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By-laws - ILLINOIS TOOL WORKS INC - 3-30-1999

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By-laws - ILLINOIS TOOL WORKS INC - 3-30-1999 Powered By Docstoc
					EXHIBIT 3(b) BY-LAWS OF ILLINOIS TOOL WORKS INC. ARTICLE I OFFICES SECTION 1. REGISTERED OFFICE. The registered office shall be in the City of Wilmington, County of New Castle, State of Delaware. SECTION 2. OTHER OFFICES. The corporation may also have offices in Chicago, Illinois, and offices at such other places as the Board of Directors or officers may from time to time determine. ARTICLE II STOCKHOLDERS SECTION 1. ANNUAL MEETING. The annual meeting of the stockholders shall be in the month of April or May of each year. The place, date and time of the meeting shall be fixed by the Board of Directors and stated in the notice of the meeting. SECTION 2. SPECIAL MEETINGS. Special meetings of the stockholders may be called by the chairman or by a majority of the Board of Directors. SECTION 3. PLACE OF MEETING. The Board of Directors may designate any place, either within or without Delaware, as the place of meeting for any meeting of the stockholders (annual or special) called by the Board of Directors. If a special meeting is otherwise called, the place of meeting shall be in Chicago, Illinois as designated in the notice. SECTION 4. NOTICE OF MEETINGS. Written or printed notice stating the place, day and hour of the meeting shall be delivered either personally or by mail, by or at the direction of the chairman or persons calling the meeting to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mails in a sealed envelope addressed to the stockholder at his address as it appears on the records of the corporation, with postage thereon prepaid. SECTION 5. VOTING OF SHARES BY CERTAIN HOLDERS. Shares of stock standing in the name of another corporation, domestic or foreign, may be voted by such

officer, agent or proxy as the by-laws of such corporation may prescribe, or, in the absence of such provision, as the Board of Directors of such corporation may determine. Shares of stock standing in the name of a deceased person may be voted by his administrator or executor, either in person or by proxy. Persons holding stock in a fiduciary capacity shall be entitled to vote the shares so held. Persons whose stock is pledged shall be entitled to vote, unless in the transfer by the pledgor on the books of the corporation he has expressly empowered the pledgee to vote thereon, in which case only the pledgee, or his proxy, may represent such stock and vote thereon. Shares of stock standing in the name of a receiver may be voted by such receiver, and shares of stock held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority so to do be contained in an appropriate order of the court by which such receiver was appointed.

officer, agent or proxy as the by-laws of such corporation may prescribe, or, in the absence of such provision, as the Board of Directors of such corporation may determine. Shares of stock standing in the name of a deceased person may be voted by his administrator or executor, either in person or by proxy. Persons holding stock in a fiduciary capacity shall be entitled to vote the shares so held. Persons whose stock is pledged shall be entitled to vote, unless in the transfer by the pledgor on the books of the corporation he has expressly empowered the pledgee to vote thereon, in which case only the pledgee, or his proxy, may represent such stock and vote thereon. Shares of stock standing in the name of a receiver may be voted by such receiver, and shares of stock held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority so to do be contained in an appropriate order of the court by which such receiver was appointed. SECTION 6. FIXING OF RECORD DATE. Unless any statute requires otherwise, for the purpose of determining (a) stockholders entitled to notice of or to vote at any meeting of stockholders, or (b) stockholders entitled to receive payment of any dividend, or (c) stockholders, with respect to any lawful action, the Board of Directors may fix in advance a date as the record date for any such determination of stockholders, such date in any case to be not more than sixty days and, in case of a meeting of stockholders, not less than ten days. If no record date is fixed: (1) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; (2) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 7. QUORUM. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute, by the Certificate of Incorporation or by these by-laws. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time until a quorum shall be present or represented. No notice other than an announcement at the meeting need be given unless the adjournment is for more than thirty days or a new record date is to be fixed for the adjourned meeting. At such adjourned meeting at which a quorum shall be present or represented, any business -2-

may be transacted which might have been transacted at the meeting as originally notified. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the Certificate of Incorporation or of these by-laws, a different vote is required in which case such express provision shall govern and control the decision of such question. SECTION 8. PROXIES. At all meetings of stockholders, a stockholder may vote by proxy executed in writing by the stockholder or by his duly authorized attorney-in-fact. Such proxy shall be filed with the secretary of the corporation before or at the time of the meeting. Proxies shall be valid only with respect to the meeting or meetings and any adjournment thereof, for which they are given. SECTION 9. VOTING. Each stockholder shall have one vote in person or by proxy for each share of stock having voting power registered in his name on the books of the corporation at the record date. SECTION 10. STOCKHOLDER NOMINATIONS FOR DIRECTORS. Any stockholder entitled to vote in the election of directors may nominate one or more persons for election as directors, provided written notice of such stockholder's nomination has been received by the Secretary of the Company not later than (i) the close of

may be transacted which might have been transacted at the meeting as originally notified. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the Certificate of Incorporation or of these by-laws, a different vote is required in which case such express provision shall govern and control the decision of such question. SECTION 8. PROXIES. At all meetings of stockholders, a stockholder may vote by proxy executed in writing by the stockholder or by his duly authorized attorney-in-fact. Such proxy shall be filed with the secretary of the corporation before or at the time of the meeting. Proxies shall be valid only with respect to the meeting or meetings and any adjournment thereof, for which they are given. SECTION 9. VOTING. Each stockholder shall have one vote in person or by proxy for each share of stock having voting power registered in his name on the books of the corporation at the record date. SECTION 10. STOCKHOLDER NOMINATIONS FOR DIRECTORS. Any stockholder entitled to vote in the election of directors may nominate one or more persons for election as directors, provided written notice of such stockholder's nomination has been received by the Secretary of the Company not later than (i) the close of business on the last business day of December prior to the annual meeting of stockholders in April or May, or (ii) the close of business on the tenth day following the date on which notice of a special meeting of stockholders is first given to stockholders for an election of directors to be held at such meeting. Such notice must contain: (a) the name and address of the stockholder who intends to make the nomination; (b) the name, age, and business and residential addresses of each person to be nominated; (c) the principal occupation or employment of each nominee; (d) the number of shares of capital stock of the corporation beneficially owned by each nominee; (e) a statement that the nominee is willing to be nominated and serve as a director; and (f) such other information regarding each nominee as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had the Board of Directors nominated such nominee. Nothing in this Section shall preclude the Board of Directors or the Nominating Committee either from making nominations for the election of directors or from excluding the person nominated by a stockholder from the slate of directors presented to the meeting. -3-

SECTION 11. ELECTION OF DIRECTORS. Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at a meeting of stockholders and entitled to voted on the election of directors. ARTICLE III DIRECTORS SECTION 1. GENERAL POWERS. The business and affairs of the corporation shall be managed by its Board of Directors. SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of Directors of the corporation is established at ten. Each Director shall hold office for the term for which such Director is elected or until a successor shall have been chosen and shall have qualified or until such Director's earlier death, resignation, retirement, disqualification or removal. SECTION 3. REGULAR MEETING. A regular meeting of the Board of Directors shall be held without other notice than this by-law, immediately after, and at the same place as, the annual meeting of stockholders. The Board of Directors may provide, by resolution, the time and place, either within or without Delaware, for the holding of additional regular meetings without other notice than such resolution.

SECTION 11. ELECTION OF DIRECTORS. Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at a meeting of stockholders and entitled to voted on the election of directors. ARTICLE III DIRECTORS SECTION 1. GENERAL POWERS. The business and affairs of the corporation shall be managed by its Board of Directors. SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of Directors of the corporation is established at ten. Each Director shall hold office for the term for which such Director is elected or until a successor shall have been chosen and shall have qualified or until such Director's earlier death, resignation, retirement, disqualification or removal. SECTION 3. REGULAR MEETING. A regular meeting of the Board of Directors shall be held without other notice than this by-law, immediately after, and at the same place as, the annual meeting of stockholders. The Board of Directors may provide, by resolution, the time and place, either within or without Delaware, for the holding of additional regular meetings without other notice than such resolution. SECTION 4. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by or at the request of the chairman or any two directors. The person or persons authorized to call special meetings of the Board of Directors may fix any place, either within or without Delaware, as the place for holding any special meeting of the Board of Directors called by them. SECTION 5. NOTICE. Notice of any special meeting shall be given at least two days previously thereto by written notice delivered personally, by mail or telegram, to each Director at his business address or at such other address as he shall have previously requested in writing. If mailed, such notice shall be deemed to be delivered two days after being deposited in the United States mails in a sealed envelope so addressed, with postage thereon prepaid. If notice is given by telegram, such notice shall be deemed to be delivered when the telegram is delivered to the telegraph company. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting, unless otherwise required by law. SECTION 6. QUORUM. A majority of the Board of Directors shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, provided that if less than a majority of the Directors are present at said meeting, a -4-

majority of the Directors present may adjourn the meeting from time to time without further notice. The act of the majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors unless a greater number is required by the Certificate of Incorporation or these by-laws. SECTION 7. INTERESTED DIRECTORS. Except as may otherwise be provided in the Certificate of Incorporation, no contract or transaction between the corporation and one or more of its Directors or officers, or between the corporation and any other corporation, partnership, association, or other organization in which one or more of its Directors or officers are Directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the Director or officer is present at or participates in the meeting of the Board or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if: (a) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested Directors, even though the disinterested Directors be less than a quorum; or

majority of the Directors present may adjourn the meeting from time to time without further notice. The act of the majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors unless a greater number is required by the Certificate of Incorporation or these by-laws. SECTION 7. INTERESTED DIRECTORS. Except as may otherwise be provided in the Certificate of Incorporation, no contract or transaction between the corporation and one or more of its Directors or officers, or between the corporation and any other corporation, partnership, association, or other organization in which one or more of its Directors or officers are Directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the Director or officer is present at or participates in the meeting of the Board or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if: (a) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested Directors, even though the disinterested Directors be less than a quorum; or (b) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by the vote of the stockholders; or (c) The contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof, or the stockholders. Common or interested Directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. SECTION 8. VACANCIES. If vacancies occur in the Board of Directors caused by death, resignation, retirement, disqualification or removal from office of any Director or Directors or otherwise, or if any new Directorship is created by any increase in the authorized number of Directors, a majority of the Directors then in office, though less than a quorum, may choose a successor or successors, or fill the newly created Directorship and the Directors so chosen shall hold office until the next annual election of Directors and until their successors shall be duly elected and qualified, unless sooner displaced. -5-

SECTION 9. COMMITTEES. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the Directors of the corporation. (a) The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member, at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the certificate of incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the by-laws of the corporation; and, unless the resolution or the certificate of incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required.

SECTION 9. COMMITTEES. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the Directors of the corporation. (a) The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member, at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the certificate of incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the by-laws of the corporation; and, unless the resolution or the certificate of incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required. (b) EXECUTIVE COMMITTEE. The Board of Directors, by resolution adopted by a majority of the whole Board, may designate two or more Directors to constitute an Executive Committee and one or more Directors as alternates thereof. Subject to the limitations provided in these by-laws and such further limitation as might be required by law or by the Certificate of Incorporation or by further resolution of the Board of Directors, the Executive Committee may, during intervals between meetings of the Board of Directors, exercise the powers of the Board of Directors in the management of the business and affairs of the corporation (including the corporation's dealings with its foreign subsidiaries, affiliates, and licensees) and may authorize the seal of the corporation to be affixed to all papers which may require it. The Committee shall not be empowered to take action with respect to: issuing bonds, debentures; increasing or reducing the capital of the corporation; authorizing commitments and expenditures in excess of the total amount or amounts provided in the capital budgets approved or otherwise authorized by -6-

the Board of Directors; borrowing of monies, except within limits expressly approved by the Board of Directors; electing officers; fixing the compensation of officers; establishment of stock option plans, profit sharing or similar types of compensation plans, filling vacancies or newly-created directorships on the Board of Directors; removing officers or directors of the corporation; dissolution, or any other action specifically reserved to the Board of Directors including all matters requiring the approval of stockholders. The Committee may also from time to time formulate and recommend to the Board for approval general policies regarding management of the business and affairs of the corporation. The designation of the Committee and the delegation thereto of authority shall not operate to relieve the Board of Directors or any member thereof of any responsibility imposed upon it or him by operation of law. The secretary of the corporation (or in his absence a person designated by the Executive Committee) shall act as secretary at all meetings of the Executive Committee. A majority of the Committee, from time to time, shall constitute a quorum for the transaction of business and the act of a majority of the Directors present at a meeting in which a quorum is present shall be the act of the Committee, provided that in the absence or disqualification of any member of the Committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Regular meetings of the Committee may be held without notice at such times and at such places as shall be fixed by resolution adopted by a majority of the Committee. Special meetings may be called by any member of the Committee on twenty-four hours' prior written or telegraphic notice. (c) COMPENSATION COMMITTEE. The Board of Directors, by resolution adopted by a majority of the whole Board, may designate not less than two Directors to constitute a Compensation Committee and one or

the Board of Directors; borrowing of monies, except within limits expressly approved by the Board of Directors; electing officers; fixing the compensation of officers; establishment of stock option plans, profit sharing or similar types of compensation plans, filling vacancies or newly-created directorships on the Board of Directors; removing officers or directors of the corporation; dissolution, or any other action specifically reserved to the Board of Directors including all matters requiring the approval of stockholders. The Committee may also from time to time formulate and recommend to the Board for approval general policies regarding management of the business and affairs of the corporation. The designation of the Committee and the delegation thereto of authority shall not operate to relieve the Board of Directors or any member thereof of any responsibility imposed upon it or him by operation of law. The secretary of the corporation (or in his absence a person designated by the Executive Committee) shall act as secretary at all meetings of the Executive Committee. A majority of the Committee, from time to time, shall constitute a quorum for the transaction of business and the act of a majority of the Directors present at a meeting in which a quorum is present shall be the act of the Committee, provided that in the absence or disqualification of any member of the Committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Regular meetings of the Committee may be held without notice at such times and at such places as shall be fixed by resolution adopted by a majority of the Committee. Special meetings may be called by any member of the Committee on twenty-four hours' prior written or telegraphic notice. (c) COMPENSATION COMMITTEE. The Board of Directors, by resolution adopted by a majority of the whole Board, may designate not less than two Directors to constitute a Compensation Committee and one or more directors as alternate members thereof, none of whom shall be employees of the corporation. In the absence or disqualification of any member of the Committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member, provided that the majority of the Committee, as then constituted, shall not be employees of the corporation. The Compensation Committee shall review and determine from time to time the salaries and other compensation of all elected officers of the corporation and shall submit to the Board of Directors such reports in such form and at such time as the Board of Directors may request. The Compensation Committee shall also submit recommendations from time to time to the Board of Directors as to the granting of stock options. -7-

(d) AUDIT COMMITTEE. The Board of Directors, by resolution adopted by a majority of the whole Board, may designate two or more Directors who are not employees of the corporation to constitute an Audit Committee and one or more Directors who are not employees of the corporation as alternate members thereof, which Committee shall review the selection and qualifications of the independent public accountants employed from time to time to audit the financial statements of the corporation and the scope and adequacy of their audits. The Committee shall also consider recommendations made by such independent public accountants. The Committee may also make such review of the internal financial audits of the corporation as it considers desirable and shall report to the Board any additions or changes which it deems advisable. In the absence or disqualification of any member of the Committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors who is not an employee of the corporation to act at the meeting in the place of any such absent or disqualified member. (e) EMPLOYEE BENEFITS COMMITTEE. The Board of Directors, by resolution adopted by a majority of the whole Board, may designate three (3) or more individuals, any or all of whom may be non-director employees of the Company, to constitute an Employee Benefits Committee. The Committee shall select, retain or remove the investment managers, advisors, consultants and persons otherwise employed by the Company as named fiduciaries under the Company's employee benefit plans, which actions it shall report to the Board of Directors. The Committee shall review the performance of the trustee or trustees, investment managers, advisors and consultants under said plans with respect to the investment of plan assets. The Committee shall be responsible for the administration of the Company's employee benefit plans and, in fulfilling that responsibility, may delegate to others, whether Company employees or otherwise, specific assignments in administering the plans.

(d) AUDIT COMMITTEE. The Board of Directors, by resolution adopted by a majority of the whole Board, may designate two or more Directors who are not employees of the corporation to constitute an Audit Committee and one or more Directors who are not employees of the corporation as alternate members thereof, which Committee shall review the selection and qualifications of the independent public accountants employed from time to time to audit the financial statements of the corporation and the scope and adequacy of their audits. The Committee shall also consider recommendations made by such independent public accountants. The Committee may also make such review of the internal financial audits of the corporation as it considers desirable and shall report to the Board any additions or changes which it deems advisable. In the absence or disqualification of any member of the Committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors who is not an employee of the corporation to act at the meeting in the place of any such absent or disqualified member. (e) EMPLOYEE BENEFITS COMMITTEE. The Board of Directors, by resolution adopted by a majority of the whole Board, may designate three (3) or more individuals, any or all of whom may be non-director employees of the Company, to constitute an Employee Benefits Committee. The Committee shall select, retain or remove the investment managers, advisors, consultants and persons otherwise employed by the Company as named fiduciaries under the Company's employee benefit plans, which actions it shall report to the Board of Directors. The Committee shall review the performance of the trustee or trustees, investment managers, advisors and consultants under said plans with respect to the investment of plan assets. The Committee shall be responsible for the administration of the Company's employee benefit plans and, in fulfilling that responsibility, may delegate to others, whether Company employees or otherwise, specific assignments in administering the plans. (f) CORPORATE GOVERNANCE AND NOMINATING COMMITTEE. The Board of Directors, by resolution adopted by a majority vote of the whole Board, may designate two or more Directors to constitute a Corporate Governance and Nominating Committee. This Committee shall recommend criteria for Board membership, establish procedures for the receipt and evaluation of suggestions of candidates, and make recommendations to the Board concerning nominees for Board membership. The Committee may recommend to the Board policies and procedures relating to corporate governance and monitor such policies and procedures when established. The Committee may also make recommendations to the Board concerning the number of Directors to serve on the Board and may establish standards for evaluation of the performance of the Directors in order to make recommendations with regard thereto. -8-

(g) FINANCE COMMITTEE. The Board of Directors, by resolution adopted by a majority of the whole Board, may designate two or more directors to constitute a Finance Committee and one or more directors as alternate members thereof. The duties and responsibilities of the Finance Committee shall be to review, upon the request of the Chairman or the President, management's proposals with respect to: the corporation's debt and equity financing; recommendations to the Board with respect to dividend policy and payments; acquisitions and divestitures exceeding the standing authority management has by virtue of the resolution dated December 10, 1993, or its successors; recommendations to the Board concerning the corporation's investment portfolio; the corporation's real estate investments; and other financing and investment matters. SECTION 10. CONSENT IN LIEU OF MEETING. Unless otherwise restricted by the Certificate of Incorporation or these by-laws, any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting if all members of the Board or committee thereof, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of the proceedings of the Board or committee. SECTION 11. COMPENSATION. Directors who are also full time employees of the corporation shall not receive any compensation for their services as Directors but they may be reimbursed for reasonable expenses of attendance. By resolution of the Board of Directors, all other Directors may receive, as compensation for their services any combination of: an annual fee; a fee for each meeting attended; shares of stock; or other forms of compensation; together with reimbursement of expenses of attendance, if any, at each regular or special meeting of the Board of Directors or any committee of the Board of Directors; provided, that nothing herein contained

(g) FINANCE COMMITTEE. The Board of Directors, by resolution adopted by a majority of the whole Board, may designate two or more directors to constitute a Finance Committee and one or more directors as alternate members thereof. The duties and responsibilities of the Finance Committee shall be to review, upon the request of the Chairman or the President, management's proposals with respect to: the corporation's debt and equity financing; recommendations to the Board with respect to dividend policy and payments; acquisitions and divestitures exceeding the standing authority management has by virtue of the resolution dated December 10, 1993, or its successors; recommendations to the Board concerning the corporation's investment portfolio; the corporation's real estate investments; and other financing and investment matters. SECTION 10. CONSENT IN LIEU OF MEETING. Unless otherwise restricted by the Certificate of Incorporation or these by-laws, any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting if all members of the Board or committee thereof, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of the proceedings of the Board or committee. SECTION 11. COMPENSATION. Directors who are also full time employees of the corporation shall not receive any compensation for their services as Directors but they may be reimbursed for reasonable expenses of attendance. By resolution of the Board of Directors, all other Directors may receive, as compensation for their services any combination of: an annual fee; a fee for each meeting attended; shares of stock; or other forms of compensation; together with reimbursement of expenses of attendance, if any, at each regular or special meeting of the Board of Directors or any committee of the Board of Directors; provided, that nothing herein contained shall be construed to preclude any Director from serving the corporation in any other capacity and receiving compensation therefor. SECTION 12. MEETING BY CONFERENCE TELEPHONE. Unless otherwise restricted by the Certificate of Incorporation, members of the Board of Directors or any committee designated by such Board may participate in a meeting of such Board or committee by means of conference telephone or similar communication equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant hereto shall constitute presence in person at such meeting. Unless otherwise required by law, no notice shall be required if a quorum of the Board or any committee is participating. -9-

ARTICLE IV OFFICERS SECTION 1. NUMBER. The officers of the corporation shall be a chairman, vice chairman, chairman of the Executive Committee, one or several executive vice presidents or vice presidents (the number thereof to be determined by the Board of Directors), one or several of the vice presidents may be designated "senior vice president" by the Board of Directors, and one of whom may be elected as chief financial officer of the corporation, a treasurer, a controller, a secretary, and other such officers as may be elected in accordance with the provisions of this article. Any two or more offices may be held by the same person. SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the corporation shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of stockholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as conveniently may be. Vacancies may be filled or new offices created and filled at any meeting of the Board of Directors. Each officer shall hold office until his successor shall have been duly elected and shall have qualified or until his death or until he shall resign or shall have been removed in the manner hereinafter provided. SECTION 3. REMOVAL. Any officer or agent elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interests of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. SECTION 4. VACANCIES. A vacancy in any office because of death, resignation, removal, disqualification or

ARTICLE IV OFFICERS SECTION 1. NUMBER. The officers of the corporation shall be a chairman, vice chairman, chairman of the Executive Committee, one or several executive vice presidents or vice presidents (the number thereof to be determined by the Board of Directors), one or several of the vice presidents may be designated "senior vice president" by the Board of Directors, and one of whom may be elected as chief financial officer of the corporation, a treasurer, a controller, a secretary, and other such officers as may be elected in accordance with the provisions of this article. Any two or more offices may be held by the same person. SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the corporation shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of stockholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as conveniently may be. Vacancies may be filled or new offices created and filled at any meeting of the Board of Directors. Each officer shall hold office until his successor shall have been duly elected and shall have qualified or until his death or until he shall resign or shall have been removed in the manner hereinafter provided. SECTION 3. REMOVAL. Any officer or agent elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interests of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. SECTION 4. VACANCIES. A vacancy in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the Board of Directors for the unexpired portion of the term. SECTION 5. CHAIRMAN. The chairman shall be the chief executive officer of the corporation and shall have general supervision over all of the affairs of the corporation and shall determine and administer the policies of the corporation as established by the Board of Directors or by the Executive Committee. The chairman shall: (i) provide leadership to the Board in reviewing and advising upon matters which exert major influence on the manner in which the corporation's business is conducted; (ii) preside at all meetings of the stockholders and of the Board of Directors; (iii) in the absence of the chairman of the Executive Committee, preside at all meetings of the Executive Committee; and (iv) perform such other duties as may be conferred by law or assigned by the Board of Directors. The chairman may sign, with the secretary or other proper officer of the corporation thereunto authorized by the Board of Directors, stock certificates of the corporation, any deeds, mortgages, bonds, contracts, or other instruments, except in cases where the signing or -10-

execution thereof shall be expressly delegated by the Board of Directors or by these by-laws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed. The chairman may also execute proxies on behalf of the corporation with respect to the voting of any shares of stock owned by the corporation; have the power to appoint agents or employees as in the chairman's judgment may be necessary or appropriate for the transaction of the business of the corporation; and in general shall perform all duties incident to the office of chairman. SECTION 6. VICE CHAIRMAN. The vice chairman shall assist the chairman in supervising the affairs of the corporation, with special responsibility for integrating acquired businesses into the corporation. In the absence of the chairman, the vice chairman shall preside at all meetings of the stockholders and the Board of Directors. In the event of the absence or disability of the chairman, the vice chairman shall assume all of the duties and responsibilities of that office. The vice chairman may sign any deeds, mortgages, bonds, contracts or other instruments, except in cases where the signing is required to be by some other officer or agent of the corporation. The vice chairman shall perform such other duties as may be designated by the chairman or the Board of Directors. SECTION 7. CHAIRMAN OF THE EXECUTIVE COMMITTEE. The chairman of the Executive Committee shall preside at all meetings of the Executive Committee; in the absence of the chairman and vice chairman, he

execution thereof shall be expressly delegated by the Board of Directors or by these by-laws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed. The chairman may also execute proxies on behalf of the corporation with respect to the voting of any shares of stock owned by the corporation; have the power to appoint agents or employees as in the chairman's judgment may be necessary or appropriate for the transaction of the business of the corporation; and in general shall perform all duties incident to the office of chairman. SECTION 6. VICE CHAIRMAN. The vice chairman shall assist the chairman in supervising the affairs of the corporation, with special responsibility for integrating acquired businesses into the corporation. In the absence of the chairman, the vice chairman shall preside at all meetings of the stockholders and the Board of Directors. In the event of the absence or disability of the chairman, the vice chairman shall assume all of the duties and responsibilities of that office. The vice chairman may sign any deeds, mortgages, bonds, contracts or other instruments, except in cases where the signing is required to be by some other officer or agent of the corporation. The vice chairman shall perform such other duties as may be designated by the chairman or the Board of Directors. SECTION 7. CHAIRMAN OF THE EXECUTIVE COMMITTEE. The chairman of the Executive Committee shall preside at all meetings of the Executive Committee; in the absence of the chairman and vice chairman, he shall preside at all meetings of the stockholders and the Board of Directors; he shall act in an advisory capacity to the chairman in all matters concerning the interest and management of the corporation, and he shall perform such other duties as may be assigned to him by the Board of Directors, the Executive Committee or the chairman. In the event of the absence or disability of the chairman and vice chairman, he shall assume all the duties and responsibilities of the office of the chairman. The chairman of the Executive Committee may sign, with the secretary or other proper officer of the corporation thereunto authorized by the Board of Directors, stock certificates of the corporation, any deeds, mortgages, bonds, contracts, or other instruments delegated by the Board of Directors or by these by-laws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed. The chairman of the Executive Committee may also execute proxies on behalf of the corporation with respect to the voting of any shares of stock owned by the corporation. SECTION 8. EXECUTIVE VICE PRESIDENT(S). The executive vice president or executive vice presidents (if elected by the Board of Directors) shall perform such duties not inconsistent with these by-laws as may be assigned to him or them by the chairman or the Board of Directors. In the event of absence or disability of the chairman, and vice chairman and chairman of the Executive Committee, the executive vice president (or in the event there be more than one, the executive vice president determined in the order of election) shall assume all the duties and responsibilities of the office of the chairman. -11-

SECTION 9. CHIEF FINANCIAL OFFICER. The chief financial officer (if elected by the Board of Directors) shall have general supervision over the financial affairs of the corporation. SECTION 10. THE VICE PRESIDENT(S). The Board of Directors may designate any vice president as a senior vice president. In the event of absence or disability of the chairman and vice chairman, the chairman of the Executive Committee and all executive vice presidents, the senior vice president)) or the vice president(s) in the order of election, shall assume all the duties and responsibilities of the office of the chairman. Any senior vice president or any vice president may sign, with the secretary or an assistant secretary, stock certificates of the corporation; and shall perform such other duties as from time to time may be assigned to him by the chairman or by the Board of Directors. In general, the vice president (or vice presidents, including the senior vice president or senior vice presidents) shall perform such duties not inconsistent with these by-laws as may be assigned to him (or them) by the chairman, the executive vice presidents or by the Board of Directors. SECTION 11. THE TREASURER. If required by the Board of Directors, the treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board of Directors shall determine. He shall: (a) have charge and custody of and be responsible for all funds and securities of the corporation; receive and give receipts for monies due and payable to the corporation from any source whatsoever, and deposit all such monies in the name of the corporation in such banks, trust companies or other depositories as shall be selected in accordance with the provisions of Article VI of these by-laws; (b) in general

SECTION 9. CHIEF FINANCIAL OFFICER. The chief financial officer (if elected by the Board of Directors) shall have general supervision over the financial affairs of the corporation. SECTION 10. THE VICE PRESIDENT(S). The Board of Directors may designate any vice president as a senior vice president. In the event of absence or disability of the chairman and vice chairman, the chairman of the Executive Committee and all executive vice presidents, the senior vice president)) or the vice president(s) in the order of election, shall assume all the duties and responsibilities of the office of the chairman. Any senior vice president or any vice president may sign, with the secretary or an assistant secretary, stock certificates of the corporation; and shall perform such other duties as from time to time may be assigned to him by the chairman or by the Board of Directors. In general, the vice president (or vice presidents, including the senior vice president or senior vice presidents) shall perform such duties not inconsistent with these by-laws as may be assigned to him (or them) by the chairman, the executive vice presidents or by the Board of Directors. SECTION 11. THE TREASURER. If required by the Board of Directors, the treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board of Directors shall determine. He shall: (a) have charge and custody of and be responsible for all funds and securities of the corporation; receive and give receipts for monies due and payable to the corporation from any source whatsoever, and deposit all such monies in the name of the corporation in such banks, trust companies or other depositories as shall be selected in accordance with the provisions of Article VI of these by-laws; (b) in general perform all duties incident to the office of treasurer and such other duties not inconsistent with these by-laws as from time to time may be assigned to him by the Board of Directors, or by the chairman, or any vice president designated for such purpose by the chairman. SECTION 12. THE SECRETARY. The secretary shall: (a) keep the minutes of the stockholders' and the Board of Directors' meetings in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these by-laws or as required by law; (c) be custodian of the corporate records and of the seal of the corporation and see that the seal of the corporation is affixed to all stock certificates prior to the issue thereof and to all documents, the execution of which on behalf of the corporation under its seal is required; (d) keep a register of the post office address of each stockholder which shall be furnished to the secretary by such stockholder; (e) sign with a vice president, or the chairman, stock certificates of the corporation, the issue of which shall have been authorized by resolution of the Board of Directors; (f) have general charge of the stock transfer books of the corporation; (g) act as secretary at all meetings of the Executive Committee; and (h) in general perform all duties incident to the office of secretary and such other duties -12-

not inconsistent with these by-laws as from time to time may be assigned to him by the chairman or by the Board of Directors. SECTION 13. THE CONTROLLER. The controller shall provide guidance and evaluation with respect to the corporation's accounting and related functions, control and procedures systems, budget programs, and coordinate same on a divisional and overall corporate level. The controller shall report to such officer or officers of the corporation and perform such other duties incident to the office of controller as may be prescribed from time to time by the chairman, chief financial officer, or by the Board of Directors. SECTION 14. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The chairman may appoint one or more assistant treasurers and one or more assistant secretaries who shall serve as such until removed by the chairman or the Board of Directors. The assistant treasurers may be required to give bonds for the faithful discharge of their duties in such sums and with such sureties as the chairman shall determine. The assistant treasurers and assistant secretaries, in general, shall perform such duties as shall be assigned to them by the treasurer or the secretary, respectively, or by the chairman, but shall not be considered to be officers of the corporation solely by reason of such appointments or titles. SECTION 15. APPOINTIVE PRESIDENTS AND VICE PRESIDENTS. The chairman may from time to time designate employees of the corporation who are managing one or several groups, divisions, or other operations of the corporation as "President", "Vice President", or similar title, which employees shall not be considered to be officers of the corporation solely by reason of such appointments or titles. The chairman shall

not inconsistent with these by-laws as from time to time may be assigned to him by the chairman or by the Board of Directors. SECTION 13. THE CONTROLLER. The controller shall provide guidance and evaluation with respect to the corporation's accounting and related functions, control and procedures systems, budget programs, and coordinate same on a divisional and overall corporate level. The controller shall report to such officer or officers of the corporation and perform such other duties incident to the office of controller as may be prescribed from time to time by the chairman, chief financial officer, or by the Board of Directors. SECTION 14. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The chairman may appoint one or more assistant treasurers and one or more assistant secretaries who shall serve as such until removed by the chairman or the Board of Directors. The assistant treasurers may be required to give bonds for the faithful discharge of their duties in such sums and with such sureties as the chairman shall determine. The assistant treasurers and assistant secretaries, in general, shall perform such duties as shall be assigned to them by the treasurer or the secretary, respectively, or by the chairman, but shall not be considered to be officers of the corporation solely by reason of such appointments or titles. SECTION 15. APPOINTIVE PRESIDENTS AND VICE PRESIDENTS. The chairman may from time to time designate employees of the corporation who are managing one or several groups, divisions, or other operations of the corporation as "President", "Vice President", or similar title, which employees shall not be considered to be officers of the corporation solely by reason of such appointments or titles. The chairman shall report such appointments to the Compensation Committee at least annually. SECTION 16. SALARIES. The salaries of the officers shall be fixed from time to time by the Board of Directors on a monthly basis and no officer shall be prevented from receiving such salary by reason of the fact that he is also a Director of the corporation. ARTICLE V INDEMNIFICATION OF OFFICERS, DIRECTORS EMPLOYEES AND AGENTS SECTION 1. NON-DERIVATIVE ACTIONS AND CRIMINAL PROSECUTIONS. To the extent permitted by applicable law from time to time in effect, the corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the -13-

corporation) by reason of the fact that he is or was a Director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. SECTION 2. DERIVATIVE ACTIONS. The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a Director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such

corporation) by reason of the fact that he is or was a Director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. SECTION 2. DERIVATIVE ACTIONS. The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a Director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation unless and only to the extent that the court in which such action or suit was brought shall determine upon application that despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper. SECTION 3. RIGHT TO INDEMNIFICATION. To the extent that a Director, officer, employee or agent of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 1 and 2 of this Article, or in defense of any claim, issue or matter therein, he shall be indemnified by the corporation against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. SECTION 4. WHERE NO ADJUDICATION. Any indemnification under Sections 1 and 2 of this Article (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the Director, officer, employee or agent is proper in the circumstances because he has -14-

met the applicable standard of conduct set forth in said Sections 1 and 2. Such determination shall be made (i) by the Board of Directors by a majority vote of a quorum consisting of Directors who were not parties to such action, suit or proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable and a quorum of disinterested Directors so directs, by independent legal counsel (compensated by the corporation) in a written opinion, or (iii) by the stockholders. SECTION 5. EXPENSES. Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors in the specific case upon receipt of an undertaking by or on behalf of the Director, officer, employee or agent to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the corporation as authorized in this Article. SECTION 6. NON-EXCLUSIVE. The indemnification provided by this Article shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any by-law, agreement, vote of stockholders or disinterested Directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a Director, officer, employee, or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

met the applicable standard of conduct set forth in said Sections 1 and 2. Such determination shall be made (i) by the Board of Directors by a majority vote of a quorum consisting of Directors who were not parties to such action, suit or proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable and a quorum of disinterested Directors so directs, by independent legal counsel (compensated by the corporation) in a written opinion, or (iii) by the stockholders. SECTION 5. EXPENSES. Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors in the specific case upon receipt of an undertaking by or on behalf of the Director, officer, employee or agent to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the corporation as authorized in this Article. SECTION 6. NON-EXCLUSIVE. The indemnification provided by this Article shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any by-law, agreement, vote of stockholders or disinterested Directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a Director, officer, employee, or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. SECTION 7. INSURANCE. The corporation may purchase and maintain insurance on behalf of any person who is or was a Director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article or of applicable law. ARTICLE VI CONTRACTS, LOANS, CHECKS AND DEPOSITS SECTION 1. CONTRACTS. The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of any on behalf of the corporation, and such authority may be general or confined to specific instances. -15-

SECTION 2. LOANS. No loans shall be contracted on behalf of the corporation and no evidence of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Directors. Such authority may be general or confined to specific instances. SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation, shall be signed by such officer or officers, agent or agents of the corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors. SECTION 4. DEPOSITS. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositaries as the Board of Directors may select. ARTICLE VII STOCK CERTIFICATES SECTION 1. STOCK CERTIFICATES. Certificates representing shares of stock of the corporation shall be in such form as may be determined by the Board of Directors, shall be numbered and shall be entered in the books of the corporation as they are issued. They shall exhibit the holder's name and number of shares and shall be signed by the chairman, the chairman of the Executive Committee, or a vice president and the treasurer or an

SECTION 2. LOANS. No loans shall be contracted on behalf of the corporation and no evidence of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Directors. Such authority may be general or confined to specific instances. SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation, shall be signed by such officer or officers, agent or agents of the corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors. SECTION 4. DEPOSITS. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositaries as the Board of Directors may select. ARTICLE VII STOCK CERTIFICATES SECTION 1. STOCK CERTIFICATES. Certificates representing shares of stock of the corporation shall be in such form as may be determined by the Board of Directors, shall be numbered and shall be entered in the books of the corporation as they are issued. They shall exhibit the holder's name and number of shares and shall be signed by the chairman, the chairman of the Executive Committee, or a vice president and the treasurer or an assistant treasurer or the secretary or an assistant secretary, and shall be sealed with the seal of the corporation. If a stock certificate is countersigned (a) by a transfer agent other than the corporation or its employee, or (b) by a registrar other than the corporation or its employee, any other signature on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. SECTION 2. LOST CERTIFICATES. The Board of Directors may from time to time make such provision as it deems appropriate for the replacement of lost, stolen or destroyed stock certificates, including the requirement to furnish an affidavit and an indemnity. SECTION 3. TRANSFERS OF STOCK. Upon surrender to the corporation or the transfer agent of the corporation of a stock certificate duly endorsed or accompanied by proper evidence of succession, assignment of authority to transfer, it shall be the -16-

duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon the books of the corporation. The person in whose name shares of stock stand on the books of the corporation shall be deemed the owner thereof for all purposes as regards the corporation. SECTION 4. TRANSFER AGENTS AND REGISTRARS. The Board of Directors may appoint one or more transfer agents and registrars and may thereafter require all stock certificates to bear the signature of a transfer agent and registrar. SECTION 5. RULES OF TRANSFER. The Board of Directors shall have the power and authority to make all such rules and regulations as they may deem expedient concerning the issue, transfer and registration of stock certificates of the corporation. ARTICLE VIII FISCAL YEAR The fiscal year of the corporation shall begin on the first day of January in each year and end on the thirty-first of December in each year.

duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon the books of the corporation. The person in whose name shares of stock stand on the books of the corporation shall be deemed the owner thereof for all purposes as regards the corporation. SECTION 4. TRANSFER AGENTS AND REGISTRARS. The Board of Directors may appoint one or more transfer agents and registrars and may thereafter require all stock certificates to bear the signature of a transfer agent and registrar. SECTION 5. RULES OF TRANSFER. The Board of Directors shall have the power and authority to make all such rules and regulations as they may deem expedient concerning the issue, transfer and registration of stock certificates of the corporation. ARTICLE VIII FISCAL YEAR The fiscal year of the corporation shall begin on the first day of January in each year and end on the thirty-first of December in each year. ARTICLE IX DIVIDENDS The Board of Directors may from time to time, declare, and the corporation may pay, dividends on its outstanding shares of stock in the manner and upon the terms and conditions provided by law and its Certificate of Incorporation. ARTICLE X SEAL The Board of Directors shall provide a corporate seal which shall be in the form of a circle and shall have inscribed thereon the name of the corporation and the words "Corporate Seal, Delaware". ARTICLE XI -17-

WAIVER OF NOTICE Whenever any notice whatever is required to be given under the provisions of these by-laws or under the provisions of the Certificate of Incorporation or under the provisions of The General Corporation Law of Delaware, waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Attendance of any person at a meeting for which any notice whatever is required to be given under the provisions of these by-laws, the Certificate of Incorporation or The General Corporation Law of Delaware shall constitute a waiver of notice of such meeting, except when the person attends for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. -18-

EXHIBIT 10(g) DIRECTOR COMPENSATION ANNUAL RETAINER AND ATTENDANCE FEES

WAIVER OF NOTICE Whenever any notice whatever is required to be given under the provisions of these by-laws or under the provisions of the Certificate of Incorporation or under the provisions of The General Corporation Law of Delaware, waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Attendance of any person at a meeting for which any notice whatever is required to be given under the provisions of these by-laws, the Certificate of Incorporation or The General Corporation Law of Delaware shall constitute a waiver of notice of such meeting, except when the person attends for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. -18-

EXHIBIT 10(g) DIRECTOR COMPENSATION ANNUAL RETAINER AND ATTENDANCE FEES For 1998, each ITW director received a $25,000 annual retainer and $1,000 for each Board meeting or committee meeting he or she attended. Committee chairmen received an additional $600 for each committee meeting they chaired. For 1999, the retainer is $35,000, the fee for each Board or committee meeting is $1,500, and the fee for chairmen is an additional $900 per meeting chaired. As of 1999, non-officer directors can elect to receive some or all of their retainer and fees in an equivalent value of ITW common stock. In addition, under our deferred fee plan, a director can defer receipt of all or part of cash fees until he or she is no longer a director. Deferred amounts are credited with interest at current rates. RESTRICTED ITW COMMON STOCK A portion of director compensation includes the periodic grant of restricted ITW common stock, which directly links an element of director compensation with stockholder interests. In January 1998, each non-officer director of ITW received an award of 900 restricted shares. These shares vest equally over three years and fully vest upon the director's death or retirement. Each new non-officer director who joins the Board will be granted an award of 300 shares for each full year of service remaining until January 2001. These shares will vest equally over the years remaining until January 2001 and fully vest upon death or retirement. A director cannot sell the shares until the earliest of retirement, death or January 2001. A director who terminates other than for death or retirement prior to January 2001 will forfeit any unvested restricted shares. PHANTOM ITW STOCK To tie a further portion of their compensation to stockholder interests, non-officer directors of ITW are granted 1,000 units of phantom stock upon becoming a director. The value of each unit equals the market value of one share of ITW common stock. Additional units are credited to a director's phantom stock account in an amount equivalent to cash dividends paid on ITW stock. Accounts are adjusted for stock dividends, stock splits, combinations or similar

changes. A director is eligible for a cash distribution from his or her account at retirement or upon approved resignation. When phantom stock is granted, directors elect to receive the distribution in either a lump sum or in up to ten annual installments. Directors may change this election at any time until two years preceding the distribution. Directors receive the value of their phantom stock account immediately upon a change of control. OTHER ARRANGEMENTS WITH DIRECTORS Harold B. Smith has a one-year agreement with ITW to provide consulting services for a fee of $85,000.

EXHIBIT 10(g) DIRECTOR COMPENSATION ANNUAL RETAINER AND ATTENDANCE FEES For 1998, each ITW director received a $25,000 annual retainer and $1,000 for each Board meeting or committee meeting he or she attended. Committee chairmen received an additional $600 for each committee meeting they chaired. For 1999, the retainer is $35,000, the fee for each Board or committee meeting is $1,500, and the fee for chairmen is an additional $900 per meeting chaired. As of 1999, non-officer directors can elect to receive some or all of their retainer and fees in an equivalent value of ITW common stock. In addition, under our deferred fee plan, a director can defer receipt of all or part of cash fees until he or she is no longer a director. Deferred amounts are credited with interest at current rates. RESTRICTED ITW COMMON STOCK A portion of director compensation includes the periodic grant of restricted ITW common stock, which directly links an element of director compensation with stockholder interests. In January 1998, each non-officer director of ITW received an award of 900 restricted shares. These shares vest equally over three years and fully vest upon the director's death or retirement. Each new non-officer director who joins the Board will be granted an award of 300 shares for each full year of service remaining until January 2001. These shares will vest equally over the years remaining until January 2001 and fully vest upon death or retirement. A director cannot sell the shares until the earliest of retirement, death or January 2001. A director who terminates other than for death or retirement prior to January 2001 will forfeit any unvested restricted shares. PHANTOM ITW STOCK To tie a further portion of their compensation to stockholder interests, non-officer directors of ITW are granted 1,000 units of phantom stock upon becoming a director. The value of each unit equals the market value of one share of ITW common stock. Additional units are credited to a director's phantom stock account in an amount equivalent to cash dividends paid on ITW stock. Accounts are adjusted for stock dividends, stock splits, combinations or similar

changes. A director is eligible for a cash distribution from his or her account at retirement or upon approved resignation. When phantom stock is granted, directors elect to receive the distribution in either a lump sum or in up to ten annual installments. Directors may change this election at any time until two years preceding the distribution. Directors receive the value of their phantom stock account immediately upon a change of control. OTHER ARRANGEMENTS WITH DIRECTORS Harold B. Smith has a one-year agreement with ITW to provide consulting services for a fee of $85,000. 8

EXHIBIT 10 (k) ILLINOIS TOOL WORKS INC. EXECUTIVE CONTRIBUTORY RETIREMENT INCOME PLAN

ILLINOIS TOOL WORKS INC.

changes. A director is eligible for a cash distribution from his or her account at retirement or upon approved resignation. When phantom stock is granted, directors elect to receive the distribution in either a lump sum or in up to ten annual installments. Directors may change this election at any time until two years preceding the distribution. Directors receive the value of their phantom stock account immediately upon a change of control. OTHER ARRANGEMENTS WITH DIRECTORS Harold B. Smith has a one-year agreement with ITW to provide consulting services for a fee of $85,000. 8

EXHIBIT 10 (k) ILLINOIS TOOL WORKS INC. EXECUTIVE CONTRIBUTORY RETIREMENT INCOME PLAN

ILLINOIS TOOL WORKS INC. EXECUTIVE CONTRIBUTORY RETIREMENT INCOME PLAN Illinois Tool Works Inc. hereby amends and restates in its entirety, effective as of January 1, 1999, the Illinois Tool Works Inc. Executive Contributory Retirement Income Plan, which was originally established April 1, 1993. I. PURPOSE The purpose of this Illinois Tool Works Inc. Executive Contributory Retirement Income Plan is to provide a further means whereby Illinois Tool Works Inc. and its subsidiaries and affiliated companies may afford financial security to certain employees. II. DEFINITIONS 2.1 "Agreement" means the Illinois Tool Works Inc. Executive Contributory Retirement Income Plan Deferral Agreement(s) executed between a Participant and the Company, whereby a Participant agrees to defer a portion of his/her Salary and/or Bonus pursuant to the provisions of the Plan and/or specifies the number of years over which payments might be made pursuant to Section 4.8 (subject to the provisions of Section 4.10), and the Company agrees to make benefit payments in accordance with the provisions of the Plan. To the extent a Participant's deferral agreement changes the number of payments specified in a prior deferral agreement the most recent agreement shall be deemed to amend all prior agreements. 2.2 "Beneficiary" means the person or persons so designated by a Participant pursuant to Section 4.11. 2.3 "Board of Directors" means the Board of Directors of Illinois Tool Works Inc. Notwithstanding anything herein to the contrary, except in regard to a Change in Control, the Executive Committee of the Board of Directors can act under the Plan in lieu of the entire Board. 2.4 "Bonus" means the amount(s) earned during a calendar year by the Participant under the Company's Executive Incentive Plan, if the Participant is eligible for such Bonus. 2.5 "A Change in Control" means any of the following: a) the dissolution of the Company; b) the merger, consolidation, or reorganization of the Company with any other corporation after which the

EXHIBIT 10 (k) ILLINOIS TOOL WORKS INC. EXECUTIVE CONTRIBUTORY RETIREMENT INCOME PLAN

ILLINOIS TOOL WORKS INC. EXECUTIVE CONTRIBUTORY RETIREMENT INCOME PLAN Illinois Tool Works Inc. hereby amends and restates in its entirety, effective as of January 1, 1999, the Illinois Tool Works Inc. Executive Contributory Retirement Income Plan, which was originally established April 1, 1993. I. PURPOSE The purpose of this Illinois Tool Works Inc. Executive Contributory Retirement Income Plan is to provide a further means whereby Illinois Tool Works Inc. and its subsidiaries and affiliated companies may afford financial security to certain employees. II. DEFINITIONS 2.1 "Agreement" means the Illinois Tool Works Inc. Executive Contributory Retirement Income Plan Deferral Agreement(s) executed between a Participant and the Company, whereby a Participant agrees to defer a portion of his/her Salary and/or Bonus pursuant to the provisions of the Plan and/or specifies the number of years over which payments might be made pursuant to Section 4.8 (subject to the provisions of Section 4.10), and the Company agrees to make benefit payments in accordance with the provisions of the Plan. To the extent a Participant's deferral agreement changes the number of payments specified in a prior deferral agreement the most recent agreement shall be deemed to amend all prior agreements. 2.2 "Beneficiary" means the person or persons so designated by a Participant pursuant to Section 4.11. 2.3 "Board of Directors" means the Board of Directors of Illinois Tool Works Inc. Notwithstanding anything herein to the contrary, except in regard to a Change in Control, the Executive Committee of the Board of Directors can act under the Plan in lieu of the entire Board. 2.4 "Bonus" means the amount(s) earned during a calendar year by the Participant under the Company's Executive Incentive Plan, if the Participant is eligible for such Bonus. 2.5 "A Change in Control" means any of the following: a) the dissolution of the Company; b) the merger, consolidation, or reorganization of the Company with any other corporation after which the holders of common stock immediately prior to the effective date thereof hold less than 70% of the outstanding common stock of the surviving or resulting entity; c) the sale of all or substantially all of the assets of the Company to any person or entity other than a whollyowned subsidiary; -1-

d) any person or group of persons acting in concert, other than descendants of Byron L. Smith and trusts for the benefit of such descendants, or entity becomes the beneficial owner, directly or indirectly, of more than 30% of the outstanding common stock; or

ILLINOIS TOOL WORKS INC. EXECUTIVE CONTRIBUTORY RETIREMENT INCOME PLAN Illinois Tool Works Inc. hereby amends and restates in its entirety, effective as of January 1, 1999, the Illinois Tool Works Inc. Executive Contributory Retirement Income Plan, which was originally established April 1, 1993. I. PURPOSE The purpose of this Illinois Tool Works Inc. Executive Contributory Retirement Income Plan is to provide a further means whereby Illinois Tool Works Inc. and its subsidiaries and affiliated companies may afford financial security to certain employees. II. DEFINITIONS 2.1 "Agreement" means the Illinois Tool Works Inc. Executive Contributory Retirement Income Plan Deferral Agreement(s) executed between a Participant and the Company, whereby a Participant agrees to defer a portion of his/her Salary and/or Bonus pursuant to the provisions of the Plan and/or specifies the number of years over which payments might be made pursuant to Section 4.8 (subject to the provisions of Section 4.10), and the Company agrees to make benefit payments in accordance with the provisions of the Plan. To the extent a Participant's deferral agreement changes the number of payments specified in a prior deferral agreement the most recent agreement shall be deemed to amend all prior agreements. 2.2 "Beneficiary" means the person or persons so designated by a Participant pursuant to Section 4.11. 2.3 "Board of Directors" means the Board of Directors of Illinois Tool Works Inc. Notwithstanding anything herein to the contrary, except in regard to a Change in Control, the Executive Committee of the Board of Directors can act under the Plan in lieu of the entire Board. 2.4 "Bonus" means the amount(s) earned during a calendar year by the Participant under the Company's Executive Incentive Plan, if the Participant is eligible for such Bonus. 2.5 "A Change in Control" means any of the following: a) the dissolution of the Company; b) the merger, consolidation, or reorganization of the Company with any other corporation after which the holders of common stock immediately prior to the effective date thereof hold less than 70% of the outstanding common stock of the surviving or resulting entity; c) the sale of all or substantially all of the assets of the Company to any person or entity other than a whollyowned subsidiary; -1-

d) any person or group of persons acting in concert, other than descendants of Byron L. Smith and trusts for the benefit of such descendants, or entity becomes the beneficial owner, directly or indirectly, of more than 30% of the outstanding common stock; or e) the individuals who, as of the close of the most recent annual meeting of the Company's stockholders, are members of the Board of Directors (the "Existing Directors") cease for any reason to constitute more than 50% of the Board of Directors; provided, however, that if the election or nomination for election, by the Company's stockholders of any new director was approved by a vote of at least 50% of the Existing Directors, such new director shall be considered an Existing Director; provided further, however, that no individual shall be considered an Existing Director if such individual initially assumed office as a result of either an actual or threatened "Election Contest" (as described in Rule14a-11 under the Securities Exchange Act of 1934) or other actual or threatened solicitation of proxies by or on behalf of anyone other than the Board of Directors (a "Proxy Contest"), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy

d) any person or group of persons acting in concert, other than descendants of Byron L. Smith and trusts for the benefit of such descendants, or entity becomes the beneficial owner, directly or indirectly, of more than 30% of the outstanding common stock; or e) the individuals who, as of the close of the most recent annual meeting of the Company's stockholders, are members of the Board of Directors (the "Existing Directors") cease for any reason to constitute more than 50% of the Board of Directors; provided, however, that if the election or nomination for election, by the Company's stockholders of any new director was approved by a vote of at least 50% of the Existing Directors, such new director shall be considered an Existing Director; provided further, however, that no individual shall be considered an Existing Director if such individual initially assumed office as a result of either an actual or threatened "Election Contest" (as described in Rule14a-11 under the Securities Exchange Act of 1934) or other actual or threatened solicitation of proxies by or on behalf of anyone other than the Board of Directors (a "Proxy Contest"), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest. 2.6 "Committee" means the Employee Benefits Committee of the Company appointed by the Board of Directors to manage and administer the Plan. 2.7 "Company" means Illinois Tool Works Inc. and any subsidiaries and affiliated companies of which Illinois Tool Works Inc. owns more than 80% of the outstanding common stock or other ownership interest. 2.8 "Deferral Year" means any calendar year. 2.9 "Deferred Benefit Account" means the account maintained on the books of the Company for each Participant pursuant to Article III. One Deferred Benefit Account shall be maintained for all Agreements entered into by a Participant and the Company pursuant to this Plan. A Participant's Deferred Benefit Account shall not constitute or be treated as a trust fund of any kind. 2.10 "Determination Date" means the date on which the amount of a Participant's Deferred Benefit Account is determined as provided in Article III hereof. The last day of each calendar quarter or the date of a Participant's Termination of Service shall be a Determination Date. 2.11 "Disability" shall have the same meaning as Disabled under the Illinois Tool Works Inc. Pension Plan. 2.12 "Early Benefit Date" means the date of Termination of Service of the Participant on or after he/she attains age 55 and has 10 Years of Service with the Company and before attaining age 65. -2-

2.13 "Interest Yield" means either the Retirement Interest Yield, Death Interest Yield or the Termination Interest Yield as defined below: a) "Retirement Interest Yield" or "Death Interest Yield" means 130 percent of Moody's. The maximum Retirement Interest Yield or Death Interest Yield pursuant to this Plan shall be 15.6%. b) "Termination Interest Yield" means 100 percent of Moody's. The maximum Termination Interest Yield pursuant to this Plan shall be 12%. 2.14 "Moody's" means the average Moody's Long-Term Corporate Bond Yield for the preceding calendar quarter as determined from the Moody's Bond Record published by Moody's Investor's Service, Inc. (or any successor thereto). For purposes of this Plan, Moody's shall not exceed 12%. In the event that Moody's exceeds 12%, for purposes of calculating the appropriate Interest Yield, 12% shall be used. 2.15 "Normal Benefit Date" means the date of Termination of Service of the Participant on or after he/she attains age 65 and has completed five Years of Service with the Company.

2.13 "Interest Yield" means either the Retirement Interest Yield, Death Interest Yield or the Termination Interest Yield as defined below: a) "Retirement Interest Yield" or "Death Interest Yield" means 130 percent of Moody's. The maximum Retirement Interest Yield or Death Interest Yield pursuant to this Plan shall be 15.6%. b) "Termination Interest Yield" means 100 percent of Moody's. The maximum Termination Interest Yield pursuant to this Plan shall be 12%. 2.14 "Moody's" means the average Moody's Long-Term Corporate Bond Yield for the preceding calendar quarter as determined from the Moody's Bond Record published by Moody's Investor's Service, Inc. (or any successor thereto). For purposes of this Plan, Moody's shall not exceed 12%. In the event that Moody's exceeds 12%, for purposes of calculating the appropriate Interest Yield, 12% shall be used. 2.15 "Normal Benefit Date" means the date of Termination of Service of the Participant on or after he/she attains age 65 and has completed five Years of Service with the Company. 2.16 "Participant" means an executive of the Company who is designated to be eligible pursuant to Section 3.1 who enters into an Agreement, and who has commenced Salary and/or Bonus reductions pursuant to such Agreement. 2.17 "Plan" means the Illinois Tool Works Inc. Executive Contributory Retirement Income Plan as amended from time-to-time. 2.18 "Plan Effective Date" means April 1, 1993. 2.19 "Salary" means the Participant's base pay. 2.20 "Termination of Service" means the Participant's cessation of his/her service with the Company for any reason whatsoever, whether voluntarily or involuntarily, including by reason of retirement, death, or Disability. 2.21 "Years of Service" shall have the same meaning as Eligibility Service under the Illinois Tool Works Inc. Pension Plan. III. PARTICIPANT AND COMPENSATION REDUCTION 3.1 Participation. Participation in the Plan shall be limited to executives of the Company who qualify for inclusion in a "select group of management or highly compensated employees" as provided in Sections 201(2), 301(a)(3), 401(a)(1) and 4021(b)(6) of ERISA and who are designated to be eligible by the Chief Executive Officer (CEO) of the Company. The CEO of the Company must be designated to be eligible by the Board of Directors. In addition, to be eligible to participate in the Plan, an eligible employee must file an Agreement with the Company prior to the first day of the deferral period on which a Participant's participation commences in the Plan. The election to participate shall be effective upon the receipt by the Company of an Agreement that is properly completed and executed in conformity with the Plan. -3-

A Participant must be designated to be eligible for each deferral period as outlined in Section 3.2. 3.2 Minimum and Maximum Deferral and Length of Participation. A Participant may elect to defer between 5% and 50% of his/her Salary in 1% increments during a Deferral Year. In addition, a Participant may elect to defer up to 100% of his/her Bonus in 1% increments earned during a Deferral Year. At the time of election, a Participant may elect to defer a different percentage of his/her Salary or Bonus for each Deferral Year and may also elect not to defer any portion of his/her Salary or Bonus in a Deferral Year. The deferral opportunity shall extend through December 31, 2004, however there shall be two periods of three years each. The initial deferral period shall be from January 1, 1999 through December 31, 2001. The second

A Participant must be designated to be eligible for each deferral period as outlined in Section 3.2. 3.2 Minimum and Maximum Deferral and Length of Participation. A Participant may elect to defer between 5% and 50% of his/her Salary in 1% increments during a Deferral Year. In addition, a Participant may elect to defer up to 100% of his/her Bonus in 1% increments earned during a Deferral Year. At the time of election, a Participant may elect to defer a different percentage of his/her Salary or Bonus for each Deferral Year and may also elect not to defer any portion of his/her Salary or Bonus in a Deferral Year. The deferral opportunity shall extend through December 31, 2004, however there shall be two periods of three years each. The initial deferral period shall be from January 1, 1999 through December 31, 2001. The second deferral period shall be from January 1, 2002 through December 31, 2004. A Participant must complete a separate Agreement for each deferral period and in order to be eligible for the second deferral period, a Participant must be designated to be eligible for the second deferral period and must complete a separate Agreement for that deferral period. 3.3 Timing of Deferral Credits. The amount of Salary and Bonus that a Participant elects to defer in an Agreement shall cause an equivalent reduction in the Participant's Salary and Bonus. Salary and Bonus deferrals shall be credited to the Participant's Deferred Benefit Account throughout each Plan year at the end of each calendar quarter. 3.4 New Participants. Subsequent to January 1, 1999, an employee shall be eligible to participate after being approved by the CEO. The eligible employee may begin participation pursuant to Section 3.1 and shall be bound by all terms and conditions of the Plan, provided, however, that his/her Agreement must be filed no later than 30 days following notification of his/her eligibility to participate. 3.5 Alteration of Salary and Bonus Deferral. Except as provided in this Section 3.5 and in Section 3.6, a Participant's election to defer Salary and Bonus shall be irrevocable. Pursuant to this Section 3.5, a Participant may increase or decrease his/her original Salary and/or Bonus deferral percentage prior to December 1 of the year preceding the Deferral Year for which such adjustment is requested. A Participant may increase or decrease the deferral percentage of his/her Salary and/or Bonus by the greater of 5% for Salary and 10% for Bonus or a percentage which is not more than 50% of the Participant's original election if changed prior to December 1 of the year preceding the Deferral Year for which the adjustment is effective. In the event that the maximum adjustment percentage is not an integer percentage it shall be rounded up to the next highest integer percentage. A Participant may not decrease his/her Salary deferral percentage below 5%, but may choose not to have any Salary deferral in accordance with this section 3.5. To the extent a Participant has elected to defer 0% of Salary and/or Bonus for any Deferral Year on his/her deferral agreement, the Participant may increase his/her Salary deferral from 0% to 5% and/or increase his/her Bonus deferral from 0% to 10% by entering into a deferral Agreement by December 1 of the year preceding the Deferral Year for which such Agreement is to be effective. -4-

3.6 Emergency Benefit: Waiver of Deferral. In the event that the Company, upon written petition of the Participant or his/her Beneficiary, determines in its sole discretion, that the Participant or his/her Beneficiary has suffered an unforeseeable financial emergency, the Company may pay to the Participant or his/her Beneficiary as soon as practicable following such determination, an amount, not in excess of the Participant's Deferred Benefit Account, necessary to satisfy the emergency. For purposes of this Plan, an unforeseeable financial emergency is an unanticipated emergency that is caused by an event beyond the control of the Participant or Beneficiary and that would result in severe financial hardship to the individual if the emergency distribution were not permitted, as may result from illness, casualty loss or sudden financial reversal. Cash needs arising from foreseeable events, such as the purchase of a residence or education expenses for children shall not be considered the result of an unforeseeable financial emergency. The Company may also grant a waiver of the Participant's agreement to defer a stated amount of Salary and Bonus upon finding that the Participant has suffered an unforeseeable financial emergency. The waiver shall be for such period of time as the Company deems necessary under the circumstances. 3.7 Company Matching Contribution. The Company shall contribute an amount to a Participant's Deferred Benefit Account as and when the Participant's own Salary deferrals are added pursuant to

3.6 Emergency Benefit: Waiver of Deferral. In the event that the Company, upon written petition of the Participant or his/her Beneficiary, determines in its sole discretion, that the Participant or his/her Beneficiary has suffered an unforeseeable financial emergency, the Company may pay to the Participant or his/her Beneficiary as soon as practicable following such determination, an amount, not in excess of the Participant's Deferred Benefit Account, necessary to satisfy the emergency. For purposes of this Plan, an unforeseeable financial emergency is an unanticipated emergency that is caused by an event beyond the control of the Participant or Beneficiary and that would result in severe financial hardship to the individual if the emergency distribution were not permitted, as may result from illness, casualty loss or sudden financial reversal. Cash needs arising from foreseeable events, such as the purchase of a residence or education expenses for children shall not be considered the result of an unforeseeable financial emergency. The Company may also grant a waiver of the Participant's agreement to defer a stated amount of Salary and Bonus upon finding that the Participant has suffered an unforeseeable financial emergency. The waiver shall be for such period of time as the Company deems necessary under the circumstances. 3.7 Company Matching Contribution. The Company shall contribute an amount to a Participant's Deferred Benefit Account as and when the Participant's own Salary deferrals are added pursuant to Section 3.3. The amount of the Company matching contribution shall be equal to 3% of the Participant's Salary. In order for the Company matching contribution to be credited to a Participant's Deferred Benefit Account, the Participant must elect to defer at least 5% of his/her Salary during the Deferral Year. Notwithstanding the foregoing, when the CEO designates a Participant pursuant to Section 3.4, he may specify that such Participant is not entitled to a Company matching contribution. 3.8 Determination of Account. The balance of each Participant's Deferred Benefit Account as of each Determination Date shall be calculated as follows, using the terms and methods in the order defined below: a) Beginning Balance: The balance on the beginning of the first day of the quarter. This equals the Ending Balance as of the end of the day on the prior Determination Date. b) Sub-Ending Balance: The Beginning Balance, plus Participant deferrals plus Company matching contributions less any distributions, made after the prior Determination Date and up through and including the current Determination Date. c) Average Balance: The arithmetic average of the Beginning Balance and the Sub-Ending Balance from the current quarter. -5-

d) Interest: The Average Balance times the appropriate Interest Yield divided by four, times the number of calendar days from the prior Determination Date to the current Determination Date (or the date of payment if applicable and deemed appropriate by the Company) divided by the total number of calendar days in the quarter. e) Ending Balance: The Sub-Ending Balance plus Interest. 3.9 Vesting of a Participant's Deferred Benefit Account. A Participant shall be 100% vested in his/her Deferred Benefit Account equal to the amount of Salary and Bonus he/she deferred into the Deferred Benefit Account and the interest credited thereon. The Company matching contributions and interest credited thereon shall vest in the same manner as under the Illinois Tool Works Inc. Savings and Investment Plan. IV. BENEFITS

d) Interest: The Average Balance times the appropriate Interest Yield divided by four, times the number of calendar days from the prior Determination Date to the current Determination Date (or the date of payment if applicable and deemed appropriate by the Company) divided by the total number of calendar days in the quarter. e) Ending Balance: The Sub-Ending Balance plus Interest. 3.9 Vesting of a Participant's Deferred Benefit Account. A Participant shall be 100% vested in his/her Deferred Benefit Account equal to the amount of Salary and Bonus he/she deferred into the Deferred Benefit Account and the interest credited thereon. The Company matching contributions and interest credited thereon shall vest in the same manner as under the Illinois Tool Works Inc. Savings and Investment Plan. IV. BENEFITS 4.1 Return of Deferrals. At the time a Participant executes an Agreement, he/she may elect to receive a return of his/her deferrals made within a particular Deferral Year. The return of deferral election does not apply to either the Company's matching contribution or the interest credited to the Participant's Deferred Benefit Account. The return of deferral election shall specify the year (distribution year) in which payment shall be made, which shall be paid as of June 30, five or more years after the Deferral Year in which the Salary and/or Bonus deferral was initially credited to the Participant's Deferred Benefit Account. Each such return of deferral shall be paid in a lump sum. A return of deferral shall only be paid prior to a Participant's Termination of Service. Any return of deferral paid shall be deemed a distribution, and shall be deducted from the Participant's Deferred Benefit Account. A separate return of deferrals election shall be made for each Deferral Year and for both Salary and Bonus deferrals. 4.2 Retirement Benefit. Subject to Section 4.8 below, upon a Participant's Early Benefit Date or Normal Benefit Date, he/she shall be entitled to receive the amount of his/her Deferred Benefit Account determined under Section 3.8 using the Retirement Interest Yield. The form of benefit payment shall be as provided in Section 4.8. 4.3 Termination Benefit. Upon the Termination of Service of a Participant before becoming eligible for a retirement benefit, for reasons other than death or Disability, the Company shall pay to the Participant, a benefit equal to the vested portion of his/her Deferred Benefit Account using the Termination Interest Yield. Unless otherwise directed by the Committee, the termination benefit shall be payable in a lump sum within 60 days following his/her Termination of Service. Upon a Termination of Service, the Participant shall immediately cease to be eligible for any other benefit provided under this Plan. -6-

4.4 Death Prior to Termination of Service. Upon the Termination of Service due to a Participant's death, the Beneficiary of the deceased Participant shall be entitled to a death benefit equal to the Participant's Deferred Benefit Account determined under Section 3.8 using the Death Interest Yield. The form of benefit shall be as provided in Section 4.8 and shall be in lieu of all other benefits under this Plan. 4.5 Death Subsequent to Early or Normal Benefit Date. Upon the death of a Participant subsequent to his/her Early or Normal Benefit Date, the Beneficiary of the deceased Participant shall receive the Participant's remaining Deferred Benefit Account. Payment of a Participant's remaining Deferred Benefit Account shall be in accordance with Section 4.8. 4.6 Disability. In the event of a Termination of Service due to Disability, which first manifests itself after the Plan Effective Date and prior to the commencement of Benefit Payments in Section 4.8, a disabled Participant may receive a benefit equal to the balance of his/her Deferred Benefit Account under Section 3.8 using the Retirement Interest Yield. The commencement of such benefit will be on the Participant's earliest benefit date consistent with Sections 2.12 and 2.15. Payments shall be made in accordance with Section 4.8. The Company, in its sole

4.4 Death Prior to Termination of Service. Upon the Termination of Service due to a Participant's death, the Beneficiary of the deceased Participant shall be entitled to a death benefit equal to the Participant's Deferred Benefit Account determined under Section 3.8 using the Death Interest Yield. The form of benefit shall be as provided in Section 4.8 and shall be in lieu of all other benefits under this Plan. 4.5 Death Subsequent to Early or Normal Benefit Date. Upon the death of a Participant subsequent to his/her Early or Normal Benefit Date, the Beneficiary of the deceased Participant shall receive the Participant's remaining Deferred Benefit Account. Payment of a Participant's remaining Deferred Benefit Account shall be in accordance with Section 4.8. 4.6 Disability. In the event of a Termination of Service due to Disability, which first manifests itself after the Plan Effective Date and prior to the commencement of Benefit Payments in Section 4.8, a disabled Participant may receive a benefit equal to the balance of his/her Deferred Benefit Account under Section 3.8 using the Retirement Interest Yield. The commencement of such benefit will be on the Participant's earliest benefit date consistent with Sections 2.12 and 2.15. Payments shall be made in accordance with Section 4.8. The Company, in its sole discretion, may accelerate the payment of any disability benefit payable under this Section. Disability benefits shall be treated as distributions from a Participant's Deferred Benefit Account. 4.7 Change of Status. In the event it is determined that the Participant ceases to be eligible to participate in this Plan or if the Participant's Salary is materially reduced, the Participant may elect to reduce the amount of any remaining deferral. In such event, he/she shall not be treated as having terminated participation pursuant to this Plan. 4.8 Form of Benefit Payment. a) Upon the happening of an event described in Section 4.2, 4.4, 4.5, or 4.6, the Company shall pay the Participant's Deferred Benefit Account in a lump sum or in monthly installments payable in approximately equal amounts over 2 to 20 years, commencing on the event described in Section 4.2, 4.4, 4.5 or 4.6 in accordance with the Participant's last Agreement. Interest on the unpaid principal balance equal to the applicable Retirement Interest Yield will be added to the Participant's Deferred Benefit Account on each Determination Date. The amount of the installment payments shall be based on the prevailing Retirement Interest Yield at the commencement of payments, projected into the future using a method approved by the Company. The amount of the installment payments shall be recomputed no less frequently than every three years and the installment payments shall be increased or decreased to reflect any changes in the Retirement Interest Yield. A Participant may, by written request filed with the Company at least 13 months prior to the commencement of a distribution pursuant to this Plan, change the method of distribution elected in his/her Agreement to any other method permitted under this Section 4.8. -7-

b) In the event of the death of the Participant, as described in Sections 4.4. or 4.5, the Participant's Beneficiary may, with the consent of the Company, elect an alternative form of benefit payment, such as a lump-sum payment or a shorter installment period. In such event, the applicable Death Interest Yield shall be utilized in determining the Deferred Benefit Account until all payments have been made to the Beneficiary of the deceased Participant. c) In the event that a Participant retires on or subsequent to his/her Early Benefit Date but prior to his/her Normal Benefit Date, the Participant may file a written request with the Company requesting the deferral of his/her Retirement Benefit until up to age 70. The written request must be made at least 13 months prior to the Participant's Termination of Service. The Company may, but is not required to, grant the Participant's request. 4.9 Tax Withholding. To the extent required by law in effect at the time payments are made, the Company shall withhold any taxes required to be withheld by any Federal, State, or local government. 4.10 Commencement of Payments. Unless otherwise provided, commencement of payments under this Plan shall be within 60 days following receipt of notice by the Company of an event which entitles a Participant or a Beneficiary to payments under this Plan, or at such earlier date as may be determined by the Company. All

b) In the event of the death of the Participant, as described in Sections 4.4. or 4.5, the Participant's Beneficiary may, with the consent of the Company, elect an alternative form of benefit payment, such as a lump-sum payment or a shorter installment period. In such event, the applicable Death Interest Yield shall be utilized in determining the Deferred Benefit Account until all payments have been made to the Beneficiary of the deceased Participant. c) In the event that a Participant retires on or subsequent to his/her Early Benefit Date but prior to his/her Normal Benefit Date, the Participant may file a written request with the Company requesting the deferral of his/her Retirement Benefit until up to age 70. The written request must be made at least 13 months prior to the Participant's Termination of Service. The Company may, but is not required to, grant the Participant's request. 4.9 Tax Withholding. To the extent required by law in effect at the time payments are made, the Company shall withhold any taxes required to be withheld by any Federal, State, or local government. 4.10 Commencement of Payments. Unless otherwise provided, commencement of payments under this Plan shall be within 60 days following receipt of notice by the Company of an event which entitles a Participant or a Beneficiary to payments under this Plan, or at such earlier date as may be determined by the Company. All payments shall be made as of the first day of the month. Benefits paid pursuant to Section 4.2 may commence no earlier than age 55 and Deferred Benefit Accounts must be paid out no later than age 85. 4.11 Recipients of Payments: Designation of Beneficiary. All payments to be made by the Company under the Plan shall be made to the Participant during his/her lifetime, provided that if the Participant dies prior to the completion of such payments, then all subsequent payments under the Plan shall be made by the Company to the Beneficiary determined in accordance with this Section 4.11. The Participant may designate a Beneficiary by filing a written notice of such designation with the Company in such form as the Company requires and may include contingent Beneficiaries. The Participant may from time-to-time change the designated Beneficiary by filing a new designation in writing with the Company. If no designation is in effect or if an existing designation is determined to be invalid or ineffective at the time any benefits payable under this Plan become due, the Beneficiary shall be the spouse of the Participant, or if no spouse is then living, the representatives of the Participant's estate. V. CLAIMS FOR BENEFITS PROCEDURE 5.1 Claim for Benefits. Any claim for benefits under the Plan shall be made in writing to the Company. If such claim is wholly or partially denied by the Company, the Company shall, within a reasonable period of time, but not later than 60 days after receipt of the claim, notify the claimant of the denial of the claim. Such notice of denial shall be in writing and shall contain: (a) The specific reason(s) for denial of the claim; (b) A reference to the relevant Plan provisions upon which the denial is based; -8-

(c) A description of any additional material or information necessary for the claimant to perfect the claim, together with an explanation of why such material or information is necessary; and (d) An explanation of the Plan's claim review procedure. If no such notice is provided, the claim shall be deemed granted. 5.2 Request for Review of a Denial of a Claim for Benefits. Upon the receipt by the claimant of written notice of a denial of a claim, the claimant may within 90 days file a written request to the Committee, requesting a review of the denial of the claim, which review shall include a hearing if deemed necessary by the Committee. In connection with the claimant's appeal of the denial of his/her claim, he/she may review relevant documents and may submit issues and comments in writing. 5.3 Decision Upon Review of Denial of Claim for Benefits. The Committee shall render a decision on the claim review promptly, but no more than 60 days after the receipt of the claimant's request for review, unless special

(c) A description of any additional material or information necessary for the claimant to perfect the claim, together with an explanation of why such material or information is necessary; and (d) An explanation of the Plan's claim review procedure. If no such notice is provided, the claim shall be deemed granted. 5.2 Request for Review of a Denial of a Claim for Benefits. Upon the receipt by the claimant of written notice of a denial of a claim, the claimant may within 90 days file a written request to the Committee, requesting a review of the denial of the claim, which review shall include a hearing if deemed necessary by the Committee. In connection with the claimant's appeal of the denial of his/her claim, he/she may review relevant documents and may submit issues and comments in writing. 5.3 Decision Upon Review of Denial of Claim for Benefits. The Committee shall render a decision on the claim review promptly, but no more than 60 days after the receipt of the claimant's request for review, unless special circumstances (such as the need to hold a hearing) require an extension of time, in which case the 60 day period shall be extended to 120 days. Such decision shall: (a) Include specific reasons for the decision; (b) Be written in a manner calculated to be understood by the claimant; and (c) Contain specific references to the relevant Plan provisions upon which the decision is based. The decision of the Committee shall be final and binding in all respects on both the Company and the claimant. VI. ADMINISTRATION 6.1 In general, the Plan shall be administered by the Company. 6.2 Administrative Rights, Powers, and Duties. The Company shall be responsible for the management, operation, and administration of the Plan. In addition to any powers, rights and duties set forth elsewhere in the Plan, the Company shall have the following powers and duties: (a) To adopt such rules and regulations consistent with the provisions of the Plan as it deems necessary for the proper and efficient administration of the Plan; (b) To administer the Plan in accordance with its terms and any rules and regulations it establishes; (c) To maintain records concerning the Plan sufficient to prepare reports, returns and other information required by the Plan or by law; -9-

(d) To construe and interpret the Plan and to resolve all questions arising under the Plan; (e) To direct the payment of benefits under the Plan, and to give such other directions and instructions as may be necessary for the proper administration of the Plan; (f) To employ or retain agents, attorneys, actuaries, accountants or other persons, who may also be employed by or represent the Company in matters other than this Plan; and (g) To be responsible for the preparation, filing and disclosure on behalf of the Plan of such documents and reports as are required by any applicable Federal or State law. 6.3 Information to be Furnished to Committee. The Company shall furnish the Committee such data and information as it may require. The records of the Company shall be determinative of each Participant's period of

(d) To construe and interpret the Plan and to resolve all questions arising under the Plan; (e) To direct the payment of benefits under the Plan, and to give such other directions and instructions as may be necessary for the proper administration of the Plan; (f) To employ or retain agents, attorneys, actuaries, accountants or other persons, who may also be employed by or represent the Company in matters other than this Plan; and (g) To be responsible for the preparation, filing and disclosure on behalf of the Plan of such documents and reports as are required by any applicable Federal or State law. 6.3 Information to be Furnished to Committee. The Company shall furnish the Committee such data and information as it may require. The records of the Company shall be determinative of each Participant's period of employment, termination of employment and the reason therefore, leave of absence, reemployment, Years of Service, personal data, and Salary and Bonus reductions. Participants and their Beneficiaries shall furnish to the Company such evidence, data, or information, and execute such documents as it requests. 6.4 Responsibility. No employee of the Company, member of the Committee or of the Board of Directors of the Company shall be liable to any person for any action taken or omitted in connection with the administration of this Plan. VII. AMENDMENT AND TERMINATION 7.1 Amendment. The Plan may be amended in whole or in part by the Company at any time. Notice of any such amendment shall be given in writing to the Committee and to each Participant and each Beneficiary of a deceased Participant. An amendment may not decrease the value of a Participant's Deferred Benefit Account. 7.2 Company's Right to Terminate. The Company or the Committee may terminate the Plan and/or any Agreements pertaining to the Participant at any time after the Plan Effective Date. In the event of any such termination, the Participant shall be entitled to the amount of his/her Deferred Benefit Account determined under Section 3.8, using the Retirement Interest Yield as of the date of termination of the Plan and/or his/her Agreement. Such benefit shall be paid to the Participant in quarterly installments over a period of no more than 15 years, except that the Company, in its sole discretion, may pay out such benefit in a lump sum or in installments over a period shorter than 15 years. -10-

7.3 Change in Control. If there is a Change in Control, notwithstanding any other provision of this Plan, any Participant or Beneficiary who has a Deferred Benefit Account hereunder shall, at any time during an 18 month period immediately following a Change in Control, have the right to request and be paid by the Company a lump sum payment equal to 90% of the Participant's remaining Deferred Benefit Account. The remaining 10% of the Participant's Deferred Benefit Account shall be permanently forfeited and shall not be paid to, or in respect of, the Participant. In the event no such request is made by a Participant, the Plan and Agreement shall remain in full force and effect with respect to such Participant. VIII. MISCELLANEOUS 8.1 No Implied Rights: Rights on Termination of Service. Neither the establishment of the Plan nor any amendment thereof shall be construed as giving any Participant, Beneficiary or any other person any legal or equitable right unless such right shall be specifically provided for in the Plan or conferred by specific action of the Company in accordance with the terms and provisions of the Plan. Except as expressly provided in this Plan, the Company shall not be required or be liable to make any payment under this Plan subsequent to the Termination of Service of the Participant. 8.2 No Right to Company Assets. Neither the Participant 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 whatsoever including, without limiting the generality of the foregoing any specific funds, assets or other property which the Company, in its sole discretion,

7.3 Change in Control. If there is a Change in Control, notwithstanding any other provision of this Plan, any Participant or Beneficiary who has a Deferred Benefit Account hereunder shall, at any time during an 18 month period immediately following a Change in Control, have the right to request and be paid by the Company a lump sum payment equal to 90% of the Participant's remaining Deferred Benefit Account. The remaining 10% of the Participant's Deferred Benefit Account shall be permanently forfeited and shall not be paid to, or in respect of, the Participant. In the event no such request is made by a Participant, the Plan and Agreement shall remain in full force and effect with respect to such Participant. VIII. MISCELLANEOUS 8.1 No Implied Rights: Rights on Termination of Service. Neither the establishment of the Plan nor any amendment thereof shall be construed as giving any Participant, Beneficiary or any other person any legal or equitable right unless such right shall be specifically provided for in the Plan or conferred by specific action of the Company in accordance with the terms and provisions of the Plan. Except as expressly provided in this Plan, the Company shall not be required or be liable to make any payment under this Plan subsequent to the Termination of Service of the Participant. 8.2 No Right to Company Assets. Neither the Participant 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 whatsoever including, without limiting the generality of the foregoing any specific funds, assets or other property which the Company, in its sole discretion, may set aside in anticipation of a liability hereunder. Any benefits which become payable hereunder shall be paid from the general assets of the Company. The Participant shall have only a contractual right to the amounts, if any, payable hereunder unsecured by any asset of the Company. Nothing contained in the Plan constitutes a guarantee by the Company that the assets of the Company shall be sufficient to pay any benefit to any person. 8.3 No Employment Rights. Nothing herein shall constitute a contract of continuing service or in any manner obligate the Company to continue the services of the Participant, or obligate the Participant to continue in the service of the Company, or as a limitation of the right of the Company to discharge any of its employees, with or without cause. Nothing herein shall be construed as fixing or regulating the Salary and Bonus payable to the Participant. 8.4 Offset. If at the time payments or installments of payments are to be made hereunder, the Participant or the Beneficiary or both are indebted or obligated to the Company, then the payments remaining to be made to the Participant or the Beneficiary or both may, at the discretion of the Company, be reduced by the amount of such indebtedness or obligation, provided, however, that an election by the Company not to reduce any such payment or payments shall not constitute a waiver of its claim for such indebtedness or obligation. -11-

8.5 Non-assignability. Neither the Participant 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 seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by the Participant or any other person, or be transferable by operation of law in the event of the Participant's or any other person's bankruptcy or insolvency. 8.6 Notice. Any notice required or permitted to be given under the Plan shall be sufficient if in writing and hand delivered, or sent by registered or certified mail, and if given to the Company, delivered to the principal office of the Company, directed to the attention of the CEO. Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or the receipt for registration or certification. 8.7 Governing Laws. The Plan shall be construed and administered according to the laws of the State of Illinois. IN WITNESS WHEREOF, the Company has adopted and restated this Illinois Tool Works Inc. Executive Contributory Retirement Income Plan on January 1, 1999.

8.5 Non-assignability. Neither the Participant 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 seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by the Participant or any other person, or be transferable by operation of law in the event of the Participant's or any other person's bankruptcy or insolvency. 8.6 Notice. Any notice required or permitted to be given under the Plan shall be sufficient if in writing and hand delivered, or sent by registered or certified mail, and if given to the Company, delivered to the principal office of the Company, directed to the attention of the CEO. Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or the receipt for registration or certification. 8.7 Governing Laws. The Plan shall be construed and administered according to the laws of the State of Illinois. IN WITNESS WHEREOF, the Company has adopted and restated this Illinois Tool Works Inc. Executive Contributory Retirement Income Plan on January 1, 1999. ILLINOIS TOOL WORKS INC.
By: /s/ John Karpan --------------------------------------------Its: Senior Vice President, Human Resources ---------------------------------------------

-12-

Exhibit 10(m) Illinois Tool Works Inc. Non-officer Directors' Fee Conversion Plan RESOLVED: that 1. The Company establishes the "Non-officer Directors' Fee Conversion Plan" ("Plan") pursuant to which each non-officer Director of the Company can elect that all or a portion of his or her retainer and meeting fees be paid in the form of shares of ITW Common Stock ("ITW Shares"); 2. An appropriate election shall be made annually, but may be rescinded at any time. 3. The number of ITW Shares to be issued to a Director shall be determined by dividing the dollar amount of the fee subject to the election by the closing price of ITW shares on the date such fee would have otherwise been paid in cash, as reported in the Wall Street Journal for such date or, if no sales of ITW Shares were reported for that date, on the most recent preceding date on which such stock was traded. Any fractional shares resulting from this calculation will be paid in cash; and 4. The Board shall have broad discretion to administer this Plan. FURTHER RESOLVED: that management is authorized to prepare and execute a Registration Statement and to file such Registration Statement with the Securities and Exchange Commission (the "SEC") for the registration under the Securities Act of 1933, as amended, of 50,000 ITW Shares to be offered under the Plan and to take any and all other actions (including the preparation of a prospectus summarizing the Plan underlying such Registration Statement) as may be necessary or desirable to cause the Registration Statement to be filed and to become effective; and

Exhibit 10(m) Illinois Tool Works Inc. Non-officer Directors' Fee Conversion Plan RESOLVED: that 1. The Company establishes the "Non-officer Directors' Fee Conversion Plan" ("Plan") pursuant to which each non-officer Director of the Company can elect that all or a portion of his or her retainer and meeting fees be paid in the form of shares of ITW Common Stock ("ITW Shares"); 2. An appropriate election shall be made annually, but may be rescinded at any time. 3. The number of ITW Shares to be issued to a Director shall be determined by dividing the dollar amount of the fee subject to the election by the closing price of ITW shares on the date such fee would have otherwise been paid in cash, as reported in the Wall Street Journal for such date or, if no sales of ITW Shares were reported for that date, on the most recent preceding date on which such stock was traded. Any fractional shares resulting from this calculation will be paid in cash; and 4. The Board shall have broad discretion to administer this Plan. FURTHER RESOLVED: that management is authorized to prepare and execute a Registration Statement and to file such Registration Statement with the Securities and Exchange Commission (the "SEC") for the registration under the Securities Act of 1933, as amended, of 50,000 ITW Shares to be offered under the Plan and to take any and all other actions (including the preparation of a prospectus summarizing the Plan underlying such Registration Statement) as may be necessary or desirable to cause the Registration Statement to be filed and to become effective; and FURTHER RESOLVED: that management is authorized to do or cause to have done any and all further acts, as management may, with the advice of counsel, deem necessary or desirable to carry out the purpose and intent of this resolution and to comply with all legal requirement relating thereto.

EXHIBIT 13 MANAGEMENT'S DISCUSSION AND ANALYSIS INTRODUCTION Illinois Tool Works Inc. is a multinational manufacturer of highly engineered products and specialty systems. The Company has 400 operations in 35 countries which are aggregated and organized for internal reporting purposes into the following five segments: Engineered Products--North America, Engineered Products--International, Specialty Systems--North America, Specialty Systems--International, and Leasing and Investments. These segments are described below. ENGINEERED PRODUCTS--NORTH AMERICA Businesses in this segment are located in North America and manufacture short lead-time components and fasteners, and specialty products such as adhesives, resealable packaging and electronic component packaging. In 1998, this segment primarily served the automotive (38%), construction (27%), and general industrial (14%) markets.
Dollars in thousands 1998 1997 1996 -------------------------------------------------------------------------------Operating revenues $1,790,221 $1,596,156 $1,480,214 Operating income 363,369 307,106 274,670 Margin % 20.3% 19.2% 18.6%

EXHIBIT 13 MANAGEMENT'S DISCUSSION AND ANALYSIS INTRODUCTION Illinois Tool Works Inc. is a multinational manufacturer of highly engineered products and specialty systems. The Company has 400 operations in 35 countries which are aggregated and organized for internal reporting purposes into the following five segments: Engineered Products--North America, Engineered Products--International, Specialty Systems--North America, Specialty Systems--International, and Leasing and Investments. These segments are described below. ENGINEERED PRODUCTS--NORTH AMERICA Businesses in this segment are located in North America and manufacture short lead-time components and fasteners, and specialty products such as adhesives, resealable packaging and electronic component packaging. In 1998, this segment primarily served the automotive (38%), construction (27%), and general industrial (14%) markets.
Dollars in thousands 1998 1997 1996 -------------------------------------------------------------------------------Operating revenues $1,790,221 $1,596,156 $1,480,214 Operating income 363,369 307,106 274,670 Margin % 20.3% 19.2% 18.6%

In 1998, revenues increased versus 1997 largely due to acquisitions, primarily in the automotive and general industrial businesses, which contributed 8% to the revenue growth. The primary contributors to the base business revenue growth of 5% were the construction, automotive and general industrial businesses. Operating income grew 18% in 1998 due to cost reductions in the base businesses and acquisitions. Margins improved in 1998 due to cost improvements in the base businesses, partially offset by lower margins for acquired businesses. Revenues and operating income increased in 1997 over 1996 mainly due to acquisitions and growth in the base businesses, primarily in the automotive businesses. The sale of a fastener distribution business in the first quarter of 1997 moderated revenue growth. New products and increased market penetration in the adhesives and automotive businesses resulted in margin growth, partially offset by flat operating income in the construction businesses. ENGINEERED PRODUCTS--INTERNATIONAL Businesses in this segment are located outside North America and manufacture short lead-time components and fasteners, and specialty products such as electronic component packaging and adhesives. In 1998, this segment primarily served the automotive (37%), construction (33%), electronics (10%), and general industrial (10%) markets.
Dollars in thousands 1998 1997 1996 -------------------------------------------------------------------------------Operating revenues $ 937,243 $ 875,200 $ 877,088 Operating income 140,323 136,511 108,398 Margin % 15.0% 15.6% 12.4%

Revenues increased in 1998 compared with 1997 mainly due to acquisitions, primarily in the construction businesses, which had a contribution of 9% to the revenue growth. The general industrial, electronic component packaging and automotive businesses were the primary contributors to the base business revenue growth of 4%. Operating income was higher in 1998 due to cost reductions in the base businesses and due to acquisitions. Margins were lower in 1998 as a result of the lower margins of acquired companies, partially offset by the effect of cost improvements in the base businesses. Foreign currency fluctuations in 1998 versus 1997 decreased revenues by 6% and operating income by 7%. Revenues for the base businesses grew in 1997 over 1996 due to increased market penetration by the European automotive businesses. The increase in revenues was more than offset, however, by the negative effect of European currencies against the U.S. dollar and flat revenues for the construction businesses. A more profitable product mix and lower overall cost structure in the construction businesses, however, combined with increased revenues in the international automotive operations, resulted in strong operating income and margin increases.

revenues in the international automotive operations, resulted in strong operating income and margin increases. Foreign currency fluctuations in 1997 versus 1996 decreased revenues by 7% and operating income by 9%. 16

ILLINOIS TOOL WORKS INC. SPECIALTY SYSTEMS--NORTH AMERICA Businesses in this segment are located in North America and produce longer lead-time machinery and related consumables, and specialty equipment for applications such as industrial spray coating, quality measurement, and static control. In 1998, this segment primarily served the general industrial (30%), construction (15%), food and beverage (15%), and automotive (12%) markets.
Dollars in thousands 1998 1997 1996 -------------------------------------------------------------------------------Operating revenues $2,000,308 $2,012,851 $1,930,503 Operating income 377,994 329,984 296,493 Margin % 18.9% 16.4% 15.4%

In 1998, revenues declined 2% in the base businesses as a result of slower growth in the North American industrial markets, which affected the majority of the businesses. The effect of divestitures also contributed 2% to the revenue decrease. Acquisitions increased revenues by 4%, which almost offset the revenue declines from the base businesses and divestitures. Despite the decrease in revenues, operating income and margins increased due to administrative and manufacturing cost reductions. Acquisitions also contributed to the higher operating income in 1998. Revenues and operating income increased in 1997 versus 1996 due primarily to acquisitions and new products in the decorating businesses, along with new product introductions in the welding and finishing systems businesses. Tempering revenue growth was a decline in revenues in the quality measurement businesses and a shift in product mix by the Signode operations from steel to plastic strapping systems, which sell for a lower unit price and higher margins. Reduced manufacturing costs at the Signode and the welding operations, increased revenues from the finishing systems businesses and growth in the decorating businesses contributed to operating income and margin increases. SPECIALTY SYSTEMS--INTERNATIONAL Businesses in this segment are located outside North America and manufacture longer lead-time machinery and related consumables, and specialty equipment for industrial spray coating and other applications. In 1998, this segment primarily served the general industrial (37%), food and beverage (15%), industrial capital goods (10%), and paper products (10%) markets.
Dollars in thousands 1998 1997 1996 -------------------------------------------------------------------------------Operating revenues $1,048,895 $ 919,063 $ 886,309 Operating income 125,617 113,509 95,715 Margin % 12.0% 12.4% 10.8%

Acquisitions, primarily in the Signode packaging and stretch film businesses, contributed 19% to the revenue growth in 1998. The base business revenues grew 1%, as higher sales in the stretch film equipment operations were partially offset by lower revenues in the businesses that serve the general industrial markets. Operating income and margins increased in the base operations due to cost improvements, but the lower margins of acquired businesses more than offset the margin increase. Foreign currency translation reduced revenues by 5% and operating income by 6% in 1998 versus 1997. Revenues grew in 1997, due primarily to the acquisition of a stretch film business in Europe and acquisitions in the Signode businesses. Currency translation and the sale of the European palletizing operations in the first quarter of 1997 partially offset the revenue growth. Operating income and margins also improved as a result of cost reductions in Signode operations and new product introductions in the finishing systems businesses. Foreign currency translation reduced revenues by 7% and operating income by 8% in 1997 versus 1996. LEASING AND INVESTMENTS

ILLINOIS TOOL WORKS INC. SPECIALTY SYSTEMS--NORTH AMERICA Businesses in this segment are located in North America and produce longer lead-time machinery and related consumables, and specialty equipment for applications such as industrial spray coating, quality measurement, and static control. In 1998, this segment primarily served the general industrial (30%), construction (15%), food and beverage (15%), and automotive (12%) markets.
Dollars in thousands 1998 1997 1996 -------------------------------------------------------------------------------Operating revenues $2,000,308 $2,012,851 $1,930,503 Operating income 377,994 329,984 296,493 Margin % 18.9% 16.4% 15.4%

In 1998, revenues declined 2% in the base businesses as a result of slower growth in the North American industrial markets, which affected the majority of the businesses. The effect of divestitures also contributed 2% to the revenue decrease. Acquisitions increased revenues by 4%, which almost offset the revenue declines from the base businesses and divestitures. Despite the decrease in revenues, operating income and margins increased due to administrative and manufacturing cost reductions. Acquisitions also contributed to the higher operating income in 1998. Revenues and operating income increased in 1997 versus 1996 due primarily to acquisitions and new products in the decorating businesses, along with new product introductions in the welding and finishing systems businesses. Tempering revenue growth was a decline in revenues in the quality measurement businesses and a shift in product mix by the Signode operations from steel to plastic strapping systems, which sell for a lower unit price and higher margins. Reduced manufacturing costs at the Signode and the welding operations, increased revenues from the finishing systems businesses and growth in the decorating businesses contributed to operating income and margin increases. SPECIALTY SYSTEMS--INTERNATIONAL Businesses in this segment are located outside North America and manufacture longer lead-time machinery and related consumables, and specialty equipment for industrial spray coating and other applications. In 1998, this segment primarily served the general industrial (37%), food and beverage (15%), industrial capital goods (10%), and paper products (10%) markets.
Dollars in thousands 1998 1997 1996 -------------------------------------------------------------------------------Operating revenues $1,048,895 $ 919,063 $ 886,309 Operating income 125,617 113,509 95,715 Margin % 12.0% 12.4% 10.8%

Acquisitions, primarily in the Signode packaging and stretch film businesses, contributed 19% to the revenue growth in 1998. The base business revenues grew 1%, as higher sales in the stretch film equipment operations were partially offset by lower revenues in the businesses that serve the general industrial markets. Operating income and margins increased in the base operations due to cost improvements, but the lower margins of acquired businesses more than offset the margin increase. Foreign currency translation reduced revenues by 5% and operating income by 6% in 1998 versus 1997. Revenues grew in 1997, due primarily to the acquisition of a stretch film business in Europe and acquisitions in the Signode businesses. Currency translation and the sale of the European palletizing operations in the first quarter of 1997 partially offset the revenue growth. Operating income and margins also improved as a result of cost reductions in Signode operations and new product introductions in the finishing systems businesses. Foreign currency translation reduced revenues by 7% and operating income by 8% in 1997 versus 1996. LEASING AND INVESTMENTS This segment makes opportunistic investments in mortgage-related assets, leveraged and direct financing leases of equipment, properties and property developments, and affordable housing.
Dollars in thousands 1998 1997 1996 --------------------------------------------------------------------------------

Operating revenues Operating income

$

149,748 71,983

$

101,110 40,113

$

68,357 25,310

Revenues and operating income increased in 1998 due primarily to the commercial mortgage transaction entered into at year-end 1997. Increased property development activity and sales of mortgage-related assets also contributed to the higher revenues and operating income. Revenues and operating income increased in 1997 primarily due to the commercial mortgage transaction entered into at year-end 1996. In December 1997, the Company acquired a pool of mortgage-related assets in exchange for a nonrecourse note payable of $217.4 million, preferred stock of a subsidiary of $20 million and cash of $80 million. In December 1996, the Company acquired a pool of mortgage-related assets in exchange for a nonrecourse note payable of $266.3 million, preferred stock of a subsidiary of $20 million and cash of $80 million. In December 1995, the Company acquired a pool of mortgage-related assets in exchange for a nonrecourse note payable of $256 million, preferred stock of a subsidiary of $20 million and cash of $80 million. The mortgage-related assets for the three transactions are located throughout the U.S. and include 24 subperforming, variable rate, balloon loans and 23 foreclosed properties at December 31, 1998. In conjunction with these transactions, the Company simultaneously entered into ten-year swap agreements and other related agreements whereby the Company will pay a third party the portion of the interest and net operating cash flow from the mortgage-related assets in excess of $26 million per year and a portion of the proceeds from the disposition of the mortgage-related assets and principal repayments, in exchange for the third party making payments to the Company equal to the 17

MANAGEMENT'S DISCUSSION AND ANALYSIS contractual principal and interest payments on the nonrecourse notes payable. In addition, in the event that the pools of mortgage-related assets do not generate income of $26 million a year, the Company has a collateral right against the cash flow generated by three separate pools of mortgage-related assets (owned by third parties in which the Company has minimal interests) which have a total fair value of approximately $2.7 billion at December 31, 1998. The Company entered into the swaps and other related agreements in order to reduce its credit and interest rate risks relative to the mortgage-related assets. The Company expects to recover its net investment in the mortgage-related assets of $320.2 million at December 31, 1998 (net of the related nonrecourse notes payable) through its expected net cash flow of $26 million per year for the remainder of the ten-year periods and its estimated $415.4 million share of the total proceeds from disposition of the mortgage-related assets and principal repayments. The Company believes that because the swaps' counterparty is Aaa-rated and that significant collateral secures the net annual cash flow of $26 million, its risk of not recovering that portion of its net investment has been significantly mitigated. The Company currently believes that its share of the disposition proceeds will be sufficient to recover the remainder of its net investment. However, there can be no assurances that all of the net investment will be recovered. The net assets attributed to the Leasing and Investments segment at December 31, 1998 and 1997 are summarized as follows:
In thousands 1998 1997 ----------------------------------------------------------------Assets: Investments-Mortgage-related assets $1,018,698 $1,017,984 Leases 78,396 79,875 Properties and affordable housing 50,837 57,549 Prepaid forward contract 20,247 -Other 15,315 14,607 Deferred tax assets 345,127 360,262 Other assets 1,422 4,519 ------------------1,530,042 1,534,796 ========== ========== Liabilities: Debt-Nonrecourse notes payable 698,462 720,125 Allocated general corporate debt 258,751 302,332 Deferred investment income 313,144 327,508

MANAGEMENT'S DISCUSSION AND ANALYSIS contractual principal and interest payments on the nonrecourse notes payable. In addition, in the event that the pools of mortgage-related assets do not generate income of $26 million a year, the Company has a collateral right against the cash flow generated by three separate pools of mortgage-related assets (owned by third parties in which the Company has minimal interests) which have a total fair value of approximately $2.7 billion at December 31, 1998. The Company entered into the swaps and other related agreements in order to reduce its credit and interest rate risks relative to the mortgage-related assets. The Company expects to recover its net investment in the mortgage-related assets of $320.2 million at December 31, 1998 (net of the related nonrecourse notes payable) through its expected net cash flow of $26 million per year for the remainder of the ten-year periods and its estimated $415.4 million share of the total proceeds from disposition of the mortgage-related assets and principal repayments. The Company believes that because the swaps' counterparty is Aaa-rated and that significant collateral secures the net annual cash flow of $26 million, its risk of not recovering that portion of its net investment has been significantly mitigated. The Company currently believes that its share of the disposition proceeds will be sufficient to recover the remainder of its net investment. However, there can be no assurances that all of the net investment will be recovered. The net assets attributed to the Leasing and Investments segment at December 31, 1998 and 1997 are summarized as follows:
In thousands 1998 1997 ----------------------------------------------------------------Assets: Investments-Mortgage-related assets $1,018,698 $1,017,984 Leases 78,396 79,875 Properties and affordable housing 50,837 57,549 Prepaid forward contract 20,247 -Other 15,315 14,607 Deferred tax assets 345,127 360,262 Other assets 1,422 4,519 ------------------1,530,042 1,534,796 ========== ========== Liabilities: Debt-Nonrecourse notes payable 698,462 720,125 Allocated general corporate debt 258,751 302,332 Deferred investment income 313,144 327,508 Preferred stock of subsidiaries 70,000 60,000 Other liabilities 24,291 16,720 ------------------1,364,648 1,426,685 ------------------Net assets $ 165,394 $ 108,111 ========== ==========

OPERATING REVENUES Total operating revenues increased 8.2% in 1998 versus 1997 and 4.5% in 1997 compared with 1996. Overall, the Company believes that the majority of the increases in operating revenues is due to higher sales volume rather than increased sales prices. COST OF REVENUES Cost of revenues as a percentage of revenues was 64.2% in 1998 compared with 64.7% in 1997 and 65.7% in 1996. The continued decline in this ratio was mainly due to increased sales volume coupled with lower manufacturing costs. SELLING, ADMINISTRATIVE AND R&D EXPENSES Selling, administrative, and research and development expenses were 15.8% of revenues in 1998 versus 16.7% in 1997 and 17.5% in 1996. This ratio continues to decline because of increasing revenues and expense reductions as a result of a Company-wide objective to reduce administrative costs.

INTEREST EXPENSE Interest expense decreased to $14.2 million in 1998 versus $19.4 million in 1997, and $27.8 million in 1996, primarily due to higher interest expense in 1997 and 1996 because of debt assumed from acquisitions. Interest costs of $64.4 million in 1998, $49.3 million in 1997, and $24.8 million in 1996 attributed to the Leasing and Investments segment have been classified in the segment's cost of revenues. 18

Illinois Tool Works Inc. OTHER INCOME (EXPENSE) Other income (expense) was an expense of $5.5 million in 1998 versus income of $16.5 million in 1997, primarily due to losses on the sale of operations in 1998 versus gains on the sale of operations in 1997 and lower interest income in 1998 versus 1997. Other income was $16.5 million in 1997 versus expense of $2.4 million in 1996, primarily due to higher gains on the sale of operations, foreign currency translation gains, and debt prepayment costs in 1996, partially offset by higher losses on sale of fixed assets in 1997. INCOME TAXES The effective tax rate was 36.5% in 1998 and 1997 and 36.9% in 1996. See the Income Taxes note for a reconciliation of the U.S. federal statutory rate to the effective tax rate. The Company has not recorded a valuation allowance on the net deferred income tax assets of $520.0 million at December 31, 1998, and $548.4 million at December 31, 1997, as it expects to continue to generate significant taxable income in future years. NET INCOME Net income in 1998 of $672.8 million ($2.69 per basic share and $2.67 per diluted share) was 14.6% higher than 1997 net income of $587.0 million ($2.35 per basic share and $2.33 per diluted share). Net income in 1997 was 20.7% higher than 1996 net income of $486.3 million ($1.96 per basic share and $1.95 per diluted share). FOREIGN CURRENCY The strengthening of the U.S. dollar against foreign currencies in 1998 and 1997 resulted in decreased operating revenues of $114 million in 1998 and $142 million in 1997 and decreased net income by approximately 5 cents per diluted share in 1998 and 1997. Foreign currency fluctuations had minimal impact on revenues or earnings in 1996. FINANCIAL POSITION Net working capital at December 31, 1998 and 1997 is summarized as follows:
Increase Dollars in thousands 1998 1997 (Decrease) -------------------------------------------------------------------------------Current Assets: Cash and equivalents $ 93,485 $ 185,856 $ (92,371) Trade receivables 989,086 902,022 87,064 Inventories 581,755 522,996 58,759 Other 170,147 247,768 (77,621) ----------------------------1,834,473 1,858,642 (24,169) ========== ========== =========== Current Liabilities: Short-term debt 406,707 298,278 108,429 Accounts payable and accrued expenses 726,412 727,469 (1,057) Other 88,890 132,133 (43,243) 1,222,009 1,157,880 64,129 ---------------------------Net Working Capital $ 612,464 $ 700,762 $ (88,298) ========== ========== ========== Current Ratio 1.50 1.61 ========== ==========

Illinois Tool Works Inc. OTHER INCOME (EXPENSE) Other income (expense) was an expense of $5.5 million in 1998 versus income of $16.5 million in 1997, primarily due to losses on the sale of operations in 1998 versus gains on the sale of operations in 1997 and lower interest income in 1998 versus 1997. Other income was $16.5 million in 1997 versus expense of $2.4 million in 1996, primarily due to higher gains on the sale of operations, foreign currency translation gains, and debt prepayment costs in 1996, partially offset by higher losses on sale of fixed assets in 1997. INCOME TAXES The effective tax rate was 36.5% in 1998 and 1997 and 36.9% in 1996. See the Income Taxes note for a reconciliation of the U.S. federal statutory rate to the effective tax rate. The Company has not recorded a valuation allowance on the net deferred income tax assets of $520.0 million at December 31, 1998, and $548.4 million at December 31, 1997, as it expects to continue to generate significant taxable income in future years. NET INCOME Net income in 1998 of $672.8 million ($2.69 per basic share and $2.67 per diluted share) was 14.6% higher than 1997 net income of $587.0 million ($2.35 per basic share and $2.33 per diluted share). Net income in 1997 was 20.7% higher than 1996 net income of $486.3 million ($1.96 per basic share and $1.95 per diluted share). FOREIGN CURRENCY The strengthening of the U.S. dollar against foreign currencies in 1998 and 1997 resulted in decreased operating revenues of $114 million in 1998 and $142 million in 1997 and decreased net income by approximately 5 cents per diluted share in 1998 and 1997. Foreign currency fluctuations had minimal impact on revenues or earnings in 1996. FINANCIAL POSITION Net working capital at December 31, 1998 and 1997 is summarized as follows:
Increase Dollars in thousands 1998 1997 (Decrease) -------------------------------------------------------------------------------Current Assets: Cash and equivalents $ 93,485 $ 185,856 $ (92,371) Trade receivables 989,086 902,022 87,064 Inventories 581,755 522,996 58,759 Other 170,147 247,768 (77,621) ----------------------------1,834,473 1,858,642 (24,169) ========== ========== =========== Current Liabilities: Short-term debt 406,707 298,278 108,429 Accounts payable and accrued expenses 726,412 727,469 (1,057) Other 88,890 132,133 (43,243) 1,222,009 1,157,880 64,129 ---------------------------Net Working Capital $ 612,464 $ 700,762 $ (88,298) ========== ========== ========== Current Ratio 1.50 1.61 ========== ==========

The increase in trade receivables and inventories at December 31, 1998, was primarily due to 1998 acquisitions. Short-term debt increased at December 31, 1998, due to the higher commercial paper borrowings used to fund 1998 acquisitions. Long-term debt at December 31, 1998, consisted of $100 million of commercial paper, $125 million of 5.875% notes, $698 million of nonrecourse notes, and $57 million of capitalized lease obligations and other debt. Longterm debt increased $93 million from December 31, 1997, principally as a result of higher commercial paper borrowings. Excluding the effect of the Leasing and Investments segment, the percentage of total debt to total capitalization increased to 11.1% at December 31, 1998, from 4.6% at December 31, 1997. In February 1999,

the Company issued $500 million of 5.75% notes due March 1, 2009. Stockholders' equity was $3.3 billion at December 31, 1998, compared with $2.8 billion at December 31, 1997. Affecting equity were earnings of $673 million, dividends declared of $135 million, and unfavorable currency translation adjustments of $22 million. The Statement of Cash Flows for the years ended December 31, 1998 and 1997 is summarized below:
In thousands 1998 1997 -------------------------------------------------------------------------------Net income $ 672,784 $ 586,951 Depreciation and amortization 211,779 185,386 Income from investments, net of non-cash interest on nonrecourse debt (90,932) (58,014) Acquisitions (751,981) (221,954) Additions to plant and equipment (207,918) (178,702) Cash dividends paid (127,421) (107,053) Net proceeds (repayments) of debt 199,090 (241,880) Purchase of investments (13,232) (89,729) Proceeds from investments 45,455 43,772 Other, net (29,995) 129,380 ----------------Net increase (decrease) in cash and equivalents $ (92,371) $ 48,157 ========= =========

19

MANAGEMENT'S DISCUSSION AND ANALYSIS Net cash provided by operating activities of $721 million in 1998 was primarily used for acquisitions, additions to plant and equipment, and cash dividends. Net cash provided by operating activities of $660 million in 1997 was primarily used for acquisitions, for additions to plant and equipment, for cash dividends, to repay debt assumed from acquisitions and to make investments. Commercial paper borrowings in 1998 were primarily used to fund acquisitions and to refinance maturing long-term debt. Dividends paid per share increased 19% to $.51 per share in 1998 from $.43 per share in 1997. The Company expects to continue to meet its dividend payout objective of 25-30% of the average of the last three years' net income. Management continues to believe that internally generated funds will be adequate to service existing debt and maintain appropriate debt to total capitalization and earnings to fixed charge ratios. Internally generated funds are also expected to be adequate to finance internal growth, small-to-medium sized acquisitions and additional investments. The Company has additional debt capacity to fund larger acquisitions. The Company had no material commitments for capital expenditures at December 31, 1998 or 1997. MARKET RISK Interest Rate Risk The Company's exposure to market risk for changes in interest rates relates primarily to the Company's long-term debt obligations and certain mortgage-related investments. The Company has no cash flow exposure on its long-term obligations related to changes in market interest rates. The Company primarily enters into long-term debt obligations for general corporate purposes, including the funding of capital expenditures and acquisitions. The Company has not entered into any material derivative financial instruments to hedge interest rate risk on these general corporate borrowings. The Company has also issued nonrecourse notes in connection with the three commercial mortgage transactions. The holders of these notes only have recourse against certain mortgage-related assets. The mortgage-related assets acquired in the commercial mortgage transactions include 24 and 38 subperforming, variable rate, balloon loans at December 31, 1998 and 1997, respectively. The fair value of these commercial mortgage loans fluctuates as market interest rates change. The Company has entered into swap and other related agreements to reduce its credit and interest rate risks relative to the commercial mortgage loans and other mortgage-related assets. See the Leasing & Investments section for additional details regarding the net swap

MANAGEMENT'S DISCUSSION AND ANALYSIS Net cash provided by operating activities of $721 million in 1998 was primarily used for acquisitions, additions to plant and equipment, and cash dividends. Net cash provided by operating activities of $660 million in 1997 was primarily used for acquisitions, for additions to plant and equipment, for cash dividends, to repay debt assumed from acquisitions and to make investments. Commercial paper borrowings in 1998 were primarily used to fund acquisitions and to refinance maturing long-term debt. Dividends paid per share increased 19% to $.51 per share in 1998 from $.43 per share in 1997. The Company expects to continue to meet its dividend payout objective of 25-30% of the average of the last three years' net income. Management continues to believe that internally generated funds will be adequate to service existing debt and maintain appropriate debt to total capitalization and earnings to fixed charge ratios. Internally generated funds are also expected to be adequate to finance internal growth, small-to-medium sized acquisitions and additional investments. The Company has additional debt capacity to fund larger acquisitions. The Company had no material commitments for capital expenditures at December 31, 1998 or 1997. MARKET RISK Interest Rate Risk The Company's exposure to market risk for changes in interest rates relates primarily to the Company's long-term debt obligations and certain mortgage-related investments. The Company has no cash flow exposure on its long-term obligations related to changes in market interest rates. The Company primarily enters into long-term debt obligations for general corporate purposes, including the funding of capital expenditures and acquisitions. The Company has not entered into any material derivative financial instruments to hedge interest rate risk on these general corporate borrowings. The Company has also issued nonrecourse notes in connection with the three commercial mortgage transactions. The holders of these notes only have recourse against certain mortgage-related assets. The mortgage-related assets acquired in the commercial mortgage transactions include 24 and 38 subperforming, variable rate, balloon loans at December 31, 1998 and 1997, respectively. The fair value of these commercial mortgage loans fluctuates as market interest rates change. The Company has entered into swap and other related agreements to reduce its credit and interest rate risks relative to the commercial mortgage loans and other mortgage-related assets. See the Leasing & Investments section for additional details regarding the net swap receivables. The table below presents the Company's financial instruments for which fair value is subject to changing market interest rates:
Mortgage-re General Corporate Debt and Related -----------------------------------------------------------7.5% notes due 5.875% notes Commercial 6.59% December 1, due March 1, mortgage Net swap nonrecourse nonr In thousands 1998 2000 loans receivables note --------------------------------------------------------------------------------------------------------AS OF DECEMBER 31, 1998: estimated cash inflow (outflow) by year of principal maturity-1999 $ -$ -$ 60,875 $ 60,082 $ (16,000) $ 2000 -(125,000) -(41,168) (16,000) 2001 ---65,157 (16,000) 2002 ---33,170 (16,000) 2003 ---43,071 (16,000) 2004 and thereafter --508,343 325,771 (137,500) ( Total -(125,000) 569,218 486,083 (217,500) ( Estimated fair value -(126,270) 510,795 371,000 (237,784) ( Carrying value -(125,000) 371,812 371,000 (217,500) ( AS OF DECEMBER 31, 1997: Total estimated cash inflow (outflow) Estimated fair value Carrying value

$ (125,000) (126,484) (125,000)

$(125,000) (124,707) (125,000)

$ 694,721 600,304 450,994

$ 616,861 420,378 420,378

$(236,500) (246,963) (236,500)

$( ( (

20

Illinois Tool Works Inc. Foreign Currency Risk The Company operates in the United States and 34 other countries. In general, the Company manufactures products that are sold in its significant foreign markets in the particular local country. As the initial funding for these foreign manufacturing operations is provided primarily through the permanent investment of capital from the U.S. parent company, the Company and its subsidiaries do not have significant assets or liabilities denominated in currencies other than their functional currencies. As such, the Company does not have any significant derivatives or other financial instruments which are subject to foreign currency risk at December 31, 1998 or 1997. YEAR 2000 ISSUE The Company utilizes software and related technologies throughout its businesses that will be affected by the date change in the year 2000. To determine the extent of the year 2000 compliance issues related to its computer systems, including equipment with embedded chip technology, the Company began an extensive internal study at all of its business units in 1997. Approximately 70% of the business units have completed testing of existing systems and remediation activities as of the end of 1998, and it is expected that substantially all businesses will have completed their projects by June 30, 1999. It is anticipated that the remaining non-critical year 2000 issues will be resolved by the end of 1999. The Company also has initiated formal communications with its significant suppliers, customers and other relevant third parties to determine the extent and steps that they are taking to be year 2000 compliant. To date, no significant issues have been identified. However, there is a risk that the systems of these other companies could have a negative impact on the Company's operations if they are not year 2000 compliant. To mitigate this risk, the Company is monitoring the status of these companies' year 2000 compliance programs. To the extent that critical suppliers are not compliant, in many instances the Company may be able to obtain alternative sources of raw materials or services. The Company believes that the overall risk of year 2000 issues having a material adverse effect on the Company's operations is mitigated by the Company's decentralized organization, in which there are 400 operating units and very few individual computer systems which affect a significant number of operating units. In addition, the Company's products are primarily components or consumable goods that do not have embedded chip technology. Approximately 20% of the Company's products are capital equipment goods that could have embedded chip issues. The Company is reviewing this equipment as part of its internal year 2000 compliance study. To date, because this equipment is generally not highly automated, no significant year 2000 issues related to the Company's equipment products have been identified. In case critical systems of third parties are not year 2000 compliant by the end of the first quarter of 1999, the Company has begun to develop contingency plans for the affected operations. Based on preliminary estimates, the total cost of the Company's year 2000 compliance program is approximately $34 million for 1997 through 1999. Of this amount, approximately 67% relates to capital expenditures and 33% to expensed costs. Approximately two-thirds of the total cost has been incurred through December 31, 1998. Estimates of year 2000 related costs are based upon numerous assumptions and there is no certainty that actual costs could not be significantly different from the estimates. FORWARD-LOOKING STATEMENTS This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, without limitation, statements regarding the adequacy of internally generated funds, the recoverability of the Company's investment in mortgage-related assets, and year 2000 readiness. These statements are subject to certain risks, uncertainties, and other factors which could cause actual results to differ materially from those anticipated, including, without limitation, the risks described herein. Important factors that may influence future results include (1) a downturn in the automotive, construction, general industrial or real estate markets, (2) deterioration in global and domestic business and economic conditions, particularly in North America, Europe and Australia, (3) an interruption in, or reduction in, introducing new products into the Company's product line, (4) an unfavorable environment for making acquisitions, domestic and foreign, including adverse accounting or regulatory requirements and market values of candidates, and (5) the failure of the Company's suppliers or customers to be year 2000 compliant or unexpected costs or difficulties in the Company becoming year 2000 compliant.

Illinois Tool Works Inc. Foreign Currency Risk The Company operates in the United States and 34 other countries. In general, the Company manufactures products that are sold in its significant foreign markets in the particular local country. As the initial funding for these foreign manufacturing operations is provided primarily through the permanent investment of capital from the U.S. parent company, the Company and its subsidiaries do not have significant assets or liabilities denominated in currencies other than their functional currencies. As such, the Company does not have any significant derivatives or other financial instruments which are subject to foreign currency risk at December 31, 1998 or 1997. YEAR 2000 ISSUE The Company utilizes software and related technologies throughout its businesses that will be affected by the date change in the year 2000. To determine the extent of the year 2000 compliance issues related to its computer systems, including equipment with embedded chip technology, the Company began an extensive internal study at all of its business units in 1997. Approximately 70% of the business units have completed testing of existing systems and remediation activities as of the end of 1998, and it is expected that substantially all businesses will have completed their projects by June 30, 1999. It is anticipated that the remaining non-critical year 2000 issues will be resolved by the end of 1999. The Company also has initiated formal communications with its significant suppliers, customers and other relevant third parties to determine the extent and steps that they are taking to be year 2000 compliant. To date, no significant issues have been identified. However, there is a risk that the systems of these other companies could have a negative impact on the Company's operations if they are not year 2000 compliant. To mitigate this risk, the Company is monitoring the status of these companies' year 2000 compliance programs. To the extent that critical suppliers are not compliant, in many instances the Company may be able to obtain alternative sources of raw materials or services. The Company believes that the overall risk of year 2000 issues having a material adverse effect on the Company's operations is mitigated by the Company's decentralized organization, in which there are 400 operating units and very few individual computer systems which affect a significant number of operating units. In addition, the Company's products are primarily components or consumable goods that do not have embedded chip technology. Approximately 20% of the Company's products are capital equipment goods that could have embedded chip issues. The Company is reviewing this equipment as part of its internal year 2000 compliance study. To date, because this equipment is generally not highly automated, no significant year 2000 issues related to the Company's equipment products have been identified. In case critical systems of third parties are not year 2000 compliant by the end of the first quarter of 1999, the Company has begun to develop contingency plans for the affected operations. Based on preliminary estimates, the total cost of the Company's year 2000 compliance program is approximately $34 million for 1997 through 1999. Of this amount, approximately 67% relates to capital expenditures and 33% to expensed costs. Approximately two-thirds of the total cost has been incurred through December 31, 1998. Estimates of year 2000 related costs are based upon numerous assumptions and there is no certainty that actual costs could not be significantly different from the estimates. FORWARD-LOOKING STATEMENTS This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, without limitation, statements regarding the adequacy of internally generated funds, the recoverability of the Company's investment in mortgage-related assets, and year 2000 readiness. These statements are subject to certain risks, uncertainties, and other factors which could cause actual results to differ materially from those anticipated, including, without limitation, the risks described herein. Important factors that may influence future results include (1) a downturn in the automotive, construction, general industrial or real estate markets, (2) deterioration in global and domestic business and economic conditions, particularly in North America, Europe and Australia, (3) an interruption in, or reduction in, introducing new products into the Company's product line, (4) an unfavorable environment for making acquisitions, domestic and foreign, including adverse accounting or regulatory requirements and market values of candidates, and (5) the failure of the Company's suppliers or customers to be year 2000 compliant or unexpected costs or difficulties in the Company becoming year 2000 compliant. 21

FINANCIAL STATEMENTS STATEMENT OF INCOME Illinois Tool Works Inc. and Subsidiaries
FOR THE YEARS ENDED D --------------------------------------------------------------------------------------------------------IN thousands except for per share amounts 1998 1997 --------------------------------------------------------------------------------------------------------Operating Revenues $5,647,889 $5,220,433 Cost of revenues 3,626,123 3,378,794 Selling, administrative, and research and development expenses 890,581 870,268 Amortization of goodwill and other intangible assets 44,593 36,842 Amortization of retiree health care 7,306 7,306 ------------------Operating Income 1,079,286 927,223 Interest expense (14,230) (19,383 Other income (expense) (5,472) 16,511 ------------------Income Before Income Taxes 1,059,584 924,351 Income taxes 386,800 337,400 ------------------Net Income $ 672,784 $ 586,951 ========== ========== Net Income Per Share: Basic $2.69 $2.35 ===== ===== Diluted $2.67 $2.33 ===== =====

STATEMENT OF INCOME REINVESTED IN THE BUSINESS ILLINOIS Tool Works Inc. and Subsidiaries
FOR THE YEARS ENDE --------------------------------------------------------------------------------------------------------IN thousands 1998 1997 --------------------------------------------------------------------------------------------------------Balance, Beginning of Year $2,592,416 $2,105,144 Net income 672,784 586,951 Cash dividends declared (134,987) (113,467 Effect of pooling of interests acquisitions -13,788 ------------------Balance, End of Year $3,130,213 $2,592,416 ========== ==========

FINANCIAL STATEMENTS STATEMENT OF INCOME Illinois Tool Works Inc. and Subsidiaries
FOR THE YEARS ENDED D --------------------------------------------------------------------------------------------------------IN thousands except for per share amounts 1998 1997 --------------------------------------------------------------------------------------------------------Operating Revenues $5,647,889 $5,220,433 Cost of revenues 3,626,123 3,378,794 Selling, administrative, and research and development expenses 890,581 870,268 Amortization of goodwill and other intangible assets 44,593 36,842 Amortization of retiree health care 7,306 7,306 ------------------Operating Income 1,079,286 927,223 Interest expense (14,230) (19,383 Other income (expense) (5,472) 16,511 ------------------Income Before Income Taxes 1,059,584 924,351 Income taxes 386,800 337,400 ------------------Net Income $ 672,784 $ 586,951 ========== ========== Net Income Per Share: Basic $2.69 $2.35 ===== ===== Diluted $2.67 $2.33 ===== =====

STATEMENT OF INCOME REINVESTED IN THE BUSINESS ILLINOIS Tool Works Inc. and Subsidiaries
FOR THE YEARS ENDE --------------------------------------------------------------------------------------------------------IN thousands 1998 1997 --------------------------------------------------------------------------------------------------------Balance, Beginning of Year $2,592,416 $2,105,144 Net income 672,784 586,951 Cash dividends declared (134,987) (113,467 Effect of pooling of interests acquisitions -13,788 ------------------Balance, End of Year $3,130,213 $2,592,416 ========== ==========

The Notes to Financial Statements are an integral part of these statements. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Illinois Tool Works Inc.: We have audited the accompanying statement of financial position of Illinois Tool Works Inc. (a Delaware corporation) and Subsidiaries as of December 31, 1998 and 1997, and the related statements of income, income reinvested in the business, cash flows and comprehensive income for each of the three years in the period ended December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Illinois Tool Works Inc. and Subsidiaries as of December 31, 1998 and 1997, and the results of their

position of Illinois Tool Works Inc. and Subsidiaries as of December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles.
/S/ ARTHUR ANDERSEN LLP Chicago, Illinois January 27, 1999

22

Illinois Tool Works Inc. STATEMENT OF FINANCIAL POSITION Illinois Tool Works Inc. and Subsidiaries
--------------------------------------------------------------------------------------------------------In thousands except shares 1998 --------------------------------------------------------------------------------------------------------ASSETS Current Assets: Cash and equivalents $ 93,485 Trade receivables 989,086 Inventories 581,755 Deferred income taxes 102,607 Prepaid expenses and other current assets 67,540 ----------Total current assets 1,834,473 ----------Plant and Equipment: Land 73,266 Buildings and improvements 554,383 Machinery and equipment 1,624,703 Equipment leased to others 107,186 Construction in progress 57,894 ----------2,417,432 Accumulated depreciation (1,429,883 ----------Net plant and equipment 987,549 ----------Investments Goodwill Deferred Income Taxes Other Assets 1,183,493 1,189,323 417,361 505,963 ----------$ 6,118,162 ===========

LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Short-term debt Accounts payable Accrued expenses Cash dividends payable Income taxes payable Total current liabilities Noncurrent Liabilities: Long-term debt Other Total noncurrent liabilities Stockholders' Equity: Preferred stock Common stock: Issued--250,388,969 shares in 1998 and 249,865,904 shares in 1997 Additional paid-in-capital

406,707 268,869 457,543 37,519 51,371 ----------1,222,009 ----------947,008 611,110 ----------1,558,118 ------------

$

2,504 302,684

Illinois Tool Works Inc. STATEMENT OF FINANCIAL POSITION Illinois Tool Works Inc. and Subsidiaries
--------------------------------------------------------------------------------------------------------In thousands except shares 1998 --------------------------------------------------------------------------------------------------------ASSETS Current Assets: Cash and equivalents $ 93,485 Trade receivables 989,086 Inventories 581,755 Deferred income taxes 102,607 Prepaid expenses and other current assets 67,540 ----------Total current assets 1,834,473 ----------Plant and Equipment: Land 73,266 Buildings and improvements 554,383 Machinery and equipment 1,624,703 Equipment leased to others 107,186 Construction in progress 57,894 ----------2,417,432 Accumulated depreciation (1,429,883 ----------Net plant and equipment 987,549 ----------Investments Goodwill Deferred Income Taxes Other Assets 1,183,493 1,189,323 417,361 505,963 ----------$ 6,118,162 ===========

LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Short-term debt Accounts payable Accrued expenses Cash dividends payable Income taxes payable Total current liabilities Noncurrent Liabilities: Long-term debt Other Total noncurrent liabilities Stockholders' Equity: Preferred stock Common stock: Issued--250,388,969 shares in 1998 and 249,865,904 shares in 1997 Additional paid-in-capital Income reinvested in the business Common stock held in treasury Cumulative translation adjustment Total stockholders' equity

406,707 268,869 457,543 37,519 51,371 ----------1,222,009 ----------947,008 611,110 ----------1,558,118 ------------

$

2,504 302,684 3,130,213 (1,783 (95,583 ----------3,338,035 ----------$ 6,118,162 ===========

The Notes to Financial Statements are an integral part of this statement. 23

FINANCIAL STATEMENTS STATEMENT OF CASH FLOWS Illinois Tool Works Inc. and Subsidiaries
FOR THE YEARS EN --------------------------------------------------------------------------------------------------------In thousands 1998 1997 --------------------------------------------------------------------------------------------------------Cash Provided by (Used for) Operating Activities: Net income $ 672,784 $ 586,951 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 211,779 185,386 Change in deferred income taxes 59,943 (7,819 Provision for uncollectible accounts 5,008 6,268 Loss on sale of plant and equipment 6,887 7,683 Income from investments (139,310) (93,652 Non-cash interest on nonrecourse debt 48,378 35,638 (Gain) loss on sale of operations and affiliates 3,788 (6,824 Other non-cash items, net 4,831 (1,206 ---------------Cash provided by operating activities 874,088 712,425 ========= ========= Change in assets and liabilities: (Increase) decrease in-Trade receivables (410) (66,001 Inventories 18,547 6,173 Prepaid expenses and other assets (33,718) (46,519 Increase (decrease) in-Accounts payable (56,703) 20,714 Accrued expenses & other liabilities (42,915) (3,472 Income taxes payable (37,358) 35,836 Other, net (40) 1,102 ---------------Net cash provided by operating activities 721,491 660,258 Cash Provided by (Used for) Investing Activities: Acquisition of businesses (excluding cash and equivalents) and additional interest in affiliates (751,981) (221,954 Additions to plant and equipment (207,918) (178,702 Purchase of investments (13,232) (89,729 Proceeds from investments 45,455 43,772 Proceeds from sale of plant and equipment 22,103 17,054 Proceeds from sale of operations and affiliates 10,203 168,383 Other, net 4,939 6,542 ---------------Net cash used for investing activities (890,431) (254,634 ========= ========= Cash Provided by (Used for) Financing Activities: Cash dividends paid (127,421) (107,053 Issuance of common stock 7,381 7,763 Net proceeds (repayments) of short-term debt 317,154 (208,362 Proceeds from long-term debt 17,938 3,341 Repayments of long-term debt (136,002) (36,859 Other, net 911 4,700 ---------------Net cash provided by (used for) financing activities 79,961 (336,470 ---------------Effect of Exchange Rate Changes on Cash and Equivalents (3,392) (20,997 ---------------Cash and Equivalents: Increase (decrease) during the year (92,371) 48,157 Beginning of year 185,856 137,699 ---------------End of year $ 93,485 $ 185,856 ---------------Cash Paid During the Year for Interest $ 30,887 $ 32,184 ---------------Cash Paid During the Year for Income Taxes $ 360,710 $ 291,721 ========= ========= Liabilities Assumed from Acquisitions $ 151,428 $ 132,122 ========= =========

See the Investments note for information regarding noncash transactions. The Notes to Financial Statements are

an integral part of this statement. 24

Illinois Tool Works Inc. STATEMENT OF COMPREHENSIVE INCOME Illinois Tool Works Inc. and Subsidiaries
In thousands 1998 1997 --------------------------------------------------------------------------------------------------------Net Income $672,784 $586,951 Other comprehensive income: Foreign currency translation adjustments (18,423) (94,632 Income tax related to foreign currency translation adjustments (3,379) 1,993 --------------Comprehensive income $650,982 $494,312 ======== ========

NOTES TO FINANCIAL STATEMENTS THE NOTES TO FINANCIAL STATEMENTS furnish additional information on items in the financial statements. The notes have been arranged in the same order as the related items appear in the statements. Illinois Tool Works Inc. (the "Company") is a multinational manufacturer of highly engineered products and specialty systems. The Company primarily serves the automotive, construction and general industrial markets. Significant accounting principles and policies of the Company are highlighted in italics. Certain reclassifications of prior years' data have been made to conform with current year reporting. The preparation of the Company's financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the notes to financial statements. Actual results could differ from those estimates. CONSOLIDATION AND TRANSLATION--The financial statements include the Company and its majorityowned subsidiaries. All significant intercompany transactions are eliminated from the financial statements. Substantially all of the Company's foreign subsidiaries have November 30 fiscal year-ends to facilitate inclusion of their financial statements in the December 31 financial statements. Foreign subsidiaries' assets and liabilities are translated to U.S. dollars at end-of-period exchange rates. Revenues and expenses are translated at average rates for the period. Translation adjustments are not included in income but are reported as a separate component of stockholders' equity. ACQUISITIONS AND DISPOSITIONS--In the fourth quarter of 1996, the Company acquired all of the outstanding common stock of Azon Limited ("Azon"), an Australian manufacturer of strapping and other industrial products. The acquisition has been accounted for as a purchase, and accordingly, the acquired net assets have been recorded at their estimated fair values at the date of acquisition. The results of operations have been included in the Statement of Income from the acquisition date, except for the Azon businesses which were expected to be sold, which were not consolidated at December 31, 1996. During 1997, the Company disposed of the majority of the Azon businesses which were expected to be sold. Based on the assumption that the Azon acquisition had occurred on January 1, 1996, the Company's pro forma operating revenues, net income and net income per share would not have been significantly different. During 1998, 1997 and 1996, the Company acquired 36, 28 and 19 operations, respectively, none of which materially affected consolidated results. RESEARCH AND DEVELOPMENT EXPENSES are recorded as expense in the year incurred. These costs were $50,678,000 in 1998, $52,021,000 in 1997 and $55,800,000 in 1996. RENTAL EXPENSE was $42,669,000 in 1998, $41,809,000 in 1997 and $41,740,000 in 1996. Future minimum lease payments for the years ended December 31 are as follows:
In thousands -------------------------------------------------------------------------------1999 $ 35,234 2000 26,083 2001 19,985

Illinois Tool Works Inc. STATEMENT OF COMPREHENSIVE INCOME Illinois Tool Works Inc. and Subsidiaries
In thousands 1998 1997 --------------------------------------------------------------------------------------------------------Net Income $672,784 $586,951 Other comprehensive income: Foreign currency translation adjustments (18,423) (94,632 Income tax related to foreign currency translation adjustments (3,379) 1,993 --------------Comprehensive income $650,982 $494,312 ======== ========

NOTES TO FINANCIAL STATEMENTS THE NOTES TO FINANCIAL STATEMENTS furnish additional information on items in the financial statements. The notes have been arranged in the same order as the related items appear in the statements. Illinois Tool Works Inc. (the "Company") is a multinational manufacturer of highly engineered products and specialty systems. The Company primarily serves the automotive, construction and general industrial markets. Significant accounting principles and policies of the Company are highlighted in italics. Certain reclassifications of prior years' data have been made to conform with current year reporting. The preparation of the Company's financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the notes to financial statements. Actual results could differ from those estimates. CONSOLIDATION AND TRANSLATION--The financial statements include the Company and its majorityowned subsidiaries. All significant intercompany transactions are eliminated from the financial statements. Substantially all of the Company's foreign subsidiaries have November 30 fiscal year-ends to facilitate inclusion of their financial statements in the December 31 financial statements. Foreign subsidiaries' assets and liabilities are translated to U.S. dollars at end-of-period exchange rates. Revenues and expenses are translated at average rates for the period. Translation adjustments are not included in income but are reported as a separate component of stockholders' equity. ACQUISITIONS AND DISPOSITIONS--In the fourth quarter of 1996, the Company acquired all of the outstanding common stock of Azon Limited ("Azon"), an Australian manufacturer of strapping and other industrial products. The acquisition has been accounted for as a purchase, and accordingly, the acquired net assets have been recorded at their estimated fair values at the date of acquisition. The results of operations have been included in the Statement of Income from the acquisition date, except for the Azon businesses which were expected to be sold, which were not consolidated at December 31, 1996. During 1997, the Company disposed of the majority of the Azon businesses which were expected to be sold. Based on the assumption that the Azon acquisition had occurred on January 1, 1996, the Company's pro forma operating revenues, net income and net income per share would not have been significantly different. During 1998, 1997 and 1996, the Company acquired 36, 28 and 19 operations, respectively, none of which materially affected consolidated results. RESEARCH AND DEVELOPMENT EXPENSES are recorded as expense in the year incurred. These costs were $50,678,000 in 1998, $52,021,000 in 1997 and $55,800,000 in 1996. RENTAL EXPENSE was $42,669,000 in 1998, $41,809,000 in 1997 and $41,740,000 in 1996. Future minimum lease payments for the years ended December 31 are as follows:
In thousands -------------------------------------------------------------------------------1999 $ 35,234 2000 26,083 2001 19,985 2002 15,543 2003 10,790 2004 and future years 22,111 -------$129,746

========

25

NOTES TO FINANCIAL STATEMENTS OTHER INCOME (EXPENSE) consisted of the following:
In thousands 1998 1997 --------------------------------------------------------------------------------------------------------Interest income $ 9,743 $ 14,592 Gain (loss) on sale of operations and affiliates (3,788) 6,824 Loss on sale of plant and equipment (6,887) (7,683 Gain (loss) on foreign currency translation (153) 3,628 Debt prepayment costs --Other, net (4,387) (850 ---------------$ (5,472) $ 16,511 ========= ========

INCOME TAXES--The Company utilizes the liability method of accounting for income taxes. Deferred income taxes are determined based on the estimated future tax effects of differences between the financial and tax bases of assets and liabilities given the provisions of the enacted tax laws. The components of the provision for income taxes were as shown below:
In thousands 1998 1997 --------------------------------------------------------------------------------------------------------U.S. federal income taxes: Current $ 209,186 $ 189,876 Deferred 11,274 21,961 -----------------220,460 211,837 ========== ========= Foreign income taxes: Current 88,532 121,990 Deferred 33,902 (34,420 -----------------122,434 87,570 ========== ========= State income taxes: Current Deferred

37,920 5,986 ---------43,906 ---------$ 386,800 ==========

40,238 (2,245 --------37,993 --------$ 337,400 =========

Income before income taxes for domestic and foreign operations was as follows: In thousands 1998 1997 --------------------------------------------------------------------------------------------------------Domestic $ 775,047 $ 728,120 Foreign 284,537 196,231 -----------------$1,059,584 $ 924,351 ========== ========= The reconciliation between the U.S. federal statutory tax rate and the effective tax rate was as follows: 1998 1997 --------------------------------------------------------------------------------------------------------U.S. federal statutory tax rate 35.0% 35.0 State income taxes, net of U.S. federal tax benefit 2.7 2.7 Amortization of nondeductible goodwill .8 .9 Differences between U.S. federal statutory and foreign tax rates .6 .9 Other, net (2.6) (3.0 Effective tax rate 36.5% 36.5 ========== ========

NOTES TO FINANCIAL STATEMENTS OTHER INCOME (EXPENSE) consisted of the following:
In thousands 1998 1997 --------------------------------------------------------------------------------------------------------Interest income $ 9,743 $ 14,592 Gain (loss) on sale of operations and affiliates (3,788) 6,824 Loss on sale of plant and equipment (6,887) (7,683 Gain (loss) on foreign currency translation (153) 3,628 Debt prepayment costs --Other, net (4,387) (850 ---------------$ (5,472) $ 16,511 ========= ========

INCOME TAXES--The Company utilizes the liability method of accounting for income taxes. Deferred income taxes are determined based on the estimated future tax effects of differences between the financial and tax bases of assets and liabilities given the provisions of the enacted tax laws. The components of the provision for income taxes were as shown below:
In thousands 1998 1997 --------------------------------------------------------------------------------------------------------U.S. federal income taxes: Current $ 209,186 $ 189,876 Deferred 11,274 21,961 -----------------220,460 211,837 ========== ========= Foreign income taxes: Current 88,532 121,990 Deferred 33,902 (34,420 -----------------122,434 87,570 ========== ========= State income taxes: Current Deferred

37,920 5,986 ---------43,906 ---------$ 386,800 ==========

40,238 (2,245 --------37,993 --------$ 337,400 =========

Income before income taxes for domestic and foreign operations was as follows: In thousands 1998 1997 --------------------------------------------------------------------------------------------------------Domestic $ 775,047 $ 728,120 Foreign 284,537 196,231 -----------------$1,059,584 $ 924,351 ========== ========= The reconciliation between the U.S. federal statutory tax rate and the effective tax rate was as follows: 1998 1997 --------------------------------------------------------------------------------------------------------U.S. federal statutory tax rate 35.0% 35.0 State income taxes, net of U.S. federal tax benefit 2.7 2.7 Amortization of nondeductible goodwill .8 .9 Differences between U.S. federal statutory and foreign tax rates .6 .9 Other, net (2.6) (3.0 Effective tax rate 36.5% 36.5 ========== ========

Deferred U.S. federal income taxes and foreign withholding taxes have not been provided on approximately $265,000,000 and $201,000,000 of undistributed earnings of international affiliates as of December 31, 1998 and 1997, respectively. In the event these earnings were distributed to the Company, U.S. federal income taxes payable would be reduced by foreign tax credits based on income tax laws and circumstances at the time of distribution. If these undistributed earnings were not considered permanently reinvested, additional deferred taxes

distribution. If these undistributed earnings were not considered permanently reinvested, additional deferred taxes of approximately $43,000,000 and $34,000,000 would have been provided at December 31, 1998 and 1997, respectively. 26

Illinois Tool Works Inc. NOTES TO FINANCIAL STATEMENTS The components of deferred income tax assets and liabilities at December 31, 1998 and 1997 were as follows:
1998 ----------------------------------------In thousands Asset Liability Asset --------------------------------------------------------------------------------------------------------Acquisition asset basis differences $ 34,900 $ (25,121) $ 40,689 Inventory reserves, capitalized tax cost and LIFO inventory 24,279 (10,550) 22,134 Investments 384,632 (39,505) 400,280 Plant and equipment 12,451 (38,078) 10,736 Accrued expenses and reserves 72,111 -74,173 Employee benefit accruals 66,829 -60,694 Foreign tax credit carryforward 34,255 --Net operating loss carryforwards 18,911 -41,414 Allowances for uncollectible accounts 6,287 -4,395 Prepaid pension assets -(27,735) -Other 39,647 (22,020) 44,422 ---------------------------Gross deferred income tax assets (liabilities) 694,302 (163,009) 698,937 Valuation allowances (11,325) -(1,658 ---------------------------Total deferred income tax assets (liabilities) $ 682,977 $ (163,009) $ 697,279 ---------========== ---------Net deferred income tax assets $ 519,968 $ 548,435 ========== ==========

No valuation allowance has been recorded on the net deferred income tax assets at December 31, 1998 and 1997 as the Company expects to continue to generate significant taxable income in future years. At December 31, 1998, the Company had net operating loss carryforwards of approximately $59,650,000 available to offset future taxable income in the U.S. and certain foreign jurisdictions which expire as follows:
In thousands --------------------------------------------------------------------------------------------------------2000 $ 263 2001 10,154 2002 -2003 249 2004 1,664 2005 2,653 2006 1,244 2007 2,950 2008 135 2009 1,170 2010 630 2011 850 2012 2,360 2013 2,123 Do not expire 33,205 --------$ 59,650 =========

27

NET INCOME PER SHARE--The Company adopted Statement of Financial Accounting Standards No. 128,

Illinois Tool Works Inc. NOTES TO FINANCIAL STATEMENTS The components of deferred income tax assets and liabilities at December 31, 1998 and 1997 were as follows:
1998 ----------------------------------------In thousands Asset Liability Asset --------------------------------------------------------------------------------------------------------Acquisition asset basis differences $ 34,900 $ (25,121) $ 40,689 Inventory reserves, capitalized tax cost and LIFO inventory 24,279 (10,550) 22,134 Investments 384,632 (39,505) 400,280 Plant and equipment 12,451 (38,078) 10,736 Accrued expenses and reserves 72,111 -74,173 Employee benefit accruals 66,829 -60,694 Foreign tax credit carryforward 34,255 --Net operating loss carryforwards 18,911 -41,414 Allowances for uncollectible accounts 6,287 -4,395 Prepaid pension assets -(27,735) -Other 39,647 (22,020) 44,422 ---------------------------Gross deferred income tax assets (liabilities) 694,302 (163,009) 698,937 Valuation allowances (11,325) -(1,658 ---------------------------Total deferred income tax assets (liabilities) $ 682,977 $ (163,009) $ 697,279 ---------========== ---------Net deferred income tax assets $ 519,968 $ 548,435 ========== ==========

No valuation allowance has been recorded on the net deferred income tax assets at December 31, 1998 and 1997 as the Company expects to continue to generate significant taxable income in future years. At December 31, 1998, the Company had net operating loss carryforwards of approximately $59,650,000 available to offset future taxable income in the U.S. and certain foreign jurisdictions which expire as follows:
In thousands --------------------------------------------------------------------------------------------------------2000 $ 263 2001 10,154 2002 -2003 249 2004 1,664 2005 2,653 2006 1,244 2007 2,950 2008 135 2009 1,170 2010 630 2011 850 2012 2,360 2013 2,123 Do not expire 33,205 --------$ 59,650 =========

27

NET INCOME PER SHARE--The Company adopted Statement of Financial Accounting Standards No. 128, Earnings per Share ("SFAS 128"), in the fourth quarter of 1997. Under SFAS 128, net income per basic share is computed by dividing net income by the weighted average number of shares outstanding for the period. Net income per diluted share is computed by dividing net income by the weighted average number of shares assuming dilution. Dilutive shares reflect the potential additional shares that would be outstanding if the dilutive stock options outstanding were exercised during the period. The computation of net income per share was as follows:

NET INCOME PER SHARE--The Company adopted Statement of Financial Accounting Standards No. 128, Earnings per Share ("SFAS 128"), in the fourth quarter of 1997. Under SFAS 128, net income per basic share is computed by dividing net income by the weighted average number of shares outstanding for the period. Net income per diluted share is computed by dividing net income by the weighted average number of shares assuming dilution. Dilutive shares reflect the potential additional shares that would be outstanding if the dilutive stock options outstanding were exercised during the period. The computation of net income per share was as follows:
In thousands except per share data 1998 1997 --------------------------------------------------------------------------------------------------------Net income $ 672,784 $ 586,951 ========== ========= Net income per share--Basic: Weighted average common shares 249,906 249,284 ----------------Net income per share--Basic $ 2.69 $ 2.35 ========== ========= Net income per share--Diluted: Weighted average common shares Effect of dilutive stock options Weighted average common shares assuming dilution Net income per share--Diluted

249,906 2,537 ---------252,443 --------$ 2.67 ==========

249,284 2,476 --------251,760 --------$ 2.33 =========

Options to purchase 1,128,639 shares of common stock at an average price of $54.61 per share were outstanding at December 31, 1997, but were not included in the computation of diluted net income per share for the period because the options' exercise price was greater than the average market price of the common shares. These options will expire in 2007. There were no options outstanding at December 31, 1998 that had an exercise price greater than the average market price. CASH AND EQUIVALENTS included interest-bearing deposits of $27,434,000 at December 31, 1998 and $118,982,000 at December 31, 1997. Interest-bearing deposits have maturities of 90 days or less and are stated at cost, which approximates market. TRADE RECEIVABLES as of December 31, 1998 and 1997 were net of allowances for uncollectible accounts of $28,000,000 and $20,800,000, respectively. INVENTORIES at December 31, 1998 and 1997 were as follows:
In thousands 1998 1997 -------------------------------------------------------------------------------------Raw material $163,868 $145,851 Work-in-process 72,254 67,956 Finished goods 345,633 309,189 --------------$581,755 $522,996 ======== ========

Inventories are stated at the lower of cost or market and include material, labor and factory overhead. The lastin, first-out (LIFO) method is used to determine the cost of the inventories of approximately half of the U.S. operations. Inventories priced at LIFO were 34% and 39% of total inventories as of December 31, 1998 and 1997, respectively. The first-in, first-out (FIFO) method is used for all other inventories. Under the FIFO method, which approximates current cost, total inventories would have been approximately $49,100,000 and $58,500,000 higher than reported at December 31, 1998 and 1997, respectively. PLANT AND EQUIPMENT are stated at cost less accumulated depreciation. Renewals and improvements that increase the useful life of plant and equipment are capitalized. Maintenance and repairs are charged to expense as incurred. Depreciation was $167,186,000 in 1998 compared with $148,544,000 in 1997 and $146,360,000 in 1996 and

was reflected primarily in cost of revenues. Depreciation of plant and equipment for financial reporting purposes is computed principally on an accelerated basis. The range of useful lives used to depreciate plant and equipment is as follows:
Buildings and improvements Machinery and equipment Equipment leased to others 10-50 YEARS 3-12 YEARS TERM OF LEASE

28

Illinois Tool Works Inc. INVESTMENTS as of December 31, 1998 and 1997 consisted of the following:
In thousands 1998 --------------------------------------------------------------------------------------------------------Commercial mortgage loans $ 371,812 Commercial real estate 217,340 Net swap receivables 371,000 Receivable from mortgage servicer 58,546 Prepaid forward contract 20,247 Leveraged, direct financing and sales-type leases of equipment 78,396 Properties held for sale 23,035 Property developments 16,482 Affordable housing 11,320 Annuity contract 5,483 U.S. Treasury security 4,869 Other 4,963 ------------$ 1,183,493 =============

In December 1997, the Company acquired a pool of mortgage-related assets in exchange for a nonrecourse note payable of $217,440,000, preferred stock of a subsidiary of $20,000,000 and cash of $80,000,000. In December 1996, the Company acquired a pool of mortgage-related assets in exchange for a nonrecourse note payable of $266,265,000, preferred stock of a subsidiary of $20,000,000 and cash of $80,000,000. In December 1995, the Company acquired a pool of mortgage-related assets in exchange for a nonrecourse note payable of $256,000,000, preferred stock of a subsidiary of $20,000,000 and cash of $80,000,000. The mortgage-related assets for the three transactions are located throughout the U.S. and include 24 and 38 subperforming, variable rate, balloon loans and 23 and 13 foreclosed properties at December 31, 1998 and 1997, respectively. In conjunction with these transactions, the Company simultaneously entered into ten-year swap agreements and other related agreements whereby the Company will pay a third party the portion of the interest and net operating cash flow from the mortgage-related assets in excess of $26,000,000 per year and a portion of the proceeds from the disposition of the mortgage-related assets and principal repayments, in exchange for the third party making payments to the Company equal to the contractual principal and interest payments on the nonrecourse notes payable. In addition, in the event that the pools of mortgage-related assets do not generate income of $26,000,000 a year, the Company has a collateral right against the cash flow generated by three separate pools of mortgage-related assets (owned by third parties in which the Company has minimal interests) which have a total fair value of approximately $2,660,000,000 at December 31, 1998. The Company entered into the swaps and other related agreements in order to reduce its credit and interest rate risks relative to the mortgage-related assets. The Company expects to recover its net investment in the mortgage-related assets of $320,236,000 at December 31, 1998 (net of the related nonrecourse notes payable) through its expected net cash flow of $26,000,000 per year for the remainder of the ten-year periods and its estimated $415,419,000 share of the total proceeds from disposition of the mortgage-related assets and principal repayments. The Company evaluates whether the commercial mortgage loans have been impaired by reviewing the discounted estimated future cash flows of the loans versus the carrying value of the loans. If the carrying value exceeds the discounted cash flows, an impairment loss is recorded through income. At December 31, 1998 and 1997, the impairment loss allowance was $5,600,000 and $12,000,000, respectively. The estimated fair value of the commercial mortgage loans, based on discounted future cash flows, exceeds the carrying value at December 31, 1998 and 1997 by $138,983,000 and $149,310,000, respectively. The net swap receivables are recorded at

Illinois Tool Works Inc. INVESTMENTS as of December 31, 1998 and 1997 consisted of the following:
In thousands 1998 --------------------------------------------------------------------------------------------------------Commercial mortgage loans $ 371,812 Commercial real estate 217,340 Net swap receivables 371,000 Receivable from mortgage servicer 58,546 Prepaid forward contract 20,247 Leveraged, direct financing and sales-type leases of equipment 78,396 Properties held for sale 23,035 Property developments 16,482 Affordable housing 11,320 Annuity contract 5,483 U.S. Treasury security 4,869 Other 4,963 ------------$ 1,183,493 =============

In December 1997, the Company acquired a pool of mortgage-related assets in exchange for a nonrecourse note payable of $217,440,000, preferred stock of a subsidiary of $20,000,000 and cash of $80,000,000. In December 1996, the Company acquired a pool of mortgage-related assets in exchange for a nonrecourse note payable of $266,265,000, preferred stock of a subsidiary of $20,000,000 and cash of $80,000,000. In December 1995, the Company acquired a pool of mortgage-related assets in exchange for a nonrecourse note payable of $256,000,000, preferred stock of a subsidiary of $20,000,000 and cash of $80,000,000. The mortgage-related assets for the three transactions are located throughout the U.S. and include 24 and 38 subperforming, variable rate, balloon loans and 23 and 13 foreclosed properties at December 31, 1998 and 1997, respectively. In conjunction with these transactions, the Company simultaneously entered into ten-year swap agreements and other related agreements whereby the Company will pay a third party the portion of the interest and net operating cash flow from the mortgage-related assets in excess of $26,000,000 per year and a portion of the proceeds from the disposition of the mortgage-related assets and principal repayments, in exchange for the third party making payments to the Company equal to the contractual principal and interest payments on the nonrecourse notes payable. In addition, in the event that the pools of mortgage-related assets do not generate income of $26,000,000 a year, the Company has a collateral right against the cash flow generated by three separate pools of mortgage-related assets (owned by third parties in which the Company has minimal interests) which have a total fair value of approximately $2,660,000,000 at December 31, 1998. The Company entered into the swaps and other related agreements in order to reduce its credit and interest rate risks relative to the mortgage-related assets. The Company expects to recover its net investment in the mortgage-related assets of $320,236,000 at December 31, 1998 (net of the related nonrecourse notes payable) through its expected net cash flow of $26,000,000 per year for the remainder of the ten-year periods and its estimated $415,419,000 share of the total proceeds from disposition of the mortgage-related assets and principal repayments. The Company evaluates whether the commercial mortgage loans have been impaired by reviewing the discounted estimated future cash flows of the loans versus the carrying value of the loans. If the carrying value exceeds the discounted cash flows, an impairment loss is recorded through income. At December 31, 1998 and 1997, the impairment loss allowance was $5,600,000 and $12,000,000, respectively. The estimated fair value of the commercial mortgage loans, based on discounted future cash flows, exceeds the carrying value at December 31, 1998 and 1997 by $138,983,000 and $149,310,000, respectively. The net swap receivables are recorded at fair value, based on the estimated future cash flows discounted at the current market interest rate. Any adjustments to the carrying value of the net swap receivables due to changes in expected future cash flows or interest rates are recorded through income. Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"), was issued in 1998. SFAS 133 requires that an entity recognize certain derivatives in the Statement of Financial Position and measure those instruments at fair value. The Company is required to adopt SFAS 133 for annual and interim periods beginning after June 15, 1999. The adoption of SFAS 133 is not expected to have a material effect on the Company's financial position or results of operations. 29

NOTES TO FINANCIAL STATEMENTS The Company's investment in leveraged and direct financing leases relates to equipment used primarily in the transportation, mining and paper processing industries. The components of the investment in leveraged, direct financing and sales-type leases at December 31, 1998 and 1997 were as shown below:
In thousands 1998 --------------------------------------------------------------------------------------------------------Lease contracts receivable (net of principal and interest on nonrecourse financing) Estimated residual value of leased assets Unearned and deferred income Investment in leveraged, direct financing and sales-type leases Deferred income taxes related to leveraged and direct financing leases Net investment in leveraged, direct financing and sales-type leases 81,400 25,428 (28,432) ----------78,396 (34,281) ----------$ 44,115 =========== $ $ ( ----( ----$ =====

GOODWILL represents the excess cost over fair value of the net assets of purchased businesses. Goodwill is being amortized on a straight-line basis over 15 to 40 years. The Company assesses the recoverability of unamortized goodwill and the other long-lived assets whenever events or changes in circumstances indicate that such assets may be impaired by reviewing the sufficiency of future undiscounted cash flows of the related entity to cover the amortization or depreciation over the remaining useful life of the asset. For any long-lived assets which are determined to be impaired, a loss would be recognized for the difference between the carrying value and the fair value for assets to be held or the net realizable value for assets to be disposed of. Amortization expense was $32,526,000 in 1998, $25,666,000 in 1997, and $21,727,000 in 1996. Accumulated goodwill amortization was $163,602,000 and $133,137,000, at December 31, 1998 and 1997, respectively. OTHER ASSETS as of December 31, 1998 and 1997 consisted of the following:
In thousands 1998 --------------------------------------------------------------------------------------------------------Other intangible assets $155,538 Accumulated amortization of other intangible assets (34,755) Cash surrender value of life insurance policies 113,999 Prepaid pension assets 75,412 Investment in unconsolidated affiliates 135,659 Other 60,110 ---------$505,963 ===========

Other intangible assets represent patents, noncompete agreements and other assets acquired with purchased businesses and are being amortized primarily on a straight-line basis over five to 17 years. Amortization expense was $12,067,000 in 1998, $11,176,000 in 1997, and $10,146,000 in 1996. 30

Illinois Tool Works Inc. RETIREMENT PLANS AND POSTRETIREMENT HEALTH CARE BENEFITS--Summarized information regarding the Company's defined benefit pension and postretirement health care benefits was as follows:
Pension Postretirement --------------------------------------------------------------------------------------------------------In thousands 1998 1997 1996 1998 1997 --------------------------------------------------------------------------------------------------------Components of net periodic benefit cost: Service cost $ 30,485 $ 29,830 $ 24,373 $ 2,647 $ 2,381 Interest cost 43,334 41,688 35,641 9,264 9,246

NOTES TO FINANCIAL STATEMENTS The Company's investment in leveraged and direct financing leases relates to equipment used primarily in the transportation, mining and paper processing industries. The components of the investment in leveraged, direct financing and sales-type leases at December 31, 1998 and 1997 were as shown below:
In thousands 1998 --------------------------------------------------------------------------------------------------------Lease contracts receivable (net of principal and interest on nonrecourse financing) Estimated residual value of leased assets Unearned and deferred income Investment in leveraged, direct financing and sales-type leases Deferred income taxes related to leveraged and direct financing leases Net investment in leveraged, direct financing and sales-type leases 81,400 25,428 (28,432) ----------78,396 (34,281) ----------$ 44,115 =========== $ $ ( ----( ----$ =====

GOODWILL represents the excess cost over fair value of the net assets of purchased businesses. Goodwill is being amortized on a straight-line basis over 15 to 40 years. The Company assesses the recoverability of unamortized goodwill and the other long-lived assets whenever events or changes in circumstances indicate that such assets may be impaired by reviewing the sufficiency of future undiscounted cash flows of the related entity to cover the amortization or depreciation over the remaining useful life of the asset. For any long-lived assets which are determined to be impaired, a loss would be recognized for the difference between the carrying value and the fair value for assets to be held or the net realizable value for assets to be disposed of. Amortization expense was $32,526,000 in 1998, $25,666,000 in 1997, and $21,727,000 in 1996. Accumulated goodwill amortization was $163,602,000 and $133,137,000, at December 31, 1998 and 1997, respectively. OTHER ASSETS as of December 31, 1998 and 1997 consisted of the following:
In thousands 1998 --------------------------------------------------------------------------------------------------------Other intangible assets $155,538 Accumulated amortization of other intangible assets (34,755) Cash surrender value of life insurance policies 113,999 Prepaid pension assets 75,412 Investment in unconsolidated affiliates 135,659 Other 60,110 ---------$505,963 ===========

Other intangible assets represent patents, noncompete agreements and other assets acquired with purchased businesses and are being amortized primarily on a straight-line basis over five to 17 years. Amortization expense was $12,067,000 in 1998, $11,176,000 in 1997, and $10,146,000 in 1996. 30

Illinois Tool Works Inc. RETIREMENT PLANS AND POSTRETIREMENT HEALTH CARE BENEFITS--Summarized information regarding the Company's defined benefit pension and postretirement health care benefits was as follows:
Pension Postretirement --------------------------------------------------------------------------------------------------------In thousands 1998 1997 1996 1998 1997 --------------------------------------------------------------------------------------------------------Components of net periodic benefit cost: Service cost $ 30,485 $ 29,830 $ 24,373 $ 2,647 $ 2,381 Interest cost 43,334 41,688 35,641 9,264 9,246

Illinois Tool Works Inc. RETIREMENT PLANS AND POSTRETIREMENT HEALTH CARE BENEFITS--Summarized information regarding the Company's defined benefit pension and postretirement health care benefits was as follows:
Pension Postretirement --------------------------------------------------------------------------------------------------------In thousands 1998 1997 1996 1998 1997 --------------------------------------------------------------------------------------------------------Components of net periodic benefit cost: Service cost $ 30,485 $ 29,830 $ 24,373 $ 2,647 $ 2,381 Interest cost 43,334 41,688 35,641 9,264 9,246 Expected return on plan assets (56,004) (69,530) (50,726) --Amortization of prior service cost 5,274 5,291 5,286 --Amortization of actuarial (gain)/loss (6,515) 13,319 (2,306) (766) (1,172) Amortization of transition amount (4,904) (4,793) (4,775) 7,306 7,306 -------------------------------------Net periodic benefit cost $ 11,670 $ 15,805 $ 7,493 $ 18,451 $17,761 ========= ========== ========== ======== ======= = Pension Postretire --------------------------------------------------------------------------------------------------------In thousands 1998 1997 1998 --------------------------------------------------------------------------------------------------------Change in benefit obligation: Benefit obligation at beginning of year $ 613,343 $ 555,071 $129,32 Service cost 30,485 29,830 2,64 Interest cost 43,334 41,688 9,26 Plan participant contributions 1,406 1,144 3,47 Amendments 3,261 284 Actuarial loss 83,325 26,791 11,30 Acquisitions and divestitures 9,118 -Benefits paid (44,261) (37,572) (14,72 Liabilities from other plans 5,066 1,500 Foreign currency translation (3,318) (5,393) ----------------------Benefit obligation at end of year $ 741,759 $ 613,343 $141,28 ========= ========= ======== Change in plan assets: Fair value of plan assets at beginning of year Actual return on plan assets Acquisitions and divestitures Company contributions Plan participant contributions Benefits paid Assets from other plans Foreign currency translation Fair value of plan assets at end of year

$ 770,286 (17,954) 4,204 23,376 1,406 (44,261) -(5,453) --------$ 731,604 =========

$ 622,174 162,192 -23,203 1,144 (37,572) 2,893 (3,748) --------$ 770,286 =========

11,25 3,47 (14,72 ------$ ========

$

Funded status Unrecognized net actuarial (gain)/loss Unrecognized prior service cost Unrecognized net transition amount Net prepaid/(accrued) benefit cost

$ (10,155) 23,431 23,206 (12,559) --------$ 23,923 =========

$ 156,943 (142,095) 26,275 (17,127) --------$ 23,996 =========

$(141,28 (9,56 100,83 ------$ (50,01 =========

Plans with accumulated benefit obligation in excess of plan assets: Projected benefit obligation Accumulated benefit obligation Fair value of plan assets $ 64,396 ========= $ 62,580 ========= $ 2,249 ========= $ 47,365 ========= $ 44,040 ========= $ 1,797 =========

31

NOTES TO FINANCIAL STATEMENTS
Pension Postretirem --------------------------------------------------------------------------------------------------------1998 1997 1996 1998 1997 --------------------------------------------------------------------------------------------------------Weighted average assumptions as of December 31: Discount rate 6.63% 7.42% 7.86% 6.75% 7.50 Expected return on plan assets 10.38% 9.59% 9.70% --Rate of compensation increases 4.32% 4.06% 4.53% --Current and ultimate health care cost trend rate ---5.00% 5.00

Assumed health care cost trend rates can have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects:
1-PercentageIn thousands Point Increase --------------------------------------------------------------------------------------------------------Effect on total of service and interest cost components $ 1,700 Effect on postretirement benefit obligation 17,944

In addition to the above defined benefit pension plans, the Company sponsors defined contribution retirement plans covering the majority of domestic employees. The Company's contributions to these plans were $13,400,000 in 1998, $11,900,000 in 1997, and $12,200,000 in 1996. SHORT-TERM DEBT as of December 31, 1998 and 1997 consisted of the following:
In thousands 1998 --------------------------------------------------------------------------------------------------------Bank overdrafts $ 64,00 Commercial paper 226,81 Current maturities of long-term debt 33,78 Australian cash advance facility 51,00 Other borrowings by foreign subsidiaries 31,09 --------$ 406,70 =========

In August 1996, to fund the Azon acquisition, the Company entered into a 364-day Australian cash advance facility with maximum available borrowings of Australian $325,000,000. In September 1997, the Company amended this cash advance facility to decrease the maximum available borrowings to Australian $175,000,000 and to extend the term of the facility to August 1998. In October 1998, the Company again amended this cash advance facility to decrease the maximum available borrowings to Australian $95,000,000 and to extend the term of the facility to August 1999. The facility had an interest rate of 5.2% at December 31, 1998 and 5.0% at December 31, 1997. The weighted average interest rate on other foreign borrowings was 6.7% at December 31, 1998 and 5.0% at December 31, 1997. In November 1998, the Company entered into a $350,000,000 Line of Credit Agreement. In December 1998, the maturity date of the agreement was extended from January 30, 1999 to March 31, 1999. No amounts were outstanding under this facility at December 31, 1998. ACCRUED EXPENSES as of December 31, 1998 and 1997 consisted of accruals for:
In thousands 1998 --------------------------------------------------------------------------------------------------------Compensation and employee benefits $181,988 Deferred investment income 42,211 Other 233,344 -------$457,543 ========

32

LONG-TERM DEBT at December 31, 1998 and 1997 consisted of the following:
In thousands 19 --------------------------------------------------------------------------------------------------------7.5% notes due December 1, 1998 $ 5.875% notes due March 1, 2000 125,0 6.59% nonrecourse note due semiannually through December 31, 2005 217,5 7.00% nonrecourse note due semiannually through November 30, 2006 263,5 6.44% nonrecourse note due semiannually from August 31, 2002 through February 29, 2008 217,4 Commercial paper 100,0 Other, including capitalized lease obligations 57,3 -------980,7 Current maturities (33,7 -------$ 947,0 ========

In 1991, the Company issued $125,000,000 of 7.5% notes at 99.892% of face value. The Company repaid the notes on December 1, 1998. The quoted market prices of the notes exceeded the carrying value by $1,484,000 at December 31, 1997. In 1993, the Company issued $125,000,000 of 5.875% notes due March 1, 2000, at 99.744% of face value. The notes may not be redeemed by the Company prior to maturity. The effective interest rate of the notes is 5.9%. The quoted market price of the notes exceeded the carrying value by approximately $1,270,000 at December 31, 1998, and was below the carrying value by approximately $293,000 at December 31, 1997. The Company issued a $256,000,000, 6.28% nonrecourse note at face value in December 1995, a $266,265,000, 7.0% nonrecourse note at face value in December 1996 and a $217,440,000, 6.44% nonrecourse note at face value in December 1997. In 1997, the Company refinanced the 6.28% nonrecourse note with a 6.59% nonrecourse note with similar terms. The holders of these notes only have recourse against the commercial mortgage loans, commercial real estate and net swap receivables, which are included in investments. The estimated fair value of the three nonrecourse notes, based on discounted cash flows, exceeded the carrying value by $63,570,000 at December 31, 1998, and $22,978,000 at December 31, 1997. In 1992, the Company entered into a $300,000,000 revolving credit facility (RCF). In 1994, the Company canceled $150,000,000 of the RCF. In 1996, the Company amended the RCF to increase the maximum available borrowings to $250,000,000 and extended the commitment termination date to May 30, 2001. In September 1998, the Company amended the RCF to increase the maximum available borrowings to $350,000,000 and extend the termination date to September 30, 2003. The amended RCF provides for borrowings under a number of options and may be reduced or canceled at any time at the Company's option. There were no amounts outstanding under these facilities as of December 31, 1998 or 1997. The amended RCF contains financial covenants establishing a maximum total debt to total capitalization percentage and a minimum consolidated tangible net worth. The Company was in compliance with these covenants at December 31, 1998. Commercial paper is issued at a discount and generally matures 30 to 90 days from the date of issue. The Company maintains unused commitments under the RCF equal to any commercial paper borrowings. The weighted average interest rate on commercial paper outstanding was 5.15% at December 31, 1998. No commercial paper was outstanding at December 31, 1997. In 1998, the commercial paper balance expected to remain outstanding beyond one year has been classified as long-term, reflecting the Company's intent and ability to finance the borrowings on a long-term basis. The remaining commercial paper balance has been classified as short-term. Other debt outstanding at December 31, 1998, bears interest at rates ranging from 2.5% to 16.97%, with maturities through the year 2012. Scheduled maturities of long-term debt for the years ended December 31 are as follows:
In thousands --------------------------------------------------------------------------------------------------------2000 2001 2002

LONG-TERM DEBT at December 31, 1998 and 1997 consisted of the following:
In thousands 19 --------------------------------------------------------------------------------------------------------7.5% notes due December 1, 1998 $ 5.875% notes due March 1, 2000 125,0 6.59% nonrecourse note due semiannually through December 31, 2005 217,5 7.00% nonrecourse note due semiannually through November 30, 2006 263,5 6.44% nonrecourse note due semiannually from August 31, 2002 through February 29, 2008 217,4 Commercial paper 100,0 Other, including capitalized lease obligations 57,3 -------980,7 Current maturities (33,7 -------$ 947,0 ========

In 1991, the Company issued $125,000,000 of 7.5% notes at 99.892% of face value. The Company repaid the notes on December 1, 1998. The quoted market prices of the notes exceeded the carrying value by $1,484,000 at December 31, 1997. In 1993, the Company issued $125,000,000 of 5.875% notes due March 1, 2000, at 99.744% of face value. The notes may not be redeemed by the Company prior to maturity. The effective interest rate of the notes is 5.9%. The quoted market price of the notes exceeded the carrying value by approximately $1,270,000 at December 31, 1998, and was below the carrying value by approximately $293,000 at December 31, 1997. The Company issued a $256,000,000, 6.28% nonrecourse note at face value in December 1995, a $266,265,000, 7.0% nonrecourse note at face value in December 1996 and a $217,440,000, 6.44% nonrecourse note at face value in December 1997. In 1997, the Company refinanced the 6.28% nonrecourse note with a 6.59% nonrecourse note with similar terms. The holders of these notes only have recourse against the commercial mortgage loans, commercial real estate and net swap receivables, which are included in investments. The estimated fair value of the three nonrecourse notes, based on discounted cash flows, exceeded the carrying value by $63,570,000 at December 31, 1998, and $22,978,000 at December 31, 1997. In 1992, the Company entered into a $300,000,000 revolving credit facility (RCF). In 1994, the Company canceled $150,000,000 of the RCF. In 1996, the Company amended the RCF to increase the maximum available borrowings to $250,000,000 and extended the commitment termination date to May 30, 2001. In September 1998, the Company amended the RCF to increase the maximum available borrowings to $350,000,000 and extend the termination date to September 30, 2003. The amended RCF provides for borrowings under a number of options and may be reduced or canceled at any time at the Company's option. There were no amounts outstanding under these facilities as of December 31, 1998 or 1997. The amended RCF contains financial covenants establishing a maximum total debt to total capitalization percentage and a minimum consolidated tangible net worth. The Company was in compliance with these covenants at December 31, 1998. Commercial paper is issued at a discount and generally matures 30 to 90 days from the date of issue. The Company maintains unused commitments under the RCF equal to any commercial paper borrowings. The weighted average interest rate on commercial paper outstanding was 5.15% at December 31, 1998. No commercial paper was outstanding at December 31, 1997. In 1998, the commercial paper balance expected to remain outstanding beyond one year has been classified as long-term, reflecting the Company's intent and ability to finance the borrowings on a long-term basis. The remaining commercial paper balance has been classified as short-term. Other debt outstanding at December 31, 1998, bears interest at rates ranging from 2.5% to 16.97%, with maturities through the year 2012. Scheduled maturities of long-term debt for the years ended December 31 are as follows:
In thousands --------------------------------------------------------------------------------------------------------2000 2001 2002 2003 2004 and future years

OTHER NONCURRENT LIABILITIES at December 31, 1998 and 1997 consisted of the following:
In thousands 1998 --------------------------------------------------------------------------------------------------------Deferred investment income $270,93 Preferred stock of subsidiaries 70,00 Other 270,17 ------$611,11 =======

33

NOTES TO FINANCIAL STATEMENTS PREFERRED STOCK, without par value, of which 300,000 shares are authorized, is issuable in series. The Board of Directors is authorized to fix by resolution the designation and characteristics of each series of preferred stock. The Company has no present commitments to issue its preferred stock. COMMON STOCK, ADDITIONAL PAID-IN-CAPITAL and COMMON STOCK HELD IN TREASURY transactions during 1998, 1997 and 1996 are shown below. On May 9, 1997, the stockholders approved a) an amendment to the Restated Certificate of Incorporation changing the number of authorized shares of common stock from 150,000,000 shares without par value to 350,000,000 shares with a par value of $.01 and b) a two-for-one split of the Company's common stock, with a distribution date of May 27, 1997, at a rate of one additional share for each common share held by stockholders of record on May 20, 1997. All per share data in this report has been restated to reflect the stock split.
Common Stock Paid --------------In thousands except shares Shares Amount --------------------------------------------------------------------------------------------------------Balance, December 31, 1995 118,369,029 $ 239,688 $ During 1996-Stock options exercised 254,181 5,871 Shares surrendered on exercise of stock options (11,791) (462) Tax benefits related to stock options exercised -3,176 Shares issued for acquisitions 5,408,704 25,510 Shares issued for stock incentive and restricted stock grants -81 ------------------------Balance, December 31, 1996 124,020,123 273,864 =========== ============ ==== During 1997-Adjustment to reflect the May 1997 stock split 124,020,123 -Adjustment to reflect change in par value -(275,701) Stock options exercised 673,132 4,018 Shares surrendered on exercise of stock options (33,162) (10) Tax benefits related to stock options exercised --Shares issued for acquisitions 1,181,228 289 Shares issued for stock incentive and restricted stock grants 4,460 39 ------------------------Balance, December 31, 1997 249,865,904 2,499 =========== ============ ==== During 1998-Stock options exercised 551,399 5 Shares surrendered on exercise of stock options (28,334) -Tax benefits related to stock options exercised --Shares issued for stock incentive and restricted stock grants --------------------------Balance, December 31, 1998 250,388,969 $ 2,504 $ =========== ============ ====

NOTES TO FINANCIAL STATEMENTS PREFERRED STOCK, without par value, of which 300,000 shares are authorized, is issuable in series. The Board of Directors is authorized to fix by resolution the designation and characteristics of each series of preferred stock. The Company has no present commitments to issue its preferred stock. COMMON STOCK, ADDITIONAL PAID-IN-CAPITAL and COMMON STOCK HELD IN TREASURY transactions during 1998, 1997 and 1996 are shown below. On May 9, 1997, the stockholders approved a) an amendment to the Restated Certificate of Incorporation changing the number of authorized shares of common stock from 150,000,000 shares without par value to 350,000,000 shares with a par value of $.01 and b) a two-for-one split of the Company's common stock, with a distribution date of May 27, 1997, at a rate of one additional share for each common share held by stockholders of record on May 20, 1997. All per share data in this report has been restated to reflect the stock split.
Common Stock Paid --------------In thousands except shares Shares Amount --------------------------------------------------------------------------------------------------------Balance, December 31, 1995 118,369,029 $ 239,688 $ During 1996-Stock options exercised 254,181 5,871 Shares surrendered on exercise of stock options (11,791) (462) Tax benefits related to stock options exercised -3,176 Shares issued for acquisitions 5,408,704 25,510 Shares issued for stock incentive and restricted stock grants -81 ------------------------Balance, December 31, 1996 124,020,123 273,864 =========== ============ ==== During 1997-Adjustment to reflect the May 1997 stock split 124,020,123 -Adjustment to reflect change in par value -(275,701) Stock options exercised 673,132 4,018 Shares surrendered on exercise of stock options (33,162) (10) Tax benefits related to stock options exercised --Shares issued for acquisitions 1,181,228 289 Shares issued for stock incentive and restricted stock grants 4,460 39 ------------------------Balance, December 31, 1997 249,865,904 2,499 =========== ============ ==== During 1998-Stock options exercised 551,399 5 Shares surrendered on exercise of stock options (28,334) -Tax benefits related to stock options exercised --Shares issued for stock incentive and restricted stock grants --------------------------Balance, December 31, 1998 250,388,969 $ 2,504 $ =========== ============ ==== Authorized, December 31, 1998 350,000,000 ===========

Common Stock Held in Treasury ---------------In thousands except shares Shares Amount --------------------------------------------------------------------------------------------------Balance, December 31, 1995 (136,268) $ (1,866) During 1996-Stock options exercised 23,462 1,579 Shares surrendered on exercise of stock options (23,462) (1,579) Tax benefits related to stock options exercised --Shares issued for acquisitions --Shares issued for stock incentive and restricted stock grants 1,800 25 ---------------------Balance, December 31, 1996 (134,468) (1,841)

=========== During 1997-Adjustment to reflect the May 1997 stock split Adjustment to reflect change in par value Stock options exercised Shares surrendered on exercise of stock options Tax benefits related to stock options exercised Shares issued for acquisitions Shares issued for stock incentive and restricted stock grants Balance, December 31, 1997 During 1998-Stock options exercised Shares surrendered on exercise of stock options Tax benefits related to stock options exercised Shares issued for stock incentive and restricted stock grants Balance, December 31, 1998 (134,468) -14,862 (14,862) --1,200 ----------(267,736) =========== 3,163 (3,163) -7,200 ----------(260,536) ===========

============ --796 (796) --8 -----------(1,833) ============ 176 (176) -50 -----------$ (1,783) ============

34

Illinois Tool Works Inc. CASH DIVIDENDS declared were $.54 per share in 1998, $.46 per share in 1997 and $.36 per share in 1996. Cash dividends paid were $.51 per share in 1998, $.43 per share in 1997 and $.35 per share in 1996. COMPREHENSIVE INCOME--DURING 1998, the Company adopted Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income, which established standards for reporting and displaying comprehensive income and its components in a separate financial statement. Comprehensive Income is defined as the changes in equity during a period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. The Company's only component of other comprehensive income is foreign currency translation adjustments. STOCK OPTIONS have been issued to officers and other employees under the Company's 1996 Stock Incentive Plan. At December 31, 1998, 18,482,078 shares were reserved for issuance under the plan. Option prices are 100% of the common stock fair market value on the date of grant. Effective in 1996, Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS 123"), allows the recognition of compensation cost related to employee stock options. The Company has elected to continue to apply Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, which does not require that compensation cost be recognized. The pro forma net income effect of applying SFAS 123 was as follows:
In thousands except per share data 1998 199 --------------------------------------------------------------------------------------------------------Net Income: As reported $672,784 $586,95 Pro forma 664,638 582,90 Net income per basic share: As reported $2.69 $2.3 Pro forma 2.66 2.3 Net income per diluted share: As reported $ 2.67 $ 2.3 Pro forma 2.63 2.3 Stock option transactions during 1998, 1997 and 1996 are summarized as follows:

1998 1997 ---------------------------------------------------------------------------------------------------------

Illinois Tool Works Inc. CASH DIVIDENDS declared were $.54 per share in 1998, $.46 per share in 1997 and $.36 per share in 1996. Cash dividends paid were $.51 per share in 1998, $.43 per share in 1997 and $.35 per share in 1996. COMPREHENSIVE INCOME--DURING 1998, the Company adopted Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income, which established standards for reporting and displaying comprehensive income and its components in a separate financial statement. Comprehensive Income is defined as the changes in equity during a period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. The Company's only component of other comprehensive income is foreign currency translation adjustments. STOCK OPTIONS have been issued to officers and other employees under the Company's 1996 Stock Incentive Plan. At December 31, 1998, 18,482,078 shares were reserved for issuance under the plan. Option prices are 100% of the common stock fair market value on the date of grant. Effective in 1996, Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS 123"), allows the recognition of compensation cost related to employee stock options. The Company has elected to continue to apply Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, which does not require that compensation cost be recognized. The pro forma net income effect of applying SFAS 123 was as follows:
In thousands except per share data 1998 199 --------------------------------------------------------------------------------------------------------Net Income: As reported $672,784 $586,95 Pro forma 664,638 582,90 Net income per basic share: As reported $2.69 $2.3 Pro forma 2.66 2.3 Net income per diluted share: As reported $ 2.67 $ 2.3 Pro forma 2.63 2.3 Stock option transactions during 1998, 1997 and 1996 are summarized as follows:

1998 1997 --------------------------------------------------------------------------------------------------------Weighted Average Number Weighted Average Number of Shares Exercise Price of Shares Exercise Price of ------------------------------------------------------------------- -----------------------------------Under option at beginning of year 5,384,685 $29.36 4,999,416 $21.56 5,1 Granted 1,109,763 58.24 1,128,639 54.61 4 Exercised (554,562) 15.89 (687,994) 14.30 (5 Canceled or expired (30,000) 47.72 (55,376) 27.17 ( ------------------------------------Under option at end of year 5,909,886 35.96 5,384,685 29.36 4,9 =========== ====== =========== ======== ===== Exercisable at year-end 3,422,878 3,145,946 3,0 Available for grant at year-end 12,572,192 13,620,685 14,6 Weighted average fair value of option grant during the year $16.71 $15.82

35

NOTES TO FINANCIAL STATEMENTS The following table summarizes information on stock options outstanding as of December 31, 1998:
OPTIONS OUTSTANDING OPTI --------------------------------------------------------------------------------------------------------Weighted Average

NOTES TO FINANCIAL STATEMENTS The following table summarizes information on stock options outstanding as of December 31, 1998:
OPTIONS OUTSTANDING OPTI --------------------------------------------------------------------------------------------------------Weighted Average Range of Number Outstanding Remaining Weighted Average Number Exercisable W Exercise Prices 1998 Contractual Life Exercise Price 1998 --------------------------------------------------------------------------------------------------------$10.34-18.19 1,686,034 4.22 years $16.24 1,686,034 20.06-30.13 1,589,622 6.80 years 28.92 1,279,445 33.38-40.22 417,078 7.36 years 33.64 168,078 51.06-58.25 2,217,152 9.45 years 56.43 289,321 --------5,909,886 7.10 years 35.96 3,422,878 =========

The estimated fair value of each option granted is calculated using the Black-Scholes option pricing model. The following summarizes the assumptions used in the model:
1998 1997 1996 --------------------------------------------------------------------------------------------Risk-free interest rate 4.8% 5.9% 6.4% Expected stock volatility 24.5% 21.7% 22.2% Dividend yield 1.20% 1.29% 1.36% Expected years until exercise 5.5 5.5 5.5

SEGMENT INFORMATION--In 1998, the Company adopted Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information ("SFAS 131"). SFAS 131 requires that segment information be reported based on the way the segments are organized within the Company for making operating decisions and assessing performance. The Company has approximately 400 operations in 35 countries which are aggregated and organized for internal reporting purposes into the following five segments: Engineered Products--North America: Businesses that are located in North America and that manufacture short lead-time components and fasteners, and specialty products such as adhesives, resealable packaging and electronic component packaging. Engineered Products--International: Businesses that are located outside North America and that manufacture short lead-time components and fasteners, and specialty products such as electronic component packaging and adhesives. Specialty Systems--North America: Businesses that are located in North America and that produce longer leadtime machinery and related consumables, and specialty equipment for applications such as industrial spray coating, quality measurement and static control. Specialty Systems--International: Businesses that are located outside North America and that manufacture longer lead-time machinery and related consumables, and specialty equipment for industrial spray coating and other applications. Leasing & Investments: Businesses that make opportunistic investments in mortgage-related assets, leveraged and direct financing leases of equipment, properties and property developments and affordable housing investments. Upon the adoption of SFAS 131, the Company's number of reportable segments increased to five from the three segments that were reported under the previous standard. Prior year amounts have been restated to conform with the new segments reported under SFAS 131. 36

Illinois Tool Works Inc. Segment information for 1998, 1997 and 1996 was as follows:
In thousands 1998 1997

Illinois Tool Works Inc. Segment information for 1998, 1997 and 1996 was as follows:
In thousands 1998 1997 --------------------------------------------------------------------------------------------------------Operating Revenues: Engineered Products--North America $ 1,790,221 $ 1,596,156 $ 1,480 Engineered Products--International 937,243 875,200 877 Specialty Systems--North America 2,000,308 2,012,851 1,930 Specialty Systems--International 1,048,895 919,063 886 Leasing & Investments 149,748 101,110 68 Intersegment revenues (278,526) (283,947) (245 ----------------------------$ 5,647,889 $ 5,220,433 $ 4,996 ============ ============ ======= Operating Income: Engineered Products--North America $ 363,369 $ 307,106 $ 274 Engineered Products--International 140,323 136,511 108 Specialty Systems--North America 377,994 329,984 296 Specialty Systems--International 125,617 113,509 95 Leasing & Investments 71,983 40,113 25 ----------------------------$ 1,079,286 $ 927,223 $ 800 ============ ============ ======= Depreciation and Amortization: Engineered Products--North America $ 67,915 $ 56,934 $ 52 Engineered Products--International 41,057 36,207 40 Specialty Systems--North America 64,494 57,135 56 Specialty Systems--International 37,334 34,541 27 Leasing & Investments 979 569 ----------------------------$ 211,779 $ 185,386 $ 178 ============ ============ ======= Plant & Equipment Additions: Engineered Products--North America $ 75,578 $ 55,146 $ 46 Engineered Products--International 40,346 35,698 44 Specialty Systems--North America 58,973 58,570 47 Specialty Systems--International 33,021 29,288 30 ----------------------------$ 207,918 $ 178,702 $ 168 ============ ============ ======= Identifiable Assets: Engineered Products--North America $ 1,101,077 $ 736,474 $ 677 Engineered Products--International 824,700 613,486 601 Specialty Systems--North America 1,273,430 1,057,480 1,019 Specialty Systems--International 963,182 1,011,383 996 Leasing & Investments 1,530,042 1,534,796 1,157 Corporate 425,731 441,137 353 ----------------------------$ 6,118,162 $ 5,394,756 $ 4,806 ============ ============ =======

Identifiable assets by segment are those assets that are specifically used in that segment. Corporate assets are principally cash and equivalents, investments, and other general corporate assets. 37

NOTES TO FINANCIAL STATEMENTS Enterprise-wide information for 1998, 1997 and 1996 was as follows:
In thousands 1998 1997 --------------------------------------------------------------------------------------------------------Operating Revenues by Product Line: Engineered Products--North America-Fasteners & Components $1,324,034 $1,178,425 $1,10 Specialty Products 466,187 417,731 37 --------------------- -----$1,790,221 $1,596,156 $1,48

NOTES TO FINANCIAL STATEMENTS Enterprise-wide information for 1998, 1997 and 1996 was as follows:
In thousands 1998 1997 --------------------------------------------------------------------------------------------------------Operating Revenues by Product Line: Engineered Products--North America-Fasteners & Components $1,324,034 $1,178,425 $1,10 Specialty Products 466,187 417,731 37 --------------------- -----$1,790,221 $1,596,156 $1,48 ============ ========== ====== Engineered Products--International-Fasteners & Components $ 847,500 $ 781,054 $ 79 Specialty Products 89,743 94,146 8 --------------------- -----$ 937,243 $ 875,200 $ 87 ============ ========== ====== Specialty Systems--North America-Equipment & Consumables $1,640,263 $1,627,429 $1,55 Specialty Equipment 360,045 385,422 37 --------------------- -----$2,000,308 $2,012,851 $1,93 ============ ========== ====== Specialty Systems--International-Equipment & Consumables $ 892,537 $ 760,057 $ 71 Specialty Equipment 156,358 159,006 17 --------------------- -----$1,048,895 $ 919,063 $ 88 ============ ========== ====== Operating Revenues by Geographic Region: United States $3,617,727 $3,359,485 $3,18 Europe 1,482,092 1,339,419 1,36 Asia 192,783 171,742 16 Other 355,287 349,787 27 --------------------- -----$5,647,889 $5,220,433 $4,99 ============ ========== ======

No single customer accounted for more than 10% of consolidated revenues in 1998, 1997 or 1996. Export sales from U.S. operations to third parties were less than 10% of total operating revenues during those years. Total noncurrent assets excluding deferred tax assets and financial instruments were $2,939,000,000 and $2,158,000,000 at December 31, 1998 and 1997, respectively. Of these amounts, approximately 61% and 58%, respectively, were attributed to U.S. operations. The remaining amounts were attributed to the Company's foreign operations, with no single country accounting for a significant portion. 38

QUARTERLY AND COMMON STOCK DATA Illinois Tool Works Inc. QUARTERLY FINANCIAL DATA (UNAUDITED)
THR --------------------------------------------------------------------------------------------------------In thousands except March 31 June 30 September 30 ----------------------- ----------------------- ----------------------- ------per share amounts 1998 1997 1998 1997 1998 1997 1 --------------------------------------------------------------------------------------------------------Operating revenues $1,340,991 $1,229,798 $1,420,461 $1,326,344 $1,377,212 $1,315,388 $1,509, Cost of revenues 873,957 807,317 910,889 854,352 888,741 857,495 952, Operating income 234,352 196,433 283,687 245,819 264,562 235,763 296, Net income 148,658 123,255 175,979 154,394 163,870 149,130 184, Net income per share: Basic .60 .49 .70 .62 .66 .60 Diluted .59 .49 .70 .61 .65 .59

QUARTERLY AND COMMON STOCK DATA Illinois Tool Works Inc. QUARTERLY FINANCIAL DATA (UNAUDITED)
THR --------------------------------------------------------------------------------------------------------In thousands except March 31 June 30 September 30 ----------------------- ----------------------- ----------------------- ------per share amounts 1998 1997 1998 1997 1998 1997 1 --------------------------------------------------------------------------------------------------------Operating revenues $1,340,991 $1,229,798 $1,420,461 $1,326,344 $1,377,212 $1,315,388 $1,509, Cost of revenues 873,957 807,317 910,889 854,352 888,741 857,495 952, Operating income 234,352 196,433 283,687 245,819 264,562 235,763 296, Net income 148,658 123,255 175,979 154,394 163,870 149,130 184, Net income per share: Basic .60 .49 .70 .62 .66 .60 Diluted .59 .49 .70 .61 .65 .59

COMMON STOCK PRICE AND DIVIDEND DATA--The common stock of Illinois Tool Works Inc. is listed on the New York Stock Exchange and the Chicago Stock Exchange. Quarterly market price and dividend data for 1998 and 1997 were as shown below:
MARKET PRICE PER SHARE ---------------------HIGH LOW DIVIDE --------------------------------------------------------------------------------------------------------1998 Fourth quarter $67.69 $50.88 Third quarter 68.75 45.19 Second quarter 73.19 62.13 First quarter 65.00 52.56 1997 Fourth quarter Third quarter Second quarter First quarter

$60.13 55.31 52.63 45.69

$46.88 45.56 40.31 37.38

The approximate number of holders of record of common stock as of February 5, 1999 was 5,764. This number does not include beneficial owners of the Company's securities held in the name of nominees. 39

Illinois Tool Works Inc. ELEVEN-YEAR FINANCIAL SUMMARY
Dollars and shares in thousands except per share amounts 1998 19 --------------------------------------------------------------------------------------------------------INCOME: Operating revenues $ 5,647,889 5,220,4 Cost of revenues $ 3,626,123 3,378,7 Selling, administrative and research and development expenses $ 890,581 870,2 Amortization of goodwill and other intangible assets $ 44,593 36,8 Amortization of retiree health care $ 7,306 7,3 Operating income $ 1,079,286 927,2 Interest expense $ (14,230) (19,3 Other income (expense) $ (5,472) 16,5 Income before income taxes $ 1,059,584 924,3 Income taxes $ 386,800 337,4 Net income $ 672,784 586,9 Basic per share $ 2.69 2. Diluted per share $ 2.67 2. FINANCIAL POSITION: Net working capital $ 612,464 700,7 Net plant and equipment $ 987,549 884,0 Total assets $ 6,118,162 5,394,7

Illinois Tool Works Inc. ELEVEN-YEAR FINANCIAL SUMMARY
Dollars and shares in thousands except per share amounts 1998 19 --------------------------------------------------------------------------------------------------------INCOME: Operating revenues $ 5,647,889 5,220,4 Cost of revenues $ 3,626,123 3,378,7 Selling, administrative and research and development expenses $ 890,581 870,2 Amortization of goodwill and other intangible assets $ 44,593 36,8 Amortization of retiree health care $ 7,306 7,3 Operating income $ 1,079,286 927,2 Interest expense $ (14,230) (19,3 Other income (expense) $ (5,472) 16,5 Income before income taxes $ 1,059,584 924,3 Income taxes $ 386,800 337,4 Net income $ 672,784 586,9 Basic per share $ 2.69 2. Diluted per share $ 2.67 2. FINANCIAL POSITION: Net working capital $ 612,464 700,7 Net plant and equipment $ 987,549 884,0 Total assets $ 6,118,162 5,394,7 Long-term debt $ 947,008 854,3 Total debt $ 1,353,715 1,152,6 Stockholders' equity $ 3,338,035 2,806,4 OTHER DATA: Operating income: Return on operating revenues % 19.1 17 Net income: Return on operating revenues % 11.9 11 Return on average stockholders' equity % 21.9 22 Cash dividends paid $ 127,421 107,0 Per share--paid $ .51 . --declared $ .54 . Book value per share $ 13.35 11. Common stock market price at year-end $ 58.00 60. Long-term debt to total capitalization 22.1 23 Total debt to total capitalization % 28.9 29 Total debt to total capitalization (excluding Leasing and Investments segment) % 11.1 4 Shares outstanding: At December 31 250,128 249,5 Weighted average 249,906 249,2 Plant and equipment additions $ 207,918 178,7 Depreciation $ 167,186 148,5 Research and development expenses $ 50,678 52,0 Employees at December 31 29,200 25,7 Operating revenues per employee $ 193 2

Note: Certain reclassifications of prior years' data have been made to conform with current year reporting. 40

Eleven-Year Financial Summary
Dollars and shares in thousands except per share amounts 1995 1994 --------------------------------------------------------------------------------------------------------INCOME: Operating revenues 4,178,080 3,461,315 Cost of revenues 2,723,988 2,290,117 Selling, administrative and research and development expenses 776,112 666,576 Amortization of goodwill and other intangible assets 25,031 22,344 Amortization of retiree health care 6,968 6,968 Operating income 645,981 475,310 Interest expense (29,991) (26,943) Other income (expense) 7,718 1,916 Income before income taxes 623,708 450,283 Income taxes 236,100 172,500 Net income 387,608 277,783 Basic per share 1.64 1.22 Diluted per share 1.63 1.22

Eleven-Year Financial Summary
Dollars and shares in thousands except per share amounts 1995 1994 --------------------------------------------------------------------------------------------------------INCOME: Operating revenues 4,178,080 3,461,315 Cost of revenues 2,723,988 2,290,117 Selling, administrative and research and development expenses 776,112 666,576 Amortization of goodwill and other intangible assets 25,031 22,344 Amortization of retiree health care 6,968 6,968 Operating income 645,981 475,310 Interest expense (29,991) (26,943) Other income (expense) 7,718 1,916 Income before income taxes 623,708 450,283 Income taxes 236,100 172,500 Net income 387,608 277,783 Basic per share 1.64 1.22 Diluted per share 1.63 1.22 FINANCIAL POSITION: Net working capital 681,558 634,500 Net plant and equipment 694,941 641,235 Total assets 3,591,318 2,580,498 Long-term debt 615,557 272,987 Total debt 791,745 339,989 Stockholders' equity 1,924,237 1,541,521 OTHER DATA: Operating income: Return on operating revenues 15.5 13.7 Net income: Return on operating revenues 9.3 8.0 Return on average stockholders' equity 22.4 19.8 Cash dividends paid 71,783 61,162 Per share--paid .31 .27 --declared .32 .28 Book value per share 8.14 6.76 Common stock market price at year-end 29.50 21.88 Long-term debt to total capitalization 24.2 15.0 Total debt to total capitalization 29.2 18.1 Total debt to total capitalization (excluding Leasing and Investments segment 16.2 18.1 Shares outstanding: At December 31 236,466 227,916 Weighted average 235,978 226,775 Plant and equipment additions 150,176 131,055 Depreciation 126,900 109,805 Research and development expenses 52,700 48,700 Employees at December 31 21,200 19,500 Operating revenues per employee 197 178

Eleven-Year Financial Summary Dollars and shares in thousands except per share amounts 1991 1990 --------------------------------------------------------------------------------------------------------INCOME: Operating revenues 2,639,650 2,544,153 Cost of revenues 1,759,288 1,686,423 Selling, administrative and research and development expenses 551,865 512,685 Amortization of goodwill and other intangible assets 23,979 19,181 Amortization of retiree health care --Operating income 304,518 325,864 Interest expense (44,342) (39,190) Other income (expense) 27,583 13,209 Income before income taxes 287,759 299,883 Income taxes 107,200 117,500 Net income 180,559 182,383 Basic per share .81 .84 Diluted per share .81 .83 FINANCIAL POSITION: Net working capital 442,041 615,055 Net plant and equipment 525,695 483,549 Total assets 2,257,139 2,150,307 Long-term debt 307,082 430,632 Total debt 489,189 495,952 Stockholders' equity 1,212,051 1,091,842 OTHER DATA: Operating income: Return on operating revenues 11.5 12.8 Net income:

Return on operating revenues Return on average stockholders' equity Cash dividends paid Per share--paid --declared Book value per share Common stock market price at year-end Long-term debt to total capitalization Total debt to total capitalization Total debt to total capitalization (excluding Leasing and Investments segment Shares outstanding: At December 31 Weighted average Plant and equipment additions Depreciation Research and development expenses Employees at December 31 Operating revenues per employee

6.8 15.7 44,108 .20 .21 5.44 15.94 20.2 28.8 28.8 222,872 222,354 106,036 91,414 40,300 18,700 141

7.2 18.6 35,861 .17 .17 4.98 12.07 28.3 31.2 31.2 219,218 217,745 101,183 82,913 40,300 18,400 138

41
CORPORATE EXECUTIVES W. JAMES FARRELL Chairman and Chief Executive Officer, 33 Years of Service HAROLD B. SMITH Chairman of the Executive Committee, 44 Years of Service FRANK S. PTAK Vice Chairman, 23 Years of Service RUSSELL M. FLAUM Executive Vice President, 23 Years of Service DIRECTORS W. JAMES FARRELL Chairman and Chief Executive Officer, Illin Director since 1995 HAROLD B. SMITH Chairman of the Executive Committee, Illino Director since 1968

WILLIAM F. ALDINGER III Chairman and Chief Executive Officer, House (financial services), Director since 1998 MICHAEL J. BIRCK President and Chief Executive Officer, Tell (telecommunications), Director since 1996 MARVIN D. BRAILSFORD Vice President, Kaiser-Hill Co LLC (constru and environmental services). Director since SUSAN CROWN Vice President, Henry Crown and Company (diversified investments), Director since 1 H. RICHARD CROWTHER Retired Vice Chairman, Illinois Tool Works Director since 1995 ROBERT C. MCCORMACK Partner, Trident Capital L.P. (venture capi since 1993. Previously 1978-1987 PHILLIP B. ROONEY Vice Chairman, ServiceMaster Company (a net service companies), Director since 1990 ORMAND J. WADE Former Vice Chairman, Ameritech Corporation (telecommunications products and services), EDWARD BYRON SMITH Honorary Director, Director 1938-93

THOMAS J. HANSEN Executive Vice President, 19 Years of Service DENNIS J. MARTIN Executive Vice President, 7 Years of Service F. RONALD SEAGER Executive Vice President, 18 Years of Service DAVID B. SPEER Executive Vice President, 21 Years of Service HUGH J. ZENTMYER Executive Vice President, 31 Years of Service

STEWART S. HUDNUT Senior Vice President, General Counsel and Secretary 7 Years of Service JOHN KARPAN Senior Vice President, Human Resources, 9 Years of Service JON C. KINNEY Senior Vice President and Chief Financial Officer 26 Years of Service ALLAN C. SUTHERLAND Senior Vice President, Leasing and Investments 6 Years of Service

EXHIBIT 21 DECEMBER 31, 1998

CORPORATE EXECUTIVES W. JAMES FARRELL Chairman and Chief Executive Officer, 33 Years of Service HAROLD B. SMITH Chairman of the Executive Committee, 44 Years of Service FRANK S. PTAK Vice Chairman, 23 Years of Service RUSSELL M. FLAUM Executive Vice President, 23 Years of Service

DIRECTORS W. JAMES FARRELL Chairman and Chief Executive Officer, Illin Director since 1995 HAROLD B. SMITH Chairman of the Executive Committee, Illino Director since 1968

WILLIAM F. ALDINGER III Chairman and Chief Executive Officer, House (financial services), Director since 1998 MICHAEL J. BIRCK President and Chief Executive Officer, Tell (telecommunications), Director since 1996 MARVIN D. BRAILSFORD Vice President, Kaiser-Hill Co LLC (constru and environmental services). Director since SUSAN CROWN Vice President, Henry Crown and Company (diversified investments), Director since 1 H. RICHARD CROWTHER Retired Vice Chairman, Illinois Tool Works Director since 1995 ROBERT C. MCCORMACK Partner, Trident Capital L.P. (venture capi since 1993. Previously 1978-1987 PHILLIP B. ROONEY Vice Chairman, ServiceMaster Company (a net service companies), Director since 1990 ORMAND J. WADE Former Vice Chairman, Ameritech Corporation (telecommunications products and services), EDWARD BYRON SMITH Honorary Director, Director 1938-93

THOMAS J. HANSEN Executive Vice President, 19 Years of Service DENNIS J. MARTIN Executive Vice President, 7 Years of Service F. RONALD SEAGER Executive Vice President, 18 Years of Service DAVID B. SPEER Executive Vice President, 21 Years of Service HUGH J. ZENTMYER Executive Vice President, 31 Years of Service

STEWART S. HUDNUT Senior Vice President, General Counsel and Secretary 7 Years of Service JOHN KARPAN Senior Vice President, Human Resources, 9 Years of Service JON C. KINNEY Senior Vice President and Chief Financial Officer 26 Years of Service ALLAN C. SUTHERLAND Senior Vice President, Leasing and Investments 6 Years of Service

EXHIBIT 21 DECEMBER 31, 1998 ILLINOIS TOOL WORKS INC. SUBSIDIARIES AND AFFILIATES
COMPANY ----------------------------------------------------------------------------A 3 Sud S.p.A. - Italy (1) Accu-Lub manufacturing GmbH - Germany Arcsmith Canada, Inc. - Canada (2) Arcsmith, Inc. (3) Azon Administration Pty. Ltd. - Australia (4) Azon Nominees Ltd. - Australia (4) Azon Operations Pty. Ltd. - Australia (4) Azon Pty. Limited - Australia (5) Binks Sames (Australia) Pty. Ltd. - Australia (7) Binks Sames (Deutschland) GmbH - Germany (8) Binks Sames S.A. - Belgium (8) Binks Sames (UK) Limited - United Kingdom (9) BSH-TM GmbH - Germany (10) Buell Industries, Inc. - Delaware Burseryds Bruk AB - Sweden Bursped AB - Sweden (11) RELATIONSHIP -----------Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary

EXHIBIT 21 DECEMBER 31, 1998 ILLINOIS TOOL WORKS INC. SUBSIDIARIES AND AFFILIATES
COMPANY ----------------------------------------------------------------------------A 3 Sud S.p.A. - Italy (1) Accu-Lub manufacturing GmbH - Germany Arcsmith Canada, Inc. - Canada (2) Arcsmith, Inc. (3) Azon Administration Pty. Ltd. - Australia (4) Azon Nominees Ltd. - Australia (4) Azon Operations Pty. Ltd. - Australia (4) Azon Pty. Limited - Australia (5) Binks Sames (Australia) Pty. Ltd. - Australia (7) Binks Sames (Deutschland) GmbH - Germany (8) Binks Sames S.A. - Belgium (8) Binks Sames (UK) Limited - United Kingdom (9) BSH-TM GmbH - Germany (10) Buell Industries, Inc. - Delaware Burseryds Bruk AB - Sweden Bursped AB - Sweden (11) California Industrial Products L.L.C. - Delaware Cema Maschinefabrik GmbH - Germany (12) CEV Hydroelectric Company - Italy (13) Champs Investment E.U.R.L. - France (14) Cofiva S.p.A. - Italy (15) Compagnie de Materiel et d'Equipements Techniques S.A.S. - France Company Consurtium Valle D'Aosta - Italy (13) CS Packaging (Malaysia) Sdn Bhd - Malaysia (16) CS Packaging Corporation Ltd. - British Virgin Islands CS Packaging Corporation Ltd. - Hong Kong (17) CS Packaging Corporation Pte. Ltd.- Singapore (18) CS Packaging Investment Pte. Ltd.- Singapore (17) CS Packaging Corporation Shanghai Ltd. - China (17) Comptoir des Produits Metallurgiques S.A. - France (19) Cumberland Leasing Co. - Illinois (20) Cyclone Hardware Pty. Ltd. - Australia (21) Cyklop Signode Packaging Corporation - Thailand Cyklop Singapore Pte. Ltd.- Singapore (18) Danband Products Australia Pty. Ltd. - Australia (22) Danband Products Limited - New Zealand (22) Devcon de Mexico, S.A. - Mexico Devcon Limited - Ireland DeVilbiss Equipamentos Para Pintura Industrial Ltda. - Brazil DeVilbiss Ransburg de Mexico S.A. de C.V. - Mexico Edgepack Limited - United Kingdom (23) Elematic s.r.l. - Italy (1) Elematic 2 s.r.l. - Italy (24) Elettro Gibi S.p.A. - Italy (15) Elleyse Financing SNC - France (25) Envases Multipac, S.A.de C.V. - Mexico European Diamond Tools N.V. - Belgium (15) Fixing System S.A. - Switzerland (26) Gema Volstatic AG - Switzerland (26) Gerhard Haugk GmbH - Germany (27) Gerrard Signode Limited - New Zealand (22) Gerrard Signode Pty. Limited - Australia (22) Grawo AG - Switzerland (28) H.A. Springer Far East Pte. Ltd. - Singapore (29) H.A. Springer marine & industrie service Gmb2 - Germany (15) RELATIONSHIP -----------Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Affiliate Subsidiary Subsidiary Subsidiary Affiliate Affiliate Affiliate Affiliate Affiliate Affiliate Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Affiliate Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary

PAGE 2... DECEMBER 31, 1998 ILLINOIS TOOL WORKS INC. SUBSIDIARIES AND AFFILIATES
COMPANY ----------------------------------------------------------------------------RELATIONSHIP ------------

PAGE 2... DECEMBER 31, 1998 ILLINOIS TOOL WORKS INC. SUBSIDIARIES AND AFFILIATES
COMPANY ----------------------------------------------------------------------------Halles Financing E.U.R.L. - France (30) Haloila Vertrieb GmbH - Germany (14) Heistrap Industriesysteme GmbH - Germany (12) Henschel Kunststofftechnik GmbH - Germany (15) Hobart Brothers (International) AG - Switzerland (26) Hobart Brothers Company - Ohio Hobart Mexico - Mexico (31) Hylec Eletro Gibi (UK) Ltd. - United Kingdom (32) I.T.W. Inc. - Illinois Illinois Tool Works FSC Inc. - Barbados (33) IMSA ITW, S.A. de C.V. - Mexico IMSA Paslode, S.A. de C.V. - Mexico IMSA Signode, S.A. de C.V. - Mexico Inmobiliaria Cit, S.A. de C.V. - Mexico Ispra-Control S.p.A. - Italy (34) Ispra-Flex S.p.A. - Italy (32) ITW Ampang Industries Philippines, Inc. - Philippines ITW Asia (Pte) Limited - Singapore ITW Ateco GmbH - Germany (35) ITW Australia Pty. Ltd. ITW Austria Vertriebs GmbH - Austria (27) ITW Automotive Products GmbH - Germany (35) ITW Automotive Products GmbH, K.G. - Germany (36) ITW Befestigungssyteme GmbH - Germany (35) ITW Belgium S.A. - Belgium ITW Bevestigingssystemen B.V. - Netherlands (37) ITW Binks Corporation - Delaware (38) ITW Canada - Canada (39) ITW Canada Holdings Company - Canada (31) ITW Canada Management Inc. - Canada ITW-Canguru Rotulos Ltda. - Brazil ITW Cayman - Cayman Islands (15) ITW China Components Inc. - Delaware ITW Construction Products (Suzhou) Co. Ltd. - China ITW de Argentina S.A - Argentina (15) ITW Decorating Swiss AG - Switzerland (26) ITW de Fastex de Argentina S.A. - Argentina (40) ITW de France S.A.S. - France (14) ITW (Deutschland) GmbH - Germany (41) ITW Devcon Industriel Products GmbH - Germany (35) ITW do Brazil Industrial e Comercial Ltda. - Brazil ITW Domestic Holdings Inc. - Delaware ITW Dynatec (Hong Kong) Limited - Hong Kong ITW Dynatec Kabushiki Kaisha - Japan ITW Dynatec Singapore Pte. Ltd.- Singapore ITW Dynatec Thailand Ltd. - Thailand ITW Electronic Components Pte. Ltd. - Singapore ITW Electronic Packaging (Malta) Ltd. - Malta (42) ITW Espana, S.A. - Spain (15) ITW Expandet S.A.S. - France (14) ITW Fastex de Mexico S.A. de C.V. - Mexico ITW Fastex Italia S.p.A. - Italy (15) ITW Finance L.L.C. - Delaware (43) ITW Finance II L.L.C. - Delaware (44) ITW Finishing L.L.C. - Delaware (45) ITW Gema s.r.l. - Italy (15) RELATIONSHIP -----------Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Affiliate Subsidiary Subsidiary Affiliate Affiliate Affiliate Affiliate Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Affiliate Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Affiliate Subsidiary Affiliate Affiliate Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary

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PAGE 3... DECEMBER 31, 1998 ILLINOIS TOOL WORKS INC. SUBSIDIARIES AND AFFILIATES COMPANY ----------------------------------------------------------------------------ITW Gunther Denmark A/S - Denmark ITW Gunther GmbH ITW Gunther S.A.S - France (14) ITW Gunther Sweden AB - Sweden RELATIONSHIP -----------Subsidiary Subsidiary Subsidiary Subsidiary

PAGE 3... DECEMBER 31, 1998 ILLINOIS TOOL WORKS INC. SUBSIDIARIES AND AFFILIATES COMPANY ----------------------------------------------------------------------------ITW Gunther Denmark A/S - Denmark ITW Gunther GmbH ITW Gunther S.A.S - France (14) ITW Gunther Sweden AB - Sweden ITW Holding France S.A.S. - France (15) ITW Holdings GmbH - Germany (46) ITW Holdings Japan L.L.C. - Delaware (47) ITW Holdings Pty. - Australia (48) ITW Holdings U.K. - United Kingdom (15) ITW-Imaden Industria E Comercio Ltda. - Brazil ITW Industrie G.m.b.H. - Germany (35) ITW Industry Co., Ltd. - Japan (49) ITW International Finance Inc. - Delaware (33) ITW International Finance S.A.S. - France (15) ITW International Holdings Inc. - Delaware (50) ITW Investments, Inc. - Delaware (51) ITW Ireland - Ireland (52) ITW Ireland Holdings - Ireland (53) ITW Italy Finance E.U.R.L. - Italy (30) ITW Jeju Industries Private Limited - India ITW Leasing & Investments Inc. - Delaware (54) ITW Limited Sweden Filial Sverige - Sweden (55) ITW Limited - United Kingdom (9) ITW Mapri Industria e Commercio Ltda - Brazil (56) ITW Meritex Sdn. Bhd. - Malaysia (57) ITW Mima Films L.L.C. - Delaware (58) ITW Mima Holdings L.L.C. - Delaware (58) ITW Mima Systems S.A.S. - France (59) ITW Mima Service S.A.S. - France (60) ITW Morlock GmbH - Germany (27) ITW Mortgage Investments I, Inc. - Delaware (61) ITW Mortgage Investments II, Inc. - Delaware (62) ITW Mortgage Investments III, Inc. - Delaware (63) ITW Mortgage Investments IV, Inc. - Delaware (64) ITW Muller Inc. - Texas (65) ITW Nederland B.V. - Netherlands ITW New Zealand - New Zealand ITW Oberflaechentechnik GmbH - Germany (35) ITW Packaging Corporation - Delaware ITW PanCon Inc. - Delaware ITW Paris E.U.R.L. - France (14) ITW Philippines, Inc. - Philippines (21) ITW Polska Sp.s.o.o. - Poland (15) ITW Real Estate L.L.C. - Delaware (66) ITW Real Estate Investments Inc. - Delaware (67) ITW Residuals Inc. - Delaware ITW Residuals II Inc. - Delaware ITW Scanimed S.A.S. - France (14) ITW Service Inc. - Korea (68) ITW Shippers S.A. - Belgium (69) ITW Signode Australasia Pty. Limited - Australia (70) ITW Signode Holding GmbH - Germany ITW Signode India Limited - India ITW SP Europe S.a.r.l. - Luxembourg (35) ITW Stretch Packaging L.L.C. - Delaware (71) ITW Surfaces & Finitions S.A. - France (14) RELATIONSHIP -----------Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary

3
PAGE 4... DECEMBER 31, 1998 ILLINOIS TOOL WORKS INC. SUBSIDIARIES AND AFFILIATES COMPANY ----------------------------------------------------------------------------ITW Sverige AB - Sweden ITW Switches Asia Ltd.- Taiwan ITW Tech Co. Inc. - Delaware (72) ITW Universal L.L.C. - Delaware (15) ITW Welding Products Asia Pacific Pte. Limited - Singapore ITW Welding S.A. - France (14) RELATIONSHIP -----------Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary

PAGE 4... DECEMBER 31, 1998 ILLINOIS TOOL WORKS INC. SUBSIDIARIES AND AFFILIATES COMPANY ----------------------------------------------------------------------------ITW Sverige AB - Sweden ITW Switches Asia Ltd.- Taiwan ITW Tech Co. Inc. - Delaware (72) ITW Universal L.L.C. - Delaware (15) ITW Welding Products Asia Pacific Pte. Limited - Singapore ITW Welding S.A. - France (14) Jambro Ltd. - New Zealand Japit Inc. - Japan Jemco de Mexico, S.A. de C.V. - Mexico KC Metal Products Pty. Ltd. - Australia (22) Kinnears Pty. Ltd. - Australia (22) Kinnears Ropes Ltd. - New Zealand (73) Kormag Industries e Comercio Ltda. - Brazil LSPS Inc. - Delaware (74) Liljendals Bruk Ab - Finland Lombard Pressings Limited - United Kingdom (9) Loveshaw Corporation, The - Delaware (75) Lys Comet S.A.S. - France (14) Lys Fusion Poland Sp.z.o.o. - Poland (13) Lys Fusion S.p.A. - Italy (76) Mazel Limited - United Kingdom (55) Meritex Plastic Industries, Inc. - Texas (15) Meyercord Co., The - Delaware Miller Electric Mfg. Co. - Wisconsin Miller Europe S.p.A. - Italy (77) Miller Insurance Ltd - Bermuda (77) Mima Films L.L.C. - Delaware (78) Mima Films S.a.r.l. - Luxembourg (65) Mima Films SCA - Belgium (79) Modern Maintenance Products International Limited - United Kingdom (55) Mortgage Ally Inc. - Delaware (80) Nation Financing E.U.R.L. - France (14) Nifco Hi-Cone Leasing Company Limited - Japan NKT Tr dvaerket A/S - Denmark (15) Nouva Cannottieri Olona s.r.l. - Italy (32) Nuovo Lys Fusion s.r.l. - Italy (81) Odesign, Inc. - Illinois Orgapack E.U.R.L. - France (14) Orgapack Finance GmbH - Switzerland (82) Orgapack GmbH - Switzerland (82) Oy M Haloila Ab - Finland (14) PT Cyklop Indo Utama - Indonesia (83) Pack-Band Hagen GmbH - Germany (27) Packaging Leasing Systems Inc. - Delaware Packaging Systems, L.L.C. - Illinois (84) PanCon GmbH - Germany (27) Pronovia s.r.o. - Czechoslovakia (15) Pronovia Plus s.r.o. - Czechoslovakia (15) Ransburg Industrial Finishing K.K. - Japan (85) Ransburg Manufacturing Corporation - Indiana Richmond Systempak Limited - Hong Kong Rivex S.A. - France (86) Rivex Ltd. - U.K. (19) Samson Spray Equipment Pty. Ltd. - Australia (87) Scanilec B.V. - Netherlands (37) Scybele S.A.S. - France (14) RELATIONSHIP -----------Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Affiliate Subsidiary Subsidiary Subsidiary Subsidiary Affiliate Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Affiliate Subsidiary Affiliate Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Affiliate Subsidiary Subsidiary Affiliate Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary

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PAGE 5... DECEMBER 31, 1998 ILLINOIS TOOL WORKS INC. SUBSIDIARIES AND AFFILIATES
COMPANY ----------------------------------------------------------------------------Seine Investments E.U.R.L. - France (14) Serim s.r.l. - Italy (32) RELATIONSHIP -----------Subsidiary Subsidiary

PAGE 5... DECEMBER 31, 1998 ILLINOIS TOOL WORKS INC. SUBSIDIARIES AND AFFILIATES
COMPANY ----------------------------------------------------------------------------Seine Investments E.U.R.L. - France (14) Serim s.r.l. - Italy (32) Shanghai ITW Plastic & Metal Company Limited - China (88) Signode B.V. - Netherlands (37) Signode Bernpak GmbH - Germany Signode Brasileria S.A. - Brazil Signode France S.A.S. - France (14) Signode Ireland Limited - United Kingdom (89) Signode Kabushiki Kaisha - Japan (15) Signode Packaging Systems Limited - East Africa Signode Systems GmbH - Germany (27) Sima Industri A/S - Denmark (90) Simco (Nederland) B.V. - Netherlands (15) Simco Japan, K.K. - Japan (85) Societe de Rectification et de Decolletage SARL - France (91) Societe de Prospection et d'Inventions Techniques S.A.S. (SPIT) - France (14) Societe d'Applications Thermiques S.A. (SAT) - France (14) Societe Nouvelle Provence Plastiques S.A.R.L. - France (14) Spencer & Co. (Machinery) Limited - United Kingdom (92) S.P.I.M. S.A. - France (15) Stahl, S.A. de C.V. - Mexico (93) Thimon S.A. - France (14) Toolmatic B.V. - Netherlands (94) Toolmatic N.V. - Belgium (94) Triumph Financing E.U.R.L. - France (14) Unibraze of Canada (1983) Ltd. - Canada (95) Unipac Corporation - Canada (96) Unipac, Inc. - Delaware (3) Unipac Limited - United Kingdom (55) Wide Body (FSC) I, Inc. - U.S. Virgin Islands (33) RELATIONSHIP -----------Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Affiliate Subsidiary Affiliate Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Affiliate Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary

PAGE 6... JANUARY 1999 ILLINOIS TOOL WORKS INC. SUBSIDIARIES AND AFFILIATES 1. Wholly owned by ITW Fastex Italia S.p.A. 2. Wholly owned by Arcsmith, Inc. 3. Wholly owned by LSPS Inc. 4. Wholly owned by Cyclone Hardware Pty. Limited 5. Wholly owned by Gerrard Signode Limited 6. Wholly owned by Mima Films SCA 7. Wholly owned by Binks Sames (UK) Limited 8. Wholly owned by ITW Binks Corporation 9. Wholly owned by ITW Holdings U.K. 10. Ownership interest by EDT N.V. 11. Wholly owned by Burseryds Bruk AB 12. Wholly owned by Signode Bernpak GmbH 13. Ownership interest is by Lys Fusion S.p.A. 14. Wholly owned by ITW Holding France S.A.S. 15. Wholly Owned by ITW International Holdings Inc. 16. Wholly owned by CS Packaging Corporation Pte. Ltd. (Singapore) 17. Wholly owned by CS Packaging Corporation Ltd. (BVI) 18. Wholly owned by CS Packaging Investment Pte. Ltd. 19. Wholly owned by Rivex S.A. 20. Wholly owned by ITW Residuals II Inc. 21. Wholly owned by ITW Australia Pty. Ltd.

PAGE 6... JANUARY 1999 ILLINOIS TOOL WORKS INC. SUBSIDIARIES AND AFFILIATES 1. Wholly owned by ITW Fastex Italia S.p.A. 2. Wholly owned by Arcsmith, Inc. 3. Wholly owned by LSPS Inc. 4. Wholly owned by Cyclone Hardware Pty. Limited 5. Wholly owned by Gerrard Signode Limited 6. Wholly owned by Mima Films SCA 7. Wholly owned by Binks Sames (UK) Limited 8. Wholly owned by ITW Binks Corporation 9. Wholly owned by ITW Holdings U.K. 10. Ownership interest by EDT N.V. 11. Wholly owned by Burseryds Bruk AB 12. Wholly owned by Signode Bernpak GmbH 13. Ownership interest is by Lys Fusion S.p.A. 14. Wholly owned by ITW Holding France S.A.S. 15. Wholly Owned by ITW International Holdings Inc. 16. Wholly owned by CS Packaging Corporation Pte. Ltd. (Singapore) 17. Wholly owned by CS Packaging Corporation Ltd. (BVI) 18. Wholly owned by CS Packaging Investment Pte. Ltd. 19. Wholly owned by Rivex S.A. 20. Wholly owned by ITW Residuals II Inc. 21. Wholly owned by ITW Australia Pty. Ltd. 22. Wholly owned by ITW Signode Australasia Pty. Limited 23. Wholly owned by Lombard Pressings Limited 24. 40% owned by ITW Fastex Italia S.p.A.; 60% owned by Elematic s.r.l. 25. Wholly owned by Champs Investment E.U.R.L. 26. Wholly owned by Orgapack GmbH 27. Wholly owned by ITW Signode Holding GmbH 28. Wholly owned by ITW Decorating Swiss AG 29. Ownership interest by H.A. Springer machine & industrie service GmbH 30. Wholly owned by ITW International Finance S.A.S. 31. Wholly owned by Hobart Brothers Company 32. Ownership interest is by Elettro GiBi S.p.A. 33. Wholly owned by ITW Leasing & Investments Inc. 34. Wholly owned by Elettro GiBi S.p.A. 35. Wholly owned by ITW (Deutschland) GmbH 36. 99.9% owned by ITW Befestigungssysteme GmbH; .1% owned by ITW Automotive Products GmbH 37. Wholly owned by ITW Nederland B.V. 38. Wholly owned by ITW Finishing L.L.C. 39. 99.9% owned by ITW Canada Holdings Company; .1% owned by ITW Canada Management Inc. 40. Wholly owned by ITW Mapri Industria e Comercio Ltda. 41. 94% owned by ITW International Holdings Inc.; 6% owned by Illinois Tool Works Inc. 42. 99.9% owned by Illinois Tool Works Inc.; .1% owned by ITW Limited 43. 99% owned by ITW Tech Co. Inc.; 1% owned by Illinois Tool Works Inc. 44. 99% owned by ITW Leasing & Investments Inc.; 1% owned by Illinois Tool Works Inc. 45. 99% owned by Illinois Tool Works Inc.; 1% owned by ITW Domestic Holdings Inc. 46. 50% owned by ITW Holdings Pty.; 50% owned by ITW International Holdings Inc. 47. 90% owned by ITW International Holdings Inc.; 10% owned by ITW Leasing & Investments Inc. 48. 99% owned by Illinois Tool Works Inc.; 1% owned by W.A. Deutsher Pty. Ltd. 49. Wholly owned by Ransburg Industrial Finishing K.K. 50. 1,000 common shares owned by ITW Investments, Inc.; 150,000 Preferred 6% Non-Voting shares owned by ITW Finishing L.L.C. 51. 1,000 common shares owned by ITW Leasing & Investments Inc.; 800 preferred Series A 7.3% cumulative non-voting owned by ITW Leasing & Investments Inc. 52. 99.9% owned by ITW Ireland Holdings; .1% owned by ITW Cayman

53. 99.9% owned by ITW International Holdings Inc.; .1% owned by ITW Cayman 54. 1,000 common shares owned by Illinois Tool Works Inc.; 75,000 Preferred 6% Non-Voting shares owned by ITW Finishing L.L.C.

PAGE 7... JANUARY 1999 ILLINOIS TOOL WORKS INC. SUBSIDIARIES AND AFFILIATES 55. Wholly owned by ITW Limited 56. 96.39% owned by Illinois Tool Works Inc.; .3% owned by ITW do Brazil Industrial e Comercial Ltda. 57. Wholly owned by Meritex Plastic Industries, Inc. 58. 99% owned by ITW Stretch Packaging L.L.C.; 1% owned by ITW Leasing & Investments Inc. 59. 69.8% owned by Thimon S.A.; 30.1% owned by ITW Holdings France; .1% owned by ITW Paris E.U.R.L. 60. Wholly owned by Thimon S.A. 61. 1,000 common shares, 800 Preferred Series A 6% Cumulative Non-Voting shares and 800 Preferred Series B 7.3% Cumulative Non-Voting shares owned by ITW Leasing & Investments Inc. 62. 1,000 common shares owned by Illinois Tool Works Inc.; 1,000 Preferred Series A 6% Cumulative NonVoting shares owned by ITW Real Estate L.L.C. 63. 1,000 common shares owned by Illinois Tool Works Inc.; 1,000 Preferred Series A 5% Cumulative NonVoting shares owned by ITW Real Estate L.L.C. 64. 1,000 common shares owned by Illinois Tool Works Inc.; 1,000 Preferred Series A 7.5% Cumulative NonVoting shares owned by ITW Investments, Inc. 65. Wholly owned by ITW Stretch Packaging L.L.C. 66. 99% owned by ITW Mortgage Investments I, Inc.; 1% owned by Illinois Tool Works Inc. 67. Wholly owned by ITW Investments, Inc. 68. 50.65% owned by Illinois Tool Works Inc.; 43.72% owned by ITW International Holdings Inc.; 5.63% owned by ITW Dynatec Kabushiki Kaisha 69. 76% owned by Scybele S.A.S.; 24% owned by ITW Belgium S.A. 70. Wholly owned by ITW Holdings GmbH 71. 90% Illinois Tool Works Inc.; 10% ITW Leasing & Investments Inc. 72. Wholly owned by ITW International Finance Inc. 73. Wholly owned by ITW Finance L.L.C. 74. Wholly owned by ITW Finance II L.L.C. 75. 1,000 common shares owned by Illinois Tool Works Inc.; 52,850 Preferred Series A 7% Cumulative NonVoting shares owned by ITW Finance II L.L.C.; 54,000 Preferred Series B 7.1% Cumulative Non-Voting shares owned by LSPS Inc. 76. Wholly owned by Cofiva S.p.A. 77. Wholly owned by Miller Electric Mfg. Co. 78. Wholly owned by ITW Mima Films L.L.C. 79. 73% owned by ITW Mima Films L.L.C.; 1% owned by Mima Films L.L.C. 80. Wholly owned by ITW Mortgage Investments II, Inc. 81. 90% owned by Lys Fusion S.p.A.; 10% ITW Fastex Italia S.p.A. 82. 99% owned by ITW International Holdings; 1% owned by ITW Universal L.L.C. 83. Ownership interest by Cyklop Singapore Pte. Ltd. 84. Ownership interest by ITW Packaging Corporation 85. Wholly owned by ITW Japan Holdings L.L.C. 86. 53.54% owned by S.P.I.M. S.A.;44.20% owned by ITW International Holdings Inc. 87. Wholly owned by Binks Sames (Australia) Pty. Ltd. 88. Ownership interest is by ITW China Components Inc. 89. Ownership interest is by ITW Limited 90. Wholly owned by NKT Tr dvaerket A/S 91. Ownership interest by Rivex S.A. 92. Wholly owned by Binks Sames (UK) Limited 93. Wholly owned by IMSA ITW S.A. de C.V. 94. Wholly owned by European Diamond Tools N.V. 95. Wholly owned by Arcsmith Canada, Inc. 96. Wholly owned by Unipac, Inc.

PAGE 7... JANUARY 1999 ILLINOIS TOOL WORKS INC. SUBSIDIARIES AND AFFILIATES 55. Wholly owned by ITW Limited 56. 96.39% owned by Illinois Tool Works Inc.; .3% owned by ITW do Brazil Industrial e Comercial Ltda. 57. Wholly owned by Meritex Plastic Industries, Inc. 58. 99% owned by ITW Stretch Packaging L.L.C.; 1% owned by ITW Leasing & Investments Inc. 59. 69.8% owned by Thimon S.A.; 30.1% owned by ITW Holdings France; .1% owned by ITW Paris E.U.R.L. 60. Wholly owned by Thimon S.A. 61. 1,000 common shares, 800 Preferred Series A 6% Cumulative Non-Voting shares and 800 Preferred Series B 7.3% Cumulative Non-Voting shares owned by ITW Leasing & Investments Inc. 62. 1,000 common shares owned by Illinois Tool Works Inc.; 1,000 Preferred Series A 6% Cumulative NonVoting shares owned by ITW Real Estate L.L.C. 63. 1,000 common shares owned by Illinois Tool Works Inc.; 1,000 Preferred Series A 5% Cumulative NonVoting shares owned by ITW Real Estate L.L.C. 64. 1,000 common shares owned by Illinois Tool Works Inc.; 1,000 Preferred Series A 7.5% Cumulative NonVoting shares owned by ITW Investments, Inc. 65. Wholly owned by ITW Stretch Packaging L.L.C. 66. 99% owned by ITW Mortgage Investments I, Inc.; 1% owned by Illinois Tool Works Inc. 67. Wholly owned by ITW Investments, Inc. 68. 50.65% owned by Illinois Tool Works Inc.; 43.72% owned by ITW International Holdings Inc.; 5.63% owned by ITW Dynatec Kabushiki Kaisha 69. 76% owned by Scybele S.A.S.; 24% owned by ITW Belgium S.A. 70. Wholly owned by ITW Holdings GmbH 71. 90% Illinois Tool Works Inc.; 10% ITW Leasing & Investments Inc. 72. Wholly owned by ITW International Finance Inc. 73. Wholly owned by ITW Finance L.L.C. 74. Wholly owned by ITW Finance II L.L.C. 75. 1,000 common shares owned by Illinois Tool Works Inc.; 52,850 Preferred Series A 7% Cumulative NonVoting shares owned by ITW Finance II L.L.C.; 54,000 Preferred Series B 7.1% Cumulative Non-Voting shares owned by LSPS Inc. 76. Wholly owned by Cofiva S.p.A. 77. Wholly owned by Miller Electric Mfg. Co. 78. Wholly owned by ITW Mima Films L.L.C. 79. 73% owned by ITW Mima Films L.L.C.; 1% owned by Mima Films L.L.C. 80. Wholly owned by ITW Mortgage Investments II, Inc. 81. 90% owned by Lys Fusion S.p.A.; 10% ITW Fastex Italia S.p.A. 82. 99% owned by ITW International Holdings; 1% owned by ITW Universal L.L.C. 83. Ownership interest by Cyklop Singapore Pte. Ltd. 84. Ownership interest by ITW Packaging Corporation 85. Wholly owned by ITW Japan Holdings L.L.C. 86. 53.54% owned by S.P.I.M. S.A.;44.20% owned by ITW International Holdings Inc. 87. Wholly owned by Binks Sames (Australia) Pty. Ltd. 88. Ownership interest is by ITW China Components Inc. 89. Ownership interest is by ITW Limited 90. Wholly owned by NKT Tr dvaerket A/S 91. Ownership interest by Rivex S.A. 92. Wholly owned by Binks Sames (UK) Limited 93. Wholly owned by IMSA ITW S.A. de C.V. 94. Wholly owned by European Diamond Tools N.V. 95. Wholly owned by Arcsmith Canada, Inc. 96. Wholly owned by Unipac, Inc.

EXHIBIT 22

EXHIBIT 22 ELECTION OF DIRECTORS Stockholders will elect ten directors at the Annual Meeting. The individuals listed below have been nominated by the Board of Directors as recommended by the Corporate Governance and Nominating Committee. L. Richard Flury recently resigned from our Board as he completes his move to BP-Amoco's business in the United Kingdom. Each director will serve until the May 2000 annual meeting, until a qualified successor director has been elected, or until he or she resigns or is removed by the Board of Directors. We will vote your shares as you specify on the enclosed proxy card. If you do not specify how you want your shares voted, we will vote them FOR the election of all the nominees listed below. If unforeseen circumstances (such as death or disability) make it necessary for the Board of Directors to substitute another person for any of the nominees, we will vote your shares FOR that other person. The Board of Directors does not anticipate that any nominee will be unable to serve. The nominees have provided the following information about themselves: WILLIAM F. ALDINGER III, 51, has served as the Chairman and Chief Executive Officer of Household International, Inc. a consumer finance company, since 1994. From 1986 through 1994, Mr. Aldinger held various senior management positions at Wells Fargo Bank, N.A. He serves on the boards of SunAmerica, Inc. and MasterCard International. Mr. Aldinger has been a director of ITW since 1998. MICHAEL J. BIRCK, 61, founded Tellabs, Inc. and has been its President and Chief Executive Officer since 1975. Tellabs designs, manufactures, markets and services voice and data equipment. Mr. Birck is a director of Molex, Inc. and Tellabs, Inc. He has been a director of ITW since 1996.

MARVIN D. BRAILSFORD, 60, has been Vice President of Kaiser-Hill Company LLC, a construction and environmental services company, since 1996. Mr. Brailsford founded the Brailsford Group, an acquisition consulting firm, and served as its President from 1995 to 1996. From 1992 to 1995, he was the President of Metters Industries, an information technology company. Mr. Brailsford retired from the United States Army in 1992 with the rank of Lieutenant General after 33 years of service. He has served as a director of ITW since 1996. SUSAN CROWN, 40, has been Vice President of Henry Crown and Company, a family owned and operated business with investments in securities, real estate and manufacturing operations, since 1984. Ms. Crown is a director of Baxter International Inc. and Northern Trust Corporation and its subsidiary, The Northern Trust Company. She has been a director of ITW since 1994. H. RICHARD CROWTHER, 66, was the Vice Chairman of ITW from 1990 to 1995 and Executive Vice President from 1983 through 1989. Mr. Crowther had 36 years of service with ITW prior to his retirement. He is a director of Applied Power Inc. and has been a director of ITW since 1995. W. JAMES FARRELL, 56, has been Chairman of ITW since 1996 and Chief Executive Officer since 1995. Mr. Farrell served as President from 1994 until 1996 and as Executive Vice President from 1983 until 1994. He has 33 years of service with ITW. Mr. Farrell is a director of Morton International, Inc., Premark International, Inc. and The Quaker Oats Company. He has been a director of ITW since 1995.

ROBERT C. MCCORMACK, 59, has been a Partner of Trident Capital LP, a venture capital firm, since 1993. Mr. McCormack served as Assistant Secretary of the Navy from 1990 to 1993, as Deputy Under Secretary of Defense from 1987 to 1990, and as Managing Director of Morgan Stanley & Co. Incorporated, an investment bank, from 1985 to 1987. He is a director of DeVry, Inc. and has been a director of ITW since 1993. He previously was a director of ITW from 1978 through 1987. PHILLIP B. ROONEY, 54, has served as Vice Chairman of The ServiceMaster Company, a network of quality service companies, since 1997. Mr. Rooney was the President of WMX Technologies Inc., a waste management

MARVIN D. BRAILSFORD, 60, has been Vice President of Kaiser-Hill Company LLC, a construction and environmental services company, since 1996. Mr. Brailsford founded the Brailsford Group, an acquisition consulting firm, and served as its President from 1995 to 1996. From 1992 to 1995, he was the President of Metters Industries, an information technology company. Mr. Brailsford retired from the United States Army in 1992 with the rank of Lieutenant General after 33 years of service. He has served as a director of ITW since 1996. SUSAN CROWN, 40, has been Vice President of Henry Crown and Company, a family owned and operated business with investments in securities, real estate and manufacturing operations, since 1984. Ms. Crown is a director of Baxter International Inc. and Northern Trust Corporation and its subsidiary, The Northern Trust Company. She has been a director of ITW since 1994. H. RICHARD CROWTHER, 66, was the Vice Chairman of ITW from 1990 to 1995 and Executive Vice President from 1983 through 1989. Mr. Crowther had 36 years of service with ITW prior to his retirement. He is a director of Applied Power Inc. and has been a director of ITW since 1995. W. JAMES FARRELL, 56, has been Chairman of ITW since 1996 and Chief Executive Officer since 1995. Mr. Farrell served as President from 1994 until 1996 and as Executive Vice President from 1983 until 1994. He has 33 years of service with ITW. Mr. Farrell is a director of Morton International, Inc., Premark International, Inc. and The Quaker Oats Company. He has been a director of ITW since 1995.

ROBERT C. MCCORMACK, 59, has been a Partner of Trident Capital LP, a venture capital firm, since 1993. Mr. McCormack served as Assistant Secretary of the Navy from 1990 to 1993, as Deputy Under Secretary of Defense from 1987 to 1990, and as Managing Director of Morgan Stanley & Co. Incorporated, an investment bank, from 1985 to 1987. He is a director of DeVry, Inc. and has been a director of ITW since 1993. He previously was a director of ITW from 1978 through 1987. PHILLIP B. ROONEY, 54, has served as Vice Chairman of The ServiceMaster Company, a network of quality service companies, since 1997. Mr. Rooney was the President of WMX Technologies Inc., a waste management company, from 1985 until 1997. He is a director of The ServiceMaster Company and Urban Shopping Centers Inc. and a trustee of the Van Kampen American Capital Open-End Funds. Mr. Rooney has been a director of ITW since 1990. HAROLD B. SMITH, 65, has been Chairman of the Executive Committee of ITW since 1982. Mr. Smith is a director of W.W. Grainger Inc. and Northern Trust Corporation and its subsidiary, The Northern Trust Company. He is a trustee of The Northwestern Mutual Life Insurance Company. He has served as a director of ITW since 1968. ORMAND J. WADE, 59, was Vice Chairman of Ameritech Corp., a telecommunications products and services provider, from 1987 to 1993. Mr. Wade served as the President and Chief Executive Officer of Illinois Bell Telephone Company from 1982 to 1986. He is a director of Andrew Corporation and Westell Inc. and has been a director of ITW since 1985.

OWNERSHIP OF ITW STOCK DIRECTORS AND EXECUTIVE OFFICERS The following table shows how much ITW common stock the directors, the named executive officers, and all executive officers and directors as a group beneficially owned as of December 31, 1998. The named executive officers include the Chief Executive Officer and the four next most highly compensated executive officers based on compensation earned during 1998. Beneficial ownership is a technical term broadly defined by the SEC to mean more than ownership in the usual sense. In general, beneficial ownership includes any shares a director or executive officer can vote or transfer and

ROBERT C. MCCORMACK, 59, has been a Partner of Trident Capital LP, a venture capital firm, since 1993. Mr. McCormack served as Assistant Secretary of the Navy from 1990 to 1993, as Deputy Under Secretary of Defense from 1987 to 1990, and as Managing Director of Morgan Stanley & Co. Incorporated, an investment bank, from 1985 to 1987. He is a director of DeVry, Inc. and has been a director of ITW since 1993. He previously was a director of ITW from 1978 through 1987. PHILLIP B. ROONEY, 54, has served as Vice Chairman of The ServiceMaster Company, a network of quality service companies, since 1997. Mr. Rooney was the President of WMX Technologies Inc., a waste management company, from 1985 until 1997. He is a director of The ServiceMaster Company and Urban Shopping Centers Inc. and a trustee of the Van Kampen American Capital Open-End Funds. Mr. Rooney has been a director of ITW since 1990. HAROLD B. SMITH, 65, has been Chairman of the Executive Committee of ITW since 1982. Mr. Smith is a director of W.W. Grainger Inc. and Northern Trust Corporation and its subsidiary, The Northern Trust Company. He is a trustee of The Northwestern Mutual Life Insurance Company. He has served as a director of ITW since 1968. ORMAND J. WADE, 59, was Vice Chairman of Ameritech Corp., a telecommunications products and services provider, from 1987 to 1993. Mr. Wade served as the President and Chief Executive Officer of Illinois Bell Telephone Company from 1982 to 1986. He is a director of Andrew Corporation and Westell Inc. and has been a director of ITW since 1985.

OWNERSHIP OF ITW STOCK DIRECTORS AND EXECUTIVE OFFICERS The following table shows how much ITW common stock the directors, the named executive officers, and all executive officers and directors as a group beneficially owned as of December 31, 1998. The named executive officers include the Chief Executive Officer and the four next most highly compensated executive officers based on compensation earned during 1998. Beneficial ownership is a technical term broadly defined by the SEC to mean more than ownership in the usual sense. In general, beneficial ownership includes any shares a director or executive officer can vote or transfer and stock options that are exercisable currently or become exercisable within 60 days. Except as otherwise noted, the stockholders named in this table have sole voting and investment power for all shares shown as beneficially owned by them. The number of shares beneficially owned by each non-officer director includes 900 shares (600 for Mr. Aldinger granted January 4, 1999) of restricted ITW common stock that were granted under the Directors' Restricted Stock Plan. The number of the director's phantom stock units disclosed in the table represents an equivalent number of shares of ITW common stock. Phantom stock units are not transferable and have no voting rights. The units are not included in the "percent of class" calculation. 8
PERCENT OF CLASS -------* * * * * * 5.7 * 15.2

NAME OF BENEFICIAL OWNER -----------------------Directors (other than Executive Officers) William F. Aldinger III......................... Michael J. Birck................................ Marvin D. Brailsford............................ Susan Crown..................................... H. Richard Crowther............................. L. Richard Flury................................ Robert C. McCormack............................. Phillip B. Rooney............................... Harold B. Smith.................................

SHARES OF COMMON STOCK BENEFICIALLY OWNED ---------------------700(1) 3,500 2,200 10,700(2) 351,612(3) 2,100 14,519,200(4) 34,641(5) 38,640,002(6)

PHANTOM STOCK UNITS ----------1,000 2,041 2,036 2,058 2,212 2,058 2,058 2,058 --

OWNERSHIP OF ITW STOCK DIRECTORS AND EXECUTIVE OFFICERS The following table shows how much ITW common stock the directors, the named executive officers, and all executive officers and directors as a group beneficially owned as of December 31, 1998. The named executive officers include the Chief Executive Officer and the four next most highly compensated executive officers based on compensation earned during 1998. Beneficial ownership is a technical term broadly defined by the SEC to mean more than ownership in the usual sense. In general, beneficial ownership includes any shares a director or executive officer can vote or transfer and stock options that are exercisable currently or become exercisable within 60 days. Except as otherwise noted, the stockholders named in this table have sole voting and investment power for all shares shown as beneficially owned by them. The number of shares beneficially owned by each non-officer director includes 900 shares (600 for Mr. Aldinger granted January 4, 1999) of restricted ITW common stock that were granted under the Directors' Restricted Stock Plan. The number of the director's phantom stock units disclosed in the table represents an equivalent number of shares of ITW common stock. Phantom stock units are not transferable and have no voting rights. The units are not included in the "percent of class" calculation. 8
PERCENT OF CLASS -------* * * * * * 5.7 * 15.2 * * * * * * 16.0

NAME OF BENEFICIAL OWNER -----------------------Directors (other than Executive Officers) William F. Aldinger III......................... Michael J. Birck................................ Marvin D. Brailsford............................ Susan Crown..................................... H. Richard Crowther............................. L. Richard Flury................................ Robert C. McCormack............................. Phillip B. Rooney............................... Harold B. Smith................................. Ormand J. Wade.................................. Executive Officers W. James Farrell................................ Russell M. Flaum................................ Frank S. Ptak................................... F. Ronald Seager................................ David B. Speer.................................. Directors and Executive Officers as a Group (24 Persons)........................................

SHARES OF COMMON STOCK BENEFICIALLY OWNED ---------------------700(1) 3,500 2,200 10,700(2) 351,612(3) 2,100 14,519,200(4) 34,641(5) 38,640,002(6) 5,700 444,252(7) 103,388(8) 227,552(9) 203,038(10) 57,011(11) 40,516,295(12)

PHANTOM STOCK UNITS ----------1,000 2,041 2,036 2,058 2,212 2,058 2,058 2,058 -2,058 -----17,579

* Less than 1%. (1) Includes 100 shares owned by Mr. Aldinger's spouse, as to which he disclaims beneficial ownership. (2) Includes (a) 2,000 shares owned in a trust as to which Ms. Crown shares voting and investment power; and (b) 2,000 shares held in trusts of which Ms. Crown's children are beneficiaries and as to which she disclaims beneficial ownership. (3) Includes (a) 255,041 shares held in a revocable living trust as to which Mr. Crowther shares voting and investment power; (b) 30,107 shares owned by his spouse as to which Mr. Crowther disclaims beneficial ownership; and (c) 27,104 shares covered by options exercisable within 60 days. (4) Includes (a) 400 shares owned in a trust as to which Mr. McCormack shares voting and investment power with The Northern Trust Company; and (b) 14,510,380 shares owned in twelve trusts as to which Messrs.

NAME OF BENEFICIAL OWNER -----------------------Directors (other than Executive Officers) William F. Aldinger III......................... Michael J. Birck................................ Marvin D. Brailsford............................ Susan Crown..................................... H. Richard Crowther............................. L. Richard Flury................................ Robert C. McCormack............................. Phillip B. Rooney............................... Harold B. Smith................................. Ormand J. Wade.................................. Executive Officers W. James Farrell................................ Russell M. Flaum................................ Frank S. Ptak................................... F. Ronald Seager................................ David B. Speer.................................. Directors and Executive Officers as a Group (24 Persons)........................................

SHARES OF COMMON STOCK BENEFICIALLY OWNED ---------------------700(1) 3,500 2,200 10,700(2) 351,612(3) 2,100 14,519,200(4) 34,641(5) 38,640,002(6) 5,700 444,252(7) 103,388(8) 227,552(9) 203,038(10) 57,011(11) 40,516,295(12)

PHANTOM STOCK UNITS ----------1,000 2,041 2,036 2,058 2,212 2,058 2,058 2,058 -2,058 -----17,579

PERCENT OF CLASS -------* * * * * * 5.7 * 15.2 * * * * * * 16.0

* Less than 1%. (1) Includes 100 shares owned by Mr. Aldinger's spouse, as to which he disclaims beneficial ownership. (2) Includes (a) 2,000 shares owned in a trust as to which Ms. Crown shares voting and investment power; and (b) 2,000 shares held in trusts of which Ms. Crown's children are beneficiaries and as to which she disclaims beneficial ownership. (3) Includes (a) 255,041 shares held in a revocable living trust as to which Mr. Crowther shares voting and investment power; (b) 30,107 shares owned by his spouse as to which Mr. Crowther disclaims beneficial ownership; and (c) 27,104 shares covered by options exercisable within 60 days. (4) Includes (a) 400 shares owned in a trust as to which Mr. McCormack shares voting and investment power with The Northern Trust Company; and (b) 14,510,380 shares owned in twelve trusts as to which Messrs. McCormack, E.B. Smith, Jr., H.B. Smith and The Northern Trust Company are trustees and share voting and investment power. Mr. McCormack's address is c/o The Secretary, Illinois Tool Works Inc., 3600 West Lake Avenue, Glenview, Illinois 60025. (5) Includes 2,000 owned by Mr. Rooney's spouse, as to which he disclaims beneficial ownership. (6) Includes (a) 21,318,764 shares owned in twelve trusts as to which Mr. Smith shares voting and investment power with The Northern Trust and others; (b) 2,164,480 shares owned in ten trusts as to which he shares voting and investment power; (c) 14,510,380 shares owned in twelve trusts as to which Messrs. McCormack, E.B. Smith, Jr., H.B. Smith and The Northern Trust Company are trustees and share voting and investment power; and (d) 69,792 shares owned by a charitable foundation of which Mr. Smith is a director. Mr. Smith's address is c/o The Secretary, Illinois Tool Works Inc., 3600 West Lake Avenue, Glenview, Illinois 60025. (7) Includes (a) 1,395 shares owned by Mr. Farrell's son as to which he disclaims beneficial ownership; (b) 1,700 shares owned by Mr. Farrell's spouse as to which he disclaims beneficial ownership; (c) 38,158 shares owned in a partnership as to which Mr. Farrell shares voting and investment power; (d) 7,263 shares owned by a charitable foundation of which Mr. Farrell is an officer; (e) 7,044 shares allocated to Mr. Farrell's account in the ITW Savings and Investment Plan; and (f) 367,000 shares covered by options exercisable within 60 days.

(8) Includes (a) 1,534 shares allocated to Mr. Flaum's account in the ITW Savings and Investment Plan; and (b) 71,600 shares covered by options exercisable within 60 days.

(8) Includes (a) 1,534 shares allocated to Mr. Flaum's account in the ITW Savings and Investment Plan; and (b) 71,600 shares covered by options exercisable within 60 days. (9) Includes 159,500 shares covered by options exercisable by Mr. Ptak within 60 days. (10) Includes (a) 1,976 shares owned by Mr. Seager's spouse as to which he disclaims beneficial ownership; and (b) 152,500 shares covered by options exercisable within 60 days. (11) Includes (a) 806 shares allocated to Mr. Speer's account in the ITW Savings and Investment Plan; and (b) 53,500 shares covered by options exercisable within 60 days. (12) Includes 1,181,018 shares covered by options exercisable within 60 days. OTHER PRINCIPAL STOCKHOLDERS This table shows, as of December 31, 1998, all stockholders other than directors that we know to be beneficial owners of more than 5% of ITW common stock. We have a commercial banking relationship with The Northern Trust Company, which also acts as the trustee under our principal pension plan. The Northern Trust Company is a wholly owned subsidiary of Northern Trust Corporation. Harold B. Smith and Susan Crown, directors of ITW, are also directors of Northern Trust Corporation and The Northern Trust Company.
NAME AND ADDRESS OF BENEFICIAL OWNER ------------------Edward Byron Smith, Jr...................................... The Northern Trust Company.................................. AMOUNT OF BENEFICIAL OWNERSHIP -------------------14,753,365(1) 46,149,581(2) PERCENT OF CLASS -------5.8 18.2

(1) Includes (a) 13,440 shares that Mr. Smith holds directly and as to which he has sole voting and investment power; (b) 32,932 shares owned in two trusts as to which Mr. Smith has sole voting and investment power; (c) 155,733 shares owned in two trusts as to which Mr. Smith shares voting and investment power with his sister; (d) 14,510,380 shares owned in twelve trusts as to which Messrs. McCormack, E.B. Smith, Jr., H.B. Smith and The Northern Trust Company are trustees and share voting and investment power; and (e) 40,880 shares held for the benefit of Mr. Smith's children in four accounts as to which Mr. Smith has sole voting and investment power. Mr. Smith's address is c/o The Secretary, Illinois Tool Works Inc., 3600 West Lake Avenue, Glenview, Illinois 60025. (2) The Northern Trust Company and its affiliates act as sole fiduciary or co-fiduciary of trusts and other fiduciary accounts that own an aggregate of 46,149,581 shares. They have sole voting power with respect to 16,917,386 shares and share voting power with respect to 16,953,619 shares. They have sole investment power with respect to 3,471,813 shares and share investment power with respect to 37,878,984 shares. In addition, The Northern Trust Company holds in other accounts, but does not beneficially own, 17,428,099 shares, resulting in aggregate holdings by The Northern Trust Company of 63,577,680 shares, or 25.1%. The Northern Trust Company's address is 50 South LaSalle Street, Chicago, Illinois 60675.

EXECUTIVE COMPENSATION This table summarizes the compensation of the Chief Executive Officer and the other four most highly compensated executive officers of ITW. SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION(3) --------------AWARDS ------

EXECUTIVE COMPENSATION This table summarizes the compensation of the Chief Executive Officer and the other four most highly compensated executive officers of ITW. SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION(3) --------------AWARDS -----SECURITIES UNDERLYING OPTIONS --------------100,000 100,000 400,000 60,000 50,000 -30,000 30,000 -30,000 30,000 -30,000 30,000 --

NAME AND PRINCIPAL POSITION -----------------W. James Farrell................. Chairman and Chief Executive Officer Frank S. Ptak.................... Vice Chairman F. Ronald Seager................. Executive Vice President David B. Speer................... Executive Vice President Russell M. Flaum................. Executive Vice President

ANNUAL COMPENSATION -----------------------------YEAR SALARY(1) BONUS(1)(2) ---------------------1998 $600,000 $877,500 1997 499,900 600,000 1996 453,754 500,000 1998 $312,312 $468,000 1997 288,017 293,030 1996 255,261 275,000 1998 $244,650 $360,000 1997 232,562 220,980 1996 218,801 204,580 1998 $214,231 $295,350 1997 190,924 183,300 1996 179,507 159,480 1998 $230,000 $257,140 1997 214,955 218,500 1996 208,082 209,195

ALL OTHER COMPENSATION (4)(5) -----------$42,935(6) 48,042 40,808 $11,826 14,140 11,429 $10,983 15,155 12,160 $ 7,203 7,262 5,931 $ 6,516 7,552 6,411

(1) Actual salary or bonus earned. Includes amounts deferred by the executive under the 1993 Executive Contributory Retirement Income Plan or the Savings and Investment Plan. (2) Amounts awarded under the Executive Incentive Plan are calculated on the executive's base salary as of December 31 for that year and paid in the following year. (3) As part of long term compensation, awards of ITW restricted stock were made under the Stock Incentive Plan in 1994. At December 31, 1998 the number of unvested restricted shares and their value was: Mr. Farrell, 22,400 shares valued at $1,299,200; Mr. Ptak, 22,400 shares valued at $1,299,200; Mr. Seager, 14,000 shares valued at $812,000; and Mr. Flaum, 14,000 shares valued at $812,000. (4) Includes company matching contributions to the 1993 Executive Contributory Retirement Income Plan or the Savings and Investment Plan as follows: Mr. Farrell, $18,000; Mr. Ptak, $9,369; Mr. Seager, $7,339; Mr. Speer, $6,427; and Mr. Flaum $5,308.

(5) Includes interest credited on deferred compensation under the 1993 Executive Contributory Retirement Income Plan in excess of 120% of the Applicable Long Term Rate as follows: Mr. Farrell, $2,854; Mr. Ptak, $2,457; Mr. Seager, $3,644; Mr. Speer, $776; and Mr. Flaum, $1,208. (6) Includes $22,081 representing imputed income on Mr. Farrell's outstanding home loan made by ITW in 1995. The maximum amount of the loan outstanding during 1998 was $355,000, which by March 1, 1999 had been reduced to $225,000. The imputed rate of interest on the loan is 7.34% per annum and the loan is repayable in annual installments through the year 2000. Under stock ownership guidelines established by the Board of Directors, we require each executive officer to own a certain number of shares of ITW stock based upon a multiple of base salary. We have lent money to Messrs. Farrell, Ptak and Flaum to help them comply with these guidelines. The promissory notes evidencing

(5) Includes interest credited on deferred compensation under the 1993 Executive Contributory Retirement Income Plan in excess of 120% of the Applicable Long Term Rate as follows: Mr. Farrell, $2,854; Mr. Ptak, $2,457; Mr. Seager, $3,644; Mr. Speer, $776; and Mr. Flaum, $1,208. (6) Includes $22,081 representing imputed income on Mr. Farrell's outstanding home loan made by ITW in 1995. The maximum amount of the loan outstanding during 1998 was $355,000, which by March 1, 1999 had been reduced to $225,000. The imputed rate of interest on the loan is 7.34% per annum and the loan is repayable in annual installments through the year 2000. Under stock ownership guidelines established by the Board of Directors, we require each executive officer to own a certain number of shares of ITW stock based upon a multiple of base salary. We have lent money to Messrs. Farrell, Ptak and Flaum to help them comply with these guidelines. The promissory notes evidencing these loans have a five-year term, which is renewable. The executive must repay the note within 180 days following termination of employment with ITW or upon bankruptcy, insolvency, death or breach of the terms of the note. In addition, if we terminate the executive's employment for gross or willful misconduct, then he must repay the note immediately. As of February 28, 1999, Mr. Farrell had an outstanding loan payable December 31, 2000 of $99,760, which is the largest amount that Mr. Farrell has been indebted to us since the beginning of 1998. This loan is at an annual interest rate of 5.91% and is secured by 3,200 shares of ITW stock. Also as of February 28, 1999, Mr. Ptak had two outstanding loans. A loan in the amount of $31,018 payable October 23, 2000 is at an annual interest rate of 6.31% and is secured by 4,000 shares of ITW stock. A second loan in the amount of $25,915 payable December 31, 2000 is at an annual interest rate of 5.91% and is secured by 3,200 shares of ITW stock. The largest aggregate amount that Mr. Ptak has been indebted to us since the beginning of 1998 was $63,363. In addition, in February 1999, Mr. Flaum repaid an outstanding loan of $62,352, which is the largest amount that Mr. Flaum had been indebted to us since the beginning of 1998. The loan was at an annual interest rate of 5.91% and was secured by 2,000 shares of ITW stock. In the event of a change of control of ITW, each executive officer's unvested restricted stock and stock options previously granted under the Stock Incentive Plan fully vest. In addition, executives receive a cash payment under the Executive Incentive Plan immediately upon a change of control. The amount paid under the Executive Incentive Plan equals a portion of the maximum awards payable under the Plan for that year based on the number of days in the year that have elapsed as of the date of the change of control.

OPTION GRANTS IN 1998 This table gives information relating to option grants in 1998 to the Chief Executive Officer and the other four most highly compensated executive officers of ITW.
INDIVIDUAL GRANTS ----------------------------------------------------PERCENT OF SECURITIES TOTAL OPTIONS UNDERLYING GRANTED TO EXERCISE OR OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION GRANTED(1) 1998 PER SHARE DATE ----------------------------------------100,000 9.0 $58.25 12/11/08 60,000 5.3 58.25 12/11/08 30,000 2.7 58.25 12/11/08 30,000 2.7 58.25 12/11/08 30,000 2.7 58.25 12/11/08

NAME ---W. James Farrell............. Frank S. Ptak................ F. Ronald Seager............. David B. Speer............... Russell M. Flaum.............

GRANT DATE VALUE ---------------GRANT DATE PRESENT VALUE(2) ---------------$1,671,000 1,002,600 501,300 501,300 501,300

(1) Options become exercisable in four equal annual installments on the anniversaries of the grant or immediately in the event of retirement, disability or death. A restorative option right applies to option grants so long as the option holder is employed by ITW. This means that an option holder who delivers previously acquired shares of ITW common stock in payment of an option's exercise price will be granted an additional option, which is subject to certain restrictions, to purchase the number of shares equal to the number of delivered shares.

OPTION GRANTS IN 1998 This table gives information relating to option grants in 1998 to the Chief Executive Officer and the other four most highly compensated executive officers of ITW.
INDIVIDUAL GRANTS ----------------------------------------------------PERCENT OF SECURITIES TOTAL OPTIONS UNDERLYING GRANTED TO EXERCISE OR OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION GRANTED(1) 1998 PER SHARE DATE ----------------------------------------100,000 9.0 $58.25 12/11/08 60,000 5.3 58.25 12/11/08 30,000 2.7 58.25 12/11/08 30,000 2.7 58.25 12/11/08 30,000 2.7 58.25 12/11/08

NAME ---W. James Farrell............. Frank S. Ptak................ F. Ronald Seager............. David B. Speer............... Russell M. Flaum.............

GRANT DATE VALUE ---------------GRANT DATE PRESENT VALUE(2) ---------------$1,671,000 1,002,600 501,300 501,300 501,300

(1) Options become exercisable in four equal annual installments on the anniversaries of the grant or immediately in the event of retirement, disability or death. A restorative option right applies to option grants so long as the option holder is employed by ITW. This means that an option holder who delivers previously acquired shares of ITW common stock in payment of an option's exercise price will be granted an additional option, which is subject to certain restrictions, to purchase the number of shares equal to the number of delivered shares. (2) The estimated fair value of each option granted is calculated using the Black-Scholes option pricing model. The model assumes a 4.76% risk-free interest rate, 24.5% expected stock volatility, 1.20% dividend yield and 5.5 years expected until exercise. OPTION EXERCISES IN 1998 AND YEAR-END 1998 OPTION VALUES This table provides information regarding the exercise of options during 1998 and options outstanding at the end of the year for the Chief Executive Officer and the other four most highly compensated executive officers of ITW. The "value realized" is calculated using the difference between the option exercise price and the price of ITW common stock on the date of exercise multiplied by the number of shares acquired upon exercise. The "value of unexercised in-the-money options at year end 1998" is calculated using the difference between the option exercise price and $58.00 (the closing price of ITW stock on December 31, 1998) multiplied by the number of shares underlying the option. An option is in-the-money if the market value of ITW common stock is greater than the option's exercise price.
SECURITIES UNDERLYING UNEXERCISED OPTIONS AT YEAR END 1998 --------------------------EXERCISABLE UNEXERCISABLE ----------------------367,000 445,000 159,500 112,500 152,500 67,500 53,500 58,500 71,600 60,000 VALUE OF UNEXERCISED IN-THE-MONEY OPTIONS AT YEAR END 1998 ------------------------EXERCISABLE UNEXERCISAB --------------------$10,302,000 $6,999,750 5,550,999 544,875 5,393,475 494,175 1,606,850 243,300 2,347,163 285,113

NAME ---W. James Farrell..... Frank S. Ptak........ F. Ronald Seager..... David B. Speer....... Russell M. Flaum.....

SHARES ACQUIRED ON EXERCISE ----------15,992 0 15,000 6,200 0

VALUE REALIZED -------$793,882 0 774,843 329,375 0

RETIREMENT PLANS ITW's principal defined benefit pension plan covers approximately 15,000 domestic business unit employees, including executive officers. Upon retirement, participants receive benefits based on years of service and average monthly compensation for the five highest consecutive years out of the last ten years of employment. Because the

RETIREMENT PLANS ITW's principal defined benefit pension plan covers approximately 15,000 domestic business unit employees, including executive officers. Upon retirement, participants receive benefits based on years of service and average monthly compensation for the five highest consecutive years out of the last ten years of employment. Because the Internal Revenue Code imposes limits on those plan benefits, the Board has established a supplemental plan that provides for payments to certain executives equal to benefits that would be paid but for these limitations. The table below shows the maximum estimated annual benefits to be paid under the pension plan and supplemental plan at age 65 normal retirement to individuals in specified compensation and years of service categories. Compensation includes salary and bonus shown in the Summary Compensation Table on page 11.
ESTIMATED ANNUAL NORMAL RETIREMENT BENEFITS(1) -------------------------------------------------------------------------YEARS OF SERVICE AT NORMAL RETIREMENT(2) 10 15 20 25 30 35 -------------------------------------------$ 57,750 $ 86,625 $115,500 $144,375 $173,250 $186,375 $1 99,000 148,500 198,000 247,500 297,000 319,500 3 140,250 210,375 280,500 350,625 420,750 452,625 4 181,500 272,250 363,000 453,750 544,500 585,750 6 222,750 334,125 445,500 556,875 668,250 718,875 7 264,000 396,000 528,000 660,000 792,000 852,000 9

COMPENSATION -----------$ 350,000................. 600,000................. 850,000................. 1,100,000................. 1,350,000................. 1,600,000.................

(1) The actual pension formula in effect excludes an amount equivalent to 0.65% of Social Security covered compensation times the individual's years of service up to 30 years. This exclusion is not reflected in the table and, therefore, the amounts shown are overestimated by relatively small percentages. (2) Years of service as of December 31, 1998 for the five most highly compensated executive officers were as follows: Mr. Farrell, 33.5 years; Mr. Ptak, 23.1 years; Mr. Seager, 18.6 years; Mr. Speer, 20.5 years; and Mr. Flaum, 12.0 years. In addition, under ITW's 1982 Executive Contributory Retirement Income Plan, annual benefits payable beginning at the normal retirement age of 65 for 15 years are as follows: Mr. Farrell, $113,529 and Mr. Seager, $68,266.

EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference of our reports dated January 27, 1999 included in this Form 10-K into the Company's previously filed registration statements on Form S-8 (File No.'s 333-22035 and 333-17473), Form S-4 (File No.'s 33-302671 and 333-25471) and Form S-3 (File No.'s 33-5780 and 333-70691). ARTHUR ANDERSEN LLP Chicago, Illinois March 29, 1999

EXHIBIT 24 ILLINOIS TOOL WORKS INC. FORM 10-K ANNUAL REPORT

EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference of our reports dated January 27, 1999 included in this Form 10-K into the Company's previously filed registration statements on Form S-8 (File No.'s 333-22035 and 333-17473), Form S-4 (File No.'s 33-302671 and 333-25471) and Form S-3 (File No.'s 33-5780 and 333-70691). ARTHUR ANDERSEN LLP Chicago, Illinois March 29, 1999

EXHIBIT 24 ILLINOIS TOOL WORKS INC. FORM 10-K ANNUAL REPORT

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears below constitutes and appoints W. James Farrell, Harold B. Smith and Stewart S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for her or him and his or her name, place and stead, in any and all capacities, to sign the Company's Form 10-K Annual Report and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue thereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney this 19th day of February 1999.
/s/ William F. Aldinger ----------------------------William F. Aldinger

ILLINOIS TOOL WORKS INC. FORM 10-K ANNUAL REPORT

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears below constitutes

EXHIBIT 24 ILLINOIS TOOL WORKS INC. FORM 10-K ANNUAL REPORT

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears below constitutes and appoints W. James Farrell, Harold B. Smith and Stewart S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for her or him and his or her name, place and stead, in any and all capacities, to sign the Company's Form 10-K Annual Report and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue thereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney this 19th day of February 1999.
/s/ William F. Aldinger ----------------------------William F. Aldinger

ILLINOIS TOOL WORKS INC. FORM 10-K ANNUAL REPORT

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears below constitutes and appoints W. James Farrell, Harold B. Smith and Stewart S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents, wit full power of substitution and resubstitution for her or him and his or her name, place and stead, in any and all capacities, to sign the Company's Form 10-K Annual Report and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue thereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney this 19th day of February 1999.
/s/ Michael J. Birck ----------------------------Michael J. Birck

ILLINOIS TOOL WORKS INC. FORM 10-K ANNUAL REPORT

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears below constitutes and appoints W. James Farrell, Harold B. Smith and Stewart S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents, wit full power of substitution and resubstitution for her or him and his or her name, place and stead, in any and all capacities, to sign the Company's Form 10-K Annual Report and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue thereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney this 19th day of February 1999.
/s/ Michael J. Birck ----------------------------Michael J. Birck

ILLINOIS TOOL WORKS INC. FORM 10-K ANNUAL REPORT

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears below constitutes and appoints W. James Farrell, Harold B. Smith and Stewart S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents, wit full power of substitution and resubstitution for her or him and his or her name, place and stead, in any and all capacities, to sign the Company's Form 10-K Annual Report and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue thereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney this 19th day of February 1999.
/s/ Marvin G. Brailsford ----------------------------Marvin D. Brailsford

ILLINOIS TOOL WORKS INC. FORM 10-K ANNUAL REPORT

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears below constitutes and appoints W. James Farrell, Harold B. Smith and Stewart S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents, wit full power of substitution and resubstitution for her or him and his or her name, place and stead, in any and all capacities, to sign the Company's Form 10-K Annual Report and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue thereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney this 19th day of February 1999.
/s/ Marvin G. Brailsford ----------------------------Marvin D. Brailsford

ILLINOIS TOOL WORKS INC. FORM 10-K ANNUAL REPORT

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears below constitutes and appoints W. James Farrell, Harold B. Smith and Stewart S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents, wit full power of substitution and resubstitution for her or him and his or her name, place and stead, in any and all capacities, to sign the Company's Form 10-K Annual Report and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue thereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney this 19th day of February 1999.
/s/ Susan Crown ----------------------------Susan Crown

ILLINOIS TOOL WORKS INC. FORM 10-K ANNUAL REPORT

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears below constitutes and appoints W. James Farrell, Harold B. Smith and Stewart S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents, wit full power of substitution and resubstitution for her or him and his or her name, place and stead, in any and all capacities, to sign the Company's Form 10-K Annual Report and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue thereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney this 19th day of February 1999.
/s/ Susan Crown ----------------------------Susan Crown

ILLINOIS TOOL WORKS INC. FORM 10-K ANNUAL REPORT

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears below constitutes and appoints W. James Farrell, Harold B. Smith and Stewart S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents, wit full power of substitution and resubstitution for her or him and his or her name, place and stead, in any and all capacities, to sign the Company's Form 10-K Annual Report and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue thereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney this 19th day of February 1999.
/s/ H. Richard Crowther ----------------------------H. Richard Crowther

ILLINOIS TOOL WORKS INC. FORM 10-K ANNUAL REPORT

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears below constitutes and appoints W. James Farrell, Harold B. Smith and Stewart S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents, wit full power of substitution and resubstitution for her or him and his or her name, place and stead, in any and all capacities, to sign the Company's Form 10-K Annual Report and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue thereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney this 19th day of February 1999.
/s/ H. Richard Crowther ----------------------------H. Richard Crowther

ILLINOIS TOOL WORKS INC. FORM 10-K ANNUAL REPORT

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears below constitutes and appoints W. James Farrell, Harold B. Smith and Stewart S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents, wit full power of substitution and resubstitution for her or him and his or her name, place and stead, in any and all capacities, to sign the Company's Form 10-K Annual Report and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue thereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney this 19th day of February 1999.
/s/ W. James Farrell ----------------------------W. James Farrell

ILLINOIS TOOL WORKS INC. FORM 10-K ANNUAL REPORT

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears below constitutes and appoints W. James Farrell, Harold B. Smith and Stewart S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents, wit full power of substitution and resubstitution for her or him and his or her name, place and stead, in any and all capacities, to sign the Company's Form 10-K Annual Report and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue thereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney this 19th day of February 1999.
/s/ W. James Farrell ----------------------------W. James Farrell

ILLINOIS TOOL WORKS INC. FORM 10-K ANNUAL REPORT

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears below constitutes and appoints W. James Farrell, Harold B. Smith and Stewart S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents, wit full power of substitution and resubstitution for her or him and his or her name, place and stead, in any and all capacities, to sign the Company's Form 10-K Annual Report and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue thereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney this 19th day of February 1999.
/s/ Robert C. McCormack ----------------------------Robert C. McCormack

ILLINOIS TOOL WORKS INC. FORM 10-K ANNUAL REPORT

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears below constitutes and appoints W. James Farrell, Harold B. Smith and Stewart S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents, wit full power of substitution and resubstitution for her or him and his or her name, place and stead, in any and all capacities, to sign the Company's Form 10-K Annual Report and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue thereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney this 19th day of February 1999.
/s/ Robert C. McCormack ----------------------------Robert C. McCormack

ILLINOIS TOOL WORKS INC. FORM 10-K ANNUAL REPORT

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears below constitutes and appoints W. James Farrell, Harold B. Smith and Stewart S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents, wit full power of substitution and resubstitution for her or him and his or her name, place and stead, in any and all capacities, to sign the Company's Form 10-K Annual Report and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue thereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney this 19th day of February 1999.
/s/ Phillip B. Rooney ----------------------------Phillip B. Rooney

ILLINOIS TOOL WORKS INC. FORM 10-K ANNUAL REPORT

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears below constitutes and appoints W. James Farrell, Harold B. Smith and Stewart S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents, wit full power of substitution and resubstitution for her or him and his or her name, place and stead, in any and all capacities, to sign the Company's Form 10-K Annual Report and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue thereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney this 19th day of February 1999.
/s/ Phillip B. Rooney ----------------------------Phillip B. Rooney

ILLINOIS TOOL WORKS INC. FORM 10-K ANNUAL REPORT

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears below constitutes and appoints W. James Farrell, Harold B. Smith and Stewart S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents, wit full power of substitution and resubstitution for her or him and his or her name, place and stead, in any and all capacities, to sign the Company's Form 10-K Annual Report and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue thereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney this 19th day of February 1999.
/s/ Harold B. Smith ----------------------------Harold B. Smith

ILLINOIS TOOL WORKS INC. FORM 10-K ANNUAL REPORT

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears below constitutes and appoints W. James Farrell, Harold B. Smith and Stewart S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents, wit full power of substitution and resubstitution for her or him and his or her name, place and stead, in any and all capacities, to sign the Company's Form 10-K Annual Report and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue thereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney this 19th day of February 1999.
/s/ Harold B. Smith ----------------------------Harold B. Smith

ILLINOIS TOOL WORKS INC. FORM 10-K ANNUAL REPORT

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears below constitutes and appoints W. James Farrell, Harold B. Smith and Stewart S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents, wit full power of substitution and resubstitution for her or him and his or her name, place and stead, in any and all capacities, to sign the Company's Form 10-K Annual Report and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue thereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney this 19th day of February 1999.
/s/ Ormand J. Wade -----------------------------

Ormand J. Wade

ILLINOIS TOOL WORKS INC. FORM 10-K ANNUAL REPORT

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears below constitutes and appoints W. James Farrell, Harold B. Smith and Stewart S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents, wit full power of substitution and resubstitution for her or him and his or her name, place and stead, in any and all capacities, to sign the Company's Form 10-K Annual Report and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue thereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney this 19th day of February 1999.
/s/ Ormand J. Wade -----------------------------

Ormand J. Wade

ARTICLE 5 THIS STATEMENT CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE STATEMENT OF INCOME AND THE STATEMENT OF FINANCIAL POSITION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. MULTIPLIER: 1,000

PERIOD TYPE FISCAL YEAR END PERIOD START PERIOD END CASH SECURITIES RECEIVABLES ALLOWANCES INVENTORY CURRENT ASSETS PP&E DEPRECIATION TOTAL ASSETS CURRENT LIABILITIES BONDS PREFERRED MANDATORY PREFERRED COMMON OTHER SE TOTAL LIABILITY AND EQUITY SALES TOTAL REVENUES CGS TOTAL COSTS OTHER EXPENSES LOSS PROVISION INTEREST EXPENSE

12 MOS DEC 31 1998 JAN 01 1998 DEC 31 1998 93,485 0 1,017,086 28,000 581,755 1,834,473 2,417,432 1,429,883 6,118,162 1,222,009 947,008 0 0 2,504 3,335,531 6,118,162 5,647,889 5,647,889 3,626,123 3,626,123 51,899 5,008 14,230

ARTICLE 5 THIS STATEMENT CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE STATEMENT OF INCOME AND THE STATEMENT OF FINANCIAL POSITION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. MULTIPLIER: 1,000

PERIOD TYPE FISCAL YEAR END PERIOD START PERIOD END CASH SECURITIES RECEIVABLES ALLOWANCES INVENTORY CURRENT ASSETS PP&E DEPRECIATION TOTAL ASSETS CURRENT LIABILITIES BONDS PREFERRED MANDATORY PREFERRED COMMON OTHER SE TOTAL LIABILITY AND EQUITY SALES TOTAL REVENUES CGS TOTAL COSTS OTHER EXPENSES LOSS PROVISION INTEREST EXPENSE INCOME PRETAX INCOME TAX INCOME CONTINUING DISCONTINUED EXTRAORDINARY CHANGES NET INCOME EPS PRIMARY EPS DILUTED

12 MOS DEC 31 1998 JAN 01 1998 DEC 31 1998 93,485 0 1,017,086 28,000 581,755 1,834,473 2,417,432 1,429,883 6,118,162 1,222,009 947,008 0 0 2,504 3,335,531 6,118,162 5,647,889 5,647,889 3,626,123 3,626,123 51,899 5,008 14,230 1,059,584 386,800 672,784 0 0 0 672,784 2.69 2.67