W.W. Grainger (GWW)

Employment Contracts, Termination of Employment Arrangements, and Change in Control Arrangements

       All of the NEOs and certain other key executives have entered into Change in Control Employment Agreements (CIC Agreements) with the Company. These agreements are intended to ensure that in the event of a pending or threatened change in control of the Company, the executives' full attention is focused on the best interests of the Company and its shareholders and not on their future employment prospects or by uncertainty about their compensation and benefits under those circumstances. The Company does not maintain any other employment agreements with its executives. Under each CIC Agreement, the executive is entitled to certain benefits if, within a two-year period following a change in control of the Company, (a) the executive's employment is terminated other than for cause, or (b) the executive terminates employment for good reason (for example, because Grainger reduced his authority or his aggregate benefits). Benefits include a lump-sum payment generally equal to a multiple of the sum of (i) the executive's annual salary, (ii) the executive's target annual incentive, and (iii) in connection with the Company's non-contributory profit sharing plans, a percentage of annual salary and annual incentive equal to the average percentage of covered compensation contributed by the Company under the plans for the last three fiscal years. In the case of all of the NEOs, the multiple is three. In the case of most of the other key executives, the multiple is two. The level of CIC Agreements is determined by the individual executive's position within the Company, as well as the likely value each would be required to add to any change in control transaction, and the likelihood that employment would continue after a CIC event.

       Benefits that are payable under the CIC Agreements include continuation of health and dental benefits for a number of years equal to the applicable multiple. Each agreement further provides that the executive is to be made whole on an after-tax basis with respect to excise tax due as a consequence of payments (whether or not under the agreement) being classified as "excess parachute payments" under Section 280G of the Internal Revenue Code. In certain cases, the lump-sum payment upon termination is limited under the CIC Agreement to an amount such that no payments would be considered "excess parachute payments" and thus no excise tax would be due.

Employment Contracts, Termination of Employment Arrangements, and Change in Control Arrangements

        All of the NEOs and certain other key executives have entered into Change in Control Employment Agreements (CIC Agreements) with the Company. These agreements are intended to ensure that in the event of a pending or threatened change of control of the Company, the executives' full attention is focused on the best interests of the Company and its shareholders and not on their future employment prospects. The Company does not maintain any other employment agreements with its executives. Under each CIC Agreement, the executive is entitled to certain benefits if, within a two-year period following a change in control of the Company, (a) the executive's employment is terminated other than for cause, or (b) the executive terminates employment for good reason (for example, because Grainger reduced his authority or his aggregate benefits). Benefits include a lump-sum payment generally equal to a multiple of the sum of (i) the executive's annual salary, (ii) the executive's target annual incentive, and (iii) in connection with the Company's non-contributory profit sharing plans, a percentage of annual salary and annual incentive equal to the average percentage of covered compensation contributed by the Company under the plans for the last three fiscal years. In the case of all of the NEOs, the multiple is three. In the case of most of the other key executives, the multiple is two. Benefits additionally include continuation of health and dental benefits for a number of years equal to the applicable multiple. Each agreement further provides that the executive is to be made whole on an after-tax basis with respect to excise tax due as a consequence of payments (whether or not under the agreement) being classified as "excess parachute payments" under Section 280G of the Internal Revenue Code. In certain cases, the lump-sum payment upon termination is limited under the CIC Agreement to an amount such that no payments would be considered "excess parachute payments" and thus no excise tax would be due.

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