Document:

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.

 

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 AVAILABLE GENERALLY TO EMPLOYEES

 

U.S. executives are eligible to participate in benefit plans which are
available generally to employees of the Company. These include the following:  (i) a defined benefit pension plan (the
Ecolab Pension Plan), (ii) a 401(k) plan and ESOP (the Ecolab Savings Plan and
ESOP), (iii) a medical and dental plan, (iv) a group term life insurance plan
with additional accidental death and dismemberment and travel accident
benefits, (v) a long term disability plan, (vi) a cafeteria plan with health
and dependent care reimbursement accounts, (vii) a post-retirement medical and
death benefit plan, and (viii) a severance plan. While corporate officers are
excluded from the general severance plan, it is customary (depending on the
circumstances of the termination) to negotiate a severance package of between
one and two years base salary and bonus at the time of termination. NEOs and
other executive officers are also excluded from the Company’s open market
employee stock purchase plan (the Ecolab Stock Purchase Plan) that provides a
15% Company match on participant contributions up to $6,000 annually.

 

EXECUTIVE BENEFITS 

 

In addition to the benefits available generally to employees, U.S. executives
may be eligible to participate in the following additional benefit plans.

 

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.  Except as to restrictions on the Ecolab Stock Fund, the
investment options generally are the same as those offered for the Ecolab
Savings Plan and ESOP. Deferrals and Ecolab’s matching contributions 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.

 

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 and to the extent
permitted by regulations issued under Section 409A of the Internal Revenue
Code), 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

 

•                                          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

 

Liability Protection

 

Article V of the Company’s By-Laws provides for indemnification of the
Company’s officers and directors to the fullest extent allowed by Delaware law.
The Company’s current D&O insurance coverage is $65 million. There is no
individual deductible.

 

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. Benefit payments generally
continue until an executive reaches age 65 or is no longer disabled, but may
continue longer if disability occurs after age 60. The Company pays the full
cost.

 

Executive Death Benefit

 

Under this plan, an executive is eligible for a death benefit equal to
three times the executive’s prior year compensation (base salary and bonus),
limited to a $9 million benefit. If the benefit is subject to US federal income
tax when paid to the executive’s beneficiary, an additional amount for federal
income taxes will be paid, based on a 34% tax rate. Additionally, a retired
executive who has satisfied certain age and service requirements is eligible
for a post-retirement death benefit equal to two 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.

 

Executives also receive a higher level of accidental death and
dismemberment and travel accident benefit than employees generally under the
rank and file plan. Executives receive three times prior year compensation, up
to a $3.75 million limit, if death is the result of an accident and an
additional three times prior year compensation, up to a $3 million limit, if
death is caused by an accident while traveling on company business.

 

 

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 for all flights due to
security concerns and enhanced efficiencies associated with such aircraft,
although such executives are entitled to use such form of transportation as
they may deem appropriate and necessary.Exhibit (10)V

 

NON-EMPLOYEE DIRECTOR
COMPENSATION AND BENEFITS SUMMARY

(Effective January 1, 2006)

 

COMPENSATION

 

Annual
Payments

 

	
  Annual Retainer 

  	
   

  	
  $

  	
  60,000

  	
   

  
	
  Committee Chair Fee

  	
   

  	
   

  	
   

  
	
  - Audit

  	
   

  	
  $

  	
  11,000

  	
   

  
	
  - Compensation, Finance and Governance

  	
   

  	
  $

  	
  6,000

  	
   

  

 

In
addition, a number of shares of stock units are credited annually to each
director’s deferred stock unit account. The Board has fixed the annual value of
the stock units to one half the value of the annual retainer, or $30,000
beginning in 2006.

 

All
reasonable travel, telephone and other expenses incurred on behalf of Ecolab
are reimbursable.

 

Directors
may choose, at the time of initial election to the Board and annually
thereafter, to have the portions of their compensation which are paid in cash deferred
into an interest-bearing deferred account or the stock unit account.

 

Deferred
Accounts

 

Deferred accounts are of two types: (i) stock unit
accounts which are comprised of stock equivalents which increase/decrease with
Ecolab’s stock price and are credited with dividend equivalents; and (ii)
interest-bearing accounts which are credited with interest at the prime rate.

 

Deferred
accounts for a director are tax deferred until the director ceases Board
service. At that time the proceeds are paid in a lump sum or in equal annual
installments for up to 10 years depending on the director’s election, which can
be made, generally, as late as one year prior to leaving the Board for amounts
deferred before 2005. Amounts deferred in 2005 or later must be paid in a lump
sum. Amounts deferred to the interest-bearing account, are paid in cash. Amounts
in the stock unit account are paid in Ecolab stock. Upon death a lump sum of
any remaining amounts will be paid to the director’s beneficiary.

 

BENEFITS

 

Stock
Option Plan

 

Directors
receive a non-qualified option to purchase a number of shares of Common Stock,
as fixed from time to time by the fair market value on such date. The right to
exercise the option vests on grant. Currently, the Board has fixed the value of
the annual stock option grant at $55,000.

 

Options
may be exercised for a period of 10 years from grant. However, in the event a
director ceases to be a director, the exercise period is shortened to the
lesser of five years from the date the director terminates director status or
the remaining term of the original option period.

 

Matching
Gifts

 

Ecolab
will match, up to $1,000 per fiscal year, a director’s contributions to
accredited U.S. educational institutions and an additional $100 for
contributions to qualifying U.S. public radio and television stations.

 

Eligibility
for this program continues through the calendar year in which a director ceases
to be a director.

 

 

Travel
Insurance

 

Directors
are covered by $50,000 business travel accident coverage while traveling on
Ecolab business.

 

Director
Liability Protection

 

•                    The current D&O coverage is $65 million. There
is no individual deductible.

 

•                    Ecolab’s Certificate of Incorporation
eliminates the ability of Ecolab or its stockholders to recover monetary
damages resulting from good-faith breaches of certain fiduciary duties by a
director.

 

•                       Directors are entitled to indemnification by
Ecolab for actions as a director taken in good faith and in a manner reasonably
believed to be in, or not opposed to, the best interests of Ecolab.

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