Document:

exv10w8

Exhibit 10.8

COOPER US, INC.

BASE SALARY DEFERRAL PLAN

 

 

COOPER US, INC.

BASE SALARY DEFERRAL PLAN

TABLE OF CONTENTS

	 	 	 	 	 
	Section	 	Page	 
	ARTICLE I
	 	 	 	 
	DEFINITIONS
	 	 	 	 
	 
	 	 	 	 
	1.1 Definitions
	 	 	2	 
	1.2 Construction
	 	 	4	 
	 
	 	 	 	 
	ARTICLE II
	 	 	 	 
	ELIGIBILITY FOR PLAN PARTICIPATION
	 	 	 	 
	 
	 	 	 	 
	2.1 Participation by Eligible Employees
	 	 	5	 
	2.2 Election Forms
	 	 	5	 
	 
	 	 	 	 
	ARTICLE III
	 	 	 	 
	ACCOUNTS AND DEEMED INTEREST
	 	 	 	 
	 
	 	 	 	 
	3.1 Establishment and Crediting of Accounts
	 	 	6	 
	3.2 Adjustment of Accounts
	 	 	6	 
	 
	 	 	 	 
	ARTICLE IV
	 	 	 	 
	DISTRIBUTION
	 	 	 	 
	 
	 	 	 	 
	4.1 Distributions
	 	 	7	 
	4.2 Post-Separation from Service Payment Options
	 	 	7	 
	4.3 In-Service Payment Options
	 	 	8	 
	4.4 Alternative Payment Forms
	 	 	8	 
	4.5 No Acceleration
	 	 	8	 
	4.6 Special Transition Elections
	 	 	9	 
	4.7 Section 409A Violation
	 	 	9	 
	4.8 Payment Upon Change in Control
	 	 	9	 
	4.9 Payment Upon Disability
	 	 	9	 
	4.10 Rules
	 	 	9	 
	 
	 	 	 	 
	ARTICLE V
	 	 	 	 
	BENEFICIARIES
	 	 	11	 
	 
	 	 	 	 
	ARTICLE VI
	 	 	 	 
	ADMINISTRATIVE PROVISIONS
	 	 	 	 
	 
	 	 	 	 
	6.1 Administration
	 	 	12	 
	6.2 Powers and Authorities of the Plan Administrator
	 	 	12	 
	6.3 Claims Review
	 	 	12	 

i

 

	 	 	 	 	 
	Section
	 	 	Page	 
	 
	ARTICLE VII
	 	 	 	 
	ADMINISTRATIVE PROVISIONS
	 	 	14	 
	 
	 	 	 	 
	ARTICLE VIII
	 	 	 	 
	MISCELLANEOUS
	 	 	 	 
	8.1 Non-Alienation of Benefits
	 	 	15	 
	8.2 Payment of Benefits to Others
	 	 	15	 
	8.3 Plan Non-Contractual
	 	 	15	 
	8.4 Funding
	 	 	16	 
	8.5 Controlling Status
	 	 	16	 
	8.6 Claims of Other Person
	 	 	16	 
	8.7 Specified Employees
	 	 	16	 
	8.8 Section 409A
	 	 	16	 
	8.9 Severability
	 	 	17	 
	8.10 Governing Law
	 	 	17	 

ii

 

COOPER US, INC.

BASE SALARY DEFERRAL PLAN

     WHEREAS, Cooper US, Inc. (the “Company”) desires to establish, effective January 1, 2007, the
Cooper US, Inc. Base Salary Deferral Plan (the “Plan”) to permit a select group of management
employees and highly compensated employees of the Company and its affiliates to defer a portion of
their compensation; and

     WHEREAS, the Plan is intended to comply with Section 409A of the Internal Revenue Code of
1986, as amended (“Section 409A”) and shall be construed consistently with such intent;

     NOW, THEREFORE, effective January 1, 2007, the Plan is hereby established as hereinafter set
forth.

 

 

ARTICLE I

DEFINITIONS

     1.1 Definitions. As used herein, the following words shall have the meanings
hereinafter set forth unless otherwise specifically provided.

     (1) The term “Affiliate” shall mean any member of a controlled group of
corporations (as determined under Section 414(b) of the Code) of which the Company
is a member and any member of a group of trades or business under common control (as
determined under Section 414(c) of the Code) with the Company; any member of an
affiliated service group (as determined under Section 414(m) of the Code) of which
the Company is a member; and any other entity which is required to be aggregated
with the Company pursuant to the provisions of Section 414(o) of the Code.

     (2) The term “Base Salary” shall mean the annual base cash compensation
relating to services performed during any Plan Year by a Participant and designated
as “salary” by the Employer. Base Salary shall be calculated before any reduction
for compensation voluntarily deferred or contributed by or on behalf of a
Participant under all qualified and nonqualified plans of the Employer and shall
include amounts not included in a Participant’s gross income due to deferrals to
plans of the Employer pursuant to provisions of Sections 125, 129, 132(f),
402(e)(3), or 402(h) of the Code.

     (3) The term “Beneficiary” shall mean the person or persons who, in accordance
with the provisions of Article V, is entitled to distribution hereunder in the event
a Participant dies before his interest under the Plan has been distributed to him in
full.

     (4) The term “Change in Control” shall mean a change in the ownership or
effective control of the Company or a change in the ownership of a substantial
portion of the assets of the Company that constitutes a “change in control” under
Section 409A.

     (5) 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.

     (6) The term “Company” shall mean Cooper US, Inc., its corporate successors,
and the surviving corporation resulting from any merger of Cooper US, Inc. with any
other corporation or corporations.

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     (7) The term “Deferral” shall mean that portion of the Base Salary of a
Participant for each Plan Year that such Participant elects to defer pursuant to the
terms of the Plan.

     (8) The term “Deferral Account” shall mean the bookkeeping account established
under the Plan in the name of each Participant to reflect the Deferrals of such
Participant.

     (9) The term “Disability” shall mean that the Participant (i) is unable to
engage in any substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or can be
expected to last for a continuous period of not less than twelve months or (ii) is,
by reason of any medically determinable physical or mental impairment that can be
expected to result in death or can be expected to last for a continuous period of
not less than twelve months, receiving income replacement benefits for a period of
not less than three months under a welfare benefit plan covering employees of the
Employer.

     (10) The term “Election Form” shall mean the form which may be electronic,
telephonic or hard copy and on which a Participant elects to defer a portion of his
Base Salary under the Plan as provided in Section 2.1 and to receive distribution
thereof pursuant to the provisions of Article IV.

     (11) The term “Eligible Employee” shall mean any highly compensated or select
management employee of the Company or an Affiliate who is designated by the Plans
Administration Committee to participate in the Plan with respect to a particular
Fiscal Year.

     (12) The term “Employer” shall mean the Company as well as any Affiliates of
the Company that is designated as a participating employer under the Plan by the
Plans Administration Committee.

     (13) The term “ERISA” shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time. Reference to a section of ERISA shall include
such section and any comparable section or sections of any future legislation that
amends, supplements, or supersedes such section.

     (14) The term “Participant” shall mean an Eligible Employee who elects to defer
a portion of his Base Salary under the Plan pursuant to the provisions of Article
II.

     (15) The term “Plan” shall mean the Cooper US, Inc. Base Salary Deferral Plan
with all amendments, supplements, and modifications hereafter made.

     (16) The term “Plan Administrator” shall mean the Company.

     (17) The term “Plan Year” shall mean the calendar year.

3

 

     (18) The term “Section 409A” shall mean Section 409A of the Code, and the
regulations and rulings promulgated thereunder.

     (19) The term “Separation from Service” shall mean the termination of
employment of a Participant with the Company and all Affiliates for any reason other
than death; provided, however, that a Company-approved leave of absence shall not be
considered a termination of employment if the leave does not exceed six months or,
if longer, so long as the Participant’s right to reemployment is provided either by
statute or by contract. Notwithstanding the foregoing, whether or not a Participant
has incurred a Separation from Service shall be determined in accordance with
Section 409A.

     (20) The term “Specified Employee” shall mean a “specified employee” within the
meaning of Section 409A and the Company’s Specified Employee identification policy,
if any.

     1.2 Construction. Where necessary or appropriate to the meaning herein, the singular
shall be deemed to include the plural and the masculine pronoun to include the feminine.

4

 

ARTICLE II

ELIGIBILITY FOR PLAN PARTICIPATION

     2.1 Participation by Eligible Employees. Each Eligible Employee may elect to become a
Participant in the Plan and to defer a percentage of his Base Salary, in integral increments of 1%
to 50%, by filing with the Company or its designee a completed Election Form prior to the beginning
of the Plan Year during which the Eligible Employee performs the services for which such Base
Salary is to be earned.

     2.2 Election Forms. Each Election Form is irrevocable as of the first day of the Plan
Year in which such Base Salary is to be earned and a new Election Form must be filed by a
Participant with respect to each Plan Year.

5

 

ARTICLE III

ACCOUNTS AND DEEMED INTEREST

     3.1 Establishment and Crediting of Accounts. Each Participant shall have a
bookkeeping Deferral Account established in his name that will reflect the Deferrals of the
Participant and interest credited thereon pursuant to Section 3.2.

     3.2 Adjustment of Accounts. Each Deferral Account shall be deemed to earn, and shall
be credited daily with, a rate of interest equal to the average prime rate published by JPMorgan
chase Bank for the immediately prior calendar quarter.

6

 

ARTICLE IV

DISTRIBUTION

     4.1 Distributions. Subject to the provisions of Section 4.2, 4.3, 4.5, 4.6, 4.7, and
4.8, on and after January 1, 2007, the Deferral Accounts of a Participant shall be distributed to a
Participant or his Beneficiary in the form and time set forth on the Election Form filed with the
Company or its designee by the Participant in accordance with procedures established by the Plan
Administrator. The elections made on an Election Form shall continue in effect for future Plan
Years unless subsequent elections pursuant to the provisions of Section 4.4 are made and become
effective. Notwithstanding the foregoing provisions of this Section 4.1, in the event any
Participant fails to file an Election Form indicating the time and form of the distribution of his
Deferral Account, his Deferral Account shall be distributed in a lump sum payment on the first
payroll date of the seventh month following his Separation from Service; provided, however, that
such distribution provisions shall be subject to the provisions of Section 4.5.

     4.2 Post-Separation from Service Payment Options. Except as otherwise provided in
this Article IV and subject to the provisions of Section 8.7, the Deferral Account of a Participant
shall be paid to such Participant on account of Separation from Service under one of the following
options elected by the Participant:

	 	(a)	 	Single Sum Option — Payment in a single sum as of the
first day of the calendar year quarter immediately after the Participant’s
Commencement Date.
	 
	 	(b)	 	Installment Option — Payment in annual installments as
of the first day of the calendar year quarter immediately after the
Participant’s Commencement Date over a period of 3, 5, 7, or 10 years as
specified by the Participant on his Election Form. To the extent permitted by
Section 409A, installment payments shall be treated as a single payment.

For purposes hereof, a Participant’s Commencement Date shall be the .5, 3, 5, or 10 year
anniversary of the Participant’s Separation from Service as indicated on the Participant’s

7

 

Election Form. Notwithstanding the foregoing, subject to the requirements of Section 409A, if the
balance of a Participant’s Deferral Account on his Separation from Service is less than $25,000,
such amount shall be paid to him in a single sum payment (in lieu of any other payment method that
he may have elected) on the first day of the calendar year quarter immediately following the
six-month anniversary of such Participant’s Separation from Service.

     4.3 In-Service Payment Options. Except as otherwise provided in this Article IV and
subject to the provisions of Section 8.7, any Deferral, or portion thereof, for a Plan Year that is
credited to the Deferral Account of a Participant shall be paid to such Participant while still
employed by the Employer as indicated on the Participant’s Election Form in a single sum on a date
that is at least 5 years after the Deferral was credited to the Participant’s Deferral Account.

     4.4 Alternative Payment Forms. Subject to the Company’s consent, a Participant who is
employed by the Employer may elect to delay payment or to change the form of payment of his
Deferral Account, if all the following conditions are met:

     (i) Such election will not take effect until at least twelve months after the date on
which the election is made; and

     (ii) The payment with respect to which such election is made is deferred for a period
of not less than five years from the date such payment would otherwise be made; and

     (iii) Any election for a “specified time (or pursuant to a fixed schedule)” within the
meaning of Section 409A(a)(2)(A)(iv) of the Code, may not be made less than twelve months
prior to the date of the first scheduled payment.

To the extent permitted under Section 409A, installment payments shall be treated as a single
payment.

     4.5 No Acceleration. Except as permitted under Section 409A, no acceleration of the
time or form of payment of a Participant’s Deferral Account under the Plan shall be permitted.

8

 

     4.6 Special Transition Elections.

          (a) Changes in Payment Elections. During 2007 and 2008, a Participant may make an
election(s) to receive payment of his Deferral Account without complying with the requirements of
Section 4.1; provided, however, that such election(s) shall only be effective:

(i) If made in 2007, it applies only to amounts that would not otherwise be payable
in 2007 and does not cause an amount to be paid in 2007 that would not otherwise be
payable in 2007; and

(ii) If made in 2008, it applies only to amounts that would not otherwise be payable
in 2008 and that does not cause an amount to be paid in 2008 that would not
otherwise be payable in 2008.

     4.7 Section 409A Violation. If the Plan fails to meet the requirements of Section
409A with respect to a Participant, the Company shall distribute the amount required to be included
in such Participant’s gross income as a result of such failure within 60 days of the Company’s
determination of such compliance failure.

     4.8 Payment Upon Change in Control. Notwithstanding any provision of the Plan to the
contrary, to the extent permitted under Section 409A, the balance of the Deferral Account of a
Participant under the Plan shall be paid to such Participant within 15 days following a Change in
Control.

     4.9 Payment Upon Disability. Notwithstanding any provision of the Plan to the
contrary, to the extent permitted under Section 409A, the balance of the Deferral Account of a
Participant who incurs a Disability shall be paid to such Participant as of the first day of the
calendar year quarter following a decision by the Plan Administrator that the Participant has
incurred a Disability.

     4.10 Rules. Subject to the provisions of Section 409A, the Plan Administrator may
from time to time adopt additional policies or rules governing the manner in which distributions

9

 

are made from the Plan so that the Plan may be conveniently administered and comply with
Section 409A.

10

 

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 shall be distributed in a single sum to his Beneficiary who shall
be the person designated as his beneficiary on the beneficiary designation form provided by and
filed with the Employer or its designee. If the Participant does not designate a Beneficiary, the
Beneficiary shall be his surviving spouse. If the Participant does not designate a Beneficiary and
has no surviving spouse, the Beneficiary shall be the Participant’s estate. The designation of a
Beneficiary may be changed or revoked only by filing a new beneficiary designation form with the
Plan Administrator or its designee. If a Beneficiary (the “Primary Beneficiary”) is receiving or
is entitled to receive payments under the Plan and dies before receiving all of the payments due
him, the balance to which he is entitled shall be paid to the Contingent Beneficiary, if any, named
in the Participant’s current beneficiary designation form. If there is no Contingent Beneficiary,
the balance shall be paid to the estate of the Primary Beneficiary. Any Beneficiary may disclaim
all or any part of any benefit to which such Beneficiary shall be entitled hereunder by filing a
written disclaimer with the Plan Administrator before payment of such benefit is to be made. Such
a disclaimer shall be made in form satisfactory to the Plan Administrator and shall be irrevocable
when filed. Any benefit disclaimed shall be payable from the Plan in the same manner as if the
Beneficiary who filed the disclaimer had died on the date of such filing. Notwithstanding the
foregoing, the six-month delay applicable to Participants under Article IV shall not apply to any
Beneficiary.

11

 

ARTICLE VII

ADMINISTRATIVE PROVISIONS

     6.1 Administration. The Plan shall be administered in a manner consistent with the
requirements of Section 409A, as from time to time amended.

     6.2 Powers and Authorities of the Plan Administrator. The Plan Administrator 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 Plan Administrator 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.

     6.3 Claims Review. Any Eligible Employee or Participant, as the case may be, who is
eligible for a benefit under the Plan, and does not receive the amount of benefit to which he
believes he is entitled, may submit an application therefor to the Plan Administrator requesting
such distribution or withdrawal. The Plan Administrator shall accept, reject or modify such
request and shall notify the requesting party in writing, setting forth the response of the Plan
Administrator and, in the case of a denial or modification, the Plan Administrator shall:

	 	(a)	 	state the specific reason or reasons for the denial or modification;
	 
	 	(b)	 	provide specific reference to pertinent Plan provisions on which the denial or
modification is based;
	 
	 	(c)	 	provide a description of any additional material or information necessary for
the requesting party to perfect the claim and an explanation of why such material or
information is necessary; and
	 
	 	(d)	 	explain the Plan’s claim review procedures as contained herein.

12

 

     In the event the request is denied or modified, if the requesting party desires to have such
denial or modification reviewed, he must, within 60 days following receipt of the notice of such
denial or modification, submit a written request for review by the Plan Administrator of the
initial decision of the Plan Administrator. As soon as practicable, and in no event later than 120
days following such request for review, the Plan Administrator shall, after providing a full and
fair hearing, render its final decision in writing to the requesting party stating specific reasons
for such decision.

13

 

ARTICLE VII

AMENDMENT AND TERMINATION

     The Company may amend, modify, suspend or terminate (individually or in the aggregate, a
“Change”) the Plan for any purpose or extend the Plan to any Affiliate, except that: (i) no Change
shall adversely affect the benefit amount that any Participant is receiving, or is eligible to
receive, under the Plan, unless an equivalent benefit is otherwise provided under another plan or
program sponsored by the Company or an Affiliate; and (ii) no distribution of a Deferral Account
subject to the Plan shall occur unless the requirements of Section 409A have been met.

14

 

ARTICLE VIII

MISCELLANEOUS

     8.1 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 Plan Administrator may select.

     8.2 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 Plan Administrator 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 benefit so paid.

     8.3 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.

15

 

     8.4 Funding. In order to provide a source of payment for its obligations under the
Plan, the Company may establish a grantor trust. Subject to the provisions of the trust agreement
governing such grantor trust, 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 an Employer.

     8.5 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.

     8.6 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.

     8.7 Specified Employees. Notwithstanding anything in the Plan to the contrary, in the
event that a Participant is a Specified Employee at the time of his Separation from Service, to the
extent his benefit under the Plan constitutes “nonqualified deferred compensation” within the
meaning of Section 409A, no Plan benefit shall be paid or begin to be paid to him until the 30-day
period commencing after the six-month period following his Separation from Service; provided,
however, that if such 30-day period begins in one calendar year and ends in another, such
Participant shall have no right to designate the calendar year of payment.

     8.8 Section 409A. Notwithstanding any provision to the contrary in the Plan, nothing
shall restrict the Company’s right to amend the Plan, without the consent of Participants and

16

 

without additional consideration to affected Participants, to the extent necessary to avoid
taxation, penalties, and/or interest arising under Section 409A, even if such amendments reduce,
restrict, or eliminate rights granted thereunder before such amendments. Although the Company
shall use its best efforts to avoid the imposition of taxation, penalties, and/or interest under
Section 409A, tax treatment of deferrals and other credits under the Plan is not warranted or
guaranteed. If, at any time, it is determined that amounts deferred pursuant to the Plan are
currently taxable to a Participant or his Beneficiary under Section 409A, the amounts credited to
such Participant’s Deferral Account which become so taxable shall be distributed immediately to
him; provided, however, that in no event shall amounts so payable under the Plan to a Participant
exceed the value of his Deferral Account. Notwithstanding the foregoing, the Company, any
Affiliate, or any delegatee shall not be held liable for any taxes, penalties, interest or other
monetary amount owed by any Participant, Beneficiary, or other person as a result of the deferral
or payment of any amounts under the Plan or as a result of the administration of amounts subject to
the Plan.

     8.9 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.

     8.10 Governing Law. The provisions of the Plan shall be governed and construed in
accordance with the laws of the State of Texas.

	 
	Executed at Houston, Texas this                     day of December 2008.

	 	 	 	 	 
	 	COOPER US, INC.

 	 
	 	By:  	 	 
	 	 	Title: 	 
	 	 	 	 
	 

17exv10w9

Exhibit 10.9

COOPER INDUSTRIES

AMENDED AND RESTATED

MANAGEMENT ANNUAL INCENTIVE PLAN

(As Amended and Restated for Non-Deferral Terms as of February 13, 2006)

(As Amended and Restated in connection with Section 409A, Effective January 1, 2005)

BACKGROUND

     The Cooper Industries Amended and Restated Management Annual Incentive Plan (“Plan”) is a
bonus plan for senior executives designed to link executive compensation to achievement of
short-term business objectives. The Plan was last approved by shareholders on April 25, 2006, when
the maximum annual Award was increased from $2.5 million to $3 million and the Plan was extended
until March 11, 2011. The Plan was also amended to require proportionate adjustments to Shares
upon certain corporate transactions.

     Plan Awards are subject to unilateral reduction or elimination by the Committee after the
Performance Period and are paid in the calendar year in which Participants obtain a “legally
binding right” to Awards. Thus, Awards paid in the normal course (i.e., in the absence of
voluntary deferral elections by Participants) should not constitute “deferred compensation” within
the meaning of Section 409A. Similarly, Plan amendments that apply solely to annual bonus
opportunity paid in the normal course should not result in “material modifications” that subject
pre-2004 deferrals under the Plan to Section 409A.

     Awards paid in Shares have historically been deferred under the terms of this Plan, rather than
under the Cooper Industries Management Incentive Compensation Deferral Plan. Plan terms applicable
to Share deferrals have not been amended since October 3, 2004, and those Plan terms (the “Pre-409A
Employee Share Deferral Terms”) have been frozen and shall not be modified except as permitted
under Section 409A, so as to preserve the grandfathered status of pre-2004 Share deferrals and
related earnings thereunder. Deferrals retained and administered under the Pre-409A Employee Share
Deferral Terms are those employee Share deferrals that were earned and vested as of December 31,
2004, and income attributable to such grandfathered deferrals. The terms of the Plan applicable to
Share deferrals are being deleted effective January 1, 2005 and no such deferrals are permitted
after such date.

I. Purpose of the Plan

     The Cooper Industries Amended and Restated Management Annual Incentive Plan is intended to
provide Cooper Industries, Ltd. (“the Company”) a means by which it can engender and sustain a
sense of personal commitment on the part of its Senior Executive Officers in the continued growth,
development, and financial success of the Company and 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 Senior Executive Officers annual
incentive compensation on the terms and conditions established herein.

1

 

II. Definitions

     2.1 “Affiliates” shall have the meaning set forth in Rule 12b-2 under Section 12 of the
Exchange Act.

     2.2 “Annual Incentive Award” or “Award” means the compensation payable in cash or Shares
granted under the Plan to a Participant by the Committee pursuant to such terms, conditions,
restrictions, and limitations established by the Committee and the Plan.

     2.3 “Board” means the Board of Directors of the Company.

     2.4 “Change in Control” shall mean a change in control in the ownership or effective control
of the Company, or in the ownership of a substantial portion of the assets of the Company, within
the meaning of Section 409A.

     2.5 “Code” means the Internal Revenue Code of 1986, as amended from time to time.

     2.6 “Committee” means the Management Development and Compensation Committee of the Board, or
such other committee designated by the Board to administer the Plan; provided that the
Committee shall consist of three or more persons each of whom is an “outside director” within the
meaning of Section 162(m) and a “disinterested person” within the meaning of Rule 16b-3 under the
Exchange Act.

     2.7 “Exchange Act” means the Securities Exchange Act of l934, as amended from time to time.

     2.8 “Participant” means a Senior Executive Officer of the Company who is selected by the
Committee to participate in the Plan.

     2.9 “Performance Goals” shall be defined as the performance criterion or criteria established
by the Committee, pursuant to Section V hereof, for the purpose of determining Awards under the
Plan.

     2.10 “Performance Period” means the consecutive 12 month period that constitutes the Company’s
fiscal year.

     2.11 “Plan” means the Cooper Industries Amended and Restated Management Annual Incentive Plan
(as amended and restated February 13, 2006, and as further amended, effective January 1, 2005, for
compliance with Section 409A).

     2.12 “Pre-409A Employee Share Deferral Terms” shall mean the terms of the Cooper Industries
Amended and Restated Management Annual Incentive Plan that relate to deferral of Share Awards, as
in effect on October 3, 2004.

2

 

     2.13 “Section 162(m)” means Section 162(m) of the Code and the regulations promulgated
thereunder.

     2.14 “Section 409A” means Section 409A of the Code and the regulations and rulings promulgated
thereunder.

     2.15 “Senior Executive Officer” means the Chairman; Chief Executive Officer; President; Chief
Operating Officer; any Executive Vice President; any Senior Vice President; or any other senior
officer reporting directly to the Chief Executive Officer who is designated as a Participant in the
Plan.

III. Administration

     3.1 The overall administration of the Plan, including the final determination of Awards to
each Participant, is vested in the Committee.

     3.2 Determinations of the Committee in administering the Plan shall be final and binding upon
all Participants.

IV. Eligibility

     Participation in the Plan shall be limited to Senior Executive Officers. Participants will be
selected for participation annually by the Committee not later than 90 days after the commencement
of the Performance Period. The Committee may withdraw its approval for participation in the Plan
for a Participant at any time. In the event of such withdrawal, such Participant shall cease to be
a Participant as of the date designated by the Committee and the individual shall be notified of
such withdrawal as soon as practicable following such action. Further, such individual shall cease
to have any right to an Award for the Performance Period in which such withdrawal is effective;
provided, however, that the Committee may, in its sole discretion, authorize a prorated
award based on the number of full months of participation prior to the effective date of such
withdrawal and the Company’s performance during such period.

V. Performance Goals and Measures

     5.1 Performance Goals shall be established by the Committee not later than 90 days after
commencement of the Performance Period relating to a specific Award. The Performance Goals may be
identical for all Participants or, at the discretion of the Committee, may be different to reflect
more appropriate measures of individual performance. The criterion or criteria used in
establishing Performance Goals may, at the discretion of the Committee, include one or any
combination of the following: (i) the Company’s return on equity, assets, capital or investment;
(ii) pre-tax or after-tax profit levels expressed in absolute dollars or earnings per Share of the
Company; or (iii) cash flow or similar measure. The Performance Goals established by the Committee
shall include a threshold level of performance below which no Award will be payable and a maximum
Award opportunity for each Senior Executive Officer. The determination of attainment of the
Performance Goals shall be determined in accordance with generally accepted accounting principles
and certified in writing by the Committee.

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     5.2 The Committee shall be authorized to make adjustments in the method of calculating
attainment of Performance Goals in recognition of: (i) extraordinary or non-recurring items, (ii)
changes in tax laws, (iii) changes in generally accepted accounting principles or changes in
accounting policies, (iv) charges related to restructured or discontinued operations, (v)
restatement of prior period financial results, and (vi) any other unusual, non-recurring gain or
loss that is separately identified and quantified in the Company’s financial statements.
Notwithstanding the foregoing, the Committee may, at its sole discretion, modify the performance
results upon which Awards are based under the Plan, to offset any unintended result(s) arising from
events not anticipated when the Performance Goals were established, provided that such
adjustment is permitted by Section 162(m).

VI. Awards

     6.1 Awards under the Plan shall be paid in cash.

     6.2 At the first meeting of the Committee after the expiration of the Performance Period, the
Committee shall review the prior year’s performance in relation to the Performance Goals and
determine the level of achievement of the Performance Goals. Payment of Annual Incentive Awards to
Participants under the Plan shall occur only after the Committee has certified in writing that the
Performance Goals have been achieved for the relevant Performance Period; provided that
payment shall occur on or before June 15 of the calendar year immediately following the Performance
Period. Notwithstanding the attainment of Performance Goals for the Company as a whole, Awards for
individual Participants under the Plan may be denied or adjusted by the Committee, in its sole
judgment, based on its assessment of the Participant’s performance. However, no upward adjustment
may be made to an Award for a Participant if Section 162(m) would limit the deduction the Company
may claim for that Participant’s compensation. Further, the total Award, as adjusted, shall not
exceed the maximum Award opportunity. The maximum Annual Incentive Award that may be granted to a
Senior Executive Officer under the Plan for any Performance Period shall be $3.0 million.

VII. Deferrals and Settlements

     The Committee may permit Participants to elect to defer receipt of all or a portion of the
Annual Incentive Award pursuant to the terms of the Company’s Management Incentive Compensation
Deferral Plan.

VIII. Withholding Taxes

     The Company shall have the right to deduct from any payment to be made pursuant to the Plan
the amount of any taxes required by law.

IX. No Right to Continued Employment or Awards

     No person shall have any claim or right to be granted an Award, and the granting of an Award
shall not be construed as giving a Participant the right to be retained in the employ of the

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Company or any of its subsidiaries. Further, the Company and its subsidiaries expressly
reserve the right at any time to terminate the employment of any Participant free from any
liability under the Plan; except that a Participant, who meets or exceeds the Performance Goals for
the Performance Period and was actively employed for the full term of the Performance Period, will
be eligible for an Award even though the Participant is not an active employee of the Company at
the time the Committee grants Awards under the Plan.

X. Change in Control

     10.1 Vesting. Immediately upon a Change in Control, all outstanding Awards shall be
deemed earned at the Target Performance Goal level with respect to the portion of such Award equal
to the amount of such Target Performance Goal level Award for the Participant multiplied by a
fraction, the numerator of which is the number of months elapsed in the year of the Change in
Control (with any partial month counted as a full month for such purpose) and the denominator of
which is 12 (such Award to be called the “Earned Pro Rata Award”).

     10.2 Payment. In the absence of a valid deferral of an Award pursuant to the Pre-409A
Employee Share Deferral Terms or the Cooper Industries Management Incentive Compensation Deferral
Plan, the Company shall, within ten (10) days after the occurrence of a Change in Control, make, or
cause to be made, a lump sum cash payment to the Participant equal to the Earned Pro Rata Award.

XI. Amendment, Modification, Suspension or Termination

     The Board may amend, modify, suspend or terminate (individually or in the aggregate, a
“Change”) this Plan for any purpose except that: (i) no Change shall be effective prior to approval
by the Company’s shareholders to the extent that such approval is then required pursuant to Section
162(m) or otherwise required as a matter of law; and (ii) no Change to the Plan shall be effective
that would (a) increase the maximum amount that can be paid to a Participant under the Plan, (b)
change the performance criterion or criteria set forth in Section V hereof for the payment of
Awards or (c) modify the eligibility requirements for Participants in the Plan unless first
approved by the Company’s shareholders.

XII. Governing Law

     The validity, construction and effect of the Plan and any actions taken or relating to the
Plan shall be determined in accordance with the laws of the State of Texas and applicable Federal
law.

XIII. Other Benefit and Compensation Programs

     Unless otherwise specifically provided to the contrary in the relevant plan, program, or
practice, Awards received by Participants under the Plan shall not be deemed a part of a
Participant’s regular, recurring compensation for purposes of calculating payments or benefits
under any other Company benefit plan, program, or practice or any severance policy of the Company.
Further, the Company may adopt other compensation programs, plans, or

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arrangements for employees below the level of Senior Executive Officer as it deems necessary
and appropriate.

XIV. Successors and Assigns

     The Plan shall be binding on all successors and assigns of a Participant, including, without
limitation, the estate of such Participant and the executor, administrator, or trustee of such
estate, or any receiver or trustee in bankruptcy or representative of the Participant’s creditors.

XV. Effective Date and Term

     The shareholders of the Company approved the extension of the term of the Plan until March 1,
2011. After termination of the Plan, no future Awards may be granted but previously outstanding
Awards shall remain outstanding in accordance with their applicable terms and conditions and the
terms and conditions of the Plan.

XVI. Interpretation

     The Plan is designed to comply with Section 162(m) and, to the extent applicable, Section
409A, and all provisions hereof shall be construed in a manner consistent with that intent.

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