Exhibit 10(x)

 

CHANGE IN CONTROL EMPLOYMENT AGREEMENT

(Senior Executive)

 

AGREEMENT by and between W.W. Grainger, Inc., an Illinois corporation (the
“Company”), and INSERT NAME (“Executive”), dated as of December 10, 2007 (the
“Agreement Date”).

 

Recitals

 

A. The Board of Directors of the Company (the “Board”) has determined that it is
in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of Executive, notwithstanding the
possibility, threat, or occurrence of a Change in Control (as defined below) of
the Company.

 

B. The Board believes it is imperative to diminish the inevitable distraction of
Executive by virtue of the personal uncertainties and risks created by a pending
or threatened Change in Control, to encourage Executive's full attention and
dedication to the Company, and to provide Executive with compensation and
benefits arrangements upon a Change in Control which (i) will satisfy
Executive's compensation and benefits expectations and (ii) are competitive with
those of other major corporations.

 

Agreement

 

In consideration of the mutual agreements contained herein, and of certain other
commitments separately made by the Executive to the Company concerning the
Company's competitors, the protection of the Company's confidential information,
and the non-solicitation of the Company's customers and employees, the Company
and Executive hereby agree as follows:

 

1. Certain Definitions. The terms set forth below in alphabetical order have the
following meanings (such meanings to be applicable to both the singular and
plural forms):

 

“Accrued Annual Bonus” means the amount of any annual bonus accrued but not yet
paid with respect to each fiscal year of the Company ended prior to the Date of
Termination.

 

“Accrued Base Salary” means the amount of Executive's Annual Base Salary which
is accrued but not yet paid as of the Date of Termination.

 

“Accrued Obligations” -- see Section 4(a)(i)(A).

“Agreement Term” means the period commencing on the Agreement Date and ending on
the third anniversary of such date or, if later, such later date to which the
Agreement Term is extended pursuant to the following sentence. On each day after
the second anniversary of the Agreement Date, the Agreement Term shall be
automatically extended by one day to create a new one-year term until, at any
time on or after the second anniversary of the Agreement Date, the Company
delivers a written notice (an “Expiration Notice”) to Executive stating that
this Agreement shall expire on a date specified in the Expiration Notice (the
“Expiration Date”) that is at least 12 months after the date the Expiration
Notice is delivered to Executive; provided, however, that if a Change in Control
occurs before the Expiration Date specified in an Expiration Notice, then
(a) such Expiration Notice shall automatically be cancelled and of no further
effect and (b) the Company shall not give Executive any additional Expiration
Notice prior to the date which is 24 months after the Effective Date.

 

“Annual Base Salary” -- see Section 2(b)(i).

 

“Annual Bonus” -- see Section 2(b)(ii).

 

“Average Profit Sharing Plan Contribution” -- see Section 2(b)(iii).

 

“Cause” -- see Section 3(b).

 

“Change in Control” means any one or more of the following events:

 

(a) the consummation of:

 

(i) any merger, reorganization or consolidation of the Company or any Subsidiary
with or into any corporation or other Person if Persons who were the beneficial
owners (as such term is used in Rule 13d-3 under the Act) of the Company’s
Common Stock and securities of the Company entitled to vote generally in the
election of directors (“Voting Securities”) immediately before such merger,
reorganization or consolidation are not, immediately thereafter, the
beneficially owners, directly or indirectly, of at least 60% of the
then-outstanding common shares and the combined voting power of the
then-outstanding Voting Securities (“Voting Power”) of the corporation or other
Person surviving or resulting from such merger, reorganization or consolidation
(or the parent corporation thereof) in substantially the same respective
proportions as their beneficial ownership, immediately before the consummation
of such merger, reorganization or consolidation, of the then-outstanding Common
Stock and Voting Power of the Company; or

 

(ii) the sale or other disposition of all or substantially all of the
consolidated assets of the Company, other than a sale or other disposition by
the Company of all or substantially all of its consolidated assets to an entity
of which at least 60% of the common shares and the Voting Power outstanding

 

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immediately after such sale or other disposition are then beneficially owned (as
such term is used in Rule 13d-3 under the Act) by shareholders of the Company in
substantially the same respective proportions as their beneficial ownership of
Common Stock and Voting Power of the Company immediately before the consummation
of such sale or other disposition; or

 

(b) approval by the shareholders of the Company of a liquidation or dissolution
of the Company; or

 

(c) the following individuals cease for any reason to constitute a majority of
the directors of the Company then serving: individuals who, on the Agreement
Date, constitute the Board and any subsequently-appointed or elected director of
the Company whose appointment or election by the Board or nomination for
election by the Company's shareholders was approved or recommended by a vote of
at least two-thirds of the Company’s directors then in office whose appointment,
election or nomination for election was previously so approved or recommended or
who were directors on the Agreement Date; or

 

(d) the acquisition or holding by any person, entity or “group” (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Act), other than by any Exempt
Person, the Company, any Subsidiary, any employee benefit plan of the Company or
a Subsidiary, of beneficial ownership (as such term is used in Rule 13d-3 under
the Act) of 20% or more of either the Company’s then-outstanding Common Stock or
Voting Power; provided that:

 

(i) no such person, entity or group shall be deemed to own beneficially any
securities held by the Company or a Subsidiary or any employee benefit plan (or
any related trust) of the Company or a Subsidiary;

 

(ii) no Change in Control shall be deemed to have occurred solely by reason of
any such acquisition if both (x) after giving effect to acquisition, such
person, entity or group has beneficial ownership of less than 30% of the
then-outstanding Common Stock and Voting Power of the Company and (y) prior to
such acquisition, at least two-thirds of the directors described in paragraph
(c) of this definition vote to adopt a resolution of the Board to the specific
effect that such acquisition shall not be deemed a Change in Control; and

 

(iii) no Change in Control shall be deemed to have occurred solely by reason any
such acquisition or holding in connection with any merger, reorganization or
consolidation of the Company or any Subsidiary which is not a Change in Control
within the meaning of paragraph (a)(i) of this definition.

 

Notwithstanding the occurrence of any of the foregoing events, no Change in
Control shall occur with respect to Executive if (i) the event which otherwise
would be a

 

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Change in Control (or the transaction which resulted in such event) was
initiated by Executive or was discussed by him with any third party, in either
case without the approval of the Board with respect to Executive’s initiation or
discussion, as applicable, or (ii) Executive is, by written agreement, a
participant on his own behalf in a transaction in which the persons (or their
affiliates) with whom Executive has the written agreement cause the Change in
Control to occur and, pursuant to the written agreement, Executive has an equity
interest (or a right to acquire such equity interest) in the resulting entity.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Date of Termination” means the effective date of any termination of Executive's
employment for any or no reason, whether by the Company or by Executive, as
specified in the Notice of Termination; provided, however, that if Executive's
employment is terminated by reason of his death or Disability, the Date of
Termination shall be the date of death or the Disability Effective Date, as the
case may be.

 

“Effective Date” means the first date during the Agreement Term on which a
Change in Control occurs. Anything in this Agreement to the contrary
notwithstanding, if Executive's employment with the Company is terminated prior
to the date on which a Change in Control occurs, and Executive reasonably
demonstrates that such termination of employment (i) was requested by a third
party who has taken steps reasonably calculated to effect the Change in Control
or (ii) otherwise arose in connection with or anticipation of the Change in
Control, then for all purposes of this Agreement the Effective Date shall be the
date immediately prior to the Date of Termination.

 

“Employment Period” means the period commencing on the Effective Date and ending
on the second anniversary of such date.

 

“Exempt Person” means any one or more of the following:

 

(a) any descendant of W.W. Grainger, or any spouse, widow or widower of W.W.
Grainger or any such descendant (any such descendants, spouses, widows and
widowers collectively defined as the “Grainger Family Members”);

 

(b) any descendant of E.O. Slavik, or any spouse, widow or widower of E.O.
Slavik or any such descendant (any such descendants, spouses, widows and
widowers collectively defined as the “Slavik Family Members” and with the
Grainger Family Members collectively defined as the “Family Members”);

 

(c) any trust which is in existence on the Agreement Date and which has been
established by one or more Grainger Family Members, any estate of a Grainger
Family Member who died on or before the Agreement Date, and The

 

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Grainger Foundation (such trusts, estates and named entity collectively defined
as the “Grainger Family Entities”);

 

(d) any trust which is in existence on the Agreement Date and which has been
established by one or more Slavik Family Members, any estate of a Slavik Family
Member who died on or before the Agreement Date and Mark IV Capital, Inc. (such
trusts, estates and named entities collectively defined as the “Slavik Family
Entities” and with the Grainger Family Entities collectively defined as the
“Existing Family Entities”);

 

(e) any estate of a Family Member who dies after the Agreement Date or any trust
established after the Agreement Date by one or more Family Members or Existing
Family Entities; provided that one or more Family Members, Existing Family
Entities or charitable organizations which qualify as exempt organizations under
Section 501(c) of the Code (“Charitable Organizations”), collectively are the
beneficiaries of at least 50% of the actuarially-determined beneficial interests
in such estate or trust;

 

(f) any Charitable Organization which is established by one or more Family
Members or Existing Family Entities (a “Family Charitable Organization”);

 

(g) any corporation of which a majority of the voting power and a majority of
the equity interest is held, directly or indirectly, by or for the benefit of
one or more Family Members, Existing Family Entities, estates or trusts
described in clause (e) above, or Family Charitable Organizations; or

 

(h) any partnership or other entity or arrangement of which a majority of the
voting interest and a majority of the economic interest is held, directly or
indirectly, by or for the benefit of one or more Family Members, Existing Family
Entities, estates or trusts described in clause (e) above, or Family Charitable
Organizations.

 

“Good Reason” -- see Section 3(c).

 

“Gross-Up Multiple” -- see Section 9(e).

 

“including” means including without limitation.

 

“Non-Employee Director” means a director of the Company who is not an employee
of (i) the Company, (ii) any Subsidiary or (iii) any Person who beneficially
owns more than 30% of the Common Stock then outstanding.

 

“Person” means any individual, corporation, partnership, limited liability
company, sole proprietorship, trust or other entity.

 

“Policies” means policies, practices and programs.

 

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“Prorated Annual Bonus” means the product of (i) the amount of the annual bonus
to which Executive would have been entitled (based on target-level performance)
if he had been employed by the Company on the last day of the Company's fiscal
year that includes the Date of Termination and if performance were achieved at
the target level for such fiscal year, multiplied by (ii) a fraction of which
the numerator is the numbers of days that have elapsed in such fiscal year
through the Date of Termination and the denominator is 365.

 

“Subsidiary” means corporation, limited liability company, partnership or other
business entity in which the Company, directly or indirectly, holds a majority
of the voting power of the outstanding securities.

 

“Target Bonus” means the amount of the annual bonus which Executive was, as of
the Date of Termination, eligible to receive in respect of the fiscal year of
the Date of Termination, assuming for purposes of this paragraph (i) that
target-level performance had been achieved for such fiscal year, (ii) that
Executive's employment would have continued until the first date on which such
annual bonus would have been payable, and (iii) if the amount of such annual
bonus that Executive was eligible to receive was reduced after the Effective
Date (whether or not such reduction qualified as Good Reason), that such
reduction had not occurred.

 

“Taxes” means the incremental United States federal, state and local income,
excise and other taxes payable by Executive with respect to any applicable item
of income.

 

2. Terms of Employment. The Company shall continue Executive in its employ
during the Employment Period on the following terms and conditions:

 

(a) Position and Duties.

 

(i) During the Employment Period, (A) Executive's position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned at any time during
the 90-day period immediately preceding the Effective Date and (B) Executive's
services shall be performed at the location where Executive was employed
immediately preceding the Effective Date or any office or location less than 50
miles from such location.

 

(ii) During the Employment Period, and excluding any periods of vacation, sick
leave and disability to which Executive is entitled, Executive shall devote
reasonable attention and time during normal business hours to the business and
affairs of the Company and, to the extent necessary to discharge the
responsibilities assigned to Executive thereunder, use Executive's reasonable
best efforts to perform faithfully and efficiently such

 

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responsibilities. During the Employment Period, Executive may (A) serve on
corporate, civic or charitable boards or committees, (B) deliver lectures,
fulfill speaking engagements or teach at educational institutions and (C) manage
personal investments, so long as such activities are consistent with the
policies of the Company at the Effective Date and do not significantly interfere
with the performance of Executive's responsibilities (as set forth in this
Agreement) as an employee of the Company. To the extent that any such activities
have been conducted by Executive prior to the Effective Date and were consistent
with the policies of the Company at the Effective Date, the continued conduct of
such activities (or the conduct of activities similar in nature and scope
thereto) subsequent to the Effective Date shall not thereafter be deemed to
interfere with the performance of Executive's responsibilities to the Company.

 

(b) Compensation.

 

(i) Base Salary. During the Employment Period, Executive shall receive an annual
base salary in cash (“Annual Base Salary”), which shall be paid in a manner
consistent with the Company's payroll practices immediately preceding the
Effective Date at a rate at least equal to 12 times the highest monthly base
salary (unreduced by any salary reductions or deferrals pursuant to a plan
maintained under Section 401(k) of the Code or any similar plan) paid or payable
to Executive by the Company in respect of the 12-month period immediately
preceding the month in which the Effective Date occurs. During the Employment
Period, the Company shall review the Annual Base Salary at least annually and
may increase Annual Base Salary at any time and from time to time based on the
performance of the Executive and the Company. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation to Executive under this
Agreement. Annual Base Salary shall not be reduced after any such increase and
the term “Annual Base Salary” shall refer to Annual Base Salary as so increased.

 

(ii) Annual Bonus. In addition to Annual Base Salary, during the Employment
Period Executive shall be entitled to participate in the Management Incentive
Program or other annual bonus program maintained by the Company for peer
executives, and the Executive's target bonus thereunder shall be not be less
than the Target Bonus. Any annual bonus due to Executive under such program (the
"Annual Bonus") shall be paid in cash no later than 90 days after the end of the
fiscal year for which the Annual Bonus is awarded, unless Executive shall elect
to defer the receipt of such Annual Bonus.

 

(iii) Incentive, Savings and Retirement Plans. In addition to Annual Base Salary
and Annual Bonus payable as hereinabove provided, Executive shall be entitled to
participate during the Employment Period in all incentive, savings and
retirement plans and Policies applicable to peer

 

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executives of the Company, but in no event shall such plans and Policies provide
Executive with incentive, savings and retirement benefits opportunities, in each
case, less favorable, in the aggregate, than the most favorable of those
provided by the Company for Executive under such plans and Policies as in effect
at any time during the 90-day period immediately preceding the Effective Date.
Benefits to which this paragraph shall apply include, but are not limited to, a
contribution (“Average Profit Sharing Plan Contribution”) for each calendar year
of Executive's employment during the Employment Period, on Executive's behalf to
the W.W. Grainger, Inc. Profit Sharing Plan (the “PST”) and, if applicable, a
credit under the W.W. Grainger, Inc. Supplemental Profit Sharing Plan (the
“Supplemental Plan” and with the PST, collectively referred to as the “Profit
Sharing Plans”) equal to not less than the product of (A) the average percentage
of the sum of Executive's base salary and annual bonus paid or payable as a
contribution to or credit under the Profit Sharing Plans, as applicable, for the
three fiscal years preceding the Effective Date, and (B) the sum of Executive's
Annual Base Salary and annual bonus, each as of the first day of such calendar
year. In the event that a contribution or credit, as applicable, of less than
the Average Profit Sharing Plan Contribution is made to the Profit Sharing Plans
on Executive's behalf for any calendar year of Executive's employment during the
Employment Period, Executive shall be entitled to a cash payment equal to the
difference between the Average Profit Sharing Plan Contribution and the amount
of the Company's contribution or credit, as applicable, to the Profit Sharing
Plans on Executive's behalf for such year, payable at the time that the
Company's contribution is made to the PST, but in no event later than the date
prescribed by law, including extensions of time, for the filing of the Company's
federal income tax return for such year.

 

(iv) Welfare Benefit Plans. During the Employment Period, Executive and/or
Executive's family, as the case may be, shall be eligible to participate in and
shall receive all benefits under welfare benefit plans and Policies provided by
the Company (including medical, prescription, dental, disability, salary
continuance, employee life, group life, accidental death and travel accident
insurance plans and programs) and applicable to peer executives of the Company,
but in no event shall such plans and Policies provide benefits which are less
favorable, in the aggregate, than the most favorable of such plans and Policies
in effect at any time during the 90-day period immediately preceding the
Effective Date.

 

(v) Expenses. During the Employment Period, Executive shall be entitled to
prompt reimbursement for all reasonable expenses incurred by Executive in
accordance with the most favorable Policies of the Company in effect at any time
during the 90-day period immediately preceding the Effective Date or, if more
favorable to Executive, as in effect at any time thereafter with respect to peer
executives of the Company.

 

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(vi) Fringe Benefits. During the Employment Period, Executive shall be entitled
to fringe benefits in accordance with the most favorable plans and Policies of
the Company in effect at any time during the 90-day period immediately preceding
the Effective Date or, if more favorable to Executive, as in effect at any time
thereafter with respect to peer executives of the Company.

 

(vii) Office; Support Staff. During the Employment Period, Executive shall be
entitled to an office or offices of a size and with furnishings and other
appointments, and to personal secretarial and other assistance, at least equal
to the most favorable of the foregoing provided to Executive by the Company at
any time during the 90-day period immediately preceding the Effective Date or,
if more favorable to Executive, as provided at any time thereafter with respect
to peer executives of the Company.

 

(viii) Vacation. During the Employment Period, Executive shall be entitled to
paid vacation in accordance with the most favorable plans and Policies of the
Company as in effect at any time during the 90-day period immediately preceding
the Effective Date or, if more favorable to Executive, as in effect at any time
thereafter with respect to peer executives of the Company.

 

(ix) Subsidiaries. To the extent that, immediately prior to the Effective Date,
Executive has been on the payroll of, and participated in the bonus, incentive
or employee benefit plans of, a Subsidiary, the references to the Company
contained in Sections 2(b)(i) through 2(b)(viii) and elsewhere in this Agreement
referring to benefits to which Executive may be entitled shall also refer to
such Subsidiary.

 

3. Termination of Employment.

 

(a) Death or Disability. Executive's employment shall terminate automatically
upon Executive's death during the Employment Period. If the Company determines
in good faith that the Disability of Executive has occurred during the
Employment Period, it may give to Executive written notice of its intention to
terminate Executive's employment. In such event, Executive's employment with the
Company shall terminate as of the 30th day after Executive’s receipt of such
notice (the “Disability Effective Date”); provided that, within the 30 days
after such receipt, Executive shall not have returned to full-time performance
of his duties. “Disability” means the absence of Executive from Executive's
duties with the Company on a full-time basis for a period of time equal to the
Waiting Period as a result of incapacity due to mental or physical illness that
is determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to Executive or Executive's legal representative
(such agreement as to acceptability not to be unreasonably withheld or delayed).
“Waiting Period” means the waiting period under

 

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a long-term disability plan of the Company that is applicable to Executive and
satisfies the requirements of Section 2(b)(iv).

 

(b) Cause. The Company may terminate Executive's employment during the
Employment Period for Cause. “Cause” means the occurrence of any one or more of
the following actions or failures to act as determined by the Board in its
reasonable judgment and in good faith:

 

(i) embezzlement, fraud or theft with respect to the property of the Company or
a conviction for any felony involving moral turpitude or causing material harm,
financial or otherwise, to the Company;

 

(ii) habitual neglect in the performance of Executive's significant duties
(other than on account of incapacity due to physical or mental illness or
Disability); or

 

(iii) a demonstrably deliberate act or failure to act, including a violation of
the rules or policies of the Company, which causes a material financial or other
loss, damage or injury to the property, reputation or employees of the Company;
provided, however, that, unless such an act or a failure to act was done by
Executive in bad faith or without a reasonable belief that Executive's act or
failure to act, as the case may be, was in the best interest of the Company or
was required by applicable law, such act or failure to act shall not constitute
Cause if, within 20 days after the Board or the Chief Executive Officer of the
Company gives Executive written notice of such act or failure to act that
specifically refers to this Section, Executive cures such act or failure to act
to the fullest extent that it is curable.

 

“Cause” shall not mean (x) bad judgment or negligence other than habitual
neglect of significant duties or (y) any act or omission in respect of which the
Board could have properly determined that Executive met the applicable standard
of conduct for the indemnification or reimbursement under the by-laws of the
Company or applicable law, in each case as in effect at the time of such act or
omission. In addition, a termination of Executive's employment shall not be
deemed to be for Cause unless each of the following conditions is satisfied:

 

(v) The Company provides Executive a written notice (a “Notice of Intent to
Terminate”) not less than 30 days prior to the Date of Termination setting forth
the Company's intention to consider terminating Executive’s employment. Such
Notice shall include a statement of the intended Date of Termination and a
detailed description of the specific facts that the Company believes to
constitute Cause.

 

(w) No act or omission of Executive shall constitute Cause if such act or
omission occurred more than 12 months before the earliest date on which any
member of the Board who is not a party to the act or omission

 

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knew or in the reasonable exercise of his or her duties as a director should
have known of such act or omission.

 

(x) Executive is offered an opportunity to respond to such Notice of Intent to
Terminate by appearing in person, together with Executive's legal counsel,
before the Board on a date specified in the Notice of Intent to Terminate, which
date shall be at least 25 days after Executive’s receipt of the Notice of Intent
to Terminate and, in any event, at least five days prior to the Date of
Termination proposed in such Notice.

 

(y) By a vote of the Board that includes the affirmative vote of at least 75% of
the Non-Employee Directors, the Board determines that the actions of Executive
specified in the Notice of Intent to Terminate constitute Cause and that
Executive's employment should accordingly be terminated for Cause.

 

(z) The Company provides Executive a copy of the Board's written determination
setting forth in detail (I) the specific basis for such termination for Cause
and (II) if the Date of Termination is other than the date of Executive’s
receipt of such determination, the Date of Termination (which date shall be not
more than 15 days after the giving of such notice).

 

By determination of the Board, the Company may suspend Executive from his duties
for a period of up to 30 days with full pay and benefits thereunder during the
period of time in which the Board is determining whether to terminate Executive
for Cause. Any purported termination for Cause by the Company that does not
satisfy each substantive and procedural requirement of this Section 3(b) shall
be treated for all purposes under this Agreement as a termination by the Company
without Cause.

 

(c) Good Reason. Executive may terminate his employment at any time during the
Employment Period for Good Reason. “Good Reason” means any one or more of the
following:

 

(i) the assignment to Executive of any duties inconsistent in any material
respect with Executive's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as contemplated
by Section 2(a), or any other action by the Company which results in a material
adverse change in such position, authority, duties or responsibilities,
excluding an isolated, insubstantial and inadvertent action not taken in bad
faith and which is remedied by the Company promptly after receipt of notice
thereof given by Executive (it being understood that, without limiting the
generality of the foregoing, if a substantial portion of Executive's duties
prior to the Change in Control related to the Company's status as a public
company and such activities no longer constitute a substantial portion of
Executive's duties during the Employment Period, then Executive shall be deemed
to have "Good Reason");

 

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(ii) any reduction by the Company in the base salary, annual bonus opportunity
or long-term incentive opportunity provided to the Executive under Section 2(b),
or any material reduction by the Company in the aggregate benefits (other than
base salary, annual bonus opportunity or long-term incentive opportunity)
provided to the Executive under such section;

 

(iii) any requirement that Executive be based at any office or location other
than the location specified in Section 2(a)(i)(B);

 

(iv) any purported termination by the Company of Executive's employment
otherwise than as expressly permitted by this Agreement (it being understood
that any such purported termination shall not be effective for any other purpose
of this Agreement); or

 

(v) any failure by the Company to comply with Section 10(c).

 

Any good faith determination of Good Reason made by Executive shall be
conclusive.

 

(d) Notice of Termination. Any termination of Executive’s employment by the
Company or by Executive shall be communicated by Notice of Termination to the
other party hereto. “Notice of Termination” means a written notice which
(i) indicates the specific termination provision in this Agreement relied upon,
(ii) sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated and (iii) if the Date of Termination is other than the date of receipt
of such notice, specifies the Date of Termination (which date shall be not more
than 15 days after the giving of such notice). The failure by Executive to set
forth in the Notice of Termination any fact or circumstance which contributes to
a showing of Good Reason shall not waive any right of Executive thereunder or
preclude Executive from asserting such fact or circumstance in enforcing
Executive's rights thereunder.

 

(e) Transitional Assistance. If the Company shall so request, Executive shall
provide reasonable assistance to the Company to help ensure an orderly
transition of Executive's duties and responsibilities to such individual(s) as
the Company may designate, provided that the period during which Executive shall
provide such assistance shall not exceed ninety (90) days and that during such
period Executive's employment with the Company shall continue and the Company
shall compensate Executive as described in Section 2(b) above. Any such
transitional assistance and continuation of employment shall not waive, release
or otherwise affect any of the Executive's rights or the Company's obligations
hereunder, including without limitation those set forth in Section 4 below.

 

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4. Obligations of the Company upon Termination.

 

(a) Good Reason; Other Than for Cause or Disability. If, during the Employment
Period, Executive's employment shall be terminated by the Company other than for
Cause, death or Disability, or by Executive for Good Reason, then the Company
shall have all of the following obligations:

 

(i) The Company shall pay to Executive the following amounts in a lump sum in
cash within 10 days after Executive's Date of Termination:

 

(A) an amount equal to the sum of Executive's Accrued Base Salary, Accrued
Annual Bonus and accrued but unpaid vacation pay (collectively, the “Accrued
Obligations”),

 

(B) the Prorated Annual Bonus,

 

(C) the product of three (3.0) (such number, the “Severance Multiple”) times the
sum of Executive's (I) Annual Base Salary, (II) Target Bonus and (III) Average
Profit Sharing Plan Contribution; and

 

(D) an amount equal to the value of the unvested portion of Executive's accounts
under the Profit Sharing Plans as of the Date of Termination.

 

(ii)          (A) During the period commencing on the Date of Termination and
continuing thereafter for a number of years equal to the Severance Multiple, or
such longer period as any plan or Policy in which Executive is a participant as
of the Date of Termination (such eligibility to be determined based on the terms
of such plan or Policy as in effect on the Effective Date or, if more favorable
to Executive, the terms of such plan or Policy as in effect on the Date of
Termination), the Company shall continue to provide medical (including
post-retirement medical benefits to the extent that Executive is or becomes
eligible for such benefits as of the Date of Termination after giving effect to
paragraph (C) of this Section 4(a)(ii)), prescription, dental and similar health
care benefits (or, if such benefits are not available, the after-tax economic
value thereof determined pursuant to paragraph (D) of this Section 4(a)(ii)) to
Executive and his family.

 

(B) The terms of such benefits shall be at least as favorable to Executive as
the terms of the most favorable plans or Policies of the Company applicable to
peer executives at Executive's Date of Termination, but in no event less
favorable to Executive than the most favorable plans or Policies of the Company
applicable to peer

 

13

executives during the 90-day period immediately preceding the Effective Date.

 

(C) Such benefits shall be provided at no cost to Executive and his family,
except that Executive shall be responsible for the payment of premiums,
co-payments, deductibles and similar charges based on the terms of the most
favorable plans or Policies of the Company applicable to peer executives at
Executive's Date of Termination, but in no event less favorable to Executive
than the most favorable plans or Policies of the Company applicable to peer
executives during the 90-day period immediately preceding the Effective Date.

 

(D) For purposes of determining whether, and on what terms and conditions,
Executive is eligible to receive the post-retirement medical benefits specified
in paragraph (A) above, Executive shall on the Date of Termination be credited
with three (3.0) additional years for purposes of attained age and years of
service.

 

(E) The after-tax economic value of any benefit to be provided pursuant to
paragraph (A) above shall be deemed to be the present value of the premiums
expected to be paid for all such benefits that are to be provided on an insured
basis. The after-tax economic value of all other benefits shall be deemed to be
the present value of the expected net cost to the Company of providing such
benefits.

 

(iii) The Company shall cause Executive to receive, at the Company's expense,
standard outplacement services from a nationally-recognized firm selected by
Executive; provided that the cost of such services to the Company shall not
exceed 15% of Executive's Annual Base Salary in effect on the Date of
Termination.

 

(iv) If on the Date of Termination the Executive is a “specified employee” of
the Company (as defined in Treasury Regulation Section 1.409A-1(i)), and if
amounts payable under this Section 4(a) (other than Accrued Obligations) are not
on account of an “involuntary separation from service” (as defined in Treasury
Regulation Section 1.409A – 1(n)), amounts that would otherwise have been paid
during the 6-month period immediately following the Date of Termination shall be
paid on the first regular payroll date immediately following the 6-month
anniversary of the Date of Termination.

 

 

14

(b) Cause; Other than for Good Reason. If, during the Employment Period,
Executive's employment is terminated by the Company for Cause or by Executive
other than for Good Reason, the Company shall pay to Executive in a lump sum in
cash within no more than 10 days after the Date of Termination, any Accrued
Obligations.

 

(c) Death or Disability. If, during the Employment Period, Executive's
employment is terminated by reason of Executive's death or Disability, the
Company shall pay to Executive in cash a lump sum amount equal to all Accrued
Obligations within no more than 10 days after the Date of Termination.

 

5. Non-exclusivity of Rights. If Executive receives payments pursuant to Section
4(a), Executive hereby waives the right to receive severance payments under any
other plan, policy or agreement of the Company. Except as provided in the
previous sentence, nothing in this Agreement shall prevent or limit Executive's
continuing or future participation in any benefit, bonus, incentive or other
plans or Policies provided by the Company or any of its Subsidiaries and for
which Executive may qualify, nor shall anything herein limit or otherwise affect
such rights as Executive may have under any other agreements with the Company or
any of its Subsidiaries.

 

6. Full Settlement. The Company's obligation to make the payments provided for
in this Agreement and otherwise to perform its obligations hereunder shall not
be affected by any circumstances, including set-off, counterclaim, recoupment,
defense or other claim, right or action that the Company may have against
Executive or others.

 

7. No Duty to Mitigate. Executive shall not be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to Executive under any of the provisions of this Agreement, nor shall the amount
of any payment hereunder be reduced by any compensation earned by Executive as
result of employment by another employer or by any retirement benefits which may
be paid or payable to Executive; provided, however, that any continued welfare
benefits provided for pursuant to Section 4(a)(ii) shall not duplicate any
benefits that are provided to Executive and his family by such other employer
and shall be secondary to any coverage provided by such other employer.

 

8. Enforcement.

 

(a) If Executive incurs legal, accounting, expert witness or other fees and
expenses in an effort to establish entitlement to compensation and benefits
under this Agreement, the Company shall, regardless of the outcome of such
effort, pay or reimburse Executive for such fees and expenses, together with an
additional amount such that, after providing for the Taxes payable by Executive
in respect of such additional amount, there remains a balance sufficient to pay
the Taxes payable by Executive in respect of such payment or reimbursement of
fees and expenses by

 

15

the Company. The Company shall reimburse Executive for such fees and expenses on
a monthly basis within 10 days after its receipt of his request for
reimbursement accompanied by reasonable evidence that the fees and expenses were
incurred.

 

(b) If Executive does not prevail (after exhaustion of all available judicial
remedies), and the Company establishes before a court of competent jurisdiction
that Executive had no reasonable basis for bringing an action hereunder and
acted in bad faith in doing so, no further reimbursement for legal fees and
expenses shall be due to Executive and Executive shall refund any amounts
previously reimbursed hereunder with respect to such action.

 

(c) If the Company fails to pay any amount provided under this Agreement when
due, the Company shall pay interest on such amount at a rate equal to 200 basis
points over the prime commercial lending rate published from time to time in The
Wall Street Journal; provided, however, that if the interest rate determined in
accordance with this Section shall in no event exceed the highest
legally-permissible interest rate.

 

9. Certain Additional Payments by the Company.

 

(a) Gross-Up. If it is determined (by the reasonable computation of the
Company's designated tax counsel, which determination shall be certified to by
such counsel and set forth in a written certificate (“Certificate”) delivered to
Executive) that any monetary or other benefit received or deemed received by
Executive from the Company or any Subsidiary or affiliate pursuant to this
Agreement or otherwise, whether or not in connection with a Change in Control
(such monetary or other benefits collectively, the “Potential Parachute
Payments”), is or will become subject to any excise tax under Section 4999 of
the Code or any similar tax under any United States federal, state, local or
other law (such excise tax and all such similar taxes collectively, “Excise
Taxes”), then the Company shall, subject to Section 9(h), within five business
days after such determination, pay Executive an amount (the “Gross-Up Payment”)
equal to the product of:

 

(i) the amount of such Excise Taxes

 

multiplied by

 

(ii) the Gross-Up Multiple.

 

The Gross-Up Payment is intended to compensate Executive for the Excise Taxes
and any other Taxes payable by Executive with respect to the Gross-Up Payment.

 

(b) Timing. Executive or the Company may at any time request the preparation and
delivery to Executive of a Certificate. The Company shall, in addition to
complying with Section 9(c), cause all determinations and certifications under
this

 

16

Article to be made as soon as reasonably possible and in adequate time to permit
Executive to prepare and file his individual tax returns on a timely basis.

 

(c) Determination by Executive.

 

(i) If (A) the Company shall fail to deliver a Certificate to Executive within
30 days after receipt from Executive of a written request for a Certificate, (B)
the Company shall deliver a Certificate to Executive but shall fail to pay to
Executive the full amount of the Gross-Up Payment set forth therein, or (C) at
any time following his receipt of a Certificate, Executive disputes either (x)
the amount of the Gross-Up Payment set forth therein or (y) the determination
set forth therein to the effect that no Gross-Up Payment is due by reason of
Section 9(h), then Executive may elect to require the Company to pay a Gross-Up
Payment in the amount determined by Executive, in accordance with an Executive
Counsel Opinion (as defined in Section 9(f)). Executive shall make any such
demand by delivery to the Company of a written notice that specifies the
Gross-Up Payment determined by Executive and an Executive Counsel Opinion
regarding such Gross-Up Payment (such written notice and opinion collectively,
the “Executive's Determination”). Within 15 days after delivery of Executive's
Determination to the Company, the Company shall either (1) pay Executive the
Gross-Up Payment set forth in the Executive's Determination (less the portion of
such amount, if any, previously paid to Executive by the Company) or (2) deliver
to Executive a Certificate specifying the Gross-Up Payment determined by the
Company's designated tax counsel, together with a Company Counsel Opinion (as
defined in Section 9(f)), and pay Executive the Gross-Up Payment specified in
such Certificate. If for any reason the Company fails to comply with the
preceding sentence, the Gross-Up Payment specified in the Executive's
Determination shall be controlling for all purposes.

 

(ii) If Executive does not request a Certificate, and the Company does not
deliver a Certificate to Executive, the Company shall, for purposes of Section
9(h), be deemed to have determined that no Gross-Up Payment is due.

 

(d) Additional Gross-Up Amounts. If for any reason (whether pursuant to
subsequently-enacted provisions of the Code, final regulations or published
rulings of the Internal Revenue Service (“IRS”), a final judgment of a court of
competent jurisdiction or a determination of the Company's independent auditors)
it is later determined that the amount of Excise Taxes payable by Executive is
greater than the amount determined by the Company or Executive pursuant to
Section 9(a) or 9(b), as applicable, then the Company shall pay Executive an
amount (which shall also be deemed a Gross-Up Payment) equal to the product of:

 

(i) the sum of (A) such additional Excise Taxes and (B) any interest, fines,
penalties, expenses or other costs incurred by Executive as a

 

17

result of having taken a position in accordance with a determination made
pursuant to Section 9(a) or 9(b), as applicable,

 

multiplied by:

 

(ii) the Gross-Up Multiple.

 

(e) Gross-Up Multiple. The Gross-Up Multiple shall equal a fraction, the
numerator of which is one (1.0), and the denominator of which is one (1.0) minus
the sum, expressed as a decimal fraction, of the effective after-tax marginal
rates of all Taxes and any Excise Taxes applicable to the Gross-Up Payment;
provided that such sum of rates shall not exceed 0.8 and if it does exceed 0.8,
it shall be deemed to be 0.8. If different rates of tax are applicable to
various portions of a Gross-Up Payment, the weighted average (not to exceed
0.80) of such rates shall be used.

 

(f) Opinion of Counsel. “Executive Counsel Opinion” means a legal opinion of
nationally-recognized executive compensation counsel to the effect that the
amount of the Gross-Up Payment determined by Executive is the amount that courts
of competent jurisdiction, based on a final judgment not subject to further
appeal, are most likely to decide to have been calculated in accordance with
this Article and applicable law. “Company Counsel Opinion” means a legal opinion
of nationally-recognized executive compensation counsel to the effect that
(i) the amount of the Gross-Up Payment set forth in the Certificate of the
Company's designated tax counsel is the amount that courts of competent
jurisdiction, based on a final judgment not subject to further appeal, are most
likely to decide to have been calculated in accordance with this Article and
applicable law, and (ii) there is no reasonable basis for the calculation of the
Gross-Up Payment determined by Executive.

 

(g) Amount Increased or Contested. Executive shall notify the Company in writing
of (i) any claim by the IRS or other taxing authority that, if successful, would
require the payment by Executive of Excise Taxes in respect of Potential
Parachute Payments or (ii) of any intention by Executive to pay any Excise Taxes
in respect of Potential Parachute Payments notwithstanding the absence of such a
claim. Such notice shall include the nature of such claim and the date on which
such claim is due to be paid. Executive shall give such notice as soon as
practicable, but no later than 10 business days, after Executive first obtains
actual knowledge of such claim; provided, however, that any failure to give or
delay in giving such notice shall affect the Company's obligations under this
Article only if and to the extent that such failure results in actual prejudice
to the Company. Executive shall not pay such claim less than 30 days after
Executive gives such notice to the Company (or, if sooner, the date on which
payment of such claim is due). If the Company notifies Executive in writing
before the expiration of such 30-day period that the Company desires to contest
such claim, Executive shall:

 

18

(i) give the Company any information that it reasonably requests relating to
such claim,

 

(ii) take such action in connection with contesting such claim as the Company
reasonably requests in writing from time to time, including accepting legal
representation with respect to such claim by an attorney reasonably selected by
the Company,

 

(iii) cooperate with the Company in good faith to contest such claim, and

 

(iv) permit the Company to participate in any proceedings relating to such
claim;

 

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold Executive harmless, on an
after-tax basis, for any Excise Tax or income tax, including related interest
and penalties, imposed as a result of such representation and payment of costs
and expenses. Without limiting the foregoing, the Company shall control all
proceedings in connection with such contest and, at its sole option, may pursue
or forego any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct Executive to pay the tax claimed and sue for a refund
or contest the claim in any permissible manner. Executive agrees to prosecute
such contest to a determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts, as the Company
shall determine; provided, however, that if the Company directs Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to Executive, on an interest-free basis and shall indemnify Executive,
on an after-tax basis, for any Excise Tax or income tax, including related
interest or penalties, imposed with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment of
taxes for the taxable year of Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount. The
Company's control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable. Executive shall be entitled to settle
or contest, as the case may be, any other issue raised by the IRS or other
taxing authority.

 

(h) Limitation on Gross-Up Payments. Notwithstanding any other provision of this
Section 9, if it shall be determined (by the reasonable computation of the
Company's designated tax counsel, which determination shall be certified to by
such counsel and set forth in the Certificate delivered to Executive) that the

 

19

aggregate amount of the Potential Parachute Payments that, but for this Section
9(h), would be payable to Executive, does not exceed 110% of the greatest amount
of Potential Parachute Payments that could be paid to Executive without giving
rise to any liability for Excise Taxes in connection therewith (such greatest
amount, the “Floor Amount”), then:

(i) no Gross-Up Payment shall be made to Executive; and

 

(ii) the aggregate amount of Potential Parachute Payments payable to Executive
shall be reduced (but not below the Floor Amount) to the largest amount which
would both (A) not cause any Excise Taxes to be payable by Executive and (B) not
cause any Potential Parachute Payments to become nondeductible by the Company by
reason of Section 280G of the Code (or any successor provision); provided,
however, that in no event shall any such reduction (x) in any way affect any
Potential Parachute Payments that are provided to Executive in any form other
than cash or (y) reduce the aggregate amount of Potential Parachute Payment that
are payable in cash to an amount below the aggregate amount of Taxes payable by
Executive in respect of all Potential Parachute Payments received by him
(whether in cash or otherwise).

 

For purposes of the preceding sentence, Executive shall be deemed to be subject
to the highest effective after-tax marginal rate of federal and Illinois Taxes.

 

(i) Refunds. If, after the receipt by Executive of any payment or advance of
Excise Taxes by the Company pursuant to this Article, Executive becomes entitled
to receive any refund with respect to such Excise Taxes, Executive shall
(subject to the Company's complying with any applicable requirements of Section
9(g)) promptly pay the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after the
receipt by Executive of an amount advanced by the Company pursuant to Section
9(g), a determination is made that Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify Executive in writing
of its intent to contest such determination before the expiration of 30 days
after such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid. Any contest of a
denial of refund shall be controlled by Section 9(g).

 

10. Successors.

 

(a) This Agreement is personal to Executive and without the prior written
consent of the Company shall not be assignable by Executive otherwise than by
will or the laws of descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by Executive's legal representatives.

 

20

(b) The Company may not assign its rights and obligations under this Agreement
without the prior written consent of Executive except to a successor which has
satisfied the provisions of Section 10(c). This Agreement shall inure to the
benefit of the Company and such permitted assigns.

 

(c) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. All references
to the Company shall also refer to any such successor, and the Company and such
successor shall be jointly and severally liable for all obligations of the
Company under this Agreement.

 

11. Miscellaneous.

 

(a) Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois, without reference to such
State's principles of conflict of laws.

 

(b) Notices. All notices hereunder shall be in writing and shall be given by
hand delivery, nationally-recognized courier service that provides overnight
delivery, or by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:

 

If to Executive, at his most recent home address on file with the Company.

 

 

 

If to the Company, to:

W.W. Grainger, Inc.

 

 

100 Grainger Parkway

 

 

Lake Forest, Illinois 60045

 

 

Attention: General Counsel

 

 

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice shall be effective when actually received
by the addressee.

 

(c) Severability. If any part of this Agreement is declared by any court or
governmental authority to be unlawful or invalid, such unlawfulness or
invalidity shall not serve to invalidate any part of this Agreement not declared
to be unlawful or invalid. Any paragraph or part of a paragraph so declared to
be unlawful or invalid shall, if possible, be construed in a manner which will
give effect to the terms of such paragraph or part of a paragraph to the fullest
extent possible while remaining lawful and valid.

 

21

(d) Tax Withholding. The Company may withhold from any amounts payable under
this Agreement such federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.

 

(e) Amendments; Waiver. This Agreement may not be amended or modified otherwise
than by a written agreement executed by the Company and Executive. A waiver of
any term, covenant or condition contained in this Agreement shall not result in
a waiver of any other term, covenant or condition, and any waiver of any default
shall not result in a waiver of any later default.

 

(f) Entire Agreement. This Agreement contains the entire understanding of the
Company and Executive with respect to the subject matter hereof, and shall
supersede all prior agreements, promises and representations of the parties
regarding employment or severance, whether in writing or otherwise. Without
limiting the generality of the foregoing, this Agreement expressly terminates,
with immediate effect, any Change in Control Employment Agreement which may
previously have been entered into between the Company and Executive.

 

(g) No Right to Employment. Except as may be provided under any other agreement
between Executive and the Company, the employment of Executive by the Company is
at will, and, prior to the Effective Date, may be terminated by either Executive
or the Company at any time. Upon a termination of Executive's employment prior
to the Effective Date, there shall be no further rights under this Agreement.

 

(h) Sections. Except where otherwise indicated by the context, any reference to
a “Section” shall be to a section of this Agreement.

 

(i) Survival of Executive's Rights. All of Executive's rights hereunder shall
survive the termination of Executive's employment.

 

(j) Number and Gender. Wherever appropriate, the singular shall include the
plural, the plural shall include the singular, and the masculine shall include
the feminine.

 

(k) Counterparts. This Agreement may be executed in multiple counterparts, each
of which shall be deemed an original, but all of which together will constitute
one and the same instrument.

 

(l) Section 409A Compliance. To the extent applicable, it is intended that this
Agreement shall comply with the provisions of Section 409A of the Code, and this
Agreement shall be construed and applied in a manner consistent with this
intent. In the event that any payment or benefit under this Agreement is
determined by the Company to be in the nature of a deferral of compensation, the
Company and the Executive hereby agree to take such actions, not otherwise
provided herein, as may be mutually agreed between the parties to ensure that
such payments comply

 

22

with the applicable provisions of Section 409A of the Code and the Treasury
Regulations thereunder. To the extent that any payment or benefit under this
Agreement is modified by reason of this Section 11(l), it shall be modified in a
manner that complies with Section 409A of the Code and preserves to the maximum
possible extent the economic costs or value thereof (as applies) to the
respective parties (determined on a pre-tax basis).

 

 

IN WITNESS WHEREOF, Executive and the Company have executed this Agreement as of
the date first above written.

 

 

 

W.W. GRAINGER, INC.

 

 

 

 

By:

 

 

 

Richard L. Keyser

Chairman and Chief Executive Officer

 

 

 

 

EXECUTIVE:

 

 

 

 

 

 

 

 

INSERT NAME

 

 

23