GRAINGER W W INC
EXHIBIT10(XI)
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<DESCRIPTION>EXHIBIT10(XI)
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                                      <p align="center"><font face="Times New Roman" size="2">Exhibit
                                      10 (xi)&nbsp;</font>
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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>SUMMARY DESCRIPTION OF
THE<br>
2004 COMPANY MANAGEMENT
INCENTIVE PROGRAM</i></b></FONT></P>

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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>I.</i></b> </FONT></TD>
<TD WIDTH=98%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>
<u><i>Introduction</i></u></b></FONT></TD>
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The
2004 Company Management Incentive Program (MIP) was designed to focus on two key factors
that drive improvements in shareholder value:&nbsp; return on invested capital (ROIC) and sales
growth. </FONT></TD>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>II.</i></b> </FONT></TD>
<TD WIDTH=98%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><u><i>Objectives</i></u></b> </FONT></TD>
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The
MIP is designed to:</FONT></TD>
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    <li><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Encourage decision-making focused on producing a constantly improving rate of ROIC and on
growing the business rapidly, thus leading to improvements in shareholder value. </FONT></li>
    <li><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Influence participants to make decisions consistent with shareholders&#146; interests.</FONT></li>
    <li><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Align management with Company objectives. </FONT></li>
    <li><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
 Attract and retain the talent required to
achieve the Company&#146;s objectives. </FONT></li>
  </ul>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>III.</i></b> </FONT></TD>
<TD WIDTH=98%><font face="Times New Roman, Times, Serif" size="2"><b><u><i>Eligibility</i></u></b></font></TD>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
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Positions
that participate in this program are those that have significant impact on the Company.
Eligibility for participation in this program is based on the determination of management.
Criteria for inclusion are market practice, impact of the role on overall Company
results and internal practice. Participation in this program is subject to the Terms and
Conditions. </FONT></TD>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>IV.</i></b> </FONT></TD>
<TD WIDTH=98%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><u><i>Performance Measures</i></u></b></FONT></TD>
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Shareholder
value will improve most dramatically if the Company can achieve two goals simultaneously: </FONT></TD>
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          <TD ALIGN=RIGHT WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1. </FONT></TD>
          <TD ALIGN=LEFT WIDTH=92%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;
            Produce a constantly improving rate of ROIC, and&nbsp; </FONT></TD>
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          <TD ALIGN=RIGHT WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. </FONT></TD>
          <TD ALIGN=LEFT WIDTH=92%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Grow the business rapidly. </FONT></TD>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=98%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
2004 MIP will be based on ROIC, sales growth and individual performance. The payout
earned for ROIC will be multiplied by a factor based on sales growth. A separate amount
attributable to individual performance will then be added to the result. This can be
represented algebraically as follows: </FONT></TD>
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&nbsp;

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<TD WIDTH=96%> <font face="Times New Roman" size="2">Total
Payout = (ROIC Payout x Sales Growth Multiplier) + Individual Performance</font>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%> <FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>ROIC</B>
is defined as operating earnings divided by net working assets:</FONT></TD>
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      </font><font size="2" face="Times New Roman">ROIC</font></p>
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    <td width="33" rowspan="2"><font face="Times New Roman" size="2">&nbsp;&nbsp;
      =&nbsp;&nbsp;&nbsp;</font></td>
    <td width="167"><font face="Times New Roman" size="2">&nbsp; <u>Operating
      Earnings</u></font></td>
    <td width="221" rowspan="2">&nbsp;</td>
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    <td width="167"><font face="Times New Roman" size="2">&nbsp; Net Working
      Assets</font></td>
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The
ROIC component will range from 0% to 50% of a participant&#146;s total Target Incentive.</FONT></TD>
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<TD WIDTH=95%> <FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Sales
growth</B> is defined as year-over-year performance:</FONT></TD>
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      Sales growth</font></p>
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    <td width="26" rowspan="2"><font face="Times New Roman" size="2">&nbsp;&nbsp;
      =</font></td>
    <td width="213"><font face="Times New Roman" size="2">&nbsp; <u>Total
      Company Sales, Current Year</u></font></td>
    <td width="221" rowspan="2">&nbsp;<font face="Times New Roman" size="2">- 1</font>&nbsp;&nbsp;</td>
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    <td width="213"><font face="Times New Roman" size="2">&nbsp;&nbsp;&nbsp;
      Total Company Sales, Prior Year</font></td>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
sales growth component will not account for a specific portion of a participant&#146;s
total Target Incentive. Instead, it will serve as a multiplier of the ROIC payout. </FONT></TD>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
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<B>The individual
performance</B> component is based on the individual participants&#146; performance
against strategic objectives. Payouts under this portion of the program would be paid only
if the Company achieved an actual ROIC result greater than 10%. </FONT></TD>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
individual performance component will range from 0% to 30% of a participant&#146;s total
Target Incentive.</FONT></TD>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>V.&nbsp;</i></b>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>
<u><i>Target Award
Opportunity</i></u></b> </FONT></TD>
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Target
awards are established for each position based on the competitive market practice and
internal considerations and are stated as a percentage of the employee&#146;s base salary. </FONT></TD>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>VI.&nbsp;</i></b> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><u><i>Determination Of
Payment Amounts</i></u></b> </FONT>

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<TD WIDTH=97%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
following process is used to determine the payment amount for each participant. </FONT></TD>
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<B>Step
1:</B> Determine the performance results for ROIC and the resultant performance to goal.
Compute the appropriate percentage of target award earned. </FONT></TD>
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<B>Step
2: </B>Determine the performance results for sales growth and the resultant sales growth
multiplier based on these results. Apply the sales growth multiplier to the ROIC payout. </FONT></TD>
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<B>Step
3</B>: As long as ROIC is greater than 10%, add the individual performance component to
determine the total percentage payout. </FONT></TD>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=97%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Step
4</B>: Calculate each participant&#146;s incentive amount earned as follows: </FONT></TD>
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Incentive Amount Earned&nbsp; =
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=97%><font face="Times New Roman" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  (Annualized Base Salary (as of 12/31)&nbsp; X&nbsp; Target Award %)&nbsp; X
Total % Payout
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</font></P>

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Those
employees who are eligible to participate for only part of the year will have their
incentive amount adjusted accordingly, based on the eligibility provisions of the Terms
and Conditions. </FONT></TD>
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<B>Step
5</B>: The Compensation Committee of Management and the Compensation Committee of the
Board must approve final incentive amounts. </FONT></TD>
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<TD WIDTH=97%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Step
6:</B> Once approved, final incentive amounts are forwarded to the Employee Systems
Manager for payment.</FONT></TD>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>
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