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


 





















 


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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