-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, IIkGnb1rGtrQxVt3lW7zV2tj7yQHPQzPvi1Bo0dVCPYxjKQ/AIjQo54idd4bH4EI Ax2aJAfybv47FfbMHhQ15g== 0000912057-94-001018.txt : 19940324 0000912057-94-001018.hdr.sgml : 19940324 ACCESSION NUMBER: 0000912057-94-001018 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940506 FILED AS OF DATE: 19940323 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ILLINOIS TOOL WORKS INC CENTRAL INDEX KEY: 0000049826 STANDARD INDUSTRIAL CLASSIFICATION: 3089 IRS NUMBER: 361258310 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 34 SEC FILE NUMBER: 001-04797 FILM NUMBER: 94517421 BUSINESS ADDRESS: STREET 1: 3600 W LAKE AVE CITY: GLENVIEW STATE: IL ZIP: 60025 BUSINESS PHONE: 7087247500 MAIL ADDRESS: STREET 1: 3600 WEST LAKE AVENUE CITY: GLENVIEW STATE: IL ZIP: 60025-5811 DEF 14A 1 DEF 14A SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 Filed by the Registrant / / Filed by a Party other than the Registrant / / Check the appropriate box: / / Preliminary Proxy Statement /X/ Definitive Proxy Statement / / Definitive Additional Materials / / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.142-12 ILLINOIS TOOL WORKS INC. - -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) STEWART S. HUDNUT - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement) Payment of Filing Fee (Check the appropriate box): /X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) / / $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(i)(3) / / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11 1) Title of each class of securities to which transaction applies: ------------------------------------------------------------------------ 2) Aggregate number of securities to which transaction applies: ------------------------------------------------------------------------ 3) Per unit price or other underlying value of transaction computed pursu- ant to Exchange Act Rule 0-11:* ------------------------------------------------------------------------ 4) Proposed maximum aggregate value of transaction: ------------------------------------------------------------------------ * Set forth the amount on which the filing fee is calculated and state how it was determined. / / Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 1) Amount Previously Paid: ------------------------------------------------------------------------ 2) Form, Schedule or Registration Statement No.: ------------------------------------------------------------------------ 3) Filing Party: ------------------------------------------------------------------------ 4) Date Filed: ------------------------------------------------------------------------ ILLINOIS TOOL WORKS INC. NOTICE OF ANNUAL MEETING OF STOCKHOLDERS To Be Held Friday, May 6, 1994 TO THE STOCKHOLDERS: The Annual Meeting of the Stockholders of Illinois Tool Works Inc., a Delaware corporation, will be held on Friday, May 6, 1994 at 3:00 p.m., Central Time, at The Northern Trust Company (6th Floor), 50 South LaSalle Street, Chicago, Illinois, for the following purposes: (1) To elect eleven directors of the Company, and (2) To transact such other business as may properly come before the meeting or any adjournment thereof. The Board of Directors recommends a vote FOR the nominated directors. The Board of Directors set March 8, 1994 as the record date for the determination of stockholders entitled to vote at the Annual Meeting of Stockholders. Only stockholders of record at the close of business on that date will be entitled to receive notice of and to vote at the meeting. The transfer books of the Company will not be closed. Even if you expect to attend the meeting, you are requested to sign the enclosed proxy and return it promptly in the accompanying envelope. The Company's Annual Report for 1993 is being mailed to stockholders with this Notice. BY ORDER OF THE BOARD OF DIRECTORS STEWART S. HUDNUT SECRETARY Glenview, Illinois March 28, 1994 IMPORTANT -- PLEASE MAIL YOUR SIGNED PROXY PROMPTLY IN THE ENCLOSED ENVELOPE. ILLINOIS TOOL WORKS INC. 3600 WEST LAKE AVENUE GLENVIEW, ILLINOIS 60025 March 28, 1994 PROXY STATEMENT For the Annual Meeting of Stockholders of Illinois Tool Works Inc. To Be Held on May 6, 1994 This proxy statement is furnished in connection with the solicitation of proxies to be voted at the Annual Meeting of Stockholders of Illinois Tool Works Inc. to be held on Friday, May 6, 1994 and is being mailed to stockholders on or about March 28, 1994. The enclosed proxy is solicited by the Board of Directors of the Company and will be voted at the Annual Meeting and any adjournment of the meeting. The proxy may be revoked at any time before it is exercised by delivering a written revocation to the Secretary of the Company. The only business which the Board of Directors intends to present or knows will be presented is the election of directors. However, the proxy confers discretionary authority upon the persons named therein, or their substitutes, with respect to any other business that may properly come before the meeting. As of March 8, 1994, the record date for the Annual Meeting, the Company had issued and outstanding 113,213,921 shares of Common Stock, without par value. Each share is entitled to one vote. ELECTION OF DIRECTORS Eleven directors of the Company are to be elected to hold office until the next Annual Meeting or until their successors are duly elected and qualified or until their earlier resignation or removal. Edward F. Swift, a director of the Company since 1972, is retiring from the Board of Directors as a result of attaining the Company's mandatory retirement age for directors. The Board of Directors thanks Mr. Swift for his services to the Company over the years. Susan Crown has been recommended by the Nominating Committee, as well as by the Board as a whole, to fill the vacancy created by Mr. Swift's retirement. The favorable vote of the holders of a majority of the Common Stock present in person or represented by proxy at the meeting is necessary to elect each of the eleven directors. Votes withheld and abstentions are treated as votes against the election of directors. Broker non-votes are treated as shares as to which the beneficial holders have not granted voting power and, therefore, as shares not entitled to vote. Unless otherwise directed, the proxies will be voted at the meeting for the election of the persons listed below, or in the event of an unforeseen contingency, for different persons as substitutes. Set forth below are the name, age, principal occupation and other information concerning each nominee. Julius W. Becton, Jr. (67) President, Prairie View A&M University since 1989. Mr. Becton served as Director of the Federal Emergency Management Agency from 1985 to 1989 after 40 years of commissioned service in the U.S. Army, during which he attained the rank of Lieutenant General. He is a director of Marine Spill Response Corporation and Metters Industries, Inc., and has been a director of the Company since 1992. 1 Silas S. Cathcart (67) Former Chairman, Kidder, Peabody Group, Inc. (investment banking) from January 1989 through December 1989, Chairman and Chief Executive Officer from February 1988 to January 1989, and President and Chief Executive Officer from May 1987 to February 1988. In May 1986, Mr. Cathcart retired as Chairman of Illinois Tool Works Inc., a position that he had held since 1972. Mr. Cathcart is a director of Baxter International Inc., General Electric Company and The Quaker Oats Company, and has been a director of the Company since 1964. Susan Crown (35) Vice President, Henry Crown and Company since 1984. Henry Crown and Company is a family owned and operated company with investments in securities, real estate, resort properties and manufacturing operations. Ms. Crown is a director of Baxter International Inc. She also is a trustee and executive committee member of Rush-Presbyterian-St. Luke's Medical Center in Chicago and president and a director of the Juvenile Protective Association. Richard M. Jones (67) Former Chairman and Chief Executive Officer, Guaranty Federal Savings Bank from 1989 to 1991. Mr. Jones was President of Sears, Roebuck and Co. (diversified merchandise, insurance, real estate and financial services) from 1986 to 1988 and Chief Financial Officer from 1980 to 1988. Mr. Jones is a director of Applied Power Inc., Baker, Fentress & Co., Guaranty Federal Savings Bank and MCI Communications Corp., and has been a director of the Company since 1988. George D. Kennedy (67) Chairman, Mallinckrodt Group Inc. (animal and human health) since 1991; Chairman and Chief Executive Officer from 1986 to 1991. Mr. Kennedy is a director of American National Can Corporation, Brunswick Corporation, Kemper National Insurance Company, Kemper Corporation, Mallinckrodt Group Inc., Medical Care America, Inc., Scotsman Industries, Inc. and Stone Container Corporation, and has been a director of the Company since 1988. Richard H. Leet (67) Former Vice Chairman, Amoco Corporation (oil and chemicals) from March 1991 to October 1991 and Executive Vice President from 1983 through February 1991. Mr. Leet is a director of Landauer, Inc. and Vulcan Materials Corp., and has been a director of the Company since 1988. Robert C. McCormack (54) Partner, Trident Capital, Inc. (venture capital) since January 1993; Assistant Secretary of the Navy from 1990 to 1993; Deputy Under Secretary of Defense from 1987 to 1990; and Managing Director, Morgan Stanley & Co. Incorporated (investment banking) from 1985 to 1987. Mr. McCormack has been a director of the Company since 1993 and was previously a director from 1978 through 1987. John D. Nichols (63) Chairman and Chief Executive Officer of the Company since May 1986; President and Chief Executive Officer from January 1982 to May 1986. Mr. Nichols is a director of Household International, Inc., Philip Morris Cos., Inc., Rockwell International Corporation and Stone Container Corporation. He has been a director of the Company since 1981. Phillip B. Rooney (49) President and Chief Operating Officer, WMX Technologies, Inc. (environmental services) since 1985; Chairman and Chief Executive Officer, Wheelabrator Technologies Inc. (waste-to-energy) since 1990; and Chairman of the Board, Rust International Inc. (engineering, design and construction services) since January 1993. Mr. Rooney is a director of Caremark International Inc., Chemical Waste Management, Inc., Rust International Inc., The ServiceMaster Company, Urban Shopping Centers, Inc., Waste Management International plc, Wheelabrator Technologies Inc. and WMX Technologies, Inc. and has been a director of the Company since 1990. 2 Harold B. Smith (60) Chairman of the Executive Committee of the Company since 1982. Mr. Smith is a director of W.W. Grainger, Inc. and Northern Trust Corporation and a trustee of The Northwestern Mutual Life Insurance Company. He has been a director of the Company since 1968. Ormand J. Wade (54) Former Vice Chairman, Ameritech Corp. (telecommunications products and services) from 1989 to 1993; President of the Ameritech Bell Group from 1987 to 1989; and President and Chief Executive Officer, Illinois Bell Telephone Company from 1982 through 1986. Mr. Wade is a director of Andrew Corporation, NBD Bancorp, Inc. and Westell Inc. He has been a director of the Company since 1985. BOARD OF DIRECTORS AND ITS COMMITTEES The Audit Committee is responsible for reviewing and reporting to the full Board concerning the engagement of independent public accountants, internal audit systems and procedures, and any other matters which might significantly affect the Company's financial status. This Committee met three times during 1993 and is currently composed of Mr. Kennedy (Chairman) and Messrs. Becton, Jones and Swift. The Compensation Committee is responsible for reviewing and reporting to the full Board concerning the compensation the Committee has approved for the management of the Company. This Committee met two times during 1993 and is currently composed of Mr. Leet (Chairman) and Messrs. McCormack, Rooney and Wade. The Nominating Committee receives suggestions and evaluates and recommends to the Board candidates for directors. This Committee also evaluates and makes recommendations as to Board committees and the size of the Board. The Committee met twice in 1993 and is currently composed of Mr. Swift (Chairman) and Messrs. Becton, Cathcart, McCormack and Wade. Stockholders wishing to suggest nominees to the Committee may do so by letter addressed to the Nominating Committee, c/o The Secretary, Illinois Tool Works Inc., 3600 West Lake Avenue, Glenview, IL 60025. The Board of Directors of the Company met five times during 1993. Each director attended at least 80% of the meetings of the Board and of the Committees of which he was a member. DIRECTORS' COMPENSATION Compensation for non-employee directors consists of a $25,000 annual fee plus $1,000 for each Board of Directors meeting and committee meeting attended. Committee Chairmen receive an additional $600 for each meeting chaired. The Company's deferred fee plan permits non-employee directors to defer receipt of all or any part of their fees. Amounts deferred are credited with interest at current rates and are paid after an individual ceases to be a director. Retired non-employee directors also receive an annual payment equal to one-half of the annual retainer paid to an active director on the date of retirement so long as the retired director serves the Company in an advisory capacity and refrains from any activity adverse to the best interests of the Company. In January 1992 all incumbent non-employee directors also received, pursuant to a restricted stock grant program, 600 shares (as adjusted for the two-for-one stock split) of the Company's Common Stock, one-third of which shares vest annually on the anniversary dates of the grant, except that all shares vest on the date of retirement in accordance with Board policy or on the date of death. Non-employee directors elected to the Board after January 1992 received proportionate awards pursuant to such program in January of the year following their election to the Board. None of the restricted shares issued to non-employee directors under this program may be sold or transferred prior to January 2, 1995 so long as such non-employee director is still serving on the Company's Board. The shares granted to the non-employee directors pursuant to this program are included in the table under "Security Ownership." 3 SECURITY OWNERSHIP The following table sets forth information regarding ownership of the Company's Common Stock as of March 8, 1994 by each director and nominee for director, by each of the named executive officers, by all directors, nominees and executive officers as a group, and by other persons who, to the knowledge of the Company, own of record or beneficially more than 5% of the outstanding Common Stock of the Company.
AMOUNT AND NATURE OF BENEFICIAL NAME OF BENEFICIAL OWNER OR GROUP OWNERSHIP(1) PERCENT OF CLASS - ------------------------------------------------------------------------- ------------------ ---------------- Directors and Nominees -- Julius W. Becton, Jr................................................... 400 * Silas S. Cathcart...................................................... 220,974(2) * Susan Crown............................................................ -- -- Richard M. Jones....................................................... 4,600 * George D. Kennedy...................................................... 860 * Richard H. Leet........................................................ 3,600 * Robert C. McCormack.................................................... 7,285,400(3)(4) 6.4 Phillip B. Rooney...................................................... 4,600 * Harold B. Smith........................................................ 19,802,290(4)(5) 17.5 Edward F. Swift........................................................ 11,800(6) * Ormand J. Wade......................................................... 1,000 * Executive Officers -- H. Richard Crowther.................................................... 189,448(7)(8) * W. James Farrell....................................................... 57,436(7)(9) * Robert H. Jenkins...................................................... 15,535(7)(10) * John D. Nichols........................................................ 414,856(11) * Frank S. Ptak.......................................................... 26,452(7) * All Directors, Nominees and Executive Officers as a Group (24 Persons)................................................ 20,937,358(7) 18.5 Other Principal Beneficial Owners -- Edward Byron Smith, Jr................................................. 7,607,256(4)(12) 6.7 The Northern Trust Company............................................. 21,800,516(13) 19.3 - --------- * Less than 1% of Class (1) Unless otherwise noted, ownership is direct. (2) Includes 17,920 shares owned by Mr. Cathcart's wife, for which he disclaims beneficial ownership; 11,664 shares owned by a trust as to which Mr. Cathcart has sole voting and investment power; 560 shares owned by a trust as to which Mr. Cathcart shares voting and investment power; and 3,000 shares owned by a charitable organization of which Mr. Cathcart is president and a director. (3) Includes 3,760 shares held in a revocable living trust as to which Mr. McCormack has sole voting and investment power, 200 shares owned in a trust as to which he shares voting and investment power with The Northern Trust Company and 7,281,240 shares as described in Footnote 4. (4) Robert C. McCormack, Harold B. Smith, Edward Byron Smith, Jr. and The Northern Trust Company are trustees of twelve trusts owning 7,281,240 shares as to which they share voting and investment power. (5) Includes 151,338 shares held in a revocable living trust as to which Harold B. Smith has sole voting and investment power, 11,053,216 shares owned in twelve trusts as to which he shares voting and investment power with The Northern Trust Company, 1,079,240 shares owned in seven trusts as to which he shares voting and investment power, and 7,281,240 shares as described in Footnote 4. In addition, Mr. Smith is a director of a charitable organization that owns 45,256 shares. (6) Includes 3,200 shares owned by Mr. Swift's wife, for which he disclaims beneficial ownership.
4 (7) Includes shares covered by stock options exercisable within 60 days of March 8, 1994 as follows: Mr. Crowther, 58,450; Mr. Farrell, 40,996; Mr. Jenkins, 15,000; Mr. Ptak, 23,500; and all directors, nominees and executive officers as a group, 265,196. (8) Includes 130,998 shares held in a revocable living trust as to which Mr. Crowther shares voting and investment power. (9) Includes 2,212 shares held by Mr. Farrell as custodian for his minor children. (10) Includes 99 shares allocated to Mr. Jenkins' account in the Company's savings and investment plan. (11) Includes 363,838 shares held in a family partnership of which Mr. Nichols is general partner and shares voting and investment powers, 7,200 shares owned by Mr. Nichols' wife, for which Mr. Nichols disclaims beneficial ownership, 6,148 shares held by Mrs. Nichols as custodian for their minor children, for which he disclaims beneficial ownership, and 3,440 shares allocated to Mr. Nichols' account in the Company's savings and investment plan. In addition Mr. Nichols is co-trustee of a charitable foundation which owns 28,630 shares. In September 1993, Mr. Nichols filed a Form 5 to report a gift to this foundation of 31,130 shares of Common Stock (as adjusted for the two-for-one stock split) on December 31, 1992. This was his only transaction in 1992 reportable on Form 5, and such form should have been filed in February 1993. (12) Includes 10,874 shares owned in a trust as to which Edward Byron Smith, Jr. has sole voting and investment power, 96,200 shares owned in a trust as to which The Northern Trust Company has sole voting and investment power, 122,392 shares owned in three trusts as to which Mr. Smith shares voting and investment power, and 7,281,240 shares as described in Footnote 4. Also includes the following shares held for the benefit of Mr. Smith's minor children: 65,190 shares owned in two trusts as to which The Northern Trust Company has sole voting and investment power; 6,720 shares held in a trust as to which Mr. Smith and his wife share voting and investment power; 9,320 shares held in a trust as to which Mr. Smith's wife and sisters share voting and investment power; and 4,400 shares owned in two trusts as to which Mr. Smith's sisters share voting and investment power. (13) Includes its holdings as trustee described in Footnotes 3, 4, 5, and 12. The Northern Trust Company and its affiliates act as sole fiduciary or co-fiduciary of trusts and other fiduciary accounts which own an aggregate of 21,800,516 shares. They have sole voting power with respect to 2,349,909 shares and share voting power with respect to 18,732,658 shares. They have sole investment power with respect to 1,956,319 shares and share investment power with respect to 19,727,903 shares. In addition, The Northern Trust Company holds in other accounts, but does not beneficially own, 10,563,684 shares, resulting in aggregate holdings by The Northern Trust Company of 32,364,200 shares (28.6%).
Because of their holdings individually and as trustees, the holdings of their immediate families and/or their positions with the Company, Robert C. McCormack, Edward Byron Smith Jr. and Harold B. Smith may be deemed to be "controlling persons" of the Company within the meaning of the Securities Act of 1933, as amended. The Company maintains normal commercial banking relationships with The Northern Trust Company, which also acts as the trustee under the Company's pension plan and as the trustee and an investment manager of the Company's savings and investment plan. The Northern Trust Company is a wholly owned subsidiary of Northern Trust Corporation. Harold B. Smith, director of the Company, is also a director of Northern Trust Corporation. With respect to the addresses of beneficial owners of more than 5% of the Company's Common Stock, The Northern Trust Company's address is 50 South LaSalle Street, Chicago, IL 60675 and the address of each of the other principal beneficial owners is c/o The Secretary, Illinois Tool Works Inc., 3600 West Lake Avenue, Glenview, IL 60025. 5 EXECUTIVE COMPENSATION The table below summarizes the compensation of the Chief Executive Officer and the other four most highly compensated Executive Officers. SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION --------------------------------------- AWARDS ---------------------- ANNUAL COMPENSATION SECURITIES ------------------------------------------------ RESTRICTED UNDERLYING PAYOUTS NAME AND OTHER ANNUAL STOCK OPTIONS --------------- PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($)(1)(2) COMPENSATION($)(3) AWARDS($) (#)(4) LTIP PAYOUTS($) - ---------------------- ---- ------------ -------------- ------------------ ---------- ---------- --------------- John D. Nichols ...... 1993 600,000 567,600 -- -- 50,000 1,015,111(5) Chairman and Chief 1992 580,584 530,900 -- -- -- 782,097(5) Executive Officer 1991 516,664 435,000 -- -- -- 769,552(5) H. Richard 1993 272,000 258,000 -- -- 42,708 -- Crowther ............ Vice Chairman 1992 263,651 250,000 -- -- 6,082 -- 1991 245,412 167,700 -- -- 30,000 -- W. James Farrell ..... 1993 242,000 228,000 -- -- 36,996 -- Executive 1992 233,448 146,000 -- -- -- -- Vice President 1991 224,167 163,070 -- -- 20,000 -- Robert H. Jenkins .... 1993 200,000 177,000 -- -- 30,000 -- Executive 1992 186,805 150,000 -- -- -- -- Vice President 1991 175,000 87,675 -- -- 20,000 152,500(6) Frank S. Ptak ........ 1993 180,000 177,000 -- -- 30,000 139,758(6) Executive 1992 172,500 173,000 -- -- -- -- Vice President 1991 150,000 70,500 -- -- 15,000 42,166(6) NAME AND ALL OTHER PRINCIPAL POSITION COMPENSATION($) - ---------------------- --------------- John D. Nichols ...... 4,461 (7)(8) Chairman and Chief 6,866(7) Executive Officer 6,667(7) H. Richard 2,062(7)(8) Crowther ............ Vice Chairman 6,866(7) 7,510(7) W. James Farrell ..... 1,763(7)(8) Executive 6,866(7) Vice President 4,238(7) Robert H. Jenkins .... 1,457(7)(8) Executive 5,452(7) Vice President 5,085(7) Frank S. Ptak ........ 1,365(7)(8) Executive 5,003(7) Vice President 4,500(7) - ------------ (1) Includes any amounts deferred under the Company's 1993 Executive Contributory Retirement Income Plan and/or the Savings and Investment Plan. (2) Amounts awarded under the Executive Incentive Compensation Plan for the respective years. (3) Perquisites and other personal benefits, securities or property in the aggregate do not exceed the threshold reporting level of the lesser of $50,000 or 10% of total salary and bonus reported for the named executive officer. (4) Stock option grants have been adjusted where appropriate to reflect the 2 for 1 stock split effective June 1993. (5) For 1993, the market value of 20,000 phantom stock units, the vesting of which was approved by the Compensation Committee on February 18, 1994 to be effective March 31, 1994, was $875,000 (as of March 8, 1994 for this disclosure); and interest and dividends credited on 244,000 shares in the Phantom Stock account totaled $140,111. For 1992, the market value at the time of vesting (December 11, 1992) for 20,000 phantom stock units was $628,750, and interest and dividends credited on 264,000 shares in Mr. Nichols' Phantom Stock account during 1992 were $153,347. For 1991, the market value at the time of vesting (March 31, 1992) of 20,000 phantom stock units was $653,750, and interest and dividends credited on 244,000 shares in Mr. Nichols' Phantom Stock account during 1991 were $115,802. The Compensation Committee previously authorized the distribution to Mr. Nichols on December 31, 1992 of (i) the market value of and accrued dividends and interest on the 20,000 phantom stock units vested for 1992 totaling $659,683, and (ii) the market value of and accrued dividends and interest on 20,000 phantom stock units earned in 1991 totaling $668,567. Other than the December 31, 1992 distribution referred to in the previous sentence, all vested units and accrued interest and dividends are being held for Mr. Nichols in his Phantom Stock account and have not been distributed. Units have been adjusted where appropriate to reflect the 2 for 1 stock split effective June 1993.
6 (6) Cash and market value of Common Stock paid in 1993 and 1991 in respect of performance share appreciation units granted under the Company's 1979 Stock Incentive Plan for two three-year performance periods ended December 31, 1992 and 1990. (7) Company matching contribution to the executive officer's account in the Savings and Investment Plan. For 1993 the amounts are: Mr. Nichols, $4,143; Mr. Crowther, $1,878; Mr. Farrell, $1,670; Mr. Jenkins, $1,381; and Mr. Ptak, $1,243. (8) Interest credited on deferred compensation in excess of 120% of the Applicable Federal Long Term Rate: Mr. Nichols, $318; Mr. Crowther, $184; Mr. Farrell, $93; Mr. Jenkins, $76; and Mr. Ptak, $122.
The table below sets forth, as to the Executive Officers listed in the Summary Compensation Table, information with respect to options granted during 1993. OPTION GRANTS IN 1993
INDIVIDUAL GRANTS(1) ------------------------------------------------------ NUMBER OF POTENTIAL REALIZABLE VALUE SECURITIES AT ASSUMED ANNUAL RATES OF UNDERLYING % OF TOTAL EXERCISE OR STOCK PRICE APPRECIATION OPTIONS OPTIONS GRANTED BASE FOR OPTION TERM(2) GRANTED TO EMPLOYEES PRICE EXPIRATION ---------------------------- NAME (#) IN 1993 ($/SH) DATE 0% ($) 5% ($) 10% ($) - ------------------ ---------- --------------- ----------- ---------- ------ --------- --------- John D. Nichols... 50,000(3) 7.5 36.375 12/10/03 0 1,144,000 2,899,000 H. Richard Crowther......... 30,000(3) 4.5 36.375 12/10/03 0 686,000 1,739,000 12,708(4) 1.9 36.625 12/08/99 0 182,000 421,000 W. James Farrell.......... 30,000(3) 4.5 36.375 12/10/03 0 686,000 1,739,000 6,996(4) 1.0 36.875 12/11/97 0 67,000 148,000 Robert H. Jenkins.......... 30,000(3) 4.5 36.375 12/10/03 0 686,000 1,739,000 Frank S. Ptak..... 30,000(3) 4.5 36.375 12/10/03 0 686,000 1,739,000 - --------- (1) These grants contain a reload feature providing that if the exercise price is paid by surrender of previously owned shares of Common Stock, a new option in the amount of the shares surrendered will be granted. The exercise price of the new option will be the market value of a share of Common Stock on the date of grant. The new option will become exercisable in one year, providing the shares acquired on exercise of the underlying option are held for one year, and will expire on the same date as the underlying option. (2) The dollar amounts under these columns are the result of calculations at 0% and at the 5% and 10% rates set by the Securities and Exchange Commission. They are therefore not intended to forecast possible future appreciation, if any, of the Company's Common Stock price and do not reflect any income tax liability of the individual recipients at the time of exercise nor the time value of money. The Company did not use an alternative formula for a grant date valuation, as the Company is not aware of any formula which will determine with reasonable accuracy a present value based on future unknown or volatile factors. (3) These grants were made on December 10, 1993. The exercise price is the closing market price of a share of Common Stock on the date of grant, and the options become exercisable at the rate of 25% each year following the first full year after the grant. (4) These grants were made on February 23, 1993 (Mr. Crowther) and March 5, 1993 (Mr. Farrell) in connection with the exercise of previously granted options containing a reload feature and have been adjusted for the 2 for 1 stock split effective June 1993.
7 The table below sets forth, as to the Executive Officers listed in the Summary Compensation Table, information as to option exercises during 1993 as well as the number and value of unexercised options as of December 31, 1993. AGGREGATED OPTION EXERCISES IN 1993 AND 1993 YEAR-END OPTION VALUES
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT YEAR END (#) AT YEAR END ($)(1) SHARES --------------------- -------------------- ACQUIRED ON VALUE EXER- UNEXER- EXER- UNEXER- NAME EXERCISE(#) REALIZED($) CISABLE(2) CISABLE(2) CISABLE(2) CISABLE(2) - ------------------------------ ----------- ----------- --------- --------- --------- --------- John D. Nichols............... -- -- -- 50,000 -- 131,250 H. Richard Crowther........... 28,900 540,594 45,742 57,708 841,805 247,682 W. James Farrell.............. 16,000 232,000 34,000 46,966 532,000 186,117 Robert H. Jenkins............. -- -- 15,000 40,000 184,063 171,250 Frank S. Ptak................. -- -- 23,500 37,500 439,750 148,125 - --------- (1) Based on the year-end closing market price of the Company's Common Stock ($39.00). (2) Adjusted where appropriate for the 2 for 1 stock split effective June 1993.
RETIREMENT PLANS The Company's principal non-contributory defined benefit Pension Plan covers substantially all employees of the parent company and certain domestic subsidiaries. Executive Officers participate in this plan on the same basis as do more than 10,000 other eligible employees. Benefit amounts are based on years of service and average monthly compensation for the five highest consecutive years out of the last ten years of employment. The Company did not make any contributions to the Pension Plan during the year ended December 31, 1993. The following table illustrates the maximum estimated annual benefits to be paid upon normal retirement at age 65 under the formula described above to individuals in specified compensation and years of service classifications. The table does not reflect the limitations contained in the Internal Revenue Code of 1986 on benefit accruals under the Pension Plan. Under a plan adopted by the Board of Directors, supplemental payments in excess of those limitations will be made to participants designated by the Compensation Committee in order to maintain benefits upon retirement at the levels provided under the Pension Plan's formula.
ESTIMATED ANNUAL NORMAL RETIREMENT BENEFITS(1) -------------------------------------------------------------------- YEARS OF SERVICE AT NORMAL RETIREMENT(2) COMPENSATION(3) 10 15 20 25 30 35 40 - -------------------- -------- -------- -------- -------- -------- -------- -------- $ 300,000........... $ 49,500 $ 74,250 $ 99,000 $123,750 $148,500 $159,750 $171,000 400,000........... 66,000 99,000 132,000 165,000 198,000 213,000 228,000 600,000........... 99,000 148,500 198,000 247,500 297,000 319,500 342,000 800,000........... 132,000 198,000 264,000 330,000 396,000 426,000 456,000 1,000,000.......... 165,000 247,500 330,000 412,500 495,000 532,500 570,000 1,200,000.......... 198,000 297,000 396,000 495,000 594,000 639,000 684,000 1,400,000.......... 231,000 346,500 462,000 577,500 693,000 745,500 798,000 - --------- (1) Amounts shown exceed actual amounts by .65% of Social Security covered compensation for each year of service up to 30 years.
8 (2) Years of service as of December 31, 1993 for the five most highly compensated Executive Officers were as follows: Mr. Nichols, 24.2 years; Mr. Crowther, 35.0 years; Mr. Farrell, 28.5 years; Mr. Jenkins, 14.6 years; Mr. Ptak, 18.1 years. The years of service for Mr. Nichols reflect the Company's agreement to provide him pension benefits to which he otherwise would be entitled if his service with certain previous employers had been with the Company. (3) Compensation includes all amounts shown under the columns "Salary" and "Bonus" in the Summary Compensation Table.
The Company's 1982 Executive Contributory Retirement Income Plan provided certain executives designated by the Compensation Committee the opportunity to supplement their retirement benefits in exchange for salary reductions during the four year period 1983 through 1986. Four of the five named Executive Officers included in the Summary Compensation Table elected to have their salaries reduced by 10%. During the period of salary reduction the executives could not contribute to and did not receive the Company's matching contribution in the Savings and Investment Plan. Under the 1982 Plan, annual benefits payable beginning at the normal retirement age of 65 for 15 years are as follows: Mr. Nichols, $107,658; Mr. Crowther, $62,477; Mr. Farrell, $113,529; and Mr. Jenkins, $70,240. REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION The Compensation Committee of the Board of Directors, composed of non-employee directors, administers the Company's compensation plans, including the Executive Incentive Plan and the Stock Incentive Plan, and approves compensation levels for Executive Officers. In administering and making decisions regarding these plans, the Committee reviewed management's contribution to the Company's growth during the last five years, noting among other performance indices the Company's average annual earnings per share growth rate of 10.6% and the increase in stockholders' value, as measured by the change in total market capitalization of the Company's Common Stock, from $1.8 billion on December 31, 1988 to $4.4 billion on December 31, 1993. Annual compensation of Executive Officers is comprised of an incentive bonus and base salary. It is the Company's compensation philosophy that the incentive bonus opportunity be performance-based and represent a significant and meaningful portion of total annual compensation. In establishing the incentive bonus opportunity and base salary for the Chief Executive Officer (CEO) and other Executive Officers, the Committee considers compensation information obtained annually from independent consultants relating to executives of other industrial companies of comparable size ("peer group"). The companies used for compensation purposes are not necessarily the same as those included in the S&P Diversified Manufacturing Index, which is used in the Performance Graph to evaluate stockholder return. The Company has retained the services of The Hay Group and Hewitt Associates, compensation consulting firms, to assist the Committee in connection with the performance of its various duties, including generating compensation data on the peer group. Hewitt Associates has been retained in this capacity since 1985 and The Hay Group since 1987. Annual cash bonuses are paid pursuant to the Executive Incentive Plan based on predetermined objectives. Under this plan, maximum bonus opportunities for Executive Officers range from 40% to 100% of base compensation, with one-half of the maximum opportunity directly related to the Company's net income and/or the operating unit's operating income and one-half to the individual's performance measured against predetermined management goals. The resultant average cash bonuses awarded to Executive Officers for performance relative to the Company and personal objectives during 1993 were approximately 90% of the maximum award, placing this group in the second highest performance category within the plan. These awards reflected the all-time high earnings performance of the Company and the accomplishment of organizational and product objectives by the Executive Officers. In establishing and making periodic adjustments to base salary, the Committee considers factors such as the Executive Officer's past performance and future potential, the performance of the Company as a whole, and the 9 individual performance of the respective operating units. The compensation policy of the Committee is to target base salaries of Executive Officers near the median competitive level and provide performance incentives that, if achieved, can provide above average total compensation. For 1993, base salaries for Executive Officers were below the median level of the peer group. However, total compensation for the Executive Officers for 1993, including bonuses, was at approximately the 75th percentile of the peer group. The CEO and other Executive Officers participate in the Stock Incentive Plan. Stock option awards under the Plan generally are made on a biennial basis and are based on the evaluation by the Committee of the Executive Officers' ability to influence the Company's long-term growth and profitability. All options are granted at market price. Since the ultimate value of a stock option bears a direct relationship to the market price of the Company's Common Stock, it is an effective incentive for executives to create value for the stockholders. The Committee therefore views stock options as an important component of its long-term, performance based compensation philosophy. In 1991 the Compensation Committee extended for five additional years the Phantom Stock Plan for the CEO which was initially approved by the Board in 1986. The extended Plan, like the 1986 plan, is a long-term program that provides the opportunity to vest up to 100,000 Phantom Stock Units (as adjusted for the two-for-one stock split) during the five years through 1995. The Committee considers the Company's ongoing performance and the CEO's contribution to such performance, considering such criteria as the Company's earnings per share, continued market share growth, the success of the Company's acquisition programs, enhanced stockholder value over the past decade, the development of a strong management team and a succession plan. Based upon its evaluation of the CEO's performance, the Committee determines annually the number of Phantom Stock Units (not to exceed 20,000) to vest. The Committee awarded 20,000 Phantom Stock Units for 1993 reflecting the CEO's outstanding contributions to the Company's continuing strong performance. The CEO's Phantom Stock Account is credited with dividends and interest equivalent to the Company's Common Stock dividends and Federal short-term interest rates. In 1987 and 1989 the Board of Directors approved special incentive compensation programs for certain senior operating managers under the Stock Incentive Plan. These programs provided the designated managers the opportunity to realize market price appreciation on performance share units earned based on the attainment of various performance targets established for each participant for a three year period (1988-1990 and 1990-1992). The market value appreciation is the difference between the discounted 50% of the market price of the Company's Common Stock on the date of the grant and the closing market price of the stock on the date of the actual award. The new compensation deduction limitations recently enacted under Section 162 of the Internal Revenue Code became effective on January 1, 1994. The limitations, had they been in effect for 1993, would not have affected the Company's ability to deduct all taxable compensation paid to the CEO and other named Executive Officers during 1993. During 1994 the Committee will undertake a comprehensive review of the issues involved with respect to these new compensation deduction limitations. Factors affecting the level of compensation, including the need to retain highly skilled managers and remaining competitive with other employers, will be evaluated by the Committee in determining its compensation policy. Richard H. Leet, CHAIRMAN Phillip B. Rooney, MEMBER Robert C. McCormack, MEMBER Ormand J. Wade, MEMBER
10 PERFORMANCE GRAPH NOTE: The Stock Price Performance shown on the graph below is not necessarily indicative of future price performance. Comparison of Five Year Cumulative Total Return* For Illinois Tool Works Inc., S&P 500, and S&P Diversified Manufacturing Index [GRAPHIC] * Assumes that the value of investment in Illinois Tool Works Inc. Common Stock and each index was $100 on December 31, 1988 and that all dividends were reinvested. Total returns are based on market capitalization. STOCKHOLDER PROPOSALS Stockholder proposals intended to be presented at the 1995 Annual Meeting must be received by the Secretary of the Company on or before November 28, 1994. INDEPENDENT PUBLIC ACCOUNTANTS Arthur Andersen & Co. has been the Company's independent public accounting firm since 1951. During 1993 the Company engaged Arthur Andersen & Co. to examine the Company's annual financial statements, review its unaudited quarterly financial statements and assist in the preparation of required financial reports for the Securities and Exchange Commission and related matters. The Board of Directors has engaged Arthur Andersen & Co. to act in similar capacities as the Company's independent public accountants for 1994. Representatives of Arthur Andersen & Co. will be present at the Annual Meeting to respond to any questions and to make any comments they deem appropriate. 11 GENERAL The cost of preparing and mailing this proxy statement and the solicitation of proxies will be paid by the Company. Solicitations will be made by mail but in some cases may also be made by telephone or personal call of officers, directors or regular employees of the Company who will not be specially compensated for such solicitation. The Company will also pay the cost of supplying necessary additional copies of the solicitation material and the Company's Annual Report to Stockholders to beneficial owners of shares held of record by brokers, dealers, banks and voting trustees, and their nominees. Upon request, the Company will also pay reasonable expenses of record holders for mailing such materials to the beneficial owners. BY ORDER OF THE BOARD OF DIRECTORS STEWART S. HUDNUT SECRETARY Glenview, Illinois March 28, 1994 UPON WRITTEN REQUEST, THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS SOLICITED AND TO EACH PERSON REPRESENTING THAT AS OF THE RECORD DATE FOR THE MEETING HE OR SHE WAS A BENEFICIAL OWNER OF SHARES ENTITLED TO BE VOTED AT THE MEETING, A COPY OF THE COMPANY'S 1993 ANNUAL REPORT (FORM 10-K) TO THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE SCHEDULES THERETO. THE REQUEST SHOULD BE DIRECTED TO STEWART S. HUDNUT, SECRETARY, AT THE ADDRESS SET FORTH ON THE FIRST PAGE OF THIS PROXY STATEMENT. 12 [LOGO] RECYCLED PAPER WITH A MINIMUM OF 10% POST CONSUMER WASTE ILLINOIS TOOL WORKS INC. 3600 WEST LAKE AVENUE, GLENVIEW, ILLINOIS 60025 ANNUAL MEETING OF STOCKHOLDERS MAY 6, 1994 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The undersigned stockholder of Illinois Tool Works Inc. hereby appoints Silas S. Cathcart, Harold B. Smith and Ormand J. Wade, or any of them, with full power of substitution, to act as proxies at the Annual Meeting of Stockholders of the Company to be held in Chicago, Illinois on May 6, 1994 with authority to vote as directed by this Proxy at the Meeting, and any adjournments of the meeting, all shares of stock of the Company registered in the name of the undersigned. IMPORTANT - THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE. ILLINOIS TOOL WORKS INC. PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY For Withheld All (Except nominees written below) 1. ELECTION OF DIRECTORS / / / / / / Nominees: J. W. Becton, Jr., S. S. Cathcart, S. Crown, R. M. Jones, G. D. Kennedy, R. H. Leet, R. C. McCormack, J. D. Nichols, P. B. Rooney, H. B. Smith, O. J. Wade. ---------------------------------------- THE PROXY WILL BE VOTED AS DIRECTED. THE 2. In their discretion, upon such BOARD OF DIRECTORS RECOMMENDS A VOTE FOR other matters as may properly THE NOMINATED DIRECTORS, WHICH IS THE come before the meeting. MANNER IN WHICH THIS PROXY WILL BE VOTED IF NO DIRECTION IS MADE. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. Please sign exactly as your name or names appear. If jointly held, each owner must sign. Executors, administrators, trustees, officers, etc. should give full title as such. Dated 1994 ------------------- ----------------------------------------- Signature ----------------------------------------- Signature ANNUAL MEETING MAY 6, 1994 PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY -----END PRIVACY-ENHANCED MESSAGE-----