W.W. GRAINGER, INC.

STOCK OPTION AWARD AGREEMENT

 

This Stock Option Award Agreement (the “Agreement”) is entered into between W.W.
Grainger, Inc., an Illinois corporation (the “Company”) and the employee named
below (the “Employee”).

 

Pursuant to the W.W. Grainger, Inc. 2005 Incentive Plan (the “Plan”), the
Company desires to afford the Employee an opportunity to purchase shares of its
common stock (the “Common Stock”) as hereinafter provided, in consideration of
the Employee’s agreement to enter into that certain Unfair Competition Agreement
between the Company and the Employee of even date herewith (the “Unfair
Competition Agreement”), and the Employee desires to enter into the Unfair
Competition Agreement and accept the Option, on the terms and conditions set
forth in this Agreement, the Plan and the Unfair Competition Agreement.
Capitalized terms used but not defined in this Agreement shall have the meanings
specified in the Plan.

 

NOW, THEREFORE, in consideration of the mutual promises set forth below and in
the Unfair Competition Agreement, the parties hereto agree as follows:

 

1.

Grant of Option and Purchase Price. Subject to the terms and conditions of this
Agreement, the Plan and the Unfair Competition Agreement (the terms of which are
hereby incorporated herein by reference), the Company grants to the Employee the
right and option (“Option”) to purchase all or part of the number of shares of
the Common Stock of the Company and at the Option price per share specified in
the Certificate of Stock Option Award issued pursuant to the Plan and as it may
be hereafter amended.

 

2.

Certificate of Stock Option Award. The Certificate of Stock Option Award (the
“Certificate”), referred to in the preceding section shall be dated _________
(the “Award Date”) and shall specify the Option price, the expiration date of
the Option as set forth in Section 4 below, and the number of shares to which
the Option applies, and may include other terms and conditions not inconsistent
with the Plan. The Certificate is incorporated herein by reference and the terms
of this Agreement, the Plan and the Unfair Competition Agreement are
incorporated by reference into each Certificate.

 

3.

Receipt by the Employee of the Plan. The Employee acknowledges receipt of the
Plan booklet which contains the entire Plan. The Employee represents and
warrants that he has read the Plan and that he agrees that all Options awarded
under it shall be subject to all of the terms and conditions of the Plan
including, but not limited to, the right to amend the Plan and to provisions of
the Plan which provide (i) that the Committee shall have the sole and complete
authority to determine the terms and provisions of the Stock Option Award
Agreements and to make all determinations necessary or advisable for the
administration of the Plan, which determinations shall be conclusive and (ii)
the terms and conditions governing the exercise of all Options.

 

4.

Term of Option. An Option awarded under the Plan shall expire ten (10) years
from the Award Date, subject to the terms and conditions set forth in the Plan,
this Agreement and the Unfair Competition Agreement.

 

5.

Tax Deposit. Upon exercising all or any part of an Option, the Employee shall
deposit with the Company an amount of cash equal to the amount determined by the
Company to be withheld upon

 

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the exercise of the Option for any withholding taxes, FICA contributions, or the
like under any federal or state statute, rule, or regulation. The Company may
withhold, and the Committee may in its discretion permit the Employee to elect
(subject to such conditions as the Committee shall require) to have the Company
withhold, a number of shares of Common Stock having a fair market value on the
date that the amount of tax to be withheld is determined equal to the required
statutory minimum withholding. The Company shall not issue and deliver any of
its Common Stock upon the exercise of any Option until and unless the Employee
has made the deposit required herein or proper provision for withholding has
been made.

 

6.

Agreement to Serve. Except in the case of an event causing acceleration of
exercisability of the Option in accordance with the Plan, the Employee agrees to
remain in the employ of the Company or its subsidiaries for a period of at least
one (1) year from each award date, subject to the right of the Company to
terminate such employment.

 

7.

Other Terms and Conditions Applicable to Exercise of the Option.

 

 

a.

Exercise Date. Unless otherwise provided in the Plan, an Option awarded under
the Plan shall not be exercisable in whole or in part until three (3) years from
the Award Date, provided, however, that the Option shall become immediately
exercisable in the event of death, disability, or retirement of the Employee in
accordance with the provisions of the applicable retirement plan. For purposes
of this Agreement, the term “disability” means the Employee’s inability to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to result in
death or that has lasted for a continuous period of not less than twelve (12)
months.

 

 

b.

Notice. The Employee shall exercise an Option by giving appropriate notice of
the Employee’s desire to exercise the Option. The notice shall specify the
number of shares to be acquired.

 

 

c.

Payment of Purchase Price. The Employee shall at the time of exercise of an
Option (except in the case of a cashless exercise) tender to the Company the
full purchase price. At the discretion of the Committee, and subject to such
rules and regulations as it may adopt, the purchase price may be paid (i) in
full in cash, (ii) in Common Stock already owned by the Employee for at least
six months and having a fair market value on the date of exercise equal to the
full purchase price, (iii) through a combination of cash and Common stock, or
(iv) through a cashless exercise through a broker-dealer approved for this
purpose by the Company.

 

 

d.

Minimum Exercise. An Option of 200 shares or less must be exercised in its
entirety. An Option for more than 200 shares may be exercised in part for no
fewer than 200 shares, or 100 share multiples in excess thereof, unless the
remaining shares subject to the Option are less than 200 shares, in which case
if any are exercised, the entire balance must be exercised.

 

 

e.

Rights of Shareholder. The Employee shall have none of the rights of a
shareholder with respect to the shares subject to an Option until such shares
shall be issued on the exercise of an Option. The Company agrees to advise the
transfer agent of the exercise as soon as practicable after receipt of the
notice of exercise, but the Company assumes no liability with respect to any
delay or other action or inaction on the part of the transfer agent.

 

8.

Severability. The provisions of the Agreement shall be severable, and in the
event that any provision of it is found to be unenforceable, all other
provisions shall be binding and enforceable on the parties as drafted. In the
event that any provision is found to be unenforceable, the parties

 

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consent to the Court’s modification of that provision in order to make the
provision enforceable, subject to the limitations of the Court’s powers under
the law.

 

9.

Venue. The Employee acknowledges that, in the event that a determination of the
enforceability of this Agreement is sought, or any other judicial proceedings
are brought pertaining to this Agreement, the Company has the choice of venue
and the preferred venue for such proceedings is Lake County, Illinois.

 

IN WITNESS WHEREOF, the Company has caused this Stock Option Award Agreement to
be executed by a duly authorized Officer of the Company and the Employee hereby
agrees to all the terms and conditions set forth above.

 

 

 

W.W. GRAINGER, INC.

 

By:

 

 

Richard L. Keyser

Chairman and Chief Executive Officer

 

 

 

 

Employee (Signature)

 

 

 

Employee (Print Name)

 

 

 

Date

 

 

 

 

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