W.W. Grainger (GWW)

Entry into a Material Definitive Agreement.

On November 1, 2006, W.W. Grainger, Inc. (the "Company") entered into new Change in Control Employment Agreements with a number of its key executives. The new agreements are substantially the same as the previous agreements (which are described in more detail on page 20 of the Company's Proxy Statement dated March 24, 2006), but incorporate certain changes which were recommended by the independent consultant to the Compensation Committee of the Company's Board of Directors.

The new agreements do not include certain provisions from the previous agreements, including a provision that would have permitted specified executives to receive severance benefits if the executive terminated employment for any reason within the 30-day period following the first anniversary of a change in control. The changes also clarify the definition of a "Change in Control" and specify that only material modifications to the terms and conditions of the executive’s duties would constitute “Good Reason” for the executive to terminate employment unilaterally and receive severance benefits.

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W.W. Grainger, Inc. and Subsidiaries

The new agreements replace and terminate other Change in Control Employment Agreements which the Company previously entered into with its executives, including Richard L. Keyser, Chairman and Chief Executive Officer; James T. Ryan, President; P. Ogden Loux, Senior Vice President, Finance and Chief Financial Officer; John L. Howard, Senior Vice President and General Counsel; Y.C. Chen, Group President; and Larry J. Loizzo, Senior Vice President of the Company and President of Lab Safety Supply, Inc.

Similar to the previous agreements, following a change in control of the Company, the executive would receive certain benefits if his or her employment were terminated in specified circumstances. These benefits include a lump-sum payment equal, in general terms, to either two or three times (depending on the version of the agreement signed) the executive's annual compensation. The agreements also provide that certain of the executive's compensation arrangements would continue in effect for a period of time if the executive's employment with the Company continued after a change in control.

The form of the new Change in Control Employment Agreements is attached as Exhibit 10 to this Quarterly Report on Form 10-Q and is incorporated herein by reference.

Item 1.01.  Entry into a Material Definitive Agreement.

On August 11, 2006, W.W. Grainger, Inc. (the "Company") entered into a Change in Control Employment Agreement with Y.C. Chen, the Company's Group President. Under the agreement, Mr. Chen would receive certain benefits if his employment terminated in specified circumstances following a "change in control" of the Company. These benefits include a lump-sum payment equal, in general terms, to three times his annual compensation.

The Company has previously entered into Change in Control Employment Agreements with all of its named executive officers and certain other key executives, including Mr. Chen. The new agreement entered into by Mr. Chen is substantially the same as his previous agreement, which the new agreement replaces, except that the previous agreement (i) provided for a multiple of two times annual compensation, rather than three, and (ii) lacked a provision, contained in the new agreement, under which Mr. Chen would receive benefits under the agreement if he terminated employment for any reason within the 30-day period following the first anniversary of a "change in control."

The Company's Change in Control Employment Agreements are described in more detail on page 20 of the Company's Proxy Statement dated March 24, 2006, which description is incorporated herein by reference.

Item 1.01. Entry into a Material Definitive Agreement.

2006 Performance Share Program

On February 21, 2006, the Compensation Committee of the Board of Directors (the "Committee") of W.W. Grainger, Inc. (the "Company") adopted the 2006 Performance Share Program (the "Program"). The Committee established the Program to encourage decision-making leading to improvements in shareholder value, to align management with the Company’s growth objectives, and to attract and retain key executive talent. The Company’s elected officers (approximately 30 individuals) will participate in the Program (the "Participants"). Awards under the Program were granted February 21, 2006 in the form of "Performance Shares" pursuant to the terms of the Company's 2005 Incentive Plan. Performance Shares will be earned, if at all, following the 2008 fiscal year, and will be settled in shares of Company common stock.

Under the Program, a Participant is entitled to receive a number of Performance Shares determined by the Company’s performance against a growth target for total net sales, with the vesting of those Performance Shares being subject to the Company’s achievement of a return on invested capital (“ROIC”) target. More specifically, each Participant is awarded a target number of Performance Shares, but the actual number of Performance Shares which the Participant may receive can vary from the target number depending on the Company’s total net sales during its 2006 fiscal year as compared to those during its 2005 fiscal year.

The vesting of the Performance Shares will depend on the Company’s average ROIC during its 2006, 2007 and 2008 fiscal years. If the Company’s average ROIC during that period is less than the target, then none of a Participant’s Performance Shares will vest. If the average ROIC equals or exceeds the target, then 100 percent of a Participant’s Performance Shares will vest (in other words, either all of a Participant’s Performance Shares will vest, or none of them will vest). Under the February 21, 2006 awards, the aggregate target number of Performance Shares granted to Participants was 56,400.

Item 1.01.   Entry into a Material Definitive Agreement.

On April 27, 2005, the shareholders of W.W. Grainger, Inc. (the “Company”) approved the Company’s 2005 Incentive Plan. The description of the 2005 Incentive Plan is incorporated by reference to pages 27 through 34 of the Company’s Proxy Statement dated March 18, 2005.

SIGNATURES

             Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: April 27, 2005

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