Document oEvnqzLzZG1dLgeGXVkoBkwX

COOPER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) See "Nonrecurring Charges" in Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information related to the 2001 and 1999 severance and facility consolidation charges mcludmg spendmg, number of employees terminated and remaining accrual balances See Note 20 of the Notes to Consolidated Financial Statements for a discussion concerning the Company's review of strategic alternatives NOTE 3: CHARGE RELATED TO DISCONTINUED OPERATIONS In October 1998, Cooper sold its Automotive Products busmess to Federal-Mogul Corporation ("FederalMogul") These discontinued businesses (mcludmg the Abex product lme obtained from Pneumo-Abex Corporation ("Pneumo") m 1994) were operated through subsidiary companies, and the stock of those subsidiaries was sold to Federal-Mogul pursuant to a Purchase and Sale Agreement dated August 17, 1998 ("1998 Agreement") In conjunction with the sale, Federal-Mogul indemnified Cooper for certain liabilities of these subsidiary companies, mcludmg liabilities related to the Abex product lme and any potential liability that Cooper may have to Pneumo pursuant to a 1994 Mutual Guaranty Agreement between Cooper and Pnuemo On October 1,2001, Federal-Mogul and several of its affiliates filed a Chapter 11 bankruptcy petition and mdicated that Federal-Mogul may not honor the indemnification obligations to Cooper As of the date of this filing, Federal-Mogul had not yet made a decision whether to reject the 1998 Agreement, which includes the indemnification to Cooper If Federal-Mogul rejects the 1998 Agreement, Cooper will be relieved of its future obligations under the 1998 Agreement, mcludmg specific indemnities relatmg to payment of taxes and certain obligations regarding insurance for its former Automotive Products businesses To the extent Cooper is obligated to Pneumo for any asbestos-related claims arising from the Abex product lme ("Abex Claims"), Cooper has rights, confirmed by Pneumo, to significant insurance for such claims Based on information provided by representatives of Federal-Mogul, from August 28, 1998 through December 31, 2001, a total of 75,152 Abex Claims were filed, of which 16,974 claims have been resolved leavmg 58,178 Abex Claims pending at December 31, 2001, that are the responsibility of Federal-Mogul Smce August 28, 1998, the average indemnity payment for resolved Abex Claims was $908 before insurance A total of $25 5 million was spent on defense costs for the period August 28, 1998 through December 31, 2001 Historically, existing insurance coverage has provided 50% to 80% of the total defense and indemnity payments for Abex claims. Smce the October 1, 2001 bankruptcy filing by Federal-Mogul through December 31, 2001, a total of 3,541 Abex Claims have been filed With the assistance of independent advisors, Cooper has completed a thorough analysis of its potential exposure for asbestos liabilities m the event Federal-Mogul rejects the 1998 Agreement At this time, the manner m which this issue ultimately will be resolved is not known Based on Cooper's analysis of its contingent liability exposure resultmg from Federal-Mogul's bankruptcy, Cooper concluded that an additional fourth-quarter 2001 discontinued-operations provision of $30 million after-tax, or $ 32 per share, was appropriate to reflect the potential net financial impact of this issue This conclusion is based on a review ofthe Abex claims history, existing insurance coverage, the contractual indemnities and other facts determined to date Cooper is preserving its rights as a creditor for breach of Federal-Mogul's indemnification to Cooper and its rights agamst all Federal-Mogul subsidiaries. Cooper mtends to take all actions to seek a resolution of the indemnification issues and future handling of the Abexrelated claims within the Federal-Mogul bankruptcy proceedmgs NOTE 4: ACQUISITIONS AND DIVESTITURES During 2001, Cooper received purchase pnce adjustments of $9 8 million net, primarily related to businesses acquired prior to 2001 In 2000, Cooper completed two large acquisitions and three small product-lme acquisitions in its Electrical Products segment and one small acquisition m its Tools & Hardware segment for an aggregate cost of $578 4 million, subject to adjustment as provided m the acquisition agreements A total of $378 2 million m goodwill was recorded, mcludmg an additional $23 2 million in 2001, with respect to the acquisitions In March 2000, Cooper acquired Eagle Electric for a total cost of $124 6 million Eagle Electric manufactures and sells electrical wiring devices F-9