8-KMaterial AgreementsExhibits & Filings

EMERSON ELECTRIC CO 8-K Report, Agreement Terminated (Sep 2, 2005)

Filed September 2, 2005For Securities:EMR

Summary

This 8-K filing from Emerson Electric Co. (EMR) dated September 1, 2005, reports on the termination and transition of its split dollar life insurance program for its CEO and four other highly paid executive officers. This action was taken in response to interpretations of Section 402 of the Sarbanes-Oxley Act of 2002, which has been understood to restrict loans to executive officers, potentially including certain split dollar arrangements. The company has ceased premium payments and withdrawn previously paid premiums. As a transition, executives could either cancel their policies and receive the cash value or convert them to term life insurance policies where Emerson would continue to pay premiums as long as the officer remains employed. All Named Officers elected to convert their policies to term life insurance with $200,000 in coverage and annual premiums under $5,000 per policy.

Key Highlights

  • 1Emerson Electric Co. is terminating its split dollar life insurance program for its top five executives.
  • 2The termination is a proactive measure due to regulatory interpretations of the Sarbanes-Oxley Act of 2002 (Section 402) concerning executive loans.
  • 3The company has stopped paying premiums and is withdrawing prior payments made under the split dollar agreements.
  • 4Executives were offered a choice to cancel the policy for its cash value or convert it to a term life insurance policy.
  • 5All five Named Officers have chosen to convert their policies to term life insurance.
  • 6The new term life insurance policies each provide $200,000 in coverage.
  • 7The annual premium for each converted term life policy is less than $5,000.

Frequently Asked Questions

Emerson is terminating the program due to regulatory concerns arising from interpretations of Section 402 of the Sarbanes-Oxley Act of 2002. This section restricts loans to executive officers, and some interpretations suggest that certain split dollar life insurance arrangements could be considered prohibited loans.

The executive officers were given two options: either cancel their existing split dollar policy and receive its accumulated cash value, or convert the policy into a standalone term life insurance policy. Under the term life option, Emerson would cover the premiums as long as the officer remains employed by the company.

No, all five of the Named Officers elected to convert their split dollar life insurance policies into new term life insurance policies. They did not choose to cancel their policies and receive the cash value.

Each executive's new term life insurance policy provides a coverage amount of $200,000. The annual premium for each of these policies is less than $5,000.