EXHIBIT 10(k)
RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS
OF CUMMINS ENGINE COMPANY, INC.
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(As Amended February 11, 1997)
1. Purpose. The Retirement Plan for Non-Employee Directors
("the Plan") was originally established to provide term-certain
pension payments, as set forth more fully herein, to eligible non-
employee Directors of Cummins Engine Company, Inc. ("the
Company"). It was modified on February 11, 1997 to cease future
benefit accruals and to permit the conversion of existing accrued
benefits into an equivalent value of phantom shares of Company
Common Stock. The Plan is intended to enhance the Company's
ability to retain as Directors individuals with the highest
caliber of experience, ability and judgment.
2. Eligibility. Each Director of the Company who was not an
employee or former employee of the Company with vested rights
under a pension plan sponsored by the Company, its subsidiaries
or affiliates is eligible to participate in the Plan as set forth
below.
3. Participation. An eligible Director became a Participant in
the Plan commencing with the sixth (6th) year of service as a
Director of the Company. No person who becomes a Director after
February 11, 1997 shall be eligible to participate in the Plan.
4. Vesting. Each eligible Director was fully vested in benefits
accrued under the Plan immediately upon becoming a Participant.
5. Pension Benefit Amount. Each Participant shall be entitled
to receive an annual pension benefit, payable annually, equal to
the fees (excluding Committee fees) paid or payable to such
Participant for services rendered as a Director of the Company
during the one-year period immediately preceding February 11,
1997.
6. Benefit Conversion Election. In lieu of the pension benefits
described in paragraph 5, each Participant may elect to convert
the present value of his or her accrued pension benefits under
the Plan into an equivalent value of phantom units of the
Company's Common Stock ("Stock Units"), with each unit equal in
value to one share of Common Stock. The present value of accrued
benefits shall be determined 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 incorporated
by reference into the Cummins Engine Company, Inc. and Affiliates
Cash Balance Retirement Plan, or any successor plan thereto. The
number of Stock Units into which the present value will be
converted shall be based on the average of closing prices of the
Common Stock on the New York Stock Exchange for the 180 trading
days immediately preceding the date of conversion.
The Stock Units, including any additional Stock Units credited
thereon as dividend equivalents (using the same 180 trading day
trailing average methodology), will be evidenced only by
bookkeeping entries. A Participant making the conversion
election shall have no share voting or investment power with
respect to the Stock Units.
The value of an electing Participant's Stock Units shall be
payable only in cash in a lump-sum upon the Participant ceasing
to be a Director, provided, however, that payment or the stock
units may be deferred pursuant to the Company's Deferred
Compensation Plan for Non-Employee Directors ("the Deferral
Plan").
7. Commencement of Pension Benefits. The annual pension
benefits described in paragraph 5 shall be payable on the first
business day in the month of May each year, commencing with the
May next following the later of (i) the date the Participant
ceases to be a Director or (ii) the Participant's 65th birthday.
8. Duration of Pension Benefits. Once begun, the annual pension
benefit shall be payable for the lesser of (i) the number of
completed full years the Participant served as a Director prior
to February 11, 1997 or (ii) twenty (20) years.
9. Payments Upon Death of Participant.
a) In the event of the death of a Participant who had not made
the election described in paragraph 6, the Participant's
surviving spouse, if any, shall continue to receive annual
benefit payments equal to fifty percent (50%) of the pension
benefit payable to the Participant. If death occurs prior to
commencement of pension benefits, such spousal benefit payments
shall continue for the greater of (i) ten (10) years or (ii) the
number of years the Participant would have been entitled to
payments under paragraph 8. If death occurs following
commencement of pension benefits, but prior to receiving the
number of payments described in paragraph 8, such spousal
benefits shall continue for the remaining number of payments. In
the event there is no surviving spouse at the time of a
Participant's death, the Participant's estate or designated
beneficiary shall receive a lump-sum payment equal to the present
value of annual pension benefits that otherwise would have been
payable to a spouse in accordance with this paragraph. In the
event of a surviving spouse's death prior to receiving all
payments otherwise due in accordance with this paragraph, the
estate or designated beneficiary of such spouse shall receive a
lump-sum payment equal to the present value of the remainder of
all such payments. The amount of any lump-sum payment made
pursuant to this paragraph shall be calculated assuming (a) the
interest rate used by the Pension Benefit Guaranty Corporation in
determining the value of immediate benefits as of January 1
immediately preceding the date of payment and (b) the mortality
table incorporated by reference into the Cummins Engine Company,
Inc. and Affiliates Cash Balance Retirement Plan.
b) In the event a Participant who had made an election under
paragraph 6 dies prior to the value of the Stock Units being
paid to the Participant or deferred under the Deferral Plan, such
value shall be paid to the Participant's surviving spouse. In
the event there is no surviving spouse at the time of the
Participant's death, the Participant's estate or designated
beneficiary shall receive such value.
10. Payments upon Change of Control. Notwithstanding anything
contained in paragraphs 7, 8 or 9 to the contrary, following a
Change of Control (as hereinafter defined), each Participant (or
beneficiary, if appropriate) shall be entitled to receive a lump-
sum payment of the actuarial equivalent of pension benefits
accrued and remaining unpaid or, in the case of a Participant who
has made an election described in paragraph 6, the cash value of
the Participant's Stock Units as of the date of the Change of
Control. The lump-sum equivalent of pension benefits 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 and
(b) the mortality tables incorporated by reference into the
Cummins Engine Company, Inc. and Affiliates Cash Balance
Retirement Plan, or any successor plan thereto.
For purposes of this Plan, a "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 or 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 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 two-year period was approved by a vote of at least
two-thirds of the directors then still in office who were
directors at the beginning of such two-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 promulgated under the Exchange Act.
11. Funding of Pension Benefits. The Company shall set aside
funds to satisfy its obligations to pay the pension benefits
described in paragraph 5 by making deposits to the grantor trust
created under agreement dated February 1, 1988 ("the Trust") by
and between the Company and Wachovia Bank and Trust Company, N.A.
("the Trustee") or any successor trust thereto. Deposits to the
Trust to fund such obligations shall be calculated on a sound
actuarial basis. Benefit payments will be made from the Trust by
the Trustee to the extent not paid by the Company.
12 Miscellaneous.
a) Participation in the Plan shall not confer any rights
concerning nomination for re-election to the Board of Directors
of the Company.
b) The Board of Directors of the Company shall be responsible
for the administration of the Plan. Any decisions by the Board
of Directors (as reflected in its approved minutes) shall be
final.
c) The Plan shall continue in force with respect to any
Participant until completion of any payments due hereunder. The
Company may, however, at any time, amend or terminate the Plan,
provided, however, that no such termination or amendment shall
deprive any Participant or surviving spouse of any benefits
accrued under the Plan prior to such amendment.
d) No right or interest of a Participant or surviving spouse
under the Plan shall be subject to voluntary or involuntary
alienation, assignment or transfer of any kind.