W.W. GRAINGER,
INC.
PERFORMANCE SHARE AWARD
AGREEMENT
This Performance Share Award Agreement (this
“Agreement”) is entered into as of [date] between W.W.
Grainger, Inc., an Illinois corporation (the “Company”)
and the undersigned Company executive (the
“Executive”).
Pursuant to the W.W. Grainger, Inc. 2005
Incentive Plan (the “Plan”), the Company desires to
award to the Executive as hereinafter provided certain performance
shares (the “Performance Shares”), entitling the
Executive to receive shares of the Company’s common stock
(“Common Stock”) based upon the Company’s
attainment of certain long-term performance goals. This award of
Performance Shares is in consideration of the Executive’s
agreement to enter into an Unfair Competition Agreement (the
“Unfair Competition Agreement”) between the Company and
the Executive concurrently with this Agreement. In turn, the
Executive desires to enter into the Unfair Competition Agreement
and accept the award of Performance Shares, 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 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:
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1.
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General. This award is governed by and subject to the
terms and conditions of this Agreement, the
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Plan and the Unfair Competition
Agreement (the terms of which are hereby incorporated herein by
reference). In general, the Executive will be entitled to receive a
number of Performance Shares determined by the Company’s
performance against its sales growth target (as described in
Section 2 below), with the vesting of those Performance Shares
being subject to the Company’s achievement of its return on
invested capital target (as described in Section 3
below).
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2.
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Grant of Performance Shares; Sales Growth
Target. The Company
hereby awards to the Executive a total of _______ Performance
Shares (the “Target Number”), such number being subject
to possible adjustment as follows. The actual number of Performance
Shares which the Executive will receive will depend on the
relationship between the Company’s total net sales during its
____ [current] fiscal year as compared to its total net sales
during its ____ [immediately preceding] fiscal year. Such number
will be calculated in accordance with the following
table:
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If, compared to ____ sales,
the
Company’s ____
sales:
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Then the number of
Performance Shares will
be:
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Increase by less than __ percent
(__%)
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Zero (0)
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Increase by __ percent
(__%)
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__ percent (__%) of the Target
Number
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Increase by __ percent
(__%)
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__ percent (__%) of the Target Number
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Increase by __ percent (__%) or
more
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__ percent (__%) of the Target Number
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Amounts between the foregoing
numbers will be interpolated as necessary. For example, if ____ net
sales increased by __ percent (__%) relative to ____ net sales,
then the Executive would receive __ percent (__%) of the Target
Number of Performance Shares.
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3.
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Vesting; ROIC Target. The vesting of the Performance Shares will
depend upon the Company’s average return on invested capital
(“ROIC”) during the period of three fiscal years
beginning with the ____ fiscal year, i.e., the Company’s
____, ____ and ____ fiscal years (the “Measuring
Period”). For this purpose, ROIC means the Company’s
operating earnings divided by its net working assets. The average
ROIC during the Measuring Period will be calculated by adding
together the average ROIC for each of the three fiscal years
comprising the Measuring Period and dividing the resulting sum by
three (3). Vesting will be determined in accordance with the
following table:
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If the Company’s average
ROIC
during the Measuring Period
is:
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Then the following percentage
of
Performance Shares will
vest:
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Less than __ percent
(__%)
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Zero (0)
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__ percent (__%) or more
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One hundred percent
(100%)
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Amounts between the foregoing
numbers will not be interpolated. In other words, the
Performance Shares will either vest at one hundred percent (100%)
or they will not vest at all. If the Performance Shares vest, then
in settlement of the Performance Shares, the Executive will receive
a number of shares of Common Stock equal to the number of
Performance Shares determined under Section 2 above, subject,
however, to the withholding provisions below. If the Performance
Shares do not vest, then th
