2,748,219 $46.48
========= ========= =========
Options exercisable at end of year...... 1,361,573 1,571,842 1,416,896
Options available for grant at end of
year.................................. 4,706,406 5,760,467 1,676,054
</TABLE>
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ----------------------------------------------------- ----------------------
WEIGHTED
SHARES AVERAGE WEIGHTED SHARES WEIGHTED
OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE
RANGE OF AT CONTRACTUAL EXERCISE AT EXERCISE
EXERCISE PRICES 12/31/97 LIFE PRICE 12/31/97 PRICE
- --------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$39.06 1,531,406 5.9 $39.06 681,902 $39.06
$45.06 902,000 9.1 $45.06 -- --
$50.13 - $52.81 679,671 .6 $51.64 679,671 $51.64
--------- ---------
3,113,077 5.6 1,361,573
========= =========
</TABLE>
During 1997, options to purchase 9,000 shares of Common stock were granted
to nonemployee directors at an exercise price of $45.44 and options for 6,000
shares were exercised at $27.13 per share. During 1996, options to purchase
9,000 shares of Common stock were granted to nonemployee directors at an
exercise price of $42.13 and options for 8,000 shares were exercised at $27.00
per share. During 1995, options for 4,000 shares were granted, net of the annual
retainer fee, at $17.31 per share and options for 6,000 shares were exercised at
$25.44 per share. At December 31, 1997, options under the director plans for
12,000 Common shares were exercisable at $14.69 to $24.00 per share, and 174,800
shares were reserved for future grants.
EMPLOYEE STOCK PURCHASE PLAN
Participants in the Employee Stock Purchase Plan receive an option to
purchase Common stock at a price that is the lesser of 90% of the market value
on the offering date or 100% of the market value on the purchase date. On
September 8, 1997, a total of 575,135 shares were sold to employees at $35.33
per share. At December 31, 1997, subscriptions for 711,332 shares of Common
stock were outstanding at $45.68 per share or, if lower, the average market
price on September 10, 1999, which is the purchase date. At December 31, 1997,
an aggregate of 3,042,973 shares of Common stock were reserved for future
issuance.
A-27
<PAGE> 29
COOPER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11: INCOME TAXES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1997 1996 1995
------ ------ ------
(IN MILLIONS, EXCEPT FOR
PERCENTAGES)
<S> <C> <C> <C>
Components of income before income taxes:
U.S. operations........................................... $526.0 $434.7 $384.9
Foreign operations........................................ 100.7 123.3 93.1
------ ------ ------
Income from continuing operations before income
taxes............................................ $626.7 $558.0 $478.0
====== ====== ======
Components of income tax expense:
Current:
U.S. Federal........................................... $166.9 $156.9 $ 82.1
U.S. state and local................................... 26.2 20.9 23.3
Foreign................................................ 42.4 51.5 26.6
------ ------ ------
235.5 229.3 132.0
------ ------ ------
Deferred:
U.S. Federal........................................... 4.2 2.2 51.0
U.S. state and local................................... (9.3) 10.2 5.8
Foreign................................................ 1.7 .9 8.6
------ ------ ------
(3.4) 13.3 65.4
------ ------ ------
Income tax expense................................ $232.1 $242.6 $197.4
====== ====== ======
Total income taxes paid..................................... $252.1 $208.4 $158.2
====== ====== ======
Effective tax rate reconciliation:
U.S. Federal statutory rate............................... 35.0% 35.0% 35.0%
State and local income taxes.............................. 2.4 2.8 3.4
Foreign statutory rate differential....................... (1.0) (.4) (.5)
Nondeductible goodwill.................................... 3.4 4.0 4.7
Automotive asset goodwill write-down...................... -- 2.3 --
State tax settlements(1).................................. (1.0) -- --
Foreign Sales Corporation................................. (0.8) (0.5) (0.6)
Tax credits............................................... (1.0) (0.2) --
Other..................................................... -- .5 (0.7)
------ ------ ------
Effective tax rate attributable to continuing
operations....................................... 37.0% 43.5% 41.3%
====== ====== ======
</TABLE>
- ---------------
(1) During 1997, Cooper settled several state income tax matters and recognized
a $6.1 million benefit in its income tax provision.
A-28
<PAGE> 30
COOPER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1996
------- -------
(IN MILLIONS)
<S> <C> <C>
Components of deferred tax liabilities and assets:
Deferred tax liabilities:
Property, plant and equipment and intangibles.......... $(121.4) $(143.6)
Unrealized net gain on investments in marketable equity
securities and DECS................................... (59.7) (72.5)
Inventories............................................ (63.8) (63.8)
Employee medical program funding....................... (11.5) (11.5)
Employee stock ownership plan.......................... (22.0) (19.7)
Pension plans.......................................... (30.2) (24.8)
Other.................................................. (53.0) (65.1)
------- -------
Total deferred tax liabilities.................... (361.6) (401.0)
------- -------
Deferred tax assets:
Postretirement benefits other than pensions............ 226.2 242.6
Accrued liabilities.................................... 195.0 193.1
Minimum pension liability.............................. 13.3 31.9
Net operating loss carryforwards....................... 2.3 15.2
Other.................................................. 19.8 29.7
------- -------
Total deferred tax assets......................... 456.6 512.5
------- -------
Valuation allowances...................................... (16.3) (16.3)
------- -------
Net deferred tax assets........................... $ 78.7 $ 95.2
======= =======
</TABLE>
The U.S. Federal portion of the above provision includes U.S. tax expected
to be payable on the foreign portion of Cooper's income before income taxes when
such earnings are remitted. Cooper's liabilities for continuing operations at
December 31, 1997 and 1996 include the additional U.S. tax estimated to be
payable on substantially all unremitted earnings of foreign subsidiaries.
NOTE 12: PENSION PLANS
Cooper and its subsidiaries have numerous pension plans covering
substantially all domestic employees and pension and similar arrangements in
accordance with local customs covering employees at foreign locations. The
assets of the various domestic and foreign plans are maintained in various
trusts and consist primarily of equity and fixed-income securities. Funding
policies range from five to thirty years. Pension benefits for salaried
employees are generally based upon career earnings. Benefits for hourly
employees are generally based on a dollar unit, multiplied by years of service.
Aggregate pension expense amounted to $37.8 million, $41.5 million and $40.7
million during 1997, 1996 and 1995, respectively. The amount of expense with
respect to Cooper's various defined benefit pension plans is set forth in the
table below. During 1997, 1996 and 1995, expense with respect to domestic and
foreign defined contribution plans (primarily related to various groups of
hourly employees) amounted to $18.7 million, $18.9 million and $16.2 million,
respectively. Also included in pension expense are gains and losses on
curtailments and settlements and other matters. Cooper partially or completely
settled or curtailed one salaried plan in 1997 resulting in a net loss of $.5
million and four defined benefit plans for hourly employees in 1995 resulting in
a reversion to Cooper of surplus assets totaling $1.0 million during 1995.
A-29
<PAGE> 31
COOPER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1997 1996 1995
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Components of defined benefit plan net pension expense:
Service cost -- benefits earned during the year............. $23.1 $23.7 $21.6
Interest cost on projected benefit obligation............... 69.7 69.1 67.6
Actual return on assets..................................... (93.7) (79.2) (65.9)
Net amortization and deferral............................... 19.5 9.0 1.2
----- ----- -----
Net pension expense......................................... $18.6 $22.6 $24.5
===== ===== =====
</TABLE>
The funded status of the plans at December 31 was as follows:
<TABLE>
<CAPTION>
ASSETS EXCEED ACCUMULATED BENEFITS
ACCUMULATED BENEFITS EXCEED ASSETS
--------------------- ---------------------
1997 1996 1997 1996
--------- --------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Actuarial present value of:
Vested benefit obligation............................ $(585.7) $(476.3) $(291.9) $(419.9)
======= ======= ======= =======
Accumulated benefit obligation....................... $(618.8) $(509.2) $(318.3) $(446.1)
======= ======= ======= =======
Projected benefit obligation......................... $(632.3) $(529.0) $(330.8) $(453.0)
Plan assets at fair value.............................. 762.8 624.3 212.5 319.0
------- ------- ------- -------
Projected benefit obligation less than (in excess of)
plan assets.......................................... 130.5 95.3 (118.3) (134.0)
Unrecognized net (gain) loss........................... (52.2) (46.1) 51.8 75.2
Unrecognized net (asset) obligation from adoption
date................................................. (5.6) (7.7) 2.3 4.5
Unrecognized prior service cost........................ (3.7) (4.4) 7.2 5.1
Adjustment required to recognize minimum liability..... -- -- (41.2) (86.8)
------- ------- ------- -------
Pension asset (liability) at end of year............... $ 69.0 $ 37.1 $ (98.2) $(136.0)
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
1997 1996
------------------------ ------------------------
DOMESTIC INTERNATIONAL DOMESTIC INTERNATIONAL
-------- ------------- -------- -------------
<S> <C> <C> <C> <C>
Actuarial assumptions used:
Discount Rate................................... 7 1/2% 6-7 1/4% 7 1/2% 6 1/2-8 1/4%
Rate of compensation increase................... 4 3/4% 4-6% 4 3/4% 4-6%
Expected long-term rate of return on assets..... 8 1/2% 7 1/2-9 3/4% 8 1/2% 7 1/2-10%
</TABLE>
NOTE 13: POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The benefits provided under Cooper's various postretirement plans other
than pensions, all of which are unfunded, include retiree medical care, dental
care, prescriptions and life insurance, with medical care accounting for
approximately 90% of the total. While Cooper has numerous plans, primarily
resulting from Cooper's extensive acquisition activity, the vast majority of the
annual expense is related to employees who are already retired. In fact, as a
result of actions taken by Cooper starting in 1989, virtually no active salaried
employees continue to earn retiree medical benefits, and the number of active
hourly employees earning such benefits has been greatly diminished.
Additionally, Cooper continues to amend its various plans to provide for
appropriate levels of cost sharing and other cost-control measures.
A-30
<PAGE> 32
COOPER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Postretirement benefit cost includes the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
------ ------ -----
(IN MILLIONS)
<S> <C> <C> <C>
Service cost -- benefits earned during the year............. $ 0.6 $ 0.6 $ 0.6
Interest cost on accumulated postretirement benefit
obligation................................................ 30.2 30.5 36.5
Net amortization and deferral............................... (12.7) (10.5) (19.0)
------ ------ -----
Postretirement benefit cost................................. $ 18.1 $ 20.6 $18.1
====== ====== =====
</TABLE>
Amounts recognized in the consolidated balance sheets were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1997 1996
------ ------
(IN MILLIONS)
<S> <C> <C>
Accumulated postretirement benefit obligation (APBO):
Retirees.................................................. $356.8 $452.9
Employees eligible to retire.............................. 24.3 7.5
Other employees........................................... 10.2 12.6
------ ------
391.3 473.0
Unrecognized prior service costs............................ 13.9 22.0
Unrecognized net gain....................................... 152.8 111.4
------ ------
Accrued postretirement benefit cost......................... $558.0 $606.4
====== ======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------
1997 1996
------------------- ---------------------
(IN MILLIONS, EXCEPT PERCENTAGES)
<S> <C> <C>
Actuarial assumptions:
Discount rate...................................... 6.75% 7.23%
Ensuing year to 2002 health care cost trend rate... 11% ratable to 5.5% 11.5% ratable to 5.5%
Effect of 1% change in health care cost trend rate:
Increase in APBO................................... $34.8 $40.9
Increase in expense................................ $ 2.7 $ 2.7
</TABLE>
NOTE 14: COOPER SAVINGS AND EMPLOYEE STOCK OWNERSHIP PLANS
All full-time domestic employees, except for certain bargaining unit
employees, are eligible to participate in the Cooper Savings Plan ("CO-SAV").
Under the terms of the Plan, employee savings deferrals are partially matched
with contributions by Cooper of Common stock consisting of either an allocation
of shares in Cooper's Employee Stock Ownership Plan ("ESOP") or new shares
issued to the ESOP.
Cooper makes annual contributions to the ESOP to fund the payment of
principal and interest on ESOP debt (See Note 8). All dividends received by the
ESOP are used to pay debt service. As the debt is repaid, unallocated shares are
allocated to participants to satisfy Cooper's matching obligation or to replace
dividends on allocated shares with Cooper Common shares.
For shares purchased by the ESOP prior to 1994, compensation expense is
equal to Cooper's matching obligation, adjusted for the difference between the
fair market value and cost of the shares released. Compensation expense is
reduced by the amount of dividends paid on unallocated ESOP shares available for
future matching. In addition, all shares issued to the ESOP are considered
outstanding for purposes of computing earnings per share. For shares purchased
by the ESOP in 1994, compensation expense is recorded equal to the amount of
Cooper's CO-SAV matching obligation, with the difference between the fair market
value and cost of shares released recorded as an adjustment to capital in excess
of par value. Dividends paid on unallocated shares are recorded as a reduction
of ESOP debt and accrued interest. Unallocated shares are not treated as
outstanding in the earnings per share computation.
A-31
<PAGE> 33
COOPER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Dividends paid on unallocated shares purchased prior to 1994 of $1.6
million and $2.3 million during 1997 and 1996, respectively, were used to reduce
the amount of cash required to fund principal and interest payments on ESOP
debt. Dividends paid on allocated ESOP shares purchased prior to 1994 of $4.7
million and $4.3 million during 1997 and 1996, respectively, were used to pay
additional principal and interest payments in order to release shares equivalent
to the dividend amount to participants in the savings plan. Cooper contributed
an additional $21.6 million and $26.6 million in cash to the ESOP during 1997
and 1996, respectively, to fund principal and interest payments on debt
associated with shares purchased prior to 1994.
During 1994, Cooper sold 1.6 million shares to the ESOP for $82.3 million
in cash. The 1994 sales were funded by loans between the ESOP and Cooper, which
for financial statement purposes are treated as eliminated intercompany loans.
The fair value of the remaining unallocated ESOP shares purchased during 1994
was $34.0 million at December 31, 1997. The number of allocated, committed to be
released, and unallocated ESOP shares held at December 31, 1997 and 1996 is
summarized below.
<TABLE>
<CAPTION>
SHARES PURCHASED SHARES PURCHASED
IN 1994 PRIOR TO 1994
------------------ ----------------------
1997 1996 1997 1996
------- ------- --------- ---------
<S> <C> <C> <C> <C>
Allocated....................................... 619,320 668,146 3,638,849 3,532,167
Committed to be released........................ 8,156 11,271 60,510 130,275
Unallocated..................................... 692,942 740,880 725,412 1,327,446
</TABLE>
Compensation expense with respect to the CO-SAV plan and the ESOP was $18.9
million, $23.5 million and $21.7 million and interest expense on ESOP debt was
$1.4 million, $2.7 million and $4.2 million in 1997, 1996 and 1995,
respectively.
NOTE 15: INDUSTRY SEGMENTS, DOMESTIC AND INTERNATIONAL OPERATIONS
INDUSTRY SEGMENTS
Cooper's operations consist of three segments: Electrical Products, Tools &
Hardware and Automotive Products. Markets for Cooper's products and services are
worldwide, with the United States being the largest market.
The Electrical Products segment manufactures and markets electrical and
electronic distribution and circuit protection products and lighting fixtures
for use in residential, commercial and industrial construction, maintenance and
repair and products for use by utilities and industries for primary power
distribution and control.
The Tools & Hardware segment produces and markets tools and hardware items
for use in residential, commercial and industrial construction, maintenance and
repair and for general industrial and consumer use. This segment manufactured
and marketed window treatments through May 30, 1997.
The Automotive Products segment manufactures and distributes spark plugs,
wiper blades, lamps, brake friction materials and other products for use by the
automotive aftermarket and in automobile assemblies. In addition, this segment
manufactures and distributes suspension, steering, temperature control,
driveline and brake system components and material for the automotive
aftermarket.
Intersegment sales and related receivables for each of the years presented
were immaterial.
A-32
<PAGE> 34
COOPER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Financial information by industry segment was as follows:
<TABLE>
<CAPTION>
REVENUES OPERATING EARNINGS IDENTIFIABLE ASSETS
------------------------------ --------------------------- ------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, DECEMBER 31,
------------------------------ --------------------------- ------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
-------- -------- -------- ------- ------- ------- -------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Electrical Products(1)............ $2,568.3 $2,407.5 $2,089.7 $ 445.7 $ 405.3 $ 355.5 $2,464.4 $1,985.0 $2,000.4
Tools & Hardware(1)(2)............ 847.3 973.0 962.4 151.7 111.4 111.2 548.9 773.2 759.7
Automotive Products(1)............ 1,873.2 1,903.2 1,758.8 143.5 87.3 180.7 2,547.6 2,594.0 2,635.3
-------- -------- -------- ------- ------- ------- -------- -------- --------
$5,288.8 $5,283.7 $4,810.9 740.9 604.0 647.4 5,560.9 5,352.2 5,395.4
======== ======== ========
Other income...................... 14.2 23.0 25.5
Nonrecurring gains(3)............. 23.2 150.4 11.7
General corporate(1).............. (61.2) (77.3) (55.6) 487.1 575.3 646.0
Interest expense.................. (90.4) (142.1) (151.0)
------- ------- -------
Consolidated income from
continuing
operations before income
taxes........................... $ 626.7 $ 558.0 $ 478.0
======= ======= =======
Investments in unconsolidated
affiliates...................... 4.5 22.9 22.5
-------- -------- --------
Consolidated assets............... $6,052.5 $5,950.4 $6,063.9
======== ======== ========
</TABLE>
- ---------------
(1)The respective 1997 and 1996 operating earnings amount includes nonrecurring
expenses of $15.9 million and $3.0 million for Electrical Products, $22.5
million and $2.0 million for Tools & Hardware and $43.4 million and $102.0
million (including an $85.3 million asset write-down) for Automotive Products
and $2.1 million and $10.9 million for general corporate expense (See Note
2).
(2)The Tools & Hardware segment includes revenues and operating earnings for the
Kirsch division through May 30, 1997. Operating earnings include a gain on
the sale of Kirsch of $69.8 million in 1997.
(3)Includes gain on the exchange of DECS of $23.2 million in 1997 and gains on
the sale of investments in marketable equity securities of $150.4 million and
$11.7 million in 1996 and 1995, respectively (See Note 6).
- ---------------
<TABLE>
<CAPTION>
DEPRECIATION GOODWILL AMORTIZATION CAPITAL EXPENDITURES
------------------------ ------------------------ ------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------ ------------------------ ------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
------ ------ ------ ------ ------ ------ ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Electrical Products........... $ 61.2 $ 63.4 $ 52.6 $27.9 $26.9 $23.1 $ 79.2 $ 79.1 $ 62.4
Tools & Hardware.............. 26.5 35.2 36.1 4.5 4.6 4.8 37.0 32.7 31.6
Automotive Products........... 64.9 67.4 66.2 32.7 33.7 32.9 78.4 87.1 85.7
Corporate..................... 1.9 2.6 3.1 -- -- -- 1.1 3.0 8.7
------ ------ ------ ----- ----- ----- ------ ------ ------
$154.5 $168.6 $158.0 $65.1 $65.2 $60.8 $195.7 $201.9 $188.4
====== ====== ====== ===== ===== ===== ====== ====== ======
</TABLE>
A-33
<PAGE> 35
COOPER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DOMESTIC AND INTERNATIONAL OPERATIONS
Transfers between domestic and international operations, principally
inventory transfers, are designed to charge the receiving organization at
third-party arms-length prices that are generally sufficient to recover
manufacturing costs and provide a reasonable return. Export sales to
unaffiliated customers included in domestic sales were $366.9 million, $302.5
million and $268.5 million in 1997, 1996 and 1995, respectively. Of total export
sales, approximately 39% in 1997, 41% in 1996 and 39% in 1995 were to Asia,
Africa, Australia and the Middle East; 26% in 1997, 25% in 1996 and 27% in 1995
were to Canada and Europe; 35% in 1997, and 34% in 1996 and 1995 were to Latin
America. Domestic and international financial information was as follows:
<TABLE>
<CAPTION>
REVENUES OPERATING EARNINGS IDENTIFIABLE ASSETS
------------------------------ ------------------------ ------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, DECEMBER 31,
------------------------------ ------------------------ ------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
-------- -------- -------- ------ ------ ------ -------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Domestic(1)....................... $4,297.7 $4,294.2 $4,030.2 $628.8 $459.9 $540.8 $4,128.6 $4,132.8 $4,171.2
-------- -------- -------- ------ ------ ------ -------- -------- --------
International:(1)
Europe.......................... 678.8 737.9 537.5 58.7 88.2 56.1 1,125.9 987.9 959.2
Canada.......................... 219.1 256.7 250.8 14.9 6.3 10.7 138.1 146.6 131.9
Other........................... 290.0 257.2 225.7 39.6 50.4 39.9 363.9 311.9 280.5
-------- -------- -------- ------ ------ ------ -------- -------- --------
Sub-total International....... 1,187.9 1,251.8 1,014.0 113.2 144.9 106.7 1,627.9 1,446.4 1,371.6
Eliminations:
Transfers to International...... (153.5) (178.2) (165.4) -- -- -- (42.8) (57.1) (62.1)
Transfers to Domestic........... (43.3) (84.1) (67.9) -- -- -- (141.0) (158.3) (75.4)
Other........................... -- -- -- (1.1) (.8) (.1) (11.8) (11.6) (9.9)
-------- -------- -------- ------ ------ ------ -------- -------- --------
$5,288.8 $5,283.7 $4,810.9 740.9 604.0 647.4 5,560.9 5,352.2 5,395.4
======== ======== ========
Other income...................... 14.2 23.0 25.5
Nonrecurring gains(2)............. 23.2 150.4 11.7
General corporate(3).............. (61.2) (77.3) (55.6) 487.1 575.3 646.0
Interest expense.................. (90.4) (142.1) (151.0)
------ ------ ------
Consolidated income from
continuing operations before
income taxes.................... $626.7 $558.0 $478.0
====== ====== ======
Investments in unconsolidated
affiliates...................... 4.5 22.9 22.5
-------- -------- --------
Consolidated assets............... $6,052.5 $5,950.4 $6,063.9
======== ======== ========
</TABLE>
- ---------------
(1) The 1997 domestic, Europe and other operating earnings amount includes
nonrecurring expenses of $56.8 million, $15.3 million and $9.7 million,
respectively. The 1996 domestic operating earnings includes nonrecurring
expenses of $107.0 million. The 1997 domestic operating earnings also
include a gain on the sale of Kirsch of $69.8 million.
(2) Includes gain on the exchange of DECS of $23.2 million in 1997 and gains on
the sale of investments in marketable equity securities of $150.4 million
and $11.7 million in 1996 and 1995, respectively (See Note 6).
(3) Includes nonrecurring expenses of $2.1 million and $10.9 million in 1997 and
1996, respectively.
- ---------------
International revenues by destination, based on the location products were
delivered, were as follows by segment:
<TABLE>
<CAPTION>
INTERNATIONAL REVENUES
------------------------------
1997 1996 1995
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Electrical Products......................................... $ 612.7 $ 578.6 $ 355.2
Tools & Hardware(1)......................................... 319.6 357.2 354.8
Automotive Products......................................... 543.8 537.5 506.6
-------- -------- --------
$1,476.1 $1,473.3 $1,216.6
======== ======== ========
</TABLE>
- ---------------
(1) Includes $29.1 million in 1997, $83.3 million in 1996 and $90.0 in 1995 of
Kirsch revenues.
A-34
<PAGE> 36
COOPER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 16: OFF-BALANCE-SHEET RISK, CONCENTRATIONS OF CREDIT RISK AND FAIR VALUE OF
FINANCIAL INSTRUMENTS, INCLUDING DERIVATIVES
As a result of having sales and purchases and other transactions
denominated in currencies other than the functional currencies used by Cooper's
businesses, Cooper is exposed to the effect of foreign exchange rate
fluctuations on its cash flows and earnings. To the extent possible, Cooper
utilizes natural hedges to minimize the effect on cash flows of fluctuating
foreign currencies. When natural hedges are not sufficient, it is Cooper's
policy to enter into forward foreign exchange contracts to hedge all significant
transactions for periods consistent with the terms of the underlying
transactions. Cooper does not engage in speculative transactions. While forward
contracts affect Cooper's results of operations, they do so only in connection
with the underlying transactions. Gains and losses on these contracts offset
losses and gains on the transactions being hedged. The volume of forward
activity engaged in by Cooper from year to year fluctuates in proportion to the
level of worldwide cross-border transactions, and contracts generally have
maturities that do not exceed one year. The table below summarizes, by currency,
the contractual amounts of Cooper's forward exchange contracts at December 31,
1997 and 1996.
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1997 1996
------ ------
(IN MILLIONS)
<S> <C> <C>
British Pound Sterling(1)................................... $175.3 $ 7.7
Canadian Dollar............................................. -- 58.2
German Deutschemark......................................... 4.1 27.8
Italian Lira................................................ 5.4 16.9
Spanish Peseta.............................................. 1.3 10.6
Australian Dollar........................................... 7.2 6.9
Japanese Yen................................................ 2.2 4.6
Dutch Guilder............................................... 2.5 1.8
Other....................................................... 11.0 12.8
------ ------
$209.0 $147.3
====== ======
</TABLE>
- ---------------
(1)Substantially all of the British Pound Sterling forward contracts were
entered into in December 1997 and matured in January 1998.
In an effort to reduce interest expense on Cooper's fixed-rate borrowings,
Cooper entered into an interest rate swap in 1991, which matured in February
1996, that converted a $50 million fixed rate borrowing into a floating-rate
borrowing resulting in an effective interest rate of 6.2% during 1995.
In the normal course of business, Cooper has letters of credit, performance
bonds and other guarantees which are not reflected in the consolidated balance
sheets. In the past, no significant claims have been made against these
financial instruments. Management believes the likelihood of performance under
these instruments is minimal and expects no material losses to occur in
connection with these instruments. Cooper's other off-balance-sheet risks are
not material.
CONCENTRATIONS OF CREDIT RISK
Concentrations of credit risk with respect to trade receivables are limited
due to the wide variety of customers and no one customer exceeding 3% of
accounts receivable. Credit risk is also limited by the world-wide markets into
which Cooper's products are sold, as well as their dispersion across many
different geographic areas.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Cooper's financial instruments consist primarily of cash and cash
equivalents, trade receivables, trade payables, debt instruments and foreign
currency forward contracts. The book values of cash and cash equivalents, trade
receivables and trade payables are considered to be representative of their
respective fair values. Cooper had approximately $1.5 billion and $1.9 billion
of debt instruments at December 31, 1997 and 1996, respectively. The book value
of these instruments was approximately equal to fair value at December 31, 1997
and 1996. Based on year-end
A-35
<PAGE> 37
COOPER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
exchange rates and the various maturity dates of the foreign currency forward
contracts, Cooper estimates that the contract value is representative of the
fair value of these items at December 31, 1997 and 1996.
NOTE 17: SUMMARY OF NONCASH INVESTING AND FINANCING ACTIVITIES
The following noncash transactions have been excluded from the consolidated
statements of cash flows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C>
Assets acquired and liabilities assumed or incurred from the
acquisition of businesses:
Fair value of assets acquired............................. $ 532.1 $ 131.6 $ 249.9
Cash used to acquire businesses, net of cash acquired..... (386.5) (93.2) (175.9)(1)
------- ------- -------
Liabilities assumed or incurred............................. $ 145.6(2) $ 38.4 $ 74.0
======= ======= =======
Noncash increase (decrease) in net assets from:
Conversion of 7.05% Convertible Subordinated Debentures
into Cooper Common stock............................... $ 610.0 $ -- $ --
Exchange of DECS for Wyman-Gordon common stock............ 33.8 -- --
Retirement of Cooper Common shares exchanged for Cooper
Cameron common shares.................................. -- -- 427.5
Exchange of $1.60 Convertible Exchangeable Preferred Stock
into 7.05% Convertible Subordinated Debentures......... -- -- 691.2
</TABLE>
- ---------------
(1) Includes approximately $164 million at December 31, 1995 for the acquisition
of CEAG that was paid on January 5, 1996 (See Note 3).
(2) Includes $46.2 million of notes exchanged for Menvier-Swain common stock.
NOTE 18: DISCONTINUED OPERATIONS
In September 1994, Cooper announced its decision to establish its Petroleum
& Industrial Equipment segment as an independent publicly traded company, Cooper
Cameron, through an exchange offer with Cooper's common shareholders. The
exchange offer was completed on June 30, 1995, at which time 9.5 million shares
of Cooper Common stock were exchanged for 85.5% of Cooper Cameron common stock.
The Petroleum & Industrial Equipment segment split-off has been accounted for as
a discontinued operation.
During the second quarter of 1995, Cooper recorded an additional charge of
$186.6 million, with no tax benefit, to reflect the actual loss on the split-off
of Cooper Cameron. This additional charge was composed of the difference between
the historical cost of Cooper's investment in Cooper Cameron remaining after the
initial September 1994 estimated charge and the market value of Cooper Cameron
common stock during the first few days the common stock traded on a national
exchange ($162.8 million), additional Cooper Cameron operating losses during the
period October 1, 1994 through June 30, 1995 ($20.3 million) and additional
transaction costs ($3.5 million). The additional operating losses and
transaction costs resulted primarily from the delay in completing the exchange
transaction and the recording by Cooper Cameron of a $17 million pretax charge
in the second quarter of 1995 for the write-down of receivables due from
customers in Iran.
Cooper retained a 14.5% interest in Cooper Cameron, which was accounted for
as a marketable equity security. Cooper sold its entire investment in Cooper
Cameron common stock during 1996 (See Note 6).
A-36
<PAGE> 38
COOPER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 19: NET INCOME PER COMMON SHARE
<TABLE>
<CAPTION>
BASIC DILUTED
------------------------------ ------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------------ ------------------------------
1997 1996 1995 1997 1996 1995
-------- -------- -------- -------- -------- --------
($ IN MILLIONS, SHARES IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Income from continuing operations..... $ 394.6 $ 315.4 $ 280.6 $ 394.6 $ 315.4 $ 280.6
Charge for discontinued operations.... -- -- (186.6) -- -- (186.6)
Interest expense on 7.05% Convertible
Subordinated Debentures, net of
income taxes........................ -- -- -- 5.8 29.2 29.2
-------- -------- -------- -------- -------- --------
Net income applicable to Common
stock............................... $ 394.6 $ 315.4 $ 94.0 $ 400.4 $ 344.6 $ 123.2
======== ======== ======== ======== ======== ========
Weighted average Common shares
outstanding......................... 117,459 107,284 111,510 117,459 107,284 111,510
======== ======== ========
Incremental shares from assumed
conversions:
Options, performance-based stock
awards and other employee
awards........................... 1,201 613 442
7.05% Convertible Subordinated
Debentures....................... 4,270 16,731 16,731
-------- -------- --------
Weighted average Common shares and
Common share equivalents............ 122,930 124,628 128,683
======== ======== ========
</TABLE>
NOTE 20: UNAUDITED QUARTERLY OPERATING RESULTS
<TABLE>
<CAPTION>
1997 (BY QUARTER)
-----------------------------------------
1 2 3 4
-------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues.................................................... $1,318.9 $1,384.9 $1,296.9 $1,288.1
Cost of sales............................................... 905.7 938.4 883.1 861.1
Selling and administrative expenses......................... 240.8 238.8 222.5 223.2
Goodwill amortization....................................... 16.0 16.1 16.3 16.7
Nonrecurring gains.......................................... -- (69.8) (23.2) --
Nonrecurring charges........................................ -- 70.5 13.4 --
Other (income) expense, net................................. 1.5 (0.6) -- 1.2
Interest expense............................................ 29.6 21.3 19.4 20.1
-------- -------- -------- --------
Income before income taxes.................................. 125.3 170.2 165.4 165.8
Income taxes(1)............................................. 47.6 64.7 62.9 56.9
-------- -------- -------- --------
Net income.................................................. $ 77.7 $ 105.5 $ 102.5 $ 108.9
======== ======== ======== ========
Income per Common share:(2)(3)
Basic..................................................... $ 0.71 $ 0.89 $ 0.85 $ 0.91
======== ======== ======== ========
Diluted................................................... $ 0.67 $ 0.86 $ 0.84 $ 0.90
======== ======== ======== ========
</TABLE>
- ---------------
(1)Includes $6.1 million related to the favorable settlements of state income
tax issues in the fourth quarter.
(2)Includes gain, net of nonrecurring expenses, on the exchange of the DECS of
$.05 in the third quarter and $.05 related to the favorable settlements of
state tax issues in the fourth quarter.
(3)Adoption of Statement of Financial Accounting Standards No. 128, Earnings Per
Share increased the second and third quarter 1997 Basic Income per Common
Share $.01 each quarter.
A-37
<PAGE> 39
COOPER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1996 (BY QUARTER)
-----------------------------------------
1 2 3 4
-------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues................................................... $1,291.7 $1,351.4 $1,308.1 $1,332.5
Cost of sales.............................................. 897.1 919.3 889.8 899.5
Selling and administrative expenses........................ 233.6 232.8 235.5 243.5
Goodwill amortization...................................... 16.2 16.4 16.4 16.2
Nonrecurring gains......................................... (10.9) (9.5) (107.2) (22.8)
Nonrecurring charges....................................... 10.9 8.3 85.3 13.4
Other (income) expense, net................................ 1.5 (2.3) (0.5) 1.1
Interest expense........................................... 37.6 36.8 35.4 32.3
-------- -------- -------- --------
Income before income taxes................................. 105.7 149.6 153.4 149.3
Income taxes(1)............................................ 43.6 61.3 76.1 61.6
-------- -------- -------- --------
Net income................................................. $ 62.1 $ 88.3 $ 77.3 $ 87.7
======== ======== ======== ========
Income per Common share:(2)(3)
Basic.................................................... $ 0.58 $ 0.82 $ 0.72 $ 0.82
======== ======== ======== ========
Diluted.................................................. $ 0.56 $ 0.77 $ 0.68 $ 0.76
======== ======== ======== ========
</TABLE>
- ---------------
(1)Income before income taxes includes a net nonrecurring gain of $21.9 million
and income taxes include a $12.9 million effect related to the goodwill
write-down included in the Automotive Products asset write-down in the third
quarter of 1996.
(2)Includes gains from the sale of marketable equity securities, net of
nonrecurring expense, of $.01 and $.04 in the second and fourth quarters,
respectively.
(3)Adoption of Statement of Financial Accounting Standards No. 128, Earnings Per
Share increased the fourth quarter of 1996 Basic Income per Common Share
$.01.
A-38
<PAGE> 1
Exhibit 21.0
December 31, 1997
SUBSIDIARIES
Cooper has no parent. The subsidiaries of Cooper are listed in groupings that
indicate the nature and management of the operations of each. Unless noted
herein, all subsidiaries are wholly owned by Cooper or one of its subsidiaries.
<TABLE>
<CAPTION>
Place of
Name Incorporation
---- -------------
A. GENERAL CORPORATE ADMINISTRATION
<S> <C>
BZ Holdings Inc. Delaware, U.S.
Champion Executive Pensions Limited United Kingdom
CI Leasing Company Delaware, U.S.
Cooper A & S Company Delaware, U.S.
Cooper (Great Britain) Ltd. United Kingdom
Cooper (U.K.) Limited Delaware, U.S.
Cooper CPS Corporation Delaware, U.S.
Cooper Enterprises LLC Delaware, U.S.
Cooper Finance, Inc. Delaware, U.S.
Cooper Industries (Canada) Inc. Ontario, Canada
Cooper Industries Australia Pensions Pty Ltd Australia
Cooper Industries Australia Pty Limited Australia
Cooper Industries Foreign Sales Company, Limited Barbados
Cooper Industries Foundation Ohio, U.S.
Cooper Industries France SARL France
Cooper Industries International Company Delaware, U.S.
Cooper Industries Italia S.p.A. Italy
Cooper Industries, Inc. Delaware, U.S.
Cooper Industries (U.K.) Plc United Kingdom
Cooper International Company Delaware, U.S.
Cooper PAC Corporation Delaware, U.S.
Cooper Pensions Limited United Kingdom
Cooper Securities, Inc. Texas, U.S.
Cooper Technologies Company Delaware, U.S.
Cooper Trading, Inc. Delaware, U.S.
Cooper Western Hemisphere Company Delaware, U.S.
Coopind Inc. Delaware, U.S.
CoopKC Michigan, U.S.
CS Holdings International Inc. Cayman Islands
Industrias Cooper de Venezuela, S.A. Venezuela
Moog Redevelopment Corporation Missouri, U.S.
</TABLE>
1
<PAGE> 2
<TABLE>
<CAPTION>
Place of
NAME Incorporation
- ----------------- -------------
B. ELECTRICAL PRODUCTS
----------------------
<S> <C>
Active Control, Inc. Texas, U.S.
Alpha Lighting, Inc. Delaware, U.S.
Arrow-Hart, S.A. de C.V. Mexico
Atlite Inc. Delaware, U.S.
Blessing Electronics B.V. Netherlands
Blessing International B.V. Netherlands
Bussmann do Brasil Ltda. Brazil
Bussmann International, Inc. Delaware, U.S.
Bussmann, S.A. de C.V. Mexico
CALP International, Inc. Florida, U.S.
CEAG Benelux B.V. Netherlands
CEAG Crouse-Hinds Asia Pacific Pte. Ltd. Singapore
CEAG digi table Sicherheitstechnik GmbH Germany
CEAG Electronics GmbH Germany
CEAG Flameproof Control Gears Private Limited (51% owned) India
CEAG Grundstucks GmbH & Co. OHG Germany
CEAG Grundstucksverwaltungsgesellschaft mbH Germany
CEAG Middle East Limited Liability Company (49% owned) Dubai, U.A.E.
CEAG Norge AS Norway
CEAG NORTEM, S.A. Spain
CEAG Sicherheitstechnik GmbH Germany
Coiltronics, Inc. Florida, U.S.
Coiltronics International Corporation Florida, U.S.
Componentes de Iluminacion, S.A. de C.V. Mexico
Connectron, Inc. New Jersey, U.S.
Cooper Bussmann, Inc. Delaware, U.S.
Cooper Elektrische Ausrustungen GmbH Germany
Cooper Elektrische Ausrustungen GmbH & Co. Offene Germany
Handelsgesellschaft
Cooper Industries GmbH Germany
Cooper Power Systems do Brasil Ltda. Brazil
Cooper Lighting, Inc. Delaware, U.S.
Cooper Power Systems Pty. Ltd. Australia
Cooper Power Systems, Inc. Delaware, U.S.
Cooper Power Systems Overseas, Inc. Delaware, U.S.
Cooper Power Systems Transportation Company Wisconsin, U.S.
Cortek Internacional S.A. Costa Rica
Crouse-Hinds (Australia) Pty., Ltd. Australia
Crouse-Hinds Domex, S.A. de C.V. Mexico
Crouse-Hinds Inc. Delaware, U.S.
CTIP Inc. Delaware, U.S.
Digital Lighting Holdings Limited (50% owned) British Virgin Islands
Dunfermline Company Ireland
Edison Fusegear, Inc. Delaware, U.S.
Fulleon Synchrobell Ltd. United Kingdom
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C>
Iluminacion Cooper de las Californias S.A. de C.V. Mexico
Industries Karp, S.A. de C.V. Mexico
Kearney Company, Inc. Delaware, U.S.
Kearney-National (Canada) Limited Ontario, Canada
Kearney (Thailand) Company Limited (51% owned) Thailand
Les Appareillages Electriques Kearney Inc. Quebec, Canada
Luminox Securite Electronique S.A. France
Major Liting, Inc. Pennsylvania, U.S.
McGraw-Edison Company Delaware, U.S.
McGraw-Edison Development Corporation Delaware, U.S.
Menvier (Electronic Engineers) Ltd. United Kingdom
Menvier ApS Denmark
Menvier CSA Srl Italy
Menvier Electronics International Pty Ltd. Australia
Menvier Hybrids Ltd. United Kingdom
Menvier Notstrom-Und Systemtechnik GmbH Germany
Menvier Overseas Holdings Ltd. United Kingdom
Menvier Research Ltd. Ireland
Menvier Security Ltd. United Kingdom
Menvier-Amberlec Systems Ltd. United Kingdom
Menvier-Swain Group plc United Kingdom
Nugelec S.A. France
Ping Ding Shan Edison Power Systems
Company Limited (60% owned) China
Pretronica Precisao Electron Ltda. Portugal
Pretronica precisao Electron Ltda. II Portugal
RTE Far East Corporation Taiwan
Scantronic France S.A. France
Scantronic Holdings Inc. PLC United Kingdom
Scantronic International Ltd. United Kingdom
Scantronic Ltd. United Kingdom
SCI Noemi France
Si-Tronic Srl Italy
Silver Light International Limited (50% owned) British Virgin Islands
Thepitt Manufacturing Company Pennsylvania, U.S.
Transmould Ltd. United Kingdom
Univel EPE Greece
Western Power Products, Inc. Oregon, U.S.
</TABLE>
3
<PAGE> 4
<TABLE>
<CAPTION>
Place of
NAME Incorporation
- ------------------------ --------------
C. TOOLS & HARDWARE
-------------------
<S> <C>
Cooper Industries GmbH Beteiligungen Germany
Cooper Power Tools, Inc. Delaware, U.S.A.
Cooper Tools GmbH Germany
Cooper Tools Industrial Ltda. Brazil
Cooper Tools Pty. Limited Australia
Cooper Tools S.A. France
Deutsche Gardner-Denver Beteiligungs-GmbH Germany
Deutsche Gardner-Denver GmbH & Co. Germany
Empresa Andina de Herramientas, S.A. (49% owned) Columbia
Erem S.A. Swizterland
Lufkin Europa B.V. Netherlands
Nicholson Mexicana, S.A. de C.V. Mexico
The Cooper Group, Inc. Delaware, U.S.
</TABLE>
4
<PAGE> 5
<TABLE>
<CAPTION>
Place of
NAME Incorporation
- ----------------------- -------------
<S> <C>
D. AUTOMOTIVE PRODUCTS
----------------------
CAP Automotive Company Delaware, U.S.
Cooper Automotive de Mexico, S.A. de C.V. Mexico
Cooper Automotive de Venezuela, C.A. Venezuela
Cooper Automotive do Brasil, Ltda. Brazil
Cooper Automotive Electrical do Brasil, Ltda. Brazil
Cooper Automotive Filtration S.p.A. Italy
Cooper Automotive France, S.A. France
Cooper Automotive Iberica, S.A. Spain
Cooper Automotive, Inc. Delaware, U.S.
Cooper Automotive K.K. Japan
Cooper Automotive of Latin America, S.A. de C.V. Mexico
Cooper Automotive Netherlands B.V. Netherlands
Cooper Automotive of South Africa (Proprietary) Limited South Africa
Cooper Automotive Products (India) Private Limited India
Cooper Automotive Pty. Ltd. Australia
Cooper Automotive S.A. Belgium
Cooper Automotive, Taiwan, Inc. Taiwan
Champion Aviation, Inc. Delaware, U.S.
Champion Interamericana, Ltd. Delaware, U.S.
Champion Spark Plug Company Delaware, U.S.
Crucetas Mexicanas, S.A. de C.V. (40% owned) Mexico
Farloc Argentina S.A.I.C. y F. (23.9% owned) Argentina
Frenos Hidraulicos Automotrices S.A. (49% owned) Mexico
Guangzhou Champion Spark Plug Co., Ltd. (50% owned) China
Moog Automotive Company Delaware, U.S.
Moog Automotive, Inc. Missouri, U.S.
Sistemas de Energia de Matamoros, S.A. de C.V. Mexico
</TABLE>
5
<PAGE> 6
<TABLE>
<CAPTION>
Place of
NAME Incorporation
- -------------------- -------------
E. INACTIVE SUBSIDIARIES
------------------------
<S> <C>
Aerocharter (Coventry) Ltd. United Kingdom
AP Alarm Systems, Ltd. United Kingdom
B & S Fuses Limited United Kingdom
Bussmann de Mexico S.A. de C.V. Mexico
Bussmann (U.K.) Limited United Kingdom
Carlton Santee Corporation California, U.S.
CEAG Egypt Ltd. Delaware, U.S.
Champion Spark Plug Belgium S.A. Belgium
Champion Spark Plug GmbH Germany
Champion Sparking Plug Company (Ireland) Limited Ireland
Contronic Inc. Canada
Coopauto Corporation Delaware, U.S.
Cooper Industries Norge AS Norway
Crouse-Hinds de Venezuela, C.A. Venezuela
DFL Fusegear Limited United Kingdom
Firecom Ltd. United Kingdom
Gardner-Denver (Aust.) Pty. Limited Australia
Gardner-Denver International, C.A. Venezuela
Homelink Telecom Ltd. United Kingdom
Inmobiliaria Cisco, S.A. Mexico
McGraw-Edison Export Corporation Delaware, U.S.
Menvier (CJS) Ltd. United Kingdom
Moog Automotive, Ltd. Cayman Islands
MSG Leasing Limited United Kingdom
Productos de Frenos Automotrices de
Calidad, S.A. de C.V. Mexico
R S Alarm Systems Ltd. United Kingdom
Scantronic (Singapore) Pte Ltd. Singapore
Scantronic Benelux B.V. Netherlands
Scantronic B.V. Netherlands
Scantronic GmbH Germany
Scantronic Holdings Inc. (CAN) Canada
Scantronic Holdings Inc. Delaware, U.S.
Scantronic International Holdings B.V. Netherlands
Scantronic Spain S.A. Spain
Synchrobell Ltd. United Kingdom
The Cooper Group, B.V. Netherlands
Veda Manufacturing Pty. Limited Australia
WAWD Autoteile GmbH Germany
WPC Corporation, Inc. Delaware, U.S.
ZV Zundkerzenvertriebs GmbH Germany
</TABLE>
6
<PAGE> 1
Exhibit 23.0
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Cooper Industries, Inc. of our report dated January 23, 1998, included in
Appendix A to the Cooper Industries, Inc. Proxy Statement for the 1998 Annual
Meeting of Shareholders.
We also consent to the incorporation by reference in the following Registration
Statements on Form S-8 or Form S-3 of Cooper Industries, Inc. and in each
related Prospectus of our report dated January 23, 1998, with respect to the
consolidated financial statements incorporated herein by reference.
Registration
Statement No. Purpose
No. 2-71732 Form S-8 Registration Statement for Shares issuable pursuant to
Substitute Deferred Compensation Agreements in connection with
the acquisition of Crouse-Hinds Company
No. 2-33-14542 Form S-8 Registration Statement for Cooper Industries, Inc.
1985 and 1989 Employee Stock Purchase Plans
No. 2-33-19574 Form S-8 Registration Statement for Cooper Industries, Inc.
1986 Stock Option Plan
No. 2-33-29302 Form S-8 Registration Statement for 1989 Director Stock Option
Plan
No. 33-57829 Form S-8 Registration Statement for Cooper Industries, Inc.
1986 Stock Option Plan
No. 333-00117 Form S-3 Registration Statement for Cooper Industries, Inc.
Debt Securities (Debt Shelf)
No. 333-02847 Form S-8 Registration Statement for Cooper Industries, Inc.
Directors' Stock Plan
No. 333-08277 Form S-8 Registration Statement for Cooper Industries, Inc.
Stock Incentive Plan
No. 333-24237 Form S-3 Registration Statement for Cooper Industries, Inc.
Dividend Reinvestment and Stock Purchase Plan
/s/ Ernst & Young LLP
Houston, Texas
March 26, 1998
<PAGE> 1
EXHIBIT 24.0
POWER OF ATTORNEY
COOPER INDUSTRIES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director or
officer of Cooper Industries, Inc. ("Cooper"), an Ohio corporation, does hereby
make, constitute and appoint Diane K. Schumacher and Karen E. Herbert, and each
of them acting individually, his true and lawful attorney with power to act
without the other and with full power of substitution, to execute, deliver and
file, for and on behalf of the undersigned, and in his name and in his capacity
or capacities as aforesaid, the Cooper Annual Report on Form 10-K with the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended, and any other documents in support thereof or supplemental thereto,
with respect to the fiscal year ended December 31, 1997, and any and all
amendments thereto. The undersigned hereby grants to said attorneys and each of
them full power and authority to do and perform each and every act and thing
whatsoever as said attorney or attorneys may deem necessary or advisable to
carry out fully the intent of the foregoing as the undersigned might or could do
personally or in the capacity or capacities as aforesaid, hereby ratifying and
confirming all acts and things which said attorney or attorneys may do or cause
to be done by virtue of these presents.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
11th day of February, 1998.
/s/ Harold S. Hook
--------------------------
Harold S. Hook
<PAGE> 2
POWER OF ATTORNEY
COOPER INDUSTRIES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director or
officer of Cooper Industries, Inc. ("Cooper"), an Ohio corporation, does hereby
make, constitute and appoint Diane K. Schumacher and Karen E. Herbert, and each
of them acting individually, her true and lawful attorney with power to act
without the other and with full power of substitution, to execute, deliver and
file, for and on behalf of the undersigned, and in her name and in her capacity
or capacities as aforesaid, the Cooper Annual Report on Form 10-K with the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended, and any other documents in support thereof or supplemental thereto,
with respect to the fiscal year ended December 31, 1997, and any and all
amendments thereto. The undersigned hereby grants to said attorneys and each of
them full power and authority to do and perform each and every act and thing
whatsoever as said attorney or attorneys may deem necessary or advisable to
carry out fully the intent of the foregoing as the undersigned might or could do
personally or in the capacity or capacities as aforesaid, hereby ratifying and
confirming all acts and things which said attorney or attorneys may do or cause
to be done by virtue of these presents.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand this
11th day of February, 1998.
/s/ Linda A. Hill
--------------------------
Linda A. Hill
<PAGE> 3
POWER OF ATTORNEY
COOPER INDUSTRIES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director or
officer of Cooper Industries, Inc. ("Cooper"), an Ohio corporation, does hereby
make, constitute and appoint Diane K. Schumacher and Karen E. Herbert, and each
of them acting individually, his true and lawful attorney with power to act
without the other and with full power of substitution, to execute, deliver and
file, for and on behalf of the undersigned, and in his name and in his capacity
or capacities as aforesaid, the Cooper Annual Report on Form 10-K with the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended, and any other documents in support thereof or supplemental thereto,
with respect to the fiscal year ended December 31, 1997, and any and all
amendments thereto. The undersigned hereby grants to said attorneys and each of
them full power and authority to do and perform each and every act and thing
whatsoever as said attorney or attorneys may deem necessary or advisable to
carry out fully the intent of the foregoing as the undersigned might or could do
personally or in the capacity or capacities as aforesaid, hereby ratifying and
confirming all acts and things which said attorney or attorneys may do or cause
to be done by virtue of these presents.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
11th day of February, 1998.
/s/Constantine S. Nicandros
--------------------------
Constantine S. Nicandros
<PAGE> 4
POWER OF ATTORNEY
COOPER INDUSTRIES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director or
officer of Cooper Industries, Inc. ("Cooper"), an Ohio corporation, does hereby
make, constitute and appoint Diane K. Schumacher and Karen E. Herbert, and each
of them acting individually, his true and lawful attorney with power to act
without the other and with full power of substitution, to execute, deliver and
file, for and on behalf of the undersigned, and in his name and in his capacity
or capacities as aforesaid, the Cooper Annual Report on Form 10-K with the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended, and any other documents in support thereof or supplemental thereto,
with respect to the fiscal year ended December 31, 1997, and any and all
amendments thereto. The undersigned hereby grants to said attorneys and each of
them full power and authority to do and perform each and every act and thing
whatsoever as said attorney or attorneys may deem necessary or advisable to
carry out fully the intent of the foregoing as the undersigned might or could do
personally or in the capacity or capacities as aforesaid, hereby ratifying and
confirming all acts and things which said attorney or attorneys may do or cause
to be done by virtue of these presents.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
16th day of February, 1998.
/s/John D. Ong
--------------------------
John D. Ong
<PAGE> 5
POWER OF ATTORNEY
COOPER INDUSTRIES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director or
officer of Cooper Industries, Inc. ("Cooper"), an Ohio corporation, does hereby
make, constitute and appoint Diane K. Schumacher and Karen E. Herbert, and each
of them acting individually, his true and lawful attorney with power to act
without the other and with full power of substitution, to execute, deliver and
file, for and on behalf of the undersigned, and in his name and in his capacity
or capacities as aforesaid, the Cooper Annual Report on Form 10-K with the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended, and any other documents in support thereof or supplemental thereto,
with respect to the fiscal year ended December 31, 1997, and any and all
amendments thereto. The undersigned hereby grants to said attorneys and each of
them full power and authority to do and perform each and every act and thing
whatsoever as said attorney or attorneys may deem necessary or advisable to
carry out fully the intent of the foregoing as the undersigned might or could do
personally or in the capacity or capacities as aforesaid, hereby ratifying and
confirming all acts and things which said attorney or attorneys may do or cause
to be done by virtue of these presents.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
11th day of February, 1998.
/s/Sir Ralph H. Robins
--------------------------
Sir Ralph H. Robins
<PAGE> 6
POWER OF ATTORNEY
COOPER INDUSTRIES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director or
officer of Cooper Industries, Inc. ("Cooper"), an Ohio corporation, does hereby
make, constitute and appoint Diane K. Schumacher and Karen E. Herbert, and each
of them acting individually, his true and lawful attorney with power to act
without the other and with full power of substitution, to execute, deliver and
file, for and on behalf of the undersigned, and in his name and in his capacity
or capacities as aforesaid, the Cooper Annual Report on Form 10-K with the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended, and any other documents in support thereof or supplemental thereto,
with respect to the fiscal year ended December 31, 1997, and any and all
amendments thereto. The undersigned hereby grants to said attorneys and each of
them full power and authority to do and perform each and every act and thing
whatsoever as said attorney or attorneys may deem necessary or advisable to
carry out fully the intent of the foregoing as the undersigned might or could do
personally or in the capacity or capacities as aforesaid, hereby ratifying and
confirming all acts and things which said attorney or attorneys may do or cause
to be done by virtue of these presents.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
11th day of February, 1998.
/s/James R. Wilson
--------------------------
James R. Wilson
