Exhibit 10.(i)


 


CUMMINS INC.


LONGER TERM PERFORMANCE
PLAN


(as amended
2/12/01)


 


1.  Objectives.  The objectives of the Plan are to (i) serve
as a balance against the short-term compensation provided by base salary and
bonus payments of the Company, (ii) emphasize the Longer-term performance
of the Company,  (iii) strengthen
the relationship between Company management and shareholder interests, and (iv) encourage
participants to remain with the Company through important business cycles.


 


The size of grants under
the Plan are intended to reflect the degrees of influence participating
executive officers have in their functional positions on the Longer-term
performance of the Company.  The
calculation of payments from the Plan is intended to reflect the Company’s
performance against certain performance measures designated by the Compensation
Committee.


 


2.  Definitions.


 


(a) “Award
Cycle” means the period upon which a particular year’s payout is
calculated.  A new Award Cycle commences
as designated by the Committee.   Payments, if any, under the Plan to
Participants during a fiscal year are based upon the Company’s performance
during the most recently completed Award Cycle.


 


(b) “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 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 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% 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 (2) 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 (2/3) 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 or Regulation 14A promulgated under
the Exchange Act.


 


(c) “Committee”
means the Compensation Committee of the Board of Directors of the Company.


 


(d) “Company”
means Cummins Engine Company, Inc.


 


(e) “Participants”
means the Company’s officers and other key employees designated annually by the
Committee to participate in the Plan for the ensuing Award Cycle.


 


(f) “Payout Factor”
means the percentage determined by the Committee and applied to a Target Award
to determine the amount of an award to be paid as described in section 4 of the
Plan.


 


(g) “Peer Group”
means a group of companies selected by the Committee.


 

















 


The Committee may define
Performance Measures for an Award Cycle as Cummins’ performance compared to the
performance of a “Peer Group”.


 


(h) “Performance
Measures” means the Company’s return on equity, return on sales, net income,
sales growth, return on assets, total shareholder return, Free Cash Flow, or
any combination thereof.


 


(i) “Plan” means the
Longer Term Performance Plan described herein.


 


(j) “Target Award”
means the amount of targeted compensation described in section 3 of the Plan.


 


3.  Target Award.  The Committee shall assign each Participant a
Target Award for each Award Cycle, in its discretion, based upon, but not
limited to, the scope and breadth of the Participant’s position, ability to
affect the Company’s Longer-term financial performance, and his or her working
relationships within the Company.  The
Target Award for an Award Cycle shall be expressed in terms of a threshold,
target, and maximum dollar amount.


 


The Target Award for each
Award Cycle shall be assigned and communicated to each Participant as soon as
practicable thereafter, but in no event later than the day representing 25% of
that Award Cycle.  Target Awards may be
changed during the course of an Award Cycle based on the Committee’s
reevaluation of the criteria described in the preceding paragraph; provided,
however, a Target Award shall not be increased following commencement of the
Award Cycle.


 


4.  Payout Schedule.  On or before the day representing 25% of each
Award Cycle, the Committee shall establish the Performance Measures to be used
in determining a Payout Factor applicable to the Award Cycle.  The Committee may determine the Payout Factor
based upon the attainment of one or more different Performance Measures,
provided the measures, when established, are stated as alternatives to one
another.


 


5.  Change in Accounting
Standards.  For purposes of
determining the Payout Factor, the Company’s actual performance under the
Performance Measures will exclude


 

















 


extraordinary charges and
credits which result from a change in accounting standards of the Company.


 


6.  Plan Payments.  Any payout under the Plan will be made as soon
as practicable following audits of the Company’s financial statements
applicable to all fiscal years of the Award Cycle and written certification by
the Committee of attainment of the applicable Performance Measures and
corresponding Payout Factor.  Payments
under the Plan may be deferred pursuant to the Company’s Deferred Compensation
Plan.


 


7.  Administration.  The Plan shall be administered by the
Compensation Committee.  No member of the
Committee shall be eligible for a Target Award while serving on the
Committee.  The Committee shall have
authority to interpret the Plan and to establish, amend and rescind rules and
regulations for the administration of the Plan, and all such interpretations, rules and
regulations shall be conclusive and binding on all persons.  Notwithstanding any other provision of the
Plan to the contrary, the Committee may impose such conditions on participation
in, awards under and payments from the Plan as it deems appropriate.


 


8.  Termination of Employment.
 If a Participant’s employment
with the Company terminates during the first year of an Award Cycle, other than
by reason of retirement, death or disability, the Participant will not receive
any payout for that Award Cycle.  If a
Participant’s employment so terminates during subsequent years of an Award
Cycle, the Committee, in its discretion, shall determine whether the
Participant will receive a proportionate payout of any payment with respect to
the Award Cycle based on the period of employment during the cycle.


 


If a Participant retires,
dies or becomes disabled during an Award Cycle, the Participant or such
Participant’s estate, as the case may be, shall receive a proportionate share
of any payment with respect to the Award Cycle based on the period of
employment during the cycle, regardless of the length of time of such
employment.


 


9.  Change of Control.  Notwithstanding any other provision herein to
the contrary, in the event of a Change of Control, an amount shall be
immediately payable from the Plan to each Participant equal to the Targeted
Amount times a fraction, the numerator of which is the year of the  Award


 

















 


Cycle in progress and the
denominator of which is the total number of years in the Award Cycle.


 


10. Effective
Date.  The Plan, as amended,
shall be effective for the Award Cycle beginning January 1, 2001, subject
to its approval by the Company’s shareholders.


 


11. Amendment
and Termination.  The Board of
Directors of the Company may at any time amend, modify, alter or terminate this
Plan.


 


12. Governing
Law.  This Plan and all
determinations made and actions taken pursuant hereto, shall be governed by the
laws of the State of Indiana and construed accordingly.