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                                                                  Exhibit 10 (w)

                                Eaton Corporation
                        2006 Annual Report on Form 10-K
                                   Item 15 (b)

                                EATON CORPORATION

                      EXECUTIVE STRATEGIC INCENTIVE PLAN I

                 (Originally Effective as of January 1, 1991 and

            Amended and Restated as of June 21, 1994, July 25, 1995,

         April 21, 1998, April 1, 1999, January 1, 2001 and January 23,

                                      2007)

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                                EATON CORPORATION

                      EXECUTIVE STRATEGIC INCENTIVE PLAN I

1.    PURPOSE

      The purpose of the Executive Strategic Incentive Plan I (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

      Except as otherwise expressly provided herein, the Plan shall be
      administered by the Compensation and Organization Committee (the
      "Committee") of the Company's Board of Directors (the "Board") which shall
      consist of at least three directors of the Company selected by the Board.

      Except as otherwise expressly provided herein, the Committee shall 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. With respect to Award Periods beginning on or after
            January 1, 1998, participant incentive targets will be expressed in
            the form of Phantom Common Share Units which will be determined by
            the Committee by: (a) first establishing

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            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 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 List of Composite Transactions 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. For Award
            Periods commencing on or after January 1, 1998, 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. Within sixty (60) days after the performance
            objectives have been established by the Committee, each participant
            will be provided with written notice of his or her established
            objectives. In its sole discretion, the Committee may modify
            previously established performance objectives due to any change in
            conditions, the occurrence of any events or other factors which make
            such objectives unsuitable. 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

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            prove detrimental to the interests of the Plan's participants.

     (D)   Determination of Payments

            For each Award Period, payments ranging from 50% to 200% of the
            Phantom Common Share Units credited under Section 4(A) will be
            determined by the Committee for the attainment of performance
            objectives between either threshold and target or target and
            maximum.

            For Award Periods beginning on or after January 1, 1998, Final
            Individual Phantom Common Share Unit Awards shall be determined by
            the Committee as promptly as practicable after the completion of the
            Award Period: (a) determining the CFROGC/EPS Growth Matrix
            Performance Percentage applicable for the Award Period (equal to (i)
            50% upon attainment of the threshold performance objective; (ii)
            100% upon attainment of the target performance objective; and (iii)
            200% upon attainment of the maximum performance; or the applicable
            percentage for performance between threshold and target or target
            and maximum); (b) multiplying such percentage by the number of
            Performance Share Units credited to the participant and (c) further
            multiplying the result by an Individual Performance Rating which
            will be a whole percentage between zero and 150% established by the
            Committee in its sole discretion after considering the
            recommendations of Company management.

            The Final Individual Phantom Common Share Unit Award shall be
            converted to cash at a market value of Company common shares as
            determined by the Committee based on the average of the mean prices
            for the Company's common shares for the final twenty (20) trading
            days of the Award Period), and distributed to the participate within
            ninety (90) days, unless the participant has made an irrevocable
            election to defer all or part of the amount of his or her award
            pursuant to any long term incentive compensation deferral plan
            adopted by the Committee or the Company.

            Notwithstanding any provision in this Section 4(D)to the contrary,
            the amount of the cash award with respect to the Chairman and Chief
            Executive Officer for the 2003-2006 Award Period Plan shall be
            limited to the amount of his award for the 2002-2005 Award Period.

      5.    PRORATA PAYMENTS

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            A participant must be employed by the Company or one of its
            subsidiaries at the end of an Award Period in order to be entitled
            to a payment in respect to such Award Period; provided, however,
            that a payment, prorated for the participant's length of service
            during the Award Period, may be authorized by the Committee, in its
            sole discretion, in the event the employment of a participant
            terminates before the end of an Award Period due to death, permanent
            disability, normal or early retirement, closure or divestiture of an
            Eaton facility or any other reason. Notwithstanding the foregoing,
            upon any termination of the Plan by the Committee during the term of
            any Award Period, payments to all participants will be made,
            prorated for each participant's length of service during the Award
            Period prior to the date of Plan termination.

      6.    OTHER PROVISIONS

                  (A)   Adjustments upon Certain Changes

                        In the event of changes to the structure or corporate
                        organization of the Company's businesses which affect
                        the participants and/or the performance prospects of the
                        Company, the Committee may make appropriate adjustments
                        to individual participant Incentive Targets or to the
                        established performance objectives for incomplete Award
                        Periods. Adjustments under this Section 6 shall be made
                        by the Committee, whose determination as to what
                        adjustments shall be made, and the extent thereof, shall
                        be final, binding and conclusive. Notwithstanding the
                        foregoing, after a Change in Control, neither the
                        Committee nor the Board shall have the authority to
                        change established Performance Objectives in any manner
                        which could prove detrimental to the interests of the
                        participant.

                  (B)   Change in Control Defined

                        For purposes of the Plan, a Change in Control shall be
                        deemed to have occurred if:

                      (i)     a tender offer shall be made and consummated for
                              the ownership of 25% or more of the outstanding
                              voting securities of the Company,

                      (ii)    the Company shall be merged or consolidated with
                              another corporation and as a result of such merger
                              or consolidation less than 75% of the outstanding
                              voting securities of the surviving or resulting
                              corporation shall be owned in the aggregate by the
                              former shareholders of the Company as the same

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                              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)    a "person" within the meaning of Section 3(a)(9)
                              or of Section 13(d)(3) of the Securities Exchange
                              Act of 1934 (as in effect on the effective date of
                              the Plan) shall acquire 25% or more of the
                              outstanding voting securities of the Company
                              (whether directly, indirectly, beneficially or of
                              record). For purposes of the Plan, ownership of
                              voting securities shall take into account and
                              shall include ownership as determined by applying
                              the provisions of Rule 13d-3(d)(1)(I) under the
                              Securities Exchange Act of 1934 (as in effect on
                              the effective date of the Plan), or

                      (v)     during any period of two 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 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.

                      (C) Non-Transferability

                          No right to payment under the Plan shall be subject to
                          debts, contract liabilities, engagements or torts of
                          the participant, nor to transfer, anticipation,
                          alienation, sale, assignment, pledge or encumbrance by
                          the participant except by will or the law of descent
                          and distribution or pursuant to a qualified domestic
                          relations order.

                      (D) Compliance with Law and Approval of Regulatory Bodies

                          No payment shall be made under the Plan except in
                          compliance with all applicable federal and state laws
                          and regulations including, without limitation,
                          compliance with tax requirements.

                      (E) No Right to Employment

                          Neither the adoption of the Plan nor its operation,
                          nor any document describing or referring to the Plan,
                          or any part thereof, shall confer upon any participant

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            under the Plan any right to continue in the employ of the Company or
            any subsidiary, or shall in any way affect the right and power of
            the Company or any subsidiary to terminate the employment of any
            participant under the Plan at any time with or without assigning a
            reason therefore, to the same extent as the Company might have done
            if the Plan had not been adopted.

      (F)   Interpretation of the Plan

            Headings are given to the sections of the Plan solely as a
            convenience to facilitate reference; such headings, numbering and
            paragraphing shall not in any case be deemed in any way material or
            relevant to the construction of the Plan or any provisions thereof.
            The use of the masculine gender shall also include within its
            meaning the feminine. The use of the singular shall also include
            within its meaning the plural and vice versa.

      (G)   Amendment and Termination

            The Committee may at any time suspend, amend or terminate the Plan.
            Notwithstanding the foregoing, upon the occurrence of a Change in
            Control, no amendment, suspension 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.

      (H)   Effective Dates of the Plan

            The Plan was adopted by the Board on April 24, 1991 but the
            effective date of the Plan shall be January 1, 1991. The Plan was
            amended and restated as of June 21, 1994, July 25, 1995, April 21,
            1998, April 1, 1999 and January 1, 2001 (which includes changes
            which affect Awards granted on or after January 1, 1998).

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APPROVAL AND ADOPTION

The Eaton Corporation EXECUTIVE STRATEGIC INCENTIVE PLAN I, in the form attached
hereto, is hereby approved and adopted.

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