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ILLINOIS TOOL WORKS INC.
PHANTOM STOCK PLAN FOR NON-OFFICER DIRECTORS
The Plan set
forth herein shall be known as the “Non-Officer
Directors’ Phantom Stock Plan.” Illinois Tool Works
Inc. is hereinafter referred to as ITW.
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1.
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Eligibility
.
Each member of
ITW’s Board of Directors who is not an officer of ITW shall
be eligible to participate in the Plan and shall be known for the
purposes of this Plan as an “eligible
director.”
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2.
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Purpose
.
The purpose of the Plan
is to enable ITW to attract and retain as members of its Board of
Directors persons who are not officers of ITW, but whose experience
and judgment are a valuable asset to ITW. It is also intended to
provide for the equivalent of additional stock ownership to align
the interests of the non-officer (employee) directors with
those of the stockholders.
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3.
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Grant of Phantom Stock
Units . All eligible directors shall have
their phantom stock accounts credited with one thousand phantom
stock units, with each unit having a value at any time equal to the
current market value of a share of ITW Common Stock.
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4.
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Plan Administration
.
The Plan shall be
administered under the direction of the Corporate Secretary of ITW.
Each phantom stock account will be maintained by ITW Corporate
accounting, and annual statements will be issued reflecting current
account balances adjusted for dividend reinvestment and market
value changes.
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5.
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Dividends
.
Whenever ITW declares a
dividend on the ITW Common Stock, a dividend award shall be made to
all eligible directors as of the date of payment of the dividend.
The dividend award for an eligible director shall be determined by
multiplying the phantom stock units credited to the eligible
director’s account on the date of payment by the amount of
the dividend paid on the ITW Common Stock. The dividend award shall
be converted into phantom stock units by dividing the award by the
closing market price of a share of ITW Common Stock as of the
dividend payment date.
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6.
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Adjustments
.
In the event of a stock
dividend on the ITW Common Stock, or any split up or combination of
shares of the ITW Common Stock, or other change therein,
appropriate adjustment shall be made to the phantom stock units in
each eligible director’s phantom stock account so as to give
effect, to the extent practicable, to such change in ITW’s
capital structure.
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7.
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Distribution of Phantom Stock
Account . An eligible director will be
eligible for a cash distribution for his/her phantom stock account
at retirement, death or approved resignation. This distribution
will be in the form of a lump sum or annual installments over one
to ten years as elected by the eligible director at the time that
this Plan was implemented or upon appointment to the Board of
Directors for future participants. The distribution will take place
on the first day of the month following the date of retirement,
death or approved resignation. With respect to grants made prior to
January 1, 2005, any such election may be changed by the
eligible director, provided that such change is made no less than
twenty-four months prior to the first distribution to the director.
With respect to grants made on or after January 1, 2005, any
such election may be changed by the eligible director, provided
that (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 disabilit
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