<PAGE>
SCHEDULE 14A - INFORMATION REQUIRED IN PROXY STATEMENT
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a)
of the Securities and Exchange Act of
1934 (Amendment No. _____)
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12
Name of Registrant as Specified in its Charter: W.W. GRAINGER, INC.
---------------------
Name of Person(s) Filing Proxy Statement: MERRILL CORPORATION
---------------------
Payment of Filing Fee (Check the Appropriate Box):
/X/ $125.00 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
or 14a-6(j)(2)
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies: _____
_____________________________________________________________________
(2) Aggregate number of securities to which transaction applies: ________
_____________________________________________________________________
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11: __________________________________________
_____________________________________________________________________
(4) Proposed maximum aggregate value of transaction: ____________________
_____________________________________________________________________
Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid: _____________________________________________
(2) Form, Schedule or Registration Statement No.: _______________________
(3) Filing Party: _______________________________________________________
(4) Date Filed: _________________________________________________________
<PAGE>
[Front Cover]
W.W. GRAINGER, INC.
5500 W. Howard St., Skokie, IL 60077-2699
(708) 982-9000
March 25, 1994
TO OUR SHAREHOLDERS:
The 1994 annual meeting of shareholders of W.W. Grainger, Inc., an Illinois
corporation, will be held at the Corporate Offices of the Company, located at
5500 W. Howard St., Skokie, Illinois (see map overleaf), on Wednesday, April 27,
1994 at 10:00AM (Central).
We will report at the meeting on our operations and other matters of
current interest. The Board of Directors and management cordially invite you to
attend.
The formal notice of the annual meeting and the proxy statement follow.
Whether or not you plan to attend the meeting, please sign, date, and return the
enclosed proxy promptly to assure that your shares will be represented.
Office of the Chairman
/s/ D. W. Grainger
Chairman of the Board
and President
/s/ J. D. Fluno /s/ R. L. Keyser
Vice Chairman Executive Vice President
YOUR VOTE IS IMPORTANT.
PLEASE COMPLETE AND RETURN YOUR PROXY PROMPTLY.
<PAGE>
[Inside Front Cover]
W.W. GRAINGER, INC.
1994 Annual Shareholders' Meeting
Wednesday, April 27, 1994 - 10:00AM (Central)
Location: Corporate Offices
5500 W. Howard St.
Skokie, IL 60077-2699
(Building Entrance: 7650 Frontage Rd.)
[MAP - of Chicago and Niles/Skokie, IL areas showing location the of Annual the
Meeting.]
<PAGE>
- -------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 27, 1994
The annual meeting of shareholders of W.W. Grainger, Inc. will be held at
the Corporate Offices of the Company, located at 5500 W. Howard St., Skokie,
Illinois (see map on previous page), April 27, 1994 at 10:00AM (Central) for the
following purposes:
1. To elect ten directors for the ensuing year;
2. To consider and act upon a proposal to ratify the appointment of Grant
Thornton as independent auditors for the year ending December 31, 1994;
3. To consider and act upon a proposal to amend the Articles of
Incorporation concerning directors' liability;
4. To consider and act upon a shareholder proposal requesting a report,
if such proposal is presented at the meeting; and
5. To transact such other business as may properly come before the
meeting and any adjournment thereof.
The Board has fixed the close of business on March 7, 1994 as the record
date for the meeting. Shareholders may vote either in person or by proxy.
By order of the Board of Directors.
J. M. Baisley
Secretary
Skokie, Illinois
March 25, 1994
3
<PAGE>
March 25, 1994
PROXY STATEMENT
INTRODUCTION
This proxy statement is furnished in connection with the solicitation on
behalf of the Board of Directors of W.W. Grainger, Inc., an Illinois corporation
(the "Company"), of proxies to be voted at the annual meeting of shareholders of
the Company to be held on April 27, 1994, and at any adjournment thereof. It is
anticipated that this proxy statement and the accompanying form of proxy will be
mailed to shareholders commencing on or about March 25, 1994.
VOTING AT THE MEETING
The Board has fixed the close of business on March 7, 1994, as the record
date for determining shareholders entitled to notice of and to vote at the
meeting. On that date, there were outstanding on the books of the Company
xx,xxx,xxx shares of Company common stock. A majority of the shares having
voting power at the meeting will constitute a quorum for the transaction of
business.
In the election of directors, shareholders have the right to cumulative
voting, as provided by the laws of the State of Illinois. "Cumulative voting"
means that each shareholder has that number of votes equal to the number of
directors to be elected, times the number of shares owned by such shareholder.
The total number of these votes may be cast for one nominee or apportioned among
two or more nominees, as the shareholder desires. In any matter other than the
election of directors, each share is entitled to one vote.
4
<PAGE>
Shares of record on the record date and represented by each properly
executed proxy received by the Company in time to permit its use at the meeting
will be voted in accordance with the instructions indicated in the proxy. If no
instructions are indicated, such shares will be voted as recommended by the
Board. A shareholder who has given a proxy may revoke it by voting in person at
the meeting, or by giving written notice of revocation or a later-dated proxy to
the Secretary of the Company at any time before the voting.
EXPENSES OF SOLICITATION
The expenses of soliciting proxies will be paid by the Company. In
addition to the use of the mails, proxies may be solicited personally, or by
telephone or other means, by directors, officers, and regular employees of the
Company and its subsidiaries who, except for normal overtime pay in certain
instances, will not receive additional compensation therefor, and by
representatives of the Company's stock transfer agent. Arrangements will also
be made with brokerage firms and other custodians, nominees and fiduciaries for
the forwarding of proxy soliciting material to certain beneficial owners of
Company common stock, and the Company will reimburse such brokerage firms,
custodians, nominees, and fiduciaries for reasonable expenses incurred by them
in connection therewith. D.F. King & Co., Inc. has been retained by the Company
to aid in the solicitation of proxies and will be paid for its services in this
regard a fee approximating $5,000, plus reasonable costs and expenses.
5
<PAGE>
BOARD OF DIRECTORS
ELECTION OF DIRECTORS
Ten directors are to be elected to hold office until the next annual
meeting of shareholders and until their successors shall have been elected and
qualified. When authorized to vote for any of the directors, as set forth in
the proxy, the person or persons voting the proxy, voting cumulatively, are
permitted to and may apportion the total votes represented by the proxy to one
or more of the nominees as he or they shall determine. Directors are elected by
the votes of a majority of the shares represented in person or by proxy at the
meeting. Broker non-votes and directions to withhold authority will not count
as votes in the election.
If any nominee named herein should not continue to be available for
election, a circumstance which is not expected, discretionary authority may be
exercised to vote for a substitute. Shareholder nominations of persons for
election as directors are subject to the notice requirements described under the
caption OTHER MATTERS appearing later in this proxy statement.
In accordance with the Board's policy on retirement of directors,
Mr. Kingman Douglass is not standing for re-election at the meeting.
Mr. Douglass, whose service to the Company as a member of the Board spans
a period of 25 years, will long be remembered for his many contributions to
the success of the Company.
The following pages contain certain information about the nominees. All of
the nominees are presently directors and were previously elected by the
shareholders. Unless otherwise indicated, each of the nominees has served for
at least the past five years in the principal business position currently or
most recently held. For the nominees' beneficial ownership of shares of Company
common stock, see STOCK OWNERSHIP appearing later in this proxy statement.
6
<PAGE>
[Photographs] GEORGE R. BAKER, age 64, is a corporate director/advisor. Until
1985, he was a special limited partner of Bear, Stearns & Co.
Inc., investment bankers. Mr. Baker is also a director of The
Midland Company, Reliance Group Holdings, Inc., Reliance
Insurance Company, and WMS Industries, Inc. He was first elected
a director of the Company in 1976 and is a member of the Audit
Committee and the Board Affairs and Nominating Committee.
ROBERT E. ELBERSON, age 65, retired in 1989 as Vice Chairman and
a director of Sara Lee Corporation, a marketer, manufacturer, and
distributor of consumer products and food services. Until 1986,
he served that company as President and Chief Operating Officer.
Mr. Elberson is also a director of Sonoco Products Company. He
was first elected a director of the Company in 1982 and is a
member of the Audit Committee and the Board Affairs and
Nominating Committee.
JERE D. FLUNO, age 52, is Vice Chairman of the Company, with
overall responsibility for the Company's corporate staff
functions. Mr. Fluno, who joined the Company in 1969, is a
member of the Office of the Chairman. He is also a member of the
Board of Governors of the Chicago Stock Exchange, Incorporated
and a director of Midwest Clearing Corporation. Mr. Fluno was
first elected a director of the Company in 1975.
7
<PAGE>
[Photographs] WILBUR H. GANTZ, age 56, is President and Chief Executive Officer
of PathoGenesis Corporation, a health care company discovering
and developing therapeutics for infectious diseases. Prior to
assuming this position in 1992, he served as President of Baxter
International Inc., a manufacturer and distributor of health care
products and services. Mr. Gantz is also a director of Bank of
Montreal and its subsidiaries, Harris Bankcorp, Inc. and Harris
Trust and Savings Bank; The Gillette Company; and PathoGenesis
Corporation. He was first elected a director of the Company in
1985 and is the chairman of the Compensation Committee.
DAVID W. GRAINGER, age 66, is Chairman of the Board and, since
1992, President of the Company. Mr. Grainger, who joined the
Company in 1952, is a member of the Office of the Chairman. He
is also a director of Baxter International Inc. Mr. Grainger was
first elected a director of the Company in 1953 and is a member
of the Board Affairs and Nominating Committee.
RICHARD L. KEYSER, age 51, is Executive Vice President of the
Company, a position assumed in 1992, with overall responsibility
for the Company's operations. Mr. Keyser, who joined the Company
in 1986, is a member of the Office of the Chairman. He is also
President of the Company's Grainger Division, a position assumed
in 1991. Previously, Mr. Keyser served as Executive Vice
President and General Manager of the Grainger Division. He
became a director of the Company in 1992.
JOHN W. MCCARTER, JR., age 56, is a Senior Vice President of
Booz, Allen & Hamilton Inc., a management consulting firm. Mr.
McCarter is also a director of A.M. Castle & Co. and, until March
31, 1994, will be a director of Booz, Allen & Hamilton Inc. He
was first elected a director of the Company in 1990 and is a
member of the Board Affairs and Nominating Committee and the
Compensation Committee.
8
<PAGE>
[Photographs] JAMES D. SLAVIK, age 41, is President of Mark IV Properties,
Inc., a real estate investment and development company. Until
1987, he served as an investment real estate broker of Coldwell
Banker Commercial Real Estate Services, a real estate brokerage
company. Mr. Slavik is also a director of Janss Corporation and
Mark IV Properties, Inc. He was first elected a director of the
Company in 1987 and is the chairman of the Audit Committee.
HAROLD B. SMITH, age 60, is Chairman of the Executive Committee
of Illinois Tool Works Inc., a manufacturer and marketer of
engineered components and industrial systems and consumables. He
is also a director of Illinois Tool Works Inc. and Northern Trust
Corporation, and a trustee of Northwestern Mutual Life Insurance
Company. Mr. Smith was first elected a director of the Company
in 1981 and is a member of the Compensation Committee.
FRED L. TURNER, age 61, is Senior Chairman of the Board and
Chairman of the Executive Committee of McDonald's Corporation, a
restaurant licensor. He joined McDonald's Corporation in 1956
and assumed his current position in 1990, after serving that
company as Chairman of the Board and Chief Executive Officer.
Mr. Turner is also a director of Aon Corporation, Baxter
International Inc., McDonald's Corporation, and Ronald McDonald
Children's Charities. He was first elected a director of the
Company in 1984 and is the chairman of the Board Affairs and
Nominating Committee.
9
<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD
Five meetings of the Board were held in 1993. In addition, the directors
acted twice during the year by unanimous consent.
The Board has three standing committees: Audit, Board Affairs and
Nominating, and Compensation. Committee members are elected by the Board
shortly following the annual meeting of shareholders.
Directors who presently serve on the Audit Committee are Messrs. Slavik
(Chairman), Baker, Douglass, and Elberson. The Audit Committee met five times
in 1993. Each year, the Audit Committee reviews the annual audit plan with the
independent auditors and also reviews the results of the annual audit with them.
In addition, the Audit Committee reviews the adequacy of internal controls with
both the independent auditors and the Company's internal auditors, and has
oversight responsibilities for investment performance and other aspects of
certain employee benefit plans. Although the Audit Committee, as well as the
Board, is apprised of the nature and costs of the non-audit professional
services provided by the independent auditors, neither the Audit Committee nor
the Board reviews all non-audit services in advance. All services and fees,
however, are subsequently reviewed and approved by the Audit Committee. The
Audit Committee reviews the independence of the independent auditors, giving
consideration to the possible effect of each audit and non-audit service on such
independence.
Directors who presently serve on the Board Affairs and Nominating Committee
are Messrs. Turner (Chairman), Baker, Douglass, Elberson, Grainger, and
McCarter. The Board Affairs and Nominating Committee, which met three times in
1993, recommends to the Board the size of the Board, criteria for Board
membership, and prospective nominees. It also recommends to the Board the
make-up of the Board committees (Audit, Board Affairs and Nominating, and
Compensation), makes periodic reviews with respect to senior management
organization and succession, and makes initial assessments and recommendations
to the Board regarding major issues or proposals. The Board Affairs and
Nominating Committee has not established any policy or procedure for considering
nominees recommended by shareholders.
10
<PAGE>
Directors who presently serve on the Compensation Committee are Messrs.
Gantz (Chairman), Douglass, McCarter, and Smith. The Compensation Committee,
which met five times in 1993, reviews compensation policy and objectives as
recommended by management (generally with regard to all employees and
specifically with regard to officers), reviews proposed major compensation
program modifications, and makes appropriate reports and recommendations to the
Board. The Compensation Committee also acts as the Administration Committee of
Company stock incentive plans.
Each director who is not an employee of the Company or any subsidiary
thereof is an alternate member of each Board committee of which he has not been
specifically appointed a member. An alternate committee member may serve for
all purposes at a committee meeting in place of a specifically appointed
committee member who is absent.
DIRECTORS' FEES AND RELATED INFORMATION
Directors who are not employees of the Company or any subsidiary thereof
receive for their services (i) a retainer fee at the rate of $20,000 per annum,
(ii) an additional retainer fee for serving as chairman of any Board committee
at the rate of $2,000 per annum, and (iii) a fee of $1,000 for each meeting of
the Board and for each meeting of a committee thereof attended. The Company
reimburses related travel expenses. Directors who are employees of the Company
do not receive any fees for Board or Board committee service.
Under the Plan for Payment of Directors' Fees, a director may elect to
defer payment of all or any portion of his fees until after he ceases to be a
director. In the case of deferral, the fees are payable in either a lump sum or
periodic installments, at the discretion of the Compensation Committee of the
Board. Such deferred fees bear interest at a rate equivalent to the rate of
return of the short-term income fund established pursuant to the Company's non-
contributory profit-sharing plan. No director deferred payment of his 1993
fees.
11
<PAGE>
Under the Post-Service Benefit Plan for Non-Management Directors, a benefit
is provided with respect to any non-employee director who ceases to be a
director (i) after reaching age 70; (ii) after at least five years of service as
a director; or (iii) by reason of permanent disability or death. The benefit is
80% of the retainer for serving as a director at the time of payment, payable
for a number of years equal to the lesser of ten, or the number of years of
service as a director. If the director dies before all payments are made, such
payments are made to his spouse, but cease upon the spouse's death.
In the ordinary course of business during 1993, the Company and its
subsidiaries engaged in various types of business transactions with, and with
affiliates of, organizations with which directors of the Company are associated
in their principal business occupations or otherwise. The transactions are not
deemed material to any of the directors. Similar transactions are likely to
occur in the future.
12
<PAGE>
STOCK OWNERSHIP
The table below, which is based upon information furnished to the Company
by the individuals involved, sets forth the number of shares of Company common
stock beneficially owned (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) on March 7, 1994 by each of the directors, the
nominees and certain executive officers of the Company, and by all directors and
executive officers of the Company as a group. Unless otherwise indicated in the
footnotes following the table, each of the named persons had beneficial
ownership with respect to the shares shown by sole voting and investment power.
<TABLE>
<CAPTION>
Shares Percentage
Beneficially of Common
Beneficial Owner Owned (1) Stock (2)
- ---------------- ------------ -----------
<S> <C> <C>
David W. Grainger (3)(4)(5)(6)
5500 W. Howard St.
Skokie, IL 60077 5,959,359 xx.xx%
James D. Slavik (3)(7)(8)(9)(10)
19000 MacArthur Blvd.
Suite 610
Irvine, CA 92715 4,390,156 x.xx%
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Shares Percentage
Beneficially of Common
Beneficial Owner Owned (1) Stock (2)
- ---------------- ------------ ----------
<S> <C> <C>
James M. Baisley (11) 33,360 *
George R. Baker 800 *
Donald E. Bielinski (11)(12) 57,148 *
Kingman Douglass 2,000 *
Robert E. Elberson 8,400 *
Jere D. Fluno (11)(13) 164,240 *
Wilbur H. Gantz 3,200 *
Richard L. Keyser (11)(14) 56,400 *
John W. McCarter, Jr. (15) 2,000 *
Harold B. Smith (16) 17,000 *
Fred L. Turner 3,000 *
Directors and Executive Officers
as a group (11)(17) 10,900,230 xx.xx%
<FN>
- -------------------------------
1. In some instances, shares are included as to which beneficial
ownership has been disclaimed in reports filed with the Securities and
Exchange Commission.
</TABLE>
14
<PAGE>
<TABLE>
<C> <S>
2. An asterisk (*) indicates less than 1%.
3. Messrs. Grainger and Slavik are the only persons known by the Company to be
beneficial owners of more than 5% of the Company's common stock.
4. Includes 769,498 shares held by The Grainger Foundation Inc., a
charitable foundation, as to which shares Mr. Grainger has shared
voting and investment power.
5. Includes 927,360 shares held by various family trusts, as to which
shares Mr. Grainger has shared voting and investment power.
6. Includes 357,215 shares held by various family trusts, as to which shares
Mr. Grainger, alone or with his wife, has voting and investment power.
7. Excludes 344 shares held by Mr. Slavik's wife, as to which shares Mr.
Slavik disclaims voting or investment power.
8. Includes 3,218,680 shares held by certain family-owned corporations,
as to which shares Mr. Slavik has sole voting power and shared
investment power.
9. Includes 707,006 shares held by various family trusts, as to which
shares Mr. Slavik has shared voting and investment power.
10. Includes 82,810 shares held by various family trusts or as custodian for
family members, as to which shares Mr. Slavik, alone or with his wife, has
voting and investment power.
11. Includes shares that may be acquired within 60 days after March 7,
1994 upon exercise of employee stock options as follows: Mr. Baisley,
33,230 shares; Mr. Bielinski, 52,662 shares; Mr. Fluno, 104,240
shares; Mr. Keyser, 56,150 shares; and all directors and executive
officers of the Company as a group, 408,440 shares. In computing the
percentage of shares
</TABLE>
15
<PAGE>
<TABLE>
<C> <S>
owned by each such person and by the group, such shares were added to the
total number of outstanding shares for the separate calculations.
12. Includes 3,760 shares as to which Mr. Bielinski has shared voting and
investment power with his wife.
13. Includes 52,612 shares as to which Mr. Fluno has shared voting and
investment power with his wife.
14. Includes 200 shares as to which Mr. Keyser has shared voting and investment
power with his wife.
15. As to such shares, Mr. McCarter has shared voting and investment power with
his wife.
16. Includes 16,000 shares as to which Mr. Smith has shared voting and
investment power.
17. Includes 5,926,646 shares as to which members of the group have shared
voting and/or investment power.
</TABLE>
16
<PAGE>
MANAGEMENT COMPENSATION AND BENEFITS
SUMMARY COMPENSATION INFORMATION
Set forth below is certain summary information concerning compensation paid
to or accrued for those persons who, at December 31, 1993, were (i) the
Company's Chief Executive Officer and (ii) each of the four other most highly
compensated executive officers of the Company (the "Named Executive Officers")
for services in all capacities to the Company and its subsidiaries for the
fiscal years ended December 31, 1993, 1992, and 1991:
<TABLE>
<CAPTION>
All Other
Annual Compensation Long-Term Compensation Compensation (3)
------------------- ------------------------ ----------------
Awards Payouts
------ -------
Stock Long-term
Name and Principal Position Options Incentive
(at 12/31/93) Year Salary Bonus (1) (Shares) Payouts (2)
- --------------------------- ---- ------ --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
David W. Grainger 1993 $607,000 $389,000 - 0 - $ - 0 - $149,136
Chairman of the Board and 1992 578,100 200,000 - 0 - 215,107 143,713
President 1991 553,830 190,000 - 0 - 173,613 143,311
James M. Baisley 1993 $240,000 $164,283 4,820 $ - 0 - $60,607
Vice President, General 1992 224,400 88,580 5,310 56,280 54,024
Counsel, and Secretary 1991 209,040 64,950 6,400 44,087 52,777
Donald E. Bielinski 1993 $268,800 $222,267 6,480 $ - 0 - $75,069
Vice President and Chief 1992 249,300 137,960 7,150 71,300 64,761
Financial Officer 1991 223,560 97,380 8,620 51,533 61,994
Jere D. Fluno 1993 $437,000 $490,000 13,160 $ - 0 - $134,310
Vice Chairman 1992 416,860 290,000 14,320 155,232 125,662
1991 397,730 255,000 18,760 124,681 120,901
Richard L. Keyser 1993 $394,000 $490,000 11,830 $ - 0 - $112,359
Executive Vice President 1992 331,850 214,335 9,530 115,231 78,641
of the Company and 1991 246,000 88,940 8,620 59,163 64,508
President, Grainger
Division
</TABLE>
17
<PAGE>
<TABLE>
<FN>
<C> <S>
(1) The amounts shown were paid with respect to performance during the
indicated fiscal year. Concerning the 1993 fiscal year, the newly
established Management Incentive Plan combines features of, and supersedes,
the annual and long-term cash incentive plans previously in effect.
(2) The amounts shown were paid with respect to the three-year performance
cycle concluded at the end of the indicated fiscal year. Concerning the
1993 fiscal year, see footnote (1) above.
(3) The amounts shown were accrued under the Company's non-contributory profit-
sharing plan, in which most Company employees participate, and the related
supplemental profit-sharing plan.
</TABLE>
STOCK OPTION GRANTS
Set forth below is further information concerning Company grants of stock
options during the fiscal year ended December 31, 1993 to the Named Executive
Officers other than Mr. Grainger, to whom no stock options were granted during
the year. No stock appreciation rights were granted during the year.
<TABLE>
<CAPTION>
Percentage of
Total Options
Options Granted to Exercise or Earliest
Granted Employees in Base Price Exercise Expiration Grant Date
Name (Shares) Fiscal 1993 (Per Share)(1) Date (2) Date Present Value (3)
- ---- -------- ------------- -------------- -------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C>
James M. Baisley 4,820 2.49% $58.75 4/28/96 4/27/03 $108,643
Donald E. Bielinski 6,480 3.35% 58.75 4/28/96 4/27/03 146,059
Jere D. Fluno 13,160 6.80% 58.75 4/28/96 4/27/03 296,626
Richard L. Keyser 11,830 6.11% 58.75 4/28/96 4/27/03 266,648
<FN>
(1) The per-share option exercise price equals the per-share closing price of
Company common stock reported in the Composite Tape for New York Stock
Exchange-listed stocks on the business day preceding the date of grant.
Stock optionees presently may make payment of the exercise price of stock
options by delivering already owned shares of Company common stock (based
on the fair
</TABLE>
18
<PAGE>
<TABLE>
<C> <S>
(2) market value of the shares at the time). Stock optionees presently may
also direct that shares of Company common stock otherwise deliverable upon
exercise (based on the fair market value of the shares at the time) be
withheld in satisfaction of withholding tax obligations arising from
exercise. All options granted to the Named Executive Officers were granted
on April 28, 1993, and become exercisable three years following the date of
grant.
(3) The amounts shown are based on the Black-Scholes option pricing model.
Material assumptions incorporated into this model in estimating the value
of the options include the following:
a. Exercise price of $58.75.
b. Term of ten years.
c. Interest rate of 6.03%, representing the ten-year constant
maturity Treasury yield at April 28, 1993.
d. Volatility of 18.60%, an annualized number using weekly prices of
Company common stock for the six-month period prior to April 28,
1993.
e. Dividend yield of 1.23%, calculated by dividing the annualized
dividend payout by the closing price of Company common stock on
the business day preceding the date of grant.
The actual value, if any, an executive may realize will depend on the
excess of the stock price over the exercise price on the date the option is
exercised. There is no assurance the value realized by an executive will
be at or near the value estimated by the Black-Scholes model.
</TABLE>
19
<PAGE>
STOCK OPTION EXERCISES AND HOLDINGS
Set forth below is information relating to stock options exercised by the
Named Executive Officers during the 1993 fiscal year and the number of shares of
Company common stock covered by, and the value of, outstanding stock options
held by them at December 31, 1993. At no time during the year did the Company
have any outstanding stock appreciation rights. Mr. Grainger is excluded from
the table as he did not hold any stock options during the year.
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised In-the-Money
Unexercised Options at 12/31/93 Options at 12/31/93 (3)
------------------------------ ---------------------------------
Shares Acquired Value
Name on Exercise (1) Realized (2) Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James M. Baisley 6,116 $193,899 28,920 10,130 $ 693,127 $31,860
Donald E. Bielinski - 0 - - 0 - 45,512 13,630 1,141,965 42,900
Jere D. Fluno - 0 - - 0 - 89,920 27,480 2,108,503 85,920
Richard L. Keyser - 0 - - 0 - 46,620 21,360 1,171,191 57,180
<FN>
(1) The figures shown are the numbers of shares covered by the exercised stock
options.
(2) The amounts shown are the differences between the per-share stock option
exercise prices and fair market values of Company common stock on the dates
of exercise, multiplied by the number of shares covered by the exercised
stock options.
(3) The amounts shown are the differences between the per-share stock option
exercise prices and the closing price of Company common stock on December
31, 1993 of $57.50 per share, as reported in the Composite Tape for New
York Stock Exchange-listed stocks, multiplied by the number of shares
covered by the unexercised stock options.
</TABLE>
20
<PAGE>
OTHER BENEFITS
The Executive Deferred Compensation Plan, an unfunded plan administered by
a committee of management, permitted participants selected by the committee and
the committee to agree on a salary reduction of between 5% and 15% (or more with
special agreement) for up to four years. The Company allocated to participants'
accounts an additional 15% of the salary reduction to reflect reduced profit-
sharing plan contributions. Under the related Plan Agreement, a participant is
entitled to 180 monthly payments, commencing at age 65, in an annual amount that
is based upon the amount of the salary reduction, the additional amount
allocated by the Company, and the number of years to normal retirement age.
Reduced or increased payments are provided in the event that the participant
begins receiving payments before or after age 65. If a participant terminates
his service with the Company prior to qualifying for early benefits pursuant to
the terms of the Plan, or if the Company reduces benefits or terminates the
Plan, or if there is a "change of control" of the Company, the Plan provides for
various benefits to the participant, ranging from a return of the amount of
salary deferral, plus interest, to a lump-sum benefit equal to the present value
of a projected payment stream. If a participant dies before retirement or
before having received the full amount of his benefits, the balance will be paid
to his designated beneficiary. Although the initiation of salary payment
deferrals has not been permitted for several years and there were no such
deferrals for 1993, all of the Named Executive Officers and certain other
members of management have deferred salary payments under the Plan for prior
years. Payments under the Plan have commenced with respect to Mr. Grainger, who
is receiving $12,280 per month in this regard. If Messrs. Baisley, Bielinski,
Fluno, and Keyser remain employees of the Company until age 65 and then commence
receiving payments under the Plan, the monthly payments would amount to $5,545,
$3,664, $26,207, and $10,509, respectively.
Participation of employees in the Executive Death Benefit Plan, which is
unfunded, is determined by a committee of management. The beneficiary of a
participant who dies while employed by the Company is entitled to monthly
payments equal to 50% of the participant's monthly salary or compensation for
the longer of 120 months or until the participant would have attained age 65. A
lump-sum benefit in an amount which, after taxes, approximates one year's salary
or compensation, is
21
<PAGE>
payable to a participant's designated beneficiary upon death after retirement,
as defined in the Plan. All of the Named Executive Officers and certain other
members of management participate in the Plan.
The Company has minimized its exposure relating to the Executive Deferred
Compensation Plan and the Executive Death Benefit Plan by purchasing life
insurance contracts, which are owned by the Company.
The Management Incentive Program (MIP), which is unfunded, is administered
by a committee of management. MIP accounts have been established in the names
of participants. Initial MIP account balances of participants who were
participants in the superseded long-term incentive plan reflect amounts accrued
but not paid under that plan. MIP account balances are adjusted periodically as
a result of MIP bonuses earned, MIP bonuses paid, and merit salary adjustment
guidelines applicable to salaried employees generally. MIP account balances are
generally paid out upon death, retirement, or long term disability, but are
subject to forfeiture in the event of voluntary resignation or termination for
misconduct. Messrs. Grainger, Baisley, Bielinski, Fluno, and Keyser currently
have MIP account balances of $222,636, $58,250, $73,796, $160,665, and $135,819,
respectively.
The Company provides a separation benefit to certain full-time employees
upon termination of employment (other than for cause) at age 55 or later with at
least 15 years service. This benefit, which is unfunded, is equal to one week's
regular pay for each two full years of continuous employment accrued prior to
December 31, 1984, with a maximum of 13 weeks pay. Mr. Keyser joined the
Company after December 31, 1984 and, accordingly, will not receive the
separation benefit. Had they been eligible and terminated their employment as
of the date of this proxy statement, Messrs. Grainger, Baisley, Bielinski, and
Fluno would have received a separation
22
<PAGE>
benefit of $153,000, $4,800, $32,988, and $61,772, respectively. Of these
individuals, only Mr. Grainger is currently eligible to receive the separation
benefit.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD
This report of the Compensation Committee of the Board (the "Committee")
discusses the Company's executive compensation policies and the bases for the
compensation paid to the chief executive officer (Mr. Grainger), to members of
the Office of the Chairman (consisting of Messrs. Fluno, Grainger, and Keyser),
and to executive officers generally.
The Committee administers the Company's executive compensation program.
All members of the Committee are non-employee directors. The Committee
determines the compensation of the members of the Office of the Chairman and
approves the compensation of the other executive officers. In this connection,
the Committee considers information and data supplied by management and by an
independent compensation and benefits consultant.
Executive Compensation Policies
The purpose of the executive compensation program is to enable the Company
to attract and retain qualified executives and to provide appropriate
incentives, including equity incentives, to support the achievement of the
Company's business strategies. The overall program includes variable pay
components and links total executive compensation to the creation of shareholder
value over the long term.
23
<PAGE>
The Company's objective is to pay total compensation within a targeted range
based on Company performance, but at least at the size-adjusted median of a peer
group of companies approved by the Committee. All elements of compensation are
valued to determine the Company's posture relative to the comparator group. For
1993, the Company met its total compensation objective.
The companies used for compensation comparator purposes are not the same
companies used to compare total shareholder return in the Performance Graph.
The companies in the Performance Graph are those comprising the Dow Jones
Electrical Components Index. However, the Company's "market" for executive
talent is broader than the Dow Jones published industry index. Accordingly, the
compensation comparator group is representative of a cross section of major
companies with whom the Company historically competes for its executive talent.
Total compensation consists of base salary, cash incentive compensation,
stock options, and benefits. Policies relative to each of these elements are
discussed herein.
Base Salaries
The Committee reviews base salaries annually. Adjustments to base salaries
are determined based on an evaluation of the competitive market, individual
performance, position in salary range (where applicable), experience of the
executive, and internal equity issues. After evaluating the competitive market,
a merit increase guideline program for all exempt employees was approved by the
24
<PAGE>
Committee in 1993. Salary increases to the executive officers in 1993 were
consistent with this program.
In determining Mr. Grainger's salary compensation, the Committee considers
the financial and non-financial performance of the Company, as well as an
analysis of his salary in relation to that of CEO's in the comparator group of
companies approved by the Committee. The Committee approved a merit increase of
5.15% for Mr. Grainger effective March 1, 1993, based on an assessment of the
above factors. This increase is consistent with the average increase of 5.5%
granted to Company salaried employees as a group in 1993.
Cash Incentives
For executive officers and officers in the principal business unit, the
Team Achievement Bonus plan (TAB), the discretionary bonus plan used for the
Office of the Chairman, and the Long-Term Incentive Program (LTIP) were
discontinued effective at the beginning of 1993. These plans were replaced by a
Management Incentive Program (MIP) that will reward participants for
improvements in economic earnings, i.e., earnings in excess of the company's
cost of capital.
MIP combines features of the prior plans to provide an appropriate balance
between short-term and long-term results.
25
<PAGE>
The basic concept underlying the MIP is that improved economic earnings
result from:
- Increasing the returns on existing investments,
- Making new investments that have returns exceeding the Company's cost
of capital, and
- Reducing or eliminating investments that fail to meet the Company's
cost of capital.
Long-term improvements in economic earnings are expected to correspond to
long-term improvements in shareholder value.
The MIP is based on quantitative measures but also provides for utilization
of a qualitative component. The quantitative component is built around target
bonuses which are stated as a percentage of base salary. These target bonuses
were established based on a review of competitive market practice and are
similar to the targets previously used for TAB and LTIP. Target bonuses range
from 25 percent to 75 percent of base salary. The qualitative component
consists of a discretionary factor under which, if used, bonuses can be adjusted
up or down to account for economic or other conditions outside the participants'
control. The discretionary factor is limited to 10% of participants' base
salaries. Annually, actual results are compared to targets to determine the
amount of the bonus earned.
26
<PAGE>
Company economic earnings for 1993 exceeded target and, during the same
period, significant milestones were achieved in moving toward the Company's
strategic objectives. Bonuses were calculated under the MIP formula based on
Company-wide performance for the Office of the Chairman, a weighted blending of
total Company and Corporate staff performance for other Corporate participants,
and business unit performance for the divisional operating officers. No
discretionary adjustment was made to the Office of the Chairman or to the
business unit participant bonuses. A positive discretionary adjustment was made
to other Corporate participant bonuses to achieve a more appropriate
relationship of bonuses across the Company. The Committee did reallocate the
bonus amount generated for the Office of the Chairman among the three members of
that office, as reflected in the summary compensation table, based on Mr.
Grainger's recommendation that the other members of the office receive a larger
portion of the pool in recognition of their contributions to 1993's positive
results.
Stock Options
Stock options are granted at an option price not less than the fair market
value of the underlying Company common stock on the date of grant. The stock
options are considered an important means of aligning the financial interests of
executive officers and other key employees to the longer term financial
interests of the shareholders. The number of shares granted at each level in
the organization is designed to provide an economic value that is competitive
with grants made by other companies for comparable jobs. It is the current
expectation of the Committee to ensure that any gains realized upon exercise of
stock options continue to be
27
<PAGE>
deductible by the Company for federal income tax purposes under Section 162(m)
of the Internal Revenue Code of 1986, as amended.
Stock option grants made in prior years as well as the total number of
options to be granted relative to the total number of Company shares outstanding
also were factors considered in determining appropriate grants for 1993.
Mr. Grainger elected not to accept stock option grants in 1993.
Benefits
With the exception of the Executive Death Benefit Plan, which is discussed
in an earlier section, the profit sharing and welfare benefits provided to
executives are comparable to those provided to most Company employees, both
salaried and hourly.
Wilbur H. Gantz, Chairman
Kingman Douglass
John W. McCarter, Jr.
Harold B. Smith
Members of the Compensation
Committee of the Board of Directors
28
<PAGE>
STOCK PRICE PERFORMANCE
The following stock price performance graph compares the cumulative total
return on an investment in Company common stock against the cumulative total
return of an investment in each of the S&P 500 Stock Index and the Dow Jones
Electrical Components Index for the period commencing December 31, 1988 and
ending December 31, 1993. The graph assumes that the value for the investment
in Company common stock and in each index was $100 on December 31, 1988 and that
all dividends were reinvested.
[Performance Graph filed under Form SE on March 4, 1994]
29
<PAGE>
PROPOSAL TO RATIFY THE APPOINTMENT OF INDEPENDENT AUDITORS
Upon the recommendation of its Audit Committee, the Board has appointed
Grant Thornton as independent auditors of the Company for the fiscal year ending
December 31, 1994 which appointment will be submitted for ratification at the
meeting. Grant Thornton has served as independent auditors of the Company for
nearly 60 years. It is expected that representatives of Grant Thornton will be
present at the meeting to respond to appropriate questions of shareholders and
to make any desired statements.
THE BOARD RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY THE APPOINTMENT OF
INDEPENDENT AUDITORS.
Approval of the proposal requires the affirmative votes of a majority of
the shares of Company common stock represented in person or by proxy at the
meeting. Broker non-votes and abstentions will have the same effect as votes
against the proposal. In the event the proposal is not approved, the Board will
consider the negative vote as a mandate to appoint other independent auditors of
the Company for the next fiscal year.
30
<PAGE>
PROPOSAL TO AMEND ARTICLES OF INCORPORATION
CONCERNING DIRECTORS' LIABILITY
The Board has determined that there be submitted to the shareholders a
proposal to amend the Articles of Incorporation of the Company by adding to the
end thereof a new Article Nine. This addition would limit the personal
liability of the directors to the Company or its shareholders for monetary
damages arising from a breach of fiduciary duty. The new Article Nine is
authorized by a change in the Illinois Business Corporation Act of 1983 that
became effective January 1, 1994.
BACKGROUND
Until recently, Illinois was one of the few states that did not
specifically permit Articles of Incorporation to protect directors who acted in
good faith, but who were nevertheless threatened with substantial liability by
virtue of negligence claims. Effective January 1, 1994, however, an Illinois
corporation may provide its directors with liability protection similar to that
which may be provided by corporations incorporated in the vast majority of other
states, including Delaware. As under Delaware law, liability may not be limited
under Illinois law with respect to acts or omissions of directors that are in
bad faith, that involve intentional wrongdoing, that violate certain statutory
provisions, or that result in profit or other advantage to which directors are
not legally entitled.
TEXT OF PROPOSED AMENDMENT
The text of Article Nine proposed to be added to the Company's Articles of
Incorporation is as follows:
"A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of
the director's duty of loyalty to the corporation or its shareholders, (ii)
for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law, (iii) under Section 8.65 of the
Business Corporation
31
<PAGE>
Act or any successor provision thereto, or (iv) for any transaction from
which the director derived an improper personal benefit. If the Business
Corporation Act is hereafter amended to permit further elimination or
limitation of the personal liability of directors, then the liability of a
director of the corporation shall be eliminated or limited to the fullest
extent permitted by the Business Corporation Act as so amended. Any repeal
or modification of this Article by the shareholders of the corporation or
otherwise shall not apply to or have any effect on the liability or alleged
liability of any director of the corporation for or with respect to any
acts or omissions of such director occurring prior to such amendment or
repeal."
REASONS FOR THE PROPOSED AMENDMENT
Directors of Illinois corporations are required, under Illinois law, to
perform their duties in good faith and with that degree of care that an
ordinarily prudent person in a like position would use under similar
circumstances. A director may rely upon information, opinions, and reports
prepared by certain officers and other employees, professional advisors, or
committees of the Board. Decisions made on the basis of this information
generally are protected by the "business judgment rule" and should not be
questioned by a court in the event of a lawsuit challenging the decisions.
However, the expense of defending such lawsuits and the uncertainties of
applying the business judgment rule to particular facts and circumstances mean,
as a practical matter, that directors are not relieved of the threat of monetary
damage awards.
Although no director of the Company has indicated an intent to resign from
the Board because of the threat of monetary damage awards, the Board believes
that adoption of the proposed amendment would enhance the Company's ability to
attract and retain competent, qualified, and talented persons to serve as
directors. In this connection, the Board believes that absence of the liability
protection could place the Company at a disadvantage in attracting such persons
to serve as directors, in that many other companies provide the liability
protection.
32
<PAGE>
EFFECT OF THE PROPOSED AMENDMENT
The proposed amendment does not reduce the fiduciary duty of a director; it
merely limits monetary damage awards to the Company and its shareholders arising
from certain breaches of that duty. It does not affect the availability of
equitable remedies, such as the right to enjoin or rescind a transaction based
upon a director's breach of fiduciary duty. It also does not affect a
director's liability for acts taken or omitted prior to the amendment becoming
effective (after shareholder approval and upon filing with the Illinois
Secretary of State). The liability protection afforded by the amendment would
affect only actions brought by the Company or its shareholders, and would not
preclude or limit recovery of damages by third parties.
The proposed amendment protects the Company's directors against personal
liability to the Company or its shareholders for any breach of duty, unless a
judgment or other final adjudication adverse to them establishes (i) a breach of
the duty of loyalty to the Corporation, (ii) acts or omissions in bad faith or
involving intentional misconduct or a knowing violation of the law, (iii) acts
violating the prohibitions contained in Section 8.65 of the Illinois Business
Corporation Act, which Section generally pertains to certain improper
distributions of assets, or (iv) an improper personal benefit to a director to
which he or she was not legally entitled. No claim of the type that would be
affected by the amendment is presently pending or, to the knowledge of
management of the Company, threatened.
If the Illinois Business Corporation Act is hereafter amended to permit
further elimination or limitation of the personal liability of directors, the
amendment would eliminate or limit the personal liability of the directors to
the fullest extent permitted by the Illinois Business Corporation Act as so
amended. This would be the case without any further amendment to the Articles
of Incorporation or any further action by shareholders.
The Board recognizes that present and future directors may benefit from the
adoption of the proposed amendment. The Board believes, however, that the high
level of performance exercised by directors stems from their desire to act in
the
33
<PAGE>
best interests of the Company, and not from a fear of litigants seeking monetary
damages. In the Board's view, therefore, the level of care exercised by
directors would not be lessened.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND THE
ARTICLES OF INCORPORATION CONCERNING DIRECTORS' LIABILITY.
Approval of the proposal requires the affirmative votes of a majority of
the outstanding shares of Company common stock. Abstentions and broker non-
votes will have the same effect as votes against the proposal.
SHAREHOLDER PROPOSAL REQUESTING A REPORT
The Company has received notice of intent to present the following
shareholder proposal for action at the meeting:
"GIVEN that the W.W. Grainger's EEO-1 report can be requested by the
public under the Freedom of Information Act, and that a lack of
supplementary information could result in misinterpretation of
Grainger's EEO conduct;
"GIVEN the new strategy of civil rights groups, such as the NAACP, of
scrutinizing companies with federal contracts to assure that they
comply with affirmative action requirements;
"GIVEN that a clear policy opposing all forms of discrimination is a
sign of a responsible corporation and that a substandard Equal
Employment Opportunity record leaves a company open to expensive legal
action, poor employee morale and even the loss of certain business, it
is in the company's and shareholders' interest to have information on
Grainger's equal employment record publicly available;
34
<PAGE>
"GIVEN that we share the concerns of the 1991 United States
Congressional Civil Rights and Glass Ceiling Acts that '. . .
additional remedies under Federal law are needed to deter harassment
and intentional discrimination in the work place . . . women and
minorities remain underrepresented in management and decision making
positions in business', we support the U.S. Labor Department's
statement '. . . if the CEO is committed to ensuring diversity it can
happen';
"GIVEN that we believe issues related to Equal Employment Opportunity
and Affirmative Action are important to shareholder value, our goal is
to encourage our Board of Directors and CEO to improve Grainger's
Equal Employment record;
"GIVEN that Grainger is a major employer and in a position to take the
lead in ensuring that women and minority employees receive fair
employment opportunities and promotions, we believe a report
containing the basic information requested in this resolution keeps
the issue high on management's agenda;
"GIVEN that the report requests information already gathered for the
purpose of complying with government regulations, it is not an undue
burden or cost. The format of the report requested is not the central
question;
"RESOLVED: The shareholders request the Board to prepare a report at
reasonable cost, available to shareholders and employees reporting on
the following issues. This report, which may omit confidential
information, shall be available by June 1994.
1. A chart identifying employees according to their gender and
race in each of the nine major Equal Employment Opportunity Commission
defined job categories for 1991, 1992, and 1993 listing either numbers
or percentages in each category;
35
<PAGE>
2. A summary description of Affirmative Action policies and
programs to improve EEO performance, including job categories where
women and minorities are under utilized;
3. A description of policies and programs oriented specifically
toward increasing the number of managers who are female and/or
minority;
4. A general description of how Grainger publicizes its
affirmative action policies and programs to merchandise suppliers and
service providers;
5. A description of policies and programs utilizing the
purchase of goods and services from minority and/or female owned
business enterprises."
The name, address, and reported share ownership of each of the various
shareholder proponents may be promptly obtained without charge upon oral or
written request therefor to the Secretary of the Company at its corporate
offices.
THE BOARD RECOMMENDS A VOTE AGAINST THE SHAREHOLDER PROPOSAL REQUESTING A
REPORT.
The Company firmly supports, and believes it is in full compliance with,
federal and state equal employment opportunity laws and regulations. It has a
long established written policy promoting equality of opportunity and
prohibiting discrimination in employment. Its practices and procedures to
ensure equal employment opportunity are an integral part of management. In
addition, the Company has developed affirmative action plans to further ensure
employment opportunities for all qualified individuals and will continue to give
these plans appropriate support and attention.
The Company intends to maintain its practice of responding in a reasonable
fashion to all legitimate concerns of shareholders, and has initiated a dialogue
with respect to this shareholder proposal. This process involved senior
executive communication of information about the relevant Company policies and
procedures.
36
<PAGE>
The Company, however, already is required by law to prepare numerous reports on
numerous subjects and does not believe it in the shareholders' interest to
increase this burden by preparing the requested report. This position is taken
even though the Company may be in full agreement with the ultimate objectives of
the shareholder proponents.
Approval of the proposal requires the affirmative votes of a majority of
the shares of Company common stock represented in person or by proxy at the
meeting. Broker non-votes and abstentions will have the same effect as votes
against the proposal.
37
<PAGE>
OTHER MATTERS
NOTICE REQUIREMENTS
Any shareholder who desires to have a proposal included in the Company's
proxy soliciting material relating to the Company's 1995 annual meeting of
shareholders (in accordance with Rule 14a-8 of Regulation 14A under the
Securities Exchange Act of 1934, as amended) should send to the Secretary of the
Company at its corporate offices a signed notice of intent to submit the
proposal at the meeting. The notice, including the text of the proposal, must
be received at such offices no later than November 25, 1994 in order for the
proposal to be considered for inclusion in such proxy soliciting material.
The Company's By-Laws require that there be furnished to the Chairman of
the Board of the Company written notice with respect to the nomination of a
person for election as a director (other than a person nominated at the
direction of the Board) at a meeting of shareholders. In order for any such
nomination to be proper, the notice must contain certain information concerning
the nominating shareholder and the nominee and be furnished no later than the
date corresponding with the date relating to the submission of notice of intent
to submit a shareholder proposal. (See the preceding paragraph in this regard.)
A copy of the applicable By-Law provisions may be obtained without charge upon
written request to the Secretary of the Company at its corporate offices.
38
<PAGE>
DISCRETIONARY AUTHORITY
The Board does not know of any matters other than those described in this
proxy statement that will be presented for consideration at the meeting. If any
matter not described in this proxy statement should properly be so presented, it
is intended that the proxies will be voted on the matter in accordance with the
judgment of the person or persons voting them.
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE AND SIGN
THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN THE
ACCOMPANYING POSTPAID ENVELOPE.
39
<PAGE>
APPENDIX
Description of omitted graphic material
1. On Inside Front Cover - a map representing location of the Annual Meeting.
2. On pages 7 thru 9 - 10 photos of the Board of Directors nominees.
3. On page 29 - Stock Price Performance graph, which is filed separately under
Form SE.
<PAGE>
COMMON PROXY W.W. GRAINGER, INC. COMMON PROXY
5500 W. Howard St., Skokie, IL 60077
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Proxy for Annual Shareholders' Meeting April 27, 1994
The undersigned hereby appoints James M. Baisley, Jere D. Fluno,
and David W. Grainger, and each of them, proxies of the undersigned with full
power of substitution to represent the undersigned and to vote all of the shares
of the Common Stock of the Company which the undersigned is entitled to vote at
the Annual Meeting of Shareholders of W.W. Grainger, Inc. to be held April 27,
1994 and at any and all adjournments thereof, with all the powers the
undersigned would possess if personally present and voting thereat.
A majority of said proxies or substitutes who shall be present at the
meeting may exercise all powers hereunder. All proxies will be voted as
specified. If no specification is made, the proxy will be voted FOR items 1 and
2. If authority is given to vote for the election of directors, this proxy may
be voted cumulatively for directors as set forth in the proxy statement.
CONTINUED, AND TO BE SIGNED AND DATED ON REVERSE SIDE
<PAGE>
<TABLE>
<S> <C>
1. Election of Directors 3. Proposal to amend the
Articles of Incorporation
Nominees: George R. Baker, Robert E. Elberson, concerning directors'
Jere D. Fluno, Wilbur H. Gantz, David W. Grainger, liability.
Richard L. Keyser, John W. McCarter, Jr.,
James D. Slavik, Harold B. Smith, Fred L. Turner
4. Shareholder proposal
requesting a report.
5. In their discretion upon such other matters
as may properly come before the meeting.
___________________________________________________ Please sign exactly as your name or names appear hereon.
For, except vote withheld from nominees named above Joint owners should each sign personally. If signing in a
fiduciary or representative capacity, give full title
as such.
2. Proposal to ratify appointment
of Grant Thornton as independent Signature: __________________________ Date: ______________
auditors for the year ending Signature: __________________________ Date: ______________
December 31, 1994.
</TABLE>
