Document:

EXHIBIT 10(o)

 

CUMMINS INC.

2006 EXECUTIVE RETENTION PLAN

 (Effective as of January 1, 2006)

 

The Board of Directors of
Cummins Inc. (the “Company”) has determined that it is in the best interests of
the Company and its shareholders to assure that the Company will have the
continued dedication of its executives, notwithstanding the possibility, threat
or occurrence of a Change of Control (as defined below) of the Company. The
Board of Directors (the “Board”) believes it is imperative to diminish the
inevitable distraction of the executives by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control
and to encourage the executives’ full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the executives with updated compensation and benefits arrangements
upon a Change of Control which ensure that the compensation and benefits
expectations of the executives will be satisfied and which are competitive with
those of other major U.S. industrial corporations. In order to accomplish these
objectives, the Board has caused the Company to adopt this Cummins Inc. 2006 Executive
Retention Plan (the “Plan”).

 

This Plan is in addition
to but separate and distinct from and does not supersede or amend the Company’s
Key Employee Compensation Protection Plan, effective as of April 3, 1984
(the “1984 Plan”). Therefore, in the event of a Change of Control, amounts are
payable under the terms of the 1984 Plan and this Plan. This Plan does,
however, supersede any other severance pay or salary continuance plan or
program adopted by the Company to retain and protect its employees in the event
of a Change of Control, specifically including the “Cummins Engine Company, Inc.
Executive Retention Plan”, effective October 10, 1995, as amended.

 

1.             Definitions.
In addition to other terms defined elsewhere herein, the following terms shall
have the following meanings, such meanings to be equally applicable to both the
singular and plural forms of the terms defined.

 

(a)           “Affiliate”
means (i) any entity that, directly or indirectly, is controlled by,
controls or is under common control with, the Company and/or (ii) any
entity in which the Company has a significant equity interest, in either case
as determined by the Board.

 

 

(b)           “Bonus
Payment” means, in the case of an Officer or a Key Employee, one annual bonus
payment in the amount of the Participant’s Target Bonus payment as calculated
under, and payable at the times contemplated in, the Company’s Target Bonus
Plan (“Bonus Plan”) in effect prior to the Change of Control and adjusted as
provided in the next sentence. In making the calculations under the Bonus Plan,
the Participant’s “Base Salary” (as defined therein) shall be the annual rate
in effect immediately prior to the date of Termination or the effective date of
the Change of Control, whichever is higher, and the applicable “Bonus Factor”
(as defined therein) in each case shall be 1.0 without regard to the Company’s
actual performance under the performance measures during the measurement
period.

 

(c)           “Change
of Control” means the occurrence of any of the following: (i) there shall be
consummated (A) any merger, consolidation, statutory share exchange or similar
form of corporate transaction involving (x) the Company or (y) any of its
Subsidiaries, but in the case of this clause (y) only if Company Voting
Securities (as defined below) are issued or issuable (each of the events
referred to in this clause (A) being hereinafter referred to as a “Reorganization”)
or (B) the sale or other disposition of all or substantially all the
assets of the Company to an entity that is not an Affiliate (a “Sale”) if such
Reorganization or Sale requires the approval of the Company’s stockholders
under the law of the Company’s jurisdiction of organization (whether such
approval is required for such Reorganization or Sale or for the issuance of
securities of the Company in such Reorganization or Sale), unless, immediately
following such Reorganization or Sale, all or substantially all the individuals
and entities who were the “beneficial owners” (as such term is defined in Rule
13d-3 under the Exchange Act (or a successor rule thereto)) of the Company’s
shares or other securities eligible to vote for the election of the Board (“Company
Voting Securities”) outstanding immediately prior to the consummation of such
Reorganization or Sale beneficially own, directly or indirectly, more than 50%
of the combined voting power of the then outstanding voting securities of the
corporation resulting from such Reorganization or Sale (including, without
limitation, a corporation that as a result of such transaction owns the Company
or all or substantially all the Company’s assets either directly or through one
or more subsidiaries) (the “Continuing Corporation”) in substantially the same
proportions as their ownership, immediately prior to the consummation of such

 

2

 

Reorganization or Sale, of the outstanding Company
Voting Securities (excluding any outstanding voting securities of the
Continuing Corporation that such beneficial owners hold immediately following
the consummation of the Reorganization or Sale as a result of their ownership
prior to such consummation of voting securities of any company or other entity
involved in or forming part of such Reorganization or Sale other than the
Company); (ii) the stockholders of the Company shall approve any plan or
proposal for the complete 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’)) (each a “Person”),
other than (A) the Company, (B) a Subsidiary, (C) any employee benefit plan
sponsored by the Company or an Affiliate or (D) a company 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, 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 (the “Incumbent
Directors”) shall cease for any reason to constitute at least a majority
thereof; provided, however, that any individual becoming a
director subsequent to the first day of such period whose election, or
nomination for election, by the Company’s stockholders was approved by a vote
of at least a majority of the Incumbent Directors shall be considered as though
such individual were an Incumbent Director, but excluding, for purposes of this
proviso, any such individual whose initial assumption of office occurs as a
result of an actual or threatened proxy contest with respect to election or
removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person, in each case other than the management of
the Company or the Board, 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.

 

3

 

(d)           “Designated
Officers” means certain officers of the Company designated as such by the Board
from time-to-time for purposes of receiving payments and benefits under the
Plan.

 

(e)           “Designated
Officers Bonus Payment” means, in the case of a Designated Officer, two annual
bonus payments as calculated under, and payable at the times contemplated in,
the Company’s Senior Executive Bonus Plan or Target Bonus Plan (each a “Bonus
Plan”) in effect prior to the Change of Control and adjusted as provided in the
next sentence. In making the calculations under the Bonus Plan, the Participant’s
“Base Salary” (as defined therein) shall be the annual rate in effect
immediately prior to the date of Termination or the effective date of the
Change of Control, whichever is higher, and the applicable “Bonus Factor” (as
defined therein) in each case shall be 1.0 without regard to the Company’s
actual performance under the performance measures during the measurement
period.

 

(f)            “Key Employee” means an employee of the
Company or any Subsidiary whom the Committee designates by name as a
participant in this Plan and who is not an Officer.

 

(g)           “Officer”
means an officer of the Company who is not a Designated Officer.

 

(h)           “Participant”
means a Designated Officer, Officer or Key Employee, as the context requires.

 

(i)            “Severance Period” means (i) in the
case of a Designated Officer, a period of twenty-four (24) months following the
date of Termination and (ii) in the case of an Officer or a Key Employee, a
period of twelve (12) months following the date of Termination.

 

(j)            “Subsidiary”
means any entity in which the Company, directly or indirectly, possesses fifty
percent (50%) or more of the total combined voting power of all classes of
stock.

 

(k)           “Termination
for Cause” means a termination of a Participant’s employment by the Company due
to (i) the willful and continued failure of the Participant to perform
substantially the Participant’s duties with the Company or one of its Affiliates
(other than any such failure resulting from incapacity due to physical or
mental illness), after a written demand for substantial performance is
delivered to the Participant by the Board or the Chief Executive Officer of the
Company which specifically identifies the manner in which the

 

4

 

Board or Chief Executive
Officer believes that the Participant has not substantially performed the
Participant’s duties, or (ii) the conviction of a felony.

 

For
purposes of this definition, no act or failure to act on the part of the
Participant shall be considered “willful” unless it is done, or omitted to be
done, by the Participant in bad faith or without reasonable belief that the Participant’s
action or omission was in the best interests of the Company. Any act, or
failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer or
a senior officer of the Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be done, by
the Executive in good faith and in the best interests of the Company. The
cessation of employment of the Participant shall not be deemed to be a
termination for Cause unless and until there shall have been delivered to the
Participant a copy of a resolution duly adopted by the affirmative vote of not
less than three quarters of the entire membership of the Board at a meeting of
the Board called and held for such purpose (after reasonable notice is provided
to the Participant and the Participant is given an opportunity, together with
counsel, to be heard before the Board), finding that, in the good faith opinion
of the Board, the Participant is guilty of the conduct described in
subparagraph (i) or (ii) above, and specifying the particulars thereof in
detail.

 

(l)            “Termination
for Good Reason” means a termination of a Participant’s employment by the
Participant within 90 days following (i) the assignment to the Participant of
any duties inconsistent in any respect with the Participant’s position
(including status, offices, titles and reporting requirements), authority,
duties or responsibilities, or any other action by the Company which results in
a diminution in such position, authority, duties or responsibilities, excluding
for this purpose an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company promptly after receipt of notice
thereof given by the Participant, (ii) the Company’s requiring the Participant
to be based at any office or location other than the location at which the
Participant is based on the effective date of the Change of Control or the
Company’s requiring the Participant to travel on Company business to a
substantially greater extent than required immediately prior to the effective
date of the Change of Control, (iii) a reduction in the

 

5

 

Participant’s annual base
salary or participation level or opportunity in any bonus or other incentive
compensation plan or program of the Company, (iv) a material reduction in the
aggregate value of the pension and welfare benefits provided to the Participant
from those in effect on the effective date of the Change of Control (other than
a reduction which is proportionate to the reductions applicable to other senior
participants pursuant to a cost-saving plan that includes all senior
participants) or (v) a material breach of any provision of this Plan by the
Company.

 

For
purposes of this definition, any good faith determination of “Good Reason” made
by the Participant shall be conclusive.

 

(m)          “Termination
Without Cause” means any termination of the Participant’s employment by the
Company other than a Termination for Cause.

 

2.             Termination
Payments. In the event of a Termination Without Cause or a Termination for
Good Reason (in either such case a “Termination”) before the second anniversary
of the effective date of any Change of Control, and in addition to amounts
payable and the periods of time during which benefits continue to be provided
under the 1984 Plan, the Company shall pay to the Participant and provide him
or her with the following:

 

(a)                                  a
lump-sum cash payment in an amount equal to salary payments for the number of
months in the Severance Period applicable to the Participant at the monthly
rate in effect immediately prior to the date of Termination or the effective
date of the Change of Control, whichever is higher; and

 

(b)                                  a
lump-sum cash payment in an amount equal to (i) in the case of a Designated
Officer, the Designated Officers Bonus Payment applicable to the Participant
and (ii) in the case of an Officer or a Key Employee, the Bonus Payment
applicable to the Participant.

 

In addition, the
Participant shall receive the lump-sum present cash value of the following: (i)
the additional pension benefits that would have accrued under any pension
benefit plan and supplemental pension plan maintained by the Company if the
Participant had remained in the employ of the Company for the Applicable Period
after the date of Termination, and (ii) the employee benefits (including, but
not limited to, coverage under any life insurance, medical,

 

6

 

dental, disability and financial advisory arrangements or programs) to
which the Participant would have been entitled under all employee benefit
plans, programs, policies or arrangements maintained by the Company if the
Participant had remained in its employ for the Applicable Period after the date
of Termination (in each case, with respect to the preceding clauses (i) and
(ii), on an after-tax basis where such benefits if provided through the
employee benefit plan would not be taxable to the Participant). The amounts of
any lump-sum payments described in this Section 2 shall be determined and such
payments shall be made as soon as possible following the Participant’s
Termination; provided, however, that, to the extent necessary, in
the good faith determination of the Company, to comply with Section 409A
of the Internal Revenue Code of 1986, as amended (the “Code), if the
Participant is deemed to be a “specified employee” for purposes of
Section 409A of the Code, payment under this Plan shall be made on the
first business day following the date that is six (6) months after the date of
Termination.

 

3.             Nonexclusivity
of Rights. Nothing in this Plan shall prevent or limit any Participant’s
continuing or future participation in any plan, program, policy or practice
provided by the Company or any of its affiliates and for which the Participant
may qualify, nor shall anything herein limit or otherwise affect such rights as
a Participant may have under any contract or agreement with the Company or any
of its affiliates. Amounts which are vested benefits or which a Participant is
otherwise entitled to receive under any plan, policy, practice or program of or
any contract or agreement with the Company or any of its affiliates at or
subsequent to a Change of Control or Termination shall be payable in accordance
with such plan, policy, practice or program or contract or agreement except as
explicitly modified by this Plan.

 

4.             Full
Settlement. The Company’s obligation to make the payments provided for in this
Plan and otherwise to perform its obligations hereunder shall not be affected
by any set-off, counterclaim, recoupment, defense or other claim, right or
action which the Company may have against a Participant or others. In no event
shall a Participant be obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to the Participant under any
of the provisions of this Plan and such amounts shall not be reduced whether or
not the Participant obtains other employment. The Company agrees to pay as
incurred, to the full extent permitted by law, all legal fees and expenses
which the Participant may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company, the Participant or others
of the validity or enforceability of, or liability under, any provision of this

 

7

 

Plan or any guarantee of
performance hereof (including as a result of any contest by the Participant
about the amount of any payment pursuant to this Plan), plus in each case
interest on any delayed payment at the applicable Federal rate provided for in
Section 1274(d) of the Code.

 

5.             Certain
Additional Payments. If any payments or benefits paid by the Company
pursuant to this Plan (“Plan Payments”) causes such payments and any other
payments (including those under the 1984 Plan) made in connection with a Change
of Control (collectively, the “Total Payments”) to be subject to the tax (the “Excise
Tax”) imposed by Section 4999 of the Code, the Company shall pay the
Participant an additional amount (the “Gross-Up Payment”) such that the net
amount retained by the Participant, after deduction of any Excise Tax paid or
payable (and not grossed-up under a similar provision of another plan or
program sponsored by the Company) on the Plan Payments and such other Total
Payments and any Federal, state and local income tax and Excise Tax upon the
payment provided for by this paragraph 5, shall be equal to the Plan Payments
and such other Total Payments. If any of such other Total Payments are subject
to the Excise Tax without regard to Plan Payments, a Gross-Up Payment shall be
made, but shall only be equal to the increase in the Excise Tax (plus any Federal,
state and local income tax and Excise Tax on such Gross-Up Payment) arising
solely as a result of Plan Payments, payments from the 1984 Plan and any other
plan or program of the Company not providing for Gross-Up payments.

 

For purpose of
determining whether any of the payments described above will be subject to the
Excise Tax and the amount of such Excise Tax, (i) any other payments or
benefits received or to be received by the Executive in connection with a
Change of Control of the Company, whether payable pursuant to the terms of this
Plan or any other plan, arrangement or agreement with the Company, its
successors, any person whose actions result in a Change of Control of the
Company or any corporation affiliated (or which, as a result of the completion
of a transaction causing a Change of Control, will become affiliated) with the
Company within the meaning of Section 1504 of the Code, shall be treated as “parachute
payments” within the meaning of Section 280G(b)(2) of the Code, and all “excess
parachute payments” within the meaning of Section 280G(b)(1) shall be treated
as subject to the Excise Tax, unless in the opinion of tax counsel selected by
the Company’s auditors and acceptable to the Participant the payments (in whole
or in part) do not constitute parachute payments, or such excess parachute
payments (in whole or in part) represent reasonable compensation for services
actually rendered within the meaning of Section 280G(b)(4) of the Code and are

 

8

 

in excess of the base amount within the meaning of Section 280G(b)(3)
of the Code, or are otherwise not subject to the Excise Tax, (ii) the amount of
the payments that shall be treated as subject to the Excise Tax shall be equal
to the amount of excess parachute payments within the meaning of Section
280G(b)(1) (after applying clause (i), above), and (iii) the value of any
non-cash benefits or any deferred payment or benefit shall be determined by the
Company’s auditors in accordance with the principles of Section 280G(d)(4) of
the Code. For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay Federal income taxes at the highest marginal
rate of Federal income taxation in the relevant calendar year and state and
local income taxes at the highest marginal rate of taxation in the state and
locality of the Participant’s residence for the relevant calendar year, net of
the maximum reduction in Federal income taxes which could be obtained from
deduction of such state and local taxes. In the event that the Excise Tax is
subsequently determined to be less than the amount taken into account hereunder
at the time of payment, the Participant shall repay to the Company at the time
that the amount of such reduction in Excise Tax is finally determined the portion
of the Gross-Up Payment attributable to such reduction (plus the portion of the
Gross-Up Payment attributable to the Excise Tax and Federal and state and local
income tax imposed on the Gross-Up Payment being repaid by the Participant if
such repayment results in a reduction in Excise Tax and/or a Federal and state
and local income tax deduction) plus interest on the amount of such repayment
at the rate provided in Section 1274(d) of the Code. In the event that the
Excise Tax is determined to exceed the amount taken into account hereunder at
the time of the Gross-Up Payment (including by reason of any payment the
existence or amount of which cannot be determined at the time of the Gross-Up
Payment), the Company shall make an additional Gross-Up Payment in respect to
such excess) at the time that the amount of such excess is finally determined.

 

6.             Successors.
(a)    Benefits under this Plan are personal to the
Participant and without the prior written consent of the Company shall not be
assignable by the Participant otherwise than by will or the laws of descent and
distribution. This Plan shall inure to the benefit of and be enforceable by the
Participant’s legal representatives.

 

(b)           This
Plan shall inure to the benefit of and be binding upon the Company and its
successors and assigns.

 

(c)           The
Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business

 

9

 

and/or assets of the Company to assume expressly and agree to perform
this Plan in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. As used in this
Plan, “Company” shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees
to perform this Plan by operation of law, or otherwise.

 

7.             Miscellaneous.
(a)    This Plan shall be governed by and construed in
accordance with the laws of the State of Indiana, without reference to
principles of conflict of laws. The captions of this Plan are not part of the
provisions hereof and shall have no force or effect. This Plan may not be
amended or modified to reduce any Participant’s benefits otherwise than with
the written consent of the Participant or the Participant’s successor or legal
representative.

 

(b)           The
invalidity or unenforceability of any provision of this Plan shall not affect
the validity or enforceability of any other provision of this Plan.

 

(c)           The
Company may withhold from any amounts payable under this Plan such Federal,
state, local or foreign taxes as shall be required to be withheld pursuant to
any applicable law or regulation.

 

(d)           The
Participant’s failure to insist upon strict compliance with any provision of
this Plan or the failure to assert any right the Participant may have
hereunder, including, without limitation, the right of the Participant to
terminate employment for Good Reason as defined in paragraph 1(l) of this Plan,
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Plan.

 

(e)           All
the foregoing severance and benefit arrangements shall be communicated to each
Participant in this Plan and shall be generally described in filings with the
Securities and Exchange Commission and to the shareholders of the Company, all
to the extent deemed necessary or desirable by the Company, in order that each
Participant shall be deemed to have continued his employment with the Company
hereafter in good faith reliance upon this Plan.

 

10EXHIBIT 10(r)

 

FIFTH AMENDMENT OF CUMMINS
INC.

SUPPLEMENTAL LIFE INSURANCE AND DEFERRED
INCOME PLAN

 

Cummins Inc. (“Company”) has adopted this Fifth Amendment of Cummins
Inc. Supplemental Life Insurance and Deferred Income Plan (“Plan”), effective
as of January 1, 2006.

 

BACKGROUND

 

A.            The Company adopted
the Plan, effective as of January 1, 1997, and it has amended the Plan on four
occasions since that time.

 

B.            The Company wishes to
amend the Plan further as provided herein, effective January 1, 2006, for Plan
participants who terminate employment on or after that date.

 

Therefore, the Company amends the Plan as follows, effective January 1,
2006, with respect to participants who terminate employment with the Company
and its related entities on or after that date: 

 

AMENDMENT

 

1. Section 1.10 is amended to read as follows:

 

“Average
Covered Compensation” means the average of Covered Compensation earned by an
Executive for the five consecutive years in the Executive’s ten years of
employment immediately preceding his or her termination of employment with the
Company during which his or her Covered Compensation is the highest.

 

2. Section  5.1 is
amended to read as follows:

 

An Executive
with at least 10 years of Service who terminates employment with the Company on
or after attainment of age 60 shall receive from the Trustee, beginning as of
the first day of the month following the Executive’s termination of employment,
in monthly installments, a Supplemental Life Annuity retirement benefit in an
annual amount equal to:

 

(a) 2% of the
Executive’s Average Covered Compensation times years of Service not exceeding
20 years; plus

 

(b) 1% of the
Executive’s Average Covered Compensation times a maximum of 10 years of Service
in excess of 20 years; plus

 

 

(c) In the
case of an Executive who is among the two most highly compensated Executives of
the Company at the time of termination of employment, an additional 10% of
Average Covered Compensation; minus

 

(d) The
Executive’s annual benefit, payable in monthly installments, in the form of a
life annuity form the Cash Balance Plan and from the Excess Benefit Plan, if
any.

 

3. Section 5.4
is amended to read as follows:

 

If an
Executive with at least 10 years of Service terminates employment with the
Company on or after age 55 but prior to attainment of age 60, the Executive
shall be entitled to receive early retirement benefits under the Plan equal to
the benefits otherwise payable under Section 5.1, reduced by 1/3
of 1% for each full month that benefits commence before the Executive’s 60th
birthday. No reduction in benefits shall be made, however, with respect to (i)
a person who was an Executive on December 31, 2005, whose total age and years
of Service on the date of termination of employment equals or exceeds 80, or
(ii) a participant in the Prior Program whose Service on the date of
termination of employment equals or exceeds 30 years.

 

To document
the Company’s adoption of this Fifth Amendment of Cummins Inc. Supplemental
Life Insurance and Deferred Income Plan, the undersigned duly authorized
officer of the Company has signed below on this 24th day of February,
2006.

 

	
   

  	
  CUMMINS INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jill E. Cook

  	
   

  
	
   

  	
   

  	
      Vice President –

  
	
   

  	
   

  	
      Human Resources

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00098-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00098-of-00352.parquet"}]]