EXHIBIT (10)F(ii)

 

AMENDMENT NO. 1 TO
ECOLAB INC. 2001 NON-EMPLOYEE DIRECTOR STOCK OPTION AND
DEFERRED COMPENSATION PLAN
(As Amended and Restated Effective as of May 1, 2004)
WITH RESPECT TO THE AMERICAN JOBS CREATION ACT OF 2004

 

WHEREAS, Ecolab Inc. (the “Company”) adopted an amended and restated 2001
Non-Employee Director Stock Option and Deferred Compensation Plan (the “Plan”)
effective as of May 1, 2004; and

 

WHEREAS, the American Jobs Creation Act of 2004, P.L. 108-357 (the “AJCA”) added
a new Section 409A to the Code, which significantly changed the Federal tax law
applicable to certain amounts deferred under the Plan after December 31, 2004
that would be within the definition of deferred compensation; and

 

WHEREAS, pursuant to the AJCA, the Secretary of the Treasury and the Internal
Revenue Service will issue proposed, temporary or final regulations and/or other
guidance with respect to the provisions of new Section 409A of the Code
(collectively, the “AJCA Guidance”); and

 

WHEREAS, the AJCA Guidance has not yet been issued; and

 

WHEREAS, to the fullest extent permitted by Code Section 409A and the AJCA
Guidance, the Company wants to protect the “grandfathered” status of the Plan
benefits that are deferred prior to January 1, 2005;

 

NOW THEREFORE, pursuant to Section 14.1 of the Plan, the Company hereby adopts
this Amendment No. 1 to the Plan, effective January 1, 2005, which amendment is
intended to (1) allow deferred compensation that was deferred prior to January
1, 2005 to qualify for “grandfathered” status and to continue to be governed by
the law applicable to nonqualified deferred compensation prior to the addition
of Code Section 409A (as specified in the Plan as in effect before the adoption
of this Amendment No. 1); (2) cause deferred compensation that is deferred after
December 31, 2004 to be in compliance with the requirements of Code Section
409A; and (3) to clarify certain share accounting matters to comply with
shareholder approval requirements of the New York Stock Exchange.

 

Section 1

 

Article 1 of the Plan is hereby amended by adding the following new Section 1.5
to the end thereof, to read as follows:

 

1.5           American Jobs Creation Act (AJCA).

 

(a)           It is intended that the Plan (including any Amendments thereto)
comply with the provisions of Section 409A of the Code, as enacted by the AJCA,
so as to prevent the inclusion in gross income of any amount credited to a
Participant’s Account

 

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hereunder in a taxable year that is prior to the taxable year or years in which
such amounts would otherwise be actually distributed or made available to the
Participant.  It is intended that the Plan be administered in a manner that will
comply with Section 409A of the Code, including proposed, temporary or final
regulations or any other guidance issued by the Secretary of the Treasury and
the Internal Revenue Service with respect thereto (collectively with the AJCA,
the “AJCA Guidance”).  Any Plan provision that would cause the Plan to fail to
satisfy Section 409A of the Code (including any provision added by Amendment No.
1 thereto) shall have no force and effect until amended to comply with Code
Section 409A (which amendment may be retroactive to the extent permitted by the
AJCA Guidance).

 

(b)           The Administrator shall not take any action hereunder that would
violate any provision of Section 409A of the Code.  It is intended that all
Participant elections hereunder will comply with Code Section 409A and the AJCA
Guidance.  The Administrator is authorized to adopt rules or regulations deemed
necessary or appropriate in connection therewith to anticipate and/or comply
with the requirements thereof (including any transition or grandfather rules
thereunder).  In this regard, the Administrator is authorized to permit
Participant elections with respect to amounts deferred after December 31, 2004
and is also permitted to give the Participants the right to amend or revoke such
elections in accordance with the AJCA Guidance.

 

(c)           The effective date of Amendment No. 1 to this Plan is January 1,
2005.  Amendment No. 1 creates two separate Sub-Accounts for each Participant’s
Account hereunder — (a) the “Pre-2005 Sub-Account” for amounts that are
“deferred” (as such terms is defined in the AJCA Guidance) as of December 31,
2004 (and earnings thereon) and (b) the “Post-2004 Sub-Account” for amounts that
are deferred after December 31, 2004 (and earnings thereon).  Amendment No. 1
also modifies the distribution elections and provisions for the Post-2004
Sub-Accounts to comply with the requirements of Code Section 409A.

 

(d)           In furtherance of, but without limiting the foregoing, any
deferrals (and the earnings thereon) that are deemed to have been deferred prior
to January 1, 2005 and that qualify for “grandfathered status” under Section
409A of the Code shall continue to be governed by the law applicable to
nonqualified deferred compensation prior to the addition of Section 409A to the
Code and shall be subject to the terms and conditions specified in the Plan as
in effect prior to the effective date of Amendment No. 1 thereto.

 

Section 2

 

Section 2.1(c) of the Plan is hereby amended by deleting the period at the end
of the third sentence and adding the following language to the end of the third
sentence to read as follows:

 

, to the extent permitted by Code Section 409A.

 

Section 3

 

Article 3 of the Plan is hereby amended by adding the following sentence to the
end thereof, to read as follows:

 

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For each Participant, each of the Cash Account and Share Account shall be
further divided into the following two Sub-Accounts:  (a) the “Pre-2005
Sub-Account” for amounts that are “deferred” (as such term is defined in the
AJCA Guidance) as of December 31, 2004 (and earnings thereon), including
carryover credits described in Article 4, and (b) the “Post-2004 Sub-Account”
for amounts that are deferred after December 31, 2004 (and earnings thereon).

 

Section 4

 

Section 5.1 of the Plan is hereby amended by adding the following sentence to
the end thereof, to read as follows:

 

All credits made to the Qualified Director’s Share Account after December 31,
2004 will be made to the Post-2004 Sub-Account.

 

Section 5

 

Section 5.2(d) of the Plan is hereby amended by adding the following sentence to
the end thereof, to read as follows:

 

All credits made to the Qualified Director’s Cash Account and/or Share Account
after December 31, 2004 will be made to the respective Post-2004 Sub-Account.

 

Section 6

 

Section 5.2(a) of the Plan is hereby amended by adding the following sentence to
the end thereof, to read as follows:

 

Notwithstanding the foregoing, all Qualified Directors shall be required to make
a deferral election for the 2005 Plan Year and prior elections shall not be
given any further force or effect.

 

Section 7

 

Section 6.1 of the Plan is hereby amended by adding the following sentence to
the end thereof, to read as follows:

 

Interest will be credited separately for the Pre-2005 Sub-Account and Post-2004
Sub-Account of the Participant’s Cash Account.

 

Section 8

 

Section 6.2 of the Plan is hereby amended by adding the following sentence to
the end thereof, to read as follows:

 

Dividends will be credited separately for the Pre-2005 Sub-Account and Post-2004
Sub-Account of the Participant’s Share Account.

 

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Section 9

 

Section 8.1(a) the Plan is hereby amended in its entirety to read as follows:

 

8.1           Distribution of Cash and Share Accounts to a Participant Upon
Termination of Service.

 

(a)           Form of Distribution.  A Participant’s Pre-2005 Sub-Account of his
or her Cash Account and Share Account will be distributed as provided in this
section in a lump sum payment unless:

 

(i) the Participant elects, on a properly completed election form, to receive
his or her distribution in the form of annual installment payments for a period
of not more than 10 years, and

 

(ii) except when cessation results from Disability, the date on which he or she
ceases to be a member of the Board follows by more than one year the date on
which a properly completed election form is received by the Administrator.

 

Any election made pursuant to this section may be changed from time to time upon
the Administrator’s receipt of a properly completed election form, provided
that, unless cessation results from Disability, such change will not be valid
and will not have any effect unless it is made more than one year prior to a
Participant’s cessation of service as member of the Board.  A new election to
change has no effect on any previous election until the new election becomes
effective, at which time any previous election will automatically be void.  (For
example, if the Administrator receives an election to change on July 1 of year 1
and another election on September 1 of year 1, the July 1 election will become
effective on July 1 of year 2 and will remain in effect through August 30 of
year 2.  On September 1 of year 2, the September 1 election will become
effective.)  Any election made pursuant to this section will apply to the entire
balance of the Participant’s Pre-2005 Sub-Accounts of his or her Cash and Share
Accounts attributable to credits with respect to the period through the date on
which he or she ceases to be a member of the Board.  If a Participant has a
valid election in effect under any Prior Deferred Compensation Plan, such
Participant’s prior election will automatically be deemed to be the
Participant’s election under this section unless and until a new election is
made and has become effective.  Any distribution from a Participant’s Pre-2005
Sub-Account of his or her Cash Account will be made in cash only.  Subject to
Section 13, any distribution from a Participant’s Pre-2005 Sub-Account of his or
her Share Account will be made in whole Shares only, rounded up to the next
whole Share.

 

A Participant’s Post-2004 Sub-Account of his or her Cash Account and Share
Account will be distributed as a lump sum payment.  Any distribution from a
Participant’s Post-2004 Sub-Account of his or her Cash Account will be made in
cash only.  Subject to Section 13, any distribution from a Participant’s
Post-2004 Sub-Account of his or her Share Account will be made in whole Shares
only, rounded up to the next whole Share

 

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(b)           Time of Distribution.  To the extent allowed under Section 409A of
the Code, distribution to a Participant will be made (to the extent a
distribution is in the form of a lump sum) or commence (to the extent that the
Participant’s Pre-2005 Sub-Account will be distributed in installments) as soon
as administratively practicable after the next Credit Date after the Participant
ceases to be a member of the Board; provided that if a lump sum distribution
from a Participant’s Share Account would otherwise be made after the record date
for a dividend but before the payment date for such dividend, the distribution
will be delayed and made as soon as administratively practicable after the
earnings credits have been made to the Share Account pursuant to Section 6.2 on
the payment date of the dividend (the “Time of Distribution”).

 

If a Participant is considered to be a “key employee,” as defined under Code
Section 409A, no distribution will be made or commence before the date that is
six months after the Participant’s “separation from service,” as defined under
Code Section 409A, (except in case of the Participant’s death).

 

(c)           Amount of Distribution for Cash Account.

 

(i)            Lump Sum.  The amount of a lump sum payment from a Participant’s
applicable Sub-Account of his or her Cash Account will be equal to the balance
of the applicable Sub-Account of his or her Cash Account as of the Time of
Distribution.

 

(ii)           Installments.  The amount of each installment payment from a
Participant’s Pre-2005 Sub-Account of the Cash Account will be determined by
dividing the balance of the Pre-2005 Sub-Account of the Cash Account as of the
distribution date for such installment payment by the total number of remaining
payments (including the current payment).

 

(d)           Amount of Distribution for Share Account.

 

(i)            Lump Sum.  A lump sum distribution from a Participant’s
applicable Sub-Account of his or her Share Account will consist of the number of
Shares equal to the number of Share Units credited to the applicable Sub-Account
of his or her Share Account as of the Time of Distribution, rounded up to the
next whole Share.

 

(ii)           Installments.  Each installment distribution from a Participant’s
Pre-2005 Sub-Account of the Share Account will consist of the number of Shares
determined by dividing the number of whole Share Units credited to the Pre-2005
Sub-Account of the Share Account as of the distribution date for such
installment distribution by the total number of remaining payments (including
the current payment) and rounding the quotient to the next whole Share.

 

(e)           Reduction of Account Balance.  The balance of the applicable
Sub-Account of the Cash or Share Account from which a distribution is made will
be reduced, as of the date of the distribution, by the cash amount or number of
Shares distributed.

 

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Section 10

 

Section 8.2(a) the Plan is hereby amended in its entirety to read as follows:

 

(a)           Withdrawals Due to Unforeseeable Emergency.  A distribution will
be made to a Participant from his or her Account if the Participant submits a
written distribution request to the Administrator and the Administrator
determines that the Participant has experienced an Unforeseeable Emergency.  The
amount of the distribution may not exceed the lesser of:

 

(i)            the amount necessary to satisfy the emergency, as determined by
the Administrator, or

 

(ii)           the sum of the balances of the Participant’s Accounts as of the
date of the distribution, as the case may be.

 

Payments made on account of an Unforeseeable Emergency will not be made to the
extent that such Unforeseeable Emergency is or may be relieved through
reimbursement or compensation by insurance or otherwise, by liquidation of the
Participant’s assets (to the extent that such liquidation would not itself cause
severe financial hardship) or, to the extent permitted by Code Section 409A, by
cessation of deferrals under Section 5.2.  Any distribution pursuant to this
section will be made as soon as administratively practicable after the
Administrator’s determination that the Participant has experienced an
Unforeseeable Emergency and in the form of a lump sum payment that is in cash
from the Cash Account and in Shares from the Share Account (rounded up to the
next whole Share).  Any distribution pursuant to this section will be made first
from the Participant’s Cash Account, then from the Participant’s Share Account.

 

Section 11

 

Section 8.2(c) of the Plan is amended in its entirety to read as follows:

 

(c)           Accelerated Distribution.  A Participant may, at any time, elect
an immediate distribution of his or her Pre-2005 Sub-Accounts of his or her Cash
and Share Accounts in an amount equal to 90 percent of the sum of the balances
of the Pre-2005 Sub-Accounts of his or her Cash and Share Accounts as of the
date of the distribution, in which case the remaining balances of such Pre-2005
Sub-Accounts of his or her Cash and Share Accounts will be forfeited.  The
distribution will be made in the form of a lump sum payment as soon as
administratively practicable after the Administrator’s receipt of a written
application in form prescribed by the Administrator.  Any distribution pursuant
to this section from a Participant’s Pre-2005 Sub-Accounts of his or her Cash
Account will be made in cash.  Any distribution pursuant to this section from a
Participant’s Pre-2005 Sub-Accounts of his or her Share Account will be made in
whole Shares (rounded up to the next whole Share).  The balance of the Pre-2005
Sub-Accounts of his or her Cash or Share Accounts from which a distribution is
made will be reduced to zero as of the date of the distribution.

 

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No distribution of a Participant’s Post-2004 Sub-Accounts of his or her Cash or
Share Accounts will be allowed.

 

Section 12

 

Section 8.2(e) of the Plan is amended in its entirety to read as follows:

 

(e)           Reduction of Account Balance.  Except in the case of accelerated
distributions pursuant to Section 8.2(c), the balance of the Sub-Account of the
Cash or Share Account from which a distribution is made will be reduced, as of
the date of the distribution, by the cash amount or number of Shares
distributed, as the case may be.

 

Section 13

 

Section 8.3(a) of the Plan is amended by deleting the period at the end of the
first sentence and adding the following language to the end of the first
sentence to read as follows

 

, to the extent permitted by Code Section 409A.

 

Section 14

 

A new Section 14.1(e) is added to the Plan to read as follows:

 

(e)           Notwithstanding the other provisions in this Section 14.1,
including any limitation on the right of the Company to amend the Plan in
Section 14.1(b), the Company will have the right to amend the Plan as it deems
necessary or reasonable (as determined in the sole discretion of the Company) to
comply with the requirements of Code Section 409A.

 

Section 15

 

Section 15.7 of the Plan is amended by adding the following sentence at the end
to read as follows:

 

The Cash Account will include a Pre-2005 Sub-Account and Post-2004 Sub-Account.

 

Section 16

 

Section 15.28 of the Plan is amended by adding the following sentence at the end
to read as follows:

 

The Share Account will include a Pre-2005 Sub-Account and Post-2004 Sub-Account.

 

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Section 17

 

Section 15.34 of the Plan is amended in its entirety to read as follows:

 

Unforeseeable Emergency.  With respect to a Participant’s Post-2004
Sub-Accounts, “Unforeseeable Emergency” shall mean an event which results in a
severe financial hardship to the Participant as a consequence of (1) an illness
or accident of the Participant, the Participant ‘s spouse or a dependent within
the meaning of Code Section 152, (2) loss of the Participant ‘s property due to
casualty or (3) other similar extraordinary and unforeseeable circumstances
arising as a result of events beyond the control of the Participant.  With
respect to a Participant Pre-2005 Sub-Accounts, “Unforeseeable Emergency” shall
mean an unanticipated emergency that is caused by an event beyond the
Participant’s control resulting in a severe financial hardship that cannot be
satisfied through other means.  The existence of an Unforeseeable Emergency will
be determined by the Administrator.

 

Section 18

 

A new Section 15.35 is added to the Plan to read as follows:

 

Sub-Account.  “Sub-Account” refers to the Participant’s Pre-2005 Sub-Account,
accounting for those amounts deferred into the Plan prior January 1, 2005 (and
related earnings credits), the Participant’s Post-2004 Sub-Account, accounting
for those amounts deferred into the Plan after December 31, 2004 (and related
earnings), or both as the context requires.

 

Section 19

 

Section 17.2 of the Plan is amended in its entirety to read as follows:

 

Accounting.  Shares that are issued or distributed under the Plan or that are
subject to outstanding Periodic Options granted under the Plan or Share Units
will be applied to reduce the maximum number of Shares remaining available for
issuance or distribution under the Plan.  Any Shares that are subject to a
Periodic Option granted under the Plan that lapses, expires, is forfeited or for
any reason is terminated unexercised and any Shares that are subject to Share
Units in a Share Account that are forfeited pursuant to Section 8.2(c) will
automatically again become available for issuance or distribution under the
Plan.  To the extent that the exercise price of any Periodic Option granted
under the Plan and/or associated tax withholding obligations are paid by tender
or attestation as to ownership of Previously Acquired Shares on or before May
11, 2011 (the date ten years following approval of the Plan by the Company’s
stockholders), or to the extent that such tax withholding obligations are
satisfied by withholding of shares

 

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otherwise issuable upon exercise of the Periodic Option, only the number of
Shares issued net of the number of Shares tendered, attested to or withheld will
be applied to reduce the maximum number of Shares remaining available for
issuance under the Plan.

 

IN WITNESS WHEREOF, Ecolab Inc. has executed this Amendment No. 1 and has caused
its corporate seal to be affixed this 15th day of December, 2004.

 

 

 

ECOLAB INC.

 

 

 

 

 

By:

/s/ Douglas M. Baker

 

 

Douglas M. Baker
President and Chief Executive Officer

 

 

 

 

Attest:

 

 

 

 

 

/s/ Lawrence T. Bell

 

 

Lawrence T. Bell
Senior Vice President,
General Counsel and Secretary

 

 

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