Document:

Exhibit
10.B(i)

 

Transition
Agreement

 

This TRANSITION AGREEMENT
(this “Agreement”)
is entered into as of February 28, 2004 (the “Effective Date”) by and
between Ecolab Inc., a Delaware corporation with its principal place of
business in St. Paul, Minnesota (the “Company”), and Allan L. Schuman, a
resident of Minnesota (“Schuman”).

 

Recitals

 

A.                                   Schuman
is currently employed by the Company as its Chairman of the Board and Chief
Executive Officer.

 

B.                                     The
Company and Schuman entered into an Employment Agreement (Management) on
December 19, 1994 (the “Employment Agreement”) relating to, among
other things, non-competition, non-hiring or inducement of Company employees
and assignments of inventions.

 

C.                                     Schuman
has indicated his desire to resign as Chief Executive Officer of the Company
effective upon the date and subject to the terms and conditions as provided for
in this Agreement.

 

D.                                    The
Company desires to employ Schuman following his resignation as Chief Executive
Officer in order to provide for an appropriate transition to a new Chief
Executive Officer.  The Compensation
Committee (the “Compensation Committee”) and the Board of Directors (the “Board”)
of the Company desire that Schuman continue to serve as Chairman of the Board
following his resignation as Chief Executive Officer.  The Company further desires to engage Schuman as a consultant
following the termination of his employment with the Company, in order to
retain Schuman’s expertise, historical knowledge, and contacts.

 

E.                                      The
parties desire to resolve all present and potential issues between them
relating to Schuman’s employment, Schuman’s services for the Company, and the
termination of his employment, and have agreed to the full resolution of any
such issues as provided for in this Agreement and the Exhibits to this
Agreement.

 

Agreements

 

In consideration of the
mutual promises and provisions contained in this Agreement, the parties,
intending to be legally bound, agree as follows:

 

1.                                       Employment.

 

(a)                                  Resignation
Date.  Schuman shall resign
as Chief Executive Officer of the Company effective July 1, 2004, unless
Schuman and the Board shall

 

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otherwise mutually agree
in writing.  The effective date of such
resignation as Chief Executive Officer is referred to in this Agreement as the “Resignation
Date.”

 

(b)                                 Employment
Through Resignation Date. 
From the date of this Agreement through the Resignation Date, Schuman
shall remain employed by the Company as its Chief Executive Officer.  During such period, he shall continue to
report to the Board and shall faithfully and to the best of his ability devote
his full time and skills to such employment as Chief Executive Officer.

 

(c)                                  Employment
Following Resignation Date. 
From and after the Resignation Date through December 31, 2004 (the “Employee
Transition Date”), the Company agrees to continue to employ Schuman,
during which period he shall have responsibility for assisting with the
transition to the new Chief Executive Officer and special project matters as
determined by the Board.  In addition,
as long as he shall continue as Chairman of the Board during such period, he
also shall have the responsibilities of the Chairman of the Board.  It is understood by the parties that until
the Employee Transition Date, Schuman’s principal obligation will be to the
Company as its employee.

 

(d)                                 Early
Termination of Employment. Schuman’s employment under this Agreement
may be terminated prior to the Employee Transition Date as follows:  (i) by the Company for Cause or in the event
Schuman shall resign as Chief Executive Officer prior to the Resignation Date
or as Chairman of the Board or a member of the Board prior to the Employee
Transition Date; (ii) by Schuman for any reason upon 30 days prior written
notice to the Company; (iii) upon the death or Disability of Schuman; or (iv)
by mutual written consent of the Company and Schuman.  For purposes of this Agreement, “Disability” shall have the
meaning given to it in the Company’s 1999 Management Performance Incentive Plan,
as such plan may be reapproved by the Company shareholders (the “MPIP”).  If Schuman’s employment under this Agreement
is terminated pursuant to this Section 1(d) prior to the Employee
Transition Date, Sections 4 and 5 of this Agreement shall be of no further
force or effect.  Upon such termination
of employment, Schuman will be paid base salary and benefits accrued through
the date of termination of his employment in accordance with the normal
practices of the Company.

 

(e)                                  Cause.  For purposes of this Agreement, “Cause” shall
mean:

 

(1)                                  a
persistent failure by Schuman to perform the duties of his positions hereunder,
which failure is willful and deliberate on the part of Schuman and constitutes
gross neglect of duties by Schuman and which is not remedied within 30 days
after receipt of written notice thereof;

 

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(2)                                  a
willful and material breach of any of Schuman’s representations and warranties
contained in this Agreement; or

 

(3)                                  the
conviction of Schuman for a felony if the act or acts constituting the felony
is or are substantially detrimental to the Company or its reputation.

 

2.                                       Compensation
until Employee Transition Date.

 

(a)                                  Salary.  While Schuman is employed by the
Company during 2004, regardless of the capacity in which he is so employed, the
Company shall pay Schuman a base salary at an annual rate of $1,000,000.  Payments shall be made in installments in
accordance with the customary payment schedule for officers of the
Company.

 

(b)                                 Bonus.  The Compensation Committee has
determined, pursuant to the terms of the MPIP, that Schuman shall be a
participant in the MPIP in calendar year 2004 and shall be eligible for the
maximum cash award bonus based on achievement of defined performance goals (subject
to downward discretionary adjustments by the Compensation Committee as
permitted under the MPIP).  Such
determination by the Compensation Committee shall remain in full force and
effect, and payment for 2004 to Schuman under the MPIP shall be made in accordance
with the terms of the MPIP.  If the
performance goals included in the bonus award under the MPIP for 2004 are
achieved in a manner that would entitle Schuman to a payment of at least
$750,000 (or, if Schuman’s employment with the Company terminates before the
Employee Transition Date for any of the reasons specified in 1(d) of this
Agreement, a prorated portion of $750,000 based on the portion of 2004 that
Schuman is employed by the Company) but for the downward discretionary
adjustment by the Compensation Committee, the Compensation Committee agrees
that, unless such termination is by the Company for Cause, it will not exercise
its discretion to reduce Schuman’s 2004 award below $750,000 (or such prorated
portion of $750,000 as applicable).

 

(c)                                  Employee
Benefits. While Schuman is employed by the Company hereunder, he
shall be eligible to continue to participate in such employee benefit plans and
programs of the Company in which he is currently participating and in
accordance with the terms of such plans and programs, to the extent that
Schuman meets the eligibility requirements for each individual plan or program,
at the same level as generally applicable to other executive officers of the
Company, and subject to the Company’s right to modify or discontinue any such
plan or program.  Without limiting the
generality of the preceding sentence, Schuman shall be entitled, during his
employment hereunder, to benefits of the nature referred to in
Section 5(b)(1), (3) and (4).

 

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(d)                                 Stock
Options.  As of the date of
this Agreement, the Compensation Committee has granted Schuman an option to
purchase 310,000 shares of common stock of the Company, at a per share exercise
price equal to 100% of the Fair Market Value, as defined in the Company’s 2002
Stock Incentive Plan (the “Stock Plan”), as of the date of this
Agreement, of a share of common stock of the Company, pursuant to the terms of
the Stock Plan and the non-statutory stock option agreement attached to this
Agreement as Exhibit A.  This Agreement
will not affect or alter any of the previous agreements in effect between the
Company and Schuman pertaining to any previous grants of stock options to
Schuman.

 

3.                                       Chairmanship
and Board of Directors. 
During and following Schuman’s employment with the Company, Schuman
shall continue to serve on the Board, and as its Chairman, in accordance with
the certificate of incorporation and by-laws of the Company.  His term as Chairman of the Board shall
continue until the earliest of his resignation therefrom, his death or
Disability, his removal from the Chairmanship by the Board, the Board’s
election of a successor Chairman, or his ceasing to be a member of the
Board.  His term as a member of the
Board of Directors shall continue until his resignation or removal from the
Board or until a successor shall have been duly elected.  The Company and Schuman agree that nothing
stated in this Agreement shall require (a) Schuman to continue to serve as
Chairman or as a member of the Board, (b) the Board to continue to retain
Schuman as its Chairman, or (c) the Board or any committee of the Board to
nominate Schuman for reelection to the Board at the expiration of his
term.  However, the existing policy of
the Company limiting membership on the board solely because a member is a
former Chief Executive Officer or has reached age 70 shall not apply to Schuman
on or prior to December 31, 2005. 
Schuman’s service on the Board or as Chairman of the Board, or the
termination of such service, shall have no effect on Schuman’s continued
employment pursuant to Section 1, except as otherwise specifically
provided in Section 1(d).  The
obligation of the Company to employ Schuman until the Employee Transition Date
shall not limit the Board’s right to replace Schuman as Chairman without Cause
at any time prior to the Employee Transition Date.

 

4.                                       Compensation
as Chairman of the Board After Employee Transition Date.

 

(a)                                  Fees.  If Schuman continues as an employee of the
Company until the Employee Transition Date and thereafter serves during
calendar year 2005 as non-employee Chairman of the Board of the Company (or if
the Board shall not elect him to serve as Chairman of the Board in 2005 for any
reason other than Cause, death or Disability, notwithstanding Schuman’s
willingness to serve as a member of the Board and Chairman of the Board in
2005), Schuman shall, during calendar year 2005, receive annual compensation of
$500,000, payable in equal monthly installments on or before the last day of each
month.  If Schuman shall cease to be a
member of the Board or Chairman of the Board of the Company prior to
December 31, 2005 (except in the event of his

 

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removal by the Board as
Chairman for any reason other than Cause, death or Disability), such annual
compensation shall be pro-rated for the portion of 2005 that he serves as
Chairman.

 

(b)                                 Non-Employee.  During 2005, Schuman shall not be
an employee of the Company and shall not be entitled to any employee benefits
of the Company.

 

(c)                                  Post 2005
Compensation.  If Schuman
shall continue as Chairman of the Board beyond December 31, 2005 by mutual
agreement of the Board and Schuman, compensation for such continuing service
shall be mutually determined in writing by the Company and Schuman.

 

5.                                       Consulting
Services.  Immediately
following the Employee Transition Date and for a ten-year period ending on the
earlier of December 31, 2014, or Schuman’s death (the “Consulting Term”), the
Company shall engage Schuman, and Schuman shall accept such engagement, as a
consultant to the Board on the following terms:

 

(a)                                  Services;
Availability.  Schuman will
provide input and advice as reasonably requested from time to time by the Board
and/or the Company’s Chief Executive Officer, it being understood that the
consulting services rendered by Schuman in any year (excluding such services,
if any, to be provided as Chairman of the Board of the Company or as a director
of the Company) shall not exceed 200 hours. 
Schuman’s services hereunder shall include, without limitation:

 

(1)                                  services that promote the goodwill of the
Company and provide the Company with the benefit of his experience;

 

(2)                                  timely execution and delivery of such
acknowledgements, instruments, certificates, and other ministerial documents
(including without limitation, certification as to specific actions performed
by Schuman in his capacity as an officer or director of the Company) as may be
necessary or appropriate to formalize and update applicable corporate records;

 

(3)                                  cooperation with the Company and
performance of such actions as reasonably requested by the Company in
connection with any legal proceedings, investigations or litigation in which
the Company is involved or otherwise has an interest; and

 

(4)                                  discussion and consultation with the
Company regarding business matters that Schuman was involved with while
employed by the Company.

 

5

 

Schuman shall render such services to the Board and/or
the Company upon reasonable notice and at such time or times as may be mutually
convenient to the parties. Schuman shall devote his best efforts to the
performance of services to the Board under this Section, but he may engage in
employment or other business activities during the Consulting Term, and such
employment or other business activities during the Consulting Term may
constitute his principal activities. 
Schuman has advised the Company that such other employment or business
activities will constitute his principal activities during the Consulting Term.

 

(b)                                 Compensation.  Schuman’s sole compensation for
his consulting services during the Consulting Term pursuant to this
Section 5 shall be in the form of the following benefits:

 

(1)                                  Vehicle.  The Company shall continue the Executive
Vehicle Program for Schuman under the present terms for a period of five years
from the first day of the Consulting Term.

 

(2)                                  Office. The Company shall reimburse Schuman for all reasonable costs and
expenses incurred by Schuman in connection with setting up an office in
Florida, including any such reasonable costs and expenses incurred prior to the
date of this Agreement.  Such office may
be set up prior to commencement of the Consulting Term. In addition, during the
Consulting Term the Company shall pay all reasonable costs and expenses
necessary to maintain said office, including rent, the costs and expenses of a
computer, telecommunications services (including telephone, internet access,
and a WATS line), furniture, and an administrative assistant.

 

(3)                                  Financial Planning Services. 
The
Company will provide reasonable financial planning services to Schuman and his
spouse through December 31, 2009. 
In the event of Schuman’s earlier death, such services will be provided
to Schuman’s spouse at the Company’s expense through December 31, 2009.

 

(4)                                  Physicals.  The Company will provide for reasonable
annual executive physicals for Schuman through the earlier of the last day of
the Consulting Term or December 31, 2009.

 

(c)                                  Expenses.  During the Consulting Term, the Company shall
reimburse Schuman for all reasonable and necessary out-of-pocket business,
travel and entertainment expenses incurred by Schuman in the performance of the
duties and responsibilities hereunder, subject to advance approval by the
Company and the Company’s normal policies and procedures for expense
verification and documentation.

 

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(d)                                 Status;
Authority. The parties acknowledge and agree that during the
Consulting Term, Schuman shall not be an employee of the Company and that
Schuman’s status hereunder is that of an independent contractor providing
services to the Company.  Schuman shall
alone be responsible for the conduct of his business and his employees, agents
and subcontractors, and shall not be subject to the control of the
Company.  Schuman neither expects nor
desires that the Company: (i) withhold from any fees due and payable to him any
taxes – state, federal, income, social security or otherwise; (ii) pay with respect
to Schuman any fees or taxes for workers’ compensation or unemployment
compensation; or (iii) provide Schuman with any other benefits customarily
provided to employees.  Schuman
acknowledges and agrees that it is his responsibility to make all estimated and
other necessary federal and state tax payments arising from compensation
received by Schuman pursuant to Section 5(b).

 

6.                                       Mutual
Release.  Simultaneously
with the execution of this Agreement, Schuman and the Company will execute a
mutual release in the form attached to this Agreement as Exhibit B  (the “Release”).  This Agreement will not be interpreted or construed to limit the
Release in any manner and the existence of any dispute respecting the
interpretation or alleged breach of this Agreement will not nullify or
otherwise affect the validity or enforceability of this Release.

 

7.                                       Schuman’s
Representations and Warranties. 
Schuman represents and warrants to the Company as follows:

 

(a)                                  Good Faith.  At all times that he was an employee,
officer, or director of the Company prior to the date of this Agreement,
Schuman acted in good faith, had no reasonable cause to believe that his
conduct was unlawful, and reasonably believed that his conduct was in or not
opposed to the best interests of the Company.

 

(b)                                 Capacity:
Enforceability.  Schuman has
the legal capacity to execute and deliver this Agreement and the Release and to
perform his obligations hereunder and thereunder.  This Agreement and the Release are the legal, valid and binding
obligations of Schuman, enforceable in accordance with their respective terms.

 

(c)                                  Company
Statements.  Schuman has not
relied upon any statements or representations made by the Company or its
attorneys, written or oral, including but not limited to statements regarding
tax or legal matters pertaining to actions contemplated by this Agreement,
other than the statements set forth in this Agreement and the Release.

 

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8.                                       Company’s
Representations and Warranties. 
The Company represents and warrants to Schuman as follows:

 

(a)                                  Capacity:
Enforceability.  The
execution and delivery of this Agreement and the Release on behalf of the
Company have been duly authorized by all necessary corporate action of the
Company.  This Agreement and the Release
are the legal, valid and binding obligations of the Company, enforceable in
accordance with their respective terms.

 

(b)                                 Schuman
Statements.  The Company has
not relied upon any statements or representations made by Schuman or his attorneys,
written or oral, pertaining to actions contemplated by this Agreement, other
than the statements set forth in this Agreement and the Release.

 

9.                                       Mutual
Confidentiality.

 

(a)                                  Non-Disclosure.  Schuman and the Company will not disclose or
discuss the terms of this Agreement and the Release (the “Confidential Information”)
to or with anyone at any time, except as provided in Section 9(b) below.

 

(b)                                 Exceptions.

 

(1)                                  It
will not be a violation of this Agreement for the Company to disclose
Confidential Information in reports to governmental agencies as required by law
or regulation, including but not limited to, disclosure as required by federal
securities laws and regulations or any federal or state tax authority.  It is understood and agreed that this Agreement
and summaries thereof will be disclosed in filings with the Securities and
Exchange Commission and summarized in proxy statements disseminated to
shareholders of the Company.

 

(2)                                  It
will not be a violation of this Agreement for the parties to acknowledge the
existence of this Agreement and the expected continuing relationships in
response to any inquiry regarding Schuman’s retirement as Chief Executive
Officer of the Company.

 

(3)                                  It
will not be a violation of this Agreement for Schuman to disclose Confidential
Information to his spouse, attorneys, accountants or tax advisors, or to
otherwise disclose any Confidential Information that the Company has previously
publicly disclosed.

 

(4)                                  It
will not be a violation of this Agreement for Schuman to disclose to employers
and prospective employers that he is constrained from

 

8

 

certain activities as a
result of the terms of this Agreement and the Employment Agreement.  Nor will it be a violation of this Agreement
for Schuman to inform Company employees who ask him about employment
opportunities outside the Company that the terms of the Employment Agreement
preclude him from engaging in certain activities that could interfere with
their employment with the Company.

 

(5)                                  It
will not be a violation of this Agreement for either party to disclose
Confidential Information to the Company’s auditors, its attorneys, or its
directors, officers, employees, and agents who have a legitimate reason to
obtain the Confidential Information in the course of performing their duties or
responsibilities for the Company.

 

(6)                                  It
will not be a violation of this Agreement for either party to disclose
Confidential Information in connection with any litigation or arbitration
proceeding involving the parties’ rights or obligations under this Agreement,
the Employment Agreement, or the Release.

 

10.                                 Non-Disparagement.  Schuman will act to promote the goodwill of
the Company and will not malign, defame or disparage the reputation, character,
image, products, or services of the Company, or the reputation or character of
the Company’s directors, officers, employees, or agents.  The Company will not authorize any of its
officers, directors, employees or agents acting on its behalf to malign, defame
or disparage the reputation or character of Schuman, and will take appropriate
and reasonable actions to prevent any such person from doing so.  Nothing in this Section 10 will be
interpreted to limit in any manner the exercise of fiduciary responsibilities
of any person as an officer or director of the Company, or to prohibit any
person from giving truthful information in response to a valid subpoena or
court order.

 

9

 

11.                                 Full
Compensation; Termination of Other Agreements and Policies.

 

(a)                                  Full
Compensation.  Schuman
acknowledges and understands that the payments made and other consideration
provided by the Company under this Agreement will fully compensate Schuman for
and extinguish any and all of the potential claims Schuman is releasing in the
Release, including without limitation, any claims for attorneys’ fees and costs
and any and all claims for any type of legal or equitable relief.  Schuman agrees that such payments are in
lieu of any severance payments to which he may be entitled under any other
agreements, plans, policies or arrangements of the Company.

 

(b)                                 Termination
of Other Agreements and Policies. 
The Change in Control Severance Compensation policy of the Company from
and after this date shall no longer apply to Schuman, and Schuman shall be
entitled to no benefits thereunder.  For
purposes of any agreement, plan, policy or arrangement providing payments or
benefits to non-employee directors of the Company only, Schuman shall not be deemed
to be a non-employee director during his service as a member of the Board.  Nothing in this Agreement shall be
interpreted to modify Schuman’s rights or benefits under any medical or
retirement plan of the Company in which Schuman is a participant.

 

12.                                 Charitable
Contributions and Foundation.

 

(a)                                  Charitable
Contribution.  As part of its
charitable giving program, the Company intends that charitable contributions
will be made by the Company (unless made by the Company’s foundation), in the
aggregate amount of $1,000,000, to a charity or charities jointly designated by
Schuman and the Company or the foundation within the Company’s or the
foundation’s charitable giving guidelines. 
Schuman will cooperate with the Company or the foundation in making such
joint designation or designations prior to December 31, 2004.

 

(b)                                 Foundation.  Schuman agrees to serve as Chairman of the
Company’s foundation for an initial term of one year if selected by the board
of directors of the foundation, subject to the terms and conditions of the
foundation’s charter documents.  The
Board believes that it would be beneficial for Schuman to serve the foundation
in that capacity during such term.  Continuation
of Schuman’s term as Chairman of the foundation beyond the initial one year
term may be mutually agreed to by Schuman and the foundation.

 

13.                                 Legal
Representation.  Schuman
acknowledges that he consulted with his own attorney before executing this
Agreement and the Release, that he has had a full

 

10

 

opportunity to consider
this Agreement and the Release, and that he has had a full opportunity to ask
any questions that he may have concerning this Agreement and the Release, and
the settlement of his potential claims against the Company.

 

14.                                 Taxes.  The Company will deduct from any payments
made to Schuman under this Agreement any withholding or other taxes that the
Company is required to deduct, if any, under applicable law.  Except to the extent taxes are withheld by
the Company, Schuman shall be solely responsible for the payment of all taxes
due and owing with respect to wages, benefits, consulting fees, and other
compensation provided to him hereunder.

 

15.                                 Assignment.  The rights and obligations of the
Company under this Agreement will inure to the benefit of and be binding upon
the successors and assigns of the Company. 
Schuman may not assign this Agreement or any rights hereunder.  Any purported or attempted assignment or
transfer by Schuman of this Agreement or any of Schuman’s duties,
responsibilities, or obligations hereunder will be void.

 

16.                                 Miscellaneous.

 

(a)                                  Notices.  Notices required to be given
under this Agreement must be in writing and will be deemed to have been given
when personally served, sent by courier or mailed by United States registered
or certified mail, return receipt requested, postage prepaid, to the last known
residence address of Schuman or, in the case of the Company, to its principal
office, to the attention of the Board, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address will be effective only upon receipt by the other
party.

 

(b)                                 Governing
Law.  The validity,
interpretation, performance, and enforcement of this Agreement will be governed
by the laws of the State of Minnesota without regard to conflicts-of-laws
provisions that would require application of any other law.

 

(c)                                  Jurisdiction
and Venue.  Schuman and the
Company consent to jurisdiction of the Hennepin County, Minnesota district
court and/or United States District Court for the District of Minnesota, for
the purpose of resolving all claims for enforcement or breach of this
Agreement.  Any such actions must be
brought in such courts.  Each party
consents to personal jurisdiction over such party in the state and/or federal
courts of Minnesota and hereby waives any defense of lack of personal
jurisdiction or forum non conveniens.

 

(d)                                 Severability.  In the event any provision of this Agreement
is held illegal or invalid for any reason, such illegality or invalidity will
not in any way affect the

 

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legality or validity of
any other provision hereof and such illegal or invalid provision will be deemed
severed from this Agreement.

 

(e)                                  Entire
Agreement.  Except for any
and all agreements or understandings related to Schuman’s stock options (which
have not been affected or altered by this Agreement except as provided in
Section 2(d)), this Agreement, the Release, the Employment Agreement, and
the Option Agreement set forth the entire understanding between the Company and
Schuman, and there are no understandings other than as set forth in this
Agreement, the Release, the Employment Agreement, and the Option Agreement.
This Agreement may not be altered or amended, except by a writing executed by
the party against whom such alteration or amendment is to be enforced.  This Agreement, the Release, and the Option
Agreement do not supercede the Employment Agreement.

 

(f)                                    Counterparts.  This Agreement may be simultaneously
executed in any number of counterparts, and such counterparts executed and
delivered, each as an original, will constitute but one and the same
instrument.

 

(g)                                 Captions and
Headings.  The captions and
section headings used in this Agreement are for convenience of reference
only, and will not affect the construction or interpretation of this Agreement
or any of the provisions hereof.

 

(h)                                 Waivers.  No failure on the part of either party to exercise,
and no delay in exercising, any right or remedy hereunder will operate as a
waiver thereof; nor will any single or partial exercise of any right or remedy
hereunder preclude any other or further exercise thereof, or the exercise of
any other right or remedy granted hereby or by any related document or by
law.  No single or partial waiver of
rights or remedies hereunder, nor any course of conduct of the parties, will be
construed as a waiver of rights or remedies by either party (other than as
expressly and specifically waived).

 

(i)                                     Reliance By
Third Parties.  This
Agreement is intended for the exclusive benefit of the parties hereto and their
respective heirs, executors, administrators, personal representatives,
successors, and permitted assigns, and no other person or entity has any right
to rely on this Agreement or to claim or derive any benefit therefrom, absent
the express written consent of the party to be charged with such reliance or
benefit.

 

**[signature
page follows]

 

12

 

The parties have signed
this Agreement as of the dates set forth below their respective signatures
below.

 

 

	
  ECOLAB INC.

  	
  ALLAN L. SCHUMAN

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   /s/ Les S. Biller

  	
   

  	
   /s/
  Allan L. Schuman

  	
   

  
	
   

  	
  Les S. Biller

  	
  Signature

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Its:

  	
  Chairman of the
  Compensation

  	
  Dated:

  	
  02/18/04

  	
   

  
	
   

  	
  Committee of the Board
  of

  	
   

  	
   

  
	
   

  	
  Directors

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Dated:

  	
   02/18/04

  	
   

  	
   

  	
   

  
									

 

13Exhibit 10.B(ii)

 

NON-STATUTORY
STOCK OPTION AGREEMENT

 

THIS AGREEMENT is entered
into and effective as of this 28th day of February 2004 (the “Date of
Grant”), by and between Ecolab Inc. (the “Company”) and Allan L. Schuman (the
“Optionee”).

 

A.                                   The
Company has adopted the Ecolab Inc. 2002 Stock Incentive Plan (the “Plan”),
authorizing the Board of Directors of the Company, or a committee as provided
for in the Plan (the Board or such a committee to be referred to as the
“Committee”), to grant non-statutory stock options to employees of the Company
and its Subsidiaries.

 

B.                                     The
Company desires to give the Optionee an inducement to enter into a Transition
Agreement with the Company (the “Transition Agreement”) simultaneously with the
execution of this Agreement providing for, among other things, continued
services by Optionee to the Company following his resignation as Chief
Executive Officer of the Company, an inducement to acquire a proprietary
interest in the Company and an added incentive to advance the interests of the
Company by granting to the Optionee an option to purchase shares of common
stock of the Company pursuant to the Plan.

 

C.                                     Under
the terms of the Plan, any termination of the Optionee other than by reason of
death or Disability will constitute a Retirement.

 

Accordingly, the parties
agree as follows:

 

ARTICLE 1.  GRANT OF OPTION.

 

The Company hereby grants
to the Optionee the option (the “Option”) to purchase 310,000 shares (the
“Option Shares”) of the Company’s common stock, $1.00 par value (the “Common
Stock”), according to the terms and subject to the conditions hereinafter set
forth and as set forth in the Plan.  The
Option is not intended to be an “incentive stock option,” as that term is used
in Section 422 of the Internal Revenue Code of 1986, as amended (the
“Code”).

 

ARTICLE 2.  OPTION EXERCISE PRICE.

 

The per share price to be
paid by Optionee in the event of an exercise of the Option will be $27.32.

 

1

 

ARTICLE 3.  DURATION OF OPTION AND TIME OF EXERCISE.

 

3.1                                 Initial
Period of Exercisability.  The
Option will be exercisable in full on December 31, 2004 if Optionee shall
be continuously employed by the Company from the Date of Grant until
December 31, 2004 but, except as otherwise provided in Section 3.2,
shall expire upon the termination of Optionee’s employment prior to
December 31, 2004.  This Option
will remain exercisable as to all unexercised Option Shares that have not been
expired until 5:00 p.m. (St. Paul, Minnesota time) on December 31, 2009
(“Time of Termination”).

 

3.2                                 Termination
of Employment.

 

(a)                                  In
the event that the Optionee’s employment with the Company and all Subsidiaries
is terminated prior to December 31, 2004 by reason of the Optionee’s death
or Disability, this Option will become immediately exercisable in full and will
remain exercisable for a period of five years after such termination (but in no
event will this Option be exercisable after the Time of Termination).

 

(b)                                 The
Transition Agreement contemplates that Optionee will cease to be an employee of
the Company on December 31, 2004. 
In the event that the Optionee’s employment with the Company and all
Subsidiaries is terminated at least six months after the Date of Grant but
prior to December 31, 2004 as a result of the termination of Optionee’s
employment by the Company other than (i) for Cause (as defined in the
Transition Agreement), or (ii) following Optionee’s resignation, without the
written consent of the Company, as Chairman or a member of the Board of Directors
of the Company, then this Option will become exercisable in full immediately
prior to such termination and remain exercisable for a period of five years
after such termination (but in no event will this Option be exercisable after
the Time of Termination).

 

ARTICLE 4.  MANNER OF OPTION EXERCISE

 

4.1                                 Notice.  This Option may be exercised by the Optionee
in whole or in part from time to time, subject to the conditions contained in
the Plan and in this Agreement, by delivery, in person, by facsimile or
electronic transmission or through the mail, to the Company at its principal
executive office in St. Paul, Minnesota (Attention:  Sr. Vice President-Human Resources), of a written notice of
exercise.  Such notice will be in a form
satisfactory to the Committee, will identify the Option, will specify the
number of Option Shares with respect to which the Option is being exercised,
and will be signed by the person or persons so exercising the Option.  Such notice will be accompanied by payment
in full of the total purchase price of the Option Shares purchased.  In the event that the Option is being
exercised, as provided by the Plan and Section 3.2 above, by any person or
persons other than the Optionee, the notice will be accompanied by appropriate
proof of right of such person or persons to exercise the Option.  As soon as practicable after the effective
exercise of the Option, the Optionee will be recorded on the stock transfer
books of the Company as

 

2

 

the owner of the Option
Shares purchased, and the Company will deliver to the Optionee certificated or
uncertificated (“book entry”) shares evidencing such ownership.  In the event that the Option is being
exercised, as provided by resolutions of the Committee and Section 4.2
below, by tender of a Broker Exercise Notice, the Company will deliver such
shares directly to the Optionee’s broker or dealer or their nominee.

 

4.2                                 Payment.  At the time of exercise of this Option, the
Optionee will pay the total purchase price of the Option Shares to be purchased
solely in cash (including a check, bank draft or money order, payable to the
order of the Company); provided, however, that the Committee, in its sole
discretion, may allow such payment to be made, in whole or in part, by tender
of a Broker Exercise Notice, by tender, or attestation as to ownership, of
Previously Acquired Shares that have been held for the period of time necessary
to avoid a charge to the Company’s earnings for financial reporting purposes
and that are otherwise acceptable to the Committee, or by a combination of such
methods.  In the event the Optionee is
permitted to pay the total purchase price of this Option in whole or in part by
tender or attestation as to ownership of Previously Acquired Shares, the value
of such shares will be equal to their Fair Market Value on the date of exercise
of this Option.

 

ARTICLE 5.  NONTRANSFERABILITY.

 

Neither this Option nor
the Option Shares acquired upon exercise may be transferred by the Optionee,
either voluntarily or involuntarily, or subjected to any lien, directly or
indirectly, by operation of law or otherwise, except as provided in the
Plan.  Any attempt to transfer or
encumber this Option or the Option Shares other than in accordance with this
Agreement and the Plan will be null and void and will void this Option.

 

ARTICLE 6.  EMPLOYMENT.

 

Nothing in this Agreement
will be construed to (a) limit in any way the right of the Company to terminate
the employment or service of the Optionee at any time, or (b) be evidence of
any agreement or understanding, express or implied, that the Company will
retain the Optionee in any particular position, at any particular rate of
compensation or for any particular period of time.

 

ARTICLE 7.  WITHHOLDING TAXES.

 

7.1                                 General
Rules.  The Company is entitled to
(a) withhold and deduct from future wages of the Optionee (or from other
amounts which may be due and owing to the Optionee from the Company), or make
other arrangements for the collection of, all legally required amounts
necessary to satisfy any federal, state or local withholding and
employment-related tax requirements attributable to the grant or exercise of
this Option or otherwise incurred with respect to this Option, or (b) require
the Optionee promptly to remit

 

3

 

the amount of such
withholding to the Company before acting on the Optionee’s notice of exercise
of this Option.  In the event that the
Company is unable to withhold such amounts, for whatever reason, the Optionee
must promptly pay the Company an amount equal to the amount the Company would
otherwise be required to withhold under federal, state or local law.

 

7.2                                 Special
Rules.  The Committee may, in its
sole discretion and upon terms and conditions established by the Committee,
permit or require the Optionee to satisfy, in whole or in part, any withholding
or tax obligation as described in Section 7.1 above by electing to tender,
or by attestation as to ownership of, Previously Acquired Shares that have been
held for the period of time necessary to avoid a charge to the Company’s
earnings for financial reporting purposes and that are otherwise acceptable to
the Committee, or by a Broker Exercise Notice, or by a combination of such
methods.  For purposes of satisfying a
Participant’s withholding or employment-related tax obligation, Previously
Acquired Shares tendered or covered by an attestation will be valued at their
Fair Market Value.

 

ARTICLE 8.  ADJUSTMENTS.

 

In the event of any
reorganization, merger, consolidation, recapitalization, liquidation,
reclassification, stock dividend, stock split, combination of shares, rights
offering, divestiture or extraordinary dividend (including a spin-off), or any
other change in the corporate structure or shares of the Company, the Committee
(or, if the Company is not the surviving corporation in any such transaction,
the board of directors of the surviving corporation), in order to prevent
dilution or enlargement of the rights of the Optionee, will make appropriate
adjustment (which determination will be conclusive) as to the number, kind and
exercise price of securities subject to this Option.

 

ARTICLE 9.  SUBJECT TO PLAN.

 

9.1                                 Terms
of Plan Prevail.  The Option has
been and the Option Shares granted and issued pursuant to this Agreement will
be granted and issued under, and are subject to the terms of, the Plan.  The terms of the Plan are incorporated by
reference in this Agreement in their entirety, and the Optionee, by execution
of this Agreement, acknowledges having received a copy of the Plan. The
provisions of this Agreement will be interpreted as to be consistent with the
Plan, and any ambiguities in this Agreement will be interpreted by reference to
the Plan.  In the event that any
provision of this Agreement is inconsistent with the terms of the Plan, the
terms of the Plan will prevail.

 

9.2                                 Definitions.  Unless otherwise defined in this Agreement,
the terms capitalized in this Agreement have the same meanings as given to such
terms in the Plan.

 

4

 

ARTICLE 10.  MISCELLANEOUS.

 

10.1                           Binding
Effect.  This Agreement will be
binding upon the heirs, executors, administrators and successors of the parties
to this Agreement.

 

10.2                           Governing
Law.  This Agreement and all rights
and obligations under this Agreement will be construed in accordance with the
Plan and governed by the laws of the State of Minnesota without regard to
conflicts of laws provisions.  Any legal
proceedings related to this Agreement will be brought in an appropriate
Minnesota court, and the parties to this Agreement consent to the exclusive
jurisdiction of the court for this purpose.

 

10.3                           Entire
Agreement.  This Agreement and the
Plan set forth the entire agreement and understanding of the parties to this
Agreement with respect to the grant and exercise of this Option and the
administration of the Plan and supersede all prior agreements, arrangements,
plans and understandings relating to the grant and exercise of this Option and
the administration of the Plan.

 

10.4                           Amendment
and Waiver.  Other than as provided
in the Plan, this Agreement may be amended, waived, modified or canceled only
by a written instrument executed by the parties hereto or, in the case of a
waiver, by the party waiving compliance.

 

10.5                           Captions.  The Article, Section and paragraph
captions in this Agreement are for convenience of reference only, do not
constitute part of this Agreement and are not to be deemed to limit or
otherwise affect any of the provisions of this Agreement.

 

10.6                           Counterparts.  For convenience of the parties hereto, this
Agreement may be executed in any number of counterparts, each such counterpart
to be deemed an original instrument, and all such counterparts together to
constitute the same agreement.

 

5

 

The parties to this
Agreement have executed this Agreement effective the day and year first above
written.

 

	
   

  	
  ECOLAB INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/
  Diana Lewis

  
	
   

  	
   

  	
   

  
	
   

  	
  Its

  	
  Sr.
  Vice President, Human Resources

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  [By execution of this
  Agreement,

  the Optionee acknowledges having

  received a copy of the Plan.]

  	
   

  	
  OPTIONEE

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/
  Allan L. Schuman

  
	
   

  	
   

  	
   Allan
  L. Schuman

  

 

6

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