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-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TXKgua2SNwoOHYQR1/4e9SZg3N61xu3QX4ygwKDIki+U9b2X0SBSMvYfdMDhGnn8 1Yrzzf0+Y2B/fzd0ribFGQ== 0000950129-07-000803.txt : 20070221 0000950129-07-000803.hdr.sgml : 20070221 20070221104804 ACCESSION NUMBER: 0000950129-07-000803 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 20061231 FILED AS OF DATE: 20070221 DATE AS OF CHANGE: 20070221 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COOPER INDUSTRIES LTD CENTRAL INDEX KEY: 0001141982 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC LIGHTING & WIRING EQUIPMENT [3640] IRS NUMBER: 980355628 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-31330 FILM NUMBER: 07637761 BUSINESS ADDRESS: STREET 1: 600 TRAVIS STREET 2: SUITE 5800 CITY: HOUSTON STATE: TX ZIP: 77002-1001 BUSINESS PHONE: 7132098400 MAIL ADDRESS: STREET 1: 600 TRAVIS STREET 2: SUITE 5800 CITY: HOUSTON STATE: TX ZIP: 77002-1001 10-K 1 h43741e10vk.htm FORM 10-K - ANNUAL REPORT e10vk

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K


(Mark One)
þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2006
OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-31330

Cooper Industries, Ltd.

(Exact Name of Registrant as Specified in Its Charter)


Bermuda		98-0355628
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)

600 Travis, Suite 5800, Houston, Texas (Address of Principal Executive Offices)		77002 (Zip Code)

713/209-8400
(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


		Name of Each Exchange
Title of Each Class		on Which Registered
Class A Common Shares, $0.01 par value		The New York Stock Exchange
Rights to Purchase Preferred Shares		The New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:		None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o No þ

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.


Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

The aggregate value of the registrant’s voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2006 was $8,485,636,152 based on the closing sale price as reported on the New York Stock Exchange.

Number of registrant’s common shares outstanding as of January 31, 2007 — 91,244,066 publicly traded Class A common shares, 13,046,201 Class A common shares held by the issuer’s subsidiaries, and 54,810,129 Class B common shares held by the issuer’s subsidiaries.

DOCUMENTS INCORPORATED BY REFERENCE
Cooper Industries, Ltd. Proxy Statement to be filed for the Annual Meeting of Shareholders
to be held on April 24, 2007 (Part II — Item 5, Part III — Items 10, 11, 12, 13 and 14)

TABLE OF CONTENTS


			Page
Part I
	Item 1:	Business		2
	Item 1A:	Risk Factors		6
	Item 1B:	Unresolved Staff Comments		8
	Item 2:	Properties		8
	Item 3:	Legal Proceedings		10
	Item 4:	Submission of Matters to a Vote of Security Holders		13

Part II
	Item 5:	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		13
	Item 6:	Selected Financial Data		15
	Item 7:	Management’s Discussion and Analysis of Financial Condition and Results of Operations		15
	Item 7A:	Quantitative and Qualitative Disclosures about Market Risk		32
	Item 8:	Financial Statements and Supplementary Data		32
	Item 9:	Changes in and Disagreements with Accountants on Accounting and Financial Disclosures		32
	Item 9A:	Controls and Procedures		32
	Item 9B:	Other Information		32

Part III
	Item 10:	Director, Executive Officers and Corporate Goverance		32
	Item 11:	Executive Compensation		32
	Item 12:	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		33
	Item 13:	Certain Relationships and Related Transactions		33
	Item 14:	Principal Accountant Fees and Services		33

Part IV
	Item 15:	Exhibits and Financial Statement Schedules		33
First Amendment to Amended Stock Incentive Plan
First Amendment to Amended Management Annual Incentive Plan
Plan B Settlement Agreement
Separation and Transition Agreement
Computation of Ratios of Earnings to Fixed Charges
Subsidiaries
Consent of Ernst & Young LLP
Consent of Bates white, LLC
Powers of Attorney
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906

PART I

ITEM 1. BUSINESS

GENERAL

The term “Cooper” refers to the registrant, Cooper Industries, Ltd., which was incorporated under the laws of Bermuda on May 22, 2001, and became the successor-registrant to Cooper Industries, Inc. on May 22, 2002.

Cooper operates in two business segments: Electrical Products and Tools. Cooper manufactures, markets and sells its products and provides services throughout the world. Cooper has manufacturing facilities in 21 countries and currently employs approximately 31,000 people. Operations in the United States are conducted by wholly-owned subsidiaries of Cooper, organized by the two business segments. Activities outside the United States contribute significantly to the revenues and operating earnings of both segments of Cooper. These activities are conducted in major commercial countries by wholly-owned subsidiaries and jointly-owned companies, the management of which is structured through Cooper’s two business segments. As a result of operations outside the United States, sales and distribution networks are maintained throughout most of the industrialized world. Cooper generally believes that there are no substantial differences in the business risks associated with operations outside the United States compared with United States activities, although Cooper is subject to certain political and economic uncertainties encountered in activities outside the United States, including trade barriers and restrictions on the exchange and fluctuations of currency. Cooper generates the most non-U.S. revenues in Canada, Germany, France, Mexico and the United Kingdom. Cooper has operations in India, Malaysia and China and has several joint ventures with operations in China. Investments in emerging markets such as India, Malaysia and China are subject to greater risks related to economic and political uncertainties as compared to most countries where Cooper has operations. Exhibit 21.0 contains a list of Cooper’s subsidiaries.

Financial information with respect to Cooper’s industry segments and geographic areas is contained in Note 15 of the Notes to the Consolidated Financial Statements. A discussion of acquisitions and divestitures is included in Notes 3, 7 and 16 of the Notes to the Consolidated Financial Statements.

With its two business segments, Cooper serves four major markets: the industrial, commercial construction, residential and utility markets. Cooper also serves the electronics and telecommunications markets. Markets for Cooper’s products and services are worldwide, though the United States is the largest market. Within the United States, there is no material geographic concentration by state or region. Cooper experiences substantial competition in both of its business segments. The number and size of competitors vary considerably depending on the product line. Cooper cannot specify with exactitude the number of competitors in each product category or their relative market position. However, most operating units experience significant competition from both larger and smaller companies with the key competitive factors being customer and end-user service, price, quality, brand name and availability. Cooper considers its reputation as a manufacturer of a broad line of quality products and premier brands to be an important factor in its businesses. Cooper believes that it is among the leading manufacturers in the world of electrical distribution equipment, wiring devices, support systems, hazardous duty electrical equipment, lighting fixtures, emergency lighting, fuses, nonpower hand tools and industrial power tools.

Cooper’s research and development activities are for purposes of improving existing products and services and originating new products. During 2006, approximately $83.5 million was spent for research and development activities as compared with approximately $71.5 million in 2005 and $70.6 million in 2004. Cooper obtains and holds patents on products and designs in the United States and many other countries where operations are conducted or products are sold. Although in the aggregate Cooper’s patents are important in the operation of its businesses, the loss by expiration or otherwise of any one patent or license or group of patents or licenses would not materially affect its business.

Cooper does not presently anticipate that compliance with currently applicable environmental regulations and controls will significantly change its competitive position, capital spending or earnings during 2007. Cooper has been a party to administrative and legal proceedings with governmental agencies that have arisen under statutory provisions regulating the discharge or potential discharge of material into the environment. Orders and decrees consented to by Cooper, or currently under negotiation with state regulatory agencies, have contained agreed-upon timetables for fulfilling reporting or remediation obligations or maintaining specified air and water discharge levels in connection with permits for the operations of various plants. Cooper believes it is in compliance with the orders and decrees, and such compliance is not material to the business or financial condition of Cooper. For additional information concerning Cooper’s accruals for environmental liabilities, see Note 7 of the Notes to the Consolidated Financial Statements.

Approximately 62 percent of the United States hourly production work force of Cooper is employed in 45 manufacturing facilities, distribution centers and warehouses not covered by labor agreements. Numerous agreements covering approximately 38 percent of all hourly production employees exist with 17 bargaining units at 20 operations in the United States and with various unions at 32 operations in other countries. During 2006, new agreements were concluded covering hourly production employees at 7 operations in the United States. Cooper considers its employee relations to be excellent.

Sales backlog at December 31, 2006 was approximately $677.6 million, all of which is for delivery during 2007, compared with backlog of approximately $479.9 million at December 31, 2005.

Cooper’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available, free of charge, at the “Investor Center” tab on Cooper’s website (www.cooperindustries.com) as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities Exchange Commission.

The following describes the business conducted by each of Cooper’s business segments. Additional information regarding the products, markets and distribution methods for each segment is set forth in the table at the end of this Item. Information concerning market conditions, as well as information concerning revenues and operating earnings for each segment, is included under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Electrical Products

The Electrical Products segment manufactures, markets and sells electrical and circuit protection products, including fittings, support systems, enclosures, wiring devices, plugs, receptacles, lighting fixtures, hazardous duty electrical equipment, fuses, emergency lighting, fire detection systems and security products for use in residential, commercial and industrial construction, maintenance and repair applications. The segment also manufactures, markets and sells products for use by utilities and in industry for electrical power transmission and distribution, including distribution switchgear, transformers, transformer terminations and accessories, capacitors, voltage regulators, surge arresters and other related power systems components.

The principal raw material requirements include: steel, copper, aluminum, aluminum ingots, brass, tin, lead, plastics, electronic components and insulating materials including transformer oil. These raw materials are available from and supplied by numerous sources located in the United States and other countries, although there are limited sources of supply for electrical core steel and transformer oil that Cooper uses in electrical power transmission and distribution products.

component production and spending by utilities for replacements, expansions and efficiency improvements. The segment’s product lines are marketed directly to original equipment manufacturers and utilities and to a variety of end users through major distributor chains, retail home centers, hardware outlets and thousands of independent distributors.

Tools

The Tools segment manufactures, markets and sells hand tools for industrial, construction and consumer markets; automated assembly systems for industrial markets; and electric and pneumatic industrial power tools for general industry, primarily automotive and aerospace manufacturers.

The principal raw material requirements include: flat and bar stock steel, brass, copper, fiberglass, aluminum, metal castings and forgings, wood, plastic pellets and plastic sheet. These materials are available from and supplied by numerous sources located in the United States and other countries.

Demand for nonpowered hand tools, assembly systems and industrial power tools is driven by employment levels and industrial activity in major industrial countries and by consumer spending. In addition, demand for industrial power tools is influenced by automotive and aerospace production. The segment’s products are sold by a company sales force, independent distributors and retailers.

COOPER INDUSTRIES, LTD.
PRODUCTS, MARKETS AND DISTRIBUTION METHODS BY SEGMENT

Electrical Products - Major Products and Brands

Access Cabinets, E2 Cabinets and Enviroshield electrical enclosures.

Arktite and eXLink plugs and receptacles.

Ametrix, Corelite and Neo-Ray indirect lighting products.

Aspire and Siena decorative wiring devices.

Aspire RF radio frequency controls, switches and receptacles.

AtLite commercial, exit and emergency lighting.

B-Line support systems, enclosures, fasteners.

Bussmann and Buss electrical and electronic fuses.

Cam-Lok electrical connectors.

Cannon Technologies and Cybectec software and automation technologies.

Capri cable accessories and flexible conduits.

CEAG emergency lighting systems and explosion protected electrical materials.

Cent-R-Rail and Redi-Rail metal rack units and cable trays.

Champ and Hazard-Gard HID and fluorescent lighting.

Coiltronics inductors and transformers.

Combined Technologies current-limiting fuses.

Condulet fittings and outlet bodies.

Cooper Fire, Fulleon and Nugelec fire detection systems.

Cooper Power Systems distribution transformers, power capacitors, voltage regulators, surge arresters and SCADA master stations.

Cooper Wiring Devices circuit protective devices.

Crompton lighting fixtures.

Crouse-Hinds and CEAG electrical construction materials and Crouse-Hinds aviation lighting products.

CUBEFuse fuses, fuse holders and fuse boxes.

DLS electrical wiring and control systems.

Domex electrical construction materials.

Dura-Cooper and Dura-Green epoxy coatings.

Edison and Edison Pro relays and fusegear.

Edison Series Metering residential and commercial meter bases.

Eletromec DIN style fuses.

Emerald consumer recessed and track lighting.

EMSA power transformers.

Envirotemp dielectric fluids.

EX-Cell and NexT industrial enclosures.

Fail-Safe high abuse, clean room and vandal-resistant lighting fixtures.

Fusetron electric fuses and protectors.

G&H specialty connectors.

Halo recessed and track lighting fixtures.

Hart-Lock electrical receptacles, caps, connectors and accessories.

INVUE outdoor architectural lighting.

IriS lighting systems.

JSB, Luminox and Menvier emergency lighting and fire detection systems.

Karp, Edison, Mercury and B&S electrical fuses.

Kearney fuses, connectors, tools and switches.

Kyle distribution switchgear.

Limitron electric fuses.

Low-Peak electric fuses.

Lumière specification grade landscape lighting.

Magnum terminal strips and disconnect blocks.

McGraw-Edison and Lumark indoor and outdoor lighting.

McGraw-Edison transformer components, cable accessories and fuses.

MEDC signals and alarms

Media Sync multi-media wiring systems

Metalux fluorescent lighting.

Mobile X-Ray specialty plugs and receptacles.

Mini-Line molded-to-cable miniature connectors.

MWS modular wiring systems.

Myers electrical hubs.

Nortem electrical construction materials.

NOVA reclosers, sectionalizers and switches.

Novitas occupancy sensors and switch packs.

Optima fuseholders.

Portfolio architectural recessed lighting.

Posi-Break electrical connectors.

Posi-Lok electrical panel units.

Power-Lock wiring devices, receptacles, caps and covers.

PowerPlus panel boards.

PowerStor carbon aerogel supercapacitors.

Pretronica and Univel emergency lighting and power systems.

RCM+ cable management systems.

Regalsafe signaling and life saving apparatus.

Regent security lighting systems.

Royer wiring devices, sockets and switches.

Ruff-in prefabricated mounting and support systems.

Scantronic and Menvier security systems.

Shaper specification and commercial grade lighting fixtures.

Shock Sentry sockets, connectors, and wall plates.

Streetworks outdoor lighting.

Sure-Lites exit and emergency lighting.

SurgBloc electrical voltage receptacles and surge suppressors.

TransX transient voltage protection devices.

UltraSIL surge arresters.

VariGap and VariStar surge arresters.

Wheelock signals, alarms and communication systems.

Willsher & Quick electrical enclosures.

WPI connectors and cable assemblies.

Tools — Major Products and Brands

Airetool, Automated Systems, Cleco, DGD, Dotco,Gardner-Denver*, and Rotor Tool industrial power tools and assembly Equipment.

Apex screwdriver bits, impact sockets and universal joints.

Campbell chain products.

Crescent pliers and wrenches.

Diamond farrier tools and horseshoes.

Erem precision cutters and tweezers.

Kahnetics dispensing systems.

Lufkin measuring tapes.

Master Power industrial air tools.

Metronix servos and drive controls.

Nicholson files and saws.

Plumb hammers.

Utica torque measuring and controls.

Weller soldering equipment.

Wire-Wrap solderless connection equipment.

Wiss and H.K. Porter cutting products.

Xcelite screwdrivers and nutdrivers.


*		Gardner-Denver is a registered trademark of Gardner Denver, Inc. and is used by Cooper Industries under license.

COOPER INDUSTRIES, LTD.
PRODUCTS, MARKETS AND DISTRIBUTION METHODS BY SEGMENT — (Continued)

ELECTRICAL PRODUCTS

Major Markets

Fuses and circuit protection products are utilized in products for the construction, industrial, transportation and consumer markets and to manufacturers in the electrical, electronic, telecommunications and transportation industries. Lighting fixtures are utilized in residential construction, industrial, institutional and commercial building complexes, shopping centers, parking lots, roadways, and sports facilities. Electrical power products are used by utilities and commercial and industrial power users. Electrical construction materials are used in commercial, residential and industrial projects, by utilities, airports and wastewater treatment plants and in the process and energy industries. Emergency lighting, fire detection and security systems are installed in residential, commercial and industrial applications. Support systems and enclosures are used in industrial, commercial and telecommunications complexes. Wiring devices are used in the construction, renovation, maintenance and repair of residential, commercial, industrial and institutional buildings.

Principal Distribution Methods

Products are sold through distributors for use in general construction, plant maintenance, process and energy applications, shopping centers, parking lots, sports facilities, and data processing and telecommunications systems; through distributors and direct to utilities and manufacturers for use in electronic equipment for consumer, industrial, government and military applications; through distributors and direct to retail home centers and hardware outlets; and direct to original equipment manufacturers of appliances, tools, machinery and electronic equipment.

TOOLS

Major Markets

Power tools and assembly systems are used by general industrial manufacturers, particularly durable goods producers and original equipment manufacturers, such as those in the aerospace and automobile industries. Hand tools are used in a variety of industrial, electronics, agricultural, construction and consumer applications.

Principal Distribution Methods

Products are sold through distributors and agents to general industry, particularly automotive and aircraft; through distributors and wholesalers to hardware stores, lumberyards and department stores; and direct to original equipment manufacturers, home centers, specialty stores, department stores, mass merchandisers and hardware outlets.


ITEM 1A.		RISK FACTORS

Our financial condition and performance are subject to various risks and uncertainties, including the risk factors described below. We may amend or supplement the risk factors from time to time by other reports that we file with the SEC in the future.

Our Businesses Are Subject to Competitive Pressures.

Our businesses operate in markets that are highly competitive, and we compete on the basis of price, quality, service and/or brand name across the industries and markets served. Some of our competitors for

certain products have greater sales, assets and financial resources than we do. Competitive pressures could affect prices we charge our customers or demand for our products, which could adversely affect our operating results.

Demand for Our Products Is Sensitive to the Economic Conditions in the Markets We Serve.

Demand for electrical products follows general economic conditions and is generally sensitive to activity in the commercial and residential construction markets, industrial production levels, electronic component production and spending by utilities for replacements, expansions and efficiency improvements. Demand for non-powered hand tools, assembly systems and industrial power tools is driven by employment levels, industrial activity and consumer spending. In addition, demand for industrial power tools is influenced by automotive and aerospace production. Reduced demand due to economic and market conditions could adversely affect our results of operations.

Price Increases or Significant Shortages of Raw Materials and Components Could Adversely Affect Our Operating Costs and the Competitive Position of Our Products.

Our major requirements for raw materials include steel, copper, aluminum, electronic components and plastics and, to a lesser degree brass, tin, lead, fiberglass, wood and insulating materials including transformer oil. We have multiple sources of supply for each of our major requirements, although there are limited sources of supply for electrical core steel and transformer oil that Cooper uses in electrical power transmission and distribution products. Significant shortages could disrupt the supply of raw materials or price increases could affect prices we charge our customers, our product costs, and the competitive position of our products and services, which could adversely affect our results of operations.

Operations and Supply Sources Located Outside the United States, Particularly Emerging Markets, Are Subject to Increased Risks.

Our operating activities outside the United States contribute significantly to our revenues and earnings. Serving a global customer base and remaining competitive in the global market place requires that we place more production in countries other than the United States, including emerging markets, to capitalize on market opportunities and maintain a cost-efficient structure. In addition, we source a significant amount of raw materials and other components from third-party suppliers or joint-venture operations in low-cost countries. Our operations outside the United States could be disrupted by a natural disaster, labor strike, war, political unrest, terrorist activity or public health concerns. Operations outside the United States are also subject to certain regulatory and economic uncertainties including trade barriers and restrictions on the exchange and fluctuations of currency. We believe that our operations in emerging markets such as China, India and Malaysia are subject to greater risks related to these political and economic uncertainties as compared to most countries where Cooper has operations.

Our Key Strategic Initiatives Affect Our Ability to Grow Revenues, Control Costs and Improve Productivity.

Our operating model is built on a platform of key strategic initiatives that are designed to grow revenues, control costs and improve productivity. Our ability to execute and realize the expected benefits from our strategic initiatives affects our revenues and operating costs. Also, our operations could be disrupted by manufacturing rationalizations and system conversions relating to the implementation of the Enterprise Business System.

We Engage in Acquisitions and May Encounter Difficulties in Integrating These Businesses.

We are a company that, from time to time, seeks to grow through strategic acquisitions. The success of these transactions depends on our ability to integrate the assets and personnel acquired in these

transactions. We may encounter difficulties in integrating acquisitions with our operations and may not realize the degree or timing of the benefits that we anticipated from an acquisition.

We Have Liability Exposure for Asbestos-Related Claims.

We have owned businesses that produced and sold products that contained asbestos. We, therefore, have potential liability arising from individuals claiming illness from exposure to asbestos. Insurance policies satisfy portions of claim settlements and related legal costs. We have reached a proposed settlement agreement, subject to a vote of creditors and court approval, that provides for us to resolve asbestos claims arising from our former Abex Friction Products business by participating in a 524(g) trust that is part of Federal-Mogul Corporation’s bankruptcy plan of reorganization. If our participation in the 524(g) trust is not approved, we will adjust the estimates of our recorded liabilities and insurance recoveries related to the matter. Those adjustments may be significant.

We Could Incur a Material Amount of Taxes if There Are Unfavorable Changes in the Tax Laws or Their Interpretation.

Changes in tax laws, tax treaties or tax regulations or differing interpretation or enforcement of applicable law by the U.S. Internal Revenue Service or other taxing jurisdiction could have a material adverse impact on our financial statements. On May 22, 2002, we reorganized Cooper and became a publicly traded Bermuda company. Among other benefits, the inversion reorganization improved our worldwide effective tax rate and increased our cash flow. Recently, and in prior years, there have been attachments to legislation in the Senate to eliminate the tax benefit realized by certain inverted companies. Previous attempts to enact this legislation have failed to pass both Houses of Congress. Depending on the terms, if enacted into law, such proposed legislation could have a material impact on our financial statements.

Inability to Maintain Access to Capital Markets May Adversely Affect Our Business and Financial Results.

Our ability to invest in our businesses, make strategic acquisitions and refinance maturing debt obligations may require access to the capital markets and sufficient bank credit lines to support short-term borrowings. If we are unable to access the capital markets, we could experience a material adverse affect on our business and financial results.


ITEM 1B.		UNRESOLVED STAFF COMMENTS

Not applicable.


ITEM 2.		PROPERTIES

On December 31, 2006, the plants and other facilities used by Cooper throughout the world contained an aggregate of approximately 19,269,617 square feet of space, of which approximately 80 percent was owned and 20 percent was leased. The charts on the next page show the number of employees, square footage of facilities owned and leased and location of manufacturing facilities for each industry segment. Certain equipment and production facilities have been financed by industrial revenue bonds issued by local government authorities and are subject to security arrangements customary in such financing.


											Square Footage of
			Number and Nature of Facilities								Plants and Facilities
	Number of
Segment	Employees		Manufacturing		Warehouse		Sales		Other		Owned		Leased
Electrical Products		25,228		82		21		79		3		11,425,716		3,362,633

Tools		5,035		25		4		7		—		3,996,390		349,252

Other		298		—		—		—		2		—		135,626


Total		30,561		107		25		86		5		15,422,106		3,847,511


*		Multi-purpose facilities at a single location are listed in each applicable column.

Manufacturing Plant Locations


			Europe
	United		(Other		United				South								Republic
Segment	States		Than UK)		Kingdom		Mexico		America		Australia		Canada		China		of China		India		Korea		Malaysia
Electrical Products		39		10		12		10		2		1		—		4		1		1		1		1

Tools		12		7		—		2		2		1		1		—		—		—		—		—


Total		51		17		12		12		4		2		1		4		1		1		1		1


*		Does not include joint venture operations. Some facilities are shared by Electrical Products and Tools operations.


ITEM 3.		LEGAL PROCEEDINGS

In October 1998, Cooper sold its Automotive Products business to Federal-Mogul Corporation (“Federal-Mogul”). These discontinued businesses (including the Abex product line obtained from Pneumo-Abex Corporation (“Pneumo”) in 1994) were operated through subsidiary companies, and the stock of those subsidiaries was sold to Federal-Mogul pursuant to a Purchase and Sale Agreement dated August 17, 1998 (“1998 Agreement”). In conjunction with the sale, Federal-Mogul indemnified Cooper for certain liabilities of these subsidiary companies, including liabilities related to the Abex product line and any potential liability that Cooper may have to Pneumo pursuant to a 1994 Mutual Guaranty Agreement between Cooper and Pneumo. On October 1, 2001, Federal-Mogul and several of its affiliates filed a Chapter 11 bankruptcy petition and indicated that Federal-Mogul may not honor the indemnification obligations to Cooper. As of the date of this filing, Federal-Mogul had not rejected the 1998 Agreement, which includes the indemnification to Cooper. If Federal-Mogul rejects the 1998 Agreement, Cooper will be relieved of its future obligations under the 1998 Agreement, including specific indemnities relating to payment of taxes and certain obligations regarding insurance for its former Automotive Products businesses. To the extent Cooper is obligated to Pneumo for any asbestos-related claims arising from the Abex product line (“Abex Claims”), Cooper has rights, confirmed by Pneumo, to significant insurance for such claims. Based on information provided by representatives of Federal-Mogul and recent claims experience, from August 28, 1998 through December 31, 2006, a total of 141,529 Abex Claims were filed, of which 110,229 claims have been resolved leaving 31,300 Abex Claims pending at December 31, 2006, that are the responsibility of Federal-Mogul. During the year ended December 31, 2006, 3,806 claims were filed and 10,941 claims were resolved. Since August 28, 1998, the average indemnity payment for resolved Abex Claims was $1,960 before insurance. A total of $107.4 million was spent on defense costs for the period August 28, 1998 through December 31, 2006. Historically, existing insurance coverage has provided 50% to 80% of the total defense and indemnity payments for Abex Claims. However, insurance recovery is currently at a lower percentage (approximately 30%) due to exhaustion of primary layers of coverage and litigation with certain excess insurers.

With the assistance of independent advisors, Bates White, LLC, in the fourth quarter of 2001 Cooper completed a thorough analysis of its potential exposure for asbestos liabilities in the event Federal-Mogul rejects the 1998 Agreement. Based on Cooper’s analysis of its contingent liability exposure resulting from Federal-Mogul’s bankruptcy, Cooper concluded that an additional fourth-quarter 2001 discontinued operations provision of $30 million after-tax, or $.32 per share, was appropriate to reflect the potential net impact of this issue.

Throughout 2003, Cooper worked towards resolution of the indemnification issues and future handling of the Abex-related claims within the Federal-Mogul bankruptcy proceedings. This included negotiations with the representatives of Federal-Mogul, its bankruptcy committees and the future claimants (the “Representatives”) regarding participation in Federal-Mogul’s proposed 524(g) asbestos trust. Based on the status of the negotiations in 2004, Cooper concluded that it was probable that Federal-Mogul would reject the 1998 Agreement. Cooper also concluded that the Representatives would require any negotiated settlement through the Federal-Mogul bankruptcy to be at the high end of the Bates White, LLC liability analysis and with substantially lower insurance recovery assumptions and higher administrative costs.

During late February and early March 2004, Cooper reassessed the accrual required based on the then current status of the negotiations with the Representatives and the liability and insurance receivable that would be required to be recorded if this matter is not settled within the Federal-Mogul bankruptcy. Cooper concluded that resolution within the Federal-Mogul proposed 524(g) asbestos trust would likely be within the range of the liabilities, net of insurance recoveries, that Cooper would accrue if this matter were not settled within the Federal-Mogul bankruptcy. Accordingly, Cooper recorded a $126.0 million after-tax discontinued operations charge, net of a $70.9 income tax benefit, in the fourth quarter of 2003.

liability for asbestos claims arising from Cooper’s former Abex Friction Products business. The proposed settlement agreement was subject to court approval, approval of 75 percent of the current Abex asbestos claimants and certain other approvals. The settlement would resolve more than 38,000 pending Abex Claims as of December 31, 2005. Future claims would be resolved through the bankruptcy trust, and Cooper would be protected against future claims by an injunction to be issued by the district court upon plan confirmation.

Key terms and aspects of the proposed settlement agreement included Cooper agreeing to pay $130 million in cash into the trust, with $115 million payable upon Federal-Mogul’s emergence from bankruptcy. The remainder would be due on January 15, 2007, or upon emergence from bankruptcy, if later. Cooper would receive a total of $37.5 million during the funding period from other parties associated with the Federal-Mogul bankruptcy. Cooper would further provide the trust 1.4 million shares of Cooper common stock upon Federal-Mogul’s emergence from bankruptcy. The agreement provided that the trust may, during the first year after issuance, sell these shares to Cooper at market prices and, thereafter, in open market transactions.

The proposed settlement agreement also provided for further payments by Cooper subject to the amount and timing of insurance proceeds. Cooper agreed to make 25 annual payments of up to $20 million each, reduced by certain insurance proceeds received by the trust. In years that the insurance proceeds exceed $17 million, Cooper would be required to contribute $3 million with the excess insurance proceeds carried over to the next year. The trust would retain 10 percent of the insurance proceeds for indemnity claims paid by the trust until Cooper’s obligation is satisfied and would retain 15 percent thereafter. The agreement also provided for Cooper to receive the insurance proceeds related to indemnity and defense costs paid prior to the date a stay of current claims is entered by the bankruptcy court. Cooper would also be required to forego certain claims and objections in the Federal-Mogul bankruptcy proceedings. In addition, the parties involved had agreed to petition the court for a stay on all current claims outstanding.

Although the payments related to the settlement could extend to 25 years and the collection of insurance proceeds could extend beyond 25 years, the liability and insurance would be undiscounted on Cooper’s balance sheet as the amount of the actual annual payments is not reasonably predictable.

A critical term of the proposed settlement was the issuance of a preliminary injunction staying all pending Abex asbestos claims. At a hearing on January 20, 2006, other parties to the bankruptcy proceedings were unable to satisfy the court’s requirements to grant the required preliminary injunction. As a result, the proposed settlement agreement required renegotiation of certain terms. The final determination of whether Cooper will participate in the Federal-Mogul 524(g) trust was unknown. However, Cooper management concluded that, at the date of the filing of its 2005 Form 10-K, the most likely outcome in the range of potential outcomes was a revised settlement approximating the December 2005 proposed settlement. Accordingly, Cooper recorded a $227.2 million after-tax discontinued operations charge, net of a $127.8 million income tax benefit, in the fourth quarter of 2005.

The fourth quarter 2005 charge to discontinued operations included payments to a 524(g) trust over 25 years that were undiscounted, and the insurance recoveries only included recoveries where insurance in place agreements, settlements or policy recoveries were probable. If the negotiations with the Representatives in early 2004 had resulted in an agreement, Cooper would have paid all the consideration when Federal-Mogul emerged from bankruptcy and the 524(g) trust was formed and would have relinquished all rights to insurance. The lack of discounting and the limited recognition of insurance recoveries in the fourth quarter 2005 charge to discontinued operations are a significant component of the increase in the accrual for discontinued operations. While it is not possible to quantify, the accrual for discontinued operations also includes a premium for resolving the inherent uncertainty associated with resolving Abex claims though the tort system. If Cooper is unable to reach a settlement to participate in the Federal-Mogul 524(g) trust, the accrual for discontinued operations potentially may have to be reduced to the estimated liability and related insurance recoveries through the tort system. There are numerous assumptions that are required to project the liability in the tort system and Cooper has not completed the analysis and determined the liability that would be recorded under this scenario.

Cooper, through Pneumo-Abex LLC, has access to Abex insurance policies with remaining limits on policies with solvent insurers in excess of $750 million. Cooper included insurance recoveries of approximately $215 million pre-tax in the fourth quarter 2005 charge to discontinued operations discussed above. Cooper believes that it is likely that additional insurance recoveries will be recorded in the future as new insurance in place agreements are consummated and settlements with insurance carriers are completed. However, extensive litigation with the insurance carriers may be required to receive those additional recoveries.

On July 7, 2006, Cooper announced a revised agreement had been reached regarding Cooper’s participation in Federal-Mogul’s 524(g) trust. The revised proposed settlement agreement remains subject to court approval, to approval by 75 percent of the current Abex asbestos claimants and to certain other approvals.

Key terms and aspects of the revised proposed settlement agreement include Cooper agreeing to pay $256 million in cash into the trust on the date Federal-Mogul emerges from bankruptcy, which includes elimination of the contribution of 1.4 million common shares to the trust by increasing the cash contribution. Removing Cooper common stock as a component of the revised settlement agreement eliminates additional charges and reversals of charges that may have occurred to account for any changes in the market value of Cooper stock. Cooper has or will receive $37.5 million from other parties toward its cash obligation.

As in the December 2005 agreement, Cooper has agreed to make 25 annual payments of up to $20 million each to the trust with such payments being reduced by insurance proceeds. The minimum annual payment of $3 million in the December 2005 agreement has been eliminated. However, Cooper has agreed to make advances, beginning in 2015 through 2021, in the event the trust is unable to pay outstanding qualified claims at 100 percent of the value provided for in the trust agreement. In the event that advances are made by Cooper, they will accrue interest at 5 percent per annum, and will be repaid in years where excess funds are available in the trust or credited against the future year annual payments. The maximum advances are $36.6 million.

Cooper will pay all defense costs through the date Federal-Mogul emerges from bankruptcy and will be reimbursed for indemnity payments to the extent such payments are eligible for payment from the trust. Cooper will retain the rights to receive the insurance proceeds related to indemnity and defense costs paid prior to the date Federal-Mogul emerges from bankruptcy. For claims paid by the trust, the trust will retain 10 percent of any reimbursed insurance proceeds for the first 25 years and thereafter will retain 15 percent.

As in the December 2005 proposed agreement, Cooper will forego certain claims and objections in the Federal-Mogul bankruptcy proceedings. However, under the revised proposed agreement, which is subject to court approval, in the event that Cooper’s participation in the Federal-Mogul 524(g) trust is not approved for any reason, Cooper would receive a cash payment of $138 million on the date Federal-Mogul emerges from bankruptcy and 20 percent of any insurance policy settlements related to the former Wagner business purchased by Federal-Mogul in 1998. If Cooper participates in the trust, it will receive 12 percent of any Wagner insurance settlements.

Accordingly, Cooper recorded a $20.3 million after-tax discontinued operations charge, net of an $11.4 million income tax benefit, in the second quarter of 2006.

The revised proposed settlement agreement has been incorporated into Federal-Mogul’s Fourth Amended Joint Plan of Reorganization, which was filed on November 21, 2006.

expire on April 6, 2007. In addition, any objections to the Fourth Amended Plan must be filed with the Court by April 6, 2007 and the Court set the dates for a hearing on confirmation of the Plan on May 8 and 9, 2007. If the Plan is confirmed, Federal-Mogul could emerge from bankruptcy in mid-year 2007.

From a cash flow perspective, Cooper management continues to believe that a settlement on the terms of the revised agreement would allow Cooper to continue to grow through acquisitions and return cash to shareholders through dividends and stock repurchases. The settlement agreement remains subject to bankruptcy court approval, approval by the current claimants and other matters. At this time, the exact manner in which this issue will be resolved is not known. The accrual for potential liabilities related to the Automotive Products sale and the Federal-Mogul bankruptcy was $529.6 million at December 31, 2006 and $526.3 million at December 31, 2005.


ITEM 4.		SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the fourth quarter of the fiscal year covered by this report, no matters were submitted to a vote of the shareholders.

PART II


ITEM 5.		MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Cooper Class A common shares (symbol — CBE) are listed on the New York Stock Exchange. Options for Cooper Class A common shares are listed on the American Stock Exchange. Cooper Class B common shares are not publicly traded. The Class B common shares were issued to Cooper Industries, Inc. in connection with the reincorporation merger in May 2002 whereby Cooper Industries, Inc., formerly the publicly traded parent company, became a wholly-owned subsidiary of Cooper Industries, Ltd. Effective January 1, 2005, the Class B common shares were transferred to Cooper US, Inc., which is a wholly-owned Cooper subsidiary. Cooper US, Inc. is the only holder of Class B common shares. The holders of Class B common shares are not entitled to vote, except as to matters for which the Bermuda Companies Act specifically requires voting rights for otherwise non-voting shares. Cooper Industries, Ltd. and Cooper subsidiaries holding Class A or Class B common shares have entered into a voting agreement whereby any Class A or Class B common shares held by such Cooper subsidiaries will be voted (or abstained from voting) in the same proportion as the other holders of Class A common shares. Therefore, Class A and Class B common shares held by Cooper subsidiaries do not dilute the voting power of the Class A common shares held by the public.

As of January 31, 2007 there were 21,647 record holders of Cooper Class A common shares and one holder of Cooper Class B common shares.

The high and low quarterly sales prices for the past two years of Cooper Class A common shares as reported by Dow Jones & Company, Inc., are as follows:


		Quarter
		1		2		3		4
2006	High	$	87.85	$	96.12	$	94.03	$	94.69
	Low		72.03		81.74		79.95		85.00

2005	High	$	72.65	$	72.28	$	69.77	$	75.75
	Low		64.12		62.10		62.08		66.05

Annual cash dividends declared on Cooper’s Class A and Class B common shares during 2005 and 2006 were $1.48 a share ($.37 a quarter). On February 14, 2007, the Board of Directors declared an increase in the quarterly dividend to $.42 a share (or $1.68 on an annualized basis). This represents a 14 percent increase over the prior dividend rate. On February 14, 2007, the Board of Directors also approved a 2-for-1 stock split to shareholders of record as of February 28, 2007. As a result of the 2-for-1 stock split, the increase in the dividend will equate to a quarterly dividend of $.21 a share (or $.84 on an annualized basis). The increase in the dividend rate will be effective for the dividend paid on April 2, 2007. Based on Cooper’s capital structure in 2006, all of the dividend distributions paid by it in 2006 are treated as a return of capital to its shareholders. For dividends payable in 2007, Cooper currently anticipates that based on its capital structure all or a substantial portion of its dividend distributions will be treated as a return of capital to its shareholders. Cooper’s subsidiaries waived the right to receive all dividends on Class A and Class B common shares that were payable in 2004. For the dividends payable in 2005 and 2006, Cooper’s subsidiaries that held Class A and Class B shares received dividends on such shares.

The following table reflects activity related to equity securities purchased by Cooper’s wholly-owned subsidiaries during the three months ended December 31, 2006:

Purchases of Equity Securities


					Total Number of
					Shares Purchased as		Maximum Number of
	Total Number		Average		Part of Publicly		Shares that May Yet Be
	of Shares		Price Paid		Announced Plans		Purchased Under the
Period	Purchased		per Share		or Programs		Plans or Programs⁽¹⁾
As of 9/30/06								3,631,250
10/01/06 — 10/31/06		—	$	—		—		3,631,250
11/01/06 — 11/30/06		—	$	—		—		3,631,250
12/01/06 — 12/31/06		27,900	$	89.78		27,900		5,103,350	⁽²⁾

Total		27,900	$	89.78		27,900


⁽¹⁾		On November 2, 2004, Cooper’s Board of Directors authorized the repurchase of up to five million additional shares of Cooper’s Class A common stock. Cooper has also announced that the Board authorized the repurchase of shares issued from time to time under its equity compensation plans, matched savings plan and dividend reinvestment plan in order to offset the dilution that results from issuing shares under these plans.

⁽²⁾		For 2007, Cooper’s current estimate is that 1.5 million shares will be issued under equity compensation plans, which is reflected in the above table.

Further information required by this Item is set forth under the caption “Equity Compensation Plan Information” in Cooper’s Proxy Statement to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934 in connection with Cooper’s 2007 Annual Meeting of Shareholders (the “Proxy Statement”) and is incorporated herein by reference.


ITEM 6.		SELECTED FINANCIAL DATA

The following table sets forth selected historical financial data for Cooper for each of the five years in the period ended December 31, 2006. The selected historical financial information shown below has been derived from Cooper’s audited consolidated financial statements. This information should be read in conjunction with Cooper’s consolidated financial statements and notes thereto.


	Years Ending December 31,
	2006		2005		2004		2003		2002
	(in millions, except per share data)
INCOME STATEMENT DATA:
Revenues	$	5,184.6	$	4,730.4	$	4,462.9	$	4,061.4	$	3,960.5


Income from continuing operations	$	484.3	$	391.1	$	339.8	$	274.3	$	213.7
Charge from discontinued operations, net of taxes		20.3		227.2		—		126.0		—

Net income	$	464.0	$	163.9	$	339.8	$	148.3	$	213.7


INCOME PER COMMON SHARE DATA:
Basic -
Income from continuing operations	$	5.28	$	4.23	$	3.67	$	2.96	$	2.29
Charge from discontinued operations		.22		2.46		—		1.36		—

Net income	$	5.06	$	1.77	$	3.67	$	1.60	$	2.29


Diluted -
Income from continuing operations	$	5.16	$	4.12	$	3.58	$	2.92	$	2.28
Charge from discontinued operations		.21		2.39		—		1.34		—

Net income	$	4.95	$	1.73	$	3.58	$	1.58	$	2.28


BALANCE SHEET DATA (at December 31):
Total assets	$	5,374.8	$	5,215.1	$	5,407.8	$	4,965.3	$	4,687.9
Long-term debt, excluding current maturities.		702.8		1,002.9		698.6		1,336.7		1,280.7
Shareholders’ equity		2,475.3		2,205.2		2,286.5		2,118.2		2,002.4
CASH DIVIDENDS PER COMMON SHARE	$	1.48	$	1.48	$	1.40	$	1.40	$	1.40

In October 1998, Cooper sold its Automotive Products segment for $1.9 billion in proceeds. Discontinued operations charges of $20.3 million, net of a $11.4 million income tax benefit in 2006; $227.2 million, net of a $127.8 million income tax benefit in 2005 and $126.0 million, net of a $70.9 million income tax benefit in 2003 were recorded for potential liabilities related to the Automotive Products segment sale and the Federal-Mogul bankruptcy. See Note 16 of the Notes to the Consolidated Financial Statements.


ITEM 7.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

This Annual Report on Form 10-K, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, includes certain forward-looking statements. The forward-looking statements reflect Cooper’s expectations, objectives and goals with respect to future events and financial performance, and are based on assumptions and estimates which Cooper believes are reasonable. Forward-looking statements include, but are not limited to, any statements regarding future revenues, costs and expenses, earnings, earnings per share, margins, cash flows, dividends and capital expenditures. Cooper wishes to caution readers not to put undue reliance on these statements and that actual results could differ materially from anticipated results. Important factors which may affect the actual results include, but are not limited to, the resolution of Federal-Mogul’s bankruptcy proceedings, political developments, market and economic conditions, changes in raw material, transportation and energy costs, industry competition, the

ability to execute and realize the expected benefits from strategic initiatives including revenue growth plans and cost-control and productivity improvement programs, the magnitude of any disruptions from manufacturing rationalizations and the implementation of the Enterprise Business System, changes in mix of products sold, mergers and acquisitions and their integration into Cooper, the timing and amount of any stock repurchases by Cooper, changes in financial markets including currency exchange rate fluctuations and changing legislation and regulations including changes in tax law, tax treaties or tax regulations. The forward-looking statements contained in this report are intended to qualify for the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended.

Critical Accounting Policies

The Consolidated Financial Statements and Notes to the Consolidated Financial Statements contain information that is pertinent to management’s discussion and analysis. The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities. Cooper believes the following critical accounting policies involve additional management judgment due to the sensitivity of the methods, assumptions and estimates necessary in determining the related asset and liability amounts.

Cooper recognizes revenues when products are shipped and accruals for sales returns and other allowances are provided at the time of shipment based upon past experience. If actual future returns and allowances differ from past experience, additional allowances may be required. The accrual for sales returns and other allowances was $73.4 million and $62.5 million at December 31, 2006 and 2005, respectively.

Allowances for excess and obsolete inventory are provided based on current assessments about future demands, market conditions and related management initiatives. If market conditions are less favorable than those projected by management, additional inventory allowances may be required. The allowance for excess and obsolete inventory was $65.6 million at December 31, 2006 and $58.7 million at December 31, 2005.

Pension assets and liabilities are determined on an actuarial basis and are affected by the market value of plan assets, estimates of the expected return on plan assets, discount rates and estimated future employee earnings and demographics. Actual changes in the fair market value of plan assets and differences between the actual return on plan assets and the expected return on plan assets will affect the amount of pension expense ultimately recognized. Differences between actuarial assumptions and estimates and actual experience are deferred in accumulated other nonowner changes in equity as actuarial net gains and losses. Actuarial net gains and losses in excess of a calculated minimum annual amount are amortized and recognized in net periodic pension cost over the average remaining service period of active employees.

Total net periodic pension benefits cost was $31.0 million in 2006, $18.9 million in 2005 and $18.9 million in 2004. During 2006, Cooper announced that effective January 1, 2007, future benefit accruals will cease under the Cooper U.S. Salaried Pension Plan. Cooper recognized a $4.2 million curtailment loss in 2006 as a result of this action. During 2006, Cooper also recognized a $4.1 million settlement loss primarily in connection with the retirement of senior executives. Total net periodic pension benefits cost is currently expected to decline to approximately $2.1 million in 2007 primarily due to the elimination of service cost on the salaried pension plan and non-recurrence of the 2006 losses discussed above. Beginning in 2007, Cooper will make a cash contribution equal to 3% of compensation to the Cooper Retirement Savings and Stock-Ownership Plan (“CO-SAV”). Cooper will further increase the company-matching contribution under the CO-SAV plan to a dollar-for-dollar match up to 6% of employee contributions. The net periodic pension benefit cost for 2007 has been estimated assuming a discount rate of 5.75% and an expected return on plan assets of 8.25%. See Note 13 of the Notes to the Consolidated Financial Statements.

The postretirement benefits other than pensions liability is also determined on an actuarial basis and is affected by assumptions including the discount rate and expected trends in health care costs. Changes in the discount rate and differences between actual and expected health care costs will affect the recorded

amount of postretirement benefits expense. Differences between assumptions and actual experience are deferred in accumulated other nonowner changes in equity as actuarial net gains and losses. Actuarial net gains and losses in excess of a minimum annual amount are amortized and recognized in net periodic postretirement benefit cost over the average remaining life expectancy of the participants. Cooper announced the elimination of postretirement life insurance for active employees effective January 1, 2007. As a result, Cooper recognized a $3.2 million curtailment gain in the second quarter of 2006. Excluding the curtailment gain, net periodic postretirement benefit cost decreased to $0.8 million in 2006, primarily as a result of plan amendments related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003, compared to $3.6 million in 2005 and $5.5 million in 2004. Net periodic postretirement benefit cost is expected to be approximately $0.7 million in 2007, assuming a discount rate of 5.75%. See Note 13 of the Notes to the Consolidated Financial Statements.

Stock-based compensation expense is recorded for stock-option grants, performance-based and restricted stock awards based upon fair value. The fair value of stock option awards are estimated at the grant date using the Black-Scholes-Merton option pricing model, which includes assumptions for volatility, expected term, risk-free interest rate and dividend yield. Expected volatility is based on implied volatilities from traded options on Cooper stock, historical volatility of Cooper stock and other factors. Historical data is used to estimate employee termination experience and the expected term of the options. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The fair value of performance-based and restricted stock awards granted are measured at the market price on the grant date. Performance awards are typically arranged in levels, with increasing number of shares earned as higher levels of growth are achieved. Performance goals are currently assumed to be achieved at the maximum level. If goal-level assumptions are not met, stock-based compensation expense is adjusted and previously recognized compensation expense would be reversed. Total stock-based compensation expense was $29.1 million in 2006, $40.3 million in 2005, and $22.1 million in 2004. See Note 10 of the Notes to the Consolidated Financial Statements.

Environmental liabilities are accrued based on estimates of known environmental remediation exposures. The liabilities include accruals for sites owned by Cooper and third-party sites where Cooper was determined to be a potentially responsible party. Third party sites frequently involve multiple potentially responsible parties and Cooper’s potential liability is determined based on estimates of Cooper’s proportionate responsibility for the total cleanup. The amounts accrued for such sites are based on these estimates as well as an assessment of the financial capacity of the other potentially responsible parties. Environmental liability estimates may be affected by changing determinations of what constitutes an environmental liability or an acceptable level of cleanup. To the extent that remediation procedures change or the financial condition of other potentially responsible parties is adversely affected, Cooper’s estimate of its environmental liabilities may change. The liability for environmental remediation was $29.7 million at December 31, 2006 and $32.7 million at December 31, 2005. See Note 7 of the Notes to the Consolidated Financial Statements.

Cooper records current tax liabilities as well as deferred tax assets and liabilities for those taxes incurred as a result of current operations but deferred until future periods. The annual provision for income taxes is the sum of both the current and deferred tax amounts. Current taxes payable represents the liability related to Cooper’s income tax returns for the current year, while the net deferred tax expense or benefit represents the change in the balance of deferred tax assets or liabilities reported on Cooper’s consolidated balance sheet. Deferred tax assets or liabilities are determined based upon differences between the book basis of assets and liabilities and their respective tax basis as measured by the enacted tax rates that Cooper estimates will be in effect when these differences reverse. In addition to estimating the future applicable tax rates, Cooper must also make certain assumptions regarding whether tax differences are permanent or temporary and whether taxable operating income in future periods will be sufficient to fully recognize any gross deferred tax assets. Cooper has established valuation allowances when it is more likely than not that some portion or all of the deferred tax assets will not be realized. During 2006, there were no significant changes in the methodologies utilized to calculate Cooper’s tax provision or related tax balance sheet accounts.

Cooper is subject to income taxes in both the United States and numerous non-U.S. jurisdictions. Cooper is regularly under examination by various tax authorities. United States federal and state tax authorities and tax authorities in other countries have challenged the amount of taxes due for certain tax periods. Cooper evaluates the potential exposure associated with various filing positions and records a liability for tax contingencies. Although Cooper believes all tax positions are reasonable and properly reported in accordance with applicable tax laws and regulations in effect during the periods involved, the final determination of tax audits and any related litigation could be materially different than that which is reflected in historical income tax provisions and accruals. Based on audits and litigation, a material effect on Cooper’s consolidated cash flows in the period or periods for which that determination is finalized could result. However, management does not believe that any of these matters will have a material effect on Cooper’s consolidated financial position or consolidated results of operations. See Note 12 of the Notes to the Consolidated Financial Statements.

During the fourth quarter of 2005, Cooper revised the accrual that represents its best estimate of liabilities related to the sale of the Automotive Products business to Federal-Mogul in 1998. During the three year period ending December 31, 2006, Cooper accounted for payments made to settle asbestos-related cases by reducing the accrual and insurance recoveries collected during the periods as increases to the accrual. Subsequent proceeds from insurance claims for settlements would increase the accrual. The analysis of Cooper’s contingent liability exposure for asbestos-related claims involving Abex products was conducted in the fourth quarter of 2001 with assistance from independent advisors, Bates White, LLC, and assumed future resolution of the Abex-related asbestos claims within the Federal-Mogul bankruptcy proceeding. As discussed in Note 16 of the Notes to the Consolidated Financial Statements, throughout 2003, Cooper worked towards resolution of the indemnification issues and future handling of the Abex-related claims within the Federal-Mogul bankruptcy proceedings. This included negotiations with representatives of Federal-Mogul, its bankruptcy committees and the future claimants (“Representatives”) regarding participation in Federal-Mogul’s proposed 524(g) asbestos trust.

Based on the status of the negotiations in 2004, Cooper concluded that it was probable that Federal-Mogul would reject the 1998 Agreement. Cooper also concluded that the Representatives would require any negotiated settlement through the Federal-Mogul bankruptcy to be at the high end of the Bates White, LLC liability analysis and with substantially lower insurance recovery assumptions and higher administrative costs.

In December 2005, Cooper announced that the Company and other parties involved in the resolution of the Federal-Mogul bankruptcy proceeding had reached an agreement regarding Cooper’s participation in Federal Mogul’s proposed 524 (g) asbestos trust. By participating in this trust, Cooper would resolve its liability for asbestos claims arising from Cooper’s former Abex Friction Products business. The proposed settlement agreement was subject to court approval, approval of 75 percent of the current Abex asbestos claimants and certain other approvals. The settlement would resolve more than 38,000 pending Abex claims as of December 31, 2005. Future claims would be resolved through the bankruptcy trust, and Cooper would be protected against future claims by an injunction to be issued by the district court upon plan confirmation.

stock upon Federal-Mogul’s emergence from bankruptcy. The agreement provided that the trust may, during the first year after issuance, sell these shares to Cooper at market prices and, thereafter, in open market transactions.

A critical term of the proposed settlement was the issuance of a preliminary injunction staying all pending Abex asbestos claims. At a hearing on January 20, 2006, other parties to the bankruptcy proceedings were unable to satisfy the court’s requirements to grant the required preliminary injunction. As a result, the proposed settlement agreement required renegotiation of certain terms. The final determination of whether Cooper will participate in the Federal-Mogul 524(g) trust was unknown. However, Cooper management concluded that, at the date of the filing of its 2005 Form 10-K, the most likely outcome in the range of potential outcomes is a revised settlement approximating the December 2005 proposed settlement. Accordingly, Cooper recorded a $227.2 million after-tax discontinued operations charge, net of a $127.8 million income tax benefit, in the fourth quarter of 2005.

court approval, to approval by 75 percent of the current Abex asbestos claimants and to certain other approvals.

Accordingly, Cooper recorded a $20.3 million after-tax discontinued operations charge, net of an $11.4 million income tax benefit, in the second quarter of 2006.

The revised proposed settlement agreement has been incorporated into Federal-Mogul’s Fourth Amended Joint Plan of Reorganization, which was filed on November 21, 2006.

On February 2, 2007, the U.S. Bankruptcy Court for the District of Delaware approved the adequacy of Federal-Mogul’s Supplemental Disclosure Statement describing the Fourth Amended Joint Plan of Reorganization. The Court also approved the Voting Procedures and ordered that the voting period shall expire on April 6, 2007. In addition, any objections to the Fourth Amended Plan must be filed with the Court by April 6, 2007 and the Court set the dates for a hearing on confirmation of the Plan on May 8 and 9, 2007. If the Plan is confirmed, Federal-Mogul could emerge from bankruptcy in mid-year 2007.

If a settlement within the 524(g) trust is in fact achieved on a basis consistent with the terms discussed above, Cooper will periodically assess the current overall adequacy of the accrual for discontinued operations, including updates to the assumptions regarding estimates of insurance recoveries, levels of defense and indemnity payments and other assumptions related to the matter. As this additional information becomes available, Cooper will record a charge or credit to the accrual for discontinued operations, which may be significant.

to shareholders through dividends and stock repurchases. The settlement agreement remains subject to bankruptcy court approval, approval by the current claimants and other matters. At this time, the exact manner in which this issue will be resolved is not known. The accrual for potential liabilities related to the Automotive Products sale and the Federal-Mogul bankruptcy was $529.6 million at December 31, 2006 and $526.3 million at December 31, 2005.

Results of Operations

Revenues


	Year Ended December 31,
	2006		2005		2004
	(in millions)
Electrical Products	$	4,426.0	$	3,997.5	$	3,722.2
Tools		758.6		732.9		740.7

Total Revenues	$	5,184.6	$	4,730.4	$	4,462.9

See the geographic information included in Note 15 of the Notes to the Consolidated Financial Statements for a summary of revenues by country.

2006 vs. 2005 Revenues Revenues for 2006 increased 10% compared to 2005. The impact of currency translation was nominal, while acquisitions, net of a small divestiture, added approximately 2% in revenues.

Electrical Products segment revenues for 2006, which represented 85% of revenues, increased approximately 11% compared to 2005. Currency translation had a nominal impact on 2006 revenues. The impact of acquisitions, net of a small divestiture, increased segment revenues by approximately 2%. All of the Electrical Products segment businesses posted revenue growth during 2006. Sales growth was a result of strong demand from industrial and utility markets, improvement in non-residential construction demand and successful expansion into developing international markets. These gains more than offset a decline in retail sales due to an overall slowdown in the residential market and ceding product lines in the channel over prices.

Tools segment revenues for 2006, which represented 15% of revenues, increased approximately 4% compared to 2005. Currency translation increased revenues by approximately 1%. Increased sales of hand tools were driven by new product introductions, strength in industrial markets and international expansion. These gains offset the loss of chain product position at a major retailer and the overall slowdown in the residential market. Demand for industrial power tools strengthened and strong fourth quarter shipments led to modest year over year growth in revenue from the automated systems business.

2005 vs. 2004 Revenues Revenues for 2005 increased 6% compared to 2004. The impact of currency translation increased revenues by approximately 1%.

Electrical Products segment revenues for 2005, which represented 85% of total revenues increased approximately 7% compared to 2004. Currency translation contributed approximately 1% to the revenue increase. All of Cooper’s Electrical Products businesses experienced revenue growth over the prior year. Favorable industrial, utility and energy markets as well as steady commercial construction drove organic sales growth. Key initiatives to expand global presence and deliver new products were successful in penetrating new markets. Price increases in response to inflationary cost pressures also supported growth across the business lines.

Tools segment revenues, which represented 15% of total revenues, decreased approximately 1% compared to 2004. Currency translation increased revenues by approximately 1% in 2005. Solid industrial demand drove growth in hand tools, but continued weaknesses in the automotive markets resulted in declines

in power tools and automated assembly systems revenues. Retail demand increased over the previous year for hand tools, while slowing in the fourth quarter from customer inventory realignments.

Operating Results


	Year Ended December 31,
	2006		2005		2004
	(in millions, except per share data)
Electrical Products	$	703.2	$	585.0	$	511.2
Tools		85.6		66.7		62.7

Total Segment Operating Earnings		788.8		651.7		573.9
General Corporate Expense		89.6		91.9		77.3

Operating Earnings		699.2		559.8		496.6
Interest Expense, net		51.5		64.8		68.1

Income from Continuing Operations Before Income Taxes		647.7		495.0		428.5
Income Tax Expense		163.4		103.9		88.7

Income from Continuing Operations		484.3		391.1		339.8
Charge Related to Discontinued Operations		20.3		227.2		—

Net Income	$	464.0	$	163.9	$	339.8


Diluted Earnings Per Share:
Income from Continuing Operations	$	5.16	$	4.12	$	3.58
Charge from Discontinued Operations		.21		2.39		—

Net Income	$	4.95	$	1.73	$	3.58

Cooper measures the performance of its businesses exclusive of financing expenses. All costs directly attributable to operating businesses are included in segment operating earnings. Corporate overhead costs, including costs of traditional headquarters activities, such as treasury, are not allocated to the businesses. See Note 15 of the Notes to the Consolidated Financial Statements.

2006 vs. 2005 Segment Operating Earnings Segment Operating Earnings were $788.8 million in 2006 compared to $651.7 million in 2005.

Electrical Products segment 2006 operating earnings increased 20% to $703.2 million from $585.0 million for 2005. Return on revenues was 15.9% for 2006 compared to 14.6% for 2005. The increase was primarily due to leverage of fixed costs on higher volume, favorable pricing offsetting inflation in production material costs, strong execution on productivity improvement initiatives, and a shift in sales mix away from the lower margin retail channel.

Tools segment 2006 operating earnings increased 28% to $85.6 million compared to $66.7 million for 2005. Return on revenues was 11.3% compared to 9.1% in 2005. The increase reflects leverage on fixed costs due to increased volume, improved sales mix, price increase realization and successful cost reduction initiatives.

2005 vs. 2004 Segment Operating Earnings Segment operating earnings were $651.7 million in 2005 compared to $573.9 million in 2004.

Electrical Products segment 2005 operating earnings increased 14% to $585.0 million from $511.2 million for 2004. Return on revenues was 14.6% for 2005, compared to 13.7% in 2004. The increase in operating earnings was due to higher revenues in key industrial, construction and utility markets and ongoing

productivity improvement initiatives. Price increases sufficient to offset commodity and energy inflation also contributed to earnings. Partially offsetting these positive factors were higher selling and administrative costs in support of global expansion.

Tools segment 2005 operating earnings increased 6% to $66.7 million compared to $62.7 million in 2004. Return on revenues was 9.1% in 2005 and 8.5% in 2004. The increase in operating earnings resulted from ongoing productivity improvement initiatives and benefits from previously completed restructuring projects, which offset an overall revenue decline from broad-based weakness in capital spending by global automotive companies and weaker demand for power tools. Favorable price realization, which offset inflation in material and energy costs and reduced selling and administrative costs, also contributed to earnings.

Restructuring

During the fourth quarter of 2003, Cooper recorded net restructuring charges of $16.9 million, or $13.6 million after taxes ($.14 per diluted common share). This represented costs associated with restructuring projects undertaken in 2003 of $18.4 million, partially offset by a $1.5 million adjustment of estimates for restructuring projects initiated in 2002.

The most significant action included in the charges was an announcement of the closing of Cooper Wiring Devices’ manufacturing operations in New York City. This action included plans for the withdrawal from a multiple-employer pension plan. Cooper recorded a $12.5 million obligation as an estimate of Cooper’s portion of unfunded benefit obligations of the plan. In 2005, Cooper finalized activities related to withdrawal from the multi-employer pension plan and recorded an additional $4.0 million pre-tax charge. The multiple-employer pension obligation was satisfied with a cash payment of $14.1 million in October 2006 representing full and final payment of the withdrawal liability. The remaining $5.9 million charge in 2003 primarily represented severance for announced employment reductions at several locations. As of December 31, 2006 and 2005, Cooper had paid $5.9 million and $5.3 million, respectively, for these actions, all of which was for severance costs.

A total of 114 salaried and 150 hourly personnel were eliminated as a result of these actions. Cooper estimates the annual savings from the personnel reductions was approximately $6 million, (net of the anticipated additional employees added in lower-cost regions) with most of the savings beginning in the first quarter of 2004. The majority of the eliminated costs previously were reflected as cost of sales.

See Note 2 of the Notes to the Consolidated Financial Statements for additional information on restructuring charges.

General Corporate Expense General Corporate expense decreased $2.3 million during 2006 to $89.6 million compared to $91.9 million for 2005. In 2005, General Corporate expense included additional stock-based compensation expense due to the accelerated vesting of expense related to the retirement of a senior executive as well as costs relating to reorganizing certain corporate activities.

Increased incentive costs and legal and environmental costs in 2006 were partially offset by the benefit of the 2005 additional costs discussed above not recurring and $5.1 million of income from Belden, Inc. (“Belden”) as discussed below.

General corporate expense was reduced in 2006 by $5.1 million in proceeds received under an agreement with Belden. In 1993, Cooper completed an initial public offering of the stock of Belden, formerly a division of Cooper. Under the agreement, Belden and Cooper made an election that increased the tax basis of certain Belden assets. Belden is required to pay Cooper ninety percent of the amount by which Belden has actually reduced tax payments that would otherwise have been payable if the increase in the tax basis of assets had not occurred, as realized over substantially fifteen years. If Belden does not have sufficient future taxable income, it is possible that Belden will not be able to utilize the tax deductions arising from the increase in the tax basis of the assets resulting in a tax loss carryforward. Belden is not obligated to

pay Cooper until a tax loss carryforward is utilized. Belden can carry any loss forward twenty years to offset future taxable income. Belden has incurred tax loss carryforwards and no proceeds under the Agreement were received in the prior three years. The timing and ultimate receipt of future payment are contingent upon the ultimate taxable income Belden reports each year.

General Corporate expense increased $14.6 million to $91.9 million during 2005 compared to $77.3 million during 2004. The increase was primarily associated with costs incurred to reorganize certain corporate activities, higher stock-based compensation costs from 2005 grants and accelerated vesting of stock-based compensation and other costs related to the retirement of a senior executive. Increased audit and Sarbanes-Oxley Act compliance expenses also contributed to the increase.

Interest Expense, Net Interest expense, net for 2006 decreased $13.3 million from 2005 as a result of both lower average debt balances and average interest rates. Average debt balances were $1.04 billion and $1.26 billion and average interest rates were 5.70% and 5.87% for 2006 and 2005, respectively.

The decline in the average interest rates was primarily the result of conversion of debt balances to lower interest-rate debt. The debt balance during 2005 included 6.25%, 300 million Euro bonds that matured in October 2005. Cooper partially funded repayment of this Euro bond debt with $325 million, 5.25% senior unsecured notes maturing in 2012. Proceeds from the notes were swapped to €272.6 million with cross-currency interest-rate swaps, effectively converting the seven-year U.S. notes to seven-year Euro notes with an annual interest rate of 3.55%.

Interest expense, net for 2005 decreased $3.3 million from 2004 primarily as a result of lower average debt balances and additional interest earned on higher average cash balances, partially offset by higher average interest rates. Average debt balances were $1.26 billion and $1.34 billion, and average interest rates were 5.87% and 5.63% for 2005 and 2004, respectively.

During August 2003, Cooper entered into interest-rate swaps to effectively convert $300 million of 5.25% long-term fixed-rate debt to variable-rate debt at the six-month LIBOR rate plus 1.91% (with semi-annual reset). The notional principal amount and maturity dates of the interest-rate swaps match the underlying long-term debt, which matures in July 2007. During 2006, Cooper recognized additional interest expense of $5.8 million due to the interest-rate swaps. During 2005 and 2004, Cooper recognized reductions of interest expense, net of $0.1 million and $5.1 million, respectively, related to the interest-rate swaps.

Income Tax Expense The effective tax rate attributable to continuing operations was 25.2% for 2006, 21.0% for 2005 and 20.7% for 2004. The increase is primarily related to increased taxable earnings in 2006 without a corresponding increase in tax benefits.

Charge Related to Discontinued Operations In the second quarter of 2006, Cooper recorded an additional charge of $20.3 million, net of an $11.4 million income tax benefit, related to potential asbestos obligations regarding the Automotive Products segment, which was sold in 1998. In the fourth quarter of 2005, Cooper concluded that additional charges of $227.2 million, net of a $127.8 million income tax benefit related to this matter were required in order to adjust the existing accrual to amounts within the likely range of outcomes. See Note 16 of the Notes to the Consolidated Financial Statements.

Diluted Earnings Per Share Diluted earnings per share from continuing operations was $5.16 in 2006, $4.12 in 2005, and $3.58 in 2004.

Percentage of Revenues


	Year Ended December 31,
	2006			2005			2004
Cost of Sales:
Electrical Products		67.7	%		68.1	%		69.3	%
Tools		69.3	%		70.8	%		72.6	%

Selling and Administrative:
Electrical Products		16.4	%		17.2	%		17.0	%
Tools		19.4	%		20.1	%		18.9	%

2006 vs 2005 Percentage of Revenues Electrical Products segment cost of sales, as a percentage of revenues, was 67.7% for 2006 compared to 68.1% for 2005. The decrease in the cost of sales percentage was primarily the result of leverage on higher volumes, pricing offsetting inflationary pressures for production material and energy costs, successful productivity improvement initiatives, and a shift in sales mix away from the lower margin retail channel. Tools segment cost of sales, as a percentage of revenues, was 69.3% for 2006 compared to 70.8% for 2005. The decrease in cost of sales percentage reflects continuing cost productivity improvements, favorable sales mix, and price increase realization.

Electrical Products segment selling and administrative expenses, as a percentage of revenues, for 2006 were 16.4% compared to 17.2% for 2005. The decrease in selling and administrative expenses percentage is primarily due to leveraging higher volumes, enterprise business system benefits, and benefits realized from prior year cost reductions. These performance improvements more than offset continued investment in key commercial and global growth initiatives. Tools segment selling and administrative expenses, as a percentage of revenues, for 2006 were 19.4% compared to 20.1% for 2005. The decrease in the selling and administrative expenses percentage is primarily due to leverage on fixed costs and cost reduction activities.

2005 vs. 2004 Percentage of Revenues Electrical Products segment cost of sales, as a percentage of revenues, was 68.1% for 2005 compared to 69.3% for 2004. The decrease in the cost of sales percentage was primarily a result of successful pricing actions, cost reductions through focused execution of company-wide productivity initiatives and leveraging of manufacturing costs from higher production volumes. Tools segment cost of sales, as a percentage of revenues, was 70.8% for 2005 compared to 72.6% for 2004. The decrease in cost of sales percentage reflects successful pricing actions, productivity improvements and decreased sales of lower margin assembly systems.

Electrical Products segment selling and administrative expenses, as a percentage of revenues, for 2005 were 17.2% compared to 17.0% for 2004. The increase in selling and administrative expenses percentage is primarily due to investment in strategic growth initiatives and increased stock-based compensation costs. Tools segment selling and administrative expenses, as a percentage of revenues, for 2005 were 20.1% compared to 18.9% for 2004. The increase in the selling and administrative expenses percentage was primarily due to increased incentive-based compensation expenses and investment in globalization initiatives.

Cooper realizes certain costs and proceeds that are not directly attributable to the operating segments. These items are reflected as General Corporate expenses. See the “General Corporate Expense” section above.

Earnings Outlook

The following sets forth Cooper’s general business outlook for 2007 based on current expectations.

Cooper expects low double digit growth in revenues for Electrical Products in 2007 from continuing growth in utility and industrial market demand, successful market penetration from key growth initiatives

and price increases in response to commodity and energy cost inflation partially offset by slower residential construction markets. Acquisitions completed through January 2007 add approximately 3% to Electrical Products revenue growth. In the Tools segment, Cooper expects mid single-digit revenue growth through continued expansion of industrial markets, focused market penetration initiatives and price increases as a result of raw material and energy cost increases. Operating earnings are expected to grow more rapidly than revenues as a result of benefits from previous cost reduction programs, realizing further productivity improvements and leveraging of fixed costs. Diluted continuing earnings per share is expected to increase 12% to 15% compared to 2006.

The above statements are forward looking, and actual results may differ materially. The above statements are based on a number of assumptions, risks and uncertainties. The primary economic assumptions include, without limitation: (1) continued growth in the United States and other economies; (2) no significant change in raw material or energy costs that are not realized through price increases; (3) realization of benefits of cost-reduction programs (including implementing an Enterprise Business System) with no major disruptions from those programs currently underway; (4) no significant adverse changes in the relationship of the U.S. dollar to the currencies of countries in which Cooper does business, and (5) no significant changes in the income tax laws or their interpretation. The estimates also assume, without limitation, no significant change in competitive conditions and such other risk factors as are discussed from time to time in Cooper’s periodic filings with the Securities and Exchange Commission.

Pricing and Volume

In each of Cooper’s segments, the nature of many of the products sold is such that an accurate determination of the changes in unit volume of sales is neither practical nor, in some cases, meaningful. Each segment produces a family of products, within which there exist considerable variations in size, configuration and other characteristics.

It is Cooper’s judgment that unit volumes in both the Electrical Products and Tools segments increased in 2006.

During the three-year period ending December 31, 2006, Cooper has experienced an overall increase in customer pricing, primarily in response to increased material, energy and components costs. Cooper has aggressively acted to control and reduce costs during the three-year period through strategic sourcing, manufacturing improvement and rationalization efforts in order to improve profitability in the segments.

Effect of Inflation

Over the three-year period, inflation has had a relatively minor impact on Cooper’s results of operations. However, during 2006, 2005 and 2004, there were significant increases in certain key commodities and components, which resulted in price increases in certain businesses lagging the increased costs. Cooper’s on-going initiatives to improve productivity and rationalize its operational base has mitigated increases in employee compensation and benefits, as well as general inflation on operating costs.

Liquidity and Capital Resources

Operating Working Capital

For purposes of this discussion, operating working capital is defined as receivables and inventories less accounts payable.

Cooper’s operating working capital increased $78.6 million during 2006. The increase included a $53.6 million increase in receivables and a $68.9 million increase in inventories, partially offset by a $43.9 million increase in accounts payable, which were driven primarily by increased sales volume and actions to improve customer service, as well as working capital increases from completed acquisitions. The increase in inventories was partially offset by a $6.9 million increase in the allowance for excess and obsolete

inventories. Operating working capital turnover (defined as annualized revenues divided by average quarterly operating working capital) for 2006 of 5.2 turns increased from 4.9 turns in 2005 primarily due to initiatives focused on reducing days sales outstanding and improved payables management. Inventory turns remained flat with 2005, as the company maintained focus on improving customer service.

Cooper’s operating working capital decreased $40 million to $953 million in 2005 compared to $993 million in 2004. The decrease in operating working capital for 2005 was due to a $77 million increase in accounts payable, partially offset by a $21 million increase in receivables and a $16 million increase in inventories. Receivables and inventories increased with higher sales volume and ongoing efforts to improve customer service. Payables increased on higher volumes and improved payables management through expanded leverage of enterprise business system capabilities. Operating working capital turnover (defined as annualized revenues divided by average quarterly operating working capital) for 2005 of 4.9 turns increased from 4.6 turns in 2004 due to revenue growth and a decline in operating working capital.

Cooper’s operating working capital increased $31 million to $993 million in 2004 compared to $962 million in 2003. The increase in operating working capital for 2004 was due to a $82 million increase in accounts receivable partially offset by a $29 million decrease in inventories and a $22 million increase in accounts payable. Excluding acquisitions and currency translation, operating working capital was essentially flat on a 10% revenue increase. Operating working capital turnover (defined as annual revenues divided by average operating working capital) for 2004 was 4.6 turns, increasing from 4.2 turns in 2003, due to continued focus on improving the use of working capital, particularly lowering inventory levels, while increasing sales. A portion of the reduction in inventories was due to an $11 million increase in the allowance for excess and obsolete inventories.

Cash Flows

Net cash provided by operating activities was $601 million during 2006. This cash, plus an additional $29 million of cash and cash equivalents and $89 million of cash received from employee stock option exercise activity were primarily used to fund capital expenditures of $85 million, acquisitions of $280 million, dividends of $137 million and share purchases of $264 million.

Net cash provided by operating activities was $574 million for 2005. These funds, plus $200 million of cash and cash equivalents and $73 million of cash received from employee stock activity were primarily used to fund capital expenditures of $97 million, dividends of $138 million, net debt repayments of $384 million and share purchases of $211 million during 2005.

Net cash provided by operating activities in 2004 totaled $474 million. These funds, along with $78 million of cash received from employee stock plan activity and a $90 million net increase in debt, were used to fund capital expenditures of $103 million, dividends of $131 million, share repurchases of $203 million and acquisitions of $49 million, resulting in an increase in cash and cash equivalents of $189 million.

In connection with accounting for acquisitions, Cooper records, to the extent appropriate, accruals for the costs of closing duplicate facilities, severing redundant personnel and integrating the acquired businesses into existing Cooper operations. At December 31, 2006, Cooper had no accruals related to these activities. Cash flows from operating activities for each of the three years in the period ended December 31, 2006, is reduced by the amounts expended on the various accruals established in connection with each acquisition. Cooper spent $6.3 million, $4.7 million, and $7.1 million on these integration activities in 2006, 2005 and 2004, respectively. See Note 7 of the Notes to the Consolidated Financial Statements for further information.

Cooper currently anticipates that it will continue to annually generate in excess of $300 million in cash flow available for acquisitions, debt repayment and common stock repurchases.

As discussed in Note 16 of Notes to the Consolidated Financial Statements, Cooper has reached a revised agreement with the Representatives of Federal-Mogul, its bankruptcy committees and the future

claimants regarding settlement of Cooper’s contingent liabilities related to the Automotive Products sale to Federal-Mogul. Cooper anticipates that any settlement would be funded from operating cash flows, existing cash, and commercial paper proceeds (if required).

Debt

At December 31, 2006 and 2005, Cooper had cash and cash equivalents of $423.5 million and $452.8 million, respectively. At December 31, 2006 and 2005, Cooper had short-term debt of $5.0 million and $7.6 million, respectively. None of this short-term debt consisted of commercial paper.

Cooper’s practice is to back up its short-term debt with a combination of cash and committed credit facilities. At December 31, 2006 and 2005, Cooper had a $500 million committed credit facility, which matures in November 2009. Short-term debt, to the extent not backed up by cash, reduces the amount of additional liquidity provided by the committed credit facility.

The credit facility agreement is not subject to termination based on a decrease in Cooper’s debt ratings or a material adverse change clause. The principal financial covenants in the agreement limit Cooper’s debt-to-total capitalization ratio to 60% and require Cooper to maintain a minimum earnings before interest expense, income taxes, depreciation and amortization to interest ratio of 3 to 1. Cooper is in compliance with all covenants set forth in the credit facility agreement.

Cooper’s access to the commercial paper market could be adversely affected by a change in the credit ratings assigned to its commercial paper. Should Cooper’s access to the commercial paper market be adversely affected due to a change in its credit ratings, Cooper would rely on a combination of available cash and its committed credit facility to provide short-term funding. The committed credit facility does not contain any provision, which makes its availability to Cooper dependent on Cooper’s credit ratings.

On November 8, 2005, Cooper US, Inc., a subsidiary of Cooper, issued $325 million of 5.25% senior unsecured notes that mature on November 15, 2012. Payment of the notes is guaranteed by Cooper and certain of its subsidiaries. Proceeds of the notes were swapped with cross-currency interest-rate swaps to €272.6 million, effectively converting the seven-year U.S. notes to seven-year Euro notes with an annual interest rate of 3.55%. The proceeds of €272.6 million partially funded repayment of the 6.25% Euro bonds that matured in October 2005.

Cooper’s $300 million, 5.25% senior unsecured notes, which were issued in June 2002, will mature in July 2007. Cooper is evaluating alternatives for funding the repayment of these notes. Alternatives under consideration include using available cash, issuing commercial paper, issuing new long-term notes and various combinations of these alternatives.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

Cooper executes stand-by letters of credit, performance bonds and other guarantees in the normal course of business that ensure Cooper’s performance or payments to third parties. The aggregate notional value of these instruments was $118.6 million and $104.3 million at December 31, 2006 and 2005, respectively. Eighty-six percent of these instruments have an expiration date within one year. In the past, no significant claims have been made against these financial instruments. Management believes the likelihood of demand for payment under these instruments is minimal and expects no material cash outlays to occur in connection with these instruments.

The following table summarizes Cooper’s contractual obligations at December 31, 2006 and the effect such obligations are expected to have on its liquidity and cash flows in future periods.


	Payments Due
			Less than		One to		Four to		After
Contractual Obligations:	Total		One Year		Three Years		Five Years		Five Years
	(in millions)
Long-Term Debt	$	1,003.5	$	300.7	$	375.3	$	2.3	$	325.2
Short-Term Debt		5.0		5.0		—		—		—
Noncancellable Operating Leases		107.9		22.8		31.7		21.4		32.0
Purchase Obligations		282.4		275.2		7.2		—		—
Other Long-Term Liabilities⁽¹⁾		235.9		20.3		39.4		37.1		139.1

	$	1,634.7	$	624.0	$	453.6	$	60.8	$	496.3


⁽¹⁾		Includes unfunded other postretirement benefit obligations, unfunded non-U.S. defined benefit pension plan liabilities, other postemployment benefit liabilities and environmental liabilities.

Capitalization

On November 2, 2004, Cooper’s Board of Directors authorized the purchase of up to five million shares of common stock. Cooper has also announced that the Board authorized the repurchase of shares issued from time to time under its equity compensation plans, matched savings plan and dividend reinvestment plan in order to offset the dilution that results from issuing shares under these plans.

Cooper targets a 30% to 40% debt-to-total capitalization ratio. Excess cash flows are utilized to purchase shares of Cooper’s Common stock or fund acquisitions. At December 31, 2006, 2005 and 2004, Cooper’s debt-to-total capitalization ratio was 28.9%, 31.7% and 39.0%, respectively.

On February 14, 2007, Cooper announced that the Board of Directors approved a two-for-one stock split of Cooper common stock and increased the annual dividend rate of Cooper’s common stock by $.20 cents per share to $1.68 (or $.84 per share after the stock split). The record date for the stock split is February 28, 2007 and the distribution date is March 15, 2007. On February 9, 2005, Cooper’s Board of Directors increased the annual dividend rate of Cooper’s common stock by eight cents per share to $1.48.

Capital Expenditures and Commitments

Capital expenditures on projects to reduce product costs, improve product quality, increase manufacturing efficiency and operating flexibility, or expand production capacity were $85 million in 2006, $97 million in 2005 and $103 million in 2004. Capital expenditures are projected to be approximately $110 to $120 million in 2007. Projected expenditures for 2007 will focus on capacity expansions in key markets, development of new products, continued implementation of new business systems and cost reduction programs.

Interest Rate and Currency Risk

Changes in interest rates and currency exchange rates affect Cooper’s earnings and cash flows. As a result of having sales, purchases and certain intercompany transactions denominated in currencies other than the functional currencies used by Cooper’s businesses, Cooper is exposed to the effect of exchange rate changes on its cash flows and earnings. Cooper enters into currency forward exchange contracts to hedge significant non-functional currency denominated transactions for periods consistent with the terms of the underlying transactions. Contracts generally have maturities that do not exceed one year.

The table below provides information about Cooper’s derivative financial instruments and other financial instruments at December 31, 2006 that are sensitive to changes in interest rates. For debt obligations the table presents principal cash flows by expected maturity dates and weighted average interest rates. For interest-rate swaps, the table presents notional amounts and weighted average interest rates by

contractual maturity dates. Notional amounts are used to calculate the contractual payments to be exchanged under the contract. The average pay-rate on interest-rate swaps is based on implied forward-rates in the yield curve as of December 31, 2006.


	2007			2008			2009			2010			2011			Thereafter			Total
	($ in millions)
Long-term debt:

Fixed-rate (U.S. Dollar)	$	300.7		$	100.3		$	275.0		$	2.3		$	—		$	325.0		$	1,003.3
Average interest-rate		5.5	%		5.5	%		5.4	%		5.3	%		5.3	%		5.3	%		5.4	%

Variable-rate (U.S. Dollar)	$	—		$	—		$	—		$	—		$	—		$	8.0		$	8.0
Average interest-rate		5.6	%		5.6	%		5.6	%		5.6	%		5.6	%		5.6	%		5.6	%

Interest-rate swaps:
Fixed to variable:
Notional amount⁽¹⁾	$	300.0		$	—		$	—		$	—		$	—		$	—		$	300.0
Average pay-rate		7.38	%		—			—			—			—			—			7.38	%
Average receive-rate		5.25	%		—			—			—			—			—			5.25	%

Cross-currency interest-rate swaps:
Fixed to fixed:
Notional amount⁽²⁾	$	325.0		$	325.0		$	325.0		$	325.0		$	325.0		$	325.0		$	325.0
Average pay-rate		3.5275	%		3.5275	%		3.5275	%		3.5275	%		3.5275	%		3.5275	%		3.5275	%
Average receive-rate		5.232	%		5.232	%		5.232	%		5.232	%		5.232	%		5.232	%		5.232	%


⁽¹⁾		Cooper entered into interest-rate swaps to effectively convert its fixed-rate $300 million senior unsecured debt due in July 2007 to variable-rate debt.

⁽²⁾		Cooper entered into cross-currency interest-rate swaps to effectively convert $325 million of 5.25% senior unsecured debt due in November 2012 to Euro 272.6 million with an annual interest rate of 3.55%.

The table below provides information about Cooper’s currency forward exchange contracts to purchase currencies in excess of $10 million at December 31, 2006. The contracts mature during 2007. The notional amount is used to calculate the contractual payments exchanged under the contracts. The notional amount represents the U.S. dollar equivalent.


	2007
	(in millions,
	where applicable)
Euro Functional Currency
Buy U.S. Dollars / Sell Euro
Notional amount	$	143.9
Average contract rate		1.288

U.S. Dollar Functional Currency
Buy Euro / Sell U.S. Dollars
Notional amount	$	121.7
Average contract rate		1.306

Canadian Dollar Functional Currency
Buy U.S. Dollars / Sell Canadian Dollars
Notional amount	$	76.0
Average contract rate		.8913

U.S. Dollar Functional Currency
Buy Mexican Pesos / Sell U.S. Dollars
Notional amount	$	22.9
Average contract rate		.0908

The table below provides information about Cooper’s derivative financial instruments and other financial instruments at December 31, 2005 that are sensitive to changes in interest rates. For debt obligations the table presents principal cash flows by expected maturity dates and weighted average interest rates. For interest-rate swaps, the table presents notional amounts and weighted average interest rates by contractual maturity dates. Notional amounts are used to calculate the contractual payments to be exchanged under the contract. The average pay-rate on interest-rate swaps is based on implied forward-rates in the yield curve as of December 31, 2005.


	2006			2007			2008			2009			2010			Thereafter			Total
	($ in millions)
Long-term debt:
Fixed-rate (U.S. Dollar)	$	11.4		$	300.8		$	100.3		$	275.0		$	2.3		$	325.0		$	1,014.8
Average interest-rate		5.5	%		5.5	%		5.5	%		5.4	%		5.3	%		5.3	%		5.4	%

Variable-rate (U.S. Dollar)	$	—		$	—		$	—		$	—		$	—		$	8.0		$	8.0
Average interest-rate		4.5	%		4.5	%		4.5	%		4.5	%		4.5	%		4.5	%		4.5	%

Interest-rate swaps:
Fixed to variable:
Notional amount⁽¹⁾	$	300.0		$	300.0		$	—		$	—		$	—		$	—		$	300.0
Average pay-rate		6.78	%		6.80	%		—			—			—			—			6.79	%
Average receive-rate		5.25	%		5.25	%		—			—			—			—			5.25	%

Cross-currency interest-rate swaps:
Fixed to fixed:
Notional amount⁽²⁾	$	325.0		$	325.0		$	325.0		$	325.0		$	325.0		$	325.0		$	325.0
Average pay-rate		3.5275	%		3.5275	%		3.5275	%		3.5275	%		3.5275	%		3.5275	%		3.5275	%
Average receive-rate		5.232	%		5.232	%		5.232	%		5.232	%		5.232	%		5.232	%		5.232	%


⁽¹⁾		Cooper entered into interest-rate swaps to effectively convert its fixed-rate $300 million senior unsecured debt due in July 2007 to variable-rate debt.

⁽²⁾		Cooper entered into cross-currency interest-rate swaps to effectively convert $325 million of 5.25% senior unsecured debt due in November 2012 to Euro 272.6 million with an annual interest rate of 3.55%.

The table below provides information about Cooper’s currency forward exchange contracts to purchase currencies in excess of $10 million at December 31, 2005. The contracts matured during 2006. The notional amount is used to calculate the contractual payments exchanged under the contracts. The notional amount represents the U.S. dollar equivalent.


	2006
	(in millions,
	where applicable)
Canadian Dollar Functional Currency
Buy U.S. Dollars / Sell Canadian Dollars
Notional amount	$	98.9
Average contract rate		.8542

U.S. Dollar Functional Currency
Buy Mexican Pesos / Sell U.S. Dollars
Notional amount	$	19.1
Average contract rate		.0884

See Note 17 of the Notes to the Consolidated Financial Statements for additional information regarding the fair value of Cooper’s financial instruments.

Recently Issued Accounting Standards

See Note 1 of the Notes to the Consolidated Financial Statements.


ITEM 7A.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by this Item is included under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”


ITEM 8.		FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Cooper’s consolidated financial statements, together with the report thereon of Ernst & Young LLP and the supplementary financial data are set forth on pages F-1 through F-44 hereof. (See Item 15 for Index.)


ITEM 9.		CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.


ITEM 9A.		CONTROLS AND PROCEDURES

As of the end of the period covered by this report, Cooper’s management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of the design and operation of Cooper’s disclosure controls and procedures. Based on that evaluation, Cooper’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the disclosure controls and procedures are effective. There have been no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of this evaluation. See Report of Management on Internal Control Over Financial Reporting on page F-1.

Cooper is executing a multi-year process of implementing an Enterprise Business System (“EBS”) globally. Implementing an EBS system on a global basis involves significant changes in business processes. The implementation is phased, which reduces the risks associated with making these changes. In addition, Cooper is taking the necessary steps to monitor and maintain appropriate internal controls during the implementations.


ITEM 9B.		OTHER INFORMATION

Not applicable.

PART III


ITEM 10.		DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item is set forth under the captions “Election of Directors”, “Executive Officers”, and “Corporate Governance” in Cooper’s Proxy Statement to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934 in connection with Cooper’s 2007 Annual Meeting of Shareholders (the “Proxy Statement”) and is incorporated herein by reference.


ITEM 11.		EXECUTIVE COMPENSATION

The information required by this Item is set forth under the caption “Executive Management Compensation” and “Directors’ Compensation” in the Proxy Statement and is incorporated herein by reference.


ITEM 12.		SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this Item is set forth under the captions “Cooper Stock Ownership of Certain Beneficial Owners”, “Securities Ownership of Officers and Directors” and “Equity Compensation Plan Information” in the Proxy Statement and is incorporated herein by reference.


ITEM 13.		CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item is set forth under the caption “Transactions with Related Persons” and “Corporate Governance-Director Independence” in the Proxy Statement and is incorporated herein by reference.


ITEM 14.		PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item is set forth under the caption “Relationship with Independent Auditors” in the Proxy Statement and is incorporated herein by reference.

PART IV


ITEM 15.		EXHIBITS AND FINANCIAL STATEMENT SCHEDULES


(a) 1.		Financial Statements and Other Financial Data.


		Page
Report of Management on Internal Control Over Financial Reporting		F-1
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting		F-2
Report of Independent Registered Public Accounting Firm		F-3
Consolidated Income Statements for each of the three years in the period ended December 31, 2006		F-4
Consolidated Balance Sheets as of December 31, 2006 and 2005		F-5
Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2006		F-6
Consolidated Statements of Shareholders’ Equity for each of the three years in the period ended December 31, 2006		F-7
Notes to Consolidated Financial Statements		F-8

Financial information with respect to subsidiaries not consolidated and 50 percent or less owned entities accounted for by the equity method has not been included because in the aggregate such subsidiaries and investments do not constitute a significant subsidiary.

Financial Statement Schedules

Financial statement schedules are not included in this Form 10-K Annual Report because they are not applicable or the required information is shown in the financial statements or notes thereto.

Exhibits

2.0

Agreement and Plan of Merger among Cooper Industries, Inc., Cooper Mergerco, Inc. and Cooper Industries, Ltd. (incorporated herein by reference to Annex I to Cooper’s Registration Statement on Form S-4, Registration No. 333-62740).

	3.1		Memorandum of Association of Cooper Industries, Ltd. (incorporated herein by reference to Annex II to Cooper’s Registration Statement on Form S-4, Registration No. 333-62740).

	3.2		Amended and Restated Bye-Laws of Cooper Industries, Ltd. (incorporated herein by reference to Annex III to Cooper’s Registration Statement on Form S-4, Registration No. 333-62740).

	4.1		Rights Agreement dated as of May 16, 2002 between Cooper Industries, Ltd. and EquiServe Trust Company, N.A., as Rights Agent (incorporated herein by reference to Exhibit 4.4 to Cooper’s Registration Statement on Form 8-A, Registration No. 001-31330).

	4.2		Amended and Restated Voting Agreement between Cooper Industries, Ltd., Cooper Industries, Inc. and Cooper Bermuda Investments Ltd. (incorporated herein by reference to Exhibit 4 to Cooper’s Form 10-Q for the quarter ended March 31, 2004).

	4.3		Indenture dated as of January 15, 1990, between Cooper Industries, Inc. and The Chase Manhattan Bank (National Association), as Trustee (incorporated herein by reference to Exhibit 4(a) to Cooper’s Registration Statement on Form S-3, Registration No. 33-33011).

	4.4		First Supplemental Indenture dated as of May 15, 2002 between Cooper Industries, Inc. and JPMorgan Chase Bank, N.A., as successor Trustee to The Chase Manhattan Bank (National Association) (incorporated herein by reference to Exhibit 4.3 to Cooper’s Form 10-Q for the quarter ended June 30, 2002).

	4.5		Second Supplemental Indenture dated as of June 21, 2002 among Cooper Industries, Inc., Cooper Industries, Ltd. and JPMorgan Chase Bank, N.A., as Trustee (incorporated herein by reference to Exhibit 4.4 to Cooper’s Form 10-Q for the quarter ended June 30, 2002).

	4.6		Third Supplemental Indenture dated as of October 28, 2002 among Cooper Industries, Inc., Cooper Industries, Ltd. and JPMorgan Chase Bank, N.A., as Trustee (incorporated herein by reference to Exhibit 4.1 to Cooper’s Form 10-Q for the quarter ended September 30, 2002).

	4.7		Fourth Supplemental Indenture dated as of January 1, 2005 among Cooper Industries, LLC, Cooper Industries, Ltd. and JPMorgan Chase Bank, N.A., as Trustee (incorporated by reference to Exhibit 4 to Cooper’s Form 10-Q for the quarter ended March 31, 2005).

	4.8		Indenture dated as of November 8, 2005 among Cooper US, Inc., Cooper Industries, Ltd., Subsidiary Guarantors and JPMorgan Chase Bank, N.A., as Trustee (incorporated by reference to Exhibit 4.1 to Cooper’s Form 8-K filed November 9, 2005).

	4.9		Registration Rights Agreement dated November 8, 2005 among Cooper US, Inc., Cooper Industries, Ltd., Subsidiary Guarantors, and Banc of America Securities LLC and Citigroup Global Markets, Inc. as representatives of several initial purchasers of $325 million aggregate principal amount of debt securities (incorporated by reference to Exhibit 4.2 to Cooper’s Form 8-K filed November 9, 2005).

	10.1		Cooper Industries, Inc. Directors Deferred Compensation Plan (incorporated by reference to Exhibit 10.2 to Cooper’s Form 10-K for the year ended December 31, 1997).

	10.2		Cooper Industries, Inc. Directors Retirement Plan (incorporated by reference to Exhibit 10.3 to Cooper’s Form 10-K for the year ended December 31, 1997).

	10.3		Cooper Industries, Inc. Executive Restricted Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to Cooper’s Form 10-K for the year ended December 31, 1997).

	10.4		First Amendment to Cooper Industries, Inc. Executive Restricted Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to Cooper’s Form 10-K for the year ended December 31, 2003).

	10.5		Cooper Industries, Inc. Supplemental Excess Defined Benefit Plan (August 1, 1998 Restatement) (incorporated by reference to Exhibit 10(iii) to Cooper’s Form 10-Q for the quarter ended September 30, 1998).

	10.6		First Amendment to Cooper Industries, Inc. Supplemental Excess Defined Benefit Plan (August 1, 1998 Restatement) (incorporated by reference to Exhibit 10.6 to Cooper’s Form 10-K for the year ended December 31, 2003).

	10.7		Cooper Industries, Inc. Supplemental Excess Defined Contribution Plan (August 1, 1998 Restatement) (incorporated by reference to Exhibit 10(iv) to Cooper’s Form 10-Q for the quarter ended September 30, 1998).

	10.8		First, Second and Third Amendments to Cooper Industries, Inc. Supplemental Excess Defined Contribution Plan (August 1, 1998 Restatement) (incorporated by reference to Exhibit 10.8 to Cooper’s Form 10-K for the year ended December 31, 2003).

	10.9		Management Incentive Compensation Deferral Plan (incorporated by reference to Exhibit 10.7 to Cooper’s Form 10-K for the year ended December 31, 1997).

	10.10		Third and Fourth Amendments to Management Incentive Compensation Deferral Plan (incorporated by reference to Exhibit 10.10 to Cooper’s Form 10-K for the year ended December 31, 2003).

	10.11		Crouse-Hinds Company Officers’ Disability and Supplemental Pension Plan (September 10, 1999 Restatement, as amended) (incorporated by reference to Exhibit 10.11 to Cooper’s Form 10-K for the year ended December 31, 2003).

	10.12		Cooper Industries Amended and Restated Stock Incentive Plan (February 9, 2005 Restatement) (incorporated herein by reference to Exhibit 10.4 to Cooper’s Form 10-Q for the quarter ended March 31, 2005).

	10.13		First Amendment to Cooper Industries Amended and Restated Stock Incentive Plan.

	10.14		Form of Incentive Stock Option Agreement for Cooper Industries, Inc. Stock Incentive Plan (incorporated by reference to Exhibit 10.14 to Cooper’s Form 10-K for the year ended December 31, 2003).

	10.15		Form of Nonqualified Stock Option Agreement for Cooper Industries, Inc. Stock Incentive Plan (incorporated by reference to Exhibit 10.15 to Cooper’s Form 10-K for the year ended December 31, 2003).

	10.16		Form of Cooper Industries, Inc. Executive Stock Incentive Agreement for the performance period January 1, 2004 to December 31, 2006 (incorporated by reference to Exhibit 10 to Cooper’s Form 10-Q for the quarter ended March 31, 2004).

	10.17		Form of Cooper US, Inc. Executive Stock Incentive Agreement for the performance period January 1, 2005 to December 31, 2007 (incorporated by reference to Exhibit 10.3 to Cooper’s Form 10-Q for the period ended March 31, 2005).

	10.18		Form of Cooper US, Inc. Executive Stock Incentive Agreement for the performance period January 1, 2006 to December 31, 2008 (incorporated by reference to Exhibit 10.1 to Cooper’s Form 10-Q for the period ended March 31, 2006).

	10.19		Cooper Industries Amended and Restated Management Annual Incentive Plan (February 13, 2006 Restatement) (incorporated herein by reference to Appendix C to Cooper’s Proxy Statement for the Annual Meeting of Shareholders held on April 25, 2006).

	10.20		First Amendment to Cooper Industries Amended and Restated Management Annual Incentive Plan (February 13, 2006 Restatement).

	10.21		Amended and Restated Cooper Industries, Ltd. Directors’ Stock Plan (February 14, 2006 Restatement) (incorporated herein by reference to Appendix D to Cooper’s Proxy Statement for the Annual Meeting of Shareholders held on April 25, 2006).

	10.22		Form of Directors’ Nonqualified Stock Option Agreement for Directors’ Stock Plan (incorporated herein by reference to Exhibit 10.18 to Cooper’s Form 10-K for the year ended December 31, 1997).

	10.23		Cooper Industries, Ltd. Amended and Restated Directors’ Retainer Fee Stock Plan (April 1, 2003 Restatement) (incorporated by reference to Exhibit 10.21 to Cooper’s Form 10-K for the year ended December 31, 2003).

	10.24		Form of Management Continuity Agreement between Cooper Industries, Ltd. and key management personnel, which applies if there is a Change in Control of Cooper (incorporated herein by reference to Exhibit 10.5 to Cooper’s Form 10-Q for the quarter ended March 31, 2005).

	10.25		Form of Indemnification Agreement between Cooper Industries, Ltd. and key management personnel (incorporated by reference to Exhibit 10.23 to Cooper’s Form 10-K for the year ended December 31, 2003).

	10.26		Purchase and Sale Agreement between Cooper Industries, Inc. and Federal-Mogul Corporation dated August 17, 1998 (incorporated herein by reference to Exhibit 10(i) of Cooper’s Form 10-Q for the quarter ended September 30, 1998).

	10.27		Term Sheet Pneumo Abex Settlement Plan A and Plan B dated as of July 6, 2006 among Cooper Industries, Ltd.; Cooper Industries, LLC; Federal-Mogul Corporation; Federal-Mogul Products, Inc.; the Future Claimants’ Representative for Federal-Mogul Corporation and Federal-Mogul Products, Inc.; the Official Committee of Asbestos Claimants for Federal-Mogul Corporation and Federal-Mogul Products, Inc.; Pneumo Abex LLC; and PCT International Holdings, Inc. (incorporated by reference to Exhibit 99.1 to Cooper’s Form 8-K dated July 20, 2006).

	10.28		Plan B Settlement Agreement dated as of September 18, 2006 among Cooper Industries, Ltd.; Cooper Industries, LLC; Federal-Mogul Corporation; Federal-Mogul Products, Inc.; the Future Claimants’ Representative for Federal-Mogul Corporation and Federal-Mogul Products, Inc.; the Official Committee of Asbestos Claimants for Federal-Mogul Corporation and Federal-Mogul Products, Inc.; Pneumo Abex LLC; and PCT International Holdings, Inc.

	10.29		Cooper (UK 2002) Employee Share Purchase Plan (incorporated by reference to Exhibit 10.25 to Cooper’s Form 10-K for the year ended December 31, 2003).

	10.30		Five-Year Credit Agreement dated November 3, 2004 among Cooper Industries, Ltd., Cooper US, Inc. and the banks named therein (incorporated by reference to Exhibit 10.25 of Cooper’s Form 10-K for the year ended December 31, 2004).

	10.31		Form of Executive Employment Agreement for employees who received stock option and performance share awards on February 13, 2006 (incorporated by reference to Exhibit 10.1 to Cooper’s Form 8-K dated March 17, 2006).

	10.32		Separation and Transition Agreement dated September 1, 2006 between Cooper Industries, Ltd. and David R. Sheil (incorporated by reference to Exhibit 10.2 to Cooper’s Form 10-Q for the quarter ended September 30, 2006).

	10.33		Separation and Transition Agreement dated January 16, 2007 between Cooper Industries, Ltd. and Paul M. Isabella.

	12.0		Computation of Ratios of Earnings to Fixed Charges for the Calendar years 2002 through 2006.

	21.0		List of Cooper Industries, Ltd. Subsidiaries.

	23.1		Consent of Ernst & Young LLP.

	23.2		Consent of Bates White, LLC.

	24.0		Powers of Attorney from members of the Board of Directors of Cooper Industries, Ltd.

	31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Cooper will furnish to the Commission supplementally upon request a copy of any instrument with respect to long-term debt of Cooper.

Copies of the above Exhibits are available to shareholders of record at a charge of $.25 per page, minimum order of $10.00. Direct requests to:

Cooper Industries, Ltd.
Attn: Corporate Secretary
P.O. Box 4446
Houston, Texas 77210

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	COOPER INDUSTRIES, LTD.
Date: February 21, 2007	By:	/s/ Kirk S. Hachigian
		Kirk S. Hachigian, Chairman, President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


Signature	Title	Date

/s/ Kirk S. Hachigian Kirk S. Hachigian	Chairman, President and Chief Executive Officer	February 21, 2007
/s/ Terry A. Klebe Terry A. Klebe	Senior Vice President and Chief Financial Officer	February 21, 2007
/s/ Jeffrey B. Levos Jeffrey B. Levos	Vice President, Finance and Chief Accounting Officer	February 21, 2007
*STEPHEN G. BUTLER Stephen G. Butler	Director	February 21, 2007
*JAMES J. POSTL James J. Postl	Director	February 21, 2007
*GERALD B. SMITH Gerald B. Smith	Director	February 21, 2007
*JAMES R. WILSON James R. Wilson	Director	February 21, 2007



*By:	/s/ Kevin M. McDonald
		Kevin M. McDonald, as Attorney-In-Fact
		for each of the persons indicated

REPORT OF MANAGEMENT ON
INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Cooper Industries, Ltd. (“Cooper”) is responsible for establishing and maintaining adequate internal control over financial reporting. Cooper’s internal control system was designed to provide reasonable assurance to Cooper’s management and Board of Directors regarding the preparation and fair presentation of published financial statements.

Cooper management assessed the effectiveness of Cooper’s internal control over financial reporting as of December 31, 2006. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework. Based on our assessment we believe that, as of December 31, 2006, Cooper’s internal control over financial reporting is effective based on those criteria.

Cooper’s independent registered public accounting firm has issued an audit report on our assessment of Cooper’s internal control over financial reporting. This report appears on Page F-2.


Kirk S. Hachigian Chairman, President and Chief Executive Officer		Terry A. Klebe Senior Vice President and Chief Financial Officer		Jeffrey B. Levos Vice President, Finance and and Chief Accounting Officer

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL

CONTROL OVER FINANCIAL REPORTING

The Board of Directors and Shareholders
Cooper Industries, Ltd.

We have audited management’s assessment, included in the accompanying Report of Management on Internal Control over Financial Reporting, that Cooper Industries, Ltd. (“the Company”) maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Cooper as of December 31, 2006 and 2005, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2006 and our report dated February 19, 2007 expressed an unqualified opinion thereon.


	ERNST & YOUNG LLP

Houston, Texas
February 19, 2007

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders
Cooper Industries, Ltd.

We have audited the accompanying consolidated balance sheets of Cooper Industries, Ltd. (“the Company”), as of December 31, 2006 and 2005, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2006 and 2005, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States.

As discussed in Note 1 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 158 on December 31, 2006.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 19, 2007 expressed an unqualified opinion thereon.


	ERNST & YOUNG LLP

Houston, Texas
February 19, 2007

F-3

COOPER INDUSTRIES, LTD.
CONSOLIDATED INCOME STATEMENTS


	Year Ended December 31,
	2006		2005		2004
	(in millions, except per share data)
Revenues	$	5,184.6	$	4,730.4	$	4,462.9
Cost of sales		3,516.4		3,243.8		3,119.7
Selling and administrative expenses		969.0		926.8		846.6

Operating earnings		699.2		559.8		496.6
Interest expense, net		51.5		64.8		68.1

Income from continuing operations before income taxes.		647.7		495.0		428.5
Income taxes		163.4		103.9		88.7

Income from continuing operations		484.3		391.1		339.8
Charge related to discontinued operations, net of income taxes		20.3		227.2		—

Net income	$	464.0	$	163.9	$	339.8

Income per Common share
Basic:
Income from continuing operations	$	5.28	$	4.23	$	3.67
Charge from discontinued operations		.22		2.46		—

Net income	$	5.06	$	1.77	$	3.67

Diluted:
Income from continuing operations	$	5.16	$	4.12	$	3.58
Charge from discontinued operations		.21		2.39		—

Net income	$	4.95	$	1.73	$	3.58


Cash dividends per Common share	$	1.48	$	1.48	$	1.40

The Notes to Consolidated Financial Statements are an integral part of these statements.

F-4

COOPER INDUSTRIES, LTD.
CONSOLIDATED BALANCE SHEETS


	December 31,
	2006			2005
	(in millions)
ASSETS
Cash and cash equivalents	$	423.5		$	452.8
Receivables		896.0			842.4
Inventories		607.6			538.7
Deferred income taxes and other current assets		266.6			297.2

Total current assets		2,193.7			2,131.1

Property, plant and equipment, less accumulated depreciation		665.4			673.7
Goodwill		2,336.9			2,084.0
Deferred income taxes and other noncurrent assets		178.8			326.3

Total assets	$	5,374.8		$	5,215.1

LIABILITIES AND SHAREHOLDERS’ EQUITY
Short-term debt	$	5.0		$	7.6
Accounts payable		471.7			427.8
Accrued liabilities		522.3			518.0
Current discontinued operations liability		199.6			196.3
Current maturities of long-term debt		300.7			11.4

Total current liabilities		1,499.3			1,161.1

Long-term debt		702.8			1,002.9
Postretirement benefits other than pensions		83.2			163.0
Long-term discontinued operations liability		330.0			330.0
Other long-term liabilities		284.2			352.9

Total liabilities		2,899.5			3,009.9

Common stock, $.01 par value		0.9			0.9
Capital in excess of par value		278.4			383.2
Retained earnings		2,324.4			1,997.4
Accumulated other nonowner changes in equity		(128.4	)		(176.3	)

Total shareholders’ equity		2,475.3			2,205.2

Total liabilities and shareholders’ equity	$	5,374.8		$	5,215.1

The Notes to Consolidated Financial Statements are an integral part of these statements.

F-5

COOPER INDUSTRIES, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS


	Year Ended December 31,
	2006			2005			2004
	(in millions)
Cash flows from operating activities:
Net income	$	464.0		$	163.9		$	339.8
Plus: charge related to discontinued operations		20.3			227.2			—

Income from continuing operations		484.3			391.1			339.8
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization		111.7			111.0			117.6
Deferred income taxes		15.4			21.5			27.7
Excess tax benefits from stock options and awards		(26.8	)		—			—
Restructuring charge payments		—			(0.4	)		(4.3	)
Changes in assets and liabilities: ⁽¹⁾
Receivables		(16.1	)		(39.8	)		(56.7	)
Inventories		(43.3	)		(17.6	)		47.6
Accounts payable and accrued liabilities		1.3			86.8			17.8
Other assets and liabilities, net		74.9			20.9			(15.9	)

Net cash provided by operating activities		601.4			573.5			473.6


Cash flows from investing activities:
Capital expenditures		(85.3	)		(96.7	)		(102.8	)
Cash paid for acquired businesses		(280.4	)		(7.1	)		(48.6	)
Proceeds from sales of property, plant and equipment and other		18.9			13.6			11.8

Net cash used in investing activities		(346.8	)		(90.2	)		(139.6	)


Cash flows from financing activities:
Proceeds from issuances of debt		—			326.4			94.3
Repayments of debt		(14.8	)		(710.4	)		(4.7	)
Debt issuance costs		—			(3.8	)		—
Dividends		(137.0	)		(138.1	)		(131.0	)
Subsidiary purchase of parent shares		(264.2	)		(211.0	)		(202.9	)
Excess tax benefits from stock options and awards		26.8			—			—
Activity under employee stock plans and other		89.2			72.7			78.4

Net cash used in financing activities		(300.0	)		(664.2	)		(165.9	)

Effect of exchange rate changes on cash and cash equivalents		16.1			(19.1	)		21.0

Increase (decrease) in cash and cash equivalents		(29.3	)		(200.0	)		189.1
Cash and cash equivalents, beginning of year		452.8			652.8			463.7

Cash and cash equivalents, end of year	$	423.5		$	452.8		$	652.8

⁽¹⁾ Net of the effects of acquisitions and translation.

The Notes to Consolidated Financial Statements are an integral part of these statements.

F-6

COOPER INDUSTRIES, LTD.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY


			Capital						Accumulated
			In Excess						Nonowner
	Common		of Par			Retained			Changes in
	Stock		Value			Earnings			Equity			Total
	(in millions)
Balance December 31, 2003	$	0.9	$	518.0		$	1,762.8		$	(163.5	)	$	2,118.2

Net income							339.8						339.8
Minimum pension liability adjustment										(8.0	)		(8.0	)
Translation adjustment										36.3			36.3
Change in fair value of derivatives										3.0			3.0

Net income and other nonowner changes in equity													371.1

Common stock dividends							(131.0	)					(131.0	)
Stock-based compensation				21.5									21.5
Subsidiary purchase of parent shares				(202.9	)								(202.9	)
Stock issued under employee stock plans				107.5									107.5
Other activity				2.1									2.1

Balance December 31, 2004		0.9		446.2			1,971.6			(132.2	)		2,286.5

Net income							163.9						163.9
Minimum pension liability adjustment										(11.0	)		(11.0	)
Translation adjustment										(37.9	)		(37.9	)
Change in fair value of derivatives										4.8			4.8

Net income and other nonowner changes in equity													119.8

Common stock dividends							(138.1	)					(138.1	)
Stock-based compensation				40.3									40.3
Subsidiary purchase of parent shares				(211.0	)								(211.0	)
Stock issued under employee stock plans				106.4									106.4
Other activity				1.3									1.3

Balance December 31, 2005		0.9		383.2			1,997.4			(176.3	)		2,205.2
Net income							464.0						464.0
Translation adjustment										53.8			53.8
Change in fair value of derivatives										2.3			2.3

Net income and other nonowner changes in equity													520.1

Adjustment to initially apply SFAS No. 158										(8.2	)		(8.2	)
Common stock dividends							(137.0	)					(137.0	)
Stock-based compensation				27.5									27.5
Subsidiary purchase of parent shares				(264.2	)								(264.2	)
Stock issued under employee stock plans				130.3									130.3
Other activity				1.6									1.6

Balance December 31, 2006	$	0.9	$	278.4		$	2,324.4		$	(128.4	)	$	2,475.3

The Notes to Consolidated Financial Statements are an integral part of these statements.

F-7

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation: The consolidated financial statements of Cooper Industries, Ltd., a Bermuda company (“Cooper”), have been prepared in accordance with generally accepted accounting principles in the United States.

Principles of Consolidation: The consolidated financial statements include the accounts of Cooper and its majority-owned subsidiaries. Affiliated companies are accounted for on the equity method where Cooper owns 20% to 50% of the affiliate unless significant economic, political or contractual considerations indicate that the cost method is appropriate.

Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash Equivalents: For purposes of the consolidated statements of cash flows, Cooper considers all investments purchased with original maturities of three months or less to be cash equivalents.

Accounts Receivable: Cooper provides an allowance for doubtful trade accounts receivable, determined under the specific identification method. The allowance was $9.8 million and $6.6 million at December 31, 2006 and 2005, respectively.

Inventories: Inventories are carried at cost or, if lower, net realizable value. On the basis of current costs, 57.3% and 59.2% of inventories at December 31, 2006 and 2005, respectively, were carried on the last-in, first-out (LIFO) method. The remaining inventories are carried on the first-in, first-out (FIFO) method. Cooper records provisions for potential obsolete and excess inventories. See Note 4 of the Notes to the Consolidated Financial Statements.

Property, Plant and Equipment: Property, plant and equipment are stated at cost. Depreciation is provided over the estimated useful lives of the related assets using primarily the straight-line method. This method is applied to group asset accounts, which in general have the following lives: buildings — 10 to 40 years; machinery and equipment — 3 to 18 years; and tooling, dies, patterns and other — 3 to 10 years.

Goodwill: Under Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”), goodwill is subject to an annual impairment test. Cooper designated January 1 as the date of its annual goodwill impairment test. If an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value, an interim impairment test would be performed between annual tests. The first step of the SFAS No. 142 two-step goodwill impairment test compares the fair value of a reporting unit with its carrying value. Cooper has designated seven reporting units, consisting of six units in the Electrical Products reportable operating segment plus the Tools reportable operating segment. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test shall be performed. Fair value is determined by estimating the present value of future cash flows. The second step compares the implied fair value of reporting unit goodwill to the carrying amount of the goodwill to measure the amount of impairment loss. See Note 6 of the Notes to the Consolidated Financial Statements.

Revenue Recognition: Cooper recognizes revenues when products are shipped. Accruals for sales returns and other allowances are provided at the time of shipment based upon experience. The accrual for sales returns and other allowances was $73.4 million and $62.5 million at December 31, 2006 and 2005,

F-8

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

respectively. Shipping and handling costs of $172.7 million, $157.1 million and $132.2 million in 2006, 2005 and 2004, respectively, are reported as a reduction of revenues in the consolidated income statements.

Research and Development Expenditures: Research and development expenditures are charged to earnings as incurred. Research and development expenses were $83.5 million, $71.5 million and $70.6 million in 2006, 2005 and 2004, respectively.

Impact of New Accounting Standards: In December 2004, the Financial Accounting Standards Board issued FASB Statement 123(R), Share-Based Payment, which is a revision of SFAS No. 123. Statement 123(R) also supersedes APB No. 25, and amends FASB Statement No. 95, Statement of Cash Flows. For Cooper, the revised statement was effective January 1, 2006. See Note 10 of the Notes to the Consolidated Financial Statements.

In June 2006, the Financial Accounting Standards Board issued FASB Interpretation No. 48 ¸ Accounting for Uncertainty in Income Taxes (the “Interpretation”). This Interpretation clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB Statement No. 109, Accounting for Income Taxes. This Interpretation prescribes a more-likely-than not recognition threshold that a tax position will be sustained upon examination and a measurement attribute for the financial statement recognition of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. This Interpretation is effective for fiscal years beginning after December 15, 2006. The cumulative effect of applying the provisions of this Interpretation shall be reported as an adjustment to the opening balance of retained earnings in 2007. Cooper is currently evaluating the impact of the Interpretation on its consolidated financial statements and anticipates the adjustment to retained earnings will not be material.

In September 2006, the Financial Accounting Standards Board issued FASB Statement No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 provides enhanced guidance for using fair value to measure assets and liabilities. SFAS No. 157 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing the assets or liabilities and establishes a hierarchy that prioritizes the information used to develop those assumptions. SFAS No. 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. Cooper is currently evaluating the impact of this Statement on its consolidated financial statements.

In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans (“SFAS No. 158”). SFAS No. 158 requires an employer to recognize the overfunded or underfunded status of a defined benefit pension plan and other postretirement plans as an asset or liability on its balance sheet and recognize changes in its funded status in the year in which the change occurs through accumulated other nonowner changes in equity. For Cooper, the Statement was effective December 31, 2006. See Note 13 of the Notes to the Consolidated Financial Statements.

NOTE 2: RESTRUCTURING

F-9

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

from a multiple-employer pension plan. Cooper recorded a $12.5 million obligation as an estimate of Cooper’s portion of unfunded benefit obligations of the plan. In 2005, Cooper finalized activities related to withdrawal from the multi-employer pension plan and recorded an additional $4.0 million pre-tax charge. The multiple-employer pension obligation was satisfied with a cash payment of $14.1 million in October 2006 representing full and final payment of the withdrawal liability. The remaining $5.9 million charge primarily represented severance for announced employment reductions at several locations. As of December 31, 2006, 2005 and 2004, Cooper had paid $5.9 million, $5.3 million and $4.9 million, respectively, for the actions, all of which was for severance costs.

A total of 114 salaried and 150 hourly personnel were eliminated as a result of these actions. A total of 106 personnel were terminated as of December 31, 2003 and the remainder terminated in 2004. The majority of the remaining severance obligation was paid in the first half of 2004.

See “Restructuring” in Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information related to the restructuring.

NOTE 3: ACQUISITIONS AND DIVESTITURES

Cooper completed four acquisitions during 2006. These acquisitions were selected because of their strategic fit with existing Cooper businesses or were new strategic lines that were complementary to Cooper’s operations. Cooper makes an initial allocation of the purchase price as of the date of acquisition, based on its understanding of the fair value of the assets and liabilities acquired. In the months after the closing of the transaction, Cooper obtains additional information about the assets and liabilities acquired and finalizes allocation of the purchase price.

In August 2006, Cooper completed the acquisition of all of the outstanding stock of Cannon Technologies, Inc. for $191.3 million, net of cash acquired, including acquisition costs. Cannon is a provider of automation technologies for monitoring and metering, and energy management by electrical utilities. The Cannon acquisition resulted in the recognition of a preliminary estimate of goodwill of $149.0 million, primarily related to the future earnings and cash flow potential resulting from Cannon’s rapidly expanding customer base.

Cooper acquired three additional companies during 2006 for total consideration of $89.1 million, net of cash acquired, including acquisition costs. In general, the acquired businesses were manufacturers and assemblers of electrical products, in markets such as aerospace, subsea, military, industrial and fire and safety. These companies were all complementary to existing businesses owned by Cooper and resulted in aggregate goodwill of $39.2 million.

The following table summarizes the aggregate estimated preliminary fair values of the assets acquired and the liabilities assumed at the date of acquisition for the acquisitions consummated during the year ended December 31, 2006:

F-10


	Cannon			All Others			Total
	(in millions)
Receivables	$	7.0		$	8.8		$	15.8
Inventories		4.6			12.2			16.8
Property, Plant and Equipment		1.7			8.2			9.9
Goodwill		149.0			39.2			188.2
Other intangible assets		55.4			38.9			94.3
Accounts payable		(3.9	)		(4.2	)		(8.1	)
Other assets and liabilities, net		(22.5	)		(14.0	)		(36.5	)

Net cash consideration	$	191.3		$	89.1		$	280.4

Approximately $14.0 million of the $188.2 million of goodwill is expected to be deductible for tax purposes.

In connection with the purchase of Cannon Technologies, Inc., $4.2 million pre-tax of intangible asset cost was attributed to purchased research and development costs and written off on the date of acquisition and included in cost of sales. Of the remaining intangible asset values, $27.0 million was assigned to trademarks that are not subject to amortization, $30.3 million was assigned to technology (15 year weighted average life), $28.5 million was assigned to customer lists (16 year weighted average life), and $4.3 million assigned to other intangibles.

Cooper continues to evaluate the fair value of the assets and liabilities acquired during the year ended December 31, 2006 and will adjust the allocations as additional information relative to the businesses becomes available for up to one year from the acquisition date.

In 2004, Cooper acquired two companies for $48.6 million. These companies were complementary to existing business in the Electrical Products segment. In March 2004, Cooper acquired a manufacturer of specification and commercial grade lighting fixtures for $10.1 million. In November 2004, Cooper acquired a U.K. based manufacturer of visual and audible alarms and public address speakers for $38.5 million.

The results of operations of the acquisitions are included in the consolidated income statement since the respective acquisition dates. Pro-forma net income and earnings per share for the years ended December 31, 2006, 2005 and 2004, assuming the acquisitions had been made at the beginning of the year, would not be materially different from reported results.

In July 2006, Cooper divested the assets of one small business within the Electrical Products segment for aggregate proceeds of $11.5 million. A pre-tax gain of $4.7 million was recognized on the divestiture.

In January 2007, Cooper completed two acquisitions for total consideration of approximately $97 million. Both of these businesses are complementary to existing businesses in the Electrical Products segment.

F-11

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 4: INVENTORIES


	December 31,
	2006			2005
	(in millions)
Raw materials	$	204.2		$	206.1
Work-in-process		160.7			137.9
Finished goods		366.3			303.7
Perishable tooling and supplies		14.6			14.4

		745.8			662.1
Allowance for excess and obsolete inventory		(65.6	)		(58.7	)
Excess of current standard costs over LIFO costs		(72.6	)		(64.7	)

Net inventories	$	607.6		$	538.7

NOTE 5: PROPERTY, PLANT AND EQUIPMENT


	December 31,
	2006			2005
	(in millions)
Land and land improvements.	$	61.5		$	60.6
Buildings		481.7			474.5
Machinery and equipment		837.7			808.9
Tooling, dies and patterns.		274.9			258.4
All other		366.0			323.4
Construction in progress		65.6			85.1

		2,087.4			2,010.9
Accumulated depreciation		(1,422.0	)		(1,337.2	)

	$	665.4		$	673.7

NOTE 6: GOODWILL AND OTHER INTANGIBLE ASSETS

Changes in the carrying amount of goodwill by segment, were as follows:


	Electrical
	Products			Tools			Total
	(in millions)
Balance December 31, 2004	$	1,840.1		$	302.2		$	2,142.3
Additions to goodwill		5.9			—			5.9
Translation adjustments		(63.8	)		(0.4	)		(64.2	)

Balance December 31, 2005		1,782.2			301.8			2,084.0
Additions to goodwill		188.2			—			188.2
Disposal of business		(4.9	)		—			(4.9	)
Translation adjustments		67.8			1.8			69.6

Balance December 31, 2006	$	2,033.3		$	303.6		$	2,336.9

Under SFAS No. 142, goodwill is subject to an annual impairment test. See Note 1 of the Notes to the Consolidated Financial Statements. The results of step one of the goodwill impairment test did not require the completion of step two of the test for any reporting units in 2006, 2005 or 2004.

F-12

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Other intangible assets primarily consist of patents, trademarks, software and customer lists. The gross carrying value of other intangible assets was $102.7 million and $11.8 million at December 31, 2006 and 2005, respectively. Accumulated amortization of other intangible assets was $13.6 million and $9.3 million at December 31, 2006 and 2005, respectively. Other intangible assets are amortized over their remaining useful lives. Amortization expense of other intangible assets was $4.1 million in 2006, $0.6 million in 2005, and $0.7 million in 2004. Annual amortization expense is expected to be $6.8 million in 2007, $6.7 million in 2008 and $6.3 million in 2009, $3.7 million in 2010 and $3.0 million in 2011.

NOTE 7: ACCRUED LIABILITIES


	December 31,
	2006		2005
	(in millions)
Salaries, wages and employee benefit plans	$	228.5	$	244.0
Commissions and customer incentives		135.0		132.7
Product and environmental liability accruals		34.1		36.2
Facility integration of acquired businesses		—		6.3
Other (individual items less than 5% of total current liabilities)		124.7		98.8

	$	522.3	$	518.0

At December 31, 2006, Cooper had accruals of $19.3 million with respect to potential product liability claims and $29.7 million with respect to potential environmental liabilities, including $14.9 million classified as a long-term liability, based on Cooper’s current estimate of the most likely amount of losses that it believes will be incurred.

The product liability accrual consists of $5.4 million of known claims with respect to ongoing operations, $1.7 million of known claims for previously divested operations and $12.2 million, which represents an estimate of claims that have been incurred but not yet reported. While Cooper is generally self-insured with respect to product liability claims, Cooper has insurance coverage for individual 2006 claims above $5.0 million.

Environmental remediation costs are accrued based on estimates of known environmental remediation exposures. Such accruals are adjusted as information develops or circumstances change. The environmental liability accrual includes $5.3 million related to sites owned by Cooper and $24.4 million for retained environmental liabilities related to sites previously owned by Cooper and third-party sites where Cooper was a potentially responsible party. Third-party sites usually involve multiple contributors where Cooper’s liability will be determined based on an estimate of Cooper’s proportionate responsibility for the total cleanup. The amount actually accrued for such sites is based on these estimates as well as an assessment of the financial capacity of the other potentially responsible parties.

It has been Cooper’s consistent practice to include the entire product liability accrual and a significant portion of the environmental liability accrual as current liabilities, although only approximately 15-25% of the balance classified as current is normally spent on an annual basis. The annual effect on earnings for product liability is essentially equal to the amounts disbursed. In the case of the environmental liability, the annual expense is considerably smaller than the disbursements, since the vast majority of Cooper’s environmental liability has been recorded in connection with acquired companies. The change in the accrual balances from year to year reflects the effect of acquisitions and divestitures as well as normal expensing and funding.

F-13

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Cooper has not utilized any form of discounting in establishing its product or environmental liability accruals. While both product liability and environmental liability accruals involve estimates that can have wide ranges of potential liability, Cooper has taken a proactive approach and has managed the costs in both of these areas over the years. Cooper does not believe that the nature of its products, its production processes, or the materials or other factors involved in the manufacturing process subject Cooper to unusual risks or exposures for product or environmental liability. Cooper’s greatest exposure to inaccuracy in its estimates is with respect to the constantly changing definitions of what constitutes an environmental liability or an acceptable level of cleanup.

In connection with acquisitions, Cooper records, to the extent appropriate, accruals for the costs of closing duplicate facilities, severing redundant personnel and integrating the acquired business into existing Cooper operations. The following table summarizes the accrual balances and activity during each of the last three years:


	2006			2005			2004
	(in millions)
Balance, beginning of year	$	6.3		$	11.0		$	18.1
Spending		(6.3	)		(4.7	)		(7.1	)

Balance, end of year	$	—		$	6.3		$	11.0

At December 31, 2005 and 2004, respectively, $6.3 million and $11.0 million of the balance was related to facilities shutdown and realignment costs resulting from the acquisition of Eagle Electric in 2000. During the three years ended December 31, 2006, the annual spending was primarily related to downsizing and consolidating facilities. Involuntary termination benefits of $4.5 million in 2006, $2.0 million in 2005, and $1.2 million in 2004 were paid and 344 and 68 hourly positions were eliminated during 2005 and 2004, respectively. The termination and facility shutdown activities were completed as of December 31, 2006.

NOTE 8: DEBT AND LEASE COMMITMENTS


	December 31,
	2006			2005
	(in millions)
5.25% senior unsecured notes, due July 2007	$	293.3		$	292.7
5.50% senior unsecured notes, due November 2009		275.0			275.0
5.25% senior unsecured notes, due November 2012		325.0			325.0
6.91% second series medium-term notes, due through 2010		2.3			13.3
6.38% third series medium-term notes, due through 2008.		100.0			100.0
Other		7.9			8.3

Total long-term debt		1,003.5			1,014.3
Current maturities		(300.7	)		(11.4	)

Long-term portion	$	702.8		$	1,002.9

Cooper has a U.S. committed credit facility of $500 million, which matures in November 2009. At December 31, 2006 and 2005, all of Cooper’s $500 million U.S. committed credit facility was available. The agreement for the credit facility requires that Cooper maintain certain financial ratios, including a prescribed limit on debt as a percentage of total capitalization and a minimum earnings before interest, income taxes, depreciation and amortization to interest ratio. Retained earnings are unrestricted as to the payment of dividends, except to the extent that payment would cause a violation of the prescribed limit on the debt-to-total capitalization ratio.

F-14

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

On November 8, 2005, Cooper US, Inc., a subsidiary of Cooper, issued $325 million of 5.25% senior unsecured notes that mature on November 15, 2012. Payment of the notes is guaranteed by Cooper and certain of its subsidiaries. Proceeds of the notes were swapped to €272.6 million with cross-currency interest-rate swaps, effectively converting the seven-year U.S. notes to seven-year Euro notes with an annual interest rate of 3.55% (see Note 17). The proceeds of €272.6 million partially funded repayment of the 6.25% Euro bonds that matured in October 2005.

During June 2002, Cooper issued $300 million senior unsecured notes due July 1, 2007 with a 5.25% interest rate. During August 2003, Cooper entered into interest-rate swaps to effectively convert this fixed-rate debt to variable-rate debt (see Note 17). The fair value of the interest rate swaps are included in long-term debt on the consolidated balance sheets.

Maturities of long-term debt for the five years subsequent to December 31, 2006 are $300.7 million in 2007, $100.3 million in 2008, $275.0 million in 2009, $2.3 million in 2010 and insignificant in 2011. The future net minimum lease payments under capital leases are not significant.

Total interest paid during 2006, 2005 and 2004 was $57 million, $79 million and $82 million, respectively.

Cooper has entered into various operating lease agreements, primarily for manufacturing, warehouse and sales office facilities and equipment. Generally, the leases include renewal provisions and rental payments may be adjusted for increases in taxes, insurance and maintenance related to the property. Rent expense for all operating leases was $33.3 million, $34.3 million and $35.0 million during 2006, 2005 and 2004, respectively.

At December 31, 2006, minimum annual rental commitments under noncancellable operating leases that have an initial or remaining lease term in excess of one year were $22.8 million in 2007, $17.8 million in 2008, $13.9 million in 2009, $12.1 million in 2010, $9.3 million in 2011 and $32.0 million thereafter.

NOTE 9: COMMON AND PREFERRED STOCK

Cooper’s authorized share capital is U.S. $4,100,000 consisting of 250,000,000 Class A common shares, par value of $.01 per share, 150,000,000 Class B common shares, par value $.01 per share and 10,000,000 preferred shares, par value $.01 per share, which preferred shares may be designated and created as shares of any other classes or series of shares with the respective rights and restrictions determined by action of the Board of Directors. No preferred shares were outstanding at December 31, 2006, 2005 or 2004.

At December 31, 2006, 91,141,021 Class A common shares, $.01 par value were issued and outstanding (excluding the 12,938,401 Class A common shares held by wholly-owned subsidiaries as discussed below) compared to 91,556,569 Class A common shares, $.01 par value (excluding the 9,850,101 Class A common shares held by wholly-owned subsidiaries) at December 31, 2005. During 2006, Cooper issued 2,672,752 Class A common shares primarily in connection with employee incentive and benefit plans and Cooper’s dividend reinvestment program. During 2006, Cooper’s wholly-owned subsidiaries purchased 3,088,300 Class A common shares for $264.2 million under Cooper’s share repurchase plan. The share purchases are recorded by Cooper’s wholly-owned subsidiaries as an investment in its parent company that is eliminated in consolidation.

At December 31, 2005, 91,556,569 Class A common shares, $.01 par value were issued and outstanding (excluding the 9,850,101 Class A common shares held by wholly-owned subsidiaries as discussed below) compared to 92,543,660 Class A common shares, $.01 par value (excluding the 3,700,200 Class A common shares held by wholly-owned subsidiaries) at December 31, 2004. During 2005, Cooper issued 2,152,309 Class A common shares primarily in connection with employee incentive and benefit plans

F-15

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

and Cooper’s dividend reinvestment program. During 2005, Cooper’s wholly-owned subsidiaries purchased 3,139,400 Class A common shares for $211.0 million under Cooper’s share repurchase plan and a wholly-owned subsidiary purchased 3,669,037 previously unissued Class A common shares at fair market value. The share purchases are recorded by Cooper’s wholly-owned subsidiaries as an investment in its parent company that is eliminated in consolidation. During 2005, 658,536 Class A common shares held by wholly-owned subsidiaries were issued in connection with employee incentive and benefit plans, leaving 9,850,101 Class A common shares held by wholly-owned subsidiaries at December 31, 2005.

At December 31, 2004, 92,543,660 Class A common shares, $.01 par value were issued and outstanding (excluding the 3,700,200 Class A common shares held by wholly-owned subsidiaries as discussed below) compared to 93,797,765 Class A common shares, $.01 par value (excluding the 1,130 Class A common shares held by wholly-owned subsidiaries) at December 31, 2003. During 2004, Cooper issued 2,446,095 Class A common shares primarily in connection with employee incentive and benefit plans and Cooper’s dividend reinvestment program. During 2004, Cooper’s wholly-owned subsidiaries purchased 3,700,200 Class A common shares for $202.9 million. The share purchases are recorded by Cooper’s wholly-owned subsidiaries as an investment in its parent company that is eliminated in consolidation. During 2004, 1,130 Class A common shares held by wholly-owned subsidiaries were issued primarily in connection with employee benefit plans, leaving 3,700,200 Class A common shares held by wholly-owned subsidiaries at December 31, 2004.

Certain wholly-owned subsidiaries own Cooper Class A common shares and a wholly-owned subsidiary owns all the issued and outstanding Cooper Class B common shares. The subsidiaries investments in the Class A and Class B common shares are accounted for as investments in the parent company that are eliminated in consolidation. The Class B common shares are not entitled to vote, except as to matters for which Bermuda law specifically requires voting rights for otherwise nonvoting shares. Cooper and its wholly-owned subsidiaries have entered into a voting agreement which provides that in those limited circumstances where the Class B common shares have the right to vote, Cooper’s wholly-owned subsidiaries shall vote the Class B common shares and any Class A common shares that may be held by Cooper’s wholly-owned subsidiaries in the same proportion as the holders of Class A common shares. If at any time a dividend is declared or paid on the Class A common shares, a like dividend shall be declared and paid on Class B common shares in an equal amount per share. During 2004, Cooper’s wholly-owned subsidiaries waived their rights to receive the regular quarterly dividend declared of $.35 per share (a total of $81.6 million in 2004) on both the Class A and Class B common shares held by Cooper’s wholly-owned subsidiaries.

Under the terms of the Dividend Reinvestment Plan, any holder of common stock may elect to have cash dividends and up to $24,000 per year in cash payments invested in common stock without incurring any brokerage commissions or service charges. At December 31, 2006, Cooper had 11,420,720 shares reserved for the Dividend Reinvestment Plan, grants and exercises of stock options, performance-based stock awards, restricted stock awards and subscriptions under the Employee Stock Purchase Plan and other plans.

On February 14, 2007, Cooper announced that the Board of Directors approved a two-for-one stock split of Cooper Class A common stock and increased the annual dividend rate of Cooper’s common stock by $.20 cents per share to $1.68 (or $.84 per share after the stock split). The record date for the stock split is February 28, 2007 and the distribution date is March 15, 2007. On February 9, 2005, Cooper’s Board of Directors increased the annual dividend rate of Cooper’s common stock by eight cents per share to $1.48.

The Board of Directors adopted a Shareholder Rights Plan that authorized the issuance of one right for each common share outstanding on May 22, 2002. Each Right entitles the holder to buy one one-hundredth of a share of Series A Participating Preferred Stock at a purchase price of $225 per one one-hundredth of a share or, in certain circumstances common shares having a value of twice the purchase price. Each Right becomes exercisable only in certain circumstances constituting a potential change of control on a

F-16

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

basis considered inadequate by the Board of Directors. The Rights expire August 5, 2007 and, at Cooper’s option, may be redeemed prior to expiration for $.01 per Right.

NOTE 10: STOCK-BASED COMPENSATION

Effective January 1, 2003, Cooper adopted Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (“SFAS No. 123”), as amended. Cooper utilized the prospective method of adoption. Cooper accounted for stock-based compensation awards granted, modified or settled prior to January 1, 2003 using the intrinsic value method of accounting as prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees and related interpretations (“APB No. 25”). In accordance with APB No. 25, compensation expense was recognized for performance-based and restricted stock awards. No compensation expense was recognized under Cooper’s fixed stock option plans or Employee Stock Purchase Plan for grants prior to January 1, 2003.

SFAS No. 123 provided an alternative fair value based method for recognizing stock-based compensation in which compensation expense was measured at the grant date based on the value of the award and recognized over the service period, which was usually the vesting period. The fair value of stock options was estimated on the grant date, using the Black-Scholes-Merton option-pricing model. The fair value of restricted stock and performance-based awards granted were measured at the market price on the grant date.

The following table presents pro forma net income and earnings per share as if the fair value recognition provisions of SFAS No. 123 had been applied to all outstanding and unvested awards in 2005 and 2004. In 2005 and 2004, there were essentially two remaining differences between as reported and pro-forma net income and earnings per share. First, Cooper accounted for awards granted prior to January 1, 2003 using the intrinsic value method, whereas the pro-forma amounts reflect those award grants as calculated under SFAS No. 123. Secondly, the pro-forma amounts reflect recognition of the tax benefits of disqualifying dispositions of incentive stock options in accordance with SFAS No. 123.


	Year Ended December 31}
	2005			2004
	(in millions)
Net income, as reported	$	163.9		$	339.8
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects		24.9			13.3
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(20.9	)		(14.6	)

Pro forma net income	$	167.9		$	338.5


	Year Ended December 31
	2005		2004
Earnings per share:
Basic — as reported	$	1.77	$	3.67
Basic — pro forma	$	1.81	$	3.66
Diluted — as reported	$	1.73	$	3.58
Diluted — pro forma	$	1.77	$	3.57

F-17

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In December 2004, the Financial Accounting Standards Board issued FASB Statement 123(R), Share-Based Payment, which is a revision of SFAS No. 123. Statement 123(R) also supersedes APB No. 25, and amends FASB Statement No. 95, Statement of Cash Flows. Effective January 1, 2006, Cooper adopted Statement 123(R) using the modified prospective method. Recognition of compensation cost is based on the requirements of Statement 123(R) for all share-based payments granted after January 1, 2006 and based on the requirements of SFAS No. 123 for all awards granted to employees prior to January 1, 2006 that remained unvested on that date.

Cooper adopted SFAS No. 123 using the prospective transition method, which applied only to awards granted, modified or settled after the adoption date. Accordingly, compensation expense for some previously granted awards that were not recognized under SFAS No. 123 is recognized under Statement 123(R). However, had we adopted Statement 123(R) in prior periods, the impact of that standard would have approximated the impact of SFAS No. 123 as described in the disclosure of pro forma net income and earnings per share above.

Cooper uses the Black-Scholes-Merton formula to estimate the value of stock options granted to employees, as well as the straight-line recognition method for awards subject to graded vesting. Cooper has recorded an estimate for forfeitures of 2006 awards of stock options, performance-based shares and restricted stock units. This estimate will be adjusted as actual forfeitures differ from the estimate. Prior to adoption of Statement 123(R), forfeitures were accounted for as recognized when they actually occurred. Upon adoption of Statement 123(R), the cumulative effect of this change in accounting principle to reflect compensation expense that would not have been recognized in periods prior to 2006, had forfeitures been estimated during these periods, was immaterial.

Statement 123(R) also requires the benefits of tax deductions in excess of recognized compensation expense be reported as a financing cash flow, rather than as an operating cash flow. This requirement reduced net operating cash flows and increased net financing cash flows during the year ended 2006 by $26.8 million.

Cooper has a share-based compensation plan known as the Amended and Restated Stock Incentive Plan (the “Plan”). The Plan provides for the granting of stock options, performance-based share awards and restricted stock units. Since the original Plan’s inception in 1996, the aggregate number of shares authorized under the Plan is 17 million. As of December 31, 2006, 2,762,091 shares remain available for future grants under the Plan all of which are available for grants of performance-based shares and restricted stock units. Activity for each of these stock-incentive awards is discussed in more detail below. Total compensation expense for all share-based compensation arrangements under the Plan was $29.1 million, $40.3 million and $22.1 million during the years ended December 31, 2006, 2005 and 2004, respectively. The total income tax benefit recognized in the income statement for all share-based compensation arrangements under the Plan was $10.3 million, $15.4 million and $8.8 million during the years ended December 31, 2006, 2005 and 2004, respectively.

Stock Options

Stock option awards are granted with an exercise price no less than the market price of Cooper’s stock at the date of grant. Stock option awards generally vest over a three-year period with one-third vesting in each successive year so that the option is fully exercisable after three years and generally have five-, seven- and ten-year contractual terms. Stock option awards provide that, upon a change in control in Cooper (as defined in the Plan), all options will be cancelled and Cooper will make a cash payment to the employee equal to the difference in the fair market value of Cooper Class A common shares (or the highest price actually paid for the stock in connection with the change in control, if higher) and the option price.

F-18

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The fair value of each stock option award is estimated on the date of grant using the Black-Scholes-Merton option valuation model using the assumptions noted in the following table. Expected volatility in 2006 is based on implied volatilities from traded options on Cooper stock, historical volatility of Cooper stock, and other factors. Cooper believes that the resulting blended volatility represents a more accurate estimate of potential fluctuations in Cooper stock. Cooper uses historical data to estimate employee termination experience. The expected term of options granted is determined based on historical exercise behavior. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.


	2006			2005			2004
Expected volatility		18.0	%		27.7	%		34.0	%
Expected dividends		1.8	%		2.1	%		2.5	%
Expected term (in years)		4.5			5.0			5.0
Risk-free interest rate		4.6	%		3.7	%		3.1	%

A summary of option activity under the Plan as of December 31, 2006, and changes during the year then ended is presented below:


						Weighted Average		Aggregate Intrinsic
				Weighted-Average		Remaining		Value
Options	Shares			Exercise Price		Contractual Term		(in millions)
Outstanding at January 1, 2006		5,428,821		$	48.81
Granted		823,600		$	82.94
Exercised		(1,955,185	)	$	43.94
Forfeited or expired		(185,425	)	$	71.69

Outstanding at December 31, 2006		4,111,811		$	56.93		4.3	$	139.2

Vested or expected to vest at December 31, 2006		4,058,933		$	56.59		4.4	$	138.7

Exercisable at December 31, 2006		2,363,863		$	45.05		3.5	$	108.1

The weighted-average grant date fair values of options granted during the years ended December 31, 2006, 2005 and 2004 were $16.06, $17.37 and $14.92, respectively. The total intrinsic value of options exercised during the years ended December 31, 2006, 2005 and 2004 was $81.5 million, $54.7 million and $40.0 million, respectively.

As of December 31, 2006, total unrecognized compensation expense related to nonvested stock options was $14.8 million. This expense is expected to be recognized over a weighted-average period of 1.6 years. The total fair value of stock options vested during the years ended December 31, 2006, 2005 and 2004 was $12.6 million, $8.4 million and $3.6 million, respectively.

Performance-Based Shares and Restricted Stock Units

Under the Plan, Cooper grants certain executives and other key employees performance-based share awards with vesting contingent upon meeting Company-wide performance goals, typically tied to cumulative compound growth in earnings per share over a defined multi-year performance period. Awards under the performance-based component of the Plan are typically arranged in levels, with increasing numbers of shares earned as higher levels of growth are achieved. In order to earn the performance shares, participants are generally required to remain actively employed by Cooper for the performance period. Under the Plan,

F-19

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Cooper also awards grants of restricted stock units to certain executives and other key employees in order to provide financial incentive to remain in the employ of Cooper, thereby enhancing management continuity. Cooper may also utilize restricted stock units for new executives and other key employees to replace equity compensation forfeited upon resignation from their former employer. Restricted stock units vest pursuant to time-based service conditions.

The fair value of each performance-based share and restricted stock unit was calculated at the market price on the date of grant. Performance goals for the performance-based shares are currently assumed to be achieved at the maximum level. If goal-level assumptions are not met, compensation expense is adjusted and previously recognized compensation expense is reversed. Upon distribution of performance-based shares, Cooper also pays the recipient cash equal to the aggregate amount of cash dividends that the recipient would have received had they been the owner of record from the date of grant. Dividends on restricted stock units are payable on the dividend payment date or on the date when restrictions lapse, depending upon the specific award. For performance-based share and restricted stock unit awards, upon a change in control in Cooper (as defined in the Plan), all restrictions on those awards will lapse and shares shall be issued as otherwise provided in the Plan.

A summary of the status of Cooper’s nonvested performance-based shares as of December 31, 2006 and changes during the year then ended is presented below:


				Weighted-
				Average
				Grant-Date
Nonvested Performance-Based Shares	Shares			Fair Value
Nonvested at January 1, 2006		962,138		$	55.05
Granted		299,260		$	83.09
Vested		(288,975	)	$	37.58
Forfeited		(134,857	)	$	68.47

Nonvested at December 31, 2006		837,566		$	68.94

The weighted-average grant-date fair value of performance-based shares granted during the years ended December 31, 2006, 2005 and 2004 was $83.09, $69.26 and $55.64, respectively. The total intrinsic value of performance-based shares awarded during the years ended December 31, 2006, 2005 and 2004 was $27.2 million, $25.5 million and $26.0 million, respectively.

As of December 31, 2006, total unrecognized compensation expense related to nonvested performance-based shares was $23.3 million. This expense is expected to be recognized over a weighted-average period of 1.1 years. The total fair value of performance-based shares vested during the year ended December 31, 2006 was $10.9 million. No performance based shares vested during the years ended December 31, 2005 or December 31, 2004.

A summary of the status of Cooper’s nonvested restricted stock units as of December 31, 2006, and changes during the year then ended is presented below:

F-20

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


				Weighted-
				Average
				Grant-Date
Nonvested Restricted Stock Units	Shares			Fair Value
Nonvested at January 1, 2006		309,400		$	49.97
Granted		52,000		$	87.34
Vested		(178,850	)	$	39.11
Forfeited		(44,000	)	$	56.76

Nonvested at December 31, 2006		138,550		$	75.84

The weighted-average grant-date fair value of restricted stock units granted during the years ended December 31, 2006, 2005 and 2004 was $87.34, $68.93 and $55.64, respectively. The total intrinsic value of restricted stock units awarded during the years ended December 31, 2006, 2005 and 2004 was $4.7 million, $9.2 million and $0.3 million, respectively.

As of December 31, 2006, total unrecognized compensation expense related to nonvested restricted stock unit compensation arrangements was $7.0 million. This expense is expected to be recognized over a weighted-average period of 3.4 years. The total fair value of restricted stock units vested during the years ended December 31, 2006, 2005 and 2004 was $7.0 million, $6.1 million and $2.3 million, respectively.

Cash received from stock option exercises during the years ended December 31, 2006, 2005 and 2004 was $89.2 million, $72.7 million and $78.4 million, respectively. The actual tax benefit realized for the tax deductions from option exercises totaled $31.7 million, $18.7 million and $13.7 million, respectively, during the years ended December 31, 2006, 2005 and 2004. Cash used to settle equity instruments granted under all share-based payment arrangements during the years ended December 31, 2006, 2005 and 2004 was immaterial in all periods.

Cooper has a practice of repurchasing shares on the open market to satisfy shares issued for option exercises and share awards and expects to repurchase approximately 1.5 million shares during 2007, based on estimates of option exercises and share awards vesting for the year.

The impact of adopting Statement 123(R) on January 1, 2006, on Cooper’s income from continuing operations before income taxes, net income and basic and diluted earnings per share during the year ended December 31, 2006 was immaterial.

NOTE 11: ACCUMULATED NONOWNER CHANGES IN EQUITY


							Gain
	Pension and						(Loss) On			Cumulative
	Postretirement			Minimum			Derivative			Translation
	Benefit Plans			Pension Liability			Instruments			Adjustment			Total
	(in millions)
Balance December 31, 2003	$	—		$	(59.7	)	$	(1.5	)	$	(102.3	)	$	(163.5	)
Current year activity		—			(8.0	)		3.0			36.3			31.3

Balance December 31, 2004		—			(67.7	)		1.5			(66.0	)		(132.2	)
Current year activity		—			(11.0	)		4.8			(37.9	)		(44.1	)

Balance December 31, 2005		—			(78.7	)		6.3			(103.9	)		(176.3	)
Current year activity		(86.9	)		78.7			2.3			53.8			47.9

Balance December 31, 2006	$	(86.9	)	$	—		$	8.6		$	(50.1	)	$	(128.4	)

F-21

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


	2006									2005									2004
	Before			Tax						Before			Tax						Before			Tax
	Tax			(Expense)			Net			Tax			(Expense)			Net			Tax			(Expense)			Net
	Amount			Benefit			Amount			Amount			Benefit			Amount			Amount			Benefit			Amount
	(in millions)
Pension and postretirement benefit plans	$	(142.0	)	$	55.1		$	(86.9	)	$	—		$	—		$	—		$	—		$	—		$	—

Minimum pension liability adjustment		130.8			(52.1	)		78.7			(18.1	)		7.1			(11.0	)		(13.3	)		5.3			(8.0	)

Change in fair value of derivatives		15.3			(6.1	)		9.2			10.7			(4.3	)		6.4			5.2			(2.1	)		3.1
Reclassification to earnings		(11.4	)		4.5			(6.9	)		(2.7	)		1.1			(1.6	)		(0.2	)		0.1			(0.1	)

		3.9			(1.6	)		2.3			8.0			(3.2	)		4.8			5.0			(2.0	)		3.0

Translation adjustment		82.8			(29.0	)		53.8			(58.3	)		20.4			(37.9	)		55.8			(19.5	)		36.3

Other nonowner changes in equity	$	75.5		$	(27.6	)	$	47.9		$	(68.4	)	$	24.3		$	(44.1	)	$	47.5		$	(16.2	)	$	31.3

NOTE 12: INCOME TAXES


	Year Ended December 31,
	2006			2005			2004
	($ in millions)
Components of income from continuing operations before income taxes:
U.S. operations	$	234.0		$	104.4		$	71.3
Non-U.S. operations		413.7			390.6			357.2

Income from continuing operations before income taxes	$	647.7		$	495.0		$	428.5

Components of income tax expense:
Current:
U.S. Federal	$	67.6		$	21.5		$	4.6
U.S. state and local		11.6			14.2			4.9
Non-U.S		68.8			46.7			51.5

		148.0			82.4			61.0

Deferred:
U.S. Federal		21.1			3.6			19.8
U.S. state and local		2.0			1.7			4.7
Non-U.S		(7.7	)		16.2			3.2

		15.4			21.5			27.7

Income tax expense	$	163.4		$	103.9		$	88.7

Total income taxes paid	$	175.0		$	90.9		$	87.3

Effective tax rate reconciliation:
U.S. Federal statutory rate		35.0	%		35.0	%		35.0	%
State and local income taxes		1.8			1.2			1.5
Non-U.S. Operations		(10.6	)		(13.8	)		(13.5	)
Extraterritorial income exclusion		(0.3	)		(0.6	)		(1.0	)
Tax credits		(0.5	)		(0.7	)		(1.3	)
Other		(0.2	)		(0.1	)		—

Effective tax rate attributable to continuing operations		25.2	%		21.0	%		20.7	%

F-22

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


	December 31,
	2006			2005
	(in millions)
Components of deferred tax assets and liabilities:
Deferred tax assets:
Postretirement and other employee welfare benefits	$	44.6		$	65.7
Accrued liabilities		344.4			349.7
Pension plans		19.1			52.1
Net operating loss carryforward		23.3			15.6
Other		9.9			32.5

Gross deferred tax assets		441.3			515.6
Valuation allowance		(8.4	)		(9.6	)

Total deferred tax assets		432.9			506.0

Deferred tax liabilities:
Property, plant and equipment and intangibles		(223.6	)		(190.8	)
Inventories		(8.7	)		(13.2	)
Pension plans		(13.6	)		(70.6	)

Total deferred tax liabilities		(245.9	)		(274.6	)

Net deferred tax asset	$	187.0		$	231.4

Generally, Cooper provides United States income tax that would be imposed on the repatriation of the earnings of its non-U.S. operations. However, as of December 31, 2006 and 2005, United States income taxes have not been provided on approximately $125 million and $110 million, respectively, of undistributed non-U.S. earnings that are expected to be permanently reinvested outside the United States.

In 2005, Cooper protested the United States Internal Revenue Service (“IRS”) examination findings for the 2000-2001 tax years. The IRS has challenged Cooper’s treatment of gains and interest deductions claimed on its 2000 and 2001 federal income tax returns, relating to transactions involving government securities. If the proposed adjustments are upheld, it would require Cooper to pay approximately $26.5 million in taxes plus accrued interest. There would be an additional payment related to those items for the 2002-2003 tax years of approximately $67.2 million in taxes plus accrued interest if the IRS prevails in its proposed treatment for the 2000-2001 tax years. Interest will continue to accrue until the matter is resolved. Cooper believes these transactions were properly reported on its federal income tax returns in accordance with applicable tax laws and regulations in effect during the periods involved and is challenging these adjustments vigorously.

On February 1, 2007, the IRS issued its examination report for the 2002-2004 tax years. In addition to the finding related to transactions involving government securities discussed above, the IRS has challenged Cooper’s treatment of certain interest payments made during these years to a subsidiary. If the proposed adjustments are upheld, it would require Cooper to pay approximately $140 million of federal withholding tax plus accrued interest. Cooper believes that these interest payments are not subject to this tax, and that the interest payments were properly reflected on its federal income tax returns in accordance with applicable tax laws and regulations in effect during the period involved. Cooper is preparing a protest related to these proposed adjustments, and will challenge the proposed adjustments vigorously.

F-23

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

While the outcome of the above proceedings cannot be predicted with certainty, management believes that the ultimate outcome of these matters will not have a material impact on Cooper’s consolidated financial position or results of operations.

In addition to the above, Cooper is under examination by various United States state and local taxing authorities as well as various taxing authorities in other countries. Cooper fully cooperates with all audits, but defends existing positions vigorously. These audits are in various stages of completion. To provide for potential tax exposures, Cooper maintains a liability for tax contingencies, which management believes is adequate. The results of future audit assessments, if any, could have a material effect on Cooper’s cash flows as these audits are completed. However, management does not believe that any of these matters will have a material adverse effect on Cooper’s consolidated results of operations.

NOTE 13: PENSION AND OTHER POSTRETIREMENT BENEFITS

Cooper and its subsidiaries have numerous defined benefit pension plans and other postretirement benefit plans. The benefits provided under Cooper’s various postretirement benefit plans other than pensions, all of which are unfunded, include retiree medical care, dental care, prescriptions and life insurance, with medical care accounting for approximately 90% of the total. Current employees, unless grandfathered under plans assumed in acquisitions, are not provided postretirement benefits other than pensions. The vast majority of the annual other postretirement benefit expense is related to employees who are already retired. The measurement date for all plan disclosures is December 31.

During June 2006, Cooper announced that, effective January 1, 2007, future benefit accruals will cease under the Cooper U. S. Salaried Pension Plan. Benefits earned through December 31, 2006 will remain in each participant’s Salaried Pension Plan account. The account balance will continue to earn interest credits until a participant is eligible for and elects to receive the plan benefit. Cooper recognized a curtailment loss of $4.2 million in the second quarter of 2006 as a result of this action. Beginning in 2007, Cooper will make a cash contribution equal to 3% of compensation to the Cooper Retirement Savings and Stock-Ownership Plan (“CO-SAV”). Cooper will further increase the company-matching contribution under the CO-SAV plan to a dollar-for-dollar match up to 6% of employee contributions.

Cooper also announced the elimination of postretirement life insurance for active employees, effective January 1, 2007. As a result, Cooper recognized a curtailment gain of $3.2 million in the second quarter of 2006.

Effective December 31, 2006, Cooper adopted Statement of Financial Accounting Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans. See Note 1 of the Notes to the Consolidated Financial Statements.

F-24

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


							Other
	Pension Benefits						Postretirement Benefits
	2006			2005			2006			2005
	(in millions)
Change in benefit obligation:
Benefit obligation at January 1	$	783.7		$	763.7		$	105.0		$	129.5
Service cost		16.7			17.5			0.1			0.2
Interest cost		41.4			41.0			5.6			6.8
Benefit payments		(43.8	)		(59.4	)		(9.3	)		(13.9	)
Actuarial (gain) loss		2.7			37.8			(3.4	)		1.5
Exchange rate changes		17.3			(17.2	)		—			—
Settlements		(26.0	)		(1.3	)		—			—
Curtailment		(5.7	)		—			(3.2	)		—
Amendments		(21.7	)		—			—			(19.1	)
Other		3.6			1.6			—			—

Benefit obligation at December 31		768.2			783.7			94.8			105.0


Change in plan assets:
Fair value of plan assets at January 1		650.1			660.5			—			—
Actual return on plan assets		63.4			34.4			—			—
Employer contributions		9.8			20.0			9.3			13.9
Benefit payments		(43.8	)		(56.7	)		(9.3	)		(13.9	)
Exchange rate changes		9.7			(7.5	)		—			—
Settlements		(23.1	)		(1.3	)		—			—
Other		0.6			0.7			—			—

Fair value of plan assets at December 31		666.7			650.1			—			—


Funded status		(101.5	)		(133.6	)		(94.8	)		(105.0	)
Unrecognized net actuarial (gain) loss		—			246.6			—			(38.5	)
Unrecognized prior service cost		—			6.8			—			(19.5	)

Net amount recognized	$	(101.5	)	$	119.8		$	(94.8	)	$	(163.0	)


							Other
	Pension Benefits						Postretirement Benefits
	2006			2005			2006			2005
	(in millions)
Assets and liabilities recognized in the balance sheet consist of:
Noncurrent assets	$	41.9		$	120.7		$	—		$	—
Accrued liabilities		(4.4	)		(24.5	)		(11.6	)		—
Long-term liabilities		(139.0	)		(107.2	)		(83.2	)		(163.0	)

	$	(101.5	)	$	(11.0	)⁽¹⁾	$	(94.8	)	$	(163.0	)


⁽¹⁾		In 2005, a pre-tax minimum pension liability adjustment of $130.8 million was included in accumulated other nonowner changes in equity.

F-25

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


						Other
	Pension Benefits					Postretirement Benefits
	2006			2005		2006			2005
	(in millions)
Amounts recognized in accumulated other nonowner changes in equity consist of:
Net actuarial (gain) loss	$	217.6		$	—	$	(39.1	)	$	—
Prior service cost		(19.0	)		—		(17.5	)		—

	$	198.6		$	—	$	(56.6	)	$	—

The incremental effect of adopting SFAS No. 158 on individual consolidated balance sheet line items as of December 31, 2006 was as follows:


	Before Application						After Application
	of SFAS No. 158			Adjustments			of SFAS No. 158
	(in millions)
Deferred income taxes and other noncurrent assets	$	335.6		$	(156.8	)	$	178.8
Accrued liabilities		541.9			(19.6	)		522.3
Postretirement benefits other than pensions		139.8			(56.6	)		83.2
Other long-term liabilities		356.6			(72.4	)		284.2
Accumulated other nonowner changes in equity		(120.2	)		(8.2	)		(128.4	)

The accumulated benefit obligation for defined benefit pension plans was $758.3 million and $763.3 million at December 31, 2006 and 2005, respectively.

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets of defined benefit pension plans with accumulated benefit obligations in excess of plan assets were $313.2 million, $307.3 million and $172.0 million, respectively as of December 31, 2006 and $309.2 million, $302.5 million and $173.9 million, respectively at December 31, 2005.


	Pension Benefits									Other Postretirement Benefits
	2006			2005			2004			2006			2005			2004
	(in millions)
Components of net periodic benefit cost:
Service cost	$	16.7		$	17.5		$	16.2		$	0.1		$	0.2		$	0.2
Interest cost		41.4			41.0			41.8			5.6			6.8			8.2
Expected return on plan assets		(49.1	)		(50.7	)		(47.1	)		—			—			—
Amortization of prior service cost		0.5			0.6			0.6			(2.0	)		(0.4	)		(0.1	)
Recognized actuarial (gain) loss		13.2			10.0			7.4			(2.9	)		(3.0	)		(2.8	)
Settlement loss		4.1			0.5			—			—			—			—
Curtailment (gain) loss		4.2			—			—			(3.2	)		—			—

Net periodic benefit cost	$	31.0		$	18.9		$	18.9		$	(2.4	)	$	3.6		$	5.5

F-26

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The estimated net loss and prior service cost credit for the defined benefit pension plans that will be amortized from accumulated other nonowner changes in equity into net periodic benefit cost over the next fiscal year are $10.2 million and $(2.1) million, respectively. The estimated net gain and prior service credit for the other postretirement plans that will be amortized from accumulated other nonowner changes in equity into net periodic benefit cost over the next fiscal year are $(2.7) million and $(2.0) million, respectively.


							Other
	Pension Benefits						Postretirement Benefits
	2006			2005			2006			2005
Weighted average assumptions used to determine benefit obligations as of December 31:
Discount rate		4.50% - 5.75	%		4.25% - 5.60	%		5.75	%		5.60	%
Rate of compensation increase		2.75% - 4.00	%		2.25% - 4.00	%		—			—


							Other
	Pension Benefits						Postretirement Benefits
	2006			2005			2006			2005
Weighted average assumptions used to determine net costs for the years ended December 31:
Discount rate		4.25% - 5.60	%		5.00% - 5.75	%		5.60	%		5.75	%
Expected return on plan assets		6.00% - 8.25	%		6.00% - 8.25	%		—			—
Rate of compensation increase.		2.75% - 4.00	%		2.75% - 4.00	%		—			—


	2006			2005
Assumed healthcare cost trend rates:
Healthcare cost trend rate assumed for next year		8.00	%		9.00	%
Rate to which trend rate is assumed to decline (ultimate trend rate)		5.00	%		5.00	%
Year that rate reaches ultimate trend rate		2010			2010


	1-Percentage-		1-Percentage-
	Point Increase		Point Decrease
	(in millions)
A one-percentage-point change in the assumed health care cost trend rate would have the following effects:
Effect on total of service and interest cost components	$	0.4	$	(0.3	)
Effect on the postretirement benefit obligation	$	5.3	$	(4.7	)

Defined benefit pension plan assets consist of:


	Percentage of Plan Assets
	at December 31,
Asset Category	2006			2005
Equity Securities		60	%		60	%
Debt Securities		40	%		40	%

		100	%		100	%

Cooper’s policy is to invest its pension assets in equity and fixed income investments. The plan investments are managed by outside investment advisors and include equity futures, other equity derivatives, fixed income futures and short to intermediate duration fixed income securities. The allocation of plan assets is determined based on plan liabilities and funded status.

F-27

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Cooper’s overall expected long-term rate of return on assets assumption is based upon (i) a long-term expected inflation rate, (ii) long-term expected stock and bond market risk premiums over the expected inflation rate, and (iii) a target allocation of equity and fixed income securities that will generate the overall expected long-term rate of return.

During 2007, Cooper expects to contribute approximately $5.4 million in cash to the defined benefit pension plans. Other postretirement benefit plans are not subject to any minimum regulatory funding requirements. Cooper funds these benefits payments as incurred.

Estimated future benefit payments for the next five fiscal years, and in the aggregate for the five fiscal years thereafter, are $55.5 million in 2007, $55.2 million in 2008, $56.4 million in 2009, $58.0 million in 2010, $59.3 million in 2011 and $301.6 million for 2012 through 2016.

During the fourth quarter of 2003, Cooper recorded a $12.5 million restructuring charge as an estimate of Cooper’s portion of unfunded benefit obligations related to the withdrawal from a multiple-employer pension plan associated with the closing of Cooper Wiring Device manufacturing operations in New York City. In 2005, Cooper finalized activities related to withdrawal from the multi-employer pension plan and recorded an additional $4.0 million pre-tax charge. The multiple-employer pension obligation was satisfied with a cash payment of $14.1 million in 2006 representing full and final payment of the withdrawal liability. Cooper participates in two other multiple-employer plans. Obligations under these plans are insignificant.

During 2006, 2005 and 2004, expense with respect to defined contribution plans (primarily related to various groups of hourly employees) totaled $18.3 million, $17.8 million and $16.4 million, respectively.

NOTE 14: RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN

All full-time domestic employees, except for certain bargaining unit employees, are eligible to participate in the Cooper Retirement Savings and Stock Ownership Plan (“CO-SAV”). Under the terms of the CO-SAV plan, employee savings deferrals are partially matched with Cooper common stock.

Compensation expense for the CO-SAV plan was $20.1 million, $19.5 million and $20.0 million in 2006, 2005 and 2004, respectively.

See Note 13 of the Notes to the Consolidated Financial Statements regarding changes in company contribution levels for the CO-SAV plan that became effective January 1, 2007.

NOTE 15: INDUSTRY SEGMENTS AND GEOGRAPHIC INFORMATION

Industry Segments

Cooper’s operations consist of two segments: Electrical Products and Tools. Markets for Cooper’s products and services are worldwide, with the United States being the largest market.

F-28

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The Tools segment manufactures, markets and sells hand tools for industrial, construction and consumer markets; automated assembly systems for industrial markets and electric and pneumatic industrial power tools for general industry, primarily automotive and aerospace manufacturers.

The performance of businesses is evaluated at the segment level and resources are allocated among the segments. The Cooper executive responsible for the segments further allocates resources among the various division operating units that compose the segments and, in international markets, determines the integration of product lines and operations across division operating units. The accounting policies of the segments are the same as those described in the summary of significant accounting policies in Note 1. Cooper manages cash, debt and income taxes centrally. Accordingly, Cooper evaluates performance of its segments and operating units based on operating earnings exclusive of financing activities and income taxes. The segments are managed separately because they manufacture and distribute distinct products. Intersegment sales and related receivables for each of the years presented were insignificant.

Financial information by industry segment was as follows:


	Revenues						Operating Earnings									Total Assets
	Year Ended December 31,						Year Ended December 31,									Year Ended December 31,
	2006		2005		2004		2006			2005			2004			2006		2005		2004
	(in millions)
Electrical Products	$	4,426.0	$	3,997.5	$	3,722.2	$	703.2		$	585.0		$	511.2		$	3,960.8	$	3,600.9	$	3,591.8
Tools		758.6		732.9		740.7		85.6			66.7			62.7			686.6		700.5		737.0

Total management reporting	$	5,184.6	$	4,730.4	$	4,462.9		788.8			651.7			573.9			4,647.4		4,301.4		4,328.8

General Corporate expense								(89.6	)		(91.9	)		(77.3	)

Operating earnings								699.2			559.8			496.6
Interest expense, net								(51.5	)		(64.8	)		(68.1	)

Consolidated income from continuing operations before income taxes							$	647.7		$	495.0		$	428.5

Corporate assets																	727.4		913.7		1,079.0

Consolidated assets																$	5,374.8	$	5,215.1	$	5,407.8


	Electrical						Consolidated
	Products		Tools		Corporate		Total
	(in millions)
2006
Depreciation and amortization	$	90.4	$	20.0	$	1.3	$	111.7
Capital expenditures		60.8		9.1		15.4		85.3
Investment in unconsolidated affiliates.		21.3		—		—		21.3

2005
Depreciation and amortization	$	88.7	$	20.1	$	2.2	$	111.0
Capital expenditures		69.9		12.4		14.4		96.7
Investment in unconsolidated affiliates.		21.6		—		—		21.6

2004
Depreciation and amortization	$	93.9	$	21.7	$	2.0	$	117.6
Capital expenditures		73.0		10.2		19.6		102.8
Investment in unconsolidated affiliates.		23.3		—		—		23.3

Geographic Information

Revenues and long-lived assets by country are summarized below. Revenues are attributed to geographic areas based on the location of the assets producing the revenues. Revenues are generally denominated in the currency of the location of the assets producing the revenues.

F-29

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


	Revenues						Long-Lived Assets
	2006		2005		2004		2006		2005		2004
	(in millions)
United States	$	3,781.1	$	3,459.5	$	3,264.4	$	490.0	$	726.3	$	703.4
Germany		253.5		235.0		249.7		38.7		35.0		42.4
United Kingdom.		305.3		311.3		283.6		41.1		57.2		67.3
Canada		226.3		205.1		181.6		0.7		0.8		0.9
Mexico		172.4		139.2		132.1		83.2		87.7		85.6
Other countries		446.0		380.3		351.5		80.2		69.0		54.5

	$	5,184.6	$	4,730.4	$	4,462.9	$	733.9	$	976.0	$	954.1

International revenues by destination, based on the location products were delivered, were as follows by segment:


	International Revenues
	2006		2005		2004
	(in millions)
Electrical Products	$	1,312.5	$	1,152.6	$	1,052.5
Tools		343.0		312.9		329.0

	$	1,655.5	$	1,465.5	$	1,381.5

NOTE 16: CHARGE RELATED TO DISCONTINUED OPERATIONS

F-30

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In December 2005, Cooper announced that the Company and other parties involved in the resolution of the Federal-Mogul bankruptcy proceeding had reached an agreement regarding Cooper’s participation in Federal Mogul’s proposed 524 (g) asbestos trust. By participating in this trust, Cooper would resolve its liability for asbestos claims arising from Cooper’s former Abex Friction Products business. The proposed settlement agreement was subject to court approval, approval of 75 percent of the current Abex asbestos claimants and certain other approvals. The settlement would resolve more than 38,000 pending Abex Claims as of December 31, 2005. Future claims would be resolved through the bankruptcy trust, and Cooper would be protected against future claims by an injunction to be issued by the district court upon plan confirmation.

F-31

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

As in the December 2005 agreement, Cooper has agreed to make 25 annual payments of up to $20 million each to the trust with such payments being reduced by insurance proceeds. The minimum annual

F-32

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

payment of $3 million in the December 2005 agreement has been eliminated. However, Cooper has agreed to make advances, beginning in 2015 through 2021, in the event the trust is unable to pay outstanding qualified claims at 100 percent of the value provided for in the trust agreement. In the event that advances are made by Cooper, they will accrue interest at 5 percent per annum, and will be repaid in years where excess funds are available in the trust or credited against the future year annual payments. The maximum advances are $36.6 million.

Accordingly, Cooper recorded a $20.3 million after-tax discontinued operations charge, net of an $11.4 million income tax benefit, in the second quarter of 2006.

The revised proposed settlement agreement has been incorporated into Federal-Mogul’s Fourth Amended Joint Plan of Reorganization, which was filed on November 21, 2006.

NOTE 17: FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES, CONCENTRATIONS OF CREDIT RISK AND FAIR VALUE OF FINANCIAL INSTRUMENTS

Derivative Instruments and Hedging Activities

Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS No. 133”), as amended, requires that all derivatives be recognized as assets and liabilities and measured at fair value. For derivative instruments that are not designated as hedges, the gain or loss on the derivative is recognized in earnings currently. A derivative instrument may be designated as a hedge of the exposure to changes in the fair value of an asset or liability or variability in expected future cash flows if

F-33

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

the hedging relationship is expected to be highly effective in offsetting changes in fair value or cash flows attributable to the hedged risk during the period of designation. If a derivative is designated as a fair value hedge, the gain or loss on the derivative and the offsetting loss or gain on the hedged asset, liability or firm commitment is recognized in earnings. For derivative instruments designated as a cash flow hedge, the effective portion of the gain or loss on the derivative instrument is reported as a component of accumulated nonowner changes in equity and reclassified into earnings in the same period that the hedged transaction affects earnings. The ineffective portion of the gain or loss is immediately recognized in earnings.

Hedge accounting is discontinued prospectively when (1) it is determined that a derivative is no longer effective in offsetting changes in the fair value or cash flows of a hedged item; (2) the derivative is sold, terminated or exercised; (3) the hedged item no longer meets the definition of a firm commitment; or (4) it is unlikely that a forecasted transaction will occur within two months of the originally specified time period.

When hedge accounting is discontinued because it is determined that the derivative no longer qualifies as an effective fair-value hedge, the derivative will continue to be carried on the balance sheet at its fair value, and the hedged asset or liability will no longer be adjusted for changes in fair value. When hedge accounting is discontinued because a hedged item no longer meets the definition of a firm commitment, the derivative will continue to be carried on the balance sheet at its fair value, and any asset or liability that was recorded pursuant to recognition of the firm commitment will be removed from the balance sheet and recognized as a gain or loss currently in earnings. When hedge accounting is discontinued because it is probable that a forecasted transaction will not occur within two months of the originally specified time period, the derivative will continue to be carried on the balance sheet at its fair value, and gains and losses reported in accumulated nonowner changes in equity will be recognized immediately in earnings.

Cooper enters into currency forward exchange contracts and commodity futures contracts and swaps to reduce the risks of adverse changes in currency exchange rates and commodity prices. Cooper entered into cross-currency interest-rate swaps in 2005 and interest-rate swaps in 2003 to reduce the interest-rate risk associated with certain fixed-rate debt. Cooper does not enter into speculative derivative transactions.

As a result of having sales, purchases and certain intercompany transactions denominated in currencies other than the functional currencies of Cooper’s businesses, Cooper is exposed to the effect of currency exchange rate changes on its cash flows and earnings. Cooper enters into currency forward exchange contracts to hedge significant non-functional currency denominated transactions for periods consistent with the terms of the underlying transactions. Contracts generally have maturities that do not exceed one year.

Currency forward exchange contracts executed to hedge a recognized asset, liability or firm commitment are accounted for as fair value hedges. The net gain or loss on contracts designated as fair value hedges was not material during 2006, 2005 or 2004. Currency forward exchange contracts executed to hedge forecasted transactions are accounted for as cash flow hedges. The net gain or loss on contracts designated as cash flow hedges was not material during 2006, 2005 or 2004. Cooper also enters into certain currency forward exchange contracts that are not designated as hedges. These contracts are intended to reduce cash flow volatility related to short-term intercompany financing transactions.

Cooper enters into commodity futures contracts and swaps to reduce the volatility of price fluctuations on a portion of its forecasted annual material purchases. These instruments are designated as cash flow hedges. The net gain or loss on commodity futures contracts and swaps was not material in 2006, 2005 or 2004.

During October 2005, Cooper entered into cross-currency interest-rate swaps to effectively convert its newly issued $325 million, 5.25% fixed-rate debt to €272.6 million of 3.55% fixed-rate debt.

F-34

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The $325 million debt issuance proceeds were swapped to €272.6 million and lent through an intercompany loan to a non-U.S. subsidiary to partially fund repayment of the 300 million Euro bond debt that matured on October 25, 2005. The cross-currency interest-rate swaps have been designated as cash flow hedges. Changes in the currency spot exchange rate results in reclassification of amounts from other comprehensive income to earnings to offset transaction gains and losses on the non-U.S.-denominated intercompany debt. The cross-currency interest-rate swaps mature in November 2012.

During August 2003, Cooper entered into interest-rate swaps to effectively convert $300 million of 5.25% long-term fixed-rate debt to variable-rate debt at the six-month LIBOR rate plus 1.91% (with semi-annual reset). The interest-rate swaps are designated as fair value hedges. The notional principal amount and maturity dates of the interest-rate swaps match the underlying long-term debt, which matures in July 2007. During 2006, Cooper recognized $5.8 million additional interest expense, net related to the interest-rate swaps. During the years ended December 31, 2005 and 2004, respectively, Cooper recognized a $0.1 million and $5.1 million reduction of interest expense, net related to the interest-rate swaps.

Gains or losses on derivative instruments are reported in the same line item as the underlying hedged transaction in the consolidated statements of income. At December 31, 2006, Cooper estimates that approximately $1.5 million of net gains on derivative instruments designated as cash flow hedges will be reclassified from accumulated nonowner changes in equity to earnings during the next twelve months. The amount of discontinued cash flow hedges during 2006, 2005 and 2004 was not material.

The table below summarizes the U. S. dollar equivalent contractual amounts of Cooper’s forward exchange contracts at December 31, 2006 and 2005.


	December 31,
	2006		2005
	(in millions)
U.S. Dollar	$	224.3	$	108.2
Euro		122.5		0.2
Mexican Peso		23.2		19.1
British Pound Sterling		8.5		0.4
Other		0.7		—

	$	379.2	$	127.9

Other Instruments

In the normal course of business, Cooper executes stand-by letters of credit, performance bonds and other guarantees that ensure Cooper’s performance or payment to third parties that are not reflected in the consolidated balance sheets. The aggregate notional value of these instruments was $118.6 million and $104.3 million at December 31, 2006 and 2005, respectively. In the past, no significant claims have been made against these financial instruments. Management believes the likelihood of demand for payment under these instruments is minimal and expects no material losses to occur in connection with these instruments.

Concentrations of Credit Risk

Concentrations of credit risk with respect to trade receivables are limited due to the wide variety of customers as well as their dispersion across many different geographic areas with no one customer receivable exceeding 4% of accounts receivable.

F-35

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Fair Value of Financial Instruments Other than Derivatives

Cooper’s financial instruments other than derivative instruments, consist primarily of cash and cash equivalents, trade receivables, trade payables and debt instruments. The book values of cash and cash equivalents, trade receivables and trade payables are considered to be representative of their respective fair values. Cooper had approximately $1.0 billion of debt instruments at both December 31, 2006 and 2005. The book value of these instruments was approximately equal to fair value (as represented primarily by quoted market prices) at December 31, 2006 and 2005.

NOTE 18: NET INCOME PER COMMON SHARE


	Basic						Diluted
	Year Ended December 31,						Year Ended December 31,
	2006		2005		2004		2006		2005		2004
	($ in millions, shares in thousands)
Income from continuing operations	$	484.3	$	391.1	$	339.8	$	484.3	$	391.1	$	339.8
Charge from discontinued operations		20.3		227.2		—		20.3		227.2		—

Net income applicable to common stock	$	464.0	$	163.9	$	339.8	$	464.0	$	163.9	$	339.8

Weighted average common shares outstanding		91,773		92,520		92,480		91,773		92,520		92,480

Incremental shares from assumed conversions:
Options, performance-based stock awards and other employee awards								2,019		2,529		2,283

Weighted average common shares and common share equivalents								93,792		95,049		94,763

Options and employee awards are not considered in the calculations if the effect would be antidilutive.

On February 14, 2007, Cooper announced a two-for-one stock split to shareholders of record on February 28, 2007, to be distributed on March 15, 2007. Unaudited pro forma earnings per share, assuming that the stock split occurred on January 1, 2004, is presented below.


	Year Ended December 31,
	2006		2005		2004
	(unaudited)
Basic:
Income from continuing operations	$	2.64	$	2.12	$	1.84
Charge from discontinued operations		.11		1.23		—

Net income	$	2.53	$	.89	$	1.84


Diluted:
Income from continuing operations	$	2.58	$	2.06	$	1.79
Charge from discontinued operations		.10		1.19		—

Net income	$	2.48	$	.87	$	1.79

F-36

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 19: UNAUDITED QUARTERLY OPERATING RESULTS


	2006 (by quarter)
	1		2		3		4
	(in millions, except per share data)
Revenues	$	1,240.9	$	1,287.8	$	1,314.6	$	1,341.3
Cost of sales		846.8		870.3		887.2		912.1
Selling and administrative expenses		237.5		244.3		240.8		246.4

Operating earnings		156.6		173.2		186.6		182.8
Interest expense, net		12.1		12.4		14.0		13.0

Income from continuing operations before income taxes		144.5		160.8		172.6		169.8
Income taxes		36.8		41.0		44.4		41.2

Income from continuing operations		107.7		119.8		128.2		128.6
Charge related to discontinued operations		—		20.3		—		—

Net income	$	107.7	$	99.5	$	128.2	$	128.6


Income per Common share
Basic:
Income from continuing operations	$	1.17	$	1.30	$	1.40	$	1.41
Charge from discontinued operations		—		.22		—		—

Net income	$	1.17	$	1.08	$	1.40	$	1.41


Diluted:
Income from continuing operations	$	1.14	$	1.27	$	1.37	$	1.38
Charge from discontinued operations		—		.21		—		—

Net income	$	1.14	$	1.06	$	1.37	$	1.38


	2005 (by quarter)
	1		2		3		4
	(in millions, except per share data)
Revenues	$	1,144.8	$	1,189.2	$	1,210.4	$	1,186.0
Cost of sales		787.6		814.7		828.1		813.4
Selling and administrative expenses		227.5		232.9		235.9		230.5

Operating earnings		129.7		141.6		146.4		142.1
Interest expense, net		17.8		17.7		16.5		12.8

Income from continuing operations before income taxes		111.9		123.9		129.9		129.3
Income taxes		24.1		26.6		27.9		25.3

Income from continuing operations		87.8		97.3		102.0		104.0
Charge related to discontinued operations		—		—		—		227.2

Net income (loss)	$	87.8	$	97.3	$	102.0	$	(123.2	)


Income (loss) per Common share
Basic:
Income from continuing operations	$	.94	$	1.05	$	1.11	$	1.13
Charge from discontinued operations		—		—		—		2.47

Net income (loss)	$	.94	$	1.05	$	1.11	$	(1.34	)


Diluted:
Income from continuing operations	$	.92	$	1.02	$	1.08	$	1.10
Charge from discontinued operations		—		—		—		2.40

Net income (loss)	$	.92	$	1.02	$	1.08	$	(1.30	)

F-37

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 20: CONSOLIDATING FINANCIAL INFORMATION

Cooper and certain of its principal operating subsidiaries (the “Guarantors”) fully and unconditionally guarantee, on a joint and several basis, the registered debt securities of Cooper Industries, LLC and Cooper US, Inc. The following condensed consolidating financial information is included so that separate financial statements of Cooper Industries, LLC, Cooper US, Inc. or the Guarantors are not required to be filed with the Securities and Exchange Commission. The consolidating financial statements present investments in subsidiaries using the equity method of accounting. Intercompany investments in the Class A and Class B common shares are accounted for using the cost method.

Consolidating Income Statements
Year Ended December 31, 2006
(in millions)


				Cooper			Cooper
				Industries,			US,						Other			Consolidating
	Cooper			LLC			Inc.			Guarantors			Subsidiaries			Adjustments			Total
Revenues	$	—		$	—		$	—		$	3,367.1		$	2,055.2		$	(237.7	)	$	5,184.6
Cost of sales		(5.1	)		(1.0	)		0.6			2,358.1			1,401.5			(237.7	)		3,516.4
Selling and administrative expenses		9.6			19.7			64.9			509.1			365.7			—			969.0
Interest expense, net		(0.8	)		45.0			12.2			—			(4.9	)		—			51.5
Equity in earnings of subsidiaries, net of tax		584.5			(105.3	)		337.9			96.4			338.5			(1,252.0	)		—
Intercompany income (expense)		(18.2	)		133.8			22.4			(369.7	)		330.4			(98.7	)		—

Income (loss) from continuing operations before income taxes		562.6			(35.2	)		282.6			226.6			961.8			(1,350.7	)		647.7
Income tax expense (benefit)		—			(29.9	)		(56.0	)		48.4			200.9			—			163.4

Income from continuing operations		562.6			(5.3	)		338.6			178.2			760.9			(1,350.7	)		484.3
Charge related to discontinued operations, net of tax		—			20.3			—			—			—			—			20.3

Net income (loss)	$	562.6		$	(25.6	)	$	338.6		$	178.2		$	760.9		$	(1,350.7	)	$	464.0

F-38

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Consolidating Income Statements
Year Ended December 31, 2005
(in millions)


				Cooper			Cooper
				Industries,			US,						Other		Consolidating
	Cooper			LLC			Inc.			Guarantors			Subsidiaries		Adjustments			Total
Revenues	$	—		$	—		$	—		$	3,124.2		$	1,745.7	$	(139.5	)	$	4,730.4
Cost of sales		0.2			0.4			1.1			2,203.4			1,178.2		(139.5	)		3,243.8
Selling and administrative expenses		8.9			9.8			70.4			495.8			341.9		—			926.8
Interest expense, net		(1.1	)		51.3			(1.3	)		—			15.9		—			64.8
Equity in earnings of subsidiaries, net of tax.		259.1			55.9			100.7			117.5			39.9		(573.1	)		—
Intercompany income (expense)		(6.7	)		(59.0	)		(73.7	)		(373.6	)		593.5		(80.5	)		—

Income (loss) from continuing operations before income taxes		244.4			(64.6	)		(43.2	)		168.9			843.1		(653.6	)		495.0
Income tax expense (benefit)		—			(44.7	)		(82.9	)		15.1			216.4		—			103.9

Income from continuing operations		244.4			(19.9	)		39.7			153.8			626.7		(653.6	)		391.1
Charge related to discontinued operations, net of taxes		—			227.2			—			—			—		—			227.2

Net income (loss)	$	244.4		$	(247.1	)	$	39.7		$	153.8		$	626.7	$	(653.6	)	$	163.9

Consolidating Income Statements
Year Ended December 31, 2004
(in millions)


				Cooper						Other		Consolidating
	Cooper			Ohio			Guarantors			Subsidiaries		Adjustments			Total
Revenues	$	—		$	185.5		$	2,666.5		$	1,656.2	$	(45.3	)	$	4,462.9
Cost of sales		0.7			124.1			1,891.1			1,149.1		(45.3	)		3,119.7
Selling and administrative expenses		9.5			90.5			432.7			313.9		—			846.6
Interest expense, net		(1.0	)		47.8			—			21.3		—			68.1
Equity in earnings of subsidiaries, net of tax		353.4			379.5			30.0			162.0		(924.9	)		—
Intercompany income (expense)		(4.4	)		(256.9	)		(329.5	)		590.8		—			—

Income before income taxes		339.8			45.7			43.2			924.7		(924.9	)		428.5
Income tax expense (benefit)		—			(116.3	)		(3.1	)		208.1		—			88.7

Net income	$	339.8		$	162.0		$	46.3		$	716.6	$	(924.9	)	$	339.8

F-39

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Consolidating Balance Sheets
December 31, 2006
(in millions)


			Cooper			Cooper
			Industries,			US,						Other			Consolidating
	Cooper		LLC			Inc.			Guarantors			Subsidiaries			Adjustments			Total
Cash and cash equivalents	$	11.5	$	—		$	204.9		$	(2.8	)	$	209.9		$	—		$	423.5
Receivables		0.2		—			0.4			469.3			426.1			—			896.0
Inventories		—		—			—			348.6			259.0			—			607.6
Deferred income taxes and other current assets		1.1		141.4			51.9			25.6			46.6			—			266.6

Total current assets		12.8		141.4			257.2			840.7			941.6			—			2,193.7

Property, plant and equipment, less accumulated depreciation.		—		—			49.8			320.0			295.6			—			665.4
Goodwill		—		—			—			1,025.0			1,311.9			—			2,336.9
Investment in subsidiaries		3,554.6		570.0			4,081.8			1,219.2			1,346.2			(10,771.8	)		—
Investment in parent		—		—			2,811.2			—			312.8			(3,124.0	)		—
Intercompany accounts receivable		686.3		806.5			—			1,289.0			598.6			(3,380.4	)		—
Intercompany notes receivable		91.8		24.9			758.5			0.7			4,067.3			(4,943.2	)		—
Deferred income taxes and other noncurrent assets		—		20.0			2.0			23.0			133.8			—			178.8

Total assets	$	4,345.5	$	1,562.8		$	7,960.5		$	4,717.6		$	9,007.8		$	(22,219.4	)	$	5,374.8


Short-term debt	$	—	$	—		$	—		$	—		$	5.0		$	—		$	5.0
Accounts payable		32.1		17.2			4.5			225.9			192.0			—			471.7
Accrued liabilities		5.2		43.4			84.5			230.0			159.2			—			522.3
Current discontinued operations liability		—		199.6			—			—			—			—			199.6
Current maturities of long-term debt		—		300.0			—			—			0.7			—			300.7

Total current liabilities		37.3		560.2			89.0			455.9			356.9			—			1,499.3

Long-term debt		—		370.5			323.9			8.0			0.4			—			702.8
Intercompany accounts payable		—		—			3,380.4			—			—			(3,380.4	)		—
Intercompany notes payable		552.3		329.9			1,901.4			1,707.3			452.3			(4,943.2	)		—
Long-term discontinued operations liability		—		330.0			—			—			—			—			330.0
Other long-term liabilities		—		(57.7	)		119.2			172.9			133.0			—			367.4

Total liabilities		589.6		1,532.9			5,813.9			2,344.1			942.6			(8,323.6	)		2,899.5

Class A common stock		1.0		—			—			—			—			(0.1	)		0.9
Class B common stock		0.5		—			—			—			—			(0.5	)		—
Subsidiary common stock		—		—			—			—			500.3			(500.3	)		—
Capital in excess of par value		3,392.0		—			56.2			1,431.5			5,174.7			(9,776.0	)		278.4
Retained earnings		358.4		128.3			2,230.1			943.3			2,485.6			(3,821.3	)		2,324.4
Accumulated other nonowner changes in equity		4.0		(98.4	)		(139.7	)		(1.3	)		(95.4	)		202.4			(128.4	)

Total shareholders’ equity		3,755.9		29.9			2,146.6			2,373.5			8,065.2			(13,895.8	)		2,475.3

Total liabilities and shareholders’ equity	$	4,345.5	$	1,562.8		$	7,960.5		$	4,717.6		$	9,007.8		$	(22,219.4	)	$	5,374.8

F-40

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Consolidating Balance Sheets
December 31, 2005
(in millions)


				Cooper			Cooper
				Industries,			US,						Other			Consolidating
	Cooper			LLC			Inc			Guarantors			Subsidiaries			Adjustments			Total
Cash and cash equivalents	$	64.1		$	—		$	144.4		$	(3.5	)	$	247.8		$	—		$	452.8
Receivables		0.1			—			8.6			469.7			364.0			—			842.4
Inventories		—			—			—			327.1			211.6			—			538.7
Deferred income taxes and other current assets		1.2			130.7			94.0			48.8			22.5			—			297.2

Total current assets		65.4			130.7			247.0			842.1			845.9			—			2,131.1

Property, plant and equipment, less accumulated depreciation		—			—			41.0			339.5			293.2			—			673.7
Goodwill		—			—			—			1,018.3			1,065.7			—			2,084.0
Investment in subsidiaries		2,887.9			759.5			3,579.4			917.6			899.1			(9,043.5	)		—
Investment in parent		—			—			2,547.1			—			312.7			(2,859.8	)		—
Intercompany accounts receivables		588.4			550.5			—			1,367.3			589.9			(3,096.1	)		—
Intercompany notes receivable		43.9			23.5			651.1			0.8			3,683.4			(4,402.7	)		—
Deferred income taxes and other noncurrent assets		—			223.5			48.7			(43.2	)		97.3			—			326.3

Total assets	$	3,585.6		$	1,687.7		$	7,114.3		$	4,442.4		$	7,787.2		$	(19,402.1	)	$	5,215.1


Short-term debt	$	—		$	—		$	—		$	—		$	7.6		$	—		$	7.6
Accounts payable		34.1			14.0			8.0			214.7			157.0			—			427.8
Accrued liabilities		3.9			28.9			107.5			238.8			138.9			—			518.0
Current discontinued operations liability		—			196.3			—			—			—			—			196.3
Current maturities of long-term debt		—			11.0			—			—			0.4			—			11.4

Total current liabilities		38.0			250.2			115.5			453.5			303.9			—			1,161.1

Long-term debt		—			670.0			323.7			8.0			1.2			—			1,002.9
Intercompany accounts payables		—			—			3,096.1			—			—			(3,096.1	)		—
Intercompany notes payable		326.0			258.7			1,652.8			1,708.0			457.2			(4,402.7	)		—
Long-term discontinued operations liability		—			330.0			—			—			—			—			330.0
Other long-term liabilities		—			131.4			191.2			77.0			116.3			—			515.9

Total liabilities		364.0			1,640.3			5,379.3			2,246.5			878.6			(7,498.8	)		3,009.9

Class A common stock		1.0			—			—			—			—			(0.1	)		0.9
Class B common stock		0.5			—			—			—			—			(0.5	)		—
Subsidiary common stock		—			—			—			—			272.9			(272.9	)		—
Capital in excess of par value		3,232.7			—			29.4			1,388.6			5,082.3			(9,349.8	)		383.2
Retained earnings		31.5			162.4			1,892.3			832.5			1,733.2			(2,654.5	)		1,997.4
Accumulated other nonowner changes in equity		(44.1	)		(115.0	)		(186.7	)		(25.2	)		(179.8	)		374.5			(176.3	)

Total shareholders’ equity		3,221.6			47.4			1,735.0			2,195.9			6,908.6			(11,903.3	)		2,205.2

Total liabilities and shareholders’ equity	$	3,585.6		$	1,687.7		$	7,114.3		$	4,442.4		$	7,787.2		$	(19,402.1	)	$	5,215.1

F-41

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Consolidating Statements of Cash Flows
Year Ended December 31, 2006
(in millions)


				Cooper			Cooper
				Industries,			US,						Other			Consolidating
	Cooper			LLC			Inc			Guarantors			Subsidiaries			Adjustments			Total
Net cash provided by (used in) operating activities	$	(20.9	)	$	(18.8	)	$	(11.7	)	$	129.3		$	523.5		$	—		$	601.4

Cash flows from investing activities:
Capital expenditures		—			—			(15.3	)		(37.2	)		(32.8	)		—			(85.3	)
Cash paid for acquired businesses		—			—			(45.0	)		(229.6	)		(5.8	)		—			(280.4	)
Investment in affiliates		(12.3	)		—			(36.7	)		—			—			49.0			—
Loans to affiliates		(192.0	)		—			(44.5	)		—			(539.1	)		775.6			—
Repayments of loans from affiliates		146.2			—			—			—			199.3			(345.5	)		—
Dividends from affiliates		5.0			5.5			91.7			18.1			7.9			(128.2	)		—
Other		—			—			—			1.0			17.9			—			18.9

Net cash provided by (used in) investing activities		(53.1	)		5.5			(49.8	)		(247.7	)		(352.6	)		350.9			(346.8	)

Cash flows from financing activities:
Repayments of debt		—			(11.0	)		—			—			(3.8	)		—			(14.8	)
Borrowings from affiliates		271.2			44.4			458.4			1.5			0.1			(775.6	)		—
Repayments of loans to affiliates		(47.3	)		—			(251.8	)		(2.4	)		(44.0	)		345.5			—
Other intercompany financing activities		13.0			(20.1	)		83.7			120.0			(196.6	)		—			—
Dividends		(137.0	)		—			—			—			—			—			(137.0	)
Dividends paid to affiliates		(98.6	)		—			—			—			(29.6	)		128.2			—
Subsidiary purchase of parent shares		20.1			—			(284.3	)		—			—			—			(264.2	)
Issuance of stock		—			—			—			—			49.0			(49.0	)		—
Excess tax benefits from stock options and awards		—			—			26.8			—			—			—			26.8
Employee stock plan activity and other		—			—			89.2			—			—			—			89.2

Net cash provided by (used in) financing activities		21.4			13.3			122.0			119.1			(224.9	)		(350.9	)		(300.0	)
Effect of exchange rate changes on cash and cash equivalents		—			—			—			—			16.1			—			16.1

Increase (decrease) in cash and cash equivalents		(52.6	)		—			60.5			0.7			(37.9	)		—			(29.3	)
Cash and cash equivalents, beginning of period		64.1			—			144.4			(3.5	)		247.8			—			452.8

Cash and cash equivalents, end of period	$	11.5		$	—		$	204.9		$	(2.8	)	$	209.9		$	—		$	423.5

F-42

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Consolidating Statements of Cash Flows
Year Ended December 31, 2005
(in millions)


				Cooper			Cooper
				Industries,			US,						Other			Consolidating
	Cooper			LLC			Inc			Guarantors			Subsidiaries			Adjustments			Total
Net cash provided by (used in) operating activities	$	(10.4	)	$	(141.6	)	$	2.0		$	103.6		$	619.9		$	—		$	573.5

Cash flows from investing activities:
Capital expenditures		—			—			(14.4	)		(40.7	)		(41.6	)		—			(96.7	)
Cash paid for acquired businesses		—			—			—			—			(7.1	)		—			(7.1	)
Investment in affiliates		(11.1	)		(225.0	)		(49.2	)		(3.4	)		—			288.7			—
Sale of investment in affiliates		—			—			—			—			130.9			(130.9	)		—
Loans to affiliates		(46.0	)		(23.5	)		(646.7	)		(0.7	)		(238.3	)		955.2			—
Repayments of loans from affiliates		27.7			—			—			—			46.2			(73.9	)		—
Dividends from affiliates		10.0			0.9			98.4			52.8			5.1			(167.2	)		—
Other		—			1.5			—			0.6			11.5			—			13.6

Net cash provided by (used in) investing activities		(19.4	)		(246.1	)		(611.9	)		8.6			(93.3	)		871.9			(90.2	)

Cash flows from financing activities:
Proceeds from issuances of debt		—			—			325.0			—			1.4			—			326.4
Repayments of debt		—			(229.0	)		—			—			(481.4	)		—			(710.4	)
Borrowings from affiliates		235.8			258.7			—			5.9			454.8			(955.2	)		—
Repayments of loans to affiliates		(46.2	)		—			—			—			(27.7	)		73.9			—
Other intercompany financing activities		(11.7	)		358.0			227.6			(100.6	)		(473.3	)		—			—
Dividends		(138.1	)		—			—			—			—			—			(138.1	)
Dividends paid to affiliates		(70.2	)		—			—			(22.2	)		(74.8	)		167.2			—
Subsidiary purchase of parent shares		12.8			—			(113.3	)		—			(110.5	)		—			(211.0	)
Issuance of stock		—			—			—			—			157.8			(157.8	)		—
Employee stock plan activity and other		—			—			68.9			—			—			—			68.9

Net cash provided by (used in) financing activities		(17.6	)		387.7			508.2			(116.9	)		(553.7	)		(871.9	)		(664.2	)
Effect of exchange rate changes on cash and cash equivalents		—			—			—			—			(19.1	)		—			(19.1	)

Decrease in cash and cash equivalents		(47.4	)		—			(101.7	)		(4.7	)		(46.2	)		—			(200.0	)
Cash and cash equivalents, beginning of period		111.5			—			246.1			1.2			294.0			—			652.8

Cash and cash equivalents, end of period	$	$64.1		$	—		$	144.4		$	(3.5	)	$	247.8		$	—		$	452.8

F-43

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Consolidating Statements of Cash Flows
Year Ended December 31, 2004
(in millions)


				Cooper						Other			Consolidating
	Cooper			Ohio			Guarantors			Subsidiaries			Adjustments			Total
Net cash provided by (used in) operating activities	$	(7.3	)	$	(173.9	)	$	45.7		$	609.1		$	—		$	473.6

Cash flows from investing activities:
Capital expenditures		—			(21.4	)		(40.7	)		(40.7	)		—			(102.8	)
Cash paid for acquired business		—			—			(10.1	)		(38.5	)		—			(48.6	)
Intercompany sale (purchase) of investment in parent		—			(182.1	)		—			182.1			—			—
Intercompany sale (purchase) of investment in subsidiaries		—			109.5			—			(109.5	)		—			—
Investments in affiliates		(9.0	)		(80.3	)		—			—			89.3			—
Loans to affiliates		(60.5	)		(23.6	)		—			(154.0	)		238.1			—
Repayments of loans from affiliates		35.1			23.0			—			84.5			(142.6	)		—
Dividends from subsidiaries		134.0			87.7			—			—			(221.7	)		—
Other		—			28.3			10.0			1.8			(28.3	)		11.8

Net cash provided by (used in) investing activities.		99.6			(58.9	)		(40.8	)		(74.3	)		(65.2	)		(139.6	)


Cash flows from financing activities:
Proceeds from issuances of debt.		—			—			—			94.3			—			94.3
Repayments of debt		—			—			—			(4.7	)		—			(4.7	)
Borrowings from affiliates		176.1			—			8.5			53.5			(238.1	)		—
Repayments of loans from affiliates		(132.1	)		—			(0.8	)		(9.7	)		142.6			—
Other intercompany financing activities		9.8			253.6			(11.5	)		(251.9	)		—			—
Dividends		(131.0	)		—			—			—			—			(131.0	)
Dividends paid to parent		—			—			—			(221.7	)		221.7			—
Subsidiary purchase of parent shares		—			(110.3	)		—			(92.6	)		—			(202.9	)
Issuance of stock		—			—			—			89.3			(89.3	)		—
Employee stock plan activity and other		—			78.4			—			(28.3	)		28.3			78.4

Net cash provided by (used in) financing activities		(77.2	)		221.7			(3.8	)		(371.8	)		65.2			(165.9	)
Effect of exchange rate changes on cash and cash equivalents.		—			—			—			21.0			—			21.0

Increase (decrease) in cash and cash equivalents		15.1			(11.1	)		1.1			184.0			—			189.1
Cash and cash equivalents, beginning of year		96.4			257.2			0.1			110.0			—			463.7

Cash and cash equivalents, end of year	$	111.5		$	246.1		$	1.2		$	294.0		$	—		$	652.8

F-44

INDEX TO EXHIBITS

	2.0		Agreement and Plan of Merger among Cooper Industries, Inc., Cooper Mergerco, Inc. and Cooper Industries, Ltd. (incorporated herein by reference to Annex I to Cooper’s Registration Statement on Form S-4, Registration No. 333-62740).

	3.1		Memorandum of Association of Cooper Industries, Ltd. (incorporated herein by reference to Annex II to Cooper’s Registration Statement on Form S-4, Registration No. 333-62740).

	3.2		Amended and Restated Bye-Laws of Cooper Industries, Ltd. (incorporated herein by reference to Annex III to Cooper’s Registration Statement on Form S-4, Registration No. 333-62740).

	4.1		Rights Agreement dated as of May 16, 2002 between Cooper Industries, Ltd. and EquiServe Trust Company, N.A., as Rights Agent (incorporated herein by reference to Exhibit 4.4 to Cooper’s Registration Statement on Form 8-A, Registration No. 001-31330).

	4.2		Amended and Restated Voting Agreement between Cooper Industries, Ltd., Cooper Industries, Inc. and Cooper Bermuda Investments Ltd. (incorporated herein by reference to Exhibit 4 to Cooper’s Form 10-Q for the quarter ended March 31, 2004).

	4.3		Indenture dated as of January 15, 1990, between Cooper Industries, Inc. and The Chase Manhattan Bank (National Association), as Trustee (incorporated herein by reference to Exhibit 4(a) to Cooper’s Registration Statement on Form S-3, Registration No. 33-33011).

	4.4		First Supplemental Indenture dated as of May 15, 2002 between Cooper Industries, Inc. and JPMorgan Chase Bank, N.A., as successor Trustee to The Chase Manhattan Bank (National Association) (incorporated herein by reference to Exhibit 4.3 to Cooper’s Form 10-Q for the quarter ended June 30, 2002).

	4.5		Second Supplemental Indenture dated as of June 21, 2002 among Cooper Industries, Inc., Cooper Industries, Ltd. and JPMorgan Chase Bank, N.A., as Trustee (incorporated herein by reference to Exhibit 4.4 to Cooper’s Form 10-Q for the quarter ended June 30, 2002).

	4.6		Third Supplemental Indenture dated as of October 28, 2002 among Cooper Industries, Inc., Cooper Industries, Ltd. and JPMorgan Chase Bank, N.A., as Trustee (incorporated herein by reference to Exhibit 4.1 to Cooper’s Form 10-Q for the quarter ended September 30, 2002).

	4.7		Fourth Supplemental Indenture dated as of January 1, 2005 among Cooper Industries, LLC, Cooper Industries, Ltd. and JPMorgan Chase Bank, N.A., as Trustee (incorporated by reference to Exhibit 4 to Cooper’s Form 10-Q for the quarter ended March 31, 2005).

	4.8		Indenture dated as of November 8, 2005 among Cooper US, Inc., Cooper Industries, Ltd., Subsidiary Guarantors and JPMorgan Chase Bank, N.A., as Trustee (incorporated by reference to Exhibit 4.1 to Cooper’s Form 8-K filed November 9, 2005).

	4.9		Registration Rights Agreement dated November 8, 2005 among Cooper US, Inc., Cooper Industries, Ltd., Subsidiary Guarantors, and Banc of America Securities LLC and Citigroup Global Markets, Inc. as representatives of several initial purchasers of $325 million aggregate principal amount of debt securities (incorporated by reference to Exhibit 4.2 to Cooper’s Form 8-K filed November 9, 2005).

	10.1		Cooper Industries, Inc. Directors Deferred Compensation Plan (incorporated by reference to Exhibit 10.2 to Cooper’s Form 10-K for the year ended December 31, 1997).

	10.2		Cooper Industries, Inc. Directors Retirement Plan (incorporated by reference to Exhibit 10.3 to Cooper’s Form 10-K for the year ended December 31, 1997).

	10.3		Cooper Industries, Inc. Executive Restricted Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to Cooper’s Form 10-K for the year ended December 31, 1997).

	10.4		First Amendment to Cooper Industries, Inc. Executive Restricted Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to Cooper’s Form 10-K for the year ended December 31, 2003).

	10.5		Cooper Industries, Inc. Supplemental Excess Defined Benefit Plan (August 1, 1998 Restatement) (incorporated by reference to Exhibit 10(iii) to Cooper’s Form 10-Q for the quarter ended September 30, 1998).

	10.6		First Amendment to Cooper Industries, Inc. Supplemental Excess Defined Benefit Plan (August 1, 1998 Restatement) (incorporated by reference to Exhibit 10.6 to Cooper’s Form 10-K for the year ended December 31, 2003).

	10.7		Cooper Industries, Inc. Supplemental Excess Defined Contribution Plan (August 1, 1998 Restatement) (incorporated by reference to Exhibit 10(iv) to Cooper’s Form 10-Q for the quarter ended September 30, 1998).

	10.8		First, Second and Third Amendments to Cooper Industries, Inc. Supplemental Excess Defined Contribution Plan (August 1, 1998 Restatement) (incorporated by reference to Exhibit 10.8 to Cooper’s Form 10-K for the year ended December 31, 2003).

	10.9		Management Incentive Compensation Deferral Plan (incorporated by reference to Exhibit 10.7 to Cooper’s Form 10-K for the year ended December 31, 1997).

	10.10		Third and Fourth Amendments to Management Incentive Compensation Deferral Plan (incorporated by reference to Exhibit 10.10 to Cooper’s Form 10-K for the year ended December 31, 2003).

	10.11		Crouse-Hinds Company Officers’ Disability and Supplemental Pension Plan (September 10, 1999 Restatement, as amended) (incorporated by reference to Exhibit 10.11 to Cooper’s Form 10-K for the year ended December 31, 2003).

	10.12		Cooper Industries Amended and Restated Stock Incentive Plan (February 9, 2005 Restatement) (incorporated herein by reference to Exhibit 10.4 to Cooper’s Form 10-Q for the quarter ended March 31, 2005).

	10.13		First Amendment to Cooper Industries Amended and Restated Stock Incentive Plan.

	10.14		Form of Incentive Stock Option Agreement for Cooper Industries, Inc. Stock Incentive Plan (incorporated by reference to Exhibit 10.14 to Cooper’s Form 10-K for the year ended December 31, 2003).

	10.15		Form of Nonqualified Stock Option Agreement for Cooper Industries, Inc. Stock Incentive Plan (incorporated by reference to Exhibit 10.15 to Cooper’s Form 10-K for the year ended December 31, 2003).

	10.16		Form of Cooper Industries, Inc. Executive Stock Incentive Agreement for the performance period January 1, 2004 to December 31, 2006 (incorporated by reference to Exhibit 10 to Cooper’s Form 10-Q for the quarter ended March 31, 2004).

	10.17		Form of Cooper US, Inc. Executive Stock Incentive Agreement for the performance period January 1, 2005 to December 31, 2007 (incorporated by reference to Exhibit 10.3 to Cooper’s Form 10-Q for the period ended March 31, 2005).

	10.18		Form of Cooper US, Inc. Executive Stock Incentive Agreement for the performance period January 1, 2006 to December 31, 2008 (incorporated by reference to Exhibit 10.1 to Cooper’s Form 10-Q for the period ended March 31, 2006).

	10.19		Cooper Industries Amended and Restated Management Annual Incentive Plan (February 13, 2006 Restatement) (incorporated herein by reference to Appendix C to Cooper’s Proxy Statement for the Annual Meeting of Shareholders held on April 25, 2006).

	10.20		First Amendment to Cooper Industries Amended and Restated Management Annual Incentive Plan (February 13, 2006 Restatement).

	10.21		Amended and Restated Cooper Industries, Ltd. Directors’ Stock Plan (February 14, 2006 Restatement) (incorporated herein by reference to Appendix D to Cooper’s Proxy Statement for the Annual Meeting of Shareholders held on April 25, 2006).

	10.22		Form of Directors’ Nonqualified Stock Option Agreement for Directors’ Stock Plan (incorporated herein by reference to Exhibit 10.18 to Cooper’s Form 10-K for the year ended December 31, 1997).

	10.23		Cooper Industries, Ltd. Amended and Restated Directors’ Retainer Fee Stock Plan (April 1, 2003 Restatement) (incorporated by reference to Exhibit 10.21 to Cooper’s Form 10-K for the year ended December 31, 2003).

	10.24		Form of Management Continuity Agreement between Cooper Industries, Ltd. and key management personnel, which applies if there is a Change in Control of Cooper (incorporated herein by reference to Exhibit 10.5 to Cooper’s Form 10-Q for the quarter ended March 31, 2005).

	10.25		Form of Indemnification Agreement between Cooper Industries, Ltd. and key management personnel (incorporated by reference to Exhibit 10.23 to Cooper’s Form 10-K for the year ended December 31, 2003).

	10.26		Purchase and Sale Agreement between Cooper Industries, Inc. and Federal-Mogul Corporation dated August 17, 1998 (incorporated herein by reference to Exhibit 10(i) of Cooper’s Form 10-Q for the quarter ended September 30, 1998).

	10.27		Term Sheet Pneumo Abex Settlement Plan A and Plan B dated as of July 6, 2006 among Cooper Industries, Ltd.; Cooper Industries, LLC; Federal-Mogul Corporation; Federal-Mogul Products, Inc.; the Future Claimants’ Representative for Federal-Mogul Corporation and Federal-Mogul Products, Inc.; the Official Committee of Asbestos Claimants for Federal-Mogul Corporation and Federal-Mogul Products, Inc.; Pneumo Abex LLC; and PCT International Holdings, Inc. (incorporated by reference to Exhibit 99.1 to Cooper’s Form 8-K dated July 20, 2006).

	10.28		Plan B Settlement Agreement dated as of September 18, 2006 among Cooper Industries, Ltd.; Cooper Industries, LLC; Federal-Mogul Corporation; Federal-Mogul Products, Inc.; the Future Claimants’ Representative for Federal-Mogul Corporation and Federal-Mogul Products, Inc.; the Official Committee of Asbestos Claimants for Federal-Mogul Corporation and Federal-Mogul Products, Inc.; Pneumo Abex LLC; and PCT International Holdings, Inc.

	10.29		Cooper (UK 2002) Employee Share Purchase Plan (incorporated by reference to Exhibit 10.25 to Cooper’s Form 10-K for the year ended December 31, 2003).

	10.30		Five-Year Credit Agreement dated November 3, 2004 among Cooper Industries, Ltd., Cooper US, Inc. and the banks named therein (incorporated by reference to Exhibit 10.25 of Cooper’s Form 10-K for the year ended December 31, 2004).

	10.31		Form of Executive Employment Agreement for employees who received stock option and performance share awards on February 13, 2006 (incorporated by reference to Exhibit 10.1 to Cooper’s Form 8-K dated March 17, 2006).

	10.32		Separation and Transition Agreement dated September 1, 2006 between Cooper Industries, Ltd. and David R. Sheil (incorporated by reference to Exhibit 10.2 to Cooper’s Form 10-Q for the quarter ended September 30, 2006).

	10.33		Separation and Transition Agreement dated January 16, 2007 between Cooper Industries, Ltd. and Paul M. Isabella.

	12.0		Computation of Ratios of Earnings to Fixed Charges for the Calendar years 2002 through 2006.

	21.0		List of Cooper Industries, Ltd. Subsidiaries.

	23.1		Consent of Ernst & Young LLP.

	23.2		Consent of Bates White, LLC.

	24.0		Powers of Attorney from members of the Board of Directors of Cooper Industries, Ltd.

	31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

EX-10.13 2 h43741exv10w13.htm FIRST AMENDMENT TO AMENDED STOCK INCENTIVE PLAN exv10w13

EXHIBIT 10.13

FIRST AMENDMENT TO
COOPER INDUSTRIES
AMENDED AND RESTATED
STOCK INCENTIVE PLAN
(Amended and Restated February 9, 2005)

WHEREAS, Cooper US, Inc. (the “Company”) maintains the Cooper Industries Amended and Restated Stock Incentive Plan (the “Plan”); and

WHEREAS, the Company desires to amend the Plan in certain respects;

NOW, THEREFORE, the Plan is hereby amended, effective as of August 1, 2006 as follows:

1. Section 14.2 of the Plan is hereby amended in its entirety to read as follows:

If there is a change in the number of outstanding Shares of Common Stock by reason of any stock dividend, stock split or reverse stock split, recapitalization, reclassification, reorganization, merger, consolidation, combination or exchange of Shares, or similar corporate change, an equitable substitution or proportionate adjustment shall be made to:


		(i) the aggregate number of Shares available for issuance under the Plan;


		(ii) the number of Shares subject to outstanding Awards granted under the Plan;


		(iii) the Option exercise price per Share; and


		(iv) number of deferred Shares credited to a Participant’s account pursuant to Section XI.

Executed as of this 1^st day of August 2006.

COOPER US, INC.


By:		/s/ David R. Sheil

		David R. Sheil
		Senior Vice President
		Human Resources and
		Chief Administration Officer

EX-10.20 3 h43741exv10w20.htm FIRST AMENDMENT TO AMENDED MANAGEMENT ANNUAL INCENTIVE PLAN exv10w20

Exhibit 10.20

FIRST AMENDMENT TO
COOPER INDUSTRIES
AMENDED AND RESTATED
MANAGEMENT ANNUAL INCENTIVE PLAN

(Amended and Restated February 13, 2006)

WHEREAS, Cooper US, Inc. (the “Company”) maintains the Cooper Industries Amended and Restated Management Annual Incentive Plan (the “Plan”); and

WHEREAS, the Company desires to amend the Plan in certain respects;

NOW, THEREFORE, the Plan is hereby amended, effective as of August 1, 2006 as follows:

1. Article XVII of the Plan is hereby amended in its entirety to read as follows:

	(i)		the aggregate number of Shares available for issuance under the Plan; and

	(ii)		number of deferred Shares credited to a Participant’s account pursuant to Section 7.2.

Executed as of this 1^st day of August 2006.

COOPER US, INC.


By:	/s/ David R. Sheil
	David R. Sheil
	Senior Vice President Human Resources and Chief Administration Officer

EX-10.28 4 h43741exv10w28.htm PLAN B SETTLEMENT AGREEMENT exv10w28

Exhibit 10.28

Execution Version

PLAN B SETTLEMENT AGREEMENT

DATED AS OF SEPTEMBER 18, 2006

Table of Contents


			Page

ARTICLE I. DEFINITIONS			2
	Section 1.01	Definitions	2
	Section 1.02	Other Definitional Provisions	11
	Section 1.03	Captions	11
	Section 1.04	Recitals	11

ARTICLE II. SETTLEMENT OF CLAIMS			11
	Section 2.01	Settlement; Plan B Payment	11

ARTICLE III. RELEASES			12
	Section 3.01	Debtor Release of Pneumo Parties	12
	Section 3.02	Pneumo Party Release of FMC Group	13
	Section 3.03	Limitation on Releases	14
	Section 3.04	Release and Termination of PSA	15
	Section 3.05	Releases Under 1994 APA	15
	Section 3.06	Release of Pneumo Asbestos Claims	16

ARTICLE IV. CERTAIN COVENANTS			16
	Section 4.01	Certain Obligations of the FM Parties	16
	Section 4.02	Cooperation	17
	Section 4.03	Motion to Approve Settlement	17
	Section 4.04	Voting by Pneumo Parties	18
	Section 4.05	Stay of Pending Appeal	18
	Section 4.06	Specific Performance	18
	Section 4.07	Documentation of Agreement Set Forth in Section 9(a) of Term Sheet	19
	Section 4.08	Restriction on Payments Under Plan	19
	Section 4.09	Segregation of Assets	19
	Section 4.10	Plan/Confirmation Order Provisions	20
	Section 4.11	Termination of Asbestos Participation in Plan	20

ARTICLE V. EFFECTIVENESS OF ARTICLES II AND III			21
	Section 5.01	Conditions	21
	Section 5.02	Pneumo Abex Consultation Rights	24

ARTICLE VI. REPRESENTATIONS AND WARRANTIES			25
	Section 6.01	Representations and Warranties of the FM Parties	25
	Section 6.02	Representations and Warranties of Cooper	25
	Section 6.03	Representations and Warranties of PCT and Pneumo Abex	26

ARTICLE VII. TERMINATION			26
	Section 7.01	Termination of this Agreement	26
	Section 7.02	Consequences of Termination of Agreement	28

ARTICLE VIII. GENERAL PROVISIONS			28
	Section 8.01	Binding Effect; Assignment; Third Party Beneficiaries	28
	Section 8.02	Entire Agreement; Amendment; Waivers	28

Table of Contents
(continued)


		Page

Section 8.03	No Admissions	29
Section 8.04	Notices	29
Section 8.05	Governing Law; Jurisdiction	31
Section 8.06	Exercise of Rights and Remedies	31
Section 8.07	Further Assurances	32
Section 8.08	Reformation and Severability	32
Section 8.09	Construction	32
Section 8.10	Settlement Privilege	32
Section 8.11	Counterparts	32


Exhibits

Exhibit A:		Affiliates of Debtors
Exhibit B:		Pneumo Protected Parties
Exhibit 4.03(a):		9019 Motion
Exhibit 4.03(b):		Form of Settlement Approval Order
Exhibit 4.07:		Wagner Insurance Agreement

PLAN B SETTLEMENT AGREEMENT

This PLAN B SETTLEMENT AGREEMENT (this “Agreement”) is made as of September 18, 2006 (the “Execution Date”), by and among Cooper Industries, Ltd., a Bermuda company (“Cooper Ltd”), Cooper Industries, LLC, a Delaware limited liability company (“Cooper LLC”, and together with Cooper Ltd, “Cooper”), PCT International Holdings Inc., a Delaware corporation (“PCT”), Pneumo Abex LLC, a Delaware limited liability company (“Pneumo Abex” and together with PCT and Cooper, the “Pneumo Parties”), Federal-Mogul Corporation, a Michigan corporation (“FMC”), Federal-Mogul Products, Inc., a Missouri corporation (“FMP” and together with FMC, the “FM Parties”), the Future Claimants Representative for FMC and FMP appointed in the Reorganization Cases (the “FCR”), and the Official Committee of Asbestos Claimants for FMC and FMP appointed in the Reorganization Cases (the “ACC”). Capitalized terms used herein are defined in Article I below.

RECITALS

A. On October 1, 2001, the Debtors filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court;

B. Cooper, on behalf of itself and its Affiliates, filed the following proofs of claim in the Reorganization Cases against FMP, FMC, Federal-Mogul Global Growth Limited, F-M U.K. Holding Limited, FM International LLC, Federal Mogul Ignition Company, Carter Automotive Company, Inc., Federal Mogul Piston Rings, Inc., Federal Mogul Dutch Holdings Inc., Federal Mogul FX, Inc., Federal Mogul Global Properties, Inc., Federal Mogul Machine Tool, Inc., Federal Mogul Mystic, Inc., Federal Mogul Powertrain, Inc., Federal Mogul Puerto Rico, Inc., Federal Mogul Venture Corporation, Federal Mogul World Wide, Inc., Felt Products Manufacturing Co, Ferodo America Inc., Gasket Holdings, Inc., J W J Holdings, Inc., McCord Sealing, Inc., and T and N Industries, Inc. dated: (1) March 1, 2003 in the total liquidated claim amount of $17,786,050.88, including asbestos liabilities and defense costs liquidated since October 1, 2001; (2) July 12, 2004 (amending the proof of claim dated March 1, 2003) in the total liquidated claim amount of $104,382,778.41, including asbestos liabilities and defense costs liquidated as of May 31, 2004; (3) November 2, 2004 (amending the proof of claim dated July 12, 2004) in the total liquidated claim amount of $135,075,462.42, including asbestos liabilities and defense costs liquidated as of November 1, 2004; and (4) May 8, 2006 (amending the proof of claim dated November 2, 2004) in the total amount of $479,542,188.86, including asbestos liabilities and defense costs liquidated as of March 31, 2006 and the net present value of future claims. Cooper has also asserted that it holds claims against non-Debtors affiliated with FMC for some or all of the claims specified in the foregoing proofs of claims. All of the claims described in this Recital B are referred to herein as the “Cooper Claims”.

C. Pneumo Abex filed a proof of claim in the Reorganization Cases against FMP dated February 28, 2003 in the total liquidated amount of $2,190,615.39, together with a contingent claim, which was, in part, resolved by that certain Settlement Agreement among Pneumo Abex Corporation (predecessor in interest to Pneumo Abex), Mafco Consolidated Group Inc., FMP, and Federal-Mogul Canada, Ltd. approved by order of the Bankruptcy Court dated February 5, 2004 (the “Pneumo Settlement Agreement”) (to the extent the proof of claim asserted by Pneumo Abex was not resolved by the Pneumo Settlement Agreement, and together with the Cooper Claims, the “Asserted Claims”).

D. Following extensive arm’s length negotiations, in order to avoid the delay and cost of litigation, the Pneumo Parties, the FM Parties, the FCR, and the ACC entered into that certain Term Sheet — Pneumo Abex Settlement Plan A and Plan B dated as of July 6, 2006 which sets forth the principal terms of a settlement of the Asserted Claims, among other things (the “Term Sheet”).

E. To give effect to the settlement reflected in the Term Sheet as “Plan B”, the Pneumo Parties, the FM Parties, the FCR, and the ACC have agreed to enter into this Agreement and this Agreement constitutes the “Plan B Settlement Agreement” referred to in the Term Sheet.

F. Each of the Pneumo Parties and the FM Parties has concluded that it is in its respective best interests, and each of the FCR and the ACC has concluded that it is in the best interests of its respective constituency, to enter into this Agreement and to effect the settlement reflected in this Agreement on the terms and subject to the conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants and understandings contained herein, the sufficiency of which is hereby acknowledged, and subject to Bankruptcy Court approval of the terms and conditions herein set forth, the Pneumo Parties, the FM Parties, the FCR and the ACC, intending to be legally bound, hereby agree as follows:

ARTICLE I.
DEFINITIONS

Section 1.01 Definitions. The following capitalized terms used herein shall have the meanings set forth below:

“1994 APA” means that certain Asset Purchase Agreement dated as of November 21, 1994 between Wagner and Pneumo Abex Corporation (whose successor in interest is Pneumo Abex).

“1994 APA Buyer Indemnified Parties” means the “Buyer Indemnified Parties” as defined in the 1994 APA.

“1994 APA Seller Indemnified Parties” means the “Seller Indemnified Parties” as defined in the 1994 APA.

“9019 Motion” has the meaning set forth in Section 4.03.

“Affiliate” shall mean, as to any Entity: (A) any other Entity that directly or indirectly owns, controls, or holds with power to vote, 20 percent or more of the outstanding voting securities of, or other equity interests in, such Entity, other than an Entity that holds such securities (i) in a fiduciary or agency capacity without sole discretionary power to vote such securities, or (ii) solely to secure a debt, if such Entity has not in fact exercised such power to vote (any Entity qualifying under this part (A), an “Owner”); (B) any other Entity 20 percent or more of whose outstanding voting securities or other equity interests are directly or indirectly owned, controlled, or held

with power to vote, by such Entity or an Owner of such Entity, other than an Entity that holds such securities (i) in a fiduciary or agency capacity without sole discretionary power to vote such securities, or (ii) solely to secure a debt, if such Entity has not in fact exercised such power to vote; (C) any other Entity whose business is operated under a lease or operating agreement by such Entity, or an Entity substantially all of whose property is operated under an operating agreement with such Entity; (D) any other Entity that operates the business or substantially all of the property of such Entity under a lease or operating agreement; or (E) when used with reference to any Debtor, shall include each of the Entities listed on Exhibit A to be attached hereto and which will be finalized at least ten days prior to the hearing on the 9019 Motion.

“Agreement” has the meaning set forth in the preamble.

“Asserted Claims” has the meaning set forth in the Recitals.

“Bankruptcy Code” means title 11 of the United States Code, 11 U.S.C. §§ 101, et seq., as in effect on October 1, 2001, together with all amendments and modifications thereto that were subsequently made applicable to the Reorganization Cases.

“Bankruptcy Court” means the United State Bankruptcy Court for the District of Delaware.

“Business” has the meaning set forth in the 1994 APA.

“Business Day” means any day other than a Saturday, Sunday or legal holiday (as such term is defined in Rule 9006(a) of the Federal Rules of Bankruptcy Procedure) in the U.S.

“Buyers” has the meaning set forth in the PSA.

“Challenge Proceeding” means an action, cause of action, suit or other proceeding challenging the constitutionality of the FAIR Act as to a debtor in possession.

“Claim” has the meaning given to such term in Section 101(5) of the Bankruptcy Code.

“Class 5J Claims” has the meaning set forth in Section 5.01(j)(i)(A).

“Class 6J Claims” has the meaning set forth in Section 5.01(j)(i)(A).

“Cooper” has the meaning set forth in the preamble.

“Cooper Claims” has the meaning set forth in the Recitals.

“Cooper LLC” has the meaning set forth in the preamble.

“Cooper Ltd” has the meaning set forth in the preamble.

“Damages” that may be asserted by or suffered by any specified Entity means (a) any cost (including defense and indemnity costs), damage (including any consequential, exemplary, punitive, or treble damage) or expense (including fees and actual disbursements by attorneys, consultants, experts, or other agents or representatives and costs of litigation) to, and any penalty on or any liability (including loss of earnings or profits) of any other nature of, that Entity, or (b) any fine or penalty imposed by any Governmental Unit upon that Entity.

“Debtors” means FMC and the other debtors listed in footnote 1 of the Plan.

“Disclosure Statement” means the disclosure statement, including all exhibits, appendices, schedules and annexes attached thereto, with respect to the Plan for purposes of Section 1125 of the Bankruptcy Code.

“Effective Date” means the date on which the Plan becomes effective and shall be the same date on which the “Effective Date” (as defined in the Plan) occurs.

“Entity” means any Person, estate, trust, Governmental Unit, or the U.S. Trustee.

“Estate” means, as to each Debtor, the estate created for that Debtor under Section 541 of the Bankruptcy Code upon the commencement of its Reorganization Case.

“Excluded Claims” has the meaning set forth in Section 3.03.

“Execution Date” has the meaning set forth in the preamble.

“FAIR Act” means, collectively, The Fairness in Asbestos Injury Resolution Act of 2005 or any other legislation creating a national trust or similar fund to resolve asbestos-related liabilities.

“Final Order” means an order or judgment of any court of competent jurisdiction, the implementation, operation or effect of which has not been stayed and as to which order (or any revision, modification or amendment thereof) the time to appeal or seek review, rehearing or writ of certiorari has expired and as to which no appeal or petition for review, rehearing or certiorari has been taken and is pending.

“FMC” has the meaning set forth in the preamble.

“FMP” has the meaning set forth in the preamble.

“FM Parties” has the meaning set forth in the preamble.

“Former Affiliate” means, as to any Entity, any other Entity that (a) at any time prior to the date of this Agreement would have qualified as an Affiliate of such Entity or any predecessor in interest of such Entity under the definition set forth herein had this Agreement been in effect at such time and (b) does not qualify as an Affiliate of such Entity as of the date of this Agreement.

“Future Affiliate” means, as to any Entity, any other Entity that (a) at any time after the date of this Agreement qualifies as an Affiliate of such Entity or any successor in interest of such Entity under the definition set forth herein and (b) does not qualify as an Affiliate of such Entity as of the date of this Agreement.

“Governmental Unit” means any domestic, foreign, provincial, federal, state, local or municipal (a) government or (b) governmental agency, commission, department, bureau, ministry or other governmental entity.

“Insurance Agreement” has the meaning set forth in the 1994 APA.

“Interim Plan A Effective Date” means and shall occur on the Effective Date if and only if each of the following has occurred:

(i) the Pneumo Protected Party Injunction has been issued in accordance with Section 524(g) of the Bankruptcy Code prior to or as of the Effective Date,

(ii) a court of competent jurisdiction has stayed the effectiveness of the Pneumo Protected Party Injunction prior to or as of the Effective Date, and

(iii) the Effective Date occurs while the stay of the Pneumo Protected Party Injunction referenced in clause (ii) of this definition is in effect but prior to the date on which Articles II and III of this Agreement have become effective pursuant to Section 5.01(i).

“Interim Plan B Effective Date” means and shall occur on the Effective Date if and only if each of the following has occurred:

(i) the Pneumo Protected Party Injunction has not been issued in accordance with Section 524(g) of the Bankruptcy Code prior to or as of the Effective Date, and

(ii) Articles II and III of this Agreement have not become effective pursuant to Section 5.01 prior to or as of the Effective Date.

“Mallia Case” means Mallia v. Bennett Auto Supply, Inc., et al., No. 04-16236 CA 42 (Fla. Cir. Ct., 10th Jud. Dist.), on appeal sub nom., Pneumo Abex, LLC v. Mallia, No. 3D06-220 (1st Fla. Dist. Ct. App.)

“Materially Changed Plan” has the meaning set forth in Section 4.1l(a)(i).

“Modified Plan” means the Plan as modified by the Pneumo Plan Supplement.

“Mutual Guaranty” means that certain Mutual Guaranty Agreement dated as of December 30, 1994 between Abex, Inc. and Cooper Industries, Inc. (whose successor in interest is Cooper LLC).

“Non-Debtor Affiliates” means Affiliates of the Debtors that are not Debtors in the Reorganization Cases.

“PCT” has the meaning set forth in the preamble.

“Person” means any person, individual, partnership, corporation, limited liability company, joint venture company, association or other entity or being of whatever kind, whether or not operating or existing for profit, but excluding any Governmental Unit, including any “person” as such term is defined in Section 101(41) of the Bankruptcy Code,.

“Plan” means the Third Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code of Federal-Mogul Global, Inc., T&N Limited, et al., Case No. 01-10578 (RTL)(Jointly Administered), as the same may be amended, supplemented or modified from time to time.

“Plan A” means the settlement referred to in the Term Sheet as “Plan A” as modified by the provisos in Section 7.01(b)(ii), as such settlement may be further modified or otherwise given effect in the Plan A Documents on terms satisfactory to Cooper, the FM Parties, the FCR and the ACC, and to the extent such modifications are directly related to Pneumo Abex or PCT, on terms reasonably satisfactory to Pneumo Abex, all of which subsequent modifications are incorporated into this definition by reference.

“Plan A Documents” means the definitive agreements and/or the Pneumo Plan Supplement necessary to effectuate Plan A.

“Plan A Effective Date” means and shall occur on the Effective Date if and only if the Pneumo Protected Party Injunction (a) has been issued in accordance with Section 524(g) of the Bankruptcy Code and (b) is not stayed and is otherwise in effect as of the Effective Date.

“Plan B Date” means the Plan B Effective Date or the Plan B Implementation Date, as applicable.

“Plan B Effective Date” means and shall occur on the Effective Date if and only if the following shall have occurred:

(a) the Settlement Approval Order shall have been entered prior to or as of the Effective Date;

(b) the Pneumo Protected Party Injunction (i) has not been issued in accordance with Section 524(g) of the Bankruptcy Code or (ii) has been issued in accordance with Section 524(g) of the Bankruptcy Code but is stayed or otherwise not in effect as of the Effective Date; and

(c) Articles II and III of this Agreement have become effective pursuant to Section 5.01 prior to or as of the Effective Date.

“Plan B Implementation Date” means and shall occur on the first Business Day following the date on which the following shall have occurred:

(a) the Settlement Approval Order shall have been issued; and

(b) either:

(i) (x) the Plan A Effective Date shall have occurred but the order(s) confirming the Plan shall not have become a Final Order as of the Plan A Effective Date; and (y) after the Plan A Effective Date, Articles II and III of this Agreement shall become effective pursuant to Section 5.01; or

(ii) (x) the Interim Plan A Effective Date or the Interim Plan B Effective Date shall have occurred and (y) after the Interim Plan A Effective Date or the Interim Plan B Effective Date, as applicable, Articles II and III of this Agreement shall become effective pursuant to Section 5.01.

“Plan B Payment” has the meaning set forth in Section 2.01.

“Plan Documents” means all documents, attachments and exhibits related to the Plan that aid in effectuating the Plan.

“Plan Proponents” means, collectively, the Debtors, the Official Committee of Unsecured Creditors of the Debtors appointed in the Reorganization Cases by the U.S. Trustee, the ACC, the FCR, JPMorgan Chase Bank (as administrative agent under that certain Fourth Amended and Restated Credit Agreement among FMC and the other parties thereto (including all related loan documents) dated as of December 29, 2000, as the same may be amended from time to time), and the Official Committee of Equity Security Holders of FMC appointed in the Reorganization Cases by the U.S. Trustee.

“Pneumo Abex” has the meaning set forth in the preamble.

“Pneumo Asbestos Claims” means any and all Claims and demands (as defined in Section 524(g)(5) of the Bankruptcy Code) (including without limitation any Claim or demand for compensatory damages; loss of consortium; medical monitoring; survivorship; wrongful death; proximate, consequential, general, special or punitive damages; reimbursement; indemnity; warranty; contribution or subrogation), whenever and however asserted, whether now existing or hereafter arising, whether in the nature of or sounding in tort, contract, warranty, conspiracy or any other theory of law, equity or admiralty whatsoever, for, attributable to, based on, arising out of or under or derivative of, directly or indirectly, physical, emotional or other personal injuries (including without limitation death resulting therefrom) caused, or allegedly caused, in whole or in part, directly or indirectly, by the presence of or exposure to asbestos or asbestos-containing products for which FMP is or could be liable and arising or allegedly arising, directly or indirectly, from acts, omissions, business or operations of one or more of the Debtors or the predecessors of any of the Debtors, or any other Entity for whose acts, omissions, business or operations any of the Debtors have liability (to the extent of such Debtor’s or

Debtors’ liability for such acts, omissions, business or operations), including those (A) for which Wagner is or could be liable, directly or indirectly, under or as a result of 1994 APA, (B) for which Cooper is or could be liable under the Mutual Guaranty, (C) against any Pneumo Protected Party to the extent arising, directly or indirectly, from acts, omissions, business, or operations of Wagner (including its successors in interest) related to or in connection with the operation of any business, activity, and operations of Wagner while Wagner (or its successors in interest) was a direct or indirect subsidiary of Cooper, or (D) against any Pneumo Protected Party to the extent such claims or demands would constitute “Assumed Liabilities” within the meaning of the 1994 APA or to the extent arising, directly or indirectly, from acts, omissions, business, or operations of Pneumo Abex (including its predecessors in interest) related to or in connection with the operation of the Business but excluding Retained Liabilities (as defined in the 1994 APA) for so long as they remain Retained Liabilities; provided, however, that Pneumo Asbestos Claims shall not include workers’ compensation claims or Wagner Asbestos Claims; provided further, however, that any and all parts of this definition may be modified in the Plan A Documents on terms satisfactory to Cooper, the FM Parties, the FCR and the ACC, and to the extent such modifications are directly related to Pneumo Abex or PCT, on terms reasonably satisfactory to Pneumo Abex, all of which subsequent modifications are incorporated into this definition by reference.

“Pneumo Parties” has the meaning set forth in the preamble.

“Pneumo Plan Supplement” means provisions of the Plan and the other Plan Documents (which may take the form of a supplement or addendum to the Plan) that (a) provide for the Plan B Payment on the terms and subject to the conditions set forth herein and that are otherwise necessary or reasonably desirable to implement this Agreement and (b) are necessary or reasonably desirable to implement Plan A.

“Pneumo Protected Asbestos Claims” means, collectively, the Pneumo Asbestos Claims and the Wagner Asbestos Claims.

“Pneumo Protected Party” means (a) the Pneumo Parties, (b) each of the respective Pneumo Parties’ Affiliates and Former Affiliates listed on Exhibit B attached hereto (provided that each Pneumo Party may modify such Exhibit B from time to time prior to the date on which the order(s) confirming the Plan becomes a Final Order to remove Entities affiliated with it therefrom) and Future Affiliates (including, without limitation, direct or indirect parents or subsidiaries), successors or assigns (but excluding (i) PepsiAmericas, Inc. and its predecessors (including IC Industries, Inc.) and (ii) any Future Affiliate to the extent it has any independent liability for Pneumo Protected Asbestos Claims in existence prior to its becoming such an Affiliate), as applicable, of any Pneumo Party, but only in their capacities as such and (c) each of the past, present and future officers, directors, employees, agents, Affiliates and Former Affiliates (but, with respect to Affiliates and Former Affiliates, only if such Affiliates or Former Affiliates are listed on Exhibit B attached hereto), equity holders (but, with respect to past and present equity holders, only if such equity holders are either (i) listed on Exhibit B attached hereto or (ii) hold publicly traded securities of any Pneumo Party, Affiliate or Former Affiliate thereof listed on Exhibit B attached hereto), lenders, attorneys,

accountants, financial advisors, consultants and other representatives of any Entity listed in clauses (a) or (b) of this definition, but only in their capacities as such, provided however that any and all parts of this definition may be modified in the Plan A Documents on terms satisfactory to Cooper, the FM Parties, the FCR and the ACC, and to the extent such modifications are directly related to Pneumo Abex or PCT, on terms reasonably satisfactory to Pneumo Abex, all of which subsequent modifications are incorporated into this definition by reference.

“Pneumo Protected Party Injunction” means injunction(s) under Section 524(g) (and, to the extent permitted by applicable law, under Section 105) of the Bankruptcy Code permanently staying, restraining and enjoining all Entities which have or may have Pneumo Protected Asbestos Claims, whenever and wherever arising or asserted, from taking any action against any Pneumo Protected Party for the purpose of directly or indirectly collecting, recovering or receiving payments or recovery with respect to any such Pneumo Protected Asbestos Claim and otherwise permanently protecting the Pneumo Protected Parties from any and all Pneumo Protected Asbestos Claims (except that the Pneumo Protected Party Injunction shall not enjoin (a) the Mallia Case until the earliest to occur of the following: (i) a Final Order affirms any unsatisfied, final judgment against Pneumo Abex Corporation in the Mallia Case, (ii) a Final Order reverses in whole or in part or vacates in whole or in part any unsatisfied, final judgment against Pneumo Abex Corporation in the Mallia Case and requires a new trial, or (iii) a Final Order gives the plaintiff in the Mallia Case the option of a new trial, which option is exercised by such plaintiff, or (b) any Claim, debt, obligation or liability for payment of any amount payable by Cooper LLC in respect of any unsatisfied, final judgment against Pneumo Abex Corporation entered in the Mallia Case unless: (i) a Final Order reverses in whole or in part or vacates in whole or in part such judgment against Pneumo Abex Corporation and requires a new trial, or (ii) a Final Order gives the plaintiff in the Mallia Case the option of a new trial, which option is exercised by such plaintiff).

“Pneumo Settlement Agreement” has the meaning set forth in the Recitals.

“PSA” means that certain Purchase and Sale Agreement between Cooper Industries, Inc., FMC and the other parties thereto dated August 17,1998, as amended.

“PSA Buyer Indemnified Parties” means the “Buyer Indemnified Parties” as defined in the PSA.

“PSA Seller Indemnified Parties” means the “Seller Indemnified Parties” as defined in the PSA.

“Qualifying Materially Changed Plan” means any Materially Changed Plan proposed after the conditions of Sections 4.1l(a)(i) and (ii) have been met that does not include or provide for the issuance of any injunction under Section 524(g) of the Bankruptcy Code.

“Released Claims Against Cooper” has the meaning set forth in Section 3.01(a).

“Released Claims Against FMC Group” has the meaning set forth in Section 3.02(a).

“Released Claims Against Pneumo Abex/PCT” has the meaning set forth in Section 3.01(b).

“Reorganization Cases” means the cases currently pending under Chapter 11 of the Bankruptcy Code of FMC and its affiliated Debtors before the Bankruptcy Court.

“Reversal Order” has the meaning set forth in Section 5.01 (g).

“Settlement Approval Order” has the meaning set forth in Section 4.03.

“Term Sheet” has the meaning set forth in the Recitals.

“FMP/T&N Voting Determination” has the meaning set forth in Section 5.01(j)(i)(B).

“FMP/T&N Voting Notice” has the meaning set forth in Section 5.01(j)(i)(A).

“Trust” means a trust established in accordance with Section 524(g) of the Bankruptcy Code with respect to the Reorganization Cases, which will be a “qualified settlement fund” pursuant to Section 468B of the Internal Revenue Code of 1986, as amended, and the regulations issued pursuant thereto, and which, on and after the Effective Date is to be responsible for, among other things, Pneumo Asbestos Claims.

“Trust Advisory Committee” means the Trust Advisory Committee appointed under the Plan to advise the Trust.

“U.S.” means the United States of America.

“U.S. Trustee” means the Office of the U.S. Trustee for the District of Delaware.

“Voting Determination” has the meaning set forth in Section 5.01(a)(i)(B).

“Voting Notice” has the meaning set forth in Section 5.01(a)(i)(A).

“Wagner” means Wagner Electric Corporation (whose successor in interest is FMP).

“Wagner Asbestos Claims” means any and all Claims and demands (as defined in Section 524(g)(5) of the Bankruptcy Code) (including without limitation any Claim or demand for compensatory damages; loss of consortium; medical monitoring; survivorship; wrongful death; proximate, consequential, general, special or punitive damages; reimbursement; indemnity; warranty; contribution or subrogation), whenever and however asserted, whether now existing or hereafter arising, whether in the nature of or sounding in tort, contract, warranty, conspiracy or any other theory of law, equity or admiralty whatsoever, for, attributable to, based on, arising out of or under or derivative

of, directly or indirectly, physical, emotional or other personal injuries (including without limitation death resulting therefrom) caused, or allegedly caused, in whole or in part, directly or indirectly, by the presence of or exposure to asbestos or asbestos-containing products for which FMP is or could be liable and arising or allegedly arising, directly or indirectly, from acts, omissions, business, or operations of Wagner prior to the consummation of the acquisition of the Business pursuant to the 1994 APA (and which shall expressly not include any acts, omissions, business, or operations of Pneumo Abex Corporation or its predecessors).

“Wagner Insurance Agreement” has the meaning set forth in Section 4.07.

Section 1.02 Other Definitional Provisions.

(a) This Agreement uses the words “herein,” “hereof,” and “hereunder” and words of similar import to refer to this Agreement as a whole and not to any provision of this Agreement, and the words “Article,” “Section,” “Recitals,” and “Exhibit” refer to Articles and Sections of, the Recitals in, and Exhibits to, this Agreement unless otherwise specified.

(b) Whenever the context so requires, the singular number includes the plural and vice versa, and a reference to one gender includes the other gender and the neuter.

(c) Except where the context otherwise requires, the word “including” (and, with correlative meaning the word “include”) means including, without limiting the generality of any description preceding that word, and the words “shall” and “will” are used interchangeably and have the same meaning.

(d) All references to “$” or “Dollars” are to U.S. dollars.

(e) The phrase “order(s) confirming the Plan” includes any order approving Plan A that is separate from a confirmation order.

Section 1.03 Captions. This Agreement includes captions to Articles, Sections and subsections of, and Exhibits to, this Agreement for convenience of reference only, and these captions do not constitute a part of this Agreement for any other purpose or in any way affect the meaning or construction of any provision of this Agreement.

Section 1.04 Recitals. The Recitals are incorporated into this Agreement and made a part hereof.

ARTICLE II.
SETTLEMENT OF CLAIMS

Section 2.01 Settlement; Plan B Payment. Subject to Section 5.01, on or as soon as reasonably practicable following (but in no event later than ten (10) days after) the Plan B Date, (a) $138,000,000 (One Hundred Thirty Eight Million Dollars) in cash shall be paid to Cooper LLC from assets available for distribution under the Plan and (b) $2,000,000 (Two Million Dollars) in cash shall be paid to Pneumo Abex from assets available for distribution under the Plan (such payments are collectively referred to herein as the “Plan B Payment”) in full, final and complete

satisfaction of, and in consideration of the Pneumo Parties’ release of, the Released Claims Against FMC Group. The Plan B Payment shall not be disallowed, reduced or subordinated for any reason whatsoever, and is accordingly not subject to any offset or reduction for any reason, including, but not limited to, under Section 502(d) of the Bankruptcy Code, and none of the FM Parties, the Trust, the ACC and the FCR shall take any action that is inconsistent with the foregoing. Each of the Pneumo Parties acknowledges and agrees to the treatment of the Released Claims Against FMC Group provided for herein.

ARTICLE III.
RELEASES

Section 3.01 Debtor Release of Pneumo Parties.

(a) Release of Cooper. Effective as of the Effective Date, subject to Sections 3.03 and 5.01, and subject to the satisfaction of the condition precedent that Cooper LLC and Pneumo Abex shall have actually received the Plan B Payment as provided herein, each of the FM Parties (on behalf of themselves, their Affiliates and, to the extent permitted under applicable law, their Former Affiliates (including the Non-Debtor Affiliates), the other Debtors and all of the Estates) hereby forever releases and discharges, to the fullest extent permitted by applicable law, (i)(A) Cooper, (B) each of Cooper’s Affiliates and Former Affiliates, (C) each successor or assign of any Entity listed in (A) or (B) hereof (but only in their capacities as such), (D) each past, present and future officer, director, employee, agent and other representatives of any kind of any Entity listed in (A), (B) or (C) hereof (but only in their capacities as such), (E) each equity holder of any Entity listed in (A), (B) or (C) hereof (but only in their capacities as such), and (F) each attorney, accountant, lender, financial advisor, consultant and other representatives of any kind of any Entity listed in (A), (B), or (C) hereof (but only in their capacities as such), from any and all past, present, or future Claims, demands, causes of action, Damages, liabilities, and obligations whatsoever (whether any such Claims, demands, causes of action, Damages, liabilities or obligations are reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, whether or not the facts of or legal bases therefore are known or unknown, and whether in the nature of or sounding in tort, or under contract, warranty, or any other theory of law, equity, or admiralty), including any of the foregoing based on or related to acts or omissions that constituted or may have constituted ordinary or gross negligence or reckless, willful, or wanton misconduct, or any conduct which may result in strict liability under any applicable law, arising out of, resulting from or relating to, directly or indirectly, acts or omissions, or transactions occurring, prior to the Plan B Date, regardless of whether any such Claim, demand, cause of action, Damage, liability or obligation is asserted before or after the Plan B Date (collectively, but excluding the Excluded Claims, the “Released Claims Against Cooper”) and (ii) any and all rights under and benefits of Cal. Civ. Code § 1542, any other similar state statute and any common law to the extent the same would limit the effectiveness or binding nature of the release of the Released Claims Against Cooper contained herein.

(b) Release of Pneumo Abex/PCT. Effective as of the Effective Date, subject to Sections 3.03 and 5.01, and subject to the satisfaction of the condition precedent that Cooper LLC and Pneumo Abex shall have actually received the Plan B Payment as provided herein, each of the FM Parties (on behalf of themselves, their Affiliates and, to the extent permitted under

applicable law, Former Affiliates (including the Non-Debtor Affiliates), the other Debtors and all of the Estates) hereby forever releases and discharges, to the fullest extent permitted by applicable law, (i) (A) Pneumo Abex, (B) PCT, (C) each of Pneumo Abex’s and PCT’s respective Affiliates and Former Affiliates, (D) each successor or assign of any Entity listed in (A), (B) or (C) hereof (but only in their capacities as such), (E) each past, present and future officer, director, employee, agent and other representatives of any kind of any Entity listed in (A), (B), (C) or (D) hereof (but only in their capacities as such), (F) each equity holder of any Entity listed in (A), (B), (C) or (D) hereof (but only in their capacities as such), and (G) each attorney, accountant, lender, financial advisor, consultant and other representatives of any kind of any Entity listed in (A), (B), (C) or (D) hereof (but only in their capacities as such), from any and all past, present, or future Claims, demands, causes of action, Damages, liabilities, and obligations whatsoever (whether any such Claims, demands, causes of action, Damages, liabilities or obligations are reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, whether or not the facts of or legal bases therefore are known or unknown, and whether in the nature of or sounding in tort, or under contract, warranty, or any other theory of law, equity, or admiralty), including any of the foregoing based on or related to acts or omissions that constituted or may have constituted ordinary or gross negligence or reckless, willful, or wanton misconduct, or any conduct which may result in strict liability under any applicable law, arising out of, resulting from or relating to, directly or indirectly, acts or omissions, or transactions occurring, prior to the Plan B Date, regardless of whether any such Claim, demand, cause of action, Damage, liability or obligation is asserted before or after the Plan B Date (collectively, but excluding the Excluded Claims, the “Released Claims Against Pneumo Abex/PCT”) and (ii) any and all rights under and benefits of Cal. Civ. Code § 1542, any other similar state statute and any common law to the extent the same would limit the effectiveness or binding nature of the release of the Released Claims Against Pneumo Abex/PCT contained herein.

(c) Each Entity referenced in Section 3.01(a)(i) or (b)(i) not a party hereto is an intended third party beneficiary of Sections 3.01(a) and (b), as applicable.

Section 3.02 Pneumo Party Release of FMC Group.

(a) Effective as of the Effective Date, subject to Sections 3.03 and 5.01, and subject to the satisfaction of the condition precedent that Cooper LLC and Pneumo Abex shall have actually received the Plan B Payment as provided herein, Cooper (on behalf of itself and each of its respective Affiliates and, to the extent permitted under applicable law, Former Affiliates) and each of PCT and Pneumo Abex (on behalf of themselves and each of their respective Affiliates and, to the extent permitted under applicable law, Former Affiliates) hereby forever releases and discharges, to the fullest extent permitted by applicable law, (i) (A) the FM Parties, (B) the other Debtors, (C) each of the FM Parties’ and Debtors’ respective Affiliates and Former Affiliates, (D) each successor or assign of any Entity listed in (A), (B) or (C) hereof (but only in their capacities as such), (E) each past, present and future officer, director, employee, agent and other representatives of any kind of any Entity listed in (A), (B), (C) or (D) hereof (but only in their capacities as such), (F) each equity holder of any Entity listed in (A), (B), (C) or (D) hereof (but only in their capacities as such), and (G) each attorney, accountant, lender, financial advisor, consultant and other representatives of any kind of any Entity listed in (A), (B), (C) or (D) hereof

(but only in their capacities as such), from any and all past, present, or future Claims, demands, causes of action, Damages, liabilities, and obligations whatsoever (whether any such Claims, demands, causes of action, Damages, liabilities or obligations are reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, whether or not the facts of or legal bases therefore are known or unknown, and whether in the nature of or sounding in tort, or under contract, warranty, or any other theory of law, equity, or admiralty), including any of the foregoing based on or related to acts or omissions that constituted or may have constituted ordinary or gross negligence or reckless, willful, or wanton misconduct, or any conduct which may result in strict liability under any applicable law, arising out of, resulting from or relating to, directly or indirectly, acts or omissions, or transactions occurring, prior to the Plan B Date, regardless of whether any such Claim, demand, cause of action, Damage, liability or obligation is asserted before or after the Plan B Date, including the Asserted Claims (collectively, but excluding the Excluded Claims, the “Released Claims Against FMC Group”) and (ii) any and all rights under and benefits of Cal. Civ. Code § 1542, any other similar state statute and any common law to the extent the same would limit the effectiveness or binding nature of the release of the Released Claims Against FMC Group contained herein.

(b) Each Entity referenced in Section 3.02(a)(i) not a party hereto is an intended third party beneficiary of Section 3.02(a).

Section 3.03 Limitation on Releases. Notwithstanding any provision herein to the contrary, the Released Claims Against Cooper, the Released Claims Against PCT/Pneumo Abex and the Released Claims Against FMC Group shall not include, and nothing in this Agreement shall be deemed to release, any Claims, demands, causes of action, Damages, liabilities, or obligations arising out of, resulting from or relating to any of the following (collectively, the “Excluded Claims”):

(a) the obligations of the Pneumo Parties, the FM Parties, the FCR or the ACC under this Agreement, the Plan A Documents, the Plan, Modified Plan or the Plan Documents;

(b) Cooper’s right to the refund of $1,651,870 paid by Cooper to FMC pursuant to Section 4.b of that certain Agreement dated as of December 26, 2003 between FMC and Cooper Industries, Inc. (whose successor in interest is Cooper LLC) relating to the carry back of losses from the 2002 tax years of Champion Spark Plug Company and Moog Automotive Products, Inc. to Cooper’s 1998 and prior tax years or the other terms of such Agreement dated as of December 26, 2003, all of which terms shall apply independent of this Agreement;

(d) any contractual rights, remedies or obligations between Pneumo Abex and its Affiliates and Former Affiliates, on the one hand, and Cooper and its Affiliates and Former Affiliates, on the other hand;

(e) obligations under that certain letter agreement dated November 20, 2003 from FMC and Federal-Mogul Canada Ltd. to Cooper Industries regarding 177 Pinebrush Road, Cambridge, Ontario;

(f) FMP’s rights under Section 5.1 of the Pneumo Settlement Agreement, FMP’s rights under Section 11.6 of the 1994 APA (including the Insurance Agreement) with respect to amounts paid and costs incurred by FMP prior to October 1, 2001 in connection with Pneumo Asbestos Claims and FMP’s rights to receive insurance proceeds, to the extent collected, under Section 5.25(b) of the PSA with respect to amounts paid and costs incurred by FMP prior to October 1, 2001 in connection with Pneumo Asbestos Claims;

(g) FMP’s rights under Section 7.1 of the Pneumo Settlement Agreement; or

(h) PepsiAmericas, Inc., any predecessor in interest of PepsiAmericas, Inc. on as to any of the foregoing, any of their respective Affiliates and Former Affiliates (other than any predecessor in interest (whether through the acquisition of stock, assets, lines of business or otherwise) of PepsiAmericas, Inc. or any of their respective Affiliates and Former Affiliates, to , the extent such predecessor is also a predecessor of Pneumo Abex or a Former Affiliate of such predecessor of Pneumo Abex).

Section 3.04 Release and Termination of PSA.

(a) Effective as of the Effective Date, subject to Sections 3.03 and 5.01 and the condition precedent that Cooper LLC and Pneumo Abex shall have actually received the Plan B Payment as provided herein, (i) the FM Parties (on behalf of themselves, their Affiliates and, to the extent permitted under applicable law, Former Affiliates, the other Buyers and the PSA Buyer Indemnified Parties) hereby forever release Cooper and each of its Affiliates and Former Affiliates in full from any and all indemnification obligations under the PSA and agree that any and all ongoing obligations that Cooper or any of its Affiliates or Former Affiliates may have under the PSA are hereby terminated in full and of no further force or effect, and (ii) Cooper LLC (on behalf of itself, its Affiliates and, to the extent permitted under applicable law, Former Affiliates and the PSA Seller Indemnified Parties) hereby forever releases the Buyers and each of their Affiliates and Former Affiliates in full from any and all indemnification obligations under the PSA and agrees that any and all ongoing obligations that the Buyers or any of their Affiliates or Former Affiliates may have under the PSA are hereby terminated in full and of no further force or effect.

(b) Nothing contained in Section 3.04 shall be deemed to limit the generality of Sections 3.01 and 3.02, which, subject to the limitations set forth in Section 3.03, are intended to effect complete and general releases of all past, present, or future Claims, demands, causes of action, Damages, liabilities, and obligations whatsoever arising out of, resulting from or relating to, directly or indirectly, acts or omissions, or transactions occurring, prior to the Plan B Date.

Section 3.05 Releases Under 1994 APA.

(a) Effective as of the Effective Date, subject to Sections 3.03 and Section 5.01 and the condition precedent that Cooper LLC and Pneumo Abex shall have actually received the Plan B Payment as provided herein, (i) FMP, as successor to Wagner Electric Corporation, (on behalf of itself, its Affiliates and, to the extent permitted under applicable law, Former Affiliates and the 1994 Buyer Indemnified Parties) hereby forever releases Pneumo Abex and its Affiliates and Former Affiliates in full from any and all indemnification obligations under the 1994 APA, and

(ii) Pneumo Abex (on behalf of itself, its Affiliates and, to the extent permitted under applicable law, Former Affiliates and the 1994 APA Seller Indemnified Parties) hereby forever releases FMP, as successor to Wagner Electric Corporation, the other Debtors, the Non-Debtor Affiliates, and the Affiliates and Former Affiliates of FMP, the other Debtors and the Non-Debtor Affiliates, in full from any and all indemnification obligations under the 1994 APA; provided however that the foregoing releases shall not release Cooper LLC from its obligations under the Mutual Guaranty and Cooper LLC shall continue to honor and perform its obligations under the Mutual Guaranty as if the 1994 APA remained in effect and fully enforceable against Wagner Electric Corporation, its successors and assigns, without regard to any performance or other obligations of Pneumo Abex thereunder; and provided further that Cooper LLC shall continue to have such rights as are afforded to it under that certain Interim Letter Agreement dated October 23, 2001 among Cooper LLC, MAFCO Consolidated Group Inc. and Pneumo Abex Corporation notwithstanding the foregoing releases and the foregoing releases shall not change or affect in any manner any of the rights of any of the parties to such Interim Letter Agreement dated October 23,2001 in respect thereof.

(b) Nothing contained in Section 3.05 shall be deemed to limit the generality of Sections 3.01 and 3.02, which, subject to the limitations set forth in Section 3.03, are intended to effect complete and general releases of all past, present, or future Claims, demands, causes of action, Damages, liabilities, and obligations whatsoever arising out of, resulting from or relating to, directly or indirectly, acts or omissions, or transactions occurring, prior to the Plan B Date.

Section 3.06 Release of Pneumo Asbestos Claims. From and after the Plan B Date, subject to Section 5.01 and the condition precedent that Cooper LLC and Pneumo Abex shall have actually received the Plan B Payment as provided herein, Cooper LLC shall use reasonable efforts (which shall not involve additional cost to Cooper LLC) to obtain appropriate releases in favor of FMP and the Trust from holders of Pneumo Asbestos Claims in connection with the payment of such Pneumo Asbestos Claims. In addition, from and after the Plan B Date, upon reasonable request from the Trust, and subject to Section 5.01 and the condition precedent that Cooper LLC and Pneumo Abex shall have actually received the Plan B Payment as provided herein, Cooper shall promptly provide the Trust with such information in Cooper’s possession regarding the resolution of any Pneumo Asbestos Claim as may be reasonably necessary to enable the Trust to prevent double payment of such Pneumo Asbestos Claim.

ARTICLE IV.
CERTAIN COVENANTS

Section 4.01 Certain Obligations of the FM Parties. The FM Parties agree as follows (and with respect to the matters in clauses (a) through (d), to do the same as soon as reasonably practicable after the Execution Date):

(a) to cause the Plan, the Plan Documents or any alternative plan of reorganization proposed by any of the Debtors (including any Materially Changed Plan), the ACC or the FCR to provide for the Plan B Payment on the terms and subject to the conditions set forth herein and to otherwise be amended to implement this Agreement (including the payment provisions and restrictions set forth in Sections 2.01, 4.08 and 4.09, respectively, and the releases by or on behalf of the Debtors set forth in Article III);

(b) to provide Cooper with the opportunity to comment on, and to incorporate all reasonable comments provided by or on behalf of Cooper to the extent related to Cooper or this Agreement into, the Plan, the Plan Documents and any disclosure documents to be used in soliciting acceptances of the Plan (including the Disclosure Statement), and to provide Pneumo Abex with the opportunity to comment on, and to incorporate all reasonable comments provided by or on behalf of Pneumo Abex to the extent directly related to this Agreement and Pneumo Abex or PCT into, the Plan, the Plan Documents and any disclosure documents to be used In soliciting acceptances of the Plan (including the Disclosure Statement);

(c) to cause the Plan and the Plan Documents to provide that provisions of the Plan and the Plan Documents related to this Agreement may not be modified or amended (i) without the prior written approval of Cooper LLC or Cooper Ltd and (ii) to the extent directly related to Pneumo Abex’s or PCT’s rights or obligations under this Agreement and directly related to Pneumo Abex or PCT, without the prior written approval of Pneumo Abex, such approval not to be unreasonably withheld;

(d) except with respect to a Qualifying Materially Changed Plan, to cause the Plan, the Plan Documents and such other documents as are necessary (including the trust agreement for the Trust) to provide that, on the Effective Date, the Trust will be bound by this Agreement;

(e) that any future modifications to the Plan or Plan Documents that they or any of the other Debtors may seek or support shall not contain provisions that adversely affect the rights of the Pneumo Parties under this Agreement (as the same may be amended or modified from time to time in accordance herewith);

(f) that if at least seventy-five percent (75%) of the holders of Class 5J Claims and/or Class 6J Claims, respectively, voting in respect of the Plan do not vote in favor of the Plan by the applicable voting deadline (as the same may be extended) and any plan of reorganization with respect to the Debtors (whether the Plan, the Modified Plan or a Materially Changed Plan) thereafter includes or provides for the issuance of an injunction under Section 524(g) of the Bankruptcy Code in the case of FMP, to cause such plan of reorganization to include Plan A; and

(g) that if at least seventy-five percent (75%) of the holders of Class 5J Claims voting in respect of the Plan vote in favor of the Plan by the applicable voting deadline (as the same may be extended) and at least seventy-five percent (75%) of the holders of Class 6J Claims voting in respect of the Plan do not vote in favor of the Plan by the applicable voting deadline (as the same may be extended) and any plan of reorganization with respect to the Debtors (whether the Plan, the Modified Plan or a Materially Changed Plan) thereafter includes or provides for the issuance of an injunction under Section 524(g) of the Bankruptcy Code in the case of T&N Limited, to cause such plan of reorganization to include Plan A.

Section 4.02 Cooperation. Each of the FCR and the ACC shall use their best efforts to support the FM Parties’ efforts to accomplish the matters set forth in Section 4.01.

Section 4.03 Motion to Approve Settlement. Not later than two Business Days after the execution of this Agreement by all parties hereto, the FM Parties, the FCR and the ACC shall file a motion in the Bankruptcy Court substantially in the form of Exhibit 4.03(a) hereto (the “9019

Motion”) seeking entry of an order, which shall be in the form of Exhibit 4.03(b) hereto or such other form as is (a) reasonably satisfactory to each of the FM Parties, the FCR, the ACC and Cooper and (b) to the extent directly related to Pneumo Abex’s or PCT’s rights or obligations under Section 2.01, 3.01(b), 3.02(a), 3.03(c), 3.03(d), 3.03(h), 3.05(a), 3.05(b), 4.01(b), 4.01(c), 4.01(d), 4.01(e), 4.04, 4.08, 4.09, 4.10, 4.1l(a), 5.01(a), 5.01(c), 5.02, 7.01(b)(ii) or 8.02, reasonably satisfactory to Pneumo Abex and PCT, approving this Agreement (the “Settlement Approval Order”). The FM Parties, the FCR and the ACC shall use their best efforts to cause the 9019 Motion to be approved and the Settlement Approval Order to be issued. If any Entity appeals the Settlement Approval Order, the FM Parties, the FCR and the ACC shall join in opposing any such appeal and shall take all reasonable steps to ensure that the Settlement Approval Order becomes a Final Order.

Section 4.04 Voting by Pneumo Parties. Each of the Pneumo Parties shall, to the extent permitted to vote, vote in favor of, and shall not object to confirmation of, the Plan or any alternative plan of reorganization proposed by any of the Debtors (including any Materially Changed Plan) provided that the Pneumo Parties shall only be obligated to so vote and not object if the Plan or any such alternative plan of reorganization (including a Materially Changed Plan) and related Plan Documents contain provisions (x) necessary or desirable to effectuate the settlements contemplated by the Term Sheet, including (A) the Plan B Payment on the terms and subject to the conditions set forth in this Agreement (and otherwise implementing this Agreement) and (B) Plan A (unless the conditions of Sections 4.1l(a)(i) and (ii) have been met, in which case Plan A would no longer be required to be included in a Materially Changed Plan), and (y) with respect to issues or provisions directly affecting Cooper, otherwise reasonably satisfactory to Cooper. Notwithstanding any other provision of this Agreement, (a) if the 9019 Motion is denied prior to, or the Settlement Approval Order has not been issued or, if issued, has not become a Final Order by, the date that is 20 days prior to the deadline fixed by the Bankruptcy Court after the Execution Date for filing objections to confirmation of the Plan or any alternative plan of reorganization proposed by any of the Debtors (including any Materially Changed Plan), the Pneumo Parties shall not be required to vote in favor of the Plan or any such alternative plan of reorganization (including any Materially Changed Plan) and may raise any objection available to any of them with respect to any matter in the Reorganization Cases and (b) if any plan of reorganization other than the Modified Plan is proposed (other than a Materially Changed Plan proposed after the conditions of Sections 4.11(a)(i) and (ii) have been met), the Pneumo Parties may raise any objection available to any of them with respect to any matter in the Reorganization Cases.

Section 4.05 Stay of Pending Appeal. Each of the parties to the appeal will use its reasonable efforts to cause the existing stay of the appeal in the case entitled Cooper Industries, LLC v. Federal-Mogul Global, Inc., Case No. 05-3495 (3d Cir. filed July 25, 2005) to remain in effect until the Effective Date.

Section 4.06 Specific Performance. Notwithstanding any other provision of this Agreement to the contrary, the parties acknowledge that a breach by any party of its obligations under Sections 4.01 through 4.05 (inclusive) and Sections 4.08, 4.09 and 4.10 will cause irreparable harm to the non-breaching party(ies) and such harm cannot be compensated adequately by money damages alone. Accordingly, the non-breaching party(ies) shall be entitled to specific performance of the obligations of any breaching party at any time after the entry of the Settlement Approval Order.

Section 4.07 Documentation of Agreement Set Forth in Section 9(a) of Term Sheet. Cooper and FMP shall enter into an agreement with respect to the Partitioning Agreement as described by Section 9 of the Term Sheet, which agreement shall be substantially in the form of Exhibit 4.07 attached hereto (the “Wagner Insurance Agreement”), effective as of the Effective Date (provided that either the Effective Date constitutes the Plan A Effective Date or the Plan B Date occurs).

Section 4.08 Restriction on Payments Under Plan. If the Plan B Effective Date occurs, the FM Parties shall not make any payment, distribution or contribution, and the FM Parties shall cause the other Debtors, the Non-Debtor Affiliates and any disbursing agent under the Plan not to make any payment, distribution or contribution, under the Plan (other than a payment, distribution or contribution to the Trust or other Entity necessary to make the Plan B Payment and which payment, distribution or contribution (or the cash proceeds thereof) is actually used by the Trust or such other Entity to make the Plan B Payment to Cooper LLC and Pneumo Abex in accordance with Section 2.01) prior to the time the Plan B Payment in full in cash is made by wire transfer of immediately available funds to Cooper LLC and Pneumo Abex in accordance with Section 2.01.

Section 4.09 Segregation of Assets. If (a) the Plan A Effective Date occurs and the order(s) confirming the Plan are not Final Orders as of the Plan A Effective Date, (b) the Interim Plan A Effective Date occurs or (c) the Interim Plan B Effective Date occurs, then the FM Parties shall not make any payment, distribution or contribution, and the FM Parties shall cause the other Debtors, the Non-Debtor Affiliates and any disbursing agent under the Plan not to make any payment, distribution or contribution, under the Plan until a segregated, interest bearing escrow account (the “Escrow Account”) shall be created and funded with (i) $140 million in cash or cash equivalents, which shall be held in such escrow account and shall only be used to make the Plan B Payment to Cooper LLC and Pneumo Abex, as applicable, or (ii) such other assets, which shall be held in such Escrow Account and used solely to make the Plan B Payment, as may be acceptable to Cooper LLC and Pneumo Abex, each acting in its sole discretion. Notwithstanding the foregoing, the Debtors, the Non-Debtor Affiliates and any disbursing agent under the Plan may make a payment, distribution or contribution to the Trust or other Entity in an amount necessary to fund the Escrow Account if such payment, distribution or contribution (or the cash proceeds thereof) is actually used by the Trust or such other Entity to fund the Escrow Account in accordance with the foregoing. The Escrow Account shall be maintained and the assets therein used only to make the Plan B Payment in accordance herewith upon the occurrence of the Plan B Date unless and until such time as the order(s) confirming the Plan (including Plan A) become Final Orders (which includes, in the case of the Interim Plan A Effective Date or the Interim Plan B Effective Date, that the Pneumo Protected Party Injunction has become effective pursuant to a Final Order), after which time the assets held in such Escrow Account shall be utilized in accordance with the Plan. If the Plan B Payment is required to be paid to Cooper LLC and Pneumo Abex as provided herein, (1) interest accruing from the date the Escrow Account is established until December 31, 2007 on amounts held in the Escrow Account shall be paid to the Debtors and (2) interest accruing after December 31, 2007 through the date the Plan B Payment is made on amounts held in the Escrow Account shall be paid as follows: (x) 138/140 of such interest shall be paid to Cooper LLC and (y) 2/140 of such interest shall be paid to Pneumo Abex.

Section 4.10 Plan/Confirmation Order Provisions.

(a) FMP and FMC shall cause the Plan, all applicable Plan Documents and any order(s) confirming the Plan (i) to provide for the obligation to make the Plan B Payment from assets available for distribution under the Plan as provided herein and that the Plan Proponents shall otherwise be bound by and perform, as applicable, the provisions of Sections 2.01, 4.08 and 4.09, and (ii) to include such other provisions reasonably acceptable to Cooper LLC and Pneumo Abex as may be necessary or reasonably desirable to cause the Trust, the Debtors, the FCR, the ACC and any other party in interest to be bound (x) by the requirement that the Plan B Payment be made in cash from assets available for distribution under the Plan as described by the provisions of Section 2.01, and (y) by the provisions of Sections 4.08 and 4.09.

(b) Each of the FCR and the ACC shall use its best efforts to accomplish the matters set forth in Section 4.10(a) and shall not take any action that is inconsistent with any of the provisions of Sections 2.01, 4.08 and 4.09.

(c) If the Plan, all applicable Plan Documents and any order(s) confirming the Plan do not contain the provisions required by Section 4.10(a), the Plan shall not become effective and the Effective Date shall not occur and none of the FM Parties, the ACC and the FCR shall take any action to cause the Plan to become effective or the Effective Date to occur.

Section 4.11 Termination of Asbestos Participation in Plan.

(a) If:

(i) FMC and/or FMP propose a plan of reorganization that is materially different from the Plan on file with the Bankruptcy Court immediately prior to the Execution Date or the Modified Plan (a “Materially Changed Plan”) as a result of (A) the Bankruptcy Court or the U.S. District Court for the District of Delaware failing to confirm the Plan, (B) the company voluntary arrangements of valuable U.K. Debtors not being approved, (C) one or more of the principal deals underlying the current form of the Plan no longer being viable and one or more of the Plan Proponents no longer supporting the Plan, (D) either (or both) of the Class 5J Claims or the Class 6J Claims votes to reject the Plan, or (E) some other event that jeopardizes the success of the current form of the Plan other than the passage of the FAIR Act, and

(ii) Articles II and III of this Agreement have become effective pursuant to Section 5.01,

then FMC and/or FMP shall continue to have all of the rights and obligations set forth in this Agreement (including those under the Plan B portion of the Wagner Insurance Agreement to be entered into pursuant to Section 4.07), and the Pneumo Parties shall continue to have all of their respective rights and obligations set forth in this Agreement (including those under the Plan B portion of the Wagner Insurance Agreement to be entered into pursuant to Section 4.07), in each case as if references herein to the Plan were references to the Materially Changed Plan. For the avoidance of doubt, any Materially Changed Plan must provide that the Plan B Payment shall be made to Cooper LLC and Pneumo Abex on the effective date of any such Materially Changed Plan and before any other payment, distribution or contribution under that Materially Changed

Plan is made (other than a payment, distribution or contribution necessary to make the Plan B Payment to an Entity that will make the Plan B Payment and which payment, distribution or contribution (or the cash proceeds thereof) is actually used by the receiving Entity to make the Plan B Payment to Cooper LLC and Pneumo Abex in accordance with Section 2.01).

(b) If FMC and/or FMP propose a Materially Changed Plan for any of the reasons set forth in Section 4.1l(a)(i) and either the ACC or the FCR are not proponents of such Materially Changed Plan, the ACC or the FCR may raise any objection available to either of them with respect to confirmation of such Materially Changed Plan other than any objection based on any provision contained in such Materially Changed Plan (i) that relates to the Plan B Payment to be made under this Agreement, (ii) that gives effect to Section 2.01, 4.08 or 4.09, or (iii) that relates to the Wagner Insurance Agreement. For the avoidance of doubt, the ACC and the FCR agree not to oppose in any way the Plan B Payment or any of the protections provided in Section 2.01 with respect to any Materially Changed Plan.

ARTICLE V.
EFFECTIVENESS OF ARTICLES II AND III

Section 5.01 Conditions. Articles II and III of this Agreement and the parties’ obligations thereunder shall only become effective (and shall thereafter remain effective unless this Agreement is terminated in accordance with Article VII hereof) as follows (and upon the first to occur of the following):

(a) Voting of Pneumo Asbestos Claims.

(i) Not later than fifteen days after the applicable voting deadline (as the same may be extended) with respect to the Modified Plan, FMP shall either (A) notify the Pneumo Parties in writing as to whether seventy-five percent (75%) of the holders of Pneumo Asbestos Claims voting in respect of the Plan voted in favor of Plan A by the applicable voting deadline (as the same may be extended), which notice shall contain reasonable detail supporting FMP’s conclusion regarding the same (the “Voting Notice”) or (B) seek a determination by the Bankruptcy Court as to whether the requirements of Section 524(g)(2)(B)(ii)(IV)(bb) have been satisfied with respect to holders of Pneumo Asbestos Claims (a “Voting Determination”).

(ii) If FMP provides the Voting Notice, FMP shall provide, or cause to be provided, access to the Pneumo Parties, promptly upon request, to all information (and copies of all relevant documentation) regarding the tabulation of votes by holders of Pneumo Asbestos Claims and otherwise supporting FMP’s statements in the Voting Notice. If any of the Pneumo Parties disagrees with the conclusion in the Voting Notice, such Pneumo Party may seek a Voting Determination by the Bankruptcy Court. If the Pneumo Parties notify FMP that they agree with FMP’s conclusions in the Voting Notice or fail to seek a Voting Determination by (or on) the date that is fifteen days after the date it receives the Voting Notice, the conclusion reached in the Voting Notice shall be binding on the parties (effective as of the date of the Pneumo Parties’ notice of agreement or the sixteenth day after the Voting Notice is delivered, as applicable). If the Voting Notice becomes binding on the parties in accordance with the foregoing and the Voting Notice states that at least seventy-five percent (75%) of the holders of Pneumo Asbestos Claims voting in respect of the Plan did not vote in favor of Plan A by the

applicable voting deadline (as the same may be extended), then Articles II and III of this Agreement and the parties’ obligations thereunder shall become effective on the date the Voting Notice becomes binding on the parties.

(iii) If a Voting Determination is sought by either FMP or a Pneumo Party and the Bankruptcy Court’s ruling in respect of the Voting Determination states that the requirements of Section 524(g)(2)(B)(ii)(IV)(bb) have not been satisfied with respect to holders of Pneumo Asbestos Claims, then Articles II and III of this Agreement and the parties’ obligations thereunder shall become effective on the date the Bankruptcy Court issues such ruling; or

(b) Certain Court Rulings Regarding Plan A Prior to the Plan A Effective Date. If (i) a court of competent jurisdiction rules after the Execution Date but prior to the Plan A Effective Date that the Pneumo Protected Party Injunction (after giving effect to any and all deletions of Entities from the definition of Pneumo Protected Party as described in such definition) cannot be issued in accordance with applicable law or (ii) after solicitation of votes in respect of Plan A but prior to the occurrence of the Plan A Effective Date, confirmation of Plan A in compliance with applicable court rulings would require that one or more amendments be made to the Plan and, solely as a result of such amendment(s), a re-solicitation of votes in respect of the Plan would be required, then in either such event and at any time thereafter either Cooper LLC or FMP may cause Articles II and III of this Agreement and the parties’ obligations thereunder to become effective upon delivery of written notice to the other parties hereto; or

(c) Consensus. Upon the mutual written consent of each of Cooper LLC, FMP, the FCR, ACC, Pneumo Abex and PCT, Articles II and III of this Agreement and the parties’ obligations thereunder shall become effective as of the date of such consent; or

(d) Failure to Agree on Documentation. If either Cooper Ltd or Cooper LLC has the right to terminate this Agreement pursuant to Section 7.01(b)(ii) but notifies the other parties hereto that it is forever waiving such termination right, then Articles II and III of this Agreement and the parties’ obligations thereunder shall become effective upon delivery of such notice; or

(e) Effectiveness Stayed Pending Appeal. If an appeal of any portion of the order(s) confirming the Plan with respect to Plan A is commenced and the effectiveness of the Plan as a whole is stayed, solely because of issues in Plan A, pending such appeal, then during the pendency of such appeal, FMP, with the consent of the ACC and the FCR until the six month anniversary of such stay of the Plan as a whole, and without the consent of the ACC and the FCR on and after the six month anniversary of such stay of the Plan as a whole, may cause Articles II and III of this Agreement and the parties’ obligations thereunder to become effective upon delivery of written notice to the other parties hereto; or

(f) Appeal Pending After Six Months. If (i) the Plan A Effective Date, the Interim Plan A Effective Date or the Interim Plan B Effective Date has occurred and (ii) either (x) in the case of the Plan A Effective Date or the Interim Plan A Effective Date, an appeal of any portion of the order(s) confirming the Plan with respect to Plan A is commenced and remains pending on the six month anniversary of the Plan A Effective Date or the Interim Plan A Effective Date, as applicable, or (y) in the case of the Interim Plan B Effective Date, an appeal of any order declining to confirm the Plan with respect to Plan A or declining to issue the Pneumo Protected

Party Injunction is commenced and remains pending on the six month anniversary of the Interim Plan B Effective Date, then, at any time thereafter during the pendency of any such appeal, any of Cooper LLC, Cooper Ltd, FMP, FMC, the Trust, the Trust Advisory Committee or the FCR may cause Articles II and III of this Agreement and the parties’ obligations thereunder to become effective upon delivery of written notice to the other parties hereto; or

(g) Re-solicitation Issues On Reversal of Plan A Confirmation. If (x) the order(s) confirming the Plan is reversed with respect to Plan A pursuant to an order of a court of competent jurisdiction (a “Reversal Order”) and (y) the resolution of the issues in Plan A giving rise to the reversal of a portion of the order(s) confirming the Plan involving Plan A would require one or more amendments to the Plan, and solely as a result of such amendments, a re-solicitation of votes in respect of the Plan would be required, then Articles II and III of this Agreement and the parties’ obligations thereunder shall become effective on the date such Reversal Order becomes a Final Order (or on such earlier date as Cooper LLC or Cooper Ltd may request by written notice to the other parties hereto provided that such notice may not be provided until the earlier of (i) the six month anniversary of the entry of the Reversal Order, and (ii) the date on which none of the Debtors, the FCR or the ACC are, in the reasonable determination of Cooper, diligently pursuing an appeal or petition for review, rehearing or certiorari with respect to the Reversal Order); or

(h) Failure to Approve Plan A Due to Issues Involving Representative of Future Claimants. If, either at the hearing to confirm the Plan or by order following such hearing, the Bankruptcy Court (or, if applicable, the District Court) rules that it cannot confirm the Plan A portion of the Plan either because (i) a representative of future holders of Pneumo Asbestos Claims other than the FCR has been appointed and opposes Plan A, or (ii) a representative of future holders of Pneumo Asbestos Claims other than the FCR has not been appointed in the Reorganization Cases, then any of Cooper LLC, Cooper Ltd, FMC, FMP, the ACC and the FCR may cause Articles II and III of this Agreement and the parties’ obligations thereunder to become effective by so advising the Bankruptcy Court (or, if applicable, the District Court) on the record before the conclusion of the hearing to confirm the Plan or by filing a notice with the Bankruptcy Court or the District Court, as the case may be, following entry of such order, as applicable; or

(i) Stay of Pneumo Protected Party Injunction. If the Pneumo Protected Party Injunction is issued in accordance with Section 524(g) of the Bankruptcy Code but stayed, then on the 150th day following the entry of such stay and at any time thereafter (provided such stay is still in effect) Cooper LLC or Cooper Ltd may cause Articles II and III of this Agreement and the parties’ obligations thereunder to become effective upon delivery of written notice to the other parties hereto; or

(j) Voting of FMP and T&N Limited Asbestos Personal Injury Claims.

(i) Not later than fifteen days after the applicable voting deadline (as the same may be extended) with respect to the Modified Plan, FMC shall either (A) notify the Pneumo Parties in writing as to whether seventy-five percent (75%) of the holders of asbestos personal injury claims against FMP (Class 5J under the Plan on file with the Bankruptcy Court immediately prior to the Execution Date)(“Class 5J Claims”) and seventy-five percent (75%) of the holders of asbestos personal injury claims against T&N Limited (Class 6J under the Modified

Plan) (“Class 6J Claims”), respectively, voting in respect of the Plan voted in favor of the Plan by the applicable voting deadline (as the same may be extended), which notice shall contain reasonable detail supporting FMC’s conclusion regarding the same (the “FMP/T&N Voting Notice”) or (B) seek a determination by the Bankruptcy Court as to whether the requirements of Section 524(g)(2)(B)(ii)(IV)(bb) have been satisfied with respect to each or either of the Class 5J Claims and the Class 6J Claims (an “FMP/T&N Voting Determination”).

(ii) If FMC provides the FMP/T&N Voting Notice, FMC shall provide, or cause to be provided, access to the Pneumo Parties, promptly upon request, to all information (and copies of all relevant documentation) regarding the tabulation of votes by holders of Class 5J Claims and Class 6J Claims and otherwise supporting FMC’s statements in the FMP/T&N Voting Notice. If any of the Pneumo Parties disagrees with the conclusions in the FMB/T&N Voting Notice, such Pneumo Party may seek an FMP/T&N Voting Determination by the Bankruptcy Court. If the Pneumo Parties notify FMC that they agree with FMC’s conclusions in the FMP/T&N Voting Notice or fail to seek an FMP/T&N Voting Determination by (or on) the date that is fifteen days after the date it receives the FMP/T&N Voting Notice, the conclusion reached in the FMP/T&N Voting Notice shall be binding on the parties (effective as of the date of the Pneumo Parties’ notice of agreement or the sixteenth day after the FMP/T&N Voting Notice is delivered, as applicable). If the FMP/T&N Voting Notice becomes binding on the parties in accordance with the foregoing and the FMP/T&N Voting Notice states that at least seventy-five percent (75%) of the holders of Class 5J Claims and/or Class 6J Claims, respectively, voting in respect of the Plan did not vote in favor of the Plan by the applicable voting deadline (as the same may be extended) and thereafter a confirmed plan of reorganization with respect to the Debtors (whether the Plan, the Modified Plan or a Materially Changed Plan) that does not include or provide for the issuance of an injunction under Section 524(g) of the Bankruptcy Code in the case of FMP becomes effective, then Articles II and III of this Agreement and the parties’ obligations thereunder shall become effective on the effective date of such plan of reorganization.

(iii) If an FMP/T&N Voting Determination is sought by either FMC or a Pneumo Party and the Bankruptcy Court’s ruling in respect of the FMP/T&N Voting Determination states that the requirements of Section 524(g)(2)(B)(ii)(IV)(bb) have not been satisfied with respect to holders of Class 5J Claims and/or Class 6J Claims, respectively, and thereafter a confirmed plan of reorganization with respect to the Debtors (whether the Plan, the Modified Plan or a Materially Changed Plan) that does not include or provide for the issuance of an injunction under Section 524(g) of the Bankruptcy Code in the case of FMP becomes effective, then Articles II and III of this Agreement and the parties’ obligations thereunder shall become effective on the effective date of such plan of reorganization.

The foregoing provisions of this Section 5.01 shall be read as independent of each other, such that if any of the foregoing provisions is satisfied, Articles II and III of this Agreement and the parties’ obligations thereunder shall become effective without regard to any of the other potentially applicable provisions of this Section 5.01 that may not be satisfied and the parties agree not to assert that any such other provisions take precedence over the satisfied provision.

Section 5.02 Pneumo Abex Consultation Rights. If Cooper intends to exercise any right it has under Section 5.01(b), Section 5.01(f) or Section 5.01(i), Cooper LLC or Cooper Ltd, as

applicable, shall provide Pneumo Abex with advance notice of its intent to exercise such right and shall provide Pneumo Abex with reasonable opportunity to meet with and/or discuss Cooper’s decision for a period of five Business Days following such notice (after which time Cooper may exercise its rights under Section 5.01(b), Section 5.01(f) or Section 5.01(i) in its sole discretion).

ARTICLE VI.
REPRESENTATIONS AND WARRANTIES

Section 6.01 Representations and Warranties of the FM Parties. Each of the FM Parties represents and warrants to the other parties to this Agreement that, as of the Execution Date and the Effective Date:

(a) Organization and Qualification. It is a corporation duly organized, validly existing, and in good standing under the laws of its jurisdiction of incorporation.

(b) Authority. Subject only to Bankruptcy Court approval, it has the requisite corporate power and authority to enter into this Agreement and, subject to the conditions set forth herein, to consummate the settlement contemplated hereby. Subject only to Bankruptcy Court approval, the execution and delivery by it of this Agreement have been duly authorized by all necessary corporate action on its part.

(c) Enforceability. This Agreement has been duly executed and delivered by it and, subject only to Bankruptcy Court approval, constitutes its legal, valid, and binding obligation, enforceable against it in accordance with the terms hereof (except as that enforceability may be limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally).

Section 6.02 Representations and Warranties of Cooper. Each of Cooper LLC and Cooper Ltd represents and warrants to the other parties to this Agreement that, as of the Execution Date and the Effective Date:

(a) Organization and Qualification. It is duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization.

(b) Authority. Cooper LLC has the requisite limited liability company power and Cooper Ltd has the requisite company power and authority to enter into this Agreement and, subject to the conditions set forth herein, to consummate the settlement contemplated hereby. The execution and delivery by it of this Agreement have been duly authorized by all necessary limited liability company action on the part of Cooper LLC and all necessary company action on the part of Cooper Ltd.

Section 6.03 Representations and Warranties of PCT and Pneumo Abex. Each of PCT and Pneumo Abex represents and warrants to the other parties to this Agreement that, as of the Execution Date and the Effective Date:

(a) Organization and Qualification. It is duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization.

(b) Authority. Pneumo Abex has the requisite limited liability company power and PCT has the requisite corporate power and authority to enter into this Agreement and, subject to the conditions set forth herein, to consummate the settlement contemplated hereby. The execution and delivery by it of this Agreement have been duly authorized by all necessary limited liability company action on the part of Pneumo Abex and all necessary corporate action on the part of PCT.

ARTICLE VII.
TERMINATION

Section 7.01 Termination of this Agreement. This Agreement shall terminate in its entirety solely as follows:

(a) by the mutual written consent of each of the parties hereto at any time; such termination to be effective as of the date specified by the parties in such written consent;

(b) by written notice of either of Cooper Ltd or Cooper LLC to the other parties hereto if:

(i) the 9019 Motion is denied prior to, or the Settlement Approval Order has not been issued by or, if issued, has not become a Final Order by, the date that is 20 days prior to the deadline fixed by the Bankruptcy Court after the Execution Date for filing objections to confirmation of the Plan;

(ii) the Plan A Documents, the Wagner Insurance Agreement and the Pneumo Plan Supplement (A) are not filed in the Reorganization Cases in a form consistent with the Term Sheet and otherwise reasonably acceptable to Cooper, the FCR and the ACC prior to the date fixed by the Bankruptcy Court after the Execution Date for the hearing on the disclosure document and voting procedures for the Plan or, (B) if so filed (or filed thereafter with the consent of Cooper, the FCR and the ACC in a form consistent with the Term Sheet and otherwise reasonably acceptable to Cooper, the FCR and the ACC), are thereafter modified in a manner adverse to Cooper without Cooper’s consent or to Pneumo without Pneumo’s consent (such consent of Pneumo not to be unreasonably withheld)

(except that the termination right set forth in this clause (B) shall not apply with respect to a Materially Changed Plan proposed after the conditions of Sections 4.11(a)(i) and (ii) have been met); provided however that notwithstanding the terms of the Term Sheet and the foregoing, the parties agree that the Plan A Documents and the Pneumo Plan Supplement shall contain provisions providing that, in the event the Interim Plan A Effective Date occurs, (x) the obligation to fund and transfer assets to a subfund of the Trust that will be responsible for payment of Pneumo Asbestos Claims shall not become effective until any stay of the Pneumo Protected Party Injunction is dissolved and no longer in effect (in which case such subfund of the Trust shall be funded and all asset transfers effected within 10 days of the date no such stay is in effect), and (y) on the Interim Plan A Effective Date, Cooper shall escrow $246 million and Pneumo Abex shall escrow $10 million, which will be released from escrow to a subfund of the Trust that will be responsible for payment of Pneumo Asbestos Claims if the obligation to fund and transfer assets to such subfund of the Trust becomes effective (and Cooper and Pneumo Abex shall each receive any interest accrued on their escrowed funds regardless of whether such funds are ultimately delivered to the Trust or returned to Cooper and Pneumo Abex), unless Cooper causes Articles II and III of this Agreement and the parties’ obligations thereunder to become effective pursuant to Section 5.01(i) prior to the date on which no such stay is in effect, in which case there shall be no obligation to fund or transfer assets to the Trust or such subfund (and all escrowed amounts shall be released to Cooper and Pneumo Abex, as applicable) because the Plan B Implementation Date will have occurred; and provided further that notwithstanding the terms of the Term Sheet and the foregoing, the parties agree that the Plan A Documents and the Pneumo Plan Supplement shall contain provisions providing that, if the Interim Plan B Effective Date occurs and the Pneumo Protected Party Injunction is thereafter issued in accordance with Section 524(g) of the Bankruptcy Code pursuant to a Final Order prior to the Plan B Implementation Date, then the obligation to fund and transfer assets to a subfund of the Trust that will be responsible for payment of Pneumo Asbestos Claims shall become effective on the date the order(s) confirming the Plan (including Plan A and any order issuing the Pneumo Protected Party Injunction) become Final Orders; or

(iii) Cooper LLC or Pneumo Abex has not been paid the Plan B Payment in full in cash by June 30, 2008;

such termination shall be effective as of the date any such notice of termination is delivered in accordance with this Agreement;

(c) by written notice of FMP, with the consent of the FCR and the ACC, to the other parties hereto if the FAIR Act is enacted and made law and is not subject to a Challenge Proceeding, in each case prior to the date on which the Pneumo Protected Party Injunction becomes effective; such termination shall be effective as of the date any such notice of termination is delivered in accordance with this Agreement;

(d) an order denying the 9019 Motion has been entered and has become a Final

Order; such termination shall be effective as of the date such order becomes a Final Order;

(e) an order dismissing the Reorganization Cases of either of the FM Parties (a) is entered at a time when the order(s) confirming the Modified Plan has not been entered and (b) such dismissal order becomes a Final Order; such termination shall be effective as of the date such dismissal order becomes a Final Order;

(f) if the Reorganization Cases of either of the FM Parties is converted into a proceeding under Chapter 7 of the Bankruptcy Code; such termination shall be effective as of the date of such conversion; or

(g) the Pneumo Protected Party Injunction is issued in accordance with Section 524(g) of the Bankruptcy Code and in effect on the Effective Date and the order(s) confirming the Plan, including the Plan A provisions, are Final Order(s) as of the Effective Date; such termination shall be effective as of the Effective Date.

Section 7.02 Consequences of Termination of Agreement. If this Agreement is terminated under Section 7.01, (a) this Agreement shall be of no further force or effect and there shall be no liability or obligation under this Agreement on the part of any party hereto (except that such termination shall not relieve any party hereto that is then in breach of this Agreement from liability in respect of such breach), (b) no party hereto shall be bound by the terms of the Settlement Approval Order, (c) except in the case of a termination pursuant to Section 7.0 l(g), the rights, Claims and interests of each of the parties shall be reinstated, without prejudice or validation, to the same extent that such rights, claims and interests would exist had this Agreement not been executed or delivered, (d) except in the case of a termination pursuant to Section 7.0 l(g), the Pneumo Parties may raise any objection available to them with respect to any matter in the Reorganization Cases, and (e) except in the case of a termination pursuant to Section 7.0l(g), any and all otherwise applicable statutes of limitation or repose, or other time-related limitations, shall be deemed to have been tolled for the period from the Execution Date through the date that is 30 days after the date that this Agreement is terminated, and none of the parties hereto shall assert or rely on any time-related defense to any Claim by any other party related to such period.

ARTICLE VIII.
GENERAL PROVISIONS

Section 8.01 Binding Effect; Assignment; Third Party Beneficiaries. This Agreement and the rights and obligations of the parties hereunder may not be assigned (except by operation of law) without the prior written consent of the non-assigning parties and will be binding on and inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement is not intended, and shall not be construed, deemed, or interpreted, to confer on any Entity not a party hereto any rights or remedies hereunder, except as otherwise provided expressly herein.

Section 8.02 Entire Agreement; Amendment; Waivers. This Agreement and the documents referenced herein and attached hereto shall constitute the entire agreement and understanding among the parties to this Agreement with respect to Plan B and supersede all prior agreements

and understandings, oral or written, among the parties hereto relating to Plan B, including without limitation the Term Sheet insofar as it relates to Plan B. Except with respect to assignments effected in accordance with Section 8.01, this Agreement may not be amended or modified except by an agreement in writing signed by Cooper, the FM Parties, the FCR and the ACC; provided however that no amendment or modification of the rights and obligations of Pneumo Abex or PCX set forth in Section 2.01, 3.01(b), 3.02(a), 3.03(c), 3.03(d), 3.03(h), 3.05(a), 3.05(b), 4.01(b), 4.01(c), 4.01(d), 4.01(e), 4.04, 4.08, 4.09, 4.10, 4.1 l(a), 5.01(a), 5.01(c), 5.02, 7.01(b)(ii) or this Section 8.02 shall be effected without the prior written consent of Pneumo Abex and PCX, such consent not to be unreasonably withheld. The waiver of any of the terms and conditions hereof shall not be construed or interpreted as, or deemed to be, a waiver of any other term or condition hereof.

Section 8.03 No Admissions. This Agreement does not constitute, and shall not be construed, interpreted, or otherwise read to constitute any admission by any of the Pneumo Parties or the FM Parties with respect to any of the claims released herein (including the Asserted Claims).

Section 8.04 Notices. All notices required or permitted under this Agreement must be in writing and will be deemed to be delivered and received (i) when actually received by the party to whom notice is sent if personally delivered, (ii) when sent by facsimile before 5:00 p.m. New York City time on a Business Day with a copy of such facsimile sent to the recipient by reputable overnight courier service (charges prepaid) on the same day, (iii) five (5) days after deposit in the U.S. mail, mailed by registered or certified mail, return receipt requested, postage prepaid, or (iv) one Business Day after being sent to the recipient by reputable overnight courier service (charges prepaid), in each case addressed to the appropriate party or parties, at the address of such party or parties set forth below (or at such other address as such party may designate by written notice to all other parties in accordance with this Section 8.04):

	1)		If to the FM Parties:

			Federal-Mogul Corporation 26555 Northwestern Highway Southfield, MI 48034 Telephone: (248) 354-7055 Facsimile: (248) 354-8103 Attention: General Counsel

			with a copy (which will not constitute notice for purposes of this Agreement) to:

			Sidley Austin LLP One South Dearborn Street Chicago, Illinois 60603 Telephone: (312) 853-7000 Facsimile: (312) 853-7036 Attention: James F. Conlan

	2)		If to Cooper:

			Cooper Industries Ltd. 600 Travis Suite 5800 Houston, TX 77210-4446 Telephone: (713) 209-8407 Facsimile: (713) 209-8989 Attention: General Counsel

			with a copy (which shall not constitute notice for purposes of this Agreement) to:

			Orrick, Herrington & Sutcliffe LLP 3050 K Street, NW Washington, D.C. 20007 Telephone: (202) 339-8400 Facsimile: (202) 339-8500 Attention: Roger Frankel

	3)		If to the FCR:

			Eric D. Green c/o Boston University School of Law 765 Commonwealth Avenue Boston, Massachusetts 02215 Telephone: (617) 353-2807 Facsimile: (617) 353-3077

			with a copy (which shall not constitute notice for purposes of this Agreement) to:

			Young Conaway Stargatt & Taylor, LLP The Brandywine Building 1000 West Street 17th Floor Wilmington, DE 19801 Telephone: (302) 571-6600 Facsimile: (302) 571-1253 Attention: James L. Patton, Jr.

	4)		If to the ACC:

			Joseph F. Rice, Chairman of the ACC Motley Rice LLC 28 Bridgeside Blvd. Mount Pleasant, SC 29464 Telephone: (843) 216-9000 Facsimile: (843) 216-9450

			with a copy (which shall not constitute notice for purposes of this Agreement) to:

			Caplin & Drysdale, Chartered 375 Park Avenue New York, New York 10152 Telephone: (212) 319-7125 Facsimile: (212) 644-6755 Attention: Elihu Inselbuch

	5)		If to Pneumo Abex:

			Pneumo Abex LLC 35 East 62^nd Street New York, NY 10021 Telephone: (212) 572-8600 Facsimile: (212) 572-5151 Attention: Steven Fasman

			with a copy (which shall not constitute notice for purposes of this Agreement) to:

			Paul, Weiss, Rifkind, Wharton & Garrison LLP 1285 Avenue of the Americas New York, NY 10019-6064 Telephone: (212) 373-3133 Facsimile: (212) 492-0133 Attention: Stephen J. Shimshak

Section 8.05 Governing Law; Jurisdiction.

(a) This Agreement and the rights and obligations of the parties hereto shall be construed in accordance with the provisions of the Bankruptcy Code and, where not inconsistent, the laws of the State of Delaware, without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.

(b) With respect to disputes under this Agreement, each party hereby irrevocably (i) submits to the exclusive jurisdiction of the Bankruptcy Court, and (ii) agrees that any and all claims in respect of such dispute may be heard and determined in the Bankruptcy Court or upon the closing of the Reorganization Cases under Section 350(a) of the Bankruptcy Code, any court of competent jurisdiction.

Section 8.06 Exercise of Rights and Remedies. Except as this Agreement otherwise provides, no delay or omission in the exercise of any right, power, or remedy accruing to any party hereto as a result of any breach or default hereunder by any other party hereto will impair any such right, power, or remedy, nor will it be construed, deemed or interpreted as a waiver of or acquiescence in any breach or default, or of any similar breach or default occurring later; nor will any waiver of any single breach or default be construed, deemed, or interpreted as a waiver of any other breach or default hereunder occurring before or after that waiver. No right, remedy or

election any term of this Agreement gives will be deemed exclusive, but each will be cumulative with all other rights, remedies, and elections available at law or in equity. In the event of a breach of this Agreement, the non-breaching parties shall be entitled to all rights and remedies provided under this Agreement, all rights and remedies available at law or in equity (including specific performance) and to recover reasonable attorneys’ fees and expenses incurred or suffered in connection with such breach.

Section 8.07 Further Assurances. From and after the Plan B Date, each party hereto shall use all reasonable efforts to take, or cause to be taken, all appropriate actions, do or cause to be done all things necessary under applicable laws and execute and deliver such documents and other papers as may be required to carry out the provisions of this Agreement and to consummate, perform, and make effective the settlement contemplated hereby.

Section 8.08 Reformation and Severability. If any provision of this Agreement other than Section 2.01, Section 4.08 or Section 4.09 is invalid, illegal, or unenforceable, that provision will, to the extent possible, be modified in such manner as to be valid, legal, and enforceable but so as to most nearly retain the intent of the parties hereto as expressed herein, and, if such a modification is not possible, that provision will be severed from this Agreement, and in either case the validity, legality, and enforceability of the remaining provisions of this Agreement will not in any way be affected or impaired thereby, it being intended by each party hereto that all of the rights and privileges of all parties hereto will be enforceable to the fullest extent permitted by applicable law.

Section 8.09 Construction. This Agreement is the product of arm’s length negotiations between and among the parties regarding a compromise of disputed claims. Each of the parties hereto has participated in the drafting of this Agreement after consulting with counsel. Therefore, it is the intent of the parties that no part of this Agreement shall be presumptively construed against any other party because of the identity of the drafter.

Section 8.10 Settlement Privilege. All negotiations or discussions leading up to the execution of this Agreement and all related discussions and negotiations shall be deemed to fall within the protection afforded to settlements or compromises by Rule 408 of the Federal Rules of Evidence and any similar state law provisions.

Section 8.11 Counterparts. This Agreement may be executed in multiple counterparts (including via facsimile or PDF), each of which will be an original, but all of which together will constitute one and the same agreement.

* * * * *

[signature page follows]

IN WITNESS WHEREOF, the parties hereto have executed this Plan B Settlement Agreement as of the date first above written.

PNEUMO ABEX LLC

FEDERAL-MOGUL CORPORATION

By:

/s/ Steven Fasman

By:

Name:

Steven Fasman

Name:

Title:

President

Title:

PCT INTERNATIONAL HOLDINGS INC.

FEDERAL-MOGUL PRODUCTS, INC.

By:

/s/ Barry F. Schwartz

By:

Name:

Barry F. Schwartz

Name:

Title:

E.V.P & General Counsel

Title:

COOPER INDUSTRIES, LLC

FUTURE CLAIMANTS REPRESENTATIVE FOR FEDERAL-MOGUL CORPORATION AND FEDERAL-MOGUL PRODUCTS, INC.

By:

Name:

Title:

COOPER INDUSTRIES, LTD.

OFFICIAL COMMITTEE OF ASBESTOS CLAIMANTS FOR FEDERAL-MOGUL CORPORATION AND FEDERAL-MOGUL PRODUCTS, INC.

By:

Name:

Title:

S-1

IN WITNESS WHEREOF, the parties hereto have executed this Plan B Settlement Agreement as of the date first above written.

PNEUMO ABEX LLC

FEDERAL-MOGUL CORPORATION

By:

Name:

Title:

PCT INTERNATIONAL HOLDINGS INC.

FEDERAL-MOGUL PRODUCTS, INC.

By:

Name:

Title:

COOPER INDUSTRIES, LLC

FUTURE CLAIMANTS REPRESENTATIVE FOR FEDERAL-MOGUL CORPORATION AND FEDERAL-MOGUL PRODUCTS, INC.

By:

/s/ Diane K. Schumacher

By:

Name:

Diane K. Schumacher

Name:

Title:

Vice President

Title:

COOPER INDUSTRIES, LTD.

OFFICIAL COMMITTEE OF ASBESTOS CLAIMANTS FOR FEDERAL-MOGUL CORPORATION AND FEDERAL-MOGUL PRODUCTS, INC.

By:

/s/ Diane K. Schumacher

By:

Name:

Diane K. Schumacher

Name:

Title:

Special Counsel & Chief

Title:

Compliance Officer

S-1

IN WITNESS WHEREOF, the parties hereto have executed this Plan B Settlement Agreement as of the date first above written.

PNEUMO ABEX LLC

FEDERAL-MOGUL CORPORATION

By:

/s/ Lance Lis

Name:

Lance Lis

Title:

Secretary

PCT INTERNATIONAL HOLDINGS INC.

FEDERAL-MOGUL PRODUCTS, INC.

By:

/s/ Lance Lis

Name:

Lance Lis

Title:

Secretary

COOPER INDUSTRIES, LLC

FUTURE CLAIMANTS REPRESENTATIVE FOR FEDERAL-MOGUL CORPORATION AND FEDERAL-MOGUL PRODUCTS, INC.

By:

Name:

Title:

COOPER INDUSTRIES, LTD.

OFFICIAL COMMITTEE OF ASBESTOS CLAIMANTS FOR FEDERAL-MOGUL CORPORATION AND FEDERAL-MOGUL PRODUCTS, INC.

By:

Name:

Title:

S-1

IN WITNESS WHEREOF, the parties hereto have executed this Plan B Settlement Agreement as of the date first above written.

PNEUMO ABEX LLC

FEDERAL-MOGUL CORPORATION

By:

Name:

Title:

PCT INTERNATIONAL HOLDINGS INC.

FEDERAL-MOGUL PRODUCTS, INC.

By:

Name:

Title:

COOPER INDUSTRIES, LLC

FUTURE CLAIMANTS REPRESENTATIVE FOR FEDERAL-MOGUL CORPORATION AND FEDERAL-MOGUL PRODUCTS, INC.

By:

/s/ ERIC D. GREEN

Name:

ERIC D. GREEN

Title:

FCR

COOPER INDUSTRIES, LTD.

OFFICIAL COMMITTEE OF ASBESTOS CLAIMANTS FOR FEDERAL-MOGUL CORPORATION AND FEDERAL-MOGUL PRODUCTS, INC.

By:

Name:

Title:

S-1

IN WITNESS WHEREOF, the parties hereto have executed this Plan B Settlement Agreement as of the date first above written.

PNEUMO ABEX LLC

FEDERAL-MOGUL CORPORATION

By:

Name:

Title:

PCT INTERNATIONAL HOLDINGS INC.

FEDERAL-MOGUL PRODUCTS, INC.

By:

Name:

Title:

COOPER INDUSTRIES, LLC

FUTURE CLAIMANTS REPRESENTATIVE FOR FEDERAL-MOGUL CORPORATION AND FEDERAL-MOGUL PRODUCTS, INC.

By:

Name:

Title:

COOPER INDUSTRIES, LTD.

OFFICIAL COMMITTEE OF ASBESTOS CLAIMANTS FOR FEDERAL-MOGUL CORPORATION AND FEDERAL-MOGUL PRODUCTS, INC.

By:

/s/ Elihu Inselbuch

Name:

Elihu Inselbuch

Title:

Counsel

S-1

EXHIBIT A

TO PLAN B SETTLEMENT AGREEMENT

[To be attached at least ten days prior to the hearing on the 9019 Motion]

EXHIBIT B

TO PLAN B SETTLEMENT AGREEMENT

Cooper Related Entities:

	1.		Cooper B-Line. Inc.

	2.		Cooper Bussmann, Inc.

	3.		Cooper Crouse-Hinds, LLC

	4.		Cooper Electrical International, Inc.

	5.		Cooper Holdings Ltd.

	6.		Cooper Industries, Ltd.

	7.		Cooper Industries, LLC (including its predecessors-in-interest Cooper Industries, Inc., McGraw-Edison Company, Cooper Bessemer Corporation)

	8.		Cooper Lighting. Inc.

	9.		Cooper Power Systems, Inc.

	10.		Cooper Power Systems Transportation Company

	11.		Cooper Power Tools, Inc.

	12.		Cooper Tools, Inc.

	13.		Cooper US, Inc.

	14.		Cooper Wiring Devices, Inc.

	15.		Powerstor, Inc.

PCT/Pneumo Abex Related Entities:

	1.		Abex Corporation (f/k/a The American Brake Shoe & Foundry Company and American Brake Shoe Company)

	2.		American Brakeblok Corporation (f/k/a American Brake Materials Corporation)

	3.		Cleveland Pneumatic Company (f/k/a Cleveland Pneumatic Tool Company)

	4.		Flavors Holdings Inc.

	5.		Illinois Abex Corporation

	6.		M & F Worldwide Corp. (f/k/a Henley Pneumo Abex Inc. and Power Control Technologies Inc.)

	7.		Mafco Consolidated Group Inc. (f/k/a Henley Investments, Inc. and Abex Inc.)

	8.		Mafco Worldwide Corporation

	9.		MCG Intermediate Holdings Inc.

	10.		NWL Service Corp.

	11.		PCT International Holdings Inc. (f/k/a PA Acquisition Corporation, Control Technologies International Inc. and Power Control Technology Inc.)

	12.		Pneumo Abex Corporation (f/k/a Hengro Seven Inc. and PA Holdings Corporation)

	13.		Pneumo Abex LLC

	14.		Pneumo Corporation

	15.		MacAndrews & Forbes Holdings Inc. (f/k/a/ Mafco Holdings Inc.)

EX-10.33 5 h43741exv10w33.htm SEPARATION AND TRANSITION AGREEMENT exv10w33

EXHIBIT 10.33

January 16, 2007

Mr. Paul M. Isabella
P.O. Box 8967
The Woodlands, Texas 77387

Dear Paul:

I believe we have fully discussed the terms of your departure from Cooper US, Inc. (“Cooper”). However, I thought it would be beneficial to reduce our understandings to writing in this Agreement to avoid any misunderstandings at a later date. Paul, in making these arrangements, we have carefully considered the services you have rendered and the contributions you have made while working at Cooper.

Announcements and Transition

On December 1, 2006, you received Cooper’s thirty (30) day written notice (the “Notice Period”) to you that effective January 2, 2007, your role as Executive Vice President, Cooper Connection, would end. During the Notice Period, in addition to your normal responsibilities, you agreed to participate in such communications with Cooper management and other parties as may be necessary or helpful to ensure that this management transition would not have any adverse impact on current and future operations and/or financial results at Cooper. Effective January 2, 2007, when your active employment terminated, and throughout the salary continuation period up to and including June 30, 2007, (the “salary continuation period”) you have agreed to continue to assist us in an orderly transition of your management responsibilities and to provide reasonable consulting services to Cooper. Such consulting services will not exceed an aggregate of 240 hours during the salary continuation period.

Salary and Benefits Continuation

We have mutually agreed that your active employment ceased as of January 2, 2007, but that you will continue to receive your current salary ($35,000.00, on a monthly basis) through June 30, 2007. 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. It is understood that no bonuses or vacation will be earned during your salary continuation period. Your remaining accrued but not taken current year vacation days will be paid out in a lump sum.

We have also agreed that your salary and benefits continuation period may be extended for up to six (6) additional months on a month-to-month basis, and in no event later than through December 31, 2007, in the event you remain unemployed as of the completion of the six (6) month salary and benefits continuation period despite a diligent and ongoing job search. (In the event you will require this extended benefit phase, please advise me by June 15, 2007, to ensure this occurs). You will not be eligible for the additional salary and benefits continuation once new employment has been obtained. Such salary and

Personal and Confidential

Mr. Paul M. Isabella
January 16, 2007
Page 2 of 7

benefits continuation will cease effective on the last day immediately proceeding the date you commence your new employment.

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

As discussed above, we have also agreed that, if requested, you will be available to provide reasonable consulting services to facilitate a smooth management transition during the period from January 2, 2007 to June 30, 2007, including any extension. These services will be provided at mutually agreeable times that do not unreasonably interfere with your personal plans. In addition, at the request of Cooper or any of its related entities you have agreed to assist us in any threatened or actual litigation concerning it or them, where you have in your possession or knowledge any facts or other matters which we reasonably consider is relevant to such legal proceedings (among other things, giving statements/affidavits, meeting with our legal and other professional advisers, attending any legal hearing, and giving evidence during your salary continuation period. We will reimburse you for reasonable expenses properly incurred by you in giving such assistance. If such assistance is required after the completion of your salary continuation period, including any extension, we will pay to you Two Hundred Dollars and No Cents ($200.00) per hour for any time required.

Group insurance coverage, i.e., life, medical and dental, will continue during your salary continuation period, including any extension, 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 eligible for coverage. Such contributions will be on the same basis as if you were an active employee. 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.

You will receive a letter regarding your eligibility for eighteen (18) months of continuing medical and dental insurance coverage under the federal COBRA law. If you wish to continue medical and dental coverage after your salary continuation period you will need to accept the offered coverage within sixty (60) days of your last day of work. COBRA coverage will run concurrently with the salary continuation period. Once salary continuation ceases you will need to make monthly premium payments directly to the insurance carrier in order to maintain medical and dental coverage.

Outplacement

Cooper will provide you access to outplacement services through Right Management Consultants at Company expense for up to one year from your termination of employment.

Personal and Confidential

Mr. Paul M. Isabella
January 16, 2007
Page 3 of 7

Pension

You are covered by the Salaried Employees’ Retirement Plan (the Plan) of Cooper Industries, Inc. In accordance with the Plan, Company contributions made on your behalf are 33% vested after three years of service, 67% vested after four years, and 100% vested after five years of service. Plan provisions also govern the payment of benefits. Because you have less than three years of service with the Company, no contributions made on your behalf are vested and, therefore, will be forfeited.

Savings Plan

You are currently a participant in the Cooper Savings Plan (CO-SAV). You may check your account balance at any time by contacting Diversified Direct at 1-800-755-5801 or by visiting the Diversified Direct website at www.divinvest.com.

Employee contributions plus Company matching will continue for separation allowance payments received for the period up to and including December 31, 2006, or the end of your separation allowance payments, whichever is earlier. Employee contributions plus Company matching will cease no later than January 1, 2007.

Your CO-SAV account balance may be distributed to you after December 31, 2006, or at the end of your separation allowance period, whichever is earlier. Distribution cannot be requested while contributions are being made.

If you elect to leave your account in the plan you will continue to receive quarterly Participant Statements until your account is distributed. You may request distribution at any future date before you reach age 70¹/2 by calling Diversified or visiting the Diversified Direct website.

Stock Options

According to our records, you currently hold Non-Qualified Stock Option (NQSO) grants issued in 2005 and 2006. 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. 10,000 Non-qualified stock options currently vested at $70.94 and 13,333 non-qualified stock options currently vested at $65.36 awarded on April 18, 2005, will remain exercisable until ninety (90) days after your active employment with Cooper ceases, or April 2, 2007, after which date all outstanding options will automatically terminate and cease to be exercisable. 10,000 non-qualified stock options at $70.94 granted to you pursuant to an agreement dated April 18, 2005, will continue to vest in accordance with the terms of such agreement as if you were actively employed on February 7, 2007 and will remain exercisable until ninety (90) days after your active employment with Cooper ceases, or April 2, 2007. Other than the vesting described in the preceding sentence, no additional vesting of stock options shall occur following your termination of employment.

Personal and Confidential

Mr. Paul M. Isabella
January 16, 2007
Page 4 of 7

Consequently, in the event you elect to exercise any options you must do so prior to April 2, 2007. In the event you die with stock options outstanding, rights of your beneficiaries and estate will be as outlined in the applicable Stock Option Agreement.

Performance Shares

In 2005, you received grants of Performance Shares based on the 2004-2006 and 2005-2007 cycles of the program. These grants are administered under the terms of the Stock Incentive Plan and the Executive Stock Incentive Agreements between you and Cooper. (As used herein, all capitalized terms are as defined in the Stock Incentive Plan and the Executive Stock Incentive Agreement related to each grant.). Pursuant to the terms of your employment offer, the award under the 2004-2006 cycle of the program will be paid to you, in shares (net of taxes) once performance results, and awards related thereto, are determined by the MD&C Committee of the Board of Directors at the February 2007 meeting. Performance share grants made to you under the 2005-2007 and 2006-2008 cycles of the program will be forfeited immediately when you cease active service.

Restricted Stock Units

In 2005, you were awarded 28,000 Restricted Stock Units (“RSUs”) which were subject to restrictions for four (4) years. Restrictions on 7,000 of those RSUs have lapsed and those shares have been awarded to you. In accordance with the terms of your Executive Restricted Stock Agreement, the remaining 21,000 RSUs scheduled to vest ratably on December 1, 2007, December 1, 2008, and December 1, 2009, will be forfeited immediately when you cease active service. However, the 4^th quarter dividend equivalent on these unvested shares will be paid to you on January 2, 2007.

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. Effectively immediately, we have agreed that the MCA will terminate and become null and void. You also agree that this constitutes sufficient notice as required by the MCA that you will not be eligible for any payments or benefits under any MCA with Cooper.

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, but not limited to, the following: 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

Personal and Confidential

Mr. Paul M. Isabella
January 16, 2007
Page 5 of 7

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. Provisions for confidentiality and non-disclosure, which remain in effect, include the Executive Employment Agreement dated March 3, 2006, and the Invention Assignment and Confidentiality Agreement and the Secrecy Agreement signed by you on April 19, 2005 (the “Agreements”), attached hereto and incorporated herein by reference. 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 Executive Vice President, Cooper Connection, we have agreed that during the remainder of your employment and for a period of two (2) years following the termination of your employment, you will not become an employee, officer, director, agent, contractor or consultant of, or advisor to, EGS/Appleton, Hubbell Inc., Thomas and Betts Corp., Genlyte-Thomas, Acuity Brands — Lithonia Lighting, LeGrand, Leviton, Littelfuse, Inc., Ferraz Shawmut subsidiary of Groupe Carbonne Lorraine, and Hoffman. This paragraph supercedes Section. 10 of the Executive Employment Agreement dated March 3, 2006, which will otherwise remain in full force and effect. We acknowledge and agree that this language constitutes a written amendment as specified in and required by Section. 20 of the Executive Employment Agreement dated March 3, 2006.

During the remainder of your employment and for a period of two (2) years following the termination of your employment, 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. This paragraph supercedes Section. 11 of the Executive Employment Agreement dated March 3, 2006, which will otherwise remain in full force and effect. We acknowledge and agree that this language constitutes a written amendment as specified in and required by Section. 20 of the Executive Employment Agreement dated March 3, 2006.

During the remainder of your employment and for a period of two (2) years following the termination of your employment, you agree that you will not, on behalf of yourself or any other person, firm, company, business or other legal entity, solicit, contact, call upon, initiate communications with or attempt to initiate communications with any customer of the Company for the purpose of selling or providing products similar to or competitive with those manufactured by the Company. This paragraph supercedes Section. 12 of the Executive Employment Agreement dated March 3, 2006, which will otherwise remain in full force and effect. We acknowledge and agree that this language constitutes a written amendment as specified in and required by Section. 20 of the Executive Employment Agreement dated March 3, 2006.

Confidentiality

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 the Company. 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 letter and the separation benefits provided to you by Cooper only to your spouse, your personal tax advisor and your attorney, and

Personal and Confidential

Mr. Paul M. Isabella
January 16, 2007
Page 6 of 7

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. We have further agreed that the Company may cease further payments pursuant to this Agreement in the event the separation arrangements outlined in this letter are disclosed other than as permitted herein or in the event you do not comply with any obligations imposed on you pursuant to this Agreement.

Paul, I would appreciate it if you would make certain that any outstanding cash advances and business expenses be reconciled as soon as reasonably possible. If not, any amounts due the Company will be withheld from your salary during your salary continuation period. Any amounts to which you may have been entitled will be reimbursed through the normal accounting procedures upon submission of appropriate expense report forms.

If the foregoing clearly and fully reflects our understanding, please so indicate by signing and returning to me the enclosed Severance Agreement and Waiver and Release. Although you may take up to twenty-one (21) days to do so, please return the Waiver as soon as it has been signed. Thereafter, you may revoke the Waiver of claims under the ADEA in writing within seven (7) days by providing me with a letter stating your intent to reject the ADEA portion of the enclosed severance package.

Sincerely,

James P. Williams
Senior Vice President, Human Resources

JPW/sc
Attachments

Personal and Confidential

Mr. Paul M. Isabella
January 16, 2007
Page 7 of 7

I acknowledge receipt of this document and the Waiver And Release.


/s/ Paul Isabella

Employee Signature		Witness

1/18/07

Date		Date

Personal and Confidential

WAIVER AND RELEASE

In consideration of the Company’s agreement to provide me with 1) six (6) months of salary and benefits continuation; 2) to provide conditional salary and benefits continuation for up to an additional six (6) months on a month-to-month basis should I remain unemployed despite a diligent and ongoing search that will cease effective the day immediately proceeding the date my new employment commences; 3) out-placement; 4) 10,000 non-qualified stock options currently vested at $70.94 and 13,333 non-qualified stock options currently vested at $65.36 awarded on April 18, 2005, that will remain exercisable until ninety (90) days after my active employment with Cooper ceases, or April 2, 2007; and 5) 10,000 non-qualified stock options at $70.94 granted to me pursuant to an agreement dated April 18, 2005, that will continue to vest in accordance with the terms of such agreement through February 7, 2007, and that will remain exercisable until ninety (90) days after my active employment with Cooper ceases, or April 2, 2007, 50% of which is consideration for release of any and all claims under the Age Discrimination in Employment Act, as amended (“ADEA”), which I would not otherwise be eligible to receive, I hereby waive and release the Company 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, 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 Americans 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 Fair Credit Reporting Act, the ADEA, the Older Workers Benefit Protection Act, as amended, the Texas Commission on Human Rights Act, the Texas Law on Communicable Diseases, the Texas Equal Pay Act, the Texas Military Leave and Re-Employment Rights Law, the Texas Wage and Hour Laws, 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 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, breach of contract, 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 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, any claims that controlling state law clearly states that may not be released by settlement, and any claims that may arise after the date this release is signed.

I have signed this Agreement voluntarily and without coercion or duress. I acknowledge that I have reviewed all aspects of this Waiver and Release; that I have carefully read and fully understand 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; that I knowingly and willingly intend to be bound by the same; 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

Personal and Confidential

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.

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.

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, caused to be filed, or am 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 this Agreement. 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 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 consideration of this Waiver and Release.

I agree that the Executive Employment Agreement dated March 3, 2006, is attached hereto and incorporated herein by reference. I agree that during the remainder of my employment and for a period of two (2) years following the termination of my employment, I will not become an employee, officer, director, agent, contractor or consultant of, or advisor to, EGS/Appleton, Hubbell Inc., Thomas and Betts Corp., Genlyte-Thomas, Acuity Brands — Lithonia Lighting, LeGrand, Leviton, Littelfuse, Inc., Ferraz Shawmut subsidiary of Groupe Carbone Lorraine, and Hoffman. This paragraph supercedes Section. 10 of the Executive Employment Agreement dated March 3, 2006, which will otherwise remain in full force and effect. I acknowledge and agree that this language constitutes a written amendment as specified in and required by Section. 20 of the Executive Employment Agreement dated March 3, 2006.

I agree that during the remainder of my employment and for a period of two (2) years following the termination of my employment, that I will not, on behalf of myself 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 me, or any entity affiliated with me. This paragraph supercedes Section. 11 of the Executive Employment Agreement dated March 3, 2006, which will otherwise remain in full force and effect. I acknowledge

Personal and Confidential

and agree that this language constitutes a written amendment as specified in and required by Section. 20 of the Executive Employment Agreement dated March 3, 2006.

I agree that during the remainder of my employment and for a period of two (2) years following the termination of my employment, that I will not, on behalf of myself or any other person, firm, company, business or other legal entity, solicit, contact, call upon, initiate communications with or attempt to initiate communications with any customer of the Company for the purpose of selling or providing products similar to or competitive with those manufactured by the Company. This paragraph supercedes Section. 12 of the Executive Employment Agreement dated March 3, 2006, which will otherwise remain in full force and effect. I acknowledge and agree that this language constitutes a written amendment as specified in and required by Section. 20 of the Executive Employment Agreement dated March 3, 2006.

I agree that the Secrecy Agreement and the Invention Assignment and Confidentiality Agreement signed by me on April 19, 2006 (the Agreements), and the accompanying letter to me (the “Letter”) to this Waiver and Release dated January 16, 2007, are incorporated herein by reference and that I understand that my obligations under the Agreements remain in full force and effect.

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 agree that at the request of Cooper or any of its related entities that I shall assist the Company in any threatened or actual litigation concerning the Company or any of its related entities, where I have in my possession or knowledge any facts or other matters which the Company reasonably considers is relevant to such legal proceedings (among other things, giving statements/affidavits, meeting with the Company’s legal and other professional advisers, attending any legal hearing, and giving evidence during my salary continuation period. I further agree that the Company will reimburse me for reasonable expenses properly incurred by me in giving such assistance and if such assistance is required after the completion of my salary continuation period, the Company will pay to me Two Hundred Dollars and No Cents ($200.00) per hour for any time required.

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

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

The validity of this Waiver and Release shall be construed under Texas law. This Waiver and Release, the Executive Employment Agreement, the Agreements, and the Letter 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 this Agreement. I agree that this Agreement shall not be modified, altered, or discharged except by written instrument signed by an authorized Company representative and me.

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

Personal and Confidential

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


Signed by:		For the Company:

/s/ Paul Isabella		/s/ James P. Williams

Paul M. Isabella		James P. Williams


Dated: 1/18/07		Dated: 1/16/07

Witnessed by:

EX-12.0 6 h43741exv12w0.htm COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES exv12w0

Exhibit 12.0

COOPER INDUSTRIES, LTD.
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(Dollar Amounts in Thousands)
(Unaudited)


	Year Ended December 31,
	2006			2005			2004			2003			2002

Interest Expense	$	51,500		$	64,800		$	68,100		$	74,100		$	74,500

Estimated Interest Portion of Rent Expense		10,168			10,583			11,666			12,183			14,679


Fixed Charges	$	61,668		$	75,383		$	79,766		$	86,283		$	89,179


Income from Continuing Operations Before Income Taxes	$	647,700		$	495,000		$	428,500		$	346,500		$	280,200

Add: Fixed Charges		61,668			75,383			79,766			86,283			89,179

Less: Equity in Earnings of 50% or Less Owned Companies		(724	)		(1,328	)		(2,903	)		(2,534	)		(2,969	)


Earnings Before Fixed Charges	$	708,644		$	569,055		$	505,363		$	430,249		$	366,410


Ratio of Earnings to Fixed Charges		11.5x			7.5x			6.3x			5.0x			4.1x

EX-21.0 7 h43741exv21w0.htm SUBSIDIARIES exv21w0

EXHIBIT 21

Updated to
December 31, 2006

SUBSIDIARIES

Cooper has no parent. The subsidiaries of Cooper are listed in groupings that indicate the nature and management of the operations of each. Unless noted herein, all subsidiaries are wholly owned by Cooper or one of its subsidiaries.


		Place of
Name		Incorporation

A. GENERAL CORPORATE ADMINISTRATION

CBE Services, Inc.		Delaware, U.S.
CI Finance, Inc.		Delaware, U.S.
Cooper (China) Co., Ltd.		China
Cooper Bermuda Investments Ltd.		Bermuda
Cooper Bussmann Finance, Inc.		Delaware, U.S.
Cooper Electronic Technologies (Shanghai) Co., Ltd.		China
Cooper Europe Finance LLC		Delaware, U.S.
Cooper Europe Finance SNC		France
Cooper Finance (Bermuda) Ltd.		Bermuda
Cooper Finance (Canada) L.P.		Alberta
Cooper Finance Group L.P.		United Kingdom
Cooper Finance Group, S a.r.l.		Luxembourg
Cooper Finance Investment LLC		Delaware, U.S.
Cooper Finance USA, Inc.		Delaware, U.S.
Cooper France Finance SNC		France
Cooper France Finance, Inc.		Delaware, U.S.
Cooper France Investment LLC		Delaware, U.S.
Cooper Global LLC		Delaware, U.S.
Cooper Holdings Ltd.		Bermuda
Cooper Hungary Group Financing Limited Liability Company		Hungary
Cooper Industries Finanzierungs-GbR		Germany
Cooper Industries Foundation		Ohio, U.S.
Cooper Industries International, LLC		Delaware, U.S.
Cooper Industries Mexico, S. de R.L. de C.V.		Mexico
Cooper Industries, Inc.		Delaware, U.S.
Cooper International Finance, Inc.		Delaware, U.S.
Cooper Investment Group L.P.		United Kingdom
Cooper Investment Group. S a.r.l.		Luxembourg
Cooper Luxembourg Finance S à.r.l.		Luxembourg
Cooper Offshore Holdings Ltd.		Bermuda
Cooper Pensions Limited		United Kingdom
Cooper Power Systems Finance, Inc.		Delaware, U.S.
Cooper Power Tools Finance, Inc.		Delaware, U.S.
Cooper Securities, Inc.		Texas, U.S.
Cooper US, Inc.		Delaware, U.S


		Place of
Name		Incorporation

B. ELECTRICAL PRODUCTS

Alpha Lighting, Inc.		Delaware, U.S.
Arrow-Hart, S.A. de C.V.		Mexico
Atlite Inc.		Delaware, U.S.
Borden/Reaves, Inc.		California, U.S.
Broomco (1644) Limited		United Kingdom
Bussmann do Brasil Ltda.		Brazil
Bussmann International, Inc.		Delaware, U.S.
Bussmann, S. de R.L. de C.V.		Mexico
BZ Holdings Inc.		Delaware, U.S.
Cannon Technologies, Inc.		Minnesota
Capri Codec S.A.S.		France
CEAG Notlichtsysteme GmbH		Germany
Componentes de Iluminacion, S. de R.L. de C.V.		Mexico
Cooper (UK) Group Limited		United Kingdom
Cooper B-Line Limited		United Kingdom
Cooper B-Line, Inc.		Delaware, U.S.
Cooper Business Enterprise (Shanghai) Co., Ltd.		China
Cooper Bussmann, (U.K.) Limited		United Kingdom
Cooper Bussmann India Private Limited		India
Cooper Bussmann, Inc.		Delaware, U.S.
Cooper Corelite, Inc.		Delaware, U.S.
Cooper Crouse-Hinds (UK) Ltd.		United Kingdom
Cooper Crouse-Hinds AS		Norway
Cooper Crouse-Hinds B.V.		Netherlands
Cooper Crouse-Hinds GmbH		Germany
Cooper Crouse-Hinds (LLC) (49% owned by
Cooper Industries International, LLC)		Dubai, U.A.E.
Cooper Crouse-Hinds Pte. Ltd.		Singapore
Cooper Crouse-Hinds, LLC		Delaware, U.S.
Cooper Crouse-Hinds, S.A.		Spain
Cooper Crouse-Hinds, S.A. de C.V.		Mexico
Cooper Electric (Shanghai) Co., Ltd.		China
Cooper Electrical Australia Pty. Limited		Australia
Cooper Electrical France SARL		France
Cooper Electrical International, Inc.		Delaware, U.S.
Cooper Electronic Technologies, Inc.		Florida, U.S.
Cooper Enterprises LLC		Delaware, U.S.
Cooper Industries (Electrical) Inc.		Ontario, Canada
Cooper Industries (U.K.) Limited		United Kingdom
Cooper Industries Holdings GmbH		Germany
Cooper Industries Middle East, LLC		Delaware, U.S.
Cooper Industries Poland, LLC		Poland
Cooper Industries Russia LLC		Russia
Cooper Industries South Africa, LLC		Delaware
Cooper Industries Vietnam, LLC		Delaware
Cooper Lighting and Security Limited		United Kingdom
Cooper Lighting de Mexico, S. de R.L. de C.V.		Mexico
Cooper Lighting, Inc.		Delaware, U.S.


		Place of
Name		Incorporation

B. ELECTRICAL PRODUCTS (cont’d)

Cooper Menvier B.V.		Netherlands
Cooper Menvier France SARL		France
Cooper Menvier S.A.S.		France
Cooper Mexico Distribucion, S. de R.L. de C.V.		Mexico
Cooper Power Systems do Brasil Ltda.		Brazil
Cooper Power Systems Transportation Company		Wisconsin, U.S.
Cooper Power Systems, Inc.		Delaware, U.S.
Cooper Security Limited		United Kingdom
Cooper Shanghai Power Capacitor, Co. Ltd. (65% owned		China
by Cooper China Co., Ltd.)
Cooper Technologies Company		Delaware, U.S.
Cooper Wheelock, Inc.		New Jersey
Cooper Wiring Devices de Mexico, S.A. de C.V.		Mexico
Cooper Wiring Devices Manufacturing, S. de R.L. de C.V.		Mexico
Cooper Wiring Devices, Inc.		New York, U.S.
Cooper Xi’an Fusegear Ltd.		China
Crompton Lighting Holdings Limited		United Kingdom
Crompton Lighting International Limited		United Kingdom
Crompton Lighting Investments Limited		United Kingdom
CTIP Inc.		Delaware, U.S.
Digital Lighting Co., Limited (98% owned by Digital Lighting Holdings		Hong Kong
Limited and 2% owned by Alpha Lighting, Inc.)
Digital Lighting Holdings Limited (50% owned by Alpha Lighting, Inc.)		British Virgin Islands
Dongguan Cooper Electronics Co. Ltd.		China
EAM Asset Management Corp.		Delaware, U.S.
Electromanufacturas, S.A. de C.V.		Mexico
Fulleon Limited		United Kingdom
G&H Technology, Inc.		Delaware
Iluminacion Cooper de las Californias S. de R.L. de C.V.		Mexico
Industrias Royer, S.A. de C.V.		Mexico
McGraw-Edison Development Corporation		Delaware, U.S.
MEDC Limited		United Kingdom
Menvier CSA Srl		Italy
Menvier Group Limited		United Kingdom
Menvier Overseas Holdings Limited		United Kingdom
PCV Incorporated		Delaware, U.S.
PDS Edison Power Systems Co., Ltd.		China
(60% owned by Cooper Power Systems, Inc.)
PowerStor, Inc.		California, U.S.
Pretronica Precisao Electronica Lda.		Portugal
Regent Lighting Corporation		Delaware, U.S.
RL Manufacturing Sdn. Bhd.		Malaysia
RLS Incorporated		Delaware, U.S.
RTE Far East Corporation		Taiwan
Save Fusetech Inc.		Korea
Scantronic Benelux B.V.		Netherlands
Scantronic Holdings Limited		United Kingdom
Scantronic International Limited		United Kingdom


		Place of
Name		Incorporation

B. ELECTRICAL PRODUCTS (cont’d)

Shanghai RLS Lighting Appliance Manufacturing Company, Limited		China
(51% owned by Regent Lighting Corporation)
Silver Light International Limited		British Virgin Islands
Silver Victory Hong Kong Limited		Hong Kong
Sirius Industries, Inc.		Delaware
Societe Civile Immobiliere NOEMY		France
Thomas A. Edison Research & Development Center (Shanghai)		Co., Ltd. China
Univel EPE		Greece
WPI-Boston Division, Inc.		Massachusetts
Viking Electronics, Inc.		Delaware


Place of
Name	Incorporation

C. TOOLS & HARDWARE
Airetool and Yost Superior Realty, Inc.		Ohio, U.S.
(50% owned by Cooper Power Tools, Inc.)
Collins Associates Ltd.		British Virgin Islands
Cooper (Great Britain) Ltd.		United Kingdom
Cooper Brands, Inc.		Delaware, U.S.
Cooper Industries (Canada) Company		Nova Scotia, Canada
Cooper Industries (Canada) Inc.		Ontario Canada
Cooper Industries Australia Pty Limited		Australia
Cooper Industries France SARL		France
Cooper Industries GmbH		Germany
Cooper Industries, LLC		Delaware, U.S.
Cooper Italia S.r.l.		Italy
Cooper Power Tools GmbH & Co. OHG		Germany
Cooper Power Tools GmbH Beteiligungen		Germany
Cooper Power Tools, S.A.S.		France
Cooper Tools B.V.		Netherlands
Cooper Tools de Mexico, S. de R.L. de C.V.		Mexico
Cooper Tools GmbH		Germany
Cooper Tools Hungaria Kft.		Hungary
Cooper Tools Industrial Ltda.		Brazil
Cooper Tools International, LLC		Delaware, U.S.
Cooper Tools Manufacturing, S. de R.L. de C.V.		Mexico
Cooper Tools Pty. Limited		Australia
Cooper Tools S.A.S.		France
Cooper Tools, Inc.		Delaware, U.S.
Deutsche Gardner-Denver Beteiligungs-GmbH		Germany
Empresa Andina de Herramientas, S.A.		Colombia
Erem S.A.		Switzerland
Lufkin Europa B.V.		Netherlands
Metronix Messgerate und Elektronik GmbH		Germany
Societe Civile Immobiliere PRECA		France
Societe Civile Immobiliere R.M.		France
The Cooper Group, Inc.		Delaware, U.S.


		Place of
Name		Incorporation

D. INACTIVE SUBSIDIARIES

B & S Fuses Limited		United Kingdom
Blessing International B.V.		Netherlands
Brownly-Consultadoria e Projectos Lda		Madeira Free Zone
Cooper Controls (U.K.) Limited		United Kingdom
Cooper Industries Australia Pensions Pty Ltd		Australia
Cooper Industries Finance B.V.		Netherlands
Cooper Industries Foreign Sales Company, Limited		Barbados
Cooper Power Tools B.V.		Netherlands
Cortek Internacional, S.A.		Costa Rica
Crouse-Hinds de Venezuela, C.A.		Venezuela
DFL Fusegear Limited		United Kingdom
Eagle Electric MFG. Co. Mexico, S.A. de C.V.		Mexico
Firecom Limited		United Kingdom
Gardner-Denver (Aust.) Pty. Limited		Australia
Gardner-Denver International, C.A.		Venezuela
Hi-Tech Enclosures Limited		United Kingdom
Homelink Telecom Limited		United Kingdom
JSB Electrical Limited		United Kingdom
Kestron Units Limited		United Kingdom
Manufacturing Electrical Design Consultants Limited		United Kingdom
Menvier Limited		United Kingdom
Menvier Security Limited		United Kingdom
MSG Leasing Limited		United Kingdom
Next Loudspeakers Limited		United Kingdom
Next Two (International) Limited		United Kingdom
Next Two Limited		United Kingdom
Regalsafe Limited		United Kingdom
Regent Far East Limited		Hong Kong
Scantronic Limited		United Kingdom
Si-Tronic Srl (49% owned by Scantronic International Limited)		Italy
Transmould Limited		Ireland
WPP, Inc.		Oregon, U.S.

EX-23.1 8 h43741exv23w1.htm CONSENT OF ERNST & YOUNG LLP exv23w1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the following Registration Statements of Cooper Industries, Inc. or Cooper Industries, Ltd. and in each related Prospectus of our report dated February 19, 2007, with respect to the consolidated financial statements of Cooper Industries, Ltd., Cooper Industries, Ltd. management’s assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting of Cooper Industries, Ltd., included in this Annual Report (Form 10-K) for the year ended December 31, 2006.


No. 2-33-14542		Form S-8 Registration Statement for Cooper Industries, Inc. 1989 Employee Stock Purchase Plan

No. 333-136381		Form S-8 Registration Statement for Cooper Industries, Inc. Amended and Restated Directors Stock Plan

No. 333-120337		Form S-8 Registration Statement for Cooper Industries, Inc. Amended and Restated Stock Incentive Plan

No. 333-24237		Form S-3D Registration Statement for Cooper Industries, Inc. Dividend Reinvestment and Stock Purchase Plan

No. 333-101451		Form S-3D Registration Statement for Cooper Industries, Ltd. Dividend Reinvestment and Stock Purchase Plan

No. 333-51439		Form S-8 Registration Statement for Cooper Industries, Inc. Director’s Retainer Fee Stock Plan

No. 333-51441		Form S-8 Registration Statement for Cooper Industries, Inc. Amended and Restated Management Annual Incentive Plan

No. 333-37580		Form S-8 Registration Statement for Cooper (UK) Employee Share Purchase Plan





Houston, Texas February 19, 2007		/s/ Ernst & Young LLP

EX-23.2 9 h43741exv23w2.htm CONSENT OF BATES WHITE, LLC exv23w2

EXHIBIT 23.2

February 16, 2007

Cooper Industries, Ltd.
600 Travis, Suite 5800
Houston, Texas 77002-1001

Ladies and Gentlemen:

We consent to the incorporation by reference in the following Registration Statements of Cooper Industries, Ltd. (the “Company”) and/or Cooper Industries, Inc., as applicable, of the use of our name and the reference to an analysis, with which our firm assisted, concerning the contingent liability exposure of the Company for certain asbestos-related claims, under “Item 3. Legal Proceedings” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, and in Note 16 to its consolidated financial statements for the year ended December 31, 2006.


No. 2-33-14542		Form S-8 Registration Statement for Cooper Industries, Inc. 1989 Employee Stock Purchase Plan

No. 333-136381		Form S-8 Registration Statement for Cooper Industries, Inc. Amended and Restated Directors Stock Plan

No. 333-120337		Form S-8 Registration Statement for Cooper Industries, Inc. Amended and Restated Stock Incentive Plan

No. 333-24237		Form S-3D Registration Statement for Cooper Industries, Inc. Dividend Reinvestment and Stock Purchase Plan

No. 333-101451		Form S-3D Registration Statement for Cooper Industries, Ltd. Dividend Reinvestment and Stock Purchase Plan

No. 333-51439		Form S-8 Registration Statement for Cooper Industries, Inc. Director’s Retainer Fee Stock Plan

No. 333-51441		Form S-8 Registration Statement for Cooper Industries, Inc. Amended and Restated Management Annual Incentive Plan

No. 333-37580		Form S-8 Registration Statement for Cooper (UK) Employee Share Purchase Plan

Sincerely,


/s/ Charles E. Bates, Ph.D.

Charles E. Bates, Ph.D.
President and Senior Partner
Bates White, LLC

EX-24.0 10 h43741exv24w0.htm POWERS OF ATTORNEY exv24w0

Exhibit 24.0

POWER OF ATTORNEY

COOPER INDUSTRIES, LTD.

KNOW ALL MEN BY THESE PRESENTS, that the undersigned director or officer of Cooper Industries, Ltd. (“Cooper”), a Bermuda corporation, does hereby make, constitute and appoint Kevin M. McDonald and Terrance V. Helz, and each of them acting individually, his true and lawful attorney with power to act without the other and with full power of substitution, to execute, deliver and file, for and on behalf of the undersigned, and in his name and in his capacity or capacities as aforesaid, the Cooper Annual Report on Form 10-K with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and any other documents in support thereof or supplemental thereto, with respect to the fiscal year ended December 31, 2006, and any and all amendments thereto. The undersigned hereby grants to said attorneys and each of them full power and authority to do and perform each and every act and thing whatsoever as said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of these presents.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 13th day of February 2007.



	/s/ Stephen G. Butler
	Stephen G. Butler

POWER OF ATTORNEY

COOPER INDUSTRIES, LTD.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 13^th day of February 2007.



	/s/ James J. Postl
	James J. Postl

POWER OF ATTORNEY

COOPER INDUSTRIES, LTD.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 13^th day of February 2007.



	/s/ Gerald B. Smith
	Gerald B. Smith

POWER OF ATTORNEY

COOPER INDUSTRIES, LTD.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 13th day of February 2007.



	/s/ James R. Wilson
	James R. Wilson

EX-31.1 11 h43741exv31w1.htm CERTIFICATION OF CEO PURSUANT TO SECTION 302 exv31w1

Exhibit 31.1

Certifications

I, Kirk S. Hachigian, certify that:

	1.		I have reviewed this report on Form 10-K of Cooper Industries, Ltd.;

	2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

	a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: February 21, 2007	/s/ Kirk S. Hachigian
	Kirk S. Hachigian
	Chairman, President and Chief Executive Officer

EX-31.2 12 h43741exv31w2.htm CERTIFICATION OF CFO PURSUANT TO SECTION 302 exv31w2

Exhibit 31.2

I, Terry A. Klebe, certify that:

	1.		I have reviewed this report on Form 10-K of Cooper Industries, Ltd.;

	2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

	a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

	a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: February 21, 2007	/s/ Terry A. Klebe
	Terry A. Klebe
	Senior Vice President and Chief Financial Officer

EX-32.1 13 h43741exv32w1.htm CERTIFICATION OF CEO PURSUANT TO SECTION 906 exv32w1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Cooper Industries, Ltd. (the “Company”) on Form 10-K for the period ended December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kirk S. Hachigian, Chairman, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

	(1)		The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	(2)		The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



/s/ Kirk S. Hachigian
Kirk S. Hachigian
Chairman, President and Chief Executive Officer

February 21, 2007

EX-32.2 14 h43741exv32w2.htm CERTIFICATION OF CFO PURSUANT TO SECTION 906 exv32w2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Cooper Industries, Ltd. (the “Company”) on Form 10-K for the period ended December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Terry A. Klebe, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

	(1)		The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	(2)		The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



/s/Terry A. Klebe
Terry A. Klebe
Senior Vice President and Chief Financial Officer

February 21, 2007

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