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EXHIBIT 10 (CC)
EATON CORPORATION
2008 ANNUAL REPORT ON FORM 10-K
ITEM 15 (B)
EATON
CORPORATION
SUPPLEMENTAL EXECUTIVE STRATEGIC INCENTIVE PLAN
(Effective as of June 25, 2008)
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EATON CORPORATION
SUPPLEMENTAL EXECUTIVE STRATEGIC INCENTIVE PLAN
1. PURPOSE
The purpose of the Supplemental Executive
Strategic Incentive Plan (the
"Plan") is to promote the growth and
profitability of Eaton Corporation
(the "Company") through the granting of
incentives intended to motivate
executives of the Company to achieve
demanding long-term corporate
objectives and to attract and retain
executives of outstanding ability.
2. ADMINISTRATION
With respect to Plan participants who are
senior officers of the Company
(that is, those officers with at least
2,448 Hay Points), the Plan shall be
administered by the Compensation and
Organization Committee (the "C&O
Committee") of the Board of Directors of
the Company (the "Board"), except
as otherwise expressly provided herein.
With respect to Plan participants
other than senior officers of the Company,
the Plan shall be administered
by the Management Committee of the Company
(consisting of the Chairman and
Chief Executive Officer, Chief Human
Resources Officer and such other
officers as may be appointed to the
Management Committee from time to
time), except as otherwise expressly
provided herein. As used herein, the
term "Committee" means either the C&O
Committee or the Management
Committee, depending upon the type of
participant involved. Except as
otherwise expressly provided herein, with
respect to those participants for
which it has administrative
responsibility, the C&O Committee and the
Management Committee shall each have
complete authority to: (i) interpret
all provisions of the Plan consistent with
law; (ii) designate the
executives to participate under the Plan;
(iii) determine the incentive
targets and performance objectives
applicable to participants; (iv) adopt,
amend and rescind general and special
rules and regulations for the Plan's
administration; and (v) make all other
determinations necessary or
advisable for the administration of the
Plan.
3. ELIGIBILITY
Any executive of the Company designated by
the Committee in its sole
discretion shall be eligible to
participate in the Plan.
4. INCENTIVE TARGETS
(A) Establishment of Incentive
Amounts and Conversion to Phantom Common
Share
Units
Individual
Incentive Amounts for each participant with respect to each
Plan Award
Period (as defined below) shall be determined by the
Committee.
Incentive targets will be expressed in the form of Phantom
Common Share
Units which will be determined by the Committee by: (a)
first
establishing the Individual Incentive Amount in cash for each
participant
with respect to each Award Period and (b) then dividing
such
Individual Incentive Amount by the average of the mean prices
for
the
Company's common shares
2
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for the
first twenty (20) trading days of each Award Period. In all
cases, the
resulting Phantom Common Share Units shall be rounded up to
the nearest
50 whole units. For purposes of the Plan, "mean price"
shall be the
mean of the highest and lowest selling prices for Company
common
shares quoted on the New York Stock Exchange on the relevant
trading day.
Notwithstanding the foregoing provisions of this Section
4(A), the
Committee may, in its sole discretion, use a different
method for
establishing incentive targets for participants under the
Plan.
(B) Award Periods
Each Award
Period shall be the four-calendar year period commencing as
of the first
day of the calendar year in which the performance
objectives
are established for the Award Period as described in
Section
4(C). A new Award Period shall commence as of the first day of
each
calendar year, unless otherwise specified by the Committee.
(C) Establishment of Company
Performance Objectives
As soon as
practicable at the beginning of each Award Period,
threshold,
target, and maximum Company performance objectives for such
Award Period
shall be established by the Committee. Unless otherwise
determined
by the Committee in its sole discretion, performance
objectives
will be established using a CFROGC/EPS Growth Performance
Matrix which
shall use the Company's average cash flow return on gross
capital
("CFROGC") for such period along one axis and the Company's
cumulative
earnings per share ("EPS") for such period along the second
axis.
Notwithstanding the foregoing, after a Change in Control (as
hereinafter
defined), neither the Committee nor the Board shall have
the
authority to modify performance objectives in any manner which
could prove
detrimental to the interests of the Plan's participants.
(D) Determination of Payments
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