<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
W.W. GRAINGER, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO]
455 Knightsbridge Parkway, Lincolnshire, IL 60069-3620
(847) 793-9030
March 25, 1999
TO OUR SHAREHOLDERS:
The 1999 annual meeting of shareholders of W.W. Grainger, Inc., an
Illinois corporation, will be held at Company offices located at 5500
W. HOWARD ST., SKOKIE, ILLINOIS (see map overleaf), on Wednesday,
April 28, 1999, at 10 A.M. (CDT).
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 ensure that your
shares will be represented.
Sincerely,
[SIGNATURE]
Richard L. Keyser
Chairman and Chief Executive Officer
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE AND RETURN YOUR PROXY PROMPTLY.
<PAGE>
[MAP - OF CHICAGO AND NILES/SKOKIE, IL AREAS SHOWING LOCATION OF THE ANNUAL
MEETING.]
<PAGE>
[LOGO]
455 Knightsbridge Parkway, Lincolnshire, IL 60069-3620
(847) 793-9030
---------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 28, 1999
The annual meeting of shareholders of W.W. Grainger, Inc. will be held at
Company offices located at 5500 W. HOWARD ST., SKOKIE, ILLINOIS (see map on
previous page), on April 28, 1999, at 10 A.M. (CDT) for the following purposes:
1. To elect twelve directors for the ensuing year;
2. To consider and act upon a proposal to ratify the appointment of
Grant Thornton LLP as independent auditors for the year ending December 31,
1999; and
3. 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 1, 1999 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
Lincolnshire, Illinois
March 25, 1999
<PAGE>
[LOGO]
455 Knightsbridge Parkway, Lincolnshire, IL 60069-3620
(847) 793-9030
March 25, 1999
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 28, 1999, 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, 1999.
VOTING AT THE MEETING
The Board has fixed the close of business on March 1, 1999 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
93,315,991 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. "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.
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
1
<PAGE>
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.
BOARD OF DIRECTORS
ELECTION OF DIRECTORS
Twelve 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 nominees, 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. 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 that 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.
Mr. Robert E. Elberson is retiring from the Board and will not be standing
for re-election at the meeting. Mr. Elberson, whose service to the Company as a
member of the Board spans a period of 17 years, will long be remembered for his
many contributions to the success of the Company.
The following pages contain certain information about the nominees. The
information is as of the printing of this proxy statement. Except for Messrs.
Anderson and Novich, 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.
2
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[PHOTO 1] BRIAN P. ANDERSON, age 48, is Senior Vice President and
Chief Financial Officer of Baxter International Inc., a
global medical products and service company that focuses on
critical therapies for life-threatening conditions. Prior
to assuming these positions in 1998, he served as Baxter's
Vice President, Finance, a position assumed in 1997 after
serving as Controller of Baxter. Previously, Mr. Anderson
served as Baxter's Vice President, Corporate Audit. Before
joining Baxter in 1991, he was a partner in the
international accounting firm of Deloitte & Touche.
[PHOTO 2] GEORGE R. BAKER, age 69, 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 Loral Orion, Inc., The Midland Company,
Reliance Group Holdings, Inc., and Reliance Insurance
Company. He was first elected a director of the Company in
1976 and is a member of the Board Affairs and Nominating
Committee and the Compensation Committee.
[PHOTO 3] JERE D. FLUNO, age 57, is Vice Chairman of the Company. Mr.
Fluno, who joined the Company in 1969, is a member of the
Office of the Chairman. He is also a director of Andrew
Corporation, a member of the Board of Governors of the
Chicago Stock Exchange, Incorporated, and a director of
certain Chicago Stock Exchange subsidiaries. Mr. Fluno was
first elected a director of the Company in 1975.
[PHOTO 4] WILBUR H. GANTZ, age 61, is Chairman and Chief Executive
Officer of PathoGenesis Corporation, a biopharmaceutical
company developing and marketing drugs for infectious
diseases. He is also a director of The Gillette Company,
Harris Bankcorp, Inc., Harris Bankmont, Inc., and Harris
Trust and Savings Bank. Mr. Gantz was first elected a
director of the Company in 1985 and is a member of the
Board Affairs and Nominating Committee and the Compensation
Committee.
3
<PAGE>
[PHOTO 5] DAVID W. GRAINGER, age 71, is the Company's Senior Chairman
of the Board, a position assumed in 1997 after serving as
Chairman of the Board. He was the Company's Chief Executive
Officer until 1995 and President from 1992 to 1994. Mr.
Grainger, who joined the Company in 1952, is a member of
the Office of the Chairman. He was first elected a director
of the Company in 1953.
[PHOTO 6] RICHARD L. KEYSER, age 56, is the Company's Chairman of the
Board, a position assumed in 1997, and Chief Executive
Officer, a position assumed in 1995. Previously, he served
as President and Chief Operating Officer of the Company.
Mr. Keyser, who joined the Company in 1986, is a member of
the Office of the Chairman. He is also a director of Morton
International, Inc. Mr. Keyser was first elected a director
of the Company in 1992.
[PHOTO 7] JOHN W. MCCARTER, JR., age 61, is President and Chief
Executive Officer of The Field Museum of Natural History, a
position assumed in 1996. He served as Senior Vice
President of Booz, Allen & Hamilton Inc., a management
consulting firm, until 1997. Mr. McCarter is also a
director of A.M. Castle & Co., HT Insight Funds, Inc.,
LaSalle Partners Master Trust, and Pittway Corporation, and
a trustee of Harris Insight Funds Trust and LaSalle
Partners Funds, Inc. He was first elected a director of the
Company in 1990 and is Chairman of the Board Affairs and
Nominating Committee.
[PHOTO 8] NEIL S. NOVICH, age 44, is Chairman, President, and Chief
Executive Officer of Ryerson Tull, Inc., the largest metal
distributor and processor in North America. Prior to
assuming the additional office of Chairman earlier in the
year, he served Ryerson Tull as President and Chief
Executive Officer, positions assumed in 1996. Previously,
Mr. Novich served as Ryerson Tull's President and Chief
Operating Officer. Before joining Ryerson Tull in 1994 as
Chief Operating Officer, he was a director of Bain &
Company, an international management consulting firm, and
the head of
that firm's Distribution and Logistics Practice.
4
<PAGE>
[PHOTO 9] JAMES D. SLAVIK, age 46, is President, as well as a
director, of Mark IV Capital, Inc., an investment company
dealing in real estate and corporate investments. Until
1987, he served as an investment real estate broker of
Coldwell Banker Commercial Real Estate Services, a real
estate brokerage company. Mr. Slavik was first elected a
director of the Company in 1987 and is a member of the
Audit Committee and the Board Affairs and Nominating
Committee.
[PHOTO 10] HAROLD B. SMITH, age 65, is Chairman of the Executive
Committee, as well as a director, of Illinois Tool Works
Inc., a manufacturer and marketer of engineered components
and industrial systems and consumables. He is also a
director of 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
Chairman of the Compensation Committee.
[PHOTO 11] FRED L. TURNER, age 66, is Senior Chairman of the Board 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 and Baxter International Inc..
He was first elected a director of the Company in 1984 and
is a member of the Audit Committee and the Compensation
Committee.
[PHOTO 12] JANIECE S. WEBB, age 45, is Senior Vice President of
Motorola, Inc., a leading provider of electronic equipment,
systems, components and services produced for both U.S. and
international markets, and the General Manager of its
Personal Networks Group. Prior to assuming these positions
earlier in the year, she served Motorola as Corporate Vice
President and General Manager of its Internet Connectivity
Solutions Group. Previously, Ms. Webb was a Corporate Vice
President of Motorola and General Manager of the U.S.
Markets Division of its Pan American Cellular Subscriber
Group. She first became a director of the Company in 1995
and is a member of the Audit Committee and the Compensation
Committee.
5
<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD
Seven meetings of the Board were held in 1998. In addition, the directors
acted once 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
following the annual meeting of shareholders.
Directors who presently serve on the Audit Committee are R.E. Elberson
(Chairman), J.D. Slavik, F.L. Turner, and J.S. Webb. The Audit Committee, which
met four times in 1998, makes recommendations to the Board concerning the annual
appointment of the independent auditors, reviews the annual audit plan with the
independent auditors, and reviews the results of the annual audit with the
independent auditors. 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 various 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 J.W. McCarter, Jr. (Chairman), G.R. Baker, W.H. Gantz, and J.D. Slavik. The
Board Affairs and Nominating Committee, which met two times in 1998, 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 corporate
governance matters, and makes initial assessments regarding major issues or
proposals. The Board Affairs and Nominating Committee has not established any
policy or procedure for considering nominees recommended by shareholders.
Directors who presently serve on the Compensation Committee are H.B. Smith
(Chairman), G.R. Baker, W.H. Gantz, F.L. Turner, and J.S. Webb. The Compensation
Committee, which met four times in 1998, oversees the activities of the Company
in the area of compensation and benefits (generally with regard to all employees
and specifically with regard to officers) and reviews and makes recommendations
concerning compensation-related matters to be submitted to the Board and/or
shareholders for approval. The Compensation Committee also acts as the
administration committee under various stock and 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 such director
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.
6
<PAGE>
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 for serving on the Board of
$25,000 per annum, (ii) a retainer fee for serving as chairman of any Board
committee at the rate of $4,000 per annum, and (iii) a fee of $1,000 for each
Board and Board committee meeting attended. The retainer fee for Board service
is paid in the form of an annual award under the Director Stock Plan of
unrestricted shares of Company common stock. The number of shares is equal to
the retainer fee divided by the fair market value of a share of Company common
stock at the time of award, rounded up to the next 10-share increment. Directors
may elect to receive their retainer fees for serving as chairman of a Board
committee and/or their Board and Board committee meeting attendance fees in the
form of stock units under the Director Stock Plan. These stock units, each of
which is intended to be the economic equivalent of a share of Company common
stock, are settled in cash after termination of service as a director or upon a
"change in control" of the Company. In addition, the Company reimburses travel
expenses relating to service as a director.
Directors who are not employees of the Company or any subsidiary thereof
additionally receive under the Director Stock Plan an annual stock option award
to purchase shares of Company common stock. The number of shares covered by each
option is equal to $90,000 divided by the fair market value of a share of
Company common stock at the time of award, rounded up to the next 10-share
increment. The per-share option exercise price is 100% of that value. The
options are fully exercisable upon award and have a 10-year term. Upon death,
disability, or retirement after age 70 or with at least five years of Board
service, the options remain exercisable for six years, but in no case beyond the
original option term. If Board service terminates under any other circumstance,
the options may be exercised only during the first 90 days following the
termination.
Stock ownership guidelines are applicable to directors who are not employees
of the Company or any subsidiary thereof. These guidelines provide for director
ownership, within five years after election, of Company common stock having a
value of at least five times the annual retainer fee for serving on the Board.
Failure to comply with the guidelines will result in ineligibility to receive
awards of stock options under the Director Stock Plan until the guidelines are
met. All directors subject to the guidelines are in compliance with them.
Directors who are employees of the Company or any subsidiary thereof do not
receive any retainer fees for Board or Board committee service, Board or Board
committee attendance fees, or stock options under the Director Stock Plan.
In the ordinary course of business during 1998, 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.
7
<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 1, 1999 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 of 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(3,4,5,6,7) .............................................. 10,763,750 11.53%
5500 W. Howard St.
Skokie, IL 60077
James D. Slavik(3,8,9,10,11,12) ........................................... 8,787,002 9.41%
100 Bayview Circle
Suite 4500
Newport Beach, CA 92660
Brian P. Anderson.......................................................... -0- *
George R. Baker(8)......................................................... 12,604 *
Donald E. Bielinski(13,14,15).............................................. 166,680 *
Wesley M. Clark(13,14,16).................................................. 69,420 *
Robert E. Elberson(8)...................................................... 35,490 *
Jere D. Fluno(13,14,17).................................................... 357,260 *
Wilbur H. Gantz(8)......................................................... 18,027 *
Richard L. Keyser(13,14,18)................................................ 276,120 *
P. Ogden Loux(13,14,19).................................................... 70,180 *
John W. McCarter, Jr.(8,20)................................................ 10,043 *
Neil S. Novich............................................................. -0- *
Harold B. Smith(8,21)...................................................... 40,690 *
Fred L. Turner(8).......................................................... 12,690 *
Janiece S. Webb(8)......................................................... 6,700 *
Directors and Executive Officers as a group(7,8,13,14,22,23)............... 20,998,581 22.27%
</TABLE>
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(1) In some instances, shares are included as to which beneficial ownership
has been disclaimed in reports filed with the Securities and Exchange
Commission.
(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.
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<PAGE>
(4) Includes 1,102,596 shares held by The Grainger Foundation Inc., a
charitable foundation, as to which shares Mr. Grainger has shared voting and
investment power.
(5) Includes 1,524,720 shares held by various family trusts, as to which
shares Mr. Grainger has shared voting and investment power.
(6) Includes 549,270 shares held by various family trusts, as to which shares
Mr. Grainger, alone or with his wife, has voting and investment power.
(7) Excludes 8,694 shares and 10,467 shares which Mr. Grainger and all
directors and executive officers of the Company as a group, respectively,
are deemed to have the economic equivalent of investment power as of
December 31, 1998 by reason of the operation of the Company's supplemental
profit sharing plan.
(8) Includes stock units, each of which is intended to be the economic
equivalent of a share of Company common stock, credited as of December 31,
1998 to accounts of non-employee directors under the Director Stock Plan as
follows: Mr. Baker, 9,804 units; Mr. Elberson, 5,490 units; Mr. Gantz, 8,627
units; Mr. McCarter, 3,843 units; Mr. Slavik, 5,490 units; Mr. Smith, 5,490
units; Mr. Turner, 5,490 units; Ms. Webb, 2,900 units; and all non-employee
directors as a group, 47,134 units. Such units are excluded from the
computations of percentages of shares owned.
(9) Excludes 688 shares held by Mr. Slavik's wife, as to which shares Mr.
Slavik disclaims voting or investment power.
(10) Includes 6,437,360 shares held by certain family-owned corporations, as to
which shares Mr. Slavik has sole voting power and shared investment power.
(11) Includes 1,414,012 shares held by various family trusts, as to which
shares Mr. Slavik has shared voting and investment power.
(12) Includes 166,820 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.
(13) Includes shares that may be acquired within 60 days after March 1, 1999
upon exercise of employee stock options as follows: Mr. Bielinski, 108,820
shares; Mr. Clark, 29,420 shares; Mr. Fluno, 180,060 shares; Mr. Keyser,
161,920 shares; Mr. Loux, 48,240 shares; and all directors and executive
officers of the Company as a group, 781,600 shares. In computing the
percentage of shares owned by each such person and by the group, such shares
were added to the total number of outstanding shares for the separate
calculations.
(14) Includes shares of restricted stock as follows: Mr. Bielinski, 40,000
shares; Mr. Clark, 40,000 shares; Mr. Fluno, 80,000 shares; Mr. Keyser,
100,000 shares; Mr. Loux, 20,000 shares; and all directors and executive
officers as a group, 370,000 shares. Such shares, which are held under the
Company's 1990 Long Term Stock Incentive Plan are not transferable and are
subject to forfeiture during the applicable restricted period.
(15) Includes 8,520 shares as to which Mr. Bielinski has shared voting and
investment power with his wife.
9
<PAGE>
(16) Excludes 4,000 shares held by Mr. Clark's wife, as to which shares Mr.
Clark disclaims voting or investment power.
(17) Includes 88,600 shares as to which Mr. Fluno has shared voting and
investment power with his wife.
(18) Includes 14,100 shares as to which Mr. Keyser has shared voting and
investment power with his wife.
(19) Excludes 400 shares held by Mr. Loux's wife, as to which shares Mr. Loux
disclaims voting or investment power.
(20) Includes 6,200 shares as to which Mr. McCarter has shared voting and
investment power with his wife.
(21) Includes 32,000 shares as to which Mr. Smith has shared voting and
investment power.
(22) Includes 11,192,354 shares as to which members of the group have shared
voting and/or investment power.
(23) Excludes 5,588 shares held by certain family members, as to which shares
members of the group disclaim voting or investment power.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, as amended, the
Company's directors and officers, as well as persons holding more than ten
percent of the Company's common stock, are required to file with the Securities
and Exchange Commission reports concerning their initial ownership of the
Company's equity securities and subsequent changes in that ownership. While all
of the required reports were filed during 1998, Janiece Webb, a director of the
Company, filed after the due date a report disclosing a transaction in April. In
making this statement, the Company has relied solely on written representations
of its directors, officers, and ten percent holders and copies of the reports
that they have filed with the Commission.
10
<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, 1998, 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, 1998, 1997, and 1996:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION ALL OTHER
COMPENSATION(4)
---------------------- ------------------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
AWARDS
------------------------
RESTRICTED STOCK
NAME AND PRINCIPAL POSITION STOCK OPTIONS
(AT 12/31/98) YEAR SALARY BONUS(1) AWARDS(2) (SHARES)(3)
- --------------------------------- --- --------- ----------- ----------- -----------
Richard L. Keyser................ 1998 $ 679,200 $ 678,521 -0- 46,000 $ 218,366
Chairman of the Board and 1997 594,000 550,638 -0- 43,060 188,034
Chief Executive Officer 1996 576,000 587,878 $3,800,000 46,080 196,810
Donald E. Bielinski.............. 1998 $ 372,000 $ 298,411 $1,089,375 17,540 $ 105,684
Group President 1997 343,440 223,870 -0- 15,900 91,753
1996 310,560 221,708 $ 760,000 17,120 89,553
Wesley M. Clark.................. 1998 $ 372,000 $ 291,325 $1,089,375 17,540 $ 105,684
Group President................ 1997 304,000 223,870 -0- 15,900 69,497
1996 230,040 124,359 $ 760,000 12,340 42,248
Jere D. Fluno.................... 1998 $ 521,640 $ 463,216 -0- 27,260 $ 165,954
Vice Chairman 1997 501,600 430,327 -0- 32,320 160,917
1996 487,200 491,610 $3,040,000 34,660 161,796
P. Ogden Loux.................... 1998 $ 300,000 $ 198,126 -0- 13,500 $ 81,976
Senior Vice President, Finance 1997 270,000 162,486 -0- 15,900 64,513
and Chief Financial Officer 1996 231,300 127,728 $ 760,000 12,340 61,387
</TABLE>
- ---------------
(1) Includes amounts paid under the Office of the Chairman Incentive Plan, in
which Messrs. Keyser and Fluno participated for 1998 and 1997, and the
Management Incentive Program.
(2) Represents the fair market value on the date of award of restricted stock
awarded under the Company's 1990 Long Term Stock Incentive Plan. Shares of
restricted stock have the same rights, including dividend and voting rights,
as other shares of Company common stock. As of December 31, 1998, Messrs.
Keyser, Bielinski, Clark, Fluno, and Loux held 100,000, 40,000, 40,000,
80,000, and 20,000 shares of restricted stock, having then-current market
values of $4,162,500, $1,665,000, $1,665,000, $3,330,000, and $832,500,
respectively. The shares are scheduled to vest in November 2006, except for
20,000 shares held by each of Messrs. Bielinski and Clark, which are
scheduled to vest in May 2008, in all cases assuming continuation of
employment. The Plan provides for acceleration of vesting of all outstanding
restricted stock in the event of a "change in control" of the Company. With
respect to Messrs. Keyser and Fluno, the related agreements also provide for
acceleration of vesting on a pro rata basis in the event of death or
disability.
(3) Shares adjusted to reflect the Company's 1998 2-for-1 stock split.
(4) Amounts accrued under the Company's non-contributory profit sharing plan,
in which most Company employees participate, and the related supplemental
profit sharing plan.
11
<PAGE>
STOCK OPTION GRANTS
Set forth below is further information concerning grants of stock options
during the fiscal year ended December 31, 1998 to the Named Executive Officers.
All information has been adjusted to reflect the Company's 1998 2-for-1 stock
split.
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL OPTIONS EXERCISE OR
OPTIONS GRANTED TO BASE PRICE EARLIEST GRANT DATE
GRANTED EMPLOYEES IN (PER EXERCISE EXPIRATION PRESENT
NAME (SHARES) FISCAL 1998 SHARE)(1) DATE(2) DATE VALUE(3)
- --------------------- ----------- --------------- ------------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard L. Keyser.... 46,000 5.27% $ 51.6875 4/29/01 4/28/08 $ 750,030
Donald E.
Bielinski........... 17,540 2.01% $ 51.6875 4/29/01 4/28/08 285,990
Wesley M. Clark...... 17,540 2.01% $ 51.6875 4/29/01 4/28/08 285,990
Jere D. Fluno........ 27,260 3.12% $ 51.6875 4/29/01 4/28/08 444,474
P. Ogden Loux........ 13,500 1.55% $ 51.6875 4/29/01 4/28/08 220,118
</TABLE>
- ---------------
(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 for the business day preceding the date of award.
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 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.
(2) All options were granted under the Company's 1990 Long Term Stock
Incentive Plan on April 29, 1998 and are scheduled to become fully
exercisable three years following the date of award. The Plan provides for
acceleration of exercisability of all outstanding options in the event of a
"change in control" of the Company.
(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 are consistent with those required by Statement of Financial
Accounting Standards No. 123 (Accounting for Stock-Based Compensation) and
include the following:
a. Exercise price of $51.6875.
b. Expected term of 7.0 years.
c. Interest rate of 5.87%.
d. Volatility of 20.13%.
e. Dividend yield of 1.46%.
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.
12
<PAGE>
STOCK OPTION EXERCISES AND HOLDINGS
Set forth below is information relating to stock options exercised by the
Named Executive Officers during the 1998 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, 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT 12/31/98 AT 12/31/98(3)
SHARES ACQUIRED VALUE -------------------------- ---------------------------
NAME ON EXERCISE(1) REALIZED(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ --------------- ------------ ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Richard L. Keyser....... 10,860 $ 838,256 133,640 135,140 $ 1,968,893 $ 551,268
Donald E. Bielinski..... -0- -0- 107,700 50,560 1,914,608 204,383
Wesley M. Clark......... -0- -0- 17,080 45,780 190,663 166,740
Jere D. Fluno........... 19,920 1,286,085 145,400 94,240 2,135,671 414,348
P. Ogden Loux........... -0- -0- 46,540 41,740 765,909 166,740
</TABLE>
- ------------
(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, 1998 of $41.625 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.
OTHER BENEFITS
The Executive Deferred Compensation Plan, an unfunded plan administered by a
committee of management, permitted participants selected by the committee to
elect 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 from deferment 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 the Company reduces
benefits or terminates the Plan, or if there is a "change in 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 the benefits, the
balance will be paid to the participant's designated beneficiary. Although the
initiation of salary payment deferrals has not been permitted for several years
and there were no such deferrals for 1998, Messrs. Keyser,
13
<PAGE>
Bielinski, and Fluno and certain other key executives have deferred salary
payments under the Plan for prior years. If Messrs. Keyser, Bielinski, and Fluno
remain employees of the Company until age 65 and then commence receiving
payments under the Plan, their monthly payments would be $10,509, $3,664, and
$26,207, 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 generally entitled to 120
monthly payments of 50% of the participant's monthly compensation, calculated on
the basis of salary and target bonus under the applicable cash incentive
program. A lump-sum benefit in an amount which, after taxes, generally
approximates the participant's last year's compensation, calculated on the same
basis, is payable to a participant's designated beneficiary upon death after
retirement. In the event of a "change in control" of the Company, the Plan
assumes retirement on that date if the participant is then eligible for
retirement (with the participant being credited with an additional three years
of age and service for this purpose) and provides for a lump-sum payment of the
present value of the post-retirement benefit on the basis of the participant's
death at age 80. All of the Named Executive Officers and certain other key
executives 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 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. Messrs. Keyser, Clark, and
Loux 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, Mr. Fluno (who is eligible)
and Mr. Bielinski (who is not yet eligible because of age) would have received a
separation benefit of $73,032 and $47,312, respectively.
All of the Named Executive Officers and certain other key executives have
entered into Change In Control Employment Agreements with the Company. Under
each Agreement, the executive is entitled to certain benefits if, within a
two-year period following a "change in control" of the Company, (a) the Company
terminates the employment of the executive other than for "cause," (b) the
executive terminates employment with the Company for "good reason," or (c) in
the case of the Named Executive Officers, the executive terminates employment
with the Company for any reason within the 30-day period following the one-year
anniversary of the change in control. Benefits include a lump-sum payment
generally equal to a multiple of the sum of (i) the executive's annual salary,
(ii) the higher of the executive's target annual bonus or the average of the
executive's last three annual bonuses, and (iii) in connection with the
Company's non-contributory profit sharing plans, a percentage of annual salary
and bonus equal to the greater of (x) the highest
14
<PAGE>
percentage of covered compensation contributed by the Company under the plans
for any of the last three fiscal years or (y) 15%. The multiple mentioned above
is three in the case of the Named Executive Officers and two in the case of most
of the other key executives. Benefits additionally include continuation of
health and dental benefits for a number of years equal to the applicable
multiple. Each Agreement further provides that the executive is to be made whole
on an after-tax basis with respect to excise tax due as a consequence of
payments (whether or not under the Agreement) being classified as "parachute
payments" under section 280(G) of the Internal Revenue Code. In certain cases,
the lump-sum payment upon termination is limited under the Agreement to an
amount below which such excise tax would be due.
U.S. employees with whom the Company has not entered into Change In Control
Employment Agreements are generally subject to a Change In Control Severance
Policy. Under the Policy, employees whose employment with the Company is
terminated other than for "cause" or who resign under certain circumstances
within two years following a "change in control" of the Company are entitled to
severance pay and continuation of health and dental benefits in amounts and for
durations that are based upon years of service, pay, and other factors.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD
This report of the Compensation Committee of the Board (the "Committee")
discusses the Company's compensation policy and programs for the executive
officers, including members of the Office of the Chairman, which consists of
Messrs. Keyser, Fluno, and Grainger, respectively the Chairman and Chief
Executive Officer, Vice Chairman, and Senior Chairman.
The Committee administers the Company's executive compensation programs and
recommends to the Board the compensation for all executive officers. In this
connection, the Committee considers information and data supplied by management
and by an independent compensation and benefits consultant. All members of the
Committee are non-employee directors.
Executive Compensation Policy
The purpose of the executive compensation programs 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 goals. The overall program includes variable pay components
which link total executive compensation to the creation of shareholder value
over the long term.
Total compensation for purposes of the Company's total compensation
objective consists of base salary, cash incentive compensation, stock options,
and benefits. When Company performance is at target, the Company's objective is
to pay total compensation at least at the size-adjusted median of a peer group
of companies approved by the Committee. All elements of recurring compensation
are valued to determine the Company's posture relative to the comparator group.
15
<PAGE>
The companies used for compensation comparator purposes are not the same
companies used to compare total shareholder return in the stock price
performance graph. The companies in the stock price performance graph are those
comprising the Dow Jones Electrical Components & Equipment Index. However, the
Company's "market" for executive talent is broader than that index. The
compensation comparator group used is representative of the types of major
companies with whom the Company historically competes for talent.
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 the salary range (where applicable), experience of the
executive, and internal equity issues. After evaluating the competitive market,
a merit increase program for all exempt employees was approved by the Committee
for 1998. Salary adjustments to executive officers that were unrelated to
promotions were consistent with these salary objectives.
In determining the salary compensation of the members of the Office of the
Chairman, the Committee considers the financial and non-financial performance of
the Company, as well as an analysis of their salaries in relation to those for
comparable positions in the comparator group of companies approved by the
Committee.
Cash Incentives
The Management Incentive Plan (MIP) rewards participating executive officers
and other key managers mainly for improvements in economic earnings. The concept
of economic earnings recognizes the fact that capital providers have a required
rate of return on their investment. Economic earnings occur only after the
Company's earnings exceed this required return. The MIP emphasizes the need to
continually improve economic earnings. The basic concept underlying the MIP is
that improved economic earnings result from one or more of the following:
- Increasing the return on existing investments,
- Making new investments that have returns exceeding the Company's cost of
capital, and
- Reducing or eliminating investments that have returns which fail to meet
the Company's cost of capital.
The MIP is structured to provide an appropriate balance between short-term
and long-term results. The program emphasizes the common interests of management
and shareholders with long-term improvements in economic earnings expected to
correspond with long-term improvement 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
16
<PAGE>
percentage of base salary. These target bonuses are established based on a
review of competitive market practice and are similar to targets in prior
programs. The qualitative component consists of a discretionary factor under
which, if used, total bonuses can be adjusted up or down as much as 10% of
participants' base salaries to account for economic or other conditions outside
the participants' control. Annually, actual results are compared to targets to
determine the amount of the bonus earned. Target bonuses under the MIP and
similar programs range from 10% to 90% of base salary.
Economic earnings for 1998 were above target, resulting in a bonus award
that was higher than target and higher than in 1997. Bonuses were calculated
under the MIP formula based on Companywide performance for all participants who
were executive officers. The qualitative discretionary factor described above
was not used in the calculation of this year's bonus payments.
Messrs. Keyser, Fluno, and Grainger participated in the Office of the
Chairman Incentive Plan (OCIP) for 1998. OCIP bonuses, which are limited to an
incentive fund determined by reference to the Company's reported net earnings,
were calculated for the year on the same basis as MIP bonuses.
Stock Option Program
Stock options are awarded at an option price not less than the fair market
value of the underlying Company common stock on the date of award. The stock
option program is 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 option shares awarded at
each level in the organization is designed to provide an economic value that is
competitive with awards made by other companies to those with comparable jobs.
Restricted Stock Award
Effective in November 1996, the Company awarded restricted stock (generally
subject to forfeiture if employment terminates before the end of a 10-year
restricted period) to executive and other officers of the Company, in each case
subject to the execution of a confidentiality and non-competition agreement with
the Company. Similar awards and agreements have been granted to executives who
have been promoted to or otherwise assumed eligible officer positions since the
original award date. Objectives of the awards and agreements are to protect
proprietary Company information, to preserve the Company's competitive
advantages, particularly in termination of employment situations, to align more
closely the interests of executives with those of shareholders, to provide a
strong executive retention incentive, and to provide for executive continuity.
17
<PAGE>
Stock Ownership Guidelines
Ownership in Company stock can encourage executives to consider the
shareholder impact of their decisions and to act to increase shareholder value.
In 1996, the Company established stock ownership guidelines for its officers.
Members of the Office of the Chairman must achieve stock ownership of at least
five times annualized base salary. The Group Presidents must achieve stock
ownership of at least four times annualized base salary. Other officers must
achieve stock ownership of at least three times or two times annualized base
salary. These ownership guidelines must be met within three years of the
establishment of the guidelines or within three years of being named an officer,
whichever comes last. Officers who fail to achieve these ownership levels will
not be eligible to receive any stock-based awards until such time as the
ownership levels are again achieved. The Company believes that these ownership
guidelines are important in aligning the interests of the executive officers of
the Company and the shareholders. All officers subject to the guidelines are in
compliance with them.
Executive Death Benefits
The death benefit component of the executive compensation programs consists
of the Executive Death Benefit Plan, which is discussed in an earlier section.
Other Benefits
Most other benefits, including profit sharing and various welfare benefits,
provided to executives are comparable to those provided to the majority of
salaried and hourly Company employees.
Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code generally disallows a federal
income tax deduction to a public company for compensation over $1 million per
fiscal year paid to the company's chief executive officer and its four other
most highly compensated executive officers serving at the end of that year. Not
subject to the deductibility limit, however, is compensation that qualifies as
"performance-based" compensation. A Company objective is to maximize the
deductibility of compensation under Section 162(m) to the extent doing so is
reasonable and consistent with Company strategies and goals. Awards under the
OCIP and gains on exercises of stock options awarded under the 1990 Long Term
Stock Incentive Plan are considered to be "performance-based" compensation not
subject to the Section 162(m) deductibility limit.
Harold B. Smith, Chairman
George R. Baker
Wilbur H. Gantz
Fred L. Turner
Janiece S. Webb
Members of the Compensation Committee
of the Board of Directors
18
<PAGE>
STOCK PRICE PERFORMANCE
The following stock price performance graph compares the cumulative total
return on an investment in Company common stock with the cumulative total return
of an investment in each of the S&P 500 Stock Index and the Dow Jones Electrical
Components & Equipment Index for the period commencing December 31, 1993 and
ending December 31, 1998. The graph assumes that the value for the investment in
Company common stock and in each index was $100 on December 31, 1993 and that
all dividends were reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
DECEMBER 31,
S&P 500 DOW JONES ELECTRICAL
W.W. GRAINGER, INC. STOCK INDEX COMPONENTS & EQUIPMENT INDEX
<S> <C> <C> <C>
1993 $100 $100 $100
1994 $102 $101 $104
1995 $118 $139 $136
1996 $145 $171 $166
1997 $178 $229 $204
1998 $155 $294 $239
</TABLE>
19
<PAGE>
PROPOSAL TO RATIFY THE APPOINTMENT OF INDEPENDENT AUDITORS
Upon the recommendation of its Audit Committee, the Board has appointed
Grant Thornton LLP as independent auditors of the Company for the fiscal year
ending December 31, 1999, which appointment will be submitted for ratification
at the meeting. Grant Thornton LLP and its predecessors have served as
independent auditors of the Company for approximately 60 years. It is expected
that representatives of Grant Thornton LLP 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.
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 2000 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 the Company's headquarters a signed notice of intent to submit the
proposal at the meeting. The notice, including the text of the proposal, must be
received no later than November 26, 1999 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 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), as well as the
submission of a proposal (other than a proposal submitted at the direction of
the Board), at a meeting of shareholders. In order for the nomination or
submission to be proper, the notice must contain certain information concerning
the nominating or proposing shareholder, and the nominee or proposal, as the
case may be. For a nomination, the notice must be furnished no later than the
date calculated in accordance with the notice requirements referred to in the
preceding paragraph. For a proposal, the notice must be furnished generally not
less than 30 days nor more than 60 days before the meeting. Pursuant to the
By-laws, the Company's 2000 annual meeting of shareholders will be held on April
26, 2000. A copy of the By-laws may be obtained without charge upon written
request to the Secretary of the Company.
20
<PAGE>
The Company expects to relocate its headquarters on or about June 1, 1999.
The new headquarters address will be 100 Grainger Parkway, Lake Forest, IL
60045-5201.
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.
21
<PAGE>
[LOGO]
- --------------------------------------------------------------
NOTICE
of annual
meeting of
shareholders
and PROXY
STATEMENT
April 28, 1999
M Printed on recycled paper.
0945-PS-99
<PAGE>
COMMON PROXY COMMON PROXY
W.W. GRAINGER, INC.
455 Knightsbridge Parkway, Lincolnshire, IL 60069
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Proxy for Annual Shareholders' Meeting, April 28, 1999
The undersigned hereby appoints Richard L. Keyser, 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 on April 28,
1999 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.
- ---------------------------- --------------------------
SEE REVERSE SIDE SEE REVERSE SIDE
- ---------------------------- --------------------------
CONTINUED, AND TO BE SIGNED AND DATED, ON REVERSE SIDE
<PAGE>
/X/ PLEASE MARK VOTES AS IN THIS EXAMPLE.
MANAGEMENT RECOMMENDS A VOTE FOR ITEMS 1 AND 2
1. Election of Directors
NOMINEES: Brian P. Anderson, George R. Baker, Jere D. Fluno,
Wilbur H. Gantz, David W. Grainger, Richard L. Keyser,
John W. McCarter, Jr., Neil S. Novich, James D. Slavik,
Harold B. Smith, Fred L. Turner, Janiece S. Webb
FOR / / / / WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
/ /
---------------------------------------------------
FOR, except vote withheld from nominees named above
2. Proposal to ratify appointment of FOR AGAINST ABSTAIN
Grant Thornton LLP as independent / / / / / /
auditors for the year ending
December 31, 1999.
3. In their discretion upon such other matters as may
properly come before the meeting.
CHECK BOX AT RIGHT IF YOU PLAN TO ATTEND / /
THE MEETING
CHECK BOX AT RIGHT FOR ADDRESS CHANGE AND / /
NOTE AT LEFT
Please sign exactly as your name or names appear hereon. Joint owners should
each sign personally. If signing in a fiduciary or representative capacity,
give full title as such.
Signature_____________________________ Date__________
Signature_____________________________ Date__________
