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

 

Mirror Savings Plan

 

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

 

Supplemental Executive Retirement Plan and
Mirror Pension Plan

 

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

 

 

Change in Control Severance Policy

 

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

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

 

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

 

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

 

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

 

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

 

 

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

 

PERQUISITES

 

Executive Long Term Disability Plan

 

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

 

Executive Death Benefit

 

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

 

Executive Financial Counseling Plan

 

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

 

Miscellaneous Perquisites

 

The Company provides each corporate officer with an automobile and pays
for the associated maintenance and insurance. 
Additionally, the Company pays for a complete annual physical
examination for each corporate officer. 
The Company also pays the dues for club membership for the CEO (and no
other NEOs) used by such officer for business purposes.  Lastly, the Board of Directors of the Company
has encouraged the Company’s Chairman of the Board and its President and Chief
Executive Officer to use private aircraft transportation due to security
concerns, to the extent deemed appropriate.EXHIBIT (10)V

 

NON-EMPLOYEE DIRECTOR COMPENSATION AND BENEFITS
SUMMARY

 

COMPENSATION

 

Annual Payments

 

	
  Annual Retainer

  	
   

  	
  $

  	
  55,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  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.  Currently, the Board has fixed
the annual value of the stock units at $25,000.

 

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 $60 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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