AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 3, 2002
REGISTRATION NO. 333-62740
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
POST-EFFECTIVE
AMENDMENT NO. 2
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
--------------
COOPER INDUSTRIES, LTD.
(Exact Name of Registrant as Specified in its Charter)
BERMUDA 3640 NOT APPLICABLE
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
600 TRAVIS, SUITE 5800
HOUSTON, TEXAS 77002-1001
TELEPHONE: (713) 209-8400
FACSIMILE: (713) 209-8989
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
DIANE K. SCHUMACHER, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
COOPER INDUSTRIES, INC.
600 TRAVIS, SUITE 5800
HOUSTON, TEXAS 77002-1001
TELEPHONE: (713) 209-8400
FACSIMILE: (713) 209-8989
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code of Agent for Service)
--------------
Copies to:
MARGARET L. WOLFF, ESQ.
SEAN C. DOYLE, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
FOUR TIMES SQUARE
NEW YORK, NEW YORK 10036-6522
(212) 735-3000
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective and all other
conditions to the merger contemplated by the Agreement and Plan of Merger
described in the enclosed proxy statement/prospectus have been satisfied or
waived.
--------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[ ]
--------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
================================================================================
[COOPER LOGO]
April 3, 2002
Dear Fellow Shareholder:
We are pleased to present for your approval a proposal for reorganizing
your company and changing its place of incorporation from Ohio to Bermuda. If
the reorganization is completed, the shares you own of Cooper Industries, Inc.
(which we refer to as Cooper Ohio) will automatically become Class A common
shares of Cooper Industries, Ltd., a Bermuda company that we recently formed
(which we refer to as Cooper Bermuda). The number of Cooper Bermuda shares you
will own will be the same as the number of Cooper Ohio shares you own
immediately prior to the completion of the reorganization, and your relative
economic ownership in the company will remain unchanged. After completion of the
reorganization, Cooper Bermuda and its subsidiaries will continue to conduct the
business now conducted by Cooper Ohio and its subsidiaries.
As you are undoubtedly aware, we initially announced the reorganization
in June 2001. However, in August we decided to postpone your consideration of
the reorganization following the board of directors' authorization of a process
to pursue every reasonable strategic alternative that could maximize the value
of your shares, including a sale of Cooper Ohio in whole or in parts. Following
the recent completion of this strategic alternatives review process, the board
of directors concluded that it is in your best interests to move forward with
our previously announced reorganization. Our strategic alternatives review
process was very careful, deliberate and complete in analyzing how best to
maximize shareholder value, however, as a result of intervening circumstances,
including the tragic events of September 11, 2001, the bankruptcy of
Federal-Mogul Corporation and a very difficult business environment, we received
no definitive proposals to acquire the company in whole or in parts.
We are very excited about the opportunities presented by a Bermuda
reincorporation. We believe this change will facilitate the growth of your
company by enabling it to gain business, financial and strategic advantages that
are not available under our current corporate structure. For example, expansion
of the company's international business is an important part of our business
strategy and significant growth opportunities exist in the international
marketplace. The reorganization should enhance our competitiveness regarding
these opportunities. It should also increase our operational flexibility,
improve our global tax position and cash flow, and increase our capacity to
reduce debt and repurchase stock. Additionally, the company should be a more
attractive investment alternative to a wider range of investors.
Generally, for U.S. federal income tax purposes shareholders of Cooper
Ohio who are U.S. holders will recognize gain, if any, but not loss, on the
receipt of Cooper Bermuda Class A common shares in exchange for Cooper Ohio
common stock pursuant to the reorganization. Further, the holding period for any
Cooper Bermuda common shares received by a U.S. holder recognizing gain with
respect to the reorganization should begin the day after the effective date of
the reorganization. WE URGE YOU TO CONSULT YOUR OWN TAX ADVISORS REGARDING YOUR
PARTICULAR TAX CONSEQUENCES OF THE REORGANIZATION.
Cooper Ohio common stock is currently traded on the New York Stock
Exchange under the symbol "CBE" and, immediately following the reorganization,
Cooper Bermuda Class A common shares will be traded on the NYSE under the same
symbol. This proxy statement/prospectus provides you with detailed information
regarding the reorganization. We encourage you to read this entire document
carefully. PLEASE CONSIDER THE RISK FACTORS BEGINNING ON PAGE 12.
The reorganization cannot be completed unless the holders of a majority
of our outstanding shares on April 2, 2002 approve it. The reorganization will
be accomplished through a merger of a newly formed acquisition company into
Cooper Ohio, which will be the surviving company and continue to exist. Cooper
Bermuda will become the parent holding company of Cooper Ohio. Your board of
directors has approved the Agreement and Plan of Merger to facilitate the
reorganization, and it recommends that you vote "FOR" its adoption.
We urge you to join us in supporting this important opportunity.
H. JOHN RILEY, JR.
Chairman, President and
Chief Executive Officer
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This proxy statement/prospectus is dated April 3, 2002 and is first
being mailed to shareholders on or about April 9, 2002.
[COOPER LOGO]
COOPER INDUSTRIES, INC.
600 Travis, Suite 5800
Houston, Texas 77002-1001
--------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 14, 2002
--------------
To the Shareholders of Cooper Industries, Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting of the Shareholders of
Cooper Industries, Inc. will be held at the Four Seasons Hotel, 1300 Lamar
Street, Houston, Texas on Tuesday, May 14, 2002 at 10:00 a.m. for the following
purposes:
1. To adopt the Agreement and Plan of Merger, substantially
in the form attached to the accompanying proxy
statement/prospectus as annex I, among Cooper Industries, Inc.,
Cooper Mergerco, Inc. and Cooper Industries, Ltd., a Bermuda
company, whereby the company will effectively change its place of
incorporation from Ohio to Bermuda by merging Cooper Mergerco,
Inc. with Cooper Industries, Inc., which will be the surviving
entity and become a wholly-owned, indirect subsidiary of Cooper
Industries, Ltd., and pursuant to which each share of Cooper
Industries, Inc. will automatically become a share of Cooper
Industries, Ltd. and all current shareholders of Cooper
Industries, Inc. will become shareholders of Cooper Industries,
Ltd.; and
2. To transact such other business as may properly come
before the special meeting.
The board of directors has fixed the close of business on April 2, 2002
as the record date for determination of shareholders entitled to notice of, and
to vote at, the special meeting and any adjournments or postponements thereof.
YOUR VOTE IS VERY IMPORTANT. TO ENSURE THAT YOUR SHARES ARE REPRESENTED,
YOU SHOULD VOTE YOUR PROXY VIA THE INTERNET, BY TELEPHONE OR BY COMPLETING,
SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT PROMPTLY IN THE
ENCLOSED ENVELOPE, WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING. YOU
MAY REVOKE YOUR PROXY AND VOTE IN PERSON IF YOU DECIDE TO ATTEND THE MEETING.
By order of the board of directors:
DIANE K. SCHUMACHER
Senior Vice President and General Counsel
April 3, 2002
TABLE OF CONTENTS
PAGE
----
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS...................................................................iii
QUESTIONS AND ANSWERS ABOUT THE REORGANIZATION................................................................................1
What am I Being Asked to Vote On?.................................................................................1
SUMMARY.......................................................................................................................5
Parties to the Merger.............................................................................................5
The Reorganization................................................................................................6
Reasons for the Reorganization....................................................................................7
Conditions to Consummation of the Reorganization..................................................................7
U.S. Federal Income Tax Consequences to Shareholders..............................................................7
Rights of Shareholders............................................................................................8
Stock Exchange Listing; Recent Stock Prices.......................................................................8
Rights of Dissenting Shareholders.................................................................................8
Accounting Treatment of the Reorganization........................................................................8
Special Meeting...................................................................................................8
Recommendation of the Board of Directors..........................................................................9
Vote Required.....................................................................................................9
Proxies...........................................................................................................9
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA..............................................................................10
SUMMARY PRO FORMA FINANCIAL INFORMATION......................................................................................11
RISK FACTORS.................................................................................................................12
THE REORGANIZATION...........................................................................................................15
Structure of the Reorganization..................................................................................15
Background and Reasons for the Reorganization....................................................................15
The Merger Agreement.............................................................................................18
Conditions to Consummation of the Merger.........................................................................18
Effective Time...................................................................................................18
Amendment or Termination.........................................................................................18
Automatic Share Conversion.......................................................................................19
Management of Cooper Bermuda.....................................................................................19
Required Vote for the Reorganization.............................................................................19
Rights of Dissenting Shareholders................................................................................20
Dividends........................................................................................................21
Stock Compensation Plans.........................................................................................22
Stock Exchange Listing...........................................................................................22
Accounting Treatment of The Reorganization.......................................................................22
THE SPECIAL MEETING..........................................................................................................23
When and Where the Special Meeting Will be Held..................................................................23
What Will be Voted Upon..........................................................................................23
Only Cooper Ohio Shareholders of Record as of April 2, 2002 Are Entitled to Vote.................................23
Majority of Outstanding Shares Must be Represented For a Vote to be Taken........................................23
Vote Required For Approval.......................................................................................23
Voting Your Shares and Changing Your Vote........................................................................23
How Proxies Are Counted..........................................................................................24
Cost of Solicitation.............................................................................................25
DESCRIPTION OF AUTHORIZED SHARES OF COOPER INDUSTRIES, LTD...................................................................26
Authorized Share Capital.........................................................................................26
Voting...........................................................................................................26
Dividend Rights..................................................................................................26
Redemption and Conversion........................................................................................27
Stock Exchange Listing...........................................................................................27
Changes to Rights of a Class or Series...........................................................................27
Quorum for General Meetings......................................................................................28
Rights upon Liquidation..........................................................................................28
Sinking Fund.....................................................................................................28
Liability for Further Calls or Assessments.......................................................................28
Preemptive Rights................................................................................................28
Repurchase Rights................................................................................................28
Compulsory Acquisition of Shares Held by Minority Holders........................................................28
Transfer Agent...................................................................................................29
Preferred Shares.................................................................................................29
Anti-Takeover Provisions.........................................................................................29
COMPARISON OF RIGHTS OF SHAREHOLDERS.........................................................................................31
INCOME TAX CONSEQUENCES OF THE REORGANIZATION................................................................................39
U.S. Federal Income Tax Consequences to Shareholders.............................................................39
Bermuda Income Tax Consequences of the Reorganization............................................................42
EXPERTS......................................................................................................................43
LEGAL MATTERS................................................................................................................43
PROPOSALS OF SHAREHOLDERS....................................................................................................43
WHERE YOU CAN FIND MORE INFORMATION..........................................................................................44
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..............................................................................44
ANNEX I - AGREEMENT AND PLAN OF MERGER
ANNEX II - MEMORANDUM OF ASSOCIATION OF COOPER INDUSTRIES, LTD.
ANNEX III - AMENDED AND RESTATED BYE-LAWS OF COOPER INDUSTRIES, LTD.
ANNEX IV - SECTION 1701.85 OF THE OHIO GENERAL CORPORATION LAW
ii
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This document contains or incorporates by reference forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 with respect to the reorganization and our financial condition, results of
operations and business. This Act protects public companies from liability for
forward-looking statements in private securities actions if the forward-looking
statement is identified and is accompanied by meaningful cautionary statements
identifying important factors that could cause actual results to differ
materially. Forward-looking statements by their nature involve a degree of risk
and uncertainty, including, but not limited to, the risks and uncertainties
referred to under "Risk Factors" and elsewhere herein. All statements regarding
the expected benefits of the reorganization are forward-looking statements. The
forward-looking statements may include statements for the period following
completion of the reorganization. You can find many of these statements by
looking for words such as "believes," "expects," "anticipates," "estimates,"
"continues," "may," "intends," "plans" or similar expressions in this document
or in the documents incorporated by reference. You should be aware that any
forward-looking statements in this document only reflect current expectations
and are not guarantees of performance.
We have identified factors that could cause actual plans or results to
differ materially from those included in any forward-looking statements. These
factors include, but are not limited to:
o an inability to realize expected benefits of the
reorganization within the anticipated time frame, or at all;
o changes in tax laws, tax treaties or tax regulations and the
interpretation or enforcement thereof or differing
interpretation or enforcement of applicable law by the U.S.
Internal Revenue Service or other tax authority;
o an inability to execute our business strategy;
o costs or difficulties related to the reorganization and
related transactions, which could be greater than expected;
o changes in the rate of economic growth in the United States
and other major international economies;
o changes in trade, monetary and fiscal policies worldwide;
o currency fluctuations;
o outcomes of pending and future litigation;
o increasing competition by foreign and domestic companies;
o resolution of potential liability exposure resulting from
Federal-Mogul Corporation's bankruptcy filing;
o changes in capital needs; and
o changing rates of inflation and other economic or business
conditions.
Actual results may differ materially from those expressed or implied by
forward-looking statements. As you make your decision how to vote, please take
into account that forward-looking statements speak only as of the date of this
document or, in the case of documents incorporated by reference, the date of any
such document.
iii
QUESTIONS AND ANSWERS ABOUT THE REORGANIZATION
WHAT AM I BEING ASKED TO VOTE ON?
You are being asked to vote in favor of a merger by which Cooper Ohio
will become a wholly-owned, indirect subsidiary of a new holding company, Cooper
Bermuda. Your shares of Cooper Ohio common stock will automatically become an
identical number of Cooper Bermuda Class A common shares.
HOW WILL THE REORGANIZATION BE ACCOMPLISHED?
A new Ohio company, which has been formed specifically for the merger,
will merge into Cooper Ohio. Cooper Ohio will be the surviving company in the
merger and become a wholly-owned, indirect subsidiary of Cooper Bermuda. As a
result of the merger, each currently outstanding share of Cooper Ohio will
automatically convert into a Class A common share of Cooper Bermuda. This
procedure allows you to become a shareholder in Cooper Industries, Ltd., the new
Bermuda parent company of the entire Cooper Industries group. After this merger,
you will own an interest in a Bermuda holding company which, together with its
subsidiaries, will continue to be engaged in the same business that Cooper Ohio
and its subsidiaries were engaged in before the merger. The additional steps in
the reorganization are fully described in "The Reorganization -- Structure of
the Reorganization" on page 15. YOUR PROPORTIONATE OWNERSHIP AND RELATIVE VOTING
RIGHTS WILL NOT CHANGE AS A RESULT OF THE REORGANIZATION.
WHAT ARE THE BENEFITS TO THE COMPANY OF COMPLETING THIS REORGANIZATION?
We believe that a significant portion of our business is currently, and
in the future a greater portion will be, generated from non-U.S. markets. We
believe the reorganization will allow us to take advantage of financial and
other business opportunities that are not available under our current corporate
structure, including:
o Maximization of our potential business growth and cash flow;
o Improvement of our worldwide effective tax rate;
o Use of the greater cash flow to invest for further earnings growth,
including by developing higher growth product lines and acquiring
complementary higher growth electrical and electronic businesses;
o Use of the greater cash flow to reduce the amount of our debt and
repurchase stock; and
o Expansion of our investor base as our Company's shares may become more
attractive to non-U.S. investors.
See "The Reorganization -- Background and Reasons for the Reorganization" on
page 15 in this proxy statement/prospectus.
It is important to note that several members of the United States
Congress have introduced legislation that, if enacted, would have the effect of
substantially reducing or eliminating the anticipated tax benefits of the
transaction. In addition, several other members of the United States Congress
and the Treasury Department have recently announced the intent to investigate
transactions such as the reorganization. As a result, changes in the tax laws,
tax treaties or tax regulations may occur, with prospective or retroactive
effect, which would have a material adverse effect on the tax consequences of
the reorganization to the company or the tax consequences of the future
operations of the reorganized company and its subsidiaries. If in response to
any such changes the reorganized company or its subsidiaries undertake a
corporate restructuring, such restructuring could result in additional material
adverse tax consequences to the company or its shareholders.
WILL THE REORGANIZATION DILUTE MY OWNERSHIP INTEREST?
No. The reorganization will not dilute your ownership interest.
Immediately after the reorganization is consummated you will own the same
percentage of Cooper Bermuda Class A common shares as you own of Cooper Ohio
common stock immediately prior to the completion of the reorganization. In the
reorganization, Cooper Bermuda will issue its Class B common shares to Cooper
Ohio. Only Cooper Ohio and other wholly-owned subsidiaries of Cooper Bermuda
will own the Class B common shares. Consequently, the Cooper Bermuda Class B
common shares that are held by Cooper Ohio will not dilute your ownership
interest because Cooper Ohio will be a wholly-owned, indirect subsidiary of
Cooper Bermuda.
The Cooper Bermuda Class B common shares are convertible by the holder
into Class A common shares in two circumstances: (1) to satisfy obligations
under stock plans of Cooper Bermuda and its subsidiaries and (2) as
consideration for acquisitions. See "Description of Authorized Shares of Cooper
Industries, Ltd. -- Redemption and Conversion" on page 27 in this proxy
statement/prospectus.
WHY IS THE COMPANY PROPOSING THIS REORGANIZATION?
The reorganization proposal was initially announced in June 2001 and
was postponed following the decision of the board of directors of Cooper Ohio in
August 2001 to authorize a process to review Cooper Ohio's strategic
alternatives. At that time, Cooper Ohio was authorized to pursue every
reasonable alternative that could maximize value for shareholders, including a
sale of Cooper Ohio in whole or in parts. After a careful, deliberate and
complete review of all the available alternatives with management and its
advisors, the board of directors concluded that it is in the best interests of
the Cooper shareholders to move forward with the previously announced
reorganization.
The objective of the reorganization is to enhance shareholder value.
However, we cannot predict what impact, if any, the reorganization will have in
the long-term in light of the fact that the achievement of our objectives
depends on many things, including changes in the tax laws and treaties of the
various jurisdictions where we operate which may reduce or eliminate any
improvement in our global tax rate.
WILL COOPER OHIO SHAREHOLDERS BE TAXED AS A RESULT OF THE REORGANIZATION?
Generally, for U.S. federal income tax purposes, shareholders who are
U.S. holders will recognize gain, if any, but not loss, on the receipt of Cooper
Bermuda Class A common shares in the merger. Such a holder will generally
recognize gain equal to the difference, if any, between the fair market value of
the Cooper Bermuda Class A common shares received in exchange for Cooper Ohio
common stock in the merger and the holder's adjusted tax basis in the holder's
shares of Cooper Ohio common stock exchanged therefor. Generally, any such gain
will be capital gain. Further, the holding period for any gain with respect to
the reorganization should begin the day after the effective date of the
reorganization. Shareholders will not be permitted to recognize any loss
realized on the exchange of their shares of Cooper Ohio common stock in the
merger, but their aggregate adjusted tax basis in the Cooper Bermuda Class A
common shares received would equal the aggregate adjusted tax basis of their
shares of Cooper Ohio common stock. Thus, any loss would be preserved.
WE URGE YOU TO CONSULT YOUR OWN TAX ADVISORS REGARDING YOUR PARTICULAR
TAX CONSEQUENCES OF THE REORGANIZATION.
WILL COOPER OHIO BE TAXED AS A RESULT OF THE REORGANIZATION?
Based on current estimates of the fair market value of the assets
transferred to Cooper Bermuda in connection with the reorganization, we believe
that Cooper Ohio will not incur a material amount of U.S. federal income or
withholding tax as a result of the reorganization. It should be noted, however,
that the IRS may not agree with this conclusion. If the IRS were to successfully
challenge this conclusion, this could have a material adverse effect on the
company.
It is important to note that several members of the United States
Congress have introduced legislation that, if enacted, would have the effect of
substantially reducing or eliminating the anticipated tax benefits of the
transaction. In addition, several other members of the United States Congress
and the Treasury Department have recently announced the intent to investigate
transactions such as the reorganization. As a result, changes in the tax laws,
tax treaties or tax regulations may occur, with prospective or retroactive
effect, which would have a material adverse effect on the tax consequences of
the reorganization to the company or the tax consequences of the future
operations of the reorganized company and its subsidiaries. If in response to
any such changes the reorganized company or its subsidiaries undertake a
corporate restructuring, such restructuring could result in additional material
adverse tax consequences to the company or its shareholders.
WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
We hope to complete the merger shortly after the special meeting of
Cooper Ohio shareholders, assuming that it is approved by shareholders at that
meeting.
WHY WAS BERMUDA SELECTED AS THE DOMICILE OF THE NEW PARENT COMPANY?
We chose Bermuda for its political stability, legal framework and
business friendly environment. The first international (i.e., not locally owned)
company was incorporated in Bermuda in the 1930s, and there are currently many
companies domiciled there which are publicly traded on U.S. and European
markets. Under current Bermuda law, a Bermuda company is not
2
required to pay taxes in Bermuda on either income or capital gains. In addition,
despite certain differences, the corporate legal system, based on English law,
is such that your rights as a Cooper Bermuda shareholder will be substantially
unchanged from your rights as a shareholder in Cooper Ohio. We encourage you to
read the section "Comparison of Rights of Shareholders" beginning on page 31 for
a more detailed description of the differences between your rights under Ohio
law and under Bermuda law.
WILL THE PROPOSAL AFFECT CURRENT OPERATIONS? WHAT ABOUT THE FUTURE?
The reorganization, which will move the company's place of
incorporation from Ohio to Bermuda, will have no immediate impact on how we
conduct day-to-day operations. The location of future operations will depend on
the needs of the business, independent of our place of incorporation.
WHAT VOTE IS REQUIRED TO APPROVE THE TRANSACTION?
In order for us to change our domicile, we need affirmative votes from
a majority of the voting power of Cooper Ohio. SHARES FOR WHICH NO VOTES ARE
CAST WILL BE TREATED AS THOUGH THEY WERE VOTED AGAINST THE AGREEMENT AND PLAN OF
MERGER, SO IT IS VERY IMPORTANT FOR ALL SHAREHOLDERS TO VOTE. See "Special
Meeting -- Vote Required For Approval" on page 23.
WILL I BE ABLE TO TRADE MY SHARES DURING THE TIME IT TAKES TO COMPLETE THE
REORGANIZATION?
Yes. You will be able to trade your shares during the time it takes to
complete the reorganization.
HOW DO I VOTE IF MY SHARES ARE REGISTERED IN MY NAME?
After you read this document, you may vote by any one of the following
methods:
(1) CALL 1-877-779-8683 from the U.S. or Canada (this call is toll
free) or 001-201-536-8073 from all other countries to vote by telephone
anytime up to 12:00 midnight, New York time on May 13, 2002; or
(2) GO TO THE WEBSITE: http://www.eproxyvote.com/cbe to vote over the
Internet anytime up to 12:00 midnight, New York time on May 13,
2002; or
(3) MARK, SIGN, DATE AND MAIL your proxy card in the enclosed
postage-prepaid envelope. If you are voting by telephone or by the
Internet, please do not return your proxy card.
Please vote as soon as possible even if you currently plan to attend
the meeting in person, so that your shares may be represented and voted at the
special meeting.
HOW DO I VOTE MY SHARES IN THE COOPER INDUSTRIES, INC. RETIREMENT SAVINGS AND
STOCK OWNERSHIP PLAN ("CO-SAV")?
If you hold shares of Cooper Ohio through CO-SAV, you must instruct the
CO-SAV Trustee, J.P. Morgan Chase Bank, how to vote your shares. The CO-SAV
shares are included in your proxy and you instruct the Trustee how to vote your
shares by simply submitting your proxy by one of the three methods described
above for registered shareholders. If you do not properly submit your proxy (or
if you submit your proxy with an unclear voting designation or with no voting
designation at all), then the Trustee will vote the shares in your CO-SAV
account in proportion to the way the other CO-SAV participants vote their
shares. The Trustee will also vote Cooper Ohio common shares not yet allocated
to participants' accounts in proportion to the way that CO-SAV participants vote
their shares.
HOW DO I VOTE IF MY BROKER HOLDS MY SHARES IN STREET NAME?
After you read this document, you should follow the voting instructions
provided by your broker.
IF MY BROKER HOLDS MY SHARES IN "STREET NAME," WILL MY BROKER VOTE MY SHARES FOR
ME?
NO. IF YOU DO NOT PROVIDE YOUR BROKER WITH INSTRUCTIONS ON HOW TO VOTE
YOUR "STREET NAME" SHARES, YOUR BROKER WILL NOT BE PERMITTED TO VOTE THEM. You
should complete and return the enclosed form of proxy or be sure to provide your
broker with instructions on how to vote your shares.
WHAT DO I DO IF I WANT TO CHANGE MY VOTE?
There are three ways in which you may revoke your proxy and change your
vote:
o First, you may send a written notice to our proxy solicitor,
Georgeson Shareholder Communications, Inc., stating that you
would like to revoke your proxy. This
3
notice must be received prior to the special meeting.
o Second, you may complete and submit a new, later-dated proxy
by any of the three methods described above. The latest dated
proxy actually received by Cooper Ohio prior to the special
meeting will be the one that is counted, and all earlier
proxies will be revoked.
o Third, you may attend the special meeting and vote in person.
Simply attending the meeting, however, will not revoke your
proxy. You must vote in person at the meeting to revoke your
proxy.
If you have instructed a broker to vote your shares, you must follow
directions received from your broker to change or revoke your proxy.
DO I HAVE TO EXCHANGE MY STOCK CERTIFICATES?
No. After the merger is completed, your stock certificates will
automatically represent the same number of Cooper Bermuda Class A common shares.
For further information, please see "The Reorganization -- Automatic Share
Conversion" on page 19.
WHO DO I CONTACT WITH FURTHER QUESTIONS?
Please call the company's proxy solicitor, Georgeson Shareholder
Communications, Inc. at (800) 223-2064, or write us at Office of the Secretary,
Cooper Industries, Inc., P.O. Box 4446, Houston, Texas 77210-4446.
4
SUMMARY
This summary highlights selected information from this proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the merger and other transactions more fully and
for a more complete description of the legal terms of the merger, you should
read carefully this entire proxy statement/prospectus, including the annexes,
and the other documents we have referred you to. See "Where You Can Find More
Information." The Agreement and Plan of Merger is attached as annex I to this
proxy statement/prospectus. The Memorandum of Association and Bye-laws that will
govern our company once we are incorporated in Bermuda are attached as annexes
II and III.
PARTIES TO THE MERGER
Cooper Industries, Inc.
Cooper Ohio was incorporated under the laws of the State of Ohio on
January 8, 1919. Cooper operates in two business segments: Electrical Products
and Tools & Hardware. Cooper manufactures, markets and sells its products and
provides services throughout the world. Cooper has manufacturing facilities in
21 countries and currently employs approximately 30,500 people. With its two
business segments, Cooper serves four major markets: industrial/utility,
construction, electronics/telecom and energy. Markets for Cooper's products and
services are worldwide, though the United States is the largest market.
The Electrical Products segment manufactures, markets and sells
electrical and circuit protection products, including fittings, support systems,
enclosures, wiring devices, plugs, receptacles, lighting fixtures, fuses,
emergency lighting, fire detection systems and security products for use in
residential, commercial and industrial construction, maintenance and repair, and
electronics and telecom 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, pole line hardware and other related power systems components. 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 and thousands of independent
distributors.
The Tools & Hardware 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
segment's products are sold by a company sales force, independent distributors
and retailers.
Cooper Industries, Ltd.
Cooper Bermuda is a newly formed Bermuda company and is currently
wholly-owned by Cooper Ohio. Cooper Bermuda has no significant assets or
capitalization and has not engaged in any business or other activities other
than in connection with its formation and the reorganization and related
transactions. As a result of the reorganization, it will become the indirect
parent holding company of Cooper Ohio.
Cooper Mergerco, Inc.
Cooper Mergerco, Inc. is a newly formed Ohio corporation and a
wholly-owned, indirect subsidiary of Cooper Bermuda. Cooper Mergerco was formed
to accomplish the proposed merger. It has no significant assets or
capitalization and has not engaged in any business or other activities except in
connection with its formation and the reorganization and related transactions.
The principal executive offices of Cooper Ohio, Cooper Bermuda and
Cooper Mergerco are located at 600 Travis, Suite 5800, Houston, Texas
77002-1001. The telephone number of each party at that address is (713)
209-8400. The principal registered office of Cooper Bermuda is located at Cedar
House, 41 Cedar Avenue, Hamilton HM 12, Bermuda.
5
THE REORGANIZATION (SEE PAGE 15)
We initially announced the reorganization in June 2001. However, in
August we decided to postpone your consideration of the reorganization following
the board of directors' authorization of a process to pursue every reasonable
strategic alternative that could maximize the value of your shares, including a
sale of Cooper Ohio in whole or in parts. Following the recent completion of
this strategic alternatives review process, the board of directors concluded
that it is in your best interests to move forward with our previously announced
reorganization. Our strategic alternatives review process was very careful,
deliberate and complete in analyzing how best to maximize shareholder value,
however, as a result of intervening circumstances, including the tragic events
of September 11, 2001, the bankruptcy of Federal-Mogul Corporation and a very
difficult business environment, we received no definitive proposals to acquire
the company in whole or in parts. Please read the section entitled "The
Reorganization -- Background and Reasons for the Reorganization -- Background"
for a more detailed description of the events that took place since June 2001.
Our board of directors has approved and recommends that you adopt the
Agreement and Plan of Merger which effectively changes your company's place of
incorporation from Ohio to Bermuda. The reorganization will be accomplished
through the merger of Cooper Mergerco into Cooper Ohio. Cooper Ohio will be the
surviving company in the merger and become a wholly-owned, indirect subsidiary
of Cooper Bermuda. The terms of the merger are set forth in the Agreement and
Plan of Merger attached as annex I to this proxy statement/prospectus. As a
result of the merger, your shares of Cooper Ohio common stock will automatically
become Cooper Bermuda Class A common shares so that you will own shares in a
Bermuda corporation rather than an Ohio corporation. For a more detailed
description of the differences between your rights under Ohio law and under
Bermuda law, please see "Comparison of Rights of Shareholders" on page 31. After
completion of the reorganization, Cooper Bermuda and its subsidiaries will
continue to conduct the business that Cooper Ohio and its subsidiaries now
conduct.
The reorganization involves the following steps:
1. As part of the reorganization, Cooper Ohio will transfer
the shares of certain subsidiaries (the "Transferred Assets") to Cooper
Bermuda in exchange for that number of Cooper Bermuda Class B common
shares, par value US$.01 per share, which has a fair market value equal
to the fair market value of the Transferred Assets. For U.S. federal
income and withholding tax purposes, Cooper Ohio will be required to
recognize gain, but not loss, on any assets transferred to Cooper
Bermuda in the reorganization. Based on current estimates of the fair
market value of the Transferred Assets, we believe that Cooper Ohio
will not incur a material amount of U.S. federal income or withholding
taxes as a result of this transaction. For a description of the terms
of the Cooper Bermuda Class B common shares, please see the discussion
under "Description of Authorized Shares of Cooper Industries, Ltd." on
page 26.
2. Cooper Mergerco will merge into Cooper Ohio. Cooper Ohio
will be the surviving entity and become a wholly-owned, indirect
subsidiary of Cooper Bermuda.
3. In the merger, the outstanding shares of Cooper Ohio will
automatically convert by operation of law into Class A common shares of
Cooper Bermuda, and the current shareholders of Cooper Ohio will own
exactly the same number of Cooper Bermuda Class A common shares as they
currently own in Cooper Ohio. For a description of the terms of the
Cooper Bermuda Class A common shares, please see the discussion under
"Description of Authorized Shares of Cooper Industries, Ltd." on page
26.
4. Immediately following the merger, the number of Cooper
Bermuda Class B common shares owned by Cooper Ohio will be adjusted to
reflect the relative fair market values as of the effective date of the
Transferred Assets and Cooper Ohio, based on the market value of the
Cooper Ohio common shares. We currently estimate the aggregate number
of Class B common shares to be issued in the exchange to be
approximately 54 million.
Shareholders are not required to exchange their stock certificate(s) as
a result of the merger. Each outstanding certificate representing shares of
Cooper Ohio shall automatically represent the same number of Cooper Bermuda
Class A common shares. Following the merger, certificates bearing the name of
Cooper Bermuda will be issued in the normal course upon surrender of
certificates bearing the name of Cooper Ohio for exchange or transfer.
6
REASONS FOR THE REORGANIZATION (SEE PAGE 15)
International activities are an important part of our current business.
Expansion of our international business is an important part of our current
business strategy and significant growth opportunities exist in the
international marketplace. Growth through acquisitions and investment in higher
growth product lines are also important parts of our strategy. We believe that
reorganizing as a Bermuda corporation will allow us to implement our business
strategy more effectively.
We believe that the reorganization should improve our global tax
position and should maximize potential growth and cash flow. We anticipate that
the reorganization may result in significant tax savings net of tax costs. These
savings are expected to result in a reduction in our annual effective tax rate
from approximately 32% to within a range from 20% to 25% over the next several
years as a result of the reorganization and transferring the Transferred Assets
to Cooper Bermuda, after accounting for (1) taxes, if any, incurred on the
transfer of the Transferred Assets to Cooper Bermuda, (2) taxes incurred by
Cooper Ohio with respect to distributions on the Cooper Bermuda Class B common
shares, and (3) the taxability of any gains realized by Cooper Ohio with respect
to any disposition of the Cooper Bermuda Class B common shares. However, we
cannot give any assurance as to what our annual effective tax rate will be after
the reorganization. After the reorganization our tax rate will depend on, among
other things, the level and geographic mix of our earnings and changes in tax
laws, treaties and policies and the interpretation of such laws, treaties and
policies in the jurisdictions where we operate which may reduce or eliminate any
improvements in our global tax position. Our actual effective tax rate may vary
materially from our expectation.
Any improvement in our cash flow will allow the company to develop
higher growth product lines and to acquire higher-growth electrical and
electronic businesses. Increased cash flow would also put the company in a
better position to reduce the amount of its debt.
We believe that the reorganization will increase the company's
attractiveness to non-U.S. investors and result in a more favorable corporate
structure for expansion of our current business. We encourage you to read the
section titled "The Reorganization -- Background and Reasons for the
Reorganization -- Reasons for the Reorganization" for a more detailed
discussions of these reasons.
For a discussion of the risk factors associated with the
reorganization, please see the discussion under "Risk Factors" on page 12.
CONDITIONS TO CONSUMMATION OF THE REORGANIZATION (SEE PAGE 18)
The consummation of the reorganization is conditioned on several
factors, including the affirmative vote of a majority of the voting power of
Cooper Ohio, and that none of the parties to the Agreement and Plan of Merger is
subject to any governmental authority which prohibits the consummation of the
reorganization.
For a discussion of the other conditions, please see "The
Reorganization -- The Merger Agreement -- Conditions to Consummation of the
Merger" on page 18.
U.S. FEDERAL INCOME TAX CONSEQUENCES TO SHAREHOLDERS (SEE PAGE 39)
Generally, for U.S. federal income tax purposes, shareholders who are
U.S. holders will recognize gain, if any, but not loss, on the receipt of Cooper
Bermuda Class A common shares in the reorganization. Such a holder will
generally recognize gain equal to the difference, if any, between the fair
market value of the Cooper Bermuda Class A common shares received in exchange
for Cooper Ohio common stock in the reorganization and the holder's adjusted tax
basis in the holder's shares of Cooper Ohio common stock exchanged therefor.
Generally, any such gain will be capital gain. Further, the holding period for
any gain with respect to the reorganization should begin the day after the
effective date of the reorganization. Shareholders will not be permitted to
recognize any loss realized on the exchange of their shares of Cooper Ohio
common stock in the reorganization, but their aggregate adjusted tax basis in
the Cooper Bermuda Class A common shares received would equal the aggregate
adjusted tax basis of their shares of Cooper Ohio common stock. Thus, any loss
would be preserved.
7
WE URGE YOU TO CONSULT YOUR OWN TAX ADVISORS REGARDING YOUR PARTICULAR
TAX CONSEQUENCES OF THE REORGANIZATION.
A more detailed discussion of the material U.S. federal income tax
consequences of the reorganization to the shareholders is set forth under the
heading "Income Tax Consequences of the Reorganization -- U.S. Federal Income
Tax Consequences to Shareholders" on page 39.
RIGHTS OF SHAREHOLDERS (SEE PAGE 31)
The principal attributes of the Cooper Ohio common stock and the Cooper
Bermuda Class A common shares will be similar. There are differences, however,
between the rights of shareholders under Ohio law and Bermuda law. In addition,
there are differences between our current articles of incorporation and
regulations and Cooper Bermuda's memorandum of association and bye-laws. We
encourage you to read the section titled "Comparison of Rights of Shareholders"
on page 31 for a more detailed discussion of these differences.
STOCK EXCHANGE LISTING; RECENT STOCK PRICES (SEE PAGE 22)
Immediately following the merger, Cooper Bermuda's Class A common
shares will be listed on the New York Stock Exchange under the symbol "CBE," the
same symbol under which Cooper Ohio's common stock is currently listed. Since
the Cooper Bermuda Class B common shares will be held only by Cooper Ohio and
other wholly-owned subsidiaries of Cooper Bermuda, they will not be registered
with the Securities and Exchange Commission or publicly traded. We have been
advised by Standard & Poor's that the pending change of our place of
incorporation from Ohio to Bermuda should not affect the company's status as a
member of the S&P 500.
The closing price per share of our shares on the New York Stock
Exchange was $41.63 on April 2, 2002, the last trading day prior to the
date of this proxy statement/prospectus. The high and low per share sales prices
of our shares on the New York Stock Exchange were $35.20 and $34.65 on February
12, 2002, the last trading day prior to the announcement that Cooper Ohio had
completed its strategic alternatives review process and determined to proceed
with the reorganization.
RIGHTS OF DISSENTING SHAREHOLDERS (SEE PAGE 20)
Under the Ohio General Corporation Law, shareholders of record as of
the record date for the special meeting who comply with the applicable
requirements of Ohio law will have the right to seek an appraisal of the fair
cash value of their shares. We have included a copy of the provisions of Ohio
law that govern appraisal rights as annex IV.
ACCOUNTING TREATMENT OF THE REORGANIZATION (SEE PAGE 22)
The reorganization will be accounted for as a reorganization of
entities under common control which will not result in changes in the historical
consolidated carrying amount of assets, liabilities and shareholders' equity.
SPECIAL MEETING (SEE PAGE 23)
Time, Date, Place. The special meeting of shareholders will be held at
10:00 a.m., local time, on May 14, 2002, at the Four Seasons Hotel, 1300 Lamar
Street, Houston, Texas.
Record Date. Only shareholders of record at the close of business on
April 2, 2002, as shown in our records, will be entitled to vote, or to
grant proxies to vote, at the special meeting.
Quorum. The presence, in person or by proxy, of shareholders holding a
majority of the voting power of Cooper Ohio will constitute a quorum.
8
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF COOPER OHIO APPROVED THE AGREEMENT AND PLAN
OF MERGER AND RECOMMENDS THAT YOU VOTE "FOR" ITS ADOPTION.
VOTE REQUIRED (SEE PAGE 23)
ADOPTION OF THE AGREEMENT AND PLAN OF MERGER REQUIRES THE AFFIRMATIVE
VOTE OF A MAJORITY OF THE VOTING POWER OF COOPER OHIO. ABSTENTIONS AND BROKER
NON-VOTES WILL THEREFORE BE COUNTED AS VOTES AGAINST ADOPTION OF THE MERGER
AGREEMENT. As of the April 2, 2002 record date, there were 93,009,285 shares of
Cooper Ohio common stock outstanding and entitled to vote. As of the record
date, our directors and executive officers owned and were entitled to vote, in
the aggregate, approximately 333,433 shares of our common stock, which
represents approximately .36% of the outstanding Cooper Ohio common stock. These
persons have informed us that they intend to vote their shares in favor of the
proposal to adopt the Agreement and Plan of Merger.
PROXIES (SEE PAGE 23)
General
Shareholders of record and beneficial owners of shares in CO-SAV may
vote by any one of the following methods:
(1) CALL 1-877-779-8683 from the U.S. or Canada (this call is toll
free) or 001-201-536-8073 from all other countries to vote by telephone
anytime up to 12:00 midnight, New York time on May 13, 2002; or
(2) GO TO THE WEBSITE: http://www.eproxyvote.com/cbe to vote over the
Internet anytime up to 12:00 midnight, New York time on May 13,
2002; or
(3) MARK, SIGN, DATE AND MAIL your proxy card in the enclosed
postage-prepaid envelope. If you are voting by telephone or by the
Internet, please do not return your proxy card.
If you hold your Cooper Ohio shares in the name of a bank, broker or
other nominee, you should follow the instructions provided by your bank, broker
or nominee when voting your shares. To be effective, a form of proxy must be
received by us prior to the beginning of voting at the special meeting.
Revocation
There are three ways in which you may revoke your proxy and change your
vote:
o First, you may send a written notice to our proxy solicitor,
Georgeson Shareholder Communications, Inc., stating that you
would like to revoke your proxy. This notice must be received
prior to the special meeting.
o Second, you may complete and submit a new later-dated proxy by
any of the three methods described above. The latest dated
proxy actually received by the company prior to the special
meeting will be the one that is counted, and all earlier
proxies will be revoked.
o Third, you may attend the special meeting and vote in person.
Simply attending the meeting, however, will not revoke your
proxy. You must vote in person at the meeting to revoke your
proxy.
If you have instructed a broker to vote your shares, you must follow directions
received from your broker to change or revoke your proxy.
9
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The selected historical consolidated financial data of Cooper Ohio in
the table below were derived from Cooper Ohio's audited consolidated financial
statements as of and for the five years ended December 31, 2001. This data
should be read in conjunction with the audited financial statements of Cooper
Ohio, including the notes to the financial statements, incorporated by reference
into this proxy statement/prospectus.
We have not included data for Cooper Bermuda because it did not conduct
business during any of the periods discussed below.
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------------
2001 2000 1999 1998 1997(1)
------------ ------------ ------------ ------------ ------------
INCOME STATEMENT DATA:
Revenues ......................................... $ 4,209.5 $ 4,459.9 $ 3,868.9 $ 3,651.2 $ 3,415.6
Income from continuing operations ................ $ 261.3 $ 357.4 $ 331.9 $ 335.9 $ 310.0
Income from discontinued operations
(Automotive Products), net of taxes .......... (30.0) -- -- 87.1 84.6
------------ ------------ ------------ ------------ ------------
Net income ....................................... $ 231.3 $ 357.4 $ 331.9 $ 423.0 $ 394.6
============ ============ ============ ============ ============
INCOME PER COMMON SHARE DATA:
Basic --
Income from continuing operations ............ $ 2.78 $ 3.82 $ 3.53 $ 2.97 $ 2.64
Income from discontinued operations
(Automotive Products), net of taxes ..... (.32) -- -- .77 .72
------------ ------------ ------------ ------------ ------------
Net income ....................................... $ 2.46 $ 3.82 $ 3.53 $ 3.74 $ 3.36
============ ============ ============ ============ ============
Diluted --
Income from continuing operations ................ $ 2.75 $ 3.80 $ 3.50 $ 2.93 $ 2.57
Income from discontinued operations
(Automotive Products), net of taxes ..... (.31) -- -- .76 .69
------------ ------------ ------------ ------------ ------------
Net income ....................................... $ 2.44 $ 3.80 $ 3.50 $ 3.69 $ 3.26
============ ============ ============ ============ ============
BALANCE SHEET DATA (at period end):
Total assets .......................................... $ 4,611.4 $ 4,789.3 $ 4,143.4 $ 3,779.1 $ 5,507.3
Long-term debt, excluding current maturities .......... 1,107.0 1,300.8 894.5 774.5 1,272.2
Shareholders' equity .................................. 2,023.2 1,904.2 1,743.1 1,563.6 2,683.5
CASH DIVIDENDS PER COMMON SHARE ....................... $ 1.40 $ 1.40 $ 1.32 $ 1.32 $ 1.32
---------
(1) Includes the results of the Kirsch window treatment operation for the
five-month period ended May 30, 1997. Kirsch was sold to Newell Co. on
May 30, 1997.
In October 1998, Cooper Ohio sold its Automotive Products segment for
$1.9 billion in proceeds. The financial information in the above table excludes
the 1998 and 1997 results of the Automotive Products segment from income from
continuing operations. The discontinued segment's results are presented
separately in the caption, "Income from discontinued operations (Automotive
Products), net of taxes." A $30 million charge, net of a $20 million income tax
benefit was recorded in 2001 related to potential asbestos obligations
associated with the Automotive Products segment.
10
SUMMARY PRO FORMA FINANCIAL INFORMATION
A pro forma condensed consolidated balance sheet for Cooper Bermuda is
not presented in this proxy statement/prospectus because there would be no
significant pro forma adjustments required to be made to the historical
consolidated balance sheet of Cooper Ohio as of December 31, 2001. That balance
sheet is included in Cooper Ohio's Annual Report on Form 10-K for the year ended
December 31, 2001.
A pro forma condensed consolidated income statement for Cooper Bermuda
is not presented in this proxy statement/prospectus because there would be no
significant pro forma adjustments required to be made to income from operations
in the historical consolidated income statement of Cooper Ohio for the year
ended December 31, 2001. That income statement is included in Cooper Ohio's
Annual Report on Form 10-K for the year ended December 31, 2001.
Costs incurred in connection with the reorganization are not expected to
be material and are expensed as incurred.
11
RISK FACTORS
THE REORGANIZATION WILL RESULT IN A TAXABLE GAIN TO CERTAIN COOPER OHIO
SHAREHOLDERS.
Generally, for U.S. federal income tax purposes, shareholders who are
U.S. holders will recognize gain, if any, but not loss, on the receipt of Cooper
Bermuda Class A common shares in the reorganization. Such a holder will
generally recognize gain equal to the excess, if any, of the fair market value
of the Cooper Bermuda Class A common shares received in exchange for Cooper Ohio
common stock in the reorganization over the holder's adjusted tax basis in the
shares of Cooper Ohio common stock exchanged therefor. Generally, any such gain
will be capital gain. Further, the holding period for any Cooper Bermuda Class A
common shares received by a U.S. holder recognizing gain with respect to the
reorganization should begin the day after the effective date of the
reorganization. Shareholders will not be permitted to recognize any loss
realized on the exchange of their shares of Cooper Ohio common stock in the
reorganization, but their aggregate adjusted tax basis in the Cooper Bermuda
Class A common shares received would equal the aggregate adjusted tax basis of
their shares of Cooper Ohio common stock. Thus, subject to any subsequent
increases in the fair market value of the Cooper Bermuda Class A common shares,
any loss would be preserved. The holding period for any Cooper Bermuda Class A
common shares received by U.S. holders with a loss on their Cooper Ohio common
stock will include the holding period of the Cooper Ohio common stock exchanged
therefor.
WE URGE YOU TO CONSULT YOUR OWN TAX ADVISORS REGARDING YOUR PARTICULAR
TAX CONSEQUENCES OF THE REORGANIZATION.
COOPER BERMUDA AND ITS SUBSIDIARIES AND SHAREHOLDERS COULD INCUR A MATERIAL
AMOUNT OF TAXES IF THERE ARE UNFAVORABLE CHANGES IN TAX LAWS OR THEIR
INTERPRETATION.
Several members of the United States Congress have introduced
legislation that, if enacted, would have the effect of substantially reducing or
eliminating the anticipated tax benefits of the transaction. In addition,
several other members of the United States Congress and the Treasury Department
have recently announced the intent to investigate transactions such as the
reorganization. As a result, changes in the tax laws, tax treaties or tax
regulations may occur, with prospective or retroactive effect, which would have
a material adverse effect on the tax consequences of the reorganization to the
company or the tax consequences of the future operations of the reorganized
company and its subsidiaries. If in response to any such changes the reorganized
company or its subsidiaries undertake a corporate restructuring, such
restructuring could result in additional material adverse tax consequences to
the company or its shareholders.
In addition, the IRS or other taxing authority could disagree with our
assessment of the effects or interpretation of existing laws, regulations and
treaties, which could have a material adverse effect on the tax consequences of
the reorganization to the company or the tax consequences of the future
operations of the reorganized company and its subsidiaries.
THE REORGANIZATION COULD RESULT IN A TAXABLE GAIN TO COOPER OHIO.
In connection with the reorganization, Cooper Ohio intends to exchange
the Transferred Assets for the Class B common shares of Cooper Bermuda. Cooper
Ohio will be subject to U.S. federal income tax on the gain, if any, realized on
the exchange. Based on current estimates of the fair market value of the
Transferred Assets and the Cooper Bermuda Class B common shares, we believe that
Cooper Ohio will not incur a material amount of U.S. federal income or
withholding tax as a result of the reorganization. Although the company believes
that such determination is correct, any such determination will not be binding
on the Internal Revenue Service, which may assert that the fair market value of
the Class B common shares is different than that determined, resulting in income
or withholding tax. Therefore, while we expect that the company should not incur
a material amount of U.S. federal taxes as a result of the exchange of the
Transferred Assets for the Class B common shares, there can be no assurance that
the IRS will not contest such determination or that the IRS will not succeed in
any such contest.
12
COOPER BERMUDA MAY BECOME SUBJECT TO U.S. CORPORATE INCOME TAX, WHICH WOULD
REDUCE COOPER BERMUDA'S NET INCOME.
Cooper Ohio currently is subject to U.S. corporate income tax on its
worldwide income. After the reorganization, Cooper Ohio and its subsidiaries
will continue to be subject to U.S. corporate income tax on their operations.
Cooper Bermuda anticipates that its non-U.S. operations will not be subject to
U.S. corporate income tax other than withholding taxes imposed on U.S. source
income.
Cooper Bermuda and other non-U.S. Cooper affiliates intend to conduct
their operations in a manner that will cause them not to be engaged in the
conduct of a trade or business in the U.S. Based on compliance with guidelines
designed to ensure that Cooper Bermuda and its non-U.S. affiliates do not engage
in the conduct of a U.S. trade or business, Cooper Bermuda and its non-U.S.
affiliates believe that they should not be required to pay U.S. corporate income
tax, other than withholding tax on U.S. source income. However, if the IRS
successfully contends that Cooper Bermuda or any of its non-U.S. affiliates are
engaged in a trade or business in the U.S., Cooper Bermuda or that non-U.S.
affiliate would be required to pay U.S. corporate income tax on income that is
subject to the taxing jurisdiction of the U.S., and possibly the U.S. branch
profits tax.
THE ENFORCEMENT OF JUDGMENTS IN SHAREHOLDER SUITS AGAINST COOPER BERMUDA MAY BE
MORE DIFFICULT.
Cooper Bermuda is a Bermuda company. As a result, it may be difficult
for you to effect service of process within the United States or to enforce
judgments obtained against Cooper Bermuda in United States courts. Cooper
Bermuda will irrevocably agree that it may be served with process with respect
to actions based on offers and sales of securities made in the United States and
other violations of U.S. securities laws by having Cooper Industries, Inc.
(Cooper Ohio) located at 600 Travis, Suite 5800, Houston, Texas 77002-1001, be
its United States agent appointed for that purpose.
Cooper Bermuda has been advised by its Bermuda counsel, Appleby,
Spurling & Kempe, that a judgment for the payment of money rendered by a court
in the United States based on civil liability would not be automatically
enforceable in Bermuda. Cooper Bermuda has also been advised by Appleby,
Spurling & Kempe that a final and conclusive judgment obtained in a court of
competent jurisdiction in the United States under which a sum of money is
payable as compensatory damages may be the subject of an action in the Supreme
Court of Bermuda under the common law doctrine of obligation, by action on the
debt evidenced by the court's judgment. Such an action should be successful upon
proof that the sum of money is due and payable, and without having to prove the
facts supporting the underlying judgment, as long as:
o the court that gave the judgment was competent to hear the
action in accordance with private international law principles
as applied by the courts in Bermuda; and
o the judgment is not contrary to public policy in Bermuda, was
not obtained by fraud or in proceedings contrary to natural
justice of Bermuda and is not based on an error in Bermuda
law.
A Bermuda court may impose civil liability on Cooper Bermuda or its
directors or officers in a suit brought in the Supreme Court of Bermuda against
Cooper Bermuda or such persons with respect to facts that constitute a violation
of U.S. federal securities laws, provided that the facts surrounding such
violation would constitute or give rise to a cause of action under Bermuda law.
For a discussion of such violations please see "Comparison of Rights of
Shareholders" on page 31.
ANTI-TAKEOVER PROVISIONS IN COOPER BERMUDA'S BYE-LAWS AND ITS SHAREHOLDERS
RIGHTS PLAN WILL MAINTAIN CERTAIN EXISTING ANTI-TAKEOVER PROVISIONS OF COOPER
OHIO.
Provisions in Cooper Bermuda's bye-laws and shareholders rights plan,
which replicate certain provisions of Cooper Ohio's articles of incorporation,
regulations and shareholders rights plan, could discourage unsolicited takeover
bids from third parties or the removal of incumbent management. These provisions
include:
o a classified board of directors;
13
o the requirement that 80% of the voting power of Cooper Bermuda
approve certain business combinations unless those business
combinations are approved by two-thirds of the continuing
directors of Cooper Bermuda or meet certain fair price
requirements set forth in Cooper Bermuda's bye-laws; and
o the possible dilution of a potential acquiror's interest in
Cooper Bermuda as a result of the operation of the
shareholders rights plan.
Similar to the authority of Cooper Ohio's board of directors, the board
of directors of Cooper Bermuda also may issue preferred shares and determine
their rights and qualifications. The issuance of preferred shares may delay,
defer or prevent a merger, amalgamation, tender offer or proxy contest involving
Cooper Bermuda. This may cause the market price of Cooper Bermuda shares to
decrease significantly.
14
THE REORGANIZATION
STRUCTURE OF THE REORGANIZATION
The board of directors has approved and recommends that you adopt the
Agreement and Plan of Merger whereby we will change our place of incorporation
from Ohio to Bermuda. The reorganization will be accomplished through the merger
of Cooper Mergerco into Cooper Ohio. Cooper Ohio will be the surviving company
in the merger and become a wholly-owned, indirect subsidiary of Cooper Bermuda.
The terms of the merger are set forth in the Agreement and Plan of Merger
attached as annex I to this proxy statement/prospectus. As a result of the
merger your shares of Cooper Ohio common stock will automatically become the
same number of Cooper Bermuda Class A common shares.
After completion of the reorganization, you will own an interest in a
Bermuda holding company which, through Cooper Ohio and its other subsidiaries,
will be engaged in the same business that Cooper Ohio and its subsidiaries were
engaged in prior to the reorganization.
The reorganization involves the following steps:
1. As part of the reorganization, Cooper Ohio will transfer
the Transferred Assets to Cooper Bermuda in exchange for that number of
Cooper Bermuda Class B common shares, par value US$.01 per share, which
has a fair market value equal to the fair market value of the
Transferred Assets. For U.S. federal income and withholding tax
purposes, Cooper Ohio will be required to recognize gain, but not loss,
on any assets transferred to Cooper Bermuda in the reorganization.
Based on current estimates of the fair market value of the Transferred
Assets, we believe that Cooper Ohio will not incur a material amount of
U.S. federal income or withholding taxes as a result of this
transaction. For a description of the terms of the Cooper Bermuda Class
B common shares, please see the discussion under "Description of
Authorized Shares of Cooper Industries, Ltd." on page 26.
2. Cooper Mergerco will merge into Cooper Ohio. Cooper Ohio
will be the surviving entity and become a wholly-owned, indirect
subsidiary of Cooper Bermuda.
3. In the merger, the outstanding shares of Cooper Ohio will
automatically convert by operation of law into Class A common shares of
Cooper Bermuda, and the current shareholders of Cooper Ohio will own
exactly the same number of Cooper Bermuda Class A common shares as they
currently own in Cooper Ohio. For a description of the terms of the
Cooper Bermuda Class A common shares, please see the discussion under
"Description of Authorized Shares of Cooper Industries, Ltd." on page
26.
4. Immediately following the merger, the number of Cooper
Bermuda Class B common shares owned by Cooper Ohio will be adjusted to
reflect the relative fair market values as of the effective date of the
Transferred Assets and Cooper Ohio, based on the market value of the
Cooper Ohio common shares. We currently estimate the aggregate number
of Class B common shares to be issued in the exchange to be
approximately 54 million.
In addition, Cooper Bermuda expects to guarantee certain indebtedness
of its subsidiaries following completion of the reorganization.
BACKGROUND AND REASONS FOR THE REORGANIZATION
Background
On June 11, 2001, Cooper Ohio announced that its board of directors
approved a plan to reorganize the company and change its place of incorporation
from Ohio to Bermuda. At the end of July, in connection with the reorganization
Cooper Ohio mailed a proxy statement/prospectus to its shareholders for a
special shareholders meeting to be held on August 30, 2001.
15
On August 1, 2001, Danaher Corporation announced that it had made an
unsolicited acquisition proposal to Cooper Ohio. The proposal contemplated a
stock and cash transaction that was valued by Danaher in the range of $54 to $58
per share based on Danaher's share price at the time and was subject to due
diligence. On August 8, 2001, Cooper Ohio's board of directors rejected
Danaher's proposal and authorized management and its financial advisors to
explore all strategic alternatives that would maximize shareholder value,
including mergers, sales, strategic alliances, acquisitions or other similar
strategic alternatives. In addition, Cooper Ohio announced the postponement of
the August 30 special shareholders meeting so that Danaher would not be in a
position to perpetuate misconceptions about the merits of the reincorporation
and management could focus its attention on exploring all strategic
alternatives.
For the next seven months Cooper Ohio together with its financial
advisors conducted a careful, deliberate and complete process to analyze every
reasonable alternative that could maximize value for the company's shareholders,
including a sale of Cooper Ohio in whole or in parts. However, as a result of
various intervening events, including the tragic events of September 11, 2001,
the Federal-Mogul bankruptcy and a very difficult business environment, Cooper
Ohio did not receive any definitive proposals to acquire the company, as a whole
or in parts. Accordingly, on February 13, 2002, Cooper Ohio announced that the
process had been completed, and after a thorough review of all available
alternatives, its board of directors concluded that it is in the best interests
of the company and its shareholders to move forward with its previously
announced plan to reincorporate in Bermuda.
Reasons for the Reorganization
Following a seven month process of reviewing every reasonable
alternative that could maximize value for Cooper Ohio's shareholders that
resulted in no definitive proposals to acquire the company in whole or in parts,
Cooper Ohio's board of directors concluded it is in the best interests of the
company and its shareholders to move forward with its previously announced plan
to reincorporate in Bermuda. The reasons for this determination are as follows.
International activities are an important part of our current business.
In 2001, our international revenues accounted for 29% of total revenues. We have
manufacturing facilities in 21 countries with approximately 47% of our
manufacturing facilities located outside the United States, and we currently
employ approximately 13,000 persons outside the United States. Expansion of our
international business is an important part of our current business strategy and
significant growth opportunities exist in the international marketplace. Growth
through acquisitions and investment in higher growth product lines are also
important parts of our strategy. In light of this, the board of directors of
Cooper Ohio believes that reorganizing Cooper Ohio as a Bermuda company will
allow us to implement our business strategy more effectively.
In particular, the board is recommending the reorganization because it
believes that the reorganization will improve our global tax position and should
maximize potential growth and cash flow.
o We anticipate that the reorganization may result in
significant tax savings net of tax costs. These savings are
expected to result in a reduction in our annual effective tax
rate from approximately 32% to within a range from 20% to 25%
over the next several years as a result of the reorganization
and transferring the Transferred Assets to Cooper Bermuda,
after accounting for (1) taxes, if any, incurred on the
transfer of the Transferred Assets to Cooper Bermuda, (2)
taxes incurred by Cooper Ohio with respect to distributions on
the Cooper Bermuda Class B common shares, and (3) the
taxability of any gains realized by Cooper Ohio with respect
to any disposition of the Cooper Bermuda Class B common
shares. However, we cannot give any assurance as to what our
annual effective tax rate will be after the reorganization.
After the reorganization our tax rate will depend on, among
other things, the level and geographic mix of our earnings and
changes in tax laws, treaties and policies and the
interpretation of such laws, treaties and policies in the
jurisdictions where we operate which may reduce or eliminate
any improvement in our global tax position. Our actual
effective tax rate may vary materially from our expectation.
As a result of an improvement in cash flow we believe we will be able
to:
o maximize existing business growth and cash flow.
16
o allow the company to develop higher growth product lines and
to acquire higher-growth electrical and electronic businesses
by virtue of the increased cash flow.
o position the company to reduce the amount of its debt and
repurchase its stock with the additional cash flow.
In addition, the board believes that the reorganization will result in
a more favorable corporate structure for expansion of our current business
because it will facilitate the cost effective acquisition and operation of
non-U.S. businesses.
The board also believes that the reorganization will increase Cooper
Bermuda's attractiveness to non-U.S. investors. Distributions with respect to
stock in a U.S. corporation to nonresident aliens could be subject to
withholding taxes under the Internal Revenue Code. In addition, estate taxes are
payable in some cases in respect of the value of shares in a U.S. corporation
owned by a non-U.S. investor. As we will be a non-U.S. corporation following the
reorganization, these taxes will generally no longer be applicable to non-U.S.
investors. Under existing Bermuda law, there will be no Bermuda income or
withholding tax on dividends paid by Cooper Bermuda to its shareholders.
Furthermore, no Bermuda tax or other levy is payable on the sale or other
transfer (including by gift or on the death of the shareholder) of Cooper
Bermuda common stock (other than by shareholders resident in Bermuda). Cooper
Bermuda is not aware of any other taxes that non-U.S. residents might incur that
could discourage an investment in Cooper Bermuda as compared to an investment in
Cooper Ohio. As a result, non-U.S. investors may be more receptive to an
investment in Cooper Bermuda Class A common shares. Cooper Bermuda will be
indirectly subject to U.S. tax on income earned from its U.S. business much as
we are now. However, we believe the reorganization:
o will improve our worldwide effective tax rate;
o may facilitate foreign tax savings through a more flexible
corporate structure; and
o may provide future U.S. tax savings to the extent that new
foreign businesses may be held by Cooper Bermuda without any
intervening U.S. owners.
Thus the new corporate structure should give us greater flexibility in
seeking to lower our worldwide tax liability and effective tax rate.
It is important to note that several members of the United States
Congress have introduced legislation that, if enacted, would have the effect of
substantially reducing or eliminating the anticipated tax benefits of the
transaction. In addition, several other members of the United States Congress
and the Treasury Department have recently announced the intent to investigate
transactions such as the reorganization. As a result, changes in the tax laws,
tax treaties or tax regulations may occur, with prospective or retroactive
effect, which would have a material adverse effect on the tax consequences of
the reorganization to the company or its shareholders or the tax consequences of
the future operations of the reorganized company and its subsidiaries. If in
response to any such changes the reorganized company or its subsidiaries
undertake a corporate restructuring, such restructuring could result in
additional material adverse tax consequences to the company or its shareholders.
In addition to the potential benefits described above, the
reorganization will expose you to some risks. Please see the discussion under
"Risk Factors" on page 12. There are also differences between the Ohio and the
Bermuda corporate law and the organizational documents of Cooper Ohio and Cooper
Bermuda. For a discussion of these differences, please see "Comparison of Rights
of Shareholders" on page 31. The board of directors has determined that the
potential advantages of the reorganization substantially outweigh these risks
and differences. Accordingly, the board of directors of Cooper Ohio has approved
the Agreement and Plan of Merger and recommends that shareholders vote "FOR" its
adoption. However, no assurances can be given that the anticipated benefits of
the reorganization will be realized.
17
THE MERGER AGREEMENT
Cooper Ohio, Cooper Bermuda and Cooper Mergerco have entered into the
merger agreement which is the legal document that governs the merger. We
recommend that you read carefully the complete merger agreement for the precise
legal terms of the merger and other information that may be important to you.
The merger agreement is included in this proxy statement/prospectus as annex I.
CONDITIONS TO CONSUMMATION OF THE MERGER
The merger will not be completed unless, among other things, the
following conditions are satisfied or, if allowed by law, waived:
o the merger agreement is adopted by the affirmative vote of a
majority of the voting power of Cooper Ohio outstanding as of
the record date;
o none of the parties to the merger agreement is subject to any
governmental decree, order or injunction that prohibits the
consummation of any of the steps in the reorganization;
o the registration statement of which this proxy
statement/prospectus is a part is declared effective by the
Securities and Exchange Commission, and no stop order is in
effect;
o the Cooper Bermuda Class A common shares to be issued pursuant
to the merger are authorized for listing on the New York Stock
Exchange, subject to official notice of issuance;
o all filings required by a governmental or regulatory agency
are made; and
o all consents and approvals required by any governmental or
regulatory agency and all other material third-party consents
are received.
We are parties to agreements that require the consent of third parties
prior to the implementation of the merger. We believe that we will obtain all
material consents required prior to the completion of the merger and that the
failure to obtain any other consents will not have a material impact on our
business or our ability to consummate the reorganization.
EFFECTIVE TIME
If the merger agreement is adopted by the requisite vote of our
shareholders, the merger will become effective upon the filing of a certificate
of merger with the Secretary of State of the State of Ohio in accordance with
Ohio law. Cooper Ohio expects to file the certificate of merger and have the
merger become effective as promptly as possible following the special meeting.
In the event the conditions to the merger are not satisfied, the merger
may be abandoned or delayed even after the merger agreement has been adopted by
our shareholders. In addition, the merger may be abandoned or delayed for any
reason by the board of directors of Cooper Ohio at any time prior to its
becoming effective, even though the merger agreement has been adopted by our
shareholders and all conditions to the merger have been satisfied.
AMENDMENT OR TERMINATION
The merger agreement may be amended, modified or supplemented at any
time before or after its adoption. However, after adoption, no amendment,
modification or supplement may be made or effected that does any of the
following:
o alters or changes the amount or kind of shares to be received
by shareholders in the merger;
18
o alters or changes any term of the articles of the surviving
corporation, except for alterations or changes that could
otherwise be adopted by the directors of the surviving
corporation; or
o alters or changes any other terms and conditions of the merger
agreement if any of the alterations or changes, alone or in
the aggregate, would materially adversely affect the holders
of Cooper Ohio common stock.
Our board of directors may terminate the merger agreement and abandon
the merger at any time prior to its effectiveness.
AUTOMATIC SHARE CONVERSION
Shares of Cooper Ohio common stock will automatically convert by
operation of law into Class A common shares of Cooper Bermuda upon the
consummation of the merger. YOU DO NOT NEED TO TENDER YOUR SHARES IN ORDER TO
EXERCISE YOUR RIGHTS AS A SHAREHOLDER OF COOPER BERMUDA. Your share certificate
representing Cooper Ohio common stock will, at the effective time of the merger,
automatically represent the same number of Class A common shares of Cooper
Bermuda.
If you hold Cooper Ohio common stock, you WILL NOT be required to
exchange your stock certificates as a result of the merger. If you desire to
sell some or all of your Cooper Bermuda Class A common shares after the
effective date of the merger, delivery of the stock certificate(s) which
previously represented shares of Cooper Ohio common stock will be sufficient.
Your right to sell shares of Cooper Ohio before the effective date of the merger
will also not be affected.
Following the merger, certificates bearing the name of Cooper
Industries, Ltd. will be issued in the normal course upon surrender of
certificates bearing the name of Cooper Industries, Inc. for exchange or
transfer. If you surrender a share certificate and request the new certificate
to be issued in a name other than the one appearing on the surrendered
certificate, you must endorse the share certificate or otherwise prepare it to
be in proper form for transfer.
MANAGEMENT OF COOPER BERMUDA
When the reorganization is completed, all of the directors and
substantially all of the executive officers of Cooper Ohio will become the
directors and executive officers of Cooper Bermuda. Assuming the merger
agreement is approved and adopted, the current directors of Cooper Ohio will
carry over their remaining terms of office to Cooper Bermuda.
REQUIRED VOTE FOR THE REORGANIZATION
In order to complete the reorganization, the merger agreement must be
adopted by the affirmative vote of a majority of the voting power of Cooper Ohio
outstanding as of the record date. Because of this vote requirement, ABSTENTIONS
WILL HAVE THE SAME EFFECT AS VOTES AGAINST THE PROPOSAL TO ADOPT THE MERGER
AGREEMENT. THE FAILURE OF A SHAREHOLDER TO SUBMIT A FORM OF PROXY OR TO VOTE IN
PERSON AT THE MEETING WILL ALSO HAVE THE EFFECT OF A VOTE AGAINST THE ADOPTION
OF THE MERGER AGREEMENT. Under the rules of the New York Stock Exchange, brokers
who hold shares in street name for customers have the authority to vote on many
"routine" proposals when they have not received instructions from beneficial
owners. Under these rules, brokers are precluded from exercising their voting
discretion with respect to proposals for non-routine matters like the merger.
THUS, ABSENT SPECIFIC INSTRUCTIONS FROM YOU, YOUR BROKER IS NOT EMPOWERED TO
VOTE YOUR SHARES WITH RESPECT TO THE ADOPTION OF THE MERGER AGREEMENT (I.E.,
"BROKER NON-VOTES"). Since the affirmative vote of a majority of the voting
power of Cooper Ohio is required for adoption of the merger agreement, A BROKER
NON-VOTE WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE MERGER AGREEMENT.
As of the record date for the special meeting, there were 93,009,285
shares of Cooper Ohio common stock outstanding and entitled to vote. As of the
record date, our directors and executive officers owned and were entitled to
vote, in the aggregate, approximately 333,433 shares of our common stock,
which represents
19
approximately .36% of the outstanding Cooper Ohio common stock. These persons
have informed us that they intend to vote their shares in favor of the proposal
to adopt the Agreement and Plan of Merger.
RIGHTS OF DISSENTING SHAREHOLDERS
Shareholders of a corporation that is proposing to merge with another
entity are sometimes entitled to appraisal or dissenters' rights in connection
with the proposed transaction, depending on the circumstances. Most commonly,
these rights give shareholders who oppose the merger the right to receive the
fair value of their shares, as determined in a judicial appraisal proceeding,
instead of the consideration being offered in the merger.
Cooper Ohio shareholders are entitled to dissenters' rights. Cooper
Ohio, as an Ohio corporation, is governed by Section 1701.85 of the Ohio General
Corporation Law regarding the rights of dissenting shareholders. Accordingly,
described below are the steps that you must take if you are a Cooper Ohio
shareholder and you wish to exercise dissenters' rights with respect to the
merger.
You should read Section 1701.85 of the Ohio General Corporation Law.
This section is attached as annex IV to this document. Failure to take any one
of the required steps may result in termination of dissenters' rights under the
Ohio General Corporation Law. IF YOU ARE A COOPER OHIO SHAREHOLDER CONSIDERING
DISSENTING, YOU SHOULD CONSULT YOUR OWN LEGAL ADVISOR.
To exercise dissenters' rights, a Cooper Ohio shareholder must satisfy
the following five conditions:
o You must be a shareholder of record. You must be the record
holder of the dissenting shares as of April 2, 2002. If
you have a beneficial interest in shares of Cooper Ohio common
stock that are held of record in the name of another person,
you must act promptly to cause the shareholder of record to
follow the steps described below.
o You must not vote in favor of the merger. You must not vote
shares as to which you seek fair cash value in favor of
adoption of the merger agreement at the special shareholders
meeting. This requirement will be satisfied:
o if you submit a properly executed proxy with
instructions to vote "AGAINST" the merger or to
"ABSTAIN" from this vote;
o if you do not return your proxy and do not vote at
the special meeting in favor of the merger; or
o if you revoke your proxy and later "ABSTAIN" from or
vote "AGAINST" the merger.
If you vote "FOR" the merger, you automatically waive your dissenters'
rights. A proxy that is returned signed but on which no voting preference is
indicated will be voted to adopt the merger agreement and will constitute a
waiver of dissenters' rights. The mere failure to vote is not a waiver of
dissenters' rights.
o You must file a written demand. You must serve a written
demand for the fair cash value of your dissenting shares upon
Cooper Ohio on or before the tenth day after the shareholder
vote approving the merger. Cooper Ohio will not inform you of
the expiration of the ten-day period. Therefore, you should
retain this document. The required written demand must include
your name and address, the number of dissenting shares held of
record on the record date of the meeting and the amount you
claim as the fair cash value of the dissenting shares. Voting
against the merger is not a written demand as required by
Section 1701.85 of the Ohio General Corporation Law.
o You must deliver your stock certificates for legending. If
requested by Cooper Ohio, you must deliver your certificates
for dissenting shares to Cooper Ohio within 15 days after the
company sends its request. Cooper Ohio will then place a
legend on the certificates that a demand for fair cash value
has been made. Cooper Ohio will promptly return your
certificates to you.
20
o You must file a petition in court. If you and Cooper Ohio
cannot agree on the fair cash value of your dissenting shares,
you must, within three months after delivering your demand for
fair cash value, file a complaint in the Court of Common Pleas
of Cuyahoga County, Ohio, for a determination of the fair cash
value of the dissenting shares. Cooper Ohio is also permitted
to file a complaint. The court will order that you be paid the
fair cash value of your shares, if it determines that you are
entitled. The costs of the proceeding, including reasonable
compensation to the appraisers, will be assessed as the court
considers equitable. "Fair cash value" is the amount that a
willing seller under no compulsion to sell would be willing to
accept, and that a willing buyer under no compulsion to buy
would be willing to pay. The fair cash value will never be
more than the amount specified in your demand. Fair cash value
is determined as of the day before the special meeting. The
amount of the fair cash value excludes any appreciation or
depreciation in market value of your shares resulting from the
merger. The fair cash value of your shares may be higher, the
same, or lower than the market value of the shares of Cooper
Ohio common stock on the date of the merger or the date before
the merger.
Your right to be paid the fair cash value of the dissenting shares will
terminate if:
o for any reason the merger does not become effective;
o you fail to make a timely written demand on Cooper Ohio;
o you do not, upon request of Cooper Ohio, timely surrender your
stock certificates for an endorsement of a legend noting that
demand for the fair cash value of the dissenting shares has
been made;
o you withdraw your demand, with the consent of the Cooper Ohio
board; or
o Cooper Ohio and you have not come to an agreement as to the
fair cash value of the dissenting shares and you have not
filed a complaint within three months after delivering your
demand for fair cash value.
From the time you make your demand, your rights as a shareholder of
Cooper Ohio will be suspended. If Cooper Ohio pays a cash dividend during the
suspension, dissenting shareholders will receive the dividend, but the amount of
the fair cash value of the dissenting shares will be reduced by the amount of
the dividend. If your right to receive fair cash value is terminated, all rights
with respect to dissenting shares will be restored to you. Any distribution that
would have been made to you had you not made a demand will be made at the time
of the termination of your dissenters' rights.
The above description of the rights of dissenting shareholders of
Cooper Ohio is not a complete description of these rights or the procedures to
be followed by Cooper Ohio shareholders desiring to receive the fair cash value
of their shares. If you are a Cooper Ohio shareholder and want to receive the
fair cash value of your shares, you should consult Section 1701.85 of the Ohio
General Corporation Law and strictly adhere to all of the provisions of that
section. A copy of Section 1701.85 is attached to this proxy
statement/prospectus as annex IV and the above discussion concerning the rights
of dissenting shareholders is qualified in its entirety by reference to annex
IV.
DIVIDENDS
We have paid quarterly cash dividends of $0.35 per share since the
first quarter of 2000. Although Cooper Bermuda expects to continue to pay these
quarterly cash dividends following the reorganization, any future declaration
and payment of dividends by Cooper Bermuda will continue to be:
o dependent upon its results of operations, financial condition,
cash requirements and other relevant factors;
o subject to the discretion of its board of directors;
o subject to the ability of its subsidiaries to pay dividends;
and
21
o subject to the reasonable belief by its board of directors
that after the payment is made, Cooper Bermuda would be able
to pay its liabilities as they become due or that the
realizable value of Cooper Bermuda's assets would not be less
than the aggregate of its liabilities and its issued share
capital and share premium account.
The share premium account is made up of the excess of the consideration
paid on the issuance of shares over the aggregate par value of such shares.
Share premium may be distributed in certain limited circumstances. For example,
it may be used to pay-up unissued shares which may be distributed to
shareholders in proportion to their holdings, but is otherwise subject to
limitation.
STOCK COMPENSATION PLANS
If the reorganization is completed, we will amend and revise our
employee and director stock option and other stock-based plans and arrangements
to (1) provide that Cooper Ohio will continue to sponsor the employee plans and
Cooper Bermuda will assume sponsorship of certain director plans, subject to
reimbursement by Cooper Ohio for certain deferred obligations, (2) provide that
Class A common shares of Cooper Bermuda will be issued upon the exercise of any
options or the payment of any other stock-based awards under the plans and
arrangements and (3) otherwise appropriately reflect the substitution of Class A
common shares of Cooper Bermuda for common stock of Cooper Ohio under the plans
and arrangements and related agreements. Your approval of the merger will also
constitute approval of those amendments and revisions to our stock option and
other stock-based plans and arrangements providing for future use of Cooper
Bermuda Class A common shares in lieu of common stock of Cooper Ohio after the
merger.
STOCK EXCHANGE LISTING
Our common stock is currently listed on the New York Stock Exchange.
There is currently no established public trading market for the Class A common
shares of Cooper Bermuda. We have made an application so that, immediately
following the reorganization, the Class A common shares of Cooper Bermuda will
be listed on the New York Stock Exchange under the symbol "CBE," the same symbol
under which Cooper Ohio common stock is currently listed. Because the Cooper
Bermuda Class B common shares will be held only by Cooper Ohio and other
wholly-owned subsidiaries of Cooper Bermuda, they will not be registered with
the Securities and Exchange Commission or publicly traded. We have been advised
by Standard & Poor's that the pending change of our place of incorporation from
Ohio to Bermuda should not affect the company's status as a member of the S&P
500.
ACCOUNTING TREATMENT OF THE REORGANIZATION
The reorganization will be accounted for as a reorganization of
entities under common control which will not result in changes in the historical
consolidated carrying amounts of assets, liabilities and shareholders' equity.
22
THE SPECIAL MEETING
This proxy statement/prospectus is being furnished in connection with
the solicitation of proxies from the holders of Cooper Ohio common stock by the
Cooper Ohio board of directors relating to the merger and other matters to be
voted upon at the special meeting and at any adjournment or postponement of the
meeting. This proxy statement/prospectus is also a prospectus for Cooper Bermuda
Class A common shares to be issued in the merger. Cooper Ohio mailed this proxy
statement/prospectus to shareholders beginning April 9, 2002. You should
read this proxy statement/prospectus carefully before voting your shares.
WHEN AND WHERE THE SPECIAL MEETING WILL BE HELD
The special meeting of shareholders will be held at 10:00 a.m., local
time, on May 14, 2002, at the Four Seasons Hotel, 1300 Lamar Street, Houston,
Texas.
WHAT WILL BE VOTED UPON
At the special meeting, you will be asked to consider and vote upon the
following items:
o To adopt the Agreement and Plan of Merger, substantially in
the form attached to the accompanying proxy
statement/prospectus as annex I, among Cooper Ohio, Cooper
Mergerco and Cooper Bermuda, whereby the company will
effectively change its place of incorporation from Ohio to
Bermuda by merging Cooper Mergerco with Cooper Ohio, which
will be the surviving entity and become a wholly-owned,
indirect subsidiary of Cooper Bermuda, and pursuant to which
each share of Cooper Ohio will automatically become a share of
Cooper Bermuda and all current shareholders of Cooper Ohio
will become shareholders of Cooper Bermuda; and
o To transact such other business as may properly come before
the special meeting.
ONLY COOPER OHIO SHAREHOLDERS OF RECORD AS OF APRIL 2, 2002 ARE ENTITLED TO VOTE
Only shareholders of record at the close of business on April 2, 2002,
as shown in our records, will be entitled to vote, or to grant proxies to vote,
at the special meeting. On the record date, there were 93,009,285 shares
of Cooper Ohio common stock outstanding and entitled to vote at the special
meeting.
MAJORITY OF OUTSTANDING SHARES MUST BE REPRESENTED FOR A VOTE TO BE TAKEN
In order to have a quorum, a majority of the voting power of Cooper
Ohio must be represented in person or by proxy at the special meeting. If a
quorum is not present, a majority of shares that are represented may adjourn or
postpone the special meeting.
VOTE REQUIRED FOR APPROVAL
The Agreement and Plan of Merger must be adopted by the affirmative
vote of a majority of the Cooper Ohio voting power entitled to vote at the
special meeting. Each share of Cooper Ohio common stock is entitled to cast one
vote. As of the record date, directors and executive officers of Cooper Ohio
owned and were entitled to vote 333,433 shares (or .36%) of Cooper Ohio
common stock. These persons have advised us that they intend to vote their
shares in favor of the proposal.
VOTING YOUR SHARES AND CHANGING YOUR VOTE
Voting Your Shares
The Cooper Ohio board of directors is soliciting proxies from the
Cooper Ohio shareholders. This will give you the opportunity to vote at the
special meeting. When you deliver a valid proxy, the shares represented by that
proxy will be voted in accordance with your instructions. If you do not vote by
proxy using one of the three
23
methods described below or attend the special meeting and vote in person, it
will have the same effect as voting against the adoption of the merger
agreement.
Shareholders of record and beneficial owners of shares in CO-SAV may
vote by any one of the following methods:
(1) CALL 1-877-779-8683 from the U.S. or Canada (this call is toll
free) or 001-201-536-8073 from all other countries to vote by
telephone anytime up to 12:00 midnight, New York time on
May 13, 2002; or
(2) GO TO THE WEBSITE: http://www.eproxyvote.com/cbe to vote over
the Internet anytime up to 12:00 midnight, New York time on
May 13, 2002; or
(3) MARK, SIGN, DATE AND MAIL your proxy card in the enclosed
postage-prepaid envelope. If you are voting by telephone or by
the Internet, please do not return your proxy card.
If you hold your Cooper Ohio shares in the name of a bank,
broker or other nominee, you should follow the instructions provided by your
bank, broker or nominee when voting your shares. To be effective, a form of
proxy must be received by us prior to the beginning of voting at the special
meeting.
Changing Your Vote by Revoking Your Proxy
There are three ways in which you may revoke your proxy and change your
vote:
o First, you may send a written notice to our proxy solicitor,
Georgeson Shareholder Communications, Inc., stating that you
would like to revoke your proxy. This notice must be received
prior to the special meeting.
o Second, you may complete and submit a new later-dated proxy by
any of the three methods described above. The latest dated
proxy actually received by the company prior to the special
meeting will be the one that is counted, and all earlier
proxies will be revoked.
o Third, you may attend the special meeting and vote in person.
Simply attending the meeting, however, will not revoke your
proxy. You must vote in person at the meeting to revoke your
proxy.
If you have instructed a broker to vote your shares, you must follow the
directions you receive from your broker to change or revoke your proxy.
HOW PROXIES ARE COUNTED
If you return a signed and dated proxy card but do not indicate how the
shares are to be voted, those shares represented by your proxy card will be
voted as recommended by the Cooper Ohio board of directors. A valid proxy also
gives the individuals named as proxies authority to vote in their discretion
when voting the shares on any other matters that are properly presented for
action at the special meeting. A properly executed proxy marked "ABSTAIN" will
not be voted. However, it may be counted to determine whether there is a quorum
present at the special meeting. Accordingly, since the affirmative vote of a
majority of the voting power entitled to vote at the special meeting is required
to adopt the merger agreement, a proxy marked "ABSTAIN" will have the effect of
a vote against this proposal. Broker non-votes (i.e., shares held by brokers or
nominees which are represented at a meeting but with respect to which the broker
or nominee is not empowered to vote on a particular proposal) will be counted
for purposes of determining whether there is a quorum at the special meeting.
The New York Stock Exchange rules do not permit brokers and nominees to vote the
shares that they hold beneficially either for or against the adoption of the
merger agreement without specific instructions from the person who beneficially
owns those shares. Therefore, if your shares are held by a broker or other
nominee and you do not give them instructions on how to vote your shares, this
will have the same effect as voting against the merger.
24
COST OF SOLICITATION
Cooper Ohio will pay the cost of soliciting proxies. In addition to
solicitation by mail, telephone or other means, Cooper Ohio will make
arrangements with brokerage houses and other custodians, nominees and
fiduciaries to send proxy material to beneficial owners. Cooper Ohio will, upon
request, reimburse these institutions for their reasonable expenses. Cooper Ohio
has retained Georgeson Shareholder Communications, Inc. to aid in the
solicitation of proxies.
COOPER OHIO SHAREHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES
WITH THE PROXY CARDS.
25
DESCRIPTION OF AUTHORIZED SHARES
OF COOPER INDUSTRIES, LTD.
The memorandum of association and bye-laws of Cooper Bermuda and The
Companies Act 1981 (Bermuda) (the "Companies Act") govern the terms of the share
capital of Cooper Bermuda. The memorandum of association of Cooper Bermuda is
attached to this proxy statement/prospectus as annex II. Prior to the completion
of the merger, the memorandum of association of Cooper Bermuda will be amended
to increase its authorized share capital as discussed in the following
paragraph. The amended and restated bye-laws of Cooper Bermuda which will be in
effect upon consummation of the merger are attached to this proxy
statement/prospectus as annex III. The following discussion is a summary of the
terms of the share capital of Cooper Bermuda that will be in effect immediately
following the merger. This summary is not complete and is subject to the
complete text of Cooper Bermuda's memorandum of association and its amended and
restated bye-laws which are attached as annex II and III, respectively, and
incorporated by reference. We encourage you to read those documents carefully.
AUTHORIZED SHARE CAPITAL
Prior to the merger, Cooper Bermuda's memorandum of association will be
amended by a memorandum of increase in capital to provide that its authorized
share capital is US$4,100,000 divided into 250,000,000 Class A common shares,
par value US$0.01 per share, 150,000,000 Class B common shares, par value
US$0.01 per share, and 10,000,000 preferred shares, par value US$0.01 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.
VOTING
The holders of Cooper Bermuda Class A common shares will be entitled to
one vote per share on all matters submitted to a vote of the shareholders. The
holders of Cooper Bermuda Class B common shares will not be entitled to vote,
except as to matters for which the Companies Act specifically requires voting
rights for otherwise nonvoting shares. Cooper Ohio and Cooper Bermuda will enter
into a voting agreement which will provide that in those limited instances where
the Cooper Bermuda Class B common shares have the right to vote, Cooper Ohio (or
any other Cooper Bermuda subsidiary holding the Cooper Bermuda Class B common
shares) shall vote (or abstain from voting) the shares in the same proportion as
the holders of the Cooper Bermuda Class A common shares. Therefore, the Class B
shares will not dilute the voting power of the Cooper Bermuda Class A common
shares. The voting agreement will also provide that Cooper Ohio, or any other
subsidiary of Cooper Bermuda that holds any Cooper Bermuda Class A common
shares, will vote (or abstain from voting) such shares in the same proportion as
the other holders of the Cooper Bermuda Class A common shares.
Bermuda law does not provide for cumulative voting.
There are no other limitations imposed by Bermuda law or Cooper
Bermuda's amended and restated bye-laws on the right of shareholders who are not
Bermuda residents to hold or vote their Cooper Bermuda Class A common shares.
DIVIDEND RIGHTS
Subject to any rights and restrictions of any other class or series of
shares, the board of directors may, from time to time, declare dividends and
other distributions on the issued Cooper Bermuda Class A common shares and
Cooper Bermuda Class B common shares and authorize payment of such dividends and
other distributions. Such dividends or other distributions may be in cash,
shares or property of Cooper Bermuda out of assets or funds legally available
therefor.
If, at any time a dividend or other distribution in cash, shares or
other property is declared or paid on the Cooper Bermuda Class A common shares,
a like dividend or other distribution in cash, shares or other property shall
also be declared and paid on Cooper Bermuda Class B common shares in an equal
amount per share.
26
REDEMPTION AND CONVERSION
Cooper Bermuda Class A common shares will not be convertible into
shares of any other class or series or be subject to redemption either by Cooper
Bermuda or the holder of the Class A common shares.
Cooper Bermuda Class B common shares will be convertible by the holder
thereof into Cooper Bermuda Class A common shares on a one-to-one basis in the
following circumstances:
o to satisfy the obligations of Cooper Bermuda or any of its
affiliates to issue Cooper Bermuda Class A common shares with
regard to the issuance of shares under any stock plans of
Cooper Bermuda or any of its affiliates; or
o as consideration for any acquisition by the company of stock
or assets of a third party.
In addition, the Cooper Bermuda bye-laws provide that in the event
Cooper Bermuda Class B common shares are transferred to any person or entity
other than a wholly-owned subsidiary of Cooper Bermuda, the shares so
transferred will convert automatically into Cooper Bermuda Class A common shares
on a one-for-one basis. Cooper Ohio does not currently intend to transfer the
Cooper Bermuda Class B common shares, except to other wholly-owned subsidiaries
of Cooper Bermuda.
Any transfer of Cooper Bermuda Class A common shares following
conversion will only be made in accordance with the applicable rules of the New
York Stock Exchange, including those rules relating to required shareholder
approvals.
Cooper Ohio currently has approximately 14.7 million shares of Cooper
common stock reserved for issuance pursuant to certain stock plans. Cooper Ohio
currently expects to convert Cooper Bermuda Class B common shares into Cooper
Bermuda Class A common shares in order to satisfy its obligations under those
plans.
In addition, the holders of Class B common shares will have the right
at any time following the issuance thereof upon notice to Cooper Bermuda to
require Cooper Bermuda to purchase any or all of the Cooper Bermuda Class B
common shares for cash at the per share fair market value of the Cooper Bermuda
Class A common shares as of the date of such notice. The fair market value per
share of the Cooper Bermuda Class A common shares, as of any date, means the
average of the high and low sales prices of a share of the Cooper Bermuda Class
A common shares as reported on the New York Stock Exchange composite tape on the
applicable date. If no sales of Cooper Bermuda Class A common shares were made
on the New York Stock Exchange on that date, the average of the high and low
prices as reported on the composite tape for the most recent preceding day on
which sales of the Cooper Bermuda Class A common shares were made will be the
fair market value. Payment will be made within 180 calendar days of the date of
the notice and will include interest at the prime rate of the J.P. Morgan Chase
Bank from the date of the notice until the date of payment.
STOCK EXCHANGE LISTING
Immediately following the merger, Cooper Bermuda's Class A common
shares will be listed on the New York Stock Exchange under the symbol "CBE," the
same symbol under which Cooper Ohio's common stock is currently listed. Because
the Cooper Bermuda Class B common shares will be held only by Cooper Ohio and
its wholly-owned subsidiaries, they will not be registered with the Securities
and Exchange Commission or publicly traded.
CHANGES TO RIGHTS OF A CLASS OR SERIES
The Companies Act provides that the rights attached to any class or
series of common shares of Cooper Bermuda, unless otherwise provided by the
terms of that class or series, may be varied only with the consent in writing of
the holders of three-fourths of that class or series or by a resolution passed
by the affirmative vote of a majority of the total number of votes of the shares
of such class or series present at a separate general meeting of holders of the
shares of that class or series. Each holder of shares of the class or series
present, in person or by
27
proxy, will have one vote for each share of the class or series held.
Outstanding shares will not be deemed to be varied by the creation or issue of
shares that rank in any respect prior to or equivalent with those shares.
QUORUM FOR GENERAL MEETINGS
The holders of shares entitling them to exercise a majority of the
voting power of Cooper Bermuda on the relevant record date shall constitute a
quorum to hold a general meeting of the shareholders.
RIGHTS UPON LIQUIDATION
Upon the liquidation of Cooper Bermuda, after the full amounts that
holders of any issued shares ranking senior to the common shares as to
distribution on liquidation or winding up are entitled to receive have been paid
or set aside for payment, the holders of Cooper Bermuda's Class A and Class B
common shares are entitled to receive, pro rata, any remaining assets of Cooper
Bermuda available for distribution to the holders of common shares. The
liquidator may deduct from the amount payable in respect of those Class A and
Class B common shares any liabilities the holder has to or with Cooper Bermuda.
The assets received by the holders of Cooper Bermuda Class A and Class B common
shares in a liquidation may consist in whole or in part of property. That
property is not required to be of the same kind for all shareholders.
SINKING FUND
Cooper Bermuda's Class A common shares and Class B common shares have
no sinking fund provisions.
LIABILITY FOR FURTHER CALLS OR ASSESSMENTS
Cooper Bermuda's Class A common shares to be issued in the merger will
be duly and validly issued, fully paid and nonassessable.
PREEMPTIVE RIGHTS
Holders of Cooper Bermuda's Class A common shares and Class B common
shares will have no preemptive or preferential right to purchase any securities
of Cooper Bermuda.
REPURCHASE RIGHTS
The board of directors may, at its discretion, authorize the purchase
by Cooper Bermuda of its own shares of any class, at any price (whether at par
or above or below par), as long as such purchase is made in accordance with the
provisions of the Companies Act.
COMPULSORY ACQUISITION OF SHARES HELD BY MINORITY HOLDERS
An acquiring party is generally able to acquire compulsorily the common
shares of minority holders in one of the following ways:
o By a procedure under the Companies Act known as a "scheme of
arrangement." A scheme of arrangement is made by obtaining the
consent of Cooper Bermuda, the consent of the court and
approval of the arrangement by holders of the Class A and
Class B common shares voting together as a class, (1)
representing in the aggregate a majority in number of the
shareholders present at the meeting held to consider the
arrangement and (2) holding at least 75% of all the issued
Class A and Class B common shares taken together as a class.
If a scheme of arrangement receives all necessary consents,
all holders of Class A and Class B common shares could be
compelled to sell their shares under the terms of the scheme
of arrangement. In the event, however, that the scheme of
arrangement were to alter the terms of the Class A common
shares or Class B common shares, then the vote described above
would be determined by reference to such class of Class A or
Class B common shares separately.
28
o If the acquiring party is a company, by acquiring pursuant to
a tender offer 90% of the shares or class of shares not
already owned by the acquiring party (the "offeror"). If an
offeror has, within four months after the making of an offer
for all the shares or class of shares not owned by the
offeror, obtained the approval of or acquired 90% or more of
all the shares to which the offer relates, the offeror may, at
any time within two months after the end of that four month
period, require by a "Notice of Acquisition" any nontendering
shareholder to transfer its shares on the same terms as the
original offer. In those circumstances, nontendering
shareholders will be compelled to sell their shares.
Nontendering shareholders have a one-month period from the
date of the Notice of Acquisition in which to apply to a court
to enjoin the company acquisition.
o By acquiring, pursuant to a notice given to the remaining
shareholders or class of shareholders, where the acquiring
party holds not less than 95% of the shares or the class of
shares of the company, the shares of such remaining
shareholders or class of shareholders. When such a notice is
given, the purchaser is entitled and bound to acquire the
shares of the remaining shareholders on the terms set out in
such notice, unless the remaining shareholder applies to the
court for an appraisal of the value of their shares. This
provision only applies where the purchaser offers the same
terms to all holders of shares whose shares are being
acquired.
TRANSFER AGENT
The transfer agent and registrar for the Class A common shares will be
EquiServe Trust Company, N.A.
PREFERRED SHARES
The board of directors of Cooper Bermuda may issue preferred shares in
one or more classes or series, and fix for each such class or series such voting
power, full or limited, or no voting power, and such designations, preferences
and relative, participating, optional or other special rights and such
qualifications, limitations or restrictions thereof, as are provided in the
resolutions adopted by the board of directors providing for the issuance of such
class or series. The Cooper Bermuda board of directors in authorizing such class
or series may provide that any such class or series may be:
o subject to redemption at the option of the company or the
holders, or both, at such time or times and at such price or
prices;
o entitled to receive dividends (which may be cumulative or
non-cumulative) at such rates, on such conditions, and at such
times, and payable in preference to, or in such relation to,
the dividends payable on any other class or classes or any
other series;
o entitled to such rights upon the dissolution of, or upon any
distribution of the assets of, Cooper Bermuda; or
o convertible into, or exchangeable for, shares of any other
class or classes of shares, or of any other series of the same
or any other class or classes of shares, of Cooper Bermuda at
such price or prices or at such rates of exchange and with
such adjustments;
o in each case, as set forth in the resolutions authorizing the
class or series of preferred shares.
ANTI-TAKEOVER PROVISIONS
Cooper Bermuda's amended and restated bye-laws have provisions that
could have an anti-takeover effect. These provisions are intended to replicate
provisions currently in Cooper Ohio's articles of incorporation and regulations.
These provisions are intended to enhance the likelihood of continuity and
stability in the composition of the board of directors and in the policies
formulated by the board of directors and to discourage transactions that may
involve an actual or threatened change of control of Cooper Bermuda.
29
The bye-laws provide that Cooper Bermuda's board of directors will be
divided into three classes serving staggered three-year terms. Directors can be
removed from office by the affirmative vote of the holders of 80% of the voting
power of Cooper Bermuda, unless a simple majority of the board of directors
voting on the removal has previously voted in favor of removal, in which case
the shareholder voting requirements of the Companies Act will apply and only the
affirmative vote of a simple majority of the votes cast at the general meeting
shall be required for such removal. The board of directors does not have the
power to remove directors. As long as a quorum of directors remains and is
present, vacancies on the board of directors may be filled by the remaining
directors and not by the shareholders. Each of these provisions can delay a
shareholder from obtaining majority representation on the board of directors.
The bye-laws also provide that the board of directors will consist of
not less than nine nor more than fifteen persons, the exact number to be set
from time to time by a majority of the whole board of directors. Accordingly,
the board of directors, and not the shareholders, has the authority to determine
the number of directors and could delay any shareholder from obtaining majority
representation on the board of directors by enlarging the board of directors and
filling the new vacancies with its own nominees.
The bye-laws of Cooper Bermuda provide that at any annual general
meeting, only such business shall be conducted as shall have been brought before
the meeting by or at the direction of the board of directors, by any shareholder
who complies with certain procedures set forth in the bye-laws or by any
shareholder pursuant to the valid exercise of the power granted under the
Companies Act. For business to be properly brought before an annual general
meeting by a shareholder, the shareholder must have given timely notice thereof
in proper written form to the Secretary of Cooper Bermuda and satisfied all
requirements under applicable rules promulgated by the Securities and Exchange
Commission or by the New York Stock Exchange or any other exchange on which
Cooper Bermuda's securities are traded. To be timely for consideration at the
annual general meeting, a shareholder's notice must be received by the Secretary
at Cooper Bermuda's principal executive offices not less than 45 calendar days,
or such greater length of time as permitted by appropriate rules of the U.S.
Securities and Exchange Commission, in advance of the anniversary of the date
that Cooper Bermuda's proxy statement was released to shareholders in connection
with the previous year's annual general meeting (or no later than January 19,
2003 with respect to the 2003 annual general meeting).
Subject to the terms of any other class of shares in issue, any action
required or permitted to be taken by the holders of Cooper Bermuda's common
shares must be taken at a duly called annual or special general meeting of
shareholders unless taken by written consent of all holders of common shares
required or permitted to take such action. Under the bye-laws, special general
meetings may be called at any time by any of the Chairman of the board of
directors, the Deputy Chairman, the President, or the board of directors, or
when requisitioned by shareholders pursuant to the provisions of the Companies
Act. The Companies Act currently permits shareholders holding 10% of the shares
of a company entitled to vote at general meeting to requisition a special
general meeting.
The board of directors is authorized, without obtaining any vote or
consent of the holders of any class or series of shares unless expressly
provided by the terms of issue of a class or series, to from time to time issue
any authorized and unissued shares on such terms and conditions as it may
determine. For example, the board of directors could authorize the issuance of
preferred shares with terms and conditions that could discourage a takeover or
other transaction that holders of some or a majority of the Cooper Bermuda Class
A common shares might believe to be in their best interests or in which holders
might receive a premium for their shares over the then market price of the
shares.
As a Bermuda company, Cooper Bermuda is not subject to Section 1701.831
of the Ohio General Corporation Law, which prohibits the acquisition of 20%, 33
1/3% or 50% of a company's shares without the prior approval of a majority of
the outstanding shares and a majority of the shares not owned by the acquirer,
officers or employee directors. However, the Cooper Bermuda bye-laws contain the
same "fair price to shareholders in business combinations" provision currently
in Cooper Ohio's articles of incorporation. The "fair price" provision provides
that in the event any "business combination" (as defined) is proposed, the
affirmative vote of at least 80% of the voting power of Cooper Bermuda is
required for its approval. However, the 80% requirement is not applicable, if
(x) "continuing directors" of Cooper Bermuda approved the combination by a
two-thirds vote, or (y) the aggregate amount of cash or other consideration to
be received in the business combination by holders of the Class A common shares
of Cooper Bermuda, other than the "related person" involved in the business
combination,
30
is not less than the highest per share price paid by the "related person"
involved in the business combination in acquiring any of its holdings of Cooper
Bermuda's Class A common shares, as determined by two-thirds of the "continuing
directors" and further, a proxy statement which includes the opinion of the
"continuing directors" as to the advisability of the transaction and, if deemed
appropriate, the opinion of an investment banking firm as to the fairness of the
terms, has been mailed to all shareholders at least 30 days prior to the vote on
the business combination. For purposes of this "fair price" provision, (i)
"related person" means any entity or person that together with its affiliates
and associates beneficially owns 20% or more of the outstanding Class A common
shares of Cooper Bermuda, and (ii) "continuing directors" means directors who
either were members of the board immediately prior to the time that a "related
person" involved in a business combination became a "related person" or were
designated before his or her initial election as director as a "continuing
director" by two-thirds of the "continuing directors." This "fair price"
provision could act as a disincentive to any acquiror wishing to acquire Cooper
Bermuda or delay the ability of such acquiror to acquire the company.
Immediately following the merger, Cooper Bermuda will have in place a
shareholder rights plan substantially similar to the Cooper Ohio shareholder
rights plan currently in place. The operation of the shareholder rights plan
could result in the possible dilution of a potential acquiror's interest in
Cooper Bermuda. Consequently, the provisions of the shareholder rights plan
could discourage unsolicited takeover bids for Cooper Bermuda from third
parties. See "Comparison of Rights of Shareholders -- Rights Agreements."
COMPARISON OF RIGHTS OF SHAREHOLDERS
Your rights as a shareholder of Cooper Ohio are governed by the Ohio law
and Cooper Ohio's articles of incorporation and regulations. After the merger,
you will become a holder of Cooper Bermuda Class A common shares and your rights
will be governed by the Companies Act and Cooper Bermuda's memorandum of
association, as amended by the memorandum of increase in capital, and amended
and restated bye-laws.
The principal attributes of the Cooper Ohio common stock and the Cooper
Bermuda Class A common shares will be similar; however, there are certain
differences between your rights as a shareholder under Ohio law and Bermuda law,
which is modeled after that of England. In addition, there are certain
differences between Cooper Ohio's articles of incorporation and regulations and
Cooper Bermuda's memorandum of association and bye-laws. It is our intention
that your rights as a shareholder be substantially the same before and after the
merger and, accordingly, any differences which may arise would be as a
consequence of the difference between Bermuda and Ohio law. In addition, there
are similarities between those actions that constitute violations of the U.S.
federal securities laws that would also constitute or give rise to a cause of
action under Bermuda law and would therefore result in civil liability on Cooper
Bermuda or its directors or officers in a suit brought in the Supreme Court of
Bermuda. For example, a fraudulent misstatement made by a Bermuda company in a
document filed as a prospectus for a public offering of securities would give
rise to a criminal offense under Bermuda law and would give rise to civil
liability on the Bermuda company and its directors or officers to shareholders
who purchased the shares in the offering. In addition, any use of any deceptive
or manipulative devices by the company or by its officers or directors on behalf
of the company in connection with the purchase or sale of the company's
securities would give rise to civil liability on the Bermuda company and its
directors or officers under Bermuda and U.S. securities laws.
The current memorandum of association and the amended and restated
bye-laws of Cooper Bermuda, as they will be in effect immediately following the
merger, are included in this proxy statement/prospectus as annexes II and III,
respectively, and are incorporated by reference herein. The articles of
association of Cooper Ohio are included as Exhibit 3.1 to Cooper Ohio's Current
Report on Form 8-K, dated August 5, 1997, and the regulations of Cooper Ohio are
included as Exhibit 3.2 to Cooper Ohio's Annual Report on Form 10-K for the year
ended December 31, 1997. The articles of association and the regulations of
Cooper Ohio are incorporated by reference in this proxy statement/prospectus.
See "Where You Can Find More Information."
The following is a comparison of the material rights of holders of
Cooper Ohio common stock and Cooper Bermuda common shares.
31
COMPARISON OF CORPORATE GOVERNANCE PROVISIONS
--------------------------------------------------------------------------------------------------------------------
PROVISION COOPER BERMUDA COOPER OHIO
--------------------------------------------------------------------------------------------------------------------
BOARD OF DIRECTORS
-------------------------------- ------------------------------------------------ ----------------------------------
Size of Board Board must contain not less than nine nor more The provisions of Cooper Ohio's
than fifteen directors, as determined by the organizational documents are
board pursuant to a resolution adopted by the substantially similar, however a
affirmative vote of a majority of the majority of the shareholders are
directors in office. also empowered to fix and change
the number of directors by the
affirmative vote of a majority
of the shares present or
represented and entitled to vote
for directors at a duly called
and held meeting.
-------------------------------- ------------------------------------------------ ----------------------------------
Classified Board Directors are divided into three classes, each The provisions of Cooper Ohio's
class to consist, as nearly as possible, of organizational documents are
one-third of the total number of directors substantially similar.
constituting the entire board of directors.
If the number of directors is changed, any
increase or decrease will be apportioned among
the classes so as to maintain each class as
nearly equal as possible. No reduction shall
have the effect of shortening the term of any
incumbent director.
-------------------------------- ------------------------------------------------ ----------------------------------
Term of Office Except for two classes of directors which The provisions of Cooper Ohio's
shall initially hold one and two year terms organizational documents are
expiring at the annual general meetings in substantially similar.
2003 and 2004, respectively, the term of
office of each director shall be until the
third annual meeting following his or her
election and until the election and
qualification of his or her successor.
-------------------------------- ------------------------------------------------ ----------------------------------
Vacancies Any vacancy among directors of any class, The provisions of Cooper Ohio's
including a vacancy that results from an organizational documents are
increase in the number of directors, may be substantially similar, except
filled for the unexpired term by a vote of the vacancies on the board may be
majority of remaining directors, regardless of filled by a vote of the majority
class, provided, that a quorum is present. of remaining directors
During any vacancy the remaining directors regardless of whether a quorum
shall have full power to act as the board of is present.
directors of Cooper Bermuda.
-------------------------------- ------------------------------------------------ ----------------------------------
Removal of Directors Directors can be removed from office only by The provisions of Cooper Ohio's
the affirmative vote of the holders of 80% of organizational documents are
the voting power of Cooper Bermuda on the substantially similar.
relevant record date, unless a simple majority
of the board of directors voting on the
removal has previously voted in favor of
removal, in which case a simple majority of
the votes cast by shareholders at the general
meeting can remove a director.
--------------------------------------------------------------------------------------------------------------------
32
--------------------------------------------------------------------------------------------------------------------
PROVISION COOPER BERMUDA COOPER OHIO
-------------------------------- ------------------------------------------------ ----------------------------------
Indemnification of o Cooper Bermuda shall indemnify any The provisions of Cooper Ohio's
Directors, Officers and current or former director, officer, organization documents are
Employees resident representative, or any person substantially similar.
serving or who has served at the request
of the company as a director, officer or
trustee of another corporation, joint
venture, trust or other enterprise,
against expenses actually and reasonably
incurred in connection with any
threatened, pending or completed action,
suit or proceeding.
o No indemnification if the individual is
adjudged to be liable for fraud or
dishonesty in the performance of his or
her duties to Cooper Bermuda (unless a
court determines otherwise).
o The indemnification provided for in the
bye-laws is not exclusive of other rights
to which a director or officer may be
entitled, including rights provided
pursuant to the memorandum of
association, bye-laws, any agreement, any
insurance purchased by Cooper Bermuda,
vote of shareholders or disinterested
directors, or otherwise.
--------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS MEETINGS
-------------------------------- ------------------------------------------------ ----------------------------------
Calling a Special Meeting May be called by the Chairman of the board, May be called by the Chairman of
the Deputy Chairman, the President, the board the board, the President, a Vice
of directors or the shareholders when President, by action of the
requisitioned by the holders of 10% of the directors at a meeting, by a
Cooper Bermuda Class A common shares as writing by a majority of the
provided by the Companies Act. directors in office, by
shareholders holding 25% or more
of the outstanding shares
entitled to vote thereat, or as
provided in the articles.
-------------------------------- ------------------------------------------------ ----------------------------------
Quorum Requirements Holders of shares entitling them to exercise a At any meeting duly called,
majority of the voting power of Cooper Bermuda whether or not a quorum is
on the relevant record date constitutes a present, holders of a majority
quorum. At any meeting duly called, holders of the voting shares represented
of a majority of the voting shares represented at the meeting may adjourn the
at the meeting may adjourn the meeting if a meeting.
quorum is present, and if not present, the
meeting must be adjourned and Cooper Bermuda
must provide notice to shareholders in the
event the meeting is to be reconvened.
-------------------------------- ------------------------------------------------ ----------------------------------
Action by Written Consent The Companies Act provides that shareholders Ohio law has a substantially
may take action by written consent with 100% similar provision.
shareholder consent required.
--------------------------------------------------------------------------------------------------------------------
33
--------------------------------------------------------------------------------------------------------------------
PROVISION COOPER BERMUDA COOPER OHIO
-------------------------------- ------------------------------------------------ ----------------------------------
Advanced Notice Requirements At any annual general meeting only such There are no similar provisions
for Matters to be business shall be conducted as shall have been in Cooper Ohio's organizational
Considered at a brought before the meeting (1) by or at the documents.
General Meeting direction of the board of directors, (2) by any
shareholder who complies with certain
procedures set forth in the bye-laws, or (3)
by any shareholders pursuant to the valid
exercise of power under the Companies Act.
The bye-laws provide that for business to be
properly brought before an annual general
meeting by a shareholder, the shareholder must
have given timely notice thereof in proper
written form to the Secretary of Cooper
Bermuda and satisfied all requirements under
applicable rules promulgated by the U.S.
Securities and Exchange Commission or by the
New York Stock Exchange or any other exchange
on which the company's securities are traded.
To be timely for consideration at the annual
general meeting, a shareholder's notice must
be received by the Secretary at Cooper
Bermuda's principal executive offices not less
than 45 calendar days, or such greater length
of time as permitted by appropriate rules of
the US Securities and Exchange Commission, in
advance of the anniversary of the date that
the company's proxy statement was released for
shareholders in connection with the previous
year's annual general meeting (or no later
than January 19, 2003 with respect to the 2003
annual general meeting).
--------------------------------------------------------------------------------------------------------------------
AMENDMENTS TO
ORGANIZATIONAL
DOCUMENTS
-------------------------------- ------------------------------------------------ ----------------------------------
Memorandum of The memorandum may be amended in accordance The Cooper Ohio articles may be
Association/Articles of with the Companies Act which allows the amended by the affirmative vote
Incorporation memorandum to be amended by the affirmative of a majority of the outstanding
vote of a simple majority of the shareholders shares, however any amendment or
voting on the amendment. change to the provisions
regarding the fair price to
shareholders in business
combinations requires an 80%
favorable vote of all voting
power at a meeting of the
shareholders; but such 80% vote
is not required if the
amendment is recommended by
two-thirds of the continuing
directors.
Furthermore, the articles shall
not be amended in any manner
--------------------------------------------------------------------------------------------------------------------
34
--------------------------------------------------------------------------------------------------------------------
PROVISION COOPER BERMUDA COOPER OHIO
-------------------------------- ------------------------------------------------ ----------------------------------
which would materially alter or
change the powers, preferences
or special rights of the holders
of two-thirds or more of the
outstanding shares of such
preferred stock, voting
separately as a class.
-------------------------------- ------------------------------------------------ ----------------------------------
Bye-Laws/Code of Regulations The bye-laws may be amended by the board of The regulations may be amended
directors, subject to approval by the by the affirmative vote of a
affirmative vote of holders of record majority of the voting power of
entitling them to exercise a majority of the Cooper Ohio at an annual or
voting power of Cooper Bermuda on the relevant special meeting called for such
record date at an annual or special meeting purpose, or without a meeting
called for such purpose, or without a meeting by the written consent of
by the written consent of all the holders of holders of record of shares
record of shares. However, the affirmative entitling them to exercise
vote of the holders of at least 80% of the two-thirds of the Company's
company's voting power is required to amend voting power. However, the
provisions relating to the number, election affirmative vote of the holders
and term of the directors, the "fair price to of at least 80% of Cooper Ohio's
shareholders in business combinations' voting power shall be required
provision (unless, in the case of such fair to alter, amend or repeal
price provisions, the amendment is approved by provisions relating to the
2/3 of the "continuing directors") and the number, election and term of
provision relating to amending these bye-law directors.
provisions.
-------------------------------- ------------------------------------------------ ----------------------------------
Voting Requirements for Except as otherwise specifically provided in Except as specifically provided
Shareholder Action the bye-laws or the Companies Act, any action in the articles, any action to
to be taken by the shareholders may be taken be taken by the shareholders
by the affirmative vote of a simple majority under the Ohio General
of the shares voting at a general meeting of Corporation Law, including any
Cooper Bermuda. action which would require the
affirmative vote of two-thirds
of the voting power unless
otherwise provided in the
articles, may be taken by the
affirmative vote of a majority
of the voting power of Cooper
Ohio.
--------------------------------------------------------------------------------------------------------------------
35
--------------------------------------------------------------------------------------------------------------------
PROVISION COOPER BERMUDA COOPER OHIO
-------------------------------- ------------------------------------------------ ----------------------------------
Fair Price to Shareholders in The affirmative vote of at least 80% of the The provisions of Cooper Ohio's
Business Combinations voting power of Cooper Bermuda is required for organizational documents are
the approval of any business combination, but substantially similar.
this 80% requirement is not applicable, if:
o "Continuing directors" of Cooper Bermuda
approved the combination by a two-thirds
vote, or
o the aggregate amount of cash or other
consideration to be received in the
business combination by holders of the
common shares of Cooper Bermuda, other
than the "related person" involved in the
business combination, is not less than the
highest per share price paid by the
"related person" involved in the business
combination in acquiring any of its
holders of Cooper Bermuda's common shares,
as determined by two-thirds of the
"continuing directors";
and a proxy statement which includes the
opinion of the "continuing directors" as to the
advisability of the transaction and, if deemed
appropriate, the opinion of an investment
banking firm as to the fairness of the terms,
has been mailed to all shareholders at least
30 days prior to the vote on the business
combination. "Continuing directors" mean
directors who either were a member of the board
immediately prior to the time that a "related
person" involved in a business combination
became a "related person," or who were
designated before his or her initial election
as director as a "continuing director" by
two-thirds of the "continuing directors."
"Related person" means any person or entity,
other than Cooper Bermuda or its subsidiaries,
which, together with its affiliates, are
beneficial owners of 20% or more of the
outstanding Cooper Bermuda Class A common
shares.
-------------------------------- ------------------------------------------------ ----------------------------------
Purchase of Shares Any issued shares may be purchased by Cooper The provisions of Cooper Ohio's
Bermuda, to the extent not prohibited by organizational documents are
applicable law, by action of the board. substantially similar.
-------------------------------- ------------------------------------------------ ----------------------------------
Options and Warrants Directors may, in their discretion, grant The provisions of Cooper Ohio's
options for any class or series of class, to organizational documents are
any persons for any period and upon such terms substantially similar.
as the board may deem advisable, and to cause
warrants or other appropriate instruments
evidencing such options to be issued.
--------------------------------------------------------------------------------------------------------------------
36
--------------------------------------------------------------------------------------------------------------------
PROVISION COOPER BERMUDA COOPER OHIO
-------------------------------- ------------------------------------------------ ----------------------------------
RIGHTS AGREEMENTS
-------------------------------- ------------------------------------------------ ----------------------------------
Terms of Rights The terms of the rights associated with the Cooper Ohio's Rights Agreement,
Cooper Bermuda Class A common shares are dated August 5, 1997, has
presented in the form of a Rights Agreement substantially similar provisions.
attached as an exhibit to the registration
statement of which this proxy
statement/prospectus forms a part. Cooper
Bermuda will enter into the Rights Agreement
prior to the effective date of the merger and
in the merger each right issued under Cooper
Ohio's Rights Agreement will be converted into
a right of Cooper Bermuda. Initially the rights
will be attached to all Cooper Bermuda Class A
common shares. The rights will separate from
the Cooper Bermuda Class A common shares on the
earlier of (l) 10 business days after the
public announcement that a third person (an
"acquiring person") has acquired beneficial
ownership of 15% or more of the outstanding
Cooper Bermuda Class A common shares or (2) 10
business days (or later if the board so
determines) after the date that a tender or
exchange offer is first published or given,
that would result in a third person
beneficially owning 15% or more of Cooper
Bermuda's Class A common shares (a
"distribution date").
Each right will initially represent the right
to purchase 1/100 of a Series A Participating
Preferred Share and will not be exercisable
until the distribution date. If an acquiring
person becomes the beneficial holder of 15% or
more of the then outstanding Cooper Bermuda
Class A common shares, except in specified
circumstances, each bolder of a right will have
the right to receive upon exercise Cooper
Bermuda Class A common shares having a value
equal to two times the number of Cooper Bermuda
Class A common shares associated with the
right.
If, after a third person becomes the beneficial
owner of 15% or more of the Cooper Bermuda
Class A common shares, Cooper Bermuda is
acquired in a merger or other business
combination, each holder of a right will have
the right to receive common stock of the
acquired company having value equal to two
times the exercise price of a right. The final
expiration date is August 5, 2007. The
exercise price was initially set at $225 for
each 1/100 of a Series A Participating
Preferred Share, subject to
--------------------------------------------------------------------------------------------------------------------
37
--------------------------------------------------------------------------------------------------------------------
PROVISION COOPER BERMUDA COOPER OHIO
-------------------------------- ------------------------------------------------ ----------------------------------
adjustment. The board may redeem all but not
less than all of the outstanding rights for
$.01 per right, at the close of business on
the tenth day following the stock acquisition
date or the final expiration date.
-------------------------------- ------------------------------------------------ ----------------------------------
ALTERATION OF CAPITAL Cooper Bermuda may, by resolution of the Cooper Ohio's regulations do not
shareholders or where required, of a separate contain a similar provision, but
class of shareholders, increase its authorized similar rights are provided
share capital and par value; divide its shares under Ohio law.
into several classes and attach thereto
respectively any preferential, deferred,
qualified or special rights, privileges or
conditions; consolidate and divide its share
capital into shares of larger par value;
subdivide its shares into shares of smaller
par value than is fixed by the memorandum of
association; make provision for the issue and
allotment of shares which do not carry any
voting rights; cancel shares which, at the
date of the passing of the resolution in that
behalf, have not been taken or agreed to be
taken by any person, and diminish the amount
of its share capital by the amount of the
shares cancelled and change the currency
denomination of its share capital.
--------------------------------------------------------------------------------------------------------------------
38
INCOME TAX CONSEQUENCES OF THE REORGANIZATION
U.S. FEDERAL INCOME TAX CONSEQUENCES TO SHAREHOLDERS
The following general discussion summarizes the anticipated principal
U.S. federal income tax consequences of the receipt of Cooper Bermuda Class A
common shares by certain holders of Cooper Ohio common stock pursuant to the
reorganization. This discussion does not address all of the U.S. federal income
tax consequences that may be relevant to particular Cooper Ohio shareholders in
light of their individual circumstances or to shareholders who, for U.S. federal
income tax purposes, are subject to special rules, such as:
o dealers or traders in securities or currencies;
o tax-exempt entities;
o banks, financial institutions, or insurance companies;
o grantor trusts;
o real estate investment trusts or regulated investment
companies;
o holders who hold Cooper Ohio common stock as part of a
position in a straddle or as part of a hedging or conversion
transaction for U.S. federal income tax purposes;
o investors whose functional currency is not the U.S. dollar;
o holders who acquired their Cooper Ohio common stock within
twelve months of the effective date of the merger pursuant to
the exercise of employee stock options or otherwise as
compensation;
o holders that, for U.S. federal income tax purposes, are
nonresident alien individuals, foreign corporations, foreign
partnerships, foreign trusts, or foreign estates; and
o holders who own, or are deemed to own, 10% or more, determined
by voting power or value, of Cooper Ohio common stock or
Cooper Bermuda Class A common shares.
Further, this discussion does not address any U.S. federal estate and
gift or alternative minimum tax consequences or any state, local, or foreign tax
consequences relating to the reorganization or the ownership and disposition of
Cooper Bermuda Class A common shares. Nor does this discussion address the tax
consequences of the reorganization to Cooper Ohio or Cooper Bermuda.
EACH COOPER OHIO SHAREHOLDER IS STRONGLY URGED TO CONSULT HIS OR HER
OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO HIM OR HER OF THE
RECEIPT OF COOPER BERMUDA CLASS A COMMON SHARES PURSUANT TO THE REORGANIZATION
CONTEMPLATED BY THIS PROXY STATEMENT/PROSPECTUS AND THE OWNERSHIP AND
DISPOSITION OF COOPER BERMUDA CLASS A COMMON SHARES, INCLUDING THE APPLICABILITY
AND EFFECT OF FEDERAL, STATE, LOCAL, AND FOREIGN INCOME AND OTHER TAX LAWS IN
HIS OR HER PARTICULAR CIRCUMSTANCES.
This discussion is based on the Code, the Treasury regulations
promulgated thereunder, and judicial and administrative interpretations thereof,
including IRS Notice 94-93, 1994-2 C.B. 563, in each case as in effect and
available on the date of this proxy statement/ prospectus. All of the foregoing
are subject to change, which change could apply with retroactive effect and
could affect the tax consequences described below. Neither Cooper Ohio nor
Cooper Bermuda will request any ruling from the IRS as to the U.S. federal
income tax consequences of the reorganization.
This discussion assumes that Cooper Ohio shareholders hold their Cooper
Ohio common stock and will hold Cooper Bermuda Class A common shares as capital
assets. In addition, this discussion is based on certain customary assumptions
and representations made or to be made by Cooper Ohio and Cooper Bermuda,
including (1)
39
that the facts set forth in this registration statement are true, accurate, and
complete and (2) that the reorganization will be consummated as described in
this registration statement. Any change in the truth, accuracy or completeness
of any of the facts, assumptions or representations on which this discussion is
based could affect the tax consequences described below.
For purposes of this document, a U.S. holder is a beneficial owner of
Cooper Ohio common stock that, for U.S. federal income tax purposes, is:
o a citizen or resident of the U.S.;
o a corporation or partnership created or organized in or under
the laws of the U.S. or any State thereof, including the
District of Columbia;
o an estate, the income of which is subject to U.S. federal
income taxation regardless of its source;
o a trust, if such trust validly has elected to be treated as a
U.S. person for U.S. federal income tax purposes or if (1) a
U.S. court can exercise primary supervision over its
administration and (2) one or more U.S. persons have the
authority to control all of the substantial decisions of such
trust; or
o otherwise subject to U.S. federal income taxation on a net
income basis on their shares of Cooper Ohio common stock.
THE REORGANIZATION
Receipt of Cooper Bermuda Class A Common Shares. Because Cooper Bermuda
is not a U.S. corporation, U.S. holders will recognize gain, but not loss, on
the receipt of Cooper Bermuda Class A common shares in exchange for Cooper Ohio
common stock pursuant to the reorganization. Each U.S. holder will recognize
gain, but not loss, on the receipt of Cooper Bermuda Class A common shares in
exchange for Cooper Ohio common stock pursuant to the reorganization in an
amount equal to the excess, if any, of (1) the fair market value on the
effective date of the reorganization of the Cooper Bermuda Class A common shares
received by such U.S. holder (which generally may be determined by reference to
the trading price of the Cooper Bermuda Class A common shares on the New York
Stock Exchange) over (2) such U.S. holder's adjusted tax basis in its Cooper
Ohio common stock surrendered in exchange therefor. Any gain recognized will be
capital gain and will be long-term capital gain if the Cooper Ohio common stock
has been held for more than one year at the time of the reorganization. A U.S.
holder that recognizes gain with respect to the reorganization will have an
aggregate adjusted tax basis in its Cooper Bermuda Class A common shares equal
to the aggregate adjusted tax basis in the Cooper Ohio common stock exchanged
therefor, increased by the amount of gain recognized. A U.S. holder will not be
permitted to recognize any loss realized on the exchange of his or her shares of
Cooper Ohio common stock in the reorganization. In such case, the aggregate
adjusted tax basis of the Cooper Bermuda Class A common shares received by a
U.S. holder with a loss on its Cooper Ohio common stock will be equal to such
U.S. holder's aggregate adjusted tax basis in its Cooper Ohio common stock
surrendered in exchange therefor. Thus, subject to any subsequent increases in
the fair market value of the Cooper Bermuda Class A common shares, any loss
would be preserved. The holding period for any Cooper Bermuda Class A common
shares received by a U.S. holder recognizing gain with respect to the
reorganization should begin the day after the effective date of the
reorganization. A U.S. holder who has a gain with respect to some shares of
Cooper Ohio common stock, but a loss with respect to other shares of Cooper Ohio
common stock which cannot be recognized pursuant to the foregoing, will
recognize the full amount of the gain without any reduction for the loss. The
holding period for any Cooper Bermuda Class A common shares received by U.S.
holders with a loss on their Cooper Ohio common stock will include the holding
period of the Cooper Ohio common stock exchanged therefor.
Reporting Requirements. In addition to the return and reporting
requirements imposed on taxpayers generally, additional requirements may be
applicable to U.S. holders. A U.S. holder may be subject to penalties if that
holder fails to report the gain recognized in the reorganization on that
holder's U.S. federal income tax return for the taxable year of the
reorganization.
40
COOPER BERMUDA CLASS A COMMON SHARES
Distributions. Subject to the discussion below under "--Passive Foreign
Investment Company Considerations," the gross amount of any distribution by
Cooper Bermuda of cash or property (other than certain distributions, if any, of
common shares distributed pro rata to all shareholders of Cooper Bermuda) with
respect to common shares will be includible in income by a U.S. holder as
dividend income to the extent such distributions are paid out of the current or
accumulated earnings and profits of Cooper Bermuda as determined under U.S.
federal income tax principles. Such dividends will not be eligible for the
dividends received deduction generally allowed to U.S. holders that are
corporations. Subject to the discussion below under "--Passive Foreign
Investment Company Considerations," to the extent, if any, that the amount of
any distribution by Cooper Bermuda exceeds Cooper Bermuda's current and
accumulated earnings and profits as determined under U.S. federal income tax
principles, it will be treated first as a tax-free return of the U.S. holder's
adjusted tax basis in the common shares and thereafter as capital gain. Cooper
Bermuda will maintain calculations of its earnings and profits under U.S.
federal income tax principles.
The amount of any distribution of property other than cash will be the
fair market value of such property on the date of distribution.
It is anticipated that only a portion of the dividends received by a
U.S. holder with respect to Cooper Bermuda Class A common shares will be treated
as foreign source income for purposes of calculating such holder's foreign tax
credit limitation. This is because it is anticipated that (1) U.S. persons will
own a majority of the Cooper Bermuda common shares after the reorganization and
(2) a portion of the income derived by Cooper Bermuda will be U.S. source
income. To the extent that dividends distributed by Cooper Bermuda are treated
as foreign source income, they generally will constitute passive income, or, in
the case of certain U.S. holders, financial services income.
Sale or Exchange of Common Shares. Subject to the discussion below
under "--Passive Foreign Investment Company Considerations," a U.S. holder
generally will recognize gain or loss on the sale or exchange of Cooper Bermuda
Class A common shares equal to the difference between the amount realized on
such sale or exchange and the U.S. holder's adjusted tax basis in such Cooper
Bermuda Class A common shares. Such gain or loss will be capital gain or loss.
In the case of a noncorporate U.S. holder, the maximum marginal U.S. federal
income tax rate applicable to such gain will be lower than the maximum marginal
U.S. federal income tax rate applicable to ordinary income if such U.S. holder's
holding period for such common shares exceeds one year. Gain or loss, if any,
recognized by a U.S. holder generally will be treated as U.S. source income or
loss for U.S. foreign tax credit purposes. The deductibility of capital losses
is subject to limitations.
Passive Foreign Investment Company Considerations. A non-U.S.
corporation will be classified as a passive foreign investment company (a
"PFIC") for U.S. federal income tax purposes in any taxable year in which, after
applying certain look-through rules, either (1) at least 75 percent of its gross
income is passive income or (2) at least 50 percent of the gross value of its
assets is attributable to assets that produce passive income or are held for the
production of passive income. Passive income for this purpose generally includes
dividends, interest, royalties, rents, and gains from commodities and securities
transactions.
Based on certain estimates of its gross income and gross assets and the
nature of its business, Cooper Bermuda believes that it will not be classified
as a PFIC for its current taxable year. Cooper Bermuda's status in future years
will depend on its assets and activities in those years. Cooper Bermuda has no
reason to believe that its assets or activities will change in a manner that
would cause it to be classified as a PFIC. However, the tests for determining
PFIC status are applied annually, and it is difficult to predict accurately
future income and assets, which are relevant to this determination. Accordingly,
Cooper Bermuda cannot assure that it will not become a PFIC. If Cooper Bermuda
were a PFIC, a U.S. holder of common shares generally would be subject to
imputed interest charges and other disadvantageous tax treatment with respect to
any gain from the sale or exchange of, and certain distributions with respect
to, the Cooper Bermuda Class A common shares.
Alternatively, a U.S. holder generally could elect, subject to certain
limitations, to annually take into gross income the appreciation or depreciation
in its Cooper Bermuda Class A common shares' value during the tax year (the
"mark-to-market election"). If a U.S. holder makes the mark-to-market election,
the U.S. holder will not be
41
subject to the above-described rule. If a U.S. holder makes the mark-to-market
election, the U.S. holder recognizes each year an amount equal to the difference
as of the close of the taxable year between the U.S. holder's fair market value
of the common shares and the adjusted basis in the common shares. Losses would
be allowed only to the extent of net gain previously included by the U.S. holder
under the mark-to-market election for prior taxable years. Amounts included in
or deducted from income under the mark-to-market election and actual gains and
losses realized upon the sale or disposition of the common shares, subject to
certain limitations, will be treated as ordinary gains or losses. Another
alternative election, which would allow a U.S. holder to elect to take its pro
rata share of Cooper Bermuda's undistributed income into gross income as it is
earned by Cooper Bermuda (the "QEF election"), would only be available to a U.S.
holder if Cooper Bermuda provided certain information to the IRS. Because Cooper
Bermuda generally will not satisfy the IRS's record keeping requirements, a U.S.
holder may only be able to make the mark-to-market election and not the QEF
election if Cooper Bermuda were a PFIC.
U.S. holders are strongly urged to consult their tax advisors regarding
the tax consequences that would arise if Cooper Bermuda were treated as a PFIC.
Backup Withholding Tax and Information Reporting Requirements.
Currently, distributions with respect to Cooper Ohio common stock and proceeds
from the sale or redemption of Cooper Ohio common stock are subject to U.S.
backup withholding tax and information reporting rules. After the
reorganization, it is anticipated that the same rules will apply to
distributions with respect to Cooper Bermuda Class A common shares and to
proceeds from the sale or redemption of Cooper Bermuda Class A common shares.
U.S. backup withholding tax and information reporting requirements
generally apply to certain payments to certain noncorporate holders of stock.
Information reporting generally will apply to payments of dividends on, and to
proceeds from the sale or redemption of, Cooper Bermuda Class A common shares
made within the U.S. to a holder of Cooper Bermuda Class A common shares (other
than an "exempt recipient," including a corporation, a payee that is not a U.S.
person that provides an appropriate certification and certain other persons). A
payor will be required to withhold at the then applicable rate of any payments
of dividends on, or proceeds from the sale or redemption of Cooper Bermuda Class
A common shares within the U.S. to a holder (other than an "exempt recipient")
if such holder fails to furnish its correct taxpayer identification number or
otherwise fails to comply with, or establish an exemption from, such backup
withholding tax requirements. In the case of such payments by a payor or
middleman within the U.S. to a foreign simple trust, a foreign grantor trust, or
a foreign partnership (other than payments to a foreign simple trust, a foreign
grantor trust, or a foreign partnership that qualifies as a "withholding foreign
trust" or a "withholding foreign partnership" within the meaning of such U.S.
Treasury regulations and payments to a foreign simple trust, a foreign grantor
trust, or a foreign partnership that are effectively connected with the conduct
of a trade or business in the U.S.), the beneficiaries of the foreign simple
trust, the persons treated as the owners of the foreign grantor trust, or the
partners of the foreign partnership, as the case may be, will be required to
provide the certification discussed above in order to establish an exemption
from backup withholding tax and information reporting requirements. Moreover, a
payor or middleman may rely on a certification provided by a payee that is not a
U.S. person only if such payor or middleman does not have actual knowledge or a
reason to know that any information or certification stated in such certificate
is incorrect.
BERMUDA INCOME TAX CONSEQUENCES OF THE REORGANIZATION
Under current Bermuda law, Cooper Bermuda is not subject to tax on
income or capital gains. Furthermore, Cooper Bermuda has obtained from the
Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection
Act 1966 (as amended), an undertaking that, in the event that Bermuda enacts any
legislation imposing tax computed on profits, income, any capital asset, gain or
appreciation, or any tax in the nature of estate duty or inheritance tax, then
the imposition of such tax will not be applicable to Cooper Bermuda or to any of
its operations, or the shares, capital or common shares of Cooper Bermuda, until
March 28, 2016. This undertaking does not, however, prevent the imposition of
property taxes on Cooper Bermuda to the extent that it owns real property or
leasehold interests in Bermuda or certain other taxes on Cooper Bermuda if it
were to employ persons in Bermuda.
Cooper Bermuda believes that no significant portion of its income or
capital gains will be subject to tax in Bermuda, which currently has no
corporate income tax. However, this belief is based upon the anticipated nature
and conduct of the business of Cooper Bermuda, which may change, and upon Cooper
Bermuda's understanding of
42
its position under the tax laws of Bermuda and other countries, which position
is subject to review and possible challenge by taxing authorities and to
possible changes in law (which may have retroactive effect). The extent to which
certain taxing jurisdictions may require Cooper Bermuda to pay tax or to make
payments in lieu of tax cannot be determined in advance. There can be no
assurance that these factors will not have a material adverse effect on Cooper
Bermuda.
Under existing Bermuda law, there will be no Bermuda income or
withholding tax on dividends paid by Cooper Bermuda to its shareholders.
Furthermore, no Bermuda tax or other levy is payable on the sale or other
transfer (including by gift or on the death of the shareholder) of Cooper
Bermuda common stock (other than by shareholders resident in Bermuda).
EXPERTS
The consolidated financial statements of Cooper Industries, Inc.
incorporated by reference in Cooper Industries, Inc.'s Annual Report (Form 10-K)
for the year ended December 31, 2001 have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon incorporated by
reference therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given on the authority of such firm as experts in accounting and
auditing.
LEGAL MATTERS
Certain legal matters in connection with the Cooper Bermuda common
shares have been passed upon for Cooper Bermuda by its Bermuda counsel, Appleby,
Spurling & Kempe. Appleby, Spurling & Kempe has also rendered an opinion to
Cooper Bermuda regarding Bermuda tax consequences of the reorganization
described in "Income Tax Consequences of the Reorganization -- Bermuda Income
Tax Consequences of the Reorganization." Skadden, Arps, Slate, Meagher & Flom
LLP has rendered an opinion to Cooper Bermuda regarding United States federal
income tax consequences of the reorganization to shareholders of Cooper Ohio
described in "Income Tax Consequences of the Reorganization -- U.S. Federal
Income Tax Consequences to Shareholders." Ernst & Young LLP has also rendered an
opinion to Cooper Bermuda regarding United States federal income tax
consequences of the reorganization to shareholders of Cooper Ohio described in
"Income Tax Consequences of the Reorganization -- U.S. Federal Income Tax
Consequences to Shareholders."
PROPOSALS OF SHAREHOLDERS
The board of directors of Cooper Ohio is not aware of any matters that
are expected to come before the special meeting other than those referred to in
this proxy statement/prospectus. If other matters should properly come before
the meeting, the persons named in the proxy intend to vote the proxies in
accordance with their best judgment. If the reorganization is approved by the
shareholders, Cooper Bermuda's bye-laws will require that shareholders who wish
to nominate persons for election to the board of directors must submit their
nominations to Cooper Bermuda no later than November 5, 2002 to be considered at
the 2003 Annual Meeting of Shareholders. Nominations must include certain
information concerning the nominee and the proponent's ownership of common
shares of Cooper Bermuda. Nominations not meeting these requirements will not be
entertained at the Annual Meeting. The Secretary of Cooper Bermuda can be
contacted at the same address listed above for the Secretary of Cooper Ohio. Any
other shareholder proposals intended to be presented for consideration at the
2003 Annual Meeting of Shareholders must also be received by the Secretary of
Cooper Bermuda no later than November 5, 2002, to be included in the proxy
materials relating to that meeting. If timely notice is not given of a
shareholder proposal, then the proxies named on the proxy cards distributed by
Cooper Bermuda for the Annual Meeting may use the discretionary voting authority
granted them by the proxy cards if the proposal is raised at the meeting,
whether or not there is any discussion of the matter in the proxy
statement/prospectus. In any event, all shareholder proposals to be presented
for consideration at the 2003 Annual Meeting of Shareholders must be received by
the Secretary of Cooper Bermuda no later than January 19, 2003.
43
WHERE YOU CAN FIND MORE INFORMATION
Cooper Bermuda has filed with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-4 (herein, together with
all amendments and exhibits, referred to as the "Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act"). This proxy
statement/prospectus, which constitutes a part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted as permitted by the rules and regulations of
the Commission. For further information, reference is hereby made to the
Registration Statement. Statements made in this proxy statement/prospectus as to
the contents of any contract, agreement or other document are not necessarily
complete. With respect to each such contract, agreement or other document filed
as an exhibit to the Registration Statement or otherwise filed with the
Commission, reference is made to the copy so filed, and each such statement
shall be deemed qualified in its entirety by such reference.
Cooper Ohio is, and after the reorganization Cooper Bermuda will be,
subject to the informational requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and in accordance therewith files and
will file reports, proxy and information statements, and other information with
the Commission. Such reports, proxy and information statements, and other
information filed with the Commission, can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Securities and
Exchange Commission at 233 Broadway, New York, New York 10279. You may obtain
information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. Copies of reports, proxy and information
statements and other information regarding registrants that file electronically
(including Cooper Industries, Inc.) are available on the Commission's Web Site
at http://www.sec.gov.
Upon completion of the reorganization, Cooper Bermuda common shares
will be traded on the New York Stock Exchange. At the time of commencement of
such trading, Cooper Ohio common stock will be delisted and will no longer be
registered pursuant to Section 12 of the Exchange Act. At such time, your shares
will have automatically converted into shares of Cooper Bermuda and Cooper
Bermuda will be registered pursuant to Section 12 of the Exchange Act.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Cooper Ohio with the Commission
pursuant to the Exchange Act are hereby incorporated by reference in this proxy
statement/prospectus:
(1) Annual Report on Form 10-K for the fiscal year ended December 31,
2001 (File No. 1-1175);
(2) Current Reports on Form 8-K dated January 24, 2002, January 25,
2002, February 21, 2002, and March 22, 2002 (File No. 1-1175).
Each document filed by Cooper Ohio pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this proxy
statement/prospectus and prior to the date of the special meeting shall be
deemed to be incorporated by reference in this proxy statement/prospectus and to
be a part of this proxy statement/prospectus from the date of filing of such
document. Any statement contained in this proxy statement/prospectus or in a
document incorporated or deemed to be incorporated by reference in this proxy
statement/prospectus shall be deemed to be modified or superseded for purposes
of the Registration Statement and this proxy statement/prospectus to the extent
that a statement contained in this proxy statement/prospectus or in any
subsequently filed document that also is or is deemed to be incorporated by
reference in this proxy statement/prospectus modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of the Registration
Statement or this proxy statement/prospectus.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF THE INCORPORATED
DOCUMENTS (OTHER THAN EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE THEREIN) WILL BE FURNISHED UPON REQUEST
WITHOUT
44
CHARGE TO EACH PERSON TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED.
WRITTEN REQUESTS SHOULD BE MADE BY MAY 7, 2002 AND SHOULD BE DIRECTED TO
COOPER INDUSTRIES, INC., 600 TRAVIS, SUITE 5800, HOUSTON, TEXAS 77002 ATTENTION:
OFFICE OF THE SECRETARY.
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.
COOPER BERMUDA IS PROHIBITED FROM MAKING ANY INVITATION TO THE PUBLIC IN BERMUDA
TO SUBSCRIBE FOR ANY OF ITS SHARES.
45
ANNEX I
AGREEMENT AND PLAN OF MERGER
AMONG
COOPER INDUSTRIES, LTD.,
COOPER INDUSTRIES, INC.
AND
COOPER MERGERCO, INC.
DATED AS OF JUNE 11, 2001
TABLE OF CONTENTS
PAGE
----
ARTICLE I MERGER............................................ I-1
1.1 Merger................................................ I-1
1.2 Effective Time........................................ I-1
1.3 Effects of the Merger................................. I-1
ARTICLE II NAME, ARTICLES OF INCORPORATION, DIRECTORS AND
EXECUTIVE OFFICERS........................................ I-2
2.1 Name of Surviving Corporation......................... I-2
2.2 Articles of Incorporation; Regulations................ I-2
2.3 Directors............................................. I-2
2.4 Officers.............................................. I-2
ARTICLE III CONVERSION AND EXCHANGE OF STOCK................ I-2
3.1 Conversion............................................ I-2
3.2 Exchange of Stock..................................... I-3
3.3 Dissenters' Rights.................................... I-3
ARTICLE IV BENEFIT AND COMPENSATION PLANS................... I-4
4.1 Plans................................................. I-4
4.2 Reimbursement for Certain Deferred Compensation....... I-4
ARTICLE V CONDITIONS PRECEDENT.............................. I-5
5.1 Conditions to Each Party's Obligation to Effect the
Merger................................................. I-5
ARTICLE VI TERMINATION, AMENDMENT AND WAIVER................ I-5
6.1 Termination........................................... I-5
6.2 Effect of Termination................................. I-5
6.3 Amendment............................................. I-5
6.4 Waiver................................................ I-6
6.5 Procedure for Termination, Amendment, Extension or
Waiver................................................. I-6
ARTICLE VII GENERAL PROVISIONS.............................. I-6
7.1 Notices............................................... I-6
7.2 Entire Agreement; No Third-party Beneficiaries........ I-6
7.3 Governing Law......................................... I-6
I-i
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of June 11, 2001,
among Cooper Industries, Ltd., a Bermuda company ("Cooper Bermuda"), Cooper
Industries, Inc., an Ohio corporation ("Cooper Ohio"), and Cooper Mergerco,
Inc., an Ohio corporation ("Merger Sub") and a newly formed, indirect
wholly-owned subsidiary of Cooper Bermuda.
WHEREAS, the respective Boards of Directors of Cooper Bermuda, Cooper Ohio
and Merger Sub deem it advisable and in the best interests of their respective
shareholders to reorganize such that the company will effectively change its
place of incorporation from Ohio to Bermuda by merging Merger Sub with and into
Cooper Ohio;
WHEREAS, the respective Boards of Directors of Cooper Bermuda, Cooper Ohio
and Merger Sub have each approved the merger of Merger Sub with and into Cooper
Ohio, pursuant to which Cooper Ohio will be the surviving company in the merger
and become a wholly-owned, indirect subsidiary of Cooper Bermuda, upon the terms
and subject to the conditions set forth in this Agreement (the "Merger"), and
whereby each outstanding share of common stock, par value $5.00 per share, of
Cooper Ohio (together with the rights associated with such shares (the "Cooper
Ohio Rights") issued pursuant to the Rights Agreement (the "Rights Agreement"),
dated as of August 5, 1997, between Cooper Ohio and First Chicago Trust Company
of New York, as Rights Agent, ("Cooper Ohio Common Stock"), other than those
shares of Cooper Ohio Common Stock held by Cooper Ohio or any direct or indirect
wholly-owned subsidiary of Cooper Ohio and Dissenting Shares, shall be
automatically converted into one Class A common share, par value $.01 per share,
of Cooper Bermuda ("Cooper Bermuda Class A Common Share"); and
WHEREAS, the consummation of the Merger requires, among other things, the
adoption of this Agreement by the affirmative vote of a majority of the voting
power of Cooper Ohio (the "Cooper Ohio Shareholder Approval");
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
MERGER
1.1 MERGER
Upon the terms and subject to the conditions set forth in this Agreement,
and in accordance with the Ohio General Corporation Law (the "OGCL"), Merger Sub
shall be merged with and into Cooper Ohio at the Effective Time of the Merger.
Following the Effective Time of the Merger, the separate corporate existence of
Merger Sub shall cease and Cooper Ohio shall continue as the surviving
corporation (the "Surviving Corporation"), becoming a wholly-owned, indirect
subsidiary of Cooper Bermuda, and shall succeed to and assume all the rights and
obligations of Merger Sub in accordance with the OGCL.
1.2 EFFECTIVE TIME
Subject to the provisions of this Agreement, as soon as practicable
following the satisfaction or waiver of the conditions set forth in Section 5.1,
the parties shall duly prepare, execute and file a certificate of merger (the
"Ohio Certificate of Merger") in accordance with Section 1701.81 of the OGCL
with the Secretary of State of Ohio. The Merger shall become effective upon the
filing of the Ohio Certificate of Merger (or at such later time reflected in
such Certificate of Merger as shall be agreed to by Cooper Bermuda and Cooper
Ohio). The date and time when the Merger shall become effective is hereinafter
referred to as the "Effective Time."
1.3 EFFECTS OF THE MERGER
(a) General Effects. The Merger shall have the effects set forth in
Section 1701.82 of the OCGL.
(b) Assumptions of Obligations. The Surviving Corporation specifically
assumes any obligation of Merger Sub which requires that such obligation is
specifically assumed by the Surviving Corporation.
I-1
ARTICLE II
NAME, ARTICLES OF INCORPORATION,
DIRECTORS AND EXECUTIVE OFFICERS
2.1 NAME OF SURVIVING CORPORATION
The name of the Surviving Corporation shall be "Cooper Industries, Inc."
2.2 ARTICLES OF INCORPORATION; REGULATIONS
(a) The Articles of Incorporation of the Surviving Corporation shall be
amended as of the Effective Time pursuant to the Certificate of Merger to
contain the provisions in the Articles of Incorporation of Merger Sub in
effect immediately prior to the Effective Time, except that Article FIRST of
such Articles shall provide that the name of the Surviving Corporation shall
be "Cooper Industries, Inc."
(b) The Regulations of the Merger Sub in effect immediately prior to the
Effective Time shall be the regulations of the Surviving Corporation until
amended in accordance with applicable law.
2.3 DIRECTORS
The directors of Merger Sub immediately prior to the Effective Time shall be
the directors of the Surviving Corporation, until his or her successor shall be
elected and qualify, subject to prior death, resignation or removal in
accordance with the Articles of Incorporation and Regulations of the Surviving
Corporation, or as otherwise provided by applicable law.
2.4 OFFICERS
The officers of Cooper Ohio immediately prior to the Effective Time shall be
the officers of the Surviving Corporation, until his or her successor shall be
elected and qualify, subject to prior death, resignation or removal in
accordance with the Articles of Incorporation and Regulations of the Surviving
Corporation, or as otherwise provided by applicable law.
ARTICLE III
CONVERSION AND EXCHANGE OF STOCK
3.1 CONVERSION
At the Effective Time, by virtue of the Merger and without any action on the
part of the holder of any shares:
(a) Conversion of Cooper Ohio Common Stock. Each issued and outstanding
share of Cooper Ohio Common Stock, other than shares cancelled in accordance
with 3.1(b) and Dissenting Shares, shall be converted into and become one
fully paid and nonassessable Cooper Bermuda Class A Common Share.
(b) Cancellation of Cooper Ohio-Owned Stock. Each issued share of
Cooper Ohio Common Stock that is owned by Cooper Ohio or by any direct or
indirect wholly-owned subsidiary of Cooper Ohio prior to the Effective Time
shall automatically be canceled and retired and shall cease to exist, and no
Cooper Bermuda Class A Common Shares or other consideration shall be
delivered or deliverable in exchange for such shares of Cooper Ohio Common
Stock.
(c) CONVERSION OF MERGER SUB COMMON STOCK. Each issued and outstanding
share of common stock, par value $1.00 per share, of Merger Sub, shall be
converted into and become one share of common stock of the Surviving
Corporation with the same rights, power and privileges as the shares so
converted and shall constitute the only outstanding shares of capital stock
of the Surviving Corporation.
(d) STOCK OPTION AND AWARD PLANS. Cooper Ohio currently maintains and
sponsors the Employee Stock Purchase Plan, UK Employee Share Purchase Plan,
Stock Incentive Plan, Management Annual Incentive Plan and certain other
plans and agreements providing for the grant or award to its
I-2
employees of options or other rights to purchase or receive Cooper Ohio
Common Stock (the "Employee Stock Plans"). Cooper Ohio also maintains and
sponsors the Directors' Stock Plan, Directors' Retainer Fee Stock Plan and
certain other plans and agreements providing for the grant or award to its
directors of options or other rights to purchase or receive Cooper Ohio
Common Stock (the "Director Stock Plans"). Cooper Ohio shall continue to
maintain and sponsor the Employee Stock Plans and Cooper Bermuda shall
assume the rights and obligations of Cooper Ohio under the Director Stock
Plans, subject to Cooper Ohio's obligation to reimburse Cooper Bermuda for
payments to directors representing deferred shares accrued as of the
Effective Time pursuant to Section 4.2. The outstanding options and other
awards under the Employee Stock Plans and Director Stock Plans shall be
exercisable or issuable upon the same terms and conditions as under such
plans and the agreements relating thereto immediately prior to the Effective
Time of the Merger, except that upon the exercise or issuance of such
options or awards, Cooper Bermuda Class A Common Shares shall be issuable in
lieu of shares of Cooper Ohio Common Stock. The number of Cooper Bermuda
Class A Common Shares issuable upon the exercise or issuance of such an
option or award immediately after the Effective Time and the option price of
each such option or award shall be the number of shares and option price in
effect immediately prior to the Effective Time. All options or awards issued
under the Employee Stock Plans and Director Stock Plans after the Effective
Time shall entitle the holder thereof to purchase Cooper Bermuda Class A
Common Shares in accordance with the terms of the Employee Stock Plans and
Director Stock Plans.
(e) Dividend Reinvestment Plan. At the Effective Time, Cooper Bermuda
shall assume all the rights and obligations of Cooper Ohio under the Cooper
Industries, Inc. Dividend Reinvestment and Stock Purchase Plan and such Plan
shall be deemed to provide for the issuance or purchase of, or otherwise
relate to, Cooper Bermuda Class A Common Shares.
(f) Rights. Each Cooper Ohio Right shall automatically be converted
into one right issued pursuant to the Rights Agreement, to be entered into
prior to the Merger between Cooper Bermuda and EquiServe Trust Company,
N.A., as Rights Agent, containing terms and conditions substantially similar
to the Rights Agreement.
3.2 EXCHANGE OF STOCK
(a) Exchange Procedures. At the Effective Time, each outstanding
certificate theretofore representing shares of Cooper Ohio Common Stock
(other than shares to be cancelled as set forth in Section 3.1(b) and
Dissenting Shares) shall automatically represent the same number of Cooper
Bermuda Class A Common Shares, and therefore do not need to be exchanged for
certificates representing Class A Common Shares. Following the Merger,
certificates bearing the name of Cooper Bermuda will be issued in the normal
course upon surrender of certificates bearing the name of Cooper Ohio for
exchange or transfer.
(b) No Further Ownership Rights in Cooper Ohio Common Stock. All Cooper
Bermuda Class A Common Shares issued upon the Merger, including any
certificates issued upon the surrender for exchange of certificates in
accordance with the terms of this Article III, shall be deemed to have been
issued (and paid) in full satisfaction of all rights pertaining to the
shares of Cooper Ohio Common Stock theretofore represented by such
certificates, subject, however, to the Surviving Corporation's obligation
(if any) to pay any dividends or make any other distributions with a record
date prior to the Effective Time which may have been declared or made by
Cooper Ohio on such shares of Cooper Ohio Common Stock in accordance with
the terms of this Agreement or prior to the date of this Agreement and which
remain unpaid at the Effective Time, and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Cooper Ohio Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
certificates are presented to the Surviving Corporation they shall be
canceled and exchanged as provided in this Article III, except as otherwise
provided by law.
3.3 DISSENTERS' RIGHTS
Anything contained in this Agreement to the contrary notwithstanding, if any
person shall perfect dissenter's rights in respect of one or more shares of
Cooper Ohio Common Stock, in accordance with
I-3
Section 1701.85 of the OGCL, then all of the rights accruing from the shares of
Cooper Ohio Common Stock which are outstanding immediately before the Effective
Time and which are held by any shareholders who have not voted such shares in
favor of the adoption of this Agreement and who shall have delivered to Cooper
Ohio a written demand for appraisal of such shares in the manner provided in
Section 1701.85 of the OGCL shall be suspended at the Effective Time; provided,
however that (i) the holders of such shares shall be entitled ("Dissenting
Shares") upon compliance with the provisions of Section 1701.85 of the OGCL to
payment of the appraised value of such Dissenting Shares in accordance with
Section 1701.85 of the OGCL and (ii) the rights accruing from the Dissenting
Shares shall remain suspended until the earlier of (A) the date on which such
holder, upon compliance with the provisions of Section 1701.85 of the OGCL,
establishes the right to payment of the appraised value of such Dissenting
Shares in accordance with the provisions of Section 1701.85 of the OGCL and such
value is paid to such holder, at which time such Dissenting Shares shall be
cancelled and extinguished in consideration and exchange for such payment; and
(B) the date on which either the demand for appraisal of such Dissenting Shares
is withdrawn with the consent of Cooper Ohio or such holder forfeits the rights
of appraisal of such Dissenting Shares by failing to establish such holder's
entitlement to appraisal rights in accordance with Section 1701.85 of the OGCL,
at which time each such Dissenting Share shall be converted into and become one
fully paid and nonassessable Cooper Bermuda Class A Common Share.
ARTICLE IV
BENEFIT AND COMPENSATION PLANS
4.1 PLANS
At the Effective Time, (i) Cooper Ohio shall continue to sponsor and
maintain each employee benefit and deferred compensation plan and program to
which Cooper Ohio is then a party (the "Employee Benefit Plans") and the
Directors Retirement Plan, and (ii) subject to Section 4.2, Cooper Bermuda shall
assume the rights and obligations of Cooper Ohio under each director benefit and
deferred compensation plan and program to which Cooper Ohio is then a party (the
"Director Benefit Plans") other than the Directors Retirement Plan. To the
extent any Employee Benefit Plan or Director Benefit Plan provides for the
issuance or purchase of, or otherwise relates to, Cooper Ohio Common Stock,
after the Effective Time, such plan shall be deemed to provide for the issuance
or purchase of, or otherwise relate to, Cooper Bermuda Class A Common Shares.
Cooper Bermuda shall offer to enter into management continuity agreements (the
"New Change of Control Agreements") with each executive officer and key employee
of Cooper Ohio who, immediately prior to the Effective Time, is a party to a
management continuity agreement with Cooper Ohio (each a "Change of Control
Agreement") and the terms and conditions of the New Change of Control Agreements
shall be substantially similar to those set forth in the Change of Control
Agreements.
4.2 REIMBURSEMENT FOR CERTAIN DEFERRED COMPENSATION
Cooper Ohio shall reimburse Cooper Bermuda for payments to directors or
former directors representing deferred compensation in the form of cash or
shares accrued as of the Effective Time plus any interest or dividend
equivalents accruing thereon after the Effective Time under the Directors'
Deferred Compensation Plan, Directors' Stock Plan and Directors' Retainer Fee
Stock Plan. Such reimbursement shall be due to Cooper Bermuda at the time the
deferred compensation is paid by Cooper Bermuda to the director or former
director. Cooper Ohio's reimbursement obligation with respect to the payment of
deferred shares to a director or former director may, at Cooper Ohio's option,
be satisfied either: (i) by delivering to Cooper Bermuda the equivalent number
of Cooper Bermuda Class A Common Shares, or (ii) by paying cash to Cooper
Bermuda in an amount equal to the product of number of shares distributed
multiplied by the average of the per share high and low sales prices of a Class
A Common Share on the New York Stock Exchange composite tape on the day that
payment is made (or if no Class A Common Shares traded on such day, then on the
next preceding trading day). Distributions of deferred account balances shall be
deemed to be made first from balances for which Cooper Ohio is obligated to
reimburse Cooper Bermuda under this Section 4.2 and thereafter from additional
accruals for which Cooper Bermuda is responsible without reimbursement.
I-4
ARTICLE V
CONDITIONS PRECEDENT
5.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER
The respective obligation of each party to effect the Merger is subject to
the satisfaction or waiver of the following conditions:
(a) Shareholder Approval. The Cooper Ohio Shareholder Approval shall
have been obtained.
(b) Form S-4. The registration statement on Form S-4 filed with the
Securities and Exchange Commission by Cooper Bermuda in connection with the
issuance of the Cooper Bermuda Class A Common Shares in the Merger shall
have become effective under the Securities Act of 1933, as amended, and
shall not be the subject of any stop order or proceedings seeking a stop
order.
(c) NYSE Approval. The New York Stock Exchange (the "NYSE") shall have
confirmed that the Cooper Bermuda Class A Common Shares have been approved
for listing on the NYSE, subject to notice of issuance, and may trade on the
NYSE and succeed to the ticker symbol "CBE."
(d) Governmental, Regulatory and Other Material Third-Party
Consents. All filings required to be made prior to the Effective Time of
the Merger with, and all material consents, approvals, permits and
authorizations required to be obtained prior to the Effective Time from, any
court or governmental or regulatory authority or agency, domestic or
foreign, or other person in connection with the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
will have been made or obtained (as the case may be).
(e) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger or any of the other transactions contemplated
hereby shall be in effect.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
6.1 TERMINATION
This Agreement may be terminated at any time prior to the Effective Time,
whether before or after the Cooper Ohio Shareholder Approval, by action of the
Board of Directors of Cooper Bermuda, Cooper Ohio or Merger Sub.
6.2 EFFECT OF TERMINATION
In the event of termination of this Agreement as provided in Section 6.1,
this Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of Cooper Ohio, Merger Sub or Cooper
Bermuda, other than the provisions of this Article VI and Article VII.
6.3 AMENDMENT
This Agreement may be amended by the parties at any time before or after the
Cooper Ohio Shareholder Approval; provided, however, that after any such
approval, there shall not be made any amendment that alters or changes the
amount or kind of shares to be received by shareholders in the Merger; alters or
changes any term of the articles of the Surviving Corporation, except for
alterations or changes that could otherwise be adopted by the directors of the
Surviving Corporation; or alters or changes any other terms and conditions of
this Agreement if any of the alterations or changes, alone or in the aggregate,
would materially adversely affect the holders of shares of Cooper Ohio Common
Stock. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties.
I-5
6.4 WAIVER
At any time prior to the Effective Time, the parties may waive compliance by
the other parties with any of the agreements or conditions contained in this
Agreement. Any agreement on the part of a party to any such waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of such rights.
6.5 PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER
A termination of this Agreement pursuant to Section 6.1, an amendment of
this Agreement pursuant to Section 6.3 or a waiver pursuant to Section 6.4
shall, in order to be effective, require action by the Board of Directors of
Cooper Ohio, Cooper Bermuda and Merger Sub.
ARTICLE VII
GENERAL PROVISIONS
7.1 NOTICES
All notices, requests, claims, demands and other communications under this
Agreement shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to Cooper Bermuda:
Cooper Industries, Ltd.
600 Travis, Suite 5800
Houston, Texas 77002-1001
Attention: Office of the Secretary
(b) if to Cooper Ohio:
Cooper Industries, Inc.
600 Travis, Suite 5800
Houston, Texas 77002-1001
Attention: General Counsel
(c) if to Merger Sub:
Cooper Mergerco, Inc.
c/o Cooper Industries, Inc.
600 Travis, Suite 5800
Houston, Texas 77002-1001
Attention: General Counsel
7.2 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES
This Agreement (including the documents and instruments referred to herein)
(a) constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement and (b) except for the provisions of Article
III, is not intended to confer upon any person other than the parties any rights
or remedies.
7.3 GOVERNING LAW
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Ohio regardless of the laws that might otherwise govern
under applicable principles of conflicts of laws thereof.
I-6
IN WITNESS WHEREOF, Cooper Ohio, Cooper Bermuda and Merger Sub have caused
this Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
COOPER INDUSTRIES, LTD.
By: /s/ DIANE K. SCHUMACHER
-----------------------------------
Name: Diane K. Schumacher
Title: Senior Vice President
and General Counsel
COOPER MERGERCO, INC.
By: /s/ D. BRADLEY MCWILLIAMS
-----------------------------------
Name: D. Bradley McWilliams
Title: Vice President and
Treasurer
COOPER INDUSTRIES, INC.
By: /s/ H. JOHN RILEY, JR.
-----------------------------------
Name: H. John Riley, Jr.
Title: Chairman, President and
Chief Executive Officer
I-7
ANNEX II
[LOGO]
BERMUDA
THE COMPANIES ACT 1981
MEMORANDUM OF ASSOCIATION OF COMPANY LIMITED BY SHARES
SECTION 7(1) AND (2)
MEMORANDUM OF ASSOCIATION
OF
COOPER INDUSTRIES, LTD.
(hereinafter referred to as "the Company")
1. The liability of the members of the Company is limited to the amount (if
any) for the time being unpaid on the shares respectively held by them.
2. We, the undersigned, namely,
NUMBER OF BERMUDIAN
SHARES STATUS
NAME AND ADDRESS NATIONALITY SUBSCRIBED (YES OR NO)
---------------- ----------- ----------------- ----------------
Alison R. Dyer....................................... British 1 Yes
Cedar House
41 Cedar Avenue
Hamilton HM 12, Bermuda
Ruby L. Rawlins...................................... British 1 Yes
Cedar House
41 Cedar House
Hamilton HM 12, Bermuda
Angela R. B. Browne.................................. British 1 Yes
Cedar Houst
41 Cedar House
Hamilton HM 12, Bermuda
Joy F. Thompson...................................... British 1 Yes
Cedar Houst
41 Cedar House
Hamilton HM 12, Bermuda
do hereby respectively agree to take such number of shares of the Company as may
be allotted to us respectively subscribed, and to satisfy such calls as may be
made by the directors, provisional directors or promoters of the Company in
respect of the shares allotted to us respectively.
3. The Company is to be Exempted Company as defined by the Companies Act
1981.
4. The Company, with the consent of the Minister of Finance, has power to
hold land situate in Bermuda not exceeding in all, including the following
parcels:
Not applicable.
II-1
5. The authorised share capital of the Company is US$12,000.00 divided into
1,200,000 shares of $0.01 each. The minimum subscribed share capital of the
Company is $12,000.00 in United States currency.
6. The objects for which the Company is formed and incorporated are:
(a) To carry on business as a holding company and to acquire and hold
shares, stocks, debenture stock, bonds, mortgages, obligations and
securities of any kind issued or guaranteed by any company, corporation or
undertaking of whatever nature and wherever constituted or carrying on
business, and shares, stock, debentures, debenture stock, bonds, obligations
and other securities issued or guaranteed by any government, sovereign
ruler, commissioners, trust, local authority or other public body, whether
in Bermuda or elsewhere, and to vary, transpose, dispose of or otherwise
deal with from time to time as may be considered expedient any of the
Company's investments for the time being;
(b) To acquire any such shares and other securities as are mentioned in
the preceding paragraph by subscription, syndicate participation, tender,
purchase, exchange or otherwise and to subscribe for the same, either
conditionally or otherwise, and to guarantee the subscription thereof and to
exercise and enforce all rights and powers conferred by or incident to the
ownership thereof;
(c) To co-ordinate the administration, policies, management,
supervision, control, research, planning, trading and any and all other
activities of any company or companies now or hereafter incorporated or
acquired which may be or may become a Group Company (which expression, in
this and the next following paragraphs means a company, wherever
incorporated, which is or becomes a holding company or a subsidiary of, or
affiliated with, the Company within the meanings respectively assigned to
those terms in The Companies Act 1981) or, with the prior written approval
of the Minister of Finance, any company or companies now or hereafter
incorporated or acquired with which the Company may be or may become
associated;
(d) To provide financing and financial investment, management and
advisory services to any Group Company, which shall include but not be
limited to granting or providing credit and financial accommodation, lending
and making advances with or without interest to any Group Company and
lending to or depositing with any bank funds or other assets to provide
security (by way of mortgage, charge, pledge, lien or otherwise) for loans
or other forms of financing granted to such Group Company by such bank;
Provided that the Company shall not be deemed to have the power to act
as executor or administrator, or as trustee, except in connection with the
issue of bonds and debentures by the Company or any Group Company or in
connection with a pension scheme for the benefit of employees or former
employees of the Company or a Group Company or their respective
predecessors, or the dependents or connections of such employees or former
employees; and
(e) the packaging of goods of all kinds;
(f) The buying, selling and dealing in goods of all kinds;
(g) The designing and manufacturing goods of all kinds;
(h) Scientific research including the improvement, discovery and
development of processes, inventions, patents and designs and the
construction, maintenance and operation of laboratories and research
centers;
(i) All forms of engineering;
(j) The acquiring by purchase or otherwise and holding as an investment
inventions, patents, trade marks, trade names, trade secrets, designs and
the like;
(k) The buying, selling, hiring, letting and dealing in conveyances of
any sort;
(l) To acquire by purchase or otherwise and hold, sell, dispose of and
deal in real property situated outside Bermuda and in personal property of
all kinds wheresoever situated; and
II-2
(m) To enter into any guarantee, contract of indemnity or suretyship and
to assure, support or secure with our without consideration or benefit the
performance of any obligations of any person or persons and to guarantee the
fidelity of individuals filling or about to fill situations of trust or
confidence.
7. The Company has the following powers:
(a) to borrow and raise money in any currency or currencies and to
secure or discharge any debt or obligation in any manner and in particular
(without prejudice to the generality of the foregoing) by mortgages of or
charges upon all or any part of the undertaking, property and assets
(present and future) and uncalled capital of the Company or by the creation
and issue of securities;
(b) to enter into any guarantee, contract of indemnity or suretyship and
in particular (without prejudice to the generality of the foregoing) to
guarantee, support or secure, with or without consideration, whether by
personal obligation or by mortgaging or charging all or any part of the
undertaking, property and assets (present and future) and uncalled capital
of the Company or by both such methods or in any other manner, the
performance of any obligations or commitments of, and the repayment or
payment of the principal amounts of and any premiums, interest, dividends
and other moneys payable on or in respect of any securities or liabilities
of, any person, including (without prejudice to the generality of the
foregoing) any company which is for the time being a subsidiary or a holding
company of the Company or another subsidiary of a holding company of the
Company or otherwise associated with the Company;
(c) to accept, draw, make, create, issue, execute, discount, endorse,
negotiate and deal in bills of exchange, promissory notes, and other
instruments and securities, whether negotiable or otherwise.
(d) to sell, exchange, mortgage, charge, let on rent, share of profit,
royalty or otherwise, grant licences, easements, options, servitudes and
other rights over, and in any other manner deal with or dispose of, all or
any part of the undertaking, property and assets (present and future) of the
Company for any consideration and in particular (without prejudice to the
generality of the foregoing) for any securities;
(e) to issue and allot securities of the Company for cash or in payment
or part payment for any real or personal property purchased or otherwise
acquired by the Company or any services rendered to the Company or as
security for any obligation or amount (even if less than the nominal amount
of such securities) or for any other purpose;
(f) to grant pensions, annuities, or other allowances, including
allowances on death, to any directors, officers or employees or former
directors, officers or employees of the Company or any company which at any
time is or was a subsidiary or a holding company or another subsidiary of a
holding company of the Company or otherwise associated with the Company or
any predecessor in business of any of them, and to the relations,
connections or dependants of any such persons, and to other persons whose
service or services have directly or indirectly been of benefit to the
Company or whom the Company considers have any moral claim on the Company or
to their relations connections or dependants, and to establish or support
any associations, institutions, clubs, schools, building and housing
schemes, funds and trusts, and to make payment towards insurance or other
arrangements likely to benefit any such persons or otherwise advance the
interests of the Company or of its members or for any national, charitable,
benevolent, educational, social, public, general or useful object;
(g) subject to the provisions of Section 42 of the Companies Act 1981,
to issue performance shares which at the option of the holders thereof are
to be liable to be redeemed; and
(h) to purchase its own shares in accordance with the provisions of
Section 42A of the Companies Act 1981.
II-3
Signed by each subscriber in the presence of at least one witness attesting
the signature thereof:
[ILLEGIBLE]
------------------------------------------------------
[ILLEGIBLE]
------------------------------------------------------
[ILLEGIBLE]
------------------------------------------------------
[ILLEGIBLE]
------------------------------------------------------
(Subscribers)
[ILLEGIBLE]
------------------------------------------------------
[ILLEGIBLE]
------------------------------------------------------
[ILLEGIBLE]
------------------------------------------------------
[ILLEGIBLE]
------------------------------------------------------
(Witnesses)
SUBSCRIBED this 18th day of May 2001.
STAMP DUTY (To be affixed)
NOT APPLICABLE
II-4
ANNEX III
AMENDED AND RESTATED BYE-LAWS
OF
COOPER INDUSTRIES, LTD.
I HEREBY CERTIFY that the within written Amended and Restated Bye-laws are a
true copy of the Amended and Restated Bye-laws of COOPER INDUSTRIES, LTD. as
approved at the meeting of the above Company on the day of ,
2002.
------------------------------------
Director
III-1
INDEX
BYE-LAW SUBJECT
------- -------
1-7 -- Share Capital, Rights and Voting
8 -- Transfer of Shares
9-13 -- Transmission of Shares
14 -- Alteration of Capital
15 -- Seal of the Company
16-25 -- General Meetings of Shareholders
26-34 -- Board of Directors
35 -- Committees
36-50 -- Officers
51 -- Accounting Records
52 -- Appointment of Auditor
53-56 -- Indemnity
57-59 -- Fair Price to Shareholders in Business Combinations
60-61 -- Amendments
III-2
AMENDED AND RESTATED BYE -- LAWS
OF
COOPER INDUSTRIES, LTD.
SHARE CAPITAL, RIGHTS AND VOTING
1. Share Capital and Rights. The authorized share capital of the Company is
U.S.$4,100,000 divided into 250,000,000 Class A common shares par value
U.S.$.01 per share (the "Class A Common Shares"), 150,000,000 Class B common
shares par value U.S.$.01 per share (the "Class B Common Shares") and
10,000,000 Preferred Shares par value U.S.$.01 per share (the "Preferred
Shares").
A. Terms of the Class A Common Shares.
Subject to these Bye-laws, holders of the Class A Common Shares shall:
1. be entitled to one vote for each Class A Common Share held by such
holder, on the relevant record date, on all matters submitted to a
vote of the shareholders;
2. be entitled to such dividends and other distributions in cash, shares
or property of the Company out of assets or funds of the Company
legally available therefor, as the Board of Directors may from time to
time declare; and
3. generally be entitled to enjoy all of the rights attaching to shares
under the Companies Act (as used herein, the "Companies Act" means
every Bermuda Statute from time to time in force concerning companies
insofar as the same applies to the Company).
B. Terms of the Class B Common Shares.
Subject to these Bye-laws, the holders of the Class B Common Shares shall
have all of the rights of the holders of the Class A Common Shares,
except that:
1. the holders of the Class B Common Shares shall not be entitled to
vote, except as to matters for which the Companies Act specifically
requires voting rights for otherwise nonvoting shares;
2. if, at any time, a dividend or other distribution in cash, shares or
other property is declared or paid on the Class A Common Shares, a
like dividend or other distribution in kind and amount shall also be
declared and paid on the Class B Common Shares;
3. the holders of the Class B Common Shares shall have the right to
convert their shares into Class A Common Shares on a one-for-one basis
in the following circumstances:
(a) to satisfy the obligations of the Company or its subsidiaries or
affiliated companies to issue Class A Common Shares with regard to
the exercise of share options or grants of shares pursuant to share
incentive plans, employee share purchase plans or other stock
compensation plans sponsored by the Company or its subsidiaries or
affiliated companies; or
(b) as consideration for any acquisition of stock or assets of a third
party;
4. in the event of transfer of Class B Common Shares to any person other
than a wholly-owned subsidiary of the Company, the Class B Common
Shares so transferred shall automatically be converted into Class A
Common Shares on a one-for-one basis; and
5. the holders of the Class B Common Shares shall have the right upon
written notice to require the Company, subject to section 42A of the
Companies Act, to purchase for cash the number of Class B Common
Shares stated in such notice at the fair market value per share of the
Class A Common Shares on the date of such notice. Any such purchase
shall be settled within 180 calendar days of the day such notice is
given and shall include simple interest from the date of the notice to
but not including the payment date at a rate equal to the prime rate
charged by the Chase Manhattan Bank or its successor. For purposes of
this paragraph, the fair market value per share of the Class A Common
Shares, as of any date, means the average of the high and low sales
prices of a share of the Class A Common Shares as reported on the New
York Stock Exchange composite tape on the
III-3
applicable date, or if no sales of the Class A Common Shares were made
on the New York Stock Exchange on that date, the average of the high
and low prices as reported on the composite tape for the most recent
preceding day on which sales of the Class A Common Shares were made.
No dividends shall be declared on any Class B Common Shares for which
notice has been given under this paragraph.
C. Rights of Common Shares Upon Issuance of Additional Shares. For the
purposes of these Bye-laws, the rights attaching to any of the Class A
Common Shares or the Class B Common Shares shall be deemed not to be
altered by the allotment or issue by the Company of other shares ranking
in priority for payment of dividends or with respect to capital, or which
confer on the holders voting rights more favourable than those conferred
on the Class A Common Shares or Class B Common Shares, and shall not
otherwise be deemed to be altered by the creation or issue of further
shares ranking pari passu with such Common Shares, or by the purchase or
redemption by the Company of any of its own shares.
D. Preferred Shares. The Board of Directors is hereby expressly authorized
to provide for the issuance of all or any of the Preferred Shares in one
or more classes or series, and to fix for each such class or series such
voting power, full or limited, or no voting power, and such designations,
preferences and relative, participating, optional or other special rights
and such qualifications, limitations or restrictions thereof, as shall be
stated and expressed in the resolution or resolutions adopted by the
Board of Directors providing for the issuance of such class or series,
including, without limitation, the authority to provide that any such
class or series may be: (a) subject to redemption at the option of the
Company or the holders, or both, at such time or times and at such price
or prices; (b) entitled to receive dividends (which may be cumulative or
non-cumulative) at such rates, on such conditions, and at such times, and
payable in preference to, or in such relation to, the dividends payable
on any other class or classes or any other series; (c) entitled to such
rights upon the dissolution of, or upon any distribution of the assets
of, the Company; or (d) convertible into, or exchangeable for, shares of
any other class or classes of shares, or of any other series of the same
or any other class or classes of shares, of the Company at such price or
prices or at such rates of exchange and with such adjustments; all as may
be stated in such resolution or resolutions.
2. Options and Warrants. The Board of Directors is authorized, from time to
time, in its discretion, to grant such persons, for such periods and upon
such terms as the Board deems advisable, options to purchase such number of
shares of any class or classes or of any series of any class as the Board
may deem advisable, and to cause warrants or other appropriate instruments
evidencing such options to be issued.
3. Purchase of Shares by Company. The Board of Directors may, at its
discretion, authorize the purchase by the Company of its own shares of any
class upon such terms as the Board may determine, at any price (whether at
par or above or below par), provided always that such purchase is effected
in accordance with the provisions of the Companies Act.
4. No Preemptive Rights. No holder of shares of any class or other securities
of the Company shall as such holder have any preemptive right to purchase
shares of any class or other securities of the Company or shares or other
securities convertible into or exchangeable for or carrying rights or
options to purchase shares of any class of the Company, whether such shares
or other securities are now or hereafter authorized, which at any time may
be proposed to be issued by the Company or subjected to rights or options to
purchase granted by the Company.
5. Power to Issue Shares. Subject to these Bye-laws, the Board of Directors
shall have power to issue any authorized and unissued shares of the Company
on such terms and conditions as it may determine. The Company may from time
to time issue its shares in fractional denominations and deal with such
fractions to the same extent as its whole shares and shares in fractional
denominations shall have in proportion to the respective fractions
represented thereby all of the rights of whole shares including but not
limited to the right to vote, to receive dividends and distributions and to
participate in a winding up.
6. Dividends and Other Payments. The Board of Directors may from time to time
declare dividends or distributions out of assets or funds of the Company
legally available therefor, including distributions out of
III-4
contributed surplus, to be paid to the shareholders according to their
rights and interests including such interim dividends as appear to the Board
to be justified by the position of the Company. The Company may deduct from
any dividend, distribution or other monies payable to a shareholder by the
Company on or in respect of any shares all sums of money (if any) presently
payable by the shareholder to the Company on account of calls or otherwise
in respect of shares of the Company. No dividend, distribution or other
monies payable by the Company on or in respect of any share shall bear
interest against the Company.
7. Certificates. At the discretion of the Board of Directors or the Secretary,
the Company may issue shares including Class A Common Shares, Class B Common
Shares and Preferred Shares in uncertificated form upon the initial issuance
of such shares or thereafter upon surrender of the certificates representing
such shares.
TRANSFER OF SHARES
8. Transfer of Shares. Subject to the Companies Act and these Bye-laws, any
shareholder may transfer all or any of the holder's shares by an instrument
of transfer in the usual common form or in any other form which the Board of
Directors or the Company's transfer agent may approve. The instrument of
transfer of a share shall be signed by or on behalf of the transferor and
where any share is not fully paid, the instrument of transfer shall also be
signed by or on behalf of the transferee. The Board may decline to register
any transfer unless:
(a) the instrument of transfer is duly stamped and lodged with the Company,
at such place as the Board shall appoint for the purpose, accompanied by
the certificate for the shares (if any has been issued) to which it
relates, and such other evidence as the Board may reasonably require to
show the right of the transferor to make the transfer;
(b) the instrument of transfer is in respect of only one class of share; and
(c) where applicable, the permission of the Bermuda Monetary Authority with
respect thereto has been obtained.
Subject to any directions of the Board from time to time in force, the
Secretary may exercise the powers and discretions of the Board under this
Bye-law 8.
TRANSMISSION OF SHARES
9. Representative of a Deceased Shareholder. If a shareholder dies, the
survivor or survivors, where the deceased was a joint holder, and the legal
personal representative, where the deceased was a sole holder, shall be the
only person recognised by the Company as having any title to the deceased
holder's shares. Nothing herein contained shall release the estate of a
deceased holder from any liability in respect of any share held by such
deceased holder solely or jointly with other persons. For the purpose of
this Bye-law, the legal personal representative means the person to whom
probate or letters of administration has or have been granted, or failing
any such person, such other person as the Board of Directors may in its
absolute discretion determine to be the person recognised by the Company for
the purpose of this Bye-law.
10. Registration on Death or Transfer by Operation of Law. Any person becoming
entitled to a share in consequence of the death of a shareholder or
otherwise by operation of applicable law, may be registered as a shareholder
or may elect to nominate some person to be registered as a transferee of
such share upon such evidence being produced as may from time to time be
required by the Board of Directors or the Company's transfer agent. In
either case, the Company shall have the same right to decline or suspend
registration as it would have had in the case of a transfer of the share by
that shareholder before such shareholder's death or transfer by operation of
law, as the case may be.
11. Dividend Entitlement of Transferee. A person becoming entitled to a share
in consequence of the death of a shareholder or otherwise by operation of
applicable law shall (upon such evidence being produced as may from time to
time be required by the Board of Directors as to such entitlement) be
entitled to receive and
III-5
may give a discharge for any dividends or other monies payable in respect of
the share, but such person shall not be entitled in respect of the share to
receive notices of or to attend or vote at general meetings of the Company
(whether annual or special) or, except as aforesaid, to exercise in respect
of the share any of the rights or privileges of a shareholder until such
person shall have become registered as the holder thereof. The Board may at
any time give notice requiring such person to elect either to be registered
himself or to transfer the share and, if the notice is not complied with
within sixty days, the Board may thereafter withhold payment of all
dividends and other moneys payable in respect of the shares until the
requirements of the notice have been complied with.
12. Ownership of Shares. Except as ordered by a court of competent jurisdiction
or as required by law, no person shall be recognised by the Company as
holding any share upon trust and the Company shall not be bound by or
required in any way to recognise (even when having notice thereof) any
equitable, contingent, future or partial interest in any share or any
interest in any fractional part of a share or (except only as otherwise
provided in these Bye-laws or by law) any other right in respect of any
share except an absolute right to the entirety thereof in the registered
holder.
13. Exercise of Power by Secretary. Subject to any directions of the Board of
Directors from time to time in force, the Secretary may exercise the powers
and discretions of the Board under Bye-laws 9, 10, 11 and 12.
ALTERATION OF CAPITAL
14. Alteration of Capital. The Company may from time to time by resolution of
the shareholders or where required, of a separate class of shareholders:
(a) increase its authorized share capital by new shares of such amount and
par value as it thinks expedient;
(b) divide its shares into several classes and attach thereto respectively
any preferential, deferred, qualified or special rights, privileges or
conditions;
(c) consolidate and divide all or any of its share capital into shares of
larger par value than its existing shares;
(d) subdivide its shares or any of them into shares of smaller par value
than is fixed by its Memorandum of Association, so, however, that in
the subdivision the proportion between the amount paid and the amount,
if any, unpaid on each reduced share shall be the same as it was in the
case of the share from which the reduced share is derived;
(e) make provision for the issue and allotment of shares which do not carry
any voting rights;
(f) cancel shares which, at the date of the passing of the resolution in
that behalf, have not been taken or agreed to be taken by any person,
and diminish the amount of its share capital by the amount of the
shares so cancelled; and
(g) change the currency denomination of its share capital.
SEAL OF THE COMPANY
15. Seal of the Company. Any instrument to which the corporate seal of the
Company is affixed shall be signed by either two directors, or by the
Secretary and one director, or by any two officers of the Company, or by any
one person whether or not a director or officer who has been authorized
either generally or specifically to affirm use of the corporate seal;
provided that any director or officer of the Company, or any resident
representative of the Company appointed pursuant to the Companies Act (a
"Resident Representative"), may affix a corporate seal over his or her
signature alone to authenticate copies of these Bye-laws, the incorporating
documents of the Company, the minutes of any meetings or any other documents
required to be authenticated by such director, officer or Resident
Representative.
III-6
GENERAL MEETINGS OF SHAREHOLDERS
16. Annual General Meeting. The annual general meeting of shareholders shall be
held on such date and at such time as shall be designated from time to time
by the Board of Directors and stated in the notice of the meeting, at which
meeting the shareholders shall elect directors, appoint auditors and
transact such other business as may properly be brought before the meeting.
17. Special General Meetings. Special general meetings of shareholders, for any
purpose or purposes, may be called by any of: (a) the Chairman of the Board
of Directors, (b) the Deputy Chairman, (c) the Board of Directors, (d) the
President or (e) the shareholders when requisitioned by shareholders
pursuant to and in accordance with the provisions of the Companies Act. Such
request shall state the purpose or purposes of the proposed meeting. At a
special general meeting of the shareholders, only such business shall be
conducted as shall be specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board of Directors.
18. Place of Meetings. All general meetings of the shareholders may be held in
Bermuda or at such other place and at such time as may be designated by the
Chairman of the Board, the Deputy Chairman or the President and specified in
the notice of meeting.
19. Notice of Meetings. Written notice of each annual or special general
meeting of the shareholders, stating the day, time, place, and purposes
thereof, shall be given, not less than ten nor more than sixty days before
the date of the meeting, to each shareholder of record as of the applicable
record date who is entitled to vote at such meeting, by mail or by e-mail or
any other electronic means at the shareholder's address as it appears on the
register of shareholders or at any other address given in writing by such
shareholder to the Company for such purpose. Notice of each annual or
special general meeting shall also be given in the same manner as described
above to any Resident Representative of the Company who has delivered a
written notice to the Company's registered office requiring that such notice
be sent to such Resident Representative. Any notice given in the manner set
forth in this Bye-law 19 shall be deemed duly given and shall be deemed to
have been served five days after dispatch if sent by post or twenty-four
hours after its dispatch by any other means. Any shareholder or Resident
Representative may waive any notice required to be given by law, the
Memorandum, or the Bye-laws, and the attendance of any shareholder at any
meeting, whether in person or by proxy without protesting, prior to or at
the commencement of the meeting, the lack of proper notice shall be deemed
to be a waiver by such shareholder of notice of such meeting. The accidental
omission to give notice of a meeting or (in cases where instruments of proxy
are sent out with the notice) the accidental omission to send such
instrument of proxy to, or the non-receipt of notice of a meeting or such
instrument of proxy by, any person entitled to receive such notice shall not
invalidate the proceedings at that meeting.
20. Proxies. Instruments executed by any shareholder appointing a proxy or
corporate representative shall be in such form and may be accepted by the
Company at such place and at such time as the Board of Directors or the
Secretary of the Company shall from time to time determine, subject to
applicable requirements of the United States Securities and Exchange
Commission and the New York Stock Exchange or such other exchange or
exchanges on which the Company's shares are listed. No such instrument
appointing a proxy or corporate representative shall be voted or acted upon
after 2 years from its date.
21. Quorum. The holders of shares entitling them to exercise a majority of the
voting power of the Company on the relevant record date shall constitute a
quorum to hold a general meeting of the shareholders provided that at any
meeting duly called at which a quorum is present, the holders of a majority
of the voting shares represented thereat may adjourn such meeting from time
to time without notice other than by announcement of the chairman of the
meeting; and provided further that any meeting duly called at which a quorum
is not present shall be adjourned and the Company shall provide notice
pursuant to Bye-law 19 in the event that such meeting is to be reconvened.
22. Chairman of Meeting. The Chairman of the Board (if any) or, in his or her
absence, the Deputy Chairman or, in his or her absence, the President, shall
preside as chairman at every general meeting. In the absence of the Chairman
of the Board, the Deputy Chairman and the President, the directors present
shall
III-7
choose one of their number to act or if one director only is present he or
she shall preside as chairman if willing to act. If no director is present,
or if each of the directors present declines to take the chair, the persons
present and entitled to vote at the meeting shall elect one of their number
to be chairman.
23. Voting. At all general meetings of the shareholders at which a quorum is
present any question or proposal shall be decided by the affirmative vote of
the holders of a majority of the total number of votes of the capital shares
present in person or represented by proxy and entitled to vote on such
question on the relevant record date, voting as a single class, except as
otherwise required by law, the Memorandum of Association or these Bye-laws
and except that directors shall be elected by a plurality of the votes cast
by the holders of shares entitled to vote at such general meeting. The
number of votes cast in favour or against such question or proposal, or
abstaining shall be determined by a poll of the votes cast.
24. Record Date. The Board of Directors shall fix a record date in order that
the Company may determine the shareholders entitled to: (a) notice of or to
vote at any general meeting of shareholders or any adjournment or
postponement thereof, (b) consent to corporate action in writing without a
meeting, (c) receive payment of any dividend or other distribution or
allotment of rights, (d) exercise any rights in respect of any change,
conversion or exchange of shares, or (e) for the purpose of any other lawful
action. If no record date is fixed, the record date for determining
shareholders for any such purpose shall be at the close of business on the
day on which the Board of Directors adopts the resolution relating thereto.
25. Business to be Transacted. At any annual general meeting, only such
business shall be conducted as shall have been properly brought before the
meeting: (a) by or at the direction of the Board of Directors, (b) by any
shareholder of the Company who complies with the procedures set forth in
this Bye-law 25, or (c) by any shareholders of the Company pursuant to the
valid exercise of the power granted under the Companies Act. For business to
be properly brought before an annual general meeting by a shareholder, the
shareholder must have given timely notice thereof in proper written form to
the Secretary of the Company and satisfied all requirements under applicable
rules promulgated by the United States Securities and Exchange Commission or
by the New York Stock Exchange or any other exchange on which the Company's
securities are traded. To be timely for consideration at the annual general
meeting, a shareholder's notice must be received by the Secretary at the
Company's principal executive offices not less than 45 calendar days, or
such greater length of time as permitted by appropriate rules of the United
States Securities and Exchange Commission, in advance of the anniversary of
the date that the Company's proxy statement was released to shareholders in
connection with the previous year's annual general meeting (or no later than
January 19, 2003 with respect to the 2003 annual general meeting). To be in
proper written form, a shareholder's notice to the Secretary must set forth
as to each matter such shareholder proposes to bring before the annual
general meeting: (a) a brief description of the business desired to be
brought before the annual general meeting and the reasons for conducting
such business at the annual general meeting, (b) the name and record address
of such shareholder, (c) the class or series and number of capital shares of
the Company which are owned beneficially or of record by such shareholder,
(d) a description of all arrangements or understandings between such
shareholder and any other person or persons (including their names) in
connection with the proposal of such business by such shareholder and any
material interest of such shareholder in such business, and (e) a
representation that such shareholder intends to appear in person or by proxy
at the annual general meeting to bring such business before the meeting. To
be in proper written form, a shareholder's notice to the Secretary regarding
nomination of any person for election to the Board of Directors must also
set forth as to each person whom the shareholder proposes to nominate for
election as a director: (a) the name, age, business address and residence
address of the person, (b) the principal occupation or employment of the
person, (c) the class or series and number of capital shares of the Company
which are owned beneficially or of record by the person and (d) any other
information relating to the person that would be required to be disclosed in
a proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of
the United States Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations promulgated thereunder. Such notice
must be accompanied by a written consent of each proposed nominee to being
named as a nominee and to serve as a director if elected. No business shall
be conducted at the annual general meeting of shareholders except business
brought before the annual general meeting in
III-8
accordance with the procedures set forth in this Bye-law 25; provided,
however, that, once business has been properly brought before the annual
general meeting in accordance with such procedures, nothing in this Bye-law
25 shall be deemed to preclude discussion by any shareholder of any such
business.
BOARD OF DIRECTORS
26. Number; Election; Term. The number of directors shall be not less than nine
or more than fifteen. The number of directors to be elected at any time
within the minimum and maximum limitations specified in the preceding
sentence shall be determined from time to time by the Board of Directors
pursuant to a resolution adopted by the affirmative vote of a majority of
the directors in office. The directors shall be divided into three classes,
designated Class I, Class II and Class III. Each class shall consist, as
nearly as may be possible, of one-third of the total number of directors
constituting the entire Board of Directors. The initial division of the
Board of Directors into classes shall be made by the decision of the
affirmative vote of a majority of the directors in office. The term of the
initial Class I directors shall terminate on the date of the 2003 annual
general meeting; the term of the initial Class II directors shall terminate
on the date of the 2004 annual general meeting; and the term of the initial
Class III directors shall terminate on the date of the 2005 annual general
meeting. At each annual general meeting of shareholders beginning in 2003,
successors to the class of directors whose term expires at that annual
general meeting shall be elected for a three-year term. If the number of
directors is changed, any increase or decrease shall be apportioned among
the classes so as to maintain the number of directors in each class as
nearly equal as possible. In no case will a decrease in the number of
directors shorten the term of any incumbent director. A director shall hold
office until the annual general meeting for the year in which his or her
term expires and until his or her successor shall be elected and shall
qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office. Any vacancy on the Board of
Directors, including a vacancy that results from an increase in the number
of directors or from the death, resignation, retirement, disqualification or
removal of a director, shall be deemed a casual vacancy. Subject to the
terms of any one or more classes or series of Preferred Shares, any casual
vacancy may be filled by a majority of the Board of Directors then in
office, provided that a quorum is present. Any director of any class elected
to fill a vacancy resulting from an increase in the number of directors of
such class shall hold office for a term that shall coincide with the
remaining term of that class. Any director elected to fill a vacancy not
resulting from an increase in the number of directors shall have the same
remaining term as that of his or her predecessor. During any vacancy in the
Board of Directors, the remaining directors shall have full power to act as
the Board of Directors of the Company. No director shall be removed without
an 80% vote of the voting power of the Company on the relevant record date
in favour of such removal, unless a majority of the Board of Directors has
previously voted in favour of said removal, in which case the shareholder
voting requirements specified under the Companies Act shall apply. No person
may be elected or appointed to serve as director except as provided in this
Bye-law 26 and no person may be elected or appointed to serve as an
alternate director under the provisions of the Companies Act.
27. Quorum; Chairman of Meetings. A majority of the directors in office at the
time shall constitute a quorum for a meeting of the Board of Directors;
provided that at any meeting duly called, whether or not a quorum is
present, a majority of the directors present may adjourn such meeting from
time to time and place to place without notice other than by announcement by
the chairman of the meeting. At such meeting of the Board at which a quorum
is present, all questions and business shall be determined by the
affirmative vote of not less than a majority of the directors present except
as expressly provided in these Bye-laws. The Chairman of the Board or, in
his or her absence, the Deputy Chairman, or in his or her absence, the
President, shall preside as chairman at every meeting of the Board of
Directors. In the absence of the Chairman, Deputy Chairman and President,
the directors present may choose one of their number to be chairman of the
meeting.
28. Organization Meeting. Immediately after each annual general meeting of the
shareholders, or special meeting held in lieu thereof, the Board of
Directors, if a quorum is present, shall hold an organization meeting at the
place designated by the Chairman of the Board, the Deputy Chairman or the
President for the purpose of electing officers and transacting any other
business. If for any reason such organization
III-9
meeting is not held at such time, a special meeting for such purposes shall
be held as soon thereafter as practicable.
29. Regular Meetings. Regular meetings of the Board of Directors may be held at
such times and places as may be provided for in resolutions adopted by the
Board.
30. Special Meetings. Special meetings of the Board of Directors may be held at
any time upon call by the Chairman of the Board, the Deputy Chairman, the
President or at least one-third of the directors.
31. Notice of Meetings. Notice of any organization, regular or special meeting
stating the place, date and hour of the meeting shall be given to each
director either by mail not less than forty-eight (48) hours before the date
of the meeting, by telephone, facsimile, e-mail or any other electronic
means on not less than twenty-four (24) hours' notice, or on such shorter
notice as the person or persons calling such meeting may deem necessary or
appropriate in the circumstances. Any director may waive any notice required
to be given by law, the Memorandum or the Bye-laws, and the attendance of a
director at a meeting shall be deemed to be a waiver by such director of
notice of such meeting. The accidental omission to give notice of a meeting
to any director shall not invalidate the proceedings at that meeting. Unless
otherwise indicated in the notice thereof, any business may be transacted at
any organization, regular, or special meeting.
32. Action by Written Resolution. A resolution in writing signed by all the
directors in office or by all the members of a committee shall have the same
force and effect as a resolution passed at a meeting of the Board or, as the
case may be, of such committee duly called and constituted. Such resolution
may be contained in one document or in several documents in the like form
each signed by one or more of the directors or members of the committee
concerned. A resolution in writing made in accordance with this section
shall constitute minutes of the proceedings for purposes of the Companies
Act.
33. Compensation. The Board of Directors is authorized to fix a reasonable
compensation for directors and to provide a fee and reimbursement of
expenses for attendance at any meeting of the Board to be paid to each
director who is not otherwise a salaried officer or employee of the Company.
34. Validity of Appointment. All acts done by the Board of Directors or by any
committee or by any person acting as a director or member of a committee or
any person duly authorised by the Board or any committee, shall,
notwithstanding that it is afterwards discovered that there was some defect
in the appointment of any member of the Board or such committee or person
acting as aforesaid or that they or any of them were disqualified or had
vacated their office, be as valid as if every such person had been duly
appointed and was qualified and had continued to be a director, member of
such committee or person so authorised.
COMMITTEES
35. Committees. The Board of Directors at any time may elect from its number an
executive committee and other committees, each of which shall consist of not
less than three directors. Each member of each such committee shall hold
office at the pleasure of the Board and may be removed by the Board at any
time with or without cause. Vacancies occurring in the committee may be
filled by the Board. During any vacancy on a committee, the remaining
members shall have full power to act as the committee. Each committee may
prescribe its own rules for calling and holding meetings and its method of
procedure, subject, however, to any rules prescribed by the Board, and, if
no such rules shall have been prescribed, the rules applicable to calling
and holding meetings of the Board shall apply to the committee meetings. A
quorum for any meeting of a committee shall consist of not less than a
majority of the members in office at the time and at each meeting of the
committee at which a quorum is present, all questions and business shall be
determined by the affirmative vote of not less than a majority of the
members present. Except as the executive committee's powers and duties may
be limited or otherwise prescribed by the Board, the executive committee,
during the intervals between the meetings of the Board, shall possess and
may exercise all of the powers of the Board in the management and control of
the business and property of the Company; and other committees shall have
such powers of the Board as shall be from time to time delegated to them by
the Board; provided, however, that no committee shall be empowered to elect
directors to fill vacancies
III-10
among the directors or on any committee of the directors. Subject to said
exceptions, persons dealing with the Company shall be entitled to rely upon
any action of a committee with the same force and effect as though such
action had been taken by the Board. Subject to the rights of third persons,
any action of a committee shall be subject to revision or alteration by the
Board. The Board is authorized to fix a reasonable compensation for members
of the committees.
OFFICERS
36. Officers Designated. Only the Board of Directors shall have the power to
elect officers. The Board of Directors shall elect a President, one or more
Vice Presidents, a Secretary, a Treasurer, a Controller, and in its
discretion a Chairman of the Board, a Deputy Chairman of the Board, an
Assistant Secretary or Secretaries, an Assistant Treasurer or Treasurers,
and such other officers as the Board may see fit. The Company shall have a
President and a Vice President, or a Chairman and a Deputy Chairman, who
shall be directors of the Company, and may have other officers who may but
need not be chosen from among the directors. Any two or more of such
officers other than that of President and Vice President, Chairman of the
Board and Deputy Chairman of the Board, Secretary and Assistant Secretary,
or Treasurer and Assistant Treasurer, may be held by the same person, but no
officer shall execute, acknowledge or verify any instrument in more than one
capacity.
37. Tenure of Office. The officers of the Company shall hold office until the
next organization meeting of the Board and until their successors are chosen
and qualified, except in case of resignation, death or removal. The Board
may remove any officer at any time with or without cause by a majority vote
of the directors in office at the time. A vacancy in any office, however
created, may be filled by election by the Board.
38. Chairman of the Board. The Chairman of the Board, if any, shall have such
powers and duties as appertain to that office and as may be prescribed by
the Board.
39. Deputy Chairman of the Board. The Deputy Chairman of the Board, if any,
shall have such powers and duties as appertain to that office and as may be
prescribed by the Board.
40. President. The President shall have such powers and duties as appertain to
that office and as may be prescribed by the Board.
41. Vice Presidents. The Vice Presidents in the order designated by the Board
shall perform the duties of the President in case of the absence or
disability of the latter, or when circumstances prevent the latter from
acting, together with such other duties as the Board may prescribe. In case
the President and such Vice Presidents are absent or unable to perform their
duties, the Board may appoint a President pro tempore.
42. Secretary. The Secretary shall keep the minutes of all meetings of the
shareholders and the Board. He or she shall keep such books as may be
required by the Board, shall have charge of the seal, minute books and stock
books of the Company, and shall give all notices of meetings of the
shareholders and of the Board, and shall have such other powers and duties
as the Board may prescribe or are prescribed by the Companies Act.
43. Treasurer. The Treasurer shall receive and have in charge all money, bills,
notes, bonds, shares in other corporations and similar property belonging to
the Company, and shall do with the same as may be ordered by the Board. The
Treasurer shall formulate and administer credit and collection policies and
procedures, and shall represent the Company in its relations with banks and
other financial institutions, subject to instructions from the Board. On the
expiration of the Treasurer's term of office, he or she shall turn over to
his or her successor, or to the Board, all property, books, papers, and
money of the Company in his or her hands.
44. Controller. The Controller shall be the chief accounting officer of the
Company, and shall supervise the keeping of the financial accounts of the
Company.
45. Other Officers. The other officers, if any, shall have such powers and
duties as the Board may prescribe.
III-11
46. Change in Power and Duties of Officers. Anything in these Bye-laws to the
contrary notwithstanding, the Board may, from time to time, increase or
reduce the powers and duties of the respective officers of the Company
whether or not the same are set forth in these Bye-laws and may permanently
or temporarily delegate the duties of any officer to any other officer,
agent or employee and may generally control the action of the officers and
require performance of all duties imposed upon them.
47. Compensation. The Board is authorized to determine or to provide the method
of determining the compensation of officers.
48. Bond. Any officer, if required by the Board, shall give bond for the
faithful performance of his or her duties. Any surety on such bond shall be
the expense of the Company.
49. Signing Checks and Other Instruments. The Board is authorized to determine
or provide the method of determining how checks, notes, bills of exchange
and any other instruments or documentation shall be signed, countersigned,
or endorsed on behalf of the Company.
50. Authority to Transfer and Vote Securities. The Chairman of the Board, the
Deputy Chairman, the President, the Secretary or the Treasurer of the
Company are each authorized to sign the name of the Company and to perform
all acts necessary to effect a transfer of any shares, bonds, or other
evidences of indebtedness or obligations, subscription rights, warrants, and
other securities of another corporation owned by the Company and to issue
the necessary powers of attorney for the same; and each such officer is
authorized on behalf of the Company to vote such securities, to appoint
proxies with respect thereto, and to execute consents, waivers and releases
with respect thereto, or to cause any such action to be taken.
ACCOUNTING RECORDS
51. Records of Account. The Company will cause to be kept proper records of
account in accordance with the Companies Act. The records of account shall
be kept at the registered office of the Company or at such other place or
places as the Board of Directors thinks fit, and shall at all times be open
to inspection by the directors; provided that if the records of account are
kept at some place outside Bermuda, there shall be kept at an office of the
Company in Bermuda such records as will enable the directors to ascertain
with reasonable accuracy the financial position of the Company at the end of
each six month period. No shareholder (other than an officer of the Company)
shall have any right to inspect any accounting record or book or document of
the Company except as conferred by law or authorized by the Board. A copy of
the financial statements which are to be laid before the Company in general
meeting, together with the auditor's report, shall be sent to each person
entitled thereto in accordance with the Companies Act.
APPOINTMENT OF AUDITOR
52. Appointment of Auditor. The shareholders of the Company at each annual
general meeting shall appoint an auditor to audit the accounts of the
Company and such auditor shall hold office until the shareholders appoint
another auditor in accordance with the Companies Act. The remuneration of
the auditor shall be fixed by the Board of Directors or in such manner as
the Board may determine.
III-12
INDEMNITY
53. General Scope of Indemnification. The Company shall indemnify any director,
officer, Resident Representative or any former director, officer or Resident
Representative of the Company, or any person who is serving or has served at
the request of the Company as a director, officer, or trustee of another
corporation, joint venture, trust or other enterprise against expenses,
including attorneys' fees, judgments, fines, and amounts paid in settlement
actually and reasonably incurred by him or her in connection with any
threatened, pending, or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, other than an action by or in the
right of the Company, to which he or she was, is, or is threatened to be
made a party by reason of the fact that he or she is or was such director,
officer, Resident Representative or trustee; provided always that the
indemnity contained in this Bye-law shall not extend to any matter which
would render it void pursuant to the Companies Act.
54. Claims by, or in Right of, the Company. In the case of any threatened,
pending or completed action, suit or proceeding by or in the right of the
Company, the Company shall indemnify each person indicated in Bye-law 53
against expenses, including attorneys' fees, actually and reasonably
incurred in connection with the defense or settlement thereof, except no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for fraud or
dishonesty in the performance of his or her duty to the Company unless and
only to the extent that the Supreme Court in Bermuda or the court in which
such action or suit was brought shall determine upon application that
despite the adjudication of liability, but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for
such expenses as the court shall deem proper.
55. Indemnification in Advance of Final Disposition. Expenses, including
attorneys' fees, incurred in defending any action, suit or proceeding
referred to in Bye-laws 53 and 54 may be paid by the Company in advance of
the final disposition of such action, suit, or proceeding as authorized by
the Board in the specific case upon receipt of an undertaking by or on
behalf of the director, officer, trustee or other indemnitee to repay such
amount, unless it shall ultimately be determined that he or she is entitled
to be indemnified by the Company as authorized in these Bye-laws.
56. Non-Exclusive. It being the policy of the Company that indemnification of
the persons specified in Bye-laws 53 and 54 shall be made to the fullest
extent permitted by law, the indemnification provided by Bye-laws 53 through
56 shall not be deemed exclusive (a) of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under the
Memorandum of Association, the Bye-laws, any agreement, any insurance
purchased by the Company, vote of shareholders or disinterested directors,
or pursuant to the direction (however embodied) of any court of competent
jurisdiction, or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding such office, or
(b) of the power of the Company to indemnify any person who is or was an
employee or agent of the Company or of another corporation, joint venture,
trust or other enterprise which he or she is serving or has served at the
request of the Company, to the same extent and in the same situations and
subject to the same determinations as are hereinabove set forth with respect
to a director, officer, or trustee. As used in this Bye-law 56, references
to the "Company" include all constituent corporations in a consolidation or
merger in which the Company or a predecessor to the Company by consolidation
or merger was involved. The indemnification provided by Bye-laws 53 through
56 shall continue as to a person who has ceased to be a director, officer,
trustee or Resident Representative and shall inure to the benefit of the
heirs, executors, and administrators of such a person.
III-13
FAIR PRICE TO SHAREHOLDERS IN BUSINESS COMBINATIONS
57. Fair Price. The affirmative vote of the holders of not less than eighty
percent (80%) of the voting power of the Company on the relevant record date
shall be required for the approval or authorization of any "Business
Combination" (as hereinafter defined); provided, however, that the eighty
percent (80%) voting requirement shall not be applicable, and the provisions
of the Companies Act and of these Bye-laws relating to the percentage of
shareholder approval, if any, shall apply to any such Business Combination
if:
(a) The "Continuing Directors" of the Company (as hereinafter defined) by a
two-thirds ( 2/3) vote have expressly approved the Business Combination
either in advance of or subsequent to the acquisition of outstanding
Class A Common Shares of the Company that caused the Related Person (as
hereinafter defined) involved in the Business Combination to become a
Related Person; or
(b) If the following conditions are satisfied:
(i) The aggregate amount of the cash and the fair market value of the
property, securities or other consideration to be received in the
Business Combination by holders of the Class A Common Shares of the
Company, other than the Related Person involved in the Business
Combination, is not less than the "Highest Per Share Price" (with
appropriate adjustments for recapitalizations, reclassifications,
stock splits, reverse stock splits and stock dividends) paid by the
Related Person in acquiring any of its holdings of the Company's
Class A Common Shares, all as determined by two-thirds ( 2/3) of
the Continuing Directors; and
(ii) A proxy statement complying with the requirements of the United
States Securities Exchange Act of 1934, as amended, shall have
been mailed at least thirty (30) days prior to any vote on the
Business Combination, to all shareholders of the Company for the
purpose of soliciting shareholder approval of the Business
Combination. The proxy statement shall contain at the front
thereof, in a prominent place, the position of the Continuing
Directors as to the advisability (or inadvisability) of the
Business Combination and, if deemed appropriate by two-thirds
( 2/3) of the Continuing Directors, the opinion of an investment
banking firm selected by two-thirds ( 2/3) of the Continuing
Directors as to the fairness of the terms of the Business
Combination, from the point of view of the holders of the
outstanding shares of the Company other than the Related Person
involved in the Business Combination.
58. Definitions. For purposes of Bye-laws 57 through 59:
(a) The term "Business Combination" means
(i) any merger, consolidation, amalgamation or share exchange of the
Company or any of its subsidiaries into or with a Related Person,
in each case irrespective of which corporation or company is the
surviving entity;
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition to or with a Related Person (in a single transaction
or a series of related transactions) of all or a Substantial Part
(as hereinafter defined) of the assets of the Company (including
without limitation any securities of a subsidiary) or a
Substantial Part of the assets of any of its subsidiaries;
(iii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition to or with the Company or to or with any of its
subsidiaries (in a single transaction or series of related
transactions) of all or a Substantial Part of the assets of a
Related Person;
(iv) the issuance or transfer of any securities of the Company or any of
its subsidiaries by the Company or any of its subsidiaries to a
Related Person (other than an issuance or transfer of securities
which is effected on a pro rata basis to all shareholders of the
Company);
(v) any reclassification of securities (including any reverse stock
split), recapitalization, or any other transaction involving the
Company or any of its subsidiaries, that would have the effect of
increasing the voting power of a Related Person;
III-14
(vi) the adoption of any plan or proposal for the liquidation or
dissolution of the Company proposed by or on behalf of a Related
Person, and
(vii) the entering into of any agreement, contract or other arrangement
providing for any of the transactions described in this definition
of Business Combination.
(b) The term "Related Person" shall mean any individual, corporation,
partnership or other person or entity other than the Company or any of
its subsidiaries which, as of the record date for the determination of
shareholders entitled to notice of and to vote on any Business
Combination, or immediately prior to the consummation of such
transaction, together with its "Affiliates" and "Associates" (as
defined in Rule 12b-2 of the Regulations under the United States
Securities Exchange Act of 1934 as in effect at the date of the
adoption of these Bye-laws by the shareholders of the Company
(collectively and as so in effect, the "Exchange Act")), are
"Beneficial Owners" (as defined in Rule 13d-3 of the Exchange Act) in
the aggregate of twenty percent (20%) or more of the outstanding Class
A Common Shares of the Company, and any Affiliate or Associate of any
such individual, corporation, partnership or other person or entity.
Notwithstanding the definition of "Beneficial Owners" in this
subparagraph (b), any Class A Common Shares of the Company that any
Related Person has the right to acquire pursuant to any agreement, or
upon exercise of conversion rights, warrants or options, or otherwise,
shall be deemed beneficially owned by the Related Person.
(c) The term "Substantial Part" shall mean more than twenty percent (20%)
of the fair market value, as determined by two-thirds ( 2/3) of the
Continuing Directors, of the total consolidated assets of the Company
and its subsidiaries taken as a whole, as of the end of its most recent
fiscal year ending prior to the time the determination is being made.
(d) For the purposes of paragraph (b)(i) of Bye-law 57, in the event of a
Business Combination in which the Company is the surviving corporation,
the term "other consideration to be received" shall include, without
limitation, Class A Common Shares or other capital stock of the Company
retained by holders of the Class A Common Shares other than Related
Persons or parties to such Business Combination.
(e) The term "Continuing Directors" shall mean a director who either (i)
was a member of the Board of Directors of the Company immediately prior
to the time that the Related Person involved in a Business Combination
became a Related Person, or (ii) was designated (before his or her
initial election as director) as a Continuing Director by two-thirds of
the then Continuing Directors.
(f) A "Related Person" shall be deemed to have acquired a common share of
the Company at the time when such Related Person became the Beneficial
Owner thereof. With respect to the shares owned by Affiliates,
Associates or other persons whose ownership is attributed to a Related
Person under the foregoing definition of Related Person, the price paid
for said shares shall be deemed to be the higher of (i) the price paid
upon the acquisition thereof by the Affiliate, Associate or other
person or (ii) the market price of the shares in question at the time
when the Related Person became the Beneficial Owner thereof.
(g) The term "Highest Per Share Price" as used in Bye-laws 57 through 59
shall mean the highest price determined by two-thirds ( 2/3) of the
Continuing Directors to have been paid at any time by the Related
Person for any Class A Common Share or Class A Common Shares. In
determining the Highest Per Share Price, all purchases by the Related
Person shall be taken into account regardless of whether the shares
were purchased before or after the Related Person became a Related
Person. The Highest Per Share Price shall include any brokerage
commissions, transfer taxes and soliciting dealers' fees paid by the
Related Person with respect to Class A Common Shares of the Company
acquired by the Related Person.
59. Amendment or Repeal of Fair Price Bye-laws. Any amendment, change or repeal
of Bye-laws 57 through 59, or any other amendment of the Company's Bye-laws
which would have the effect of modifying or permitting circumvention of
Bye-laws 57 through 59, shall require the favorable vote, at a meeting of
the shareholders of the Company, of the holders of at least eighty percent
(80%) of the voting power of the
III-15
Company on the relevant record date; provided, however, that this Bye-law 59
shall not apply to, and such eighty percent (80%) vote shall not be required
for, any such amendment, change or repeal recommended to shareholders by
two-thirds ( 2/3) of the Continuing Directors and such amendment, change or
repeal so recommended shall require only the affirmative vote of a majority
of the voting power of the Company on the relevant record date. For the
purposes of this Bye-law 59 only, if at the time when any such amendment,
change, or repeal is under consideration there is no proposed Business
Combination (in which event, the definition of Continuing Director in
paragraph (e) of Bye-law 58 would be inapplicable), the "Continuing
Directors" shall be deemed to be those persons who are members of the Board
of Directors of the Company at the time the Company becomes publicly traded
on the New York Stock Exchange plus those persons who are Continuing
Directors under clause (ii) of paragraph (e) of Bye-law 58, except that if
there are no Continuing Directors under paragraph (e)(i) of Bye-law 58 then
the Directors in office at the time such determination is made shall be
deemed to be the Continuing Directors.
AMENDMENTS
60. Amendments by Majority Vote. Except as provided in Bye-law 61, these
Bye-laws may be altered, changed, or amended in any respect, or superseded
by new Bye-laws, in whole or in part, by the Board of Directors, subject to
approval by the affirmative vote of the holders of record of shares
entitling them to exercise a majority of the voting power of the Company on
the relevant record date with respect thereto at an annual or special
general meeting called for such purpose or without a meeting by the written
consent of all of the holders of record of shares of the Company.
61. Amendments by Super Majority Vote. Notwithstanding any other provisions of
these Bye-laws or any provision of law which might otherwise permit a lesser
vote or no vote, but in addition to any affirmative vote of the holders of
any particular class or series of shares required by law or these Bye-laws,
the affirmative vote of the holders of at least 80% of the Company's voting
power on the relevant record date shall be required to alter, amend or
repeal Bye-laws 26 and 57 through 61, except as provided in Bye-law 59.
III-16
ANNEX IV
SECTION 1701.85 OF THE OHIO GENERAL CORPORATION LAW
1701.85 RELIEF FOR DISSENTING SHAREHOLDERS; QUALIFICATION; PROCEDURES --
(A)(1) A shareholder of a domestic corporation is entitled to relief as a
dissenting shareholder in respect of the proposals described in sections
1701.74, 1701.76, and 1701.84 of the Revised Code, only in compliance with this
section.
(2) If the proposal must be submitted to the shareholders of the corporation
involved, the dissenting shareholder shall be a record holder of the shares of
the corporation as to which he seeks relief as of the date fixed for the
determination of shareholders entitled to notice of a meeting of the
shareholders at which the proposal is to be submitted, and such shares shall not
have been voted in favor of the proposal. Not later than ten days after the date
on which the vote on the proposal was taken at the meeting of the shareholders,
the dissenting shareholder shall deliver to the corporation a written demand for
payment to him of the fair cash value of the shares as to which he seeks relief,
which demand shall state his address, the number and class of such shares, and
the amount claimed by him as the fair cash value of the shares.
(3) The dissenting shareholder entitled to relief under division (C) of
section 1701.84 of the Revised Code in the case of a merger pursuant to section
1701.80 of the Revised Code and a dissenting shareholder entitled to relief
under division (E) of section 1701.84 of the Revised Code in the case of a
merger pursuant to section 1701.801 of the Revised Code shall be a record holder
of the shares of the corporation as to which he seeks relief as of the date on
which the agreement of merger was adopted by the directors of that corporation.
Within twenty days after he has been sent the notice provided in section 1701.80
or 1701.801 of the Revised Code, the dissenting shareholder shall deliver to the
corporation a written demand for payment with the same information as that
provided for in division (A)(2) of this section.
(4) In the case of a merger or consolidation, a demand served on the
constituent corporation involved constitutes service on the surviving or the new
entity, whether the demand is served before, on, or after the effective date of
the merger or consolidation.
(5) If the corporation sends to the dissenting shareholder, at the address
specified in his demand, a request for the certificates representing the shares
as to which he seeks relief, the dissenting shareholder, within fifteen days
from the date of the sending of such request, shall deliver to the corporation
the certificates requested so that the corporation may forthwith endorse on them
a legend to the effect that demand for the fair cash value of such shares has
been made. The corporation promptly shall return such endorsed certificates to
the dissenting shareholder. A dissenting shareholder's failure to deliver such
certificates terminates his rights as a dissenting shareholder, at the option of
the corporation, exercised by written notice sent to the dissenting shareholder
within twenty days after the lapse of the fifteen-day period, unless a court for
good cause shown otherwise directs. If shares represented by a certificate on
which such a legend has been endorsed are transferred, each new certificate
issued for them shall bear a similar legend, together with the name of the
original dissenting holder of such shares. Upon receiving a demand for payment
from a dissenting shareholder who is the record holder of uncertificated
securities, the corporation shall make an appropriate notation of the demand for
payment in its shareholder records. If uncertificated shares for which payment
has been demanded are to be transferred, any new certificate issued for the
shares shall bear the legend required for certificated securities as provided in
this paragraph. A transferee of the shares so endorsed, or of uncertificated
securities where such notation has been made, acquires only such rights in the
corporation as the original dissenting holder of such shares had immediately
after the service of a demand for payment of the fair cash value of the shares.
A request under this paragraph, by the corporation is not an admission by the
corporation that the shareholder is entitled to relief under this section.
(B) Unless the corporation and the dissenting shareholder have come to an
agreement on the fair cash value per share of the shares as to which the
dissenting shareholder seeks relief, the dissenting shareholder or the
corporation, which in case of a merger or consolidation may be the surviving or
new entity, within three months after the service of the demand by the
dissenting shareholder, may file a complaint in the court of
IV-1
common pleas of the county in which the principal office of the corporation that
issued the shares is located or was located when the proposal was adopted by the
shareholders of the corporation, or, if the proposal was not required to be
submitted to the shareholders, was approved by the directors. Other dissenting
shareholders, within that three-month period, may join as plaintiffs or may be
joined as defendants in any such proceeding, and any two or more such
proceedings may be consolidated. The complaint shall contain a brief statement
of the facts, including the vote and the facts entitling the dissenting
shareholder to the relief demanded. No answer to such a complaint is required.
Upon the filing of such a complaint, the court, on motion of, the petitioner,
shall enter an order fixing a date for a hearing on the complaint and requiring
that a copy of the complaint and a notice of the filing and of the date
forbearing be given to the respondent or defendant in the manner in which
summons is required to be served or substituted service is required to be made
in other cases. On the day fixed for the hearing on the complaint or any
adjournment of it, the court shall determine from the complaint and from such
evidence as is submitted by either party whether the dissenting shareholder is
entitled to be paid the fair cash value of any shares and, if so, the number and
class of such shares. If the court finds that the dissenting shareholder is so
entitled the court may appoint one or more persons as appraisers to receive
evidence and to recommend a decision on the amount of the fair cash value. The
appraisers have such power and authority as is specified in the order of their
appointment. The court thereupon shall make a finding as to the fair cash value
of a share and shall render judgment against the corporation for the payment of
it, with interest at such rate and from such date as the court considers
equitable. The costs of the proceeding, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable. The proceeding is a special proceeding and final
orders in it may be vacated, modified, or reversed on appeal pursuant to the
Rules of Appellate Procedure and to the extent not in conflict with those rules
Chapter 2505 of the Revised Code. If during the pendency of any proceeding
instituted under this section, a suit or proceeding is or has been instituted to
enjoin or otherwise to prevent the carrying out of the action as to which the
shareholder has dissented, the proceeding instituted under this section shall be
stayed until the final determination of the other suitor proceeding. Unless any
provision in division (D) of this section is applicable the fair cash value of
the shares that is agreed upon by the parties or fixed under this section shall
be paid within thirty days after the date of final determination of such value
under this division the effective date of the amendment to the articles, or the
consummation of the other action involved, whichever occurs last. Upon the
occurrence of the last such event, payment shall be made immediately to a holder
of uncertificated securities entitled to such payment. In the case of holders of
shares represented by certificates payment shall be made only upon and
simultaneously with the surrender to the corporation of the certificates
representing the shares for which the payment is made.
(C) If the proposal was required to be submitted to the shareholders of the
corporation fair cash value as to those shareholders shall be determined as of
the day prior to the day on which the vote by the shareholders was taken and in
the case of a merger pursuant to section 1701.80 or 1701.801 of the Revised
Code, fair cash value as to shareholders of a constituent subsidiary corporation
shall be determined as of the day before the adoption of the agreement of merger
by the directors of the particular subsidiary corporation. The fair cash value
of a share for the purposes of this section is the amount that a willing seller
who is under no compulsion to sell would be willing to accept and that a willing
buyer who is under no compulsion to purchase would be willing to pay, but in no
event shall the fair cash value of a share exceed the amount specified in the
demand of the particular shareholder. In computing such fair cash value any
appreciation or depreciation in market value resulting from the proposal
submitted to the directors or to the shareholders shall be excluded.
(D)(1) The right and obligation of a dissenting shareholder to receive such
fair cash value and to sell such shares as to which he seeks relief; and the
right and obligation of the corporation to purchase such shares and to pay fair
cash value of them terminates if any of the following applies:
(a) The dissenting shareholder has not complied with this section,
unless the corporation by its directors waives such failure;
(b) The corporation abandons the action involved or is finally enjoined
or prevented from carrying it out, or the shareholders rescind their
adoption, of the action involved;
IV-2
(c) The dissenting shareholder withdraws his demand, with the consent of
the corporation by its directors; or
(d) The corporation and the dissenting shareholder have not come to an
agreement as to the fair cash value per share, and neither the shareholder
nor the corporation filed or joined in a complaint under division (B) of
this section within the period provided in that division.
(2) For purposes of division (D)(1) of this section, if the merger or
consolidation has become effective and the surviving or new entity is not a
corporation, action required to be taken by the directors of the corporation
shall be taken by the general partners of a surviving or new partnership or the
comparable representatives of any other surviving or new entity.
(E) From the time of the dissenting shareholder's giving of the demand until
either the termination of the rights and obligations arising from it or the
purchase of the shares by the corporation, all other rights accruing from such
shares, including voting and dividend or distribution rights, are suspended. If
during the suspension, any dividend or distribution is paid in money upon shares
of such class or any dividend, distribution, or interest is paid in money upon
any securities issued in extinguishment of or in substitution for such shares,
an amount equal to the dividend, distribution, or interest which, except for the
suspension, would have been payable upon such shares or securities, shall be
paid to the holder of record as a credit upon the fair cash value of the shares.
If the right to receive fair cash value is terminated other than by the purchase
of the shares by the corporation, all rights of the holder shall be restored and
all distributions which, except for the suspension, would have been made shall
be made to the holder of record of the shares at the time of termination.
IV-3
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 1701.13 of the Ohio General Corporation Law contains detailed
provisions for indemnification of directors and officers of Ohio corporations
against expenses, judgments, fines and settlements in connection with
litigation. Cooper Industries, Inc.'s Articles of Incorporation and its
Directors' and Officers' Liability Insurance Policy provide for indemnification
and insurance, respectively, of the directors and officers of Cooper against
certain liabilities.
In addition, on February 17, 1987 the board of directors of Cooper
Industries, Inc. authorized Cooper Industries, Inc. to enter into
indemnification agreements with the directors and certain officers that may be
designated from time to time by the board of directors. The board's action was
approved by the shareholders at their Annual Meeting on April 28, 1987. The
indemnification agreements contain provisions for indemnification against
expenses, judgments, fines and settlements in connection with threatened or
pending litigation, inquiries or investigations that arise out of the director's
or officer's acts or omissions in his or her capacity as a director of officer
of Cooper Industries, Inc.
Cooper Industries, Ltd. is a Bermuda company. Section 98 of the
Companies Act of 1981 of Bermuda (the "Act") provides generally that a Bermuda
company may indemnify its directors, officers and auditors against any liability
which by virtue of Bermuda law otherwise would be imposed on them, except in
cases where such liability arises from fraud or dishonesty of which such
director, officer or auditor may be guilty in relation to the company. Section
98 further provides that a Bermuda company may indemnify its directors, officers
and auditors against any liability incurred by them in defending any
proceedings, whether civil or criminal, in which judgment is awarded in their
favor or they are acquitted or in which they are acquitted or granted relief by
the Supreme Court of Bermuda in certain proceedings arising under Section 281 of
the Act. In addition, Cooper Industries, Ltd. will enter into indemnification
agreements with its directors and certain executive officers substantially
similar to those of Cooper Industries, Inc. described above.
Cooper Industries, Ltd. has adopted provisions in its bye-laws that
provide that the Company shall indemnify its officers and directors to the
maximum extent permitted under the Act.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
EXHIBIT
NO. DESCRIPTION
------- -----------
2 -- Agreement and Plan of Merger among Cooper Industries, Inc.,
Cooper Mergerco, Inc. and Cooper Industries, Ltd. (included as
annex I to the proxy statement/prospectus).
3.1 -- Memorandum of Association of Cooper Industries, Ltd. (included
as annex II to the proxy statement/prospectus).
3.2 -- Amended and Restated Bye-Laws of Cooper Industries, Ltd.
(included as annex III to the proxy statement/prospectus).
4.1 -- Form of Rights Agreement between Cooper Industries, Ltd. and
EquiServe Trust Company, N.A., as Rights Agent.
4.2 -- Form of Voting Agreement between Cooper Industries, Ltd. and
Cooper Industries, Inc.
5.1 -- Opinion of Appleby, Spurling & Kempe as to the legality of the
securities being issued.
Part II-1
EXHIBIT
NO. DESCRIPTION
------- -----------
8.1 -- Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to
certain tax matters.
8.2 -- Opinion of Appleby, Spurling & Kempe as to certain tax matters
(included in Exhibit 5.1).
8.3 -- Opinion of Ernst & Young LLP as to certain tax matters.
23.1* -- Consent of Ernst & Young LLP.
23.2 -- Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included
in Exhibit 8.1).
23.3 -- Consent of Appleby, Spurling & Kempe (included in Exhibit 5.1).
23.4 -- Consent of Ernst & Young LLP (included in Exhibit 8.3).
23.5* -- Consent of Bates White Ballentine
24 -- Powers of Attorney.
99.1* -- Form of proxy card.
---------
* Filed herewith
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
The registrant undertakes that every prospectus: (1) that is filed
pursuant to the immediately preceding paragraph, or (2) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement
Part II-2
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
Part II-3
SIGNATURES AND POWERS OF ATTORNEY
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this post-effective amendment no. 2 to the registration statement to
be signed on its behalf by the undersigned, thereunto duly authorized in
Houston, Texas, on April 3, 2002.
COOPER INDUSTRIES, LTD.
(Registrant)
By: /s/ H. JOHN RILEY, JR.
---------------------------------
H. John Riley, Jr.
Chairman, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this report
has been signed by the following persons in the capacity and on the dates
indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ H. JOHN RILEY, JR. Chairman, President and Chief April 3, 2002
--------------------------- Executive Officer/Director
H. John Riley, Jr.
/s/ D. BRADLEY McWILLIAMS Senior Vice President and Chief April 3, 2002
--------------------------- Financial Officer/Director
D. Bradley McWilliams
/s/ JEFFREY B. LEVOS Vice President and Controller and April 3, 2002
-------------------------- Chief Accounting Officer
Jeffrey B. Levos
/s/ DIANE K. SCHUMACHER Director April 3, 2002
--------------------------
Diane K. Schumacher
Part II-4
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
------- -----------
2 -- Agreement and Plan of Merger among Cooper Industries, Inc.,
Cooper Mergerco, Inc. and Cooper Industries, Ltd. (included as
annex I to the proxy statement/prospectus).
3.1 -- Memorandum of Association of Cooper Industries, Ltd. (included
as annex II to the proxy statement/prospectus).
3.2 -- Amended and Restated Bye-Laws of Cooper Industries, Ltd.
(included as annex III to the proxy statement/prospectus).
4.1 -- Form of Rights Agreement between Cooper Industries, Ltd. and
EquiServe Trust Company, N.A., as Rights Agent.
4.2 -- Form of Voting Agreement between Cooper Industries, Ltd. and
Cooper Industries, Inc.
5.1 -- Opinion of Appleby, Spurling & Kempe as to the legality of the
securities being issued.
8.1 -- Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to
certain tax matters.
8.2 -- Opinion of Appleby, Spurling & Kempe as to certain tax matters
(included in Exhibit 5.1).
8.3 -- Opinion of Ernst & Young LLP as to certain tax matters.
23.1* -- Consent of Ernst & Young LLP.
23.2 -- Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included
in Exhibit 8.1).
23.3 -- Consent of Appleby, Spurling & Kempe (included in Exhibit 5.1).
23.4 -- Consent of Ernst & Young LLP (included in Exhibit 8.3).
23.5* -- Consent of Bates White Ballentine
24 -- Powers of Attorney.
99.1* -- Form of proxy card.
---------
* Filed herewith