W.W. Grainger (GWW)

Stock Option Grants

        This table contains information about grants of stock options during the year ended December 31, 2005 to the named executive officers.

(1)

The option exercise price equals the closing price of Grainger common stock reported for the business day before the date of grant, April 27, 2005.

(2)

All options were granted under the 2005 Incentive Plan on April 27, 2005 and are scheduled to become fully exercisable three years following that date. The exercisability of all such options would be accelerated upon an optionee's retirement, death or disability, or upon events defined as a "change in control" of Grainger.

(3)

The amounts shown are based on the Black-Scholes option-pricing model. Material assumptions incorporated into this model in estimating the value of the options are consistent with those required by Statement of Financial Accounting Standards No. 123 (Accounting for Stock-Based Compensation) and include the following:

a.

Exercise prices based on 100% of the fair market values of the shares on the dates of grant.

b.

Expected term of 7 years.

c.

Interest rate of 4.14%.

d.

Volatility of 20.13%.

e.

Dividend yield of 1.77%.

The actual value, if any, an executive may realize will depend on the excess of the stock price over the exercise price on the date the option is exercised. There is no assurance that the value realized by an executive will be at or near the value estimated by the Black-Scholes model.

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Stock Option Grants

        This table contains information about grants of stock options during the year ended December 31, 2004 to the named executive officers.

(1)

The option exercise price equals the closing price of Grainger common stock reported for the business day before the date of grant.

(2)

All options were granted under the 1990 Long Term Stock Incentive Plan on April 28, 2004 and are scheduled to become fully exercisable three years following that date. The exercisability of all unexercisable options is accelerated upon an optionee's death, disability or retirement, or upon events defined as a "change in control" of Grainger.

(3)

The amounts shown are based on the Black-Scholes option-pricing model. Material assumptions incorporated into this model in estimating the value of the options are consistent with those required by Statement of Financial Accounting Standards No. 123 (Accounting for Stock-Based Compensation) and include the following:

a.

Exercise prices based on 100% of the fair market values of the shares on the dates of grant.

b.

Expected term of 7 years.

c.

Interest rate of 4.16%.

d.

Volatility of 20.13%.

e.

Dividend yield of 1.77%.

The actual value, if any, an executive may realize will depend on the excess of the stock price over the exercise price on the date the option is exercised. There is no assurance that the value realized by an executive will be at or near the value estimated by the Black-Scholes model.

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