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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1994
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ............ to .............
Commission File No. 1-9328
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ECOLAB INC.
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(Exact name of registrant as specified in its charter)
Delaware 41-0231510
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Ecolab Center, St. Paul, Minnesota 55102
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 293-2233
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Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
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Common Stock, $1.00 par value New York Stock Exchange, Inc.
Pacific Stock Exchange, Inc.
Preferred Stock Purchase Rights New York Stock Exchange, Inc.
Pacific Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
Aggregate market value of voting stock held by non-affiliates of Registrant on
March 9, 1995: $1,516,618,830 (see Item 12, on pages 18 and 19 hereof). The
number of shares of Registrant's Common Stock, par value $1.00 per share,
outstanding as of March 9, 1995: 67,837,646 shares.
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DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of Registrant's Annual Report to Stockholders for the year
ended December 31, 1994 (hereinafter referred to as "Annual Report")
are incorporated by reference into Parts I, II and IV.
2. Portions of the Proxy Statement for the Annual Meeting of Stockholders
to be held May 12, 1995 and to be filed within 120 days after the
Registrant's fiscal year ended December 31, 1994 (hereinafter referred
to as "Proxy Statement") are incorporated by reference into Part III.
PART I
ITEM 1. BUSINESS
ITEM 1(A) GENERAL DEVELOPMENT OF BUSINESS
Except where the context otherwise requires, the terms "Company" and "Ecolab,"
as used herein, include Ecolab Inc. and its subsidiaries. Ecolab Inc. was
incorporated as a Delaware corporation in 1924. The Company's fiscal year is
the calendar year ending December 31.
In December, 1994 the Company acquired by merger the shares of Kay Chemical
Corporation and certain affiliated companies ("Kay"). The merger has been
accounted for as a pooling of interests and, accordingly, periods prior to the
merger included in the financial statements and financial statement schedule
incorporated by reference into this report have been restated to reflect all
accounts and operations of Kay. Kay is a manufacturer and supplier of cleaning
and sanitizing products for the quick service restaurant ("fast-food") industry.
A description of the Kay business is located at page 5 under the heading
"Business Divisions," under Item 1(c). Kay's operations are conducted through
the wholly-owned subsidiaries acquired in the merger.
The Company and Henkel KGaA of Dusseldorf, Germany, each have a 50% economic
interest in a joint venture which operates institutional and industrial cleaning
and sanitizing businesses in Europe, and which is referred to hereafter as the
"Henkel-Ecolab Joint Venture" or "Joint Venture." Henkel KGaA, by virtue of a
tie-breaking vote on certain operational matters, may control the day-to-day
operations of the Joint Venture. Strategic decisions concerning the Joint
Venture require the agreement of Henkel and the Company. The Company accounts
for its interest in the Henkel-Ecolab Joint Venture under the equity method of
accounting and therefore does not consolidate the Henkel-Ecolab Joint Venture
revenues and expenses. Except where the Henkel-Ecolab Joint Venture is
specifically referred to, the description of business in Part I does not include
the business of the Joint Venture.
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ITEM 1(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company's operations are all conducted in one industry segment.
ITEM 1(C) NARRATIVE DESCRIPTION OF BUSINESS
The Company is engaged in the development and marketing of premium products and
services for the hospitality, institutional and industrial markets. The Company
provides cleaning, sanitizing, pest elimination and maintenance products,
systems and services primarily to hotels and restaurants, foodservice and
healthcare facilities, commercial and institutional laundries and to dairy
plants, farms and food and beverage processors.
A strong commitment to service is the distinguishing characteristic of the
Company. Products and services are primarily marketed in domestic and
international markets by Company-trained sales and service personnel who also
advise and assist customers in the proper and efficient use of the products and
systems. Distributors are increasingly utilized in several markets.
The Company manufactures most of its products and related equipment in
Company-owned manufacturing facilities. Some are also produced for the Company
by third party contract manufacturers. Other products and equipment,
particularly those used in the Company's pest elimination business, are
purchased from third party suppliers. Additional information on the Company's
manufacturing facilities is located under Item 2 below under the heading
"Properties."
As described below, not all of the businesses conducted in the United States by
the Company are conducted in all international locations, and the extent and
nature of such international businesses, as well as the competitive environment,
varies by location. European markets, as described under Item 1(a) above under
the heading "General Development of Business," are served through the Henkel-
Ecolab Joint Venture, although the Kay business does have sales in Europe.
In the United States and Canada, the Company operates through six divisions:
Institutional Division, Kay Division, Klenzade Division, Pest Elimination
Division, Textile Care Division and Janitorial Division. Institutional and
Klenzade businesses are operated in virtually all locations outside of the
United States. As described below, Kay, Pest Elimination, Janitorial and
Textile Care products are not sold in all areas outside of the United States and
Canada, but these businesses are being introduced in an expanding number of
locations.
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The Company conducts business in approximately 25 countries outside of the
United States, primarily through wholly-owned subsidiaries. In certain other
countries, selected products are handled by distributors or agents, although
those sales are not significant in terms of the Company's overall revenues. For
the year ended December 31, 1994, international sales comprised approximately
22% of the Company's total reported revenues from continuing operations. For
purposes of public financial reporting, international operations include Canada,
but on an operational basis the Institutional, Klenzade, Pest Elimination,
Textile Care and Janitorial businesses in Canada are operated as a part of a
North American group for each of those businesses.
BUSINESS DIVISIONS
The following description of the divisions includes a discussion, where
applicable, of the similar business currently conducted outside of the United
States. Although the descriptions of the divisional business focuses on that
division's products, the Company pursues a "Circle-the-Customer" strategy by
developing relationships and partnerships with customers who require the
services of more than one division. Therefore, a single customer may utilize
the services of several of the Company's divisions.
INSTITUTIONAL: The Institutional Division is the Company's largest division and
sells specialized cleaners and sanitizers for washing dishes, glassware,
flatware, food service utensils and kitchen equipment ("warewashing"), for
on-premise laundries (typically used by customers having smaller machines and
laundry needs) and for general housekeeping functions, as well as dishwasher
racks and related kitchen sundries to the food-service, lodging and healthcare
industries. The Institutional Division also markets various chemical dispensing
device systems, which are generally loaned to customers, to apply the Company's
cleaners and sanitizers. Substantially similar businesses are conducted in all
international locations although somewhat less extensive product lines are often
offered internationally. Also, through its Ecotemp unit, the Institutional
Division markets, primarily to smaller and mid-size Institutional customers, a
program comprised of energy-efficient dishwashing machines, detergents and rinse
additives, including full machine maintenance.
The Company believes it is the leading supplier of chemical warewashing products
to institutions in the United States and Canada and is one of the leading
suppliers worldwide except for Europe where the business is conducted by the
Henkel-Ecolab Joint Venture.
The Institutional Division sells its products and services primarily through
Company-employed field sales and service personnel. To a lesser but increasing
extent, the Company also utilizes independent food service distributors to
market and sell
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its products to smaller accounts or accounts which purchase through food
distributors. This distribution system encompasses most of the Division's
product line and the Company provides the same service to accounts served by
food distributors as to direct customers.
KAY: The Kay Division (which is operated through wholly-owned subsidiaries of
the Company) is the Company's newest business. As noted in Item 1(a) under the
heading of "General Development of the Business," the Company acquired the Kay
business by merger in December, 1994. Kay supplies chemical cleaning and
sanitizing products primarily to the quick-service ("fast-food") restaurant
industry. Kay's products include specialty and general purpose hard surface
cleaners, degreasers, sanitizers, polishes and hand care products and assorted
cleaning tools. Products are sold under the "Kay" brand or the customer's
private label. Kay employs a direct field sales force which primarily calls
upon national and regional quick service restaurant chains and franchisees,
although the sales are made to distributors who supply the chain or franchisee's
restaurants. The addition of the Kay business has significantly expanded the
Company's presence in the restaurant and food service industry beyond the full
service market to the quick-service industry.
Kay sales are primarily in the United States but as its United States based
customers have expanded into international markets, Kay's international sales
have likewise expanded and now constitute approximately 15% of Kay's sales.
Kay's international sales are made either to domestic distributors, who export
to international accounts or by direct export sales to distributors located at
international locations.
The Company believes that its Kay Division is the leading supplier of chemical
cleaning and sanitizing products to the quick service restaurant industry in the
United States as well as in certain international markets. While the Kay
customer base has been growing, Kay's business is largely dependent upon a
limited number of major national and international quick-service restaurant
chains and franchisees.
KLENZADE: The Klenzade Division provides detergents, cleaners, sanitizers,
lubricants and water treatment products, as well as cleaning systems, electronic
dispensers and chemical injectors for the application of chemical products,
primarily to dairy plants, dairy, poultry and swine farms, breweries, soft drink
bottling plants, and meat, poultry and other food processors. The Klenzade
Division also designs, engineers and installs CIP (clean-in-place) process
control systems and facility cleaning systems to its customer base. Farm
products (which include bovine teat products) are sold through dealers and
distributors, while plant products are sold primarily by the Company's field
sales personnel. The Company believes that it is one of the leading suppliers
of cleaning and sanitizing products to the dairy plant, dairy farm and beverage
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processor industries in the United States. The Klenzade business operates in
most international locations.
PEST ELIMINATION: The Pest Elimination Division provides services for the
elimination and prevention of pests to restaurants, food and beverage
processors, education and healthcare facilities and other institutional and
commercial customers. These services are sold and performed by Company-employed
sales and service personnel. The Company believes it is the largest provider of
premium pest elimination services to institutions in the United States. The
Pest Elimination business currently is operated primarily in the United States,
with limited sales in Puerto Rico and parts of Canada and Mexico. Pest
Elimination operations will be introduced to a limited number of additional
international locations during 1995.
TEXTILE CARE: The Textile Care Division provides chemical laundry products and
proprietary dispensing systems, as well as related services, to medium-to-large
institutional and commercial laundries and to certain smaller laundry
operations. Typically these customers process a minimum of 1,000,000 pounds of
linens a year. These products and services include laundry cleaning and
specialty products and related dispensing equipment, which are marketed
primarily through a Company-employed sales force and, to a lesser extent,
through distributors. The Textile Care offerings compliment the Institutional
Division's offerings to smaller on-premise laundry facilities. The Textile Care
services are sold primarily in the United States and Canada, but similar product
lines are sold in a number of other international locations.
JANITORIAL: The Janitorial Division provides odor counteractants,
disinfectants, floor care or hard surface and carpet care systems, hand care
products and general cleaners primarily to the institutional janitorial market
in the United States and Canada and, particularly in the United States, to the
healthcare industry. Products are sold in the United States and Canada
primarily through a network of independent distributors who sell
janitorial-related products and services to the institutional marketplace. A
private-label program also manufactures janitorial-related products for resale
by major distributor organizations in the United States and Canada. Janitorial
products are also sold on a limited basis in other international markets.
COMPETITION
The Company emphasizes its ability to uniformly provide a variety of related
premium cleaning and sanitation services to multiple locations of chain customer
organizations worldwide. This is succinctly stated in the Company's "Circle the
Customer - Circle the Globe" strategy. In executing this strategy, the
Company's business units have two significant classes of competitors. First,
each business unit competes with a small number of large companies
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selling directly or through distributors on a national or international scale.
Several of these large competitors have substantially greater assets and
financial resources than the Company. Second, all of the Company's business
units have numerous smaller regional or local competitors focusing on more
limited geographies, product lines, and/or end-user segments.
The Company's objective is to achieve a significant presence in each of its
business markets. In general, competition is based on service, product
performance and price. The Company believes it competes principally by
providing superior value. Value is provided by state-of-the-art,
environmentally-compatible cleaning products and systems coupled with high
service standards and dedication to customer satisfaction after the initial
sale. This approach is believed to be made possible, in part, by the
significant ongoing investment in technology development and by the Company's
standard practice of assisting customers in complying with environmental and
sanitation regulations.
RAW MATERIALS
Raw materials purchased for use in manufacturing products for the Company are
inorganic chemicals, including phosphates, silicates, alkalis, salts and
petrochemical-based materials, including surfactants and solvents. These
materials are generally purchased on an annual contract basis from a diverse
group of chemical manufacturers. Pesticides used by the Pest Elimination
Division are purchased as finished products under contract or purchase order
from the producers or their distributors. The Company also purchases packaging
materials for the manufactured products and components for its specialized
cleaning equipment and systems. Most raw materials, or substitutes for those
materials, used by the Company, with the exception of a few specialized
chemicals which the Company manufactures, are available from several suppliers.
ADDITIONAL INFORMATION
Deliveries to customers are made from the Company's manufacturing plants and a
network of distribution centers and public warehouses. The Company uses both
common carriers and its own delivery vehicles. Additional information on the
Company's plant and distribution facilities is located under Item 2 below under
the heading "Properties."
The Company owns a number of patents and trademarks. Management does not
believe that the Company's business is materially dependent on any individual
patent or trademark.
The Company believes that its business is not materially dependent upon a
single customer although, as described above in this Item 1(c) under the
description of the Kay business, Kay is largely dependent upon a limited number
of national and international quick-service
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restaurant chains and franchisees. No material part of the Company's business
is subject to renegotiation. The Company sells two classes of products which
each constitute 10 percent or more of its sales. Worldwide sales of
warewashing products in 1994, 1993 and 1992 approximated 35, 36 and 35 percent,
respectively, of the Company's consolidated net sales. In addition, the
Company, through its Institutional and Textile Care businesses, sells laundry
products and services to a broad range of laundry customers as described in more
detail under the heading "Business Divisions" beginning on page 4 hereof. Total
laundry sales in 1994, 1993 and 1992 approximated 15, 15 and 14 percent,
respectively, of the Company's consolidated net sales.
The Company's business has little seasonality and has no unusual working capital
requirements. The Company has in the past, and will continue in the future, to
invest in merchandising equipment consisting primarily of systems used by
customers to dispense the Company's cleaning and sanitizing products. The
investment in merchandising equipment is discussed under the heading "Investing
Activities" in Management's Discussion and Analysis of Financial Condition and
Results of Operations incorporated into Item 7 hereof.
RESEARCH AND DEVELOPMENT
The Company's research and development program consists principally of devising
or testing new products, processes, techniques and equipment, improving the
efficiency of existing ones, improving service program content, and evaluating
the environmental compatibility of products. Key disciplines include analytical
and formulation chemistry, microbiology, process and packaging engineering and
product dispensing technology. Substantially all of the Company's principal
products have been developed by its research and development personnel. Note
12, entitled "Research Expenditures" located on page 42 of the Annual Report,
is incorporated herein by reference.
ENVIRONMENTAL CONSIDERATIONS
The Company's businesses are subject to various legislative enactments and
regulations relating to the protection of the environment. While the Company
cooperates with governmental authorities and takes commercially practicable
measures to meet regulatory requirements and avoid or limit environmental
effects, some risks are inherent in the Company's businesses. The Company's
management believes these are risks which the Company has in common with other
companies engaged in similar businesses. Among the risks are costs associated
with managing hazardous substances, waste disposal or plant site clean-up, fines
and penalties if the Company were found in violation of law, as well as
modifications, disruptions or discontinuation of certain operations or types of
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operations. There can be no assurance that future legislation or enforcement
policies will not have a material adverse effect on the Company's financial
condition or results of operations. Environmental matters most significant to
the Company are discussed below.
PHOSPHATE LEGISLATION: Various laws and regulations have been enacted by state,
local and foreign jurisdictions pertaining to the sale of products which contain
phosphorous. The primary thrust of such laws and regulations is to regulate the
phosphorous content of home laundry detergents, a market not served by the
Company. However, certain of the Company's products are affected by such laws
and regulations, including some commercial laundry and warewashing detergents,
cleaners and sanitizers. Three types of legislative restrictions are common:
(1) labeling of phosphorous content, (2) percentage limitation on the amount of
phosphorous permitted and (3) a ban on the use of phosphorous in certain
products or in products sold for a particular purpose. The Company has been
able to comply with legislative requirements and, where necessary, has developed
products which, although typically less effective than the products they
replace, contain no phosphorous or lower amounts of phosphorous to satisfy the
legislative limitations or bans. In limited geographic areas, the Company has
obtained a variance from existing zero-phosphorous legislation. Phosphate
legislation has not had a material negative effect on the Company's operations
to date.
PESTICIDE LEGISLATION: Various federal and state environmental laws and
regulations govern the manufacture and/or use of pesticides. The Company
manufactures and sells certain disinfecting and sanitizing products which kill
microorganisms (bacteria, viruses, fungi) on environmental surfaces. Such
products constitute "pesticides" under the current definitions of the Federal
Insecticide Fungicide and Rodenticide Act (FIFRA), the principal federal statute
governing the manufacture, labeling, handling and use of pesticides. These
products must be registered with the United States Environmental Protection
Agency ("EPA"). Registration entails the necessity to meet certain efficacy and
labeling requirements and to pay initial and on-going registration fees. In
addition, each state in which these products are sold requires registration and
payment of a fee. In general, the states impose no substantive requirements
different from those required by FIFRA. However, California does have its own
regulatory scheme and certain other states have regulatory schemes under
consideration. In addition, California imposes a tax on total pesticide sales
in that state. While the costs of complying with rules as to pesticides has not
had a material adverse effect on the Company's financial condition or the
results of its operations to date, the costs and delays in receiving necessary
approvals for these products has increased in recent years. The Company
believes that the nature of these costs and regulatory delays are similar to
those encountered by other companies in similar businesses. Total fees paid
to the
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EPA and the states to obtain or maintain pesticide registrations, and for the
California tax, in 1994 were approximately $915,000. Such costs are expected to
increase somewhat in 1995, but not in amounts which are expected to
significantly affect the Company's financial condition or results of operations.
In addition, the Company's Pest Elimination Division applies restricted-use
pesticides which it purchases from third parties. That Division must comply
with certain standards pertaining to the use of such pesticides and to the
licensing of employees who apply such pesticides. Such regulations are enforced
primarily by the states or local jurisdictions in conformity with federal
regulations. The Company has not experienced material difficulties in complying
with these requirements.
OTHER ENVIRONMENTAL LEGISLATION: The Company's manufacturing plants are subject
to federal, state, local or foreign jurisdiction laws and regulations relating
to discharge of materials into the environment and to the handling and disposal
of hazardous materials. The primary federal statutes that apply to the
Company's activities are the Clean Air Act, the Clean Water Act and the Resource
Conservation and Recovery Act ("RCRA"). The Company makes capital investments
and expenditures to comply with environmental laws and regulations, to ensure
employee safety and to carry out its announced environmental stewardship
principles. To date such expenditures have not had a significant adverse effect
on the financial condition of the Company or its results of operations. The
Company's capital expenditures for environmental control projects incurred for
1994 and budgeted for 1995 are approximately $1,000,000 and $2,400,000,
respectively. The Company is also subject to the Superfund Amendments and
Reauthorization Act of 1986, which imposes certain reporting requirements as to
emissions of toxic substances into the air, land and water.
Along with numerous other potentially responsible parties ("PRPs"), the Company
is involved with waste disposal site clean-up activities imposed by the federal
Comprehensive Environmental Response Compensation and Liability Act ("CERCLA")
or state equivalents at approximately 12 waste disposal sites which received
nominal amounts of waste materials alleged to have been generated by the Company
or it subsidiaries. In general, under CERCLA, the Company and each other PRP
which actually contributes hazardous substances to a superfund site are jointly
and severally liable for the costs associated with cleaning up the site.
Customarily, the PRP's will work with the EPA to agree and implement a plan for
site remediation and the allocation of each PRP's involvement. The above sites
are in various stages of investigation, negotiation or remediation. However,
based on an analysis of the Company's experience with such sites, the Company's
estimated share of all hazardous materials deposited on the site, and the
Company's estimate of the contribution to be made by other PRP's which the
Company believes have the financial ability to pay their shares,
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the Company has accrued its reasonable estimate of the Company's future costs
relating to such known sites.
Also, the Company is involved in certain continuing clean-up activities as
required by New Jersey and Nebraska environmental authorities at two sites
currently or formerly used by the Company. The costs associated with these
sites are comprised primarily of remediation efforts associated with soil and
ground water contamination. In addition, the Company is also committed to meet
requirements imposed by the EPA pursuant to RCRA, to remove three underground
storage tanks at its Joliet, Illinois manufacturing facility. In each of these
matters, the Company has worked with appropriate authorities to resolve the
issues involved and has accrued its reasonable estimate of future costs relating
to such sites.
A legal action commenced in August, 1989 in the District Court in Zwolle,
Netherlands, by the Netherlands government against a former subsidiary of the
Company remains pending. Netherlands authorities are seeking monetary damages
to cover the cost of investigation and planned cleanup of soil and groundwater
contamination, allegedly resulting from the discharge of wastewater and
chemicals during a period ended in 1981 when the subsidiary operated a plant on
the site. The government's initial claim was for US$900,000, but it has now
claimed the damages are approximately US$13,000,000, based upon further
environmental studies. The subsidiary has denied liability and believes it
complied with applicable Netherlands law. Even if the Netherlands government
should prevail as to liability, it is believed the reasonable costs of
investigation and cleanup are less than that claimed by the government. An
accrual has been recorded, reflecting management's best estimate of future
costs.
During 1994, the Company's expenditures for contamination remediation were
approximately $500,000. The accrual at the end of 1994 for future remediation
expenditures was approximately $8,700,000. The Company reviews its exposure for
contamination remediation costs periodically and its accruals are adjusted as
considered appropriate. In establishing accruals, the Company does not
anticipate recovery of costs from insurance proceeds. While the final
resolution of these issues could result in costs below or above current
accruals, the Company believes the ultimate resolution of these matters will not
have a significant effect on the Company's results of operations, consolidated
financial position or liquidity.
In addition, the Company has retained responsibility for certain sites where the
Company's former ChemLawn business is a PRP. Currently there are five such
locations and at each ChemLawn is a de minimus party. Anticipated costs for
these matters was included in the Company's loss from its discontinued ChemLawn
operations in 1991.
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NUMBER OF EMPLOYEES
The Company currently has approximately 8,200 employees worldwide.
ITEM 1(D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES
The financial information appearing under the heading "Geographic Segments" in
Note 14, located on page 43 of the Annual Report, is incorporated herein by
reference. Transfers between geographic areas are not significant.
A description of the business done outside of the United States is included in
Item 1(c), above. International businesses are subject to the usual risks of
foreign operations, including possible changes in trade and foreign investment
laws, tax laws, currency exchange rates and economic and political conditions
abroad. International operations constitute the fastest growing segment of the
Company's business. Profitability of international operations is lower than
profitability of businesses in the United States because of lower international
operating income margins due to the difference in scale of international
operations where operating locations are smaller in size and due to the
additional costs of operating in numerous and diverse foreign jurisdictions.
EXECUTIVE OFFICERS OF THE COMPANY
The persons listed in the following table are the current executive officers of
the Company. Officers are elected annually. There is no family relationship
among any of the directors or executive officers, and none of such persons has
been involved during the past five years in any legal proceedings described in
applicable Securities and Exchange Commission regulations.
<TABLE>
<CAPTION>
Positions Held
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Name Age Office Since Jan. 1, 1990
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<S> <C> <C> <C>
P. M. Grieve 67 Chairman of the Board March 1995 - Present
Chairman of the Board Aug. 1992 - Feb. 1995
and Chief Executive
Officer
Chairman of the Board, Jan. 1990 - July 1992
President and Chief
Executive Officer
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<CAPTION>
Positions Held
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Name Age Office Since Jan. 1, 1990
---- --- ------ ------------------
<S> <C> <C> <C>
A. L. Schuman 60 President and Chief March 1995 - Present
Executive Officer
President and Chief Aug. 1992 - Feb. 1995
Operating Officer
Executive Vice President; Jan. 1990 - July 1992
President-Ecolab
Services Group
M. E. Shannon 58 Vice Chairman, Chief Aug. 1992 - Present
Financial and
Administrative Officer
Executive Vice President June 1992 - July 1992
and Chief Financial
Officer
Executive Vice President Oct. 1990 - May 1992
and Chief Financial
Officer; President-
Residential Services
Group
Executive Vice President Jan. 1990 - Sept. 1990
and Chief Financial and
Administrative Officer;
President, ChemLawn
Services Corporation
G. K. Carlson 51 Senior Vice President- Jan. 1994 - Present
International
Senior Vice President Jan. 1991 - Dec. 1993
and General Manager-
Institutional North
America
Senior Vice President- Jan. 1990 - Dec. 1990
International Division
A.E. Henningsen, 48 Vice President and Aug. 1992 - Present
Jr. Controller
Vice President-Finance, Jan. 1990 - July 1992
Ecolab Services Group
J. L. McCarty 57 Senior Vice President- Jan. 1994 - Present
Institutional North America
Vice President and General Jan. 1990 - Dec. 1993
Manager - Pest Elimination
J. M. Millsap 49 Senior Vice President- Mar. 1995 - Present
Corporate Development and
Treasury
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<CAPTION>
Positions Held
--------------
Name Age Office Since Jan. 1, 1990
---- --- ------ ------------------
<S> <C> <C> <C>
J. M. Millsap Senior Vice President- Aug. 1992 - Feb. 1995
(Cont'd.) Corporate Development
and Treasurer
Vice President-Corporate Oct. 1990 - July 1992
Development and Treasurer
Vice President-Corporate Jan. 1990 - Sept. 1990
Development
M. Nisita 54 Senior Vice President- Jan. 1994 - Present
Global Operations
Vice President-Operations Aug. 1992 - Dec. 1993
Vice President- Jan. 1990 - July 1992
Manufacturing
W. R. Rosengren 60 Senior Vice President-Law Aug. 1992 - Present
and General Counsel
Senior Vice President- Oct. 1990 - July 1992
Law, General Counsel
and Secretary
Senior Vice President- Jan. 1990 - Sept. 1990
Law and Human Resources,
General Counsel and
Secretary
J. P. Spooner 48 Senior Vice President- June 1994 - Present
Industrial
F. W. Tuominen, 52 Senior Vice President Aug. 1992 - Present
Ph.D. and Chief Technical and
Environmental Officer
Senior Vice President Jan. 1990 - July 1992
and Chief Technical
Officer
</TABLE>
Mr. Spooner joined the Company as Senior Vice President-Industrial in June 1994.
Prior to joining the Company, Mr. Spooner was employed by PepsiCo, Inc. for 15
years, holding various positions in operations and business development,
including most recently, President of the North Division of Frito-Lay, Inc.
ITEM 2. PROPERTIES
The Company's manufacturing facilities produce chemical products or equipment
for all the Company's businesses except the Pest Elimination Division which
purchases products and substantially all its equipment from outside suppliers.
The Company's chemical production process consists primarily of blending and
packaging powders and liquids and casting solids.
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The Company's United States plant facilities devoted primarily to the production
of chemical products are located in Joliet, Illinois; Woodbridge, New Jersey;
McDonough, Georgia; Garland, Texas and San Jose, California. Smaller plant
facilities in Franklin Park, Illinois, and Grand Forks, North Dakota produce
certain chemical products primarily for the Company's Textile Care and
Janitorial divisions. These facilities are all Company-owned. The Company's
Kay business also owns and operates manufacturing facilites in Greensboro, North
Carolina and Dallas, Texas.
Additional chemical manufacturing facilities are located in Dorado, Puerto Rico;
Santa Cruz, Brazil; Hamilton, New Zealand; Noda and Shika, Japan; Singapore;
Sydney, Melbourne and Brisbane, Australia; Seoul, Korea; Mexico City, Mexico,
and Toronto, Canada. The buildings and land for the facilities located in
Canada, Australia, Puerto Rico and Mexico are leased. A chemical plant, which
is co-owned with a Chinese joint venture partner, is located near Shanghai,
People's Republic of China, and a leased chemical plant is located in Chile.
Smaller chemical plant facilities are located in certain other countries.
Additional chemical plants are expected to be added in the Great Lakes region
of the United States and in Indonesia.
The Company's plant in South Beloit, Illinois produces chemical product
dispensers and injectors and other mechanical equipment. A leased plant, which
manufactures dishwasher racks and related sundries, is located in Elk Grove
Village, Illinois. Dishwasher racks are also produced at the Shika, Japan
plant. A leased facility in Memphis, Tennessee serves as a dishwashing machine
refurbishing center.
The Company believes its manufacturing facilities are in good condition and are
adequate to meet existing production needs.
Most of the Company's manufacturing plants also serve as distribution centers.
In addition, in the United States the Company operates 7 distribution centers,
all of which are leased, and utilizes 28 primary public warehouses.
Internationally, the Company operates various additional leased or public
warehouses to facilitate distribution and, in the United States, operates
approximately 119 sales offices, including three Company-owned facilities.
Additional sales offices are located internationally.
The Company's corporate headquarters is located in downtown St. Paul, Minnesota.
The 19-story building was constructed to the Company's specifications. The
building is leased by the Company through 1998 and thereafter is subject to
multiple renewals at the Company's option. The Company also owns a building in
downtown St. Paul adjacent to its headquarters which is used for general office
- 15 -
<PAGE>
purposes, as well as a computer center located in a City of St. Paul industrial
development zone several blocks from the Company's headquarters. A
Company-owned research and development facility and a chemical pilot plant are
located in suburbs of St. Paul.
The Company is also the managing partner in a partnership which owns two
properties used in the Company's former ChemLawn operations. The properties are
currently leased to a subsidiary of ServiceMaster Limited Partnership and used
by that entity as a branch office for its lawn care business. The properties
are located in suburbs of Columbus and Dayton, Ohio.
ITEM 3. LEGAL PROCEEDINGS
Proceedings arising under laws relating to protection of the environment are
discussed at Item 1(c) above, under the heading "Environmental Considerations."
As previously reported in last year's Form 10-K, a legal action had been
commenced by F.F. Corp. of New York ("Plaintiff") in 1991 in U.S. District
Court, Western District of New York in which Plaintiff alleged that a March 1989
fire, which destroyed its rendering plant, was caused by a commercial clothes
dryer which was manufactured by the Company and purchased by Plaintiff in 1974.
Plaintiff sought in excess of $17,000,000 in damages plus interest and costs.
On December 7, 1994, this matter was settled, with the Company's contribution,
including its legal fees, totaling $1,000,000. The Company's insurance
companies and another defendant made additional contributions to the settlement.
The Company and certain of its subsidiaries are defendants in various other
lawsuits and claims arising out of the normal course of business. In the
opinion of management, the ultimate resolution of this litigation will not have
a material effect on the Company or its operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders, through the
solicitation of proxies, or otherwise, during the fourth quarter.
- 16 -
<PAGE>
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
ITEM 5(A) MARKET INFORMATION
The Company's Common Stock is listed on the New York Stock Exchange and the
Pacific Stock Exchange under the symbol ECL. The Common Stock is also traded on
the Boston, Cincinnati, Midwest and Philadelphia Exchanges. The high and low
sales price of the Company's Common Stock on the consolidated transaction
reporting system during 1994 and 1993 was as follows:
<TABLE>
<CAPTION>
1994 1993
------------------ ------------------------
Quarter High Low High Low
------- ---- --- ---- ---
<S> <C> <C> <C> <C>
First $23-1/2 $20-1/8 $20-1/16 $18-1/8
Second $23-1/2 $19-3/4 $21-5/8 $18-1/4
Third $23-1/4 $20-1/4 $22-1/2 $20-9/16
Fourth $22 $19-1/4 $23-13/16 $20-11/16
</TABLE>
The closing stock price on March 9, 1995 was $23-1/8.
ITEM 5(B) HOLDERS
On March 9, 1995 the Company had 4,854 holders of Common Stock of record.
ITEM 5(C) DIVIDENDS
Quarterly cash dividends customarily are paid on the 15th of January, April,
July and October. Dividends of $0.095 per share were declared in February, May
and August, 1993, $0.011 per share in December, 1993 and February, May and
August, 1994. A cash dividend of $0.125 per share was declared in December
1994.
ITEM 6. SELECTED FINANCIAL DATA
The comparative data for the years ended December 31, 1994, 1993, 1992, 1991 and
1990 inclusive, which are set forth under the heading entitled "Summary
Operating and Financial Data" and which are located on pages 46 and 47 of the
Annual Report, are incorporated herein by reference.
- 17 -
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The material appearing under the heading entitled "Financial Discussion,"
located on pages 24 through 30 of the Annual Report, is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and material which are an integral part of the
financial statements listed under Item 14 I(1) below and located on pages 31
through 45 of the Annual Report, are filed as a part of this Report and are
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The biographical material located on pages 6 through 10 and the paragraph
relating to understandings concerning the election of directors between Henkel
KGaA and the Company located on page 5 of the Proxy Statement appearing under
the heading entitled "Election of Directors," is incorporated herein by
reference. Information regarding executive officers is presented under the
heading "Executive Officers of the Company" in Part I of this Report on pages 12
through 14.
ITEM 11. EXECUTIVE COMPENSATION
The material appearing under the heading entitled "Executive Compensation,"
located on pages 11 through 20 of the Proxy Statement, is incorporated herein by
reference. However, pursuant to Securities and Exchange Commission Regulation
S-K, Item 402(a)(8), the material appearing under the headings entitled "Report
of the Compensation Committee on Executive Compensation" and "Comparison of Five
Year Cumulative Total Return," found, respectively, on pages 11 through 13 and
on page 17 of the Proxy Statement is not incorporated herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The material appearing under the headings entitled "Security Ownership of
Certain Beneficial Owners" and "Security Ownership of Management" located on
pages 2 and 3 of the Proxy Statement is incorporated herein by reference. The
holdings of Henkel KGaA and HC Investments, Inc. are subject to certain
limitations with respect to the Company's voting securities as more fully
described in the Company's Proxy Statement on page 20, beginning with the
- 18 -
<PAGE>
fourth paragraph under the heading "Certain Transactions," which is incorporated
herein by reference.
A total of 2,254,129 shares of Common Stock held by the Company's directors and
executive officers, some of whom may be affiliates of the Company, have been
excluded from the computation of market value of the Company's Common Stock on
the cover page of this Report. This total represents that portion of the shares
reported as beneficially owned by officers and directors of the Company in the
table entitled "Security Ownership of Management" located on page 3 of the Proxy
Statement, which are issued and outstanding.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The material appearing under the headings entitled "Certain Transactions" and
"Company Transactions" on pages 20 and 21 of the Proxy Statement and the
biographical material located on pages 7 and 9 of the Proxy Statement pertaining
to Messrs. Hugo Uyterhoeven, Albrecht Woeste and Roland Schulz is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K
I(1). The following financial statements of the Company, included in the Annual
Report, are incorporated in Item 8 hereof.
(i) Consolidated Statement of Income for the years ended
December 31, 1994, 1993 and 1992, Annual Report page 31.
(ii) Consolidated Balance Sheet at December 31, 1994, 1993 and
1992, Annual Report page 32.
(iii) Consolidated Statement of Cash Flows for the years ended
December 31, 1994, 1993 and 1992, Annual Report page 33.
(iv) Consolidated Statement of Shareholders' Equity for the years
ended December 31, 1994, 1993 and 1992, Annual Report page
34.
(v) Notes to Consolidated Financial Statements, Annual Report
pages 35 through 44.
(vi) Report of Independent Accountants, Annual Report page 45.
- 19 -
<PAGE>
I(2). The following financial statement schedule to the Company's financial
statements listed in Item 14 I(1) for the years ended December 31, 1994,
1993 and 1992 located on page 30 hereof, and the Report of Independent
Accountants on Financial Statement Schedule at page 29 hereof are filed
as part of this Report.
(i) Schedule VIII -- Valuation and Qualifying Accounts for the
years ended December 31, 1994, 1993 and 1992.
All other schedules, for which provision is made in the applicable
regulations of the Securities and Exchange Commission, are not
required under the related instructions or are inapplicable and
therefore have been omitted. All significant majority-owned
subsidiaries are included in the filed consolidated financial
statements.
I(3). The following financial statements of the Henkel-Ecolab Joint Venture
located on pages 31 to 50 hereof, are filed as part of this Report.
(i) Report of Independent Accountants.
(ii) Combined Statements of Income for the years ended November
30, 1994, 1993 and 1992.
(iii) Combined Balance Sheets at November 30, 1994, 1993 and 1992.
(iv) Combined Statements of Cash Flows for the years ended
November 30, 1994, 1993 and 1992.
(v) Combined Statements of Equity for the years ended November
30, 1994, 1993 and 1992.
(vi) Notes to the Combined Financial Statements.
I(4). The following financial statement schedules to the Henkel-Ecolab Joint
Venture financial statements listed in Item 14 I(3) for the years ended
November 30, 1994, 1993 and 1992 located on pages 51 to 53 hereof, and
the Report of Independent Accountants on pages 31 and 32 hereof are filed
as part of this Report.
(i) Schedule I -- Valuation and Qualifying Accounts and Reserves
for the years ended November 30, 1994, 1993 and 1992.
- 20 -
<PAGE>
(ii) Schedule II -- Property, Plant and Equipment for the yers
ended November 30, 1994, 1993 and 1992.
(iii) Schedule III -- Accumulated Depreciation and Amortization of
Property, Plant and Equipment for the years ended November
30, 1994, 1993 and 1992.
All other schedules, for which provision is made in the applicable
regulations of the Securities and Exchange Commission, are not
required under the related instructions or are inapplicable and
therefore have been omitted. All significant entities of the
Henkel-Ecolab Joint Venture are included in the filed combined
financial statements.
II. The following documents are filed as exhibits to this Report. The
Company will, upon request and payment of a fee not exceeding the rate at
which copies are available from the Securities and Exchange Commission,
furnish copies of any of the following exhibits to stockholders.
(3)A. Restated Certificate of Incorporation - Incorporated by
reference to Exhibit (3)A of the Company's Form 10-K Annual
Report for the year ended December 31, 1992.
B. By-Laws, as amended through February 25, 1995.
(4)A. Common Stock - see Exhibits (3)A and (3)B.
B. Form of Common Stock Certificate - Incorporated by reference
to Exhibit (4)A(ii) of the Registrant's Form 10-K Annual
Report for the year ended December 31, 1992.
C. (i) Amended and Restated Rights Agreement dated as of
February 14, 1986, as amended and restated as of July
15, 1988 - Incorporated by reference to Exhibit (4)
of the Company's Form 8-K dated July 15, 1988.
(ii) First Amendment, dated as of September 10, 1990 to
the Amended and Restated Rights Agreement -
Incorporated by reference to Exhibit (4) of the
Company's Current Report on Form 8-K dated September
11, 1990.
- 21 -
<PAGE>
D. Note Agreement dated as of October 1, 1991 relating to
$100,000,000 9.68% Senior Notes Due October 1, 2001 between
the Company and the insurance companies named therein -
Incorporated by reference to Exhibit (4)F of the Company's
Form 10-K Annual Report for the year ended December 31,
1991.
E. Multicurrency Credit Agreement dated as of September 29,
1993, as Amended and Restated as of January 1, 1995, among
the Company, the financial institutions party thereto,
Citibank, N.A., as Agent, Citibank International Plc, as
Euro-Agent and Morgan Guaranty Trust Company of New York as
Co-Agent.
F. Copies of other constituent instruments defining the rights
of holders of long-term debt of the Company and its
subsidiaries are not filed herewith, pursuant to Section
(b)(4)(iii) of Item 601 of Regulation S-K, because the
aggregate amount of securities authorized under each of such
instruments is less than 10% of the total assets of the
Company and its subsidiaries on a consolidated basis. The
Company hereby agrees that it will, upon request by the
Securities and Exchange Commission, furnish to the
Commission a copy of each such instrument.
(9) Amended and Restated Stockholder's Agreement - See Exhibit
(10)S(iv) hereof.
(10)A. Ecolab Inc. 1977 Stock Incentive Plan, as amended through
May 10, 1991 - Incorporated by reference to Exhibit (10)A
of the Company's Form 10-K Annual Report for the year ended
December 31, 1990.
B. Ecolab Inc. 1993 Stock Incentive Plan - Incorporated by
reference to Exhibit (10)B of the Company's Form 10-K Annual
Report for the year ended December 31, 1992.
C. 1988 Non-Employee Director Stock Option Plan as amended
through February 23, 1991 - Incorporated by reference to
Exhibit (10)D of the Company's Form 10-K Annual Report for
the year ended December 31, 1990.
- 22 -
<PAGE>
D. 1995 Non-Employee Director Stock Option Plan. This Plan
will become effective only upon approval by the Stockholders
of the Company at the Company's Annual Meeting scheduled to
be held May 12, 1995.
E. Non-Employee Director Stock-For-Retainer Plan - Incorporated
by reference to Exhibit (10)E of the Company's Form 10-K
Annual Report for the year ended December 31, 1991.
F. Form of Director Indemnification Agreement dated August 11,
1989. Substantially identical agreements are in effect as
to each director of the Company - Incorporated by reference
to Exhibit (19)A of the Company's Form 10-Q for the quarter
ended September 30, 1989.
G. (i) Deferred Compensation Plan for Non-Employee Directors
(1984) - Incorporated by reference to Exhibit
(10)F(i) of the Company's Form 10-K Annual Report for
the year ended December 31, 1990.
(ii) First Declaration of Amendment to Deferred
Compensation Plan for Non-Employee Directors (1984)
effective December 13, 1991 - Incorporated by
reference to Exhibit (10)G(ii) of the Company's Form
10-K Annual Report for the year ended December 31,
1991.
H. (i) Deferred Compensation Plan for Non-Employee Directors
- 1986 - Incorporated by reference to Exhibit (10)F
of the Company's Form 10-K Annual Report for the
fiscal year ended June 30, 1987.
(ii) First Declaration of Amendment to Deferred
Compensation Plan for Non-Employee Directors - 1986,
effective December 13, 1991 - Incorporated by
reference to Exhibit (10)H(ii) of the Company's Form
10-K Annual Report for the year ended December 31,
1991.
- 23 -
<PAGE>
I. Ecolab Non-Employee Directors' Retirement Plan -
Incorporated by reference to Exhibit (10)I of the Company's
Form 10-K Annual Report for the year ended December 31,
1991.
J. Ecolab Executive Death Benefits Plan, as amended and
restated effective March 1, 1994. See also Exhibit (10)P
hereof.
K. Ecolab Executive Long-Term Disability Plan, as amended and
restated effective January 1, 1994. See also Exhibit (10)P
hereof.
L. Ecolab Executive Financial Counseling Plan - Incorporated by
reference to Exhibit (10)K of the Company's Form 10-K Annual
Report for the year ended December 31, 1992.
M. (i) Ecolab Supplemental Executive Retirement Plan, as
amended and restated effective July 1, 1994. See
also Exhibit (10)P hereof.
(ii) First Declaration of Amendment to Ecolab Supplemental
Executive Retirement Plan effective as of July 1,
1994.
N. Ecolab Mirror Savings Plan (formerly: Ecolab Executive Non-
Qualified Deferred Compensation Plan), as amended and
restated effective September 1, 1994. See also Exhibit
(10)P hereof.
O. (i) Ecolab Mirror Pension Plan effective July 1, 1994.
See also Exhibit 10(P) hereof.
(ii) First Declaration of Amendment to Ecolab Mirror
Pension Plan effective as of July 1, 1994.
P. The Ecolab Inc. Administrative Document for Non-Qualified
Benefit Plans (Exhibit 10(P)) is incorporated by reference
in, and is a part of, each of the referenced Plan documents.
Q. Ecolab Management Performance Incentive Plan - Incorporated
by reference to Exhibit (10)N of the Company's Form 10-K
Annual Report for the year ended December 31, 1993.
- 24 -
<PAGE>
R. (i) Severance Agreement dated March 19, 1990, between
Pierson M. Grieve and the Company - Incorporated by
reference to Exhibit (10)M of the Company's Form 10-K
Annual Report for the year ended December 31, 1989.
(ii) Amendment, dated as of February 26, 1994, to
Severance Agreement dated March 19, 1994, between
Pierson M. Grieve and the Company - Incorporated by
reference to Exhibit (10) of the Company's Form 10-Q
for the quarter ended September 30, 1994.
S. (i) Amended and Restated Umbrella Agreement between
Henkel KGaA and Ecolab Inc. dated June 26, 1991 -
Incorporated by reference to Exhibit 13 of HC
Investments, Inc.'s and Henkel KGaA's Amendment No. 4
to Schedule 13D dated July 16, 1991.
(ii) Amended and Restated Joint Venture Agreement between
Henkel KGaA and Ecolab Inc. dated June 26, 1991 -
Incorporated by reference to Exhibit 14 of HC
Investments, Inc.'s and Henkel KGaA's Amendment No. 4
to Schedule 13D dated July 16, 1991.
(iii) Amended and Restated ROW Purchase Agreement between
Henkel KGaA and Ecolab Inc. dated June 26, 1991 -
Incorporated by reference to Exhibit (7) of the
Company's Current Report on Form 8-K dated July 11,
1991.
(iv) Amended and Restated Stockholder's Agreement between
Henkel KGaA and Ecolab Inc. dated June 26, 1991 -
Incorporated by reference to Exhibit 15 of HC
Investments, Inc.'s and Henkel KGaA's Amendment No. 4
to Schedule 13D dated July 16, 1991.
T. Agreement and Plan of Merger among Ecolab Inc., EKH, Inc. I,
EKH, Inc. II, EKH, Inc. III, Kay Chemical Company, Kay
Chemical International, Inc. and Kay Europe, Inc. dated
November 2, 1994 - Incorporated by reference
- 25 -
<PAGE>
to Exhibit (2) of the Company's Current Report on Form 8-K
dated December 7, 1994.
(11) Computation of Primary and Fully Diluted Earnings Per Share.
(13) Those portions of the Company's Annual Report to
Stockholders for the year ended December 31, 1994 which are
incorporated by reference into Parts I, II and IV hereof.
(21) List of Subsidiaries as of March 9, 1995.
(23)A. Consent of Coopers & Lybrand L.L.P. to Incorporation by
Reference at page 29 hereof is filed as a part hereof.
B. Consent of KPMG Deutsche Treuhand-Gesellschaft
Aktiengesellschaft.
(24) Powers of Attorney.
(27) The Financial Data Schedule for the year ended December 31,
1994, was previously filed with the financial statements for
that year which were included in the Company's Current
Report on Form 8-K dated February 27, 1995, and is omitted
from this filing pursuant to Item 601(c)(11) of Regulation
S-K.
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
Included in the preceding list of exhibits are the following management
contracts or compensatory plans or arrangements:
Exhibit No. Description
----------- -----------
(10)A. Ecolab Inc. 1977 Stock Incentive Plan.
(10)B. Ecolab Inc. 1993 Stock Incentive Plan.
(10)C. 1988 Non-Employee Director Stock Option Plan.
(10)D. 1995 Non-Employee Director Stock Option Plan.
(10)E. Non-Employee Director Stock-For-Retainer Plan.
(10)G. Deferred Compensation Plan for Non-Employee Directors (1984).
- 26 -
<PAGE>
Exhibit No. Description
----------- -----------
(10)H. Deferred Compensation Plan for Non-Employee Directors (1986).
(10)I. Ecolab Non-Employee Directors' Retirement Plan.
(10)J. Ecolab Executive Death Benefits Plan.
(10)K. Ecolab Executive Long-Term Disability Plan.
(10)L. Ecolab Executive Financial Counseling Plan.
(10)M. Ecolab Supplemental Executive Retirement Plan.
(10)N. Ecolab Mirror Savings Plan.
(10)O. Ecolab Mirror Pension Plan.
(10)P. The Ecolab Inc. Administrative Document for Non-Qualified
Benefit Plans.
(10)Q. Ecolab Management Performance Incentive Plan.
(10)R. Severance Agreement between Pierson M. Grieve and the Company.
III. Reports on Form 8-K:
The Company filed two Current Reports on Form 8-K, dated November 2, 1994
and December 7, 1994, during the quarter ended December 31, 1994,
reporting, respectively: (i) its agreement to acquire by merger Kay
Chemical Company, Kay Chemical International, Inc. and Kay Europe, Inc.
(the "Kay Companies"), privately held manufacturers and marketers of
janitorial cleaning and sanitizing products, and to account for the
transaction as a pooling of interests; and (ii) the closing of the merger
with the Kay Companies and the issuance of approximately 4.5 million
shares of the Company's Common Stock. Subsequent to the quarter the
Company filed a Current Report on Form 8-K, dated February 27, 1995, to
file: (i) consolidated financial statements for the Company for the
years ended December 31, 1994, 1993 and 1992; and (ii) to file a
condensed consolidated statement of income reflecting post-merger
unaudited consolidated operations of the Company and the Kay Companies
for the one-month period ended January 31, 1995.
- 27 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Ecolab Inc. has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, on the 14th day of March, 1995.
ECOLAB INC.
(Registrant)
By /s/ Allan L. Schuman
------------------------------------
Allan L. Schuman, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Ecolab Inc. and in
the capacities indicated, on the 14th day of March, 1995.
/s/ Allan L. Schuman President and Chief Executive
---------------------------- Officer (Principal Executive
Allan L. Schuman Officer and Director)
/s/ Michael E. Shannon Vice Chairman, Chief Financial
---------------------------- and Administrative Officer
Michael E. Shannon (Principal Financial Officer
and Director)
/s/ Arthur E. Henningsen, Jr. Vice President and Controller
----------------------------- (Principal Accounting Officer)
Arthur E. Henningsen, Jr.
/s/ Kenneth A. Iverson Directors
----------------------------
Kenneth A. Iverson
as attorney-in-fact for
Ruth S. Block, Russell G. Cleary,
John H. Dasburg, Pierson M. Grieve,
James J. Howard, Jerry W. Levin,
Reuben F. Richards, Richard L. Schall,
Roland Schulz, Philip L. Smith,
Hugo Uyterhoeven, and Albrecht Woeste
- 28 -
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Shareholders and Board of Directors
of Ecolab Inc.
Our report on the consolidated financial statements of Ecolab Inc. has been
incorporated by reference in this Form 10-K from the Annual Report to
Shareholders of Ecolab Inc. for the year ended December 31, 1994, on page 45
therein. In connection with our audits of such financial statements, we have
also audited the related financial statement schedule listed in the index on
page 20 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Saint Paul, Minnesota
February 27, 1995
CONSENT TO INCORPORATION BY REFERENCE
We consent to the incorporation by reference in the Registration Statements
on Form S-8 of Ecolab Inc. (Registration Nos. 2-60010; 2-74944; 33-1664; 33-
41828; 2-90702; 33-18202; 33-55986; 33-56101; 33-26241; 33-34000; 33-56151;
33-39228; 33-56125; 33-55984; 33-60266; and 33-65364) and the Registration
Statement on Form S-3 of Ecolab Inc. (Registration No. 33-57197) of our reports
dated February 27, 1995 on our audits of the consolidated financial statements
and the related financial statement schedule of Ecolab Inc. as of December 31,
1994, 1993 and 1992, and for the years ended December 31, 1994, 1993 and 1992,
which reports are included or incorporated by reference in this Annual Report on
Form 10-K.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Saint Paul, Minnesota
March 14, 1995
- 29 -
<PAGE>
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
ECOLAB INC.
(In Thousands)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
-------------------------------------------------------------------------------------------------------------
Additions
-------------------------
Balance at Charged to Charged to Deductions Balance at
Beginning Costs and Other From End
Description of Period Expenses Accounts (A) Reserves (B) of Period
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful Accounts:
Year Ended December 31, 1994 $7,994 $3,910 $ 233 $(3,434) $8,703
Year Ended December 31, 1993 $7,586 $3,152 $ (64) $(2,680) $7,994
Year Ended December 31, 1992 $7,053 $3,948 $ (12) $(3,403) $7,586
<FN>
(A) Reflects foreign currency translation adjustments and for the year ended December 31, 1993,
a deduction of $184 related to the sale of the Canadian G.H. Wood janitorial distribution business.
(B) Uncollectible accounts charged off, net of recovery of accounts previously written off.
</FN>
</TABLE>
30
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Henkel-Ecolab Joint Venture
We have audited the combined financial statements of Henkel-Ecolab Joint Venture
as listed in the accompanying index. In connection with our audit of the
combined financial statements, we also have audited the financial statement
schedules as listed in the accompanying index. These combined financial
statements and financial statement schedules are the responsibility of the Joint
Venture's management. Our responsibility is to express an opinion on these
combined financial statements and financial statement schedules based on our
audits.
We conducted our audits in accordance with German generally accepted auditing
standards which in all material respects are similar to auditing standards
generally accepted in the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
31
<PAGE>
- 2 -
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the Henkel-Ecolab
Joint Venture as of November 30, 1994, 1993 and 1992, and the results of its
operations and its cash flows for the periods beginning December 1, 1993, 1992
and 1991, and ended November 30, 1994, 1993 and 1992, in conformity with
accounting principles generally accepted in the United States. Also in our
opinion, the related financial statement schedules, when considered in relation
to the basic combined financial statements taken as whole, present fairly, in
all material respects, the information set forth therein.
Dusseldorf, Germany, January 19, 1995
KPMG Deutsche Treuhand-Gesellschaft
Aktiengesellschaft
Wirtschaftsprufungsgesellschaft
/s/Dr. Kuhr /s/Haas
Dr. Kuhr Haas
Wirtschaftsprufer Wirtschaftsprufer
32
<PAGE>
HENKEL-ECOLAB JOINT VENTURE
INDEX TO COMBINED FINANCIAL STATEMENTS FOR THE YEARS ENDED NOVEMBER 30, 1994,
NOVEMBER 30, 1993 AND NOVEMBER 30, 1992
_____________________________________________________________________________
Combined Statements of Income
Combined Balance Sheets
Combined Statements of Cash Flows
Combined Statements of Equity
Notes to the Combined Financial Statements
Financial Statement Schedules
Schedule I Valuation and Qualifying Accounts and Reserves
Schedule II Property, Plant and Equipment
Schedule III Accumulated Depreciation and Amortization
of Property, Plant, and Equipment
33
<PAGE>
HENKEL-ECOLAB JOINT VENTURE
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Twelve Months ended Twelve Months ended Twelve Months ended
(Thousands) November 30, 1994 November 30, 1993 November 30, 1992
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Sales DM 1,264,985 DM 1,245,446 DM 1,279,619
Cost of Sales 546,706 562,586 568,119
Selling, General and Administrative Expenses 600,779 569,376 605,119
Royalties to Parents 31,874 36,460 33,034
------------------------------------------------------------------------------------------------------------------------------------
Operating Income 85,626 77,024 73,347
Other Expenses/Income, principally Interest Expense, net 6,426 10,207 12,815
Equity in Loss of Affiliate 391 582 126
------------------------------------------------------------------------------------------------------------------------------------
Income before Income Taxes 78,809 66,235 60,406
Provision for Income Taxes 36,287 35,966 28,613
------------------------------------------------------------------------------------------------------------------------------------
Income before Cumulative Effect of Change in Accounting Principle 42,522 30,269 31,793
Cumulative Effect at December 1, 1992 of the Change in
Accounting for Income Taxes -- 9,771 --
------------------------------------------------------------------------------------------------------------------------------------
Net Income DM 42,522 DM 40,040 DM 31,793
-- ------- -- ------ -- ------
<FN>
See accompanying Notes to Combined Financial Statements
</FN>
</TABLE>
34
<PAGE>
Henkel-Ecolab Joint Venture
Combined Balance Sheets
<TABLE>
<CAPTION>
November 30, November 30, November 30,
(Thousands) 1994 1993 1992
--------------------------------------------------------------------------------------------------------------------------------
Assets
<S> <C> <C> <C> <C> <C> <C>
Cash and Cash Equivalents DM 60,978 DM 41,051 DM 40,090
Accounts Receivable, net 260,696 266,299 264,113
Accounts Receivable from Related Parties 15,631 33,917 17,630
Loans to Related Parties 38,140 12,297 15,937
Inventories 162,414 152,988 133,143
Prepaid Expenses and Other Current Assets 22,528 20,088 32,983
Deferred Taxes 6,011 6,714 --
--------------------------------------------------------------------------------------------------------------------------------
Current Assets 566,398 533,354 503,896
--------------------------------------------------------------------------------------------------------------------------------
Investment in Affiliated Company, net 8,987 9,470 10,287
Property, Plant and Equipment, net 153,837 146,877 121,582
Intangible and Other Assets, net 26,818 20,043 15,512
Deferred Taxes 10,195 6,821 --
--------------------------------------------------------------------------------------------------------------------------------
Total Assets DM 766,235 DM 716,565 DM 651,277
--------------------------------------------------------------------------------------------------------------------------------
Liabilities and Equity
Current Portion of Long Term Debt DM 727 DM 796 DM 581
Short Term Debt 19,256 45,505 37,226
Loans from Related Parties 63,810 75,910 79,735
Accounts Payable 83,432 79,944 55,760
Accounts Payable to Related Parties 33,070 35,019 60,263
Accrued Liabilities 125,629 103,593 82,770
Income Taxes 41,378 28,162 27,619
--------------------------------------------------------------------------------------------------------------------------------
Current Liabilities 367,302 368,929 343,954
--------------------------------------------------------------------------------------------------------------------------------
Employee Benefit Obligations 84,549 71,392 58,904
Long Term Debt, less Current Maturities 6,521 7,090 9,289
Deferred Taxes 2,705 2,027 1,033
--------------------------------------------------------------------------------------------------------------------------------
Combined Equity 305,158 267,127 238,097
--------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Equity DM 766,235 DM 716,565 DM 651,277
-- ------- -- ------- -- -------
<FN>
See accompanying Notes to Combined Financial Statements
</FN>
</TABLE>
35
<PAGE>
HENKEL-ECOLAB JOINT VENTURE
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Twelve Months ended Twelve Months ended Twelve Months ended
(Thousands) November 30,1994 November 30,1993 November 30,1992
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Income DM 42,522 DM 40,040 DM 31,793
Cumulative Effect of Change in Accounting for Income Taxes -- (9,771) --
-------------- -------------- --------------
Income before Cumulative Effect of Change in Accounting Principle 42,522 30,269 31,793
Adjustments to Reconcile Net Income to Cash
Provided by Operating Activities
Depreciation and Amortization 45,208 39,648 37,701
Equity in Loss of Affiliated Company 391 582 126
Provision for Doubtful Accounts and Other 1,032 3,484 1,440
Gain on Sale of Property and Equipment (762) (1,076) (1,264)
Deferred Income Taxes (1,993) (2,770) --
Changes in Operating Assets and Liabilities
Decrease / (Increase) in Accounts Receivable 4,571 (5,670) (28,100)
Decrease / (Increase) in Due from Related Parties 18,286 (16,287) (156)
(Increase) in Inventories (9,426) (19,845) (1,171)
Increase in Accounts Payable and Accrued Liabilities 25,524 45,007 12,928
(Decrease) in Due to Related Parties (1,949) (25,244) (33,509)
Increase in Income Taxes Payable 13,216 543 8,861
(Increase) / Decrease in Other Current Assets (2,440) 12,895 (11,508)
Increase in Employee Benefit Obligations 13,157 12,488 5,333
-------------- -------------- --------------
Cash Provided by Operating Activities 147,337 74,024 22,474
-------------- -------------- --------------
Investing Activities
Expenditures for Property and Equipment (48,237) (66,283) (59,790)
Expenditures for Intangible and Other Assets (13,900) (8,884) (17,027)
Proceeds from Sale of Property and Equipment 5,045 3,680 3,836
(Increase) / Decrease in Loans to Related Parties (25,843) 3,640 24,868
-------------- -------------- --------------
Cash Used for Investing Activities (82,935) (67,847) (48,113)
-------------- -------------- --------------
Financing Activities
(Repayments of) / Proceeds from Bank Debt, net (26,887) 6,295 19,238
(Decrease) / Increase in Loans from Related Parties (12,100) (3,825) 7,661
Equity Allocations -- 6,826 --
Equity Withdrawals -- (1,785) (7,692)
Dividends Paid (1,411) (9,535) (6,180)
-------------- -------------- --------------
Cash (Used for) / Provided by Financing Activities (40,398) (2,024) 13,027
-------------- -------------- --------------
Effect of Exchange Rate Changes on Net Cash (4,077) (3,192) (4,574)
-------------- -------------- --------------
Increase / (Decrease) in Cash and Cash Equivalents 19,927 961 (16,119)
Cash and Cash Equivalents at Beginning of Period 41,051 40,090 56,209
-------------- -------------- --------------
Cash and Cash Equivalents at End of Period DM 60,978 DM 41,051 DM 40,090
----------- ----------- -----------
<FN>
See accompanying Notes to Combined Financial Statements
</FN>
</TABLE>
36
<PAGE>
HENKEL-ECOLAB JOINT VENTURE
COMBINED STATEMENTS OF EQUITY
<TABLE>
<CAPTION>
(Thousands)
Contributed Retained Cumulative
Capital Earnings Foreign Total
Currency
Translation
_______________________________________________________________________________
<S> <C> <C> <C> <C>
Balance
November 30, 1991 DM 209,973 17,600 (3,848) 223,725
Net Income 31,793 31,793
Equity Withdrawals (7,692) (7,692)
Dividends Paid (6,180) (6,180)
Opening Equity Adjustment 4,382 4,382
Translation (7,931) (7,931)
Adjustment
________________________________________________________________________________
Balance
November 30, 1992 DM 206,663 43,213 (11,779) 238,097
Net Income 40,040 40,040
Equity Allocations 6,826 6,826
Equity Withdrawals (1,785) (1,785)
Dividends Paid (9,535) (9,535)
Translation (6,516) (6,516)
Adjustment
_______________________________________________________________________________
Balance
November 30, 1993 DM 211,704 73,718 (18,295) 267,127
Net Income 42,522 42,522
Dividends Paid (1,411) (1,411)
Translation (3,080) (3,080)
Adjustment
_______________________________________________________________________________
Balance
November 30, 1994 DM 211,704 114,829 (21,375) 305,158
------------------------- ------- ------- -------- -------
<FN>
See accompanying Notes to Combined Financial Statements
</FN>
</TABLE>
37
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
On July 1, 1991, Henkel KGaA (Henkel) and Ecolab, Inc. (Ecolab) formed a joint
venture of their respective European institutional and industrial hygiene
businesses.
Under the terms of the Amended and Restated Joint Venture Agreement dated June
26, 1991 (Joint Venture Agreement), Henkel and Ecolab have joint control over
the activities of the Joint Venture. The Joint Venture Agreement also provides
that both partners will share an equal economic interest in the profits or
losses of the Joint Venture.
The financial statements are presented on a combined basis as each Joint Venture
entity is owned beneficially by identical shareholders or their wholly owned
subsidiaries. All significant intercompany or affiliated company accounts and
transactions have been eliminated in combination. The Joint Venture's fiscal
year end has been designated as November 30.
The financial statements are presented on the basis of generally accepted
accounting principles in the United States.
FOREIGN CURRENCY TRANSLATION
The accounts of all foreign subsidiaries and affiliates are generally measured
using local currency as the functional currency. For those operations, assets
and liabilities are translated into German Marks at period-end exchange rates.
Income statement accounts are translated at the average rates of exchange
prevailing during the period. Net exchange gains or losses resulting from such
translation are excluded from net earnings and accumulated in a separate
component of combined equity. Gains and losses from foreign currency
transactions are included in the related income statement category.
The Joint Venture enters into foreign currency forward contracts and options to
hedge specific foreign currency exposures. Gains and losses on these contracts
are deferred and recognized as part of the specific transaction hedged or
included in other expenses, principally interest expense, net. The cash flows
from such contracts are classified in the same category as the transaction
hedged in the Combined Statement of Cash Flows.
CASH EQUIVALENTS
Cash equivalents are highly liquid investments with a maturity of three months
or less when purchased. Interest income for the period totalled TDM 3,877 in
1994, TDM 4,976 in 1993 and TDM 7,684 in 1992.
INVENTORIES
Inventories are stated at the lower of cost or market. The method of determining
cost varies between the First-in First-out method, and the average cost method.
38
<PAGE>
INVESTMENT IN AFFILIATED COMPANY
Investment in the common stock of one affiliated company is accounted for by the
equity method. The excess of cost of this affiliate over the Company's share of
its net assets at the acquisition date is being amortized on a straight-line
basis over 10 years.
The investment in an affiliated company consists of 33 percent of the common
stock of Comac SpA, Verona. The unamortized portion of the excess of cost over
the Joint Venture's share of net assets of Comac amounts to TDM 5,444 at
November 30, 1994, TDM 6,192 at November 30, 1993 and TDM 6,943 at November 30,
1992 The market value of the investment cannot be determined.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at original cost. Merchandise
equipment consists primarily of various systems for dispensing cleaning and
sanitizing products. Depreciation and amortization are charged to operations
using the straight-line and declining balance methods over the following
estimated useful lives:
Buildings and improvements 8 to 40 years
Machinery and equipment 3 to 20 years
Furniture, fixtures and equipment 3 to 16 years
Leasehold improvements are amortized over a period which is the lesser of the
useful life of the asset or the remaining term of the associated lease.
Betterments, renewals and extraordinary repairs that extend the life of the
asset are capitalized; other repairs and maintenance are expensed. The cost and
accumulated depreciation applicable to the assets retired are removed from the
accounts and any gain or loss credited or charged to income.
INTANGIBLE ASSETS
Intangible assets primarily consist of amounts by which cost of acquisitions
exceeded the values assigned to net tangible assets. These assets are amortized
over their estimated lives, periods from 3 to 10 years. Total amortization of
all intangible assets amounted to TDM 6,407, TDM 4,283 in 1993 and TDM 2,467 in
1992.
39
<PAGE>
HENKEL-ECOLAB JOINT VENTURE
2. BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
(Thousands) November 30, November 30, November 30,
1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Accounts Receivable, net
Accounts Receivable, Trade DM 274,179 DM 278,750 DM 273,080
Allowance for Doubtful Accounts 13,483 12,451 8,967
--------------------------------------------------------------------
DM 260,696 DM 266,299 DM 264,113
------- ------- -------
Inventories
Raw Materials DM 36,777 DM 36,087 DM 24,519
Work in Process 10,180 9,931 9,502
Finished Goods 115,457 106,970 99,122
--------------------------------------------------------------------
Total DM 162,414 DM 152,988 DM 133,143
------- ------- -------
Property, Plant and Equipment, net
Land DM 6,164 DM 6,130 DM 3,936
Buildings and Improvements 68,060 61,235 44,356
Machinery and Equipment 106,629 95,150 89,900
Merchandising Equipment, Furniture and Fixtures 172,510 151,039 130,012
Construction in Progress 2,086 6,117 8,695
--------------------------------------------------------------------
355,449 319,671 276,899
Accumulated Depreciation and Amortization 201,612 172,794 155,317
--------------------------------------------------------------------
Total DM 153,837 DM 146,877 DM 121,582
------- ------- -------
Intangible and Other Assets, net
Goodwill on Acquisitions prior to July 1,1991 DM 20,941 DM 20,941 DM 20,941
Goodwill on Acquisitions after July 1,1991 13,500 6,197 --
Other Intangible Assets 10,811 3,547 1,674
--------------------------------------------------------------------
45,252 30,685 22,615
Accumulated Depreciation 21,454 15,439 12,403
--------------------------------------------------------------------
Total Intangible Assets, net 23,798 15,246 10,212
Other Assets, net 3,020 4,797 5,300
--------------------------------------------------------------------
Total DM 26,818 DM 20,043 DM 15,512
------- ------- -------
</TABLE>
40
<PAGE>
3. RELATED PARTY TRANSACTIONS
The Joint Venture has entered into a variety of contractual arrangements,
including those discussed in the following paragraphs for the supply of
products, the performance of general and administrative services and the
transfer of technology.
Certain Joint Venture entities purchase institutional and industrial hygiene
products (primarily finished goods inventory) from Henkel and its subsidiaries
under a variety of supply agreements. The terms of these agreements require
these entities to purchase specified quantities as defined by an annual supply
plan submitted to the related manufacturing facility. Product purchases are
priced on the basis of costs incurred and amounted to TDM 259,882 in 1994, TDM
278,693 in 1993 and TDM 319,913 in 1992.
Henkel also provides certain Joint Venture entities with elective services which
include, but are not limited to General Administration, Payroll Administration,
Accounting, Research and Development. The cost of services are charged by Henkel
on a monthly basis and may not reflect the costs which the Joint Venture would
incur if it were necessary to procure such services from outside sources or if
such services were performed internally by the Joint Venture. Fees paid by the
Joint Venture in consideration for these services amounted to TDM 20,326 in
1994, TDM 23,353 in 1993 and TDM 34,063 in 1992.
Royalty payments are shared equally by both parent companies based upon a
technology transfer agreement which provides for the payment of royalties as a
percentage of third party sales. Royalty expense related to this technology
transfer agreement amounted to TDM 31,874 in 1994, TDM 36,460 in 1993 and TDM
33,034 in 1992.
The Joint Venture has entered into agreements with Henkel under which the Joint
Venture can both borrow from and lend to Henkel both on an over-draft basis and
through short term loans of more than 3 months. There is currently no maximum
level of borrowing specified under this agreement. The interest rate basis for
both arrangements is the London Interbank Offering Rate (interest rate for
German Marks overdrafts 5.75 % per November 30, 1994 and 5.32 % for 3 month
short term German Marks loans per November 30, 1994); on overdrafts,
approximately between 0.4 - 1.5 percentage point is paid to compensate Henkel
for administration costs.
At November 30, 1994 the Joint Venture had borrowed TDM 63,810, from Henkel
Group Companies, TDM 75,910 in 1993 and TDM 79,735 in 1992. The loans receivable
from Henkel Group Companies had totalled TDM 38,140 in 1994, TDM 12,297 in 1993
and TDM 15,937 in 1992. The fair values of intercompany loans receivable and
payable approximate book value.
Interest expense to related companies totalled TDM 6,304 in the year ended
November 30, 1994, TDM 9,819 in 1993 and TDM 12,418 in 1992. Interest income
from related companies amounted to TDM 1,989 for the year ended November 30,
1994, TDM 1,503 in 1993 and TDM 5,389 in 1992.
41
<PAGE>
4. INCOME TAXES
The provision for income taxes totalled TDM 36,287, compared to November 30,
1993 TDM 35,966 and November 30, 1992 TDM 28,613. The net deferred taxes
included in the provision for income taxes for 1994 were TDM 1,993 credit and
for 1993 TDM 2,770 credit, whereas in prior years they were insignificant.
Effective December 1, 1992, the Joint Venture adopted the provisions of
Statement of Financial Accounting Standards of No. 109, "Accounting for Income
Taxes" (FAS 109). FAS 109 requires a change from the deferred to the asset and
liability method of computing deferred income taxes. Under the asset and
liability method, deferred income taxes are recognized to reflect the tax
consequences on future years of temporary differences between the tax bases of
assets and liabilities and their financial reporting amounts, based on enacted
tax laws and statutory tax rates applicable to the periods in which the
differences are expected to affect taxable income. Income tax expense is the tax
payable for the year and the change during the year in deferred tax assets and
liabilities.
The cumulative effect of this change in accounting principle as of December 1,
1992 amounted to TDM 9,771. Prior years' financial statements were not restated.
The components of the Joint Venture's overall net deferred tax asset at November
30, 1994, at November 30, 1993 and at December 1, 1992 are as follows:
<TABLE>
<CAPTION>
Deferred tax assets: November November December
30, 1994 30, 1993 1, 1992
-------- -------- -------
TDM TDM TDM
<S> <C> <C> <C>
Goodwill amortization 2,213 6,226 5,923
Tax loss carryforwards 5,614 5,744 4,774
Accruals, not permitted for
tax purposes 2,921 2,148 2,314
Inventory valuation 1,345 1,084 2,295
Pension provision, not deductible 4,746 3,784 2,135
Intangible assets (other than
goodwill) amortization 2,024 693 2,170
Differences in intercompany accounts 0 0 2,041
Fixed assets 4,853 0 0
Other 3,275 2,912 2,520
-------- -------- -------
Total gross deferred tax assets 26,991 22,591 24,172
Valuation allowance (8,023) (6,369) (10,914)
-------- -------- -------
Total deferred tax assets 18,968 16,222 13,258
-------- -------- -------
Deferred tax liabilities:
Depreciation on tangible assets (3,547) (2,578) (2,062)
Other (1,920) (2,136) (2,458)
-------- -------- -------
Total deferred tax liabilities (5,467) (4,714) (4,520)
-------- -------- -------
Net deferred tax asset 13,501 11,508 8,738
-------- -------- -------
-------- -------- -------
</TABLE>
42
<PAGE>
At November 30, 1994, the Joint Venture had net foreign operating loss
carryforwards for tax purposes of approximately TDM 17,847 compared to November
30, 1993 to TDM 16,577 and compared to TDM 15,822 as at December 1, 1992. A
significant portion of these losses have an indefinite carryforward period; the
remaining losses have expiration dates up to five years. As of November 30, 1994
and 1993 the tax benefits of the loss carryforwards have been reserved 100% in
Great Britain, 80% in Switzerland and 20% in Italy. As at December 1, 1992 all
loss carryforwards had been reserved 100%. The changes in the valuation
allowance were made due to turnarounds in the profitability of the Joint Venture
companies in the respective countries.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment. Based upon the level of
historical taxable income and projections for future taxable income over the
periods which the deferred tax assets are deductible, management believes it is
more likely than not the Joint Venture will realize the benefits of these
deductible differences, net of the existing valuation allowances at November 30,
1994.
A reconciliation of the statutory German trade tax and federal corporate income
tax rate to the effective income tax rate was:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Statutory German rate 44.4% 45.3% 48.7%
Other European rates (6.6) (7.4) (8.0)
Losses and deferred items
without offsetting tax benefits 3.6 5.0 7.7
Taxable deductions not
affecting pre-tax income 0.0 (0.8) (1.7)
Different tax base in Germany 3.8 3.8 2.0
Deferred taxes refundable to
parent 3.1 9.2 0.0
Change of valuation allowance 0.0 (6.4) 0.0
Other (2.3) 5.6 (1.3)
---- ---- -----
Effective income tax rate 46.0% 54.3% 47.4%
---- ---- -----
---- ---- -----
</TABLE>
The deferred taxes refundable to parent reflect the Joint Venture Agreement in
which the partners also agreed that all tax benefits realized after the
formation of the Joint Venture should be refunded to the respective parents if
the benefits relate to temporary differences that originated in periods prior to
the formation of the Joint Venture. The amount refundable in 1993 covers the
period from July 1, 1991 to November 30, 1993.
In 1994, the tax payments were TDM 21,368, in 1993 TDM 29,846 and in 1992 TDM
17,949.
43
<PAGE>
5. RETIREMENT PLANS
The Joint Venture's German entities have noncontributory defined benefit pension
plans to provide pension benefits to substantially all eligible employees.
Employees of countries outside of Germany participate in various local plans,
principally contributory plans.
Benefits for the German plans are based upon salary and years of service. The
funding of these pension plans is not a common practice as funding provides no
economic (tax) benefit.
A summary of the components of net periodic pension cost for the German plans
for the twelve months ended November 30, 1994, 1993 and 1992 follows (TDM):
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Service cost - employee benefits 3,174 2,890 3,125
Interest cost 4,952 4,258 3,958
Net amortization and deferral 546 546 546
----- ----- -----
Total pension expense 8,672 7,694 7,629
----- ----- -----
----- ----- -----
</TABLE>
The status of the employee pension benefit plans for Germany at November 30,
1994, 1993 and 1992 is summarized below (TDM):
<TABLE>
<CAPTION>
Actuarial present value of: 1994 1993 1992
<S> <C> <C> <C>
Vested benefit obligation 47,578 38,321 34,182
Non-vested accumulated
benefit obligation 2,799 2,112 1,972
------ ------ ------
Accumulated benefit obligation 50,377 40,433 36,154
------ ------ ------
------ ------ ------
Projected benefit obligation 66,354 56,975 52,915
Unrecognized net transition
obligation 8,246 8,790 9,335
Unrecognized net (gain)/loss 124 (942) 1,344
------ ------ ------
Unfunded accrued pension cost 57,984 49,127 42,236
------ ------ ------
------ ------ ------
</TABLE>
The following assumptions have been used to develop net periodic pension expense
and the actuarial present value of projected benefit obligations:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Assumed discount rate 7.5 % 7.5 % 7.5 %
Rate of increase in future
compensation levels 4.5 % 5.0 % 5.0 %
</TABLE>
44
<PAGE>
The Joint Venture also sponsors other defined benefit plans, defined
contribution plans and participation in government-sponsored programs in certain
European countries. Expenses under these plans amounted to approximately TDM
13,433 for the twelve months ended November 30, 1994, TDM 12,863 in 1993 and TDM
5,748 in 1992.
Other Joint Venture-specific savings plans, post-retirement and post-employment
benefit plans requiring contribution by the Joint Venture are not material.
45
<PAGE>
6. TOTAL INDEBTEDNESS
Short Term Debt
As of November 30, 1994 short term debt totalled TDM 19,256 compared to
November 30, 1993 TDM 45,505 and compared to November 30, 1992 TDM 37,226,
generally in overdraft facilities with interest rates based on local money
market rates. As of November 30, 1994 the three main balances are in Italian
Lira in the equivalent amount of TDM 5,433 at an interest rate of 8.5 % p.a., in
Spanish Peseta in the equivalent amount of TDM 2,414 at an interest rate of 5.45
% p.a. and in French Franc in the equivalent amount of TDM 2,410 at an interest
rate of 5.72 % p.a..
Long term debt
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
TDM TDM TDM
<S> <C> <C> <C>
Notes 7,248 7,886 9,870
Less current maturities 727 796 581
----- ----- -----
Total 6,521 7,090 9,289
----- ----- -----
----- ----- -----
</TABLE>
Of the total long term debt amount, the equivalent of TDM 6,454 is borrowed in
Danish Krona at an average interest rate of 10.19 % p.a.. As of November 30,
1994, the aggregate annual maturities of long-term debt for the next five years
were:
1995 - TDM 727 1996 - TDM 705
1997 - TDM 638 1998 - TDM 638
1999 - TDM 638 after 1999 - TDM 3,902
Interest expense related to all debt was TDM 4,584 in 1994, compared to November
30, 1993 TDM 6,700 and compared to November 30, 1992 TDM 13,479. No significant
differences existed between interest expense and interest paid.
The fair value of short and long term debt approximates the book value.
46
<PAGE>
7. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Joint Venture operates internationally, giving rise to exposure to market
risks from changes in interest rates and foreign exchange rates. Derivative
financial instruments are utilized by the Joint Venture to reduce certain of
these risks, as explained in this note. The Joint Venture does not hold or issue
financial instruments for trading purposes. The Joint Venture is exposed to
credit-related losses in the event of nonperformance by counterparties to
financial instruments, but it does not expect any counterparties to fail to meet
their obligations given their high credit ratings.
a) Notional Amounts and Credit Exposures of Derivatives
The notional amounts of derivatives summarized in section b) do not represent
amounts exchanged by the parties and, thus, are not a measure of the exposure of
the Joint Venture through its use of derivatives. The amounts exchanged are
calculated on the basis of the notional amounts and the other terms of the
derivatives, which relate to exchange rates.
b) Foreign Exchange Risk Management
The Joint Venture enters into various types of foreign exchange contracts in
managing its foreign exchange risk, as indicated in
the following table (TDM):
<TABLE>
<CAPTION>
November 30,1994
----------------------
Notional Credit
Amount Exposure
------- --------
<S> <C> <C>
Forwards 30,753 203
Options purchased 3,142 131
------- -----
33,895 334
------- -----
------- -----
</TABLE>
The primary purpose of foreign exchange contracts is to hedge various
intercompany loans. The Joint Venture also enters to a limited extent into
forward exchange contracts and options to hedge certain existing and anticipated
future net foreign exchange exposures. The anticipated future foreign exchange
exposure of the Joint Venture is the total of the net balances of all known and
planned incoming and outgoing payments of the Joint Venture's companies in
foreign currencies during a 12 months time horizon.
The table below summarizes by major currency the contractual amounts of the
Joint Venture's forward exchange and option contracts in German Marks. Foreign
currency amounts are translated at rates current at the reporting date. The
"buy" amounts represent the German Marks equivalent of commitments to purchase
foreign currencies, and the "sell" amounts represent the German Marks equivalent
of commitments to sell foreign currencies (TDM):
47
<PAGE>
<TABLE>
<CAPTION>
1994
----------------
Buy Sell
<S> <C> <C>
Italian Lira / US-Dollar 11,044 10,739
Danish Krona 8,170 7,997
Pound Sterling 7,319 7,364
Greek Drachme / French Franc 3,148 3,248
US-Dollar 3,142 3,000
Portuguese Escudo 677 685
Swedish Krona 395 367
------ ------
33,895 33,400
------ ------
------ ------
</TABLE>
c) Fair Value of Off Balance Sheet Financial Instruments
The following table presents the carrying amounts and fair values of the Joint
Venture's off balance sheet financial instruments at November 30, 1994. The fair
value is the amount at which the instrument could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation sale
(TDM):
<TABLE>
<CAPTION>
1994
-----------------
Carrying Fair
Amount Value
------ -----
<S> <C> <C>
Derivatives 0 334
</TABLE>
48
<PAGE>
8. RESEARCH EXPENDITURES
Research expenditures which relate to the development of new products and
processes, including significant improvements and refinements to existing
products, were DM 34.1 million in 1994, DM 28.3 million in 1993 and DM 32.9
million in 1992.
49
<PAGE>
9. COMMITMENTS AND CONTINGENCIES
The Joint Venture has a number of operating lease agreements primarily involving
motor vehicles, computer and other office equipment. The following is a schedule
by year of the future minimum lease payments required under the operating leases
that have initial or remaining noncancellable lease terms in excess of one year
as of November 30, 1994 (TDM):
<TABLE>
<CAPTION>
<S> <C>
1995 15,632
1996 11,091
1997 3,020
1998 1,092
1999 741
thereafter 1,455
------
Total 33,031
-------
-------
</TABLE>
Rent expense for the twelve month period ended November 30, 1994, was
approximately TDM 16,372, compared to November 30, 1993 approximately TDM 13,415
and compared to November 30, 1992 approximately TDM 10,341.
The Joint Venture is subject to lawsuits and claims arising out of the conduct
of its business, including those relating to commercial transactions and
environmental safety. As an integral part of the Joint Venture agreement, Henkel
and Ecolab have provided certain representations and warranties against future
expenditures arising from operations prior to July 1, 1991.
A subsidiary of the Joint Venture is named in an environmental legal action
related to the conduct of its business prior to the formation of the Joint
Venture on July 1, 1991. Based on the facts currently known to the Joint
Venture, and after consultation with Legal Counsel, management believes that the
Joint Venture is indemnified against any potential liability arising from such
action under the terms and conditions of the Amended and Restated Umbrella
Agreement dated June 26, 1991, by and between Henkel and Ecolab.
Therefore, the Joint Venture does not expect material adverse effects on its
financial position, results of operations or liquidity from the outcome of these
losses and claims.
The Joint Venture's customers are concentrated in Europe and operate in the
industrial and institutional hygiene business. No single customer accounted for
a significant amount of the Joint Venture's sales in 1994, 1993 and 1992, and
there were no significant accounts receivable from a single customer at November
30, 1994, 1993 and 1992. The Joint Venture establishes an allowance for doubtful
accounts based upon factors surrounding the credit risk of specific customers,
historical trends and other information.
50
<PAGE>
HENKEL-ECOLAB JOINT VENTURE
<TABLE>
<CAPTION>
Schedule I - Valuation and Qualifying Accounts and Reserves
(Thousands)
------------------------------------------------------------------------------
Description Balance, Additions Deductions Balance,
Beg. of (a) from Close of
Period Reserve Period
(b)
------------------------------------------------------------------------------
Period Ended
November 30, 1992
<S> <C> <C> <C> <C> <C>
Allowance for DM 7,527 2,880 1,440 8,967
doubtful
Accounts
------------------------------------------------
DM 7,527 2,880 1,440 8,967
================================================
Period Ended
November 30, 1993
Allowance for DM 8,967 6,616 3,132 12,451
doubtful
Accounts
------------------------------------------------
DM 8,967 6,616 3,132 12,451
================================================
Period Ended
November 30, 1994
Allowance for DM 12,451 5,245 4,213 13,483
doubtful
Accounts
------------------------------------------------
DM 12,451 5,245 4,213 13,483
================================================
<FN>
(a) Provision for doubtful accounts
(charged to expenses)
(b) Items determined to be uncollectible,
less recovery of amounts previously written off.
</FN>
</TABLE>
51
<PAGE>
HENKEL-ECOLAB JOINT VENTURE
<TABLE>
<CAPTION>
Schedule II - Property, Plant, and Equipment
(Thousands)
-----------------------------------------------------------------------------------------
Classification Balance, Additions Retirement Reclass- Balance,
Beg. of at or ification/ Close of
Period Cost Sales Translation Period
Adjustment
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Period Ended
November 30, 1992
Land DM 3,634 519 91 (126) 3,936
Buildings and 42,374 2,159 210 33 44,356
Improvements
Machinery and 77,679 19,119 4,447 (2,451) 89,900
Equipment
Merchandising Equipment, 114,669 31,306 9,505 (6,458) 130,012
Furniture and Fixtures
Construction in Progress 3,258 6,687 168 (1,082) 8,695
---------------------------------------------------------------
DM 241,614 59,790 14,421 (10,084) 276,899
===============================================================
Period Ended
November 30, 1993
Land DM 3,936 2,391 0 (197) 6,130
Buildings and 44,356 18,071 1,895 703 61,235
Improvements
Machinery and 89,900 11,213 5,194 (769) 95,150
Equipment
Merchandising Equipment, 130,012 32,069 11,601 559 151,039
Furniture and Fixtures
Construction in Progress 8,695 2,539 172 (4,945) 6,117
---------------------------------------------------------------
DM 276,899 66,283 18,862 (4,649) 319,671
===============================================================
Period Ended
November 30, 1994
Land DM 6,130 74 0 (40) 6,164
Buildings and 61,235 4,282 315 2,858 68,060
Improvements
Machinery and 95,150 10,273 1,251 2,457 106,629
Equipment
Merchandising Equipment, 151,039 34,220 13,721 972 172,510
Furniture and Fixtures
Construction in Progress 6,117 3,303 346 (6,988) 2,086
---------------------------------------------------------------
DM 319,671 52,152 15,633 (741) 355,449
===============================================================
</TABLE>
52
<PAGE>
HENKEL-ECOLAB JOINT VENTURE
Schedule III - Accumulated Depreciation and Amortization of Property, Plant,
and Equipment
(Thousands)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
Balance, Additions Retirement Reclass- Balance,
Classification Beg. of Charged to or ification/ Close of
Period Costs and Sales Translation Period
Expenses Adjustment
---------------------------------------------------------------------------------------------
Period Ended
November 30, 1992
<S> <C> <C> <C> <C> <C> <C>
Land 388 72 0 (2) 458
Buildings and 18,072 2,636 82 (64) 20,562
Improvements
Machinery and 44,846 9,976 4,302 (1,647) 48,873
Equipment
Merchandising Equipment, 75,916 21,522 7,464 (4,550) 85,424
Furniture and Fixtures
------------------------------------------------------------
DM 139,222 34,206 11,848 (6,263) 155,317
============================================================
Period Ended
November 30, 1993
Land 458 81 0 (21) 518
Buildings and 20,562 3,624 1,686 (120) 22,380
Improvements
Machinery and 48,873 9,983 4,418 (1,261) 53,177
Equipment
Merchandising Equipment, 85,424 22,129 10,154 (680) 96,719
Furniture and Fixtures
------------------------------------------------------------
DM 155,317 35,817 16,258 (2,082) 172,794
============================================================
Period Ended
November 30, 1994
Land 518 86 0 2 606
Buildings and 22,380 3,887 168 114 26,213
Improvements
Machinery and 53,177 9,784 1,037 612 62,536
Equipment
Merchandising Equipment, 96,719 25,042 10,145 641 112,257
Furniture and Fixtures
------------------------------------------------------------
DM 172,794 38,799 11,350 1,369 201,612
============================================================
</TABLE>
53
<PAGE>
EXHIBIT INDEX
The following documents are filed as exhibits to this Report.
<TABLE>
<CAPTION>
Paper (P) or
------------
Exhibit No. Document Electronic (E)
----------- -------- --------------
<S> <C> <C>
(3)A. Restated Certificate of --
Incorporation - Incorporated
by reference to Exhibit (3)A
of the Company's Form 10-K
Annual Report for the year
ended December 31, 1992.
B. By-Laws, as amended through E
February 25, 1995.
(4)A. Common Stock - see Exhibits --
(3)A and (3)B.
B. Form of Common Stock --
Certificate - Incorporated by
reference to Exhibit (4)A(ii)
of the Registrant's Form 10-K
Annual Report for the year
ended December 31, 1992.
C.(i) Amended and Restated Rights --
Agreement dated as of
February 14, 1986, as amended
and restated as of July 15,
1988 - Incorporated by
reference to Exhibit (4) of
the Company's Form 8-K dated
July 15, 1988.
(ii) First Amendment, dated as of --
September 10, 1990 to the
Amended and Restated Rights
Agreement - Incorporated by
reference to Exhibit (4) of
the Company's Current Report
on Form 8-K dated
September 11, 1990.
- 54 -
<PAGE>
<CAPTION>
Paper (P) or
------------
Exhibit No. Document Electronic (E)
----------- -------- --------------
<S> <C> <C>
D. Note Agreement dated as of --
October 1, 1991 relating to
$100,000,000 9.68% Senior
Notes Due October 1, 2001
between the Company and the
insurance companies named
therein - Incorporated by
reference to Exhibit (4)F of
the Company's Form 10-K
Annual Report for the year
ended December 31, 1991.
E. Multicurrency Credit E
Agreement dated as of
September 29, 1993, as
Amended and Restated as of
January 1, 1995, among the
Company, the financial
institutions party thereto,
Citibank, N.A., as Agent,
Citibank International Plc,
as Euro-Agent and Morgan
Guaranty Trust Company of New
York as Co-Agent.
F. Copies of other constituent --
instruments defining the
rights of holders of
long-term debt of the Company
and its subsidiaries are not
filed herewith, pursuant to
Section (b)(4)(iii) of Item
601 of Regulation S-K,
because the aggregate amount
of securities authorized
under each of such
instruments is less than 10%
of the total assets of the
Company and its subsidiaries
on a consolidated basis. The
Company hereby agrees that it
will, upon request by the
Securities and Exchange
Commission, furnish to the
Commission a copy of each
such instrument.
- 55 -
<PAGE>
<CAPTION>
Paper (P) or
------------
Exhibit No. Document Electronic (E)
----------- -------- --------------
<S> <C> <C>
(9) Amended and Restated --
Stockholder's Agreement - See
Exhibit (10)S(iv) hereof.
(10)A. Ecolab Inc. 1977 Stock --
Incentive Plan, as amended
through May 10, 1991 -
Incorporated by reference to
Exhibit (10)A of the
Company's Form 10-K Annual
Report for the year ended
December 31, 1990.
B. Ecolab Inc. 1993 Stock --
Incentive Plan - Incorporated
by reference to Exhibit (10)B
of the Company's Form 10-K
Annual Report for the year
ended December 31, 1992.
C. 1988 Non-Employee Director --
Stock Option Plan as amended
through February 23, 1991 -
Incorporated by reference to
Exhibit (10)D of the
Company's Form 10-K Annual
Report for the year ended
December 31, 1990.
D. 1995 Non-Employee Director E
Stock Option Plan. This Plan
will become effective only
upon approval by the
Stockholders of the Company
at the Company's Annual
Meeting scheduled to be held
May 12, 1995.
E. Non-Employee Director Stock- --
For-Retainer Plan -
Incorporated by reference to
Exhibit (10)E of the
Company's Form 10-K Annual
Report for the year ended
December 31, 1991.
- 56 -
<PAGE>
<CAPTION>
Paper (P) or
------------
Exhibit No. Document Electronic (E)
----------- -------- --------------
<S> <C> <C>
F. Form of Director --
Indemnification Agreement
dated August 11, 1989.
Substantially identical
agreements are in effect as
to each director of the
Company - Incorporated by
reference to Exhibit (19)A of
the Company's Form 10-Q for
the quarter ended
September 30, 1989.
G.(i) Deferred Compensation Plan --
for Non-Employee Directors
(1984) - Incorporated by
reference to Exhibit (10)F(i)
of the Company's Form 10-K
Annual Report for the year
ended December 31, 1990.
(ii) First Declaration of --
Amendment to Deferred
Compensation Plan for Non-
Employee Directors (1984)
effective December 13, 1991 -
Incorporated by reference to
Exhibit (10)G(ii) of the
Company's Form 10-K Annual
Report for the year ended
December 31, 1991.
H.(i) Deferred Compensation Plan --
for Non-Employee Directors -
1986 - Incorporated by
reference to Exhibit (10)F of
the Company's Form 10-K
Annual Report for the fiscal
year ended June 30, 1987.
(ii) First Declaration of --
Amendment to Deferred
Compensation Plan for Non-
Employee Directors - 1986,
effective December 13, 1991 -
Incorporated by reference to
Exhibit (10)H(ii) of the
Company's Form 10-K Annual
Report for the year ended
December 31, 1991.
- 57 -
<PAGE>
<CAPTION>
Paper (P) or
------------
Exhibit No. Document Electronic (E)
----------- -------- --------------
<S> <C> <C>
I. Ecolab Non-Employee --
Directors' Retirement Plan -
Incorporated by reference to
Exhibit (10)I of the
Company's Form 10-K Annual
Report for the year ended
December 31, 1991.
J. Ecolab Executive Death E
Benefits Plan, as amended and
restated effective March 1,
1994. See also Exhibit (10)P
hereof.
K. Ecolab Executive Long-Term E
Disability Plan, as amended
and restated effective
January 1, 1994. See also
Exhibit (10)P hereof.
L. Ecolab Executive Financial --
Counseling Plan -
Incorporated by reference to
Exhibit (10)K of the
Company's Form 10-K Annual
Report for the year ended
December 31, 1992.
M.(i) Ecolab Supplemental Executive E
Retirement Plan, as amended
and restated effective July
1, 1994. See also Exhibit
(10)P hereof.
(ii) First Declaration of E
Amendment to Ecolab
Supplemental Executive
Retirement Plan effective as
of July 1, 1994.
N. Ecolab Mirror Savings Plan E
(formerly: Ecolab Executive
Non-Qualified Deferred
Compensation Plan), as
amended and restated
effective September 1, 1994.
See also Exhibit (10)P
hereof.
- 58 -
<PAGE>
<CAPTION>
Paper (P) or
------------
Exhibit No. Document Electronic (E)
----------- -------- --------------
<S> <C> <C>
O.(i) Ecolab Mirror Pension Plan E
effective July 1, 1994. See
also Exhibit 10(P) hereof.
(ii) First Declaration of E
Amendment to Ecolab Mirror
Pension Plan effective as of
July 1, 1994.
P. The Ecolab Inc. --
Administrative Document for
Non-Qualified Benefit Plans
(Exhibit 10(P)) is
incorporated by reference in,
and is a part of, each of the
referenced Plan documents.
Q. Ecolab Management Performance --
Incentive Plan - Incorporated
by reference to Exhibit (10)N
of the Company's Form 10-K
Annual Report for the year
ended December 31, 1993.
R.(i) Severance Agreement dated --
March 19, 1990, between
Pierson M. Grieve and the
Company - Incorporated by
reference to Exhibit (10)M of
the Company's Form 10-K
Annual Report for the year
ended December 31, 1989.
(ii) Amendment, dated as of --
February 26, 1994, to
Severance Agreement dated
March 19, 1994, between
Pierson M. Grieve and the
Company - Incorporated by
reference to Exhibit (10) of
the Company's Form 10-Q for
the quarter ended
September 30, 1994.
- 59 -
<PAGE>
<CAPTION>
Paper (P) or
------------
Exhibit No. Document Electronic (E)
----------- -------- --------------
<S> <C> <C>
S.(i) Amended and Restated Umbrella --
Agreement between Henkel KGaA
and Ecolab Inc. dated June 26,
1991 - Incorporated by
reference to Exhibit 13 of HC
Investments, Inc.'s and Henkel
KGaA's Amendment No. 4 to
Schedule 13D dated July 16,
1991.
(ii) Amended and Restated Joint --
Venture Agreement between
Henkel KGaA and Ecolab Inc.
dated June 26, 1991 -
Incorporated by reference to
Exhibit 14 of HC Investments,
Inc.'s and Henkel KGaA's
Amendment No. 4 to Schedule
13D dated July 16, 1991.
(iii) Amended and Restated ROW --
Purchase Agreement between
Henkel KGaA and Ecolab Inc.
dated June 26, 1991 -
Incorporated by reference to
Exhibit (7) of the Company's
Current Report on Form 8-K
dated July 11, 1991.
(iv) Amended and Restated --
Stockholder's Agreement
between Henkel KGaA and Ecolab
Inc. dated June 26, 1991 -
Incorporated by reference to
Exhibit 15 of HC Investments,
Inc.'s and Henkel KGaA's
Amendment No. 4 to Schedule
13D dated July 16, 1991.
- 60 -
<PAGE>
<CAPTION>
Paper (P) or
------------
Exhibit No. Document Electronic (E)
----------- -------- --------------
<S> <C> <C>
T. Agreement and Plan of Merger --
among Ecolab Inc., EKH, Inc.
I, EKH, Inc. II, EKH, Inc.
III, Kay Chemical Company, Kay
Chemical International, Inc.
and Kay Europe, Inc. dated
November 2, 1994 -
Incorporated by reference to
Exhibit (2) of the Company's
Current Report on Form 8-K
dated December 7, 1994.
(11) Computation of Primary and E
Fully Diluted Earnings Per
Share.
(13) Those portions of the E
Company's Annual Report to
Stockholders for the year
ended December 31, 1994 which
are incorporated by reference
into Parts I, II and IV
hereof.
(21) List of Subsidiaries as of E
March 9, 1995.
(23)A. Consent of Coopers & Lybrand --
L.L.P. to Incorporation by
Reference at page 29 hereof is
filed as a part hereof.
B. Consent of KPMG Deutsche E
Treuhand-Gesellschaft
Aktiengesellschaft.
(24) Powers of Attorney. E
- 61 -
<PAGE>
<CAPTION>
Paper (P) or
------------
Exhibit No. Document Electronic (E)
----------- -------- --------------
<S> <C> <C>
(27) The Financial Data Schedule --
for the year ended
December 31, 1994, was
previously filed with the
financial statements for that
year which were included in
the Company's Current Report
on Form 8-K dated February 27,
1995, and is omitted from this
filing pursuant to Item
601(c)(11) of Regulation S-K.
</TABLE>
- 62 -
<PAGE>
BY-LAWS
OF
ECOLAB INC.
(A DELAWARE CORPORATION)
AS AMENDED THROUGH FEBRUARY 25, 1995
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the Corporation in the
State of Delaware shall be at 1209 Orange Street, City of Wilmington, County of
New Castle, Delaware. The name of the resident agent in charge thereof shall be
The Corporation Trust Company.
SECTION 2. OTHER OFFICES. The Corporation may also have offices at such other
places, within or without the State of Delaware, as the Board of Directors may
from time to time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. Meetings of stockholders may be held at such
place, within or without the State of Delaware, as the Board of Directors or the
officer calling the same shall designate.
SECTION 2. ANNUAL MEETING. An annual meeting of the stockholders of the
Corporation for the election of directors by written ballot and for the
transaction of such other business as may properly come before the meeting shall
be held at such time and on such day of each year as shall be designated by the
Board of Directors, the Chairman of the Board, the President or the Secretary.
SECTION 3. SPECIAL MEETINGS. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statute, may be called at
any time by the Board of Directors or by the Chairman of the Board, and shall be
called by the Chairman of the Board, the President or the Secretary at the
written request of the majority of the Board of Directors or at the written
request of stockholders owning capital stock having eighty percent (80%) of the
voting power of the entire issued and outstanding capital stock of the
Corporation. Such request shall state the purpose or purposes of the proposed
meeting. No business shall be transacted at any special meeting of the
stockholders except that stated in the notice of the meeting.
SECTION 4. NOTICE OF MEETINGS. Written notice stating the place, date and hour
of each annual and special meeting of the
<PAGE>
stockholders and, in the case of a special meeting, the purpose or purposes
thereof, shall be given not less than twenty (20) nor more than sixty (60) days
before the date of such meeting to each stockholder entitled to vote at such
meeting. If mailed, notice shall be deemed given when deposited in the United
States mail, postage prepaid, directed to the stockholder at such address as
appears on the records of the Corporation. Notice of any meeting of
stockholders shall not be required to be given to any stockholder who shall
attend such meeting in person or by proxy and shall not, at the beginning of
such meeting, object to the transaction of any business because the meeting is
not lawfully called or convened, or who shall, either before or after the
meeting, submit a signed waiver of notice.
SECTION 5. QUORUM. At all meetings of the stockholders the holders of a
majority of the shares of stock of the Corporation issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall be
requisite to constitute a quorum for the transaction of business, except as
otherwise provided by statute or in the Restated Certificate of Incorporation.
In the absence of a quorum, the holders of a majority of the shares of stock
present in person or by proxy and entitled to vote may adjourn the meeting until
the requisite amount of stock shall be present.
SECTION 6. ORGANIZATION AND ORDER OF BUSINESS. At each meeting of the
stockholders, the Chairman of the Board, or in his absence the President, or in
his absence any other person selected by the Board of Directors, shall act as
Chairman of the meeting. The Secretary, or in his absence an Assistant
Secretary, or any person appointed by the Chairman of the meeting, shall act as
Secretary of the meeting and keep the minutes thereof. The order of business at
all meetings of the stockholders shall be as determined by the Chairman of the
meeting.
SECTION 7. VOTING. Except as otherwise provided by statute or by the Restated
Certificate of Incorporation, at each meeting of the stockholders each
stockholder having the right to vote thereat shall be entitled to (i) one vote
for each share of common stock of the Corporation standing in his name on the
record of stockholders of the Corporation, and (ii) such voting rights, if any,
as are provided in the applicable Certificate of Designation, Preferences and
Rights with respect to any series of preferred stock of the Corporation standing
in his name on the record of stockholders of the Corporation, in all such
instances on the date fixed by the Board of Directors as the record date for the
determination of the stockholders who shall be entitled to notice of and vote at
such meeting; or if no record date shall have been fixed, then at the close of
business on the day next preceding the day on which notice thereof shall be
given. Each stockholder entitled to vote at any meeting of stockholders may
authorize another person or persons to act for him by a proxy signed by such
stockholder or his attorney-in-fact. No proxy
- 2 -
<PAGE>
shall be valid after the expiration of three (3) years from the date thereof,
unless otherwise provided in the proxy. Except as otherwise provided by
statute, these By-Laws or the Restated Certificate of Incorporation, any
corporate action to be taken by vote of the stockholders shall be authorized by
a majority of the total votes cast at a meeting of stockholders by the holders
of shares present in person or represented by proxy and entitled to vote on such
action. Unless required by statute, or determined by the chairman of the
meeting to be advisable, the vote on any question other than elections need not
be by written ballot. On a vote by written ballot, each ballot shall be signed
by the stockholder, his attorney-in-fact, or his proxy if there be such proxy,
and shall state the stockholder's name and the number of shares voted.
SECTION 8. STOCKHOLDER LIST. The Secretary shall prepare and make, at least
ten (10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten (10) days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. This list shall also be produced and
kept at the time and place of the meeting during the whole time thereof, and may
be inspected by any stockholder who is present.
SECTION 9. INSPECTORS. The Board of Directors may, in advance of any meeting
of stockholders, appoint or provide for the appointment of one or more
inspectors to act at such meeting or any adjournments thereof. If the inspector
or inspectors shall not be appointed, or if any of them shall fail to appear or
act, the Chairman of the meeting may, and on the request of any stockholder
entitled to vote thereat shall, appoint one or more inspectors. Each inspector,
before entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. On request of the
Chairman of the meeting or any stockholder entitled to vote thereat, the
inspectors shall make a report in writing of any challenge, request or matter
determined by them and shall execute a certificate of any fact found by them.
No director or candidate for the office of director shall act as inspector of
any election of directors. Inspectors need not be stockholders of the
Corporation.
SECTION 10. ADJOURNED MEETINGS. A meeting of stockholders may be adjourned to
another time and to another place by either the chairman of the meeting or by
the stockholders and proxies
- 3 -
<PAGE>
present. When a meeting is adjourned to another time or place, notice of such
adjourned meeting need not be given if the time and place to which the meeting
shall be adjourned are announced at the meeting at which the adjournment is
taken. At the adjourned meeting, if a quorum is present any business may be
transacted which might have been transacted at the original meeting. If the
adjournment is for more than thirty (30) days or if after the adjournment a new
record date is fixed for the adjourned meeting, notice of the adjourned meeting
shall be given to each stockholder of record entitled to vote at the meeting.
SECTION 11. CONSENT OF STOCKHOLDERS. Unless otherwise provided in the Restated
Certificate of Incorporation, any action required or permitted to be taken at
any Annual or Special Meeting of Stockholders of the Corporation, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the Corporation shall
be managed by or under the direction of the Board of Directors. The Board of
Directors may exercise all such authority and powers of the Corporation and do
all such lawful acts and things as are not by statute or the Restated
Certificate of Incorporation or these By-Laws directed or required to be
exercised or done by the stockholders.
SECTION 2. NUMBER AND ELECTION OF DIRECTORS. The number of directors of the
Corporation which shall constitute the entire Board of Directors shall be such
number as is fixed by the Board of Directors in accordance with the provisions
of the Restated Certificate of Incorporation. Directors shall be elected and
shall hold office in accordance with the provisions of the Restated Certificate
of Incorporation. Election of directors by the stockholders shall be by a
plurality of the votes cast. Directors need not be stockholders of the
Corporation.
SECTION 3. PLACE OF MEETING. The Board of Directors may hold meetings at such
place, within or without the State of Delaware, as the Board of Directors or the
officer calling the meeting may from time to time determine.
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SECTION 4. ORGANIZATION MEETING. Promptly following the adjournment of the
annual meeting of the stockholders, and without other notice than this By-Law,
the newly constituted Board of Directors shall meet for the purpose of
organization, the election of officers, and the transaction of other business,
with power to adjourn and re-adjourn.
SECTION 5. MEETINGS. Regular meetings of the Board of Directors shall be held
at such time and place as the Board of Directors may from time to time
determine. Special meetings of the Board of Directors may be called by the
Chairman of the Board, the President or any two (2) or more Directors.
SECTION 6. NOTICE OF MEETINGS. Notice of regular meetings of the Board of
Directors need not be given except as otherwise required by statute or these By-
Laws. Notice of the place, date and time of the holding of each special meeting
of the Board of Directors, and the purpose or purposes thereof, shall be
delivered to each director either personally or by mail, telephone, telegraph,
cable, or similar means, three (3) days before the day on which such meeting is
to be held, or on such shorter notice as the person or persons calling such
meeting deem appropriate in the circumstances. Such notice shall be deemed to
be given at the time it is dispatched by depositing it in the United States mail
with postage prepaid, by transmission by telephone, telegraph or cable, or by
personal delivery. Notice of any such meeting need not be given to any director
who shall, either before or after the meeting, submit a signed waiver of notice
or who shall attend such meeting without protesting, prior to or at its
commencement, the lack of notice to him.
SECTION 7. QUORUM AND MANNER OF ACTING. Except as otherwise provided by
statute, the Restated Certificate of Incorporation or these By-Laws, at all
meetings of the Board of Directors a majority of the directors then in office
shall constitute a quorum for the transaction of business; provided, however,
that if by reason of catastrophe or emergency, a majority of the entire Board is
not available or capable of acting, one third (1/3) of the entire Board of
Directors, but in any event not less than two (2) directors, shall constitute a
quorum for the transaction of business at any meeting of the Board of Directors.
The act of a majority of the directors present at any meeting at which there is
a quorum, as herein provided, shall be the act of the Board of Directors except
as may be otherwise specifically provided by statute, the Restated Certificate
of Incorporation or these By-Laws. In the absence of a quorum at any meeting of
the Board of Directors, a majority of the directors present thereat, or if no
director be present, the Secretary or an Assistant Secretary, may adjourn such
meeting to another time and place until the quorum is had. Notice of any
adjourned meeting need not be given. At any adjourned meeting at which a quorum
is present, any business may be transacted which might have been transacted at
the meeting as originally called.
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SECTION 8. ORGANIZATION AND ORDER OF BUSINESS. At each meeting of the Board of
Directors, the Chairman of the Board, or in his absence the President, or in his
absence, a member of the Board of Directors selected by the directors in
attendance, shall act as Chairman of the meeting. The Secretary, or in his
absence, an Assistant Secretary, or any person appointed by the Chairman of the
meeting, shall act as Secretary of the meeting and keep the minutes thereof.
The order of business at all meetings of the directors shall be as determined by
the Chairman of the meeting.
SECTION 9. ACTION WITHOUT MEETING. Any action required or permitted to be
taken at any meeting of the Board of Directors, or of any committee thereof, may
be taken without a meeting if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of the proceedings of the Board of Directors
or committee.
SECTION 10. CONFERENCE TELEPHONE. Members of the Board of Directors, or of any
committee thereof, may participate in a meeting of the Board of Directors or
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting in this manner shall constitute presence in
person at such meeting.
SECTION 11. COMMITTEES. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of three (3) or more of the directors of the Corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. Any
such committee, to the extent provided in the resolution of the Board of
Directors, shall have and may exercise all the powers of the Board of Directors
in the management of the business and affairs of the Corporation which the Board
of Directors may lawfully delegate, and may authorize the seal of the
Corporation to be affixed to all papers which may require it. Meetings of
committees may be called by the committee chairman, if any, or as provided in
Section 5 of this Article III. Notice of such meetings shall be given to each
member of the committee in the manner set forth in Section 6 of this Article
III. Notice of any such meeting need not be given to any committee member who
shall, either before or after the meeting, submit a signed waiver of notice or
who shall attend such meeting without protesting prior to or at its
commencement, the lack of notice to him. A notice or waiver of notice of any
regular or special meeting of any committee need not state the purposes of such
meeting. A majority of any committee may determine its action, unless the Board
of Directors shall otherwise provide. Each committee shall keep written minutes
of its formal proceedings and shall report such proceedings to the Board. All
such proceedings shall be subject to revision or
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alteration by the Board of Directors; provided, however, that third parties
shall not be prejudiced by such revision or alteration. The Board of Directors
shall have power at any time to fill vacancies in, to change the membership,
duties or authority of, or to dissolve any such committee.
SECTION 12. RESIGNATIONS. Any director of the Corporation may resign at any
time by giving written notice of his resignation to the Board of Directors, the
Chairman of the Board, the President or the Secretary. Such resignation shall
take effect at the date of the receipt of such notice, or at any later time
specified therein; and unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
SECTION 13. REMOVAL. Except as otherwise provided in the Restated Certificate
of Incorporation or in these By-Laws, any director may be removed at any time,
at a special meeting of the stockholders called and held for the purpose, but,
for so long as the Board of Directors is classified, only for cause, by the
affirmative vote of the holders of a majority of the shares then entitled to
vote at an election of directors; and the vacancy in the Board caused by any
such removal shall be filled as the Restated Certificate of Incorporation
provides.
SECTION 14. VACANCIES. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, in accordance with the Restated
Certificate of Incorporation.
SECTION 15. COMPENSATION. The Board of Directors shall have authority to fix
the compensation, including fees and reimbursement of expenses, of directors for
services to the Corporation in any capacity and no such payment shall preclude
any director from serving the Corporation in any other capacity and receiving
compensation therefor.
ARTICLE IV
OFFICERS
SECTION 1. NUMBER AND QUALIFICATION. The officers of the Corporation shall be
elected by the Board of Directors. The officers shall be a Chairman of the
Board, a President, one or more Vice Presidents, a Secretary, a Treasurer, and a
Controller. The Board of Directors may also elect a Vice Chairman of the Board,
and one or more Assistant Secretaries, Assistant Treasurers, and Assistant
Controllers, and the Board of Directors may designate any Vice President as an
Executive Vice President, a Senior Vice President or a Group Vice President.
The Board of Directors may also designate from such officers (i) a Chief
Executive Officer who shall have general supervision and
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authority over the business and affairs of the Corporation subject to the
control of the Board of Directors, (ii) a Chief Operating Officer who shall have
general supervision and authority over the operations of the Corporation subject
to the control of the Chief Executive Officer, if that designation has been
made, and subject to the control of the Board of Directors, or (iii) both a
Chief Executive Officer and a Chief Operating Officer. The Chairman of the
Board, the Vice Chairman of the Board and the President shall be chosen from
among the directors, but no other officer need be a director. Any two or more
offices may be held by the same person.
SECTION 2. ELECTION AND TERM. The officers of the Corporation shall be chosen
annually by the Board of Directors at the first meeting of the Board of
Directors following the annual meeting of stockholders or as soon thereafter as
is conveniently possible. Officers may also be elected from time to time at any
other meeting of the Board of Directors to fill vacancies and otherwise. Each
officer, except such officers as may be appointed in accordance with the
provisions of Section 3 of this Article IV, shall continue in office until his
successor shall have been duly elected and qualified or until his earlier
resignation or removal.
SECTION 3. OTHER OFFICERS AND AGENTS. The Board of Directors or the Chairman
of the Board, or in his absence or disability, the President, may appoint such
other officers and agents, each of whom shall hold office for such period, have
such authority and perform such duties as are provided for in these By-Laws, or
as the Board of Directors or Chairman of the Board, or the President, may from
time to time determine.
SECTION 4. RESIGNATION. Any officer may resign at any time by giving written
notice to the Chairman of the Board, the President or the Secretary of the
Corporation. Such resignation shall take effect at the date of the receipt of
such notice, or at any later time specified therein; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
SECTION 5. REMOVAL. Any officer or agent may be removed, either with or
without cause, at any time by the vote of the majority of the whole Board of
Directors. Any subordinate officer or agent appointed in accordance with the
provisions of Section 3 of this Article IV may be removed, either with or
without cause, by a vote of the majority of the whole Board of Directors or,
except in the case of an officer or agent elected or appointed by the Board of
Directors, by the Chairman of the Board or the President.
SECTION 6. VACANCIES. A vacancy in any office because of death, resignation,
removal, disqualification or any other cause may be filled for the unexpired
portion of the term in the manner
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prescribed in these By-Laws for the regular election or appointment to such
office.
SECTION 7. COMPENSATION. The compensation of the officers of the Corporation
shall be fixed from time to time by the Board of Directors or by such officers
or a committee of the Board of Directors to which the Board of Directors has
delegated such authority. An officer of the Corporation shall not be prevented
from receiving compensation by reason of the fact that he is also a director of
the Corporation, but any such officer who shall also be a director shall not
have any vote in the determination of the amount of compensation paid to him.
SECTION 8. CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside at
all meetings of the stockholders and of the Board of Directors. He shall
perform such duties with such authority as may be prescribed from time to time
by the Board of Directors.
SECTION 9. PRESIDENT. The President shall be responsible to the Chairman of
the Board and shall perform such duties with such authority as may be prescribed
from time to time by the Board of Directors and the Chairman of the Board. In
the absence or inability of the Chairman of the Board to act or in the event of
a vacancy in the office of the Chairman of the Board, the President shall have
the powers and shall perform all the duties of the Chairman of the Board.
SECTION 10. VICE PRESIDENTS. Each Vice President shall have such powers and
shall perform such duties as shall from time to time be prescribed by the Board
and as shall from time to time be assigned to him by the Chairman of the Board
or the President.
SECTION 11. SECRETARY. The Secretary shall give or cause to be given all
required notices of meetings of stockholders and of the Board of Directors,
shall record all of the proceedings and act as custodian of the minutes of all
such meetings, shall have charge of the corporate seal and the corporate minute
books, and shall make such reports and perform such other duties as may be
assigned from time to time by the Board of Directors, the Chairman of the Board,
or the President. The Secretary shall keep in safe custody the seal of the
Corporation and the Secretary or any Assistant Secretary shall have authority to
affix the same to any instrument requiring it and when so affixed, it may be
attested by the signature of the Secretary or any Assistant Secretary. The
Assistant Secretaries, or any of them, shall perform such of the duties of the
Secretary as may from time to time be assigned to them by the Board of
Directors, the Chairman of the Board, the President, or the Secretary, and in
the absence of the Secretary or in the event of his disability or refusal to
act, shall perform the duties of the Secretary, and when so acting shall have
all the powers of and be subject to all the restrictions upon the Secretary.
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SECTION 12. TREASURER. The Treasurer shall have custody of all moneys and
securities of the Corporation, shall have responsibility for disbursement of the
funds of the Corporation, shall make payment of the just demands on the
Corporation, shall invest surplus cash of the Corporation and manage its
investment portfolio under the direction of the Board of Directors, and shall
render to the Board of Directors an account of all transactions of the
Corporation and of the financial condition of the Corporation as may be required
of him. The Treasurer shall also perform such other duties as may be assigned
to him from time to time by the Board of Directors, the Chairman of the Board,
the President or by the Chief Financial Officer. The Assistant Treasurers, or
any of them, shall perform such of the duties of the Treasurer as may from time
to time be assigned to them by the Board of Directors, the Chairman of the
Board, the President, the Chief Financial Officer, or the Treasurer, and in the
absence of the Treasurer or in the event of his disability or refusal to act,
shall perform the duties of the Treasurer, and when so acting, shall have all
the powers of and be subject to all the restrictions upon the Treasurer.
SECTION 13. CONTROLLER. The Controller shall provide and maintain a system of
accounts and accounting records of the Corporation, shall provide and administer
a system of internal financial controls, and shall present such financial
statements to the Board of Directors as may be required. The Controller shall
also perform such other duties as may from time to time be assigned to him by
the Board of Directors, the Chairman of the Board, the President or by the Chief
Financial Officer. The Assistant Controllers, or any of them, shall perform
such of the duties of the Controller as may from time to time be assigned to
them by the Board of Directors, the Chairman of the Board, the President, the
Chief Financial Officer, or the Controller, and in the absence of the Controller
or in the event of his disability or refusal to act, shall perform the duties of
the Controller, and when so acting shall have all the powers of and be subject
to all the restrictions upon the Controller.
ARTICLE V
INDEMNIFICATION
SECTION 1. RIGHT TO INDEMNIFICATION. Every person who was or is a party or is
threatened to be made a party to or is involved in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or officer of
the Corporation or, while a director or officer of the Corporation, is or was
serving at the request of the Corporation or for its benefit as a director,
officer, employee or agent of another corporation, or as its representative in a
partnership, joint venture, trust or other enterprise, including any employee
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benefit plan, shall be indemnified and held harmless by the Corporation to the
fullest extent legally permissible under the General Corporation Law of the
State of Delaware in the manner prescribed therein, from time to time, against
all expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection therewith.
Similar indemnification may be provided by the Corporation to an employee or
agent of the Corporation who was or is a party or is threatened to be made a
party to or is involved in any such threatened, pending or completed action,
suit or proceeding, by reason of the fact that he is or was an employee or agent
of the Corporation or is or was serving at the request of the Corporation or for
its benefit as a director, officer, employee, or agent of another corporation or
as its representative in a partnership, joint venture, trust or other
enterprise, including any employee benefit plan.
SECTION 2. OTHER INDEMNIFICATION. The rights of indemnification conferred by
this Article shall not be exclusive of any other rights which such directors,
officers, employees or agents may have or hereafter acquire and, without
limiting the generality of such statement, they shall be entitled to their
respective rights of indemnification under any by-law, agreement, vote of
stockholders, provision of law or otherwise, as well as their rights under this
Article.
ARTICLE VI
SHARES AND THEIR TRANSFER
SECTION 1. STOCK CERTIFICATES. Each holder of stock in the Corporation shall
be entitled to have a numbered certificate in such form as shall be approved by
the Board of Directors, certifying the number of shares owned by him and signed
in the name of the Corporation by the Chairman of the Board or the President or
a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary, and sealed with the seal of the Corporation (which
seal may be a facsimile, engraved or printed); provided however, if such
certificate is countersigned by a transfer agent, or by a registrar, the
signature of any of the above-named officers of the Corporation may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer, transfer agent, or registrar at the date of issue.
SECTION 2. TRANSFER OF STOCK. Transfers of shares of stock of the Corporation
shall be made on the stock records of the Corporation only upon authorization by
the registered holder
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thereof, or by his attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary or with a transfer agent or transfer
clerk, and on surrender of the certificate or certificates for such shares
properly endorsed or accompanied by a duly executed stock transfer power with
reasonable assurances given that such endorsement is genuine and that all taxes
thereon have been paid. Except as otherwise provided by law, the Corporation
shall be entitled to recognize the exclusive right of a person in whose name any
share or shares stand on the record of stockholders as the owner of such share
or shares for all purposes, including, without limitation, the rights to receive
dividends or other distributions, and to vote as such owner, and the Corporation
may hold any such stockholder or record liable for calls and assessments, and
the Corporation shall not be bound to recognize any equitable or legal claim to
or interest in any such share or shares on the part of any other person whether
or not it shall have express or other notice thereof.
SECTION 3. LOST CERTIFICATES. The Corporation may issue a new certificate of
stock in the place of any certificate theretofore issued by it, alleged to have
been lost, stolen or destroyed, or which shall have been mutilated, and the
Board of Directors may, in its discretion, require the owner of the lost,
stolen, destroyed or mutilated certificate, or his legal representative, to give
the Corporation a bond, limited or unlimited, in such sum and in such form and
with such surety or sureties as the Board of Directors in its absolute
discretion shall determine is sufficient to indemnify the Corporation against
any claim that may be made against it on account of the alleged loss, theft,
destruction or mutilation of any such certificate, or the issuance of a new
certificate. Anything herein to the contrary notwithstanding, the Board of
Directors in its absolute discretion may refuse to issue any such new
certificate except pursuant to legal proceedings under the laws of the State of
Delaware.
SECTION 4. RULES AND REGULATIONS. The Board of Directors may make such
additional rules and regulations, not inconsistent with these By-Laws, the
Restated Certificate of Incorporation or the laws of the State of Delaware, as
it may deem expedient concerning the issuance, transfer and registration of
certificates for shares of stock of the Corporation. The Board of Directors may
appoint, or authorize any officer or officers of the Corporation to appoint, one
or more independent transfer agents and one or more independent registrars, and
may require all certificates for shares of stock to bear the signature or
signatures of any of them.
SECTION 5. RECORD DATE. In order to determine the stockholders entitled to
notice and to vote at any meeting of stockholders or adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled
to receive payment of any
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dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be less than ten (10) nor more than
sixty (60) days before the date of such meeting, nor more than sixty (60) days
prior to any other action. A determination of stockholders of record entitled
to notice of and to vote at a meeting of stockholders shall apply to any
adjournment of the meeting unless the Board of Directors shall elect to fix a
record date for the adjourned meeting.
ARTICLE VII
GENERAL PROVISIONS
SECTION 1. CONTRACTS AND OTHER INSTRUMENTS. The Chairman of the Board, the
Vice Chairman of the Board, the President, the Chief Operating Officer, the
Chief Financial Officer and any Senior Vice President may enter into any
contract or execute and deliver any instrument in the name of the Corporation
and on behalf of the Corporation except as in these By-Laws or by resolution
otherwise provided. The Board of Directors, except as in these By-Laws
otherwise provided, may authorize any other officer or officers, agent or agents
of the Corporation, to enter into any contract or execute and deliver any
instrument in the name of the Corporation and on behalf of the Corporation, and
such authority may be general or confined to specific instances, and unless so
authorized by the Board of Directors, no such other officer, agent or employee
shall have any power or authority to bind the Corporation by any contract or
engagement or to pledge its credit or to render it liable pecuniarily for any
purpose or to any amount.
SECTION 2. LOANS. No loans shall be contracted on behalf of the Corporation
and no negotiable paper shall be issued in its name unless, and on such terms as
shall be, authorized by the Board of Directors.
SECTION 3. DISBURSEMENTS. All checks, drafts, demands for money, notes or
other evidences of indebtedness of the Corporation shall be signed by such
officer or officers or such other person or persons as may from time to time be
designated by the Board of Directors or by any officer or officers or person or
persons authorized by the Board of Directors to make such designations.
Facsimile signatures may be authorized in any such case where authorized by the
Board of Directors.
SECTION 4. DEPOSITS. All funds of the Corporation not otherwise employed shall
be deposited from time to time to the credit of the Corporation under such
conditions and in such banks or other depositories as the Board of Directors may
designate, or as may
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be designated by any officer or officers, agent or agents of the Corporation to
whom such power of designation may from time to time be delegated by the Board
of Directors. For the purpose of deposit and for the purpose of collection for
the account of the Corporation, checks, drafts, and other orders for the payment
of money which are payable to the order of the Corporation may be endorsed,
assigned and delivered by any officer or agent of the Corporation as the Board
of Directors may determine by resolution.
SECTION 5. VOTING SECURITIES OF OTHER CORPORATIONS. Unless otherwise ordered
by the Board of Directors, the Chairman of the Board, the President or any
person either may designate, shall have full power and authority on behalf of
the Corporation, in person or by proxy, to attend and to act and to vote at any
meeting of the security holders of any other corporation in which this
Corporation may hold securities, and at any such meeting he or his proxy shall
possess and may exercise any and all rights and powers incident to the ownership
of such securities and which as the owner thereof the Corporation might have
possessed and exercised if present. The Board of Directors, by resolution from
time to time, may confer like powers upon any other person or persons.
SECTION 6. CORPORATE SEAL. The Board of Directors shall provide a corporate
seal, which shall be in the form of a circle, and which shall bear the words and
figures:
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ECOLAB INC.
CORPORATE SEAL
1924
DELAWARE
SECTION 7. FISCAL YEAR. The fiscal year of the Corporation shall be as
determined by the Board of Directors.
SECTION 8. GENDER. Whenever used in these By-Laws, words in the masculine
gender shall include the feminine gender.
ARTICLE VIII
AMENDMENTS
Except as otherwise provided in the Restated Certificate of Incorporation or
these By-Laws, the Board of Directors may from time to time, by vote of a
majority of its members, alter, amend or rescind all or any of these By-Laws as
permitted, by law, subject to the power of the stockholders to change or repeal
such By-Laws.
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MULTICURRENCY CREDIT AGREEMENT
Dated as of September 29, 1993
As Amended and Restated as of January 1, 1995
ECOLAB INC., a Delaware corporation (the "COMPANY"), the banks (the
"BANKS") listed on the signature pages hereof, CITIBANK, N.A. ("CITIBANK") as
agent (the "AGENT") for the Banks hereunder, CITIBANK INTERNATIONAL PLC, as
agent for the banks in connection with certain of the Eurocurrency Advances (the
"EURO-AGENT") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as co-agent (the
"CO-AGENT"), agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"A ADVANCE" means an advance by a Bank to a Borrower as part of
an A Borrowing and refers to a Base Rate Advance or a Eurocurrency
Advance, each of which shall be a "TYPE" of A Advance.
"A BORROWING" means a borrowing consisting of simultaneous A
Advances of the same Type made to a single Borrower by each of the
Banks pursuant to SECTION 2.01.
"A NOTE" means a promissory note of a Borrower payable to the
order of any Bank, in substantially the form of EXHIBIT A-1 hereto,
evidencing the aggregate indebtedness of such Borrower to such Bank
resulting from the A Advances made by such Bank to such Borrower.
"ADVANCE" means an A Advance or a B Advance.
"AGREEMENT" means this Multicurrency Credit Agreement, as it may
from time to time be amended, restated, supplemented or otherwise
modified.
"ALTERNATIVE CURRENCY" means any lawful currency other than
Dollars which is freely transferable and convertible into Dollars.
"APPLICABLE LENDING OFFICE" means, with respect to each Bank,
such Bank's Domestic Lending Office in the case of a Base Rate Advance
and such Bank's Eurocurrency Lending Office in the case of a
Eurocurrency Advance and, in the case of a B Advance, the office of
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such Bank notified by such Bank to the Agent as its applicable Lending
office with respect to such B Advance.
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance in
substantially the form of EXHIBIT C hereto pursuant to which a Bank assigns
all or a portion of such Bank's rights and obligations under this Agreement
in accordance with the terms of SECTION 9.08.
"B ADVANCE" means an advance by a Bank to a Borrower as part of a
B Borrowing resulting from the applicable auction bidding procedure
described in SECTION 2.03.
"B BORROWING" means a borrowing consisting of simultaneous B
Advances to a Borrower from each of the Banks whose offer to make a B
Advance as part of such borrowing has been accepted by the Company on
behalf of such Borrower under the applicable auction bidding procedure
described in SECTION 2.03.
"B NOTE" means a promissory note of a Borrower payable to the
order of any Bank, in substantially the form of EXHIBIT A-2 hereto,
evidencing the indebtedness of such Borrower to such Bank resulting
from a B Advance made by such Bank.
"B REDUCTION" has the meaning specified in SECTION 2.01.
"BASE RATE" means, for any period, a fluctuating interest rate
per annum as shall be in effect from time to time which rate per annum
shall at all times be equal to the highest of:
(a) the rate of interest announced publicly by
Citibank in New York, New York, from time to time, as
Citibank's base rate; or
(b) one-half of one percent per annum above the latest
three-week moving average of secondary market morning
offering rates in the United States for three-month
certificates of deposit of major United States money market
banks, such three-week moving average being determined
weekly by Citibank on the basis of such rates reported by
certificate of deposit dealers to and published by the
Federal Reserve Bank of New York or, if such
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publication shall be suspended or terminated, on the basis of
quotations for such rates received by Citibank from three New York
certificate of deposit dealers of recognized standing selected by
Citibank, in either case adjusted to the nearest 1/4 of one percent
or, if there is no nearest 1/4 of one percent, to the next higher 1/4
of one percent; or
(c) one-half of one percent per annum above the
Federal Funds Rate.
"BASE RATE ADVANCE" means an A Advance denominated in Dollars
which bears interest as provided in SECTION 2.07(a).
"BORROWER" means the Company or any Borrowing Subsidiary, and
their respective successors and permitted assigns, and "BORROWERS"
means all of the foregoing.
"BORROWING" means an A Borrowing or a B Borrowing.
"BORROWING SUBSIDIARY" means any Subsidiary (i) that is a Wholly-
Owned Consolidated Subsidiary, (ii) that is organized under the laws
of the jurisdiction in which the Alternative Currency requested in
connection with its initial Borrowing hereunder as a Borrowing
Subsidiary is the official currency, and (iii) as to which an Election
to Participate shall have been delivered to the Agent, duly executed
on behalf of such Borrowing Subsidiary and the Company, prior to the
date of any Notice of Borrowing on behalf of such Borrowing
Subsidiary.
"BUSINESS DAY" means a day of the year (i) on which banks are not
required or authorized to close in New York City, (ii) if the
applicable Business Day relates to any Eurocurrency Advance, on which
dealings are carried on in the London interbank market and (iii) if
the applicable Business Day relates to a disbursement to or payment by
a Borrowing Subsidiary, on which banks are not required or authorized
to close in the city in which the chief executive office or principal
place of business of such Borrowing Subsidiary is located.
"CAPITALIZATION" means, as of any date, the sum of Total Debt
plus Shareholders' Equity.
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"CHANGE OF CONTROL" means an event which shall be deemed to have
occurred if any person or group of persons (within the meaning of
Section 13 or 14 of the Exchange Act) acquires beneficial ownership
(within the meaning of Rule 13d-3 promulgated by the Securities and
Exchange Commission under the Exchange Act) of stock of the Company of
any class or classes where the stock the beneficial ownership of which
is so acquired carries (otherwise than by reason only of the happening
of a contingency) more than 50 percent of the ordinary voting power
for the election of directors generally of the Company; or, during any
period of 12 consecutive calendar months, individuals:
(i) who were directors of the Company on the first day of such
period, or
(ii) whose election or nomination for election to the board of
directors of the Company was recommended or approved by at least
a majority of the directors then still in office who were
directors of the Company on the first day of such period, or
whose election or nomination for election was so approved
shall cease to constitute a majority of the board of directors of the
Company.
"CITIBANK" means Citibank, N.A.
"COMMITMENT" has the meaning specified in SECTION 2.01.
"CONSOLIDATED ASSETS" means at any date all assets which would
appear as such on a consolidated balance sheet as of such date of the
Company and its Consolidated Subsidiaries, as determined in accordance
with GAAP.
"CONSOLIDATED EARNINGS BEFORE INTEREST AND TAXES" means, for the
period of four consecutive fiscal quarters ending on or most recently
ended prior to such date of determination, the Consolidated Net Income
of the Company and its Consolidated Subsidiaries, before deduction for
Consolidated Net Interest Expense, provision for income taxes and
provisions for income taxes relating to earnings from the Joint
Venture and royalties received from the Joint Venture by the Company
and its Consolidated Subsidiaries, all as determined in accordance
with GAAP.
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<PAGE>
"CONSOLIDATED NET INCOME" means, for any period, all amounts
which would be included under net income on a consolidated income
statement of the Company and its Consolidated Subsidiaries for such
period, all as determined in accordance with GAAP.
"CONSOLIDATED NET INTEREST EXPENSE" means, for any period, the
aggregate amount of consolidated interest expense minus amounts which
have been added as interest income, each of which has been taken into
account in the determination of Consolidated Net Income of the Company
and its Consolidated Subsidiaries for such period, all as determined
in accordance with GAAP.
"CONSOLIDATED SUBSIDIARY" means at any date any Subsidiary the
accounts of which would be consolidated with those of the Company in
its consolidated financial statements at such date in accordance with
GAAP.
"CREDIT RATING" means, at any time, the credit rating on the
Company's long-term senior unsecured debt then most recently publicly
announced by either Moody's or S&P and "CREDIT RATINGS" means both
such credit ratings.
"DEBT" means (but without duplication of any item) (i)
indebtedness for borrowed money, (ii) obligations evidenced by bonds,
debentures, notes or other similar instruments, (iii) obligations to
pay the deferred purchase price of property or services, excluding
trade obligations and other accounts payable arising in the ordinary
course of business, (iv) obligations as lessee under leases which
shall have been or should be, in accordance with GAAP, recorded as
capital leases, (v) obligations under direct or indirect guaranties in
respect of, and obligations (contingent or otherwise) to purchase or
otherwise acquire, or otherwise to assure a creditor against loss in
respect of, indebtedness or obligations of others of the kinds
referred to in clauses (i) through (iv) above, (vi) Subsidiary
Statutory Liabilities in respect of indebtedness or obligations of
others of the kinds referred to in clauses (i) through (iv) above and
(vii) liabilities in respect of unfunded vested benefits under plans
covered by Title IV of ERISA. Except for Subsidiary Statutory
Liabilities, "DEBT" shall not include contingent obligations for the
liabilities of any Joint Venture Entity imposed solely as a matter of
law by virtue of ownership of equity interests in such Joint Venture
Entity.
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"DM" means the lawful currency (deutschmarks) of the Federal
Republic of Germany.
"DOLLARS" and the sign "$" each means lawful money of the United
States.
"DOMESTIC LENDING OFFICE" means, with respect to any Bank, the
office of such Bank specified as its "Domestic Lending Office"
opposite its name on SCHEDULE I hereto or such other office of such
Bank as such Bank may from time to time specify to the Company and the
Agent.
"ELECTION TO PARTICIPATE" means an Election to Participate in
substantially the form of EXHIBIT D hereto.
"ELIGIBLE ASSIGNEE" means (i) a Bank or any affiliate of a Bank;
(ii) a commercial bank organized under the laws of the United States,
or any State thereof, and having a combined capital and surplus of at
least $250,000,000; or (iii) a commercial bank organized under the
laws of any other country which is a member of the Organization for
Economic Cooperation and Development (the "OECD"), or a political
subdivision of any such country, and having a combined capital and
surplus of at least $250,000,000 or the local currency equivalent
thereof, provided that such bank is acting through a branch or agency
located in the United States.
"ERISA" means the Employment Retirement Income Security Act of
1974, as amended from time to time and the regulations promulgated and
rulings issued thereunder.
"ERISA AFFILIATE" shall mean any (i) corporation which is a
member of the same controlled group of corporations (within the
meaning of Section 414(b) of the Internal Revenue Code) as the Company
or any of its Subsidiaries, (ii) partnership, trade or business under
common control (within the meaning of Section 414(c) of the Internal
Revenue Code) with the Company or any of its Subsidiaries, and (iii)
member of the same affiliated service group (within the meaning of
Section 414(m) of the Internal Revenue Code) as the Company or any of
its Subsidiaries, any corporation described in clause (i) or any
partnership, trade or business described in clause (ii).
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<PAGE>
"EUROCURRENCY ADVANCE" means an Advance denominated in Dollars or
in an Alternative Currency which bears interest as provided in SECTION
2.07(b).
"EUROCURRENCY LENDING OFFICE" means, with respect to any Bank,
the office of such Bank specified as its "Eurocurrency Lending Office"
opposite its name on SCHEDULE I hereto (or, if no such office is
specified, its Domestic Lending Office), or such other office of such
Bank as such Bank may from time to time specify to the Company and the
Agent. A Bank may specify different offices for its A Advances
denominated in Dollars and its A Advances denominated in Alternative
Currencies, respectively, and the term "Eurocurrency Lending Office"
shall refer to any or all such offices, collectively, as the context
may require when used in respect of such Bank.
"EUROCURRENCY LIABILITIES" has the meaning assigned to that term
in Regulation D of the Board of Governors of the Federal Reserve
System, as in effect from time to time.
"EUROCURRENCY RATE" means, for the Interest Period for each
Eurocurrency Advance comprising part of the same A Borrowing, an
interest rate per annum equal to the average (rounded upward to the
nearest whole multiple of 1/16 of 1% per annum, if such average is not
such a multiple) of the rate per annum at which deposits in Dollars or
in the relevant Alternative Currency are offered by the principal
office of each of the Reference Banks in London, England to prime
banks in the London interbank market at 11:00 A.M. (London time) two
Business Days before the first day of such Interest Period in an
amount substantially equal to such Reference Bank's Eurocurrency
Advance comprising part of such A Borrowing and for a period equal to
such Interest Period. The Eurocurrency Rate for the Interest Period
for each Eurocurrency Advance comprising part of the same A Borrowing
shall be determined by the Agent on the basis of applicable rates
furnished to and received by the Agent from the Reference Banks two
Business Days before the first day of such Interest Period, SUBJECT,
HOWEVER, to the provisions of SECTION 2.09.
"EUROCURRENCY RATE RESERVE PERCENTAGE" of any Bank for the
Interest Period for any Eurocurrency Advance means the reserve
percentage applicable during such Interest Period (or if more than one
such percentage shall be so applicable, the daily average of such
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percentages for those days in such Interest Period during which any such
percentage shall be so applicable) under regulations issued from time to
time by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement (including,
without limitation, any emergency, supplemental or other marginal reserve
requirement) for such Bank with respect to liabilities or assets consisting
of or including Eurocurrency Liabilities having a term equal to such
Interest Period.
"EVENTS OF DEFAULT" has the meaning specified in SECTION 6.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is
a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"FIXED RATE AUCTION" has the meaning specified in SECTION
2.03(b)(i).
"GAAP" means generally accepted accounting principles set forth
in the opinions, statements and pronouncements of the Financial
Accounting Standards Board, Accounting Principles Board and the
American Institute of Certified Public Accountants or in such other
statements by such other entity as may be in general use by
significant segments of the accounting profession, which are
applicable to the circumstances as of the date of determination and in
any event applied in a manner consistent with the application thereof
used in the preparation of the financial statements referred to in
SECTION 4.01(e).
"INDEXED RATE AUCTION" has the meaning specified in SECTION
2.03(b)(i).
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<PAGE>
"INSUFFICIENCY" means, with respect to any Plan, the amount, if
any, by which the present value of the vested benefits under such Plan
exceeds the fair market value of the assets of such Plan allocable to
such benefits.
"INTEREST PERIOD" means, for each Eurocurrency Advance comprising
part of the same A Borrowing, the period commencing on the date of
such A Advance and ending on the last day of the period selected by
the Company (on behalf of the respective Borrower) in a Notice of A
Borrowing submitted in accordance with the terms of SECTION 2.02. The
duration of each such Interest Period shall be one, two, three or six
months, in each case as the Company may select; PROVIDED, HOWEVER,
that: (i) Interest Periods commencing on the same date for A Advances
comprising part of the same A Borrowing shall be of the same duration;
and (ii) whenever the last day of any Interest Period would otherwise
occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding
Business Day; PROVIDED that if such extension would cause the last day
of such Interest Period to occur in the next following calendar month,
the last day of such Interest Period shall occur on the next preceding
Business Day. If, in accordance with SECTION 2.12 or otherwise, any A
Borrowing shall include both Eurocurrency Advances and Base Rate
Advances, each such Base Rate Advance shall be assigned an Interest
Period that is coextensive with the Interest Period then assigned to
such Eurocurrency Advances.
"JOINT VENTURE" means the Joint Venture Entities, the equity in
the income of which is reported on the consolidated income statements
of the Company and its Consolidated Subsidiaries.
"JOINT VENTURE AGREEMENT" means the Amended and Restated Umbrella
Agreement dated as of June 26, 1991 between the Company and Henkel
Kommanditgesellschaft auf Aktien.
"JOINT VENTURE ENTITIES" means the joint venture entities and
their subsidiaries collectively, from time to time established in
accordance with the terms of the Joint Venture Agreement.
"MAJORITY BANKS" means at any time Banks holding at least 60% of
the then aggregate unpaid principal amount of the A Notes held by
Banks, or, if no such
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<PAGE>
principal amount is then outstanding, Banks having at least 60% of the
Commitments. If at any time there shall be no principal amount outstanding
under the A Notes and the Commitments shall have been terminated, "MAJORITY
BANKS" shall mean the holders of 60% of the then aggregate unpaid principal
amount of the B Notes.
"MARGIN STOCK" has the meaning specified in Regulation U issued
by the Board of Governors of the Federal Reserve System.
"MOODY'S" means Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which the Company or any of its ERISA
Affiliates is making or accruing an obligation to make contributions,
or has within any of the preceding five plan years made or accrued an
obligation to make contributions.
"MULTIPLE EMPLOYER PLAN" means an employee benefit plan, other
than a Multiemployer Plan, subject to Title IV of ERISA to which the
Company or any of its ERISA Affiliates, and more than one employer
other than the Company or any of its ERISA Affiliates, is making or
accruing an obligation to make contributions or, in the event that any
such plan has been terminated, to which the Company or any of its
ERISA Affiliates made or accrued an obligation to make contributions
during any of the five plan years preceding the date of termination of
such plan.
"NOTE" means an A Note or a B Note.
"NOTICE OF A BORROWING" has the meaning specified in SECTION
2.02(a).
"NOTICE OF B BORROWING" means (i) in the case of a B Borrowing
proposed to be made pursuant to SECTION 2.03(b), a written request for
such B Borrowing substantially in the form of EXHIBIT B-2 hereto and
(ii) in the case of a B Borrowing proposed to be made pursuant to
SECTION 2.03(c), a written request for such B Borrowing substantially
in the form of EXHIBIT B-3 hereto.
"PAYMENT OFFICE" means (i) for Dollars, the principal office of
Citibank in New York City, located on the date hereof at 399 Park
Avenue, New York, New York 10043 and (ii) for any Alternative
Currency, the office of Citibank International Plc located at 335
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<PAGE>
Strand, London WC2R ILS England, or in either case such other office of the
Agent or the Euro-Agent as shall be from time to time selected by it by
written notice to the Company and the Banks.
"PERSON" means an individual, partnership, corporation (including
a business trust), joint stock company, trust, unincorporated
association, joint venture or other entity, or a government or any
political subdivision or agency thereof.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PLAN" means an employee benefit plan, other than a Multiemployer
Plan, which is (or, in the event that any such plan has been
terminated within five years after a transaction described in Section
4069 of ERISA, was) maintained for employees of the Company or any of
its ERISA Affiliates and subject to Title IV of ERISA.
"REFERENCE BANKS" means Citibank and Morgan Guaranty Trust
Company of New York.
"S&P" means Standard & Poor's Corporation.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHAREHOLDERS' EQUITY" means at any date the consolidated
shareholders' equity of the Company and its Consolidated Subsidiaries
which would appear as such on a consolidated balance sheet as of such
date of the Company and its Consolidated Subsidiaries, after deducting
treasury stock and as determined in accordance with GAAP.
"SIGNIFICANT SUBSIDIARY" shall have the meaning assigned to such
term in Regulation S-X issued pursuant to the Securities Act and the
Exchange Act.
"SUBSIDIARY" means any corporation or other entity of which
securities having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are
at the time directly or indirectly (through one or more Subsidiaries)
owned or controlled by the Company.
"SUBSIDIARY STATUTORY LIABILITIES" means, with respect to any
Consolidated Subsidiary, any contingent obligations of such
Consolidated Subsidiary imposed
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solely as a matter of law by virtue of such Consolidated Subsidiary's
ownership of equity interests in any Joint Venture Entity with respect to
indebtedness or obligations of such Joint Venture Entity (i) outstanding in
a principal amount of at least $5,000,000 (or its equivalent in any other
currency) in the aggregate, (ii) held by or owed to a Person other than a
Person controlling, controlled by, or under common control with such Joint
Venture Entity, and (iii) with respect to which any default in the payment
of principal or interest shall exist.
"TERMINATION DATE" means September 29, 1998 or the earlier date
of termination in whole of the Commitments pursuant to SECTION 2.05 or
6.01.
"TERMINATION EVENT" means (i) a "reportable event," as such term
is described in Section 4043 of ERISA (other than a "reportable event"
not subject to the provision for 30-day notice to the PBGC), or an
event described in Section 4062(f) of ERISA, or (ii) the withdrawal of
the Company or any of its ERISA Affiliates from a Multiple Employer
Plan during a plan year in which it was a "substantial employer", as
such term is defined in Section 4001(a)(2) of ERISA, or the incurrence
of liability by the Company or any of its ERISA Affiliates under
Section 4064 of ERISA upon the termination of a Multiple Employer
Plan, or (iii) the distribution of a notice of intent to terminate a
Plan pursuant to Section 4041(a)(2) of ERISA or the treatment of a
Plan amendment as a termination under Section 4041 of ERISA, or (iv)
the institution of proceedings to terminate a Plan by the PBGC under
Section 4042 of ERISA, or (v) any other event or condition which might
constitute grounds under Section 4042 of ERISA for the termination of,
or the appointment of a trustee to administer, any Plan.
"TOTAL DEBT" means, as of any date, all Debt of the Company and
its Consolidated Subsidiaries on a consolidated basis.
"TYPE", in respect of any A Advance, has the meaning assigned
thereto in the definition herein of "A ADVANCE".
"WHOLLY-OWNED CONSOLIDATED SUBSIDIARY" means any Consolidated
Subsidiary in which all of the shares of capital stock or other equity
interests are, at the time, directly or indirectly owned by the
Company; PROVIDED that up to 10% of each class of such shares of
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capital stock or other equity interests may be directors' qualifying shares
or shares or equity interests issued by such Subsidiary under employee
compensation or incentive plans.
"WITHDRAWAL LIABILITY" shall have the meaning given such term
under Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. COMPUTATION OF TIME PERIODS. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding."
SECTION 1.03. ACCOUNTING TERMS AND CHANGE IN ACCOUNTING PRINCIPLES.
All accounting terms not specifically defined herein shall be construed in
accordance with GAAP. If any changes in accounting principles from those used
in the preparation of the financial statements referred to in SECTION 4.01(e)
are hereafter required or permitted by the rules, regulations, pronouncements
and opinions of the Financial Accounting Standards Board or the American
Institute of Certified Public Accountants (or successors thereto or agencies
with similar functions) and are adopted by the Company with the agreement of its
independent certified public accountants and such changes result in a change in
the components of the calculation of any of the financial covenants, standards
or terms found in ARTICLE V hereof, the Company and the Agent agree to enter
into negotiations in order to amend such provisions so as to equitably reflect
such changes with the desired result that the criteria for evaluating the
Company's financial condition shall be the same after such changes as if such
changes had not been made, PROVIDED, HOWEVER, that no change in GAAP that would
affect the components of the calculation of any of such financial covenants,
standards or terms shall be given effect in such calculations until such
provisions are amended, in a manner satisfactory to the Agent, to so reflect
such change in accounting principles.
SECTION 1.04. CURRENCY EQUIVALENTS GENERALLY. For all purposes of
this Agreement, except as otherwise provided in ARTICLE II, the equivalent in
any Alternative Currency of an amount in Dollars shall be determined at the rate
of exchange quoted by Citibank, in New York City, at 9:00 A.M. (New York City
time) on the date of determination, to prime banks in New York City for the spot
purchase in the New York foreign exchange market of such amount of Dollars with
such Alternative Currency.
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ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. THE A ADVANCES. (a) Each Bank severally agrees, on
the terms and conditions hereinafter set forth, to make A Advances to the
Borrowers from time to time on any Business Day during the period from the date
hereof until the Termination Date in an aggregate amount (determined in Dollars)
not to exceed at any time outstanding the Dollar amount set opposite such Bank's
name on the signature pages hereof, as such amount may be reduced pursuant to
SECTION 2.05 (such Bank's "COMMITMENT"), PROVIDED that the aggregate amount of
the Commitments of the Banks shall be deemed used from time to time to the
extent of the aggregate amount of the B Advances then outstanding and such
deemed use of the aggregate amount of the Commitments shall be applied to the
Banks ratably according to their respective Commitments (such deemed use of the
aggregate amount of the Commitments being a "B REDUCTION").
(b) Each A Borrowing shall consist of A Advances of the same Type
made on the same day to the same Borrower by the Banks ratably according to
their respective Commitments, and shall be in an aggregate amount:
(i) in the case of an A Borrowing comprised of Base Rate
Advances, not less than $1,000,000 or an integral multiple of $1,000,000 in
excess thereof;
(ii) in the case of an A Borrowing comprised of Eurocurrency
Advances denominated in Dollars, not less than $9,000,000 or an integral
multiple of $1,000,000 in excess thereof; and
(iii) in the case of an A Borrowing comprised of Eurocurrency
Advances denominated in DM, not less than DM 9,000,000 or an integral
multiple of DM 1,000,000 in excess thereof; and
(iv) in the case of an A Borrowing comprised of Eurocurrency
Advances denominated in any Alternative Currency other than DM, not less
than any amount (and an integral multiple in excess thereof) advised to the
Company by the Euro-Agent on the basis of then prevailing market conditions
and conventions;
PROVIDED, that in the case of any such A Borrowing comprised of Eurocurrency
Advances denominated in an Alternative Currency, the proceeds of which shall be
used to repay a then maturing A Borrowing comprised of Eurocurrency Advances
denominated in such Alternative Currency, such new A Borrowing may, subject to
the
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terms and conditions otherwise set forth herein, be in an aggregate principal
amount equal to the aggregate principal amount of such maturing A Borrowing.
(c) Within the limits of each Bank's Commitment, a Borrower may
borrow, repay pursuant to SECTION 2.06 or prepay pursuant to SECTION 2.10, and
reborrow under this SECTION 2.01. For purposes of this SECTION 2.01 and all
other provisions of this ARTICLE II, the equivalent in Dollars of any
Alternative Currency or the equivalent in any Alternative Currency of Dollars or
of any other Alternative Currency shall be determined in accordance with SECTION
2.15.
SECTION 2.02. MAKING THE A ADVANCES. (a) Each A Borrowing shall be
made on notice, given not later than 11:00 A.M. (New York City time) by the
Company (on behalf of the applicable Borrower):
(x) in the case of a proposed A Borrowing comprised of Base Rate
Advances, to the Agent on the date of such proposed Borrowing;
(y) in the case of a proposed A Borrowing comprised of Eurocurrency
Advances denominated in Dollars, to the Agent two Business Days prior to
the date of such proposed Borrowing; and
(z) in the case of a proposed A Borrowing comprised of Eurocurrency
Advances denominated in an Alternative Currency, to the Euro-Agent three
Business Days prior to the date of such proposed Borrowing.
The Agent or Euro-Agent, as applicable, shall give each Bank prompt notice
thereof by telecopy, telex or cable. Each such notice of an A Borrowing (a
"NOTICE OF A BORROWING") shall be by telecopy, telex or cable, confirmed
immediately in writing, in substantially the form of EXHIBIT B-1 hereto,
specifying therein the requested (i) Borrower, (ii) date of such A Borrowing,
(iii) Type of A Advances comprising such A Borrowing, (iv) in the case of a
proposed A Borrowing comprised of Eurocurrency Advances, currency of such A
Advances and Interest Period for each such Advance and (v) aggregate amount of
such A Borrowing. The Company shall certify, in each Notice of A Borrowing, the
Credit Ratings, if any, then in effect. In the case of an A Borrowing comprised
of Eurocurrency Advances denominated in an Alternative Currency, the Company
shall request, within one-half hour prior to the issuance of the applicable
Notice of A Borrowing, the advice of the Euro-Agent as to the applicable
exchange rate then in effect with respect to such Alternative Currency, and the
Company shall specify in such Notice of A Borrowing the exchange rate so advised
to it by the Euro-Agent. In the case of a
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proposed A Borrowing comprised of Eurocurrency Advances, the Agent or the Euro-
Agent, as applicable, shall promptly notify each Bank and the Company of the
applicable interest rate under SECTION 2.07(b).
(b) Each Bank shall make available for the account of its Applicable
Lending Office:
(i) in the case of an A Borrowing comprised of Base Rate
Advances, to the Agent before 12:00 noon (New York City time)(or, if
the applicable Notice of A Borrowing shall have been given on the date
of such A Borrowing, before 4:00 P.M. (New York City time)) on the
date of such A Borrowing, at such account maintained at the Payment
Office for Dollars as shall have been notified by the Agent to the
Banks prior thereto and in same day funds, such Bank's ratable portion
of such A Borrowing;
(ii) in the case of an A Borrowing comprised of Eurocurrency
Advances denominated in Dollars, to the Agent before 12:00 noon (New
York City time) on the date of such A Borrowing, at such account
maintained at the Payment Office for Dollars as shall have been
notified by the Agent to the Banks prior thereto and in same day
funds, such Bank's ratable portion of such A Borrowing in Dollars; and
(iii) in the case of an A Borrowing comprised of Eurocurrency
Advances denominated in an Alternative Currency, to the Euro-Agent
before 12:00 noon (London time) on the date of such A Borrowing, at
such account maintained at the Payment Office for such Alternative
Currency as shall have been notified by the Euro-Agent to the Banks
prior thereto and in same day funds, such Bank's ratable portion of
such A Borrowing in such Alternative Currency.
After the Agent's or the Euro-Agent's receipt of such funds and upon fulfillment
of the applicable conditions set forth in ARTICLE III, the Agent or the Euro-
Agent, as applicable, will make such funds available to the applicable Borrower
at the aforesaid applicable Payment Office.
(c) Anything hereinabove to the contrary notwithstanding,
(i) if any Bank shall, at least one Business Day before the date
of any requested A Borrowing, notify the Agent or the Euro-Agent that
the introduction of or any change in or in the interpretation of any
law or
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regulation makes it unlawful, or that any central bank or other
governmental authority asserts that it is unlawful, for such Bank or its
Eurocurrency Lending Office to perform its obligations hereunder to make
Eurocurrency Advances in a particular currency or generally or to fund or
maintain any Eurocurrency Advances hereunder, the right of the Borrowers to
select Eurocurrency Advances in the affected currency or currencies for
such A Borrowing or any subsequent A Borrowing shall be suspended until
such Bank shall notify the Agent or the Euro-Agent that the circumstances
causing such suspension no longer exist, and each A Advance comprising such
A Borrowing shall be a Eurocurrency Advance denominated in Dollars (or, if
one of the affected currencies is Dollars, a Base Rate Advance);
(ii) if the Agent or the Euro-Agent shall, at least one Business
Day before the date of any requested A Borrowing, notify the Company
and the Banks that either Reference Bank shall have failed to furnish
timely information to the Agent or the Euro-Agent for determining the
Eurocurrency Rate for Eurocurrency Advances denominated in a
particular currency and comprising any requested A Borrowing, the
right of the Borrowers to select Eurocurrency Advances in such
currency for such A Borrowing or to select such currency for any
subsequent A Borrowing shall be suspended until the Agent or Euro-
Agent shall notify the Company and the Banks that the circumstances
causing such suspension no longer exist, and each A Advance comprising
such A Borrowing shall be a Eurocurrency Advance denominated in
Dollars (or, if the affected currency is Dollars, a Base Rate
Advance);
(iii) if the Majority Banks shall, at least one Business Day
before the date of any requested A Borrowing, notify the Agent or the
Euro-Agent that the Eurocurrency Rate for Eurocurrency Advances
denominated in a particular currency and comprising such A Borrowing
will not adequately reflect the cost to such Majority Banks of making
or funding their respective Eurocurrency Advances for such A
Borrowing, the right of the Company (on behalf of the Borrowers) to
select Eurocurrency Advances in such currency for such A Borrowing or
to select such currency for any subsequent A Borrowing shall be
suspended until the Agent shall notify the Company and the Banks that
the circumstances causing such suspension no longer exist, and each A
Advance comprising such A Borrowing shall be a
- 17 -
<PAGE>
Eurocurrency Advance denominated in Dollars (or, if the affected currency
is Dollars, a Base Rate Advance);
(iv) if any Bank shall, not later than 10:00 A.M. (London time)
two Business Days before the date of any requested Eurocurrency
Advance, notify the Agent or the Euro-Agent that such Bank is not
satisfied that deposits in the relevant Alternative Currency will be
freely available to it in the relevant amount and for the relevant
Interest Period, the right of the Borrowers to request Eurocurrency
Advances in such Alternative Currency from such Bank as part of such A
Borrowing or any subsequent A Borrowing shall be suspended until such
Bank shall notify the Agent or the Euro-Agent that the circumstances
causing such suspension no longer exist, and the A Advance to be made
by such Bank as part of such A Borrowing (and the A Advance to be made
by such Bank as part of any subsequent A Borrowing in respect of which
such Alternative Currency shall have been requested during such period
of suspension) shall be a Eurocurrency Advance denominated in Dollars
and having an Interest Period coextensive with the Interest Period in
effect in respect of all other A Advances comprising a part of such A
Borrowing; and
(v) if any Bank shall, not later than 10:00 A.M. (London time)
two Business Days before the date of any requested Eurocurrency
Advance in an Alternative Currency other than DM, notify the Agent or
the Euro-Agent that such Bank, in its sole discretion, does not wish
to fund the requested Eurocurrency Advance in such Alternative
Currency for the relevant Interest Period, the right of the Borrowers
to request Eurocurrency Advances in such Alternative Currency from
such Bank as part of such A Borrowing shall be suspended as to such A
Borrowing, and the A Advance to be made by such Bank as part of such A
Borrowing shall be a Eurocurrency Advance denominated in Dollars and
having an Interest Period coextensive with the Interest Period in
effect in respect of all other A Advances comprising a part of such A
Borrowing.
Each of the Agent and the Euro-Agent shall, upon becoming aware that the
circumstances causing any such suspension no longer apply, promptly so notify
the Company, PROVIDED that the failure of the Agent or the Euro-Agent to so
notify the Company shall not impair the rights of the Banks under this SECTION
2.02(c) or expose the Agent or the Euro-Agent to any liability.
- 18 -
<PAGE>
(d) Each Notice of A Borrowing shall be irrevocable and binding on
the Borrower on whose behalf it shall have been submitted. In the case of any A
Borrowing which the related Notice of A Borrowing specifies is to be comprised
of Eurocurrency Advances, the applicable Borrower shall indemnify each Bank
against any loss, cost or expense incurred by such Bank as a result of any
failure to fulfill on or before the date specified in such Notice of A Borrowing
for such A Borrowing the applicable conditions set forth in ARTICLE III,
including, without limitation, any loss, cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by such Bank
to fund the A Advance to be made by such Bank as part of such A Borrowing when
such A Advance, as a result of such failure, is not made on such date.
(e) Unless the Agent or Euro-Agent, as applicable, shall have
received notice from a Bank prior to the date of any A Borrowing that such Bank
will not make available to the Agent or Euro-Agent such Bank's ratable portion
of such A Borrowing, the Agent or Euro-Agent, as applicable, may assume that
such Bank has made such portion available to it on the date of such A Borrowing
in accordance with SUBSECTION (b) of this SECTION 2.02 and it may, in reliance
upon such assumption, make (but shall not be required to make) available to the
applicable Borrower on such date a corresponding amount. If and to the extent
that such Bank shall not have so made such ratable portion available to the
Agent or the Euro-Agent, as applicable, such Bank and such Borrower severally
agree to repay to the Agent or Euro-Agent, as applicable, forthwith on demand
such corresponding amount together with interest thereon, for each day from the
date such amount is made available to such Borrower until the date such amount
is repaid to the Agent or the Euro-Agent, as applicable, at (i) in the case of
such Borrower, the interest rate applicable at the time to A Advances comprising
such A Borrowing and (ii) in the case of such Bank, the Federal Funds Rate. If
such Bank shall repay to the Agent or Euro-Agent, as applicable, such
corresponding amount, such amount so repaid shall constitute such Bank's A
Advance as part of such A Borrowing for purposes of this Agreement.
(f) The failure of any Bank to make the A Advance to be made by it as
part of any A Borrowing shall not relieve any other Bank of its obligation, if
any, hereunder to make its A Advance on the date of such A Borrowing, but no
Bank shall be responsible for the failure of any other Bank to make the A
Advance to be made by such other Bank on the date of any A Borrowing.
SECTION 2.03. THE B ADVANCES. (a) Each Bank severally agrees that
the Company and any Borrowing Subsidiary may make B Borrowings under this
SECTION 2.03 from time to time on any
- 19 -
<PAGE>
Business Day during the period from the date hereof until the date occurring 15
days prior to the Termination Date in the manner set forth below; PROVIDED that,
following the making of each B Borrowing, the aggregate amount (determined in
Dollars) of the Advances then outstanding shall not exceed the aggregate amount
of the Commitments of the Banks (computed without regard to any B Reduction).
(b) The procedures for the solicitation and acceptance of B Advances
to be denominated in Dollars are set forth below:
(i) The Company (on behalf of itself or any Borrowing
Subsidiary) may request a B Borrowing denominated in Dollars under
this SECTION 2.03(b) by delivering to the Agent, by telecopier, telex
or cable, confirmed immediately in writing, a Notice of B Borrowing,
identifying the applicable Borrower and specifying the date and
aggregate amount of the proposed B Borrowing, the maturity date for
repayment of each B Advance to be made as part of such B Borrowing
(which maturity date may not be earlier than the date occurring 15
days after the date of such B Borrowing or later than the Termination
Date), the interest payment date or dates relating thereto, and any
other terms to be applicable to such B Borrowing, not later than 10:00
A.M. (New York City time) (A) one Business Day prior to the date of
the proposed B Borrowing, if the Company shall specify in the Notice
of B Borrowing that the rates of interest to be offered by the Banks
shall be fixed rates per annum (such type of solicitation being a
"FIXED RATE AUCTION") and (B) three Business Days prior to the date of
the proposed B Borrowing, if the Company shall instead specify in the
Notice of B Borrowing an index or other basis to be used by the Banks
in determining the rates of interest to be offered by them (such type
of solicitation being an "INDEXED RATE AUCTION"). The Company shall,
in addition, certify in each Notice of B Borrowing the Credit Ratings,
if any, then in effect. The Agent shall, promptly following its
receipt of a Notice of B Borrowing under this SECTION 2.03(b), notify
each Bank of such request by sending such Bank a copy of such Notice
of B Borrowing.
(ii) Each Bank may, if, in its sole discretion, it elects to do
so, irrevocably offer to make one or more B Advances to the applicable
Borrower as part of such proposed B Borrowing at a rate or rates of
interest specified by such Bank in its sole discretion, by notifying
the Agent (which shall give prompt notice thereof to the Company),
before 10:00 A.M. (New York
- 20 -
<PAGE>
City time) (A) on the date of such proposed B Borrowing, in the case of a
Fixed Rate Auction, and (B) two Business Days before the date of such
proposed B Borrowing, in the case of an Indexed Rate Auction, of the
minimum amount and maximum amount of each B Advance which such Bank would
be willing to make as part of such proposed B Borrowing (which amounts may,
subject to the proviso to the first sentence of SECTION 2.03(a), exceed
such Bank's Commitment), the rate or rates of interest therefor and such
Bank's Applicable Lending Office with respect to such B Advance; PROVIDED
that if the Agent in its capacity as a Bank shall, in its sole discretion,
elect to make any such offer, it shall notify the Company of such offer
before 9:00 A.M. (New York City time) on the date on which notice of such
election is to be given to the Agent by the other Banks.
(iii) The Company shall, in turn, before 11:00 A.M. (New York
City time) (A) on the date of such proposed B Borrowing, in the case
of a Fixed Rate Auction, and (B) two Business Days before the date of
such proposed B Borrowing, in the case of an Indexed Rate Auction,
either:
(x) cancel such B Borrowing by giving the Agent notice to
that effect, or
(y) accept (on behalf of the applicable Borrower), subject
to SECTION 2.03(e), one or more of the offers made by any Bank or
Banks pursuant to PARAGRAPH (ii) above, in its sole discretion,
by giving notice to the Agent of the amount of each B Advance
(which amount shall be equal to or greater than the minimum
amount, and equal to or less than the maximum amount, notified to
the Company by the Agent on behalf of such Bank for such B
Advance pursuant to PARAGRAPH (ii) above) to be made by each Bank
as part of such B Borrowing, and reject any remaining offers made
by Banks pursuant to PARAGRAPH (ii) above by giving the Agent
notice to that effect.
(iv) If the Company notifies the Agent that such B Borrowing is
cancelled pursuant to PARAGRAPH (iii)(x) above, the Agent shall give
prompt notice thereof to the Banks and such B Borrowing shall not be
made.
(v) If the Company accepts (on behalf of the applicable
Borrower) one or more of the offers made by any Bank or Banks pursuant
to PARAGRAPH (iii)(y) above,
- 21 -
<PAGE>
the Agent shall in turn promptly notify (A) each Bank that has made an
offer as described in paragraph (ii) above of the date and aggregate amount
of such B Borrowing and whether or not any offer or offers made by such
Bank pursuant to paragraph (ii) above have been accepted by the Company,
(B) each Bank that is to make a B Advance as part of such B Borrowing, of
the amount of each B Advance to be made by such Bank as part of such B
Borrowing, and (C) each Bank that is to make a B Advance as part of such B
Borrowing, upon receipt, that the Agent has received forms of documents
appearing to fulfill the applicable conditions set forth in ARTICLE III.
Each Bank that is to make a B Advance as part of such B Borrowing shall,
before 12:00 noon (New York City time) on the date of such B Borrowing
specified in the notice received from the Agent pursuant to clause (A) of
the preceding sentence or any later time when such Bank shall have received
notice from the Agent pursuant to clause (C) of the preceding sentence,
make available for the account of its Applicable Lending Office to the
Agent at the Payment Office such Bank's portion of such B Borrowing, in
same day funds. Upon fulfillment of the applicable conditions set forth in
ARTICLE III and after receipt by the Agent of such funds, the Agent will
make such funds available to the applicable Borrower at the Agent's
aforesaid address. Promptly after each B Borrowing the Agent will notify
each Bank of the amount of the B Borrowing, the consequent B Reduction and
the dates upon which such B Reduction commenced and will terminate.
(c) The procedures for the solicitation and acceptance of B Advances
to be denominated in an Alternative Currency are set forth below:
(i) The Company (on behalf of itself or any Borrowing
Subsidiary) may request a B Borrowing denominated in an Alternative
Currency under this SECTION 2.03(c) by delivering to the Euro-Agent,
by telecopier, telex or cable, confirmed immediately in writing, a
Notice of a B Borrowing identifying the applicable Borrower and
specifying the date and aggregate amount of the proposed B Borrowing,
the maturity date for repayment of each B Advance to be made as part
of such B Borrowing (which maturity date may not be earlier than the
date occurring 15 days after the date of such B Borrowing or later
than the Termination Date), the interest payment date or dates
relating thereto, the requested Alternative Currency and any other
terms to be applicable to such B Borrowing, not later than 4:00 P.M.
(London time) four
- 22 -
<PAGE>
Business Days prior to the date of the proposed B Borrowing. Each
solicitation made under this SUBSECTION (c) shall contemplate an Indexed
Rate Auction. The Company shall request, within one-half hour prior to the
issuance of a Notice of B Borrowing under this SECTION 2.03(c), the advice
of the Euro-Agent as to the exchange rate then in effect with respect to
the applicable Alternative Currency, and the Company shall specify in such
Notice of B Borrowing the exchange rate so advised to it by the Euro-Agent.
The Company shall, in addition, certify in each Notice of B Borrowing the
Credit Ratings, if any, then in effect. The Euro-Agent shall, promptly
following its receipt of a Notice of B Borrowing under this SECTION
2.03(c), notify each Bank of such request by sending such Bank a copy of
such Notice of B Borrowing.
(ii) Each Bank may, if, in its sole discretion, it elects to do
so, irrevocably offer to make one or more B Advances to the applicable
Borrower as part of such proposed B Borrowing in the requested
Alternative Currency and at a rate or rates of interest specified by
such Bank in its sole discretion, by notifying the Euro-Agent (which
shall give prompt notice thereof to the Company), before Noon (London
time) three Business Days before the date of such proposed B
Borrowing, of the minimum amount and maximum amount of each B Advance
which such Bank would be willing to make as part of such proposed B
Borrowing (which amounts may, subject to the proviso to the first
sentence of SECTION 2.03(a), exceed such Bank's Commitment), the rate
or rates of interest therefor and such Bank's Applicable Lending
Office with respect to such B Advance; PROVIDED that if the Euro-Agent
in its capacity as a Bank shall, in its sole discretion, elect to make
any such offer, it shall notify the Company of such offer before 11:30
A.M. (London time) on the date on which notice of such election is to
be given to the Euro-Agent by the other Banks.
(iii) The Company shall, in turn, before 4:00 P.M. (London time)
three Business Days before the date of such proposed B Borrowing
either:
(x) cancel such B Borrowing by giving the Euro-Agent notice
to that effect, or
(y) accept (on behalf of the applicable Borrower), subject
to SECTION 2.03(e), one or more of the offers made by any Bank or
Banks pursuant to PARAGRAPH (ii) above, in its sole discretion,
- 23 -
<PAGE>
by giving notice to the Euro-Agent of the amount of each B Advance
(which amount shall be equal to or greater than the minimum amount,
and equal to or less than the maximum amount, notified to the Company
by the Euro-Agent on behalf of such Bank for such B Advance pursuant
to PARAGRAPH (ii) above) to be made by each Bank as part of such B
Borrowing, and reject any remaining offers made by Banks pursuant to
PARAGRAPH (ii) above by giving the Euro-Agent notice to that effect.
(iv) If the Company notifies the Euro-Agent that such B
Borrowing is cancelled pursuant to PARAGRAPH (iii)(x) above, the Euro-
Agent shall give prompt notice thereof to the Banks and such B
Borrowing shall not be made.
(v) If the Company accepts (on behalf of the applicable
Borrower) one or more of the offers made by any Bank or Banks pursuant
to PARAGRAPH (iii)(y) above, the Euro-Agent shall in turn promptly
notify (A) each Bank that has made an offer as described in paragraph
(ii) above of the Borrower, Alternative Currency, date and aggregate
amount of such B Borrowing and whether or not any offer or offers made
by such Bank pursuant to paragraph (ii) above have been accepted by
the Company, (B) each Bank that is to make a B Advance as part of such
B Borrowing, of the amount of each B Advance to be made by such Bank
as part of such B Borrowing, and (C) each Bank that is to make a B
Advance as part of such B Borrowing, upon receipt, that the Euro-Agent
has received forms of documents appearing to fulfill the applicable
conditions set forth in ARTICLE III. Each Bank that is to make a B
Advance as part of such B Borrowing shall, before 12:00 noon (London
time) on the date of such B Borrowing specified in the notice received
from the Euro-Agent pursuant to clause (A) of the preceding sentence
or any later time when such Bank shall have received notice from the
Euro-Agent pursuant to clause (C) of the preceding sentence, make
available for the account of its Applicable Lending Office to the
Euro-Agent at the Payment Office for the applicable Alternative
Currency such Bank's portion of such B Borrowing, in same day funds.
Upon fulfillment of the applicable conditions set forth in ARTICLE III
and after receipt by the Euro-Agent of such funds, the Euro-Agent will
make such funds available to the applicable Borrower at the Euro-
Agent's aforesaid address. Promptly after each B Borrowing the Euro-
Agent will notify each Bank of the Borrower, Alternative Currency and
amount of the B Borrowing, the
- 24 -
<PAGE>
consequent B Reduction and the dates upon which such B Reduction commenced
and will terminate.
(d) Each B Borrowing shall, (i) in the case of a B Borrowing to be
denominated in Dollars, be in an aggregate amount not less than $10,000,000 or
an integral multiple of $1,000,000 in excess thereof (ii) in the case of a B
Borrowing to be denominated in an Alternative Currency, be in such minimum
amount as shall be advised by the Euro-Agent as being appropriate in light of
the prevailing market conditions and conventions at the time notice is given
pursuant to SECTION 2.03(c)(i), and, following the making of each B Borrowing,
the Borrowers shall be in compliance with the limitation set forth in the
proviso to the first sentence of SUBSECTION (a) above.
(e) Each acceptance by the Company pursuant to SECTION
2.03(b)(iii)(y) or SECTION 2.03(c)(iii)(y) of the offers made in response to a
Notice of B Borrowing shall be treated as an acceptance of such offers in
ascending order of the rates or margins, as applicable, at which the same were
made but if, as a result thereof, two or more offers at the same such rate or
margin would be partially accepted, then the amounts of the B Advances in
respect of which such offers are accepted shall be treated as being the amounts
which bear the same proportion to one another as the respective amounts of the B
Advances so offered bear to one another but, in each case, rounded as the Euro-
Agent may consider necessary to ensure that the amount of each such B Advance is
$500,000 (or, if the currency in which such B Advance is denominated is an
Alternative Currency, such comparable and convenient multiple thereof as the
Euro-Agent shall consider appropriate for the purpose) or an integral multiple
thereof.
(f) Within the limits and on the conditions set forth in this SECTION
2.03, each Borrower may from time to time borrow under this SECTION 2.03, repay
pursuant to SUBSECTION (g) below, and reborrow under this SECTION 2.03.
(g) Each Borrower shall repay to the Agent for the account of each
Bank which has made a B Advance to it or (if different) for the account of the
holder of the applicable B Note, on the maturity date of each B Advance (such
maturity date being that specified by the Company for repayment of such B
Advance in the related Notice of B Borrowing and provided in the B Note
evidencing such B Advance), the then unpaid principal amount of such B Advance.
No Borrower shall have any right to prepay any principal amount of any B Advance
unless, and then only on the terms, specified by the Company for such B Advance
in the related Notice of B Borrowing and set forth in the B Note evidencing such
B Advance.
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<PAGE>
(h) Each Borrower shall pay interest on the unpaid principal amount
of each B Advance made to it, from the date of such B Advance to the date the
principal amount of such B Advance is repaid in full, at the rate of interest
for such B Advance specified by the Bank making such B Advance in the related
notice submitted by such Bank pursuant to SECTION 2.03(b)(ii) or SECTION
2.03(c)(ii), as applicable, payable on the interest payment date or dates
specified by the Company for such B Advance in such Notice of B Borrowing, in
each case as provided in the B Note evidencing such B Advance. In the event the
term of any B Advance shall be longer than three months, interest thereon shall
be payable not less frequently than once each three-month period during such
term.
(i) The indebtedness of each Borrower resulting from each B Advance
made to it shall be evidenced by a separate B Note of such Borrower payable to
the order of the Bank making such B Advance.
SECTION 2.04. FEES. (a) FACILITY FEE. The Company agrees to pay
each Bank a facility fee at the respective rate per annum set forth below on
such Bank's average daily Commitment (irrespective of usage and without giving
effect to any B Reduction) from the date hereof until the Termination Date,
payable on the last day of each March, June, September and December during the
term of such Bank's Commitment, commencing December 31, 1993, and on the
Termination Date. The facility fee in respect of any period shall be determined
on the basis of the Credit Ratings in effect during such period, in accordance
with the table set forth below. The rate per annum at which such facility fee
is calculated shall change when and as any Credit Rating changes.
- 26 -
<PAGE>
<TABLE>
<CAPTION>
CREDIT RATING FACILITY FEE
------------- ------------
(Rate per annum)
<S> <C>
A or better (S&P) AND 0.09%
A2 or better (Moody's)
Below A (S&P) or A2 (Moody's)
but
A- or better (S&P) OR 0.11%
A3 or better (Moody's)
Below A- (S&P) and A3 (Moody's)
but 0.125%
BBB+ or better (S&P) AND
Baa1 or better (Moody's)
Below BBB+ (S&P) or Baa1 (Moody's)
but 0.15%
BBB or better (S&P) AND
Baa2 or better (Moody's)
Below BBB (S&P) or Baa2 (Moody's) 0.25%
</TABLE>
If, during any period, the Company shall not have Credit Ratings from both S&P
and Moody's, the Credit Rating of the Company for purposes of this SECTION
2.04(a) shall be deemed to be below BBB (S&P) and below Baa2 (Moody's) during
such period.
(b) AGENCY FEE. The Company agrees to pay to the Agent and the Euro-
Agent those fees as are described in that certain letter agreement dated January
1, 1995 (as the same may from time to time be amended, supplemented, restated or
otherwise modified), when and as the same shall become due and payable by the
Company as provided therein.
SECTION 2.05. REDUCTION OF THE COMMITMENTS. The Company shall have
the right, upon at least five Business Days' notice to the Agent, to terminate
in whole or reduce ratably in part the unused portions of the respective
Commitments of the Banks; PROVIDED, that the aggregate amount of the Commitments
of the Banks shall not be reduced to an amount which is less than the aggregate
principal amount of the B Advances then outstanding; and PROVIDED, FURTHER, that
each partial reduction shall be in the aggregate amount of $10,000,000 or an
integral multiple of $5,000,000 in excess thereof.
SECTION 2.06. REPAYMENT OF A ADVANCES. Each Borrower shall repay the
principal amount of each Eurocurrency Advance made to it by each Bank on the
last day of the Interest Period for such Eurocurrency Advance. Except as
otherwise provided in
- 27 -
<PAGE>
SECTION 2.12, each Borrower shall repay on the Termination Date the principal
amount of each Base Rate Advance made to it.
SECTION 2.07. INTEREST ON A ADVANCES. Each Borrower shall pay
interest on the unpaid principal amount of each A Advance made by each Bank to
such Borrower from the date of such A Advance until such principal amount shall
be paid in full, at the following rates per annum:
(a) BASE RATE ADVANCES. If such A Advance is a Base Rate
Advance, a rate per annum equal at all times to the Base Rate in
effect from time to time, payable monthly on the tenth day of each
month and on the date such Base Rate Advance shall be paid in full;
PROVIDED, that any amount of principal which is not paid when due
(whether at stated maturity, by acceleration or otherwise) shall bear
interest, from the date on which such amount is due until such amount
is paid in full, payable on demand, at a rate per annum equal at all
times to 2% per annum above the Base Rate in effect from time to time.
The Agent shall provide telephonic notice to the Company (which in
turn shall advise the applicable Borrower) of the amount of interest
due and payable on Base Rate Advances by a date not later than the
date such payment is due; PROVIDED, HOWEVER, that the Agent's failure
to give such notice shall not discharge the applicable Borrower from
the payment of interest but shall only delay the due date of such
interest until such telephonic notice is given.
(b) EUROCURRENCY ADVANCES. If such A Advance is a Eurocurrency
Advance, a rate per annum equal at all times during the Interest
Period for such A Advance to the sum of the Eurocurrency Rate for such
Interest Period plus the Applicable Eurocurrency Margin, payable on
the last day of such Interest Period and, if such Interest Period has
a duration of more than three months, on each day which occurs during
such Interest Period every three months from the first day of such
Interest Period; PROVIDED that any amount of principal which is not
paid when due (whether at stated maturity, by acceleration or
otherwise) shall bear interest, from the date on which such amount is
due until such amount is paid in full, payable on demand, at a rate
per annum equal at all times to 2% per annum above (x) if the
originally scheduled Interest Period shall then be in effect, the sum
of the Eurocurrency Rate plus the Applicable Eurocurrency Margin then
in effect with respect to such A Advance, and (y) in all other cases,
the Base Rate in effect from time to time. "APPLICABLE EUROCURRENCY
MARGIN" means, in respect of any Eurocur-
- 28 -
<PAGE>
rency Advance, a rate per annum determined as of the first day of the
Interest Period for such Eurocurrency Advance in reference to the table set
forth below on the basis of the Credit Ratings and the Utilization Factor
at such time. "UTILIZATION FACTOR" means, in respect of any Eurocurrency
Advance, the percentage amount that the aggregate outstanding principal
amount of Advances as of the date such Eurocurrency Advance is made (after
giving effect to the making of such Eurocurrency Advance and all other
Advances to be made on such day and after giving effect to all payments and
prepayments of Advances occurring on such day) bears to the aggregate
Commitments (without regard to any B Reductions) on such day.
<TABLE>
<CAPTION>
Applicable Eurocurrency Margin
(Rate per annum)
------------------------------------------------------------
Credit Rating Utilization Factor
------------- -----------------------
Not Greater Greater
than 50% than 50%
------------------------
<S> <C> <C>
A or better (S&P) AND 0.160% 0.160%
A2 or better (Moody's)
Below A (S&P) or A2 (Moody's)
but
A- or better (S&P) OR 0.190% 0.240%
A3 or better (Moody's)
Below A- (S&P) and A3 (Moody's) 0.275% 0.325%
but
BBB+ or better (S&P) AND
Baa1 or better (Moody's)
Below BBB+ (S&P) or Baa1 (Moody's) 0.300% 0.350%
but
BBB or better (S&P) AND
Baa2 or better (Moody's)
Below BBB (S&P) or 0.500% 0.600%
Baa2 (Moody's)
</TABLE>
If, on the first day of the Interest Period for any Eurocurrency Advance, the
Company shall not have Credit Ratings from both S&P and Moody's, the Credit
Ratings of the Company, for purposes of this SECTION 2.07(b), shall be deemed to
be below BBB (S&P) and below Baa2 (Moody's) during such period.
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SECTION 2.08. ADDITIONAL INTEREST ON EUROCURRENCY ADVANCES. Each
Borrower shall pay to each Bank, so long as such Bank shall be required under
regulations of the Board of Governors of the Federal Reserve System to maintain
reserves with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities, additional interest on the unpaid principal amount of
each Eurocurrency Advance made by such Bank to such Borrower, from the date of
such A Advance until such principal amount is paid in full, at an interest rate
per annum equal at all times to the remainder obtained by subtracting (i) the
Eurocurrency Rate for the Interest Period for such A Advance from (ii) the rate
obtained by dividing such Eurocurrency Rate by a percentage equal to 100% minus
the Eurocurrency Rate Reserve Percentage of such Bank for such Interest Period,
payable on each date on which interest is payable on such A Advance. Such
additional interest so notified to the Company (which in turn shall advise the
applicable Borrower) by any Bank shall be payable to the Agent (or, in the case
of any Eurocurrency Advance denominated in an Alternative Currency, the Euro-
Agent) for the account of such Bank on the dates specified for payment of
interest for such Advance in SECTION 2.07.
SECTION 2.09. INTEREST RATE DETERMINATION. Each Reference Bank
agrees to furnish to the Agent (in the case of Eurocurrency Advances denominated
in Dollars) and the Euro-Agent (in the case of Eurocurrency Advances denominated
in any Alternative Currency) timely information for the purpose of determining
each Eurocurrency Rate. The Agent and Euro-Agent, as applicable, shall give
prompt notice to the Company (which in turn shall advise the applicable
Borrower) and the Banks of the applicable interest rate determined by the Agent
for purposes of SECTION 2.07(a) or (b), and the applicable rate, if any,
furnished by each Reference Bank for the purpose of determining the applicable
interest rate under SECTION 2.07(b).
SECTION 2.10. PREPAYMENTS. Subject to SECTION 9.04(b) hereof, a
Borrower may (i) following notice given to the Agent by the Company (on behalf
of such Borrower) not later than 11:00 A.M. (New York City time) on the proposed
date of prepayment, such notice specifying the applicable Borrower, the proposed
date and aggregate principal amount of the prepayment, and if such notice is
given such Borrower shall, prepay the outstanding principal amounts of the Base
Rate Advances comprising part of the same A Borrowing in whole or ratably in
part, together with accrued interest to the date of such prepayment on the
principal amount prepaid and (ii) following notice given to the Agent (or, in
the case of Eurocurrency Advances denominated in any Alternative Currency, the
Euro-Agent) by the Company (on behalf of such Borrower) not later than 11:00
A.M. (London time) three Business Days prior to the proposed date of prepayment,
such notice specifying the applicable Borrower, the proposed date of
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the prepayment, and if such notice is given such Borrower shall, prepay the
outstanding principal amounts of the Eurocurrency Advances comprising an A
Borrowing in whole (and not in part), together with accrued interest to the date
of such prepayment on the principal amount prepaid. In the case of an A
Borrowing comprised of Base Rate Advances, each partial prepayment shall be in
an aggregate principal amount not less than $1,000,000.
SECTION 2.11. INCREASED COSTS AND REDUCED RETURN. (a) If, due to
either (i) the introduction of or any change (other than any change by way of
imposition or increase of reserve requirements, in the case of Eurocurrency
Advances, included in the Eurocurrency Rate Reserve Percentage) in or in the
interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law), there shall be any increase after the
date hereof in the cost to any Bank of agreeing to make or making, funding or
maintaining Eurocurrency Advances, by an amount deemed by such Bank to be
material, then the Company shall from time to time, within 15 days after demand
by such Bank, accompanied by the certificate required therefor under SECTION
2.11(c) (with a copy of such demand and such certificate to the Agent), pay to
the Agent for the account of such Bank additional amounts sufficient to
compensate such Bank for such increased cost.
(b) If any Bank shall have determined that the adoption of any
applicable law, rule or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its
Applicable Lending Office or any corporation controlling such Bank) with any
request or directive regarding capital adequacy (whether or not having the force
of law) of any such authority, central bank or comparable agency, has or would
have the effect after the date hereof of reducing the rate of return on such
Bank's capital or the capital of any corporation controlling such Bank as a
consequence of such Bank's obligation hereunder to a level below that which such
Bank could have achieved but for such adoption, change or compliance by an
amount deemed by such Bank to be material, then the Company shall, from time to
time, within 15 days after demand by such Bank, accompanied by the certificate
required therefor under SECTION 2.11(c) (with a copy of such demand and such
certificate to the Agent), pay to the Agent for the account of such Bank such
additional amount or amounts as will compensate such Bank or such controlling
corporation for such reduction.
(c) Each Bank will promptly notify the Company and the Agent of any
event of which it has knowledge, occurring after the
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date hereof, which will entitle such Bank to compensation pursuant to this
Section and will designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the reasonable judgment of such Bank, be otherwise
disadvantageous to such Bank. In determining such amount, such Bank may use any
reasonable averaging and attribution methods. A certificate of any Bank
claiming compensation under this Section and setting forth in reasonable detail
the additional amount or amounts to be paid to it hereunder and the basis for
the calculation thereof shall be conclusive in the absence of manifest error.
SECTION 2.12. ILLEGALITY. (a) In the event that any Bank shall have
determined (which determination shall, absent manifest error, be final,
conclusive and binding upon all parties) at any time that the making or
continuance of any of its Eurocurrency Advances in Dollars or in any Alternative
Currency has become unlawful because of the introduction of or any change in or
in the interpretation of any law or regulation or because of the assertion of
unlawfulness by any central bank or other governmental authority, then, in any
such event, such Bank shall give prompt notice (by telephone confirmed in
writing) to the Company and to the Agent of such determination (which notice the
Agent shall promptly transmit to the other Banks).
(b) Upon the giving of the notice to the Company referred to in
SUBSECTION (a) above, if the affected Eurocurrency Advances are then
outstanding, the Company shall (or shall cause the affected Borrower), upon at
least one Business Day's written notice to the Agent (and, if the affected
Eurocurrency Advances are denominated in any Alternative Currency, the Euro-
Agent) and the affected Bank, or if permitted by applicable law no later than
the date permitted thereby, in the Company's sole discretion, either (i) prepay
the principal amount of all outstanding Eurocurrency Advances of such Bank to
which such notice related, together with accrued interest thereon to the date of
payment or (ii) convert each such Eurocurrency Advance into a Base Rate Advance,
and, in each case be obligated to reimburse the Banks in respect thereof
pursuant to SECTION 9.04(b) hereof. If more than one Bank gives notice pursuant
to SECTION 2.12(a) at any time, then all outstanding Eurocurrency Advances of
such Banks must be treated the same by the applicable Borrower pursuant to this
SECTION 2.12(b). Any Base Rate Advance arising by reason of this SECTION
2.12(b) shall have an Interest Period assigned to it that ends on the date that
the Eurocurrency Advance for which it shall have been substituted would have
expired, and the principal thereof and interest thereon shall be payable on the
date that principal and interest would otherwise have been payable on such
Eurocurrency Advance (whether on the last day of such Interest Period or on any
earlier date that the
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other A Advances comprising a part of the related A Borrowing shall be prepaid
in accordance with SECTION 2.10). Such Base Rate Advance may not be prepaid at
any time prior to the date that the Eurocurrency Advances comprising a part of
such A Borrowing shall be prepaid.
SECTION 2.13. PAYMENTS AND COMPUTATIONS. (a) The Borrowers shall
make each payment hereunder and under the Notes (except with respect to
principal of, interest on, and other amounts relating to Advances denominated in
an Alternative Currency) not later than 11:00 A.M. (New York City time) on the
day when due in Dollars to the Agent in same day funds by deposit of such funds
to the Agent's account maintained at the Payment Office for Dollars in New York
City. The Borrowers shall make each payment hereunder and under the Notes with
respect to principal of, interest on, and other amounts relating to Advances
denominated in an Alternative Currency not later than 11:00 A.M. (London time)
on the day when due in such Alternative Currency to the Euro-Agent in same day
funds by deposit of such funds to the Euro-Agent's account maintained at the
Payment Office for such Alternative Currency. The Agent or Euro-Agent, as
applicable, will promptly thereafter cause to be distributed like funds relating
to the payment of principal or interest or fees ratably (other than amounts
payable pursuant to SECTION 2.03, 2.08, 2.11 or 2.16) to the Banks for the
account of their respective Applicable Lending Offices, and like funds relating
to the payment of any other amount payable to any Bank to such Bank for the
account of its Applicable Lending Office, in each case to be applied in
accordance with the terms of this Agreement.
(b) Each Borrower hereby authorizes each Bank, if and to the extent
payment owed to such Bank by such Borrower is not made when due hereunder or
under the Note held by such Bank, to charge from time to time against any or all
of such Borrower's accounts with such Bank any amount so due. Each Bank agrees
promptly to notify the Company after any such charge, provided that the failure
to give such notice shall not affect the validity of such charge.
(c) All computations of interest based on the Base Rate shall be made
by the Agent on the basis of a year of 365 or 366 days, as the case may be, and
all computations of interest based on the Eurocurrency Rate or the Federal Funds
Rate and of fees shall be made by the Agent or Euro-Agent, as applicable, and
all computations of interest pursuant to SECTION 2.08 shall be made by a Bank,
on the basis of a year of 360 days, in each case for the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such interest or commitment fees are payable. Each determination by the
Agent or Euro-Agent (or, in the case of SECTION 2.08, by a
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Bank) of an interest rate hereunder shall be conclusive and binding for all
purposes, absent manifest error.
(d) Whenever any payment hereunder or under the Notes shall be stated
to be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such cases be
included in the computation of payment of interest or commitment fee, as the
case may be; PROVIDED, HOWEVER, if such extension would cause payment of
interest on or principal of Eurocurrency Advances to be made in the next
following calendar month, such payment shall be made on the next preceding
Business Day.
(e) Unless the Agent or Euro-Agent shall have received notice from a
Borrower prior to the date on which any payment is due from such Borrower to the
Banks hereunder that such Borrower will not make such payment in full, the Agent
or Euro-Agent, as applicable, may assume that such Borrower has made such
payment in full to it on such date and it may, in reliance upon such assumption,
cause (but shall not be required to cause) to be distributed to each Bank on
such due date an amount equal to the amount then due such Bank. If and to the
extent such Borrower shall not have so made such payment in full to the Agent or
Euro-Agent, as applicable, each Bank shall repay to the Agent or Euro-Agent, as
applicable, forthwith on demand such amount distributed to such Bank together
with interest thereon, for each day from the date such amount is distributed to
such Bank until the date such Bank repays such amount to the Agent or Euro-
Agent, as applicable, at the Federal Funds Rate.
SECTION 2.14. SHARING OF PAYMENTS, ETC. If any Bank shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of the A Advances made by it (other than
pursuant to SECTION 2.08, 2.11 or 2.16) in excess of its ratable share of
payments on account of the A Advances obtained by all the Banks, such Bank shall
forthwith purchase from the other Banks such participations in the A Advances
made by them as shall be necessary to cause such purchasing Bank to share the
excess payment ratably with each of them, PROVIDED, HOWEVER, that if all or any
portion of such excess payment is thereafter recovered from such purchasing
Bank, such purchase from each Bank shall be rescinded and such Bank shall repay
to the purchasing Bank the purchase price to the extent of such recovery
together with an amount equal to such Bank's ratable share (according to the
proportion of (i) the amount of such Bank's required repayment to (ii) the total
amount so recovered from the purchasing Bank) of any interest or other amount
paid or payable by the purchasing Bank in respect of the total amount so
recovered. Each Borrower agrees that any Bank so purchasing a participation
from another Bank pursuant to this SECTION 2.14 may, to the fullest extent
permitted by law,
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exercise all its rights of payment (including the right of set-off) with respect
to such participation as fully as if such Bank were the direct creditor of such
Borrower in the amount of such participation.
SECTION 2.15. CURRENCY EQUIVALENTS. For purposes of determining
compliance with SECTION 2.01 or 2.03(a) at any time, and for purposes of
determining the "Utilization Factor" at any time under SECTION 2.07(b), the
equivalent in Dollars in respect of any Advance denominated (or proposed to be
denominated) in an Alternative Currency shall be determined in accordance with
SECTION 2.02(a) or SECTION 2.03(c)(i) by the Euro-Agent, in consultation with
the Company, immediately prior to the issuance by the Company of the Notice of
Borrowing requesting such Advances. Any equivalent determined in accordance
with SECTION 2.02(a), SECTION 2.03(c)(i) or this SECTION 2.15 shall be deemed to
remain in effect at all times during (and until the last day of) the Interest
Period in respect of the Advances comprising the applicable Borrowing,
notwithstanding any fluctuation in exchange rates occurring prior to the last
day of such Interest Period.
SECTION 2.16. TAXES. (a) Subject to SECTION 2.16(f), any and all
payments by each Borrower hereunder or under the Notes shall be made, in
accordance with SECTION 2.13, free and clear of and without deduction for any
and all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, EXCLUDING, in the case
of each Bank, the Agent and the Euro-Agent, taxes imposed on its income, and
franchise taxes imposed on it, by the jurisdiction under the laws of which such
Bank, the Agent or the Euro-Agent (as the case may be) is organized or any
political subdivision thereof and, in the case of each Bank, taxes imposed on
its income, and franchise taxes imposed on it, by the jurisdiction of such
Bank's Applicable Lending Office or any political subdivision thereof (all such
non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "TAXES"). Subject to SECTION
2.16(f), if any Borrower shall be required by law to deduct any Taxes from or in
respect of any sum payable hereunder or under any Note to any Bank, the Agent or
the Euro-Agent, (i) the sum payable by such Borrower shall be increased as may
be necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this SECTION 2.16(a)) such Bank, the
Agent or the Euro-Agent (as the case may be) receives an amount equal to the sum
it would have received had no such deductions been made, (ii) such Borrower
shall make such deductions and (iii) such Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable law.
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(b) In addition, the Borrowers jointly and severally agree to pay any
present or future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies which arise from any payment made hereunder or
under the Notes or from the execution, delivery or registration of, or otherwise
with respect to, this Agreement or the Notes (hereinafter referred to as "OTHER
TAXES"). The Agent and Euro-Agent may demand payment of, and seek recourse on,
any Other Taxes from any Borrower, without any requirement that the Agent or the
Euro-Agent allocate the reimbursement obligation for such Other Taxes among the
Borrowers.
(c) Each Borrower will indemnify each Bank, the Agent and the Euro-
Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this SECTION 2.16) paid by such Bank, the Agent or the Euro-Agent
(as the case may be) and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted. This indemnification shall
be made within 30 days from the date such Bank, the Agent or the Euro-Agent (as
the case may be) makes written demand therefor.
(d) The Agent and Euro-Agent may, from time to time, request that the
Company furnish (and the Company shall, promptly following any such request,
furnish) to the Agent and the Euro-Agent the originals or certified copies of
receipts evidencing the payment of Taxes by and on behalf of the Borrowers or,
if no Taxes are payable in respect of any payment hereunder or under the Notes,
a certificate from each appropriate taxing authority, or an opinion of counsel
acceptable to the Agent, in either case stating that such payment is exempt from
or not subject to Taxes.
(e) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrowers contained in
this SECTION 2.16 shall survive the payment in full of principal and interest
hereunder and under the Notes.
(f) Promptly following the date hereof (or, in the case of any
assignee party to an Assignment and Acceptance, on the effective date of its
becoming a "Bank" hereunder), each Bank organized under the laws of a
jurisdiction outside the United States shall provide the Agent with the forms
prescribed by the Internal Revenue Service of the United States certifying such
Bank's exemption from United States withholding taxes with respect to all
payments to be made to such Bank hereunder and under any of the Notes, and each
such Bank shall thereafter provide the Agent with such supplements and
amendments thereto and such additional forms as may from time to time be
required by
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applicable law. If a Bank that is organized under the laws of a jurisdiction
outside the United States shall fail to deliver, or improperly delivers, the
forms described in this SECTION 2.16(f), SECTION 2.16(a) shall not apply with
respect to any payments made to such Bank under this Agreement during the period
that such failure or deficiency shall continue, and the Borrowers, the Agent or
the Euro-Agent shall be permitted to withhold United States federal, state and
local income taxes from any payments made under this Agreement at the applicable
statutory rate.
SECTION 2.17. SUBSTITUTION OF BANKS. In the event that (x) any one
or more Banks, pursuant to SECTION 2.11 hereof, incurs any increased costs,
receives a reduced payment or is required to make any payment for which any such
Bank demands compensation pursuant to such Section, which compensation increases
the effective lending rate of such Bank with respect to its share of the A
Advances to greater than 25 basis points in excess of the effective lending rate
of the other Banks, and such Bank has not mitigated such increased costs,
reduced payment or additional payment within 60 days after receipt by such Bank
from the Company of a written notice that such Bank's effective lending rate has
so exceeded the effective lending rate of the other Banks, or (y) any one or
more Banks have determined pursuant to SECTION 2.02(c)(i), 2.02(c)(iv) or
2.12(a) hereof that it may not make or maintain all or certain of its
Eurocurrency Advances at such time (and the other Banks shall continue to be
able to make or maintain their corresponding Eurocurrency Advances at such time)
and the inability of such Bank to make or maintain such Eurocurrency Advances
continues for 60 or more days after the receipt by such Bank from the Company of
written notice of such inability and that the Company's request that such Bank
alleviate such inability, then and in any such event, the Company may substitute
another financial institution for such Bank which is acceptable to the Agent to
assume the Commitment of such Bank and to purchase the A Note of such Bank
hereunder, without recourse to or warranty (other than as to unencumbered
ownership) by, or expense to, such Bank for a purchase price equal to the
outstanding principal amount of the A Advances then payable to such Bank plus
any accrued but unpaid interest and accrued but unpaid fees with respect
thereto. Such purchase shall be effected by execution and delivery by such Bank
and its replacement of an Assignment and Acceptance, and shall otherwise be made
in the manner described in SECTION 9.08. Upon such purchase, such Bank shall no
longer be a party hereto or have any rights or benefits hereunder (except for
rights or benefits that such Bank would retain hereunder upon termination of
this Agreement) and the replacement Bank shall succeed to the rights and
benefits, and shall assume the obligations, of such Bank hereunder and under
such A Note.
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ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. CONDITIONS PRECEDENT TO INITIAL ADVANCES. The
obligation of each Bank to make its initial Advance on the occasion of the
initial Borrowing by each Borrower (including each Borrowing Subsidiary) is
subject to the conditions precedent that (i) there shall be no outstanding
borrowings under the Credit Agreement dated as of January 15, 1988, as amended,
among the Company, Citibank, N.A., as Agent and the banks named therein, or the
Facilities Agreement dated December 21, 1990, among the Company, Morgan Guaranty
Trust Company of New York, as Facility Agent and Tender Agent, J.P. Morgan
Securities Ltd., as Arranger, and the banks named therein (collectively, the
"CREDIT AGREEMENTS"), and the Company shall have terminated in full the
commitments of the banks parties to the Credit Agreements, (ii) all commitment,
facility, agency and administrative fees provided for under the terms of the
Credit Agreements, accrued to the date hereof, shall have been paid by the
Company and (iii) the Agent shall have received on or before the day of such
initial Borrowing the following, each dated such day, in form and substance
satisfactory to the Agent and (except for the Notes) in sufficient copies for
each Bank:
(a) The A Notes of such Borrower payable to the order of the
Banks, respectively.
(b) For the initial Borrowing by each Borrowing Subsidiary, an
Election to Participate executed by such Borrowing Subsidiary and by
the Company.
(c) Certified copies of (i) for the initial Borrowing by the
Company, the resolutions of the Board of Directors of the Company
approving this Agreement and the Notes of the Company; (ii) for the
initial Borrowing by each Borrowing Subsidiary, the resolutions or
other authorizing action of the Board of Directors or other governing
body of such Borrowing Subsidiary approving its Election to
Participate, this Agreement and the Notes of such Borrowing Subsidiary
and the resolutions of the Board of Directors of the Company approving
this Agreement and the Election to Participate of such Borrowing
Subsidiary; and (iii) for the initial Borrowing by each Borrower, all
documents evidencing other necessary corporate or other authorizing
action and governmental approvals, if any, with respect to this
Agreement and the Notes of such Borrower.
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(d) Signed copies of (i) a certificate of the Secretary or an
Assistant Secretary or other appropriate officer or representative of
such Borrower certifying the names and true signatures of the officers
or other representatives of such Borrower authorized to sign this
Agreement (if the Borrower is the Company), such Borrower's Election
to Participate (if the Borrower is a Borrowing Subsidiary) and the
Notes of such Borrower and the other documents or certificates to be
delivered by such Borrower pursuant to this Agreement and (ii) for the
initial Borrowing by each Borrower other than the Company, a
certificate of the Secretary or an Assistant Secretary or other
appropriate officer of the Company certifying the names and true
signatures of the officers of the Company authorized to sign this
Agreement and such Borrower's Election to Participate. The Agent may
conclusively rely on each such certificate of such Borrower or of the
Company until the Agent shall receive a further certificate of the
Secretary or an Assistant Secretary or other representative of such
Borrower or of the Company, as the case may be, cancelling or amending
the prior certificate of such Borrower or of the Company, as the case
may be, and submitting the signatures of the officers or other
representatives named in such further certificate.
(e) Favorable opinions of (i) for the initial Borrowing by the
Company, the General Counsel of the Company in substantially the form
of EXHIBIT E hereto and special counsel for the Company in
substantially the form of EXHIBIT F hereto, (ii) for the initial
Borrowing by each Borrowing Subsidiary, counsel for such Borrowing
Subsidiary in substantially the form of EXHIBIT G hereto, the General
Counsel of the Company in substantially the form of EXHIBIT H hereto
and special counsel for the Company in substantially the form of
EXHIBIT I hereto, and (iii) for any initial Borrowing, counsel for the
Company or the applicable Borrowing Subsidiary as to such other
matters as any Bank through the Agent may reasonably request. Such
counsel shall be satisfactory to the Agent.
(f) A favorable opinion of Sidley & Austin, counsel for the
Agent and the Euro-Agent, in substantially the form of EXHIBIT J
hereto.
SECTION 3.02. CONDITIONS PRECEDENT TO EACH A BORROWING. The
obligation of each Bank to make an A Advance on the occasion of each A Borrowing
(including the initial A Borrowing) by each Borrower (including each Borrowing
Subsidiary)
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shall be subject to the further conditions precedent that on the date of such A
Borrowing (a) the following statements shall be true and the Agent shall have
received for the account of such Bank a certificate signed by a duly authorized
officer of the Company as follows:
(i) The representations and warranties contained in subsections (a),
(b), (c) and (d) of SECTION 4.01 and, if such A Borrowing is by a Borrowing
Subsidiary, SECTION 4.02 (as to such Borrowing Subsidiary) are correct in
all material respects on and as of the date of such A Borrowing, before and
after giving effect to such A Borrowing and to the application of the
proceeds therefrom, as though made on and as of such date, and
(ii) No event has occurred and is continuing, or would result from
such A Borrowing or from the application of the proceeds therefrom, which
constitutes an Event of Default;
and (b) the Agent shall have received such other approvals, opinions or
documents as any bank through the Agent may reasonably request for the purpose
of verifying compliance by the Company or any Borrower with the terms of this
Agreement or with applicable law.
SECTION 3.03. CONDITIONS PRECEDENT TO CERTAIN BORROWINGS. The
obligation of each Bank to make that portion of an A Advance on the occasion of
any A Borrowing which would increase the aggregate outstanding amount in any
currency of A Advances owing to such Bank from all Borrowers over the aggregate
amount of A Advances owing to such Bank in such currency outstanding immediately
prior to the making of such A Advance shall be subject to the further conditions
precedent that on the date of such A Borrowing (i) the representations and
warranties contained in subsections (e), (f), (g), (h), (i), (k), (l), (m) and
(n) of SECTION 4.01 are correct in all material respects on and as of the date
of such A Borrowing, before and after giving effect to such A Borrowing and to
the application of the proceeds therefrom, as though made on and as of such
date; (ii) no event has occurred and is continuing, or would result from such A
Borrowing or from the application of the proceeds therefrom, which would
constitute an Event of Default but for the requirement that notice be given or
time elapse or both; and (iii) the certificate furnished pursuant to SECTION
3.02 shall include statements to the effect of clauses (i) and (ii) above.
SECTION 3.04. CONDITIONS PRECEDENT TO EACH B BORROWING. The
obligation of each Bank which is to make a B Advance on the occasion of a B
Borrowing (including the initial B Borrowing) to make such B Advance as part of
such B Borrowing is subject to the conditions precedent that (i) at least three
Business Days
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before the date of such B Borrowing, the Agent shall have received the Notice of
B Borrowing with respect thereto, (ii) at least one Business Day before the date
of such B Borrowing, the Agent shall have received the written confirmatory
notice of such B Borrowing to be given by the Company pursuant to SECTION
2.03(b)(iii) or SECTION 2.03(c)(iii), as applicable, (iii) on or before the date
of such B Borrowing but prior to such B Borrowing, the Agent shall have received
a B Note signed by the applicable Borrower payable to the order of such Bank for
each of the one or more B Advances to be made by such Bank as part of such B
Borrowing, in a principal amount equal to the principal amount of the B Advance
to be evidenced thereby and otherwise on such terms as were agreed to for such B
Advance in accordance with SECTION 2.03, and (iv) on the date of such B
Borrowing the following statements shall be true (and each of the giving of the
applicable Notice of B Borrowing and the acceptance by such Borrower of the
proceeds of such B Borrowing shall constitute a representation and warranty by
the Company that on the date of such B Borrowing such statements are true):
(a) the representations and warranties contained in SECTION 4.01
(other than SUBSECTION (j) thereof) and, if such B Borrowing is by a
Borrowing Subsidiary, SECTION 4.02 (as to such Borrowing Subsidiary) are
correct in all material respects on and as of the date of such B Borrowing,
before and after giving effect to such B Borrowing and to the application
of the proceeds therefrom, as though made on and as of such date, and
(b) No event has occurred and is continuing, or would result from
such B Borrowing or from the application of the proceeds therefrom, which
constitutes an Event of Default, or would constitute an Event of Default
but for the requirement that notice be given or time elapse or both.
ARTICLE IV
REPRESENTATION AND WARRANTIES
SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to the Banks and the Agent as follows:
(a) The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the jurisdiction indicated at the
beginning of this Agreement.
(b) The execution, delivery and performance by the Company of this
Agreement and its Notes are within the Company's corporate powers, have
been duly authorized by all necessary corporate action, and do not
contravene (i) the
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Company's restated certificate of incorporation or by-laws or (ii) law or
any contractual restriction binding on or affecting the Company.
(c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required
for the due execution, delivery and performance by the Company of this
Agreement or the Notes.
(d) This Agreement is, and the Company's Notes when delivered
hereunder will be, legal, valid and binding obligations of the Company
enforceable against the Company in accordance with their respective terms,
subject to any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and to
general principles of equity.
(e) The consolidated balance sheets of the Company and its
Consolidated Subsidiaries as of December 31, 1992, and the related
statements of income, cash flows and shareholders' equity of the Company
and its Consolidated Subsidiaries for the fiscal year then ended, copies of
which have been furnished to each Bank, fairly present the financial
condition of the Company and its Consolidated Subsidiaries as at such date
and the consolidated results of the operations of the Company and its
Consolidated Subsidiaries for the period ended on such date, all in
accordance with GAAP consistently applied.
(f) There are no pending actions, suits or proceedings against the
Company or any of its Subsidiaries before any court or arbitrator or any
governmental body, agency or official, in which there is (in the best
judgment of the Company) a reasonable possibility of an adverse decision
which would affect (i) the business, consolidated financial position or
consolidated results of operations of the Company and its Consolidated
Subsidiaries, to the extent that there is (in the best judgment of the
Company) a reasonable possibility that such decision would prevent the
Company from repaying its obligations in accordance with the terms of this
Agreement or, (ii) the legality, validity or enforceability of this
Agreement or any Note.
(g) United States Federal income tax returns of the Company and its
Subsidiaries have been examined and closed through the year ended December
31, 1987. The Company and its Subsidiaries have filed all United States
Federal income tax returns and all other material tax returns which are
required to be filed by them and have paid all taxes due pursuant to such
returns or pursuant to any assessment
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received by the Company or any of its Subsidiaries, except such taxes or
assessments, if any, as are being contested in good faith by appropriate
proceedings. The charges, accruals and reserves on the books of the
Company and its Subsidiaries in respect of taxes are, in the opinion of the
Company, adequate.
(h) Each of the Company's Significant Subsidiaries is a corporation
duly incorporated, validly existing and in good standing under the laws of
its jurisdiction of incorporation, and has all corporate powers and all
material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted.
(i) The sum of the Insufficiencies of any and all Plans with respect
to which a Termination Event has occurred and is still in existence (or, in
the case of a Plan with respect to which a Termination Event described in
clause (ii) of the definition of Termination Event has occurred, the
liability related thereto) does not exceed $25,000,000.
(j) Schedule B (Actuarial Information) to the 1992 annual report
(Form 5500 Series) with respect to each Plan, copies of which have been
filed with the Internal Revenue Service and furnished to the Agent, was
complete and accurate and fairly presented the funding status and financial
condition of such Plan as of the date of such Schedule B, and since such
date there has been no material adverse change in such funding status or
financial condition, considered in the aggregate, except for a decline in
the funded ratio of the Ecolab Pension Plan primarily attributable to a
decrease in the interest rate used to measure liabilities and a July 1,
1993 improvement in the Ecolab Pension Plan benefit formula.
(k) Neither the Company nor any of its ERISA Affiliates has been
notified by the sponsor of a Multiemployer Plan that it has incurred
Withdrawal Liability to such Multiemployer Plan in an amount which, when
aggregated with all other amounts required to be paid to Multiemployer
Plans in connection with Withdrawal Liabilities (determined as of the date
of such notification), is greater than $25,000,000 or which would require
payments greater than $5,000,000 per annum.
(l) Neither the Company nor any of its ERISA Affiliates has been
notified by the sponsor of a Multiemployer Plan that such Multiemployer
Plan is in reorganization or is being terminated, within the meaning of
Title IV of ERISA, if as a result of such reorganization or
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termination the aggregate annual contributions of the Company and its ERISA
Affiliates to all Multiemployer Plans which are then in reorganization or
being terminated have been or will be increased over the amounts
contributed to such Multiemployer Plans for the respective plan years most
recently ended by an amount exceeding $5,000,000 per annum.
(m) The Company and its Subsidiaries are in compliance in all
material respects with all environmental and hazardous waste laws, rules
and regulations, and neither the Company nor any of its Subsidiaries has
been cited by or is otherwise on any listing of any Federal, state or local
governmental agency or other authority responsible for or having
jurisdiction over hazardous waste disposal, where the failure to so comply
or being so cited or listed would (in the best judgment of the Company)
affect the business, consolidated financial position or consolidated
results of operations of the Company and its Subsidiaries, to the extent
that there is (in the best judgment of the Company) a reasonable
possibility that such non-compliance or being so cited or listed would
prevent the Company from repaying its obligations under this Agreement in
accordance with the terms hereof.
(n) There are no pending or, to the knowledge of the Company,
threatened actions, suits or proceedings against the Company or any of its
Subsidiaries before any court or arbitrator or other governmental agency or
authority arising out of or relating to hazardous waste disposal or
environmental compliance or asserting a claim for damages based upon the
use or other application of any products of the Company or any of its
Subsidiaries, in which there is (in the best judgment of the Company) a
reasonable possibility of an adverse decision which would affect the
business, consolidated financial position or consolidated results of
operations of the Company and its Consolidated Subsidiaries to the extent
that there is (in the best judgment of the Company) a reasonable
possibility that such decision would prevent the Company from repaying its
obligations under this Agreement in accordance with the terms hereof.
SECTION 4.02. REPRESENTATIONS AND WARRANTIES OF BORROWING
SUBSIDIARIES. Each Borrowing Subsidiary shall be deemed by the execution and
delivery of its Election to Participate to have represented and warranted as of
the date thereof that:
(a) It is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization.
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(b) The execution and delivery by it of its Election to Participate
and in its Notes and the performance by it of this Agreement and its Notes
are within its powers, have been duly authorized by all necessary action,
and do not contravene (i) its constituent documents or (ii) law or any
contractual restriction binding on or affecting such Borrowing Subsidiary.
(c) This Agreement constitutes a legal, valid and binding agreement
of such Borrowing Subsidiary, and its Notes, when executed and delivered in
accordance with this Agreement, will constitute legal, valid and binding
obligations of such Borrowing Subsidiary, enforceable against such
Borrowing Subsidiary in accordance with their respective terms, subject to
any applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and to general
principles of equity.
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.01. AFFIRMATIVE COVENANTS. So long as any Note shall
remain unpaid or any Bank shall have any Commitment hereunder, the Company will,
unless the Majority Banks shall otherwise consent in writing:
(a) COMPLIANCE WITH LAWS, ETC. Comply, and cause each of its
Subsidiaries to comply, in all material respects with all applicable
laws, rules, regulations and orders, such compliance to include,
without limitation, (i) paying before the same become delinquent all
taxes, assessments and governmental charges imposed upon it or upon
its property except to the extent contested in good faith, and (ii)
required capitalization of each Borrowing Subsidiary.
(b) REPORTING REQUIREMENTS. Furnish to the Banks:
(i) as soon as available and in any event within 60 days
after the end of each of the first three quarters of each fiscal
year of the Company, the consolidated balance sheet of the
Company and its Consolidated Subsidiaries as of the end of such
quarter and the consolidated statement of income and
shareholders' equity and the consolidated statement of cash flows
of the Company and its Consolidated Subsidiaries for the period
commencing at the end of the previous fiscal year
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and ending with the end of such quarter, certified by a designated
financial officer of the Company;
(ii) as soon as available and in any event within 120 days
after the end of each fiscal year of the Company, a copy of the
annual report for such year for the Company and its Consolidated
Subsidiaries, containing financial statements for such year
certified in a manner acceptable to the Majority Banks by Coopers
& Lybrand or other independent public accountants acceptable to
the Majority Banks;
(iii) simultaneously with the delivery of each set of
financial statements referred to in clauses (i) and (ii) above, a
certificate of a designated financial officer of the Company (A)
setting forth in reasonable detail the calculations required to
establish whether the Company was in compliance with the
requirements of SECTIONS 5.02(a), 5.03(a) and 5.03(b) on the date
of such financial statements and (B) stating whether there exists
on the date of such certificate any Event of Default or condition
or event which with notice or lapse of time or both would become
an Event of Default and, if any Event of Default or any such
condition or event then exists, setting forth the details thereof
and the action which the Company is taking with respect thereto;
(iv) promptly after the sending or filing thereof, copies of
all reports which the Company sends generally to its security
holders, and copies of all periodic reports (including reports on
Form 8-K) and all registration statements which the Company or
any Subsidiary files with the Securities and Exchange Commission
(other than registration statements on Form S-8 or Form 11-K);
(v) as soon as possible and, in any event, within 14
Business Days after the Company (in its best judgment) has made a
determination pursuant to any notice or claim received by the
Company or any of its Subsidiaries to the effect that the Company
or any of its Subsidiaries is a potentially responsible party for
response costs incurred or to be incurred at any facility, other
than a facility owned or operated by the Company or any of its
Subsidiaries under the Comprehensive Environmental Response,
Compensation and Liability
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Act ("CERCLA") or any state equivalent, that the potential liability
(other than potential liability arising from the provisions of CERCLA
authorizing environmental agencies to impose joint and several
liability unless joint and several liability is being asserted by
such environmental agencies) of the Company or any of its Subsidiaries
may exceed $25,000,000, a copy of such notice or claim and a statement
of an officer of the Company explaining the Company's understanding of
the basis for such notice or claim;
(vi) as soon as possible and, in any event, within 14
Business Days from the date the Company (in its best judgment)
makes a determination, pursuant to any notice given with respect
to property owned or operated by the Company or any of its
Subsidiaries, to Federal or state environmental agencies under
any applicable environmental requirement of law, reporting the
release of a hazardous or toxic waste, substance, pollutant or
contaminant, including petroleum-based substances or wastes, into
the environment, that the potential liability (other than
potential liability arising from the provisions of CERCLA
authorizing environmental agencies to impose joint and several
liability unless joint and several liability is being asserted by
such environmental agencies) of the Company or any of its
Subsidiaries may exceed $25,000,000, a copy of such notice and a
statement of an officer of the Company explaining the Company's
understanding of the basis for such notice;
(vii) as soon as possible and, in any event, within 14
Business Days after the Company or any of its Subsidiaries
acquires actual knowledge that the operations or facilities of
the Company or any of its Subsidiaries has become the subject of
any state or federal investigation evaluating whether any
remedial action pursuant to the National Contingency Plan, or any
state equivalent, is needed to respond to a release or threatened
release of a hazardous or toxic waste, substance, pollutant or
contaminant, including petroleum-based substances or wastes, into
the environment, a statement by an officer of the Company
informing the Banks of such investigation and explaining the
Company's understanding of the basis for such investigation;
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(viii) as soon as possible and, in any event, within 10
Business Days after the Company or any of its Subsidiaries
acquires actual knowledge that any of the operations or
facilities of the Company or any of its Subsidiaries becomes
listed or is proposed for listing on the National Priorities List
in accordance with 40 C.F.R. Part 300, Appendix B, or any state
equivalent, or receives any notice or claim to the effect that it
is a potentially responsible party for response costs involving
an aggregate cost to the Company or its Subsidiaries of
$25,000,000 or more incurred or to be incurred under CERCLA or
any state equivalent, at any facility owned or operated by the
Company or any of its Subsidiaries, a statement by an officer of
the Company so informing the Banks and explaining the Company's
understanding of the basis for such listing or notice;
(ix) as soon as possible and in any event (A) within 45 days
after the Company or any of its ERISA Affiliates acquires actual
knowledge that any Termination Event described in clause (i) of
the definition of Termination Event with respect to any Plan has
occurred, and (B) within 14 days after the Company or any of its
ERISA Affiliates acquires actual knowledge that any other
Termination Event with respect to any Plan has occurred,
(PROVIDED, HOWEVER, that the statement referred to below would
not be required if (1) such Termination Event is described in
clause (ii) of the definition of Termination Event, unless the
occurrence of such Termination Event may or does result in
aggregate liability of the Company and all ERISA Affiliates of
the Company to any Multiple Employer Plan or to the PBGC of more
than $25,000,000, or (2) such Termination Event is described in
clause (iii) of the definition of Termination Event, unless such
Termination Event is not a "standard termination" as defined in
Section 4041 of ERISA) a statement of an officer of the Company
describing such Termination Event and the action, if any, which
the Company or any of its ERISA Affiliates proposes to take with
respect thereto;
(x) promptly and in any event within 5 Business Days after
receipt thereof by the Company or any of its ERISA Affiliates,
copies of each notice received by the Company or any such ERISA
Affiliate from the PBGC stating its intention to
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terminate any Plan or to have a trustee appointed to administer any
Plan;
(xi) promptly and in any event within 14 Business Days after
receipt thereof by the Company or any of its ERISA Affiliates
from the sponsor of a Multiemployer Plan, with respect to which
the aggregate annual contributions of the Company and its ERISA
Affiliates to such Multiemployer Plan for the three Plan years
preceding the day of such receipt averages in excess of
$1,000,000 per year, or, if the amount of liability incurred or
expected to be incurred pursuant to such notice exceeds
$10,000,000 (regardless of the amount of aggregate annual
contributions of the Company and its ERISA Affiliates to such
Multiemployer Plan for purposes of determining whether such an
event has occurred) a copy of each such notice received by the
Company or such ERISA Affiliate concerning (A) the imposition of
Withdrawal Liability by such Multiemployer Plan, (B) the
determination that such Multiemployer Plan is, or is expected to
be, in reorganization within the meaning of Title IV of ERISA,
(C) the termination of such Multiemployer Plan within the meaning
of Title IV of ERISA, or (D) the amount of liability incurred, or
expected to be incurred, by the Company or any such ERISA
Affiliate, as the case may be, in connection with any event
described in clause (A), (B) or (C) above;
(xii) as soon as possible and, in any event, within 5
Business Days after the Company acquires actual knowledge that
either of its Credit Ratings has changed, written notice
informing the Agent of such change; and
(xiii) such other information with respect to the condition
or operations, financial or otherwise, of the Company or any of
its Subsidiaries or ERISA Affiliates as any Bank through the
Agent may from time to time reasonably request, including,
without limitation, Schedule B (Actuarial Information) to the
annual reports (Form 5500 Series) filed with the Internal Revenue
Service for each Plan.
(c) CORPORATE EXISTENCE. Subject to SECTION 5.02(b), preserve and
keep, and will cause each of its Subsidiaries to preserve and keep, its
corporate existence, rights, franchises and licenses in full force and
effect, PROVIDED,
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HOWEVER, that the Company may terminate the corporate existence of any
Subsidiary, or permit the termination or abandonment of any Subsidiary, or
permit the termination or abandonment of any right, franchise or license
if, in the good faith judgment of the appropriate officer or officers of
the Company, such termination or abandonment is not materially
disadvantageous to the Company and is not materially disadvantageous to the
Banks or the holders of the Notes.
(d) INSURANCE. Maintain, and cause each of its Subsidiaries to
maintain, insurance with sound and reputable insurers covering all such
properties and risks as are customarily insured by, and in amounts not less
than those customarily carried by, corporations engaged in similar
businesses and similarly situated.
(e) PROPERTIES. Maintain and preserve, and cause each of its
Subsidiaries to maintain and preserve, all of its properties deemed by the
Company or such Subsidiary to be necessary or useful in the proper conduct
of its business in good working order and condition, ordinary wear and tear
excepted.
(f) BUSINESS. Without prohibiting the Company from making
acquisitions or divestitures permitted under SECTION 5.02(b), remain in the
same businesses, similar businesses or other manufacturing or service
businesses reasonably related thereto, taken as a whole, as are carried on
at the date of this Agreement.
(g) USE OF PROCEEDS. Use the proceeds of the Advances made under
this Agreement only for general corporate purposes, including, without
limitation, the repurchase of shares of capital stock of the Company (as
duly approved by the Company's board of directors from time to time), the
repayment of other indebtedness and acquisitions.
SECTION 5.02. NEGATIVE COVENANTS. So long as any Note shall remain
unpaid or any Bank shall have any Commitment hereunder, the Company will not,
without the written consent of the Majority Banks:
(a) LIENS, ETC. Create or suffer to exist, or permit any of its
Consolidated Subsidiaries to create or suffer to exist, any lien, security
interest or other charge or encumbrance ("LIEN") upon or with respect to
any of its properties (other than Margin Stock), whether now owned or
hereafter acquired, or assign, or permit any of its Consolidated
Subsidiaries to assign, any right to receive income, in each case to secure
any Debt of any Person or
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entity, other than (i) Liens securing Debt which in the aggregate does not
exceed $50,000,000 or (ii) Liens granted by any Consolidated Subsidiary as
security for any Debt owing to the Company or to a Wholly-Owned
Consolidated Subsidiary.
(b) CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. Consolidate with or
merge with or into any other Person or sell, lease or otherwise transfer
all or a majority of its assets (other than Margin Stock) to any other
Person or permit any Significant Subsidiary to consolidate with, merge into
or sell, lease or otherwise transfer all or a majority of its assets to any
Person other than the Company or a Wholly-Owned Consolidated Subsidiary
except:
(i) the Company may merge or consolidate with any other
corporation so long as the Company is the surviving corporation in
such transaction and immediately after consummation of such
transaction no event has occurred and is continuing which constitutes
an Event of Default or would constitute an Event of Default but for
the requirement that notice be given or time elapse or both;
(ii) the Company may merge into any corporation solely for
the purpose of redomiciling so long as the surviving corporation
in such transaction expressly assumes all of the obligations of
the Company under this Agreement, under its Notes and under the
letter agreement referred to in SECTION 2.04(b) and immediately
after consummation of such transaction no event has occurred and
is continuing which constitutes an Event of Default or would
constitute an Event of Default but for the requirement that
notice be given or time elapse or both; and
(iii) any Significant Subsidiary may consolidate or merge with or
sell, lease or otherwise transfer all or more than a majority of its
assets to any other Person so long as immediately after consummation
of such transaction no event has occurred and is continuing which
constitutes an Event of Default or would constitute an Event of
Default but for the requirement that notice be given or time elapse or
both.
(c) USE OF PROCEEDS FOR SECURITIES PURCHASES. Use any proceeds of
any Advance to acquire any security in any transaction which is subject to
Section 13(d), 13(g) or 14(d) of the Exchange Act except to the extent such
trans-
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action complies with such Act and the rules and regulations thereunder.
SECTION 5.03. FINANCIAL COVENANTS. So long as any Note shall remain
unpaid or any Bank shall have any Commitment hereunder, the Company will not,
without the written consent of the Majority Banks:
(a) INTEREST COVERAGE. Maintain, as reported at the end of each
fiscal quarter, a ratio of (i) Consolidated Earnings Before Interest
and Taxes to (ii) Consolidated Net Interest Expense of less than 2.75
to 1.00.
(b) TOTAL DEBT. Create or suffer to exist, or permit any of its
Consolidated Subsidiaries to create or suffer to exist, any Debt, if,
immediately after giving effect to such Debt and the receipt and
application of any proceeds thereof, the ratio of Total Debt to
Capitalization exceeds 0.48 to 1.00.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. EVENTS OF DEFAULT. If any of the following events
("Events of Default") shall occur and be continuing:
(a) Any Borrower shall fail to pay any principal of any Note
when due; or
(b) Any Borrower shall fail to pay any fee under this Agreement
or any interest on any Note within ten days after the due date
thereof; or
(c) Any written representation or warranty made by any Borrower
herein or in connection with this Agreement shall prove to have been
incorrect in any material respect when made; provided that if any such
representation or warranty shall have been incorrect through
inadvertence or oversight, no Event of Default shall occur if such
representation or warranty shall be made correct within 30 days after
any Borrower shall have discovered the error; or
(d) The Company shall fail to perform or observe any of the
covenants contained in SECTION 5.02 (other than with respect to any
involuntary Lien for purposes of SECTION 5.02(a)) or SECTION 5.03(a);
or the Company shall fail to perform or observe any other term,
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covenant (including SECTION 5.02(a) with respect to any involuntary Lien)
or agreement contained in this Agreement, other than in (a) or (b) above,
on its part to be performed or observed and such failure shall remain
unremedied for 30 days after written notice thereof shall have been given
to the Company by the Agent or any Bank; or
(e) The Company or any of its Subsidiaries shall fail to pay any
principal of or premium or interest on any Debt (other than Subsidiary
Statutory Liabilities) which is outstanding in a principal amount of
at least $5,000,000 (or its equivalent in any other currency) in the
aggregate (but excluding Debt evidenced by the Notes) of the Company
or such Subsidiary (as the case may be), when the same becomes due and
payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure shall continue
after the applicable grace period, if any, specified in the agreement
or instrument relating to such Debt; or any other event shall occur or
condition shall exist under any agreement or instrument relating to
any such Debt and shall continue after the applicable grace period, if
any, specified in such agreement or instrument, if the effect of such
event or condition is to accelerate the maturity of such Debt; or any
such Debt shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment or a
prepayment required due to a voluntary sale or condemnation of
collateral securing such Debt), prior to the stated maturity thereof;
or
(f) The Company or any of its Significant Subsidiaries shall
generally not pay its debts as such debts become due, or shall admit
in writing its inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors; or any proceeding
shall be instituted by or against the Company or any of its
Significant Subsidiaries seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or
its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order
for relief or the appointment of a receiver, trustee, or other similar
official for it or for any substantial part of its property, and in
the event of any such proceeding instituted against the Company or any
of its Significant Subsidiaries, such proceeding shall remain
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undismissed or unstayed for a period of 60 days or shall result in the
entry of an order for relief, the appointment of a trustee or receiver, or
other result adverse to the Company or such Significant Subsidiary; or the
Company or any of its Significant Subsidiaries shall take any corporate
action to authorize any of the actions set forth above in this subsection
(f); or
(g) Any judgment or order for the payment of money (to the
extent not covered by insurance under which the insurer has admitted
its liability in writing) in excess of $3,000,000 (or its equivalent
in any other currency) shall be rendered against the Company or any of
its Subsidiaries and (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order and there shall
be any time at which a stay of enforcement of such judgment or order,
by reason of a pending appeal or otherwise, shall not be in effect or
(ii) enforcement proceedings shall not have been commenced by any
creditor upon such judgment or order and there shall be any period of
10 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall
not be in effect;
then, and in any such event, the Agent (i) shall at the request, or may with the
consent, of the Majority Banks, by notice to the Company, declare the obligation
of each Bank to make Advances to be terminated, whereupon the same shall
forthwith terminate, and (ii) shall at the request, or may with the consent, of
the Majority Banks, by notice to the Company, declare the Notes, all interest
thereon and all other amounts payable under this Agreement to be forthwith due
and payable, whereupon the Notes, all such interest and all such amounts shall
become and be forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Company; PROVIDED, HOWEVER, that in the event of an Event of Default described
in SECTION 6.01(f), (A) the obligation of each Bank to make Advances shall
automatically be terminated and (B) the Notes, all such interest and all such
amounts shall automatically become and be due and payable, without presentment,
demand, protest or any notice of any kind, all of which are hereby expressly
waived by the Company.
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ARTICLE VII
THE AGENT AND THE EURO-AGENT
SECTION 7.01. AUTHORIZATION AND ACTION. Each Bank hereby appoints
and authorizes each of the Agent and the Euro-Agent to take such action as agent
on its behalf and to exercise powers under this Agreement as are delegated to
the Agent by the terms hereof, together with such powers as are reasonably
incidental thereto. As to any matters not expressly provided for by this
Agreement (including, without limitation, enforcement or collection of the
Notes), neither the Agent nor the Euro-Agent shall be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Majority Banks, and such instructions shall be
binding upon all Banks and all holders of Notes; PROVIDED, HOWEVER, that neither
the Agent nor the Euro-Agent shall be required to take any action which exposes
the Agent or the Euro-Agent to personal liability or which is contrary to this
Agreement or applicable law. Each of the Agent and the Euro-Agent agrees to
give to each Bank prompt notice of each written notice given to it by the
Company pursuant to the terms of this Agreement.
SECTION 7.02. AGENT'S RELIANCE, ETC. Neither the Agent, the Euro-
Agent, or any Affiliate of either of them, nor any of their respective
Directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or them under or in connection with this Agreement,
except for its or their own gross negligence or willful misconduct. Without
limitation of the generality of the foregoing, each of the Agent and the Euro-
Agent: (i) may treat the Bank that made any Advance as the holder of the Debt
resulting therefrom until the Agent receives and accepts an Assignment and
Acceptance entered into by such Bank, as assignor, and an Eligible Assignee, as
assignee, as provided in SECTION 9.08; (ii) may consult with legal counsel
(including counsel for any of the Borrowers), independent public accountants and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts; (iii) makes no warranty or representation to
any Bank and shall not be responsible to any Bank for any statements, warranties
or representations (whether written or oral) made in or in connection with this
Agreement; (iv) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement on the part of any of the Borrowers or to inspect the property
(including the books and records) of any of the Borrowers; (v) shall not be
responsible to any Bank for the due execution, legality, validity,
enforceability, genuineness,
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sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; and (vi) shall incur no liability under or in respect
of this Agreement by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telecopier, telegram, cable or telex)
believed by it to be genuine and signed or sent by the proper party or parties.
SECTION 7.03. CITIBANK AND AFFILIATES. With respect to its
Commitment the Advances made by it and the notes issued to it, Citibank shall
have the same rights and powers under this Agreement as any other Bank and may
exercise the same as though it were not the Agent; and the term "Bank" or
"Banks" shall, unless otherwise expressly indicated, include Citibank in its
individual capacity. Citibank and its affiliates may accept deposits from, lend
money to, act as trustee under indentures of, and generally engage in any kind
of business with, the Company, any of its Subsidiaries (including, without
limitation, any Borrowing Subsidiary) and any Person who may do business with or
own securities of the Company or any of its Subsidiaries all as if Citibank were
not the Agent and Citibank International Plc were not the Euro-Agent and without
any duty to account therefor to the Banks.
SECTION 7.04. BANK CREDIT DECISION. Each Bank acknowledges that it
has, independently and without reliance upon the Agent, the Euro-Agent or any
other Bank and based on the financial statements referred to in SECTION 4.01 and
such other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon the Agent,
the Euro-Agent or any other Bank and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under this Agreement.
SECTION 7.05. INDEMNIFICATION. The Banks agree to indemnify the
Agent and the Euro-Agent (to the extent not reimbursed by the Borrowers),
ratably according to the respective principal accounts of the A Notes then held
by each of them (or if no A Notes are at the time outstanding or if any A Notes
are held by Persons which are not Banks, ratably according to the respective
amounts of their Commitments), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against the Agent or the Euro-Agent in any way
relating to or arising out of this Agreement or any action taken or omitted by
the Agent or the Euro-Agent under this Agreement, PROVIDED that no Bank shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions,
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judgments, suits, costs, expenses or disbursements resulting from the Agent's or
the Euro-Agent's gross negligence or wilful misconduct. Without limitation of
the foregoing, each Bank agrees to reimburse the Agent or the Euro-Agent, as
applicable, promptly on demand for its ratable share of any out-of-pocket
expenses (including counsel fees) incurred by the Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
to the extent that the Agent and the Euro-Agent are not reimbursed for such
expenses by the Borrowers.
SECTION 7.06. SUCCESSOR AGENTS. Either of the Agents may resign at
any time by giving written notice thereof to the Banks and the Company and may
be removed at any time with or without cause by the Majority Banks. Upon any
such resignation or removal, the Majority Banks shall the right to appoint one
of the Banks as the successor Agent and such Bank or an affiliate of such Bank
as the successor Euro-Agent. If no successor Agent or Euro-Agent, as
applicable, shall have been so appointed by the Majority Banks, and shall have
accepted such appointment, within 30 days after the retiring Agent's or retiring
Euro-Agent's giving of notice of resignation or the Majority Banks' removal of
the retiring Agent or retiring Euro-Agent, then the retiring Agent or retiring
Euro-Agent may, on behalf of the Banks, appoint one of the Banks (or an
affiliate of one of the Banks, in the case of a successor Euro-Agent) as its
successor. If none of the Banks will accept such an appointment, the retiring
Agent or Euro-Agent, as applicable, may, on behalf of the Banks, appoint a
successor Agent or Euro-Agent, as applicable, which, in the case of a successor
Agent, shall be a commercial bank organized under the laws of the United States
of America or of any State thereof and having a combined capital and surplus of
at least $50,000,000, and in the case of a successor Euro-Agent, shall be a
commercial bank organized under the laws of any country which is a member of the
OECD, or a political subdivision of any such country, and having a combined
capital and surplus of at least $50,000,000 or the local currency equivalent
thereof, PROVIDED that such bank is located in, or acting through a branch or
agency located in, London, England. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, or as Euro-Agent hereunder by a successor
Euro-Agent, such successor shall thereupon succeed to and become vested with all
the rights, powers, privileges and duties of the retiring Agent or the retiring
Euro-Agent, as applicable, and the retiring Agent or the retiring Euro-Agent, as
applicable, shall be discharged from its duties and obligations under this
Agreement. The successor Agent or the successor Euro-Agent, as applicable,
shall immediately notify the Company of such appointment. After any retiring
Agent's or retiring Euro-Agent's resignation or removal hereunder
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as Agent or Euro-Agent, as applicable, the provisions of this Article VII shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent or Euro-Agent, as applicable, under this Agreement.
ARTICLE VIII
GUARANTY
SECTION 8.01. THE GUARANTY. The Company hereby unconditionally and
irrevocably guarantees the due and punctual payment (whether at stated maturity,
upon acceleration or otherwise) of the principal of and interest on each Note
issued by any Borrowing Subsidiary pursuant to this Agreement, and the due and
punctual payment of all other amounts payable by any Borrowing Subsidiary under
this Agreement. Upon failure by any Borrowing Subsidiary to pay punctually any
such amount, the Company shall forthwith on demand pay the amount not so paid in
the currency, at the place, in the manner and with the effect otherwise
specified in Article II of this Agreement.
SECTION 8.02. GUARANTY UNCONDITIONAL. The obligations of the Company
hereunder shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(i) any extension, renewal, settlement, compromise, waiver
or release in respect of any obligation of any Borrowing
Subsidiary under this Agreement or any Note or the exchange,
release or non-perfection of any collateral security therefor;
(ii) any modification or amendment of or supplement to this
Agreement or any Note:
(iii) any change in the corporate existence, structure or
ownership of any Borrowing Subsidiary, or any insolvency,
bankruptcy, reorganization or other similar proceeding affecting
any Borrowing Subsidiary or its assets;
(iv) the existence of any claim, set-off or other rights
which the Company may have at any time against any Borrowing
Subsidiary, the Agent, the Euro-Agent, any Bank or any other
Person, whether in connection herewith or any unrelated
transactions, PROVIDED that nothing herein shall prevent the
assertion of any such claim by separate suit or compulsory
counterclaim;
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(v) any invalidity or unenforceability relating to or
against any Borrowing Subsidiary for any reason of any provision
or all of this Agreement or any Note, or any provision of
applicable law or regulation purporting to prohibit the payment
by any Borrowing Subsidiary of the principal of or interest on
any Note or any other amount payable by it under this Agreement;
or
(vi) any other act or omission to act or delay of any kind
by any Borrowing Subsidiary, the Agent, the Euro-Agent, any Bank
or any other Person or any other circumstance whatsoever which
might, but for the provisions of this paragraph, constitute a
legal or equitable discharge of the Company's obligations
hereunder.
SECTION 8.03. DISCHARGE ONLY UPON PAYMENT IN FULL; REINSTATEMENT IN
CERTAIN CIRCUMSTANCES. The Company's obligations hereunder shall remain in full
force and effect until the principal of and interest on the Notes and all other
amounts payable by the Company and each Borrowing Subsidiary under this
Agreement shall have been paid in full and shall survive the Termination Date.
If at any time any payment of the principal of or interest on any Note or any
other amount payable by any Borrowing Subsidiary under this Agreement is
rescinded or must be otherwise restored or returned upon the insolvency,
bankruptcy or reorganization of any Borrowing Subsidiary or otherwise, the
Company's obligations hereunder with respect to such payment shall be reinstated
at such time as though such payment had been due but not made at such time.
SECTION 8.04. WAIVER BY THE COMPANY. The Company irrevocably waives
acceptance hereof, presentment, demand, protest and any notice not provided for
herein, as well as any requirement that at any time any right be exhausted or
any action be taken by the Agent, the Euro-Agent, any Bank or any other Person
against any Borrowing Subsidiary or any other Person or any collateral security.
SECTION 8.05. SUBROGATION. Upon making any payment hereunder, the
Company shall be subrogated to the rights of the Banks against any such
Borrowing Subsidiary with respect to such payment; PROVIDED that the Company
shall not enforce any right or demand or receive any payment by way of
subrogation until all amounts of principal of and interest on the Notes of such
Borrowing Subsidiary and all other amounts payable by such Borrowing Subsidiary
under this Agreement have been paid in full.
SECTION 8.06. STAY OF ACCELERATION. In the event that acceleration
of the time for payment of any amount payable by any
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Borrowing Subsidiary under this Agreement or any of its Notes is stayed upon the
insolvency, bankruptcy or reorganization of such Borrowing Subsidiary, all such
amounts otherwise subject to acceleration under the terms of this Agreement
shall nonetheless be payable by the Company hereunder forthwith on demand by the
Agent for the account of the Banks.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. AMENDMENTS, ETC. No amendment or waiver of any
provision of this Agreement or the A Notes, nor consent to any departure by any
Borrower therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Majority Banks, and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given; PROVIDED, HOWEVER, that (a) no amendment, waiver or consent shall,
unless in writing and signed by all the Banks, do any of the following: (i)
waive any of the conditions specified in SECTION 3.01, 3.02, 3.03 (if and to the
extent that the A Borrowing which is the subject of such waiver would involve an
increase in the aggregate outstanding amount of A Advances over the aggregate
amount of A Advances outstanding immediately prior to such A Borrowing) OR 3.04,
(ii) increase the Commitments of the Banks or subject the Banks to any
additional obligations, (iii) reduce the principal of, or interest on, the A
Notes or any fees or other amounts payable hereunder, (iv) postpone any date
fixed for any payment of principal of, or interest on, the A Notes or any fees
or other amounts payable hereunder, (v) release the Company's guaranty
obligations pursuant to ARTICLE VIII, (vi) change the percentage of the
Commitments or of the aggregate unpaid principal amount of the Notes which shall
be required for the Banks or any of the Banks to take any action hereunder or
(vii) amend this SECTION 9.01; (b) after a Change of Control has occurred, no
amendment, waiver or consent shall be effective with respect to SECTION 5.03
unless the same shall be in writing and signed by Banks holding at least 65% of
the then aggregate unpaid principal amount of the A Notes held by Banks, or, if
no such principal amount is then outstanding, Banks having at least 65% of the
Commitments; and (c) no amendment, waiver or consent shall, unless in writing
and signed by the Agent and/or the Euro-Agent in addition to the Banks required
above to take such action, affect the rights or duties of the Agent and/or the
Euro-Agent, as applicable, under this Agreement.
SECTION 9.02. NOTICES, ETC. All notices and other communications
provided for hereunder shall be in writing (including telecopier, telegraphic,
telex or cable communication)
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and mailed, telecopied, telegraphed, telexed, cabled or delivered,
(i) if to the Company, at its address at Ecolab Center, St. Paul,
Minnesota 55102, Attention: Treasurer, Telecopier No. 612-293-2379, with a
copy to the Company at the same address, Attention: General Counsel;
(ii) if to any Borrowing Subsidiary, at its address specified in its
Election to Participate;
(iii) if to any Bank, at its Domestic Lending Office specified
opposite its name on SCHEDULE I hereto or specified in the Assignment and
Acceptance pursuant to which it became a party hereto;
(iv) if to the Agent, at its address at Bank Loan Syndications, One
Court Square, 7th Floor, Long Island City, New York 11120, Attention:
Brigitte Milian, Telecopier No. 718-248-4844, with a copy to Citicorp
Securities, Inc., 200 South Wacker Drive, Chicago, Illinois 60606,
Attention: Lesley Noer, Telecopier No. 312-993-1050; and
(v) if to the Euro-Agent, at its address at Riverdale House, 68
Molesworth Street, Lewisham SE13 7EU, England, Attention: Kenneth
Purchase, Loans Agency, Telecopier No. 081-852-7007, Telex No. 299831
CIBLA;
or, as to the Company, the Agent or the Euro-Agent, at such other address as
shall be designated by such party in a written notice to the other parties and,
as to each other party, at such other address as shall be designated by such
party in a written notice to the Company, the Agent and the Euro-Agent. All
such notices and communications shall, when mailed, telecopied, telegraphed,
telexed or cabled, be effective when deposited in the mails, telecopied,
delivered to the telegraph company, confirmed by telex answerback or delivered
to the cable company, respectively, except that notices and communications to
the Agent or the Euro-Agent pursuant to ARTICLE II OR VII shall not be effective
until received by the Agent or the Euro-Agent, as applicable.
SECTION 9.03. NO WAIVER; REMEDIES. No failure on the part of any
Bank or the Agent or Euro-Agent to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 9.04. COSTS AND EXPENSES. (a) The Company agrees to pay on
demand all reasonable, out-of-pocket costs and
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expenses of the Agent and the Euro-Agent in connection with the preparation,
execution, delivery, administration, modification and amendment of this
Agreement, the notes and the other documents to be delivered hereunder,
including, without limitation, the reasonable fees and out-of-pocket expenses of
counsel for the Agent and the Euro-Agent with respect thereto and with respect
to advising the Agent and the Euro-Agent as to rights and responsibilities under
this Agreement, and all costs and expenses, if any, of the Agent, the Euro-Agent
and the Banks (including, without limitation, reasonable counsel fees and
expenses, which may be allocated costs of counsel who are employees of any Bank)
in connection with the enforcement (whether through negotiations, legal
proceedings or otherwise) of this Agreement, the Notes and the other documents
to be delivered hereunder, including, without limitation, reasonable counsel
fees and expenses in connection with the enforcement of rights under this
SECTION 9.04(a).
(b) If any payment of principal of any Eurocurrency Advance is made
other than on the last day of the Interest Period for such Eurocurrency Advance,
as a result of acceleration of the maturity of the Notes pursuant to SECTION
6.01 or for any other reason, the applicable Borrower shall, upon demand by any
Bank (with a copy of such demand to the Agent), pay to the Agent for the account
of such Bank any amounts required to compensate such Bank for any additional
losses, costs or expenses which it may reasonably incur as a result of such
payment, including, without limitation, any loss, cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
any Bank to fund or maintain such Eurocurrency Advance. Such Bank's demand
shall set forth the reasonable basis for calculation of such loss, cost or
expense.
SECTION 9.05. RIGHT OF SET-OFF. Upon (i) the occurrence and during
the continuance of any Event of Default and (ii) the making of the request or
the granting of the consent specified by SECTION 6.01 to authorize the Agent to
declare the Notes due and payable pursuant to the provisions of SECTION 6.01,
each Bank is hereby authorized at any time and from time to time, to the fullest
extent permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by such Bank to or for the credit or the account
of the Company or the applicable Borrowing Subsidiary against any and all of the
obligations of the Company or the applicable Borrowing Subsidiary now or
hereafter existing under this Agreement and the Note held by such Bank
irrespective of whether or not such Bank shall have made any demand under this
Agreement or such Note and although such obligations may be unmatured. Each
Bank agrees promptly to notify the Company after any such set-off and
application made by such Bank, PROVIDED that the failure to give
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such notice shall not affect the validity of such set-off and application. The
rights of each Bank under this Section are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which such
Bank may have.
SECTION 9.06. JUDGMENT. (a) If for the purposes of obtaining
judgment in any court it is necessary to convert a sum due hereunder or under
the Notes in any currency (the "Original Currency") into another currency (the
"Other Currency") the parties hereto agree, to the fullest extent that they may
effectively do so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures the Euro-Agent could purchase the
Original Currency with the Other Currency at London, England on the third
Business Day preceding that on which final judgment is given.
(b) The obligation of the applicable Borrower in respect of any sum
due in the Original Currency from it to any Bank or the Agent or Euro-Agent
hereunder or under the Note held by such Bank shall, notwithstanding any
judgment in any Other Currency, be discharged only to the extent that on the
Business Day following receipt by such Bank or the Agent or Euro-Agent (as the
case may be) of any sum adjudged to be so due in such Other Currency such Bank
or the Agent or Euro-Agent (as the case may be) may in accordance with normal
banking procedures purchase the Original Currency with such Other Currency; if
the amount of the Original Currency so purchased is less than the sum originally
due to such Bank or the Agent or Euro-Agent (as the case may be) in the Original
Currency, such Borrower agrees, as a separate obligation and notwithstanding any
such judgment, to indemnify such Bank or the Agent or Euro-Agent (as the case
may be) against such loss, and if the amount of the Original Currency so
purchased exceeds the sum originally due to any Bank or the Agent or Euro-Agent
(as the case may be) in the Original Currency, such Bank or the Agent or Euro-
Agent (as the case may be) agrees to remit to such Borrower such excess.
SECTION 9.07. BINDING EFFECT. This Agreement shall become effective
when it shall have been executed by the Company and the Agent and Euro-Agent and
when the Agent shall have been notified by each Bank that such Bank has executed
it and thereafter shall be binding upon and inure to the benefit of the
Borrowers, the Agent, the Euro-Agent and each Bank and their respective
successors and assigns, except that the Borrowers shall not have the right to
assign their respective rights hereunder or any interest herein without the
prior written consent of the Banks.
SECTION 9.08. ASSIGNMENTS AND PARTICIPATIONS. (a) Each Bank may,
upon obtaining the prior written consent of the Company (which consent shall not
be unreasonably withheld or
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delayed), assign to one or more banks or other entities all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of its Commitment, the Advances owing to it and the Note or Notes
held by it); PROVIDED, HOWEVER, that (i) each such assignment shall be of a
constant, and not a varying, percentage of all of the assigning Bank's rights
and obligations so assigned, (ii) the amount of the Commitment of the assigning
Bank being assigned pursuant to each such assignment (determined as of the date
of the Assignment and Acceptance with respect to such assignment) may be in the
amount of such Bank's entire Commitment but otherwise shall not be less than
$10,000,000 and shall be an integral multiple of $500,000, (iii) each such
assignment shall be to an Eligible Assignee and (iv) the parties to each such
assignment shall execute and deliver to the Agent, for its acceptance and
recording in the Register, an Assignment and Acceptance, together with a
processing and recordation fee of $3,000; and PROVIDED, FURTHER, that,
notwithstanding the foregoing, each Bank may, without the consent of the Company
and without the payment of the processing and recordation fee, assign to one or
more affiliates of such Bank all or a portion of its rights and obligations
under this Agreement (including, without limitation, all or a portion of its
Commitment, the Advances owing to it and the Note or Notes held by it). Upon
such execution, delivery, acceptance and recording, from and after the effective
date specified in each Assignment and Acceptance, which effective date shall be
at least two Business Days after the execution thereof, (x) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Bank hereunder and (y) the Bank
assignor thereunder shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights and be released from its obligations under this Agreement (and, in
the case of an Assignment and Acceptance covering all or the remaining portion
of an assigning Bank's rights and obligations under this Agreement, such Bank
shall cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance, the
Bank assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, such assigning Bank makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such assigning Bank makes no representation
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or warranty and assumes no responsibility with respect to the financial
condition of the Company or any Borrowing Subsidiary or the performance or
observance by the Company or any Borrowing Subsidiary of any of its obligations
under this Agreement or any other instrument or document furnished pursuant
hereto; (iii) such assignee confirms that it has received a copy of this
Agreement, together with copies of the financial statements referred to in
SECTION 4.01 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon the Agent, such assigning Bank or any other Bank and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such
assignee appoints and authorizes each of the Agent and the Euro-Agent to take
such action as agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Agent and the Euro-Agent, as applicable, by
the terms hereof, together with such powers as are reasonably incidental
thereto; and (vii) such assignee agrees that it will perform in accordance with
their terms all of the obligations which by the terms of this Agreement are
required to be performed by it as a Bank.
(c) The Agent shall maintain at its address referred to in SECTION
9.02 a copy of each Assignment and Acceptance delivered to and accepted by it
and a register for the recordation of the names and addresses of the Banks and
the Commitment of, and principal amount of the Advances owing to, each Bank from
time to time (the "REGISTER"). The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and the Borrowers, the
Agent, the Euro-Agent and the Banks may treat each Person whose name is recorded
in the Register as a Bank hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Borrowers or any Bank at any
reasonable time and from time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Bank and an assignee representing that it is an Eligible Assignee, the
Agent shall, if such Assignment and Acceptance has been completed and is in
substantially the form of EXHIBIT C hereto, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to the Borrowers.
(e) Each Bank may sell participations to one or more banks or other
entities in all or a portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Commitment and the
Advances owing to it
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and the Note or Notes held by it); PROVIDED, HOWEVER, that (i) such Bank's
obligations under this Agreement (including, without limitation, its Commitment
to the Borrowers hereunder) shall remain unchanged, (ii) such Bank shall remain
solely responsible to the other parties hereto for the performance of such
obligations, (iii) such Bank shall remain the holder of any such Note for all
purposes of this Agreement, (iv) the Borrowers, the Agent, the Euro-Agent and
the other Banks shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under this Agreement, and (v)
any agreement between such Bank and any participant in connection with such
participating interest shall not restrict such Bank's right to agree to any
amendment or waiver of any provision of this Agreement, or any consent to any
departure by any Borrower therefrom, except (to the extent such participant
would be affected thereby) a reduction of the principal of, or interest on, any
Note or postponement of any date fixed for payment thereof or a release of the
Company's guaranty obligations pursuant to ARTICLE VIII.
(f) Any Bank may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this SECTION 9.08, disclose
to the assignee or participant or proposed assignee or participant, any
information relating to the Borrowers furnished to such Bank by or on behalf of
the Borrowers; PROVIDED that, prior to any such disclosure of non-public
information, such Bank shall have obtained the Company's consent (which consent
shall not be unreasonably withheld or delayed) and, the assignee or participant
or proposed assignee or participant shall agree to preserve the confidentiality
of any confidential information relating to the Borrowers received by it from
such Bank.
(g) Notwithstanding any other provisions set forth in this Agreement,
any Bank at any time may assign, as collateral or otherwise, any of its rights
(including, without limitation, rights to payments of principal of and/or
interest on the Advances) under this Agreement to any Federal Reserve Bank
without notice to or consent of the Company, any Borrowing Subsidiary, any other
Bank, the Agent or the Euro-Agent.
SECTION 9.09. CONSENT TO JURISDICTION. (a) Each Borrowing
Subsidiary hereby irrevocably submits to the jurisdiction of any New York State
or Federal court sitting in New York City and any appellate court from any
thereof in any action or proceeding arising out of or relating to this Agreement
and hereby irrevocably agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or in such Federal
court. Each Borrowing Subsidiary hereby irrevocably waives, to the fullest
extent that it may effectively do so, the defense of an inconvenient forum to
the
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maintenance of any such action or proceeding. Each Borrowing Subsidiary hereby
irrevocably appoints CT Corporation System (the "Process Agent"), with an office
on the date hereof at 1633 Broadway, New York, New York 10019, United States, as
its agent to receive on behalf of such Borrowing Subsidiary and its property
service of copies of the summons and complaint and any other process which may
be served in any such action or proceeding. Such service may be made by mailing
or delivering a copy of such process to such Borrowing Subsidiary in care of the
Process Agent at the Process Agent's above address with a copy to such Borrowing
Subsidiary at its address specified in its Election to Participate, and such
Borrowing Subsidiary hereby irrevocably authorizes and directs the Process Agent
to accept such service on its behalf. As an alternative method of service, each
Borrowing Subsidiary also irrevocably consents to the service of any and all
process in any such action or proceeding by the mailing of copies of such
process to such Borrowing Subsidiary at its address specified in its Election to
Participate. Each Borrowing Subsidiary agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(b) Nothing in this SECTION 9.09 shall affect the right of the Agent,
the Euro-Agent or any Bank to serve legal process in any other manner permitted
by law or affect the right of the Agent or any Bank to bring any action or
proceeding against any Borrowing Subsidiary or its property in the courts of any
other jurisdictions.
SECTION 9.10. GOVERNING LAW. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York.
SECTION 9.11. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
SECTION 9.12. INDEMNIFICATION. The Company agrees to indemnify and
hold harmless the Agent, the Euro-Agent and each Bank from and against any and
all claims, damages, liabilities and expenses (including, without limitation,
fees and disbursements of counsel) which may be incurred by or asserted against
the Agent, the Euro-Agent or such Bank in connection with or arising out of any
investigation, litigation or proceeding related to the use of the proceeds of
the Borrowings by the Borrowers, whether or not the Agent or such Bank is a
party thereto, PROVIDED, HOWEVER, that the Company shall not be liable for any
portion of such claims, damages, liabilities and expenses
- 67 -
<PAGE>
resulting from the Agent's, the Euro-Agent's or any Bank's gross negligence or
willful misconduct or for such claims and liabilities settled without the
consent of the Company. Each Bank agrees to give the Company prompt written
notice of any investigation, litigation or proceeding which may lead to a claim
for indemnification under this Section, PROVIDED that the failure to give such
notice shall not affect the validity or enforceability of the indemnification
hereunder.
SECTION 9.13. CONFIDENTIALITY. Each Bank hereby agrees that it will
use reasonable efforts to keep confidential any information from time to time
supplied to it by the Company under SECTION 5.01(b) which the Company designates
in writing at the time of its delivery to the Bank is to be treated
confidentially; PROVIDED, HOWEVER, that nothing herein shall affect the
disclosure of any such information to: (i) the extent required by statute,
rule, regulation or judicial process; (ii) counsel for any Bank or the Agent or
the Euro-Agent or to their respective accountants; (iii) bank examiners and
auditors; (iv) the Agent, the Euro-Agent, any other Bank, or any transferee or
prospective transferee of any Note; or (v) any other Person in connection with
any litigation to which any one or more of the Banks is a party; PROVIDED
FURTHER, HOWEVER, that each Bank hereby agrees that it will use reasonable
efforts to promptly notify the Company of any request for information under this
subpart (v) or with respect to any request for information not enumerated in
this SECTION 9.13.
SECTION 9.14. NON-RELIANCE BY THE BANKS. Each Bank by its signature
to this Agreement represents and warrants that (i) it has not relied in the
extension of the credit contemplated by this Agreement, nor will it rely in the
maintenance thereof, upon any assets of the Company or its Subsidiaries
consisting of Margin Stock as collateral and (ii) after reviewing the financial
statements of the Company and its Subsidiaries referred to in SECTION 4.01(e),
such Bank has concluded therefrom that the consolidated cash flow of the Company
and its Subsidiaries is sufficient to support the credit extended to the Company
pursuant to this Agreement.
SECTION 9.15. NO INDIRECT SECURITY. Notwithstanding any Section or
provision of this Agreement to the contrary, nothing in this Agreement shall (i)
restrict or limit the right or ability of the Company or any of its Subsidiaries
to pledge, mortgage, sell, assign, or otherwise encumber or dispose of any
Margin Stock, or (ii) create an Event of Default arising out of or relating to
any such pledge, mortgage, sale, assignment or other encumbrance or disposition.
SECTION 9.16. WAIVER OF JURY TRIAL. EACH OF THE COMPANY, THE
BORROWING SUBSIDIARIES, THE AGENT, THE EURO-AGENT
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<PAGE>
AND THE BANKS IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, AMONG ANY OF THE PARTIES
HERETO ARISING OUT OF OR RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR ANY NOTE. ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
PARTIES HERETO TO THE WAIVER OF THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY.
SECTION 9.17. EFFECTIVENESS OF AMENDMENT AND RESTATEMENT. The
amendment and restatement of this Agreement dated as of January 1, 1995, shall
be effective as of such date when, and only when, the Agent shall have received
counterparts of this Agreement (as so amended and restated) executed by the
Borrower and all of the Banks and a counterpart of the letter agreement dated as
of January 1, 1995, referred to in SECTION 2.04(b) executed by the Borrower.
- 69 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
ECOLAB INC.
By /s/ Timothy M. Wesolowski
---------------------------
Assistant Treasurer
CITIBANK, N.A., as Agent
By /s/ Michael Mandracchia
---------------------------
Vice President
CITIBANK INTERNATIONAL PLC,
as Euro-Agent
By /s/ Stewart Holmes
---------------------------
Vice President
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Co-Agent
By /s/ William J. Stevenson
---------------------------
Vice President
- 70 -
<PAGE>
BANKS
COMMITMENT
$30,000,000 CITIBANK, N.A.
By /s/ Michael Mandracchia
----------------------------
Vice President
$21,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ William J. Stevenson
----------------------------
Title: Vice President
$16,500,000 COMMERZBANK AKTIENGESELLSCHAFT
GRAND CAYMAN BRANCH
By /s/ William Brent Peterson
----------------------------
Title: Assistant Treasurer
By /s/ Joachim G. Fuchs
----------------------------
Title: Executive V. P.
$16,500,000 CREDIT SUISSE
By /s/ Harry R. Olsen
----------------------------
Title: Member of Senior Mgmt.
By /s/ William P. Murray
----------------------------
Title: Member of Senior Mgmt.
$16,500,000 THE FIRST NATIONAL BANK OF
CHICAGO
By /s/ Steven T. Standbridge
----------------------------
Title: Vice President
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<PAGE>
$16,500,000 NATIONSBANK OF NORTH
CAROLINA, N.A.
By /s/ E. Brooke Bauer
----------------------------
Title: Vice President
$16,500,000 SOCIETE GENERALE
By /s/ Susan Hummel
----------------------------
Title: Asst. Vice President
By /s/ Joseph A. Philbin
----------------------------
Title: Vice President
$16,500,000 WACHOVIA BANK OF GEORGIA, N.A.
By /s/ Tina P. Hayes
----------------------------
Title: Senior V. P.
$150,000,000 Total of the Commitments
- 72 -
<PAGE>
ECOLAB INC.
1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. PURPOSE. The purpose of this 1995 Non-Employee Director Stock Option
Plan (the "Plan") is to advance the interests of Ecolab Inc. (the "Company") and
its stockholders by enabling the Company to attract and retain the services of
experienced and knowledgeable non-employee directors and to provide an incentive
for such directors to increase their proprietary interest in the Company's long-
term success and progress.
2. ADMINISTRATION. The Plan shall be administered by a committee
consisting solely of three or more members of the Board of Directors (the
"Committee"). Grants of stock options under the Plan ("Options") and the amount
and nature of the Options to be granted shall be automatic, as described in
paragraph 5(b)(i) of the Plan. All questions of interpretation of the Plan or
of any Options issued under it shall be determined by the Committee and such
determination shall be final and binding upon all persons having an interest in
the Plan. Any or all powers and discretion vested in the Committee under this
Plan may be exercised by any subcommittee of three or more persons so authorized
by the Committee.
3. PARTICIPATION IN THE PLAN. Directors of the Company who are not
employees of the Company or any subsidiary of the Company ("Eligible Directors")
shall be eligible to participate in the Plan.
4. STOCK SUBJECT TO THE PLAN.
(a) NUMBER OF SHARES. The maximum number of shares of Common Stock that
shall be reserved for issuance under the Plan shall be two hundred thousand
(200,000) shares of the Company's common stock, $1.00 par value (the
"Common Stock"), subject to adjustment upon changes in capitalization of
the Company as provided in subparagraph (b) below. The maximum number of
shares authorized may be increased from time to time by approval of the
Board of Directors and the stockholders of the Company. Shares of Common
Stock that may be issued upon exercise of Options granted under the Plan
shall be applied to reduce the maximum number of shares of Common Stock
remaining available for use under the Plan. The shares to be issued
pursuant to the Plan may be, at the election of the Company, either
treasury shares or shares authorized but unissued. Any shares of Common
Stock that are subject to an Option granted under the Plan (or any portion
thereof) that lapses, expires or for any reason is terminated unexercised
shall automatically again become available for use under the Plan.
<PAGE>
(b) ADJUSTMENTS TO SHARES AND OPTIONS. 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 Company in
any such transaction, the board of directors of the surviving corporation)
will make appropriate adjustment (which determination will be conclusive)
as to the number and kind of securities available for issuance under the
Plan (including, without limitation, the number of securities as to which
Options are to be granted and as to which Options become exercisable
pursuant to paragraphs 5(b)(i) and 5(b)(iii) below after the effective date
of such change) and, in order to prevent dilution or enlargement of the
rights of Optionees, the number, kind and exercise price of securities
subject to outstanding Options.
5. TERMS OF OPTIONS.
(a) NON-STATUTORY STOCK OPTIONS. All Options granted under the Plan shall
be non-statutory stock options not entitled to special tax treatment under
Section 422 of the Internal Revenue Code of 1986, as amended to date and as
may be amended from time to time (the "Code").
(b) TERMS, CONDITIONS AND FORM OF OPTIONS. Each Option granted under the
Plan shall be evidenced by a written agreement in such form as the
Committee shall from time to time approve, which agreements shall comply
with and be subject to the following terms and conditions:
(i) GRANT OF OPTIONS. An Option to purchase shares of Common
Stock shall be granted automatically on the date the Plan is adopted
by the stockholders of the Company to each Eligible Director as of
such date (including directors who are elected or re-elected on such
date), in the following amounts: Class I Directors, one thousand two
hundred (1,200) shares; Class II Directors, two thousand four hundred
(2,400) shares; Class III Directors, six thousand (6,000) shares. An
Option to purchase six thousand (6,000) shares of Common Stock shall
thereafter be granted automatically to each Eligible Director upon the
election (or re-election) of such director to the Board of Directors
for a full term by the stockholders of the Company at an annual
meeting of stockholders, beginning with the annual meeting of
stockholders to be held in
2
<PAGE>
1996. An Eligible Director chosen pursuant to the provisions of
Article IV of the Company's Restated Certificate of Incorporation to
fill a newly created directorship or a vacancy in the Board of
Directors shall be automatically granted, as of the date of the next
subsequent annual meeting of stockholders (unless the director is
chosen on the date of an annual meeting of stockholders, in which case
as of such date) an Option to purchase a number of shares of Common
Stock equal to the product of (i) two thousand (2,000), and (ii) the
number of years remaining in such director's term of office as of the
date of automatic option grant. No eligible Director shall be granted
more than one Option at any annual meeting of stockholders. The
written agreement evidencing each Option granted under the Plan shall
be dated as of the applicable date of grant (the "Date of Grant"). An
Eligible Director accepting such a grant of an Option (an "Optionee")
shall execute and return a copy of such option agreement to the
Secretary of the Company. Whenever there is a reference in the Plan
to the years remaining in the term of office of a director, the word
"year" shall refer to the interval between the annual meeting of
stockholders in one year and such meeting in the next subsequent year.
(ii) OPTION EXERCISE PRICE. The per share price to be paid by
the Optionee at the time an Option is exercised shall be 100% of the
Fair Market Value of one share of Common Stock on the Date of Grant.
For purposes of the Plan, "Fair Market Value" shall mean, as of any
date (or, if no shares were traded or quoted on such date, as of the
next preceding date on which there was such a trade or quote), the
mean between the reported high and low sale prices of the Common Stock
as reported on the New York Stock Exchange Composite Tape.
(iii) EXERCISABILITY OF OPTIONS. Except for an Option which
becomes exercisable pursuant to paragraph 5(b)(iv)(A) below, an Option
may not be exercised before the next subsequent annual meeting of
stockholders after its Date of Grant. The Option of an Optionee whose
remaining term as a director is three years as of the Date of Grant
may be exercised on a cumulative basis to the extent of two thousand
(2,000) of the total shares covered by the Option beginning on the
date of the next subsequent annual meeting of stockholders after the
Date of Grant, an additional two thousand (2,000) of the total shares
3
<PAGE>
beginning on the date of the second subsequent annual meeting of
stockholders after the Date of Grant and the remaining two thousand
(2,000) shares on the date of the third subsequent annual meeting of
stockholders after the Date of Grant. The Option of an Optionee whose
remaining term as a director is two years as of the Date of Grant may
be exercised on a cumulative basis to the extent of two thousand
(2,000) of the total shares covered by the Option beginning on the
date of the next subsequent annual meeting of stockholders after the
Date of Grant and the remaining two thousand (2,000) shares on the
date of the second subsequent annual meeting of stockholders after the
Date of Grant. The Option of an Optionee whose remaining term as a
director is one year as of the Date of Grant may be exercised in full
on the date of the next subsequent annual meeting. Notwithstanding
the foregoing, an Option granted on the date the Plan is adopted by
the stockholders of the Company to (A) a Class I Director may be
exercised in full on the date of the next subsequent annual meeting of
stockholders after the Date of Grant and (B) a Class II Director may
be exercised on a cumulative basis to the extent of one thousand two
hundred (1,200) of the total shares covered by the Option beginning on
the date of the next subsequent annual meeting of stockholders after
the Date of Grant and the remaining one thousand two hundred (1,200)
shares on the date of the second subsequent annual meeting of
stockholders after the Date of Grant.
(iv) DURATION OF OPTIONS. Each Option shall terminate ten years
after its Date of Grant. Each Option shall terminate and may no
longer be exercised if and when the Optionee ceases to serve as a
director of the Company, except (A) if the Optionee ceases to serve as
a director of the Company by reason of death or the occurrence of an
event which constitutes permanent and total disability (within the
meaning of Section 22(e)(3) of the Code), then the Option shall become
immediately exercisable in full and shall remain exercisable until the
earlier of the expiration of five years or the remaining term of the
Option, and (B) if the Optionee ceases to serve as a director of the
Company for any other reason, then the Option shall remain exercisable
to the extent that the Option was exercisable on the date the Optionee
ceased to serve as a director of the Company until the earlier of the
expiration of five years after the date the Optionee ceased to serve
as a director of the Company or the remaining term of the Option.
(v) MANNER OF OPTION EXERCISE. An Option may be exercised by an
Optionee in whole or in part from time to time, subject to the
conditions
4
<PAGE>
contained in the Plan and in the agreement evidencing such Option, by
giving written notice of exercise to the Company at its principal
executive office (Attn: Secretary), such notice shall specify the
particular Option that is being exercised and the number of shares
with respect to which the Option is being exercised and shall be
accompanied by payment of the total purchase price of the shares to be
purchased under the Option. The Company shall not be required to sell
or issue any shares under any outstanding Option if, in the sole
opinion of the Committee, the issuance of such shares would constitute
a violation by the Optionee or the Company of any applicable law or
regulation of any governmental authority, including without limitation
federal and state securities laws.
(vi) PAYMENT OF EXERCISE PRICE. The total purchase price of the
shares to be purchased may be paid entirely in cash (including check,
bank draft or money order) or by tendering shares of the Company's
Common Stock already owned by the Optionee ("Previously Acquired
Shares"), or by an combination thereof; provided, however, that any
such Previously Acquired Shares tendered by an Optionee must be
"mature" shares, as such term may be defined from time-to-time by the
Financial Accounting Standards Board or any successor body.
(vii) RESTRICTIONS ON TRANSFER. Except pursuant to
testamentary will or the laws of descent and distribution or as
otherwise expressly permitted by the Plan, no right or interest of any
Optionee in an Option prior to the exercise or vesting of such Option
will be assignable or transferable, or subjected to any lien, during
the lifetime of the Optionee, either voluntarily or involuntarily,
directly or indirectly, by operation of law or otherwise. An Optionee
will, however, be entitled to designate a beneficiary to receive an
Option upon such Optionee's death, and in the event of an Optionee's
death, payment of any amounts due under the Plan will be made to, and
exercise of any Options (to the extent permitted pursuant to paragraph
5(b)(iii)(A) above may be made by, the Optionee's legal
representatives, heirs and legatees.
(viii) SUCCESSIVE OPTIONS. Successive Options may be granted
to the same Optionee, whether or not the Options previously granted to
such Optionee remain unexercised. An Optionee may exercise an Option
if then exercisable, notwithstanding that Options previously granted
to such Optionee remain unexercised.
(ix) WITHHOLDING. The Company may require an Optionee to
promptly pay the Company the amount of any federal, state or local
withholding or other employment-related tax attributable to the
Optionee's exercise of an Option before acting on the Optionee's
notice of exercise of
5
<PAGE>
the Option. An Optionee may satisfy any such withholding or
employment-related tax obligation by electing to tender Previously
Acquired Shares or withhold shares of Common Stock that are to be
issued upon exercise of an Option, or by a combination of such
methods.
6. LIMITATION OF RIGHTS.
(a) NO RIGHT TO CONTINUE AS A DIRECTOR. Neither the plan, nor the
granting of an Option nor any other action taken pursuant to the Plan,
shall constitute or be evidence of any agreement or understanding, express
or implied, that the Company will retain a director for any period of time,
or at any particular rate of compensation.
(b) RIGHTS AS A STOCKHOLDER. No Optionee shall have any rights as a
stockholder with respect to any shares of Common Stock covered by an Option
granted pursuant to the Plan until the Optionee shall have become the
holder of record of such shares, and no adjustments shall be made for
dividends or other distributions or other rights as to which there is a
record date preceding the date the Optionee becomes the holder of record of
such shares.
7. PLAN AMENDMENT, MODIFICATION AND TERMINATION. The Board of Directors
may suspend or terminate the Plan or any portion thereof at any time, and may
amend the Plan from time to time in such respects as the Board of Directors may
deem advisable in order that Options under the Plan will conform to any change
in applicable laws or regulations or in any other respect the Board of Directors
may deem to be in the best interests of the Company; provided, however, that no
amendments to the Plan will be effective without approval of the stockholders of
the Company if stockholder approval of the amendment is then required pursuant
to Rule 16b-3 under the Exchange Act, the Code or the rules of the New York
Stock Exchange. No termination, suspension or amendment of the Plan may
adversely affect any outstanding Option without the consent of the affected
Optionee; provided, however, that this sentence will not impair the right of the
Committee to take whatever action it deems appropriate under paragraph 4(b)
above.
8. EFFECTIVE DATE AND DURATION OF THE PLAN. The Plan shall be effective
on the date of adoption by the stockholders of the Company. The Plan shall
terminate at midnight on June 30, 2000, and may be terminated prior thereto by
action of the Board of Directors, and no Option shall be granted after such
termination. Options outstanding upon termination of the Plan may continue to
be exercised in accordance with their terms.
9. GOVERNING LAWS. The Plan and all rights and obligations under the
Plan shall be construed in accordance with and governed by the laws of the State
of Minnesota.
6
<PAGE>
ECOLAB
EXECUTIVE DEATH BENEFITS PLAN
(As Amended and Restated Effective March 1, 1994)
Pursuant to Section 8.1 of the Ecolab Executive Death Benefits Plan (1991
Restatement) (the "Plan"), and the resolutions of the Board of Directors of
Ecolab Inc. (the "Company") dated February 26, 1994, the Company hereby amends
and restates the Plan in its entirety to read as follows, effective March 1,
1994.
ARTICLE I
PREFACE
SECTION 1.1. EFFECTIVE DATE. The effective date of this amendment and
restatement of the Plan is March 1, 1994. The benefit, if any, payable with
respect to a former Executive who Retired or died prior to the Effective Date
(and who is not rehired by a member of the Controlled Group thereafter) shall be
determined by, and paid in accordance with, the terms and provisions of the Plan
as in effect prior to the Effective Date.
SECTION 1.2. PURPOSE OF THE PLAN. The purpose of this Plan is to provide
further means whereby the Company may afford financial security for certain
management and highly compensated employees who perform management and
professional functions for the Company and certain related entities, by
providing their beneficiaries with a level of protection from the financial
losses that may be suffered on account of the death of such an employee.
SECTION 1.3. ADMINISTRATIVE DOCUMENT. This Plan includes the Ecolab Inc.
Administrative Document for Non-Qualified Benefit Plans (the "Administrative
Document"), which is incorporated herein by reference.
ARTICLE II
DEFINITIONS
Words and phrases used in this Plan with initial capital letters which are
defined in the Administrative Document are used herein as so defined, unless
specifically defined herein or the context clearly indicates otherwise. The
following words and phrases when used in this Plan with initial capital letters
shall have the following respective meanings, unless the context clearly
indicates otherwise:
SECTION 2.1. "DEATH BENEFICIARY." An Executive's Death Beneficiary shall be
the person or persons (natural or otherwise) designated by the Executive as his
primary or contingent Death
<PAGE>
2
Beneficiary under this Plan. Such a designation may be made, revoked or changed
at any time (without the consent of any previously designated Death Beneficiary)
only by a written instrument in a form prescribed by the Administrator, signed
by the Executive and delivered to the Administrator during the Executive's
lifetime.
SECTION 2.2. "DISABILITY" or "DISABLED." An Executive shall be deemed to have
a "Disability" or be "Disabled" if the Executive's active employment with an
Employer ceases due to a disability that entitles the Executive to benefits
under any long-term disability plan sponsored by the Company. An Executive's
Disability shall continue until the earliest to occur of (1) the date on which
the Executive's employment with the Controlled Group as an Executive terminates,
(2) the date the Executive recovers from the Disability, or (3) the date of
termination of payments under the Company's long-term disability plan for any
reason.
SECTION 2.3. "EXECUTIVE" shall mean an Employee who is selected by the
Administrator to participate in this Plan and who is in a pay grade of 24 or
above.
SECTION 2.4. "EXECUTIVE DEATH BENEFITS" shall mean the benefits described in
Article III.
SECTION 2.5. "FINAL AVERAGE COMPENSATION" shall mean the average of an
Executive's Annual Compensation for the five (5) consecutive Plan Years of
employment with the Employers preceding the Executive's Retirement (including
the Plan Year of Retirement) which yields the highest average compensation. If
the Executive has been employed by the Employers for a period of less than five
(5) Plan Years preceding his Retirement, Final Average Compensation shall be
calculated using the Executive's total period of employment with the Employers.
SECTION 2.6. "PLAN" shall mean the Ecolab Executive Death Benefits Plan, as
described herein and as it may be amended from time to time.
SECTION 2.7. "RETIREMENT" or "RETIRED." The Retirement of an Executive shall
occur upon his termination of employment with the Controlled Group for any
reason other than death or Disability on or after (1) his attainment of age 55
and the completion of at least 10 Years of Eligibility Service, or (2) his
attainment of age 65. For purposes of determining Retirement under this Plan,
the employment of a Disabled Executive shall be deemed to have terminated "for
reasons other than Disability" at such time as he ceases to meet the definition
of Disability, provided he does not resume active employment with the Controlled
Group.
<PAGE>
3
SECTION 2.8. "YEAR OF ELIGIBILITY SERVICE."
(1) An Executive shall be credited with one Year of Eligibility Service
for each year of "Continuous Service" (or such other defined term which is used
to determine vesting service) as defined by and credited to the Executive under
the Pension Plan.
(2) A Disabled Executive shall continue to accrue Years of Eligibility
Service during the period of his Disability for purposes of determining his
eligibility for Retirement hereunder.
ARTICLE III
EXECUTIVE DEATH BENEFITS
SECTION 3.1. COVERAGE. An Employee shall become covered under the Plan as of
the first date on or after the Effective Date on which he is an Executive.
SECTION 3.2. EXECUTIVE DEATH BENEFIT FOR ACTIVELY EMPLOYED EXECUTIVES.
(1) ELIGIBILITY. An Executive's entitlement to the Executive Death
Benefit coverage described in this Section 3.2 shall cease on the earliest to
occur of (a) thirty-one (31) days after the date the Executive's employment as
an Executive ceases for any reason other than death or Disability, (b) the date
the Executive Retires, or (c) with respect to a Disabled Executive, the date the
Executive is no longer Disabled, provided he does not resume active employment
as an Executive.
(2) AMOUNT OF EXECUTIVE DEATH BENEFIT.
(a) The Death Beneficiary of a deceased Executive who is covered by
the provisions of this Section 3.2 shall be entitled to receive a lump sum
Executive Death Benefit in an amount equal to the lesser of (i) three
million dollars ($3,000,000) or (ii) three hundred percent (300%) of the
Executive's Annual Compensation (A) for the last full Plan Year that ended
prior to the Executive's death in which the Executive actively performed
services as an Employee, or (B) if the Executive did not actively perform
services as an Employee in any full prior Plan Year, for the last Plan Year
in which the Executive actively performed services as an Employee, in which
case his Annual Compensation shall be annualized based on the number of
days employed by the Controlled Group out of a Plan Year of 365 days.
<PAGE>
4
(b) The Executive Death Benefit described in paragraph (a) shall be
reduced (but not below zero) by any amount payable under any life insurance
or other death benefit covering the Executive which is provided by, or
payable by or on behalf of a member of the Controlled Group.
(c) If the Executive Death Benefit described in paragraph (a), after
any reduction described in (b), is subject to United States federal income
tax when paid to the Executive's Death Beneficiary, the amount of such
Executive Death Benefit shall be "grossed-up" for federal income taxes,
using a thirty-four percent (34%) tax rate, so that the total Executive
Death Benefit under this Section 3.2 shall be equal to the amount
calculated under paragraph (a), after any reduction described in (b),
divided by sixty-six percent (66%).
SECTION 3.3. EXECUTIVE DEATH BENEFIT FOR RETIRED EXECUTIVES.
(1) ELIGIBILITY. The Death Beneficiary of an Executive who dies while he
is Retired shall be entitled to receive the Executive Death Benefit described in
this Section 3.3.
(2) AMOUNT OF EXECUTIVE DEATH BENEFIT.
(a) The Death Beneficiary of a deceased Executive who is covered by
the provisions of this Section 3.3 shall be entitled to receive a lump sum
Executive Death Benefit in an amount equal to the lesser of (i) seven
hundred and fifty thousand dollars ($750,000) or (ii) two hundred percent
(200%) of the Executive's Final Average Compensation.
(b) The Executive Death Benefit described in paragraph (a) of this
Subsection shall be reduced (but not below zero) by any amount payable
under any life insurance or other death benefit covering the Executive
which is provided by, or payable by or on behalf of a member of the
Controlled Group.
SECTION 3.4. DISABLED EXECUTIVES. An Executive who is Disabled shall be
entitled to the Executive Death Benefit described in Section 3.2, until coverage
terminates in accordance with the provisions of Section 3.2(1). In the event an
Executive dies while he is Disabled, no Executive Death Benefit shall be payable
under the provisions of Section 3.3.
SECTION 3.5. PROTECTIVE PROVISIONS. Notwithstanding the preceding Sections of
the Article, if an Executive commits suicide during the two-year period
beginning on the date of his commencement of participation in the Plan or makes
any material misstatement of information or nondisclosure of medical history,
<PAGE>
5
then, in the Administrator's sole and absolute discretion, no Executive Death
Benefits shall be payable hereunder or such Executive Death Benefits may be paid
in a reduced amount (as determined by the Administrator).
ARTICLE IV
PAYMENT OF EXECUTIVE DEATH BENEFITS
SECTION 4.1. COMMENCEMENT OF EXECUTIVE DEATH BENEFITS. Executive Death
Benefits hereunder shall be paid to the Executive's Death Beneficiary after the
amount of the Executive Death Benefit and the identity of the Death Beneficiary
have been identified and, in any event, within ninety (90) days after the date
of the Executive's death. Notwithstanding the foregoing, if payment during such
90-day period is prevented due to reasons outside of the Administrator's
control, payment of the Executive Death Benefits shall be made as soon as
practicable following the date of the Executive's death.
ARTICLE V
AMENDMENT AND TERMINATION
SECTION 5.1. EFFECT OF AMENDMENT AND TERMINATION. No amendment or termination
shall operate to deprive any Executive or, in the event of the Executive's
death, any Death Beneficiary of any Executive Death Benefit otherwise payable
with respect to an Executive who has Retired or died prior to the date such
amendment or termination is adopted.
IN WITNESS WHEREOF, Ecolab Inc. has executed this Executive Death Benefits
Plan and has caused its corporate seal to be affixed this 29th day of August,
1994.
ECOLAB INC.
By: /s/ Michael E. Shannon
------------------------
Michael E. Shannon
Vice Chairman, Chief
Financial and
Administrative Officer
(Seal)
/s/ Kenneth A. Iverson
-------------------------------
Kenneth A. Iverson
Secretary
<PAGE>
ECOLAB
EXECUTIVE LONG-TERM DISABILITY PLAN
(As Amended and Restated Effective January 1, 1994)
Pursuant to Section 7.1 of the Ecolab Executive Long-Term Disability Plan
(the "Plan") and the resolutions of the Board of Directors of Ecolab Inc. dated
February 26, 1994, Ecolab Inc. hereby amends and restates the Plan in its
entirety to read as follows, effective January 1, 1994.
ARTICLE I
PREFACE
SECTION 1.1. EFFECTIVE DATE. The effective date of this amendment and
restatement of the Plan is January 1, 1994. The benefit, if any, payable with
respect to a former Executive who became Disabled prior to the Effective Date
(and who does not recover from the Disability and is not rehired by a member of
the Controlled Group thereafter) shall be determined by, and paid in accordance
with, the terms and provisions of the Plan as in effect prior to the Effective
Date.
SECTION 1.2. PURPOSE OF THE PLAN. The purpose of this Plan is to provide
further means whereby the Company may afford financial security for certain
management and highly compensated employees who perform management and
professional functions for the company and certain related entities, by
providing a level of protection from the financial losses that may be suffered
on account of the disability of such an employee.
SECTION 1.3. ADMINISTRATIVE DOCUMENT. This Plan includes the Ecolab Inc.
Administrative Document for Non-Qualified Benefit Plans (the "Administrative
Document"), which is incorporated herein by reference.
ARTICLE II
DEFINITIONS
Words and phrases used herein with initial capital letters which are
defined in the Administrative Document or the Ecolab Long-Term Disability Plan
are used herein as so defined, unless otherwise specifically defined herein or
the context clearly indicates otherwise. The following words and phrases when
used in this Plan with initial capital letters shall have the following
respective meanings, unless the context clearly indicates otherwise:
<PAGE>
2
SECTION 2.1. "ANNUAL EARNINGS" for a Plan Year shall mean the Annual Earnings
of an Executive used under the LTD Plan for purposes of determining benefits
under the LTD Plan; provided, however, that (1) Annual Earnings shall not be
subject to the limitation contained in Section 505(b)(7) of the code, (2) Annual
Earnings shall include an Executive's deferrals under the Ecolab Mirror Savings
Plan, and (3) Annual Earning shall not exceed $700,000.
SECTION 2.2. "DISABILITY" or "DISABLED." An Executive shall be deemed to have
a "Disability" or be "Disabled" if the Executive's active employment with an
Employer ceases due to a Total Disability that entitles the Executive to
benefits under the LTD Plan.
SECTION 2.3. "EXECUTIVE" shall mean an Employee who is selected by the
Administrator to participate in the Plan and (1) who is in a pay grade of 24 or
above, or (2) whose Annual Earnings exceeds the dollar limitation described in
Code Section 505(b)(7) for a Plan Year.
SECTION 2.4. "EXECUTIVE DISABILITY BENEFITS" shall mean the benefits described
in Article III.
SECTION 2.5. "LTD PLAN" shall mean the Ecolab Long-Term Disability Plan, as
amended from time to time.
SECTION 2.6. "PLAN" shall mean the Ecolab Executive Long-Term Disability Plan,
as described herein and as it may be amended from time to time.
ARTICLE III
EXECUTIVE DISABILITY BENEFITS
SECTION 3.1. COVERAGE.
(1) COMMENCEMENT OF COVERAGE. An Employee shall become covered under the
Plan as of the first date on or after the Effective Date on which he is an
Executive.
(2) TERMINATION OF COVERAGE. An Executive shall cease to be covered under
the Plan on the earliest to occur of (a) the date the Executive ceases to be
employed by the Employer for any reason other than Disability, (b) the date of a
change in the Executive's employment status so that he no longer satisfies the
requirements of an Executive, or (c) the date the Plan is terminated or amended
to eliminate coverage with respect to the Executive.
<PAGE>
3
SECTION 3.2. AMOUNT OF EXECUTIVE DISABILITY BENEFITS. An Executive who
becomes Disabled shall be entitled to a monthly Executive Disability Benefit
equal to sixty percent (60%) of one-twelfth (1/12) of the Executive's Annual
Earnings, reduced by (1) the amount of the Monthly Benefit payable to the
Executive under the LTD Plan, and (2) the amount of any benefit reductions made
to the Monthly Benefits under the LTD Plan pursuant to the offset provisions of
the LTD Plan; provided, however, that in no event shall the monthly Executive
Disability Benefit under this Plan, when combined with the amount of benefit
under the LTD Plan, exceed $35,000.
ARTICLE IV
PAYMENT OF EXECUTIVE DISABILITY BENEFITS
SECTION 4.1. COMMENCEMENT OF EXECUTIVE DISABILITY BENEFITS. An Executive's
Executive Disability Benefits shall be paid to the Executive at the same time
and under the same conditions as the Executive's Monthly Benefits under the LTD
Plan. Notwithstanding the foregoing, in the event that payment at such time is
prevented due to reasons outside of the Administrator's control, the executive
Disability Benefits shall commence as soon as practicable after the Monthly
Benefits commence under the LTD Plan, and the first payment hereunder shall
include any Disability Benefits not made as a result of the delay in payment.
SECTION 4.2. TERMINATION OF EXECUTIVE DISABILITY BENEFITS. Payment of an
Executive's Executive Disability Benefits shall cease on the earliest to occur
of (1) the date the Executive recovers from the Disability, (2) the date of
termination of Monthly Benefits under the LTD Plan for any reason, or (3) the
date the Plan is terminated or amended to eliminate Executive Disability
Benefits with respect to the Executive.
IN WITNESS WHEREOF, Ecolab Inc. has executed this Executive Long-Term
Disability Plan and has caused its corporate seal to be affixed this 29th day of
August, 1994.
ECOLAB INC.
By: /s/ Michael E. Shannon
------------------------------
Michael E. Shannon
Vice Chairman, Chief Financial
and Administrative Officer
(Seal)
Attest:
/s/ Kenneth A. Iverson
-----------------------------
Kenneth A. Iverson
Secretary
<PAGE>
ECOLAB
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(AS AMENDED AND RESTATED EFFECTIVE JULY 1, 1994)
Pursuant to Section 7.1 of the Ecolab Supplemental Executive Retirement
Plan (the "Plan") and the resolutions of the Board of Directors of Ecolab Inc.
dated February 26, 1994, Ecolab Inc. (the "Company") hereby amends and restates
the Plan in its entirety to read as follows:
ARTICLE I
PREFACE
SECTION 1.1. EFFECTIVE DATE. The effective date of this amendment and
restatement of the Plan is July 1, 1994. The benefit, if any, payable with
respect to a former Executive who Retired or died prior to the Effective Date
(and who is not rehired by a member of the Controlled Group thereafter) shall be
determined by, and paid in accordance with, the terms and provisions of the Plan
as in effect prior to the Effective Date.
SECTION 1.2. PURPOSE OF THE PLAN. The purpose of this Plan is to provide
additional retirement benefits for certain management and highly compensated
employees who perform management and professional functions for the Company and
certain related entities.
SECTION 1.3. ADMINISTRATIVE DOCUMENT. This Plan includes the Ecolab Inc.
Administrative Document for Non-Qualified Plans (the "Administrative Document"),
which is incorporated herein by reference.
ARTICLE II
DEFINITIONS
Words and phrases used herein with initial capital letters which are
defined in the Pension Plan or the Administrative Document are used herein as so
defined, unless otherwise specifically defined herein or the context clearly
indicates otherwise. The following words and phrases when used in this Plan
with initial capital letters shall have the following respective meanings,
unless the context clearly indicates otherwise:
SECTION 2.1. "ACTUARIAL FACTORS" shall mean the actuarial assumptions set
forth in Exhibit A which is attached to and forms a part of this Plan.
<PAGE>
2
SECTION 2.2. "DEATH BENEFICIARY."
(1) The term "Death Beneficiary" shall mean the person or persons
designated by the Executive to receive SERP Benefits hereunder in the event of
his death. The designation of a Death Beneficiary under the Plan may be made,
revoked or changed only by an instrument (in form prescribed by the
Administrator) signed by the Executive and delivered to the Administrator during
the Executive's lifetime. If the Executive is married on the date of his death
and has been married to such spouse throughout the one-year period ending on the
date of death, his designation of a Death Beneficiary other than, or in addition
to, his spouse under the Plan shall not be effective unless such spouse has
consented in writing to such designation.
(2) Any SERP Benefits remaining to be paid after the death of a Death
Beneficiary shall be paid to the Death Beneficiary's estate, except as otherwise
provided in the Executive's Death Beneficiary designation.
SECTION 2.3. "DISABILITY" or "DISABLED." An Executive shall be deemed to have
a "Disability" or be "Disabled" if the Executive's active employment with an
Employer ceased due to a disability that entitles the Executive to benefits
under any long-term disability plan sponsored by the Company. An Executive's
Disability shall continue until the earliest to occur of (1) the date on which
the Executive's employment with the Controlled Group as an Executive terminates,
(2) the date the Executive recovers from the Disability, or (3) the date of
termination of payments under the Company's long-term disability plan for any
reason.
SECTION 2.4. "EXECUTIVE" shall mean an Employee (1) who is in a pay grade of
24 or above, and (2) who is selected by the Administrator to participate in the
Plan.
SECTION 2.5. "FINAL AVERAGE COMPENSATION" shall mean the average of an
Executive's Annual Compensation for the five (5) consecutive Plan Years of
employment with the Employers preceding the Executive's Retirement or death
(including the year of the Executive's Retirement or death) which yields the
highest average compensation. If an Executive has been employed by the
Employers for a period of less than five (5) Plan Years preceding his Retirement
or death, Final Average Compensation shall be calculated using the Executive's
total period of employment with the Employers (calculated using complete months
of employment).
SECTION 2.6. "MINIMUM BENEFIT" shall mean one-twelfth (1/12) of the sum of the
Executive's:
<PAGE>
3
(1) benefit as of June 30, 1994, if any, as a result of the crediting of
Years of Past Service Credit; and
(2) annual SERP Benefit (a) based on Final Average Compensation, Years of
Eligibility Service, and Years of Benefit Service as of June 30, 1994 (i.e.,
frozen target benefit), reduced by (b) the reductions under the SERP for the
Executive's (i) Pension Benefit, fifty percent (50%) of Primary Insurance
Amount, and Savings Plan Benefit, as those terms were defined in SERP on June
30, 1994, but based on actual benefit levels at the Executive's retirement, and
(ii) Mirror Pension Benefit, as that term was defined in SERP on July 1, 1994,
but based on the actual benefit level at the Executive's retirement to the
extent it is actually payable from the Mirror Pension Plan (i.e., current
benefit level offsets).
SECTION 2.7. "MIRROR PENSION BENEFIT" shall mean one-twelfth (1/12) of the
annual total benefit payable to an Executive under the Ecolab Mirror Pension
Plan calculated on a single life annuity basis commencing at age 65, as
determined by the Administrator.
SECTION 2.8. "PENSION BENEFIT" shall mean one-twelfth (1/12) of the annual
total pensions payable to the Executive under any pension plan (other than the
Ecolab Savings Plan, as such plan may be amended from time to time) sponsored by
a member of the Controlled Group which satisfies the qualification requirements
of the Code calculated on a single life annuity basis commencing at age 65, as
determined by the Administrator (including projected payments from any former
pension plan or former profit sharing plan which reduces the pension payable
under the Pension Plan).
SECTION 2.9. "PLAN" shall mean this Ecolab Supplemental Executive Retirement
Plan, as it may be amended from time to time.
SECTION 2.10. "PRIMARY INSURANCE AMOUNT" shall mean the monthly primary social
security benefit the Executive will be entitled to at age 65, determined in
accordance with Exhibit B which is attached to and forms a part of this Plan.
SECTION 2.11. "RETIREMENT" or "RETIRED." The Retirement of an Executive shall
occur upon his termination of employment with the Controlled Group for any
reason other than death or Disability on or after (1) his attainment of age 55
and the completion of at least 10 Years of Eligibility Service, or (2) his
attainment of age 65. For purposes of determining Retirement under this Plan,
the employment of a Disabled Executive shall be deemed to have terminated "for
reasons other than Disability" at such time as he
<PAGE>
4
ceases to meet the definition of Disability, provided he does not resume active
employment with the Controlled Group.
SECTION 2.12. "SAVINGS PLAN BENEFIT" shall mean the benefit payable to the
Executive calculated as of July 1, 1994 in accordance with Exhibit C which is
attached to and forms a part of this Plan.
SECTION 2.13. "SERP BENEFIT" shall mean the retirement benefit determined under
Article III.
SECTION 2.14. "SERP PRE-RETIREMENT BENEFIT" shall mean the pre-retirement
benefit determined under Article IV.
SECTION 2.15. "YEAR OF BENEFIT SERVICE."
(1) An Executive shall be credited with one Year of Benefit Service for
each year of "Credited Service" (or such other defined term which is used to
determine service for benefit accrual purposes) as defined by and credited to
the Executive under the Pension Plan.
(2) A Disabled Executive shall continue to accrue Years of Benefit Service
during the period of his Disability for purposes of determining the amount of
his SERP Benefit hereunder.
(3) In no event shall an Executive's Years of Benefit Service under the
Plan exceed thirty (30) years.
SECTION 2.16. "YEAR OF ELIGIBILITY SERVICE."
(1) An Executive shall be credited with one Year of Eligibility Service
for each year of "Continuous Service" (or such other defined term which is used
to determine service for vesting purposes) as defined by and credited to the
Executive under the Pension Plan.
(2) A Disabled Executive shall continue to accrue Years of Eligibility
Service during the period of his Disability for purposes of determining the
amount of his SERP Benefit hereunder.
SECTION 2.17. "YEAR OF PAST SERVICE CREDIT" means the excess, if any, of the
thirty (30) Years of Benefit Service required to earn the maximum SERP Benefit
hereunder over the number of Years of Benefit Service it would be possible for
the Executive to accumulate by his attainment of age 65 or, if later, the date
of his Retirement.
ARTICLE III
SERP BENEFIT
<PAGE>
5
SECTION 3.1. COVERAGE.
(1) COMMENCEMENT OF COVERAGE. An Employee shall become covered under the
Plan as of the first date on or after the Effective Date on which he is an
Executive.
(2) TERMINATION OF COVERAGE. An Executive shall cease to be covered under
the Plan on the earliest to occur of (a) the date the Executive ceases to be
employed by the Controlled Group for any reason other than death, Disability or
Retirement, or (b) with respect to a Disabled Executive, the date the Executive
is no longer Disabled, provided he does not resume active employment as an
Executive or incur a Retirement.
SECTION 3.2. AMOUNT OF SERP BENEFIT.
(1) Each Executive shall, upon Retirement, be entitled to a SERP Benefit
which shall be determined as hereinafter provided. The SERP Benefit shall be a
monthly retirement benefit payable in the form of a 15 year certain benefit
commencing upon the Executive's attainment of age 65 equal to the sum of (a) and
(b), where:
(a) = one-twelfth (1/12th) of the Executive's Final Average
Compensation, multiplied by two percent (2%) for each of the
Executive's Years of Benefit Service (up to a maximum of 30),
reduced by (i) the Pension Benefit, (ii) the Mirror Pension
Benefit, (iii) fifty percent (50%) of the Primary Insurance
Amount, and (iv) the Savings Plan Benefit; and
(b) = the difference between (i) one-twelfth (1/12th) of the
Executive's Final Average Compensation, and (ii) one-twelfth
(1/12th) of the Executive's Annual Compensation for the Plan Year
in which the Executive commenced employment with the Controlled
Group, multiplied by one percent (1%) for each of the Executive's
Years of Past Service Credit (if any).
For purposes of subsection (1)(b)(ii), if the Executive was not an Employee for
the entire Plan Year, his Annual Compensation for such Plan Year shall be
annualized based on the number of days employed by the Controlled Group out of a
Plan Year of 365 days.
(2) In no event shall an Executive's monthly SERP Benefit be less than the
amount of his Minimum Benefit.
SECTION 3.3. TIME OF PAYMENT.
<PAGE>
6
(1) IN GENERAL. An Executive's SERP Benefit shall be paid or commence to
be paid within 90 days after the later of the date the Executive attains age 65
or the date of the Executive's Retirement. Notwithstanding the foregoing, if
payment at such time is prevented due to reasons outside of the Administrator's
control, the SERP Benefits shall commence to be paid as soon as practicable
after the end of such 90-day period, and the first payment hereunder shall
include any SERP Benefits not made as a result of the delay in payment.
(2) EARLY COMMENCEMENT. Notwithstanding the provisions of Subsection (1)
of this Section, upon the written request of the Executive (on a form prescribed
by the Administrator) which is filed with the Administrator prior to the
Executive's termination of employment with the Controlled Group because of
involuntary termination, death or Disability, or at least one (1) year prior to
the Executive's voluntary Retirement, the Administrator may, in its complete and
sole discretion, commence payment of the SERP Benefits to the Executive at a
specified date which is after the Executive's Retirement but prior to the
Executive's attainment of age 65; provided, however, that the amount of the SERP
Benefit shall be reduced by one/two hundred and eightieth (1/280th) for each
month that the date of the commencement of the SERP Benefits precedes the date
on which the Executive will attain age 62.
SECTION 3.4. FORM OF PAYMENT.
(1) IN GENERAL. An Executive who does not want his SERP Benefit to paid
in the form of the 15-year certain benefit described in Section 3.2 may elect to
receive his SERP Benefit in any of the optional forms of benefit payment which
are permitted under the Pension Plan. Any such optional form of benefit shall
be the Actuarial Equivalent of the SERP Benefit payable to the Executive in the
form specified in Section 3.2.
(2) LUMP SUM PAYMENT.
(a) Notwithstanding the provisions of Subsection (1) of this Section,
an Executive may elect to receive the SERP Benefit in the form of a single
lump sum payment.
(b) The lump sum payment described in paragraph (a) of this
Subsection shall be calculated by converting the Executive's SERP Benefit
(calculated in accordance with the provisions of Section 3.2) at the time
of the commencement of such Benefit into a lump sum amount of equivalent
actuarial value when computed using the Actuarial Factors specified in
Exhibit A for this purpose, and then applying the ten percent (10%)
reduction, if applicable, provided for in Subsection (3) of this Section.
<PAGE>
7
(c) Notwithstanding any provision of the Plan to the contrary, in the
event the equivalent actuarial value of the Executive's SERP Benefit, when
computed using the Actuarial Factors specified in Exhibit A for this
purpose, does not exceed $5,000, such Benefit shall be paid in the form of
a single lump sum payment.
(3) FORM/TIMING OF ELECTION. Any election of an optional form of benefit
must be in writing (on a form provided by the Administrator) and filed with the
Administrator prior to the Executive's termination of employment with the
Controlled Group because of involuntary termination, death or Disability or at
least one (1) year prior to the Executive's voluntary Retirement. Any such
election may be changed at any time and from time to time without the consent of
any existing Death Beneficiary or any other person (except as described in
Section 2.2), by filing a later signed written election with the Administrator;
provided that any election made less than one (1) year prior to the Executive's
voluntary Retirement shall not be valid, and in such case, payment shall be made
in accordance with the latest valid election of the Executive. Notwithstanding
the foregoing, an Executive shall be permitted to make an election to receive
his SERP Benefit in the form of a lump sum payment within the one (1) year
period prior to his voluntary Retirement if (and only if) the amount of the SERP
Benefit payable to the Executive is reduced by ten percent (10%).
ARTICLE IV
SERP PRE-RETIREMENT BENEFITS
SECTION 4.1. ELIGIBILITY. The Death Beneficiary of an Executive who dies
after becoming vested in his SERP Benefits (including the Death Beneficiary of
an Executive who dies while he is Disabled) but prior to commencing to receive
SERP Benefits hereunder shall be entitled to receive the SERP Pre-Retirement
Benefits described in Section 4.2 in lieu of any other benefits described in the
Plan.
SECTION 4.2. AMOUNT, FORM AND TIMING OF SERP PRE-RETIREMENT BENEFITS. A Death
Beneficiary who is eligible for a SERP Pre-Retirement Benefit shall receive a
SERP Pre-Retirement Benefit based on the Executive's SERP Benefit hereunder.
The SERP Pre-Retirement Benefit shall be calculated in accordance with, and
payable at the same time and (except as provided in Section 3.4(2)) in the same
manner as, the pre-retirement death benefits and (if applicable) the optional
death benefits described in the Pension Plan, as determined by the
Administrator.
ARTICLE V
VESTING
<PAGE>
8
SECTION 5.1. VESTING.
(1) IN GENERAL. Except as provided in Subsection (2) of this Section, an
Executive shall become vested in the SERP Benefits upon (a) his attainment of
age 65 while in the employ of the Controlled Group, or (b) his attainment of age
55 while in the employ of the Controlled Group and his completion of ten (10)
Years of Eligibility Service.
(2) FORFEITURE PROVISIONS. Notwithstanding the provisions of Subsection
(1) of this Section, the Employers shall be relieved of any obligation to pay or
provide any future SERP Benefits or SERP Pre-Retirement Benefits under this Plan
and shall be entitled to recover amounts already distributed if, without the
written consent of the Company, the Executive, whether before or after
termination with the Controlled Group:
(a) materially breaches the terms of any confidentiality or
noncompete agreement entered into with any member of the Controlled Group;
or
(b) participates in any dishonesty, fraud, misrepresentation,
embezzlement or deliberate injury or attempted injury, in each case related
to any member of the Controlled Group; or
(c) commits any unlawful or criminal activity of a serious nature; or
(d) commits any intentional and deliberate breach of a duty or duties
that, individually or in the aggregate, are material in relation to the
Executive's overall duties.
The provisions of this Subsection (2) shall not apply to an Executive's Minimum
Benefit.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. EFFECT OF AMENDMENT AND TERMINATION. Notwithstanding any
provision of the Plan (including the Administrative Document) to the contrary,
no amendment or termination of the Plan shall, without the consent of the
Executive (or, in the case of his death, his Death Beneficiary), adversely
affect the vested SERP Benefit or vested SERP Pre-Retirement Benefit under the
Plan of any Executive or Death Beneficiary as such Benefit exists on the date of
such amendment or termination.
SECTION 6.2. PROTECTIVE PROVISIONS. Notwithstanding any provision of the Plan
to the contrary, if an Executive commits suicide during the two-year period
beginning on the date of his commencement of participation in the Plan or makes
any material misstatement of information or nondisclosure of medical history,
<PAGE>
9
then, in the Administrator's sole and absolute discretion, no SERP Benefits or
SERP Pre-Retirement Benefits shall be payable hereunder or such Benefits may be
paid in a reduced amount (as determined by the Administrator).
IN WITNESS WHEREOF, Ecolab Inc. has executed this Supplemental Executive
Retirement Plan and has caused its corporate seal to be affixed this 29th day of
August, 1994.
ECOLAB INC.
By: /s/ Michael E. Shannon
-----------------------------
Michael E. Shannon
Vice Chairman, Chief Financial
and Administrative Office
(Seal)
Attest:
/s/ Kenneth A. Iverson
----------------------------
Kenneth A. Iverson
Secretary
<PAGE>
10
EXHIBIT A
ACTUARIAL ASSUMPTIONS
1. Interest Rate: 7.5% provided that, for purposes of
determining the actuarial equivalent
value of a lump sum distribution, the
interest rate will be 120% of the
applicable interest rate as defined in
Section 417(e)(3)(B) of the Code.
2. Mortality: 1971 Group Annuity Table.
3. Annuity Values Weighted: 75% male, 25% female.
<PAGE>
EXHIBIT B
PRIMARY SOCIAL SECURITY BENEFITS
(A) For purposes of the Plan, an Executive's monthly primary social
security benefit is the estimated social security benefit amount, under the Old
Age and Survivors Insurance Benefit Act of the United States in effect on the
first day of the calendar year during which the Executive terminates his
employment, which the Executive is receiving, or would be entitled to receive,
commencing at his attainment of age 65, whether or not he applies for, or
actually receives, such benefits.
(B) The amounts determined under Section (A) hereof shall be based upon
the following assumptions:
(1) except as otherwise provided in clause (5) hereof, the Executive
is assumed to have participated in social security starting at the later of
age 22 or January 1, 1951;
(2) except as otherwise provided in clause (5) hereof, the
Executive's compensation on which his social security benefit is based
shall be assumed to be that resulting from applying a decrease for years
prior to the mid-year of the years on which the Executive's Final Average
Compensation is based, and an increase for years following such mid-year,
at the same rates as the national average total wages for adjusting
earnings as used in computing social security benefits, as published by the
Social Security Administration for each such year, with the rate for the
last published year being used for any years subsequent to such last
published year;
(3) except as otherwise provided in clause (5) hereof, the taxable
wage base, the factors for indexing wages, and the table or formula used to
determine the estimated monthly primary social security benefit amount will
be assumed to remain constant following the Executive's termination of
employment;
(4) except as otherwise provided in clause (5) hereof, for an
Executive whose employment terminates prior to his attainment of age 65, it
shall be assumed that he earned no compensation from the date of
termination of his employment to his attainment of age 65;
(5) for an Executive whose benefit is based, in whole or part, upon
the continuing accrual of Years of Benefit Service during the period of his
Disability, under Sections 2.15 and 3.1, it shall be assumed that, during
the period for which he accrues Years of Benefit Service under those
sections, he continued to earn Annual Compensation at the
<PAGE>
same rate as during the Plan Year in which he became Disabled; provided,
however, that, in the event the Executive is receiving, or is entitled to
receive, a primary social security disability benefit, the amount of such
benefit shall be deemed to be his "primary social security benefit" for
purposes of the Plan, in lieu of the amount otherwise determined under this
Exhibit B;
(5) an Executive who, for any reason, is not a participant in the
United States social security benefit program shall be deemed to
participate fully in such program for purposes of determining the
Executive's primary social security benefit.
(C) An Executive's primary social security benefit may be determined by
reference to a schedule based upon pay brackets, provided such schedule is
prepared in accordance with the foregoing provisions of this Exhibit B.
<PAGE>
EXHIBIT C
SAVINGS PLAN BENEFIT
The Savings Plan Benefit shall be one-twelfth (1/12th) of the annual
benefit, determined by the Administrator, that would be provided by Employer
Contributions to the Ecolab Savings Plan (formerly the EL Thrift Plan)
(hereafter the "Savings Plan") made on or prior to July 1, 1994, if the
Executive's benefit under the Savings Plan as of July 1, 1994 were paid
commencing at the Executive's attainment of age 65 on a straight life annuity
basis (based on an interest rate of 4.25% and the 1984 Unisex Pension Mortality
Table shifted forward one year) and assuming (1) that the Employers contributed
to the Savings Plan on the Executive's behalf from (a) the later of January 1,
1977 or the date of the Executive's first eligibility for participation in the
Savings Plan until (b) the earlier of the Executive's Retirement or July 1,
1994, an annual amount equal to three percent (3%) of the Executive's actual
Annual Compensation; provided, however, that the three percent (3%) shall be
reduced by the amount, if any, which could not be contributed in each year by
reason of the maximum contributions limitations of Code Section 415 and the
maximum compensation limitations of Code Section 401(a)(17), and (2) that such
Employer contributions to the Savings Plan on behalf of the Executive
accumulated earnings at an annual rate of eight percent (8%) for all periods
prior to January 1, 1991, and for each calendar year thereafter until the
earlier of the Executive's attainment of age 65 or December 31, 1993, at an
interest rate established annually by the Administrator based on the PBGC's
immediate annuity rate as of the December 31 of the immediately preceding year,
and for the period from January 1, 1994 until attainment of age 65, at an
interest rate of 4.25% (the December 1993 PBGC immediate rate).
<PAGE>
ECOLAB
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(AS AMENDED AND RESTATED EFFECTIVE JULY 1, 1994)
FIRST DECLARATION OF AMENDMENT
Pursuant to Section 1.3 of the Ecolab Supplemental Executive Plan ("SERP") and
Section 5.1 of the Ecolab Inc. Administrative Document for Non-Qualified Benefit
Plans which is incorporated into SERP by reference ("Administrative Document"),
the Company amends the SERP as set forth below.
(1) Exhibit A to SERP is hereby deleted in its entirety and replaced with
the attached Exhibit A, which is incorporated herein and forms a part
of this amendment to SERP.
(2) This amendment to SERP shall be effective as of July 1, 1994.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its
authorized officers and its corporate seal affixed, this 19th day of September,
1994.
ECOLAB INC.
(Seal)
By: /s/ Michael E. Shannon
---------------------------------
Michael E. Shannon
Vice Chairman, Chief Financial
and Administrative Officer
Attest: /s/ Kenneth A. Iverson
---------------------------
Kenneth A. Iverson
Vice President and Secretary
<PAGE>
EXHIBIT A
ACTUARIAL ASSUMPTIONS
1. Interest Rate: 7.5% except as provided in item 4 below and
provided that, for purposes of determining
the actuarial equivalent value of a lump sum
distribution, the interest rate will be 120%
of the applicable interest rate defined in
Section 417(e)(3)(B) of the Code.
2. Mortality: 1971 Group Annuity Table.
3. Annuity Values Weighted: 75% male, 25% female.
4. Early Commencement: In the event of early payment (pursuant to Section
3.3(2) of the Plan) in the form of a single lump
sum, the lump sum amount shall be based on the
lump sum interest rate described in item 1 above
and the "early retirement benefit" immediate
annuity amount as determined under such Section
3.3(2).
<PAGE>
ECOLAB MIRROR SAVINGS PLAN
(AS AMENDED AND RESTATED EFFECTIVE SEPTEMBER 1, 1994)
Pursuant to Section 8.1 of the Ecolab Executive Non-Qualified Deferred
Compensation Plan (the "Plan") and the resolutions of the Board of Directors of
Ecolab Inc. dated February 26, 1994, Ecolab Inc. (the "Company") hereby renames
and amends and restates the Plan in its entirety to read as follows:
ARTICLE I
PREFACE
SECTION 1.1. EFFECTIVE DATE. The effective date of this Plan is September 1,
1994. The benefit, if any, payable with respect to a former Executive who
terminated employment prior to the Effective Date (and who is not rehired by a
member of the Controlled Group thereafter) shall be determined by, and paid in
accordance with, the terms and provisions of the Plan as in effect prior to the
Effective Date.
SECTION 1.2. PURPOSE OF THE PLAN. The purpose of this Plan is to provide
additional deferred compensation benefits for certain management and highly
compensated employees who perform management and professional functions for the
Company and certain related entities.
SECTION 1.3. ADMINISTRATIVE DOCUMENT. This Plan includes the Ecolab Inc.
Administrative Document for Non-Qualified Plans (the "Administrative Document"),
which is incorporated herein by reference.
ARTICLE II
DEFINITIONS
Words and phrases when used herein with initial capital letters which are
defined in the Savings Plan or the Administrative Document are used herein as so
defined, unless otherwise specifically defined herein or the context clearly
indicates otherwise. The following words and phrases when used in this Plan
with initial capital letters shall have the following respective meanings,
unless the context clearly indicates otherwise:
SECTION 2.1. "ACCOUNT" shall mean the record maintained in accordance with
Section 3.4 by the Company for each Executive's Mirror Savings Benefit.
<PAGE>
2
SECTION 2.2. "BASE SALARY" shall mean an Executive's base salary for the Plan
Year (including, for this purpose, any salary reductions caused as a result of
participation (1) in an Employer-sponsored plan which is governed by Section
401(k) or Section 125 of the Code or (2) in this Plan).
SECTION 2.3. "BONUS." An Executive's Bonus for a Plan Year is equal to the
sum of (1) the annual cash incentive bonus under the Company's Management
Incentive Plan and/or, if applicable, the Company's Management Performance
Incentive Plan, and (2) any similar annual cash incentive bonus under any other
equivalent Employer-sponsored bonus program (as determined by the
Administrator), which, in either case, is earned with respect to services
performed by the Executive during such Plan Year, whether or not such Bonus is
actually paid to the Executive during such Plan Year. An election to defer a
Bonus under this Plan must be made before the period in which the service is
performed which gives rise to such Bonus.
SECTION 2.4. "DEATH BENEFICIARY."
(1) The term "Death Beneficiary" shall mean the person or persons
designated by the Executive to receive Mirror Savings Benefits hereunder in the
event of his death. The designation of a Death Beneficiary under the Plan may
be made, and may be revoked or changed only by an instrument ( in form
prescribed by Administrator) signed by the Executive and delivered to the
Administrator during the Executive's lifetime. If the Executive is married on
the date of his death and has been married to such spouse throughout the one-
year period ending on the date of death, his designation of a Death Beneficiary
other than, or in addition to, his spouse under the Plan shall not be effective
unless such spouse has consented in writing to such designation.
(2) Any Mirror Savings Benefits remaining to be paid after the death of a
Death Beneficiary shall be paid to the Death Beneficiary's estate, except as
otherwise provided in the Executive's Death Beneficiary designation.
SECTION 2.5. "DISABILITY" or "DISABLED." An Executive shall be deemed to have
a "Disability" or be "Disabled" if the Executive's active employment with an
Employer ceased due to a disability that entitles the Executive to benefits
under (1) any long-term disability plan sponsored by the Company, or (2) in the
event that the Executive is not a participant in any such plan, the Social
Security Act of the United States.
SECTION 2.6. "EXECUTIVE" shall mean an Employee (1) who is in a pay grade of
24 or above or whose Annual Compensation (excluding severance pay) for the
preceding Plan Year exceeds the limitation described in Code Section 401(a)(17),
and (2) who is selected by
<PAGE>
3
the Administrator to participate in the Plan. Once an Employee has satisfied
the requirements of an Executive and commenced participation in the Plan, his
participation may continue, notwithstanding the fact that his Annual
Compensation is reduced below the limitation described in Code Section
401(a)(17), until the Administrator determines, in his or her sole discretion,
that the Employee would fail to satisfy the requirements of a "management or
highly compensated employee" under ERISA.
SECTION 2.7. "EXECUTIVE DEFERRALS" shall mean the amounts described in
Section 3.1.
SECTION 2.8. "HYPOTHETICAL INVESTMENT FUND" shall mean the investment funds
designated by the Company pursuant to Section 6.1.
SECTION 2.9. "INSOLVENT." For purposes of this Plan, an Employer shall be
considered Insolvent at such time as it (1) is unable to pay its debts as they
mature, or (2) is subject to a pending voluntary or involuntary proceeding as a
debtor under the United States Bankruptcy Code.
SECTION 2.10. "MATCHING CONTRIBUTIONS" shall mean the amounts described in
Section 3.3.
SECTION 2.11. "MINIMUM BENEFIT" shall mean the sum of the portions of the
Executive's Account attributable to (1) his or her Account balance as of
September 1, 1994, and (2) any deferral of his Bonus payable with respect to
calendar 1994 and the Matching Contribution thereon.
SECTION 2.12. "MIRROR SAVINGS BENEFIT." An Executive's Mirror Savings Benefit
at any particular time shall be equal to the vested amounts credited to his
Account at such time, as determined under Articles III and V.
SECTION 2.13. "PLAN" shall mean the Ecolab Mirror Savings Plan, as described
herein and as it may be amended from time to time.
SECTION 2.14. "SAVINGS PLAN" shall mean the Ecolab Savings Plan, as such plan
may be amended from time to time.
SECTION 2.15. "UNFORESEEABLE EMERGENCY" shall mean an event which results (or
will result) in severe financial hardship to the Executive as a consequence of
an unexpected illness or accident or loss of the Executive's property due to
casualty or other similar extraordinary or unforeseen circumstances out of the
control of the Executive.
<PAGE>
4
SECTION 2.16. "YEAR OF ELIGIBILITY SERVICE." An Executive shall be credited
with one Year of Eligibility Service for each year of "Continuous Service" (or
such other defined term which is used to determine service for vesting purposes)
as defined by and credited to the Executive under the Savings Plan.
ARTICLE III
MIRROR SAVINGS BENEFIT
SECTION 3.1. AMOUNT OF EXECUTIVE DEFERRALS.
(1) IN GENERAL. Each Executive may, within 30 days after the Plan becomes
effective as to him and prior to the first day of any Plan year thereafter, by
written notice to the Administrator on a form provided by the Administrator,
direct his Employer:
(a) to reduce (in accordance with rules established by the
Administrator) the Executive's Base Salary for the balance of the Plan Year
in which the Plan becomes effective as to him (but only with respect to
Base Salary payable for periods of service commencing after the Executive
so directs) or for any following Plan Year (i) by a specified dollar amount
or percentage, and/or (ii) by an amount determined by the Administrator
which is necessary for the Executive to receive the maximum Matching
Contributions under the Savings Plan and this Plan (limited to a maximum
Salary Deferral of 25% of the Executive's Base Salary in the deferral
period) (the "Salary Deferrals"), and
(b) to reduce (in accordance with rules established by the
Administrator) the Executive's Bonus which is earned during the 1995 or
subsequent Plan Years (i) by a specified dollar amount or percentage,
and/or (ii) by an amount determined by the Administrator which is necessary
for the Executive to receive the maximum Matching Contribution on such
Bonus under this Plan, as defined in Section 3.3(2) (limited to a maximum
Bonus Deferral of 25% of the Executive's Bonus) (the "Bonus Deferrals"),
and
(c) to credit the amounts described in paragraphs (a) and (b) of this
Subsection (collectively, the "Executive Deferrals") to the Account
described in Section 3.4 at the times described therein.
(2) 1994 BONUSES. Notwithstanding the foregoing, an Executive's election
made under the Plan prior to the Effective Date to defer a portion of his Bonus
which is earned in the 1994 Plan Year (the "1994 Bonus") shall continue in full
force and
<PAGE>
5
effect hereunder. An Executive who did not make a valid deferral election
with respect to his 1994 Bonus under the Plan prior to the Effective Date shall
not be entitled to defer any portion of his 1994 Bonus hereunder.
SECTION 3.2. EFFECT AND DURATION OF DIRECTION PURSUANT TO SECTION 3.1.
(1) PLAN YEAR TO PLAN YEAR. Any direction by an Executive to make
Executive Deferrals under Section 3.1 shall be effective with respect to the
Base Salary and Bonus otherwise earned by the Executive with respect the period
to which the direction relates, and the Executive shall not be eligible to
receive such Executive Deferrals. Instead, such Executive Deferrals shall be
credited to the Executive's Account as provided in Section 3.4. Any such
direction made in accordance with Section 3.1 shall remain in effect for
subsequent periods described in Section 3.1 unless terminated by the Executive
by written notice to the Administrator, on a form provided by the Administrator,
prior to the first day of such subsequent period.
(2) AUTOMATIC TERMINATION/SUSPENSION OF DEFERRAL ELECTION.
(a) An Executive's direction pursuant to section 3.1 shall
automatically terminate on (i) the date the Executive ceases employment
with the Employers, (ii) the date on which the Executive's Employer is
deemed Insolvent, or (iii) the date the Plan is terminated.
(b) An Executive's direction pursuant to Section 3.1 shall
automatically be suspended from the first day of the first payroll period
in which the Executive receives a hardship distribution under the Savings
Plan until the one-year anniversary date of such hardship distribution.
Despite such suspension, such an Executive shall still be required to
submit a deferral election with respect to a subsequent Plan Year at the
time described in Section 3.1.
SECTION 3.3. MATCHING CONTRIBUTIONS.
(1) MATCHING CONTRIBUTIONS WITH RESPECT TO SALARY DEFERRALS.
(a) Subject to paragraph (c) of this Subsection, the Employers shall
credit the Account of an Executive with an amount (the "matching
Contributions") equal to the difference between (1) 50% of the Salary
Deferrals which are allocated to an Executive's Account during a Plan Year
and which do not exceed 6% of the Executive's Base Salary, and (2) the
maximum amount of Matching Contributions that could be made to the
Executive's account under the Savings Plan
<PAGE>
6
for such Plan Year (as determined by the Administrator); provided, however,
that for the 1994 Plan Year the Matching Contribution shall be, subject to
paragraph (c) of this Subsection, equal to 50% of the Salary Deferrals
which are allocated to the Executive's Account during the deferral period
which do not exceed 6% of Base Salary for such deferral period, less any
Matching Contributions made under the Savings Plan attributable to such
Base Salary.
(b) Subject to paragraph (c) of this Subsection, the Employers shall
also credit the Account of an Executive with an additional Matching
Contribution in an amount determined by the Administrator, which amount is
equal to the amount of matching contributions (plus earnings allocable
thereto) which the Executive is required to forfeit under the Savings Plan
due to the application of the before-tax nondiscrimination requirements of
the Code (the "True-Up Matching Contributions").
(c) Notwithstanding the foregoing provisions of this Subsection, the
Matching Contributions on the Salary Deferrals for the 1994 Plan Year shall
be reduced by the amount of the Matching Contribution described in Section
3.3(2)(b) made with respect to an Executive's 1994 Bonus. Such reduction
shall occur retroactively to the date the applicable Matching Contributions
on the Salary Deferrals were made, at the time the Matching Contribution
with respect to the 1994 Bonus is credited to the Executive's Account.
(2) MATCHING CONTRIBUTIONS WITH RESPECT TO BONUS DEFERRALS.
(a) IN GENERAL. Except as described in paragraph (b) of this
Subsection, the Employers shall credit the Account of an Executive with a
Matching Contribution equal to 50% of the Executive's Bonus Deferrals
hereunder which Bonus Deferrals do not exceed the lesser of (i) 6% of the
Executive's Bonus, or (ii) the excess of the Executive's Annual
Compensation (excluding severance pay) paid in the Plan Year in which the
services to which the Bonus relates were performed over the maximum
compensation which could be considered under the Savings Plan in such Plan
Year under Section 401(a)(17) of the Code.
(b) 1994 BONUSES. Notwithstanding the foregoing, the Employers shall
credit the Account of an Executive who was entitled to receive Matching
Contributions under the Plan prior to the Effective Date with a Matching
Contribution equal to 100% of the 1994 Bonus credited to an Executive's
Account hereunder, up to a maximum of 3% of the Executive's
<PAGE>
7
Annual Compensation (excluding severance pay) for the 1994 Plan Year.
SECTION 3.4. EXECUTIVES' ACCOUNTS. Each Employer shall establish and maintain
on its books an Account for each Executive which shall contain the following
entries:
(1) Credits for the Executive Deferrals described in Section 3.1, which
Executive Deferrals shall be credited to the Executive's Account at the time
such Executive Deferrals would otherwise have been paid to the Executive;
(2) Credits for the Matching Contributions described in Section 3.3(1)(a),
which Matching Contributions shall be credited to the Executive's Account at the
same time as the underlying Salary Deferrals are credited thereto; but no
earlier than when the Executive has received (or has been deemed to receive) the
maximum Matching Contribution available under the Savings Plan (as determined by
the Administrator);
(3) Credits for the True-Up Matching Contributions described in Section
3.3(1)(b) at the time designated by the Administrator following the end of the
Plan Year when the nondiscrimination test results under the Savings Plan are
known;
(4) Credits for the Matching Contributions described in Section 3.3(2),
which Matching Contributions shall be credited to the Executive's Account at the
same time as the underlying Bonus Deferrals are credited thereto;
(5) Credits or charges (including income, expenses, gains and losses)
equal to the amounts which would have been attributable to the Executive
Deferrals and Matching Contributions if such amounts had been invested on a tax
deferred basis in the Hypothetical Investment Fund(s) in which such amounts are
deemed to have been invested under Section 6.1. The entries provided by this
Subsection (5) shall continue to be made until the Executive's entire vested
Account has been distributed pursuant to Article IV; and
(6) Debits for any reduction pursuant to Section 3.3(1)(c) and for any
distributions made from the Account pursuant to Article IV.
SECTION 3.5. STATEMENT OF ACCOUNT. The Company shall deliver to each
Executive a written statement of his Account not less frequently than annually
as of the end of each Plan Year.
ARTICLE IV
PAYMENT OF MIRROR SAVINGS BENEFITS
<PAGE>
8
SECTION 4.1. TIME OF PAYMENT.
(1) PAYMENT TO EXECUTIVES.
(a) An Executive shall be entitled to receive the vested portion of
his Account upon the earlier of his becoming Disabled or his termination of
employment with the Controlled Group for any reason (including retirement).
(b) Notwithstanding the foregoing, the Company may at any time, upon
written request of the Executive, cause to be paid to such Executive an
amount equal to all or any part of the Executive's vested Account, other
than the portion of his or her Account attributable to Matching
Contributions, if the Administrator determines, in its sole and absolute
discretion based on such reasonable evidence as it may require, that such a
payment or payments is necessary for the purpose of alleviating the
consequences of an Unforeseeable Emergency. Payments made on account of an
Unforeseeable Emergency shall be permitted only to the extent reasonably
necessary to satisfy the emergency need and may not be made to the extent
such Unforeseeable Emergency is or may be relieved through reimbursement or
compensation by insurance or otherwise, by liquidation of the Executive's
assets (to the extent such liquidation would not itself cause severe
financial hardship) or by cessation of the Executive Deferrals under this
Plan.
(2) PAYMENT TO DEATH BENEFICIARIES. The Death Beneficiary of a deceased
Executive shall be entitled to receive the vested Account of the Executive upon
the death of the Executive.
(3) PAYMENT DATE. The vested portion of an executive's Account shall be
distributed (or commence to be distributed) to the Executive or Death
Beneficiary entitled thereto pursuant to Subsection (1) or (2) of this Section
as soon as practicable following the date on which the Executive or Death
Beneficiary becomes entitled to such distribution.
SECTION 4.2. FORM OF PAYMENT.
(1) PAYMENT IN CASH. All distributions under the Plan shall be made in
the form of cash.
(2) NORMAL FORMS OF PAYMENT.
(a) PAYMENTS TO EXECUTIVES. The Mirror Savings Benefit shall be
distributed to the Executive in the form of a single lump sum payment.
<PAGE>
9
(b) PAYMENTS TO DEATH BENEFICIARIES. An Executive's Mirror Savings
Benefit (or the remaining installments thereof if payment to the Executive
had commenced) shall be distributed to his or her Death Beneficiary in the
form of a single lump sum payment.
(c) SMALL BENEFITS. Notwithstanding any provision of the Plan to the
contrary, in the event that an Executive's Mirror Savings Benefit does not
exceed $5,000, such Benefit shall be paid to the Executive in the form of a
single lump sum payment.
(d) PAYMENT OF MINIMUM BENEFITS. Notwithstanding the foregoing, an
Executive's Minimum Benefit shall be paid in the form previously elected by
the Executive and such election shall remain in full force and effect after
the Effective Date.
(3) OPTIONAL FORMS OF PAYMENT FOR EXECUTIVES.
(a) IN GENERAL. An Executive who does not want his or her Mirror
Savings Benefit to be paid in the normal form of benefit described in
paragraph (a) of Subsection (2) of this Section may elect to receive his
Mirror Savings Benefit in the form of annual installment payments payable
over a period not exceeding ten years (as elected by the Executive).
(b) FORM/TIMING OF ELECTION. Any election of an optional form of
benefit must be in writing (on a form provided by the Administrator) and
filed with the Administrator prior to the Executive's termination of
employment with the Controlled Group because of involuntary termination,
death or Disability or at least one (1) year prior to the Executive's
voluntary termination of employment or retirement. Any such election may
be changed at any time and from time to time without the consent of any
other person (except as described in Section 2.4), by filing a later signed
written election with the Administrator; provided that any election made
less than one (1) year prior to the Executive's voluntary termination of
employment shall not be valid, and in such case, payment shall be made in
the normal form as provided in Section 4.2(2).
ARTICLE V
VESTING
SECTION 5.1. VESTING.
<PAGE>
10
(1) IN GENERAL. An Executive shall always be 100% vested in both his
Executive Deferrals and his Minimum Benefit under the Plan. Subject to the
provisions of Section 3.3(1)(c), and except as provided in Subsection (2) of
this Section, an Executive shall become 100% vested in the Matching
Contributions hereunder upon (a) his or her attainment of age 65 or his or her
death or Disability while in the employ of the Controlled Group, or (b) his or
her completion of 5 Years of Eligibility Service.
(2) FORFEITURE PROVISIONS. Notwithstanding the provisions of Subsection
(1) of this Section, the Employers shall be relieved of any obligation to pay or
provide any future Mirror Savings Benefits under this Plan and shall be entitled
to recover amounts already distributed if, without the written consent of the
Company, the Executive, whether before or after termination with the Controlled
Group:
(a) materially breaches the terms of any confidentiality or
noncompete agreement entered into with any member of the Controlled Group;
or
(b) participates in any dishonesty, fraud, misrepresentation,
embezzlement or deliberate injury or attempted injury, in each case related
to any member of the Controlled Group; or
(c) commits any unlawful or criminal activity of a serious nature; or
(d) commits any intentional and deliberate breach of a duty or duties
that, individually or in the aggregate, are material in relation to the
Executive's overall duties.
The provisions of this Subsection (2) shall not apply to an Executive's Minimum
Benefit or the portion of the Executive's Account which is attributable to his
Executive Deferrals.
ARTICLE VI
INVESTMENT OF ACCOUNTS
SECTION 6.1. HYPOTHETICAL INVESTMENT FUNDS.
(1) HYPOTHETICAL INVESTMENT FUND FOR MATCHING CONTRIBUTIONS. The Company
has designated the Ecolab Stock Fund as the Hypothetical Investment Fund for
Matching Contributions. Matching Contributions shall be deemed to have been
invested in the Ecolab Stock Fund for purposes of crediting earnings and losses
to the portion of the Executive's Account which is attributable to Matching
Contributions. The Ecolab Stock Fund shall be deemed to consist solely of
common shares of the
<PAGE>
11
Company, and dividends on common shares of the Company deemed to be held in the
Ecolab Stock Fund shall be deemed to have been reinvested in additional common
shares of the Company.
(2) HYPOTHETICAL INVESTMENT FUNDS FOR EXECUTIVE DEFERRALS. The
Hypothetical Investment Funds for purposes of the portion of an Executive's
Account which is attributable to his Executive Deferrals shall be those same
Investment Funds designated by the Company from time to time under the Savings
Plan. Each Executive (or his Death Beneficiary) shall be deemed to have elected
one or more Hypothetical Investment Funds in which his Executive Deferrals are
deemed to have been invested for purposes of crediting earnings and losses to
the portion of the Executive's Account which is attributable to Executive
Deferrals. The Executive's or Death Beneficiary's deemed election of
Hypothetical Investment Funds hereunder shall be based on the Executive's or
Death Beneficiary's investment election (or default election) under the Savings
Plan, as in effect from time to time. The Company may deem an Executive's
Executive Deferrals to have been invested in the Hypothetical Investment Fund
deemed elected by the Executive, if any, or may instead, in its sole discretion,
deem such Executive Deferrals to have been invested in one or more Hypothetical
Investment Funds selected by the Company. Earnings on any amounts deemed to
have been invested in any Hypothetical Investment Fund shall be deemed to have
been reinvested in such Hypothetical Investment Fund. Notwithstanding the
foregoing, any Executive who is subject to Section 16(b) of the Securities
Exchange Act of 1934 shall not be deemed to have directed any Executive
Deferrals to the Ecolab Stock Fund and may make a separate election to have such
Executive Deferrals which would otherwise have been deemed to be invested in the
Ecolab Stock Fund deemed invested in one or more of the other Hypothetical
Investment Funds. An Executive shall be deemed, on the day prior to becoming
subject to Section 16(b), to have elected to have Executive Deferrals then
deemed to be invested in the Ecolab Stock Fund invested in the Hypothetical
Investment Fund known as the Income Fund unless another permitted election is in
place.
(3) EXPENSES OF HYPOTHETICAL INVESTMENT FUNDS. The Hypothetical
Investment Funds shall bear and be charged with actual or hypothetical expenses
to the same extent that the corresponding Ecolab Stock Fund and other Investment
Funds in the Savings Plan bear and are charged with such expenses, as determined
by the Administrator.
ARTICLE VII
MISCELLANEOUS
<PAGE>
12
SECTION 7.1. EFFECT OF AMENDMENT AND TERMINATION. Notwithstanding any
provision of the Plan (including the Administrative Document) to the contrary,
no amendment or termination of the Plan shall, without the consent of the
Executive (or, in the case of his death, his Death Beneficiary), adversely
affect the vested Account under the Plan of any Executive or Death Beneficiary
as such Account exists on the date of such amendment or termination.
IN WITNESS WHEREOF, Ecolab Inc. has executed this Mirror Savings Plan and
has caused its corporate seal to be affixed this 29th day of August, 1994.
ECOLAB INC.
By: /s/ Michael E. Shannon
--------------------------------
Michael E. Shannon
Vice Chairman, Chief Financial
and Administrative Officer
(Seal)
Attest:
/s/ Kenneth A. Iverson
-----------------------------
Kenneth A. Iverson
Secretary
<PAGE>
ECOLAB
MIRROR PENSION PLAN
WHEREAS, Ecolab Inc. (the "Company") has established the Ecolab Pension
Plan (the "Pension Plan"), a qualified defined benefit pension plan; and
WHEREAS, Sections 401(a)(17) and 415 of the Code place certain limitations
on the amount of benefits that would otherwise be made available under the
Pension Plan for certain participants; and
WHEREAS, the Company now desires to provide the benefits which would
otherwise have been payable to such participants under the Pension Plan except
for such limitations, in consideration of services performed and to be performed
by such participants for the Company and certain related corporations.
NOW, THEREFORE, the Company hereby adopts and publishes this Mirror Pension
Plan, which shall contain the following terms and conditions:
ARTICLE I
PREFACE
SECTION 1.1. EFFECTIVE DATE. The effective date of this Plan is July 1, 1994.
SECTION 1.2. PURPOSE OF THE PLAN. The purpose of this Plan is to provide
additional retirement benefits for certain management and highly compensated
employees of the Company who perform management and professional functions for
the Company and certain related entities.
SECTION 1.3. ADMINISTRATIVE DOCUMENT. This Plan includes the Ecolab Inc.
Administrative Document for Non-Qualified Benefit Plans (the "Administrative
Document"), which is incorporated herein by reference.
ARTICLE II
DEFINITIONS
Words and phrases used herein with initial capital letters which are
defined in the Administrative Document or the Pension Plan are used herein as so
defined, unless otherwise specifically defined herein or the context clearly
indicates otherwise. The following words and phrases when used in this Plan
with initial
<PAGE>
2
capital letters shall have the following respective meanings, unless the context
clearly indicates otherwise:
SECTION 2.1. "ACTUAL PENSION PLAN BENEFIT" shall mean the amount of the
monthly benefit which would be or is payable to the Executive under the Pension
Plan calculated on a single life annuity basis commencing at age 65.
SECTION 2.2. "ACTUARIAL FACTORS" shall mean the actuarial assumptions set
forth in Exhibit A which is attached to and forms a part of this Plan.
SECTION 2.3. "CODE LIMITATIONS" shall mean the limitations imposed by Sections
401(a)(17) and 415 of the Code, or any successor(s) thereto, on the amount of
the benefits which may be payable to or with respect to an Executive from the
Pension Plan.
SECTION 2.4. "DEATH BENEFICIARY" shall mean the Beneficiary, from time to
time, who is entitled to receive part or all of a pension or other benefit
payable with respect to the Participant under the Pension Plan. If the
Executive is married on the date of his death and has been married to such
spouse throughout the one-year period ending on the date of his death, his
designation of a Death Beneficiary other than, or in addition to, his spouse
under the Plan shall not be effective unless such spouse has consented in
writing to such designation.
SECTION 2.5. "EXECUTIVE" shall mean an Employee of an Employer (1) whose
Annual Compensation from the Employers exceeds the dollar limitation described
in Section 401(a)(17) of the Code for a Plan Year, (2) who is a Participant in
the Pension Plan, and (3) who is selected by the Administrator to participate in
the Plan.
SECTION 2.6. "MIRROR SAVINGS PLAN" shall mean the Ecolab Mirror Savings Plan,
as such plan may be amended from time to time.
SECTION 2.7. "MIRROR PENSION BENEFIT" shall mean the retirement benefit
determined under Article III.
SECTION 2.8. "MIRROR PRE-RETIREMENT PENSION BENEFIT" shall mean the pre-
retirement benefit determined under Article IV.
SECTION 2.9. "PLAN" shall mean this Ecolab Mirror Pension Plan, as it may be
amended from time to time.
ARTICLE III
MIRROR PENSION BENEFIT
<PAGE>
3
SECTION 3.1. AMOUNT OF MIRROR PENSION BENEFIT. Each Executive whose benefits
under the Pension Plan payable on or after the Effective Date are reduced due to
(1) the Code Limitations, or (2) the Executive's deferrals of compensation under
the Mirror Savings Plan, shall be entitled to a Mirror Pension Benefit, which
shall be determined as hereinafter provided. The Mirror Pension Benefit shall
be a monthly retirement benefit equal to the difference between (a) and (b),
where:
(a) = the amount of the monthly benefit payable to the Executive under
the Pension Plan calculated on a single life annuity basis
commencing at age 65, determined under the Pension Plan as in
effect on the date of the Executive's termination of employment
with the Controlled Group but calculated as if (i) the Pension
Plan did not contain the Code Limitations, and (ii) the
definition of Annual Compensation under the Pension Plan included
the Executive's deferrals under the Mirror Savings Plan or its
predecessor plan; and
(b) = the amount of the Actual Pension Plan Benefit.
SECTION 3.2. TIME OF PAYMENT. An Executive's Mirror Pension Benefit shall be
paid or commence to be paid at the same time and under the same conditions as
the benefits payable to the Executive under the Pension Plan. Notwithstanding
the foregoing, if payment at such time is prevented due to reasons outside of
the Administrator's control, the Mirror Pension Benefits shall commence as soon
as practicable after the benefits commence under the Pension Plan, and the first
payment hereunder shall include any Mirror Pension Benefits not made as a result
of the delay in payment.
SECTION 3.3. FORM OF PAYMENT.
(1) IN GENERAL. The Mirror Pension Benefit shall be payable in the same
form and for the same duration as the benefits payable to the Executive under
the Pension Plan; provided, however, that if the form of payment of the Mirror
Pension Benefit selected by the Participant is not a single life annuity
commencing at age 65, the amount of such Benefit shall be adjusted to an amount
which results in a Benefit payable which is the Actuarial Equivalent of a single
life annuity commencing at age 65. An election by an Executive of a form of
benefit under the Pension Plan shall be deemed to be an election by such
Executive of the form of his Mirror Pension Benefit. In the absence of an
election by the Executive of the form of his Mirror Pension Benefit under the
Pension Plan, the form of Mirror Pension Benefit for an unmarried Executive
shall be a single life
<PAGE>
4
annuity commencing at age 65, and for a married Executive shall be a joint and
50% survivor benefit which is the Actuarial Equivalent of such single life
annuity.
(2) LUMP SUM ELECTION.
(a) Notwithstanding the foregoing, an Executive may elect to receive
the Mirror Pension Benefit or to have his Death Beneficiary receive a
Mirror Pre-Retirement Pension Benefit in the form of a single lump sum
payment by filing a notice in writing on a form provided by the
Administrator, signed by the Executive and filed with the Administrator
prior to the Executive's termination of employment with the Controlled
Group because of involuntary termination, death or Disability, or at least
one (1) year prior to the Executive's voluntary retirement or termination
of employment. Any such election may be changed at any time and from time
to time without the consent of any existing Death Beneficiary or any other
person other than, if applicable, his or her spouse, by filing a later
signed written election with the Administrator; provided that any election
made less than one (1) year prior to the Executive's voluntary retirement
or termination of employment shall not be valid. An Executive's election
of a lump sum payment under this Subsection shall be controlling with
respect to any payment of Mirror Pre-Retirement Pension Benefits to his
Death Beneficiary. Notwithstanding the foregoing, an Executive shall be
permitted to make an election to receive his Mirror Pension Benefit in the
form of a lump sum payment within the one (1) year period prior to his
voluntary termination if (and only if) the amount of the Mirror Pension
Benefit payable to the Executive is reduced by ten percent (10%).
(b) The lump sum payment described in paragraph (a) of this
Subsection shall be calculated (i) by converting the Executive's Mirror
Pension Benefit (calculated in accordance with the provisions of Section
3.1) at the time of the commencement of such Benefit into a lump sum amount
of equivalent actuarial value when computed using the Actuarial Factors for
this purpose, and then applying the ten percent (10%) reduction, if
applicable, or (ii) by converting the Death Beneficiary's Mirror Pre-
Retirement Pension Benefit (calculated in accordance with the provisions of
Section 4.2) at the time of the commencement of such Benefit into a lump
sum amount of equivalent actuarial value when computed using the Actuarial
Factors for this purpose, and then applying the ten percent (10%)
reduction, if applicable.
(c) Notwithstanding any provision of this Plan to the contrary, in
the event the equivalent actuarial value of the
<PAGE>
5
Executive's Mirror Pension Benefit, when computed using the Actuarial
Factors specified in Exhibit A for this purpose, does not exceed $5,000,
such Benefit shall be paid in the form of a single lump sum payment.
ARTICLE IV
MIRROR PRE-RETIREMENT PENSION BENEFIT
SECTION 4.1. ELIGIBILITY. The Death Beneficiary of an Executive who dies
after attaining eligibility for a pre-retirement death benefit under the Pension
Plan, but prior to commencing to receive Mirror Pension Benefits hereunder shall
be entitled to receive the Mirror Pre-Retirement Pension Benefits described in
Section 4.2 in lieu of any other benefits described in the Plan.
SECTION 4.2. AMOUNT, FORM AND TIMING OF MIRROR PRE-RETIREMENT BENEFITS. A
Death Beneficiary who is eligible for a Mirror Pre-Retirement Benefit shall
receive a Mirror Pre-Retirement Benefit based on the Executive's Mirror Pension
Benefit hereunder. The Mirror Pre-Retirement Benefit shall be calculated in
accordance with, and payable at the same time and (except as provided in Section
3.3(2)) in the same manner as, the pre-retirement death benefits and (if
applicable) the optional death benefits described in the Pension Plan, as
determined by the Administrator.
ARTICLE V
VESTING
SECTION 5.1. VESTING.
(1) IN GENERAL. Except as provided in Subsection (2) of this Section, an
Executive or Death Beneficiary shall become vested in the Mirror Pension Plan
Benefits in accordance with the vesting provisions of the Pension Plan.
(2) FORFEITURE PROVISIONS. Notwithstanding the provisions of Subsection
(1) of this Section, the Employers shall be relieved of any obligation to pay or
provide any future Mirror Pension Benefits and Mirror Pre-Retirement Pension
Benefits under this Plan and shall be entitled to recover any amounts already
distributed if, without the written consent of the Company, the Executive,
whether before or after termination with the Controlled Group:
(a) materially breaches the terms of any confidentiality or
noncompete agreement entered into with any member of the Controlled Group;
or
<PAGE>
6
(b) participates in any dishonesty, fraud, misrepresentation,
embezzlement or deliberate injury or attempted injury, in each case related
to any member of the Controlled Group; or
(c) commits any unlawful or criminal activity of a serious nature; or
(d) commits any intentional and deliberate breach of a duty or duties
that, individually or in the aggregate, are material in relation to the
Executive's overall duties.
ARTICLE VI
AMENDMENT AND TERMINATION
SECTION 6.1. EFFECT OF AMENDMENT AND TERMINATION. No amendment or termination
of the Plan shall, without the consent of the Executive (or, in the case of his
death, his Death Beneficiary), adversely affect the vested Mirror Pension
Benefit or vested Mirror Pre-Retirement Pension Benefit under the Plan of any
Executive or Death Beneficiary as such Benefit exists on the date of such
amendment or termination.
IN WITNESS WHEREOF, Ecolab Inc. has executed this Mirror Pension Plan and
has caused its corporate seal to be affixed this 29th day of August, 1994.
ECOLAB INC.
By: /s/ Michael E. Shannon
------------------------------
Michael E. Shannon
Vice Chairman, Chief Financial
and Administrative Officer
(Seal)
Attest:
/s/ Kenneth A. Iverson
----------------------------
Kenneth A. Iverson
Secretary
<PAGE>
7
EXHIBIT A
ACTUARIAL ASSUMPTIONS
1. Interest Rate: 7.5% provided that, for purposes of
determining the actuarial equivalent
value of a lump sum distribution, the
interest rate will be 120% of the
applicable interest rate as defined in
Section 417(e)(3)(B) of the Code.
2. Mortality: 1971 Group Annuity Table.
3. Annuity Values Weighted: 75% male, 25% female.
<PAGE>
ECOLAB
MIRROR PENSION PLAN
(EFFECTIVE JULY 1, 1994)
FIRST DECLARATION OF AMENDMENT
Pursuant to Section 1.3 of the Ecolab Mirror Pension Plan ("Plan") and Section
5.1 of the Ecolab Inc. Administrative Document for Non-Qualified Benefit Plans
which is incorporated into the Plan by reference ("Administrative Document"),
the Company amends the Plan as set forth below.
(1) Exhibit A to the Plan is hereby deleted in its entirety and replaced
with the attached Exhibit A, which is incorporated herein and forms a
part of this amendment to the Plan.
(2) This amendment to the Plan shall be effective as of July 1, 1994.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its
authorized officers and its corporate seal affixed, this 19th day of September,
1994.
ECOLAB INC.
(Seal)
By: /s/ Michael E. Shannon
-------------------------------
Michael E. Shannon
Vice Chairman, Chief Financial
and Administrative Officer
Attest: /s/ Kenneth A. Iverson
-------------------------
Kenneth A. Iverson
Vice President and Secretary
<PAGE>
EXHIBIT A
ACTUARIAL ASSUMPTIONS
1. Interest Rate: 7.5% except as provided in item 4 below and
provided that, for purposes of determining
the actuarial equivalent value of a lump sum
distribution, the interest rate will be 120%
of the applicable interest rate defined in
Section 417(e)(3)(B) of the Code.
2. Mortality: 1971 Group Annuity Table.
3. Annuity Values Weighted: 75% male, 25% female.
4. Early Commencement: The Mirror Pension Benefit shall be reduced by one
two hundred eightieth (1/280th) for each month
that the date of the commencement of payment
precedes the date on which the Executive will
attain age sixty-two (62). If the Executive's
Ecolab Pension Plan benefit is affected by Section
415 of the Code, the Administrator shall make such
further adjustments to the Mirror Pension Benefit
as the Administrator, in his or her sole
discretion, deems appropriate to ensure that the
total early retirement benefit from the Ecolab
Pension Plan and the Ecolab Mirror Pension Plan
equals the early retirement benefit the Executive
would have been entitled to under the Ecolab
Pension Plan without regard to the Code
Limitations and non-qualified deferrals.
If payment is in the form of a single lump sum,
the lump sum amount shall be based on the lump sum
interest rate defined in item 1 above, the
mortality assumptions specified in items 2 and 3
above, and the "early retirement benefit"
immediate annuity amount as determined under this
item 4.
<PAGE>
EXHIBIT (11)
ECOLAB INC.
COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
(thousands, except per share)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Income From Continuing Operations
Income from continuing operations $ 84,562 $ 82,772 $ 71,488 $ 63,239 $ 65,724
Convertible preferred stock dividends -- -- -- (4,064) (7,700)
-------- -------- -------- --------- --------
Income from continuing operations
available to common shareholders -
primary earnings per share computation 84,562 82,772 71,488 59,175 58,024
After-tax effect of interest on
the 5-1/8% Convertible
Subordinated Debentures due in 1991 -- -- -- 13 33
-------- -------- -------- --------- --------
Income from continuing operations available to
common shareholders - fully diluted earnings
per share computation $ 84,562 $ 82,772 $ 71,488 $ 59,188 $ 58,057
-------- -------- -------- --------- --------
-------- -------- -------- --------- --------
Discontinued Operations
Income (loss) from discontinued operations -
primary and fully diluted earnings per
share computation $ -- $ -- $ -- $(274,693) $ (4,408)
-------- -------- -------- --------- --------
-------- -------- -------- --------- --------
Extraordinary (Loss) Related to Retirement of
Debt - primary and fully diluted earnings
per share computation $ -- $ (4,018) $ -- $ -- $ --
-------- -------- -------- --------- --------
-------- -------- -------- --------- --------
Cumulative Effect of the Change in Accounting
for Income Taxes - primary and fully diluted
earnings per share computation $ -- $ 4,733 $ -- $ -- $ --
-------- -------- -------- --------- --------
-------- -------- -------- --------- --------
Cumulative Effect of the Change in Accounting
for Postretirement Health Care Benefits -
primary and fully diluted earnings per
share computation $ -- $ -- $ -- $ (24,560) $ --
-------- -------- -------- --------- --------
-------- -------- -------- --------- --------
Net Income (Loss)
Net income (loss) $ 84,562 $ 83,487 $ 71,488 $(236,014) $ 61,316
Convertible preferred stock dividends -- -- -- (4,064) (7,700)
-------- -------- -------- --------- --------
Net income (loss) available to common shareholders -
primary earnings per share computation 84,562 83,487 71,488 (240,078) 53,616
After-tax effect of interest on
the 5-1/8% Convertible Subordinated
Debentures due in 1991 -- -- -- -- 33
-------- -------- -------- --------- --------
Net income (loss) available to common shareholders -
fully diluted earnings per share computation $ 84,562 $ 83,487 $ 71,488 $(240,078) $ 53,649
-------- -------- -------- --------- --------
-------- -------- -------- --------- --------
Average shares outstanding - primary
earnings per share computation and fully
diluted (loss) per share computation 67,550 67,528 67,204 58,525 51,649
Shares assumed outstanding for the
5-1/8% Convertible Subordinated
Debentures due in 1991 -- -- -- 48 120
Additional shares outstanding, assuming
exercise of dilutive stock options and
acquisition of treasury shares at
higher of the average or ending
market price 1,103 1,351 1,022 614 374
-------- -------- -------- --------- --------
Average shares outstanding - fully
diluted earnings per share computation 68,653 68,879 68,226 59,187 52,143
-------- -------- -------- --------- --------
-------- -------- -------- --------- --------
Income (Loss) Per Common Share
Primary
Continuing operations $ 1.25 $ 1.23 $ 1.06 $ 1.01 $ 1.12
Discontinued operations -- -- -- (4.69) (0.09)
Extraordinary loss -- (0.06) -- -- --
Changes in accounting principles -- 0.07 -- (0.42) --
Net income (loss) $ 1.25 $ 1.24 $ 1.06 $ (4.10) $ 1.04
Fully diluted
Continuing operations $ 1.23 $ 1.20 $ 1.05 $ 1.00 $ 1.11
Discontinued operations -- -- -- (4.69) (0.08)
Extraordinary loss -- (0.06) -- -- --
Changes in accounting principles -- 0.07 -- (0.42) --
Net income (loss) $ 1.23 $ 1.21 $ 1.05 $ (4.10) $ 1.03
<FN>
Fully diluted income per share amount for 1990 does not include the assumed
conversion of the Company's Series A Cumulative Convertible Preferred Stock as
such assumed conversion was anti-dilutive. The Preferred Stock was converted
into the company's common stock in July 1991.
</FN>
</TABLE>
<PAGE>
Ecolab Inc.
FINANCIAL DISCUSSION
YEAR ENDED DECEMBER 31, 1994
The following discussion and analysis provides information which management
believes is useful in understanding the company's operating and cash flow
results and its financial condition. The discussion should be read in
conjunction with the consolidated financial statements and related notes. All
amounts have been restated for the pooling of interests treatment of the
company's merger with Kay Chemical Company.
1994 OVERVIEW
Ecolab followed a very strong performance in 1993 with another very successful
year in 1994. During 1994, Ecolab posted record financial results and made
significant accomplishments in several key areas; these included:
- Consolidated net sales increased 10 percent to a record $1.2 billion.
- Consolidated after-tax income from ongoing operations also reached record
levels. Net income was a record $85 million, or $1.25 per share. On a pro
forma basis, net income of $90 million, or $1.34 per share increased 12%
over 1993.
- Cash provided by continuing operations reached a record level of $154
million for 1994. Due to continued strong operating cash flows, the
company's cash levels increased significantly during 1994 and total debt
was reduced to its lowest level since 1986. In addition, total debt to
capitalization1 decreased to 24% at year-end 1994 and was at its lowest
level in the past 10 years. As a result, Ecolab's debt rating continued to
be rated "A-" by Standard and Poor's and the company maintained its long-
term financial objective of an investment grade balance sheet.
- The return on beginning shareholders' equity for 1994 was 22 percent. This
is the third consecutive year that the company has exceeded its long-term
financial objective of obtaining a 20 percent return on beginning
shareholders' equity.
- As a result of its continued financial success, the company increased its
annual dividend rate for the third consecutive year. The annual dividend
rate was increased by 14 percent to $0.50 per common share. The company
has paid dividends on its common stock for 58 consecutive years.
- In December 1994, the company completed a merger with Kay Chemical Company
and affiliates (Kay) of Greensboro, North Carolina. Kay is the leading
manufacturer and marketer of high performance cleaning and sanitizing
products to the quick-service, or fast food market. Kay has established
solid relationships with a number of the industry leaders. Ecolab issued
approximately 4.5 million shares of its common stock in exchange for all of
the outstanding common stock of Kay. The merger has been accounted for as
a pooling of interests and, accordingly, the company's consolidated
financial statements have been restated to include the accounts and
operations of Kay for all periods.
- During the fourth quarter of 1994, the company made its initial commitment
to the water care market with the acquisition of Industrial Maintenance
Corporation, a manufacturer and marketer of water treatment products and
services. The company expects to further broaden its water care operations
through additional acquisitions in the future.
OPERATING RESULTS
CONSOLIDATED
<TABLE>
<CAPTION>
(thousands, except per share) 1994 1993 1992
---------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $1,207,614 $1,102,396 $1,057,634
Operating income $ 136,964 $ 129,451 $ 125,614
Net income
As reported $ 84,562 $ 83,487 $ 71,488
Merger costs and
expenses 6,900
Kay net deferred
tax liability 1,300
Kay Subchapter S
status (2,298) (2,667) (2,797)
---------- ---------- ----------
Pro forma $ 90,464 $ 80,820 $ 68,691
---------- ---------- ----------
---------- ---------- ----------
Net income per share
As reported $ 1.25 $ 1.24 $ 1.06
Pro forma $ 1.34 $ 1.20 $ 1.02
</TABLE>
Consolidated net sales were $1.2 billion in 1994 and increased 10 percent over
net sales of $1.1 billion in 1993. Both the company's United States and
International operations contributed to this increase. Net sales in 1994
benefited from new product introductions, an increased sales-and-service force,
competitive gains and the general economic recovery in the hospitality and
lodging industries.
Consolidated operating income increased 6 percent to $137 million in 1994
from $129 million in 1993. This increase reflected improved performance by
both the company's United States and International operations, with solid
growth in the U.S. Institutional business and double digit growth in the U.S.
Pest Elimination and Janitorial businesses and in International's Asia Pacific
operations. Operating income for both years was affected by one-time
transactions. Operating income for 1994
24
<PAGE>
includes $8 million of one-time merger costs and expenses related to the Kay
transaction. In 1993, operating income was negatively affected by a net
charge from restructuring manufacturing operations, environmental costs
related to former manufacturing operations and the sale of a U.S. and an
International business. These transactions reduced operating income for 1993
by approximately $8 million. Excluding these transactions, operating income
margins were 12.0 percent in 1994 compared with 12.4 percent in 1993.
On a reported basis, net income for 1994 was $85 million, or $1.25 per share,
compared to net income of $83 million, or $1.24 per share, in 1993. The table
above also presents net income on the pro forma basis on which it will be
reported in the future. The pro forma adjustments include:
- The after-tax effect of merger costs and expenses related to the Kay
transaction.
- Income tax expense incurred to record a deferred tax liability to reflect
Kay's future net taxable temporary differences upon its merger with Ecolab.
- Income tax expense adjustments related to the loss of Kay's Subchapter S
income tax status. Prior to the merger, Kay was a Subchapter S Corporation
for federal income tax purposes and therefore did not pay U.S. income
taxes. Effective with the merger, Kay will be included in the company's
U.S. federal income tax return and, therefore, income tax expense will no
longer reflect the Subchapter S related tax benefit in future periods.
On a pro forma basis, net income for 1994 was $90 million, or $1.34 per
share and increased 12 percent over net income of $81 million, or $1.20 per
share in 1993. In addition to a strong operating income performance, net income
benefited from a significant reduction in net interest expense and increased
equity in earnings of the Henkel-Ecolab joint venture in 1994. These benefits
were partially offset by an increase in the overall effective income tax rate.
The comparison of net income also benefited from the effect of one-time
transactions which reduced net income in 1993 by approximately $2 million.
1993 COMPARED WITH 1992
Consolidated net sales were $1.1 billion in 1993 and increased 4 percent over
net sales for 1992. The comparison of net sales was negatively affected by the
sale of the company's G.H. Wood janitorial distribution business in the first
quarter of 1993. Excluding the sales of the G.H. Wood operations, consolidated
net sales for 1993 increased 7 percent over 1992 with both the company's United
States and International operations contributing to this sales increase.
Consolidated operating income for 1993 was $129 million, an increase of 3
percent over operating income of $126 million in 1992. This increase reflected
improved performance by both the company's United States and International
operations with particularly strong growth in the U.S. Pest Elimination and
Janitorial businesses and in International's Asia Pacific region. Operating
income margins were 11.7 percent for 1993, and decreased slightly from operating
income margins of 11.9 percent for 1992. The benefits of favorable raw material
costs, favorable product mix and continued cost controls were offset by
increased investments in sales-and-service personnel and the charge for
manufacturing restructuring, environmental compliance costs and the sale of two
businesses.
Net income increased 17 percent to $83 million, or $1.24 per share in 1993
from $71 million, or $1.06 per share in 1992. A substantial reduction in net
interest expense in 1993 contributed significantly to this profit improvement.
The overall effective income tax rate, which was virtually unchanged from 1992,
and the equity in earnings of the Henkel-Ecolab joint venture, which was down
modestly from the prior year, were not significant factors in the improvement in
income.
UNITED STATES
<TABLE>
<CAPTION>
(thousands) 1994 1993 1992
---------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $942,070 $867,415 $816,405
Operating income $134,510 $124,281 $123,289
Percent of sales 14.3% 14.3% 15.1%
</TABLE>
United States sales totaled $942 million in 1994 and increased 9 percent over
net sales of $867 million in 1993. All divisions contributed to this increase.
Sales of the U.S. Institutional Division for 1994 increased 8 percent over the
prior year. During 1994, Institutional had strong sales in all product lines
with excellent growth in warewashing sales, which is its most significant
product line, and exceptional growth in its Ecotemp program and the specialty
products group. Institutional revenue growth was due to sales of new products,
significant new customer business, retention of key customers, increased
product volumes, a larger sales-and-service force and the benefits from
improved market conditions in the
25
<PAGE>
hospitality and lodging industries during 1994. Institutional sales growth was
due entirely to increased unit volume and favorable product mix. Pest
Elimination Division sales for 1994 increased 15 percent over 1993. Pest
Elimination's sales growth reflected new customer business added by leveraging
off the Institutional and Klenzade Divisions' customer bases and to the
retention of key customers and new product and service offerings. Sales of
the Textile Care Division increased 12 percent over 1993. Textile Care's
sales growth was due to additional sales related to an acquisition in December
1993 and to strong sales in the healthcare and shirt laundry markets. Unit
volume growth and favorable product mix accounted for approximately 90 percent
of Textile Care's sales growth. The Janitorial Division reported sales growth
of 22 percent for 1994. Janitorial's sales growth was principally due to new
product introductions and the exceptional growth of its Signature Label
program, which added substantial business with the wholesale club market.
Virtually all of Janitorial's sales growth was due to unit volume growth and
favorable product mix. Klenzade Division sales for 1994 increased 5 percent
over the prior year. Klenzade sales growth was due to new product
introductions and successful growth in the food processing and dairy
plant markets. Unit volume growth and favorable product mix accounted for
approximately 90 percent of Klenzade's sales growth. Kay's United States
operations reported sales growth of 6 percent for 1994, primarily due to the
growth of the large fast food chains which Kay serves.
Operating income for the company's United States operations totaled $135
million and increased 8 percent over operating income of $124 million in 1993.
Operating income margins were 14.3 percent for 1994 and were unchanged from the
prior year. The improvement in operating income was primarily due to continued
growth of the Institutional business and double-digit gains from the Pest
Elimination and Janitorial Divisions. United States operating income
performance reflected strong sales, improved product mix and the effects of
continued cost controls, which were partially offset by the effect of continued
investments in the sales-and-service force. The United States business has
continued to expand its sales-and-service force and invest in training,
development and customer quality programs to improve productivity and service
to its customers. In 1994, the company added approximately 150 new U.S. sales
and service personnel compared to additions of approximately 300 in 1993 and
100 in 1992. Operating income improvements in 1994 included a modest benefit
from favorable raw material costs. While raw material costs have begun to
increase, the company is continually focusing on managing the impact of future
raw material cost increases so they will not have a significant impact on
overall operating results. Operating income comparisons also benefited due to
the charges which were included in 1993 for unusual transactions. Operating
income in 1993 included a net charge for manufacturing restructuring and
environmental compliance costs which were partially offset by a gain on the
sale of the Textile Care Division's fashion processing business.
1993 COMPARED WITH 1992
United States sales for 1993 were $867 million, an increase of 6 percent over
net sales for 1992. All divisions contributed to this sales increase.
Institutional Division sales increased 5 percent due to new product
introductions, retention of key customers, increased product volumes and a
moderate economic improvement in the hospitality and lodging industries. Pest
Elimination reported sales growth of 14 percent due to its continued success in
focusing on large national and regional accounts and to retention of key
customers and new product and service introductions. Textile Care Division
sales increased 8 percent over the prior year. The sales improvement was due to
focusing on specific market segments, advancements in applying solid products
technology and to the introduction of new products and dispensing systems. The
Janitorial Division reported sales growth of 10 percent due to new product
introductions, success with new distributors and large national accounts and
double-digit growth in sales to the wholesale club market. Klenzade Division
sales for 1993 increased 7 percent due to new product introductions and
continued success in the dairy plant and food and beverage processing markets.
Kay's United States sales increased 10 percent due to the annualized effect of
major new customers obtained in 1992 and to the growth of the businesses of its
established customers.
United States operating income for 1993 totaled $124 million, an increase
of 1 percent over operating income of $123 million in 1992. Operating income
margins for the United States business decreased from 15.1 percent in 1992 to
14.3 percent in 1993. The benefits of favorable raw material costs, improved
product volume, favorable product mix and the effects of continued cost
controls were offset by the affect of
26
<PAGE>
increased investments in sales-and-service personnel and the charge for
manufacturing restructuring and environmental compliance costs. Operating
income in 1993 also included the gain on the sale of the Textile Care fashion
processing business.
INTERNATIONAL
<TABLE>
<CAPTION>
(thousands) 1994 1993 1992
---------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $265,544 $234,981 $241,229
Operating income $ 14,838 $ 9,420 $ 8,851
Percent of sales 5.6% 4.0% 3.7%
</TABLE>
The company's International business consists of Canadian, Asia Pacific and
Latin American operations, and the international operations of Kay. Net sales
of International operations totaled $266 million in 1994, which represented an
increase of 13 percent over sales of $235 million in 1993. The effects of
currency translation did not have a significant impact on overall International
sales growth. Asia Pacific, International's largest operation, reported sales
growth of 13 percent for 1994. Asia Pacific sales benefited from double-digit
sales gains in the East Asia region and excellent sales growth in Japan, New
Zealand and China. Asia Pacific's growth included strong performances in its
Institutional and Klenzade markets which was due to new product introductions
and a continued focus on corporate accounts. Sales growth in the Latin American
region increased 6 percent over 1993. Results for the Latin American region
reflected significantly improved results in Brazil, good growth in Mexico and
double-digit growth in Argentina. These improvements reflected the benefits of
management changes which the company made in the region in late 1993 and early
1994 and an improved economic environment in Brazil. Sales growth in the Latin
American region included double-digit growth in Klenzade sales and modest growth
in sales to the Institutional markets. Sales of the company's Canadian
operations increased 22 percent during 1994. Canada reported good growth in its
Institutional business and double-digit increases in the sales of its Klenzade,
Textile Care and Janitorial businesses. The sales improvements in Canada were
due to additional sales related to a December 1993 acquisition, new product
introductions and improved economic conditions in Canada. Sales of Kay's
international operations increased 42 percent during 1994. Kay's operations are
relatively new within international markets and growth is principally due to
expanding service to all of the various locations in which their existing
customers operate.
International operating income totaled $15 million in 1994, an increase of
58 percent over operating income of $9 million in 1993. Operating income
margins were 5.6 percent compared with operating income margins of 4.0 percent
in 1993. Operating income comparisons were favorably affected by the first
quarter 1993 sale of the company's G.H. Wood janitorial distribution business in
Canada. Excluding the loss on the sale of these operations from 1993's
operating income, International's operating income for 1994 increased by 14
percent over 1993. This improvement in operating income was due to double-digit
operating income growth in Asia Pacific and Kay's international operations and
to modest growth in Canada, which was partially offset by decreased operating
income in the Latin American region. Latin America's operations included
investments in management and the sales-and-service force and a $1 million one-
time charge in the second quarter of 1994 due to the new economic program and
monetary plan in Brazil. The recent devaluation of the Mexican Peso occurred
after International's November 30, 1994 year end and is not expected to have a
significant impact on the company's overall International operations during
1995.
Operating income margins of the company's International operations are
substantially less than the operating income margins realized for the company's
United States operations. The lower International margins are due to the
difference in scale of International operations, where operating locations are
smaller in size, and to the additional costs of operating in numerous and
diverse foreign jurisdictions. Proportionately larger investments in sales and
administrative personnel are also necessary in order to facilitate growth of
International operations.
1993 COMPARED WITH 1992
International revenues for 1993 of $235 million decreased 3 percent from
revenues of $241 million in 1992. This decrease in sales was due to the
inclusion of only one month of sales of the Canadian G.H. Wood janitorial
distribution business due to the sale of these operations in the first quarter
of 1993. Excluding the G.H. Wood operations, sales of International operations
for 1993 increased 10 percent over 1992. The
27
<PAGE>
effects of currency translation did not have a significant impact on overall
International sales growth. The Asia Pacific region reported sales growth of
9 percent, which included double-digit sales gains in China and the East Asia
region and modest sales growth in Japan. Latin American sales for 1993
increased 8 percent over 1992. Sales in Mexico grew at double-digit rates for
1993, while sales in Brazil were down slightly from the prior year. Excluding
the G.H. Wood operations, sales of the company's Canadian operations decreased
2 percent during 1993, reflecting the unfavorable effects of currency
translation and the recession in Canada. Sales of Kay's international
operations for 1993 increased 90% over the prior year. This rapid growth was
primarily due to Kay being in the early stages of expanding service to
existing customers in the various international locations in which they
operate.
International operating income totaled $9 million for 1993 and increased 6
percent over the prior year. Operating income margins for the company's
International business were 4.0 percent in 1993 compared with operating income
margins of 3.7 percent in 1992. Operating income comparisons were affected by
the first quarter 1993 sale of the G.H. Wood janitorial distribution business in
Canada. Excluding the 1993 loss on sale of these operations and operating
losses from 1992, International's operating income for 1993 increased 4 percent
over 1992. Double-digit operating income improvements in Asia Pacific were
partially offset by slightly decreased operating income in Latin America due
largely to sales and marketing investments and to inventory and bad debt charges
of the company's business operations in Central America. Operating income of
Canada's operations decreased slightly due to currency rate changes. The
international operating income of Kay for 1993 was virtually unchanged from the
prior year as rapid sales growth was offset by costs necessary to establish a
network to serve international markets.
HENKEL-ECOLAB JOINT VENTURE
The company operates institutional and industrial cleaning and sanitizing
businesses in Europe through its 50 percent economic interest in the Henkel-
Ecolab joint venture. The company includes the operations of the Henkel-Ecolab
joint venture in its financial statements using the equity method of accounting.
The company's equity in earnings of the joint venture, including royalty income
and after deduction of intangible amortization, was $11 million in 1994, a
substantial increase compared with the company's equity in earnings of $8
million in 1993. Operating results for 1994's fourth quarter and fiscal year
included a $1 million benefit from a rebate under a manufacturing supply
agreement. The improvement in operating results also reflected product mix
improvements and the cost containment efforts of the joint venture. These
benefits were partially offset by sluggish sales and investments made in 1994
related to system enhancements and minor organizational changes. The joint
venture's revenues, although not consolidated in Ecolab's financial statements,
totaled $777 million for 1994, a 2 percent increase over joint venture revenues
of $758 million in 1993. Joint venture revenues in both 1994 and 1993 benefited
from the introduction of several new products, including the transfer of Ecolab
products to Europe.
1993 COMPARED WITH 1992
The company's equity in earnings of the Henkel-Ecolab joint venture was $8
million in 1993, a 5 percent decrease from 1992. Joint venture revenues for
1993 of $758 million decreased 8 percent from joint venture revenues of $821
million in 1992. Operating results of the joint venture reflected the difficult
economic conditions in Germany and the other major regions of Europe in which
the joint venture operates and the negative effects of currency rate changes.
During 1993, the joint venture continued the consolidation of manufacturing
operations into its own plants and the consolidation of administrative
activities.
CORPORATE
Corporate operating expense was $12 million in 1994 compared with $4 million in
1993. Corporate operating expense includes overhead costs directly related to
the joint venture. In addition, 1994 also included $8 million of merger costs
and expenses which were incurred as a result of the merger with Kay.
Corporate operating expense for 1993 was $4 million, a significant decrease
from expense of $7 million in 1992. In addition to overhead costs related to
the joint venture, corpo-
28
<PAGE>
rate operating expense in 1992 also included similar expenses previously
related to a discontinued business. Corporate overhead costs related to the
discontinued business decreased after its sale in 1992 due to reduction in
administrative functions and reorganizations of those areas that previously
supported this business.
INTEREST AND INCOME TAXES
Net interest expense for 1994 was $13 million, a significant decrease from net
interest expense of $21 million in 1993. This reduction in net interest expense
made a significant contribution to the company's income improvement for 1994.
The reduction was due to the early retirement of $75 million of the company's
10.375 percent debentures in July of 1993 and reduced borrowings under the
Multicurrency Credit Agreement during 1994. Net interest expense for 1993 of
$21 million also decreased significantly from net interest expense of $35
million in 1992. This reduction in net interest expense was due to a
significant reduction in debt during the second half of 1992 and throughout
1993.
The annual effective income tax rate was 40.7 percent in 1994, compared
with 30.9 percent in 1993 and 30.3 percent in 1992. The increase in the
effective income tax rate in 1994 was principally due to the nondeductibility of
a major portion of the merger costs and expenses due to Kay's Subchapter S
income tax status, and to income tax expense incurred to record a net deferred
tax liability to reflect Kay's future net taxable temporary differences upon its
merger with Ecolab. The increase in the 1994 effective income tax rate also
reflected a higher overall effective rate on earnings of International
operations, reduced income tax benefits from the company's operations in Puerto
Rico and the effects of higher levels of pre-tax income. During 1993, the
effective income tax rate reflected tax benefits associated with the sales of
the G.H. Wood operation and the Textile Care fashion processing business.
However, these benefits were substantially offset by the effects of higher
levels of pre-tax income, a higher overall effective rate on earnings of ongoing
International operations, reduced income tax benefits from the company's
operations in Puerto Rico and the impact of the increase in the enacted U.S.
federal income tax rate on 1993's earnings.
The effective income tax rate for all periods reflects Kay's favorable
income tax status as a Subchapter S Corporation for income tax purposes prior to
the December 1994 merger with Ecolab. Effective with the merger, Kay will be
included in the company's U.S. federal income tax return and, therefore, income
tax expense will no longer reflect the Subchapter S related tax benefit in
future periods. The pro forma effects of this change in income tax status are
included in the discussion of consolidated operating results above, and in note
5 of the notes to consolidated financial statements.
As a result of tax losses on the disposition of a discontinued business,
U.S. federal income tax payments were reduced by approximately $15 million in
1994, $25 million in 1993 and $15 million in 1992. However, pending final
acceptance of the company's treatment of the losses, no income tax benefit has
been recognized for financial reporting purposes. Additional reductions in
U.S. federal income tax payments are not expected to be significant.
FINANCIAL POSITION, CASH FLOWS AND LIQUIDITY
FINANCIAL POSITION
The company's balance sheet improved throughout 1993 and 1994. This is
a result of management's focus on improving the balance sheet in an effort to
maintain one of its long-term financial objectives of an investment grade
balance sheet. This objective was achieved in 1993 when the company's debt
rating was raised to an "A-" by Standard and Poor's, and this rating was
maintained throughout 1994. Significant changes to the company's balance sheet
during 1994 and 1993 included the following:
- Total debt decreased by $4 million during 1994 after a significant decrease
of $85 million during 1993. The ratio of total debt to capitalization
decreased to 24 percent at year-end 1994 from 28 percent at year-end 1993
and 40 percent at year-end 1992. In addition to reduced debt levels, the
improved total debt to capitalization ratios reflect increased
shareholders' equity due to strong earnings performances.
- Working capital levels increased to $148 million at year-end 1994 from $110
million at year-end 1993 and $72 million at year-end 1992. The working
capital increase during 1994 included a significant increase in cash and
cash equivalents, as a result of strong cash flows, and increased inventory
levels to more efficiently meet local sales requirements.
29
<PAGE>
- Total assets at December 31, 1994 and 1993 included approximately $50
million of net deferred tax assets as a result of the adoption of the new
accounting standard for income taxes in the first quarter of 1993. The
increases in other noncurrent liabilities in 1994 and 1993 were also
related to this accounting change and to the substantial increases in
income taxes payable during 1994 and 1993 due to the reduction in U.S.
federal income tax payments as a result of tax losses on the disposition of
a discontinued business.
- Changes in the company's investment in Henkel-Ecolab joint venture are
principally due to currency rate changes.
CASH FLOWS
Cash provided by continuing operating activities totaled $154 million in 1994,
$151 million in 1993 and $130 million in 1992. These strong operating cash
flows were due in large part to strong earnings growth. Cash provided by
continuing operating activities for 1994 also included a one-time benefit from
the receipt of an $18 million income tax refund related to prior years.
Cash provided by discontinued operations included a reduction in income tax
payments as a result of the loss on the disposition of a discontinued business.
Cash used for discontinued operations in 1992 also included cash required to
fund the discontinued operation prior to its disposition in May 1992.
Cash flows used for capital expenditures were $88 million in 1994, $68
million in 1993 and $60 million in 1992. Worldwide additions of merchandising
equipment, primarily cleaning and sanitizing product dispensers, accounted for
approximately 70 percent of each year's capital expenditures. Investing
activities in 1992 included $94 million of cash flows related to discontinued
operations. This represented $107 million of proceeds from the sale of a
discontinued business, net of costs incurred related to the sale. The net
proceeds from the sale were used to reduce debt.
Total debt was $147 million at December 31, 1994, compared with total debt
levels of $151 million at year-end 1993 and $237 million at year-end 1992. Cash
provided by operating activities was used to reduce debt under the company's
Multicurrency Credit Agreement during 1994, as well as to fund dividends, the
reacquisition of shares of the company's common stock under the systematic share
repurchase program and Kay shareholder distributions. Cash provided by
operating activities and proceeds from the sale of a discontinued business were
used to reduce debt levels during 1992 and 1993. During 1993, the company
provided for the early retirement of the remaining $75 million of its 10.375
percent debentures. In 1992, the company provided for the early retirement of
$50 million of these debentures in connection with the sale of its discontinued
business, as well as the reduction of borrowings under the Facilities Agreement
and the scheduled maturity of its $48 million, 9.35 percent note.
In 1994, the company increased its annual dividend rate for the third
consecutive year. The company has paid dividends on its common stock for 58
consecutive years. Cash dividends declared on common stock, by quarter, for
each of the last three years was as follows:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
1994 $0.11 $0.11 $0.11 $0.125 $0.455
1993 0.095 0.095 0.095 0.11 0.395
1992 0.0875 0.0875 0.0875 0.095 0.3575
</TABLE>
LIQUIDITY
The company maintains a $150 million committed line of credit for general
corporate financing needs. The company also has an established commercial paper
program, supported by the committed line of credit, to minimize the cost of its
short-term borrowings. The company believes its existing cash balances, cash
generated by operating activities, including cash flows from the joint venture,
and available credit are adequate to fund all of its 1995 requirements for
growth, possible acquisitions, new program investments, scheduled debt
repayments and dividend payments.
30
<PAGE>
Ecolab Inc.
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Year ended December 31 (thousands, except per share) 1994 1993 1992
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $1,207,614 $1,102,396 $1,057,634
Cost of Sales 533,143 491,306 485,206
Selling, General and Administrative Expenses 529,507 481,639 446,814
Merger Costs and Expenses 8,000
---------- ---------- ----------
Operating Income 136,964 129,451 125,614
Interest Expense, Net 12,909 21,384 35,334
---------- ---------- ----------
Income Before Income Taxes and Equity
in Earnings of Joint Venture 124,055 108,067 90,280
Provision for Income Taxes 50,444 33,422 27,392
Equity in Earnings of Henkel-
Ecolab Joint Venture 10,951 8,127 8,600
---------- ---------- ----------
Income Before Extraordinary Loss
and Cumulative Effect of Change
in Accounting 84,562 82,772 71,488
Extraordinary Loss Related to
Retirement of Debt (Net of
Income Tax Benefit of $2,528) (4,018)
Cumulative Effect of Change in
Accounting for Income Taxes 4,733
---------- ---------- ----------
Net Income $ 84,562 $ 83,487 $ 71,488
---------- ---------- ----------
---------- ---------- ----------
Income Per Common Share
Income before extraordinary loss
and cumulative effect of change
in accounting $ 1.25 $ 1.23 $ 1.06
Extraordinary loss related to
retirement of debt (0.06)
Change in accounting for income taxes 0.07
Net income $ 1.25 $ 1.24 $ 1.06
Average Common Shares Outstanding 67,550 67,528 67,204
<FN>
Prior years have been restated. See notes to consolidated financial statements.
</FN>
</TABLE>
31
<PAGE>
Ecolab Inc.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31 (thousands, except per share) 1994 1993 1992
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 98,255 $ 48,642 $ 38,205
Accounts receivable, net 168,807 146,804 142,902
Inventories 100,015 83,401 73,350
Deferred income taxes 22,349 21,841
Other current assets 11,753 10,363 10,055
---------- -------- --------
Current Assets 401,179 311,051 264,512
Property, Plant and Equipment, Net 246,191 219,268 207,183
Investment in Henkel-Ecolab
Joint Venture 284,570 255,804 289,034
Other Assets 88,416 105,607 98,135
---------- -------- --------
Total Assets $1,020,356 $891,730 $858,864
---------- -------- --------
---------- -------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt $ 41,820 $ 19,420 $ 20,732
Accounts payable 76,905 71,720 60,166
Compensation and benefits 56,445 44,713 41,611
Income taxes 13,113 8,221 6,282
Other current liabilities 65,382 57,424 63,232
---------- -------- --------
Current Liabilities 253,665 201,498 192,023
Long-Term Debt 105,393 131,861 215,963
Postretirement Health Care and
Pension Benefits 70,882 72,647 63,393
Other Liabilities 128,608 93,917 29,179
Shareholders' Equity (common
stock, par value $1.00 per
share; shares outstanding:
1994 - 67,671; 1993 - 67,570;
1992 - 67,512) 461,808 391,807 358,306
---------- -------- --------
Total Liabilities and
Shareholders' Equity $1,020,356 $891,730 $858,864
---------- -------- --------
---------- -------- --------
<FN>
Prior years have been restated. See notes to consolidated financial statements.
</FN>
</TABLE>
32
<PAGE>
Ecolab Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31 (thousands) 1994 1993 1992
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 84,562 $ 83,487 $ 71,488
Adjustments to reconcile net income
to cash provided by operating activities:
Extraordinary loss related to
retirement of debt 4,018
Cumulative effect of change in
accounting for income taxes (4,733)
Depreciation 56,867 51,256 48,514
Amortization 10,002 9,353 11,929
Deferred income taxes 2,352 (15,210) 286
Equity in earnings of joint venture,
net of royalties received (5,273) (1,741) (2,445)
Other, net 415 (1,673) 2,120
Changes in operating assets and liabilities:
Accounts receivable (18,952) (474) (10,857)
Inventories (14,285) (12,844) 911
Other assets (7,222) 4,240 (8,324)
Accounts payable 1,587 11,810 (340)
Other liabilities 44,293 23,385 16,867
-------- -------- --------
Cash provided by continuing
operations 154,346 150,874 130,149
Cash provided by (used for)
discontinued operations 15,000 24,800 (9,932)
-------- -------- --------
Cash provided by operating activities 169,346 175,674 120,217
-------- -------- --------
INVESTING ACTIVITIES
Capital expenditures (88,457) (68,321) (59,904)
Property disposals 4,836 5,059 929
Sale of investments in securities 5,022 26,521 (3,221)
Discontinued operations 93,673
Other, net 459 (6,784) (1,592)
-------- -------- --------
Cash provided by (used for)
investing activities (78,140) (43,525) 29,885
-------- -------- --------
FINANCING ACTIVITIES
Notes payable 8,512 (1,707) (8,724)
Long-term debt borrowings 12,414
Long-term debt repayments (14,621) (94,227) (164,541)
Reacquired shares (7,889) (9,279) (562)
Dividends on common stock (27,851) (24,037) (21,983)
Kay shareholder distributions (2,288) (4,108) (1,449)
Premium on early retirement
of debt (5,474)
Other, net 3,301 5,034 6,475
-------- -------- --------
Cash used for financing activities (40,836) (121,384) (190,784)
-------- -------- --------
Effect of exchange rate changes
on cash (757) (328) (519)
-------- -------- --------
INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 49,613 10,437 (41,201)
Cash and Cash Equivalents,
beginning of year 48,642 38,205 79,406
-------- -------- --------
Cash and Cash Equivalents,
end of year $ 98,255 $ 48,642 $ 38,205
-------- -------- --------
-------- -------- --------
<FN>
Bracketed amounts indicate a use of cash.
Prior years have been restated. See notes to consolidated financial statements.
</FN>
</TABLE>
33
<PAGE>
Ecolab Inc.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional Deferred
Common Paid-in Retained Compen- Cumulative Treasury
(thousands) Stock Capital Earnings sation Translation Stock Total
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1991,
as previously reported $31,929 $182,616 $ 91,733 $(3,480) $14,068 $(18,704) $298,162
Pooling of interests with
Kay (before 1993 stock dividend) 2,230 (2,030) 8,786 8,986
------- -------- -------- ------- --------- -------- --------
Balance December 31, 1991,
as restated 34,159 180,586 100,519 (3,480) 14,068 (18,704) 307,148
Net income 71,488 71,488
Cash dividends on common stock (22,507) (22,507)
Kay shareholder distributions (1,449) (1,449)
Stock options 300 7,330 7,630
Stock awards 133 41 (488) 592 278
Kay capital contribution 10 10
Reacquired shares (562) (562)
Amortization 1,613 1,613
Translation (5,343) (5,343)
------- -------- -------- ------- --------- -------- --------
Balance December 31, 1992 34,459 188,059 148,092 (2,355) 8,725 (18,674) 358,306
Net income 83,487 83,487
Cash dividends on common stock (24,987) (24,987)
Kay shareholder distributions (4,108) (4,108)
Stock dividend 34,681 (34,681)
Stock options 222 6,445 6,667
Stock awards 200 570 (1,189) 917 498
Kay capital contribution 10 10
Reacquired shares (9,279) (9,279)
Amortization 1,255 1,255
Translation (20,042) (20,042)
------- -------- -------- ------- --------- -------- --------
Balance December 31, 1993 69,362 160,033 203,054 (2,289) (11,317) (27,036) 391,807
Net income 84,562 84,562
Cash dividends on common stock (29,363) (29,363)
Kay shareholder distributions (2,288) (2,288)
Stock options 297 4,209 4,506
Stock awards 616 1,497 (3,307) 2,190 996
Reacquired shares (7,889) (7,889)
Amortization 1,404 1,404
Translation 18,073 18,073
------- -------- -------- ------- --------- -------- --------
Balance December 31, 1994 $69,659 $164,858 $257,462 $(4,192) $ 6,756 $(32,735) $461,808
------- -------- -------- ------- --------- -------- --------
------- -------- -------- ------- --------- -------- --------
COMMON STOCK ACTIVITY
<CAPTION>
1994 1993 1992
-------------------------- --------------------------- --------------------------
Common Treasury Common Treasury Common Treasury
Year ended December 31 (Shares) Stock Stock Stock Stock Stock Stock
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares, beginning of year:
As previously reported 31,928,644 (704,684)
Shares issued to effect
merger with Kay (before
1993 stock dividend) 2,230,053
---------- ---------- ---------- ---------- ---------- ----------
As restated 69,362,191 (1,792,112) 34,458,969 (702,766) 34,158,697 (704,684)
Stock options 296,910 222,127 300,272
Stock awards 167,226 31,340 17,636
Reacquired shares (363,541) (224,630) (15,718)
Stock dividend 34,681,095 (896,056)
---------- ---------- ---------- ---------- ---------- ----------
Shares, end of year 69,659,101 (1,988,427) 69,362,191 (1,792,112) 34,458,969 (702,766)
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
<FN>
Prior years have been restated. See notes to consolidated financial statements.
</FN>
</TABLE>
34
<PAGE>
1. NATURE OF BUSINESS
-------------------------------------------------------------------------------
The company is a global developer of premium cleaning, sanitizing and
maintenance products and services for the hospitality, institutional and
industrial markets. Customers include hotels, restaurants, foodservice,
healthcare and educational facilities, quick-service (fast food) restaurants,
dairy plants and farms, and food and beverage processors around the world.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-------------------------------------------------------------------------------
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the company and
all majority-owned subsidiaries. The company accounts for its investment in the
Henkel-Ecolab joint venture under the equity method of accounting. International
subsidiaries and the Henkel-Ecolab joint venture are included in the financial
statements on the basis of their November 30 fiscal year ends.
FOREIGN CURRENCY TRANSLATION
Financial position and results of operations of the company's international
subsidiaries and the Henkel-Ecolab joint venture generally are measured using
local currencies as the functional currency. Assets and liabilities of these
operations are translated at the exchange rates in effect at each fiscal year
end. Income statement accounts are translated at the average rates of exchange
prevailing during the year. Translation adjustments arising from the use of
differing exchange rates from period to period are included in the cumulative
translation account in shareholders' equity. Translation adjustments for
operations in highly inflationary economies are included in net income and were
not significant.
INVENTORY VALUATIONS
Inventories are valued at the lower of cost or market. Domestic chemical
inventory costs are determined on a last-in, first-out (lifo) basis. Lifo
inventories represented 38 percent, 39 percent and 38 percent of consolidated
inventories at year-end 1994, 1993 and 1992, respectively. All other inventory
costs are determined on a first-in, first-out (fifo) basis.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Merchandising equipment
consists principally of various systems that dispense cleaning and sanitizing
products and low temperature dishwashing machines. The dispensing systems are
accounted for on a mass asset basis, whereby equipment is capitalized and
depreciated as a group and written off when fully depreciated. Depreciation and
amortization are charged to operations using the straight-line method over the
assets' estimated useful lives.
INTANGIBLE ASSETS
Intangible assets arise principally from business acquisitions and are stated at
cost. The assets are amortized on a straight-line basis over their estimated
economic lives, generally not exceeding 30 years. The company periodically
assesses the recoverability of intangible assets based on anticipated future
earnings and operating cash flows.
INCOME PER COMMON SHARE
Income per common share amounts are computed by dividing income by the weighted
average number of common shares outstanding. Stock options did not have a
significant dilutive effect.
3. BALANCE SHEET INFORMATION
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31 (thousands) 1994 1993 1992
-------------------------------------------------------------------------
<S> <C> <C> <C>
ACCOUNTS RECEIVABLE, NET
Accounts receivable $177,510 $154,798 $150,488
Allowance for doubtful
accounts (8,703) (7,994) (7,586)
-------- -------- --------
Total $168,807 $146,804 $142,902
-------- -------- --------
-------- -------- --------
INVENTORIES
Finished goods $ 42,955 $ 36,391 $ 36,532
Raw materials and parts 60,251 49,653 40,150
Excess of fifo cost over
lifo cost (3,191) (2,643) (3,332)
-------- -------- --------
Total $100,015 $ 83,401 $ 73,350
-------- -------- --------
-------- -------- --------
PROPERTY, PLANT AND EQUIPMENT, NET
Land $ 6,348 $ 6,925 $ 5,583
Buildings and leaseholds 107,259 102,897 100,707
Machinery and equipment 174,203 161,474 155,293
Merchandising equipment 257,766 217,305 196,761
Construction in progress 6,236 6,167 3,942
-------- -------- --------
551,812 494,768 462,286
-------- -------- --------
-------- -------- --------
Accumulated depreciation
and amortization (305,621) (275,500) (255,103)
-------- -------- --------
Total $246,191 $219,268 $207,183
-------- -------- --------
-------- -------- --------
OTHER ASSETS
Intangible assets, net $ 37,549 $ 40,919 $ 30,522
Investments in securities 5,000 9,007 36,609
Deferred income taxes 26,212 28,482
Other 19,655 27,199 31,004
-------- -------- --------
Total $ 88,416 $105,607 $ 98,135
-------- -------- --------
-------- -------- --------
</TABLE>
35
<PAGE>
3. BALANCE SHEET INFORMATION (continued)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31 (thousands) 1994 1993 1992
-------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT-TERM DEBT
Notes payable $ 25,302 $ 16,089 $ 17,320
Long-term debt, current
maturities 16,518 3,331 3,412
-------- -------- --------
Total $ 41,820 $ 19,420 $ 20,732
-------- -------- --------
-------- -------- --------
LONG-TERM DEBT
9.68% senior notes,
due 1995-2001 $100,000 $100,000 $100,000
10.375% debentures,
retired in 1993 75,000
Multicurrency Credit
Agreement, due 1998 10,000
Facilities Agreement,
retired in 1993 18,378
Other 21,911 25,192 25,997
-------- -------- --------
121,911 135,192 219,375
Long-term debt,
current maturities (16,518) (3,331) (3,412)
-------- -------- --------
Total $105,393 $131,861 $215,963
-------- -------- --------
-------- -------- --------
</TABLE>
The $100 million of 9.68 percent senior notes were issued by the company to a
group of insurance companies. The notes include covenants regarding
consolidated shareholders' equity and amounts of certain long-term debt.
In June 1993, the company provided notice to call the remaining $75 million of
its 10.375 percent debentures originally scheduled for maturity in 1998 - 2017.
The redemption of these debentures was completed on July 15, 1993. The company
used proceeds from the sale of a discontinued business and cash flows from
operations to fund the debt retirement. An extraordinary loss of $4.0 million
(net of $2.5 million income tax benefit), or $0.06 per share, which consisted
primarily of redemption premiums paid to debenture holders and the write-off of
deferred financing costs associated with the debt, was recognized in the second
quarter of 1993.
The company has a $150 million Multicurrency Credit Agreement ("the
Agreement") with a consortium of banks. The company may borrow varying amounts
from time-to-time on a revolving credit basis, with loans denominated in U.S.
dollars, Deutsche marks, or certain other currencies, if available. The company
has the option of various interest rates based on short-term borrowing rates.
Amounts outstanding at December 31, 1993 were denominated in U.S. dollars and
had an annual rate of interest of 3.4 percent. The Agreement terminates in
September 1998 and includes covenants regarding interest coverage and the ratio
of total debt to capitalization.
Amounts outstanding under the Facilities Agreement at December 31, 1992 were
denominated in Deutsche marks and had an average annual interest rate of 8.9
percent.
As of December 31, the weighted average interest rate on notes payable was
5.3 percent for 1994, 4.6 percent for 1993 and 8.2 percent for 1992.
As of December 31, 1994, the aggregate annual maturities of long-term debt for
the next five years were: 1995 - $16,518,000; 1996 - $16,280,000; 1997 -
$15,086,000; 1998 - $15,096,000; and 1999 - $15,110,000.
Interest expense was $16,213,000 in 1994, $25,977,000 in 1993 and $40,587,000
in 1992. Total interest paid was $16,402,000 in 1994, $29,691,000 in 1993 and
$44,967,000 in 1992.
Other noncurrent liabilities included income taxes payable of $94 million at
December 31, 1994 and $61 million at December 31, 1993. Income taxes payable
reflected a reduction in U.S. federal income tax payments during 1994, 1993 and
1992 as a result of tax losses on the disposition of a discontinued business.
4. FINANCIAL INSTRUMENTS
-------------------------------------------------------------------------------
FOREIGN CURRENCY INSTRUMENTS
The company uses hedging and derivative financial instruments to limit financial
risk related to foreign currency exchange rates, interest rates and other market
risks. The company does not hold hedging or derivative financial instruments of
a speculative nature for trading purposes.
The company enters into foreign currency forward exchange and option contracts
to hedge specific foreign currency exposures, principally related to
intercompany debt and joint venture royalty transactions. These contracts
generally expire within one year. Gains and losses on these contracts are
deferred and recognized as part of the specific transactions hedged. The cash
flows from these contracts are classified in the same category as the
transaction hedged in the Consolidated Statement of Cash Flows.
The company had foreign currency forward exchange contracts with a face amount
denominated primarily in Deutsche marks and totaling approximately $110 million
at December 31, 1994, $115 million at December 31, 1993 and $100 million at
December 31, 1992. The unrealized gains on these contracts were not
significant.
36
<PAGE>
FAIR VALUE OF OTHER FINANCIAL INSTRUMENTS
The carrying amount and the estimated fair value of other financial instruments
held by the company as of December 31, 1994 were:
<TABLE>
<CAPTION>
Carrying Fair
(thousands) Amount Value
-------- ---------
<S> <C> <C>
Cash and cash equivalents $ 98,255 $ 98,255
Long-term investments in securities 5,000 5,000
Short-term debt 41,820 41,820
Long-term debt $105,393 $109,792
</TABLE>
Cash equivalents are highly liquid investments with a maturity of three months
or less when purchased. The carrying amounts of cash equivalents and short-term
debt approximate fair value because of their short maturity.
Long-term investments in securities are carried at cost. The carrying amount
of these securities approximates fair value based on quoted market prices.
These securities mature in periods of less than ten years.
The fair value of long-term debt is based on quoted market prices for the same
or similar issues.
5. KAY MERGER
-------------------------------------------------------------------------------
On December 7, 1994, the company issued approximately 4.5 million shares of its
common stock in exchange for all of the outstanding common stock of Kay Chemical
Company and affiliates (Kay). The merger has been accounted for as a pooling of
interests and, accordingly, the company's consolidated financial statements have
been restated to include the accounts and operations of Kay for all periods
prior to the merger.
Kay was a Subchapter S Corporation for income tax purposes and, therefore, did
not pay U.S. federal income taxes. Kay will be included in the company's U.S.
federal income tax return effective December 7, 1994, and, therefore, a net
deferred tax liability and corresponding charge to income tax expense of $1.3
million or $0.02 per share was recorded upon closing to reflect Kay's net
taxable temporary differences.
Separate net sales, net income and related per share amounts of the merged
entities are presented in the following table. In addition, the table includes
unaudited pro forma net income and net income per share amounts which reflect
the elimination of the nonrecurring merger costs and expenses in 1994 and pro
forma adjustments to present income taxes on the basis on which they will be
reported in future periods.
<TABLE>
<CAPTION>
(thousands, except per share) 1994 1993 1992
---------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales
Ecolab $1,141,005 $1,041,518 $1,004,833
Kay 66,609 60,878 52,801
---------- ---------- ----------
Total $1,207,614 $1,102,396 $1,057,634
---------- ---------- ----------
---------- ---------- ----------
Net income
Ecolab $ 86,555 $ 76,638 $ 64,270
Kay 6,207 6,849 7,218
Kay Subchapter S
status (2,298) (2,667) (2,797)
---------- ---------- ----------
Pro forma net
income 90,464 80,820 68,691
Merger costs and
expenses (6,900)
Kay net deferred tax
liability (1,300)
Kay Subchapter S
status 2,298 2,667 2,797
---------- ---------- ----------
Net income, as
reported $ 84,562 $ 83,487 $ 71,488
---------- ---------- ----------
---------- ---------- ----------
Net income per share
As reported $ 1.25 $ 1.24 $ 1.06
Pro forma $ 1.34 $ 1.20 $ 1.02
</TABLE>
MERGER COSTS AND EXPENSES
In connection with the merger, $8.0 million of merger costs and expenses ($6.9
million after-tax, or $0.10 per share) were incurred and have been charged to
expense in the fourth quarter of 1994. The merger costs and expenses consisted
of merger related bonus payments made to Kay non-shareholder employees and
legal, accounting and investment banking fees.
6. HENKEL-ECOLAB JOINT VENTURE
-------------------------------------------------------------------------------
The company and Henkel KGaA, Dusseldorf, Germany, each own 50 percent of Henkel-
Ecolab, a joint venture of their respective European institutional and
industrial cleaning and sanitizing businesses. The joint venture's operations
and the company's equity in earnings of the joint venture included:
<TABLE>
<CAPTION>
(thousands) 1994 1993 1992
----------------------------------------------------------------
<S> <C> <C> <C>
Joint venture
Net sales $776,647 $758,471 $821,380
Gross profit 440,993 415,862 456,783
Income before income
taxes 48,389 40,337 38,781
Income before change
in accounting for
income taxes $ 26,109 $ 18,434 $ 20,411
Ecolab equity in earnings
Ecolab equity in income $ 13,605 $ 9,856 $ 11,130
Ecolab royalty income
from joint venture,
net of income taxes 5,745 6,653 6,131
Amortization expense
for the excess of
cost over the
underlying net assets
of the joint venture (8,399) (8,382) (8,661)
Equity in earnings of -------- -------- ---------
Henkel-Ecolab joint
venture $ 10,951 $ 8,127 $ 8,600
-------- -------- ---------
-------- -------- ---------
</TABLE>
37
<PAGE>
The company's investment in the Henkel-Ecolab joint venture includes the
unamortized excess of the company's investment over its equity in the joint
venture's net assets. This excess was $187 million at December 31, 1994 and is
being amortized on a straight-line basis over estimated economic useful lives of
up to 30 years.
Condensed balance sheet information for the Henkel-Ecolab joint venture was:
<TABLE>
<CAPTION>
December 31 (thousands) 1994 1993 1992
----------------------------------------------------------------
<S> <C> <C> <C>
Current assets $360,648 $310,945 $316,447
Noncurrent assets 127,244 106,812 92,555
Current liabilities 233,876 215,085 216,652
Noncurrent liabilities $ 59,710 $ 46,937 $ 42,825
</TABLE>
7. INCOME TAXES
-------------------------------------------------------------------------------
Effective January 1, 1993, the company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (FAS 109). This statement
requires a change from the deferred method to the asset and liability method of
accounting for income taxes. Under the asset and liability method, deferred tax
assets and liabilities are recognized for the expected future tax consequences
of temporary differences between financial reporting amounts and the tax bases
of existing assets and liabilities. Deferred tax assets and liabilities are
recorded based on enacted tax laws and tax rates. Changes in enacted tax rates
are reflected in the income tax provision as they occur.
The cumulative effect of this change in accounting principle increased net
income for 1993 by $4.7 million, or $0.07 per share, including the impact of
adoption of FAS 109 by the Henkel-Ecolab joint venture. Prior years' financial
statements were not restated.
Income before income taxes and equity in earnings of joint venture consisted
of:
<TABLE>
<CAPTION>
(thousands) 1994 1993 1992
--------------------------------------------------------
<S> <C> <C> <C>
Domestic $108,656 $100,420 $ 86,903
Foreign 15,399 7,647 3,377
-------- -------- --------
Total $124,055 $108,067 $ 90,280
-------- -------- --------
-------- -------- --------
</TABLE>
The provision for income taxes consisted of:
<TABLE>
<CAPTION>
(thousands) 1994 1993 1992
---------------------------------------------------------
<S> <C> <C> <C>
Federal, state and Puerto
Rico $44,619 $47,106 $27,191
Foreign 3,473 1,526 (85)
------- ------- -------
Currently payable 48,092 48,632 27,106
------- ------- -------
------- ------- -------
Federal, state and
Puerto Rico 300 (10,674) 587
Foreign 2,052 (4,536) (301)
------- ------- -------
Deferred 2,352 (15,210) 286
------- ------- -------
Provision for income
taxes $50,444 $33,422 $27,392
------- ------- -------
------- ------- -------
</TABLE>
The company's overall net deferred tax assets (current and noncurrent) were
comprised of the following:
<TABLE>
<CAPTION>
December 31 January 1
---------------------
(thousands) 1994 1993 1993
------- -------- --------
<S> <C> <C> <C>
Deferred tax assets
Postretirement health care
and pension benefits $28,084 $23,752 $24,279
Other accrued liabilities 26,616 24,123 18,705
Loss carryforwards 5,109 6,093 11,135
Other, net 9,405 15,917 6,867
Valuation allowance (1,462) (1,462) (6,758)
------- -------- --------
Total 67,752 68,423 54,228
------- -------- --------
Deferred tax liabilities
Property, plant and equipment
bases differences 17,579 16,503 15,837
Other, net 1,612 1,597 3,278
------- -------- --------
Total 19,191 18,100 19,115
------- -------- --------
Net deferred tax assets $48,561 $50,323 $ 35,113
------- -------- --------
------- -------- --------
</TABLE>
During the first quarter of 1993, the valuation allowance for deferred tax
assets was reduced by $3.3 million. This change in the valuation allowance
related to Canadian loss carryforwards which the company anticipates will be
realized as a result of the sale of the G.H. Wood janitorial distribution
business.
38
<PAGE>
A reconciliation of the statutory U.S. federal income tax rate to the
company's effective income tax rate was:
<TABLE>
<CAPTION>
1994 1993 1992
------------------------------------------------------
<S> <C> <C> <C>
Statutory U.S. rate 35.0% 35.0% 34.0%
State income taxes, net
of federal benefit 3.8 3.3 2.9
Puerto Rico operations (1.3) (2.2) (4.7)
Foreign .4 (.5) (1.7)
Loss carryforwards (3.1)
Kay Subchapter S status (.1) (2.2) (2.8)
Kay deferred tax liability 1.0
Other 1.9 .6 2.6
Effective income tax ----- ----- -----
rate 40.7% 30.9% 30.3%
----- ----- -----
----- ----- -----
</TABLE>
Cash paid for income taxes was $34,686,000 in 1994, $18,118,000 in 1993 and
$14,685,000 in 1992. As a result of tax losses on the disposition of a
discontinued business, the company's U.S. federal income tax payments were
reduced by $15 million in 1994, $25 million in 1993 and $15 million in 1992.
However, pending final acceptance of the company's treatment of the losses, no
income tax benefit has been recognized for financial reporting purposes.
As of December 31, 1994, undistributed earnings of international subsidiaries
and the joint venture of $46 million were considered to have been reinvested
indefinitely and, accordingly, the company has not provided U.S. income taxes on
such earnings. If those earnings were remitted to the company, applicable
income taxes would be offset substantially by available foreign tax credits.
8. RETIREMENT PLANS
-------------------------------------------------------------------------------
PENSION PLANS
The company has a noncontributory defined benefit pension plan covering
substantially all of its U.S. employees. Plan benefits are based on years of
service and highest average compensation for five consecutive years of
employment. Various international subsidiaries also have defined benefit
pension plans. Pension expense included the following components:
<TABLE>
<CAPTION>
December 31 (thousands) 1994 1993 1992
------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - employee benefits
earned during the year $10,627 $ 8,040 $ 6,556
Interest cost on projected
benefit obligation 13,348 11,401 9,233
Actual return on plan
assets 1,952 (9,134) (3,499)
Net amortization and
deferral (11,260) (69) (5,416)
------- ------- -------
U.S. pension expense 14,667 10,238 6,874
International pension
expense 1,005 820 723
------- ------- -------
Total pension expense $15,672 $11,058 $ 7,597
------- ------- -------
------- ------- -------
</TABLE>
The funded status of the U.S. pension plan was:
<TABLE>
<CAPTION>
December 31 (thousands) 1994 1993 1992
------------------------------------------------------------
<S> <C> <C> <C>
Actuarial present value of:
Vested benefit
obligation $121,251 $118,829 $ 84,585
Non-vested benefit
obligation 9,755 10,066 6,581
-------- -------- --------
Accumulated benefit
obligation 131,006 128,895 91,166
Effect of projected future
salary increases 46,801 51,174 35,514
-------- -------- --------
Projected benefit
obligation 177,807 180,069 126,680
Plan assets at fair
value 130,262 122,440 99,920
-------- -------- --------
Plan assets less than
the projected benefit
obligation (47,545) (57,629) (26,760)
Unrecognized prior service
cost 24,135 26,040 4,500
Unrecognized net loss 39,238 49,145 33,864
Unrecognized net
transition asset (14,732) (16,134) (17,538)
Adjustment required to
recognize minimum
liability (1,840) (7,877)
-------- -------- --------
Unfunded accrued pension
expense $ (744) $ (6,455) $ (5,934)
-------- -------- --------
-------- -------- --------
</TABLE>
The company's policy is to fund pension costs currently to the extent
deductible for income tax purposes. U.S. pension plan assets consist primarily
of equity and fixed income securities. International pension benefit
obligations and plan assets were not significant.
Effective July 1, 1993, the company adopted certain amendments to its U.S.
pension plan to improve the benefit formula and enhance the value of pension
benefits. Concurrent with these amendments, the company lowered the discount
rate used for determining the pension benefit obligations and future service and
interest cost for the plan from 8.25 percent to 8.0 percent. These changes
resulted in an increase of $2.9 million in pension expense for 1993 and an
increase of approximately $29 million in the projected benefit obligation. The
discount rate was lowered further at year-end 1993 to 7.5 percent. This
reduction in discount rate resulted in an increase in the projected benefit
obligation as of December 31, 1993 of approximately $14 million and an increase
of $2.1 million in pension expense for 1994.
39
<PAGE>
U.S. pension plan assumptions, in addition to projections for employee
turnover and retirement ages, were:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Discount rate for
service and interest
cost, at beginning
of year 7.50% 8.25% 8.25%
Projected salary
increases, weighted
average 5.6 5.6 5.6
Expected return on
assets 9.0 9.0 9.0
Discount rate for
year-end benefit
obligations 8.25% 7.50% 8.25%
</TABLE>
The discount rate used for determining the year-end pension benefit
obligations and future service and interest cost was increased from 7.5 percent
at year-end 1993 to 8.25 percent at year-end 1994. The effect of this change
was to decrease the projected benefit obligation as of December 31, 1994 by
approximately $22 million.
The adjustments required to recognize a minimum liability as of December 31,
1994 and 1993 have been included in the company's noncurrent liability for
postretirement health care and pension benefits with an equal amount included in
the Consolidated Balance Sheet as an intangible asset. These adjustments
resulted principally from the plan amendments adopted in July 1993 and discount
rate changes during 1993 and 1994.
POSTRETIREMENT HEALTH CARE BENEFITS
The company provides postretirement health care benefits to substantially all
U.S. employees. The plan is contributory based on years of service and family
status, with retiree contributions adjusted annually.
Employees outside the U.S. are generally covered under government sponsored
programs and the cost for providing benefits under company plans was not
significant.
Postretirement health care benefit expense was:
<TABLE>
<CAPTION>
(thousands) 1994 1993 1992
-----------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits
attributed to service
during the period $2,672 $2,978 $3,417
Interest cost on accumulated
postretirement benefit
obligation 3,740 4,142 4,213
Actual return on plan
assets (66) (169) (220)
Net amortization and
deferral (719) (458) (187)
------ ------ ------
Total expense $5,627 $6,493 $7,223
------ ------ ------
------ ------ ------
</TABLE>
Effective July 1, 1993, the company adopted certain amendments to its U.S.
plan. These amendments modified the company's subsidy provided for each year of
service and limit health care costs which are eligible for subsidy by the
company to a 4 percent annual increase beginning in 1996. Also, effective July
1, 1993, the company lowered the discount rate used for determining the
accumulated benefit obligation and future service and interest cost for the plan
to 8.0 percent from 8.25 percent at year-end 1992 and 1991. These changes
reduced postretirement health care expense for 1993 by approximately $1.3
million and decreased the accumulated benefit obligation by approximately $9
million. The discount rate was lowered further at year-end 1993 to 7.5 percent.
This reduction in discount rate resulted in an increase in the accumulated
benefit obligation of approximately $3 million as of December 31, 1993 and an
increase of $0.3 million in postretirement health care expense for 1994.
The funded status of the postretirement health care plan was:
<TABLE>
<CAPTION>
December 31 (thousands) 1994 1993 1992
-------------------------------------------------------------------
<S> <C> <C> <C>
Actuarial present value of
accumulated postretirement
benefit obligation for:
Retirees $ 16,453 $ 16,999 $ 14,916
Fully eligible active
participants 4,044 2,995 2,160
Other active participants 29,389 32,769 40,408
-------- -------- -------
Total 49,886 52,763 57,484
Plan assets at fair value 6,298 4,740 6,388
-------- -------- -------
Plan assets less than
accumulated postretirement
benefit obligation (43,588) (48,023) (51,096)
Unrecognized gain for
prior service (10,750) (11,301)
Unrecognized net loss
(gain) (5,544) 1,535 (513)
-------- -------- -------
Unfunded accrued
postretirement health
care benefits $(59,882) $(57,789) $(51,609)
-------- -------- -------
-------- -------- -------
</TABLE>
The discount rate used for determining the year-end accumulated postretirement
benefit obligation and future service and interest cost was increased from 7.5
percent at year-end 1993 to 8.25 percent at year-end 1994. The effect of this
change was to decrease the accumulated benefit obligation by approximately $6
million at December 31, 1994.
For measurement purposes, 12.5 percent (for pre-age 65 retirees) and 9.7
percent (for post-age 65 retirees) annual rates of increase in the per capita
cost of covered health care were assumed for 1995. The rates were assumed to
decrease
40
<PAGE>
8. RETIREMENT PLANS (continued)
-------------------------------------------------------------------------------
gradually to 6.5 percent and 5.5 percent, respectively, at 2001 and
remain at that level thereafter. Health care costs which are eligible for
subsidy by the company are limited to a 4 percent annual increase beginning in
1996 for most employees. The health care cost trend rate assumption has a
significant effect on the amounts reported. To illustrate, increasing the
assumed health care cost trend rate by 1 percentage point in each year would
increase the accumulated postretirement benefit obligation as of year-end 1994
by approximately $4 million and 1994 expense by approximately $0.5 million.
The after-tax expected long-term rate of return on plan assets was 6.0 percent
in 1994, 1993 and 1992. Plan assets consist primarily of short-term
investments.
SAVINGS PLAN
The company provides a 401(k) savings plan for substantially all U.S. employees.
Employee contributions of up to 6 percent of eligible compensation are matched
50 percent by the company. The company's contribution is invested in Ecolab
common stock and amounted to $5,156,000 in 1994, $4,376,000 in 1993 and
$3,899,000 in 1992.
9. STOCK INCENTIVE AND OPTION PLANS
-------------------------------------------------------------------------------
The company's Stock Incentive and Option Plans provide for grants of stock
options and stock awards. Common shares available for grant as of December 31
were 2,042,606 for 1994, 3,008,706 for 1993 and 407,206 for 1992. Common shares
available for grant reflect 3.4 million shares approved during 1993 for issuance
under the plans.
Options may be granted to purchase shares of the company's stock at not less
than fair market value at the date of grant. Options become exercisable over
periods of up to six years from date of grant and expire within ten years and
three months from date of grant. Stock option transactions were:
<TABLE>
<CAPTION>
Shares 1994 1993 1992
--------------------------------------------------------
<S> <C> <C> <C>
Granted 806,550 769,200 740,700
Exercised (296,910) (444,254) (600,544)
Canceled (26,900) (75,100) (161,020)
--------- --------- ---------
December 31:
Outstanding 4,219,284 3,736,544 3,486,698
--------- --------- ---------
--------- --------- ---------
Exercisable 2,321,164 1,966,744 1,825,698
</TABLE>
<TABLE>
<CAPTION>
Average price per share 1994 1993 1992
---------------------------------------------------------
<S> <C> <C> <C>
Granted $21.93 $21.42 $13.90
Exercised 10.60 11.31 10.75
Canceled 16.84 15.52 13.52
December 31:
Outstanding $16.49 $14.85 $12.95
Exercisable $13.99 $12.78 $12.00
</TABLE>
Stock awards are subject to restrictions including forfeiture in the event of
termination of employment. Restrictions generally lapse over four to six years.
The value of a stock award at date of grant is charged to income over the
periods during which the restrictions lapse.
10. SHAREHOLDERS' EQUITY
-------------------------------------------------------------------------------
The company's common stock was split two for one in the form of a 100 percent
stock dividend paid January 18, 1994 to shareholders of record on December 28,
1993. All per share and number of share data have been retroactively restated
to reflect the stock split, except for the Consolidated Statement of
Shareholders' Equity.
Authorized common stock, par value $1.00 per share, was 100 million shares in
1994, 1993 and 1992. Treasury stock is stated at cost. Dividends per share of
common stock were $0.455 for 1994, $0.395 for 1993 and $0.3575 for 1992.
The company has 15 million shares, without par value, of authorized but
unissued preferred stock.
Each share of outstanding common stock entitles the holder to one-quarter of
one preferred stock purchase right. A right entitles the holder, upon
occurrence of certain events, to buy one one-hundredth of a share of Series A
Junior Participating Preferred Stock at a purchase price of $150, subject to
adjustment. The rights will become exercisable, and a Distribution Date will
occur, 15 days after a person or group acquires, or commences a tender offer
for, 20 percent or more of the company's outstanding common stock. The company
may redeem the rights at five cents per right at any time until 15 days after a
20 percent or greater interest has been acquired. If any person or group
acquires 20 percent or more of the company's common stock, each right not owned
by a 20 percent stockholder will, after the company's right of redemption has
expired (the "Stock Acquisition Date"), become exercisable for common stock of
the company having a market value of twice the exercise price of a right. If,
after the Stock Acquisition Date, the
41
<PAGE>
10. SHAREHOLDERS' EQUITY (continued)
-------------------------------------------------------------------------------
company is acquired in a merger or other business combination, each right will
become exercisable for common stock of the acquiring company having a market
value of twice the exercise price of a right. The rights have been amended to
provide that the acquisition by Henkel KGaA or its affiliates of 20 percent or
more of the company's common stock does not constitute, subject to certain
conditions, a Distribution Date or a Stock Acquisition Date. Unless redeemed
earlier, the rights will expire on March 11, 1996.
The company maintains a systematic share repurchase program which is intended
to offset the dilutive effect of shares issued for employee benefit plans. The
company reacquired approximately 364,000 shares in 1994, 449,000 shares in 1993
and 31,000 shares in 1992 of its common stock through open and private market
purchases. The company anticipates that it will continue to periodically
reacquire shares under its systematic share repurchase program.
11. RENTALS AND LEASES
-------------------------------------------------------------------------------
The company leases sales office and distribution center facilities, automobiles
and computer and other equipment under operating leases. Rental expense under
all operating leases was $29,129,000 in 1994, $29,325,000 in 1993 and
$29,253,000 in 1992. As of December 31, 1994, future minimum payments under
operating leases with noncancelable terms in excess of one year were:
<TABLE>
<CAPTION>
(thousands)
--------------------------------------
<S> <C>
1995 $10,248
1996 5,743
1997 2,936
1998 923
1999 372
Thereafter 806
-------
Total $21,028
-------
-------
</TABLE>
12. RESEARCH EXPENDITURES
-------------------------------------------------------------------------------
Research expenditures which related to the development of new products and
processes, including significant improvements and refinements to existing
products, were $27,615,000 in 1994, $24,782,000 in 1993 and $21,080,000 in 1992.
13. ENVIRONMENTAL COMPLIANCE COSTS
-------------------------------------------------------------------------------
The company and certain subsidiaries are party to various environmental actions
which have arisen in the ordinary course of business. These include possible
obligations to investigate and mitigate the effects on the environment of the
disposal or release of certain chemical substances at various sites, such as
Superfund sites and other operating or closed facilities. The effect of these
actions on the company's financial position and results of operations to date
has not been significant. The company is currently participating in
environmental assessments and remediation at a number of locations and
environmental liabilities have been accrued reflecting management's best
estimate of future costs. Potential insurance reimbursements are not
anticipated. While the final resolution of these contingencies could result in
expenses in excess of current accruals and therefore have an impact on the
company's consolidated financial results in a future reporting period,
management believes the ultimate outcome will not have a significant effect on
the company's results of operations, consolidated financial position or
liquidity.
42
<PAGE>
14. GEOGRAPHIC SEGMENTS
-------------------------------------------------------------------------------
Summary information regarding the company's operations in United States and
International markets is presented below. International consists of Canadian,
Asia Pacific, Latin American and Kay's international operations.
<TABLE>
<CAPTION>
(thousands) 1994 1993 1992
---------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales
United States $ 942,070 $ 867,415 $ 816,405
International 265,544 234,981 241,229
---------- ---------- ----------
Total $1,207,614 $1,102,396 $1,057,634
---------- ---------- ----------
---------- ---------- ----------
Operating Income
United States $ 134,510 $ 124,281 $ 123,289
International 14,838 9,420 8,851
Corporate (12,384) (4,250) (6,526)
---------- ---------- ----------
Total $ 136,964 $ 129,451 $ 125,614
---------- ---------- ----------
---------- ---------- ----------
Depreciation and Amortization
United States $ 55,035 $ 49,927 $ 49,724
International 11,834 10,682 10,719
---------- ---------- ----------
Total $ 66,869 $ 60,609 $ 60,443
---------- ---------- ----------
---------- ---------- ----------
Capital Expenditures
United States $ 71,049 $ 52,144 $ 48,385
International 17,408 16,177 11,519
---------- ---------- ----------
Total $ 88,457 $ 68,321 $ 59,904
---------- ---------- ----------
---------- ---------- ----------
Identifiable Assets
United States $ 453,121 $ 396,268 $ 341,156
International 158,064 133,474 121,348
Joint Venture 284,570 255,804 289,034
Corporate 124,601 106,184 107,326
---------- ---------- ----------
Total $1,020,356 $ 891,730 $ 858,864
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Corporate operating income included $8 million of merger costs and expenses in
1994.
In accordance with company policy, operating expenses incurred at the
corporate level totaling $21,702,000 in 1994, $18,037,000 in 1993 and
$14,277,000 in 1992 have been allocated to the geographic segments in
determining operating income.
43
<PAGE>
15. QUARTERLY FINANCIAL DATA (UNAUDITED)
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
First Second Third Fourth
(thousands, except per share) Quarter Quarter Quarter Quarter Year
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994
Net sales
United States $216,855 $234,832 $250,138 $240,245 $ 942,070
International 58,058 64,350 70,270 72,866 265,544
-------- -------- -------- -------- ----------
Total 274,913 299,182 320,408 313,111 1,207,614
Cost of sales 121,053 130,961 140,939 140,190 533,143
Selling, general and administrative expenses 125,838 132,259 133,785 137,625 529,507
Merger costs and expenses 8,000 8,000
-------- -------- -------- -------- ----------
Operating income
United States 25,935 34,857 41,616 32,102 134,510
International 3,080 2,317 4,959 4,482 14,838
Corporate (993) (1,212) (891) (9,288) (12,384)
-------- -------- -------- -------- ----------
Total 28,022 35,962 45,684 27,296 136,964
Interest expense, net 4,039 3,303 3,206 2,361 12,909
-------- -------- -------- -------- ----------
Income before income taxes and equity in
earnings of joint venture 23,983 32,659 42,478 24,935 124,055
Provision for income taxes 9,245 12,108 16,447 12,644 50,444
Equity in earnings of joint venture 1,880 3,211 2,456 3,404 10,951
-------- -------- -------- -------- ----------
Net income, as reported 16,618 23,762 28,487 15,695 84,562
Pro forma adjustments
Merger costs and expenses 6,900 6,900
Kay net deferred tax liability 1,300 1,300
Kay Subchapter S status (324) (806) (789) (379) (2,298)
-------- -------- -------- -------- ----------
Pro forma net income $ 16,294 $ 22,956 $ 27,698 $ 23,516 $ 90,464
-------- -------- -------- -------- ----------
-------- -------- -------- -------- ----------
Net income per common share
As reported $ 0.25 $ 0.35 $ 0.42 $ 0.23 $ 1.25
Pro forma $ 0.24 $ 0.34 $ 0.41 $ 0.35 $ 1.34
Average common share outstanding 67,563 67,521 67,506 67,611 67,550
1993
Net sales
United States $198,753 $214,156 $231,901 $222,605 $ 867,415
International 54,679 58,973 60,776 60,553 234,981
-------- -------- -------- -------- ----------
Total 253,432 273,129 292,677 283,158 1,102,396
Cost of sales 115,429 121,951 130,387 123,539 491,306
Selling, general and administrative expenses 116,189 117,421 123,155 124,874 481,639
-------- -------- -------- -------- ----------
Operating income
United States 24,863 31,126 35,189 33,103 124,281
International (1,963) 3,764 4,880 2,739 9,420
Corporate (1,086) (1,133) (934) (1,097) (4,250)
-------- -------- -------- -------- ----------
Total 21,814 33,757 39,135 34,745 129,451
Interest expense, net 6,586 6,090 4,431 4,277 21,384
-------- -------- -------- -------- ----------
Income before income taxes and equity in
earnings of joint venture 15,228 27,667 34,704 30,468 108,067
Provision for income taxes 2,916 9,090 11,713 9,703 33,422
Equity in earnings of joint venture 1,223 2,435 2,592 1,877 8,127
-------- -------- -------- -------- ----------
Income before extraordinary loss and
cumulative effect of change in
accounting 13,535 21,012 25,583 22,642 82,772
Extraordinary loss related to
retirement of debt (4,018) (4,018)
Change in accounting for income taxes 4,733 4,733
-------- -------- -------- -------- ----------
Net income, as reported 18,268 16,994 25,583 22,642 83,487
Pro forma adjustment
Kay Subchapter S status (355) (718) (868) (726) (2,667)
-------- -------- -------- -------- ----------
Pro forma net income $ 17,913 $ 16,276 $ 24,715 $ 21,916 $ 80,820
-------- -------- -------- -------- ----------
-------- -------- -------- -------- ----------
Income per common share
Income before extraordinary loss
and change in accounting $ 0.20 $ 0.31 $ 0.38 $ 0.34 $ 1.23
Extraordinary loss related to
retirement of debt (0.06) (0.06)
Change in accounting for
income taxes 0.07 0.07
Net income
As reported 0.27 0.25 0.38 0.34 1.24
Pro forma $ 0.27 $ 0.24 $ 0.37 $ 0.32 $ 1.20
Average common shares outstanding 67,521 67,496 67,525 67,569 67,528
<FN>
Prior periods have been restated. See Note 5 of Notes to Consolidated Financial
Statements.
Pro forma results reflect adjustments to eliminate unusual items associated with
Ecolab's merger with Kay Chemical Company.
</FN>
</TABLE>
44
<PAGE>
REPORT OF MANAGEMENT
-------------------------------------------------------------------------------
Management is responsible for the integrity and objectivity of the consolidated
financial statements. The statements have been prepared in accordance with
generally accepted accounting principles and, accordingly, include certain
amounts based on management's best estimates and judgments.
To meet its responsibility, management has established and maintains a
system of internal controls that provides reasonable assurance regarding the
integrity and reliability of the financial statements and the protection of
assets from unauthorized us or disposition. These systems are supported by
qualified personnel, by an appropriate division of responsibilities and by an
internal audit function. There are limits inherent in any system of internal
controls since the cost of monitoring such systems should not exceed the desired
benefit. Management believes that the company's system of internal controls is
effective and provides an appropriate cost/benefit balance.
The Board of Directors, acting through its Audit Committee composed solely
of outside directors, is responsible for determining that management fulfills
its responsibilities in the preparation of financial statements and maintains
financial control of operations. The Audit Committee recommends to the Board of
Directors the appointment of the company's independent accountants subject to
ratification by the shareholders. It meets regularly with management, the
internal auditors and the independent accountants.
The independent accountants provide an objective, independent review as to
management's discharge of its responsibilities insofar as they relate to the
fair presentation of the consolidated financial statements. Their report is
presented separately.
/s/Pierson M. Grieve
Pierson M. Grieve
Chairman of the Board and Chief Executive Officer
/s/Michael E. Shannon
Michael E. Shannon
Vice Chairman, Chief Financial and Administrative Officer
REPORT OF INDEPENDENT ACCOUNTANTS
------------------------------------------------------------------------------
To the Shareholders and Directors
Ecolab Inc.
We have audited the accompanying consolidated balance sheet of Ecolab Inc. as of
December 31, 1994, 1993 and 1992, and the related consolidated statements of
income, shareholders' equity and cash flows for the years then ended. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Ecolab Inc. as of
December 31, 1994, 1993 and 1992, and the consolidated results of its operations
and its cash flows for the years then ended, in conformity with generally
accepted accounting principles.
As discussed in Note 7 to the financial statements, effective January 1, 1993,
the company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes."
/s/ Coopers & Lybrand L.L.P.
----------------------------
Coopers & Lybrand L.L.P.
February 27, 1995
Saint Paul, Minnesota
45
<PAGE>
ECOLAB INC.
SUMMARY OPERATING AND FINANCIAL DATA
<TABLE>
<CAPTION>
December 31 (thousands, except per share) 1994 1993 1992 1991
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net sales
United States $ 942,070 $ 867,415 $ 816,405 $ 757,564
International 265,544 234,981 241,229 201,738
Europe/Magnus/Pulp & Paper
---------- ---------- ---------- ----------
Total 1,207,614 1,102,396 1,057,634 959,302
Cost of sales 533,143 491,306 485,206 447,356
Selling, general and administrative expenses 529,507 481,639 446,814 393,700
Merger costs and expenses 8,000
Nonrecurring expenses
---------- ---------- ---------- ----------
Operating income 136,964 129,451 125,614 118,246
Interest expense, net 12,909 21,384 35,334 30,489
---------- ---------- ---------- ----------
Income from continuing operations before income
taxes and equity in earnings of joint venture 124,055 108,067 90,280 87,757
Provision for income taxes 50,444 33,422 27,392 29,091
Equity in earnings of joint venture 10,951 8,127 8,600 4,573
---------- ---------- ---------- ----------
Income from continuing operations 84,562 82,772 71,488 63,239
Income (loss) from discontinued operations (274,693)
Extraordinary loss and changes in accounting principles 715 (24,560)
---------- ---------- ---------- ----------
Net income (loss) 84,562 83,487 71,488 (236,014)
Preferred stock dividends (4,064)
---------- ---------- ---------- ----------
Net income (loss) to common shareholders, as reported 84,562 83,487 71,488 (240,078)
Pro forma adjustments 5,902 (2,667) (2,797) (2,933)
---------- ---------- ---------- ----------
Pro forma net income (loss) to common shareholders $ 90,464 $ 80,820 $ 68,691 $ (243,011)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Income (loss) per common share, as reported
Continuing operations $ 1.25 $ 1.23 $ 1.06 $ 1.01
Discontinued operations (4.69)
Extraordinary loss and changes in accounting principles 0.01 (0.42)
Net income (loss) 1.25 1.24 1.06 (4.10)
Pro forma income (loss) per common share
Continuing operations 1.34 1.19 1.02 0.96
Net income (loss) $ 1.34 $ 1.20 $ 1.02 $ (4.15)
Average common shares outstanding 67,550 67,528 67,204 58,525
SELECTED INCOME STATEMENT RATIOS
Gross profit 55.9% 55.4% 54.1% 53.4%
Selling, general and administrative expenses 44.6 43.7 42.2 41.1
Operating income 11.3 11.7 11.9 12.3
Income from continuing operations before income taxes 10.3 9.8 8.5 9.1
Income from continuing operations 7.0 7.5 6.8 6.6
Effective income tax rate 40.7% 30.9% 30.3% 33.1%
FINANCIAL POSITION
Current assets $ 401,179 $ 311,051 $ 264,512 $ 293,053
Property, plant and equipment, net 246,191 219,268 207,183 198,086
Investment in Henkel-Ecolab joint venture 284,570 255,804 289,034 296,292
Net assets of Ecolab Europe and discontinued operations 70,000
Other assets 88,416 105,607 98,135 82,857
---------- ---------- ---------- ----------
Total assets $1,020,356 $ 891,730 $ 858,864 $ 940,288
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Current liabilities $ 253,665 $ 201,498 $ 192,023 $ 240,219
Long-term debt 105,393 131,861 215,963 325,492
Postretirement health care and pension benefits 70,882 72,647 63,393 56,427
Other liabilities 128,608 93,917 29,179 11,002
Convertible preferred stock
Shareholders' equity 461,808 391,807 358,306 307,148
---------- ---------- ---------- ----------
Total liabilities and shareholders' equity $1,020,356 $ 891,730 $ 858,864 $ 940,288
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
SELECTED CASH FLOW INFORMATION
Cash provided by operating activities $ 169,346 $ 175,674 $ 120,217 $ 128,999
Capital expenditures 88,457 68,321 59,904 53,752
Long-term debt borrowings (repayments), net (14,621) (81,813) (164,541) 154,090
Cash dividends on common stock 27,851 24,037 21,983 22,027
Cash dividends per common share $ 0.455 $ 0.395 $ 0.3575 $ 0.35
SELECTED FINANCIAL MEASURES/OTHER
Total debt and preferred stock $ 147,213 $ 151,281 $ 236,695 $ 407,221
Total debt and preferred stock to capitalization 24.2% 27.9% 39.8% 57.0%
Book value per common share $ 6.82 $ 5.80 $ 5.31 $ 4.59
Return on beginning equity 21.6% 23.3% 23.3% 13.6%
Dividends/net income per common share 36.4% 31.9% 33.7% 42.7%
Annual common stock price range $23.50-19.25 $23.81-18.13 $19.13-13.31 $16.75-9.75
Number of employees 8,206 7,822 7,601 7,428
46
<PAGE>
<CAPTION>
December 31 (thousands, except per share) 1990 1989 1988 1987
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net sales
United States $ 712,579 $ 646,895 $ 589,715 $ 544,310
International 184,220 179,705 159,374 103,168
Europe/Magnus/Pulp & Paper 150,809 122,871 122,250 104,174
---------- ---------- ---------- ----------
Total 1,047,608 949,471 871,339 751,652
Cost of sales 495,086 461,256 433,734 361,545
Selling, general and administrative expenses 425,983 383,512 337,707 307,851
Merger costs and expenses
Nonrecurring expenses 12,978 18,441
---------- ---------- ---------- ----------
Operating income 126,539 91,725 99,898 63,815
Interest expense, net 28,321 31,628 31,097 21,440
---------- ---------- ---------- ----------
Income from continuing operations before income
taxes and equity in earnings of joint venture 98,218 60,097 68,801 42,375
Provision for income taxes 32,494 19,411 21,285 20,724
Equity in earnings of joint venture
---------- ---------- ---------- ----------
Income from continuing operations 65,724 40,686 47,516 21,651
Income (loss) from discontinued operations (4,408) (29,379) 4,238 126,551
Extraordinary loss and changes in accounting principles
---------- ---------- ---------- ----------
Net income (loss) 61,316 11,307 51,754 148,202
Preferred stock dividends (7,700) (429)
---------- ---------- ---------- ----------
Net income (loss) to common shareholders, as reported 53,616 10,878 51,754 148,202
Pro forma adjustments (2,956) (3,196) (2,622) (2,606)
---------- ---------- ---------- ----------
Pro forma net income (loss) to common shareholders $ 50,660 $ 7,682 $ 49,132 $ 145,596
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Income (loss) per common share, as reported
Continuing operations $ 1.12 $ 0.68 $ 0.81 $ 0.37
Discontinued operations (0.09) (0.50) 0.07 2.18
Extraordinary loss and changes in accounting principles
Net income (loss) 1.04 0.18 0.88 2.56
Pro forma income (loss) per common share
Continuing operations 1.07 0.63 0.77 0.33
Net income (loss) $ 0.98 $ 0.13 $ 0.84 $ 2.51
Average common shares outstanding 51,649 59,258 58,594 57,990
SELECTED INCOME STATEMENT RATIOS
Gross profit 52.7% 51.4% 50.2% 51.9%
Selling, general and administrative expenses 40.6 41.7 38.7 43.4
Operating income 12.1 9.7 11.5 8.5
Income from continuing operations before income taxes 9.4 6.3 7.9 5.6
Income from continuing operations 6.3 4.3 5.5 2.9
Effective income tax rate 33.1% 32.3% 30.9% 48.9%
FINANCIAL POSITION
Current assets $ 216,612 $ 370,875 $ 265,291 $ 283,700
Property, plant and equipment, net 187,735 203,056 194,509 176,856
Investment in Henkel-Ecolab joint venture
Net assets of Ecolab Europe and discontinued operations 404,007 354,179 370,994 394,289
Other assets 76,904 65,936 73,833 74,304
---------- ---------- ---------- ----------
Total assets $ 885,258 $ 994,046 $ 904,627 $ 929,149
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Current liabilities $ 177,643 $ 201,585 $ 181,758 $ 247,825
Long-term debt 208,147 228,632 257,500 258,273
Postretirement health care and pension benefits 8,742 12,859 12,768 12,150
Other liabilities 28,792 25,343 11,590 9,863
Convertible preferred stock 110,000 110,000
Shareholders' equity 351,934 415,627 441,011 401,038
---------- ---------- ---------- ----------
Total liabilities and shareholders' equity $ 885,258 $ 994,046 $ 904,627 $ 929,149
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
SELECTED CASH FLOW INFORMATION
Cash provided by operating activities $ 154,208 $ 123,215 $ 113,514 $ 146,310
Capital expenditures 58,069 54,430 62,125 57,549
Long-term debt borrowings (repayments), net (15,842) (34,215) 4,916 162,631
Cash dividends on common stock 24,387 18,008 17,398 16,184
Cash dividends per common share $ 0.335 $ 0.33 $ 0.32 $ 0.30
SELECTED FINANCIAL MEASURES/OTHER
Total debt and preferred stock $ 353,886 $ 382,764 $ 300,448 $ 320,080
Total debt and preferred stock to capitalization 50.1% 47.9% 40.5% 44.4%
Book value per common share $ 6.81 $ 7.09 $ 7.45 $ 6.92
Return on beginning equity 12.9% 2.5% 12.9% 19.5%
Dividends/net income per common share 32.2% 183.3% 36.4% 34.1%
Annual common stock price range $15.56-8.31 $17.88-12.44 $13.88-10.63 $16.88-9.25
Number of employees 8,106 7,845 7,684 7,479
<CAPTION>
December 31 (thousands, except per share) 1986 1985 1984
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS
Net sales
United States $ 485,638 $ 446,032 $ 397,694
International 64,973 48,690 49,950
Europe/Magnus/Pulp & Paper 93,502 95,081 92,376
---------- ---------- ----------
Total 644,113 589,803 540,020
Cost of sales 304,942 292,681 268,265
Selling, general and administrative expenses 262,823 233,629 214,834
Merger costs and expenses
Nonrecurring expenses
---------- ---------- ----------
Operating income 76,348 63,493 56,921
Interest expense, net 2,975 2,944 2,498
---------- ---------- ----------
Income from continuing operations before income
taxes and equity in earnings of joint venture 73,373 60,549 54,423
Provision for income taxes 29,326 22,055 19,478
Equity in earnings of joint venture
---------- ---------- ----------
Income from continuing operations 44,047 38,494 34,945
Income (loss) from discontinued operations 7,357 9,041 5,613
Extraordinary loss and changes in accounting principles
---------- ---------- ----------
Net income (loss) 51,404 47,535 40,558
Preferred stock dividends
---------- ---------- ----------
Net income (loss) to common shareholders, as reported 51,404 47,535 40,558
Pro forma adjustments (2,924) (2,679) (2,184)
---------- ---------- ----------
Pro forma net income (loss) to common shareholders $ 48,480 $ 44,856 $ 38,374
---------- ---------- ----------
---------- ---------- ----------
Income (loss) per common share, as reported
Continuing operations $ 0.75 $ 0.66 $ 0.59
Discontinued operations 0.13 0.15 0.10
Extraordinary loss and changes in accounting principles
Net income (loss) 0.88 0.81 0.69
Pro forma income (loss) per common share
Continuing operations 0.70 0.61 0.56
Net income (loss) $ 0.83 $ 0.77 $ 0.65
Average common shares outstanding 58,474 58,556 58,764
SELECTED INCOME STATEMENT RATIOS
Gross profit 52.7% 50.4% 50.3%
Selling, general and administrative expenses 40.8 39.6 39.8
Operating income 11.9 10.8 10.5
Income from continuing operations before income taxes 11.4 10.3 10.1
Income from continuing operations 6.8 6.5 6.5
Effective income tax rate 40.0% 36.4% 35.8%
FINANCIAL POSITION
Current assets $ 275,782 $ 246,091 $ 244,506
Property, plant and equipment, net 154,277 151,111 159,486
Investment in Henkel-Ecolab joint venture
Net assets of Ecolab Europe and discontinued operations
Other assets 56,318 44,827 35,319
---------- ---------- ----------
Total assets $ 486,377 $ 442,029 $ 439,311
---------- ---------- ----------
---------- ---------- ----------
Current liabilities $ 158,533 $ 121,122 $ 134,655
Long-term debt 39,565 63,805 69,335
Postretirement health care and pension benefits 9,371
Other liabilities 16,706 11,826 11,483
Convertible preferred stock
Shareholders' equity 262,202 245,276 223,838
---------- ---------- ----------
Total liabilities and shareholders' equity $ 486,377 $ 442,029 $ 439,311
---------- ---------- ----------
---------- ---------- ----------
SELECTED CASH FLOW INFORMATION
Cash provided by operating activities $ 89,490 $ 61,948 $ 98,419
Capital expenditures 37,469 25,076 40,340
Long-term debt borrowings (repayments), net (9,916) (1,310) (3,688)
Cash dividends on common stock 15,329 14,092 14,139
Cash dividends per common share $ 0.2825 $ 0.26 $ 0.26
SELECTED FINANCIAL MEASURES/OTHER
Total debt and preferred stock $ 83,645 $ 79,911 $ 92,023
Total debt and preferred stock to capitalization 24.2% 24.6% 29.1%
Book value per common share $ 4.59 $ 4.21 $ 3.80
Return on beginning equity 21.0% 21.2% 20.0%
Dividends/net income per common share 32.1% 32.1% 37.7%
Annual common stock price range $14.66-10.28 $10.44-6.72 $7.84-5.38
Number of employees 7,455 6,976 6,896
<FN>
All per share, shares outstanding and market price data reflect the 1993 and
1986 two for one stock splits. The ratios of return on beginning equity and
dividends/net income per common share exclude the change in accounting principle
and the loss on the ChemLawn divestiture in 1991, and the Consumer gain in 1987.
Number of employees excludes ChemLawn operations.
Pro forma results reflect adjustments to eliminate unusual items associated with
Ecolab's merger with Key Chemical Company in December, 1994.
</FN>
</TABLE>
47
<PAGE>
Exhibit (21)
REGISTRANT
ECOLAB INC.
<TABLE>
<CAPTION>
STATE OR
OTHER
JURISDICTION PERCENTAGE
OF OF
NAME OF AFFILIATE INCORPORATION OWNERSHIP
----------------- ------------- ----------
<S> <C> <C>
Ecolab S.A. Argentina 100
Ecolab Pty Ltd. Australia 100
(N.S.W.)
Ecolab Limited Bahamas 100
Ecolab (Barbados) Limited Barbados 100
Ecolab Quimica Ltda. Brazil 100
Ecolab Holdings Limited Canada (Ont.) 100
Ecolab Ltd. Canada (Ont.) 100
Ecolab S.A. Chile 100
Ecolab Sociedad Anonima Costa Rica 100
Ecolab S.A. France 100
Societe Francaise de France 100
Produits Techniques
(MAGNUS)
Ecolab GmbH Germany 100
Ecolab Export GmbH Germany 100
Ecolab, Sociedad Anonima Guatemala 100
Quimicas Ecolab, S.A. Honduras 100
Ecolab Limited Hong Kong 100
PT. Ecolab Indonesia Indonesia 60
Ecolab Limited Jamaica 100
Ecolab K.K. Japan 100
Ecolab Korea Ltd. Korea 100
Soilax Lebanon S.a.r.l. Lebanon 100
Ecolab Sdn. Bhd. Malaysia 100
Ecolab S.A. de C.V. Mexico 100
Ecolab Finance N.V. Netherlands 100
Antilles
(Curacao)
<PAGE>
<CAPTION>
STATE OR
OTHER
JURISDICTION PERCENTAGE
OF OF
NAME OF AFFILIATE INCORPORATION OWNERSHIP
----------------- ------------- ----------
<S> <C> <C>
Eclab Export Limited Ireland 100
Ecolab Co. Ireland 100
Ecolab International B.V. Netherlands 100
Ecolab Limited New Zealand 100
Ecolab Chemicals Ltd. People's 51
Republic of
China
Ecolab Philippines, Inc. Philippines 100
Ecolab Pte. Ltd. Singapore 100
Ecolab Ltd. Taiwan 100
Ecolab Limited Thailand 100
Ecolab Foreign Sales Corp. U.S. Virgin 100
Islands
Ecolab S.A. Venezuela 51
UNITED STATES
Kay Chemical Company North 100
Carolina
Kay Chemical International, North 100
Inc. Carolina
Kay Europe, Inc. North 100
Carolina
Ecolab Manufacturing Inc. Delaware 100
Ecolab Holdings Inc. Delaware 100
Ecolab Investment Inc. Delaware 100
Ecolab Foundation Minnesota 100
Industrial Maintenance North 100
Corporation Carolina
<FN>
Certain additional inactive subsidiaries, which are not significant in the
aggregate, are not shown.
</FN>
</TABLE>
<PAGE>
EXHIBIT 23.B
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements on
Form S-8 of Ecolab Inc. (Registration Nos. 2-60010; 2-74944; 33-1664; 33-41828;
2-90702; 33-18202; 33-55986; 33-56101; 33-26241; 33-34000; 33-56151; 33-39228;
33-56125; 33-55984; 33-60266 and 33-65364) and the Registration Statement on
Form S-3 (Registration No. 33-57197) of our report dated January 19, 1995 on our
audits of the combined financial statements and schedules of the Henkel-Ecolab
Joint-Venture as of November 30, 1994, 1993 and 1992, and for the years ended
November 30, 1994, 1993 and 1992 included in this Form 10-K.
Dusseldorf, Germany
March 9, 1995
KPMG Deutsche Treuhand-Gesellschaft
Aktiengesellschaft
Wirtschaftsprufungsgesellschaft
/s/Dr. Kuhr /s/Haas
Dr. Kuhr Haas
Wirtschaftsprufer Wirtschaftsprufer
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That the undersigned, a Director of Ecolab
Inc., a Delaware corporation, does hereby make, nominate and appoint KENNETH A.
IVERSON and WILLIAM R. ROSENGREN, and each of them, to be my attorney-in-fact,
with full power and authority to sign his name to the Annual Report on Form 10-K
of Ecolab Inc. for the fiscal year ended December 31, 1994, and all amendments
thereto, provided that the Annual Report and any amendments thereto, in final
form, be approved by said attorney-in-fact; and his name, when thus signed,
shall have the same force and effect as though I had manually signed said
document.
IN WITNESS WHEREOF, I have hereunto affixed my signature this 25th day of
February, 1995.
/s/ Ruth S. Block
---------------------------------
Ruth S. Block
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That the undersigned, a Director of Ecolab
Inc., a Delaware corporation, does hereby make, nominate and appoint KENNETH A.
IVERSON and WILLIAM R. ROSENGREN, and each of them, to be my attorney-in-fact,
with full power and authority to sign his name to the Annual Report on Form 10-K
of Ecolab Inc. for the fiscal year ended December 31, 1994, and all amendments
thereto, provided that the Annual Report and any amendments thereto, in final
form, be approved by said attorney-in-fact; and his name, when thus signed,
shall have the same force and effect as though I had manually signed said
document.
IN WITNESS WHEREOF, I have hereunto affixed my signature this 25th day of
February, 1995.
/s/ Russell G. Cleary
---------------------------------
Russell G. Cleary
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That the undersigned, a Director of Ecolab
Inc., a Delaware corporation, does hereby make, nominate and appoint KENNETH A.
IVERSON and WILLIAM R. ROSENGREN, and each of them, to be my attorney-in-fact,
with full power and authority to sign his name to the Annual Report on Form 10-K
of Ecolab Inc. for the fiscal year ended December 31, 1994, and all amendments
thereto, provided that the Annual Report and any amendments thereto, in final
form, be approved by said attorney-in-fact; and his name, when thus signed,
shall have the same force and effect as though I had manually signed said
document.
IN WITNESS WHEREOF, I have hereunto affixed my signature this 25th day of
February, 1995.
/s/ John H. Dasburg
---------------------------------
John H. Dasburg
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That the undersigned, a Director of Ecolab
Inc., a Delaware corporation, does hereby make, nominate and appoint KENNETH A.
IVERSON and WILLIAM R. ROSENGREN, and each of them, to be my attorney-in-fact,
with full power and authority to sign his name to the Annual Report on Form 10-K
of Ecolab Inc. for the fiscal year ended December 31, 1994, and all amendments
thereto, provided that the Annual Report and any amendments thereto, in final
form, be approved by said attorney-in-fact; and his name, when thus signed,
shall have the same force and effect as though I had manually signed said
document.
IN WITNESS WHEREOF, I have hereunto affixed my signature this 8th day of
March, 1995.
/s/ Pierson M. Grieve
---------------------------------
Pierson M. Grieve
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That the undersigned, a Director of Ecolab
Inc., a Delaware corporation, does hereby make, nominate and appoint KENNETH A.
IVERSON and WILLIAM R. ROSENGREN, and each of them, to be my attorney-in-fact,
with full power and authority to sign his name to the Annual Report on Form 10-K
of Ecolab Inc. for the fiscal year ended December 31, 1994, and all amendments
thereto, provided that the Annual Report and any amendments thereto, in final
form, be approved by said attorney-in-fact; and his name, when thus signed,
shall have the same force and effect as though I had manually signed said
document.
IN WITNESS WHEREOF, I have hereunto affixed my signature this 25th day of
February, 1995.
/s/ James J. Howard
---------------------------------
James J. Howard
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That the undersigned, a Director of Ecolab
Inc., a Delaware corporation, does hereby make, nominate and appoint KENNETH A.
IVERSON and WILLIAM R. ROSENGREN, and each of them, to be my attorney-in-fact,
with full power and authority to sign his name to the Annual Report on Form 10-K
of Ecolab Inc. for the fiscal year ended December 31, 1994, and all amendments
thereto, provided that the Annual Report and any amendments thereto, in final
form, be approved by said attorney-in-fact; and his name, when thus signed,
shall have the same force and effect as though I had manually signed said
document.
IN WITNESS WHEREOF, I have hereunto affixed my signature this 25th day of
February, 1995.
/s/ Jerry W. Levin
---------------------------------
Jerry W. Levin
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That the undersigned, a Director of Ecolab
Inc., a Delaware corporation, does hereby make, nominate and appoint KENNETH A.
IVERSON and WILLIAM R. ROSENGREN, and each of them, to be my attorney-in-fact,
with full power and authority to sign his name to the Annual Report on Form 10-K
of Ecolab Inc. for the fiscal year ended December 31, 1994, and all amendments
thereto, provided that the Annual Report and any amendments thereto, in final
form, be approved by said attorney-in-fact; and his name, when thus signed,
shall have the same force and effect as though I had manually signed said
document.
IN WITNESS WHEREOF, I have hereunto affixed my signature this 25th day of
February, 1995.
/s/ Reuben F. Richards
---------------------------------
Reuben F. Richards
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That the undersigned, a Director of Ecolab
Inc., a Delaware corporation, does hereby make, nominate and appoint KENNETH A.
IVERSON and WILLIAM R. ROSENGREN, and each of them, to be my attorney-in-fact,
with full power and authority to sign his name to the Annual Report on Form 10-K
of Ecolab Inc. for the fiscal year ended December 31, 1994, and all amendments
thereto, provided that the Annual Report and any amendments thereto, in final
form, be approved by said attorney-in-fact; and his name, when thus signed,
shall have the same force and effect as though I had manually signed said
document.
IN WITNESS WHEREOF, I have hereunto affixed my signature this 25th day of
February, 1995.
/s/ Richard L. Schall
---------------------------------
Richard L. Schall
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That the undersigned, a Director of Ecolab
Inc., a Delaware corporation, does hereby make, nominate and appoint KENNETH A.
IVERSON and WILLIAM R. ROSENGREN, and each of them, to be my attorney-in-fact,
with full power and authority to sign his name to the Annual Report on Form 10-K
of Ecolab Inc. for the fiscal year ended December 31, 1994, and all amendments
thereto, provided that the Annual Report and any amendments thereto, in final
form, be approved by said attorney-in-fact; and his name, when thus signed,
shall have the same force and effect as though I had manually signed said
document.
IN WITNESS WHEREOF, I have hereunto affixed my signature this 25th day of
February, 1995.
/s/ Roland Schulz
---------------------------------
Roland Schulz
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That the undersigned, a Director of Ecolab
Inc., a Delaware corporation, does hereby make, nominate and appoint KENNETH A.
IVERSON and WILLIAM R. ROSENGREN, and each of them, to be my attorney-in-fact,
with full power and authority to sign his name to the Annual Report on Form 10-K
of Ecolab Inc. for the fiscal year ended December 31, 1994, and all amendments
thereto, provided that the Annual Report and any amendments thereto, in final
form, be approved by said attorney-in-fact; and his name, when thus signed,
shall have the same force and effect as though I had manually signed said
document.
IN WITNESS WHEREOF, I have hereunto affixed my signature this 25th day of
February, 1995.
/s/ Philip L. Smith
---------------------------------
Philip L. Smith
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That the undersigned, a Director of Ecolab
Inc., a Delaware corporation, does hereby make, nominate and appoint KENNETH A.
IVERSON and WILLIAM R. ROSENGREN, and each of them, to be my attorney-in-fact,
with full power and authority to sign his name to the Annual Report on Form 10-K
of Ecolab Inc. for the fiscal year ended December 31, 1994, and all amendments
thereto, provided that the Annual Report and any amendments thereto, in final
form, be approved by said attorney-in-fact; and his name, when thus signed,
shall have the same force and effect as though I had manually signed said
document.
IN WITNESS WHEREOF, I have hereunto affixed my signature this 25th day of
February, 1995.
/s/ Hugo Uyterhoeven
---------------------------------
Hugo Uyterhoeven
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That the undersigned, a Director of Ecolab
Inc., a Delaware corporation, does hereby make, nominate and appoint KENNETH A.
IVERSON and WILLIAM R. ROSENGREN, and each of them, to be my attorney-in-fact,
with full power and authority to sign his name to the Annual Report on Form 10-K
of Ecolab Inc. for the fiscal year ended December 31, 1994, and all amendments
thereto, provided that the Annual Report and any amendments thereto, in final
form, be approved by said attorney-in-fact; and his name, when thus signed,
shall have the same force and effect as though I had manually signed said
document.
IN WITNESS WHEREOF, I have hereunto affixed my signature this 25th day of
February, 1995.
/s/ Albrecht Woeste
---------------------------------
Albrecht Woeste
