-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JPyGl++gpgB9AslORSjK7/wnJ/z4A2Jc0xs5dVyek2JRPNT9RUcMDxeuwNnX5GOj xiaXY5fIJq6fbl2rocK9iw== 0000902561-02-000143.txt : 20020414 0000902561-02-000143.hdr.sgml : 20020414 ACCESSION NUMBER: 0000902561-02-000143 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020228 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020228 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GRAINGER W W INC CENTRAL INDEX KEY: 0000277135 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-DURABLE GOODS [5000] IRS NUMBER: 361150280 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05684 FILM NUMBER: 02563063 BUSINESS ADDRESS: STREET 1: 100 GRAINGER PARKWAY CITY: LAKE FOREST STATE: IL ZIP: 60045-5201 BUSINESS PHONE: 847-535-1000 MAIL ADDRESS: STREET 1: 100 GRAINGER PARKWAY CITY: LAKE FOREST STATE: IL ZIP: 60045 8-K 1 form8k.txt =============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of Earliest Event Reported) February 28 , 2002 --------------------------- W.W. Grainger, Inc. - ------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in its Charter) Illinois - ------------------------------------------------------------------------------- (State or Other Jurisdiction of Incorporation) 1-5684 36-1150280 - ------------------------------- ----------------------------------- (Commission File Number) (I.R.S. Employer Identification No.) 100 Grainger Parkway, Lake Forest, Illinois 60045-5201 - ------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) (847) 535-1000 - ------------------------------------------------------------------------------- (Registrant's Telephone Number, Including Area Code) Not Applicable - ------------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) =============================================================================== Item 5. Other Events. On February 28, 2002, W.W. Grainger, Inc., an Illinois corporation ("GWW"), and Mountain Capital Corporation, a Nevada corporation ("MCC"), consummated a transaction whereby MCC sold to GWW substantially all of the assets of MCC, consisting of 4,801,600 shares of common stock, par value $.50 per share, of GWW ("GWW Common Stock") and cash (the "Purchased Assets"), and in exchange for the Purchased Assets, GWW transferred to MCC 4,695,725 shares of GWW Common Stock (the "Acquisition"), upon the terms and subject to the conditions set forth in the Purchase Agreement dated as of February 28, 2002 (the "Purchase Agreement") by and among GWW, MCC and the shareholders of MCC (the "MCC Shareholders"). The number of shares of GWW Common Stock transferred by GWW to MCC reflects a 1.5% discount from the number of shares of GWW Common Stock received by GWW from MCC and reflects certain other adjustments pursuant to a formula set forth in the Purchase Agreement to account for the reimbursement by MCC of expenses incurred by GWW in connection with the Acquisition and the payment by GWW of certain indebtedness of MCC at the closing. Immediately following the Acquisition, MCC distributed all of the shares of GWW Common Stock received from GWW in the Acquisition to the MCC Shareholders in accordance with the terms of a plan of liquidation adopted by the board of directors of MCC and the MCC Shareholders that provides for a complete liquidation of the assets of MCC. In connection with the Acquisition, GWW also entered into (i) an Escrow Agreement dated as of February 28, 2002 (the "Escrow Agreement") by and among GWW, MCC, the MCC Shareholders and American National Bank and Trust Company of Chicago, which provides for, among other things, the pledge by MCC of ten percent (10%) of the shares received by MCC from GWW in the Acquisition (the "Escrow Shares"), and the pledge by the MCC Shareholders of the Escrow Shares, to GWW pursuant to the terms of the Escrow Agreement to serve as security for the indemnification obligations and liabilities of MCC and the MCC Shareholders under the Purchase Agreement and (ii) a Share Transfer Restriction Agreement dated as of February 28, 2002 (the "Share Transfer Restriction Agreement") by and among GWW, the MCC Shareholders and certain other persons and entities listed on the signature pages thereto (the "Other Shareholders"), which provides for, among other things, certain restrictions on the transfer of shares of GWW Common Stock received by the MCC Shareholders in connection with the liquidation of MCC and certain other shares of GWW Common Stock now or hereafter owned by the MCC Shareholders and the Other Shareholders. The Acquisition and the other transactions contemplated by the Purchase Agreement, the Escrow Agreement and the Share Transfer Restriction Agreement were approved by the Board of Directors of GWW based upon the recommendation of The Board Affairs and Nominating Committee of the Board of Directors of GWW. James D. Slavik, a member of the Board of Directors of GWW, was not present at any portion of the meetings of, and did not participate in any of the deliberations of, the Board of Directors of GWW or The Board Affairs and Nominating Committee relating to the review, consideration or approval of the Acquisition or the other transactions contemplated by the Purchase Agreement, the Escrow Agreement and the Share Transfer Restriction Agreement. Mr. Slavik is the President of MCC and one of two directors of MCC. In addition, Mr. Slavik, Mr. Slavik's children and certain other members of the Slavik family own all of the outstanding shares of common stock of MCC either directly or indirectly through family trusts. Mr. Slavik is the trustee or co-trustee of several of these family trusts. 2 The transfer of shares of GWW Common Stock to MCC in connection with the Acquisition and to the MCC Shareholders in connection with the liquidation of MCC was made in reliance upon an exemption from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"). MCC and the MCC Shareholders have represented to GWW that each of them is an "accredited investor" as defined in Rule 501(a) under the Securities Act. The preceding discussion is qualified in its entirety by reference to the Purchase Agreement, the Escrow Agreement and the Share Transfer Restriction Agreement, which agreements are exhibits hereto and incorporated herein by reference. Item 7. Financial Statements and Exhibits. (c) Exhibits. Exhibit No. Document Description ---------- -------------------- 10.1 Purchase Agreement dated as of February 28, 2002 by and among W.W. Grainger, Inc., Mountain Capital Corporation and the shareholders of MCC listed on the signature pages thereto. 10.2 Escrow Agreement dated as of February 28, 2002 by and among W.W. Grainger, Inc., Mountain Capital Corporation, the shareholders of Mountain Capital Corporation and American National Bank and Trust Company of Chicago. 10.3 Share Transfer Restriction Agreement dated as of February 28, 2002 by and among W.W. Grainger, Inc., the shareholders of Mountain Capital Corporation and the persons listed as the "Other Shareholders" on the signature pages thereto. 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: February 28, 2002 W.W. GRAINGER, INC. By: /s/ John L. Howard ------------------------------ Name: John L. Howard Title: Senior Vice President and General Counsel 4 EX-10.1 3 exh101.txt Exhibit 10.1 PURCHASE AGREEMENT BY AND AMONG W.W. GRAINGER, INC., MOUNTAIN CAPITAL CORPORATION AND THE SHAREHOLDERS OF MOUNTAIN CAPITAL CORPORATION LISTED ON THE SIGNATURE PAGES HERETO Dated as of February 28, 2002 =============================================================================== PURCHASE AGREEMENT ------------------ THIS PURCHASE AGREEMENT is made as of the 28th day of February, 2002, by and among W.W. Grainger, Inc., an Illinois corporation ("GWW"), Mountain Capital Corporation, a Nevada corporation ("MCC"), and the shareholders of MCC listed on the signature pages hereto (collectively, the "MCC Shareholders"). W I T N E S S E T H: - - - - - - - - - - A. The sole assets of MCC consist of cash, 4,801,600 shares of GWW Common Stock (as hereinafter defined) and certain Excluded Assets (as hereinafter defined). The MCC Shareholders own all of the issued and outstanding shares of capital stock of MCC. B. MCC and the MCC Shareholders have proposed that GWW and MCC effect a transaction whereby MCC shall transfer to GWW, free and clear of all Liens (as hereinafter defined) and Liabilities (as hereinafter defined), certain assets owned by MCC (not including the Excluded Assets) at the Closing (as hereinafter defined), and GWW shall transfer to MCC, in exchange for those certain assets owned by MCC, a number of shares of GWW Common Stock to be determined in accordance with Section 2.3(a) (the "Acquisition"), following which MCC shall distribute all of its assets to the MCC Shareholders pursuant to a complete liquidation of MCC. C. GWW and MCC have determined that the Acquisition is advisable and in the best interests of GWW and MCC, respectively, and their respective shareholders. D. GWW, MCC and the MCC Shareholders desire to consummate the Acquisition upon the terms and subject to the conditions set forth in this Agreement. E. MCC and the MCC Shareholders intend that the Acquisition and the Liquidation (as hereinafter defined) shall constitute a reorganization within the meaning of Section 368(a)(1)(C) and Section 368(a)(2)(G) of the United States Internal Revenue Code of 1986, as amended (the "Code"). NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement agree as follows: 2 ARTICLE I DEFINITIONS ----------- 1.1 Definitions. The following terms shall have the following meanings for the purposes of this Agreement: "Acquisition" shall have the meaning set forth in the recitals hereto. "Affiliate" shall mean, with respect to any specified Person, (i) any other Person which, directly or indirectly, owns or controls, is under common ownership or control with, or is owned or controlled by, such specified Person, (ii) any other Person which is a director, officer or partner, or is, directly or indirectly, the beneficial owner of ten percent (10%) or more of any class of equity securities, of the specified Person or a Person described in clause (i) of this paragraph, (iii) another Person of which the specified Person is a director, officer or partner or is, directly or indirectly, the beneficial owner of ten percent (10%) or more of any class of equity securities, (iv) another Person in which the specified Person has a substantial beneficial interest or as to which the specified Person serves as trustee or in a similar capacity or (v) any relative or spouse of the specified Person or any of the foregoing Persons, any relative of such spouse or any spouse of any such relative. For purposes of this Agreement, GWW shall not be deemed an Affiliate of MCC or any MCC Shareholder. "Agreement" shall mean this Purchase Agreement, including all exhibits and schedules hereto, as it may be amended from time to time in accordance with its terms. "Arrangement" shall mean any retirement or deferred compensation, incentive compensation, stock, unemployment compensation, vacation pay, severance pay, change of control, bonus, benefit, insurance, medical, health, life, death, hospitalization, or any other fringe benefit plan, agreement or arrangement for any current or former employee, director, consultant or agent, whether pursuant to a Contract, arrangement, custom or informal understanding. "Business Day" shall mean any day of the year other than (i) any Saturday or Sunday or (ii) any other day on which banks located in Chicago, Illinois are authorized or required to be closed for business. "Closing" shall mean the consummation of the Acquisition in accordance with Article VI. "Closing Date" shall have the meaning set forth in Section 6.1. "Closing Market Price" shall mean the closing per share sale price for shares of GWW Common Stock on February 20, 2002 as reported in the table of New York Stock Exchange composite transactions as published in The Wall Street Journal. "Code" shall have the meaning set forth in the recitals hereto. 3 "Contract" shall mean any contract, arrangement, commitment, understanding, lease, sales order, purchase order, agreement, warranty, indenture, mortgage, note, bond, right, warrant or instrument, whether written or verbal. "Determined Expense Amount" shall have the meaning set forth in Section 2.5(b). "Environmental Law" shall mean any Law that imposes liability or standards of conduct concerning, or otherwise relates to, discharges, emissions, releases or threatened releases of noises, odors or any pollutants, contaminants or hazardous or toxic wastes, substances or materials, whether as matter or energy, into ambient air, water or land, or otherwise relating to the manufacture, processing, generation, distribution, use, treatment, storage, disposal, cleanup, transport or handling of pollutants, contaminants or hazardous or toxic wastes, substances or materials, including the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Superfund Amendments and Reauthorization Act of 1986, as amended, the Resource Conservation and Recovery Act of 1976, as amended, the Toxic Substances Control Act of 1976, as amended, the Federal Water Pollution Control Act Amendments of 1972, as amended, the Clean Water Act of 1977, as amended, any so-called "Superfund" or "Superlien" Law (including those already referenced in this definition), the California Hazardous Waste Act, the California Health & Safety Code, Section 25100, et seq. and Section 25300, et seq., the California Hazardous Substance Account Act, and any other Law, including any other California statute, regulation or ordinance, having a similar subject matter. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "ERISA Affiliate" shall mean, with respect to any Person, any corporation, trade or business which, together with such Person, is a member of a controlled group of corporations or a group of trades or businesses under common control within the meaning of sections 414(b) or (c) of the Code. "Escrow Agent" shall mean American National Bank and Trust Company of Chicago, a national banking association. "Escrow Agreement" shall mean the Escrow Agreement, dated as of the date hereof, among GWW, MCC, the MCC Shareholders and the Escrow Agent. "Escrow Liquidation Notice" shall have the meaning set forth in Section 2.6(c). "Escrow Shares" shall have the meaning set forth in Section 2.3(b). "Excluded Assets" shall mean (i) all bank accounts of MCC (including any cash held in such accounts other than the MCC Cash); (ii) minute books, capital stock records, tax records, certificates of incorporation, by-laws, the corporate seal, annual and other corporate reports and other books and records of MCC; (iii) all capital stock to be received by MCC from GWW and all other rights of MCC under this Agreement; (iv) any federal, state or local income tax credits and refunds in favor of MCC; (v) all claims, causes of action, choses in action, rights of recovery and rights of set-off of every kind and nature to the extent related to Liabilities retained by MCC; and (vi) all declared but unpaid dividends on the Old GWW Shares. 4 "Financial Statements" shall mean the unaudited financial statements of MCC as of December 31, 2001, consisting of the balance sheet at such date and the related profit and loss statement for the fiscal year then ended. "Governmental Authority" shall mean the government of the United States or any foreign country or any state or political subdivision of the United States or any foreign country and any other entity, body, agency or authority exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including any quasi-governmental entity established to perform such functions. "GWW" shall have the meaning set forth in the preamble hereto. "GWW Common Stock" shall mean the Common Stock, par value $.50 per share, of GWW. "GWW Expense Reimbursement Amount" shall have the meaning set forth in Section 2.5(b). "GWW Indemnified Parties" shall mean GWW, each of its Subsidiaries and Affiliates and each of their respective officers, directors, shareholders, employees, agents and representatives; provided, that in no event shall MCC or any MCC Shareholder be deemed a GWW Indemnified Party. "GWW Tax Certificate" shall have the meaning set forth in Section 6.3(c). "Hazardous Substance" shall mean any material or substance which (i) constitutes a hazardous substance, toxic substance or pollutant (as such terms are defined by or pursuant to any Environmental Law) or (ii) is regulated or controlled as a hazardous substance, toxic substance, pollutant or other regulated or controlled material, substance or matter pursuant to any Environmental Law. "Indemnified Person" shall mean the Person or Persons entitled to, or claiming a right to, indemnification under Article VII. "Indemnifying Person" shall mean the Person or Persons claimed by the Indemnified Person to be obligated to provide indemnification under Article VII. "IRS" shall mean the United States Internal Revenue Service. "Latest Balance Sheet" shall mean the unaudited balance sheet of MCC dated as of December 31, 2001. "Law" shall mean any law (including the common law), statute, regulation, ordinance, rule, order, decree, judgment, consent decree, settlement agreement or governmental requirement enacted, promulgated, entered into, agreed or imposed by any Governmental Authority. "Liability" shall mean any past, present or future liability or obligation (whether known or unknown, whether asserted or unasserted, whether absolute, fixed, contingent or otherwise, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due), including any liability or obligation for Taxes. 5 "Lien" shall mean any lien, mortgage, charge, restriction, pledge, security interest, option, lease, sublease or right of any third party, other than any restriction arising under federal or state securities laws. "Liquidation" shall have the meaning set forth in Section 2.6(a). "Liquidation Notice" shall have the meaning set forth in Section 2.6(b). "Loss" or "Losses" shall mean any and all losses, Liabilities, costs, claims, damages, penalties and expenses (including reasonable attorneys' fees and expenses and reasonable costs of investigation and litigation). In the event any of the foregoing are indemnifiable hereunder, the terms "Loss" and "Losses" shall include any and all reasonable attorneys' fees and expenses and reasonable costs of investigation and litigation incurred by the Indemnified Person in enforcing such indemnity. The amount of any Loss or Losses incurred or suffered by the Indemnified Person shall be calculated after giving effect to (i) any insurance proceeds received by the Indemnified Person with respect to such Loss or Losses and (ii) any net Tax benefit or detriment realized by the Indemnified Person arising from the facts or circumstances giving rise to such Loss or Losses or arising from indemnification for such Loss or Losses. "MCC" shall have the meaning set forth in the preamble hereto. "MCC Cash" shall have the meaning set forth in Section 2.1. "MCC Common Stock" shall have the meaning set forth in Section 3.4(a). "MCC Escrow Certificates" shall have the meaning set forth in Section 2.3(b). "MCC Representative" shall have the meaning set forth in Section 8.13. "MCC Shareholder" shall have the meaning set forth in the preamble hereto. "MCC Shareholder Escrow Certificate" shall have the meaning set forth in Section 2.6(c). "New GWW Shares" shall have the meaning set forth in Section 2.3(a). "Old GWW Shares" shall have the meaning set forth in Section 2.1. "Permit" shall mean any permit, license, approval, consent or other authorization required or granted by any Governmental Authority. "Person" shall mean any individual, corporation, proprietorship, firm, partnership, limited partnership, limited liability company, trust, association or other entity. 6 "Plan" shall mean any "employee welfare benefit plan" or "employee pension benefit plan" as those terms are respectively defined in sections 3(1) and 3(2) of ERISA, or any "multiemployer plan" (as defined in section 3(37) of ERISA). "Plan of Liquidation" shall have the meaning set forth in Section 3.11. "Pledge" shall mean the pledge of the Old GWW Shares by MCC to Union Bank as collateral security for MCC's indebtedness to Union Bank under the Union Bank Credit Facility pursuant to the Security Agreement (Investment Securities), dated as of June 9, 2000, between MCC and Union Bank. "Purchased Assets" shall have the meaning set forth in Section 2.1. "Related Agreement" shall have the meaning set forth in Section 7.1. "SEC Filings" shall have the meaning set forth in Section 3.17. "Securities Act" shall have the meaning set forth in Section 3.17. "Securities Act Legend" shall mean the legend set forth in Section 2.10(i). "Share Transfer Restriction Agreement" shall mean the Share Transfer Restriction Agreement, dated as of the date hereof, among GWW, the MCC Shareholders and the other signatories thereto. "Share Transfer Restriction Agreement Legend" shall mean the legend set forth in Section 2.10(ii). "Subsidiary" shall mean, with respect to any Person, any corporation or other entity, whether incorporated or unincorporated, of which (i) such Person or any other Subsidiary of such Person is a general partner or (ii) at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation or other entity is, directly or indirectly, owned or controlled by such Person or by any one or more of its Subsidiaries, or by such Person and any one or more of its Subsidiaries. "Taxes" shall mean all taxes, charges, fees, duties (including customs duties), levies or other assessments, including income, gross receipts, net proceeds, ad valorem, turnover, real and personal property (tangible and intangible), sales, use, franchise, excise, goods and services, value added, stamp, leasing, lease, user, transfer, fuel, excess profits, occupational, interest equalization, windfall profits, severance, license, payroll, environmental, capital stock, disability, employee's income withholding, other withholding, unemployment and Social Security taxes, which are imposed by any Governmental Authority, and such term shall include any interest, penalties or additions to tax attributable thereto. "Tax Return" shall mean any report, return or other information required to be supplied to a Governmental Authority in connection with any Taxes. 7 "Union Bank" shall mean Union Bank of California, N.A. "Union Bank Closing Confirmation" shall have the meaning set forth in Section 2.4. "Union Bank Credit Facility" shall mean the Loan Agreement, dated as of June 9, 2000, between MCC and Union Bank and the revolving promissory note of MCC related thereto, dated as of June 9, 2000, in the original principal amount of $3 million. "Union Bank Debt Amount" shall have the meaning set forth in Section 2.4. "Union Bank Notice" shall have the meaning set forth in Section 2.4. 1.2. Interpretation. The headings preceding the text of Articles and Sections included in this Agreement and the headings to Schedules attached to this Agreement are for convenience only and shall not be deemed part of this Agreement or be given any effect in interpreting this Agreement. The use of the masculine, feminine or neuter gender or the singular or plural form of words herein shall not limit any provision of this Agreement. The use of the terms "including" or "include" shall in all cases herein mean "including, without limitation" or "include, without limitation," respectively. Reference to any Person includes such Person's successors and assigns to the extent such successors and assigns are permitted by the terms of any applicable agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually. Reference to any agreement (including this Agreement), document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms hereof. Reference to any Law means such Law as amended, modified, codified, replaced or re-enacted, in whole or in part, including rules, regulations, enforcement procedures and any interpretations promulgated thereunder. Underscored references to Articles, Sections, Subsections, Exhibits or Schedules shall refer to those portions of this Agreement. The use of the terms "hereunder," "hereof," "hereto" and words of similar import shall refer to this Agreement as a whole and not to any particular Article, Section or clause of or Exhibit or Schedule to this Agreement. No specific representation, warranty or covenant contained herein shall limit the generality or applicability of a more general representation, warranty or covenant contained herein. A breach of or inaccuracy in any representation, warranty or covenant shall not be affected by the fact that any more general or less general representation, warranty or covenant was not also breached or inaccurate. ARTICLE II ACQUISITION; RELATED TRANSACTIONS --------------------------------- 2.1. Sale and Purchase of Purchased Assets. Subject to the terms and conditions of this Agreement, at and as of the Closing, MCC shall sell, assign, transfer and deliver to GWW, free and clear of all Liens and Liabilities, 4,801,600 shares of GWW Common Stock (the "Old GWW Shares") and cash in such amount as MCC shall specify to GWW in writing at least two Business Days prior to the Closing Date (the "MCC Cash," and together with the Old GWW Shares, the "Purchased Assets"), and GWW shall purchase, and accept the assignment, transfer and delivery of, the Purchased Assets. 8 2.2. Delivery of Purchased Assets by MCC. At the Closing, MCC shall effect the sale of the Purchased Assets to GWW by delivering to GWW (i) certificates registered in the name of MCC representing all of the Old GWW Shares, which certificates shall be duly endorsed for transfer or accompanied by duly executed stock powers and (ii) the MCC Cash, which shall be delivered to GWW by electronic wire transfer to such account or accounts as GWW shall specify to MCC in writing prior to the Closing Date. 2.3. Payment for Purchased Assets by GWW. (a) At the Closing, as aggregate and complete consideration for the sale of the Purchased Assets by MCC, GWW shall (i) pay to Union Bank the Union Bank Debt Amount pursuant to Section 2.4 and (ii) transfer to MCC a number of shares of GWW Common Stock, consisting entirely of shares held in the treasury of GWW ( the "New GWW Shares"), equal to the number of Old GWW Shares less the sum of (A) a number equal to one and one-half percent (1.50%) of the number of the Old GWW Shares, (B) a number equal to the GWW Expense Reimbursement Amount divided by the Closing Market Price and (C) a number equal to the Union Bank Debt Amount divided by the Closing Market Price. (b) GWW shall effect the delivery of the New GWW Shares to MCC by delivering (i) to MCC certificates registered in the name of MCC representing ninety percent (90%) of the New GWW Shares and (ii) to the Escrow Agent, on behalf of MCC, certificates registered in the name of MCC (the "MCC Escrow Certificates") representing ten percent (10%) of the New GWW Shares (the "Escrow Shares"), in each case containing the Securities Act Legend and the Share Transfer Restriction Agreement Legend. Contemporaneous with such deliveries, MCC shall deliver to the Escrow Agent such reasonable number of duly executed stock powers (undated and in blank, with Medallion guarantee) relating to the Escrow Shares as GWW shall request. 2.4. Payment of Union Bank Loan by GWW. At or prior to the Closing, MCC shall cause Union Bank to provide a written notice (the "Union Bank Notice") to GWW and MCC that identifies the total amount necessary to pay in full all outstanding indebtedness (including principal, interest and any prepayment fee) of MCC to Union Bank under the Union Bank Credit Facility as of the Closing Date (the "Union Bank Debt Amount") and sets forth wire transfer instructions for payment of the Union Bank Debt Amount. At the Closing, GWW shall pay to Union Bank, for the account of MCC, an amount equal to the Union Bank Debt Amount by electronic wire transfer to such account or accounts specified in the Union Bank Notice. Promptly upon Union Bank's receipt of the Union Bank Debt Amount, MCC shall cause Union Bank to deliver to MCC and GWW written confirmation that (i) all indebtedness of MCC to Union Bank (including all Liabilities of MCC under the Union Bank Credit Facility, including any prepayment fee) has been paid in full and (ii) all Liens upon the Old GWW Shares (including the Pledge) under the Union Bank Credit Facility and under any and all other Contracts to which Union Bank is a party or of which Union Bank is a beneficiary, have been satisfied and released (the "Union Bank Closing Confirmation"). 9 2.5. Payment of Transaction Expenses by MCC. (a) MCC and the MCC Shareholders jointly and severally shall reimburse GWW for all of GWW's reasonable out-of-pocket costs and expenses (including legal, investment banking, accounting, auditing, transfer agent and other advisory or professional fees and expenses) paid and to be paid to third parties, and documented in summary form by GWW to the reasonable satisfaction of MCC, in connection with this Agreement, the Escrow Agreement and the Share Transfer Restriction Agreement and the transactions contemplated hereby and thereby. MCC shall also pay all sales, use, stamp, transfer, service, recording and like Taxes, if any, imposed by any Governmental Authority in connection with the transfer and assignment of the Old GWW Shares or the New GWW Shares. (b) Not later than February 21, 2002, GWW and MCC shall make a joint good faith determination of all known reimbursable costs and expenses incurred and to be incurred by GWW in connection with the Acquisition (the "Determined Expense Amount"). The MCC Cash to be received by GWW at Closing shall be applied to MCC's obligation to reimburse GWW for the Determined Expense Amount. In the event that the MCC Cash is less than the Determined Expense Amount, GWW and MCC shall calculate the remainder of the Determined Expense Amount less the MCC Cash, and such remainder (the "GWW Expense Reimbursement Amount") shall be used to calculate the number of New GWW Shares to be transferred by GWW to MCC as provided in Section 2.3(a) and MCC's obligation to reimburse GWW for the GWW Expense Reimbursement Amount shall be deemed thereby satisfied. Other than as provided in the next sentence, nothing in this Section 2.5(b) shall limit or otherwise affect the obligation of MCC and the MCC Shareholders to reimburse GWW for costs, expenses and other amounts described in Section 2.5(a) in excess of the Determined Expense Amount. MCC and the MCC Shareholders shall have no obligation to reimburse GWW for any legal, investment banking, accounting, auditing, transfer agent or other advisory or professional fees and expenses beyond those included in the Determined Expense Amount; provided, however, that nothing in this Section 2.5 shall limit or otherwise affect (i) the obligations of MCC and the MCC Shareholders to indemnify the GWW Indemnified Parties for any and all such fees and expenses that represent Losses incurred or suffered on or after the date hereof by any or all of the GWW Indemnified Parties pursuant to Section 7.2 or (ii) the obligations of the MCC Shareholders to indemnify the GWW Indemnified Parties for any and all such fees and expenses that represent Losses (as defined in the Share Transfer Restriction Agreement) incurred or suffered on or after the date hereof by any or all of the GWW Indemnified Parties pursuant to Section 8.2 of the Share Transfer Restriction Agreement. 2.6. Liquidation; Replacement of Escrow Certificates. (a) At the Closing, immediately following the consummation of the Acquisition and MCC's and the Escrow Agent's receipt of the certificates representing the New GWW Shares pursuant to Section 2.3(b), MCC may transfer and distribute all of its assets, consisting of the New GWW Shares and the Excluded Assets, to the MCC Shareholders pursuant to a complete liquidation of MCC as provided in the Plan of Liquidation of MCC (the "Liquidation"). (b) In consummation of the Liquidation, MCC shall deliver to GWW (i) a written notice to GWW confirming that the Liquidation has become effective and setting forth the number of New GWW Shares (other than the Escrow Shares) that each MCC Shareholder is entitled to receive in connection with the Liquidation (the "Liquidation Notice") and (ii) certificates registered in the name of MCC representing all of the New GWW Shares (other than the Escrow Shares), which certificates shall be duly endorsed for transfer or accompanied by duly executed stock powers. As soon as practicable following GWW's receipt of the Liquidation Notice and the certificates representing the New GWW Shares (other than the Escrow Shares), GWW shall deliver to each MCC Shareholder one or more certificates registered in the name of each such MCC Shareholder, containing the Securities Act Legend and the Share Transfer Restriction Agreement Legend, representing the number of New GWW Shares (other than the Escrow Shares) entitled to be received by such MCC Shareholder as designated by MCC pursuant to the Liquidation Notice. 10 (c) MCC shall effect the distribution of the Escrow Shares to the MCC Shareholders in the Liquidation by (i) delivering to GWW and the Escrow Agent a written notice confirming that the Plan of Liquidation has become effective and setting forth the number of Escrow Shares that each MCC Shareholder is entitled to receive in connection with the Liquidation (the "Escrow Liquidation Notice") and (ii) delivering to GWW such reasonable number of duly executed stock powers (undated and in blank, with Medallion guarantee) from each MCC Shareholder as GWW shall request, which stock powers shall relate to the Escrow Shares to be received by such MCC Shareholder as designated by MCC pursuant to the Escrow Liquidation Notice. As soon as practicable following GWW's receipt of the Escrow Liquidation Notice and the stock powers from each MCC Shareholder relating to the Escrow Shares, (i) GWW shall deliver to the Escrow Agent the certificates evidencing the Escrow Shares to which the MCC Shareholders are entitled as designated by MCC pursuant to the Escrow Liquidation Notice (each, an "MCC Shareholder Escrow Certificate"), accompanied by each MCC Shareholder's duly executed stock powers relating to the Escrow Shares, which certificates shall replace the MCC Escrow Certificates held by the Escrow Agent in the Escrow Fund (as defined in the Escrow Agreement) and (ii) GWW and the Escrow Agent shall cause the MCC Escrow Certificates to be cancelled. 2.7. Escrow Agreement. The Escrow Shares represented by the MCC Escrow Certificates shall be pledged by MCC to GWW pursuant to the terms of the Escrow Agreement to serve as security for the obligations and liabilities of MCC and the MCC Shareholders set forth in Article VII. The Escrow Shares represented by the MCC Shareholder Escrow Certificates shall be pledged by each such MCC Shareholder to GWW pursuant to the terms of the Escrow Agreement to serve as security for the obligations and liabilities of MCC and the MCC Shareholders set forth in Article VII. 2.8. No Liabilities Assumed. Notwithstanding the terms of Section 2.4 and notwithstanding anything else in this Agreement, neither GWW nor any of its Affiliates shall assume or otherwise be liable in respect of, or be deemed to have assumed or otherwise be liable in respect of, any debt, obligation or other Liability of, or claim against, MCC or any of its Affiliates or shareholders whatsoever, including (i) any Liability of MCC to Union Bank or to any other Person and (ii) any Liability for Taxes of MCC or any of its Affiliates or shareholders. 2.9. No Fractional Shares. (a) No certificates representing fractional shares of GWW Common Stock shall be issued in connection with the Acquisition. 11 (b) In lieu of the transfer by GWW to MCC of any fractional New GWW Shares as payment for the Purchased Assets in the Acquisition, the number of New GWW Shares resulting from the calculation set forth in Section 2.3(a) shall be rounded up to the nearest whole share. (c) In lieu of the distribution by MCC to the MCC Shareholders of any fractional New GWW Shares in connection with the Liquidation, MCC shall specify the manner of distributing the New GWW Shares to the MCC Shareholders such that each MCC Shareholder shall receive a whole number of New GWW Shares. (d) In lieu of the deposit by GWW, on behalf of MCC or the MCC Shareholders, as the case may be, with the Escrow Agent of any fractional New GWW Shares designated as Escrow Shares in connection with the Escrow Agreement, the number of shares to be so deposited as Escrow Shares thereunder shall be rounded up to the nearest whole share. The Escrow Liquidation Notice provided by MCC to GWW and the Escrow Agent upon the consummation of the Liquidation shall provide for each MCC Shareholder to be entitled to receive a whole number of Escrow Shares. 2.10. Legends. For so long as the restrictions described below are applicable to such shares as determined by GWW in GWW's reasonable discretion, each certificate of GWW Common Stock representing New GWW Shares (including the Escrow Shares) shall be stamped or otherwise imprinted with legends in substantially the following forms: (i) Securities Act Legend: "These securities have been obtained from the issuer in a transaction not involving a public offering and have not been registered under and are subject to the restrictions on resale pursuant to the Securities Act of 1933 and state securities laws." (ii) Share Transfer Restriction Agreement Legend: "The sale, transfer or other disposition of the shares represented by this certificate prior to February 28, 2012 is subject to, and may not be made except in compliance with, the conditions specified in a Share Transfer Restriction Agreement with W.W. Grainger, Inc. (the "Company"). A copy of the Share Transfer Restriction Agreement is on file and may be inspected at the principal office of the Company and will be furnished by the Company to the holder hereof upon request and without charge." ARTICLE III REPRESENTATIONS AND WARRANTIES OF MCC AND THE MCC SHAREHOLDERS ------------------------------- MCC and the MCC Shareholders jointly and severally represent and warrant to GWW, as of the date of this Agreement and as of the Closing Date (as if such representations and warranties were remade on the Closing Date), as set forth below. The information disclosed on any Schedule attached hereto shall be deemed to relate solely to the section of this Article III to which such Schedule relates and shall not be deemed to relate to any other sections to which such disclosures may apply unless such disclosure is cross-referenced in the Schedule(s) relating to such other section(s), and only to the extent that the applicable information or risk is described. 12 3.1. Due Incorporation; Subsidiaries. (a) MCC is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada, with all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. MCC is not, and never has been, required to be licensed or qualified to do business as a foreign corporation in any jurisdiction. Except as described in Schedule 3.1(a), MCC has no, and never has had any, direct or indirect subsidiaries, either wholly or partially owned. Except for the Old GWW Shares and except as described in Schedule 3.1(a), MCC does not hold, and never has held, any direct or indirect economic, voting, equity or management interest in any Person and does not own, and never has owned, directly or indirectly, any security issued by any Person. True, correct and complete copies of the articles of incorporation and by-laws, and, to the best of MCC's and the MCC Shareholders' knowledge, all minutes of all meetings (or written consents in lieu of meetings) of the board of directors (and all committees thereof) and the shareholders of MCC have been delivered to GWW. To the best of MCC's and the MCC Shareholders' knowledge, all action taken by the board of directors (and all committees thereof) and the shareholders of MCC is reflected in such minutes and written consents. (b) Each MCC Shareholder that is not a natural person is an entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. 3.2. Due Authorization. (a) MCC has full power and authority to execute, deliver and perform this Agreement and the Escrow Agreement and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by MCC of this Agreement and the Escrow Agreement, and the consummation by MCC of the transactions contemplated hereby and thereby, have been duly and validly approved by its board of directors and its shareholders, and no other actions or proceedings on the part of MCC are necessary to authorize this Agreement or the Escrow Agreement or the transactions contemplated hereby and thereby. MCC has duly and validly executed and delivered this Agreement and the Escrow Agreement. This Agreement and the Escrow Agreement constitute legal, valid and binding obligations of MCC, in each case, enforceable in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar laws in effect that affect the enforcement of creditors' rights generally and by equitable limitations on the availability of specific remedies. (b) Each MCC Shareholder that is not a natural person has full power and authority to execute, deliver and perform this Agreement and the Escrow Agreement and to consummate the transactions contemplated hereby and thereby. Each MCC Shareholder that is a natural person has the legal capacity, power and authority to execute, deliver and perform this Agreement and the Escrow Agreement and to consummate the transactions contemplated hereby and thereby. The trustee of each MCC Shareholder that is a trust has the legal capacity, power and authority, on behalf of the trust, to execute, deliver and perform this Agreement and the Escrow Agreement and to consummate the transactions contemplated hereby and thereby. Each MCC Shareholder has taken all action required by law, such MCC Shareholder's organizational or governing documents (if applicable), or otherwise to authorize the execution, delivery and performance of this Agreement and the Escrow Agreement and the consummation by such MCC 13 Shareholder of the transactions contemplated hereby and thereby. Each MCC Shareholder has duly and validly executed and delivered this Agreement and the Escrow Agreement. This Agreement and the Escrow Agreement constitute legal, valid and binding obligations of each MCC Shareholder, in each case, enforceable in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar laws in effect that affect the enforcement of creditors' rights generally and by equitable limitations on the availability of specific remedies. 3.3. Consents and Approvals; Authority. (a) Except as described in Schedule 3.3(a), no consent, authorization or approval of, filing or registration with, waiver of any right of first refusal or first offer from, or cooperation from, any Governmental Authority or any other Person is necessary in connection with the execution, delivery and performance by MCC and each MCC Shareholder of this Agreement or the Escrow Agreement or the consummation by MCC and each MCC Shareholder of the transactions contemplated hereby or thereby. (b) The execution, delivery and performance by MCC and each MCC Shareholder of this Agreement and the Escrow Agreement, and the consummation by MCC and the MCC Shareholders of the transactions contemplated hereby and thereby, do not and will not (i) violate any Law applicable to or binding on MCC or any MCC Shareholder, or any of their respective assets or properties; (ii) violate or conflict with, result in a breach or termination of, constitute a default or give any third party any additional right (including a termination right) under, permit cancellation of, result in the creation of any Lien upon any of the assets or properties of MCC or any MCC Shareholder under, or result in or constitute a circumstance which, with or without notice or lapse of time or both, would constitute any of the foregoing under, any Contract to which MCC or any MCC Shareholder is a party or by which MCC or any MCC Shareholder or any of their respective assets or properties are bound; (iii) permit the acceleration of the maturity of any indebtedness of MCC or any MCC Shareholder or indebtedness secured by any of their respective assets or properties; or (iv) violate or conflict with any provision of the articles of incorporation, by-laws or similar organizational instruments of MCC or any MCC Shareholder. 14 3.4. Capitalization. (a) The authorized capital stock of MCC consists of (i) 200,000 shares of Common Stock, $1.00 par value per share (the "MCC Common Stock"), of which 100,000 are currently issued and outstanding and (ii) 300,000 shares of preferred stock, $1.00 par value per share, none of which are currently issued and outstanding. All of the shares of MCC Common Stock (i) are validly issued, fully paid and nonassessable, (ii) are, and when issued were, free of preemptive rights and (iii) are free and clear of any and all Liens. Schedule 3.4(a) sets forth (i) the name, address and taxpayer identification number of each legal and beneficial holder of MCC Common Stock and (ii) the number and percentage of the outstanding shares of MCC Common Stock held by each such holder. There are no shares of capital stock of MCC held in the treasury of MCC and no shares of capital stock of MCC are currently reserved for issuance for any purpose or upon the occurrence of any event or condition. (b) There are no shares of capital stock or other securities (whether or not such securities have voting rights) of MCC issued and outstanding or any subscriptions, options, warrants, calls, rights, convertible securities or other Contracts of any character obligating MCC or any MCC Shareholder, or obligating any MCC Shareholder or any of his, her or its Affiliates to cause MCC, to issue, transfer or sell, or cause the issuance, transfer or sale of, any shares of capital stock or other securities (whether or not such securities have voting rights) of MCC. Except for this Agreement, there are no outstanding obligations (contingent or otherwise) of MCC or any MCC Shareholder that relate to the purchase, sale, issuance, repurchase, redemption, acquisition, retirement, transfer, disposition, holding or voting of any shares of capital stock or other securities of MCC or the management or operation of MCC. No Person has any right to participate in, or receive any payment based on any amount relating to, the revenue, income, value or net worth of MCC or any component or portion thereof, or any increase or decrease in any of the foregoing. There are no stock appreciation, phantom stock or similar rights with respect to MCC. There are no voting agreements, voting trust agreements, proxies or shareholder or similar agreements relating to any capital stock of MCC. 3.5. Title to Purchased Assets. Except for the Pledge, MCC owns all of the Old GWW Shares beneficially and of record, and has full power and authority to convey, free and clear of all Liens and Liabilities, the Purchased Assets. At the Closing, upon (i) the delivery and transfer by MCC to GWW of the MCC Cash and the certificates representing the Old GWW Shares, (ii) the delivery and transfer by GWW to MCC and the Escrow Agent, as provided in Section 2.3(b), of certificates for the New GWW Shares, (iii) the payment by GWW of the Union Bank Debt Amount and (iv) Union Bank's release of the Old GWW Shares from the Pledge on the Closing Date as provided in Section 2.4, MCC will convey to GWW, and GWW will receive, good, valid and marketable title to the Purchased Assets, free and clear of all Liens and Liabilities (other than those which arise out of actions taken exclusively by GWW). The assignments, endorsements, stock powers and other instruments of transfer delivered by MCC to GWW at the Closing will be sufficient to transfer to GWW the entire interest, legal and beneficial, in the Old GWW Shares. Except for this Agreement, there are no subscriptions, options, warrants, calls, conversion or other rights, commitments or Contracts of any nature obligating MCC or any MCC Shareholder or any Affiliate of MCC or any MCC Shareholder to transfer or sell, or cause the transfer or sale of, any Old GWW Shares or otherwise relating to the sale or other disposition of any Purchased Assets. There are no voting agreements, voting trust agreements, proxies or shareholder or similar agreements relating to the Old GWW Shares. 3.6. Financial Statements; Undisclosed Liabilities. (a) The Financial Statements are set forth in Schedule 3.6(a) and present fairly the financial position, assets and liabilities of MCC as of the date thereof and the revenues and expenses of MCC for the period covered thereby. The Financial Statements are in accordance with the books and records of MCC and do not reflect any transactions that are not bona fide transactions. 15 (b) Except as set forth in the Latest Balance Sheet, which is set forth in Schedule 3.6(a), or as described in Schedule 3.6(b), to the best of MCC's and the MCC Shareholders' knowledge, (i) MCC has no material debts, obligations or other Liabilities of any kind whatsoever, (ii) there is no valid basis for the assertion against MCC of any material debt, obligation or other Liability, (iii) there are no existing or foreseeable events, conditions, situations or sets of circumstances which could reasonably be expected to result in any debts, obligations or other Liabilities of MCC in excess of $100,000 in the aggregate and (iv) during the past five years, MCC has not had any debts, obligations or other Liabilities in excess of $1 million in the aggregate. 3.7. Business; Assets; Property. Except as described in Schedule 3.7, MCC does not conduct or engage in, and never has conducted or engaged in, any business, activity, operation or transaction of any kind whatsoever. MCC's assets consist solely of the Purchased Assets and the Excluded Assets. Except as described in Schedule 3.7, MCC has never purchased, owned, leased or sold any assets, products, services or property (including any real property or tangible or intangible personal property) of any kind whatsoever. MCC has never operated under any name other than Mountain Capital Corporation. 3.8. Contracts. Schedule 3.8 is an accurate and complete list of all the Contracts to which MCC is a party or to which MCC, the Purchased Assets or any other assets or properties owned by MCC is subject. MCC has delivered to GWW accurate and complete copies of each document listed on Schedule 3.8 and a complete and accurate written description of each oral arrangement so listed. 3.9. Labor Matters; Employee Benefit Plans. (a) MCC does not have, and never has had, any employees. No Person is or ever has been entitled to compensation from MCC for service as a director, officer, employee, independent contractor or otherwise, or is or ever has been entitled to any severance pay, lump sum or other payment, compensation or other remuneration from MCC. (b) Neither MCC nor any ERISA Affiliate of MCC maintains or contributes to, has ever maintained or contributed to, or has or ever has had any Liability with respect to, any Plan or Arrangement. 3.10. Taxes. All federal, state, provincial, territorial, municipal, local and foreign income, corporation and other Tax Returns have been filed for MCC (or will be filed or made on or prior to the due dates therefor) for all periods through and including the Closing Date as required by applicable Law. All Taxes shown as due on all such Tax Returns have been paid (or will be paid on or prior to the due dates therefor). Each such Tax Return is true, accurate and complete, and MCC has no, nor will MCC have any, additional liability for Taxes with respect to any Tax Return heretofore filed or which was required by Law to be filed. There are no Tax Liens (other than Liens for current Taxes not yet due and payable) upon any of the Purchased Assets. All Taxes that MCC is required by Law to withhold or collect have been duly withheld or collected and, to the extent required, have been paid over to the proper Governmental Authorities within the prescribed times. No Tax Return of MCC is under audit or examination, or has ever been audited or examined, by any taxing authority, and no written notice of such an audit or examination has been received by MCC. MCC is not a "foreign person" as defined in Section 1445(f)(3) of the Code. Neither MCC nor any of the Purchased Assets is subject to any joint venture, partnership or other arrangement or contract which is treated as a partnership for federal income tax purposes. MCC is not a party to any tax sharing agreement. 16 3.11. Plan of Liquidation. The board of directors and shareholders of MCC have duly and validly approved and adopted a plan of liquidation, in the form attached as Exhibit A to this Agreement (the "Plan of Liquidation"), which provides for the consummation of the Liquidation immediately following the Acquisition and which further provides that the Acquisition and the Liquidation are intended to qualify as a reorganization within the meaning of Section 368(a)(1)(C) and Section 368(a)(2)(G) of the Code. 3.12. No Extraordinary Distributions. Within the past three years MCC has made no distributions or dividends to its shareholders other than ordinary dividends in the ordinary course of business (consisting of the distribution to MCC Shareholders of funds representing dividends by GWW) and has not authorized any such distribution or dividend, other than the distribution of New GWW Shares to the MCC Shareholders as contemplated by the Plan of Liquidation. 3.13. Reorganization. The Acquisition and Liquidation will qualify as a reorganization under Section 368(a)(1)(C) and Section 368(a)(2)(G) of the Code. MCC will deliver to McDermott, Will & Emery a representation letter with respect to MCC in form and substance sufficient to enable such counsel to render to GWW the legal opinion required by Section 6.2(x). 3.14. No Defaults or Violations. MCC has not breached any provision of, and is not in default under the terms of, any Contract to which it is or ever has been a party or under which it has or ever has had any rights or by which it is or ever has been bound. No condition exists or event has occurred which, with or without notice or the passage of time or both, would constitute a breach of, or a default under, any such Contract by MCC and no other party to any such Contract has breached any provision of, or is in default under the terms of, any such Contract. MCC is, and has been, in compliance with all Laws applicable to or binding on MCC or any of its assets or properties, and no condition exists or event has occurred which, with or without notice or the passage of time or both, would constitute a violation under any such Law. No notice from any Governmental Authority has been received by MCC or any MCC Shareholder claiming any violation of any Law by MCC or requiring from MCC any work, construction or expenditure, or asserting against MCC any Taxes, assessment or penalty. Except as set forth in Schedule 3.14, no Permits, whether federal, state, local or foreign, are necessary (i) for the use or ownership of the Purchased Assets, (ii) for the lawful conduct or operation of the business of MCC or (iii) for MCC to otherwise obtain or hold. 3.15. Environmental Matters. MCC is in compliance with all Environmental Laws, including with respect to the Purchased Assets and the business of MCC, and no condition exists or event has occurred which, with or without notice or the passage of time or both, would constitute a violation of or give rise to any liability, obligation or Lien under any Environmental Law. No notice from any Governmental Authority or any other Person has been received by MCC or any MCC Shareholder claiming that MCC, or any aspect of the business, operations or facilities of MCC, is in violation of any Environmental Law, or that MCC is responsible (or potentially responsible) for the cleanup or remediation of any substances at any location. MCC has not ever deposited or incorporated any Hazardous 17 Substances into, on, beneath or adjacent to any property. No condition has existed or event has occurred with respect to any property owned or held by, or used in the business of, MCC, any past or present direct or indirect Subsidiary of MCC, any predecessor to MCC, or any Person that is or was an Affiliate of MCC (including any property that has been sold, transferred or disposed of or for which any lease has terminated) that in any case could, with or without notice, passage of time or both, give rise to any present or future liability or obligation of MCC pursuant to any Environmental Law. 3.16. Litigation. There is no, and never has been any, claim, action, suit, arbitration, proceeding, governmental investigation or other litigation pending or threatened against or affecting MCC or any of its officers, directors, employees, agents or shareholders in their capacity as such, or any of the Purchased Assets, and neither MCC nor any MCC Shareholder is aware of any facts or circumstances which may give rise to any of the foregoing. MCC is not and never has been subject to any order, judgment, decree, injunction, stipulation or consent order of or with any court or other Governmental Authority. MCC has not entered into any agreement to settle or compromise any proceeding pending or threatened against it. 3.17. Investment Representation. MCC is accepting, and upon the consummation of the Liquidation, each MCC Shareholder is accepting, the New GWW Shares for his, her or its own account and not for any other Person and is acquiring the New GWW Shares for investment purposes only and without any view to distribute, resell or otherwise transfer such New GWW Shares (other than the distribution of the New GWW Shares by MCC to the MCC Shareholders in the Liquidation as contemplated by the Plan of Liquidation). MCC and each MCC Shareholder has such knowledge and experience in business and financial matters as to be capable of evaluating the merits and risks of the investment in New GWW Shares contemplated to be made pursuant to this Agreement and has sufficient financial strength to hold such New GWW Shares as an investment and to bear the economic risks of such investment (including possible loss of such investment) for an indefinite period of time. MCC and each MCC Shareholder is fully informed that the New GWW Shares (i) are being issued and distributed pursuant to a private offering exemption of the Securities Act of 1933, as amended (the "Securities Act"), (ii) are not being registered under the Securities Act or under the securities or blue sky laws of any state or foreign jurisdiction, (iii) will constitute "restricted securities" within the meaning of Rule 144 under the Securities Act and (iv) must be held indefinitely unless they are subsequently registered under the Securities Act and any applicable state securities or blue sky laws, or unless an exemption from registration is available thereunder. MCC and each MCC Shareholder is fully informed that GWW has no obligation to register such securities under the Securities Act or any applicable state securities or blue sky laws. All documents filed by GWW with the Securities and Exchange Commission ("SEC Filings") pursuant to the Securities Act or the Securities Exchange Act of 1934, as amended, since January 1, 1995 have been made available or delivered to MCC and each MCC Shareholder and MCC and each MCC Shareholder has had an opportunity to ask questions of and receive answers from GWW concerning the Acquisition and the terms and conditions of this Agreement, the Escrow Agreement and the Share Transfer Restriction Agreement and to obtain additional information necessary to verify the accuracy of the information contained in such SEC Filings. MCC and each MCC Shareholder is an "accredited investor" as defined in Rule 501(a) under the Securities Act. 18 3.18. Brokers. Neither MCC nor any MCC Shareholder has used any broker or finder in connection with the Acquisition, and neither GWW nor any Affiliate of GWW has or shall have any Liability or otherwise suffer or incur any Loss as a result of or in connection with any brokerage or finder's fee or other commission of any Person retained by MCC, any MCC Shareholder or any of their respective Affiliates in connection with the Acquisition. 3.19. Accuracy of Statements. To the knowledge of MCC and the MCC Shareholders, neither this Agreement nor any schedule or certificate furnished or to be furnished by or on behalf of MCC or any MCC Shareholder to GWW or any representative or Affiliate of GWW in connection with this Agreement, the Escrow Agreement or any of the transactions contemplated hereby or thereby contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements contained herein or therein, in light of the circumstances in which they are made, not misleading. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF GWW ------------------------------------- GWW represents and warrants to MCC, as of the date of this Agreement and as of the Closing Date (as if such representations and warranties were remade on the Closing Date), as follows: 4.1. Due Incorporation. GWW is a corporation duly organized, validly existing and in good standing under the laws of the State of Illinois, with all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. 4.2. Due Authorization. GWW has full power and authority to execute, deliver and perform this Agreement and the Escrow Agreement and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by GWW of this Agreement and the Escrow Agreement, and the consummation by GWW of the transactions contemplated hereby and thereby, have been duly and validly approved by the board of directors of GWW, and no other actions or proceedings on the part of GWW are necessary to authorize this Agreement or the Escrow Agreement or the transactions contemplated hereby and thereby. GWW has duly and validly executed and delivered this Agreement and the Escrow Agreement. This Agreement and the Escrow Agreement constitute legal, valid and binding obligations of GWW, in each case, enforceable in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar laws in effect that affect the enforcement of creditors' rights generally and by equitable limitations on the availability of specific remedies. 4.3. Consents and Approvals; Authority. (a) Except as described in Schedule 4.3(a), no consent, authorization or approval of, filing or registration with, or cooperation from, any Governmental Authority or any other Person not a party to this Agreement is necessary in connection with the execution, delivery and performance by GWW of this Agreement and the Escrow Agreement or the consummation by GWW of the transactions contemplated hereby and thereby. 19 (b) The execution, delivery and performance by GWW of this Agreement and the Escrow Agreement, and the consummation by GWW of the transactions contemplated hereby and thereby, do not and will not (i) violate any Law applicable to or binding on GWW or any of its assets or properties; (ii) violate or conflict with, result in a breach or termination of, constitute a default or give any third party any additional right (including a termination right) under, permit cancellation of, result in the creation of any Lien upon any of the assets or properties of GWW under, or result in or constitute a circumstance which, with or without notice or lapse of time or both, would constitute any of the foregoing under, any Contract to which GWW is a party or by which GWW or any of its assets or properties are bound; (iii) permit the acceleration of the maturity of any indebtedness of GWW or indebtedness secured by its assets or properties; or (iv) violate or conflict with any provision of GWW's articles of incorporation or by-laws. 4.4. New GWW Shares. The New GWW Shares, when issued and delivered to MCC as consideration for the Purchased Assets pursuant to the terms of this Agreement, will be (i) validly issued and outstanding, fully paid and nonassessable, (ii) free of preemptive rights and (iii) free and clear of any and all Liens (other than Liens, if any, which arise under any securities Law or the terms of the Escrow Agreement or the Share Transfer Restriction Agreement or which arise out of other actions taken by MCC or the MCC Shareholders). 4.5. Litigation. There is no claim, action, suit, proceeding, investigation or other litigation pending or, to the best knowledge of GWW, threatened by or against GWW or any of its Affiliates with respect to the Acquisition, and GWW is not aware of any facts or circumstances which may give rise to any of the foregoing. 4.6. Brokers. Except as described in Schedule 4.6, GWW has used no broker or finder in connection with the Acquisition. Except as provided in Section 2.5, neither MCC nor any MCC Shareholder has or shall have any liability or otherwise suffer or incur any Loss as a result of or in connection with any brokerage or finder's fee or other commission of any Person retained by GWW or any of its Affiliates in connection with the Acquisition. ARTICLE V COVENANTS --------- 5.1. Implementing Agreement. Subject to the terms and conditions hereof, each party hereto shall take all action required of it to fulfill its obligations under the terms of this Agreement and the Escrow Agreement and shall otherwise use all commercially reasonable efforts to facilitate the consummation of the transactions contemplated hereby and thereby. Each party hereto agrees that he, she or it will take no action that would have the effect of preventing or impairing the performance by any party hereto of its respective obligations under this Agreement or the Escrow Agreement. 5.2. Press Release. Promptly following the Closing, GWW shall issue a press release to announce the Acquisition upon consultation with, and the reasonable approval of, MCC. James D. Slavik will provide a quotation in a form reasonably acceptable to GWW for inclusion in such press release, which quotation shall indicate his intention to continue holding shares of GWW Common Stock and underscore his long-term commitment to GWW. Neither MCC nor the MCC Shareholders shall make any public announcement regarding the Acquisition without obtaining GWW's prior written consent. 20 5.3. Tax Matters. After the Closing, MCC and the MCC Shareholders shall make available to GWW such records as GWW may request for the preparation of any Tax Returns or other similar reports or forms required to be filed by GWW and such records as GWW may request in connection with the defense of any audit, examination, administrative appeal or litigation of any such Tax Return or other similar report or form, in each case relating to MCC, the Acquisition or the Purchased Assets. MCC, the MCC Shareholders and GWW shall cooperate with one another in any such audit, examination, appeal or litigation. MCC, the MCC Shareholders and GWW agree to file all Tax Returns consistent with the Acquisition and the Liquidation qualifying as a reorganization under Section 368(a)(1)(C) and Section 368(a)(2)(G) of the Code. ARTICLE VI CLOSING ------- 6.1. Closing. The Closing shall take place concurrently with the execution and delivery of this Agreement at the offices of Mayer, Brown, Rowe & Maw, at 190 South LaSalle Street, Chicago, Illinois 60603, at 9:00 A.M., local time, on the date hereof (the "Closing Date"). 6.2. Deliveries by MCC. At the Closing, in addition to any other documents or agreements required under this Agreement, MCC and the MCC Shareholders shall deliver to GWW the following: (i) certificates registered in the name of MCC representing all of the Old GWW Shares, which certificates shall be duly endorsed for transfer or accompanied by duly executed stock powers; (ii) the MCC Cash, which shall be delivered to GWW by electronic wire transfer to such account or accounts as GWW shall specify to MCC in writing prior to the Closing Date; (iii) the Union Bank Notice and, following GWW's payment of the Union Bank Debt Amount, the Union Bank Closing Confirmation; (iv) the Escrow Agreement, duly executed by MCC, each MCC Shareholder and the Escrow Agent; (v) the Share Transfer Restriction Agreement, duly executed by each MCC Shareholder and each of the other signatories thereto other than GWW; (vi) a certificate of the Secretary of MCC certifying resolutions of the board of directors and shareholders of MCC approving and authorizing the execution, delivery and performance of this Agreement and the Escrow Agreement and the consummation of the transactions contemplated hereby and thereby and approving and adopting the Plan of Liquidation (together with an incumbency and signature certificate regarding the officer(s) signing any documents or agreements on behalf of MCC); 21 (vii) the articles of incorporation of MCC certified by the Secretary of State or equivalent Person of the State of Nevada, and the by-laws or similar instrument of MCC, certified by its Secretary; (viii) a certificate of good standing of MCC from the State of Nevada; (ix) an opinion, dated the Closing Date, of Hale Lane Peek Dennison Howard and Anderson, counsel to MCC, in form and substance satisfactory to GWW and to the effect set forth in Exhibit B; (x) an opinion, dated the Closing Date, of McDermott, Will & Emery, counsel to MCC and the MCC Shareholders, in form and substance satisfactory to GWW and to the effect set forth in Exhibit C; and (xi) an opinion, dated the Closing Date, of McDermott, Will & Emery, counsel to MCC and the MCC Shareholders, in form and substance satisfactory to GWW and to the effect set forth in Exhibit D; (xii) such other documents and instruments as may be required by any other provision of this Agreement, or any other agreement related to the Acquisition or as may reasonably be required to consummate the transactions contemplated by this Agreement. 6.3. Deliveries by GWW. (a) At the Closing, GWW shall deliver to MCC and the MCC Shareholders the following: (i) certificates registered in the name of MCC representing all of the New GWW Shares (other than the Escrow Shares) and containing the Securities Act Legend; (ii) the Escrow Agreement, duly executed by GWW; (iii) the Share Transfer Restriction Agreement, duly executed by GWW; (iv) a certificate of the Secretary of GWW certifying resolutions of the board of directors of GWW approving and authorizing the execution, delivery and performance of this Agreement, the Escrow Agreement and the Share Transfer Restriction Agreement and the consummation of the transactions contemplated hereby and thereby (together with an incumbency and signature certificate regarding the officer(s) signing any documents or agreements on behalf of GWW); and (v) an opinion, dated the Closing Date, of Mayer, Brown, Rowe & Maw, counsel to GWW, in form and substance satisfactory to MCC and to the effect set forth in Exhibit E. (b) At the Closing, GWW shall deliver to the Escrow Agent certificates registered in the name of MCC representing the Escrow Shares and containing the Securities Act Legend. 22 (c) At the Closing, GWW will deliver to McDermott, Will & Emery a certificate of GWW substantially in the form of Exhibit F (the "GWW Tax Certificate") for the sole purpose of enabling such counsel to render the legal opinion required by Section 6.2(x). Notwithstanding anything else in this Agreement, under no circumstances shall MCC or any MCC Shareholder be entitled to rely upon or to enforce any of the representations or warranties of GWW contained in the GWW Tax Certificate. ARTICLE VII INDEMNIFICATION --------------- 7.1. Survival. All of the representations and warranties of the parties hereto contained herein, in the Escrow Agreement and in any other document or agreement delivered in connection herewith other than the Share Transfer Restriction Agreement and the GWW Tax Certificate (each such other document or agreement, other than the Share Transfer Restriction Agreement and the GWW Tax Certificate, a "Related Agreement") shall survive forever. 7.2. Indemnification by MCC and the MCC Shareholders. MCC and the MCC Shareholders jointly and severally agree to indemnify each of the GWW Indemnified Parties against, and agree to hold each of the GWW Indemnified Parties harmless from, any and all Losses incurred or suffered by any or all of the GWW Indemnified Parties arising out of or in connection with any of the following: (i) any breach of or any inaccuracy in (or any third party claim involving an alleged breach of or inaccuracy in) any representation or warranty made by MCC or any MCC Shareholder in this Agreement, the Escrow Agreement or any Related Agreement; (ii) any breach (or any third party claim involving an alleged breach) by MCC or any MCC Shareholder of or failure (or any third party claim involving an alleged failure) by MCC or any MCC Shareholder to perform any covenant, agreement or obligation of MCC or any MCC Shareholder in this Agreement, the Escrow Agreement or any Related Agreement; (iii) any Liability of MCC or any of its past, present or future Subsidiaries or Affiliates (other than for payment by GWW to Union Bank of the Union Bank Debt Amount on the Closing Date as provided in Section 2.4), including any Liability that relates to, or that arises out of, any act, omission or event that occurred or any condition, situation or set of circumstances that existed prior to, on or following the Closing Date; (iv) any act or omission of, or any event, condition, situation or set of circumstances relating to or involving, MCC or any of its past, present or future Subsidiaries or Affiliates or any of their respective officers, directors, shareholders, employees, agents or representatives in their capacities as such, except to the extent GWW is required to indemnify MCC or the MCC Shareholders therefor pursuant to Section 7.3; (v) without limiting the generality of clause (iii) above, any Liability for Taxes of, or attributable to, MCC or any of its past, present or future Subsidiaries or Affiliates for taxable periods ending prior to, on or following the Closing Date, including any Taxes resulting from the consummation of the Acquisition or the Liquidation; 23 (vi) any audit, examination or investigation of the Acquisition or the Liquidation by any Governmental Authority, including the IRS or any other tax authorities; (vii) the bulk sales Laws of any jurisdiction applicable to the Acquisition and any Laws of any jurisdiction imposing liability on GWW for MCC's Taxes, including the failure to comply with any such Laws; or (viii) any assertion of appraisal or similar rights pursuant to any Law or otherwise by any of the MCC Shareholders in their capacities as such. 7.3. Indemnification by GWW. GWW agrees to indemnify MCC and the MCC Shareholders against, and agrees to hold each of them harmless from, any and all Losses incurred or suffered by any or all of them arising out of or in connection with any of the following: (i) any breach of or any inaccuracy in (or any third party claim involving an alleged breach of or inaccuracy in) any representation or warranty made by GWW in this Agreement, the Escrow Agreement or any Related Agreement; or (ii) any breach (or any third party claim involving an alleged breach) by GWW of or failure (or any third party claim involving an alleged failure) by GWW to perform any covenant, agreement or obligation of GWW in this Agreement, the Escrow Agreement or any Related Agreement. 7.4. Claims. As soon as is reasonably practicable after becoming aware of a claim for indemnification under this Agreement not involving a claim, or the commencement of any suit, action or proceeding, of the type described in Section 7.5 or Section 7.6, the Indemnified Person shall give notice to the Indemnifying Person of such claim; provided, that the failure of the Indemnified Person to give notice shall not relieve the Indemnifying Person of its obligations under this Article VII, except to the extent the Indemnifying Person shall have been materially prejudiced thereby. 7.5. Notice of Third Party Claims; Assumption of Defense. The Indemnified Person shall give notice as promptly as is reasonably practicable to the Indemnifying Person of the assertion of any claim, or the commencement of any suit, action or proceeding, by any Person not a party hereto (other than by a Governmental Authority with respect to Taxes) in respect of which indemnity may be sought under this Agreement; provided, that the failure of the Indemnified Person to give notice shall not relieve the Indemnifying Person of its obligations under this Article VII, except to the extent the Indemnifying Person shall have been materially prejudiced thereby. The Indemnifying Person may, at its own expense, (a) participate in the defense of any such claim, suit, action or proceeding and (b) upon notice to the Indemnified Person and the Indemnifying Person's delivering to the Indemnified Person a written agreement that the Indemnified Person is entitled to indemnification pursuant to Section 7.2 or Section 7.3 for all Losses arising out of such claim, suit, action or proceeding and that the Indemnifying Person shall be liable for the entire amount of any Loss 24 resulting therefrom, at any time during the course of any such claim, suit, action or proceeding, assume the defense thereof; provided, that (i) the Indemnifying Person's counsel is reasonably satisfactory to the Indemnified Person and (ii) the Indemnifying Person shall thereafter consult with the Indemnified Person upon the Indemnified Person's reasonable request for such consultation from time to time with respect to such claim, suit, action or proceeding. If the Indemnifying Person assumes such defense, the Indemnified Person shall have the right (but not the duty) to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the Indemnifying Person. If, however, the Indemnified Person reasonably determines in its judgment that representation by the Indemnifying Person's counsel of both the Indemnifying Person and the Indemnified Person would present such counsel with a conflict of interest, then such Indemnified Person may employ separate counsel to represent or defend it in any such claim, action, suit or proceeding and the Indemnifying Person shall pay the fees and disbursements of such separate counsel. Whether or not the Indemnifying Person chooses to defend or prosecute any such claim, suit, action or proceeding, all of the parties hereto shall cooperate in the defense or prosecution thereof. 7.6. Disputes Related to Taxes. The Indemnified Person shall give notice as promptly as is reasonably practicable to the Indemnifying Person of the assertion of any claim, or the commencement of any suit, action or proceeding, by any Governmental Authority with respect to Taxes for which indemnity may be sought by any GWW Indemnified Party under this Agreement; provided, that the failure of the Indemnified Person to give notice shall not relieve the Indemnifying Person of its obligations under this Article VII except to the extent the Indemnifying Person shall have been materially prejudiced thereby. The Indemnifying Person may, upon notice to the GWW Indemnified Party delivered within thirty (30) calendar days after delivery of such notice from the Indemnified Person, and the Indemnifying Person delivering to the GWW Indemnified Party, within such thirty (30) calendar days, a written agreement that the GWW Indemnified Party is entitled to indemnification pursuant to Section 7.2 for all Losses arising out of such claim, suit, action or proceeding and that the Indemnifying Person shall be liable for the entire amount of any Loss resulting therefrom, require GWW to contest any such claim, suit, action or proceeding; provided that (i) the Indemnifying Person shall have furnished to GWW an opinion of independent tax counsel selected by the Indemnifying Person and approved by GWW (which approval shall not be unreasonably withheld) to the effect that substantial authority exists for such contest, (ii) GWW shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the Governmental Authority in respect of such claim, suit, action or proceeding and may determine, at its sole option, to either pay the Tax claims and sue for a refund or contest the claim in any appropriate forum, considering in good faith such requests as the Indemnifying Person shall make concerning the most appropriate forum in which to proceed and other related matters, provided that the Indemnifying Person may, at its own expense, participate in all such proceedings and provided further that GWW shall not settle or compromise any such claim, suit, action or proceeding without the approval of the MCC Representative (acting on behalf of the Indemnifying Person), which approval shall not be unreasonably withheld, (iii) if GWW shall determine to pay the Tax claimed and sue for a refund, the Indemnifying Person shall advance to GWW all Losses incurred or suffered by GWW in connection therewith. Nothing contained in this Section 7.6 shall require GWW to contest a claim which it would otherwise be required to contest if GWW releases the Indemnifying Person from any liability under Section 7.2 for Losses incurred or suffered in connection therewith. Whether or not GWW chooses to contest or pay (and sue for a refund with respect to) any such claim, suit, action or proceeding, all of the parties hereto shall cooperate and consult with each other with respect to the resolution of any such claim, suit, action or proceeding. 25 7.7. Settlement or Compromise. Any settlement or compromise made or caused to be made by the Indemnified Person or the Indemnifying Person, as the case may be, of any such claim, suit, action or proceeding of the kind referred to in Section 7.5 or Section 7.6 shall also be binding upon the Indemnifying Person or the Indemnified Person, as the case may be, in the same manner as if a final judgment or decree had been entered by a court of competent jurisdiction in the amount of such settlement or compromise; provided, that no obligation, restriction or Loss shall be imposed on the Indemnified Person or the Indemnifying Person (other than obligations arising under this Agreement) as a result of such settlement or compromise without its prior written consent, which consent shall not be unreasonably withheld. The Indemnified Person will give the Indemnifying Person at least fifteen (15) days' notice of any proposed settlement or compromise of any claim, suit, action or proceeding referred to in Section 7.5 that it is defending, during which time the Indemnifying Person may, on reasonable grounds, reject such proposed settlement or compromise; provided, that from and after such rejection, the Indemnifying Person shall be obligated to assume the defense of and full and complete liability and responsibility for such claim, suit, action or proceeding and any and all Losses in connection therewith. Likewise, the Indemnifying Person will give the Indemnified Person at least fifteen (15) days' notice of any proposed settlement or compromise of any claim, suit, action or proceeding referred to in Section 7.5 that it is defending, during which time the Indemnified Person may, on reasonable grounds, reject such proposed settlement or compromise; provided, that from and after such rejection, the Indemnified Person shall defend the claim at its expense and the Indemnifying Person's liability shall be limited to the amount of the proposed settlement or compromise. 7.8. Failure of Indemnifying Person to Act. In the event that the Indemnifying Person does not elect to assume the defense of any claim, suit, action or proceeding, then any failure of the Indemnified Person to defend or to participate in the defense of any such claim, suit, action or proceeding or to cause the same to be done, shall not relieve the Indemnifying Person of its obligations hereunder. 7.9. Acknowledgment; No Obligation to Set-Off Against Escrow Fund. MCC and each MCC Shareholder agrees and acknowledges that (i) it has discussed with counsel and understands the joint and several nature of the indemnification obligations hereunder, (ii) the right of indemnification of the GWW Indemnified Parties hereunder is absolute, (iii) the indemnification obligations of MCC and the MCC Shareholders shall not in any manner be limited to the Escrow Shares or any other assets that may be contained in the Escrow Fund (as defined in the Escrow Agreement) at any time, and (iv) the GWW Indemnified Parties are not obligated to seek satisfaction of a claim for indemnification pursuant to this Agreement from the Escrow Fund established pursuant to the Escrow Agreement prior to seeking satisfaction of such a claim from MCC or the MCC Shareholders. 26 7.10. Treatment of Indemnification Payments. Any amounts payable under Section 7.2 or Section 7.3 shall be treated by GWW and MCC as an adjustment to the purchase price for the Purchased Assets for tax purposes, except as otherwise required by applicable Law. In the event that such payment is not treated as an adjustment to the purchase price under applicable Law, the Indemnifying Person shall further pay an amount that reflects liabilities and costs for Taxes resulting from the receipt or accrual of such payment, as, if and when incurred (including in a future year). ARTICLE VIII MISCELLANEOUS ------------- 8.1. Amendment. This Agreement may be amended, modified or supplemented but only in writing signed by GWW, MCC and each MCC Shareholder. 8.2. Notices. Any notice, request, instruction or other document to be given hereunder by a party hereto shall be in writing and shall be deemed to have been received, (a) when delivered if given in person or by courier or a courier service such as Federal Express, DHL or other similar services, (b) on the date of transmission if sent by facsimile or other wire transmission (receipt confirmed by return facsimile) or (c) five (5) Business Days after being deposited in the U.S. mail, certified or registered mail, postage prepaid: (i) If to MCC, addressed as follows: Mark IV Capital, Inc. 100 Bayview Circle, Suite 4500 Newport Beach, California 92660 Attention: James D. Slavik Facsimile No.: (949) 509-1104 with copies to: Mark IV Capital, Inc. 100 Bayview Circle, Suite 4500 Newport Beach, California 92660 Attention: Paul Slavik Facsimile No.: (949) 509-1104 and McDermott, Will & Emery 227 West Monroe Street Chicago, Illinois 60606-5096 Attention: Daniel N. Zucker, Esq. Facsimile No.: (312) 984-2097 27 (ii) If to any MCC Shareholder, addressed to the address listed for such MCC Shareholder on Schedule 3.4(a), with a copy to: McDermott, Will & Emery 227 West Monroe Street Chicago, Illinois 60606-5096 Attention: Daniel N. Zucker, Esq. Facsimile No.: (312) 984-2097 (iii) If to the MCC Representative, addressed as follows: Mark IV Capital, Inc. 100 Bayview Circle, Suite 4500 Newport Beach, CA 92660 Attention: James D. Slavik Facsimile: (949) 509-1104 (iv) If to GWW, addressed as follows: W.W. Grainger, Inc. 100 Grainger Parkway Lake Forest, Illinois 60045 Attention: Corporate Secretary Facsimile No.: (847) 535-1045 with a copy to: W.W. Grainger, Inc. 100 Grainger Parkway Lake Forest, Illinois 60045 Attention: General Counsel Facsimile No.: (847) 535-4585 and Mayer, Brown, Rowe & Maw 190 South LaSalle Street Chicago, Illinois 60603 Attention: Frederick B. Thomas, Esq. Facsimile No.: (312) 701-7711 or to such other individual or address as a party hereto may designate for itself by notice given as herein provided. 8.3. Effect of Investigation. Any due diligence review, audit or other investigation or inquiry undertaken or performed by or on behalf of GWW shall not limit, qualify, modify or amend the representations, warranties, covenants or obligations of (including indemnities by) MCC or any MCC Shareholder made or undertaken pursuant to this Agreement, the Escrow Agreement or any Related Agreement, irrespective of the knowledge and information received (or which should have been received) therefrom by GWW. 28 8.4. Payments in Dollars. Except as otherwise provided herein, all payments pursuant hereto shall be made by electronic wire transfer in United States Dollars in same day or immediately available funds. 8.5. Waivers. The failure of a party hereto at any time or times to require performance of any provision hereof shall in no manner affect its right at a later time to enforce the same. No waiver by a party of any condition or of any breach of any term, covenant, representation or warranty contained in this Agreement shall be effective unless in writing, and no waiver in any one or more instances shall be deemed to be a further or continuing waiver of any such condition or breach in other instances or a waiver of any other condition or breach of any other term, covenant, representation or warranty. 8.6. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may be executed by facsimile signature and a facsimile signature shall constitute an original signature for all purposes. 8.7. Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, heirs and legal representatives; provided, that no assignment of any rights or obligations hereunder shall be made by MCC or any MCC Shareholder to any Person without the written consent of GWW and no assignment of any rights or obligations hereunder shall be made by GWW to any Person without the written consent of the MCC Representative. 8.8. No Third Party Beneficiaries. This Agreement is solely for the benefit of the parties hereto and, to the extent provided herein, their respective Affiliates, directors, officers, employees, agents and representatives, and no provision of this Agreement shall be deemed to confer upon other third parties any remedy, claim, liability, reimbursement, cause of action or other right. 8.9. Further Assurances. Upon the reasonable request of another party to this Agreement, each party hereto shall on and after the Closing Date execute and deliver to the requesting party such other documents, assignments and other instruments as may be required to effectuate completely the transfer and assignment to GWW of, and to vest fully in GWW title to, the Purchased Assets, and to otherwise carry out the purposes of this Agreement. 8.10. Severability. If any provision of this Agreement shall be held invalid, illegal or unenforceable, the validity, legality or enforceability of the other provisions hereof shall not be affected thereby, and there shall be deemed substituted for the provision at issue a valid, legal and enforceable provision as similar as possible to the provision at issue. 8.11. Remedies Cumulative. The remedies provided in this Agreement shall be cumulative and shall not preclude the assertion or exercise of any other rights or remedies available by Law, in equity or otherwise. 8.12. Entire Understanding. This Agreement, the Escrow Agreement and the Share Transfer Restriction Agreement sets forth the entire agreement and understanding of the parties hereto with respect to the transactions contemplated hereby and supersede any and all prior agreements, arrangements and understandings among the parties (including the Mutual Letter of Intent dated as of January 24, 2002 by and between GWW and MCC) relating to the subject matter hereof. 29 8.13. MCC Representative. Each MCC Shareholder hereby irrevocably authorizes and appoints James D. Slavik as his or its true and lawful attorney and representative (the "MCC Representative") with full power and authority to take any and all actions and execute any and all documents specified in this Agreement as being within the authority of the MCC Representative. James D. Slavik hereby accepts his appointment as the MCC Representative and agrees to perform all of the duties of the MCC Representative hereunder. If the MCC Representative shall die or become incapacitated, the MCC Shareholders shall promptly appoint a successor Person to act as the MCC Representative. Each of MCC and the MCC Shareholders shall jointly and severally indemnify and hold harmless the MCC Representative from any and all Losses arising from actions or inaction of the MCC Representative taken or not taken in his capacity as such. 8.14. Applicable Law. This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Illinois without giving effect to the principles of conflicts of law thereof. 8.15. Jurisdiction of Disputes; Waiver of Jury Trial. The state courts of the County of Cook, Illinois and the United States District Court for the Northern District of Illinois shall have the exclusive jurisdiction over any and all litigation, proceedings or other legal actions relating to or arising out of this Agreement, the Escrow Agreement, the Share Transfer Restriction Agreement, the subject matter hereof or thereof or the transactions contemplated hereby or thereby. Each of the parties hereto hereby irrevocably (a) submits to the personal jurisdiction of such courts over such party in connection with any litigation, proceeding or other legal action relating to or arising out of this Agreement, the Escrow Agreement, the Share Transfer Restriction Agreement or the subject matter hereof or thereof or the transactions contemplated hereby or thereby, (b) waives to the fullest extent permitted by Law any objection to the venue of any such litigation, proceeding or other legal action which is brought in any such court and (c) agrees to the mailing of service of process to the address specified above for such party as an alternative method of service of process in any such litigation, proceeding or other legal action brought in any such court. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY LITIGATION, PROCEEDING OR OTHER LEGAL ACTION RELATING TO OR ARISING OUT OF THIS AGREEMENT, THE ESCROW AGREEMENT, THE SHARE TRANSFER RESTRICTION AGREEMENT, OR ANY MATTERS DESCRIBED OR CONTEMPLATED HEREIN OR THEREIN, AND AGREES TO TAKE ANY AND ALL ACTION NECESSARY OR APPROPRIATE TO EFFECT SUCH WAIVER. 8.16. Acknowledgment of MCC and each MCC Shareholder. MCC and each MCC Shareholder represents to GWW that he, she or it is knowledgeable and sophisticated as to business matters, including the subject matter of this Agreement, that MCC and each MCC Shareholder has read this Agreement and that he, she or it understands its terms. MCC and each MCC Shareholder acknowledges that, prior to assenting to the terms of this Agreement, he, she or it has been given a reasonable time to review it, to consult with counsel of his, her or its choice and to negotiate at arm's-length with GWW as to its contents. MCC, each MCC Shareholder and GWW agree that the language used in this Agreement is the language chosen by the parties to express their mutual intent, and that no rule of strict construction is to be applied against MCC, any MCC Shareholder or GWW. 30 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered as of the date first above written. W.W. GRAINGER, INC. By: /s/ Richard L. Keyser --------------------------------------- Name: Richard L. Keyser Title: Chairman of the Board and Chief Executive Officer MOUNTAIN CAPITAL CORPORATION By: /s/ James D. Slavik --------------------------------------- Name: James D. Slavik Title: President The MCC Shareholders: BRENNAN SLAVIK TRUST By: /s/ Paul D. Slavik --------------------------------------- Name: Paul A. Slavik Title: Trustee EVAN MICHAEL SLAVIK TRUST By: /s/ Paul D. Slavik --------------------------------------- Name: Paul A. Slavik Title: Trustee SUSAN SLAVIK INTER-VIVOS TRUST By: /s/ Susan Slavik Williams --------------------------------------- Name: Susan Slavik Williams Title: Trustee 31 JAMES AND GLENYS SLAVIK 2000 EXEMPT TRUST FBO BRENNAN JAMES SLAVIK By: /s/ Glenys Slavik --------------------------------------- Name: Glenys Slavik Title: Trustee By: /s/ Paul A. Slavik --------------------------------------- Name: Paul A. Slavik Title: Trustee JAMES AND GLENYS SLAVIK 2000 EXEMPT TRUST FBO EVAN MICHAEL SLAVIK By: /s/ Glenys Slavik --------------------------------------- Name: Glenys Slavik Title: Trustee By: /s/ Paul A. Slavik --------------------------------------- Name: Paul A. Slavik Title: Trustee PAUL AND CATHIE SLAVIK 2000 EXEMPT TRUST FBO LAUREN D. SLAVIK By: /s/ Cathie Slavik --------------------------------------- Name: Cathie Slavik Title: Trustee By: /s/ James D. Slavik --------------------------------------- Name: James D. Slavik Title: Trustee 33 PAUL AND CATHIE SLAVIK 2000 EXEMPT TRUST FBO LINDSAY C. SLAVIK By: /s/ Cathie Slavik --------------------------------------- Name: Cathie Slavik Title: Trustee By: /s/ James D. Slavik --------------------------------------- Name: James D. Slavik Title: Trustee SUSAN SLAVIK WILLIAMS & FELIX WILLIAMS 2000 TRUST By: /s/ Felix N. Williams, III --------------------------------------- Name: Felix N. Williams, III Title: Trustee By: /s/ James Garrity --------------------------------------- Name: James Garrity Title: Trustee SEAN THOMAS SLAVIK TRUST By: /s/ John H. Slavik --------------------------------------- Name: John H. Slavik Title: Trustee By: /s/ Gary King --------------------------------------- Name: Gary King Title: Trustee LAUREN DANIELLE SLAVIK TRUST ESTABLISHED DECEMBER 28, 1987 By: /s/ James D. Slavik --------------------------------------- Name: James D. Slavik Title: Trustee 34 LINDSAY SLAVIK TRUST ESTABLISHED OCTOBER 1, 1989 By: /s/ James D. Slavik --------------------------------------- Name: James D. Slavik Title: Trustee THE JAMES D. SLAVIK SEPARATE PROPERTY TRUST ESTABLISHED FEBRUARY 27, 1974, AS AMENDED By: /s/ James D. Slavik --------------------------------------- Name: James D. Slavik Title: Trustee THE PAUL A. SLAVIK TRUST ESTABLISHED JANUARY 26, 1993 By: /s/ Paul A. Slavik --------------------------------------- Name: Paul A. Slavik Title: Trustee /s/ John H. Slavik -------------------------------------------- John H. Slavik, individually Acknowledged, Consented to and Agreed: /s/ Kathleen A. Slavik -------------------------------------- Kathleen A. Slavik /s/ Sean T. Slavik -------------------------------------------- Sean T. Slavik, individually /s/ David A. Slavik -------------------------------------------- David A. Slavik, individually Acknowledged, Consented to and Agreed: /s/ Jocelyne Slavik --------------------------------------- Jocelyne Slavik 35
TABLE OF CONTENTS Page ARTICLE I DEFINITIONS...............................................................2 1.1. Definitions............................................................2 1.2. Interpretation.........................................................7 ARTICLE II ACQUISITION; RELATED TRANSACTIONS.........................................7 2.1. Sale and Purchase of Purchased Assets..................................7 2.2. Delivery of Purchased Assets by MCC....................................8 2.3. Payment for Purchased Assets by GWW....................................8 2.4. Payment of Union Bank Loan by GWW......................................8 2.5. Payment of Transaction Expenses by MCC.................................9 2.6. Liquidation; Replacement of Escrow Certificates........................9 2.7. Escrow Agreement......................................................10 2.8. No Liabilities Assumed................................................10 2.9. No Fractional Shares..................................................11 2.10. Legends...............................................................11 ARTICLE III REPRESENTATIONS AND WARRANTIES OF MCC AND THE MCC SHAREHOLDERS..........12 3.1. Due Incorporation; Subsidiaries.......................................12 3.2. Due Authorization.....................................................12 3.3. Consents and Approvals; Authority.....................................13 3.4. Capitalization........................................................14 3.5. Title to Purchased Assets.............................................14 3.6. Financial Statements; Undisclosed Liabilities.........................15 3.7. Business; Assets; Property............................................15 3.8. Contracts.............................................................15 3.9. Labor Matters; Employee Benefit Plans.................................15 3.10. Taxes.................................................................16 3.11. Plan of Liquidation...................................................16 3.12. No Extraordinary Distributions........................................16 3.13. Reorganization........................................................16 3.14. No Defaults or Violations.............................................17 3.15. Environmental Matters.................................................17 -i- TABLE OF CONTENTS (continued) 3.16. Litigation............................................................17 3.17. Investment Representation.............................................17 3.18. Brokers...............................................................18 3.19. Accuracy of Statements................................................18 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF GWW....................................18 4.1. Due Incorporation.....................................................19 4.2. Due Authorization.....................................................19 4.3. Consents and Approvals; Authority.....................................19 4.4. New GWW Shares........................................................20 4.5. Litigation............................................................20 4.6. Brokers...............................................................20 ARTICLE V COVENANTS................................................................20 5.1. Implementing Agreement................................................20 5.2. Press Release.........................................................20 5.3. Tax Matters...........................................................20 ARTICLE VI CLOSING..................................................................21 6.1. Closing...............................................................21 6.2. Deliveries by MCC.....................................................21 6.3. Deliveries by GWW.....................................................22 ARTICLE VII INDEMNIFICATION..........................................................23 7.1. Survival..............................................................23 7.2. Indemnification by MCC and the MCC Shareholders.......................23 7.3. Indemnification by GWW................................................24 7.4. Claims................................................................24 7.5. Notice of Third Party Claims; Assumption of Defense...................24 7.6. Disputes Related to Taxes.............................................25 7.7. Settlement or Compromise..............................................26 7.8. Failure of Indemnifying Person to Act.................................26 7.9. Acknowledgment; No Obligation to Set-Off Against Escrow Fund..........26 7.10. Treatment of Indemnification Payments.................................27 -ii- TABLE OF CONTENTS (continued) ARTICLE VIII MISCELLANEOUS............................................................27 8.1. Amendment.............................................................27 8.2. Notices...............................................................27 8.3. Effect of Investigation...............................................29 8.4. Payments in Dollars...................................................29 8.5. Waivers...............................................................29 8.6. Counterparts..........................................................29 8.7. Assignment............................................................29 8.8. No Third Party Beneficiaries..........................................29 8.9. Further Assurances....................................................29 8.10. Severability..........................................................30 8.11. Remedies Cumulative...................................................30 8.12. Entire Understanding..................................................30 8.13. MCC Representative....................................................30 8.14. Applicable Law........................................................30 8.15. Jurisdiction of Disputes; Waiver of Jury Trial........................30 8.16. Acknowledgment of MCC and each MCC Shareholder........................31
EXHIBITS Exhibit A Plan of Liquidation Exhibit B Opinion of Hale Lane Peek Dennison Howard and Anderson Exhibit C Opinion of McDermott, Will & Emery Exhibit D Opinion of McDermott, Will & Emery Exhibit E Opinion of Mayer, Brown, Rowe & Maw Exhibit F GWW Tax Certificate -iii- EX-10.2 4 exh102.txt EXHIBIT 10.2 ESCROW AGREEMENT BY AND AMONG W.W. GRAINGER, INC., MOUNTAIN CAPITAL CORPORATION, THE SHAREHOLDERS OF MOUNTAIN CAPITAL CORPORATION LISTED ON THE SIGNATURE PAGES HERETO AND AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO Dated as of February 28, 2002 ================================================================================ ESCROW AGREEMENT This ESCROW AGREEMENT (this "Agreement") is made and entered into as of the 28th day of February, 2002, by and among (i) W.W. Grainger, Inc., an Illinois corporation ("GWW"), (ii) Mountain Capital Corporation, a Nevada corporation ("MCC"), (iii) the shareholders of MCC listed on the signature pages hereto (collectively, the "MCC Shareholders") and (iv) American National Bank and Trust Company of Chicago, a national banking association (the "Escrow Agent"). W I T N E S S E T H: - - - - - - - - - - A. GWW, MCC and the MCC Shareholders are parties to that certain Purchase Agreement dated as of the date hereof (the "Purchase Agreement") which contemplates, among other things, the following transactions: (i) the sale by MCC to GWW of certain assets of MCC, consisting of 4,801,600 shares of GWW Common Stock (as hereinafter defined) and cash (collectively, the "Purchased Assets"), and in exchange for the Purchased Assets, the transfer by GWW to MCC of shares of GWW Common Stock (the "New GWW Shares") in a number to be determined pursuant to the terms of the Purchase Agreement (the "Acquisition"), (ii) the execution and delivery by GWW, the MCC Shareholders and certain other Persons (together with the MCC Shareholders, the "Restricted Signatories") of that certain Share Transfer Restriction Agreement, dated as of the date hereof (the "Share Transfer Restriction Agreement"), which provides for certain restrictions on the transfer of shares of GWW Common Stock and certain other securities now or hereafter owned by each Restricted Signatory and (iii) immediately following the Acquisition, the distribution by MCC of all of its assets, consisting of the New GWW Shares (including the Original Escrow Shares (as hereinafter defined)) and the Excluded Assets (as defined in the Purchase Agreement), to the MCC Shareholders pursuant to a complete liquidation of MCC (the "Liquidation"). B. The Purchase Agreement requires GWW, MCC, the MCC Shareholders and the Escrow Agent to execute and deliver this Agreement at, and as a condition to, the Closing (as hereinafter defined). C. Section 2.7 of the Purchase Agreement provides for the pledge by MCC to GWW of ten percent (10%) of the New GWW Shares to be received by MCC in the Acquisition (the "Original Escrow Shares"), and the pledge by each MCC Shareholder to GWW of the Original Escrow Shares, pursuant to the terms of this Agreement to serve as security for the obligations and liabilities of MCC and the MCC Shareholders under Article VII of the Purchase Agreement. D. GWW would not be willing to enter into the Purchase Agreement and consummate the Acquisition unless MCC and each MCC Shareholder agreed to the placement of the Escrow Shares (as hereinafter defined) in the Escrow Fund (as hereinafter defined) in accordance with the terms and conditions of this Agreement. E. GWW, MCC and the MCC Shareholders have selected American National Bank and Trust Company of Chicago to establish the Escrow Fund and to serve as Escrow Agent upon the terms and subject to the conditions set forth in this Agreement, which selection was made pursuant to the instructions of MCC and the MCC Shareholders and with the consent of GWW. F. The Escrow Agent is willing to establish the Escrow Fund and to serve as Escrow Agent upon the terms and subject to the conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement agree as follows: ARTICLE I DEFINITIONS ----------- 1.1 Definitions. The following terms shall have the following meanings for purposes of this Agreement: "Acquisition" shall have the meaning set forth in the recitals hereto. "Agreement" shall have the meaning set forth in the preamble hereto. "Anniversary" shall mean an annual anniversary of the Closing Date. "Business Day" shall mean any day of the year other than (i) any Saturday or Sunday or (ii) any other day on which banks located in Chicago, Illinois are authorized or required to be closed for business. "Claim" shall have the meaning set forth in Section 4.1(a). "Claim Notice" shall have the meaning set forth in Section 4.1(a). "Closing" shall mean the consummation of the Acquisition in accordance with Article VI of the Purchase Agreement. "Closing Date" shall mean the date on which the Closing occurs. "Escrow Agent" shall have the meaning set forth in the preamble hereto. "Escrow Fund" shall have the meaning set forth in Section 3.1. "Escrow Liquidation Notice" shall have the meaning set forth in Section 2.4. "Escrow Period" shall mean the period from and including the Closing Date to the termination of this Agreement. "Escrow Shares" shall have the meaning set forth in Section 2.1. "Governmental Authority" shall mean the government of the United States or any foreign country or any state or political subdivision of the United States or any foreign country and any other entity, body, agency or authority exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including any quasi-governmental entity established to perform such functions. "GWW" shall have the meaning set forth in the preamble hereto. "GWW Common Stock" shall mean the Common Stock, par value $.50 per share, of GWW. "GWW Indemnified Parties" shall have the meaning assigned to such term in the Purchase Agreement. "Law" shall mean any law (including the common law), statute, regulation, ordinance, rule, order, decree, judgment, consent decree, settlement agreement or governmental requirement enacted, promulgated, entered into, agreed or imposed by any Governmental Authority. "Liquidation" shall have the meaning set forth in the recitals hereto. "Market Value" shall have the meaning set forth in Section 4.1(d). "MCC" shall have the meaning set forth in the preamble hereto. "MCC Escrow Certificates" shall have the meaning set forth in Section 2.3. "MCC Representative" shall have the meaning set forth in Section 6.13. "MCC Shareholder Escrow Certificate" shall have the meaning set forth in Section 2.4. "MCC Shareholders" shall have the meaning set forth in the preamble hereto. "New GWW Shares" shall have the meaning set forth in the recitals hereto. "Objection Notice" shall have the meaning set forth in Section 4.1(b). "Original Escrow Shares" shall have the meaning set forth in the recitals hereto. 3 "Original Holder" shall have the meaning set forth in Section 4.5(a). "Person" shall mean any individual, corporation, proprietorship, firm, partnership, limited partnership, limited liability company, trust, association or other entity. "Purchase Agreement" shall have the meaning set forth in the recitals hereto. "Purchased Assets" shall have the meaning set forth in the recitals hereto. "Restricted Signatories" shall have the meaning set forth in the recitals hereto. "Share Transfer Restriction Agreement" shall have the meaning set forth in the recitals hereto. "Tax Dispute" shall have the meaning set forth in Section 4.3. "Taxes" shall mean all taxes, charges, fees, duties (including customs duties), levies or other assessments, including income, gross receipts, net proceeds, ad valorem, turnover, real and personal property (tangible and intangible), sales, use, franchise, excise, goods and services, value added, stamp, leasing, lease, user, transfer, fuel, excess profits, occupational, interest equalization, windfall profits, severance, license, payroll, environmental, capital stock, disability, employee's income withholding, other withholding, unemployment and Social Security taxes, which are imposed by any Governmental Authority, and such term shall include any interest, penalties or additions to tax attributable thereto. "Tax Return" shall mean any report, return or other information required to be supplied to a Governmental Authority in connection with any Taxes. 1.2 Interpretation. The headings preceding the text of Articles and Sections included in this Agreement are for convenience only and shall not be deemed part of this Agreement or be given any effect in interpreting this Agreement. The use of the masculine, feminine or neuter gender or the singular or plural form of words herein shall not limit any provision of this Agreement. The use of the terms "including" or "include" shall in all cases herein mean "including, without limitation" or "include, without limitation," respectively. Reference to any Person includes such Person's successors and assigns to the extent such successors and assigns are permitted by the terms of any applicable agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually. Reference to any agreement (including this Agreement), document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms hereof. Reference to any Law means such Law as amended, modified, codified, replaced or re-enacted, in whole or in part, including rules, regulations, enforcement procedures and any interpretations promulgated thereunder. Underscored references to Articles, Sections or Subsections shall refer to those portions of this Agreement. The use of the terms "hereunder," "hereof," "hereto" and words of similar import shall refer to this Agreement as a whole and not to any particular Article, Section or clause of this Agreement. No specific representation, warranty or covenant contained herein shall limit the generality or applicability of a more general representation, warranty or covenant contained herein. A breach of or inaccuracy in any representation, warranty or covenant shall not be affected by the fact that any more general or less general representation, warranty or covenant was not also breached or inaccurate. The word "class" when used by reference to securities or Escrow Shares shall have the meaning as set forth in Section 12 of the Securities Exchange Act of 1934, as amended, or any similar successor federal statute or rule or regulations thereunder, all as the same shall be in effect at the time. 4 ARTICLE II PLEDGE AND DELIVERY OF ESCROW SHARES ------------------------------------ 2.1 Pledge and Grant of Security Interest. (a) As security solely for the obligations and liabilities of MCC and the MCC Shareholders under Article VII of the Purchase Agreement, MCC pledges to the GWW Indemnified Parties, and grants to the GWW Indemnified Parties a continuing security interest in, the Original Escrow Shares and all shares of capital stock or other securities, whether issued by GWW or otherwise, issued or paid as dividends or other distributions on or in respect of the Original Escrow Shares or other shares of capital stock or securities held in the Escrow Fund, or issued pursuant to any of the events described in Section 3.3, in each case together with the certificates representing such Shares, shares or securities, and any subscriptions, warrants, options and other rights, contractual or otherwise, issued on or otherwise in respect of, the Original Escrow Shares or such other shares of capital stock or other securities, and all proceeds thereof (collectively, the "Escrow Shares") now owned or hereafter acquired by MCC during the Escrow Period. (b) As security solely for the obligations and liabilities of MCC and the MCC Shareholders under Article VII of the Purchase Agreement, each MCC Shareholder pledges to the GWW Indemnified Parties, and grants to the GWW Indemnified Parties a continuing security interest in, the Escrow Shares now owned or hereafter acquired by such MCC Shareholder during the Escrow Period. 2.2 Priority and Perfection of Security Interest. (a) MCC and the MCC Shareholders jointly and severally represent and warrant that (i) this Agreement creates a valid security interest in favor of the GWW Indemnified Parties in the Escrow Shares and (ii) the taking of possession by the Escrow Agent of the certificates representing the Escrow Shares will perfect and establish the first priority of the GWW Indemnified Parties' security interest in the Escrow Shares. (b) The Escrow Agent acknowledges and agrees that the Escrow Agent (i) shall act as the GWW Indemnified Parties' bailee and possessory agent with respect to the Escrow Shares for purposes of perfecting the security interest of the GWW Indemnified Parties in the Escrow Shares and (ii) is not acting as a "securities intermediary" with respect to the Escrow Shares. The parties hereto acknowledge and agree that the Escrow Shares held by the Escrow Agent in the Escrow Fund during the Escrow Period shall be held for the sole benefit of the GWW Indemnified Parties, subject to the rights and obligations of the parties hereunder, until such Escrow Shares are released and distributed from the Escrow Fund pursuant to the provisions of this Agreement. (c) MCC and each MCC Shareholder shall execute and deliver to GWW such financing statements and other documents and information as GWW may reasonably request in order to perfect and protect the GWW Indemnified Parties' security interest in the Escrow Shares created hereby. MCC and each MCC Shareholder hereby authorize GWW to file any financing statement that (i) indicates the Escrow Shares as collateral and (ii) contains any other information required by Section 5 of Article 9 of the Uniform Commercial Code of the jurisdiction in which such financing statement is filed regarding the sufficiency or filing office acceptance of any financing statement. 2.3 Delivery of MCC Escrow Certificates to Escrow Agent. At the Closing, GWW shall deliver to the Escrow Agent, on behalf of MCC, certificates registered in the name of MCC (the "MCC Escrow Certificates") representing the Original Escrow Shares. Contemporaneous with the delivery by GWW to the Escrow Agent of the MCC Escrow Certificates, MCC shall deliver to the Escrow Agent such reasonable number of duly executed stock powers (undated and in blank, with Medallion guarantee) relating to the Original Escrow Shares as GWW shall request. Upon the Escrow Agent's receipt of the MCC Escrow Certificates and the duly executed stock powers relating to the Original Escrow Shares, the Escrow Agent shall execute and deliver to GWW a customary written acknowledgment of the Escrow Agent's receipt of such MCC Escrow Certificates and duly executed stock powers to be held in the Escrow Fund pursuant to the provisions of this Agreement. 5 2.4 Liquidation; Replacement of Escrow Certificates. Upon consummation of the Liquidation, MCC shall effect the distribution of the Original Escrow Shares (and any other Escrow Shares owned by MCC on the date of the Liquidation) to the MCC Shareholders in the Liquidation by (i) delivering to GWW and the Escrow Agent a written notice confirming that the Liquidation has occurred and setting forth the number of Escrow Shares that each MCC Shareholder is entitled to receive in connection with the Liquidation (the "Escrow Liquidation Notice") and (ii) delivering to GWW such reasonable number of duly executed stock powers (undated and in blank, with Medallion guarantee) from each MCC Shareholder as GWW shall request, which stock powers shall relate to the Escrow Shares to be received by such MCC Shareholder as designated by MCC pursuant to the Escrow Liquidation Notice. As soon as practicable following GWW's receipt of the Escrow Liquidation Notice and the stock powers from each MCC Shareholder relating to the Escrow Shares, (i) GWW shall deliver to the Escrow Agent the certificates evidencing the Escrow Shares to which the MCC Shareholders are entitled as designated by MCC pursuant to the Escrow Liquidation Notice (each, an "MCC Shareholder Escrow Certificate"), accompanied by each MCC Shareholder's duly executed stock powers relating to the Escrow Shares, which certificates shall replace the MCC Escrow Certificates held by the Escrow Agent in the Escrow Fund and (ii) GWW and the Escrow Agent shall cause the MCC Escrow Certificates to be cancelled. Upon the Escrow Agent's receipt of the MCC Shareholder Escrow Certificates, accompanied by each MCC Shareholder's duly executed stock powers relating to the Escrow Shares, the Escrow Agent shall execute and deliver to GWW a customary written acknowledgment of the Escrow Agent's receipt of such MCC Shareholder Escrow Certificates and duly executed stock powers to be held in the Escrow Fund pursuant to the provisions of this Agreement. 2.5 Delivery of Additional Escrow Shares. In the event any Escrow Shares are delivered to MCC or to any MCC Shareholder rather than to the Escrow Agent during the Escrow Period, MCC or such MCC Shareholder, as the case may be, shall immediately take all actions necessary to have such Escrow Shares transferred to the Escrow Agent for deposit in the Escrow Fund and to otherwise perfect and protect the security interest of the GWW Indemnified Parties in such Escrow Shares. If such Escrow Shares are certificated shares, MCC or such MCC Shareholder, as the case may be, shall immediately deliver the certificates representing such Escrow Shares to the Escrow Agent, accompanied by duly executed stock powers relating to such certificates. 2.6 Delivery of Additional Stock Powers. MCC or the MCC Shareholders, as the case may be, shall take all reasonable actions necessary to ensure that duly executed stock powers (undated and in blank, with Medallion guarantee) relating to all certificates representing Escrow Shares (including any new or replacement certificates issued at any time during the Escrow Period) have been delivered to, and are held by, the Escrow Agent at all times during the Escrow Period. Without limiting the generality of the preceding sentence, (i) upon the receipt of a written request from the Escrow Agent or GWW at any time during the Escrow Period, MCC or the MCC Shareholders, as the case may be, shall immediately deliver to the Escrow Agent duly executed stock powers (undated and in blank, with Medallion guarantee) relating to any and all certificates representing Escrow Shares registered or to be registered in the name of MCC or such MCC Shareholder, as the case may be and (ii) with respect to any MCC Shareholder that is a trust, in the event that there is any change in the Person(s) serving as trustee(s) of such MCC Shareholder during the Escrow Period, such MCC Shareholder shall immediately provide written notice to GWW and the Escrow Agent describing such change and shall immediately deliver to the Escrow Agent duly executed stock powers (undated and in blank, with Medallion guarantee) signed by all of the trustees of such MCC Shareholder after such change, which stock powers shall relate to all certificates representing Escrow Shares held in the Escrow Fund at such time. 6 ARTICLE III ESTABLISHMENT OF ESCROW FUND; SPECIAL PROVISIONS RELATED TO ESCROW SHARES ------------------------------------------- 3.1 Escrow Fund. The Escrow Agent shall establish an escrow account (the "Escrow Fund") and shall hold the Escrow Shares in the Escrow Fund and distribute the Escrow Shares from the Escrow Fund pursuant to the provisions of this Agreement. 3.2 Dividends and Distributions. MCC or the MCC Shareholders, as the case may be, shall have the right to receive and retain any and all dividends and distributions paid on or in respect of the Escrow Shares, other than dividends or distributions constituting Escrow Shares. In the event that the Escrow Agent receives any dividend or distribution on or in respect of the Escrow Shares which does not constitute Escrow Shares, the Escrow Agent agrees to promptly take all necessary actions to have such dividend or distribution transferred to MCC or to the MCC Shareholders, as the case may be. 3.3 Stock Splits and Dividends. If there is any increase or decrease in the number of issued and outstanding Escrow Shares following the Closing Date resulting from a subdivision or consolidation of shares or the payment of a stock dividend or any other increase or decrease in the number of issued and outstanding Escrow Shares effected without receipt of consideration by GWW or the issuer thereof, as applicable, the shares resulting from such subdivision or consolidation or issued as such dividend or otherwise shall be Escrow Shares and shall be added to the Escrow Fund and be subject to all of the provisions of this Agreement to the same extent as were the shares as to which such subdivision or consolidation occurred or the shares with respect to which such dividend was distributed or such other increase or decrease occurred. 3.4 Voting Rights. MCC or the MCC Shareholders, as the case may be, shall have the right to exercise any and all voting rights with respect to the Escrow Shares. 3.5 No Transfers of Escrow Shares. Neither MCC nor any MCC Shareholder shall grant any security interest in, or sell, transfer, convey, grant, encumber, pledge, hypothecate, gift, donate, bequest, devise or otherwise dispose of, whether directly or indirectly, whether or not for value, any of the Escrow Shares during the Escrow Period except in accordance with the provisions of this Agreement. 3.6 Books and Records. The Escrow Agent shall maintain a ledger setting forth all Escrow Shares deposited in the Escrow Fund. 3.7 Taxes. MCC and the MCC Shareholders shall be responsible for filing all necessary Tax Returns, and shall pay any Taxes, on or with respect to the Escrow Shares or the Escrow Fund, including any Taxes related to income on or with respect to the Escrow Shares or the Escrow Fund. ARTICLE IV DISTRIBUTION OF ESCROW SHARES ----------------------------- The Escrow Agent shall not make any distribution of Escrow Shares from the Escrow Fund except as provided in this Article IV. 4.1 Distribution from Escrow Fund for Indemnification Claims. (a) Whenever any GWW Indemnified Party desires to make a claim against the Escrow Fund in order to fully or partially satisfy a claim for indemnification under Article VII of the Purchase Agreement (a "Claim"), GWW shall provide written notice of such Claim to the MCC Representative and the Escrow Agent (together, in the case of the Escrow Agent, with evidence that such notice was provided to the MCC Representative in accordance with Section 6.5), which notice (a "Claim Notice") shall specify the facts alleged to constitute the basis for the Claim, the identity of the Person making such Claim and the dollar amount of the Claim that is sought to be satisfied by a distribution from the Escrow Fund. 7 (b) If by the close of business on the thirtieth day after such Claim Notice is so received by the Escrow Agent, the MCC Representative has not provided a written notice to the Escrow Agent of the MCC Representative's objection to the distribution of Escrow Shares from the Escrow Fund to satisfy the dollar amount claimed by GWW in such Claim Notice (an "Objection Notice"), on the next Business Day (or on such later date as may be specified by GWW), the Escrow Agent shall distribute to GWW or to GWW's designee(s) from the Escrow Fund (i) the fewest whole number of Escrow Shares having an aggregate Market Value (as hereinafter defined) of not less than the dollar amount claimed in such Claim Notice, which shares shall be distributed in the manner contemplated by Section 4.4 or (ii) if the aggregate Market Value of all Escrow Shares held in the Escrow Fund is less than the dollar amount claimed by GWW in such Claim Notice, all of the Escrow Shares held in the Escrow Fund. Upon the Escrow Agent's receipt of an Objection Notice, the Escrow Agent shall promptly forward a copy of such Objection Notice to GWW. (c) If the MCC Representative provides an Objection Notice to the Escrow Agent in the manner contemplated by Section 4.1(b) and the objection stated in such Objection Notice is to less than the dollar amount claimed in such Claim Notice, on the next Business Day following the Escrow Agent's receipt of such Objection Notice (or on such later date as may be specified by GWW), the Escrow Agent shall distribute to GWW or to GWW's designee(s) from the Escrow Fund (i) the fewest whole number of Escrow Shares having an aggregate Market Value of not less than the undisputed portion of the dollar amount claimed in such Claim Notice, which shares shall be distributed in the manner contemplated by Section 4.4, or (ii) if the aggregate Market Value of all Escrow Shares held in the Escrow Fund is less than the undisputed portion of the dollar amount claimed by GWW in such Claim Notice, all of the Escrow Shares then held in the Escrow Fund. The Escrow Agent shall not distribute to GWW or to GWW's designee(s) any Escrow Shares from the Escrow Fund in satisfaction of any disputed portion of the dollar amount claimed in such Claim Notice except in accordance with the following sentence. Upon (x) joint written instructions signed by both GWW and the MCC Representative and delivered to the Escrow Agent directing the distribution of the fewest whole number of Escrow Shares having an aggregate Market Value of not less than a specified dollar amount, the Escrow Agent shall so distribute such number of Escrow Shares and (y) a final, non-appealable judgment or order by a state court of the County of Cook, Illinois or by the United States District Court for the Northern District of Illinois entitling one or more GWW Indemnified Parties to indemnification under Article VII of the Purchase Agreement, the Escrow Agent shall distribute the fewest whole number of Escrow Shares having an aggregate Market Value of not less than the dollar amount to which such GWW Indemnified Parties are entitled pursuant to such judgment or order. (d) For purposes of this Agreement, the "Market Value" of a share of securities constituting Escrow Shares shall mean, (i) with respect to a share of GWW Common Stock, the closing per share sale price for shares of GWW Common Stock on the trading day immediately prior to the date on which such Market Value is determined, as reported in the composite transactions for the New York Stock Exchange, and (ii) with respect to any share of securities constituting Escrow Shares other than GWW Common Stock, the closing per share sale price for such shares of securities for the trading day immediately prior to the date on which such Market Value is determined, as reported on the composite transactions for the primary national securities exchange or inter-dealer quotation system maintained by a registered securities association upon which such securities are listed. In the event that the Market Value of a share of securities constituting Escrow Shares is not determinable under the foregoing methods, the Market Value of such shares of securities shall be calculated using any method selected by the Escrow Agent in its discretion. 8 4.2 Distributions Upon Certain Events. In the event of either (i) the liquidation or dissolution of the issuer of any class of Escrow Shares or (ii) the occurrence of any reorganization, merger, consolidation or other transaction in which the holders of shares of GWW Common Stock immediately prior to such event, in their capacity as such holders, receive less than 50% of the combined voting power of the surviving or resulting entity, in each such case the Escrow Agent shall release and distribute all of the shares of such class of Escrow Shares or GWW Common Stock, as the case may be, held in the Escrow Fund to (i) MCC, if an Escrow Liquidation Notice has not been received by the Escrow Agent, or (ii) the MCC Shareholders in whose names such Escrow Shares are registered, if an Escrow Liquidation Notice has been received by the Escrow Agent, in each case together with all stock powers relating thereto. 4.3 Final Distribution. Unless this Agreement is terminated earlier in accordance with Section 6.1, all Escrow Shares shall be released and distributed from the Escrow Fund on the fifth Anniversary to (i) MCC, if an Escrow Liquidation Notice has not been received by the Escrow Agent, or (ii) the MCC Shareholders in whose names such Escrow Shares are registered, if an Escrow Liquidation Notice has been received by the Escrow Agent, in each case together with all stock powers relating thereto, provided, however, if on such date there is pending one or more Claims for which a Claim Notice has been received by the Escrow Agent, the Escrow Agent shall retain (w) the fewest whole number of Escrow Shares held in the Escrow Fund having an aggregate Market Value of not less than 200% of the aggregate amount of all such Claims, which shares (together with all stock powers relating thereto) shall be retained in the manner contemplated by Section 4.4 or (x) if the aggregate Market Value of all Escrow Shares held in the Escrow Fund is less than 200% of the aggregate amount of all such Claims, all of the Escrow Shares (together with all stock powers relating thereto) then held in the Escrow Fund, in each case until final resolution of each such Claim pursuant to the provisions of this Agreement, at which time, subject to the second proviso of this Section 4.3, all remaining Escrow Shares held in the Escrow Fund shall be distributed in accordance with such final resolution, and provided further that if on such date GWW has previously received notice of any Liability (as defined in the Purchase Agreement), or alleged Liability, for Taxes of, or attributable to, MCC or any of its past, present or future Subsidiaries (as defined in the Purchase Agreement) or Affiliates (as defined in the Purchase Agreement) for taxable periods ending prior to, on or following the Closing Date, including any Taxes resulting from the consummation of the Acquisition or the Liquidation, or of any audit, examination or investigation of the Acquisition or the Liquidation by any Governmental Authority, including the Internal Revenue Service or any other tax authorities (a "Tax Dispute"), and GWW has provided written notice to the Escrow Agent of such Tax Dispute, the Escrow Agent shall also retain (y) the fewest whole number of Escrow Shares in the Escrow Fund having an aggregate Market Value of not less than 200% of the aggregate amount of Taxes involved in all such Tax Disputes, which shares (together with all stock powers relating thereto) shall be retained in the manner contemplated by Section 4.4 or (z) if the aggregate Market Value of all Escrow Shares held in the Escrow Fund (excluding Escrow Shares retained pursuant to the first proviso of this Section 4.3) is less than 200% of the aggregate amount of Taxes involved in all such Tax Disputes, all of the Escrow Shares (together with all stock powers relating thereto) then held in the Escrow Fund, in each case until GWW and the MCC Representative provide a joint written notice to the Escrow Agent as to the final resolution of each such Tax Dispute, at which time, subject to the first proviso of this Section 4.3, all remaining Escrow Shares held in the Escrow Fund shall be distributed in accordance with such final resolution. 9 4.4 Order of Distribution. All distributions of Escrow Shares by the Escrow Agent in satisfaction of claims made against the Escrow Fund by a GWW Indemnified Party (i) shall first be made in shares of GWW Common Stock held in the Escrow Fund, unless and until all shares of GWW Common Stock have been distributed from the Escrow Fund, in which case all such distributions shall thereafter be made in any other securities constituting Escrow Shares held in the Escrow Fund and (ii) may be made using any certificates representing Escrow Shares held in the Escrow Fund and may be made in Escrow Shares registered in the name of the MCC Shareholders (if an Escrow Liquidation Notice has been received by the Escrow Agent) or in the name of MCC (if an Escrow Liquidation Notice has not been received by the Escrow Agent), provided that any such distributions of Escrow Shares registered in the name of the MCC Shareholders shall be made on a pro rata basis (except for any adjustments required to eliminate the issuance of fractional shares, which adjustments shall be made in any reasonable manner determined by the Escrow Agent) according to the number of Escrow Shares registered or to be registered in the name of each MCC Shareholder. In the event that any Escrow Shares are required to be retained in the Escrow Fund after the fifth Anniversary pursuant to Section 4.3, the Escrow Agent (i) shall satisfy such requirement by first retaining the fewest whole number of shares of GWW Common Stock held in the Escrow Fund having a Market Value of not less than the aggregate amount required to be retained and, to the extent the number of shares of GWW Common Stock held in the Escrow Fund is insufficient to satisfy such requirement, the fewest whole number of any other securities constituting Escrow Shares held in the Escrow Fund necessary to satisfy such requirement and (ii) may retain any certificates representing Escrow Shares held in the Escrow Fund and may retain Escrow Shares registered in the name of the MCC Shareholders (if an Escrow Liquidation Notice has been received by the Escrow Agent) or in the name of MCC (if an Escrow Liquidation Notice has not been received by the Escrow Agent), provided that such Escrow Shares shall be retained on a pro rata basis (except for any adjustments required to eliminate the issuance of fractional shares, which adjustments shall be made in any reasonable manner determined by the Escrow Agent) according to the number of Escrow Shares registered or to be registered in the name of each MCC Shareholder. 4.5 Procedures for Distribution. (a) In connection with any distribution of Escrow Shares evidenced by certificates to GWW or to GWW's designee(s), as the case may be, the Escrow Agent shall deliver to GWW (i) one or more certificates representing the Escrow Shares required to be distributed pursuant to the provisions of this Agreement, along with duly executed stock powers relating to such certificates, and (ii) instructions that such certificates be cancelled in exchange for new certificates to be registered in the name of, and delivered to, GWW or GWW's designee(s), as the case may be. The Escrow Agent's sole duty with respect to the distribution of Escrow Shares hereunder, in the event that such certificates for such shares do not represent the proper number of shares to be distributed, shall be to deliver the certificates and duly executed stock powers relating to such certificates to GWW, and to give proper instructions to GWW for the registration and delivery of such shares. In the event that some but not all of the Escrow Shares represented by the certificates delivered to GWW by the Escrow Agent are required to be distributed to GWW or to GWW's designee(s) and the remainder of the Escrow Shares represented by such certificates are to be returned to the Escrow Fund, the Escrow Agent shall (i) direct GWW to register the number of shares required to be distributed to GWW or to GWW's designee(s), as the case may be, in the name of, and to deliver one or more certificates representing such shares to, GWW or GWW's designee(s), as the case may be, (ii) upon the Escrow Agent's receipt of new duly executed stock powers from the Original Holder (as hereinafter defined), if the Escrow Agent deems such stock powers necessary pursuant to clause (iii) below of this Section 4.5(a), direct GWW to re-register the remainder of the Escrow Shares represented by such certificate or certificates in the name of the Person(s) in the name of which such shares were registered immediately prior to such distribution (the "Original Holder") and to return such certificate or certificates to the Escrow Agent and (iii) if the Escrow Agent reasonably determines that it does not then hold in the Escrow Fund a sufficient number of stock powers relating to the returned certificates, provide a written notice to the Original Holder requesting such Original Holder to deliver to the Escrow Agent such number of new duly executed stock powers related to such returned certificates as the Escrow Agent shall request. Upon receipt of any such written notice from the Escrow Agent, the Original Holder shall immediately deliver the requested duly executed stock powers to the Escrow Agent. The Escrow Agent shall have no responsibility or liability for any mistake, failure or delay by GWW in registering or delivering any shares in the manner described in this Section 4.5(a). 10 (b) In connection with any distribution of Escrow Shares evidenced by certificates to MCC or the MCC Shareholders, as the case may be, the Escrow Agent shall deliver certificates representing the Escrow Shares required to be distributed pursuant to the provisions of this Agreement to (i) MCC, if an Escrow Liquidation Notice has not been received by the Escrow Agent or (ii) the MCC Shareholders in whose names such Escrow Shares are registered, if an Escrow Liquidation Notice has been received by the Escrow Agent. 4.6 Commercially Reasonable Distribution Procedures. MCC and each MCC Shareholder agrees and acknowledges that the procedures for the distribution of Escrow Shares from the Escrow Fund described in this Article IV constitute a commercially reasonable disposition of the Escrow Shares. ARTICLE V ESCROW AGENT ------------ 5.1 Duties. The duties and responsibilities of the Escrow Agent shall be limited to those expressly set forth herein. No implied duties or discretionary powers may be imputed to the Escrow Agent by the provisions of this Agreement or otherwise, other than the duty of the Escrow Agent to use reasonable care with respect to the custody and preservation of the Escrow Shares in its possession as contemplated by Section 9-207 of the Illinois Uniform Commercial Code. 5.2 No Additional Liability. The Escrow Agent shall not be personally liable for any act taken or omitted hereunder if taken or omitted by it in good faith and in the exercise of its own best judgment and shall also be fully protected in relying upon any written notice, demand, certificate or document which it in good faith believes to be genuine. 5.3 Assumed Validity of Documents. The Escrow Agent shall not be responsible for the sufficiency, form, execution, validity or genuineness of any documents or securities deposited or delivered hereunder, or for any signature, endorsement or any lack of endorsement thereon, or for the accuracy of any description therein, or for the identity, authority or rights of the Person or Persons executing or delivering or purporting to execute or deliver any such document or endorsement. 5.4 Fees and Expenses. The Escrow Agent shall be paid the fee described in Exhibit A hereto for its services and shall be reimbursed for its reasonable expenses incurred in connection with the ordinary administration of the Escrow Fund. MCC and the MCC Shareholders jointly and severally agree to pay all such reasonable fees and expenses of the Escrow Agent. All fee invoices should be billed directly to the MCC Representative at the address set forth in Section 6.5(iii). The Escrow Agent shall have, and is hereby granted, a prior lien upon the Escrow Shares with respect to its unpaid fees and nonreimbursed expenses to which it is expressly entitled hereunder and unsatisfied claims for indemnification to which it is expressly entitled hereunder; provided, however, that such lien shall only apply to Escrow Shares to which MCC or the MCC Shareholders have a right to receive distribution pursuant to Article IV and shall not apply to Escrow Shares held in the Escrow Fund during the Escrow Period for possible distribution to GWW or another GWW Indemnified Party. The Escrow Agent shall be entitled and is hereby granted the right to set off and deduct any unpaid fees and nonreimbursed expenses to which it is expressly entitled hereunder or unsatisfied claims for indemnification to which it is expressly entitled hereunder from the Escrow Shares on which it has a lien as described in the foregoing sentence. 11 5.5 Indemnification. MCC and the MCC Shareholders jointly and severally agree to indemnify the Escrow Agent against, and agree to hold the Escrow Agent harmless from, any and all losses, liabilities and expenses (including reasonable attorneys' fees and expenses) incurred by the Escrow Agent and arising out of or in connection with the performance of its obligations pursuant to the provisions of this Agreement, except for any and all losses, liabilities or expenses incurred as a result of the negligence, bad faith or willful misconduct of the Escrow Agent. The obligations under this Section 5.5 shall survive the resignation or removal of the Escrow Agent and the termination of this Agreement. 5.6 Resignation or Removal of the Escrow Agent. The Escrow Agent may resign at any time by giving thirty (30) days' prior written notice of resignation to GWW and the MCC Representative. GWW and the MCC Representative may at any time remove the Escrow Agent upon thirty (30) days' joint prior written notice of removal to the Escrow Agent. Within thirty (30) days after giving such notice of resignation or receiving such notice of removal, the Escrow Agent shall promptly transfer the Escrow Shares and any documentation related thereto to a successor Escrow Agent designated in writing by GWW and the MCC Representative (which designation GWW and the MCC Representative hereby agree to cooperate in promptly making), and the Escrow Agent shall thereupon be discharged from all obligations under this Agreement and shall have no further duties or responsibilities in connection herewith. If GWW and the MCC Representative have failed to appoint a successor prior to the expiration of thirty (30) days following receipt of the notice of resignation or removal, the Escrow Agent may appoint a successor (provided that such successor is a bank or trust company with combined capital and surplus of at least $500,000,000) or may petition any court of competent jurisdiction for the appointment of a successor escrow agent or for other appropriate relief, and any such resulting appointment shall be binding upon all of the parties hereto. 5.7 Disputes. In the event that (i) the Escrow Agent shall receive instructions with respect to the Escrow Shares which are in conflict with other instructions received by it or any provision of this Agreement or (ii) the Escrow Agent shall be uncertain as to its rights or duties hereunder, the Escrow Agent shall be permitted to interplead all of the assets held hereunder into a court of competent jurisdiction, and thereafter be fully relieved from any and all liability or obligation with respect to such interpleaded assets. 5.8 Advice of Counsel; Litigation. The Escrow Agent shall have the right, but not the obligation, to consult with counsel of choice and shall not be liable for action taken or omitted to be taken by the Escrow Agent in good faith in accordance with the advice of such counsel. If the Escrow Agent becomes involved in litigation on account of this Agreement, it shall have the right to retain counsel and shall have a first lien on the Escrow Shares over which MCC or the MCC Shareholders have a right to receive distribution pursuant to Article IV for any and all of its reasonable and documented costs, attorneys' fees, charges, disbursements, and expenses in connection with such litigation; and shall be entitled to reimburse itself therefor from such Escrow Shares over which MCC or the MCC Shareholders have a right to receive distribution pursuant to Article IV, and if it shall be unable to reimburse itself from such Escrow Shares over which MCC or the MCC Shareholders have a right to receive distribution pursuant to Article IV, MCC and the MCC Shareholders jointly and severally agree to pay to the Escrow Agent on demand its reasonable and documented costs, attorneys' fees, charges, disbursements, and expenses in connection with such litigation; provided, however, that the Escrow Agent shall have no such rights if such litigation alleges and the court finally determines that the Escrow Agent violated the standard of care set forth in this Article V. 5.9 Successor Escrow Agent. Any banking association or corporation into which the Escrow Agent may be merged, converted or with which the Escrow Agent may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Escrow Agent shall be a party, or any banking association or corporation to which all or substantially all of the corporate trust business of the Escrow Agent shall be transferred, shall succeed to all of the Escrow Agent's rights, obligations and immunities hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. 5.10 Statements. The Escrow Agent shall send statements to GWW and the MCC Representative on a monthly basis reflecting activity in the Escrow Fund for the preceding month. 12 5.11 Court Orders, Judgments or Decrees. In the event that the Escrow Shares shall be attached, garnished or levied upon by any court order, or the delivery thereof shall be stayed or enjoined by an order of a court, or any order, judgment or decree shall be made or entered by any court order affecting the Escrow Shares, the Escrow Agent is hereby expressly authorized, in its sole discretion, to obey and comply with all writs, orders or decrees so entered or issued, which it is advised by legal counsel of its own choosing is binding upon it, whether with or without jurisdiction, and in the event that the Escrow Agent obeys or complies with any such writ, order or decree it shall not be liable to any of the parties hereto or to any other person, firm or corporation, by reason of such compliance notwithstanding such writ, order or decree be subsequently reversed, modified, annulled, set aside or vacated. ARTICLE VI MISCELLANEOUS ------------- 6.1 Termination. This Agreement shall terminate and be of no further force and effect (i) with respect to any particular class of Escrow Shares, upon the liquidation or dissolution of the issuer of such class of Escrow Shares, (ii) with respect to GWW Common Stock constituting Escrow Shares, upon the occurrence of any reorganization, merger, consolidation or other transaction in which the holders of shares of GWW Common Stock immediately prior to such event, in their capacity as such holders, receive less than 50% of the combined voting power of the surviving or resulting entity, (iii) upon the date that all Escrow Shares have been distributed from the Escrow Fund pursuant to the provisions of this Agreement or (iv) upon the fifth Anniversary, unless one or more Claim Notices and/or Tax Disputes have not been finally resolved by such date, in which case this Agreement shall terminate upon the final resolution of such pending Claim Notices and Tax Disputes and the distribution of all of the Escrow Shares held in the Escrow Fund pursuant to the provisions of this Agreement. 6.2 No Obligation to Set-Off Against Escrow Fund. MCC and each MCC Shareholder agrees and acknowledges that (i) the indemnification obligations of MCC and the MCC Shareholders under Article VII of the Purchase Agreement shall not in any manner be limited to the Escrow Shares that may be contained in the Escrow Fund at any time and (ii) the GWW Indemnified Parties are not obligated to seek satisfaction of a claim for indemnification under the Purchase Agreement from the Escrow Fund prior to seeking satisfaction of such a claim from MCC or the MCC Shareholders. 6.3 Implementing Agreement. Subject to the terms and conditions hereof, each party hereto shall take all action required of it to fulfill its obligations under the terms of this Agreement and shall otherwise use all commercially reasonable efforts to facilitate the consummation of the transactions contemplated hereby. Each party hereto agrees that he, she or it will take no action that would have the effect of preventing or impairing the performance by any party hereto of its respective obligations under this Agreement. 6.4 Amendment. This Agreement may be amended, modified or supplemented but only in writing signed by GWW, MCC and each MCC Shareholder, provided that if an Escrow Liquidation Notice has been received by GWW and the Escrow Agent as contemplated by Section 2.4, the written consent of MCC shall not be required, and provided further that if any such amendment or waiver would have the effect of increasing the Escrow Agent's obligations or duties under this Agreement, the written consent of the Escrow Agent to such amendment, modification or waiver shall also be required. 13 6.5 Notices. Any notice, request, instruction or other document to be given hereunder by a party hereto shall be in writing and shall be deemed to have been received, (a) when delivered if given in person or by courier or a courier service such as Federal Express, DHL, or other similar services, (b) on the date of transmission if sent by facsimile or other wire transmission (receipt confirmed by return facsimile) or (c) five (5) Business Days after being deposited in the U.S. mail, certified or registered mail, postage prepaid: (i) If to MCC, addressed as follows: Mark IV Capital, Inc. 100 Bayview Circle, Suite 4500 Newport Beach, CA 92660 Attention: James D. Slavik Facsimile No.: (949) 509-1104 with copies to: Mark IV Capital, Inc. 100 Bayview Circle, Suite 4500 Newport Beach, CA 92660 Attention: Paul Slavik Facsimile No: (949) 509-1104 and McDermott, Will & Emery 227 West Monroe Street Chicago, Illinois 60606-5096 Attention: Daniel N. Zucker, Esq. Facsimile No.: (312) 984-2097 (ii) If to any MCC Shareholder, addressed to the address listed for such MCC Shareholder on Schedule 3.4(a) of the Purchase Agreement, with a copy to: McDermott, Will & Emery 227 West Monroe Street Chicago, Illinois 60606-5096 Attention: Daniel N. Zucker, Esq. Facsimile No.: (312) 984-2097 (iii) If to the MCC Representative, addressed as follows: Mark IV Capital, Inc. 100 Bayview Circle, Suite 4500 Newport Beach, California 92660 Attention: James D. Slavik Facsimile No.: (949) 509-1104 14 with a copy to: McDermott, Will & Emery 227 West Monroe Street Chicago, Illinois 60606-5096 Attention: Daniel N. Zucker, Esq. Facsimile No.: (312) 984-2097 (iv) If to GWW, addressed as follows: W.W. Grainger, Inc. 100 Grainger Parkway Lake Forest, Illinois 60045 Attention: Corporate Secretary Facsimile No.: (847) 535-1045 with a copy to: W.W. Grainger, Inc. 100 Grainger Parkway Lake Forest, Illinois 60045 Attention: General Counsel Facsimile No.: (847) 535-4585 and Mayer, Brown, Rowe & Maw 190 South LaSalle Street Chicago, Illinois 60603 Attention: Frederick B. Thomas, Esq. Facsimile No.: (312) 701-7711 (v) If to the Escrow Agent, addressed as follows: American National Bank and Trust Company of Chicago 120 South LaSalle, 4th Floor Mail Code IL1-1250 Chicago, Illinois 60603 Attn: Kevin M. Ryan Facsimile No.: (312) 661-6491 or to such other individual or address as a party hereto may designate for itself by notice given as herein provided. 6.6 Waivers. The failure of a party hereto at any time or times to require performance of any provision hereof shall in no manner affect its right at a later time to enforce the same. No waiver by a party of any condition or of any breach of any term, covenant, representation or warranty contained in this Agreement shall be effective unless in writing, and no waiver in any one or more instances shall be deemed to be a further or continuing waiver of any such condition or breach in other instances or a waiver of any other condition or breach of any other term, covenant, representation or warranty. 15 6.7 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may be executed by facsimile signature and a facsimile signature shall constitute an original signature for all purposes. 6.8 Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, heirs and legal representatives; provided, that (i) the Escrow Agent shall not be permitted to assign any rights or obligations hereunder, by operation of law or otherwise, except as provided in Section 5.6, (ii) no assignment of any rights or obligations hereunder shall be made by MCC or any MCC Shareholder to any Person without the written consent of GWW, (iii) no assignment of any rights or obligations hereunder shall be made by GWW to any Person, other than to an Affiliate (as defined in the Purchase Agreement) of GWW, without the written consent of the MCC Representative and (iv) no assignment of the interests of any of the parties hereto shall be binding upon the Escrow Agent unless and until written notice of such assignment shall be provided to the Escrow Agent at the address set forth in Section 6.5(v). 6.9 Third Party Beneficiaries. This Agreement is intended solely for the benefit of the parties hereto and, to the extent provided herein, the GWW Indemnified Parties, and no provision of this Agreement shall be deemed to confer upon other third parties any remedy, claim, liability, reimbursement, cause of action or other right. 6.10 Severability. If any provision of this Agreement shall be held invalid, illegal or unenforceable, the validity, legality or enforceability of the other provisions hereof shall not be affected thereby, and there shall be deemed substituted for the provision at issue a valid, legal and enforceable provision as similar as possible to the provision at issue. 6.11 Remedies Cumulative. The remedies provided in this Agreement shall becumulative and shall not preclude the assertion or exercise of any other rights or remedies available by Law, in equity or otherwise. 6.12 Entire Understanding. This Agreement, the Purchase Agreement and the Share Transfer Restriction Agreement set forth the entire agreement and understanding of the parties hereto with respect to the transactions contemplated hereby and supersede any and all prior agreements, arrangements and understandings among the parties (including the Mutual Letter of Intent dated as of January 24, 2002 by and between GWW and MCC) relating to the subject matter hereof. 6.13 MCC Representative. MCC and each MCC Shareholder hereby irrevocably authorizes and appoints James D. Slavik as his, her or its true and lawful attorney and representative (the "MCC Representative") with full power and authority to take any and all actions and execute any and all documents specified in this Agreement as being within the authority of the MCC Representative. James D. Slavik hereby accepts his appointment as the MCC Representative and agrees to perform all of the duties of the MCC Representative hereunder. If the MCC Representative shall die or become incapacitated, the MCC Shareholders shall promptly appoint a successor Person to act as the MCC Representative. Each of MCC and the MCC Shareholders shall jointly and severally indemnify and hold harmless the MCC Representative from any and all Losses arising from actions or inaction of the MCC Representative taken or not taken in his capacity as such. 6.14 Applicable Law. This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Illinois without giving effect to the principles of conflicts of law thereof. 16 6.15 Jurisdiction of Disputes; Waiver of Jury Trial. The state courts of the County of Cook, Illinois and the United States District Court for the Northern District of Illinois shall have the exclusive jurisdiction over any and all litigation, proceedings or other legal actions relating to or arising out of this Agreement, the subject matter hereof or the transactions contemplated hereby. Each of the parties hereto hereby irrevocably (a) submits to the personal jurisdiction of such courts over such party in connection with any litigation, proceeding or other legal action relating to or arising out of this Agreement or the subject matter hereof or the transactions contemplated hereby, (b) waives to the fullest extent permitted by Law any objection to the venue of any such litigation, proceeding or other legal action which is brought in any such court and (c) agrees to the mailing of service of process to the address specified above for such party as an alternative method of service of process in any such litigation, proceeding or other legal action brought in any such court. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY LITIGATION, PROCEEDING OR OTHER LEGAL ACTION RELATING TO OR ARISING OUT OF THIS AGREEMENT OR ANY MATTERS DESCRIBED OR CONTEMPLATED HEREIN, AND AGREES TO TAKE ANY AND ALL ACTION NECESSARY OR APPROPRIATE TO EFFECT SUCH WAIVER. 6.16 Acknowledgment of MCC and each MCC Shareholder. MCC and each MCC Shareholder represents to GWW that he, she or it is knowledgeable and sophisticated as to business matters, including the subject matter of this Agreement, that MCC and each MCC Shareholder has read this Agreement and that he, she or it understands its terms. MCC and each MCC Shareholder acknowledges that, prior to assenting to the terms of this Agreement, he, she or it has been given a reasonable time to review it, to consult with counsel of his, her or its choice and to negotiate at arm's-length with GWW as to its contents. MCC, each MCC Shareholder and GWW agree that the language used in this Agreement is the language chosen by the parties to express their mutual intent, and that no rule of strict construction is to be applied against MCC, any MCC Shareholder or GWW. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered as of the date first above written. W.W. GRAINGER, INC. By: /s/ Richard L. Keyser ---------------------------------------- Name: Richard L. Keyser Title: Chairman of the Board and Chief Executive Officer MOUNTAIN CAPITAL CORPORATION By: /s/ James D. Slavik --------------------------------------- Name: James D. Slavik Title: President 17 The MCC Shareholders: BRENNAN SLAVIK TRUST By: /s/ Paul A. Slavik --------------------------------------- Name: Paul A. Slavik Title: Trustee EVAN MICHAEL SLAVIK TRUST By: /s/ Paul A. Slavik --------------------------------------- Name: Paul A. Slavik Title: Trustee SUSAN SLAVIK INTER-VIVOS TRUST By: /s/ Susan Slavik Williams --------------------------------------- Name: Susan Slavik Williams Title: Trustee JAMES AND GLENYS SLAVIK 2000 EXEMPT TRUST FBO BRENNAN JAMES SLAVIK By: /s/ Glenys Slavik --------------------------------------- Name: Glenys Slavik Title: Trustee By: /s/ Paul A. Slavik --------------------------------------- Name: Paul A. Slavik Title: Trustee JAMES AND GLENYS SLAVIK 2000 EXEMPT TRUST FBO EVAN MICHAEL SLAVIK 18 By: /s/ Glenys Slavik --------------------------------------- Name: Glenys Slavik Title: Trustee By: /s/ Paul A. Slavik --------------------------------------- Name: Paul A. Slavik Title: Trustee PAUL AND CATHIE SLAVIK 2000 EXEMPT TRUST FBO LAUREN D. SLAVIK By: /s/ Cathie Slavik --------------------------------------- Name: Cathie Slavik Title: Trustee By: /s/ James D. Slavik --------------------------------------- Name: James D. Slavik Title: Trustee PAUL AND CATHIE SLAVIK 2000 EXEMPT TRUST FBO LINDSAY C. SLAVIK By: /s/ Cathie Slavik --------------------------------------- Name: Cathie Slavik Title: Trustee By: /s/ James D. Slavik --------------------------------------- Name: James D. Slavik Title: Trustee SUSAN SLAVIK WILLIAMS & FELIX WILLIAMS 2000 TRUST By: /s/ Felix N. Williams, III --------------------------------------- Name: Felix N. Williams, III Title: Trustee By: /s/ James Garrity --------------------------------------- Name: James Garrity Title: Trustee SEAN THOMAS SLAVIK TRUST By: /s/ John H. Slavik --------------------------------------- Name: John H. Slavik Title: Trustee By: /s/ Gary R. King --------------------------------------- Name: Gary R. King Title: Trustee 19 LAUREN DANIELLE SLAVIK TRUST ESTABLISHED DECEMBER 28, 1987 By: /s/ James D. Slavik --------------------------------------- Name: James D. Slavik Title: Trustee LINDSAY SLAVIK TRUST ESTABLISHED OCTOBER 1, 1989 By: /s/ James D. Slavik --------------------------------------- Name: James D. Slavik Title: Trustee THE JAMES D. SLAVIK SEPARATE PROPERTY TRUST ESTABLISHED FEBRUARY 27, 1974, AS AMENDED By: /s/ James D. Slavik --------------------------------------- Name: James D. Slavik Title: Trustee THE PAUL A. SLAVIK TRUST ESTABLISHED JANUARY 26, 1993 By: /s/ Paul A. Slavik --------------------------------------- Name: Paul A. Slavik Title: Trustee /s/ John H. Slavik -------------------------------------------- John H. Slavik, individually Acknowledged, Consented to and Agreed: /s/ Kathleen A. Slavik ---------------------------------------- Kathleen A. Slavik /s/ Sean T. Slavik -------------------------------------------- Sean T. Slavik, individually /s/ David A. Slavik -------------------------------------------- David A. Slavik, individually Acknowledged, Consented to and Agreed: /s/ Jocelyne Slavik --------------------------------------- Name: Jocelyne Slavik AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, as Escrow Agent By: /s/ Kevin M. Ryan --------------------------------------- Name: Kevin M. Ryan Title: Authorized Officer 20 EXHIBIT A Escrow Agent Fee Schedule Acceptance Fee: $ 0.00 Annual Fee: $ 4,500.00 The Acceptance Fee and the Annual Fee are billed in advance and payable prior to that year's service. The Annual Fee for the first year of this Agreement will be billed to the MCC Representative following the Closing. These fees cover a full year, or any part thereof, and thus are not prorated in the year of termination. Any reasonable out-of-pocket expenses, or extraordinary fees or expenses of the Escrow Agent such as attorney fees or messenger costs related to this Agreement, are additional and are not included in the above schedule. 22 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS............................................2 1.1 Definitions......................................................2 1.2 Interpretation...................................................3 ARTICLE II PLEDGE AND DELIVERY OF ESCROW SHARES........................4 2.1 Pledge and Grant of Security Interest...........................4 2.2 Priority and Perfection of Security Interest....................5 2.3 Delivery of MCC Escrow Certificates to Escrow Agent.............5 2.4 Liquidation; Replacement of Escrow Certificates.................5 2.5 Delivery of Additional Escrow Shares............................6 2.6 Delivery of Additional Stock Powers.............................6 ARTICLE III ESTABLISHMENT OF ESCROW FUND; SPECIAL PROVISIONS RELATED TO ESCROW SHARES....................................7 3.1 Escrow Fund......................................................7 3.2 Dividends and Distributions......................................7 3.3 Stock Splits and Dividends.......................................7 3.4 Voting Rights....................................................7 3.5 No Transfers of Escrow Shares....................................7 3.6 Books and Records................................................8 3.7 Taxes............................................................8 ARTICLE IV DISTRIBUTION OF ESCROW SHARES...............................8 4.1 Distribution from Escrow Fund for Indemnification Claims........8 4.2 Distributions Upon Certain Events...............................9 4.3 Final Distribution..............................................9 4.4 Order of Distribution..........................................10 4.5 Procedures for Distribution....................................11 4.6 Commercially Reasonable Distribution Procedures................12 -i- TABLE OF CONTENTS (continued) Page ARTICLE V ESCROW AGENT...............................................12 5.1 Duties.........................................................12 5.2 No Additional Liability........................................12 5.3 Assumed Validity of Documents..................................12 5.4 Fees and Expenses..............................................12 5.5 Indemnification................................................13 5.6 Resignation or Removal of the Escrow Agent.....................13 5.7 Disputes.......................................................13 5.8 Advice of Counsel; Litigation..................................14 5.9 Successor Escrow Agent.........................................14 5.10 Statements.....................................................14 5.11 Court Orders, Judgments or Decrees.............................14 ARTICLE VI MISCELLANEOUS..............................................14 6.1 Termination....................................................15 6.2 No Obligation to Set-Off Against Escrow Fund...................15 6.3 Implementing Agreement.........................................15 6.4 Amendment......................................................15 6.5 Notices........................................................15 6.6 Waivers........................................................17 6.7 Counterparts...................................................17 6.8 Assignment.....................................................18 6.9 Third Party Beneficiaries......................................18 6.10 Severability...................................................18 6.11 Remedies Cumulative............................................18 6.12 Entire Understanding...........................................18 6.13 MCC Representative.............................................18 6.14 Applicable Law.................................................19 6.15 Jurisdiction of Disputes; Waiver of Jury Trial.................19 6.16 Acknowledgment of MCC and each MCC Shareholder.................19 EXHIBITS Exhibit A Escrow Agent Fee Schedule ii EX-10.3 5 exh103.txt EXHIBIT 10.3 SHARE TRANSFER RESTRICTION AGREEMENT BY AND AMONG W.W. GRAINGER, INC., THE SHAREHOLDERS OF MOUNTAIN CAPITAL CORPORATION LISTED AS "ORIGINAL MCC SHAREHOLDERS" ON THE SIGNATURE PAGES HERETO AND THE PERSONS LISTED AS "OTHER SHAREHOLDERS" ON THE SIGNATURE PAGES HERETO Dated of February 28, 2002 ================================================================================ SHARE TRANSFER RESTRICTION AGREEMENT This SHARE TRANSFER RESTRICTION AGREEMENT (this "Agreement") is made and entered into as of the 28th day of February, 2002, among (i) W.W. Grainger, Inc., an Illinois corporation ("GWW"), (ii) the shareholders of Mountain Capital Corporation, a Nevada corporation ("MCC"), which shareholders are listed as "Original MCC Shareholders" on the signature pages hereto (collectively, the "Original MCC Shareholders"), and (iii) the Persons listed as the "Other Shareholders" on the signature pages hereto (together with the Original MCC Shareholders, the "Restricted Signatories"). W I T N E S S E T H: A. GWW, MCC and the Original MCC Shareholders are parties to that certain Purchase Agreement dated as of the date hereof (the "Purchase Agreement") which contemplates, among other things, the following transactions: (i) the sale by MCC to GWW of certain assets of MCC, consisting of 4,801,600 shares of GWW Common Stock (as hereinafter defined) and cash (collectively, the "Purchased Assets"), and in exchange for the Purchased Assets, the transfer by GWW to MCC of shares of GWW Common Stock (the "Original New GWW Shares") in a number to be determined pursuant to the terms of the Purchase Agreement (the "Acquisition"), (ii) the execution and delivery by GWW, MCC, the Original MCC Shareholders and the Escrow Agent (as hereinafter defined) of that certain Escrow Agreement, dated as of the date hereof (the "Escrow Agreement"), which provides for the pledge by MCC of ten percent (10%) of the Original New GWW Shares received by MCC in the Acquisition (the "Escrow Shares"), and the pledge by the Original MCC Shareholders of the Escrow Shares, to GWW pursuant to the terms of the Escrow Agreement to serve as security for the obligations and liabilities of MCC and the Original MCC Shareholders under Article VII of the Purchase Agreement and (iii) immediately following the Acquisition, the distribution by MCC of all of its assets, consisting of the Original New GWW Shares and certain Excluded Assets (as defined in the Purchase Agreement), to the Original MCC Shareholders pursuant to a complete liquidation of MCC (the "Liquidation"). B. In connection with the Liquidation, each Original MCC Shareholder is receiving the number of Original New GWW Shares set forth in the schedule that such Original MCC Shareholder has previously provided to GWW as contemplated by Section 6.4. C. The Purchase Agreement requires the Restricted Signatories and GWW to execute and deliver this Agreement at, and as a condition to, the Closing (as hereinafter defined). D. GWW would not be willing to enter into the Purchase Agreement and consummate the Acquisition unless each Restricted Signatory agreed to restrict the Transfer (as hereinafter defined) of shares of GWW Common Stock and certain other securities now or hereafter owned or controlled by such Restricted Signatory in accordance with the terms and conditions of this Agreement. E. Each Restricted Signatory is benefiting, directly or indirectly, from the Acquisition and has determined that the execution, delivery and performance of this Agreement is advisable and in the best interests of such Restricted Signatory and, if applicable, such Restricted Signatory's shareholders, custodians or beneficiaries. 2 NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement agree as follows: ARTICLE I DEFINITIONS 1.1 Definitions. The following terms shall have the following meanings for the purposes of this Agreement: "Acquisition" shall have the meaning set forth in the recitals hereto. "Affiliate" shall mean, with respect to any specified Person, (i) any other Person which, directly or indirectly, owns or controls, is under common ownership or control with, or is owned or controlled by, such specified Person, (ii) any other Person which is a director, officer or partner, or is, directly or indirectly, the beneficial owner of ten percent (10%) or more of any class of equity securities, of the specified Person or a Person described in clause (i) of this paragraph, (iii) another Person of which the specified Person is a director, officer or partner or is, directly or indirectly, the beneficial owner of ten percent (10%) or more of any class of equity securities, (iv) another Person in which the specified Person has a substantial beneficial interest or as to which the specified Person serves as trustee or in a similar capacity or (v) any relative or spouse of the specified Person or any of the foregoing Persons, any relative of such spouse or any spouse of any such relative. For purposes of this Agreement, GWW shall not be deemed an Affiliate of any Restricted Signatory or Permitted Transferee. "Agreement" shall have the meaning set forth in the preamble hereto. "Anniversary" shall mean an annual anniversary of the Closing Date. "Bank" shall mean (i) a bank (as defined in section (3)(a)(2) of the Securities Act), (ii) a savings and loan association described in section 3(a)(5)(A) of the Securities Act, whether acting in its individual or fiduciary capacity, (iii) a broker or dealer registered pursuant to section 15 of the Exchange Act or (iv) an insurance company (as defined in section 2(13) of the Securities Act). "Blackout Period" shall mean any of the following periods during a fiscal year of GWW: (i) the period from and including the last Friday prior to the end of the first fiscal quarter through and including the sixteenth day of the second fiscal quarter, (ii) the period from and including the last Friday prior to the end of the second fiscal quarter through and including the sixteenth day of the third fiscal quarter, (iii) the period from and including the last Friday prior to the end of the third fiscal quarter through and including the sixteenth day of the fourth fiscal quarter and (iv) the period from and including the first Friday of the first fiscal quarter through and including the twenty-first day after the first Friday of the first fiscal quarter. "Bona Fide Pledgee" shall have the meaning set forth in Section 5.1(g). 3 "Business Day" shall mean any day of the year other than (i) any Saturday or Sunday or (ii) any other day on which banks located in Chicago, Illinois are authorized or required to be closed for business. "Charitable Organization" shall mean an organization that qualifies as a tax exempt organization pursuant to 501(c)(3) of the United States Internal Revenue Code of 1986, as it may be amended from time to time. "Closing" shall mean the consummation of the Acquisition in accordance with Article VI of the Purchase Agreement. "Closing Date" shall mean the date on which the Closing occurs. "Contract" shall mean any contract, arrangement, commitment, understanding, lease, sales order, purchase order, agreement, warranty, indenture, mortgage, note, bond, right, warrant or instrument, whether written or verbal. "Election Notice" shall have the meaning set forth in Section 4.1(b). "Election Period" shall mean, with respect to any proposed Transfer of Offered Shares (other than a Transfer described in Section 5.1), the period beginning on the day GWW receives a Transfer Notice from a Slavik Shareholder notifying GWW of such proposed Transfer and ending on (i) the fourteenth day following GWW's receipt of such Transfer Notice, if more than 100,000 Offered Shares are proposed to be Transferred, or (ii) subject to the last sentence of this paragraph, the seventh day following GWW's receipt of such Transfer Notice, if 100,000 or fewer Offered Shares are proposed to be Transferred; provided that if the Election Period determined in accordance with clause (i) or (ii) above would otherwise end on a day that is within a Blackout Period, the Election Period shall end on the third Business Day following the end of such Blackout Period. Notwithstanding anything to the contrary set forth in the preceding sentence, if the Slavik Shareholder providing such Transfer Notice to GWW has, within the prior thirty (30) days, provided a Transfer Notice to GWW for which a seven (7) day Election Period was applicable pursuant to clause (ii) above, then a seven (7) day Election Period shall not apply to such proposed Transfer (if and to the extent such proposed Transfer, when aggregated with the proposed Transfer(s) described in such earlier Transfer Notice for which a seven (7) day Election Period was applicable, exceeds 100,000 Offered Shares) and the Election Period shall end on the fourteenth day following GWW's receipt of the Transfer Notice with respect to such proposed Transfer (unless such day is within a Blackout Period, in which case the Election Period shall end on the third Business Day following the end of such Blackout Period), regardless of the number of Offered Shares proposed to be Transferred. "Escrow Agent" shall mean American National Bank and Trust Company of Chicago, a national banking association. "Escrow Agreement" shall have the meaning set forth in the recitals hereto. "Escrow Fund" shall have the meaning assigned to such term in the Escrow Agreement. "Escrow Shares" shall have the meaning set forth in the recitals hereto. 4 "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar successor federal statute, and the rules and regulations thereunder, all as the same shall be in effect at the time. "Family Transferee" shall mean James D. Slavik, John H. Slavik, Paul A. Slavik and Susan Slavik Williams, and any descendants or spouses of the foregoing and the spouses of any such descendants. "Glenview State Bank" shall mean Glenview State Bank, an Illinois banking corporation. "Governmental Authority" shall mean the government of the United States or any foreign country or any state or political subdivision of the United States or any foreign country and any other entity, body, agency or authority exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including any quasi-governmental entity established to perform such functions. "GWW" shall have the meaning set forth in the preamble hereto. "GWW Common Stock" shall mean the Common Stock, par value $.50 per share, of GWW. "GWW Indemnified Parties" shall mean GWW, each of its Subsidiaries and Affiliates and each of their respective officers, directors, shareholders, employees, agents and representatives; provided, that in no event shall any Restricted Signatory or Slavik Shareholder be deemed a GWW Indemnified Party. "Indemnified Person" shall mean the Person or Persons entitled to, or claiming a right to, indemnification under Article VIII. "Indemnifying Person" shall mean the Person or Persons claimed by the Indemnified Person to be obligated to provide indemnification under Article VIII. "Law" shall mean any law (including the common law), statute, regulation, ordinance, rule, order, decree, judgment, consent decree, settlement agreement or governmental requirement enacted, promulgated, entered into, agreed or imposed by any Governmental Authority. "Liability" shall mean any past, present or future liability or obligation (whether known or unknown, whether asserted or unasserted, whether absolute, fixed, contingent or otherwise, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due), including any liability or obligation for Taxes. "Lien" shall mean any lien, mortgage, charge, restriction, pledge, security interest, option, lease, sublease or right of any third party. "Liquidation" shall have the meaning set forth in the recitals hereto. "Loss" or "Losses" shall mean any and all losses, Liabilities, costs, claims, damages, penalties and expenses (including reasonable attorneys' fees and expenses and reasonable costs of investigation and litigation). In the event any of the foregoing are indemnifiable hereunder, the terms "Loss" and "Losses" shall include any and all reasonable attorneys' fees and expenses and reasonable costs of investigation and litigation incurred by the Indemnified Person in enforcing such indemnity. 5 "Market Price" shall have the meaning set forth in Section 3.2. "Market Value" shall mean the closing per share sale price for shares of GWW Common Stock on the trading day immediately prior to the relevant date as reported in the composite transactions for the New York Stock Exchange. "MCC" shall mean Mountain Capital Corporation, a Nevada corporation. "MCC Shareholder" shall mean (i) any Original MCC Shareholder or (ii) any MCC Shareholder Transferee. "MCC Shareholder Transferee" shall mean a Permitted Transferee who shall own New GWW Shares received from a MCC Shareholder pursuant to and in accordance with Section 5.1(a). "New GWW Shares" shall mean (i) the Original New GWW Shares (including the Escrow Shares) and (ii) all shares of capital stock or other securities, whether issued by GWW or otherwise, issued or paid as dividends or other distributions on or in respect of Original New GWW Shares or other shares of capital stock or securities otherwise constituting New GWW Shares. "Offer Price" shall have the meaning set forth in Section 3.2. "Offered Shares" shall have the meaning set forth in Section 3.2. "Original MCC Shareholder" shall have the meaning set forth in the preamble hereto. "Original New GWW Shares" shall have the meaning set forth in the recitals hereto. "Original Owner" of any Restricted Shares shall mean the Restricted Signatory that owned such Restricted Shares on the date hereof (or if such Restricted Shares did not exist on the date hereof, the Restricted Signatory that owned the Restricted Shares that did exist on the date hereof with respect to which the Restricted Shares in question were distributed). "Other Slavik Shares" shall mean (i) all shares of GWW Common Stock (other than New GWW Shares) now or hereafter beneficially owned by a Restricted Signatory, (ii) all shares of GWW Common Stock (other than New GWW Shares) which are hereafter beneficially owned by a Slavik Transferee and which were received from a Slavik Shareholder and (iii) all shares of capital stock or other securities, whether issued by GWW or otherwise, issued or paid as dividends or other distributions on or in respect of shares of GWW Common Stock or other shares of capital stock or securities otherwise constituting Other Slavik Shares. 6 "Permitted Transferee" shall mean (i) a Family Transferee, (ii) the custodian under any Uniform Transfers to Minors Act or similar law for a minor who is a Family Transferee, (iii) a trust (including a voting trust), other than a Charitable Organization, of which one or more Family Transferees and/or Charitable Organizations are the sole beneficiaries, (iv) a corporation of which one or more Family Transferees or such Family Transferees' Permitted Transferees (as determined under this definition of "Permitted Transferee") collectively beneficially own a majority of the combined voting power of the outstanding capital stock entitled to vote for the election of directors, a partnership of which one or more Family Transferees or such Family Transferees' Permitted Transferees (as determined under this definition of "Permitted Transferee") collectively beneficially own a majority of the partnership interests entitled to participate in the management of the partnership, a member managed limited liability company of which one or more Family Transferees or such Family Transferees' Permitted Transferees (as determined under this definition of "Permitted Transferee") collectively beneficially own a majority of the outstanding member interests entitled to participate in the management of the limited liability company, or a manager managed limited liability company of which a majority of the managers entitled to participate in decisions with respect to the voting or disposition by the limited liability company of the Restricted Shares are either Family Transferees or such Family Transferees' Permitted Transferees (as determined under this definition of "Permitted Transferee"), (v) the estate of a Family Transferee, or the executor, administrator or personal representative of the estate of a Family Transferee or (vi) the guardian, conservator, or custodian of any Family Transferee adjudged disabled by a court of competent jurisdiction. For purposes of this definition of "Permitted Transferee": (A) The relationship of any person that is derived by or through legal adoption shall be considered a natural one. (B) Each joint owner of Restricted Shares shall be considered a holder of such shares who must qualify as a Permitted Transferee. (C) Each reference to a corporation or limited liability company shall include any successor corporation or limited liability company resulting from merger, consolidation, reorganization or recapitalization; each reference to a partnership shall include any successor partnership resulting from the death or withdrawal of a partner; each reference to a trustee, executor or any other personal representative shall include any successor trustee, successor executor or successor personal representative. In this Agreement, a "Permitted Transferee" of a Person shall mean a Permitted Transferee who shall own Restricted Shares received, directly or indirectly, from such Person pursuant to one or more Transfers made pursuant to and in accordance with Section 5.1(a). "Person" shall mean any individual, corporation, proprietorship, firm, partnership, limited partnership, limited liability company, trust, association or other entity. "Purchase Agreement" shall have the meaning set forth in the recitals hereto. "Purchased Assets" shall have the meaning set forth in the recitals hereto. "Restricted Shares" shall mean the New GWW Shares and the Other Slavik Shares. "Restricted Signatories" shall have the meaning set forth in the preamble hereto. 7 "Rule 144" shall mean Rule 144 as promulgated by the SEC under the Securities Act, as such rule may be amended from time to time, or any similar successor rule that may be promulgated by the SEC. "SEC" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar successor federal statute, and the rules and regulations thereunder, all as the same shall be in effect at the time. "Securities Act Legend" shall have the meaning assigned to such term in the Purchase Agreement. "Share Transfer Restriction Agreement Legend" shall have the meaning set forth in Section 9.1. "Slavik Shareholder" shall mean (i) any Restricted Signatory or (ii) any Slavik Transferee. "Slavik Transferee" shall mean a Permitted Transferee who shall own New GWW Shares or Other Slavik Shares received from a Slavik Shareholder pursuant to and in accordance with Section 5.1(a). "Subsidiary" shall mean, with respect to any Person, any corporation or other entity, whether incorporated or unincorporated, of which (i) such Person or any other Subsidiary of such Person is a general partner or (ii) at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation or other entity is, directly or indirectly, owned or controlled by such Person or by any one or more of its Subsidiaries, or by such Person and any one or more of its Subsidiaries. "Taxes" shall mean all taxes, charges, fees, duties (including customs duties), levies or other assessments, including income, gross receipts, net proceeds, ad valorem, turnover, real and personal property (tangible and intangible), sales, use, franchise, excise, goods and services, value added, stamp, leasing, lease, user, transfer, fuel, excess profits, occupational, interest equalization, windfall profits, severance, license, payroll, environmental, capital stock, disability, employee's income withholding, other withholding, unemployment and Social Security taxes, which are imposed by any Governmental Authority, and such term shall include any interest, penalties or additions to tax attributable thereto. "Transfer" shall mean (i) when used as a noun, any sale, transfer, conveyance, grant (including a grant of a security interest), encumbrance, pledge, hypothecation, gift, donation, bequest, devise or other disposition, whether direct or indirect, whether or not for value, and shall include any disposition of the economic or other risks of ownership of Restricted Shares, including (A) a liquidation, dissolution or winding up of the Slavik Shareholder or (B) the sale, transfer, conveyance, grant, encumbrance, pledge, hypothecation, gift, donation, bequest, devise or other disposition, whether direct or indirect, whether or not for value, of options, warrants or rights to acquire, or other securities convertible into, Restricted Shares, in which case the number of shares of Restricted Shares which such options, warrants or rights give a right to acquire, or into which such other securities are convertible, shall be deemed to have been Transferred and (ii) when used as a verb, making or effecting any of the foregoing. 8 "Transfer Notice" shall have the meaning set forth in Section 3.1(a). "Transferring Shareholder" shall have the meaning set forth in Section 3.2. 1.2 Interpretation. The headings preceding the text of Articles and Sections included in this Agreement and the headings to Schedules attached to this Agreement are for convenience only and shall not be deemed part of this Agreement or be given any effect in interpreting this Agreement. The use of the masculine, feminine or neuter gender or the singular or plural form of words herein shall not limit any provision of this Agreement. The use of the terms "including" or "include" shall in all cases herein mean "including, without limitation" or "include, without limitation," respectively. Reference to any Person includes such Person's successors and assigns to the extent such successors and assigns are permitted by the terms of any applicable agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually. Reference to any agreement (including this Agreement), document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms hereof. Reference to any Law means such Law as amended, modified, codified, replaced or re-enacted, in whole or in part, including rules, regulations, enforcement procedures and any interpretations promulgated thereunder. Underscored references to Articles, Sections, Subsections or Schedules shall refer to those portions of this Agreement. The use of the terms "hereunder," "hereof," "hereto" and words of similar import shall refer to this Agreement as a whole and not to any particular Article, Section or clause of or Exhibit or Schedule to this Agreement. No specific representation, warranty or covenant contained herein shall limit the generality or applicability of a more general representation, warranty or covenant contained herein. A breach of or inaccuracy in any representation, warranty or covenant shall not be affected by the fact that any more general or less general representation, warranty or covenant was not also breached or inaccurate. The word "class" when used by reference to securities or Restricted Shares shall have the meaning as set forth in Section 12 of the Exchange Act. ARTICLE II RESTRICTIONS ON TRANSFERS OF NEW GWW SHARES 2.1 Restrictions On Transfers of New GWW Shares. In addition to complying with Rule 144 and all other Transfer restrictions and other requirements under any other Law, in each case if and to the extent applicable, each MCC Shareholder shall comply with the following restrictions on Transfers of New GWW Shares following the Closing: (a) During the period from and after the date hereof and through and including the first Anniversary, no MCC Shareholder shall Transfer, and no MCC Shareholder shall permit any Permitted Transferee of such MCC Shareholder to Transfer, any New GWW Shares; 9 (b) During the period from and after the first Anniversary through and including the second Anniversary, no MCC Shareholder shall Transfer, and no MCC Shareholder shall permit any Permitted Transferee of such MCC Shareholder to Transfer, New GWW Shares in an aggregate number, for all such Transfers by such MCC Shareholder and its Permitted Transferees, greater than twenty-five percent (25%) of the New GWW Shares received by such MCC Shareholder pursuant to the Liquidation (including the Escrow Shares of such MCC Shareholder held by the Escrow Agent); (c) During the period from and after the second Anniversary through and including the third Anniversary, no MCC Shareholder shall Transfer, and no MCC Shareholder shall permit any Permitted Transferee of such MCC Shareholder to Transfer, New GWW Shares in an aggregate number, for all such Transfers by such MCC Shareholder and its Permitted Transferees, greater than the remainder of (i) fifty percent (50%) of the New GWW Shares received by such MCC Shareholder pursuant to the Liquidation (including the Escrow Shares of such MCC Shareholder held by the Escrow Agent) less (ii) the total New GWW Shares Transferred by such MCC Shareholder and its Permitted Transferees during the period and within the limitations set forth in Section 2.1(b); (d) During the period from and after the third Anniversary through and including the fourth Anniversary, no MCC Shareholder shall Transfer, and no MCC Shareholder shall permit any Permitted Transferee of such MCC Shareholder to Transfer, New GWW Shares in an aggregate number, for all such Transfers by such MCC Shareholder and its Permitted Transferees, greater than the remainder of (i) seventy-five percent (75%) of the New GWW Shares received by such MCC Shareholder pursuant to the Liquidation (including the Escrow Shares of such MCC Shareholder held by the Escrow Agent) less (ii) the total New GWW Shares Transferred by such MCC Shareholder and its Permitted Transferees during the period and within the limitations set forth in Section 2.1(b) and (c); (e) After the fourth Anniversary, each MCC Shareholder and each Permitted Transferee of such MCC Shareholder may Transfer any or all of the New GWW Shares (other than the Escrow Shares); provided that (i) each such Transfer of New GWW Shares shall be subject to all of the provisions of this Agreement, including Articles III, IV and V, (ii) no MCC Shareholder may Transfer any New GWW Shares constituting Escrow Shares unless and until such shares have been released from the Escrow Fund and distributed to such MCC Shareholder by the Escrow Agent pursuant to the terms of the Escrow Agreement, (iii) any Transfer of New GWW Shares described in Section 5.1(a), (c), (d), (e) or (f) shall not be included in determining compliance by any MCC Shareholder with the provisions of this Article II and (iv) any Transfer of New GWW Shares described in Section 5.1(g) shall not be included in determining compliance by any MCC Shareholder with the provisions of this Article II, provided that (A) any subsequent foreclosure or similar action resulting in such a Transfer of any or all of the New GWW Shares to, by, on behalf of, or for the benefit of the Bona Fide Pledgee, are made in accordance with Rule 144 (and, in any event, no such foreclosure or similar action shall be made prior to the first Anniversary) and (B) on the date the MCC Shareholder makes, grants or enters into the bona fide pledge constituting such a Transfer, the amount of the bona fide indebtedness secured by such pledge does not exceed eighty-five percent (85%) of the aggregate Market Value of the New GWW Shares pledged as collateral security for such indebtedness. 10 ARTICLE III NOTICES OF TRANSFER 3.1 Requirement to Provide Transfer Notice. (a) Subject to Section 3.1(b), during the period from the Closing Date to the tenth Anniversary: (i) No Slavik Shareholder shall Transfer any New GWW Shares without first providing a written notice (a "Transfer Notice") to GWW complying with this Article III. (ii) No Slavik Shareholder shall Transfer any Other Slavik Shares in a negotiated private transaction effected by or on behalf of such Slavik Shareholder or in any other manner other than pursuant to a "brokers transaction" (within the meaning of section 4(4) of the Securities Act) or a transaction directly with a "market maker" (as that term is defined in section 3(a)(38) of the Securities Act) as contemplated by Rule 144 without first providing a Transfer Notice to GWW complying with this Article III. (b) Notwithstanding anything to the contrary set forth in Section 3.1(a), (i) no Transfer Notice shall be required to be provided by a Slavik Shareholder to GWW in connection with any Transfer of New GWW Shares or Other Slavik Shares described in Section 5.1(d), (e) or (f), (ii) no Transfer Notice shall be required to be provided by a Slavik Shareholder to GWW in connection with any Transfer of Other Slavik Shares described in Section 5.1(c), provided that the Other Slavik Shares so Transferred by such Slavik Shareholder do not exceed 1,000 shares in the aggregate during any twelve-month period prior to the tenth Anniversary and (iii) any Transfer Notice required to be provided by a Slavik Shareholder to GWW in connection with any Transfer described in Section 5.1(a), (b), (c) or (g) shall be provided by such Slavik Shareholder to GWW not less than three (3) Business Days following such Transfer. 3.2 Contents of Transfer Notice. Subject to the last sentence of this Section 3.2, each Transfer Notice to be provided by a Slavik Shareholder (each, a "Transferring Shareholder") to GWW shall be substantially in the form set forth in Exhibit A and shall indicate the Transferring Shareholder's good faith intention to make a Transfer of Restricted Shares and shall set forth (i) the method of making the proposed Transfer; (ii) the number of Restricted Shares proposed to be Transferred by such Transferring Shareholder (the "Offered Shares"), (iii) the name and mailing address of the proposed purchaser or proposed transferee, as the case may be, (iv) if the proposed Transfer is a proposed sale, the proposed purchase price per share of the Offered Shares (the "Offer Price") and (v) the other terms and conditions of the proposed Transfer; provided that (i) if the proposed Transfer of Offered Shares is to be made pursuant to a "brokers transaction" (within the meaning of section 4(4) of the Securities Act) or a transaction directly with a "market maker" (as that term is defined in section 3(a)(38) of the Securities Act) as contemplated by Rule 144, the Transfer Notice may state that the proposed purchaser(s) are open market purchasers (in which case no address need be provided) and (ii) instead of specifying an Offer Price, the Transfer Notice may state that the proposed purchase price per share of the Offered Shares shall be (A) the market price for shares of GWW Common Stock on the New York Stock Exchange at the time of the Transfer, (B) the market price for shares of GWW Common Stock on the New York 11 Stock Exchange at the time of the Transfer but not less than a specified amount, (C) a price calculated based on a specified premium (or discount) over (or under) the market price for shares of GWW Common Stock on the New York Stock Exchange at the time of the Transfer, (D) a price calculated based on an average of the market price for shares of GWW Common Stock on the New York Stock Exchange over a specified time period prior to the Transfer, (E) a price calculated using a specified and determinable formula similar to any of the foregoing based on the market price for shares of GWW Common Stock on the New York Stock Exchange at or prior to the Transfer or (F) a price calculated using any of the foregoing formulas but not less than a specified amount (each referred to herein as a "Market Price"); provided that if the Transfer Notice merely states that the proposed purchase price per share of the Offered Shares shall be "at market" or "at the market price," without specifying the method of calculating the Market Price, then the Market Price shall be deemed to be the market price for shares of GWW Common Stock on the New York Stock Exchange at the time of the Transfer. In the case of a Transfer Notice to be provided by a Slavik Shareholder to GWW in connection with a Transfer described in Section 5.1(a), (b), (c) or (g) that has been consummated, the Transfer Notice shall identify the date that such Transfer occurred and shall set forth the same information with respect to such Transfer as is described in the first sentence of this Section 3.2 (other than the information described in clause (iv) thereof)). ARTICLE IV RIGHT OF FIRST REFUSAL 4.1 Right of GWW to Purchase. (a) No Transfer of Offered Shares (other than a Transfer described in Section 5.1) shall be made except in accordance with this Article IV. (b) Subject to Section 4.1(c), during the Election Period with respect to a proposed Transfer, GWW may, by delivering a written notice (an "Election Notice") to the Transferring Shareholder, elect to purchase all (but not only a portion) of the Offered Shares at the Offer Price specified in the Transfer Notice related to such proposed Transfer (or, if such Transfer Notice specified a Market Price, at the higher of (i) the minimum price, if any, specified in such Transfer Notice or (ii) the Market Price, which shall be calculated as if the proposed Transfer had occurred at the close of the market on the trading day immediately prior to the day that GWW delivers such Election Notice to the Transferring Shareholder) and upon the other terms and conditions set forth in such Transfer Notice. (c) Notwithstanding anything to the contrary set forth in Section 4.1(b), a Transferring Shareholder may elect not to consummate any proposed Transfer of Offered Shares for which a Transfer Notice has been provided to GWW and may withdraw the Transfer Notice with respect to such Offered Shares by delivering a written notice of such withdrawal to GWW at any time prior to delivery by GWW of an Election Notice with respect to such Offered Shares to the Transferring Shareholder. 4.2 Right of Transferring Shareholder to Sell. If GWW does not deliver an Election Notice with respect to the Offered Shares to the Transferring Shareholder within the Election Period, then the Transferring Shareholder shall be permitted to Transfer all of the Offered Shares to the proposed purchaser(s) specified in the Transfer Notice at the Offer Price (or, if the Transfer Notice specified a Market Price, at the Market Price) and upon the other terms and conditions set forth in such Transfer Notice, within sixty (60) days following the expiration of the Election Period. If such Transfer is not completed within such sixty (60) day period, the Transferring Shareholder may not Transfer the Offered Shares without again complying with all of the provisions of this Agreement, including this Article IV. 12 4.3 Closing of Purchases by GWW. If GWW delivers an Election Notice with respect to the Offered Shares to the Transferring Shareholder within the Election Period, then (i) the Transferring Shareholder shall not Transfer the Offered Shares as contemplated in the Transfer Notice and (ii) the Transferring Shareholder shall Transfer the Offered Shares to GWW as contemplated in the Election Notice. The closing of the purchase and sale of any Offered Shares to be acquired by GWW hereunder shall be held at the offices of GWW on such dates and times as the parties may agree but in any event within ten (10) days following the day that GWW delivered the Election Notice with respect to such Offered Shares to the Transferring Shareholder. ARTICLE V EXCEPTIONS AND OTHER SPECIAL PROVISIONS CONCERNING NOTICES AND RIGHT OF FIRST REFUSAL 5.1 Exceptions to Right of First Refusal. Notwithstanding anything to the contrary set forth herein, the provisions of Article IV shall not apply to any of the following Transfers of Restricted Shares by a Slavik Shareholder: (a) a Transfer of Restricted Shares to a Permitted Transferee of such Slavik Shareholder or to any other Slavik Shareholder, provided that such Restricted Shares shall continue to be subject to all of the provisions of this Agreement to the same extent as when such Restricted Shares were held by the transferor and, with respect to a Transfer to a Permitted Transferee who is not a Slavik Shareholder, the Permitted Transferee shall, prior to such Transfer, execute and deliver to GWW and to any other issuer of Restricted Shares, a written agreement substantially in the form set forth in Exhibit B attached hereto or otherwise in a form reasonably satisfactory to GWW and any such other issuer, in which the Permitted Transferee shall agree that, as to the Restricted Shares so Transferred, such Permitted Transferee shall be bound by all of the provisions of this Agreement to the same extent as the transferor hereunder (other than the indemnification obligations of the transferor set forth in Article VIII), and provided further that no Transfer of Restricted Shares by a Slavik Shareholder pursuant to this Section 5.1(a) shall limit or otherwise affect such Slavik Shareholder's obligations (including the indemnification obligations of such Slavik Shareholder set forth in Article VIII) under this Agreement; (b) a Transfer of New GWW Shares by a Slavik Shareholder pursuant to a "brokers transaction" (within the meaning of section 4(4) of the Securities Act) or a transaction directly with a "market maker" (as that term is defined in section 3(a)(38) of the Securities Act) as contemplated by Rule 144, but only to the extent the New GWW Shares so Transferred by such Slavik Shareholder (together with all other New GWW Shares so Transferred by the Permitted Transferees of such Slavik Shareholder and, if such Slavik Shareholder is a Slavik Transferee, together with all other New GWW Shares so Transferred by the Original Owner of such New GWW Shares and all Permitted Transferees of such Original Owner), do not exceed in the aggregate, during any twelve-month period prior to the tenth Anniversary, the greater of (i) 5,000 shares or (ii) two percent (2%) of the aggregate number of shares of GWW Common Stock owned by such Slavik Shareholder at the time of the Closing, as represented and warranted by such Slavik Shareholder in the schedule that such Slavik Shareholder has previously provided to GWW as contemplated by Section 6.4, or if not so represented and warranted by such Slavik Shareholder, two percent (2%) of the New GWW Shares that were acquired by such Slavik Shareholder (or, if such Slavik Shareholder is a Slavik Transferee, by the Original Owner of such New GWW Shares) in the Liquidation; 13 (c) a Transfer of Restricted Shares as a donation to a Charitable Organization; (d) a Transfer of Restricted Shares pursuant to the terms of any tender offer made pursuant to Regulation 14D promulgated under the Exchange Act or exchange offer pursuant to a registration statement filed under the Securities Act to purchase or acquire any portion of the outstanding securities constituting the same class of securities as the Restricted Shares being transferred pursuant to this Section 5.1(d) which is extended equally to all holders of securities of such class and which is approved by the board of directors of the issuer of such class of securities, provided that if, following completion of any such offer, the holders of securities of such class immediately prior to such offer, in their capacity as such holders, received capital stock of the entity making such offer having at least a majority of the combined voting power of the capital stock of such entity, then the capital stock of such entity received by the Slavik Shareholders pursuant to such offer shall be subject to all of the provisions of this Agreement; (e) a Transfer of Restricted Shares pursuant to any merger or consolidation involving the issuer of Restricted Shares which is approved by the board of directors of such issuer, provided that if, following such merger or consolidation, the holders of securities of such class immediately prior to such merger or consolidation, in their capacity as such holders, received capital stock of an entity involved in such merger or consolidation having at least a majority of the combined voting power of the capital stock of such entity, then the capital stock of such entity received by the Slavik Shareholder pursuant to such merger or consolidation shall be subject to all of the provisions of this Agreement; (f) a Transfer of Restricted Shares in connection with any recapitalization, reorganization, reclassification, change of domicile merger or other similar transaction (A) which is approved by the board of directors of the issuer of such Restricted Shares and (B) in which there is no change in the relative percentages of ownership among the holders of the capital stock of the resulting or surviving entity, except for changes resulting from cash payments in lieu of fractional shares, from the percentages of ownership of the class of securities of which such Restricted Shares are a part which existed immediately prior to such transaction, provided that the capital stock of such surviving or resulting entity shall be subject to all of the provisions of this Agreement; and (g) a bona fide pledge by a Slavik Shareholder to Glenview State Bank or a Bank which has total assets of at least $1 billion (each, a "Bona Fide Pledgee") of Restricted Shares as collateral security for bona fide indebtedness for borrowed money due from such Slavik Shareholder to such Bona Fide Pledgee, provided that (A) upon any release or termination of such pledge, such Restricted Shares shall continue to be subject to all of the provisions of this Agreement to the same extent as if such shares had not been pledged by the Slavik Shareholder, (B) in the event of a bona fide foreclosure or other similar action resulting in a Transfer of any or all of the pledged Restricted Shares to, by, on behalf of or for the benefit of such Bona Fide Pledgee made in accordance with Rule 144, except as provided in clause (C) of this Section 5.1(g), any such pledged shares shall no longer be subject to any of the provisions of this Agreement and (C) with respect to any bona fide pledge of Restricted Shares made or granted pursuant to an agreement entered into after the date of this Agreement, such Bona Fide Pledgee agrees to provide a written notice to GWW in accordance with Section 10.4 of any foreclosure or similar action resulting in a Transfer of any or all of the pledged Restricted Shares to, by, on behalf of or for the benefit of such Bona Fide Pledgee at least three (3) Business Days prior to such foreclosure or action, provided that an extension of the term of a pledge agreement in existence prior to the date of this Agreement shall not be deemed to be an agreement entered into after the date of this Agreement. 14 5.2 Stock Splits And Dividends. If there is any increase or decrease in the number of issued and outstanding Restricted Shares following the Closing Date resulting from a subdivision or consolidation of shares or the payment of a stock dividend or any other increase or decrease in the number of issued and outstanding Restricted Shares effected without receipt of consideration by GWW or the issuer thereof, as applicable, the shares resulting from such subdivision or consolidation or issued as such dividend or otherwise shall be subject to all of the provisions of this Agreement to the same extent as were the shares as to which such subdivision or consolidation occurred or the shares with respect to which such dividend was distributed or such other increase or decrease occurred. 5.3 Changes In Ownership Of Certain Entities. If, by reason of any proposed change in the ownership of the stock, partnership interests or member interests, or the identity or ownership interests of the managers of a Permitted Transferee who acquired Restricted Shares pursuant to Section 5.1(a), such corporation, partnership or limited liability company would no longer qualify as a Permitted Transferee under clause (iv) of the "Permitted Transferee" definition, then the event by which such proposed change of ownership shall occur shall be deemed to be a Transfer of all of the Restricted Shares then held by such corporation, partnership or limited liability company which were acquired by such corporation, partnership or limited liability company pursuant to Section 5.1(a), which Transfer must comply with all of the provisions of this Agreement. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF RESTRICTED SIGNATORIES Each Restricted Signatory severally represents and warrants to GWW, as of the date of this Agreement, as set forth below. The information disclosed on any Schedule attached hereto shall be deemed to relate solely to the section of this Article VI to which such Schedule relates and shall not be deemed to relate to any other sections to which such disclosures may apply unless such disclosure is cross-referenced in the Schedule(s) relating to such other section(s), and only to the extent that the applicable information or risk is described. 6.1 Due Organization. If such Restricted Signatory is not a natural person, such Restricted Signatory is an entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. 6.2 Due Authorization. If such Restricted Signatory is not a natural person, such Restricted Signatory has full power and authority to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby. If such Restricted Signatory is a natural person, such Restricted Signatory has the legal capacity, power and authority to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby. If such Restricted Signatory is a trust or a custodianship, the trustee of such trust or the custodian of such custodianship, as the case may be, has the legal capacity, power and authority, on behalf of such trust or custodianship, as the case may be, to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby. Such Restricted Signatory has taken all action required by Law, such Restricted Signatory's organizational or governing documents (if applicable), or otherwise to authorize the execution, delivery and performance of this Agreement and the consummation by such Restricted Signatory of the transactions contemplated hereby. Such Restricted Signatory has duly and validly executed and delivered this Agreement. This Agreement constitutes legal, valid and binding obligations of such Restricted Signatory, enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar laws in effect that affect the enforcement of creditors' rights generally and by equitable limitations on the availability of specific remedies. 15 6.3 Consents and Approvals; Authority. (a) Except as described in Schedule 6.3(a), no consent, authorization or approval of, filing or registration with, waiver of any right of first refusal or first offer from, or cooperation from, any Governmental Authority or any other Person is necessary in connection with the execution, delivery and performance by such Restricted Signatory of this Agreement or the consummation by such Restricted Signatory of the transactions contemplated hereby. (b) The execution, delivery and performance by such Restricted Signatory of this Agreement and the consummation by such Restricted Signatory of the transactions contemplated hereby, do not and will not (i) violate any Law applicable to or binding on such Restricted Signatory, or any of such Restricted Subsidiary's assets or properties; (ii) violate or conflict with, result in a breach or termination of, constitute a default or give any third party any additional right (including a termination right) under, permit cancellation of, result in the creation of any Lien upon any of the assets or properties of such Restricted Signatory under, or result in or constitute a circumstance which, with or without notice or lapse of time or both, would constitute any of the foregoing under, any Contract to which such Restricted Signatory is a party or by which such Restricted Signatory or any of such Restricted Subsidiary's assets or properties are bound; (iii) permit the acceleration of the maturity of any indebtedness of such Restricted Signatory or indebtedness secured by any of such Restricted Subsidiary's assets or properties; or (iv) violate or conflict with any provision of the certificate of incorporation, by-laws or similar organizational instruments of such Restricted Signatory. 6.4 Ownership of GWW Common Stock. Such Restricted Signatory has previously provided to GWW a schedule that sets forth (i) the name, address and taxpayer identification number of such Restricted Signatory, (ii) the number of New GWW Shares (including the number of Escrow Shares) being received by such Restricted Signatory in connection with the Liquidation and (iii) except with respect to John H. Slavik, David A. Slavik, Sean T. Slavik and the Sean Thomas Slavik Trust, (A) the total number of other shares of GWW Common Stock legally or beneficially owned by such Restricted Signatory, (B) the names and accounts in which each of such New GWW Shares and other shares of GWW Common Stock are held and (C) the number of such New GWW Shares and other shares of GWW Common Stock that are subject to a pledge or similar encumbrance and the identity of the pledgee and the date such shares became subject to such pledge or similar encumbrance. 16 ARTICLE VII REPRESENTATIONS AND WARRANTIES OF GWW GWW represents and warrants to the Restricted Signatories, as of the date of this Agreement, as follows: 7.1 Due Incorporation. GWW is a corporation duly organized, validly existing and in good standing under the laws of the State of Illinois, with all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. 7.2 Due Authorization. GWW has full power and authority to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance by GWW of this Agreement, and the consummation by GWW of the transactions contemplated hereby, have been duly and validly approved by the board of directors of GWW, and no other actions or proceedings on the part of GWW are necessary to authorize this Agreement or the transactions contemplated hereby. GWW has duly and validly executed and delivered this Agreement. This Agreement constitutes legal, valid and binding obligations of GWW, enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar laws in effect that affect the enforcement of creditors' rights generally and by equitable limitations on the availability of specific remedies. 7.3 Consents and Approvals; Authority. (a) Except as described in Schedule 7.3(a), no consent, authorization or approval of, filing or registration with, or cooperation from, any Governmental Authority or any other Person not a party to this Agreement is necessary in connection with the execution, delivery and performance by GWW of this Agreement or the consummation by GWW of the transactions contemplated hereby. (b) The execution, delivery and performance by GWW of this Agreement, and the consummation by GWW of the transactions contemplated hereby, do not and will not (i) violate any Law applicable to or binding on GWW or any of its assets or properties; (ii) violate or conflict with, result in a breach or termination of, constitute a default or give any third party any additional right (including a termination right) under, permit cancellation of, result in the creation of any Lien upon any of the assets or properties of GWW under, or result in or constitute a circumstance which, with or without notice or lapse of time or both, would constitute any of the foregoing under, any Contract to which GWW is a party or by which GWW or any of its assets or properties are bound; (iii) permit the acceleration of the maturity of any indebtedness of GWW or indebtedness secured by its assets or properties; or (iv) violate or conflict with any provision of GWW's articles of incorporation or by-laws. 17 ARTICLE VIII INDEMNIFICATION 8.1 Survival. All of the representations and warranties of the parties hereto contained herein shall survive until the tenth Anniversary. 8.2 Indemnification by Restricted Signatories. Each Restricted Signatory (and each Permitted Transferee of such Restricted Signatory) severally agrees to indemnify each of the GWW Indemnified Parties against, and agrees to hold each of the GWW Indemnified Parties harmless from, any and all Losses incurred or suffered by any or all of the GWW Indemnified Parties arising out of or in connection with any of the following: (a) any breach of or any inaccuracy in (or any third party claim involving an alleged breach of or inaccuracy in) any representation or warranty made by such Restricted Signatory (or by any Permitted Transferee of such Restricted Signatory) in this Agreement; or (b) any breach (or any third party claim involving an alleged breach) by such Restricted Signatory (or by any Permitted Transferee of such Restricted Signatory) of or failure (or any third party claim involving an alleged failure) by such Restricted Signatory (or by any Permitted Transferee of such Restricted Signatory) to perform any covenant, agreement or obligation of such Restricted Signatory (or of any Permitted Transferee of such Restricted Signatory) in this Agreement. 8.3 Indemnification by GWW. GWW agrees to indemnify each Restricted Signatory against, and agrees to hold each of them harmless from, any and all Losses incurred or suffered by such Restricted Signatory arising out of or in connection with any of the following: (a) any breach of or any inaccuracy in (or any third party claim involving an alleged breach of or inaccuracy in) any representation or warranty made by GWW in this Agreement; or (b) any breach (or any third party claim involving an alleged breach) of or failure (or any third party claim involving an alleged failure) by GWW to perform any covenant, agreement or obligation of GWW in this Agreement. 8.4 Claims. As soon as is reasonably practicable after becoming aware of a claim for indemnification under this Agreement not involving a claim, or the commencement of any suit, action or proceeding, of the type described in Section 8.5, the Indemnified Person shall give notice to the Indemnifying Person of such claim; provided, that the failure of the Indemnified Person to give notice shall not relieve the Indemnifying Person of its obligations under this Article VIII, except to the extent the Indemnifying Person shall have been materially prejudiced thereby. 8.5 Notice of Third Party Claims; Assumption of Defense. The Indemnified Person shall give notice as promptly as is reasonably practicable to the Indemnifying Person of the assertion of any claim, or the commencement of any suit, action or proceeding, by any Person not a party hereto in respect of which indemnity may be sought under this Agreement; provided, that the failure of the Indemnified Person to give notice shall not relieve the Indemnifying Person of its obligations under this Article VIII, except to the extent the Indemnifying Person shall have been materially prejudiced thereby. The Indemnifying Person may, at its own expense, (a) participate in the defense of any such claim, suit, action or proceeding and (b) upon notice to the Indemnified Person and the 18 Indemnifying Person's delivering to the Indemnified Person a written agreement that the Indemnified Person is entitled to indemnification pursuant to Section 8.2 or Section 8.3 for all Losses arising out of such claim, suit, action or proceeding and that the Indemnifying Person shall be liable for the entire amount of any Loss resulting therefrom, at any time during the course of any such claim, suit, action or proceeding, assume the defense thereof; provided, that (i) the Indemnifying Person's counsel is reasonably satisfactory to the Indemnified Person and (ii) the Indemnifying Person shall thereafter consult with the Indemnified Person upon the Indemnified Person's reasonable request for such consultation from time to time with respect to such claim, suit, action or proceeding. If the Indemnifying Person assumes such defense, the Indemnified Person shall have the right (but not the duty) to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the Indemnifying Person. If, however, the Indemnified Person reasonably determines in its judgment that representation by the Indemnifying Person's counsel of both the Indemnifying Person and the Indemnified Person would present such counsel with a conflict of interest, then such Indemnified Person may employ separate counsel to represent or defend it in any such claim, action, suit or proceeding and the Indemnifying Person shall pay the reasonable fees and disbursements of such separate counsel. Whether or not the Indemnifying Person chooses to defend or prosecute any such claim, suit, action or proceeding, all of the parties hereto shall cooperate in the defense or prosecution thereof. 8.6 Settlement or Compromise. Any settlement or compromise made or caused to be made by the Indemnified Person or the Indemnifying Person, as the case may be, of any such claim, suit, action or proceeding of the kind referred to in Section 8.5 shall also be binding upon the Indemnifying Person or the Indemnified Person, as the case may be, in the same manner as if a final judgment or decree had been entered by a court of competent jurisdiction in the amount of such settlement or compromise; provided, that no obligation, restriction or Loss shall be imposed on the Indemnified Person or the Indemnifying Person (other than obligations arising under this Agreement) as a result of such settlement without its prior written consent, which consent shall not be unreasonably withheld. The Indemnified Person will give the Indemnifying Person at least fifteen (15) days' notice of any proposed settlement or compromise of any claim, suit, action or proceeding referred to in Section 8.5 that it is defending, during which time the Indemnifying Person may, on reasonable grounds, reject such proposed settlement or compromise; provided, that from and after such rejection, the Indemnifying Person shall be obligated to assume the defense of and full and complete liability and responsibility for such claim, suit, action or proceeding and any and all Losses in connection therewith. Likewise, the Indemnifying Person will give the Indemnified Person at least fifteen (15) days' notice of any proposed settlement or compromise of any claim, suit, action or proceeding referred to in Section 8.5 that it is defending, during which time the Indemnified Person may, on reasonable grounds, reject such proposed settlement or compromise; provided, that from and after such rejection, the Indemnified Person shall defend the claim at its expense and the Indemnifying Person's liability shall be limited to the amount of the proposed settlement or compromise. 19 8.7 Failure of Indemnifying Person to Act. In the event that the Indemnifying Person does not elect to assume the defense of any claim, suit, action or proceeding, then any failure of the Indemnified Person to defend or to participate in the defense of any such claim, suit, action or proceeding or to cause the same to be done, shall not relieve the Indemnifying Person of its obligations hereunder. 8.8 Acknowledgment; No Obligation to Set-Off Against Escrow Fund. Each Restricted Signatory agrees and acknowledges that (i) the right of indemnification of the GWW Indemnified Parties hereunder is absolute, (ii) the indemnification obligations of such Restricted Signatory shall not in any manner be limited to the Escrow Shares or any other assets that may be contained in the Escrow Fund at any time, and (iii) the GWW Indemnified Parties are not obligated to seek satisfaction of a claim for indemnification pursuant to this Agreement from the Escrow Fund established pursuant to the Escrow Agreement prior to seeking satisfaction of such a claim from such Restricted Signatory. ARTICLE IX LEGENDS 9.1 Legends. For so long as the restrictions hereunder are applicable to such shares as determined by GWW in GWW's reasonable discretion, in addition to the Securities Act Legend and any other legends required by the Purchase Agreement, all certificates representing New GWW Shares shall be stamped or otherwise imprinted with a legend (the "Share Transfer Restriction Agreement Legend") in substantially the following form: "The sale, transfer or other disposition of the shares represented by this certificate prior to February 28, 2012 is subject to, and may not be made except in compliance with, the conditions specified in a Share Transfer Restriction Agreement with W.W. Grainger, Inc. (the "Company"). A copy of the Share Transfer Restriction Agreement is on file and may be inspected at the principal office of the Company and will be furnished by the Company to the holder hereof upon request and without charge." 9.2 Removal of Legends. (a) Upon receipt by GWW of a written notice from a Slavik Shareholder stating that such Slavik Shareholder has made or is making a Transfer described in Section 5.1(b), (c), (d), (e) or (f) of any New GWW Shares (other than a Transfer in which New GWW Shares will remain subject to the provisions of this Agreement) or a Transfer in accordance with Section 4.2 of any New GWW Shares for which GWW did not deliver an Election Notice, along with the certificate or certificates representing the New GWW Shares Transferred or to be Transferred, GWW shall promptly instruct its transfer agent to register the number of shares Transferred or to be Transferred in the name of the transferee or to the selling broker in "street name" and to deliver one or more new certificates representing such Transferred shares to the Slavik Shareholder or to the Slavik Shareholder's designee(s), which new certificate or certificates shall not contain the Share Transfer Restriction Agreement Legend, provided that GWW shall have no obligation to provide such instructions to its transfer agent unless and until GWW has received satisfactory written evidence that such Transfer was made or is being made in accordance with the requirements of Rule 144 and 145 and otherwise in compliance with the Securities Act and all applicable state securities laws as contemplated by Section 9.2(b). 20 (b) Upon receipt by GWW of satisfactory written evidence (which evidence shall include, at GWW's reasonable request, an opinion of counsel reasonably acceptable to GWW, in form and substance reasonably acceptable to GWW) that a Slavik Shareholder has Transferred or is Transferring New GWW Shares in accordance with the requirements of Rule 144 and 145 and otherwise in compliance with the Securities Act and all applicable state securities laws, along with the certificate or certificates representing the New GWW Shares Transferred or to be Transferred, GWW shall promptly instruct its transfer agent to register the number of shares Transferred or to be Transferred in the name of the transferee or to the selling broker in "street name" and to deliver one or more new certificates representing such Transferred shares to the Slavik Shareholder or to the Slavik Shareholder's designee(s), which new certificate or certificates shall not contain the Securities Act Legend, provided that GWW shall have no obligation to provide such instructions to its transfer agent unless such Transfer was made or is being made in compliance with all of the provisions of this Agreement. (c) At any time following the tenth Anniversary, upon receipt by GWW from any Slavik Shareholder of one or more certificates representing Restricted Shares, GWW shall promptly instruct its transfer agent to (i) cancel such returned certificate or certificates and (ii) deliver one or more new certificates representing such Restricted Shares to such Slavik Shareholder or to such Slavik Shareholder's designee, which new certificate or certificates shall not contain the Share Transfer Restriction Agreement Legend. 9.3 Later Delivery of Certificates. In the event that any additional shares of GWW Common Stock or other shares of capital stock or securities shall become New GWW Shares at any time following the Closing, upon the request of GWW, the holder of such New GWW Shares shall promptly deliver the certificates for such New GWW Shares to GWW for the sole purpose of permitting GWW to stamp or otherwise imprint the Share Transfer Restriction Agreement Legend thereon. GWW shall promptly return such certificates to such holder after GWW has so stamped or imprinted such certificates. 9.4 Uncertificated Shares. To the extent any New GWW Shares are not evidenced by certificates, the books and records of GWW or the applicable issuer (including those maintained by the registrar or transfer agent of such class of New GWW Shares) shall contain appropriate notation indicating that such shares are subject to, and the Transfer thereof is subject to, and may not be made except in compliance with, all of the provisions of this Agreement. 9.5 No Limitation of Indemnification Obligations. Nothing in this Article IX shall limit or otherwise affect the indemnification obligations of the Restricted Signatories (or their respective Permitted Transferees) set forth in Article VIII or the obligation of any Restricted Signatory or Slavik Shareholder to comply with all of the provisions of this Agreement. ARTICLE X MISCELLANEOUS 10.1 Termination In Certain Events. The provisions of this Agreement shall terminate and be of no further force and effect (i) with respect to any particular class of Restricted Shares, upon the liquidation or dissolution of the issuer of such class of Restricted Shares, (ii) with respect to any particular class of Restricted Shares, upon the occurrence of any reorganization, merger, consolidation or other transaction in which the holders of securities of the same class as the applicable Restricted Shares immediately prior to such event, in their capacity as such holders, own less than 50% of the combined voting power of the surviving or resulting entity or (iii) upon the tenth Anniversary. 21 10.2 Implementing Agreement. Subject to the terms and conditions hereof, each party hereto shall take all action required of it to fulfill its obligations under the terms of this Agreement and shall otherwise use all commercially reasonable efforts to facilitate the consummation of the transactions contemplated hereby. Each party hereto agrees that he, she or it will take no action that would have the effect of preventing or impairing the performance by any party hereto of its respective obligations under this Agreement. 10.3 Amendment. This Agreement may be amended, modified or supplemented but only with the written consent of GWW and each Slavik Shareholder affected by such amendment. Without limiting the generality of the foregoing, any Slavik Shareholder may at any time request that GWW execute and deliver to such Slavik Shareholder a written agreement in which GWW agrees to waive or to otherwise amend, modify or supplement the provisions of this Agreement with respect to any or all of the Restricted Shares owned by such Slavik Shareholder or with respect to any particular transaction regarding any or all of the Restricted Shares owned by such Slavik Shareholder, provided that GWW shall have the right to accept or reject all or any part of such Slavik Shareholder's request in GWW's sole and absolute judgment. 10.4 Notices. Any notice, request, instruction or other document to be given hereunder by a party hereto shall be in writing and shall be deemed to have been received, (a) when delivered if given in person or by courier or a courier service such as Federal Express, DHL or other similar services, (b) on the date of transmission if sent by facsimile or other wire transmission (receipt confirmed by return facsimile) or (c) five (5) Business Days after being deposited in the U.S. mail, certified or registered mail, postage prepaid: (a) If to any Restricted Signatory, addressed to the address listed for such Restricted Signatory on the schedule for such Restricted Signatory referred to in Section 6.4, with a copy to: McDermott, Will & Emery 227 West Monroe Street Chicago, Illinois 60606-5096 Attention: Daniel N. Zucker, Esq. Facsimile No.: (312) 984-2097 and Mark IV Capital, Inc. 100 Bayview Circle, Suite 4500 Newport Beach, California 92650 Attention: President Facsimile No.: (949) 509-1104 22 (b) If to a Slavik Transferee, to the address listed for such Slavik Transferee pursuant to the written agreement executed and delivered by such Slavik Transferee as contemplated by Section 5.1(a), with a copy to: McDermott, Will & Emery 227 West Monroe Street Chicago, Illinois 60606-5096 Attention: Daniel N. Zucker, Esq. Facsimile No.: (312) 984-2097 and Mark IV Capital, Inc. 100 Bayview Circle, Suite 4500 Newport Beach, California 92650 Attention: President Facsimile No.: (949) 509-1104 (c) If to GWW, addressed as follows: W.W. Grainger, Inc. 100 Grainger Parkway Lake Forest, Illinois 60045 Attention: Corporate Secretary Facsimile No.: (847) 535-1045 with a copy to: W.W. Grainger, Inc. 100 Grainger Parkway Lake Forest, Illinois 60045 Attention: General Counsel Facsimile No.: (847) 535-4585 and Mayer, Brown, Rowe & Maw 190 South LaSalle Street Chicago, Illinois 60603 Attention: Frederick B. Thomas, Esq. Facsimile No.: (312) 701-7711 or to such other individual or address as a party hereto may designate for itself by notice given as herein provided. 10.5 Effect of Investigation. Any due diligence review, audit or other investigation or inquiry undertaken or performed by or on behalf of GWW shall not limit, qualify, modify or amend the representations, warranties, covenants or obligations of (including indemnities by) any Restricted Signatory made or undertaken pursuant to this Agreement, irrespective of the knowledge and information received (or which should have been received) therefrom by GWW. 23 10.6 Payments in Dollars. Except as otherwise provided herein, all payments pursuant hereto shall be made by electronic wire transfer in United States Dollars in same day or immediately available funds. 10.7 Waivers. The failure of a party hereto at any time or times to require performance of any provision hereof shall in no manner affect its right at a later time to enforce the same. No waiver by a party of any condition or of any breach of any term, covenant, representation or warranty contained in this Agreement shall be effective unless in writing, and no waiver in any one or more instances shall be deemed to be a further or continuing waiver of any such condition or breach in other instances or a waiver of any other condition or breach of any other term, covenant, representation or warranty. 10.8 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may be executed by facsimile signature and a facsimile signature shall constitute an original signature for all purposes. 10.9 Successors And Assigns. Except as otherwise provided herein, the terms and conditions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, heirs and legal representatives. Additionally the parties hereto agree that, to the extent GWW is not the issuer of a particular class of securities or Restricted Shares subject to this Agreement, GWW shall have the right to assign to the issuer of such class of securities or Restricted Shares GWW's rights and obligations under this Agreement with respect to such class of securities or Restricted Shares and any such assignment will not operate as a termination or limitation of GWW's rights and obligations under this Agreement with respect to any other class of securities or Restricted Shares. GWW shall remain liable for any of its obligations under this Agreement that are assigned in accordance with this Section 10.9. 10.10 Severability. If any provision of this Agreement shall be held invalid, illegal or unenforceable, the validity, legality or enforceability of the other provisions hereof shall not be affected thereby, and there shall be deemed substituted for the provision at issue a valid, legal and enforceable provision as similar as possible to the provision at issue. 10.11 Remedies. The remedies provided in this Agreement shall be cumulative and shall not preclude the assertion or exercise of any other rights or remedies available by Law, in equity or otherwise. Each of the parties hereto hereby acknowledges and agrees that the other parties would be damaged irreparably in the event that any of the provisions of this Agreement are not performed in accordance with their specific terms or are otherwise breached. Each of the parties hereto hereby agrees that the other parties shall be entitled to an injunction or injunctions to prevent breaches (or threatened breaches) of the provisions of this Agreement and to enforce specific performance of the provisions of this Agreement in addition to any other remedies provided in this Agreement and any other rights or remedies available by Law, in equity or otherwise. 24 10.12 Entire Understanding. This Agreement, the Purchase Agreement and the Escrow Agreement sets forth the entire agreement and understanding of the parties hereto with respect to the transactions contemplated hereby and supersede any and all prior agreements, arrangements and understandings among the parties (including the Mutual Letter of Intent dated as of January 24, 2002 by and between GWW and MCC) relating to the subject matter hereof. 10.13 Applicable Law. This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Illinois without giving effect to the principles of conflicts of law thereof. 10.14 Jurisdiction of Disputes; Waiver of Jury Trial. The state courts of the County of Cook, Illinois and the United States District Court for the Northern District of Illinois shall have the exclusive jurisdiction over any and all litigation, proceeding or other legal action relating to or arising out of this Agreement, the subject matter hereof or the transactions contemplated hereby. Each of the parties hereto hereby irrevocably (a) submits to the personal jurisdiction of such courts over such party in connection with any litigation, proceeding or other legal action relating to or arising out of this Agreement or the subject matter hereof or the transactions contemplated hereby, (b) waives to the fullest extent permitted by Law any objection to the venue of any such litigation, proceeding or other legal action which is brought in any such court and (c) agrees to the mailing of service of process to the address specified above for such party as an alternative method of service of process in any such litigation, proceeding or other legal proceeding brought in any such court. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY LITIGATION, PROCEEDING OR OTHER LEGAL ACTION RELATING TO OR ARISING OUT OF THIS AGREEMENT OR ANY MATTERS DESCRIBED OR CONTEMPLATED HEREIN, AND AGREES TO TAKE ANY AND ALL ACTION NECESSARY OR APPROPRIATE TO EFFECT SUCH WAIVER. 10.15 Acknowledgement of each Restricted Signatory. Each Restricted Signatory represents to GWW that he, she or it is knowledgeable and sophisticated as to business matters, including the subject matter of this Agreement, that such Restricted Signatory has read this Agreement and that he, she or it understands its terms. Each Restricted Signatory acknowledges that, prior to assenting to the terms of this Agreement, he, she or it has been given a reasonable time to review it, to consult with counsel of his, her or its choice and to negotiate at arm's-length with GWW as to its contents. Each Restricted Signatory and GWW agree that the language used in this Agreement is the language chosen by the parties to express their mutual intent, and that no rule or strict construction is to be applied against any Restricted Signatory or GWW. * * * * * 25 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered as of the date first above written. W.W. GRAINGER, INC. By: /s/ Richard L. Keyser --------------------------------------- Name: Richard L. Keyser Title: Chairman of the Board and Chief Executive Officer The Original MCC Shareholders: BRENNAN SLAVIK TRUST By: /s/ Paul A. Slavik --------------------------------------- Name: Paul A. Slavik Title: Trustee EVAN MICHAEL SLAVIK TRUST By: /s/ Paul A. Slavik --------------------------------------- Name: Paul A. Slavik Title: Trustee SUSAN SLAVIK INTER-VIVOS TRUST By: /s/ Susan Slavik Williams --------------------------------------- Name: Susan Slavik Williams Title: Trustee 26 JAMES AND GLENYS SLAVIK 2000 EXEMPT TRUST FBO BRENNAN JAMES SLAVIK By: /s/ Glenys Slavik ---------------------------------------- Name: Glenys Slavik Title: Trustee By: /s/ Paul A. Slavik --------------------------------------- Name: Paul A. Slavik Title: Trustee JAMES AND GLENYS SLAVIK 2000 EXEMPT TRUST FBO EVAN MICHAEL SLAVIK By: /s/ Glenys Slavik --------------------------------------- Name: Glenys Slavik Title: Trustee By: /s/ Paul A. Slavik --------------------------------------- Name: Paul A. Slavik Title: Trustee PAUL AND CATHIE SLAVIK 2000 EXEMPT TRUST FBO LAUREN D. SLAVIK By: /s/ Cathie Slavik --------------------------------------- Name: Cathie Slavik Title: Trustee By: /s/ James D. Slavik --------------------------------------- Name: James D. Slavik Title: Trustee 27 PAUL AND CATHIE SLAVIK 2000 EXEMPT TRUST FBO LINDSAY C. SLAVIK By: /s/ Cathie Slavik --------------------------------------- Name: Cathie Slavik Title: Trustee By: /s/ James D. Slavik --------------------------------------- Name: James D. Slavik Title: Trustee SUSAN SLAVIK WILLIAMS & FELIX WILLIAMS 2000 TRUST By: /s/ Felix N. Williams, III --------------------------------------- Name: Felix N. Williams, III Title: Trustee By: /s/ James Garrity --------------------------------------- Name: James Garrity Title: Trustee SEAN THOMAS SLAVIK TRUST By: /s/ John H. Slavik --------------------------------------- Name: John H. Slavik Title: Trustee By: /s/ Gary R. King --------------------------------------- Name: Gary R. King Title: Trustee LAUREN DANIELLE SLAVIK TRUST ESTABLISHED DECEMBER 28, 1987 By: /s/ James D. Slavik --------------------------------------- Name: James D. Slavik Title: Trustee 28 LINDSAY SLAVIK TRUST ESTABLISHED OCTOBER 1, 1989 By: /s/ James D. Slavik --------------------------------------- Name: James D. Slavik Title: Trustee THE JAMES D. SLAVIK SEPARATE PROPERTY TRUST ESTABLISHED FEBRUARY 27, 1974, AS AMENDED By: /s/ James D. Slavik --------------------------------------- Name: James D. Slavik Title: Trustee THE PAUL A. SLAVIK TRUST ESTABLISHED JANUARY 26, 1993 By: /s/ Paul A. Slavik --------------------------------------- Name: Paul A. Slavik Title: Trustee /s/ John H. Slavik ----------------------------------------------- John H. Slavik, individually Acknowledged, Consented to and Agreed: /s/ Kathleen A. Slavik ---------------------------------------- Kathleen A. Slavik /s/ Sean T. Slavik ----------------------------------------------- Sean T. Slavik, individually 29 /s/ David A. Slavik ----------------------------------------------- David A. Slavik, individually Acknowledged, Consented to and Agreed: /s/ Jocelyne Slavik --------------------------------------- Jocelyne Slavik The Other Shareholders: MARK IV CAPITAL, INC. By: /s/ James D. Slavik --------------------------------------- Name: James D. Slavik Title: President THE JAMES AND GLENYS SLAVIK FAMILY TRUST ESTABLISHED JUNE 6, 1990 By: /s/ James D. Slavik --------------------------------------- Name: James D. Slavik Title: Trustee By: /s/ Paul A. Slavik --------------------------------------- Name: Paul A. Slavik Title: Trustee TRUST UNDER THE WILLS OF ELMER O. SLAVIK AND ANTOINETTE SLAVIK FBO JAMES D. SLAVIK By: /s/ James D. Slavik --------------------------------------- Name: James D. Slavik Title: Trustee By: /s/ Paul A. Slavik --------------------------------------- Name: Paul A. Slavik Title: Trustee 30 TRUST UNDER THE WILLS OF ELMER O. SLAVIK AND ANTOINETTE SLAVIK FBO PAUL A. SLAVIK By: /s/ Paul A. Slavik --------------------------------------- Name: Paul A. Slavik Title: Trustee By: /s/ James D. Slavik --------------------------------------- Name: James D. Slavik Title: Trustee TRUST UNDER THE WILLS OF ELMER O. SLAVIK AND ANTOINETTE SLAVIK FBO SUSAN A. SLAVIK By: /s/ James D. Slavik --------------------------------------- Name: James D. Slavik Title: Trustee By: /s/ Paul A. Slavik --------------------------------------- Name: Paul A. Slavik Title: Trustee SLAVIK FAMILY INCOME TRUST By: /s/ Susan Ann Slavik --------------------------------------- Name: Susan Ann Slavik Title: Trustee /s/ Paul A. Slavik ----------------------------------------------- Paul A. Slavik, as custodian for Brennan J. Slavik /s/ Paul A. Slavik ----------------------------------------------- Paul A. Slavik, as custodian for Evan M. Slavik /s/ Glenys N. Slavik ----------------------------------------------- Glenys N. Slavik, individually /s/ Brennan J. Slavik ----------------------------------------------- Brennan J. Slavik, individually /s/ Evan M. Slavik ----------------------------------------------- Evan M. Slavik, individually 31 Table of Contents Page ARTICLE I DEFINITIONS..................................................3 1.1 Definitions.......................................................3 1.2 Interpretation....................................................9 ARTICLE II RESTRICTIONS ON TRANSFERS OF NEW GWW SHARES..................9 2.1 Restrictions On Transfers of New GWW Shares.......................9 ARTICLE III NOTICES OF TRANSFER.........................................11 3.1 Requirement to Provide Transfer Notice...........................11 3.2 Contents of Transfer Notice......................................11 ARTICLE IV RIGHT OF FIRST REFUSAL......................................12 4.1 Right of GWW to Purchase.........................................12 4.2 Right of Transferring Shareholder to Sell........................12 4.3 Closing of Purchases by GWW......................................13 ARTICLE V EXCEPTIONS AND OTHER SPECIAL PROVISIONS CONCERNING NOTICEs OF FIRST REFUSAL ...................................13 5.1 Exceptions to Right of First Refusal.............................13 5.2 Stock Splits And Dividends.......................................15 5.3 Changes In Ownership Of Certain Entities.........................15 ARTICLE VI REPRESENTATIONS AND WARRANTIES OF RESTRICTED SIGNATORIES ...............................................15 6.1 Due Organization.................................................15 6.2 Due Authorization................................................15 6.3 Consents and Approvals; Authority................................16 6.4 Ownership of GWW Common Stock....................................16 ARTICLE VII REPRESENTATIONS AND WARRANTIES OF GWW.......................17 7.1 Due Incorporation................................................17 7.2 Due Authorization................................................17 7.3 Consents and Approvals; Authority................................17 -i- ARTICLE VIII INDEMNIFICATION.............................................18 8.1 Survival.........................................................18 8.2 Indemnification by Restricted Signatories........................18 8.3 Indemnification by GWW...........................................18 8.4 Claims...........................................................18 8.5 Notice of Third Party Claims; Assumption of Defense..............18 8.6 Settlement or Compromise.........................................19 8.7 Failure of Indemnifying Person to Act............................20 8.8 Acknowledgment; No Obligation to Set-Off Against Escrow Fund.....20 ARTICLE IX LEGENDS.....................................................20 9.1 Legends..........................................................20 9.2 Removal of Legends. .............................................20 9.3 Later Delivery of Certificates...................................21 9.4 Uncertificated Shares............................................21 9.5 No Limitation of Indemnification Obligations.....................21 ARTICLE X MISCELLANEOUS...............................................21 10.1 Termination In Certain Events....................................21 10.2 Implementing Agreement...........................................21 10.3 Amendment........................................................22 10.4 Notices..........................................................22 10.5 Effect of Investigation..........................................23 10.6 Payments in Dollars..............................................24 10.7 Waivers..........................................................24 10.8 Counterparts.....................................................24 10.9 Successors And Assigns...........................................24 10.10 Severability.....................................................24 10.11 Remedies.........................................................24 10.12 Entire Understanding.............................................25 10.13 Applicable Law...................................................25 10.14 Jurisdiction of Disputes; Waiver of Jury Trial...................25 10.15 Acknowledgement of each Restricted Signatory.....................25 EXHIBITS Exhibit A Form of Transfer Notice Exhibit B Form of Joinder Agreement -ii- -----END PRIVACY-ENHANCED MESSAGE-----