EXHIBIT (10)U

 

EXECUTIVE COMPENSATION AND BENEFITS SUMMARY

 

 

For purposes of this summary, the “Named Executive Officers or NEOs” generally
refers to the Company’s Chief Executive Officer and the next four most-highly
compensated executive officers, and the “Committee” refers to the Compensation
Committee of the Board of Directors of the Company.

 

BASE SALARY

 

The Committee reviews base salaries for corporate officers, including NEOs, on
an annual basis in light of relevant market data and individual performance to
determine whether an increase is appropriate, with salary increases becoming
effective at various times throughout the year.  Competitive market data is
available for all of the executive positions.  Salaries are monitored to ensure
that the appropriate balance of internal value and external competitiveness is
maintained.

 

BONUSES

 

Management Incentive Plan (MIP) / Management Performance Incentive Plan (MPIP)

 

The MIP is a cash-based annual incentive plan that focuses executives’ attention
on achieving competitive annual business goals.  The Committee, with input from
Management, sets specific performance goals at the beginning of each year and
communicates them to the Company’s executives.  A mix of corporate, business
unit, and individual goals is used to foster cross-divisional cooperation and to
assure that executives have a reasonable measure of control over the factors
affecting their awards.

 

The MPIP is a stockholder-approved plan that is similar to the MIP, except that
it is intended to qualify for the performance-based exception to the $1,000,000
deduction limitation under Section 162(m) of the Internal Revenue Code.  The
Committee, working with Management and the independent compensation consultant,
Frederic W. Cook & Co., also set performance goals for the Company which are in
addition to the MPIP performance targets.

 

The Committee, in general, makes awards based strictly on the level of
achievement against pre-established goals.  Under the MIP, the Committee may, in
its sole discretion, make awards at a level higher or lower than that determined
by strict application of achievement against goals based upon such other
business and individual performance criteria as the Committee determines
appropriate.  Under the MPIP, however, the Committee may make awards only at a
level that is at or lower than the level determined by strict application of
achievement against goals.

 

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LONG-TERM INCENTIVE AWARDS

 

Long-term incentive awards, typically in the form of stock options, are granted
annually based on pre-established grant guidelines approved by the Committee
under a stockholder-approved plan with exercise prices not less than the fair
market value of the Company’s Common Stock on the date of grant, providing no
value to the executive unless the Company’s stock price increases after the
grants are made.  Individual stock incentive grant guidelines are established
for each such officer based on market competitive values.  Stock options
generally have a 10-year exercise term and vest ratably on the first three
anniversaries of the date of grant, subject to accelerated vesting in the event
of certain terminations of employment or a defined change-in-control of the
Company.  With the consent of the Committee, stock options granted to plan
participants, including executive officers, may be transferred to defined family
members or legal entities established for their benefit.  Certain stock option
grants made in 2000, 2001, and 2002 also provided for a one-time automatic grant
of a reload stock option if the optionee exercises the original stock option by
tendering shares of previously owned Common Stock of the Company (the reload
feature was eliminated for grants subsequent to 2002).  The reload stock option
is for the same number of shares tendered to exercise the original stock option
and the number of shares required to be withheld to satisfy minimum statutory
tax obligations, has an exercise price equal to the fair market value of the
Company’s Common Stock on the reload grant date, and is immediately exercisable
at any time during the remaining exercise term of the original stock option.

 

The Committee from time to time approves the grant of restricted stock awards on
a selective basis in connection with promotions and recruitment and retention
purposes.

 

BENEFITS

 

Mirror Savings Plan

 

Under the Mirror Savings Plan, participating executives can defer up to 25% of
their base pay and annual incentive bonus. The Company generally matches 100% of
a participant’s deferrals up to 3% of compensation and 50% of a participant’s
deferrals of the next 2% of compensation, reduced by the match that could be
received by the participant in the Company’s Ecolab Savings Plan and ESOP.  The
investment options generally are the same as those offered for the Ecolab
Savings Plan and ESOP and deferrals earn the rate of return equal to the rate of
return of the designated investment funds.  However, unlike the Ecolab Savings
Plan and ESOP, assets are not actually invested in the designated funds. 
Subject to certain forfeiture provisions, participants are 100% vested in their
deferrals and the Company’s matching contribution. This plan is unfunded and
participants are general unsecured creditors of the Company.

 

Supplemental Executive Retirement Plan and Mirror Pension Plan

 

In general, the SERP and the Mirror Pension Plan bridge the gap between a
participant’s target retirement benefit and the benefits provided by the Ecolab
Pension Plan, which is subject to the various Internal Revenue Code limits on
compensation and benefit payments.  The plans are unfunded. Benefits under the
SERP and the Mirror Pension Plan are subject to certain forfeiture provisions.

 

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Change in Control Severance Policy

 

The Company has a Change in Control Severance Compensation policy (the
“Policy”), which applies to elected officers (other than assistant officers) of
the Company.  The Policy, in general, runs until the later of either two years
after a notice of termination of the Policy is given by the Board of Directors
or, if a change in control has occurred, two years after a change in control.

Under the Policy, if within two years following a change in control the
employment of such an officer with the Company is terminated without Just Cause
(as defined in the Policy) or the officer voluntarily terminates his/her
employment for Good Reason (as defined in the Policy), the officer is entitled
to a severance payment. The severance payment is paid in a lump sum and is equal
to the aggregate of (i) two times the sum of the officer’s base salary plus
target annual bonus; and (ii) a pro-rated portion of the target annual bonus for
the year of termination. The officer also is entitled to payment of reasonable
outplacement service fees up to 20% of base salary and continuation, for up to
18 months, of medical and dental health coverage at the cost the officer paid
prior to termination of employment. It is a condition of the payment of such
benefits that the officer provide the Company with a release from claims against
the Company.

 

In addition, the Company’s non-qualified deferred compensation plans provide
that the interests of participants shall vest and become non-forfeitable upon a
change in control of the Company. For the purpose of the Policy, and the defined
compensation plans, a “change in control” of the Company occurs if:

 

•                                          a person or group acquires 25% or
more of the Company’s outstanding voting power. However, if the acquisition was
approved by the Board of Directors, then a change in control occurs at 34%
ownership. If the acquiring person, prior to becoming a 25% shareholder, has
entered into (and is in compliance with) a shareholder agreement which imposes
limits on the person’s maximum Company shareholdings, then a change in control
occurs only upon acquisition of 50% of the Company’s voting power;

 

•              during any 36 consecutive month period, individuals who
constitute the Board on the first day of the period or any new director (other
than a director whose initial assumption of office is in connection with an
actual or threatened election relating to the election of directors) whose
election or nomination for election by the Company’s stockholders was approved
or recommended by a vote of at least two-thirds of the directors then still in
office who were directors on the first day of such period (or whose election or
nomination were previously so approved) shall cease for any reason to constitute
at least a majority of the Board of Directors;

 

•              the Company engages in a merger or consolidation, other than a
merger or consolidation in which the Company’s voting securities immediately
prior to the transaction continue to represent over 50% of the voting power of
the Company or the surviving entity immediately after the transaction and in
which no person or group acquires 50% or more of the voting power of the Company
or surviving entity; and

 

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•              the Company’s stockholders approve a plan of complete liquidation
or the Company sells all or substantially all of the Company’s assets, other
than to an entity with more than 50% of its voting power owned by the Company’s
stockholders in substantially the same proportion as their ownership of the
Company immediately prior to the sale

 

PERQUISITES

 

Executive Long Term Disability Plan

 

This plan, in conjunction with the Company’s standard long term disability plan,
provide benefits equal to 60% of an executive’s pay, up to a maximum of $35,000
per month, in the event of such executive’s total and permanent disability
lasting longer than six months.  The Company pays the full cost.  Payments
generally continue until an executive reaches age 65 or is no longer disabled,
but may continue longer if disability occurs after age 60.

 

Executive Death Benefit

 

Under this plan, an executive is eligible for (i) a death benefit equal to three
times the executive’s prior year compensation (base salary and bonus), limited
to a $3 million benefit, (ii) an additional three times prior year compensation,
up to a $3 million limit if death is the result of an accident, and (iii) an
additional $750,000 if death is caused by an accident while traveling on company
business.  Additionally, a retired executive who has satisfied certain age and
service requirements is eligible for a post-retirement death benefit equal to
five times such executive’s high five-year average compensation, up to a maximum
of $750,000.  The Company pays the entire cost of these benefits.

 

Executive Financial Counseling Plan

 

This plan provides executive participants with the reimbursement of expenses for
financial counseling by an authorized service provider.  Financial counseling
services covered by the plan are financial/investment planning, estate planning,
tax return preparation and tax audit assistance.  The reimbursement amount for
any given year is limited to three percent (five percent for the CEO) of the sum
of the executive’s annual base salary as of December 31 for each of the
preceding three years, less the amount of any benefits paid under the plan
during the last two years.

 

Miscellaneous Perquisites

 

The Company provides each corporate officer with an automobile and pays for the
associated maintenance and insurance.  Additionally, the Company pays for a
complete annual physical examination for each corporate officer.  The Company
also pays the dues for club membership for the CEO (and no other NEOs) used by
such officer for business purposes.  Lastly, the Board of Directors of the
Company has encouraged the Company’s Chairman of the Board and its President and
Chief Executive Officer to use private aircraft transportation due to security
concerns, to the extent deemed appropriate.

 

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