Exhibit 10b
(xxvii)
CHANGE IN CONTROL
EMPLOYMENT AGREEMENT
(Executive)
AGREEMENT by
and between W.W. Grainger, Inc., an Illinois corporation (the
“ Company ”), and INSERT NAME (“
Executive ”), dated as _____________________(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:
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(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
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(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:
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(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;
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(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
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(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.
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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
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
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).
“
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.
“
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 .
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(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.
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(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.
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(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.
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(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.
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(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 contribu
