<PAGE>

                                Eaton Corporation
                         2003 Annual Report on Form 10-K
                                   Item 15 (c)
                                 Exhibit 10 (l)

                                EATON CORPORATION
                      EXECUTIVE INCENTIVE COMPENSATION PLAN

I. Purpose

The purpose of the Plan is to provide an annual incentive compensation
opportunity for eligible employees in executive, administrative, professional,
technical, or advisory positions whose actions are considered to have a
significant impact on corporate performance.

II. Effective Date

This restatement of the Plan is effective beginning with the 2003 Executive
Incentive Compensation Plan year and shall remain in effect until its terms are
changed by the Board of Directors of Eaton Corporation.

III. Administration

The Plan is adopted by the Board of Directors of the Company and may be amended,
modified or discontinued, as the Board, in its sole discretion, may deem
necessary.

The Plan is administered by the Management Compensation Committee (the
"Committee"), which shall consist of the Chief Executive Officer and up to four
officers designated by the Chief Executive Officer. The Committee shall have
complete authority to interpret all provisions of the Plan consistent with the
law.

IV. Concept

The Plan is intended to support the Company's Pay-for-Performance culture. It is
based on the concept that those individuals in positions that have an
opportunity to significantly affect company results should have a significant
portion of their total compensation at risk and linked to business and
individual results.

V. Eligibility

Any salaried employee of the Company or any of its subsidiaries (including any
subsidiary acquired after adoption of this Plan) who in the judgment of the
Committee meets the criteria described in Article I may be selected for
participation in the Plan. The Committee will have final authority for
designating participants in the Plan, but may delegate this authority, as it
deems advisable.

An employee may be designated as a participant on the first of any month
following the approval of the Committee or its designee.

VI. Calculation of Incentive Compensation Payments

Plan participants will be placed into one of three (3) Incentive Compensation
Programs within the overall Plan. These three Programs are:

 - Operations Program - which will include participants who are assigned to
   operating units.

<PAGE>

 - Corporate Staff Program - which will include participants who are members of
   corporate staff functional departments.

 - Executive Management Program - which will include senior elected officers.

Beginning with the 2003 plan year, the total Corporate Incentive pool will be
created by multiplying the participants' base salaries (as in effect as of March
1 of each year) by Target Percentage Incentive Factors which are either (a) the
standard percentage Incentive Factor appropriate to their level of
responsibility or (b) an alternative individual Percentage Incentive Factor
approved by the Company's Chief Executive Officer or designee. The aggregate
pool amount will then be multiplied by the Corporate Performance Factor to
determine the Initial Adjusted Corporate Incentive Pool.

The Corporate Performance Factor raises or lowers the Initial Corporate
Incentive Pool based on Eaton's performance as measured by a matrix of Cash Flow
Return on Gross Capital (CFR) and Earnings per Share (EPS). A philosophical
cornerstone of the Plan is the belief that consistently high performance against
this Matrix will result in increases in shareholder value. The Compensation and
Organization Committee of the Board will establish the Corporate Performance
Factor Schedule. This schedule will define the threshold, target, and maximum
CFR/EPS matrix goals and pool adjustment levels for the designated year. This
process determines the maximum amount of the Initial Adjusted Corporate
Incentive Pool but is not linked to the incentive distribution process.

The Compensation and Organization Committee of the Board of Directors, in its
sole discretion, will determine the Final Adjusted Corporate Incentive Pool by
multiplying the Initial Adjusted Corporate Incentive Pool by a Corporate
Performance Incentive Pool Modifier which can affect the initial pool by as much
as plus or minus twenty (20%) percent. In applying the Corporate Performance
Incentive Pool Modifier, the Compensation and Organization Committee of the
Board of Directors will take into consideration such other performance factors
as it deems appropriate which may include, but are not limited to: performance
versus Profit Plan goals; performance versus that reported for Eaton's peer
companies and progress toward the execution of the corporation's growth
strategies.

The process of allocating the incentive funds is based upon performance ratings.
In the Operations Program, each appropriate operating unit will be given a
rating on a scale from zero (0) to 150 percent. Participants in each program
will be given individual ratings based on the same scale. These ratings will be
established by a senior officer, subject to final review and approval by the
Chief Executive Officer, and will be based primarily upon the success of the
unit and/or individual in meeting pre-established objectives. Individual Ratings
for elected officers will be recommended by the Chief Executive Officer and must
be approved by the Compensation and Organization Committee of the Board of
Directors. It is intended that the ratings process should allow maximum
flexibility for the recognition of unanticipated challenges and opportunities,
which may not have been contemplated at the time the original objectives were
established.

While it is not necessary that the entire Final Adjusted Corporate Incentive
Pool be allocated to participants, the total of all awards made to participants
throughout the Corporation cannot be greater than the sum of the pools of all
three programs. Excepted from this provision are the awards made to designated
employees by the Compensation and Organization Committee of the Board of
Directors, which shall be calculated in a manner consistent with the Plan, but
which shall be paid from the Corporation's General Funds rather than the
Corporate Incentive Pool. At the sole discretion of the

<PAGE>

Chief Executive Officer, money not distributed from one program may be
reallocated to another program.

VII. Other Provisions

The Plan provides for a Special Award Fund which will allow the Compensation and
Organization Committee of the Board of Directors, on an exception basis, to
award special payments to individual participants who, in that Committee's
judgment, have made extraordinary contributions to the Corporation in a year
when there would normally be no incentive compensation payment due to below
threshold corporate performance. The maximum amount of such awards is defined in
Article X of this Plan.

Note: When assigning individual ratings, a specific effort is made to
differentiate in order to reward extraordinary job performance. To accomplish
this, senior officers are expected to allocate ratings above 100 based on
clearly demonstrated and exceptional job performance, leadership and initiative.
The remainder of that business unit and/or department incentive pool will be
allocated, again by job performance, to the remaining participants. As a natural
consequence of this process the individual rating will generally average 100.
However, because the Plan is designed to reward exceptional performance with
ratings well above 100, fully competent performers can expect individual ratings
that may average below 100. To insure that incentive pool funds are made
available to support effective Pay-for-Performance objective, the Compensation
and Organization Committee may, as it deems necessary for selected organizations
or groups of incentive participants, require an alternative process for applying
the Corporate Performance Factor and (if applicable) the Unit Rating in the
individual award calculations. In this alternative award calculation process,
the Lowest Ten Percent (10%) of Plan participants, as determined by final
Individual Ratings Percentages, will receive the application of eighty percent
(80%) of the final approved Corporate performance Factor and, if appropriate,
the Unit Rating approved for their organization. The Next Lowest Ten Percent
(10%) will receive the application of ninety percent (90%) of the Corporate
Performance Factor and, if appropriate, the Unit Ratings approved for their
organization. Incentive dollars made available by the application of these rules
may be allocated to those Plan participants who are deemed to have made the
greatest value contributions during the Plan award period.

In the sole discretion of the Compensation and Organization Committee: (a) the
percentages cited in the above paragraphs may be adjusted from time to time to
insure effective Plan processes and (b) a process will be established for
determining the organization levels at which the Lowest and Next Lowest Ten
Percent of Individual Ratings will be identified.

VIII. Payment

Incentive compensation will be paid in the year subsequent to the year in which
it is earned at the earliest feasible date following the determination of final
corporate performance and the calculation of individual incentive payments.

IX. Service for Part of Year

A participant must be employed by the Company or one of its subsidiaries at the
end of an Award Period; provided, however, that a payment, prorated for the
participant's months of participation during the Award Period, may be authorized
by the Committee, in its sole discretion, in the event the employment of a
participant terminates before the end of an Award Period due to death, permanent
disability, normal or early retirement, closure or divestiture of an Eaton
facility or any other reason. Notwithstanding the

<PAGE>

foregoing, upon any termination of the Plan during any Award Period, payments to
all participants will be made, prorated for each participant's length of service
during the Award Period prior to the date of Plan termination.

X. Accounting Provisions and Defined Terms

Awards paid out under the provisions of the Plan to participants in the
Operations Program will be accrued for and charged to the appropriate units.
Awards to participants in the Executive management and Corporate Staff Programs
will be accrued for and charged as a corporate administrative expense.

Initial Adjusted Corporate Incentive Pool - The sum of the Incentive Potential
for all participants in each of the three programs multiplied by the Corporate
Performance Factor.

Final Adjusted Corporate Incentive Pool - The result obtained by multiplying the
Initial Adjusted Corporate Incentive Pool by the Corporate Performance Factor as
described in Section VI.

Corporate Performance Factor - Adjustment percentages, which raise or lower the
Corporate Incentive Pool, based on Eaton's performance. The following schedule
will be applied to the 2003 incentive pool adjustment and subsequent Plan years
unless adjusted by the Compensation and Organization Committee of the Board of
Directors in its sole discretion. Performance that falls between the points on
the matrix will be interpolated to arrive at the appropriate Corporate
Performance Factor to the closest 1%.

CFROGC/Earnings Per Share Matrix  -

                          Corporate Performance Factor

<TABLE>
<CAPTION>
                             CFR         EPS
Cash Flow Return          Threshold   Threshold            Target           Maximum
----------------          ---------   ---------    -----   ------   -----   -------
<S>                      <C>         <C>         <C>     <C>      <C>       <C>
13.0%                           40%         40%
14.3%                                                75%
16.4%                                                        100%
17.0%                                                                150%
17.6%                                                                          200%
Earnings per                  less
Share (EPS)             than $2.70       $2.70    $3.68    $5.00   $5.40     $5.80
</TABLE>

  Cash Flow Return on Gross Capital (CFR) - Net income plus depreciation, and
  after-tax net interest divided by capital plus accumulated depreciation minus
  goodwill and short-term investments.

  Earnings per Share - Fully diluted Earnings per Share excluding Unusual Items
  as reported externally (also reported as "Operating Earnings Per Share")

  Special Award Fund - An amount not greater than twenty (20%) percent of the
  sum of the Corporate Incentive Pool. The Compensation and Organization
  Committee of the Board of Directors will have sole authority to grant up to
  the maximum of this Fund to recognize extraordinary contributions to the
  Corporation in a year when the CFR/EPS Matrix threshold was not met and the
  Plan did not generate payments for participants.

Percentage Incentive Factor Schedule - A schedule outlining the percentage to be
applied against the base salary of each level of participant in order to
determine the participant's Incentive Potential. The target incentive factor

<PAGE>

will vary according to level of responsibility, and may be changed from time to
time to reflect the competitive practices for companies comparable to Eaton. The
target incentive factor can be further adjusted at the beginning of the Plan
year to reflect the participant's level of performance and other factors. The
individual adjusted target incentive factors will be set at the beginning of the
Plan year. The schedule of standard incentive percentages will be established by
the Compensation Department subject to review and approval of the Compensation
and Organization Committee of the Board of Directors.