Document:

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                                Eaton Corporation
                         2004 Annual Report on Form 10-K
                                   Item 15(c)
                                  Exhibit 10(y)

                  EATON INCENTIVE COMPENSATION DEFERRAL PLAN II

                            EFFECTIVE JANUARY 1, 2005
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EATON INCENTIVE COMPENSATION DEFERRAL PLAN II

I. PURPOSE

The Incentive Compensation Deferral Plan II (the "Plan") enables employees who
contribute significantly to the success of Eaton Corporation (the "Company") to
defer receipt of awards earned under incentive compensation plans and certain
other compensation. The purpose of the Plan is to help attract and retain highly
qualified individuals, to provide an incentive to those individuals to improve
the profitability, competitiveness and growth of the Company, and to help align
their interests with those of the shareholders.

II. ELIGIBILITY

All elected officers of the Company are eligible to participate in the Plan with
respect to i) amounts earned under the Executive Strategic Incentive Plan or any
other Eaton incentive plan made available for deferral hereunder by the
Committee; and ii) any amount paid as a Recruitment Bonus. Such other executives
as determined by the Committee shall also be eligible to participate in the Plan
with respect to any amounts earned under any Eaton incentive compensation plan
made available for deferral hereunder by the Committee and any amount paid as a
Recruitment Bonus.

III. DEFINITIONS

The terms used herein shall have the following meanings:

Account--A bookkeeping account established by Eaton for a Participant to which
may be credited Deferred Incentive Compensation and earnings or losses thereon.

Agreement--A written agreement between Eaton and a Participant deferring the
receipt of Incentive Compensation and indicating the term of the deferral.

Beneficiary--The person or entity designated in writing by the Participant and
delivered to the Committee. If that person or entity is not living or in
existence at the time any unpaid balance of Deferred Incentive Compensation
becomes due after the death of a Participant, the term "Beneficiary" shall mean
the Participant's estate or legal representative or any person, trust or
organization designated in such Participant's will.

Board--The Board of Directors of Eaton Corporation.

Change in Control of Eaton--A Change in Control of Eaton shall be determined in
accordance the provisions of Section 409A of the Code and Treasury Regulations
and published guidance issued pursuant thereto.

Code-- Internal Revenue Code of 1986, as it may be amended from time to time.
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Committee--The Compensation and Organization Committee of the Board.

Common Share Retirement Compensation--Retirement Compensation which is converted
into share units in accordance with Article VI.

Deferred Incentive Compensation--That portion of Incentive Compensation deferred
pursuant to the Plan.

Eaton--Eaton Corporation, an Ohio corporation, and its subsidiaries and
successors and assigns.

Eaton Common Shares--The common shares of Eaton Corporation with a par value of
50 cents each.

Incentive Compensation--Any payment awarded to a Participant under any Incentive
Compensation Plan or paid as a Recruitment Bonus.

Incentive Compensation Plan--Any incentive compensation plan approved by either
the Board or its Compensation and Organization Committee.

Interest Rate Retirement Compensation--Retirement Compensation which is credited
with Treasury Note Based Interest in accordance with Article VI.

Participant--An employee of Eaton who elects to defer receiving benefits under
an Incentive Compensation Plan designated by the Committee as eligible for
deferral hereunder or any Recruitment Bonus.

Periodic Installments--Annual payments, over a period not to exceed fifteen
years, as elected by the Participant in accordance with the terms of the Plan,
which are substantially equal in amount, or, in the case of Common Share
Retirement Compensation, substantially equal in the number of share units being
valued and paid or the number of Eaton Common Shares being distributed, except
that earnings attributable to periods following Retirement or Termination of
Employment shall be included with each payment. Periodic Installments are paid
on or about March 15 of each year, except as otherwise provided herein.

Plan--This Incentive Compensation Deferral Plan II pursuant to which Incentive
Compensation may be deferred for later payment.

Recruitment Bonus--Any amount offered by the Company in order to recruit new
executives.

Retirement--The Termination of Employment of a Participant (i) who is age
fifty-five or older and who has at least ten years of service with Eaton, (ii)
who is age sixty-five or older, or (iii) who is age fifty or older and who has
at least ten years of service with Eaton and whose employment is terminated by
Eaton action.

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Retirement Compensation--That portion of Incentive Compensation deferred for
payment at Retirement or in Periodic Installments commencing at Retirement.

Short-Term Compensation--That portion of Incentive Compensation deferred for
payment in accordance with Article V.

Termination of Employment--The time when a Participant shall no longer be
employed by Eaton, whether by reason of retirement, death, voluntary
resignation, divestiture, discharge (with or without cause), or such disability
that, under the then current employment practices of Eaton, the employment of
the Participant is deemed to have been terminated.

Treasury Bill Interest Equivalent--A rate of interest equal to the quarterly
average yield of 13-week U.S. Government Treasury Bills.

Treasury Note Based Interest--A rate of interest equal to the average yield of
10-year U.S. Government Treasury Notes plus 300 basis points.

IV. ELECTION TO DEFER

Section 4.01 Deferral Options

For each award period ending during or after 2005 (an "Award Period") with
respect to any plan eligible for the deferral of Incentive Compensation
hereunder, or with respect to any Recruitment Bonus offered by the Company after
December 31, 2004, the Participant may elect to defer the receipt of all or part
of his or her Incentive Compensation as Short-Term Compensation or Retirement
Compensation. Once a Participant has made an effective election, he or she may
not thereafter change that election or change any allocation between Short-Term
Compensation or Retirement Compensation.

Section 4.02 Amount Deferred

Between 10% and 100% of any Recruitment Bonus may be deferred under the Plan and
not less than 10% of Incentive Compensation awarded for any Award Period may be
deferred under the Plan. If a Participant elects to allocate a portion of
Incentive Compensation to both Short-Term Compensation and Retirement
Compensation, the amount allocated to each shall be not less than 10% of the
Incentive Compensation awarded for any Award Period.

Section 4.03 Election Deadline

To be in effect for an Award Period, a Participant's election must be completed,
signed and filed with the Committee on or before December 31 of the taxable year
immediately preceding the taxable year in which the services are performed or at
such other time as may be provided in regulations under the Code, except that in
the case of any performance-based compensation based on services performed over
a period of at least 12 months, such election must be made no later than 6
months before the end of the Award Period. Moreover, in the case of the first
year in

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which a Participant becomes eligible to participate in the Plan, such election
may be made with respect to services performed subsequent to the election within
30 days after the date the Participant becomes eligible to participate in the
Plan. Elections to defer a Recruitment Bonus must be completed, signed and filed
with the Committee prior to the Participant's acceptance of employment with the
Company.

V. SHORT-TERM COMPENSATION

Section 5.01 Amount

If elected by a Participant, payment of the amount of Incentive Compensation
allocated to Short-Term Compensation will be deferred. Treasury Bill Interest
Equivalents shall be credited quarterly to the Participant's Short-Term
Compensation Account until such compensation is paid to the Participant.

Section 5.02 Election and Payment

Short-Term Compensation, together with credited Treasury Bill Interest
Equivalents, shall be paid to the Participant in a lump sum or in not more than
five annual installments as elected by the Participant. At the time a
Participant elects to defer receipt of Incentive Compensation as Short-Term
Compensation pursuant to Section 4.01, the Participant shall also elect with
respect to the deferral for such Award Period the time at which payment of such
amount shall be made or begin and which of the methods of payment described in
this Section 5.02 shall be used, provided that such payment may not be made
prior to March 15 of the second year following the Award Period for which the
Short-Term Compensation was credited to the Participant. Upon the death of a
Participant who has a Short-Term Compensation Account, the entire amount of his
or her Short-Term Compensation then remaining shall be distributed to the
Participant's Beneficiary in a lump sum as soon as practicable following the
death.

VI. RETIREMENT COMPENSATION

Section 6.01 Duration

If elected by a Participant, payment of the amount of Incentive Compensation
allocated to Retirement Compensation will be deferred to Retirement, but subject
to the limitations of Section 9.02. Retirement Compensation shall be credited to
the Participant on the date such amount would have been distributed to him or
her if there had been no valid deferral election by establishing an Account in
the Participant's name. At the time a Participant elects to defer receipt of
Incentive Compensation as Retirement Compensation pursuant to Section 4.01, the
Participant shall also elect with respect to the deferral for such Award Period,
whether such amount is to be distributed in a lump sum or in the form of
Periodic Installments over a period of five (5), ten (10), or fifteen (15)
years, subject, however, to the provisions of Section 6.07. Following a
Participant's Retirement, payment to the Participant shall be made or commence
on or about March 15 of the year following the date of such Retirement, subject
to the provisions of Sections 6.07 and 9.02.

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Section 6.02 Common Share Retirement Compensation

Between fifty percent and one hundred percent, as elected by the Participant, of
the amount allocated to Retirement Compensation shall be credited to Common
Share Retirement Compensation, and the balance shall be credited to Interest
Rate Retirement Compensation.

Common Share Retirement Compensation shall be converted into a number of share
units based upon the average of the mean prices for Eaton Common Shares for the
twenty trading days of the New York Stock Exchange during which Eaton Common
Shares were traded immediately following the end of the incentive period in
which the Incentive Compensation to be deferred was earned. On each Eaton Common
Share dividend payment date, dividend equivalents equal to the actual Eaton
Common Share dividends paid shall be credited to the share units in the
Participant's Account, and shall in turn be converted into share units utilizing
the mean Eaton Common Share price on the dividend payment date.

Upon payment of Common Share Retirement Compensation, the share units standing
to the Participant's credit shall be converted to the same number of Eaton
Common Shares for distribution to the Participant in the form of Eaton Common
Shares.

Section 6.03 Interest Rate Retirement Compensation

Retirement Compensation not credited to Common Share Retirement Compensation
shall be credited to Interest Rate Retirement Compensation. Interest Rate
Retirement Compensation shall be credited to the Interest Rate Retirement
Compensation Account, which shall earn Treasury Note Based Interest, compounded
quarterly, until paid.

Section 6.04 Periodic Installments

Upon the death of a Participant who has commenced receiving Periodic
Installments, the entire remaining amount of his or her Retirement Compensation
shall be distributed to the Participant's Beneficiary. Such distribution shall
be made in a lump sum as soon as practicable following such death.

Section 6.05 Termination of Employment

The Retirement Compensation Account of a Participant whose employment terminates
for reasons other than Retirement shall be distributed in a lump sum. The lump
sum payment shall be made as soon as practicable following such termination of
employment, subject to the provisions of Section 9.02.

Section 6.06 Earnings

Earnings shall be credited on undistributed Retirement Compensation Accounts,
and annual installment payments shall be adjusted to reflect such additional
earnings, based on the remaining

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number of installment payments to be distributed and based on Treasury Note
Based Interest, computed quarterly.

Section 6.07 Limited Redeferral

A Participant who has made an effective election under Section 6.01 with respect
to deferral of Retirement Compensation for payment in a lump sum following
Retirement may make a subsequent election to delay payment or commencement of
payment of such amount for a period of five (5) years from the date such payment
would otherwise have been made or change the form of a payment in accordance
with the following provisions, subject to such administrative rules and
procedures as may be established by the Committee:

     (a)  the subsequent election shall not take effect until 12 months after
          the date on which it is made; and

     (b)  payment in the form of Periodic Installments over a period of five
          years may be elected.

VII. AMENDMENT AND TERMINATION

Section 7.01 Right to Amend or Terminate

Eaton fully expects to continue the Plan but it reserves the right, except as
otherwise provided herein, at any time by action of the Committee, to modify,
amend or terminate the Plan for any reason, including adverse changes in the
federal tax laws. Notwithstanding the foregoing, upon the occurrence of a Change
in Control of Eaton, no amendment, modification or termination of the Plan
shall, without the consent of the Participant, alter or impair any rights or
obligations under the Plan with respect to such Participant.

Section 7.02 American Jobs Creation Act of 2004

The Plan is intended to provide for the deferral of compensation in accordance
with the provisions of Section 409A of the Code and Treasury Regulations and
published guidance issued pursuant thereto. Accordingly, the Plan shall be
construed in a manner consistent with those provisions and may at any time be
amended in the manner and to the extent determined necessary or desirable by
Eaton to reflect or otherwise facilitate compliance with such provisions with
respect to amounts deferred on and after January 1, 2005, including as
contemplated by Section 885 (f) of the American Jobs Creation Act of 2004.
Moreover, to the extent permitted in guidance issued by the Secretary of the
Treasury and in accordance with procedures established by the Committee, a
Participant may be permitted to terminate participation in the Plan or cancel an
outstanding deferral election with regard to amounts deferred after December 31,
2004. Notwithstanding any provision of the Plan to the contrary, no other
permissible election or distribution shall be made or given effect under the
Plan that would result in taxation of any amount under Section 409A of the Code.

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VIII. ADMINISTRATION

The Plan shall be administered by the Committee. The Committee shall interpret
the provisions of the Plan where necessary and may adopt procedures for the
administration of the Plan which are consistent with the provisions of the Plan
and any rules adopted by the Committee.

Each Participant or Beneficiary must claim any benefit to which such Beneficiary
may be entitled under the Plan by a written notification to the Committee. If a
claim is denied, it must be denied within a reasonable period of time in a
written notice stating the specific reasons for the denial. The claimant may
have a review of the denial by the Committee by filing a written notice with the
Committee within sixty days after the notice of the denial of his or her claim.
The written decision by the Committee with respect to the review must be given
within one hundred twenty days after receipt of the written request.

The determinations of the Committee shall be final and conclusive.

IX. PAYMENTS

Section 9.01 Automatic Lump Sum Payment

Upon the date of a Change in Control, Eaton shall make an immediate lump sum
payment of the Account balances, including all earnings to that date, to each
Participant or his or her Beneficiary, subject to the provisions of Section
9.02.

Section 9.02 Time of Payment

Notwithstanding any provision of the Plan to the contrary, compensation deferred
under the Plan shall not be distributed earlier than

     (a)  separation from service as determined by the Secretary of the Treasury
          (except as provided below with respect to a key employee of Eaton);

     (b)  the date the Participant becomes disabled (within the meaning of
          Section 409A(a)(2)(C) of the Code);

     (c)  death of the Participant;

     (d)  a specified time (or pursuant to a fixed schedule) specified under the
          Plan at the date of the deferral of such compensation;

     (e)  to the extent provided by the Secretary of the Treasury, a change in
          the ownership or effective control of Eaton, or in the ownership of a
          substantial portion of the assets of Eaton; or

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     (f)  the occurrence of an unforeseeable emergency as defined in Section
          409A(a)(2)(B)(ii) of the Code.

In the case of any key employee (as defined in Section 416(i) of the Code
without regard to paragraph (5) thereof) of Eaton, distributions may not be made
before the date that is six months after the date of separation from service
(or, if earlier, the date of death of the Participant).

X. MISCELLANEOUS

Section 10.01 Adjustments

In the event of a reorganization, merger, consolidation, reclassification,
recapitalization, combination or exchange of shares, stock split, stock
dividend, rights offering or similar event affecting shares of the Company, the
Committee shall equitably adjust the limitation on the number and class of share
units which may be allocated to Participants as Common Share Retirement
Compensation, and the number of share units previously allocated to their
Accounts.

Section 10.02 Designation of Beneficiaries

Each Participant shall have the right, by written instruction to the Committee,
on a form supplied by the Committee, to designate one or more primary and
contingent Beneficiaries (and the proportion to be paid to each, if more than
one is designated) to receive his or her Account balance upon his or her death.
Any such designation shall be revocable by the Participant.

Section 10.03 Committee Actions

All actions of the Committee hereunder may be taken with or without a meeting.
If taken without a meeting, the action shall be in writing and signed by a
majority of the members of the Committee and if taken with a meeting, a majority
of the Committee shall constitute a quorum for any such action. The
determination by the Committee as to the withholding of taxes shall be binding
upon the Participants and their Beneficiaries.

Section 10.04 Assignment

No benefit under the Plan shall be subject to anticipation, alienation, sale,
transfer or encumbrance, and any attempt to do so shall be void. No benefit
hereunder shall in any manner be liable for the debts, contracts, or liabilities
of the person entitled to such benefits. If the Participant or Beneficiary shall
become bankrupt, or attempt to anticipate, alienate, sell, transfer or encumber
any benefit hereunder, then such benefit shall, in the discretion of the
Committee, cease and terminate, and the Committee may hold or apply the same for
the benefit of the Participant or his or her spouse, children, or other
dependents, or any of them, in such manner and in such amounts and proportions
as the Committee may deem proper. During a Participant's lifetime, rights
hereunder are exercisable only by the Participant or that person's guardian or
legal representative. Notwithstanding the foregoing, nothing in this Section
shall prohibit the transfer of any benefit by will or by the laws of descent and
distribution or (if permitted by applicable

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regulations under Section 16(b) of the Exchange Act) pursuant to a qualified
domestic relations order, as defined under the Code and the Employee Retirement
Income Security Act.

Section 10.05 No Funding Required

The obligations of Eaton to make payments shall be a liability of Eaton to the
Participant. Eaton shall not be required to maintain any separate fund or
reserve, or purchase or acquire life insurance on a Participant's life, or
otherwise segregate assets to assure that any particular asset of Eaton is
available to make such payments by reason of Eaton's obligations hereunder.
Nothing contained in the Plan shall be construed as creating a trust or other
fiduciary relationship between Eaton and a Participant or any other person.

Section 10.06 No Employment Contract

The Plan shall not be deemed to constitute a contract of employment between
Eaton and a Participant. Neither shall the execution of the Plan nor any action
taken by Eaton or the Committee pursuant to the Plan confer on a Participant any
legal right to be continued in any other capacity with Eaton whatsoever.

Section 10.07 Governing Law

The Plan shall be construed and governed in accordance with the law of the State
of Ohio to the extent not covered by Federal law.

Section 10.08 Effective Date

The Plan is adopted by the Board on December 8, 2004, effective January 1, 2005.

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                              APPROVAL AND ADOPTION

     The Eaton Corporation Deferred Incentive Compensation Plan II, in the form
attached hereto, is hereby approved and adopted.

/s/ Susan J. Cook                       Date: December 10, 2004
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Name

Vice President- Human Resource
-------------------------------------
Title

/s/ Earl R. Franklin
-------------------------------------
Name

Vice President and Secretary
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Title

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                                Eaton Corporation
                         2004 Annual Report on Form 10-K
                                   Item 15(c)
                                  Exhibit 10(z)

                                EATON CORPORATION
                          SUPPLEMENTAL BENEFITS PLAN II

     The Eaton Corporation Supplemental Benefits Plan II, an unfunded,
nonqualified deferred compensation plan adopted December 8, 2004, is set forth
below.

     1. Purpose.  The purpose of the Supplemental Benefits Plan II is to provide
        -------
benefits in excess of the limitations imposed by the Code with respect to
certain employees who participate in the Pension Plan.

     2. Definitions.  The following definitions are used throughout the Plan:
        -----------
     (a) "Pension Administration Committee" means the committee comprised of
officers of the Corporation appointed by the Board of Directors from time to
time to administer the Corporation's retirement benefit programs.

     (b) "Board of Directors" means the Board of Directors of the Corporation.

     (c) "Change in Control" means a change of control of the Corporation
determined in accordance the provisions of Section 409A of the Code and Treasury
Regulations and published guidance issued pursuant thereto.

     (d) "Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time.

     (e) "Committee" means the Compensation and Organization Committee of the
Board of Directors.

     (f) "Corporation" means Eaton Corporation, an Ohio corporation.
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     (g) "Lump Sum Payment" has the meaning set forth in Section 7(b).

     (h) "Participant" means a participant in the Pension Plan who is eligible
to receive benefits under the Plan. The term "Participant" shall include the
beneficiary of a deceased Participant.

     (i) "Plan" or "Supplemental Benefits Plan II" means the Eaton Corporation
Supplemental Benefits Plan II as amended from time to time.

     (j) "Pension Plan" means the Pension Plan for Eaton Corporation Employees
sponsored by the Corporation, which is a defined benefit plan intended to
qualify under Section 401(a) of the Code, and each other defined benefit plan
sponsored by a subsidiary of the Corporation that is intended to qualify under
Section 401(a) of the Code.

     3. Eligibility.  An employee of the Corporation who is a participant in the
        -----------
Pension Plan and who is "highly compensated" within the meaning of Code Section
401(a)(4) shall be eligible to receive a benefit in an amount determined under
Section 4.

     4. Pension Plan Supplemental Benefits.  A Participant who is eligible to
        ----------------------------------
receive a benefit under the Pension Plan shall be entitled to receive a benefit
under the Plan in an amount equal to the difference between (i) and (ii), where:

          (i) equals the aggregate amount of monthly income payable to the
     Participant under the Pension Plan on the normal benefit commencement date
     specified in the Pension Plan as determined under the normal retirement
     benefit formula of the Pension Plan before applying any provision reducing
     pension benefits because of the provisions of the Code limiting the maximum
     amount of an employee's compensation which may be taken into account for
     purposes of calculating benefits under the Pension Plan; and

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          (ii) equals the aggregate amount of monthly income determined in
     paragraph (i) after applying the provisions of the Code limiting the
     maximum amount of an employee's compensation which may be taken into
     account for purposes of calculating benefits under the Pension Plan.

     Notwithstanding the foregoing, in no event shall the benefit hereunder
duplicate the benefit provided under the Eaton Corporation Excess Benefits Plan,
the Eaton Corporation Excess Benefits Plan II, or the Eaton Corporation
Supplemental Benefits Plan.

     5. Vesting.  Subject to the rights of general creditors as set forth in
        -------
Section 8 and the right of the Corporation to discontinue the Plan as provided
in Section 11(c), a Participant shall have a vested, and nonforfeitable interest
in benefits payable under Section 4 to the same extent and in the same manner as
benefits are vested under the Pension Plan.

     6. Commencement of Benefits.
        ------------------------
     (a) The benefit payable to a Participant under Section 4 shall be paid or
shall begin on the first day of the month following the later of his separation
from service (within the meaning of Section 409A of the Code) or the date he is
first eligible for commencement of benefits under the Pension Plan (whether or
not he has applied for commencement of benefits thereunder), except that in the
case of a Participant who is a key employee as defined in Section 416(i) of the
Code and applicable Treasury regulations, payment shall not in any event be made
or begin until the first business day of the month which is at least six months
after the date of his separation from service (or, if earlier, the date of death
of the Participant). If the Participant receives or begins to receive an
actuarially reduced benefit before the normal benefit commencement date under
the Pension Plan, the benefit payable under Section 4 shall also be actuarially
reduced by applying the same actuarial factors that are applied under the
Pension Plan. In the event of the termination of the

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Pension Plan and the distribution to a Participant of a fully-paid, individual
annuity contract or a single sum payment, payments received under such contract
or the single sum payment shall be deemed to be benefits paid under the Pension
Plan for purposes of the Plan.

     7. Form of Benefits.
        ----------------

     (a) The benefit payable under Section 4 shall be paid to the Participant
either in a single sum payment or in a form of annuity available under the terms
of the Pension Plan (which forms of annuity shall be limited to an annuity for
the life of a Participant, a 120-month certain period and life annuity, a joint
and 50% surviving spouse annuity, and a joint and 100% surviving spouse
annuity), as elected by the Participant in accordance with Treasury guidance
pursuant to Section 409A of the Code, provided that in the event no election has
been made with respect to any portion or all of a benefit payable under the
Plan, such benefit shall be paid in a single sum payment. Whether the
Participant elects an optional annuity form of benefit available under the terms
of the Pension Plan or a lump sum benefit, the benefit payable under Section 4
shall be actuarially adjusted by using the same actuarial factors as used under
the Pension Plan for converting the normal form of benefit to an actuarially
equivalent optional benefit. A Participant need not receive the benefit payable
under Section 4 in the same form as the form of benefit elected by the
Participant under the Pension Plan. Notwithstanding the foregoing, prior to
commencement of benefits a Participant may change an election from one available
form of annuity payments to another available form of annuity payments, but only
to the extent permitted in Treasury regulations under Section 409A of the Code.

     (b) If the Participant has a vested interest under the Plan and dies prior
to commencement of any benefit under the Plan, the Company will pay a benefit to
the Participant's surviving spouse calculated in accordance with the Plan. The
benefit shall be calculated in the

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same manner as provided under the Pension Plan. Notwithstanding the foregoing, a
Participant may elect a beneficiary other than his or her spouse (as permitted
under the Pension Plan except that no spousal consent shall be required), with
the benefit amount being determined in the same manner as provided under the
Pension Plan and payable in a lump sum form of payment only.

     (c) Upon the date of a Change in Control, the Corporation shall make an
immediate Lump Sum Payment to each Participant.

     "Lump Sum Payment" means a single payment in cash to a Participant of his
or her vested benefit determined in accordance with Section 4, actuarially
adjusted by using the same actuarial factors as under the Pension Plan for
converting the normal form of benefit to an actuarially equivalent optional
benefit. These payments would be based upon "final average annual compensation"
and "years of service" as they exist upon the date of the Change in Control, and
would be based upon the assumption (only for purposes of computing this payment)
that the Participant would retire upon that same date (even though the employee
might not otherwise be of retirement age).

     Notwithstanding anything herein to the contrary, no Lump Sum Payment shall
be paid to any Participant herein who ceases to be an employee of the
Corporation prior to attaining the age at which he or she is eligible to take
early retirement under the Pension Plan at his or her option.

     8. Funding of Benefits.
        -------------------

     (a) The Plan shall be unfunded. All benefits payable under the Plan shall
be paid from the Corporation's general assets, and nothing contained in the Plan
shall require the Corporation to set aside or hold in trust any funds for the
benefit of a Participant, who shall have the status of a general unsecured
creditor with respect to the Corporation's obligation to make payments under the
Plan. Any funds of the Corporation available to pay benefits under the Plan
shall be subject to

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the claims of general creditors of the Corporation and may be used for any
purpose by the Corporation.

     (b) Notwithstanding the provisions of subsection (a), the Corporation may,
at the direction, and in the absolute discretion, of the Pension Administration
Committee, transfer to the trustee of one or more irrevocable domestic trusts
established in the United States for the benefit of one or more Participants'
assets from which all or a portion of the benefits provided under the Plan will
be satisfied, provided that such assets held in trust shall at all times be
subject to the claims of general unsecured creditors of the Corporation and no
Participant shall at any time have a prior claim to such assets.

     9. Administration of the Plan.  The Pension Administration Committee shall
        --------------------------
administer the Plan and shall keep a written record of its action and
proceedings regarding the Plan and all dates, records and documents relating to
its administration of the Plan. The Pension Administration Committee is
authorized to interpret the Plan, to make, amend and rescind such rules as it
deems necessary for the proper administration of the Plan, to make all other
determinations necessary or advisable for the administration of the Plan and to
correct any defect or supply any omission or reconcile any inconsistency in the
Plan in the manner and to the extent that the Pension Administration Committee
deems desirable to carry the Plan into effect. The powers and duties of the
Pension Administration Committee shall include, without limitation, the
following:

     (a) Determining the amount of benefits payable to Participants and
authorizing and directing the Corporation with respect to the payment of
benefits under the Plan;

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     (b) Construing and interpreting the Plan whenever necessary to carry out
its intention and purpose and making and publishing such rules for the
regulation of the Plan as are not inconsistent with the terms of the Plan; and

     (c) Compiling and maintaining all records it determines to be necessary,
appropriate or convenient in connection with the administration of the Plan.

     No member of the Pension Administration Committee shall vote on any matter
relating specifically to such member. In the event that a majority of the
members of the Pension Administration Committee will be specifically affected by
any action proposed to be taken (as opposed to being affected in the same manner
as each other Participant in the Plan), such action shall be taken by the
Compensation Committee.

     10. Claims Procedure.
         ----------------

     (a) If a Participant (hereinafter referred to as the "Applicant") does not
receive the timely payment of the benefits which the Applicant believes are due
under the Plan, the Applicant may make a claim for benefits in the manner
hereinafter provided.

     All claims for benefits under the Plan shall be made in writing and shall
be signed by the Applicant. Claims shall be submitted to a representative
designated by the Pension Administration Committee and hereinafter referred to
as the "Claims Coordinator." If the Applicant does not furnish sufficient
information with the claim for the Claims Coordinator to determine the validity
of the claim, the Claims Coordinator shall indicate to the Applicant any
additional information which is necessary for the Claims Coordinator to
determine the validity of the claim.

     Each claim hereunder shall be acted on and approved or disapproved by the
Claims Coordinator within 30 days following the receipt by the Claims
Coordinator of the information necessary to process the claim.

                                       -7-
<PAGE>
     In the event the Claims Coordinator denies a claim for benefits in whole or
in part, the Claims Coordinator shall notify the Applicant in writing of the
denial of the claim and notify the Applicant of his right to a review of the
Claims Coordinator's decision by the Benefits Committee. Such notice by the
Claims Coordinator shall also set forth, in a manner calculated to be understood
by the Applicant, the specific reason for such denial, the specific provisions
of the Plan on which the denial is based, a description of any additional
material or information necessary to perfect the claim with an explanation of
the Plan's appeals procedure as set forth in this Section.

     If no action is taken by the Claims Coordinator on an Applicant's claim
within 30 days after receipt by the Claims Coordinator, such claim shall be
deemed to be denied for purposes of the following appeals procedure.

     (b) Any Applicant whose claim for benefits is denied in whole or in part
may appeal for a review of the decision by the Pension Administration Committee.
Such appeal must be made within three months after the Applicant has received
actual or constructive notice of the denial as provided above. An appeal must be
submitted in writing within such period and must:

          (i) request a review by the Pension Administration Committee of the
     claim for benefits under the Plan;

          (ii) set forth all of the grounds upon which the Applicant's request
     for review is based on any facts in support thereof; and

          (iii) set forth any issues or comments which the Applicant deems
     pertinent to the appeal.

     The Pension Administration Committee shall regularly review appeals by
Applicants. The Pension Administration Committee shall act upon each appeal
within 30 days after receipt thereof unless special circumstances require an
extension of the time for processing, in which case a

                                       -8-
<PAGE>
decision shall be rendered by the Pension Administration Committee as soon as
possible but not later than 60 days after the appeal is received by the Pension
Administration Committee.

     The Pension Administration Committee shall make a full and fair review of
each appeal and any written materials submitted by the Applicant in connection
therewith. The Pension Administration Committee may require the Applicant to
submit such additional facts, documents or other evidence as the Pension
Administration Committee in its discretion deems necessary or advisable in
making its review. The Applicant shall be given the opportunity to review
pertinent documents or materials upon submission of a written request to the
Pension Administration Committee, provided the Pension Administration Committee
finds the requested documents or materials are pertinent to the appeal.

     On the basis of its review, the Pension Administration Committee shall make
an independent determination of the Applicant's eligibility for benefits under
the Plan.

     In the event the Pension Administration Committee denies an appeal in whole
or in part, the Pension Administration Committee shall give written notice of
the decision to the Applicant, which notice shall set forth, in a manner
calculated to be understood by the Applicant, the specific reasons for such
denial and which shall make specific reference to the pertinent provisions of
the Plan on which the Pension Administration Committee's decision is based.

     11. Miscellaneous.
         -------------

     (a) Nothing in the Plan shall confer upon a Participant the right to
continue in the employ of the Corporation or an affiliate of the Corporation or
shall limit or restrict the right of the Corporation or any affiliate to
terminate the employment of a Participant at any time or without cause.

                                       -9-
<PAGE>
     (b) Neither the Corporation nor any Participant hereunder shall assign,
transfer or delegate this Plan or any rights or obligations hereunder except as
expressly provided herein. Without limiting the generality of the foregoing, no
right or interest under this Plan of a Participant shall be assignable or
transferable in any manner or be subject to alienation, anticipation, sale,
pledge, encumbrance or other legal process or in any manner be liable for or
subject to the debts or liabilities of any such Participant. If any Participant
shall attempt to or shall transfer, assign, alienate, anticipate, sell, pledge
or otherwise encumber his benefits hereunder or any part thereof, or if by
reason of his bankruptcy or other event happening at any time such benefits
would devolve upon anyone else or would not be enjoyed by him, then the
Corporation, in its discretion, may terminate his interest in any such benefit
to the extent the Corporation considers necessary or advisable to prevent or
limit the effects of such occurrence. Termination shall be effected by filing a
written "termination declaration" with the Plan's records and making reasonable
efforts to deliver a copy to the Participant (the "Terminated Participant")
whose interest is adversely affected.

     As long as the Terminated Participant is alive, any benefits affected by
the termination shall be retained by the Corporation and, in the Corporation's
sole and absolute judgment, may be paid to or expended for the benefit of the
terminated Participant, his spouse, his children or any other person or persons
in fact dependent upon him in such a manner as the Corporation shall deem
proper. Upon the death of the Terminated Participant, all benefits withheld from
him and not paid to others in accordance with the preceding sentence shall be
paid to the Terminated Participant's then living descendants, including adopted
children, per stirpes, or, if there are none then living, to his estate.
          -----------

                                      -10-
<PAGE>
     (c) The Plan may be amended at any time by the Pension Administration
Committee provided such amendment does not have the effect of increasing,
directly or indirectly, the benefit of any Participant. The Plan may also be
amended or terminated by the Board of Directors at any time, and any amendment
adopted by the Board of Directors shall supersede any prior or later amendment
adopted by the Pension Administration Committee that is inconsistent with the
action of the Board of Directors. Subject to the provisions of Section 11(d), no
amendment shall have the effect of impairing or decreasing a Participant's
accrued benefit, including the form of payment thereof. No amendment may amend
or modify the preceding sentence.

     (d) The Plan is intended to provide for the deferral of compensation in
accordance with the provisions of Section 409A of the Code and Treasury
Regulations and published guidance issued pursuant thereto. Accordingly, the
Plan shall be construed in a manner consistent with those provisions and may at
any time be amended in the manner and to the extent determined necessary or
desirable by the Corporation to reflect or otherwise facilitate compliance with
such provisions with respect to amounts deferred on or after January 1, 2005,
including as contemplated by Section 885(f) of the American Jobs Creation Act of
2004. Moreover, to the extent permitted in guidance issued by the Secretary of
the Treasury and in accordance with procedures established by the Committee, a
Participant may be permitted to terminate participation in the Plan or cancel an
outstanding deferral election with regard to amounts deferred after December 31,
2004. Notwithstanding any provision of the Plan to the contrary, no otherwise
permissible election or distribution shall be made or given effect under the
Plan that would result in taxation of any amount under Section 409A of the Code.

     (e) The Plan is intended to provide benefits for "management or highly
compensated" employees within the meaning of Sections 201, 301 and 401 of the
Employee Retirement Income

                                      -11-
<PAGE>
Security Act of 1974, as amended ("ERISA"), and therefore to be exempt from the
provisions of Parts 2, 3 and 4 of Title I of ERISA. Accordingly, the Plan shall
terminate and no further benefits shall accrue hereunder in the event it is
determined by a court of competent jurisdiction or by an opinion of counsel that
the Plan constitutes an employee pension benefit plan within the meaning of
Section 3(2) of ERISA which is not so exempt.

     (f) If any provision in the Plan is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining provisions
shall nevertheless continue to full force and effect without being impaired or
invalidated in any way.

     (g) The Plan shall be construed and governed in all respects in accordance
with applicable federal law and, to the extent not preempted by such federal
law, in accordance with the law of the State of Ohio.

                              APPROVAL AND ADOPTION
                              ---------------------

     The Eaton Corporation Supplemental Benefits Plan II, in the form attached
     hereto, is hereby approved and adopted.

EATON CORPORATION

/s/ Susan J. Cook                       Date: December 10, 2004
-------------------------------------
Name

Vice President- Human Resource
-------------------------------------
Title

/s/ Earl R. Franklin
-------------------------------------
Name

Title Vice President and Secretary
-------------------------------------
Title

                                      -12-

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