EXHIBIT 10(d)
CUMMINS ENGINE COMPANY, INC.
____________________________
SUPPLEMENTAL LIFE INSURANCE AND
_______________________________
DEFERRED INCOME PLAN
____________________
(Amended and Restated as of January 1, 1997)
Introduction
____________
Cummins Engine Company, Inc. ("the Company") has determined that it is
appropriate to maintain a supplemental life insurance and deferred
income plan for officers and other key employees of the Company in
order to provide increased protection and liquidity for such employees
and their families and to establish a mechanism to provide them with
additional retirement income. For this purpose, the Company
established a program effective January 1, 1986 ("the Prior Program")
and established a trust ("the Trust") for the purpose of accumulating
assets and holding title to property intended to be used in providing
benefits under the program and certain other benefit plans of the
Company. For the purpose of making the retirement income portion of
the program more competitive with supplemental executive retirement
plans of comparable employers and to integrate the program with the
Company's Cash Balance Plan and Excess Benefit Plan, the Company has
amended and restated the Prior Program in the manner set forth herein.
ARTICLE I
Definitions
___________
SECTION 1.1. "Change of Control" means the occurrence of any of the
following: (i) any person becomes the beneficial owner, directly or
indirectly, of securities of the Company having at least 25 percent of
the voting power of the Company's then outstanding securities; (ii)
the shareholders of the Company shall approve any merger or other
business combination of the Company, or a subsidiary of the Company,
sale of the Company's assets or combination of the foregoing
transactions (a "Transaction") other than a Transaction immediately
following which the shareholders of the Company immediately prior to
the Transaction and any trustee or fiduciary of any Company employee
benefit plan own at least 50 percent of the voting securities of the
surviving company (or its parent) immediately following the
Transaction; or (iii) within any 24-month period, the persons who were
directors immediately before the beginning of such period ("the
Incumbent Directors") shall cease (for any reason other than death) to
constitute at least a majority of the Board or the board of directors
of a successor to the Company. For this purpose, any director who was
not a director at the beginning of such period shall be deemed to be an
Incumbent Director if such director was elected to the Board by, or on
the recommendation of or with the approval of, at least two-thirds of
the directors who then qualified as Incumbent Directors (so long as
such director was not nominated by a person who has entered into an
agreement to affect a Change of Control).
SECTION 1.2. "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 Plan 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 Plan and who has elected to participate in the Plan
in accordance with Article II.
SECTION 1.3. "Joint Annuitant" means the spouse of an Executive who
qualifies as the Executive's Joint Annuitant under the Cash Balance
Plan.
SECTION 1.4. "Plan" means this plan, the Cummins Engine Company, Inc.
Supplemental Life Insurance and Deferred Income Plan.
SECTION 1.5. "Cash Balance Plan" means the Cummins Engine Company,
Inc. Cash Balance Plan.
SECTION 1.6. "Excess Benefit Plan" means the Excess Benefit Retirement
Plan of the Company, an ERISA excess benefit plan.
SECTION 1.7. "Supplemental Life Annuity" means the benefit payable to
an Executive pursuant to Article V hereunder.
SECTION 1.8. "Survivor Benefit" means the benefit payable to an
Executive's Joint Annuitant following the Executive's death after his
or her termination of employment with rights to a Supplemental Life
Annuity.
SECTION 1.9. "Trustee" means the Trustee from time to time under the
Trust.
SECTION 1.10. "Average Covered Compensation" means the average of
Covered Compensation earned by an Executive during the five (5) year
period immediately preceding the Executive's termination of employment
with the Company, a subsidiary or other affiliate of the Company.
SECTION 1.11. "Covered Compensation" means the total of base salary
and "Short-Term Bonus" earnings of an Executive paid or payable by the
Company, a subsidiary or other affiliate of the Company.
SECTION 1.12. "Service" means the Executive's employment service with
the Company, a subsidiary or other affiliate of the Company.
SECTION 1.13. "Short-Term Bonus" means variable incentive compensation
based on a performance measurement period of one year or less.
Examples of Short-Term Bonus include, but are not limited to, amounts
earned under the Company's Target Bonus Plan and Senior Executive Bonus
Plan.
ARTICLE II
Participation
_____________
An Executive shall commence participation in the Plan following his or
her 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
__________________
SECTION 3.1. 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.
SECTION 3.2. (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
______________
Upon the death of the Executive prior to termination of employment 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 or her death.
ARTICLE V
Retirement Benefits
___________________
SECTION 5.1. An Executive with at least ten years of Service who
terminates employment with the Company on or after attainment of age 65
shall receive from the Trustee, beginning as of the first day of the
month following the Executive's termination, in monthly installments, a
Supplemental Life Annuity retirement benefit in an annual amount equal
to:
a) 2 percent of the Executive's Average Covered Compensation
times years of Service not exceeding 20 years; plus
b) 1 percent of the Executive's Average Covered Compensation
times a maximum of ten years of Service (but in no event
including years following the year in which the Executive attains
age 60) in excess of 20 years; plus
c) in the case of an Executive who is among the two most highly
compensated Executives of the Company at the time of termination
of employment, an additional 10 percent of Average Covered
Compensation; minus
d) the Executive's annual benefit, payable in monthly
installments, in the form of a life annuity from the Cash Balance
Plan and from the Excess Benefit Plan, if any.
SECTION 5.2. Following the Executive's death after commencement of
retirement benefits, 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 the date of death, the 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 receiving benefits for 15 years and without leaving a Joint
Annuitant, or if the 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 the
Executive's children per stirpes or to the Executive's estate if there
are no surviving descendants.
SECTION 5.3. If an Executive becomes disabled and 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
disability.
SECTION 5.4. If an Executive with at least ten years of Service
terminates employment with the Company on or after age 55 but prior to
attainment of age 65, the Executive shall be entitled to receive early
retirement benefits under the Plan equal to the benefits otherwise
payable under Section 5.1, reduced by .5 percent for each full month
that benefits commence before the Executive's attainment of age 65. No
reduction in benefits shall be made, however, with respect to (a) an
Executive whose total age and Service on the date of employment
termination equals or exceeds 80 years or (b) a participant in the
Prior Program whose Service on the date of employment termination
equals or exceeds 30 years.
SECTION 5.5. An Executive entitled to retirement benefits under this
Article V may elect, by filing a written notice with the Vice President
- - Human Resources of the Company prior to termination of employment, to
have the actuarial equivalent value of the Supplemental Life Annuity
paid in a single lump sum. The lump-sum actuarial equivalent 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 January 1 immediately preceding the election and (b) the
mortality tables contained in Attachment A.
ARTICLE VI
Vested Benefits
_______________
An Executive with ten or more years of Service shall be fully vested in
the Supplemental Life Annuity. An Executive who leaves the employ of
the Company with less than ten years of Service shall be entitled to a
percentage of the Supplemental Life Annuity in accordance with the
following table:
Service Percentage
_______ __________
Less than 5 0
5 25
6 40
7 55
8 70
9 85
An Executive with at least ten years of Service or who is partially
vested in accordance with the foregoing table, who leaves the employ of
the Company prior to attaining age 55 shall be eligible to receive
vested deferred retirement benefits under the Plan.
The vested or partially vested Supplemental Life Annuity shall be
payable to the Executive upon attainment of age 65. At the election of
the Executive, early commencement of benefits may begin as of the first
day of any month beginning after attainment of age 55, reduced as
provided in Section 5.4.
ARTICLE VII
Accelerated Payment
___________________
Immediately following a Change of Control, an Executive who is entitled
to benefits under the Plan, other than an Executive who has left the
employ of the Company with vested benefits pursuant to Article VI,
shall become fully vested in the Supplemental Life Annuity and,
notwithstanding anything in Article V to the contrary, 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 Plan.
The lump-sum actuarial 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 contained 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 described in Section
5.4 at the earliest possible time, taking into consideration the
Executive's age and Service.
ARTICLE VIII
Gross-Up Payments
_________________
If payment of the Supplemental Life Annuity pursuant to Article VII
("the Accelerated Payment") causes the Accelerated Payment and any
other payments made in connection with a Change of Control (together
with the Accelerated Payment, 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 Accelerated Payment and such
other Total Payments. If any of such other Total Payments are subject
to the Excise Tax without regard to the Accelerated Payment, 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 Accelerated
Payment.
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 Plan 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, as 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 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 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
Preservation of Prior Program
______________________________
Accrued and Potential Benefits
______________________________
Section 9.3 of the Prior Program provided, among other things, that no
amendment of that Program could deprive an Executive of any benefit
that had accrued prior to such amendment. In addition, since this Plan
is a restatement and amendment of the Prior Program intended to
increase supplemental retirement benefits for Executives, in the event
that a Supplemental Life Annuity with respect to any particular
Executive would have been greater under the Prior Program in the
absence of amendments made hereby, [and assuming the Retirement Plan
(as defined therein) had not been converted to the Cash Balance Plan]
the Executive shall receive benefits under this Plan as if payable
under the terms and conditions of the Prior Program, except that the
lump-sum benefit election feature described in Section 5.5 of this Plan
shall be deemed to apply.
ARTICLE X
Miscellaneous
_____________
SECTION 10.1. 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 10.2. 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 10.3. This Plan 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 Plan, provided, however, that no such amendment
shall deprive any Executive, Joint Annuitant or other beneficiary of
any benefit that accrued under the Plan prior to such amendment. The
Company 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.
SECTION 10.4. No right or interest of an Executive, Joint Annuitant or
other beneficiary under this Plan shall be subject to voluntary or
involuntary alienation, assignment or transfer of any kind.
SECTION 10.5. The administration of this Plan shall be the
responsibility of the Vice President - Human Resources of the Company
or such other person or entity as the Company shall designate.
Decisions of such administrator of the Plan shall be final and binding
upon the Company and upon Executives, Joint Annuitants and
beneficiaries.
SECTION 10.6. This Plan shall be construed, regulated and administered
for all purposes according to the laws of the State of Indiana and the
United States.
SECTION 10.7. This Plan as an amendment and restatement of the Prior
Program shall be effective as of January 1, 1997.