SEPARATION AGREEMENT AND GENERAL RELEASE

2.  

Separation Payments / Profit Sharing Trust Retirement.   Following the Resignation Date, Grainger shall pay the Officer an amount representing Eighteen (18) months of the Officer’s current base pay.  Such total amount shall be pro-rated and thereafter paid over a Twenty-Four (24) month period (“Separation Payments”), less required deductions consistent with the following schedule: Grainger shall pay each pro-rata payment as part of its normal monthly payroll cycle beginning June 1, 2009 and running through May 31, 2011.  (the “Termination Date / Profit Sharing Trust Retirement Date”).  No Separation Payments shall be made to the Officer until at least the eight (8 ^th ) day following the day on which this Agreement is fully executed, and provided that the Agreement is not revoked by the Officer pursuant to Section 22 prior to that date.

3.  

Benefits.

a.  

Health, Dental, Life and Vision.   To the extent that the Officer currently participates, Grainger will continue to provide, through deductions from the Officer’s Separation Payments at the same rate paid by employees, group health, dental and vision benefits and life insurance as currently maintained for the Officer, or as subsequently modified by Grainger, through the Termination / Retirement Date.  Dental benefits and group life insurance will terminate earlier, however, on the date that the Officer becomes eligible for benefit coverage through a subsequent employer.  After the Officer’s benefit coverage ceases on May 31, 2011, the Officer may elect to continue group health and dental benefits under COBRA or retain group health coverage under the terms of Grainger’s Retiree Health Program.

b.  

Profit Sharing.   For the 2009, 2010 and 2011 plan years, the Officer will be eligible to share in contributions under the W.W. Grainger, Inc. Employees Profit Sharing Plan (“PST”) and the W.W. Grainger, Inc. Supplemental Profit Sharing Plan (“SPSP”).  The Separation Payments received in such plan years, including in the case of the 2009 plan year the MIP payment described in Section 3(e) below, will be included for purposes of determining the amount of the Officer’s contributions under the PST (to the extent permitted by applicable law) and SPSP.  To the extent that the Officer is not permitted to share in PST contributions under the terms of the PST, such amounts shall be contributed to the SPSP in addition to funds otherwise allocated to the Officer under the SPSP.  After the Termination / Retirement Date, the Officer will be eligible for distribution of his vested funds in accordance with the terms of PST and SPSP applicable to Plan participants.

c.  

Unemployment Benefits.    The Officer agrees that he will not apply for unemployment benefits while he continues to receive Separation Payments through the Officer’s Termination / Retirement Date or at any time in the future that would otherwise be chargeable to Grainger’s unemployment insurance account.  Any amounts of unemployment insurance benefits received by the Officer shall offset the Officer’s Separation Payments.

d.  

Vacation.   The Officer understands that he will not be eligible for or accrue any additional vacation eligibility after the Resignation Date.  Payment for any 2009 vacation earned but unused as of the Resignation Date as well as vacation that would otherwise have been taken in 2009 will be made in the form of a lump sum, less required deductions.

e.  

Management Incentive Program (MIP).   As an additional Separation Payment to those provided for in Section 2 hereof, the Officer will participate in the 2009 MIP pursuant to the provisions of the Plan then in effect, and on a 5/12ths pro-rata basis.  For such period, the Officer’s payment shall be based upon the Officer’s Individual Target, current salary and Company performance.  To the extent provided, this payment will be made to Officer on or before March 15, 2010, when executive MIP bonuses are paid and shall be paid in an amount that reflects the lesser of actual or target.  The Officer will not be eligible for any MIP or other cash incentive award other than the above referenced amount or for any period following the Resignation Date.

f.  

Executive Death Benefit Plan.   The Officer will continue as a participant under the W.W. Grainger, Inc. Executive Death Benefit Plan (the “Death Benefit Plan”) through May 31, 2011, and will thereafter be considered a general retiree of Grainger for purposes of post employment benefits under the Death Benefit Plan.  The benefit payment by Grainger to the Officer’s designated beneficiary in the event of the Officer’s death prior to the Termination Date shall be determined and paid in accordance with the provisions of the Death Benefit Plan as in effect on the date of his death, except that the Officer’s monthly salary and target MIP percentage as of the Resignation Date shall be used in any necessary calculations.  Officer has elected accelerated payment at a discounted rate at time of retirement subject to 6 month time delay based upon Section 409-A requirements.

g.  

Tax Preparation.   The Officer will be reimbursed up to a maximum of $10,000.00 for professional tax preparation assistance and related services associated with the preparation of his 2009 and 2010 tax filings.  Reimbursement will be made to Officer no later than 60 days after the receipt of appropriate invoices and paid receipts.  The Officer shall not receive any tax preparation allowance beyond those referenced above.

h.  

Career Continuation – Outplacement Assistance.   Officer shall be eligible to receive professional Career Continuation – Outplacement services.  Officer may interview and then select a service provider from those designated firms made available to him for this purpose by Grainger.    

i.  

Cessation of Benefits.   All other benefits and the Officer’s eligibility to participate in any other Grainger employee programs will cease as of the Resignation Date, except as provided or referenced in this Agreement.  The amounts and benefits payable to the Officer under this Agreement shall be in lieu of any amounts or benefits otherwise provided under any severance plan or policy of Grainger.  Notwithstanding, effective May 31, 2011, Officer shall be considered a Profit Sharing Trust Retiree of the Company and entitled to all Company benefits associated with that status.

4.  

Stock Options, Restricted Stock Units and Performance Shares.   The Officer will be eligible to exercise all vested stock options pursuant to the terms of the W.W. Grainger, Inc. 1990, 2001 and 2005 Stock Incentive Plans, and accompanying Agreements.  Options will continue to vest through the Termination Date, with any remaining unvested options forfeiting as of the same Termination Date.  Thereafter, all options must be exercised on or before the expiration date of each option or within six (6) years of the Officer’s Termination / PST Retirement Date, whichever should occur first.  The Officer further understands and agrees that the non-competition provisions of restricted stock unit and/or stock option agreements to which the Officer is a party, which provisions are incorporated herein by reference, including without limitation the Unfair Competition Agreements dated April 30, 2008, and the W.W. Grainger, Inc. Restricted Stock Unit Agreement dated April 30, 2008 (collectively, the “non-competition provisions”), will remain in full force and effect, and are in addition to and not superseded by any other obligation set forth in this Agreement.  The Officer acknowledges and agrees that, for purposes of such agreements, the Officer’s employment with Grainger shall be considered terminated on the Termination Date hereunder, and the term “Date of Termination” as used in the Unfair Competition Agreement dated April 30, 2008, shall mean the Termination Date hereunder.  The Officer understands that he will not be eligible for any further grants of stock options after the Resignation Date.

5.  

General Release and Waiver of Claims.   In exchange and in consideration for the promises, obligations, and agreements undertaken by Grainger herein, which the Officer agrees and acknowledges are adequate and sufficient consideration, the Officer, on behalf of himself, his spouse, agents, representatives, attorneys, assigns, heirs, executors, administrators, and other personal representatives, releases and forever discharges Grainger, the Affiliates, and all of their officers, employees, directors, agents, attorneys, personal representatives, predecessors, successors, and assigns (hereinafter collectively referred to as the “Releasees”) from any and all claims of any kind which he has, or might have, as of the date of this Agreement; or which are based on any facts which exist or existed on or before the date of this Agreement.  The claims the Officer is releasing include, but are not limited to, all claims relating in any way to his employment at Grainger or his separation from that employment; and all claims under Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, 42 U.S.C. § 1981, the Equal Pay Act, the Employee Retirement Income Security Act, the Americans with Disabilities Act, the Federal Rehabilitation Act, the Age Discrimination in Employment Act (“ADEA”), the Older Worker Benefit Protection Act, the Illinois Human Rights Act, the Wisconsin Fair Employment Law, the Illinois Wage Payment and Collection Act, the Wisconsin Wage Payment and Collection Act, or any other federal, state or local law relating to employment, discrimination, retaliation, or wages, or under the common law of any state (including, without limitation, claims relating to contracts, wrongful discharge, retaliatory discharge, defamation, intentional or negligent infliction of emotional distress, and wrongful termination of benefits).  The Officer also releases and forever discharges Grainger and all other Releasees from any and all other demands, claims, causes of action, obligations, agreements, promises, representations, damages, suits, and liabilities whatsoever, both known and unknown, in law or in equity, which he has or might have as of the date of this Agreement.  The Officer understands that this Section 5 of this Agreement contains a complete and general release of any claim that he now has against Grainger and all other Releasees, or could ever have against Grainger and all other Releasees, based on any fact, event, or omission that has occurred up to the time at which he signs the Agreement.