W.W. Grainger (GWW)

Change in Control

Change in Control—Equity Plans

        Under the terms of the Company's 1990 Long-Tern Incentive Plan, as amended, 2001 Long-Term Incentive Plan, as amended, 2005 Incentive Plan, as amended, and Director Stock Plan, as amended ("Plans"), a change in control generally results in accelerated vesting as follows:

•

Any unexercised options, whether or not exercisable on the date of such change in control;



•

Accelerated vesting of unvested RSUs; and



•

Settlement of performance shares in common stock equal to 100 percent of the executive's outstanding performance shares.

Change in Control Agreements

        The Company maintains Change in Control Agreements that cover each NEO. As set forth in these double-trigger agreements, if there is a change in control and an executive's employment is terminated following a change in control (other than termination by the Company for cause, involuntary termination without good reason, or by reason of death or disability) or if the executive terminates his employment in certain circumstances defined in the agreement which constitute good reason, the Company shall provide each NEO with the following:

•

Lump-sum payment of cash severance benefit in an amount equal to three times the sum of an executive's base salary, target annual incentive opportunity under the MIP, and average profit sharing contribution for the previous three years;



•

Prorated annual cash incentive;



•

An amount equal to the value of the unvested portion of executive's account under the supplemental profit sharing plan;



•

Lump-sum payment of cash equal to account balance under the compensation deferral plan; and



•

Gross-up tax on any payment that will become subject to any excise tax or similar tax.

        The following tables illustrate the potential incremental payments and benefits based on December 31, 2008 computations that could be received by the NEOs upon a termination or change in control of the Company.

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Table of Contents

Change in Control

       The Company maintains Change in Control Employment Agreements that cover each NEO. As set forth in this agreement, if an executive's employment is terminated following a change in control (other than termination by the Company for cause, involuntary termination without good reason, or by reason of death or disability) or if the executive terminates his employment in certain circumstances

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defined in the agreement which constitute good reason, the Company shall provide each NEO with the following:

•

Lump-sum payment of cash severance benefit in an amount equal to three times the sum of an executive's base salary, target annual incentive opportunity under the MIP, and average profit sharing contribution for the previous three years;

•

Prorated annual bonus;

•

An amount equal to the value of the unvested portion of executive's account under the supplemental profit sharing plan;

•

Any unexercised options, whether or not exercisable on the date of such change in control;

•

Accelerated vesting of unvested RSUs;

•

Settlement of performance shares in common stock equal to 100 percent of the executive's outstanding performance shares;

•

Lump-sum payment of cash equal to account balance under the compensation deferral plan; and

•

Gross-up tax on any payment that will become subject to any excise tax or similar tax.

       The following tables illustrate the potential incremental payments and benefits based on December 31, 2007 computations that could be received by the NEOs upon a termination or change in control of the Company.

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Other Potential Post-Employment Payments

Change in Control

        The Company maintains Change in Control Employment Agreements that cover each NEO. As set forth in this agreement, if an executive's employment is terminated following a change in control (other than termination by the Company for cause, involuntary termination without good reason, or by reason of death or disability) or if the executive terminates his employment in certain circumstances defined in the agreement which constitute good reason, the Company shall provide each NEO with the following:

•

Lump-sum payment of cash severance benefit in an amount equal to three times the sum of an executive's base salary, target annual incentive opportunity under the Management Incentive Program, and average profit sharing contribution for the previous three years;



•

Prorated annual bonus;



•

An amount equal to the value of the unvested portion of executive's account under the supplemental profit sharing plan;



•

Any unexercised options, whether or not exercisable on the date of such change in control;



•

Accelerated vesting of unvested restricted stock;



•

Settlement of performance shares in common stock equal to 100 percent of the executive's outstanding performance shares;



•

Lump-sum payment of cash equal to account balance under the compensation deferral plan; and



•

Gross-up tax on any payment that will become subject to any excise tax or similar tax.

        The following tables illustrate the potential incremental payments and benefits based on December 31, 2006 computations that could be received by the NEOs upon a termination or change in control of the Company.

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Other Potential Post-Employment Payments Tables

Section 12. Change in Control.

Except as otherwise provided in an Agreement, if a Change in Control occurs, then:

Section 13.  Change in Control.

Except as otherwise provided at the time of grant in the certificate, notice or agreement relating to a particular Award, if a Change in Control occurs, then:

Article 17. Change in Control

Except as otherwise provided at the time of grant in the certificate, notice or agreement relating to a particular Award, if a Change in Control occurs, then:

Article 17. Change in Control

Except as otherwise provided at the time of grant in the certificate, notice or agreement relating to a particular Award, if a Change in Control occurs, then:

(i)

the Participant's Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares, Cash-Based Awards, Other Stock-Based Awards, or Covered Employee Annual Incentive Awards that were forfeitable shall, unless otherwise determined by the Committee, become nonforfeitable and, to the extent applicable, shall be converted into Shares; provided, that for any Award which is performance-based, it shall be assumed for purposes of determining such payout or conversion that performance was "at target" for the applicable Performance Period, and

(ii)

any unexercised Option or SAR, whether or not exercisable on the date of such Change in Control, shall thereupon be fully exercisable and may be exercised, in whole or in part.