exv10w2



 




EXHIBIT 10.2





Cooper Industries

P.O. Box 4446

Houston, TX 77210-4446




600 Travis, Suite 5800

Houston, TX 77002-1001

Phone:(713) 209-8406

Fax:(713) 209-8977




			
	 	 	 
	Kirk S. Hachigian	 	 
	Chairman and Chief Executive Officer
	 	






September 1, 2006




Mr. David R. Sheil

26 Treasure Cove

The Woodlands, Texas 77381




Re: Transition Arrangements




Dear Dave:



Over the last few weeks, we have had discussions regarding management transition and succession
planning at Cooper Industries, Ltd. (“Cooper”). Ultimately, the decision was made that you would
step down as Senior Vice President, Human Resources & Chief Administrative Officer by January 2,
2007. To avoid any misunderstanding as we move forward, I am writing to document our
understandings and agreements on these matters (“the Agreement”).




Public Statement and Management Transition



On August 29, 2006, you notified your immediate staff of your decision to step down as
Senior Vice President, Human Resources & Chief Administrative Officer. You will continue to explain
this decision and the timing of the communication in the context of the senior management
transition at Cooper. Following this communication, in addition to your normal responsibilities,
you will participate in such communications with Cooper management and other parties as may be
necessary or helpful to ensure that this management transition will not have any adverse impact on
current and future operations, management of ongoing legal or personnel matters, and/or financial
results at Cooper. If Cooper appoints a successor who takes the position of Senior Vice President,
Human Resources & Chief Administrative Officer before January 2, 2007, you will remain actively
employed at Cooper at the same salary in the position of Special Advisor to the CEO, focusing on
issues at Kirk Hachigian’s direction until January 2, 2007, and you will report directly to Mr.
Hachigian.



Sometime after discussions with your immediate staff, we will make informal internal announcements
about this matter. Again, your decision to step down as Senior Vice President, Human Resources &
Chief Administrative Officer will be explained in the context of the management transition and
your personal plans. All subsequent communications and statements, whether by you or Cooper
management, will be consistent with this rationale and related statements. You agree that you will
not disparage or demean Cooper or its management by




 









 







making any negative comments about Cooper or its management, and Cooper agrees that members
of its management will not disparage or demean you. All requests for employment records or data
relating to you will be referred to Cooper’s Human Resources Department. Any other requests for
information about your employment with Cooper will be referred directly to Kirk Hachigian.



Following these communications and announcements, you will remain in your current position as
Senior Vice President, Human Resources & Chief Administrative Officer with the same duties and
responsibilities as in the past until January 2, 2007. During this period, your base salary will
remain at its current level ($32,375 per month).



In the absence of your death, disability, voluntary resignation or termination for Cause, the
Company agrees that it will not terminate your employment prior to January 2, 2007. As used
herein, the term “Cause” means an act or acts of personal dishonesty taken by you and intended to
result in the personal enrichment of you or your beneficiary at the expense of the Company; b)
repeated failures by you to perform faithfully, efficiently and in an ethical, professional manner
your duties, obligations and responsibilities for Cooper, which failures are demonstrably willful
and deliberate on your part and which are not remedied after sixty (60) days written notice from
the Company identifying those failures; or c) if you are convicted on felony charges.




Compensation and Benefits



We have mutually agreed that your active employment will cease as of January 2, 2007, but that you
will continue to receive your current salary ($32,375 per month) through June 30, 2007, (“the
salary continuation period”). These guaranteed payments exceed and are in lieu of benefits for
which you may be eligible under Cooper’s Separation Allowance Plan and will continue even if you
should find alternate employment. In the event you remain unemployed as of July 1, 2007, despite a
diligent and ongoing job search, we have agreed that your salary continuation period may be
extended for up to six (6) additional months on a month-to-month basis through December 31, 2007.
We have agreed that your employment as a consultant on a temporary or part-time basis during the
period from July 1, 2007 through December 31, 2007 will not impact your salary continuation
period, and you will be eligible to continue to receive such benefits even if you are employed on
a temporary or part-time basis (less than thirty hours per week). You understand and agree that
you will not earn bonuses or vacation during the salary continuation period and that your salary
continuation payments include any vacation pay which may have accrued prior to the end of your
active employment.



In accordance with the Sections IV and VI of the Cooper Industries Amended and Restated Management
Annual Incentive Plan, you agree that you will not be eligible to receive any portion of the 2006
Management Annual Incentive Award, which is hereby forfeited in its entirety.



Group insurance coverage, i.e., life, medical and dental, will continue for 18 months following
your termination date at active employee rates, unless you sooner receive alternate coverage with
another employer, even if this alternate coverage is less comprehensive. You have agreed to notify
us if and when such coverage becomes effective. You will continue to be responsible for the
appropriate employee contributions toward medical and dental insurance in order to be




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eligible for coverage. Such contributions will be on the same basis as if you were an
active employee. The group insurance coverage described in this paragraph will run concurrent with
any COBRA obligations. Under separate cover you will receive a COBRA election form reflecting the
active employee coverage rates described herein. Other non-contributory welfare benefits (business
travel & accident) will terminate on your last day of active employment. Voluntary optional life
and AD&D coverage may be continued through ongoing contributions.




Outplacement



Cooper will provide you access to executive outplacement services through Right Management
Consultants at Company expense for up to one year from termination of your active employment,
beginning no later than January 2, 2007 and ending no later than January 2, 2008.




Pension and Co-Sav Participation



You will continue to accrue benefits under the Cooper Salaried Pension Account Plan and the
Cooper Savings Plan (CO-SAV) on the same terms as other salaried employees in the United States
through December 31, 2006. As you know, we are making major changes to our pension and CO-SAV
programs in 2006/2007. In implementing these changes, your benefits will be administered in the
same manner as other employees. Effective on the date of your termination, you will have several
options for handling your CO-SAV account. First, you may roll over your CO-SAV monies to a future
employer’s pension or 401(k) plan, assuming that employer allows such transfers, or to an
Individual Retirement Account. You may also leave your monies in your CO-SAV account and withdraw
these monies, without penalty, at any time so long as you are retired. If you choose this approach,
you may continue to select your investment options, as you have done in the past. You will not
receive further contributions from the Company to either of these Plans after January 2, 2007,
unless the Company determines in its sole discretion, during your salary continuation period, that
other individuals who receive similar salary continuation after termination of their active
employment during 2007 are eligible for contributions to either of these Plans. In the event that
the Company determines that such individuals are eligible for Company contributions, you will
likewise be considered eligible for Company contributions on the same terms. In the event that the
Company does not determine that such individuals are eligible for Company contributions before
January 2, 2007, you will not receive further contributions from the Company to either of the Plans
after January 2, 2007.




Stock Options



According to our records, you currently hold Incentive Stock Options (ISO) and Non-Qualified
Stock Option (NSO) grants (as used in this and the following section of this letter, all
capitalized terms are as defined in the Stock Incentive Plan and, where relevant, in the
Executive Stock Incentive Agreement between you and Cooper). A summary of current vested and
non-vested options issued to you is attached. Non-qualified stock options granted to you pursuant
to an agreement dated February 13, 2006, will terminate automatically on January 2, 2007 in
accordance with Section 1(a) of such agreement, since you will not be actively employed for one
(1) year following the grant date. Non-qualified stock options granted to you pursuant to
agreements dated February 10, 2004 and February 8, 2005 will continue to vest in accordance with
the terms of such agreements as if you were actively employed through February 10, 2007.




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Other than the vesting described in the preceding sentence, no additional vesting of
stock options shall occur following your termination of employment. All vested options will remain
exercisable through the earlier of (1) the last day of the original option term specified under
the applicable option award agreement, (2) the last day of your salary continuation period,
including any extensions and no later than December 31, 2007; or (3) December 31, 2007, after
which date all outstanding options will automatically terminate and cease to be exercisable.
Consequently, in the event you elect to exercise any options, you must do so prior to that date.




Performance Shares



In 2004, 2005 and 2006, you entered into Executive Stock Incentive Agreements with Cooper under
which you are eligible to earn Performance Shares under the Stock Incentive Plan based upon
Cooper’s cumulative annual growth rate of Earnings Per Share (EPS) over a defined performance
cycle (2004-2006, 2005-2007, and 2006-2008).



Under the terms of the 2004 Executive Stock Incentive Agreement between you and Cooper, you are
eligible to earn up to a maximum of 15,400 shares of Cooper common stock based upon the Company’s
cumulative EPS performance during the 2004-2006 performance cycle. We have agreed that, in
accordance with the terms of the 2004 Executive Stock Incentive Agreement, so long as you remain
actively employed through December 31, 2006, you will receive the number of shares earned during
the cycle based on the Company’s EPS performance as certified by
the MD&C Committee. These shares
will be distributed in February 2007, together with dividends equivalent on those shares accrued
during the performance cycle.



You will not be eligible for any payments or distributions under the terms of the 2005 and 2006
Executive Stock Incentive Agreements between you and Cooper or any later Executive Incentive
Agreement, which will become null and void immediately on the date of termination of your active
employment with the Company.




Restricted Stock Units



In 2002, you were awarded 24,000 Restricted Stock Units (“RSUs”) which were subject to
restrictions for 3-5 years. Restrictions on 16,000 of those RSUs have lapsed and those shares have
been awarded to you. In accordance with the terms of your Executive Restricted Stock Agreement,
restrictions on the remaining 8,000 shares are scheduled to lapse on December 31, 2006 provided
that you are actively employed with the Cooper on that date.




Management Continuity Agreement/Change-In-Control Benefits



In 2006, you entered into a Management Continuity Agreement (“MCA”) with Cooper that contains
provisions that would apply in the event that a corporate Change-In-Control took place and
you were terminated or resigned with “Good Reason.” This provision is known as a “double trigger”
as both events must take place in order for benefits to become due under the MCA. We have agreed
that the MCA will terminate and become null and void on December 31, 2006, and this further
constitutes notice as required by any MCA that you will not be eligible for any payments or
benefits under any MCA with Cooper for any corporate change of control that takes place after
December 31, 2006.




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Non-Competition and Non-Solicitation



In your period of employment with Cooper, the nature of your duties were such that you had access
to confidential and proprietary information, including: Company policies, objectives, strategies
and long-range plans, and plans for market and product development that are not now and will not
later become part of the public domain. As a result, we have requested and you have agreed that
under no circumstance would you use such information gained in your position with Cooper to the
advantage of any competitor or to the disadvantage of Cooper. We are also in agreement that you
will not take with you any documents or copies of documents or use in any way, directly or
indirectly, any confidential or proprietary information which you have gained during your
employment with Cooper.



Recognizing the nature and scope of your responsibilities while employed as Senior Vice President
Human Resources and Chief Administrative Officer and with Cooper’s promise that it will continue
to provide to you highly sensitive information regarding human resources and administrative
matters at Cooper and the payments described above, we have agreed that for the period beginning
from January 3, 2007 to December 31, 2008, you will not become an employee, officer, director,
agent, contractor or consultant of, or advisor to, a corporation that is in competition with
Cooper as defined in Exhibit A and in the paragraph 10 of Executive Employment Agreement, which is
incorporated herein by reference. You may become associated with a consulting firm or similar
organization provided no work is done by you for or on behalf of competitors to Cooper as defined
in Exhibit A. We have further agreed that in the event this provision of this Agreement is
breached by you, Cooper may cease all payments and benefits provided in this Agreement and that
Cooper will be entitled to seek an immediate injunction against such breach from a court of
competent jurisdiction pending resolution of any dispute. You agree that the duration and scope of
the preceding non-compete provisions and those in the Executive Employment Agreement are
reasonable and impose no greater restraint that necessary to protect Cooper’s proprietary and
confidential information and other important business interests.



During the remainder of your employment with Cooper and for a period of twenty-four months
following the termination of your active employment and no sooner than December 31, 2008, you
agree that you will not, on behalf of yourself or any other person, firm, company business or
other legal entity, directly or indirectly, employ, solicit, influence, or attempt to influence
any management, sales, technical design or engineering employee, representative or advisor of the
Company to terminate his or her employment relationship with the Company and/or to work in any
manner for you, or any entity affiliated with you. Additionally, during the twelve months
following the termination of your active employment, you agree that you will not solicit, call
upon, initiate communications or attempt to initiate communications with any vendor or customer of
Cooper or assist any person or entity in doing so for the purpose of selling or providing products
similar to or competitive with those manufactured by Cooper.



In the event that you violate any of these obligations, you agree to be responsible for all costs
and fees, including but not limited to reasonable attorney’s fees, incurred by Cooper in enforcing
such obligations. The assertion or existence of any breach by Cooper or claim by you against
Cooper, whether predicated upon this Agreement or otherwise, shall not constitute a defense to the
enforcement of these provisions of this Agreement.




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Confidentiality



During the last several years, you have provided legal advice and counsel on several highly
confidential issues which impacted Cooper relative to personnel and legal matters. You
specifically agree to maintain all such information related to Cooper in confidence, unless
already made public, and you will not use any Cooper proprietary information for any purpose other
than performing services for Cooper for the duration of your employment.



The terms of this letter and the separation-related benefits available to you from Cooper are
highly personal and reflect the contributions you have made to Cooper over the years. As a result,
we have asked that you respect the personal nature of these arrangements by maintaining this
information in the strictest confidence. Consequently, we have agreed that you will reveal the
terms of this Agreement and the separation benefits provided to you by Cooper only to your spouse,
your personal tax advisor and your attorney, and only to the extent these individuals agree to
maintain the confidentiality of these matters.



We have also agreed that this information may be disclosed as required by law but only in
proceedings not initiated by you or on your individual behalf, except for proceedings initiated by
you to enforce this Agreement. We have further agreed that the Company may cease payments pursuant
to this Agreement in the event you do not comply with any obligations imposed on you pursuant to
this Agreement.



The Agreement shall be construed in accordance with Texas law without regard to principles of
conflicts of law, and any action to enforce this Agreement shall be brought solely in the courts of
Harris County, Texas.



If the foregoing clearly and fully reflects our understanding, please so indicate by signing and
returning the enclosed copy of this letter to me as well as a signed copy of the attached Waiver &
Release, which is a necessary condition and consideration for receipt of the additional
compensation and stock awards described herein.




Sincerely,









Kirk S. Hachigian

Chairman, Chief Executive Officer and President




Enclosure




	 	 	 	 	 	 	 	 	 
	Acknowledged:

	 	/s/ David R. Sheil	 
	 	 	9/3/06	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	David R. Sheil
	 	 	 	Date	 	 






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WAIVER AND RELEASE



I have read the letter to me dated September 1, 2006 regarding the termination of my
employment with Cooper Industries, Ltd. (“the Company”) effective January 2, 2007, and I agree to
the terms outlined in that letter, which are incorporated herein by reference (the “Agreement”).



In consideration of the Company’s agreement to provide me with 1) continued employment through
January 2, 2007 on the terms outlined in the Agreement; 2) continued salary payments as described
in the Agreement; 3) eligibility to receive restricted stock units awarded in 2002 and 4) continued
eligibility for performance shares under grants to me in 2004, 50% of which is consideration for
release of any and all claims under the Age Discrimination in Employment Act, as amended (“ADEA”),
I hereby provide the following complete wavier and release. I waive and release the Company, its
respective affiliates, subsidiaries and parent companies, and its past, present, and future
officers, directors, attorneys, insurers, agents, servants, representatives, employees,
predecessors and successors in interest, assigns, benefit plans, heirs, relations, successors,
executors, administrators, and any other persons or firms for whom the Company could be legally
responsible (collectively, “Released Cooper Parties”) from any and all present employment or
termination related claims, damages, actions, rights, demands, and causes of action, whether known
or unknown, arising from, but not limited to, my employment and any discrimination on the basis of
sex, race, color, national origin, religion, disability or veteran status; Title VII of the Civil
Rights Act of 1964, as amended, the Civil Rights Act of 1991, Sections 1981 through 1988 of Title
42 of the United States Code, as amended, the Employee Retirement Income Security Act of 1974, as
amended, the American With Disabilities Act of 1990, as amended, the Workers Adjustment and
Retraining Notification Act, as amended, The Immigration Reform and Control Act, as amended, the
Occupational Safety and Health Act, as amended, the Sarbanes-Oxley Act of 2002, the Age
Discrimination in Employment Act, as amended, the Older Workers Benefit Protection Act, the Texas
Commission on Human Rights Act, the Family Medical Leave Act, and any other federal, state, or
local civil or human rights law or any other federal, state or local law, regulation or ordinance.
I further waive and release any claims or demands arising under federal, state or local law,
including but not limited to, common law claims relating to breach of any contract or agreement,
wrongful discharge (including retaliatory discharge) or any other possible restrictions on the
Company’s ability to terminate its employees at will, including violation of public policy, breach
of any express or implied covenant of the employment contract, and breach of any covenant of good
faith and fair dealing; civil actions relating to negligence, compensation, defamation, invasion of
privacy, fraud, misrepresentation, denial of leave or other terms and conditions of employment, or
infliction of emotional or mental distress. I further acknowledge that this Waiver and Release
excludes claims related to obligations arising under the letter agreement dated September 1, 2006,
any workers’ compensation claims currently pending or permitted by law and further excludes any
pension or unemployment compensation benefits to which I may be otherwise entitled and any claims
that controlling state law clearly states that may not be released by settlement.



I have signed this Agreement voluntarily and without coercion or duress and not based on any
representations to me by any of the Released Cooper Parties. I acknowledge that I have reviewed
all aspects of this Waiver and Release; that I have carefully read and fully understand




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all the provisions of this Waiver and Release; that I understand that in agreeing to this
document I am releasing the Company from any and all claims I may have against them and
voluntarily agree to all the terms set forth in this Waiver and Release; and that I knowingly and
willingly intend to be bound by the same. I acknowledge that I was given at least 21 days to
consider the terms of this Waiver and Release; and that I have been advised in writing to consult
with counsel. I knowingly and voluntarily waive the remainder of the 21-day consideration period,
if any, following the date I signed this Waiver and Release. I have not been asked by the Company
to shorten my time period for consideration of whether to sign this release. The Company has not
threatened to withdraw or alter the benefits due me prior to the expiration of the 21-day period
nor has the Company provided different terms to me because I have decided to sign the release
prior to the expiration of the 21-day period. I agree with the Company that changes, whether
material or immaterial, do not restart the running of the 21-day consideration period. I further
acknowledge that I am voluntarily accepting the Company’s offer of additional benefits as
consideration for this Waiver and Release.



I understand that the furnishing of this Waiver and Release and corresponding consideration shall
not be deemed or construed at anytime for any purpose as an admission by the Company of any
liability or unlawful conduct of any kind. Based upon the signing of this Agreement, I affirm that
I have not filed and will not cause to be filed any claim, complaint demand, or action against the
Company in any form or forum. I further affirm that I am not presently a party to any claim,
complaint, or action against the Company in any forum or form. I further affirm that I have been
paid and/or have received all leave (paid or unpaid), compensation, wages, bonuses, commissions,
and/or benefits to which I may be entitled and that no other leave (paid or unpaid), compensation,
wages, bonuses, commissions and/or benefits are due to me, except as provided in the Agreement
dated September 1, 2006. I further affirm that I have no known workplace injuries or occupational
diseases and have been provided and/or have not been denied any leave requested.



I understand that I have a seven-day period after signing this release in which to revoke in
writing any waiver of claims under the ADEA, and that this release will not be enforceable until
the end of the seven-day period. No benefits will be paid under this release until the eighth day
after I sign this release, at the earliest.



I understand and agree to return all confidential information, computer software or hardware,
files, paper, memoranda, correspondence, customer lists, financial data, credit cards, keys, tape
recordings, pictures, and security access cards, and any other items of any nature which were or
are the property of the Company. I further agree not to retain any copies of any such property in
my possession or under my control.



I agree not to disclose any information regarding the existence or substance of this Waiver and
Release, except to my spouse, tax advisor, and an attorney with whom I choose to consult regarding
this Waiver and Release.



I agree that the letter agreement dated September 1, 2006, the Secrecy Agreement and the Invention
Assignment Agreement (the “Agreements”) signed by me are incorporated herein by reference and that
I understand that my obligations under those Agreements remain in full force and effect.




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I agree that I shall not for any reason whatsoever and whether directly or indirectly,
either alone or jointly with any person, firm or corporation at any time, in any way, make
disparaging statements about the Company or any of its related entities, their products, services
or employees to any person, entity, vendor, contractor, subcontractor, competitor, customer or
potential customer of the Company.



I warrant that I have not assigned, pledged, or otherwise transferred any part of any claims or
causes of action that are the subject of the Agreement and/or the Waiver and Release and that no
other person or entity has any interest therein. I agree that, if any claims, including, but not
limited to, any claims for taxes, liens, subrogated interests, assignments, pledges, transfers,
contribution and/or indemnity exist, I will pay any and all obligations due as a result of any
such claims, and I further agree to DEFEND, INDEMNIFY AND HOLD THE RELEASED COOPER PARTIES
HARMLESS from any such claims.



I understand that following the seven-day revocation period, this release will be final and
binding.



The validity of the Agreement and this Waiver and Release shall be construed under Texas law. This
Waiver and Release and the Agreements constitute the complete and total agreement between the
Company and me. I represent that I am not relying on any other agreements or oral representations
not fully expressed in the Agreements. I agree that the Agreements shall not be modified, altered,
or discharged except by written instrument signed by an authorized Company representative and me.



Should any provision of the Agreements be declared invalid by a Court of competent jurisdiction,
the remaining provisions shall remain in full force and effect.



As used in this Waiver and Release, the word “Company” shall mean Cooper Industries, Ltd., its
incorporated divisions, wholly-owned subsidiaries, affiliates, successors and assigns, as well as
its agents, employees, directors, and officers acting in their individual and/or official
capacity.



I SIGN THIS WAIVER AND RELEASE VOLUNTARILY AND AM NOT RELYING ON ANY STATEMENT OR PROMISE OTHER
THAN AS CONTAINED IN THE AGREEMENTS AND THIS WAIVER AND RELEASE. I AGREE THAT I HAVE BEEN AND AM
ADVISED IN WRITING TO CONSULT WITH AN ATTORNEY PRIOR TO SIGNING THIS WAIVER AND RELEASE




	 	 	 	 	 	 	 	 	 	 	 
	Signed by:

	 	/s/ David R. Sheil
	 	 	 	For the Company:
	 	/s/ Kirk S. Hachigian
	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 

	 	David R Sheil
	 	 	 	 	 	Kirk S. Hachigian


Chairman, CEO and
President	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Dated:

	 	9/4/06
	 	 	 	Dated:
	 	9/1/06	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Witnessed by:

	 	Regina M. Sheil	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 





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Attachment A




ABB

Acuity Brands — Lithonia Lighting

Eaton Corp.

EGS/Appleton

Genlyte

Hubbell Inc.

Leviton

Pentair, Inc.

Schneider Electric

The Stanley Works

Thomas & Betts Corp.





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