8-KMaterial AgreementsRegulation FDExhibits & Filings

W.W. GRAINGER, INC. 8-K Report, Material Agreement (Aug 14, 2006)

Filed August 14, 2006For Securities:GWW

Summary

W.W. Grainger, Inc. (GWW) filed an 8-K report on August 14, 2006, detailing a material definitive agreement and a related disclosure. The primary event is the entry into a new Change in Control Employment Agreement with Group President Y.C. Chen, effective August 11, 2006. This new agreement supersedes his previous one and enhances severance benefits, increasing the lump-sum payment upon a change in control to three times annual compensation, up from two times, and adding a provision for termination within 30 days after the first anniversary of a change in control. This move is consistent with the company's practice of having such agreements in place with its named executive officers and other key employees to ensure retention and stability during potential control transitions. Additionally, the filing includes a Regulation FD disclosure regarding the Company's monthly "Grainger Update" issued on August 14, 2006. This update reiterated the company's previously issued earnings per share projection for 2006, which remains between $4.00 and $4.15. Investors should note that the change in Mr. Chen's agreement aligns with the company's strategy for executive retention, while the reiterated EPS guidance provides a point of reference for the company's financial outlook for the year.

Key Highlights

  • 1W.W. Grainger entered into an updated Change in Control Employment Agreement with Group President Y.C. Chen on August 11, 2006.
  • 2The new agreement increases the severance multiple from two times to three times annual compensation for specified termination events following a change in control.
  • 3The agreement includes a new provision allowing Mr. Chen to receive benefits if he terminates employment for any reason within 30 days after the first anniversary of a change in control.
  • 4This updated agreement replaces Mr. Chen's prior Change in Control Employment Agreement, which was terminated on August 11, 2006.
  • 5The company reiterated its 2006 projected earnings per share (EPS) range of $4.00 to $4.15 in its "Grainger Update" issued on August 14, 2006.
  • 6This filing is consistent with the company's established practice of providing Change in Control Employment Agreements to its executive team.

Frequently Asked Questions

The new Change in Control Employment Agreement with Y.C. Chen is designed to provide enhanced financial protection and incentives to the executive in the event of a change in control of W.W. Grainger. It aims to ensure executive retention and stability by outlining specific benefits and compensation should his employment be terminated under defined circumstances following a change in control.

Mr. Chen's severance package under the new agreement has been significantly enhanced. The lump-sum payment upon termination following a change in control has increased from two times his annual compensation to three times his annual compensation. Additionally, the new agreement includes a provision for him to receive benefits if he terminates employment for any reason within the 30-day period immediately following the first anniversary of a change in control.

No, the reiterated EPS guidance of $4.00 to $4.15 for 2006, as stated in the "Grainger Update," suggests that the company's financial outlook for the year remains consistent with previous projections. This update does not signal a change in expected performance but rather a reaffirmation of their current forecasts.

Yes, the filing states that W.W. Grainger has previously entered into similar Change in Control Employment Agreements with all of its named executive officers and certain other key executives. The agreement with Mr. Chen is substantially the same as those in place for his peers, reflecting a consistent corporate strategy for executive compensation and security.