CUMMINS ENGINE COMPANY, INC.
____________________________
EXHIBIT 10(b)
_____________
DEFERRED COMPENSATION PLAN
__________________________
Effective as February 1, 1994
1. Purpose. The purpose of the Cummins Engine Company, Inc. 1994
Deferred Compensation Plan ("the Plan") is to provide certain
highly compensated employees of Cummins Engine Company, Inc.
("Cummins") and its subsidiaries and affiliates (hereinafter
collectively referred to as "the Company") an opportunity to
defer compensation received by them from the Company in
accordance with the terms and conditions set forth herein.
2. Approval and Administration. The Plan shall be administered by
the Compensation Committee of the Cummins Board of Directors
("the Committee"). The Committee shall have sole and complete
authority and discretion to interpret the terms and provisions of
the Plan and to adopt, alter and repeal such administrative
rules, regulations and practices governing the operation of the
Plan, and to determine facts under the Plan as it shall from time
to time deem advisable. The Committee may delegate the day-to-
day administration of the Plan to senior executive officers of
the Company.
3. Eligibility. US resident employees having an annual base salary
payable by the Company of $100,000 or more shall be eligible to
participate in the Plan. Such persons who make an election as
described in Section 4 shall individually be referred to as a
"Participant" and collectively as "Participants".
4. Election to Defer:
(a) An eligible employee may elect in writing to defer receipt
of all or a portion, as specified in the election, of his or her
base salary, Target Bonus (or other applicable profit sharing
plan) and Three-Year Performance Plan payouts otherwise to be
made by the Company. Amounts deferred under this Section 4(a)
shall be referred to as "Deferred Amounts". Except as provided
in Section 4(c) below, an election to defer cannot be revoked.
(b) For employees eligible to participate on the effective date,
an election to defer base salary or profit sharing bonus
payments, or the Three-Year Performance Plan payout in June 1995
shall be made on or before February 28, 1994. Employees who
subsequently become eligible to participate shall have thirty
(30) days following notification by the committee of their
eligibility to participate to make an election with respect to
base salary or profit sharing bonus. Except for new participants
as described in the preceding sentence, an election made after
February 28, 1994 to defer base salary or profit sharing bonus
payments must be made on or before December 31 of the year
preceding the year of payment. Except for the initial election
to be made on or before February 28, 1994, an election to defer
Three-Year Performance Plan payments must be made on or before
December 31 of the year preceding the end of the award cycle for
which the payment is to be made (e.g., an election to defer the
June 1996 payout must be made on or before December 31, 1994).
(c) Once each year, upon written application of the Participant
and with the consent of the Committee, a Participant may modify a
previously made election in order to reduce the amount or
percentage of base salary or profit sharing bonus payments to be
deferred. Any such modification may only be made on March 15,
June 15 or September 15 and shall only be applicable to amounts
earned after the beginning of the calendar quarter immediately
following the date of modification as follows:
Date Modified Applicable To
_____________ _____________
March 15 Post 4/1 base pay; Q2, Q3 or Q4 bonus
June 15 Post 7/1 base pay; Q3 or Q4 bonus
September 15 Post 10/1 base pay; Q4 bonus
5. Establishment of Deferred Compensation Account. At the time of
the Participant's initial election to defer pursuant to Section
4, the business unit of the Company which employs the Participant
shall establish a memorandum account (a "Deferred Compensation
Account") for such Participant on its books. The Deferred Amount
shall be credited to the Deferred Compensation Account as of the
last day of the month in which it otherwise would have been
received by the Participant. Any required withholding for taxes
(e.g., Social Security taxes) on the Deferred Amount shall be
made from and to the extent of other compensation of the
Participant. If other compensation is insufficient for such
purpose, the Participant shall reimburse the Company for the
amount the Company is required to withhold. Adjustments, as
provided in Section 6 below, shall be made to the Participant's
Deferred Compensation Account.
6. Adjustments to Deferred Amounts. Once each month, the Committee
shall credit the Participant's Deferred Compensation Account with
an earnings factor. The earnings factor will equal the amount
the Participant's Deferred Compensation Account would have earned
if it had been invested in the investment options determined from
time to time by the Committee. The Participant is permitted to
select the investment option used to determine the earnings
factor and may change the selection once each year. The
Participant may choose more than one investment option in
increments of at least ten percent (10%). Cummins reserves the
right to change or amend any of the investment options at any
time. The Company is under no obligation to acquire or provide
any of the investments designated by a Participant, and any
investments actually made by the Company will be made solely in
the name of the Company and will remain the property of the
Company. The crediting of an earnings factor shall occur so long
as there is a balance in the Participant's Deferred Compensation
Account, regardless of whether the Participant has terminated
employment with the Company.
7. Payment of Deferred Amounts:
(a) Except as otherwise provided in subsections (e) or (f)
below, a Participant's Deferred Amount shall be paid, or commence
to be paid, to the Participant, or the Participant's beneficiary,
as soon as practicable after the earliest to occur of the
following:
(i) the Participant's death,
(ii) the termination of Participant's employment with the
Company (otherwise than by retirement), or
(iii) the date specified in the election made by the
Participant.
In the case of Participant's termination of employment by
retirement, the date specified in (iii) shall determine the date
of payment or commencement.
In the event of the Participant's death, payment of the balance
in the Participant's Deferred Compensation Account shall be made
as soon as administratively feasible to the Participant's
designated beneficiary, or if none, to the Participant's estate.
(b) The Participant may elect to receive payment of each
Deferred Amount in his or her Deferred Compensation Account
either (i) in a lump sum or (ii) in a number of annual
installments, not to exceed fifteen, as the Participant shall
elect. The election shall be made concurrently with the election
to defer and must have approval of the Committee or its
designate. If no election is made, a lump-sum payment will be
made.
(c) Notwithstanding the election under subsection (b), in the
case of Participant's death or termination of employment other
than by retirement, payment will be made in a lump sum.
(d) Except as provided in subsections (e) or (f), the elections
referenced in subsection 7(a)(iii) and in subsection 7(b) are
irrevocable. Both such elections shall be made with respect to
and at the same time as each election to defer under Section
4(a).
(e) A Participant will receive the balance in the Deferred
Compensation Account upon the occurrence of a Change in Control
of Cummins. The term "Change in Control" shall mean a Change in
Control as defined in the Cummins Engine Company, Inc. 1992 Stock
Incentive Plan.
(f) Anything contained in this Section to the contrary
notwithstanding, in the event a Participant incurs a financial
hardship or other significant change in circumstances, the
Committee, in its sole discretion and upon written application of
such Participant, may direct immediate payment of all or a
portion of the then current value of such Participant's Deferred
Compensation Account; provided that such payment shall in no
event exceed the amount necessary to alleviate such financial
hardship or accommodate such other significant change in
circumstances. The Committee, in its sole discretion and upon
the Participant's written application, may defer the commencement
date or extend the distribution period for any Deferred Amount,
provided that (i) any such application must be submitted by the
Participant no later than one year prior to the date distribution
would otherwise commence; and (ii) if approved by the Committee,
any such election shall thereafter be irrevocable by the
Participant.
8. Participant Reports. The Company shall provide a quarterly
statement to the Participant concerning the status of his or her
Deferred Compensation Account.
9. Transferability of Interests. During the period of deferral, all
Deferred Amounts shall be considered as general assets of the
Company for use as it deems necessary and shall be subject to the
claims of the Company's creditors. The rights and interests of a
Participant during the period of deferral shall be those of a
general creditor except that such Participant's rights and
interests may not be reached by the creditors of the Participant
or the beneficiary, or anticipated, assigned, pledged,
transferred or otherwise encumbered except in the event of the
death of the Participant, and then only by will or the laws of
descent and distribution.
10. Amendment, Suspension and Termination. Cummins at any time may
amend, suspend or terminate the Plan or any portion thereof in
such manner and to such extent as it may deem advisable and in
the best interests of the Company. No amendment, suspension and
termination shall reduce the amount than credited to a
Participant's Deferred Compensation Account.
11. Unfunded Obligation. The Company shall have no obligation to
fund the Plan. No trust, escrow or other provisions shall be
established in the name of a Participant to secure payments due
under the Plan; and the Plan shall be regarded as unfunded for
purposes of the Employee Retirement Income Security Act of 1974,
as amended, and the Internal Revenue Code. A Participant shall
be treated as a general, unsecured creditor at all times under
the Plan, and shall have no rights to any specific assets of the
Company. All amounts credited to the memorandum accounts of the
Participants will remain general assets of the respective
companies.
12. No Right to Employment or Other Benefits. Nothing contained
herein shall be construed as conferring upon any Participant the
right to continue in the employ of the Company. Any
compensation deferred and any payments made under this Plan
shall not be included in creditable compensation in computing
benefits under any employee benefit plan of the Company except
to the extent expressly provided for therein.