COOPER INDUSTRIES
MANAGEMENT INCENTIVE COMPENSATION
DEFERRAL PLAN
POST-2004 PART
(Effective January 1,
2005)
In order to comply
with the requirements of Section 409A of the Internal Revenue
Code of 1986, as amended, and the Treasury regulations and rulings
thereunder (collectively, “Section 409A”) and to
facilitate administration of deferrals under Section 409A, the
Cooper Industries Management Incentive Compensation Deferral Plan
has been bifurcated into pre-409A and post-2004 parts.
The terms of the
Cooper Industries Management Incentive Compensation Deferral Plan
as in effect on October 3, 2004 (“Pre-409A Part”),
have been frozen and shall not be modified except as permitted
under Section 409A so as to preserve the grandfathered status
of deferrals and related earnings thereunder. Deferrals retained
under the Pre-409A Part are those employee deferrals that were
earned and vested as of December 31, 2004, and income
attributable to such grandfathered deferrals.
The terms of the
Cooper Industries Management Incentive Compensation Deferral Plan,
as amended and restated effective January 1, 2005, for
compliance with Section 409A shall constitute the
“Post-2004 Part.” Deferrals that were earned or vested
after December 31, 2004, including those for Award Years 2004,
2005, 2006, and 2007, although technically made under the Pre-409A
Part, were made and administered in good faith in accordance with
the requirements of Section 409A. Such non-grandfathered
deferrals and related earnings have been transferred to, and have
become part of, Accounts under the Post-2004 Part. Deferrals of
Participants for Award Year 2008 and later Award Years shall be
made under the Post-2004 Part.
The Pre-409A Part
and the Post-2004 Part shall together constitute the Cooper
Industries Management Incentive Compensation Deferral Plan
(“Plan”).
ARTICLE 1
Purposes of the Plan
The Plan is
intended to provide a method for attracting and retaining key
employees of Cooper Industries, Ltd. (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.
The following are
defined terms wherever they appear in this Post-2004
Part:
“Account” shall mean the bookkeeping account
established for a Participant or former Participant under
Article 4.
“Affiliate” shall mean all employers, present
and future, with whom the Company is considered a single employer
under Sections 414(b) and 414(c) of the Code.
“Award
Year” shall mean the initial calendar year beginning
January 1, 2004, and each calendar year thereafter, for which
an Incentive Award would become payable in one lump sum in the
calendar year immediately following the Award Year. The term
“Award Year” shall not be changed to a period that is
not the calendar year unless appropriate changes are made to the
Post-2004 Part, including those dealing with Participant elections,
to conform with the requirements of Section 409A.
“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.
“Code” shall mean the Internal Revenue Code of
1986, as amended from time to time.
“Committee” shall mean a 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 to
administer the Plan, including the Post-2004 Part.
“Company” shall mean Cooper Industries,
Ltd.
“Deduction Limitation” shall mean, to the extent
allowed under Section 409A, the following described limitation
on a distribution that is otherwise payable pursuant to the
provisions of the Post-2004 Part. If the Company determines in good
faith that there is a reasonable likelihood that a distribution
under the Post-2004 Part would not be deductible by the Company
when paid solely by reason of the limitation under Section 162(m)
of the Code, the Company may defer that amount of the distribution
to the extent deemed necessary to ensure deductibility;
provided, however , that the Deduction Limitation shall not
be applied to any distributions made after a Change in Control and
provided further that the amounts deferred (and amounts
credited thereon) because of Section 162(m) shall be distributed to
the Participant (or designated beneficiary in the event of the
Participant’s death) at the earlier of (i) the earliest
possible date that they are deductible or (ii) a Change in
Control. Any amounts deferred pursuant to the Deduction Limitation
shall continue to be credited with interest equivalents in
accordance with Section 4(b).
“Deferred Compensation” shall mean, for any
particular Award Year, an Incentive Award that has been deferred
for that Award Year pursuant to the terms of the Post-2004 Part and
the interest equivalents related to such Incentive Award. Deferred
Compensation shall
include
Incentive Awards deferred for Award Years 2004, 2005, 2006, and
2007, which were administered in good faith pursuant to the
transitional rules of Section 409A.
“Employee” shall mean an individual carried on
and paid through the payroll of the Company or an Affiliate as an
employee.
“ERISA” shall mean the Employee Retirement
Income Security Act of 1974, as amended from time to
time.
“Incentive Award” shall mean, for any particular
Award Year, the annual incentive compensation or bonus awarded to
Employees under the Cooper Industries Annual Management Incentive
Plan or another annual bonus plan for key Employees of the Company
or an Affiliate and payable (or otherwise payable but for deferral
under the Post-2004 Part) on or before March 15 of the
immediately succeeding calendar year (or any other later time
during such calendar year specified in the Cooper Industries Annual
Management Incentive Plan or other bonus plan).
“Participant” shall mean each Employee who
participates in the Post-2004 Part in accordance with its terms and
conditions. To the extent required by the context, a Participant
shall include an inactive or former Participant.
“Performance-Based Compensation” shall mean
compensation that is not equity-based compensation and that is
contingent on the satisfaction of pre-established organizational or
individual performance criteria relating to a performance period of
at least twelve (12) consecutive months in which Participants
perform services. Performance criteria shall be established in
writing not later than ninety (90) days after the commencement
of the period of service to which the criteria relate. Compensation
shall not be Performance-Based Compensation if any amount or
portion will be paid regardless of performance or is based upon a
level of performance that is substantially certain to be met at the
time the criteria are established.
“Plan” shall mean the Cooper Industries
Management Incentive Compensation Deferral Plan, which, effective
January 1, 2005, consists of the Pre-409A Part and the
Post-2004 Part.
“Post-2004 Part” shall mean the terms of the
Cooper Industries Management Incentive Compensation Deferral Plan,
as amended and restated, effective January 1, 2005, for
compliance with Section 409A, and as amended from time to
time.
“Pre-409A Part” shall mean Cooper Industries
Management Incentive Compensation Deferral Plan, as in effect on
October 3, 2004.
“Section 409A” shall mean Section 409A
of the Internal Revenue Code of 1986, as amended, and the Treasury
regulations and rulings thereunder.
“Separation from Service” shall mean the
termination of employment of an Employee 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 (6) months or, if longer, so long as the Employee’s
right to reemployment is provided either by statute or by contract.
Whether an Employee has incurred a Separation from Service shall be
determined in accordance with Section 409A.
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ARTICLE 2
Administration of the Plan
The Plan shall be
administered by the Committee. 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.
ARTICLE 3
Participation in the Plan
(a)
Eligible Class . All key Employees of the Company and its
Affiliates who are eligible to earn an Incentive Award during a
calendar year shall be within the class of employees eligible to
participate in the Post-2004 Part with respect to that Incentive
Award. The Plan, including the Post-2004 Part, is intended to
benefit only a select group of executive management and highly
compensated executive employees within the meaning of
Sections 201(2), 301(a)(3), and 401(a)(1) of ERISA.
(b)
Eligible Employees . Employees eligible to participate in
the Plan shall be those Employees within the eligible class
described in paragraph (a) above who either are officers of
the Company or who have been selected for eligibility by the Chief
Executive Officer of the Company.
(c)
Election to Participate . An eligible Employee may elect to
become a Participant with respect to the Incentive Award to be
earned by such Employee during any Award Year by filing an election
to defer the receipt of a portion or all of such Employee’s
Incentive Award for that Award Year in the form specified by the
Committee within the time permitted for making elections. Subject
to the terms of the Post-2004 Part, the election shall specify the
amount to be deferred for the Award Year, the date or dates for
payment, and the form of payment.
(d) Terms
of Initial Election . A Participant shall elect the amount of
an Incentive Award to be deferred for the Award Year, which may be
(i) an 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. A Participant shall also elect the time and
form of payment of Deferred Compensation at the time the election
to defer an Incentive Award is made.
Subject to the
“Deduction Limitation,” a Participant may elect
(x) a single lump sum payment or (y) a series of
substantially equal installments over a period certain of up to
fifteen (15) years; provided that , if payment in
installments is elected by a Participant, the number of such
installments shall be automatically reduced (at the time payment of
the Participant’s Account commences), if necessary, to the
largest number of installments that will result in an annual
payment to such Participant of $25,000 or more. If Deferred
Compensation is payable in installments, the amount of each such
installment shall be equal to a fraction of the amount of
the
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Account
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 earn
interest equivalents as provided in Section 4(b).
Subject to the
terms of the Post-2004 Part, the election shall specify the
calendar year in which the payment of the Deferred Compensation for
that Award Year shall be made or shall commence. Subject to any
limitations imposed by the Committee and/or Section 409A, the
specified calendar year may be a calendar year during the
Participant’s active employment; the earlier or later of the
calendar year in which a Participant incurs a Separation from
Service or attains a specified age; or the earliest of the
Participant’s death, Separation from Service, a specified
calendar year, or a Change in Control; provided that,
notwithstanding anything in the Post-2004 Part to the contrary, no
payment upon a Separation from Service shall be made until the
first day of the seventh (7 th )
month following a Participant’s Separation from
Service.
(e) Time
of Making Initial Elections .
(i)
Non-Performance-Based Compensation . An election by a
Participant to defer all or a portion of an Incentive Award that is
not Performance-Based Compensation shall be made not later than the
December 31 immediately preceding the Award Year for which the
election is made. Such election shall be irrevocable as of the end
of the December 31 immediately prior to the Award Year for
which it is made.
(ii)
Performance-Based Compensation . An election by a
Participant to defer all or a portion of an Incentive Award that is
Performance-Based Compensation and that relates to services to be
performed in the Award Year shall be made not later than the
June 30 of the applicable Award Year; provided that the
Participant has continuously performed services from a date no
later than ninety (90) days after the commencement of the
performance period through a date no earlier than the date on which
the deferral election is made and provided, further that ,
in no event shall such election be made after such Incentive Award
has become both substantially certain to be paid and readily
ascertainable. Such election shall be irrevocable as of the end of
each June 30 with respect to an Incentive Award payable with
respect to services to be performed in the Award Year for
wh
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