W.W. Grainger (GWW)

PART II – OTHER INFORMATION

Items 1A, 3, 4 and 5 not applicable.

W.W. Grainger, Inc. and Subsidiaries

As previously reported, the Company received a letter in December 2007 from the Commercial Litigation Branch of the Civil Division of the Department of Justice (DOJ) regarding the Company’s contract with the United States General Services Administration (GSA). The letter suggested that the Company had not complied with its disclosure obligations and the contract’s pricing provisions, and had potentially overcharged government customers under the contract. As also reported, the DOJ subsequently intervened in a previously filed civil “qui tam” action alleging non-compliance with the pricing provisions for “sourced” items under the contract and with the country of origin provisions of the Trade Agreement Act.

In March 2008, the Company began the process of meeting with the DOJ to discuss the DOJ’s allegations and damage estimates. In May 2008, counsel for the parties arrived at the terms of a proposed settlement agreement relating to the “qui tam” action and in July, the parties executed an agreement pursuant to which the Company paid $6 million to the government but did not admit any violations. The “qui tam” action was dismissed on July 25, 2008.

Discussions relating to the Company’s compliance with its disclosure obligations and the contract’s pricing provisions are ongoing. The timing and outcome of these discussions are uncertain and could include settlement or civil litigation by the DOJ to recover, among other amounts, treble damages and penalties under the False Claims Act. While this matter is not expected to have a material adverse effect on the Company’s financial position, an unfavorable resolution could result in material payments by the Company. The Company continues to believe that it has complied with the GSA contract in all material respects.

W.W. Grainger, Inc. and Subsidiaries

PART II – OTHER INFORMATION

Items 1A, 3 and 5 not applicable.

As previously reported, Grainger received a letter in December 2007 from the Commercial Litigation Branch of the Civil Division of the Department of Justice (the “DOJ”) regarding Grainger’s contract with the United States General Services Administration (the “GSA”). The letter suggested that Grainger had not complied with the contract’s disclosure obligations and pricing provisions, and had potentially overcharged government customers under the contract. As also reported, the DOJ subsequently intervened in a previously filed civil “qui tam” action alleging non-compliance with the contract and with the country of origin provisions of the Trade Agreement Act.

In March 2008, Grainger began the process of meeting with the DOJ to discuss the DOJ’s allegations and damage estimates. The timing and outcome of these discussions are uncertain and could include settlement or civil litigation by the DOJ to recover, among other amounts, treble damages and penalties under the False Claims Act. While this matter is not expected to have a material adverse effect on Grainger’s financial position, an unfavorable resolution could result in material payments by Grainger. Grainger continues to believe that it has complied with the GSA contract in all material respects.

21

W.W. Grainger, Inc. and Subsidiaries

PART II – OTHER INFORMATION

Items 1, 1A, 3, 4 and 5 not applicable.

PART II – OTHER INFORMATION

Items 1, 1A, 3, 4 and 5 not applicable.

PART II – OTHER INFORMATION

Items 1, 1A, 3 and 5 not applicable.

PART II — OTHER INFORMATION

Items 3, 4 and 5 not applicable.

Item 1.   Legal Proceedings

In its Form 10-Q for the quarter ended September 30, 2004, the Company reported an administrative complaint filed by the U.S. Environmental Protection Agency (EPA) against Grainger for alleged violations of federal clean-air regulations. The Company and the EPA settled this matter on May 18, 2005. Under the settlement, the Company agreed to pay a penalty of $177,156 for the alleged violations, without admission of liability.