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EXHIBIT 10 (I)
EATON CORPORATION
2007 ANNUAL REPORT ON FORM 10-K
ITEM 15 (B)
LIMITED EATON SERVICE
SUPPLEMENTAL RETIREMENT INCOME PLAN II
The
Limited Eaton Service Supplemental Retirement Income Plan II
(herein
referred to as the "Plan"), an unfunded, nonqualified deferred
compensation plan
adopted by Eaton Corporation (the "Company") on December 8, 2004,
for certain of
its executives, is set forth below as amended and restated
effective January 1,
2008, and such other dates as may be provided herein.
ARTICLE
I
PURPOSE OF THE PLAN
Upon
becoming employed by the Company, certain key executives may
have
foregone retirement benefits from their former employer and may not
be able to
earn adequate pension benefits from the Company. The Company
believes that it is
in the best interest of the Company to be able to attract and
retain such
mid-career executives. The purpose of the Plan is to provide each
such executive
with retirement income in an amount as set forth in Article IV, and
thereby
provide a total pension benefit that is comparable to the benefit
the executive
would have received if he or she had not agreed to the mid-career
change in
employment.
ARTICLE II
ELIGIBILITY
Any
executive of the Company designated by the Committee shall be
eligible
to participate under the Plan (a "Participant").
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ARTICLE III
DEFINITIONS
As
used in the Plan the following definitions shall apply:
"Average Final Annual Compensation." The Participant's Average
Final Annual
Compensation determined as if he or she is eligible to participate
under
Appendix A of the Pension Plan.
"Board." The Board of Directors of the Company.
"Cause." For purposes of this Plan, the Company shall have "Cause"
to
terminate the Participant's employment upon (i) the willful and
continued
failure by the Participant to substantially perform the
Participant's duties
with the Company (other than any such failure resulting from the
Participant's
incapacity due to physical or mental illness), after a demand for
substantial
performance is delivered to the Participant by the Board which
specifically
identifies the manner in which the Board believes that the
Participant has not
substantially performed the Participant's duties, or (ii) the
willful engaging
by the Participant in gross misconduct materially and demonstrably
injurious to
the Company. For purposes of this definition, no act, or failure to
act, on the
Participant's part shall be considered "willful" unless done, or
omitted to be
done, by the Participant not in good faith and without reasonable
belief that
the Participant's action or omission was in the best interest of
the Company.
Notwithstanding the foregoing, the Participant's employment shall
not be deemed
to have been terminated 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 to the Participant and an opportunity for the
Participant,
together with the Participant's counsel, to be heard before the
Board), finding
that in the good faith opinion of the Board the Participant was
guilty of
conduct set forth above in clauses (i) or (ii) of this definition
and specifying
the particulars thereof in detail.
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"Change in Control." A "Change in Control" shall be deemed to have
occurred
if (i) a tender offer shall be made and consummated for the
ownership of
securities of the Company representing 25 percent or more of the
combined voting
power of the Company's then outstanding voting securities, (ii) the
Company
shall be merged or consolidated with another corporation and as a
result of such
merger or consolidation less than 55 percent of the outstanding
voting
securities of the surviving or resulting corporation shall be owned
in the
aggregate by the former shareholders of the Company, other than
affiliates
(within the meaning of the Securities Exchange Act of 1934 (the
"Exchange Act"))
of any party to such merger or consolidation, as the same shall
have existed
immediately prior to such merger or consolidation, (iii) the
Company shall sell
substantially all of its assets to another corporation which is not
a wholly
owned subsidiary of the Company, (iv) any "person" (as such term is
used in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act) is or becomes
the beneficial
owner, directly or indirectly, of securities of the Company
representing 25
percent or more of the combined voting power of the Company's then
outstanding
securities; or (v) during any period of two (2) consecutive years,
individuals
who at the beginning of such period constitute the Board cease for
any reason to
constitute at least a majority thereof unless the election, or the
nomination
for election by the Company's shareholders, of each new director
was approved by
a vote of at least two-thirds of the directors then still in office
who were
directors at the beginning of the period. For purposes of the Plan,
ownership of
voting securities shall take into account and include ownership as
determined by
applying the provisions of Rule 13d-3(d)(1)(i) of the Exchange Act
(as then in
effect).
"Committee." The Compensation and Organization Committee of the
Board.
"Credited Service." The service credited to a Participant as
"Service"
under the Pension Plan.
"Disability." Any termination of employment which entitles the
Participant
to a disability benefit under the Pension Plan.
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"Good Reason." Any
termination of employment under the following
circumstances shall be for "Good Reason":
(i)
without the Participant's express written consent, the assignment
to
the
Participant of any duties inconsistent with the Participant's
positions, duties, responsibilities and status with the Company
immediately
prior to a Change in Control, or a change in the Participant's
reporting
responsibilities, titles or offices as in effect immediately prior
to a
Change in Control, or any removal of the Participant from or any
failure to
re-elect the Participant to any of such positions, except in
connection
with
the termination of the Participant's employment for Cause,
Disability
or
as a result of the Participant's death;
(ii)
a reduction by the Company in the Participant's base salary as
in
effect immediately prior to the Change in Control or as the same
may be
increased from time to time thereafter; or the failure by the
Company to
increase such base salary each year after a Change in Control by an
amount
which at least equals, on a percentage basis, the average annual
percentage
merit increase in the Participant's base salary during the five (5)
full
calendar years immediately preceding a Change in Control;
(iii) a failure by the Company to continue the Participant's
participation
in
the Plan, the Company's Executive Incentive Compensation Plan,
Deferred
Incentive Compensation Plan II, Executive Strategic Incentive
Plan,
Incentive Compensation Deferral Plan II, Excess Benefits Plan II
and
Supplemental Benefits Plan II, as each plan may be modified from
time to
time
but substantially in the form presently in effect (collectively,
the
"Plans"), on at least the basis as in effect immediately prior to
the
Change in Control or to pay Participant any amounts earned under
the Plans
in
accordance with the terms of the Plans.
(iv)
the relocation of the Company's principal executive offices to
a
location outside Cuyahoga County, Ohio, or any county adjoining
Cuyahoga
County, Ohio, or the Company's requiring the Participant to be
based
anywhere other than the Company's principal executive offices or
the
location where the Participant is based immediately
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prior to the Change in Control except for required travel on the
Company's
business to an extent substantially consistent with the
Participant's
business travel obligations in effect immediately prior to the
Change in
Control, or, in the event the Participant consents to any such
relocation
of
the Company's principal executive offices, the failure by the
Company to
pay
(or reimburse the Participant for) all reasonable moving
expenses
incurred by the Participant relating to a change of the
Participant's
principal residence in connection with such relocation and to
indemnify the
Participant against any loss (defined as the difference between the
actual
sale
price of such residence and the higher of (a) the Participant's
aggregate investment in such residence or (b) the fair market value
of such
residence as determined by any real estate appraiser designated by
the
Participant and reasonably satisfactory to the Company) realized in
the
sale
of the Participant's principal residence in connection with any
such
change of residence;
(v)
the failure by the Company to continue in effect any benefit or
compensation plan (including but not limited to the Plan), pension
plan,
life
insurance plan, health and accident plan or disability plan in
which
the
Participant is participating at the time of a Change in Control
(or
plans providing the Participant with substantially similar
benefits), the
taking of any action by the Company which would adversely affect
the
Participant's participation in or materially reduce the
Participant's
benefits under any of such plans or deprive the Participant of any
material
fringe or personal benefit enjoyed by the Participant at the time
of the
Change in Control, or the failure by the Company to provide the
Participant
with
the number of paid vacation days to which the Participant is
then
entitled on the basis of years of service with the Company in
accordance
with
the Company's normal vacation policy in effect immediately prior
to
the
Change in Control;
(vi)
the failure of the Company to obtain the agreement by any
successor
(whether direct or indirect, by purchase, merger, consolidation
or
otherwise) to all or substantially all of the assets of the
Company, by
agreement in form and substance satisfactory to Participant, to
expressly
assume this Plan and the obligations of the Company hereunder;
or
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(vii) any purported termination of the Participant's employment
which is
not
effected pursuant to a Notice of Termination satisfying the
requirements of a Notice of Termination as herein defined (and,
if
applicable, the definition of "Cause" as here
