Document:

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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.

 

 

     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.

 

 

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.

 

 

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.exv10wxmy

 

Exhibit 10(m)

TERMS OF THE OPTION GRANT

	 	 	 
	(a.)

	 	In the event of a stock dividend, stock split, reorganization or recapitalization,
appropriate adjustment will be made in the number of shares subject to the option and in the
option price per share.
	 
	 	 
	(b.)

	 	The option period shall be for 10 years from the date of grant on February 9, 2007.
Accordingly, no options under this grant may be exercised after the close of business in
Chicago on February 8, 2017. No purchase of shares may be made under this option during the
first year of the option period. During the second year of the option period, you shall have
the right to purchase 25% of the total number of optioned shares, and in each of the next
three years an additional 25% of the total number of shares optioned hereunder. Such rights
to exercise shall be cumulative and may be exercised in any succeeding year of the option
period up to the extent vested but not exercised in a previous year or years. On February 9,
2017, all rights under this agreement as to any shares covered by the option shall terminate.
	 
	 	 
	(c.)

	 	You shall have no voting, dividend or subscription rights except with respect to the shares
which have been issued to you following your exercise of part or all of the option. Your
rights under this option agreement may not be assigned or transferred, and during your
lifetime the option shall be exercisable only by you personally.
	 
	 	 
	(d.)

	 	If prior to February 8, 2017, you terminate employment with the Company by reason of
disability, as defined by the Company’s benefit plans, your option shall be fully vested and
exercisable not later than the earlier of five years after the date of termination due to
disability, or February 8, 2017. If you die while in the employ of the Company, or
(notwithstanding the previous sentence) after terminating by reason of disability, your option
shall be fully vested and exercisable by your estate not later than the earliest of: (i.) two
years after the date of death, or (ii.) five years after the date of termination due to
disability, or (iii.) February 8, 2017.
	 
	 	 
	(e.)

	 	If you retire (defined as term of employment with the Company after attaining age 62 and 10
years of service under the Company’s retirement plan) prior to February 8, 2017, your option
shall be fully vested and exercisable not later than the earlier of five years from the date
of your retirement or February 8, 2017. If you die after terminating employment by reason of
retirement, your option shall be exercisable by your estate not later than the earliest of:
	 

	 	(i.) two years after the date of death, or (ii.) five years after the date of retirement, or
(iii.) February 8, 2017.
	 
	 	 
	(f.)

	 	If you terminate your employment for any reason other than death, retirement or disability,
your options that were vested prior to termination and not previously exercised may be
exercised by you during the three-month period commencing on the date of your termination but
not later than February 8, 2017. If you die during this three-month period, the exercise
period will be extended to the earlier of two years from the date of death or February 8,
2017.
	 
	 	 
	(g.)

	 	Notwithstanding the foregoing, the Compensation Committee of the Board of Directors may, in
its sole discretion, deem this option to be immediately forfeited if you are terminated for
cause (as defined by the Committee), compete with the Company, or conduct yourself in a manner
adversely affecting the Company.
	 
	 	 
	(h.)

	 	The option is subject to the terms of the Illinois Tool Works Inc. 2006 Stock Incentive Plan.
Any inconsistencies shall be resolved in favor of the Plan.
	 
	 	 
	(i.)

	 	These options and the Plan should be construed in accordance with and governed by the laws of
the State of Illinois, United States of America.

The exercise of this option generally results in ordinary income being recognized for tax purposes
in an amount equal to the excess of the market price at the time of exercise over the option price.

	 	 	 	 	 	 	 
	 

	 	Received:
	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	(Optionee’s Signature)	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	(Printed Name)	 	 
	 
	 	 	 	 	 	 
	 

	 	Date:

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