CUMMINS ENGINE COMPANY, INC.
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EXHIBIT 10(i)
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EXCESS BENEFIT RETIREMENT PLAN
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Effective as of March 1, 1984
Amended as of October 24, 1986
Amended as of January 12, 1989
Amended as of February 14, 1989
Purpose:
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Section 415 of the Internal Revenue Code (the "Code"), as amended by
the Employee Retirement Income Security Act of 1974 (the "Act") and
the Tax Equity and Fiscal Responsibility Act of 1982 ("TEFRA"),
imposes certain dollar limitations on the annual retirement benefit
payable to an individual after December 31, 1982, and Section
401(a)(17) of the Code, as added by the Tax Reform Act of 1986 ("TRA")
imposes a dollar limitation on the annual compensation taken into
account for any purpose after December 31, 1988 under qualified
pension plans such as the Cummins Engine Company, Inc., and Affiliates
Retirement Plan "A" (the "Retirement Plan"). Cummins Engine Company,
Inc. ("Cummins") has amended the Retirement Plan to conform to the
benefit and compensation limitations of the Code, the Act, TRA and
TEFRA, and such amendments (the "Limitation Amendments") have reduced
the benefits that certain employees of Cummins and its Affiliates (as
such term is defined under the Retirement Plan) would otherwise be
entitled to receive under the Retirement Plan. Cummins and such
Affiliates have adopted this Plan so that eligible employees shall
receive retirement benefits in the same amounts they would have
received under the Retirement Plan were it not for the Limitation
Amendments.
Section 1. Definitions:
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a) "Employee" is defined for the purpose of this Plan as that term
is defined under the Retirement Plan.
b) "Participants" is defined as any employee who has a current
accrued retirement benefit in excess of the benefit limitations of
Section 415 of the Code.
c) "Joint Annuitant" is defined for the purposes of this Plan as
that term is defined under the Retirement Plan.
d) "Plan" is defined as the Excess Benefit Retirement Plan of
Cummins Engine Company, Inc., as amended from time to time.
e) "Change of Control" means the occurrence of any of the
following:
(i) there shall be consummated (A) any consolidation or merger of
Cummins in which Cummins is not the continuing or surviving
corporation or pursuant to which shares of Cummins common stock
would be converted in whole or in part into cash, other securities
or other property, other than a merger of Cummins in which the
holders of Cummins 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
Cummins, or
(ii) the stockholders of Cummins shall approve any plan or proposal
for the liquidation or dissolution of Cummins, 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 Cummins or a subsidiary thereof or any
employee benefit plan sponsored by Cummins or a subsidiary thereof
or a corporation owned, directly or indirectly, by the stockholders
of Cummins in substantially the same proportions as their ownership
of stock of Cummins, shall become the beneficial owners (within the
meaning of Rule 13d-3 under the Exchange Act) of securities of
Cummins representing 25 percent or more of the combined voting power
of Cummins' 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 consecutive years,
individuals who, at the beginning of such period constituted the
Board of Directors of Cummins, shall cease for any reason to
constitute at least a majority thereof, unless the election or the
nomination for election by Cummins stockholders of each new director
during such 2-year period was approved by a vote of at lest two-
thirds 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 2. Benefits:
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a) Cummins will pay or cause to be paid to each Participant or the
Participant's Joint Annuitant, as the case may be, who is entitled
to receive payments under the Retirement Plan, an amount which is
equivalent to the excess, if any, of
(i) the amount such Participant or Joint Annuitant would have been
entitled to receive under the Retirement Plan for each calendar
year, taking into account all the provisions of the Retirement Plan
as are from time to time in effect and applicable to the Participant
or Joint Annuitant except for the Limitation Amendments, minus
(ii) the amount such Participant or Joint Annuitant was entitled to
receive under the Retirement Plan for such year taking into account
the Limitation Amendments. Payments hereunder shall be made at
approximately the same time as payments are made to the Participant
or Joint Annuitant under the Retirement Plan, except as provided in
Section 2(b) below.
b) If a Participant or Joint Annuitant is entitled to a benefit
pursuant to Section 2(a) hereof, Cummins shall pay to such
Participant or Joint Annuitant the amount determined as follows:
(i) If the benefit to which the Participant or the Participant's
Joint Annuitant is entitled:
(A) is less than $100 per month, the benefit will be paid in an
actuarially equivalent lump sum
(B) has an actuarially equivalent lump-sum value which is
greater than $100 per month, the benefit will be payable in the
same form as the Participant's or Joint Annuitant's Retirement
Plan benefit.
Cummins shall determine the times at which such payments shall
be made, but they shall commence not later than one year after
the commencement of benefits under the Retirement Plan and
shall thereafter be made at least annually and over the same
period that such payments would be made if they were paid under
the Retirement Plan. Notwithstanding the foregoing, on request
of the Participant or Joint Annuitant, Cummins may, in its sole
discretion, accelerate the remaining unpaid portion of such
payments into one or more payments having, in the aggregate, an
equivalent actuarial value.
(ii) All lump-sum equivalent benefits payable under this Plan will
be calculated using:
(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, and
(B) the mortality tables in Attachment A.
c) Notwithstanding anything contained in this Section 2 to the
contrary, following a Change of Control, each Participant shall be
entitled to receive a lump-sum payment of the actuarial equivalent
of the benefits accrued and remaining unpaid as of the date of such
Change of Control, calculated using the assumptions referenced in
subsection (b)2. above. In addition, the accrued benefits of each
Participant (other than one who is a terminated vested participant
in the Retirement Plan) shall be calculated assuming, solely for the
purpose of computing benefits, including the reduction of Retirement
Plan benefits for early commencement, that the Participant has
already satisfied the conditions for unreduced benefits at the
earliest possible time, taking into consideration the Participant's
age and service with Cummins, its subsidiaries and affiliates.
d) If payment of a benefit pursuant to subsection (c) of this
Section 2 (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, Cummins shall pay
the Participant an additional amount (the "Gross-up Payment") such
that the net amount retained by the Participant, after deduction of
any Excise Tax paid or payable (and not grossed-up under a similar
provision of another plan or program sponsored by Cummins) 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 subsection (d), 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 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 Participant in connection with a change in control of Cummins,
whether payable pursuant to the terms of this Plan or any other
plan, arrangement or agreement with Cummins, its successors, any
person whose actions result in a change in control of Cummins or any
corporation affiliated (or which, as a result of the completion of a
transaction causing a Change of Control, will become affiliated)
with Cummins 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
Cummins' independent auditors and acceptable to the Participant 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 Cummins' independent auditors in
accordance with the principles of Section 280G(d)(3) and (4) of the
Code. For purposes of determining the amount of the Gross-up
Payment, the Participant shall be deemed to pay Federal income taxes
at the highest marginal rate of 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 Participant'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 Participant shall repay to Cummins 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 Participant 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
reasons of any payment the existence or amount of which cannot be
determined at the time of the Gross-up Payment), Cummins shall make
an additional Gross-up Payment in respect to such excess (plus any
interest payable with respect to such excess) at the time that the
amount of such excess is finally determined.
Section 3. Miscellaneous:
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a) Cummins shall be under only a contractual obligation to make
payments to the Participant or Joint Annuitant referred to herein
when due, and the method of making provision for the payment of such
benefits shall be solely in the discretion of the Plan Administrator
referred to in Section 3(g) hereof.
b) Nothing contained herein shall confer any right of an employee
to be continued in the employee of Cummins or an Affiliate or shall
affect the right of the employee to participate in and receive
benefits under and in accordance with any pension, profit sharing,
incentive compensation or other benefit plan or other benefit plan
or program of Cummins or an Affiliate.
c) This Plan shall continue in force with respect to any
Participant until the termination of the right of such Participant
or his Joint Annuitant to receive benefits under the Retirement
Plan, or, if later, the completion of any payments due under
Sections 2(b) or 2(c) hereof, and shall be binding upon any
successor to substantially all the assets of Cummins. Cummins may,
however, at any time, amend the Plan to provide that no additional
benefits shall accrue with respect to any Participant under the
Plan, provided, however, that no such amendment shall deprive any
Participant or Joint Annuitant of any benefit that accrued under the
Plan prior to such amendment. Cummins may also, at any time, amend
this Plan retroactively or otherwise if and to the extent that such
action is deemed appropriate in light of government regulations or
other legal requirements.
d) Cummins assumes no contractual obligation as to the continuance
of this Plan. Cummins may also, at any time, terminate the plan,
provided, however, that all benefits accrued under the Plan prior to
the termination date will be paid in an actuarially equivalent lump
sum.
e) No right or interest of a Participant or Joint Annuitant under
this Plan shall be subject to voluntary or involuntary alienation,
assignment or transfer of any kind.
f) Any elections to be made under this Plan shall be made in the
manner prescribed under equivalent provisions of the Retirement
Plan.
g) The administration of this Plan shall be the responsibility of
the Pension Policy Committee of Cummins, or such other person or
entity as Cummins shall designate. Decisions of such administrator
of the Plan shall be final and binding upon each Affiliate that
shall have adopted this Plan, employees of such Affiliates and the
Joint Annuitant of such employees.
h) If any payment to be made under this Plan is to be made on
account of an employee who was employed by an affiliate that shall
have adopted this Plan, the cost of such payment shall be borne in
such proportions as Cummins and such Affiliate shall agree.
This Plan shall be effective as of March 1, 1984.