Exhibit 10(h)
ILLINOIS TOOL WORKS INC.
DIRECTORS’ DEFERRED FEE PLAN
     The Illinois Tool Works Inc. Directors’ Deferred Fee Plan is established
effective May 5, 2006 (the “Plan”), as an amendment and restatement of, and
replacement by merger for, (i) the Illinois Tool Works Inc. Outside Directors’
Deferred Fee Plan, as established effective December 12, 1980 (the “Outside
Directors’ Deferred Fee Plan”), and (ii) the deferral provisions of the Illinois
Tool Works Inc. Non-Officer Directors’ Fee Conversion Plan, as approved by the
Board on February 19, 1999 and amended December 15, 2000 (the “Directors’ Fee
Conversion Plan”). The deferral provisions of the Directors’ Fee Conversion Plan
are hereby merged into the Plan. The non-deferral provisions of the Directors’
Fee Conversion Plan were merged into the Illinois Tool Works Inc. 2006 Stock
Incentive Plan (the “Stock Incentive Plan”) effective May 5, 2006.
     The Company has administered the Outside Directors’ Deferred Fee Plan and
the Non-Officer Directors’ Fee Conversion Plan in good faith compliance with
Code Section 409A and applicable regulations (“Code §409A”) during the 2005/2006
transition period. The Company intends for the Plan to comply with Code §409A
and to operate the Plan in good faith compliance with Code §409A during the
2006/2007 transition period and any extension thereof.
Article I — DEFINITIONS
     Section 1.1 “Accounts” mean the aggregate balance of a Director’s Share
Account and Cash Account.
     Section 1.2 “Beneficiary” means the person or persons designated by a
Director pursuant to Section 3.3.
     Section 1.3 “Board” means the Board of Directors of the Company.
     Section 1.4 “Cash Account” means the account maintained on the Company’s
books to which a Director’s Fee Deferrals are credited in the form of cash.
     Section 1.5 “Code” means the Internal Revenue Code of 1986, as amended.
     Section 1.6 “Common Stock” means the common stock, without par value, of
the Company.
     Section 1.7 “Company” means Illinois Tool Works Inc., a Delaware
corporation, and any successor thereto.
     Section 1.8 “Corporate Change” shall mean either a “Change in Ownership,”
“Change in Effective Control” or a “Change of Ownership of a Substantial Portion
of Assets,” as defined in Code §409A and summarized herein. A “Change in
Ownership” occurs on the date that any one person, or more than one person
acting as a group (as defined in Code § 409A), acquires ownership of stock of
the Company that, together with stock held by such person or group, constitutes
more than 50% of the total fair market value or total voting power of the stock
of the Company. A “Change in Effective Control” occurs on the date that either
(i) any one person, or more than one person acting as a group, acquires (or has
acquired during the 12-month period ending on the date of the most recent
acquisition by such person or persons) ownership of stock of the Company
possessing 35% or more of the total voting power of the stock of the Company; or
(ii) a majority of members of the Board is replaced during any 12-month period
by directors whose appointment or election is not endorsed by a majority of the
members of the Board prior to the date of the appointment or election. A “Change
of Ownership of a Substantial Portion of Assets” occurs on the date that any one
person, or more than one person acting as a group, acquires (or has acquired
during the 12-month period ending on the date of the most recent acquisition by
such person or persons) assets from the Company that have a total gross fair
market value equal to or more than 40% of the total gross fair market value of
all of the assets of the Company immediately prior to such acquisition or
acquisitions.
     Section 1.9 “Deferral” means the amounts deducted from a Director’s Fees
pursuant to his/her Deferral Election.

 

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     Section 1.10 “Deferral Election” means a Director’s election to defer
receipt of a certain portion of his/her Fees, which causes an equivalent
reduction in his/her Fee payments.
     Section 1.11 “Director” means any member of the Board who is not an
employee of the Company.
     Section 1.12 “Disability” means that the Director’s Separation from Service
because he/she (i) is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period
of not less than 12 months, or (ii) is, by reason of any medically determinable
physical or mental impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than 12 months, receiving
income replacement benefits for a period of not less than three months under a
Company-sponsored plan.
     Section 1.13 “Fair Market Value” means the average of the highest and
lowest price at which Common Stock was traded on the relevant date, as reported
in the “NYSE-Composite Transactions” section of the Midwest Edition of The Wall
Street Journal, or, if no sales of Common Stock were reported for that date, on
the most recent preceding date on which Common Stock was traded.
     Section 1.14 “Fees” means the annual retainer, chair and meeting fees paid
by the Company to a Director.
     Section 1.15 “Separation from Service” means a Director’s resignation,
retirement or cessation of services with the Company for any other reason.
     Section 1.16 “Share Account” means the account maintained on the Company’s
books to which a Director’s Fee Deferrals are credited in the form of Share
Units.
     Section 1.17 “Share Unit” means a unit, the value of which is equivalent to
the Fair Market Value of a share of Common Stock.
Article II — DEFERRAL ELECTIONS
     Section 2.1 Deferral Elections Generally. Each Director shall be eligible
to participate in the Plan. In order to participate, a Director must submit a
Deferral Election (using a form approved by the Company) to the Company’s
Secretary prior to the first day of the calendar year in which the Director’s
Fees would be paid. The Director’s Deferral Election shall be effective and
irrevocable with respect to Fees payable to such Director for the calendar year
following the calendar year in which such Deferral Election is made. The
Deferral Election may also be made effective (by so specifying in the Deferral
Election) with respect to subsequent calendar years; provided, however, that the
Deferral Election with respect to any calendar year may be changed or revoked by
filing a new Deferral Election prior to the beginning of such year. With respect
to the calendar year in which a Director first becomes eligible to participate,
a Deferral Election may be made as to Fees payable subsequent to the Deferral
Election within 30 days after the date the Director becomes eligible to
participate.
     Section 2.2 Deferral to Cash Account or Share Account. Each Director shall
specify in his/her Deferral Election whether Deferrals are to be credited to a
Cash Account and/or Share Account established by Company on its books in his/her
name. Fee Deferrals shall be credited to the Director’s Cash Account and/or
Share Account as of the date the deferred Fees would have otherwise been paid to
the Director. Any Deferrals that a Director elects to be credited to his/her
Share Account shall be in the form of Share Units, the number of which shall be
determined by dividing the dollar amount of the Fees subject to the election by
the Fair Market Value on the date the Fees would have otherwise been paid to the
Director in cash.
     Section 2.3 Adjustments to Accounts. A Director’s or Beneficiary’s Cash
Account shall be credited with interest quarterly from the date amounts are
credited thereto through the date that the Account has been fully paid at the
rate equivalent to the rate on the most recently issued 90 day Treasury Bills at
the beginning of each calendar quarter. A Director’s or Beneficiary’s Share
Account shall receive additional credits for cash dividends and shall be
adjusted for stock dividends, splits, combinations or other changes in the
Common Stock. Cash dividends shall be converted into additional Share Units
determined by dividing (i) the cash dividend amount that the Director would have
receive had he/she owned an equivalent number of shares of Common Stock, by
(ii) the Fair Market Value on the date on which the dividend is paid to the
Company’s stockholders.

 

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Article III — PAYMENT OF ACCOUNTS
     Section 3.1 Payment. Upon a Director’s Separation from Service for any
reason other than death, payment to the Director of his/her Accounts shall be
made or commence within 60 days following Separation from Service.
     Section 3.2 Payment Election.

  (a)   Initial Election. A Director’s Cash Account shall be paid in a lump-sum
within 60 days after his/her Separation from Service; provided that the Director
may elect (using a form approved by the Company) at the time of his/her initial
Deferral Election to have his/her Cash Account paid in monthly installments over
two to 20 years.     (b)   Change to Prior Election. A Director may elect (using
a form approved by the Company) to change a form of payment previously elected
(or if the Director had made no election, then to elect a form other than the
lump-sum), provided (i) such new election does not take effect until at least
12 months after the date the election is made, and (ii) if commencement of
payment is not related to the Director’s Disability or death, the first payment
with respect to which such new election is effective is deferred for a period of
five years from the date such payment would otherwise have commenced.
Notwithstanding the foregoing, during 2006 and 2007, a Director may elect to
change the payment form without meeting the foregoing requirements provided that
no Director whose payment commencement date occurs within 2006 may make or
change a payment election during 2006 and no Director whose payment commencement
date occurs within 2007 may make or change a payment election during 2007.    
(c)   Payment of Share Accounts. A Director’s Share Account, if any, shall be
paid in a single lump-sum within 60 days following the Director’s Separation
from Service in the form of shares of Common Stock, which shall be issued to the
Director or his/her Beneficiary pursuant to the Stock Incentive Plan. The number
of shares of Common Stock to be issued to the Director or his/her Beneficiary
shall be equal to the number of Share Units credited to the Director’s Share
Account at such time, with any fractional Share Unit paid in cash based on
current Fair Market Value.

     Section 3.3 Payment to Beneficiary. If a Director dies prior to the
commencement or completion of payments of his/her Cash Account, then such
Account shall be paid (or continue to be paid if payments had previously
commenced) within 60 days of the date of death to his/her Beneficiary
(i) pursuant to the applicable payment election made by the Director or (ii) in
a lump-sum if an effective payment election does not exist. If a Director dies
prior to payment of his/her Share Account, if any, then such Account shall be
paid within 60 days of the date of death to his/her Beneficiary pursuant to
Section 3.2(c).
Each current or former Director who has a Cash Account or Share Account may
designate (using a form approved by the Company) a Beneficiary or Beneficiaries
to whom his/her Accounts shall be paid in the event of death. Each designation
will revoke all prior designations by the Director and will be effective only
when filed during his/her lifetime by the Director with the Company’s Secretary.
If the Director shall have failed to name a Beneficiary, or if the named
Beneficiary dies before receiving payment of the entire balance in such
Director’s Accounts, the Committee may in its discretion make payment directly
to the spouse or any one or more or all of the next of kin of the Director or to
the legal representative of his/her estate.
     Section 3.4 Small Benefits. Notwithstanding anything in this Article III to
the contrary, if the aggregate value of a Director’s Accounts is $10,000 or less
on the Director’s Separation from Service or death, such value shall be paid in
a lump-sum to the Director or his/her Beneficiary in full settlement of his/her
rights under this Plan.
     Section 3.5 Domestic Relations Order. If a court order is issued to the
Company that is intended to divide a Director’s Accounts between the Director
and his/her spouse, such order shall be applied by the Company if it clearly
specifies the manner for determining a former spouse’s share of the Director’s
Accounts, and it does not provide for payments to the former spouse prior to the
time the Director or his/her Beneficiary is eligible for payments. Payments
pursuant to such an order shall be made only to the extent that payment of the
Director’s Accounts has commenced and shall reduce the Director’s Accounts.

 

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Article IV — AMENDMENT AND TERMINATION
     Section 4.1 Amendment and Termination. The Board may amend or terminate the
Plan at any time. No such amendment or termination may decrease the balance of a
Director’s or Beneficiary’s Accounts. In the event of Plan termination, each
Director’s or Beneficiary’s Accounts shall be paid to him/her as required by
Article III hereof, or the Accounts may be paid in a lump-sum provided (i) the
Company terminates all non-qualified deferred compensation arrangements of the
same type at the same time that this Plan is terminated; (ii) the Company makes
no payments to Directors and Beneficiaries for 12 months but makes all payments
within 24 months; and (iii) the Company adopts no new non-qualified deferred
compensation arrangement of the same type for five years.
     Section 4.2 Corporate Change. Upon a Corporate Change, the Board may
terminate the Plan, and in such event each current or former Director and each
Beneficiary shall immediately receive a lump-sum payment of his/her Accounts.
The Share Units in a Director’s Share Account shall be paid in cash, the amount
to be determined by multiplying the number of Share Units credited to his/her
Share Account on the date of the Corporate Change by the Fair Market Value on
such Date.
Article V — MISCELLANEOUS
     Section 5.1 Administration. The Company, which shall administer the Plan,
shall have the power and duty to maintain records concerning the Plan; to
construe and interpret the Plan; and to authorize and direct all Plan payments.
Any payment made in accordance with Plan provisions shall be in complete
discharge of the Company’s obligation to make such payment.
     Section 5.2 Service on the Board. Nothing in the Plan shall be construed as
conferring a right on any person to be nominated for reelection to the Board or
to be reelected to the Board.
     Section 5.3 No Right to Company Assets. Neither the Director nor any other
person shall acquire by reason of the Plan any right in or title to any assets,
funds or property of the Company. Any payments hereunder shall be paid from the
general assets of the Company. The Director shall have only a contractual right
to the amounts, if any, payable hereunder unsecured by any asset of the Company.
     Section 5.4 Non-Assignability. Except as provided in Section 3.5, neither
the Director nor any other person shall have any voluntary or involuntary right
to commute, sell, assign, pledge, anticipate, mortgage or otherwise encumber,
transfer, hypothecate or convey in advance of actual receipt the amounts, if
any, payable hereunder, or any part thereof, which are expressly declared to be
unassignable and non-transferable. No part of the amounts payable shall be,
prior to actual payment, subject to the payment of any debts, judgments, alimony
or separate maintenance owed by the Director or any other person, or be
transferable by operation of law in the event of the Director’s or any other
person’s bankruptcy or insolvency.
     Section 5.5 Incapacity of Recipient. If a current or former Director or a
Beneficiary is deemed by the Company to be incapable of personally receiving any
payments under the Plan, then, unless and until claim therefor shall have been
made by a duly appointed guardian or other legal representative of such person,
the Company may provide for such payment or any part thereof to be made to any
other person or institution providing for the care and maintenance of such
person. Any such payment shall be for the account of such Director or
Beneficiary and shall be a complete discharge of any liability of the Company
and the Plan therefor.
     Section 5.6 Governing Laws. The Plan shall be construed and administered
according to the laws of the State of Illinois.