CUMMINS ENGINE COMPANY, INC.
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EXHIBIT 10(d)
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SUPPLEMENTAL LIFE INSURANCE AND DEFERRED INCOME PLAN
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Effective as of January 1, 1986
Amended as of September 22, 1967
Amended as of January 12, 1989
Amended as of February 14, 1989
Introduction
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Cummins Engine Company, Inc. (the "Company") has previously
determined that it is appropriate to establish a supplemental life
insurance and deferred income program (the "Program") for officers
and other key employees of the Company, so as to provide increased
protection and liquidity for the officers, key employees and their
families and to establish a mechanism to provide them with additional
retirement income. The Company has established a trust (the "Trust")
for the purpose of accumulating assets and holding title to property
intended to be used to provide benefits under the Program and certain
other benefit plans of the Company.
Article I. Definitions
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Section 1.1.
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"Change of Control" means the occurrence of any of the following:
(i) there shall be consummated (A) any consolidation or merger of the
Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's common stock
would be converted in whole or in part into cash, other securities or
other property, other than a merger of the Company in which the
holders of the Company's common stock immediately prior to the merger
have substantially the same proportionate ownership of common stock
of the surviving corporation immediately after the merger, or (B) any
sale, lease, exchange or transfer (in one transaction or a series of
related transactions) of all or substantially all the assets of the
Company, or (ii) the stockholders of the Company shall approve any
plan or proposal for the liquidation or dissolution of the Company,
or (iii) any "person" (as such term is used in Sections 13(d) (3) and
14(d)(2) of the Securities Exchange Act of 1934, as amended [the
"Exchange Act"]), other than the Company or a subsidiary thereof or
any employee benefit plan sponsored by the Company or a subsidiary
thereof or a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company, shall become the beneficial
owners (within the meaning of Rule 13d-3 under the Exchange Act) of
securities of the Company representing 25 percent or more of the
combined voting power of the Company's then outstanding securities
ordinarily (and apart from rights accruing in special circumstances)
having the right to vote in the election of directors ("Voting
Shares"), as a result of a tender or exchange offer, open market
purchases, privately negotiated purchases or otherwise, or (iv) at
any time during a period of two (2) consecutive years, individuals
who at the beginning of such period constituted the Board of
Directors of the Company shall cease for any reason to constitute at
least a majority thereof, unless the election or the nomination for
election by the Company's stockholders of each new director during
such 2-year period was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who were directors at the
beginning of such 2-year period, or (v) any other event shall occur
that would be required to be reported in response to Item 6(e) or any
successor provision) of Schedule 14A of Regulation 14A promulgated
under the Exchange Act.
Section 1.2.
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"Executive" means: (i) an individual who becomes an officer of the
Company prior to attainment of age 60 and who has elected to
participate in the Program in accordance with Article II or (ii) any
other employee of the Company who is from time to time designated by
the Board of Directors as an executive eligible to participate in the
Program and who has elected to participate in the Program in
accordance with Article II.
Section 1.3.
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"Joint Annuitant" means the spouse of an Executive who qualifies as
the Executive's Joint Annuitant under the Retirement Plan.
Section 1.4.
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"Program" means this plan, the Cummins Engine Company, Inc.
Supplemental Life Insurance and Deferred Income Program.
Section 1.5.
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"Retirement Plan" means the Cummins Engine Company, Inc. Retirement
Plan "A".
Section 1.6.
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"Supplemental Life Annuity" means the benefit payable to an Executive
hereunder.
Section 1.7.
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"Survivor Benefit" means the benefit payable to an Executive's Joint
Annuitant following the Executive's death after his retirement.
Section 1.8.
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"Trustee" means the Trustee at the time under the Trust.
Article II. Participation
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An Executive shall commence participation in the Program following
his execution of a form provided by the Company authorizing periodic
payroll deductions in amounts sufficient to pay the Executive's share
of the premiums on life insurance policies on the Executive's life.
From time to time the Executive shall also complete any forms
required by, and submit to any necessary physical examinations
requested by, an insurance carrier.
Article III. Insurance Policies
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Section 3.1.
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An Executive shall be covered by one or more insurance policies with
an aggregate face value of approximately three times the Executive's
base salary. All such policies shall be owned by the Trustee.
Additional policies will be purchased as the Executive's salary is
increased, except that no incremental policy will be purchased in a
face amount of less than $20,000, and salary increases after the
Executive attains age 55 shall not be taken into account.
Section 3.2.
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(a) The annual premium payable with respect to policies on the
Executive's life will be paid in part by the Executive, with any
remaining amount paid by the Trustee. The Executive shall be
required to pay only that portion of the premium equal to the amount
that would be included in the Executive's income for Federal income
tax purposes if the entire premium were paid by the Trustee for the
Company. Such amount shall be determined annually in accordance with
Internal Revenue Service rules and regulations.
(b) The Company's share of the annual premium shall be paid by the
Trustee from the assets of the Trust, including, in the discretion of
the Trustee, by borrowing against the value of any policies on the
life of the Executive.
Article IV. Death Benefits
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Upon the death of the Executive prior to his retirement from the
Company, the death benefits payable under the policies shall be paid
(a) to the Trustee to the extent and in the amount of the total
premiums paid by the Company and the Trustee, and not previously
reimbursed, under the policies on the life of the Executive and (b)
to the Executive's beneficiary, as designated on an appropriate
insurance company form, to the extent of the remainder; provided,
however, that in no event shall a death benefit payment be made to an
Executive's beneficiary in an amount greater than three times the
Executive's annual base salary at the time of his death or, if
earlier, upon his attainment of age 55.
Article V. Retirement Benefits
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Section 5.1.
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An Executive who retires under the Retirement Plan on or after his
attainment of age 65 shall receive from the Trustee, beginning as of
the first day of the month following the Executive's retirement, in
monthly installments, a Supplemental Life Annuity in an annual amount
equal to 30 percent of the Executive's base pay in effect upon the
earlier of his attainment of age 55 or his date of retirement.
Section 5.2.
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Following the Executive's death after his retirement, a survivor
benefit equal to 50 percent of the monthly amount that had been
payable to the Executive shall be paid to the Executive's Joint
Annuitant; provided, however, that if the Executive had not received
retirement payments for at least 15 years prior to his death, his
Joint Annuitant shall be entitled to receive the same monthly benefit
that was payable to the Executive for the remainder of such 15-year
period. If the Executive should die prior to his receipt of benefits
for 15 years and without leaving a Joint Annuitant, or if his Joint
Annuitant should die before the expiration of such 15-year period, a
lump-sum payment of the commuted value of the remaining benefit due
to be paid over the 15-year period shall be paid to the Executive's
designated beneficiary or, if none, to his children per stirpes, or
to his estate if no descendants survive him.
Section 5.3.
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If an Executive becomes disabled and he is entitled to benefits under
the Company's Long-term Disability Plan, the Trustee shall pay all
insurance premiums under the policies for the duration of his
disability.
Section 5.4.
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If an Executive's retirement occurs prior to his attainment of age
65, but after satisfying the requirements for early retirement under
the Retirement Plan, he shall be entitled to receive early retirement
benefits under the Program as follows: (a) if the Executive is
eligible for unreduced benefits under the Retirement Plan, the
benefit that otherwise would be payable at age 65 pursuant to Section
5.1; (b) if the Executive's benefit under the Retirement Plan is
actuarially reduced because of early commencement, the benefit
otherwise payable under Section 5.1 shall be reduced by .5 percent
for each full month that benefits commence before the Executive's
attainment of age 65.
Article VI. Vested Benefits
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An Executive who leaves the employ of the Company prior to becoming
eligible for an early retirement benefit under the Retirement Plan
shall be entitled to a percentage of his Supplemental Life Annuity in
accordance with the following table:
Years of Service Percentage
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Less than 5 0
5 25
6 40
7 55
8 70
9 85
10 100
The percentage of his Supplemental Life Annuity so determined shall
be payable to the Executive upon his attainment of age 65. At the
election of the Executive, early commencement of his benefit may
begin as of the first day of any month beginning after his attainment
of age 55, reduced as provided in Section 5.4.
Article VII. Accelerated Distribution
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Immediately following a Change of Control, an Executive who is
entitled to benefits under the Plan, other than by reason of having
vested benefits pursuant to Article VI, shall become vested in 100
percent of his Supplemental Life Annuity and, notwithstanding
anything in Article V to the contrary, any Executive shall be
eligible to receive an amount equal to the actuarial equivalent lump-
sum value of the Supplemental Life Annuity accrued to the date of
such Change of Control and remaining to be paid under the Program.
The lump-sum equivalent of the Life Annuity benefit payable shall be
calculated assuming: (a) the interest rate used by the Pension
Benefit Guaranty Corporation in determining the value of immediate
benefits as of the immediately preceding January 1; (b) the mortality
tables in Attachment A; and (c) solely for the purpose of reducing
the benefit for early commencement, that the Executive, other than
one who is entitled to benefits pursuant to Article VI, has already
met the conditions for unreduced benefits under the Retirement Plan
at the earliest possible time, taking into consideration the
Executive's age and service with the Company.
Article VIII. Gross-up Payments
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If payment of the Supplemental Life Annuity pursuant to Article VII
(the "Lump Sum") causes the Lump Sum and any other payments made in
connection with a Change of Control (together with the Lump Sum, the
"Total Payments") to be subject to the tax (the "Excise Tax") imposed
by Section 4999 of the Code, the Company shall pay the Executive an
additional amount (the "Gross-up Payment") such that the net amount
retained by the Executive, after deduction of any Excise Tax paid or
payable (and not grossed-up under a similar provision of another plan
or program sponsored by the Company) on the Lump Sum and such other
Total Payments and any Federal, state and local income tax and Excise
Tax upon the payment provided for by this Article VIII, shall be
equal to the Lump Sum and such other Total Payments. If any of such
other Total Payments are subject to the Excise Tax without regard to
the Lump Sum, a Gross-up Payment shall be made, but shall only be
equal to the increase in the Excise Tax (plus any Federal, state and
local income tax and Excise Tax on such Gross-up Payment) arising
solely as a result of the Lump Sum.
For purposes of determining whether any of the payments described
above will be subject to the Excise Tax and the amount of such Excise
Tax, (i) any other payments or benefits received or to be received by
the Executive in connection with a Change of Control of the Company,
whether payable pursuant to the terms of the Program or any other
plan, arrangement or agreement with the Company, its successors, any
person whose actions result in a change in control of the Company or
any corporation affiliated (or which, is a result of the completion
of a transaction causing a change of control, will become affiliated)
with the Company within the meaning of Section 1504 of the Code shall
be treated as "parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute payments" within
the meaning of Section 280G(b)(1) shall be treated as subject to the
Excise Tax, unless in the opinion of tax counsel selected by the
Company's independent auditors and acceptable to the Executive the
payments (in whole or in part) do not constitute parachute payments,
or such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered within the
meaning of Section 280G(b)(4) of the Code either in their entirety or
in excess of the base amount within the meaning of Section 280G(b)(3)
of the Code, or are otherwise not subject to the Excise Tax; (ii) the
amount of the payments that shall be treated as subject to the Excise
Tax shall be equal to the lesser of (A) the total amount of the
payments or (B) the amount of excess parachute payments within the
meaning of Section 280G(b)(1) (after applying clause (i), above); and
(iii) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors in
accordance with the principles of Sections 280G(d)(3) and (4) of the
Code. For purposes of determining the amount of the Gross-up
Payment, the Executive shall be deemed to pay Federal income taxation
in the calendar year in which the Gross-up Payment is to be made and
state and local income taxes at the highest marginal rate of taxation
in the state and locality of the Executive's residence on the date of
payment, net of the maximum reduction in Federal income taxes which
could be obtained from deduction of such state and local taxes. In
the event that the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at the time of payment,
the Executive shall repay to the Company at the time that the amount
of such reduction in Excise Tax is finally determined the portion of
the Gross-up Payment attributable to such reduction (plus the portion
of the Gross-up Payment attributable to the Excise Tax and Federal
and state and local income tax imposed on the Gross-up Payment being
repaid by the Executive if such repayment results in a reduction in
Excise Tax and/or a Federal and state and local income tax deduction)
plus interest on the amount of such repayment at the rate provided in
Section 1274(d) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the
time of the Gross-up Payment (including by reason of any payment the
existence or amount of which cannot be determined at the time of the
Gross-up Payment), the Company shall make an additional Gross-up
Payment in respect of such excess (plus any interest payable with
respect to such excess) at the time that the amount of such excess is
finally determined.
Article IX. Miscellaneous
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Section 9.1.
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The Company shall be under only a contractual obligation to make
payments to an Executive, Joint Annuitant or other beneficiary
referred to herein when due, and then only to the extent such
payments are not made from the Trust.
Section 9.2.
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Nothing contained herein shall confer any right on an Executive to be
continued in the employ of the Company or shall affect the right of
the Executive to participate in and receive benefits under and in
accordance with any pension, profit-sharing, incentive compensation
or other benefit plan or program of the Company.
Section 9.3.
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This Program shall continue in force with respect to any Executive
until the completion of any payments due hereunder and shall be
binding upon any successor to substantially all the assets of the
Company. The Company may, however, at any time, amend the Program to
provide that no additional benefits shall accrue with respect to any
Executive under the Program; provided, however, that no such
amendment shall deprive any Executive, Joint Annuitant or other
beneficiary of any benefit that accrued under the Program prior to
such amendment. The Company may also, at any time, amend this
Program retroactively or otherwise if and to the extent that such
action is deemed appropriate in light of government regulations or
other legal requirements.
Section 9.4.
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No right or interest of an Executive, Joint Annuitant or other
beneficiary under this Program shall be subject to voluntary or
involuntary alienation, assignment or transfer of any kind.
Section 9.5.
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The administration of this Program shall be the responsibility of the
Vice President - Personnel of the Company, or such other person or
entity as the Company shall designate. Decisions of such
administrator of the Program shall be final and binding upon the
Company and upon Executives, Joint Annuitants and beneficiaries.
Section 9.6.
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This Program shall be construed, regulated and administered for all
purposes according to the laws of the State of Indiana and the United
States.
Section 9.7.
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This Program shall be effective as of January 1, 1986.