ILLINOIS TOOL WORKS INC.
                             EXECUTIVE INCENTIVE PLAN
 
                      Adopted by the Board of Directors on
                                February 16, 1996
 
                             ILLINOIS TOOL WORKS INC.
                             EXECUTIVE INCENTIVE PLAN
 
SECTION 1     PURPOSE
     The  purpose  of the Plan is to provide  key  employees  with a  meaningful
     annual  incentive   opportunity  geared  to  the  achievement  of  specific
     corporate, operating group or individual performance goals.
 
SECTION 2     DEFINITIONS
     Board:  The Board of Directors of the Company
 
     Code:  The Internal Revenue Code of 1986, as amended.
 
     Committee:  The Compensation Committee of the Board or such other committee
     appointed by the Board to administer  the Plan.  To the extent  required to
     comply with Code Section  162(m) and related  regulations,  each  Committee
     member shall qualify as an "outside director" as defined therein.
 
     Company:  Illinois Tool Works Inc., a Delaware corporation, and any success
     or thereto.
 
     Corporate Change: Any of the following: (i) the dissolution of the Company;
     (ii) the merger,  consolidation,  or reorganization of the Company with any
     other  corporation  after which the holders of the  Company's  common stock
     immediately  prior to the effective  date thereof hold less than 70% of the
     outstanding  common stock of the surviving or resulting  entity;  (iii) the
     sale of all or substantially all of the assets of the Company to any person
     or entity other than a wholly owned subsidiary; (iv) 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  becoming  the
     beneficial owner, directly or indirectly, of more than 30% of the Company's
     outstanding  common stock; or (v) the  individuals  who, as of the close of
     the most recent annual meeting of the Company's  stockholders,  are members
     of  the  Board  (the  "Existing  Directors")  ceasing  for  any  reason  to
     constitute  more  than 50% of the  Board;  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 Rule
     14a-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 (a "Proxy Contest"), including by reason of any agreement intended to
     avoid or settle any Election Contest or Proxy Contest.
 
     Disabled:  Eligible for Social Security  disability  benefits or disability
     benefits under the Company's  long-term  disability plan. An employee shall
     not be  considered  Disabled  unless  the  Committee  determines  that  the
     Disability arose prior to termination of employment.
 
     O Factor:  Performance  goals and  objectives  for individual key employees
     determined pursuant to Section 4.
 
     O Factor Award:  An award to be paid to a Participant pursuant to Section
     6.
 
     P Factor:  Performance  goals and  objectives for the Company as a whole or
     any of its business units determined pursuant to Section 5.
 
     P Factor Award:  An award to be paid to a Participant pursuant to
     Section6.
 
     Participant:  A key employee of the Company approved by the Committee to
     participate in the Plan.
 
     Plan:  The Illinois Tool Works Inc. Executive Incentive Plan, as amended
     from time to time.
 
     Qualifying O Factor: An objective  performance goal based on one or more of
     the  following:  generation  of free cash,  earnings  per share,  revenues,
     market  share,  stock  price,  cash  flow,  retained  earnings,  results of
     customer  satisfaction  surveys,  aggregate product price and other product
     price measures, safety record, acquisition activity,  management succession
     planning,  improved asset  management,  improved  gross margins,  increased
     inventory   turns,   product   development  and  liability,   research  and
     development  integration,  proprietary  protections,  legal  effectiveness,
     handling SEC or environmental issues,  manufacturing  efficiencies,  system
     review and improvement, service reliability and cost management, and one or
     more of these criteria relative to the performance of other corporations.
 
     Qualifying  O Factor  Award:  An O Factor  Award  intended  to  qualify  as
     performance based compensation under Code Section 162(m).
 
     Qualifying P Factor: An objective  performance goal based on one or more of
     the following:  operating expense ratios, total stockholder return,  return
     on sales, return on equity, return on capital,  return on assets, return on
     investment, net income, operating income, and one or more of these criteria
     relative to the performance of other corporations.
 
     Qualifying  P Factor  Award:  An P Factor  Award  intended  to  qualify  as
     performance based compensation under Code Section 162(m).
 
     Retirement:  Voluntary termination of employment while eligible for
     retirement as defined by the Company's  tax-qualified defined benefit
     retirement plan.
 
SECTION 3     ADMINISTRATION
     The Plan shall be  administered  by the Committee in accordance  with rules
     that it may establish from time to time. The determination of the Committee
     as to any disputed question arising under the Plan shall be conclusive upon
     all persons.
 
SECTION 4     O FACTOR AWARDS
     On or before March 31 of each fiscal year,  the  Committee may establish in
     writing O Factors (including Qualifying O Factors) for each Participant and
     a  formula  to  determine  the  percentage  of the  maximum  Qualifying  or
     non-Qualifying  O Factor Award  payable to the  Participant  based upon the
     degree  of  attainment  of  the  O  Factors.  O  Factors  shall  measure  a
     Participant's management effectiveness for the applicable fiscal year.
 
 
SECTION 5     P FACTOR AWARDS
     On or before March 31 of each fiscal year,  the  Committee may establish in
     writing P Factors (including Qualifying P Factors) for each Participant and
     a  formula  to  determine  the  percentage  of the  maximum  Qualifying  or
     non-Qualifying  P Factor Award  payable to the  Participant  based upon the
     degree of  attainment of the P Factors.  P Factors  shall measure  business
     performance for the applicable fiscal year.
 
SECTION 6     ADJUSTMENTS AND AWARD PAYMENTS
     (a)      Adjustments.  Qualifying O or P Factors may not be adjusted  after
              they have been  established  for any fiscal year by the Committee.
              The Committee may adjust any other O or P Factor, provided that no
              adjustment may be based upon the failure, or the expected failure,
              to attain or exceed a Qualifying O or P Factor. A non-Qualifying O
              or P  Factor  or  related  Award  may  not  be  dependent  on  any
              Qualifying O or P Factor or related Award.
 
     (b)      Payment of O or P Factor Awards.  An O or P Factor Award is
              payable in cash to a
              Participant based upon the degree of achievement of the related O
              or P Factors during the applicable fiscal year,
              as certified in writing by the Committee following the release
              of the Company's audited financial statements for the applicable
              fiscal year.  With the approval of the Committee, a Participant
              who is covered by the stock ownership guidelines adopted by the
              Board, as amended from time to time, may elect to receive up to
              50% of an Award in Common Stock under the Company's 1996 Stock
              Incentive Plan, and a Participant also may defer payment of an
              Award under rules established by the Committee.  Any O or P
              Factor Award may be adjusted by the Committee; provided, that
              the Committee may not adjust upward any Qualifying O or P Factor
              Award.  The maximum individual Qualifying O Factor Award or
              Qualifying P Factor Award payable to any Participant is $2,500,000
              for any calendar year.
 
SECTION 7     TERMINATION OF EMPLOYMENT OR PARTICIPATION
     (a)      Termination of Employment Due to Death,  Disability or Retirement.
              If a  Participant's  employment  is terminated by reason of death,
              Disability or Retirement,  the Participant,  or the  Participant's
              estate,  shall  receive an O Factor Award and/or a P Factor Award,
              determined  as if the  Participant  had remained  employed for the
              entire  fiscal  year,  prorated  for the number of days during the
              fiscal year that have elapsed as of the Participant's termination,
              and subject to the first sentence of Section 6(b).
 
     (b)      Termination of Employment for Other  Reasons.  If a  Participant's
              employment  is  terminated  for a reason not  specified in Section
              7(a),  the  Participant's  rights to any O and P Factor Awards for
              such fiscal year will be forfeited. However, the Committee may pay
              prorated O and P Factor  Awards for the portion of the fiscal year
              that the  Participant  was employed by the Company,  except in the
              event of termination for cause as determined by the Committee.
 
     (c)      Termination  of  Participation.  The  Committee  may terminate any
              Participant's  rights to an O or P Factor  Award at any time prior
              to the applicable payment date;  provided,  that the Committee may
              not,  within the 90-day  period  prior to the date of a  Corporate
              Change or at any time on or after such date,  terminate  or adjust
              any Participant's participation with respect to the current fiscal
              year.
 
 
SECTION 8     CORPORATE CHANGE
     In the event of a  Corporate  Change,  the  maximum  O Factor  and P Factor
     Awards for the fiscal  year then in  progress,  prorated  for the number of
     days in the fiscal year that have  elapsed as of the date of the  Corporate
     Change, shall be paid immediately in cash. Any adjustment or termination of
     a  Participant's  participation  in the Plan that  occurs at any time on or
     after the 90th day preceding a Corporate Change shall be of no effect.
 
 
SECTION 9     GENERAL PROVISIONS
     (a)      Withholding Taxes.  The Company shall have the right to deduct any
              Federal, state or local taxes applicable to payments under the
              Plan.
 
     (b)      Nontransferability.  No right or  interest of any  Participant  in
              this Plan shall be assignable or  transferable,  or subject to any
              lien,  directly,  by  operation  of  law or  otherwise,  including
              execution, levy, garnishment, attachment, pledge or bankruptcy.
 
     (c)      Amendment or Termination.  Except as provided in Sections 7(c) and
              8, the Board may terminate or amend the Plan at any time provided,
              that,  without the approval of  stockholders,  no amendment may be
              made which (i)  increases  the  maximum  Qualifying  O or P Factor
              Award, (ii) modifies the Plan's  eligibility  requirements,  (iii)
              changes the criteria upon which Qualifying O Factors or Qualifying
              P Factors may be based, or (iv) changes this Section 9(c).