Exhibit 10.(a)


 


CUMMINS INC.


2003 STOCK INCENTIVE PLAN


(As Amended October 14, 2003, Feb. 20,
2007, Feb. 9, 2009, May 12, 2009 and Jan. 19, 2010)


 


1.                                       Objectives. 
The Cummins Inc. 2003 Stock Incentive Plan (the “Plan”) is designed
to retain and motivate executives and other selected employees, and to link the
interests of these employees with the interests of the Company’s shareholders.
It is also intended to be a source of equity-based annual fees payable to
non-employee directors of the Company to more closely link their financial
interests with those of the Company’s shareholders. These objectives are
accomplished by making incentive and other awards of the Company’s stock under
the Plan thereby providing Participants with a proprietary interest in the growth
and performance of the Company.


 


2.                                       Definitions


 


(a)                                  “Award”—The
grant of any form of stock option, stock appreciation right or stock award
whether granted singly, in combination or in tandem, to a Participant pursuant
to such terms, conditions and limitations as the Committee may establish in
order to fulfill the objectives of the Plan.


 


(b)                                 “Award
Agreement”—An agreement between the Company and a Participant that
sets forth the terms, conditions and limitations applicable to an Award.


 


(c)                                  “Board”—The
Board of Directors of the Company.


 


(d)                                 “Change
of Control”—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 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 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, shall become the beneficial owner (within the meaning of Rule 13d-3
under the Exchange Act) of securities of the Company representing 25% 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, 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, 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 of Regulation 14A promulgated under the Exchange Act.


 


(e)                                  “Common
Stock”—Authorized and issued or unissued Common Stock, par value
$2.50 per share, of the Company.


 

















 


(f)                                    “Code”—The
Internal Revenue Code of 1986, as amended from time to time.


 


(g)                                 “Committee”—The
Compensation Committee of the Board, or such other committee of the Board that
is designated by the Board to administer the Plan. The Committee shall be
constituted so as to permit the Plan to comply with Rule 16b-3 promulgated
under the Exchange Act or any successor rule and shall initially consist
of not less than three members of the Board, each of whom is ineligible to
receive Awards (other than automatic fee Awards to Outside Directors described
in Section 6 below), shall have been so ineligible for at least one year
prior to serving on the Committee and shall satisfy the requirements to be a
disinterested person contained in Rule 16-b-3(1)(2)(i).


 


(h)                                 “Company”—Cummins Inc.
and its subsidiaries, including subsidiaries of subsidiaries.


 


(i)                                     “Fair
Market Value”—The average of the high and low prices of the Common
Stock as reported on the composite tape for securities listed on the New York
Stock Exchange for the date in question, provided that if no sales of Common
Stock were made on said Exchange on that date, the average of the high and low
prices of Common Stock as reported on said composite tape for the preceding day
on which sales of Common Stock were made on said Exchange.


 


(j)                                     “Outside Director”—A non-employee member
of the Board.


 


(k)                                  “Participant”—Any
employee or Outside Director of the Company to whom an Award has been made
under the Plan.


 


3.                                       Eligibility. 
Employees of the Company eligible for an Award under the Plan are those
who hold positions of responsibility and whose performance, in the judgment of
the Committee or the management of the Company, can have a significant effect
on the success of the Company. All Outside Directors are also eligible.


 


4.                                       Stock Available for
Awards.  A total of thirteen million five hundred
thousand (13,500,000) shares of the Company’s Common Stock shall be available
for Awards granted wholly or partly in stock under provisions of the Plan. From
time to time, the Board and appropriate officers of the Company shall take
whatever actions are necessary to file required documents with governmental
authorities and stock exchanges to make shares of Common Stock available for
issuance pursuant to Awards. Common Stock related to Awards under this Plan or
the 1992 Stock Incentive Plan that are forfeited, terminated or expired
unexercised, or related to options or stock appreciation rights settled in cash
in lieu of stock, shall again become available for Awards. Any Common Stock
that so becomes available shall be carried forward and be available for Awards.


 


5.                                       Administration. 
The Plan shall be administered by the Committee, which shall have full
and exclusive power to interpret the Plan, to grant waivers of Plan
restrictions (other than restrictions related to automatic fee Awards described
in Section 6 below), including waivers of restrictions on exercise of
outstanding stock options and appreciation rights, waivers of vesting
requirements and acceleration of Award payments, and to adopt such rules,
regulations and guidelines for carrying out the Plan as it may deem necessary
or proper, all of which powers shall be executed in the best interests of the
Company and in keeping with the objectives of the Plan. These powers include,
but are not limited to, the adoption of modifications, amendments, procedures,
sub-plans and the like as are necessary to comply with provisions of the laws
of other countries in which the Company may operate in order to assure the
viability of Awards granted under the Plan and to enable Participants employed
in such other countries to receive advantages and benefits under the Plan and
such laws.


 


6.                                       Director Automatic
Formula Awards.  Each Outside Director shall automatically
receive, on the date of each annual meeting of Shareholders, in lieu of cash payment
an annual award of Common


 

















 


stock, restricted
as to transfer for a period of six (6) months following the date of the
award. The number of shares in each such annual award shall be equal to
one-half (1/2)
of his or her Board retainer fee, divided by the average of closing prices of
Common Stock as reported on the composite tape of the New York Stock Exchange
for the twenty (20) consecutive trading days immediately preceding the
date of the award.


 


7.                                       Employee Awards. 
The Committee shall determine the type or types of Award(s) to be
made to each employee Participant and shall set forth in the related Award
Agreement the terms, conditions and limitations applicable to each Award.
Awards may include but are not limited to those listed in this Section 7.
Awards may be granted singly, in combination or in tandem. Awards may also be
made in combination or in tandem with, in replacement of or as alternatives to
grants or rights under any other employee plan of the Company, including the
plan of any acquired entity. On such terms and conditions as shall be approved
by the Committee, the Company or any of its subsidiaries may directly or
indirectly lend money to any Participant or other person to accomplish the
purposes of the Plan, including to assist such person to acquire shares of
Common Stock acquired upon the exercise of options, provided, however, such lending would not violate terms of
the Sarbanes-Oxley Act of 2002. No more than one-half of the total shares
authorized under this plan may be awarded as Stock Awards, as defined in (c) below,
that are subject only to the condition of continuous service with the Company.


 


(a)                                  Stock Option—a grant of the right to purchase a
specified number of shares of Common Stock at not less than 100% of Fair Market
Value on the date of grant during a specified period as determined by the
Committee. A stock option may be in the form of an incentive stock option (“ISO”)
which, in addition to being subject to applicable terms, conditions and
limitations established by the Committee, complies with Section 422 of the
Code which, among other limitations, provides that (i) to the extent that
the aggregate Fair Market Value (determined at the time the option is granted)
of Common Stock exercisable for the first time by a Participant during any
calendar year exceeds $100,000 (or such other limit as may be required by the
Code), such option shall not be treated as an ISO and (ii) the option
shall be exercisable for a period of not more than ten years from the date of
grant.


 


(b)                                 Stock Appreciation
Right—a right to
receive a payment, in cash and/or Common Stock, equal to the excess of the Fair
Market Value or other specified valuation of a specified number of shares of
Common Stock on the date the stock appreciation right (“SAR”) is exercised over
the Fair Market Value or other specified valuation on the date of grant of the
SAR as set forth in the applicable Award Agreement, except that where the SAR
is granted in tandem with a stock option, the grant and exercise valuations
must be not less than Fair Market Value.


 


(c)                                  Stock Award—An Award made in Common Stock or
denominated in units of Common Stock. All or part of any Common Stock award may
be subject to conditions established by the Committee and set forth in the
Award Agreement, which may include, but are not limited to, continuous service
with the Company, achievement of specific business objectives, increases in
specified indices, attaining growth rates and other comparable measurements of
Company performance. Such Awards may be based on Fair Market Value or other
specified valuation.


 


The minimum restriction period for Performance Shares (shares requiring
certain performance measures to be achieved in order to vest) will be one year
from the Grant Date. The minimum restriction period for Restricted Stock
(shares requiring only continued employment with the Company to vest) will be
two years if vesting occurs in multiple annual increments, and three years if
cliff vesting occurs for the entire grant. Therefore, no Restricted Stock grant
(other than the Performance Shares) shall fully vest in less than three years.  The minimum restriction periods do not apply
to any grants made in lieu of cash compensation, as is the case for Outside
Directors.


 

















 


8.                                       Payment of Awards. 
Award payments made in the form of Common Stock may include such
restrictions, as the Committee shall determine, including restrictions on
transfer and forfeiture provisions. When transfer of Common Stock is so
restricted or subject to forfeiture provisions it is referred to as “Restricted
Stock”. Further, with Committee approval, payments may be deferred, either in
the form of installments or a future single payment. The Committee may permit
selected Participants to elect to defer payments of some or all types of Awards
in accordance with procedures established by the Committee to assure that such
deferrals comply with applicable requirements of the Code including, at the
choice of Participants, the capability to make further deferrals for payment
after retirement. Any deferred payment, whether elected by the Participant or
specified by the Award Agreement or by the Committee, may require the payment
be forfeited in accordance with the provisions of Section 11. Dividends or
dividend equivalent rights may be extended to and made part of any Award
denominated in Common Stock or units of Common Stock, subject to such terms,
conditions and restrictions as the Committee may establish. The Committee may
also establish rules and procedures for the crediting of dividend
equivalents for deferred payments denominated in Common Stock or units of
Common Stock. At the discretion of the Committee, a participant may be offered
an election to substitute an Award for another Award or Awards of the same or
different type.


 


9.                                       Stock Option Exercise. 
The price at which shares of Common Stock may be purchased under a stock
option shall be paid in full at the time of the exercise in cash or, if
permitted by the Committee, by means of tendering Common Stock or surrendering
another Award, including Restricted Stock, valued at Fair Market Value on the
date of exercise, or any combination thereof. The Committee shall determine
acceptable methods for tendering Common Stock or other Awards and may impose
such conditions on the use of Common Stock or other Awards to exercise a stock
option as it deems appropriate. In the event shares of Restricted Stock are
tendered as consideration for the exercise of a stock option, a number of the
shares issued upon the exercise of the stock option, equal to the number of
shares of Restricted Stock used as consideration therefor, shall be subject to
the same restrictions as the Restricted Stock so submitted plus any additional
restrictions that may be imposed by the Committee.


 


10.                                 Tax Withholding. 
The Company shall have the right to deduct applicable taxes from any
Award payment and to retain at the time of delivery or vesting of shares under
the Plan, an appropriate number of shares of Common Stock in value sufficient
to cover the payment of any taxes required by law to be withheld or to take
such other action as may be necessary in the opinion of the Company to satisfy
all obligations for withholding of such taxes; provided, however, that a
Participant shall have the option to provide the Company with the funds to
enable it to pay such taxes. Notwithstanding the preceding sentence, if the
Participant is subject to Section 16 of the Exchange Act, the Participant
must affirmatively elect whether he wishes to (i) have the Company retain
shares of Common Stock, (ii) provide the Company with other funds or (iii) have
the Company deduct an amount from other compensation due him in order to
satisfy the tax withholding requirements arising under an Award.


 


11.                                 Termination of
Employment.  If the employment of a Participant
terminates, other than pursuant to paragraphs (a) through (c) of
this Section 11, all unexercised, deferred and unpaid Awards shall be
canceled immediately, unless the Award Agreement provides otherwise.


 


(a)                                  Retirement Under a
Company Retirement Plan.  When a Participant’s
employment by the Company terminates as a result of retirement in accordance
with the terms of a Company retirement plan, the Committee may permit Awards to
continue in effect beyond the date of retirement in accordance with the
applicable Award Agreement and the exercisability and vesting of any Award may
be accelerated.


 


(b)                                 Resignation in the Best
Interests of the Company.  When a Participant resigns
from the Company and, in the judgment of the Committee, the acceleration and/or
continuation of outstanding Awards would be in the best interests of the
Company, the Committee may (i) authorize, where appropriate, the
acceleration and/or continuation of all or any part of


 

















 


Awards granted
prior to such termination and (ii) permit the exercise, vesting and
payment of such Awards for such period as may be set forth in the applicable
Award Agreement, subject to earlier cancellation pursuant to Section 12 or
at such time as the Committee shall deem the continuation of all or any part of
the Participant’s Awards are not in the Company’s best interests.


 


(c)                                  Death or Disability of
a Participant.


 


(i)                                     In the event of a Participant’s death,
the Participant’s estate or beneficiaries shall have the period specified in
the Award Agreement within which to receive or exercise any outstanding Award
held by the Participant under such terms as may be specified in the applicable
Award Agreement.


 


(ii)                                  In the event a Participant is deemed by
the Company to be disabled and eligible for benefits pursuant to the terms of
the Company’s Long-Term Disability Plan, any successor plan, or similar plan of
another employer, Awards and rights to any Awards may be paid to or exercised
by the Participant, if legally competent, or a committee or other legally
designated guardian or representative if the Participant is legally incompetent
by virtue of such disability.


 


(iii)                               After the death or disability of a Participant, the
Committee may in its sole discretion at any time (1) terminate
restrictions in Award Agreements; (2) accelerate any or all installments
and rights; and (3) instruct the Company to pay the total of any
accelerated payments in a single sum to the Participant, the Participant’s
estate, beneficiaries or representative—notwithstanding that, in the absence of
such termination of restrictions or acceleration of payments, any or all of the
payments due under the Awards might ultimately have become payable to other
beneficiaries.


 


Restriction and/or
vesting periods for grants of Restricted Stock, Performance Shares and Stock
Options will not be accelerated except in the event of Retirement, Death,
Disability, or Change of Control of the Corporation provided however that the
Committee shall have the discretionary authority, when it determines it to be
in the best interests of the Company, to accelerate such restrictions under
circumstances other than those set forth above so long as the shares
accelerated in each case are less than 5% of the total shares authorized for
grants under the Plan.


 


12.                                 Cancellation and
Rescission of Awards.  Unless the Award Agreement specifies
otherwise, the Committee may cancel any unexpired, unpaid or deferred Award at
any time if the Participant is not in compliance with all other applicable
provisions of the Award Agreement and the Plan and with the condition that the
Participant (whether or not an employee of the Company at the time) shall not
render services for any organization or engage directly or indirectly in any
business which, in the judgment of the Committee, is or becomes competitive
with the Company, or which organization or business, or the rendering of
services to such organization or business, is or becomes otherwise prejudicial
to or in conflict with the interests of the Company.


 


13.                                 Transferability


 


(a)                                  Except pursuant to paragraph (c) of
Section 11 or paragraph (b) below, no Award or any other benefit
under the Plan shall be assignable or transferable, or payable to or
exercisable by, anyone other than the Participant to whom it was granted.


 


(b)                                 The Company may expressly provide in an
Award Agreement (or an amendment to an Award Agreement) that a Participant may
transfer a stock option Award (other than an


 

















 


ISO), in whole or
in part, to a spouse, domestic partner, or lineal descendant (a “Family Member”),
a trust for the exclusive benefit of Family Members, or a partnership or other
entity in which all the beneficial owners are Family Members. Subsequent
transfers of Awards shall be prohibited except in accordance with this
paragraph 13(b). All terms and conditions of the Award, including
provisions relating to the termination of the Participant’s employment or service
with the Company, shall continue to apply following a transfer made in
accordance with this paragraph 13(b).


 


14.                                 Adjustments. 
In the event of any change in the Common Stock by reason of a stock
split, stock dividend, combination or reclassification of shares,
recapitalization, split-up, spin-off, dividend other than a regular quarterly
cash dividend, separation, reorganization, liquidation, merger, consolidation
or similar event, the Committee may adjust proportionally (a) the number
of shares of Common Stock (i) reserved under the Plan, and (ii) covered
by outstanding Awards; (b) the stock prices related to outstanding Awards;
and (c) the appropriate Fair Market Value and other price determinations
for such Awards. In the event of any other change affecting the Common Stock or
any distribution (other than normal cash dividends) to holders of Common Stock,
such adjustments as may be deemed equitable by the Committee, including
adjustments to avoid fractional shares, shall be made to give proper effect to
such event. In the event of any of the changes described in the first sentence
of this Section 14, the Committee shall be authorized to issue or assume
stock options, whether or not in a transaction to which Section 424(a) of
the Code applies, by means of substitution of new options for previously issued
options or an assumption of previously issued options.


 


15.                                 Change of Control. 
In the event of a Change of Control, any time period relating to the
exercisability or realization of an outstanding Award shall be immediately
accelerated so that any outstanding Award as of the date of the Change of
Control may be exercised or realized in full. In addition, in order to maintain
the Participant’s rights in the event of a Change of Control, the Committee, in
its sole discretion, may, either at the time an Award is made hereunder or at
any time prior to, or coincident with or after the time of, a Change of
Control:


 


(a)               make such adjustment to the Awards then
outstanding as the Committee deems appropriate to reflect such Change of
Control; or


 


(b)              cause the Awards then outstanding to be
assumed, or new rights substituted therefor, by the surviving corporation in
such Change of Control.


 


The Committee may,
in its discretion, include such further provisions and limitations in any
agreement documenting such Awards, as it may deem equitable and in the best
interests of the Company with respect to changes in control.


 


16.                                 Amendment,
Modification, Suspension or Discontinuance of the Plan. 
The Board may amend, modify, suspend or terminate the Plan for the
purpose of meeting or addressing any changes in legal requirements or for any
other purpose permitted by law. Subject to changes in law or other legal
requirements, which would permit otherwise, the Plan may not be amended without
the consent of the holders of a majority of the shares of Commons Stock then
outstanding to (i) increase the maximum number of shares of Common Stock
that may be awarded under the Plan (except for adjustments pursuant to Section 14
of the Plan), (ii) decrease the option price, (iii) materially modify
the requirements as to eligibility for participation in the Plan, (iv) withdraw
administration of the Plan from the Committee or (v) extend the period
during which Awards may be granted.


 


17.                                 Governing Law. 
The Plan and all determinations made and actions taken pursuant hereto,
to the extent not otherwise governed by the Code or the securities laws of the
United States, shall be governed by the laws of the State of Indiana and
construed accordingly.


 

















 


18.           Effective
and Termination Dates.  The
Plan shall become effective on the date of its adoption by the Board and Awards
may be made immediately thereafter, but no Stock Award may be paid, Restricted
Stock issued (unless containing restrictions requiring cancellation of such
Restricted Stock if stockholder approval is not received) or Stock Option
exercised under the Plan until it is approved by the holders of a majority of
the shares of common Stock then outstanding. The Plan shall terminate on December 31,
2012, subject to earlier termination by the Board pursuant to Section 16.