Document:

exv10w1

 

Exhibit 10.1

SUMMARY OF COMPENSATION ARRANGEMENTS FOR

NAMED EXECUTIVE OFFICERS

     Following is a description of compensation arrangements that have been approved by the
Management Development and Compensation Committee (“Committee”) of the Company’s Board of Directors
for the Chief Executive Officer and the other four most highly compensated executive officers in
2004 (the “Named Executive Officers”).

Base Salary – The current annual base salaries of the Company’s Named Executive
Officers are as follows:

	 	 	 	 	 
	H. J. Riley, Jr. – Chairman and Chief Executive Officer
	 	$	1,100,000	 
	 	 	 	 	 
	K.S. Hachigian – President and Chief Operating Officer
	 	$	800,000	1
	 	 	 	 	 
	T.A. Klebe – Senior Vice President and Chief Financial Officer
	 	$	466,000	 
	 	 	 	 	 
	D.K. Schumacher – Senior Vice President, General Counsel
and Chief Compliance Officer
	 	$	430,000	 
	 	 	 	 	 
	D.R. Sheil – Senior Vice President, Human Resources and Chief
Administrative Officer
	 	$	388,500	 

	1	 	Reflects the increase to Mr. Hachigian’s base salary as a result
of his promotion to Chief Executive Officer effective May 1, 2005.

Annual Incentive Compensation

     On February 8, 2005, the Committee established performance goals and maximum bonus
opportunities for the Named Executive Officers and other executives for the fiscal year ending
December 31, 2005. The 2005 annual incentive compensation awards are made pursuant to the
Company’s Management Annual Incentive Plan, as amended, which was filed as Exhibit 10.18 to
Cooper’s Form 10-K for the fiscal year ended December 31, 2003. The performance goals for 2005 are
based upon actual results as compared to budgeted performance on two financial measures: (1)
earning per share; and (2) free cash flow, with the award being determined by reference to a matrix
of different performance levels. Participants can receive a bonus based on a percentage of their
annual salary if the Company meets threshold, good, target or maximum attainments. In determining
the actual annual incentive award to be part to an executive, the Committee may also consider the
executive’s individual performance objectives and personal contributions.

 

 

     The following table sets forth the minimum and maximum annual incentive award payouts for each
of the Company’s Named Executive Officers based on the achievement of the Company’s performance
criteria for the year ending December 31, 2005.

	 	 	 	 	 	 	 	 	 
	 	 	Minimum	 	 	Maximum	 
	 	 	Payout	 	 	Payout	 
	H.J. Riley, Jr.
	 	 	0	%	 	 	200	%
	 	 	 	 	 	 	 	 	 
	K.S. Hachigian
	 	 	0	%	 	 	180	%
	 	 	 	 	 	 	 	 	 
	T.A. Klebe
	 	 	0	%	 	 	120	%
	 	 	 	 	 	 	 	 	 
	D.K. Schumacher
	 	 	0	%	 	 	100	%
	 	 	 	 	 	 	 	 	 
	D.R. Sheil
	 	 	0	%	 	 	100	%

Stock Options

     The Company’s Amended and Restated Stock Incentive Plan provides for the granting of stock
options, restricted stock units and performance-based share awards to the Named Executive Officers
and other key executives. On February 8, 2005, the Committee approved the following nonqualified
stock option grants to the Named Executive Officers at an exercise price of $70.94, which was the
fair market value of the Company’s stock on the grant date.

	 	 	 	 	 
	H.J. Riley, Jr.
	 	0 shares
	 	 	 	 	 
	K.S. Hachigian
	 	47,500 shares
	 	 	 	 	 
	T.A. Klebe
	 	30,400 shares
	 	 	 	 	 
	D.K. Schumacher
	 	23,800 shares
	 	 	 	 	 
	D.R. Sheil
	 	21,400 shares

     In addition, in connection with Mr. Hachigian’s promotion to Chief Executive Officer and Mr.
Riley’s continued service as Chairman of the Company, on April 25, 2005, the Committee approved the
following non-qualified stock option grants at an exercise price of $65.47, which was the fair
market value of the Company’s stock on the grant date.

	 	 	 	 	 
	H.J. Riley, Jr.
	 	150,000 shares
	 	 	 	 	 
	K.S. Hachigian
	 	52,500 shares

 

 

     All the stock option grants disclosed above vest in three equal annual installments and expire
seven years after the grant date, except the options granted to Mr. Riley will expire on December
1, 2010.

Performance Shares

     On February 8, 2005 the Committee also set performance goals for performance – based share
awards for the Named Executive Officers and other key executives for a three-year performance
period beginning on January 1, 2005 and ending on December 31, 2007. The Committee set performance
goals tied to the cumulative compound growth in earnings per share during the performance period.
The Committee determined that compound earnings per share growth over the period of the at least 4%
was required before any award would be earned and at least 16% was required for a payout at the
maximum level. The awards, to the extent earned, will be distributed in Class A common shares of
Cooper, or at the executive’s election and upon approval by the Committee, up to 50% of the earned
award may be paid in cash. The following table presents information about the long term incentive
award granted in 2005 to the Named Executive Officers.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Performance or	 	 	Estimated Future
	 	 	Other Period until	 	 	Payouts Under
	 	 	Maturation or	 	 	Non-Stock Price-
	 	 	Payout	 	 	Based Plans
	 	 	 	 	 	 	Threshold	 	 	Target	 	 	Maximum	 
	 	 	 	 	 	 	(shares)	 	 	(shares)	 	 	(shares)	 
	H.J. Riley, Jr.
	 	 	—	 	 	 	0	 	 	 	0	 	 	 	0	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	K.S. Hachigian2
	 	February 2008	 	 	20,000	 	 	 	60,000	 	 	 	80,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	T.A. Klebe
	 	February 2008	 	 	4,350	 	 	 	13,040	 	 	 	17,380	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	D.K. Schumacher
	 	February 2008	 	 	3,400	 	 	 	10,200	 	 	 	13,600	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	D.R. Sheil
	 	February 2008	 	 	3,060	 	 	 	9,170	 	 	 	12,220	 

	2	 	Includes the following performance-based share awards granted to Mr.
Hachigian in recognition of his promotion to Chief Executive Officer effective My 1, 2005:
threshold 13,210 shares; target 39,640 shares; and maximum 52,860 shares.exv10w2

 

Exhibit 10.2

Summary of Nonemployee Director Compensation

     Cooper pays nonemployee directors an annual retainer fee of $45,000. In addition, nonemployee
directors are paid meeting attendance fees of $2,000 for regular Board meetings, $1,500 for regular
committee meetings and $2,000 for special Board or committee meetings. The Audit Committee
chairman receives a supplemental annual retainer of $10,000. Each nonemployee chairman of a
standing committee other than the Audit Committee receives a supplemental annual retainer of
$7,500. The Board has established a stock ownership guideline of three times the annual retainer
for each director.

     In lieu of receiving the annual retainer and meeting fees in cash, each nonemployee director
may elect, under the Directors Deferred Compensation Plan, to defer receipt of such amounts until a
date determined by the director or until retirement from the Board. Alternatively, each
nonemployee director may elect to receive all or a portion of the annual retainer fee and meeting
fees in Cooper Class A common shares instead of cash, under the Directors’ Retainer Fee Stock Plan,
which was approved by shareholders in April 1998. The Directors’ Retainer Fee Stock Plan also
provides that each nonemployee director may elect to defer the receipt of all or a portion of the
shares of Cooper stock otherwise payable under the Plan.

     Under the Directors’ Stock Plan, which was approved by the shareholders in April 1996, each
nonemployee director receives an annual stock award of 500 Cooper Class A common shares and 1,000
restricted stock units on each annual meeting date. Restricted stock units represent one Class A
common share each and vest during the year following grant on a pro rata basis depending on the
number of regularly scheduled board meetings during the year. Restricted stock units are credited
with additional shares equal to the amount of dividends that would have been paid on an equal
number of outstanding shares. Upon a director’s cessation of service on the board, restricted
stock units are converted into Class A common shares and are distributed to the director in
accordance with the director’s payment election. Each newly elected or appointed nonemployee
director receives, upon election or appointment, a pro rata stock and restricted stock unit award
according to the time remaining before the next annual meeting date. Each nonemployee director may
elect under the Directors’ Stock Plan to defer receipt of all or a portion of the Class A common
shares payable under the Plan until a date determined by the director or until retirement from the
Board. Each nonemployee director is also granted annually a stock option for 2,000 shares at fair
market value under the Directors’ Stock Plan. The option vests on the third anniversary of the date
of grant and has a 10-year term. As of December 31, 2004, options for 84,000 shares were
outstanding under the Directors’ Stock Plan.exv10w3

 

EXHIBIT 10.3

Cooper US, Inc.

Executive Stock Incentive Agreement

This Agreement is made as of the 8th day of February 2005 between Cooper US, Inc., a
Delaware corporation, having its principal place of business in Houston, Texas (the “Company”) and
                                        , an Executive of the Company (“Executive”). All
capitalized terms used in this Agreement are as defined in the Cooper Industries Stock Incentive
Plan (the “Plan”), unless otherwise defined in this Agreement.

     1. Performance Share Award

        (a) Performance Period. For purposes of this Agreement, the “Performance Period”
shall be January 1, 2005 to December 31, 2007.

        (b) Performance Share Grant. Pursuant to Section IX of the Plan and subject to
Paragraph 7 of this Agreement, the Company hereby grants to the Executive, as of the date hereof,
an award of Performance Shares that may be earned based on the financial performance of the Company
during the Performance Period, subject to the restrictions and conditions set forth in this
Agreement (“Performance Share Grant”). The Committee has established Performance Goals such that
if the Company achieves a cumulative annual growth rate of earnings per share (“EPS”) for the
Performance Period of four (4) percent or greater, then the Executive will be issued Performance
Shares in accordance with the following chart:

	 	 	 	 	 	 	 
	 	 	 	 	Fully Diluted EPS	 	 
	 	 	Annual EPS	 	Cumulative Total Over	 	Performance Shares
	Performance Goal	 	Growth Rate	 	Performance Period	 	That May Be Earned
	Threshold
	 	4%	 	$11.62	 	                                        
	Good
	 	8%	 	$12.55	 	                                        
	Target
	 	12%	 	$13.53	 	                                        
	Maximum
	 	16%	 	$14.56	 	                                        

        The number of shares appearing under the heading “Performance Shares That May Be Earned” shall
constitute the number of Performance Shares which may be earned by the

 

 

Executive based upon achievement of that specific Performance Goal as established by the Committee based on cumulative
EPS performance during the Performance Period (Threshold, Good, Target or Maximum). In the event
the Company’s actual annual growth rate of EPS for the Performance Period exceeds the Threshold
level of 4% but is lower than the Maximum level of 16%, the number of Performance Shares earned by
the Executive shall be determined by interpolation. In the event the Company’s actual annual
growth rate of EPS for the Performance Period is below the Threshold (4%) level, no Performance
Shares will be earned. The Maximum number of Performance Shares will be earned if the annual
growth rate of EPS equals or exceeds 16% during the Performance Period.

        At the end of the Performance Period, the Committee shall determine the Performance Goal
achieved and the number of Performance Shares, if any, earned by the Executive. Except for shares
withheld by the Company as provided in Paragraph 4 or shares the receipt of which has been deferred
as provided in Paragraph 5, the Company shall then cause its parent, Cooper Industries, Ltd., to
issue a stock certificate or book entry shares in the Executive’s name for the number of shares of
Common Stock equal to the Performance Shares earned by the Executive upon lapse of the forfeiture
restrictions set forth in Paragraph 3(a). The Company shall then provide stock certificate or
book-entry shares to the Executive.

     2. Dividends. Upon distribution of earned Performance Shares to Executive, the
Company shall pay to the Executive in cash an amount equal to the aggregate amount of cash
dividends that the Executive would have received had the Executive been the owner of record of all
such earned Performance Shares, including shares withheld as provided under Paragraph 4, if any,
from the effective date of this Agreement to the date of distribution.

     3. Restrictions and Limitations. The Executive hereby accepts the Performance Share
Grant and agrees to the following restrictions and conditions.

        (a) Forfeiture. Except as provided in (b) below, if the Executive’s active
employment with the Company terminates for any reason prior to the effective date upon which the
Committee determines the number of Performance Shares, if any, earned by the Executive,

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all earned and unearned Performance Shares granted under this Agreement shall be forfeited by the Executive
and this Performance Share Grant shall be null and void.

        (b) Termination Upon Death or Disability. In the event of the Executive’s death or
permanent and total disability under the Cooper Industries, Inc. Salaried Employees Retirement Plan
(or such other pension plan in which the Executive participates) on or after January 1, 2007, the
Executive or his heirs or beneficiaries shall receive a pro-rata share of the Performance Shares
which would have been earned by the Executive under this Agreement had he or she remained actively
employed throughout the Performance Period. In determining the pro-rata Performance Shares for
which the Executive or his heirs or beneficiaries may be eligible, the Company will multiply the
total Performance Shares earned during the Performance Period by a fraction the numerator of which
is the months in the Performance Period during which Executive was actively employed and the
denominator is thirty-six (36). Any Performance Shares earned and awarded under this provision
shall be approved by the Committee and distributed at the conclusion of the Performance Period.

        (c) Limitations on Transferability. The Executive shall not sell, exchange,
transfer, pledge, hypothecate or otherwise dispose of this Performance Share Grant prior to the
conclusion of the Performance Period and distribution of earned Performance Shares in accordance
with Paragraph 1 of this Agreement.

     4. Tax. Upon the issuance of Common Shares to the Executive for Performance Shares
earned under this Agreement, the Executive shall pay the Company any taxes required to be withheld
by reason of the receipt of compensation resulting from the issuance of such Common Shares. In
lieu thereof, the Company shall have the right to retain, or the Executive may direct the Company
to retain, a sufficient number of Common Shares to satisfy the Company’s withholding obligations,
provided the value of the Common Shares used to satisfy the withholding obligations does not exceed
the minimum required tax withholding for the transaction. The value of any Common Shares used to
satisfy the tax withholding requirement shall be determined by the average of the high and the low
trading prices of the Common Shares on the New York Stock Exchange on the date the restrictions
lapse (or if shares are not traded on the Exchange on such date, then on the immediately preceding
trading date).

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     5. Election to Defer Shares. The Executive may elect to defer the issuance and
receipt of Common Shares for all or any portion of the Performance Shares earned under this
Agreement until either the Executive’s termination of employment with the Company or a calendar
year specified by the Executive. In such an event, the Company shall credit to an account
maintained on behalf of such Executive (the “Executive Deferred Account”) the shares deferred. The
Executive Deferred Account shall be credited with all dividends or other distributions that the
Executive would have received had he or she been the owner of record of such deferred shares during
the deferral period. Accrued dividends credited to the Executive Deferred Account shall bear
interest equal to the average quarterly prime rate of interest charged by J.P.Morgan Chase Bank.
Until the deferred shares are issued to the Executive, the Executive shall have no other rights as
a shareholder of Cooper Industries, Ltd. with respect to such deferred shares.

        The deferred shares shall be issued in a lump sum or in up to five (5) annual installments in
accordance with the deferral election of the Executive unless the Executive dies prior to issuance
of all of the deferred shares. Upon issuance of any or all of such deferred shares, the Company
also shall pay to the Executive in cash a pro rata portion of the accrued dividends and interest in
the Executive Deferred Account. If the Executive elects deferral until termination of employment,
the first installment shall be made in January of the year following such termination. If the
Executive elects deferral until a specified calendar year, the first installment or, if elected,
the entire amount deferred shall be
made in January of such year. If the Executive dies prior to issuance of all of the deferred
shares or the payment of cash with respect thereto, all deferred shares shall be issued and all
cash payments shall be made in January of the year following the Executive’s death to the
Executive’s beneficiary or beneficiaries as such Executive may designate in writing to the Company.
A deferral election by an Executive hereunder must be made in writing to the Company on or before
December 31 of the year preceding the date the Performance Period concludes, shall specify the
percentage of Performance Shares earned, if any, to be deferred and shall be irrevocable.

     6. Change in Control. In the event of a Change in Control, the Performance Share
Grant shall be deemed earned at the Target level, all restrictions on those Performance Shares

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shall immediately lapse and distribution of the Target level of Performance Shares shall be
governed by the terms of the Plan.

     7. Consideration. The parties agree that the consideration for any issuance of Common
Shares for Performance Shares earned hereunder shall be past services by the Executive having a
value not less than the par value of such Common Shares.

     8. Plan Incorporated. The Executive acknowledges receipt of a copy of the Plan, which
is incorporated by reference into this Agreement. The Executive agrees that this Performance Share
Grant shall be subject to all of the terms and provisions of the Plan and this Agreement.

     9. Binding Effect. This Agreement shall be binding upon and inure to the benefit of
any successors to the Company and all persons lawfully claiming under the Executive.

     IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by an officer
thereunto duly authorized, and the Executive has executed this Agreement, all as of the date first
above written.

	 	 	 	 	 	 	 
	 	 	COOPER US, INC.	 	 
	 
	 	 	 	 	 	 
	

	 	By:	 	 	 	 
	

	 	 	 	

	 	 
	

	 	 	 	(name)

(title)	 	 
	 
	 	 	 	 	 	 
	 	 	EXECUTIVE	 	 
	 
	 	 	 	 	 	 
	

	 	By:	 	 	 	 
	

	 	 	 	

	 	 
	

	 	 	 	(name)

(title)	 	 

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