<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
ECOLAB INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO]
ECOLAB INC.
- --------------------------------------------------------------------------------
Ecolab Center
370 N. Wabasha Street
St. Paul, Minnesota 55102
612/293-2233
March 30, 1998
DEAR FELLOW STOCKHOLDER:
You are cordially invited to join us for our Annual Meeting of Stockholders, to
be held at 10:00 a.m. on Friday, May 8, 1998, at The Culinary Institute of
America at Greystone, 2555 Main Street, St. Helena, California 94574. The Notice
of Annual Meeting and the Proxy Statement that follow describe the business to
be conducted at the meeting. We urge you to read both carefully.
The meeting will be held in the "Ecolab Theater" at The Culinary Institute of
America. Ecolab is a proud benefactor of the Institute, which is dedicated to
providing professional culinary arts and science education in support of the
foodservice and hospitality industry. A map for The Culinary Institute is
located on the last page of the Proxy Statement.
We hope you plan to attend the meeting. However, if you will not be able to join
us, we encourage you to exercise your right as a stockholder and vote. Please
sign, date and promptly return the accompanying proxy card, or make use of our
new telephone voting service.
Sincerely,
/s/ ALLAN L. SCHUMAN /s/ MICHAEL E. SHANNON
Allan L. Schuman Michael E. Shannon
President and Chief Executive Officer Chairman of the Board
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE AND RETURN THE
ACCOMPANYING PROXY, OR USE THE TELEPHONE
VOTING SYSTEM.
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 8, 1998
TO THE STOCKHOLDERS OF ECOLAB INC.:
The Annual Meeting of Stockholders of Ecolab Inc. will be held on Friday, May 8,
1998, at 10:00 a.m. at The Culinary Institute of America at Greystone, St.
Helena, California, for the following purposes (which are more fully explained
in the Proxy Statement):
(1) To elect four Class III Directors to a term to end at the third
subsequent annual meeting.
(2) To ratify the appointment of Coopers & Lybrand L.L.P. as the Company's
independent accountants for the current year ending December 31, 1998.
(3) To transact such other business as may properly come before the meeting
and any adjournment thereof.
The Board of Directors has fixed the close of business on March 17, 1998, as the
record date for the determination of stockholders entitled to notice of and to
vote at the meeting.
Whether or not you plan to attend the meeting, please complete and return the
accompanying proxy in the enclosed envelope. Or, you may vote by telephone. If
you attend the meeting, you may vote your shares in person even though you have
previously returned your proxy by mail or telephone.
By Order of the Board of Directors
KENNETH A. IVERSON,
Vice President and Secretary
March 30, 1998
<PAGE>
ECOLAB INC.
Ecolab Center, 370 N. Wabasha Street, St. Paul, Minnesota 55102
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 8, 1998
This Proxy Statement, which is first being mailed to stockholders on or about
March 30, 1998, is furnished in connection with the solicitation of proxies on
behalf of the Board of Directors of Ecolab Inc., a Delaware corporation
(hereinafter called the "Company"), from holders of Common Stock of the Company,
to be voted at the Annual Meeting of Stockholders to be held at 10:00 a.m. on
Friday, May 8, 1998, and at any adjournment thereof.
Holders of Common Stock of record at the close of business on March 17, 1998,
will be entitled to vote at the meeting and any adjournment thereof. At that
time, the Company had outstanding and entitled to vote 128,827,676 shares of
Common Stock. Each of such shares is entitled to one vote on each matter
presented at the meeting. The presence at the meeting, in person or by proxy, of
the holders of a majority of the issued and outstanding shares of Common Stock
entitled to vote, is required for a quorum for the transaction of business.
Shares represented by a proxy with instructions to abstain and any shares
represented by a limited proxy (i.e., a broker non-vote) will be counted in
determining whether a quorum is present.
If the stockholder is a participant in the Company's Dividend Reinvestment Plan
or a participant in the Company's Employee Stock Purchase Plan, the proxy
represents the number of shares held on account of the participant in those
plans as well as shares held of record by the participant. With respect to
participants and beneficiaries of the Company's defined contribution 401(k)
Savings Plan, the proxy also serves as the voting instruction card to the plan
trustee and represents the stockholder's proportional interest in shares of
Common Stock beneficially held by the trustee.
Stockholders described in the two immediately preceding paragraphs may vote (or
in the case of participants and beneficiaries of the Company's defined
contribution 401(k) Savings Plan, instruct the trustee) by telephone using the
telephone number indicated on the proxy card. Stockholders who own their shares
through a bank or broker can vote by telephone if that choice is offered by the
bank or broker.
Proxies in proper form received by the time of the meeting will be voted as
specified. A stockholder giving a proxy may revoke it at any time before it is
exercised by submitting a written revocation to the Secretary of the Company,
submitting a subsequently dated proxy, voting by telephone at a later time, or
by attending the meeting and voting in person.
The Company will bear the cost of the preparation and solicitation of proxies,
including the charges and expenses of brokerage firms, banks or other nominees
for forwarding proxy material to beneficial owners. In addition to solicitation
by mail, proxies may be solicited by telephone, telegraph or personally. The
Company has retained Georgeson & Company Inc., Wall Street Plaza, New York, NY
10005, to aid in the solicitation of proxies for a fee of $8,000 plus expenses.
Proxies may also be solicited by certain directors, officers and employees of
the Company without extra compensation.
1
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to entities which have reported to
the Securities and Exchange Commission ("SEC") or have advised the Company that
they are a "beneficial owner," as defined by the SEC rules and regulations, of
more than five percent of the Company's outstanding Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT OF
CLASS OF BENEFICIAL OWNER OWNERSHIP CLASS(1)
<S> <C> <C> <C>
Common Henkel KGaA 16,575,512(2) 12.9%
Henkelstrasse 67
Postfach 1100
40191 Dusseldorf 13
Germany
Common HC Investments, Inc. 14,666,664(3) 11.4%
1105 North Market Street
Suite 1300
Wilmington, DE 19899
</TABLE>
(1) The percent of class is based on the number of voting shares outstanding as
of March 17, 1998.
(2) Henkel KGaA is a partnership limited by shares organized under the laws of
Germany. The Company understands that the majority of the voting stock of
Henkel KGaA is controlled by members of the Henkel family. Voting shares of
the Company beneficially owned by Henkel KGaA are subject to an agreement
containing certain restrictions pertaining to, among other things, maximum
shareholding, transfer and voting rights. For a description of the
agreement, see the information found at page 20 hereof under the heading
"Stockholder Agreement."
(3) HC Investments, Inc., a Delaware corporation, is an indirect, wholly-owned
subsidiary of Henkel KGaA. Voting shares of the Company beneficially owned
by HC Investments, Inc. are bound by the terms of the agreement between the
Company and Henkel KGaA, as described at page 20 hereof.
SECURITY OWNERSHIP OF MANAGEMENT
In general, "beneficial ownership" includes those shares of Common Stock which a
director or officer has the power to vote or transfer, as well as stock options
that are exercisable currently or within 60 days. On March 2, 1998, the
executive officers and directors of the Company owned, in the aggregate,
3,275,793 shares of Common Stock which is approximately 2.5 percent of shares
outstanding. (As required by SEC disclosure rules, "shares outstanding" for this
purpose includes options exercisable within 60 days.) The detail of beneficial
ownership is set forth in the following table. No individual executive officer
or director beneficially owned in excess of one percent of the outstanding
stock.
Non-employee directors also have interests in stock units under the Company's
1997 Non-Employee Director Deferred Compensation Plan which was approved by the
Stockholders in May, 1997. The stock units are Common Stock equivalents. The
stock units are credited to a deferred stock unit account
2
<PAGE>
and will be paid in the form of Common Stock when a director leaves the Board.
Although the stock units may not be voted or transferred, they are shown in the
table below because they represent part of the total economic interest of the
directors in Company stock.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL STOCK
NAME OF BENEFICIAL OWNER OWNERSHIP UNITS TOTAL
<S> <C> <C> <C> <C> <C>
Allan L. Schuman 1,038,051(1)(2) 0 1,038,051
Michael E. Shannon 688,937(1)(2 (3) 0 688,937
John P. Spooner 103,084(1)(2) 0 103,084
James L. McCarty 104,783(1)(2) 0 104,783
Gerald K. Carlson 346,365(1)(2) 0 346,365
Leslie S. Biller 10,000 687 10,687
Ruth S. Block 32,310(2) 8,482 40,792
James J. Howard 29,112(2) 4,221 33,333
Joel W. Johnson 9,158(2) 1,916 11,074
Jerry W. Levin 24,832(2) 2,892 27,724
Reuben F. Richards 33,912(2) 9,616 43,528
Richard L. Schall 37,912(2) 15,350 53,262
Roland Schulz 27,446(2) 2,341 29,787
Philip L. Smith 30,312(2) 274 30,586
Hugo Uyterhoeven 23,171(2) 4,485 27,656
Albrecht Woeste 28,397(2) 3,982 32,379
Current Directors and Executive Officers
as a Group (23 persons) 3,275,793(4)
</TABLE>
(1) Includes the following shares held by officers in the Ecolab Savings Plan
as of the last Plan report: Mr. Schuman, 11,323; Mr. Shannon, 35,321; Mr.
Spooner, 1,328; Mr. McCarty, 40,306; and Mr. Carlson, 10,271.
(2) Includes the following shares which could be purchased under
Company-granted stock options within 60 days from March 2, 1998: Mr.
Schuman, 732,700; Mr. Shannon, 412,980; Mr. Spooner, 80,000; Mr. McCarty,
44,348; Mr. Carlson, 236,248; Ms. Block, 23,200; Mr. Howard, 18,400; Mr.
Johnson, 8,000; Mr. Levin, 15,200; Mr. Richards, 15,200; Mr. Schall, 23,200;
Mr. Schulz, 13,600; Mr. Smith, 21,600; Mr. Uyterhoeven, 16,800; Mr. Woeste,
16,800.
(3) Includes 58,868 shares held by Mr. Shannon's wife.
(4) Includes 60,068 shares held by or on behalf of family members of directors
and executive officers, 153,058 shares held for executive officers in
Company-sponsored employee benefit plans as of the last plan reports,
2,159,326 shares to which these persons have the right to acquire beneficial
ownership within 60 days of March 2, 1998, by the exercise of
Company-granted stock options and 167,380 shares held by executive officers
under Company-granted restricted stock awards which are subject to events of
forfeiture.
ELECTION OF DIRECTORS
The business and affairs of the Company are managed under the overall direction
of the Board of Directors. To assist it in carrying out its duties, the Board
has delegated certain authority to four standing committees: Audit,
Compensation, Finance and Governance.
There were four meetings of the Board of Directors during the year ended
December 31, 1997. Each director attended at least 75 percent of Board and
Committee meetings. Overall attendance at Board and Committee meetings was 95
percent.
The Audit Committee, currently comprised of Messrs. Biller, Richards, Schall
(Chairman), Uyterhoeven and Woeste, met four times during the past year. The
Committee, which is comprised entirely of independent directors, assists the
Board of Directors in overseeing management's discharge of its
3
<PAGE>
duties for the preparation of interim and annual financial statements and for
maintaining financial control of operations. Principal responsibilities include
(a) oversight of the accuracy of public financial reports, including review of
the plan and scope of the annual audit, the results of the audit and the
independence of the independent accountants, (b) providing oversight assurance
that the Company has an effective system of internal controls and (c) providing
oversight assurance that the Company has effective controls against employee
conflict of interest and fraud and reasonably complies with related laws. The
Committee also recommends to the Board of Directors with regard to the retention
of the Company's independent accountants. In addition, the Committee assists the
Board of Directors in overseeing the accounting controls and policies and
reporting practices of the Henkel-Ecolab Joint Venture, an entity described at
page 19 hereof under the heading "Certain Transactions" and whose financial
statements are filed as a part of the Company's Annual Report on Form 10-K. The
Committee meets regularly with the Company's management and internal auditors,
and with the Company's independent accountants.
The Compensation Committee, currently comprised of Ms. Block and Messrs. Howard,
Johnson, Levin and Smith (Chairman), met four times during the past year. The
Committee is comprised entirely of independent directors. The principal
functions of this Committee are to review and approve (a) the Company's overall
compensation policy and executive salary plan, (b) the base salary of the five
most highly compensated and certain other executive officers, and (c) the
design, amendment, establishment and termination of the Company's employee
benefit plans and related trusts. The Committee also administers the Company's
stock and cash-based incentive plans for executives, and makes recommendations
to the Board with respect to (a) the base salary and other compensation of
officers of the Company who also serve as directors, and (b) the design and
establishment of long-term executive compensation and executive benefit plans.
To assist the Committee in the design and review of executive compensation
programs, the Board has selected and retained an independent compensation
consultant who reports directly to the Committee. A report by the Committee on
executive compensation is located on pages 11 through 13 hereof.
The Finance Committee, currently comprised of Ms. Block and Messrs. Johnson,
Richards (Chairman), Schall, Schulz, Shannon and Uyterhoeven, met four times
during the past year. The principal functions of this Committee are to review
and make recommendations to the Board concerning (a) the financial condition,
financial policies and standards, and long-range financial objectives of the
Company, (b) the Company's financing requirements, including the evaluation of
management's proposals concerning funding vehicles to meet such requirements,
(c) debt limits, (d) dividends, (e) the Company's capital expenditures budget,
(f) adequacy of insurance coverage and (g) the financial structure and policies
of the Henkel-Ecolab Joint Venture with particular attention to their impact on
the financial condition of the Company. The Committee also evaluates
acquisitions and divestitures of businesses from a financial standpoint. The
Committee oversees a management committee which is charged with monitoring the
performance of trust assets held in the Company's benefit plans.
The Governance Committee, currently comprised of Messrs. Biller, Howard
(Chairman), Levin, Schuman, Smith and Woeste, met three times during the past
year. The Governance Committee (a) reviews and recommends to the Board policies
for the composition of the Board, (b) identifies, interviews, evaluates and
recommends to the Board prospective director nominees, (c) reviews and makes
recommendations to the Board with regard to compensation for Board service, (d)
reviews and recommends to the Board changes in the Company's Certificate of
Incorporation and By-Laws, (e) reviews and recommends to the Board with respect
to Board organization, management succession and corporate governance issues,
social responsibility and the Company's environmental practices, (f) leads the
Board's Chief Executive Officer evaluation and Board effectiveness review
processes, and (g) undertakes projects which do not fall within the jurisdiction
of other committees of the Board. Recommendations by stockholders of potential
director nominees may be directed to the Governance Committee in care of the
Secretary of the Company, at the Company address located at the top of page 1.
4
<PAGE>
Under the Company's Restated Certificate of Incorporation, the number of
directors is determined exclusively by the Board. Currently, the Board has fixed
the number of directors at 13.
Pursuant to the agreement between the Company and Henkel KGaA described at page
20 hereof under the heading "Stockholder Agreement," Henkel is entitled to
designate a number of persons to be nominated for election to the Company's
Board of Directors proportionate to Henkel's shareholding in the Company rounded
to the nearest whole number. As of March 17, 1998, Henkel beneficially owned
approximately 24.3% of the Company's outstanding Common Stock and was
accordingly entitled to designate three directors. Messrs. Roland Schulz, Hugo
Uyterhoeven and Albrecht Woeste have been appointed or elected to the Board
pursuant to designation by Henkel.
The Board of Directors is divided into three classes. The members of each class
are elected to serve a three-year term with the terms of office of each class
ending in successive years.
The term of Class III Directors expires with this Annual Meeting of
Stockholders. Messrs. Johnson, Smith, Uyterhoeven and Woeste are the nominees
for election to the Board as Class III Directors and all have previously served
as directors of the Company. Class III Directors being elected at the current
Annual Meeting will serve until the 2001 Annual Meeting expected to be held in
the Spring of 2001, or until their successors have been duly elected and
qualified. The directors of Classes I and II will continue in office. The Board
of Directors has no reason to believe that any of the named nominees is not
available or will not serve if elected.
The directors shall be elected by a plurality of the votes cast. The four
director nominees receiving the highest vote totals will be elected. Shares
represented by proxy which contain instructions to "withhold" voting authority
on one or more nominees will not affect the election of nominees receiving a
plurality of the votes cast. It is intended that proxies solicited by the Board
of Directors will (unless otherwise directed) be voted for the election of the
four nominees named in this Proxy Statement. If, for any reason, any nominee
becomes unavailable for election, the proxies solicited by the Board of
Directors will be voted for such substituted nominee as is selected by the Board
of Directors, or the Board of Directors, at its option, may reduce the number of
directors to constitute the entire Board.
The following information with regard to business experience has been furnished
by the respective directors or nominees or obtained from the records of the
Company.
5
<PAGE>
- --------------------------------------------------------------------------------
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS -- CLASS III
(FOR A TERM ENDING 2001)
- --------------------------------------------------------------------------------
JOEL W. JOHNSON, age 54.
[PHOTO] Chairman of the Board, President and Chief Executive Officer
of Hormel Foods Corporation, a processor and marketer of meat
and food products. Director of Ecolab since 1996. Member of
the Compensation Committee and Finance Committee.
Following an extensive career at General Foods Corporation,
joined Hormel Foods Corporation in 1991 as Executive Vice
President - Sales & Marketing. Advanced to President in 1992,
Chief Operating Officer and Chief Executive Officer in 1993
and Chairman of the Board in 1995. Director of Hormel Foods
Corporation and the Meredith Corporation. Also a director of
The Hormel Foundation, American Meat Institute and Grocery
Manufacturers Association as well as a Trustee of Hamilton
College and member of Board of Overseers of the Carlson School
of Management at the University of Minnesota.
- --------------------------------------------------------------------------------
PHILIP L. SMITH, age 64.
[PHOTO] Former Chairman of the Board, President and Chief Executive
Officer of The Pillsbury Company. Director of Ecolab since
1989. Chairman of the Compensation Committee and member of the
Governance Committee.
Joined General Foods Corporation in 1966. After holding
various positions with General Foods, assumed the position of
Chairman, President and Chief Executive Officer in 1987. In
August 1988 became Chairman of the Board, President and Chief
Executive Officer of The Pillsbury Company, a position held
until the acquisition of Pillsbury by Diageo Plc (formerly:
Grand Metropolitan Public Limited Company) in January 1989.
Director of Whirlpool Corporation and U.S. Trust Corporation.
- --------------------------------------------------------------------------------
HUGO UYTERHOEVEN, age 66.
[PHOTO] Timken Professor of Business Administration, Graduate School
of Business Administration, Harvard University. Elected
pursuant to an understanding between the Company and Henkel
(see information found at page 5 hereof under the heading
"Election of Directors"). Director of Ecolab since 1992.
Member of the Audit Committee and Finance Committee.
Member of the Harvard Business School Faculty since 1960 where
he has served as Chairman of the Advanced Management Program,
Chairman of the General Management Area, and Senior Associate
Dean. Director of Bombardier Inc., Harcourt General, Inc. and
The Stanley Works.
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
ALBRECHT WOESTE, age 62.
[PHOTO] Owner of R. Woeste GmbH & Co. KG, Dusseldorf, Germany, a
privately-held manufacturer of tube fittings made of steel,
malleable iron and special castings. Member of the Henkel
family which controls Henkel KGaA, Dusseldorf, Germany, a
manufacturer of chemicals, household and personal care
products and adhesives and Chairman of the Shareholders'
Committee and the Supervisory Board of Henkel. Elected
pursuant to an understanding between the Company and Henkel
(see information found at page 5 hereof under the heading
"Election of Directors"). Director of Ecolab since 1991.
Member of the Audit Committee and Governance Committee.
Owner of R. Woeste GmbH & Co. KG, a family business
enterprise, since 1963. Named to the position of Vice Chairman
of the Shareholders' Committee of Henkel KGaA in 1965 and
appointed Chairman in 1990. Chairman of the Supervisory Board
of Henkel KGaA. Member of the Supervisory Board of Deutsche
Bank AG and of ALLIANZ Lebensversicherungs - AG (Life Insur-
ance). President Dusseldorf Chamber of Industry and Commerce.
- --------------------------------------------------------------------------------
MEMBERS OF BOARD OF DIRECTORS CONTINUING IN OFFICE -- CLASS I
(FOR A TERM ENDING 1999)
- --------------------------------------------------------------------------------
JAMES J. HOWARD, age 62.
[PHOTO] Chairman of the Board, President and Chief Executive Officer
of Northern States Power Company ("NSP"), an operating public
utility primarily engaged in the generation, transmission and
distribution of electricity and the distribution of natural
gas to 1.8 million customers in the Upper Midwest. NSP,
through non-regulated subsidiaries (NRG Energy, Inc., which
operates and has interests in independent, non-regulated power
and energy businesses worldwide; and Energy Masters
International, Inc., which markets gas, electricity and
energy-related services nationwide) also conducts operations
nationally and internationally. Director of Ecolab since 1991.
Chairman of the Governance Committee and member of the
Compensation Committee.
After holding various positions with affiliates of the Bell
Companies, in 1983 became President and Chief Operating
Officer of Ameritech, the Chicago- based holding company for
the Bell companies serving that region. Joined NSP as
President and Chief Executive Officer in February 1987, and
became Chairman of the Board in March 1988. Relinquished the
position of President from July 1990 through November 1994.
Director of Honeywell Inc., NSP, ReliaStar Financial Corp.,
the Federal Reserve Bank of Minneapolis and Walgreen Company.
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
JERRY W. LEVIN, age 53.
[PHOTO] Chairman of Revlon, Inc., a beauty care company and Chairman
of The Coleman Company, Inc., an outdoor recreational products
company. Executive Vice President of MacAndrews & Forbes.
Director of Ecolab since 1992. Member of the Compensation
Committee and Governance Committee.
Served in a number of senior executive positions with The
Pillsbury Company from 1974 through 1989. In 1989, joined
MacAndrews & Forbes which controls Revlon, Inc. and The
Coleman Company, among other companies. Appointed President of
Revlon in 1991, Chief Executive Officer in 1992 and Chairman
in 1995. Relinquished the positions of President in 1995 and
of Chief Executive Officer in January 1997. Named Chairman of
The Coleman Company, Inc. in February 1997. Prior thereto, was
Chairman of Coleman Holdings, the parent company of The
Coleman Company, Inc. Director of Coleman Worldwide Corp., The
Coleman Company, Inc., U.S. Bancorp, Meridian Sports Inc., The
Cosmetic Center Inc., Revlon, Inc. and Revlon Worldwide Corp.
- --------------------------------------------------------------------------------
REUBEN F. RICHARDS, age 68.
[PHOTO] Retired Chairman of the Board of Terra Industries Inc., an
agribusiness. Director of Ecolab since 1983. Chairman of the
Finance Committee and member of the Audit Committee.
Chairman of the Board of Terra Industries Inc. from December
1982 to May 1, 1996. Served as Chief Executive Officer from
December 1982 to May 1991 and as President from July 1983 to
May 1991. Chairman of the Board of Engelhard Corporation from
May 1985 to December 1994 and held positions as President and
CEO and/or Chairman of the Board of Minorco (U.S.A.) Inc. from
May 1990 to March 1996. Director of Potlatch Corporation,
Santa Fe Energy Resources, Inc., Engelhard Corporation and
Grupo Financiero Banorte.
- --------------------------------------------------------------------------------
RICHARD L. SCHALL, age 68.
[PHOTO] Consultant since 1985. Retired Vice Chairman of the Board and
Chief Administrative Officer of Dayton Hudson Corporation, a
national retailer. Director of Ecolab since 1978. Chairman of
the Audit Committee and member of the Finance Committee.
Joined Dayton Hudson in 1972 as Vice President and Controller.
Retired in 1985 as Chief Administrative Officer and Vice
Chairman of the Board, a position he had held since 1977.
Director of Medtronic, Inc., Meritex and U.S. Bancorp.
- --------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
ROLAND SCHULZ, age 56.
[PHOTO] Executive Vice President in charge of Human Resources and
member of the Executive Board of Henkel KGaA, Dusseldorf,
Germany, a manufacturer of chemicals, household and personal
care products and adhesives. Director of Ecolab since August
1993. Appointed to the Board pursuant to an understanding
between the Company and Henkel (see information found at page
5 hereof under the heading "Election of Directors"). Member of
the Finance Committee.
Joined Henkel in 1972 and held various operational and
marketing executive positions in the Henkel organization.
Appointed Vice President of Henkel KGaA in charge of personnel
in 1990. In 1991, named Executive Vice President and became a
member of the Henkel KGaA Executive Board. Director of Gothaer
Lebensversicherung AG, Goettingen (Life Insurance).
- --------------------------------------------------------------------------------
MEMBERS OF BOARD OF DIRECTORS CONTINUING IN OFFICE -- CLASS II
(FOR A TERM ENDING 2000)
- --------------------------------------------------------------------------------
LESLIE S. BILLER, age 50.
[PHOTO] President and Chief Operating Officer of Norwest Corporation,
a diversified financial services company. Director of Ecolab
since 1997. Member of the Audit Committee and the Governance
Committee.
After holding various positions with Citicorp and Bank of
America, joined Norwest Corporation in 1987 as Executive Vice
President in charge of strategic planning and acquisitions for
Norwest Banking. Appointed Executive Vice President in charge
of South Central Community Banking in 1990 and promoted to
President and Chief Operating Officer in February 1997.
Director of Norwest Corporation, VISA USA, Visa International,
International Data Response Corporation, The Minnesota Mutual
Life Insurance Company, the Minnesota Orchestra, and Jewish
Vocational Services. Also Vice-Chairman of Twin Cities RISE!
and a trustee of the University of Nevada, Reno Foundation.
- --------------------------------------------------------------------------------
RUTH S. BLOCK, age 67.
[PHOTO] Retired Executive Vice President and Chief Insurance Officer
of The Equitable, an insurance and investment company.
Director of Ecolab since 1985. Member of the Compensation
Committee and Finance Committee.
Joined Equitable in 1952. Elected Executive Vice President in
1980; Chairman and Chief Executive Officer of EVLICO in 1980
and Chief Insurance Officer of Equitable in 1984; retired in
1987. Director of Alliance Capital Mutual Funds (38 Funds) and
Amoco Corporation.
- --------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
ALLAN L. SCHUMAN, age 63.
[PHOTO] President and Chief Executive Officer of Ecolab. Director of
Ecolab since 1991. Member of the Governance Committee.
Joined Ecolab in 1957 and after promotions through all levels
of sales and marketing positions in the Company's
Institutional Division, became a Vice President,
Institutional, Marketing and National Accounts in 1972.
Promoted to Vice President and Director, Institutional
Division in 1979 and to Senior Vice President of the Company
in 1984. In 1985 was named Executive Vice President and in
1988, President, Ecolab Services Group. Promoted to President
and Chief Operating Officer of the Company in August 1992.
Named President and Chief Executive Officer in March 1995.
Director of Soap and Detergent Association, International
Foodservice Manufacturers Association, American Marketing
Association Services Council, Hazelden Foundation and the
Ordway Music Theatre. Trustee of the Culinary Institute of
America and of the National Education Foundation of the
National Restaurant Association.
- --------------------------------------------------------------------------------
MICHAEL E. SHANNON, age 61.
[PHOTO] Chairman of the Board, Chief Financial and Administrative
Officer of Ecolab. Director of Ecolab since 1991. Member of
the Finance Committee.
From 1975 to 1984 held various senior financial positions with
Republic Steel Corporation, including from 1982 to 1984,
Executive Vice President and Chief Financial Officer. In April
1984 joined Ecolab as Executive Vice President and Chief
Financial Officer. From December 1984 to October 1990 held the
additional position of Chief Administrative Officer and from
June 1988 to October 1990 was also President of ChemLawn
Services Corporation, a former subsidiary of the Company, and
from October 1990 to May 1992 also served as President of the
Residential Services Group of the Company. Assumed positions
of Vice Chairman and Chief Administrative Officer in August
1992 and named Chairman of the Board effective January 1,
1996. Director of the Minnesota Mutual Life Insurance Company,
Apogee Enterprises, Inc. and National Association of
Manufacturers. Chairman of the Minnesota Orchestral
Association.
- --------------------------------------------------------------------------------
10
<PAGE>
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Company's Board of Directors
is responsible for the overall executive compensation program and each
component. The Company's management and a compensation consultant provide
competitive data and assistance to help the Committee carry out its
responsibilities. The Board holds authority to ratify certain actions of the
Committee.
The Committee reviews each executive compensation component annually to maintain
alignment with the Company's goals and philosophy.
PHILOSOPHY: The Committee uses compensation to help communicate desired
business results to executives, influencing them to make decisions to produce
those results. The program must be competitive to attract, retain and motivate
executives, and it must reinforce and complement sound management practices. In
addition, the executives' interests must be effectively aligned with those of
our shareholders and, to this end, the Committee has developed executive stock
ownership guidelines to ensure that executives accumulate a significant
ownership stake and are vested in maximizing long-term shareholder returns.
Each component of the executives' compensation is targeted at the median of a
broad range of United States manufacturing and service companies, representing a
broader index for comparison than the Standard and Poor's Chemicals (Specialty)
Index represented in the performance graph on page 17. The Committee consults a
number of general industry surveys which collect a significant portion of their
data from the Standard & Poor's 500 Index or equivalent companies. The data is
adjusted through regression analysis to reflect the Company's size relative to
those companies included in the data. This size-adjusted data of the "comparator
group" of companies is the information relied upon by the Committee to provide a
generally accurate representation of the relevant competitive market.
The overall executive compensation program is designed to deliver median pay for
median Company performance. To the extent the Company's performance exceeds the
general industry median performance, total compensation will also exceed median
levels. Conversely, total compensation will be less than the median if Company
performance falls below the median performance level.
COMPONENTS: The Company's compensation program for executives includes four
components, each of which plays a specific role in the overall total
compensation approach, including:
- Base Salary;
- Management Incentive Plan or Management Performance Incentive Plan;
- Long-Term Incentives; and
- Benefits/Perquisites.
Base Salary: The Company's philosophy is to set base salaries at the
competitive market median, as represented by the comparator group. However,
individual performance is also taken into account in determining any
variations from the median. Surveys provide the data needed to determine the
market median base salary opportunities of the comparator group. The
Committee reviews the base salary of executive officers on an annual basis
in light of the market data and the officer's individual performance to
determine whether an increase in base pay is appropriate. In 1997, executive
officers' base salary increases averaged 5.6 percent, excluding promotional
increases.
The Committee increased Mr. Schuman's base salary by 8.6 percent effective
on January 1, 1997. This increase brought Mr. Schuman's base salary to a
level generally equivalent to the competitive market median.
11
<PAGE>
Management Incentive Plan (MIP)/Management Performance Incentive Plan
(MPIP): The MIP is a cash-based annual incentive plan that focuses
executives' attention on achieving competitive annual business goals. The
Committee, with input from management, sets specific performance goals at
the beginning of each year and communicates them to the Company's
executives. A mix of corporate and business unit goals is used to assure
that executives have a reasonable measure of control over the factors
affecting their awards. The Committee also establishes median awards,
expressed as a percentage of base salary. The median award is established at
a level which approximates median annual incentive targets expressed as a
percentage of base salary of the comparator group. Achievement of median
performance goals, as established by the Committee, will result in a median
award, while achievement of performance levels below or above the median
performance goal will result in minimum, premium or maximum awards.
The MPIP is a shareholder approved plan which is essentially the same as the
MIP. The MPIP was adopted in response to Section 162(m) of the Internal
Revenue Code, which disallows deductions by public corporations of certain
executive compensation in excess of $1,000,000 unless the plan meets certain
requirements. For 1997, Messrs. Schuman and Shannon were the only
participants in this plan.
Mr. Schuman and Mr. Shannon, as well as other executives with corporate-wide
responsibility, earn awards based solely on the achievement of Earnings Per
Share (EPS) goals. The Committee establishes annual EPS levels that must be
achieved to receive threshold, median and maximum awards. Economic
projections and the compounded annual EPS growth over three-year periods for
the Standard & Poor's 500 Index were the basis for the EPS goals in 1997.
For executives with business-unit responsibilities, 75% of their MIP award
is earned by meeting unit-specific operating income goals and 25% is
dependent on corporate EPS performance. As long as operating income
thresholds are met by the business unit, other financial or strategic
factors can also affect the size of the awards. The weight of each
performance measure varies among business units. In 1997, the average
weighting of the performance measures for the majority of the business units
was 43% operating income, 42% sales, and 8% cash flow. The remaining
performance measures, which fluctuated more greatly among units, included
measures such as management of working capital items.
The Committee, in general, makes awards based strictly on level of
achievement against pre-established goals. However, under the MIP, the
Committee may, in its sole discretion, make awards at a level higher or
lower than that determined by strict application of achievement against
goals based upon such other business criteria as the Committee determines
appropriate.
The award under the MPIP for 1997 performance was $945,000 or 150% of base
salary for Mr. Schuman. The award was based on the Company's 1997 EPS growth
of approximately 18% over 1996 results, and was derived from the EPS
performance levels and corresponding cash award levels established by the
Committee at the beginning of the plan year using the methodology described
above. The potential cash award for 1997, as established by the Committee,
ranged from a threshold of 26% of base salary to a maximum of 150% of base
salary. Under the MPIP, the Committee is allowed only downward discretion in
determining the award, and no adjustment was made to the award.
Special Recognition Award: At its February, 1998 meeting, the Committee,
after receiving a completed performance report conducted by the Governance
Committee on Mr. Schuman's accomplishments and performance in 1997, awarded
Mr. Schuman a special recognition award of $55,000. This special award,
together with the award earned under the MPIP, brought total cash awarded as
annual bonus in respect of 1997 to $1,000,000.
Long-Term Incentives: The Committee uses grants of stock options and
restricted stock to deliver a competitive compensation package that
motivates executives to make decisions that will
12
<PAGE>
increase the value of Company stock, thus providing an appropriate focus on
the long-term growth of the Company. When executives deliver sustained
superior returns to shareholders by outperforming the general industry, they
increase their own compensation accordingly.
Options are granted with exercise prices not less than the fair market value
of the Company's shares on the date of grant, providing no value to the
executive unless the Company's stock price increases after the grants are
made. The options become exercisable cumulatively at the rate of 25, 50, 75
and 100 percent on each anniversary of the date of grant and become
exercisable earlier upon a Change in Control of the Company as such term is
defined in footnote 4 to the Summary Compensation Table found at page 15 of
this Proxy Statement. The options have a term of ten years.
Restricted stock vests in equal installments on the second and fourth
anniversary of the grant. The Committee uses restricted stock as a component
of long-term executive compensation for two reasons: (1) similar to options,
restricted stock aligns executive pay with shareholder value over the
long-term; and (2) restricted stock grants provide a retention incentive,
decreasing the likelihood of costly, disruptive executive turnover.
The Committee makes stock incentive grants at the median gain opportunity
awarded to executives in similar positions in the comparator group. The
grants consist primarily of stock options. As to executive officers,
restricted stock represents between 22% to 48% of the total long-term
incentive value granted. The mix of restricted shares is set at
approximately 20% for Messrs. Schuman and Shannon, and increases to an
average of 30% for the remaining executive officers named in this proxy
statement. This mix between options and restricted shares has been in place
for a number of years and has proven to be valuable in building alignment
with shareholders, providing retention incentive, and increasing executive
share ownership.
On August 15, 1997, the Committee granted to Mr. Schuman options to purchase
120,000 shares with an exercise price of $21.890625 and a restricted stock
grant in the amount of 12,000 shares. The Committee based Mr. Schuman's
stock incentives upon the median gain opportunity of the comparator group.
Benefits/Perquisites: Executive benefits and perquisites are primarily
attraction and retention tools. They provide protection against the
financial catastrophes that can result from illness, disability and death.
They meet basic executive needs, allowing them to focus their attention on
the Company's business goals. The Company surveys the practices of the
comparator group and matches its benefits and perquisites to those provided
by a majority of companies.
POLICY WITH RESPECT TO THE $1 MILLION DEDUCTION LIMIT: Section 162(m) of the
Internal Revenue Code generally limits corporate deduction for compensation paid
to executive officers named in the proxy statement to $1,000,000, unless certain
requirements are met. The Committee's intent is to operate its compensation
programs for the executive officers subject to the deduction limit so the
corporate tax deduction is maximized on compensation paid. However, the
Committee will do so only to the extent practicable, and consistent with the
Company's overall compensation philosophy.
The Committee believes that compensation realized from the exercise of stock
options granted under its Stock Incentive Plans (which Plans have been approved
by the stockholders) will be exempt from the $1,000,000 cap imposed by Section
162(m).
CONCLUSION: The Committee believes that these executive compensation policies
and programs serve the interests of shareholders and the Company effectively.
The various pay vehicles utilized maintain an appropriate balance between
motivating achievement of short-term goals and strategically leading the Company
in a direction to provide long-term success. We will continue to monitor the
effectiveness of the Company's total compensation program to ensure that it
meets the needs of the Company.
Ruth S. Block Jerry W. Levin
James J. Howard Philip L. Smith
Joel W. Johnson
13
<PAGE>
SUMMARY COMPENSATION TABLE
The following table shows cash and non-cash compensation for each of the last
three years ended December 31 for the Company's Chief Executive Officer and for
the next four most highly-compensated executive officers who were serving in
those capacities at December 31, 1997. No other individuals served in those
capacities at any time during the year. All per share and number of share data
reflect the Company's two-for-one stock split paid January 15, 1998 in the form
of a 100% stock dividend to shareholders of record on December 26, 1997.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
SALARY(1) BONUS(1,2) COMPENSATION(3) AWARD(S)(4) OPTIONS COMPENSATION(5)
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Allan L. Schuman, 1997 $630,000 $1,000,000(6) $10,282 $262,688 120,000 $ 47,200
President and Chief 1996 $566,667 $ 680,000 $ 7,756 $212,625 150,000 $ 37,400
Executive Officer 1995 $483,333 $ 517,200(6) $ 2,136 $597,653 415,600 $ 28,516
Michael E. Shannon, 1997 $418,000 $ 500,000(6) $ 4,111 $131,344 54,000 $ 27,226
Chairman of the Board, 1996 $400,000 $ 399,600 $ 2,944 $208,250 160,000 $523,988
Chief Financial and 1995 $380,000 $ 310,000 $ 2,037 $108,873 78,760 $ 20,700
Administrative Officer
James L. McCarty, 1997 $308,000 $ 230,000 $ 2,053 $ 87,563 30,000 $ 16,050
Senior Vice President -- 1996 $280,000 $ 147,500 $ 2,561 $ 75,938 30,000 $ 12,825
Institutional North America 1995 $250,000 $ 165,000 $ 1,296 $ 79,448 38,500 $ 12,450
Gerald K. Carlson, 1997 $287,000 $ 229,600 $ 541 $ 43,781 10,000 $ 15,448
Senior Vice President -- 1996 $280,000 $ 173,700 $ 363 $ 30,375 16,000 $ 13,611
Corporate Planning and 1995 $273,300 $ 96,800 $ 147 $ 58,850 27,500 $ 11,103
Development
John P. Spooner, 1997 $343,833 $ 115,400 -0- $ 52,538 18,000 $ 13,727
Senior Vice President -- 1996 $333,667 $ 136,400 -0- $ 45,563 20,000 $ 14,102
International 1995 $322,350 $ 146,700 -0- $133,750 60,000 $ 14,072
</TABLE>
(1) Includes amounts deferred under Section 401(k) of the Internal Revenue
Code, pursuant to the Company's Savings Plan, amounts deferred under a
non-qualified deferred compensation plan maintained by the Company for a
select group of executives and salary reductions per Section 125 of the
Internal Revenue Code.
(2) Represents annual cash awards under the Company's Management Incentive Plan
("MIP") and, if applicable, the Company's Management Performance Incentive
Plan ("MPIP"). The MIP and MPIP are discussed at page 12 hereof in the
"Report of the Compensation Committee on Executive Compensation."
(3) Represents payment by the Company of certain payroll taxes under the
Company's non-contributory non-qualified supplemental defined benefit plans
referred to in the text following the "Pension Plan Table" on page 18. In
addition, the Company maintains executive death and supplemental long-term
disability benefits for a select group of executives, which benefits are
self-funded. With regard to disability benefits, no specific allocation of
cost is made to any named executive officer prior to the occurrence of a
disability. The cost of life insurance which the Company acquired to provide
a source of funds to satisfy its death benefit obligation is below the
reporting threshold for each named executive officer.
(4) Represents the cumulative dollar value of restricted stock awards during
the calendar year based on the closing market price of the Company's Common
Stock on the date of grant. The recipients receive dividends declared on,
and have voting power over, the restricted shares. The value and number of
the aggregate shares of restricted stock held by the named executive
officers at December 31, 1997 were as follows: Mr. Schuman, $1,572,485 with
56,730 shares; Mr. Shannon, $778,065 with 28,070 shares; Mr. McCarty,
$406,634 with 14,670 shares; Mr. Carlson, $232,838 with 8,400 shares; and
Mr. Spooner, $426,869 with 15,400 shares.
14
<PAGE>
All shares granted during 1997, 1996 and 1995 vest on the second and fourth
anniversary dates of the grant at the cumulative rate of 50% of each award,
based on continued employment of the recipient. The number of shares awarded
during 1997, 1996 and 1995, respectively, to the named executive officers
were: Mr. Schuman, 12,000, 14,000 and 51,460; Mr. Shannon, 6,000, 14,000 and
8,140; Mr. McCarty, 4,000, 5,000 and 5,940; Mr. Carlson, 2,000, 2,000 and
4,400; and Mr. Spooner, 2,400, 3,000 and 10,000.
Restrictions will lapse immediately on all restricted stock awards in the
event of a change in control of the Company. A change in control occurs if:
(i) a person or group acquires 25% or more of the Company's outstanding
voting power. However, if the acquisition was approved by the Board of
Directors, then a change in control occurs at 34% ownership. If the
acquiring person, prior to becoming a 25% shareholder, has entered into (and
is in compliance with) a shareholder agreement which imposes limits on the
person's maximum shareholding, then a change in control occurs only upon
acquisition of 50% of the Company's voting power; (ii) during the period of
two consecutive years, individuals who, at the beginning of such a period,
were members of the Board, cease for any reason to constitute at least a
majority thereof (unless the election or the nomination for election by the
Company's stockholders of each new director was approved by a vote of at
least two-thirds of the directors then still in office who were directors at
the beginning of the period or whose election or nomination were previously
so approved); (iii) the stockholders approve a merger or consolidation of
the Company in which voting securities of the surviving entity will
represent less than 80% of the Company's voting securities prior to the
transaction; or (iv) the stockholders of the Company approve a plan of
complete liquidation or an agreement to sell all or substantially all of the
Company's assets (hereinafter a "Change in Control of the Company").
(5) Amounts reported for 1997 represent: (i) the maximum matching contribution
of $4,750 made by the Company to each of the named executive officers under
the Company's defined contribution 401(k) Savings Plan available generally
to all employees; and (ii) the matching contributions made or to be made by
the Company on base salary and bonus earned in respect of 1997 which the
executive elected to defer under a non-qualified deferred compensation plan
maintained by the Company for a select group of executives, in the following
amounts: Mr. Schuman, $42,450; Mr. Shannon, $22,476; Mr. McCarty, $11,300;
Mr. Carlson, $10,698; and Mr. Spooner, $8,977.
(6) Includes, in addition to the annual cash award under the Company's
incentive plans referenced in note (2) above, special recognition awards as
follows: Mr. Schuman, $55,000 in 1997 and $50,000 in 1995; and Mr. Shannon,
$8,800 in 1997.
15
<PAGE>
OPTION GRANTS IN 1997(1)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT
ASSUMED ANNUAL RATES OF
STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(2)
PERCENT
NUMBER OF OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED
OPTIONS TO EXERCISE OR
GRANTED(3) EMPLOYEES BASE PRICE EXPIRATION 0% 5% 10%
NAME (#) IN 1997 ($/SH) DATE ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Allan L. Schuman 120,000 11.8% $ 21.890625 08/15/07 -0- $1,654,931 $4,176,731
Michael E. Shannon 54,000 5.3% $ 21.890625 08/15/07 -0- $ 744,719 $1,879,529
James L. McCarty 30,000 2.9% $ 21.890625 08/15/07 -0- $ 413,733 $1,044,183
Gerald K. Carlson 10,000 1.0% $ 21.890625 08/15/07 -0- $ 137,911 $ 348,061
John P. Spooner 18,000 1.8% $ 21.890625 08/15/07 -0- $ 248,240 $ 626,510
</TABLE>
(1) All per share and number of share data reflect the Company's two-for-one
stock split paid January 15, 1998 in the form of a 100% stock dividend to
shareholders of record on December 26, 1997.
(2) The dollar amounts under these columns are the results of calculations at
the 0 percent, 5 percent and 10 percent compounded growth rates set or
permitted by the SEC for the purposes of this table over a period equal to
the term of the option. These rates and amounts are not intended to forecast
possible future price appreciation of the Company's Common Stock. No gain to
the optionees is possible without an increase in stock price.
(3) All options granted during 1997 become exercisable cumulatively at the rate
of 25, 50, 75 and 100 percent on each anniversary of the date of grant and
become exercisable earlier upon a Change in Control of the Company.
AGGREGATED OPTION EXERCISES IN 1997 AND DECEMBER 31, 1997
OPTION VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1997 DECEMBER 31, 1997(2)
SHARES
ACQUIRED VALUE
ON EXERCISE REALIZED(3) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C>
Allan L. Schuman -0- -0- 632,700 465,300 $ 11,258,322 $ 5,895,778
Michael E. Shannon 140,000 $ 1,658,125 412,980 233,380 $ 7,519,276 $ 2,754,595
James L. McCarty 15,200 $ 269,488 44,348 79,352 $ 664,584 $ 859,641
Gerald K. Carlson -0- -0- 264,248 43,252 $ 5,195,425 $ 531,107
John P. Spooner -0- -0- 80,000 78,000 $ 1,245,781 $ 973,500
</TABLE>
(1) All per share and number of share data reflect the Company's two-for-one
stock split paid January 15, 1998 in the form of a 100% stock dividend to
shareholders of record on December 26, 1997.
(2) Represents the difference between the fair market value of the Company's
Common Stock as of December 31, 1997 and the exercise price of the option.
(3) Represents the difference between the fair market value of the Company's
Common Stock on the exercise date and the exercise price of the option.
16
<PAGE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN(1)
The graph below compares the cumulative total shareholder return on the
Company's Common Stock for the five calendar years ended December 31, 1997, with
the cumulative total return on the Standard & Poor's 500 Index and the Standard
& Poor's Chemicals (Specialty) Index over the same periods (assuming the
investment of $100 in the Company's Common Stock, the Standard & Poor's 500
Index and the Standard & Poor's Chemicals (Specialty) Index on January 1, 1993,
and reinvestment of all dividends).
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Ecolab, Inc. S&P 500 Index S&P Chemicals (Specialty) Index
<S> <C> <C> <C>
1992 $100.00 $100.00 $100.00
1993 $124.76 $110.08 $114.02
1994 $118.25 $111.53 $99.54
1995 $173.27 $153.45 $130.83
1996 $221.09 $188.68 $134.19
1997 $330.44 $251.63 $166.17
</TABLE>
(1) Total return calculations prepared by Standard & Poor's Compustat.
17
<PAGE>
PENSION PLAN TABLE
<TABLE>
<CAPTION>
AVERAGE ANNUAL
EARNINGS DURING
THE HIGHEST FIVE
CONTINUOUS COMBINED ANNUAL RETIREMENT INCOME FROM THE
YEARS OF ELIGIBLE PLANS WITH YEARS OF SERVICE
SERVICE 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
<S> <C> <C> <C> <C> <C> <C> <C>
$ 200,000 $ 40,000 $ 60,000 $ 80,000 $ 100,000 $ 120,000 $ 120,000 $ 120,000
300,000 60,000 90,000 120,000 150,000 180,000 180,000 180,000
400,000 80,000 120,000 160,000 200,000 240,000 240,000 240,000
500,000 100,000 150,000 200,000 250,000 300,000 300,000 300,000
600,000 120,000 180,000 240,000 300,000 360,000 360,000 360,000
700,000 140,000 210,000 280,000 350,000 420,000 420,000 420,000
800,000 160,000 240,000 320,000 400,000 480,000 480,000 480,000
900,000 180,000 270,000 360,000 450,000 540,000 540,000 540,000
1,000,000 200,000 300,000 400,000 500,000 600,000 600,000 600,000
1,100,000 220,000 330,000 440,000 550,000 660,000 660,000 660,000
1,200,000 240,000 360,000 480,000 600,000 720,000 720,000 720,000
</TABLE>
The preceding table shows the estimated annual benefits payable under the
Company's non-contributory qualified defined benefit Pension Plan, the Company's
non-contributory non-qualified defined benefit Mirror Pension Plan and the
Company's Supplemental Executive Retirement Plan (based upon a 15-year period
certain for the supplemental retirement benefit and a straight life annuity for
both the qualified and non-qualified pension benefits) following retirement at
age 65 for sample covered compensation amounts and lengths of plan
participation, without regard to vesting and offsets, if any, for benefits under
the Savings Plan or any predecessor plans and Social Security. At the end of 15
years, payment of amounts attributable solely to the Supplemental Executive
Retirement Plan cease. The amounts shown in the preceding table which are
attributable to the Supplemental Executive Retirement Plan would be reduced by
$7,956, which is the amount attributable to 50 percent of the primary Social
Security annual retirement benefit, based upon 1997 maximum levels for
retirement in 1997 at age 65, and by annuitized amounts presumed to be paid from
the Company's matching contribution made prior to July 1, 1994 under the
Company's Savings Plan and a former profit-sharing plan of the Company.
The table does not show the additional "past service benefit" provided under the
Supplemental Executive Retirement Plan to eligible executives who are unable to
earn the maximum supplemental benefit by retirement at or after age 65 because
the executive was hired by the Company after age 35. The past service benefit
would add an additional benefit of 1 percent of the difference between covered
compensation at retirement and earnings at the time of joining the Company
("first year earnings") for each year of service less than 30 years. Messrs.
Shannon and Spooner are currently subject to these provisions and their first
year earnings and estimated years of service creditable as past service are as
follows: Mr. Shannon, $215,682 with 13.12 years; Mr. Spooner, $365,000 with
12.93 years.
Applicable approximate covered compensation and credited years of service as of
December 31, 1997 for the combined pensions and supplemental executive
retirement benefits for the individuals named in the Summary Compensation Table
at page 14 hereof are as follows: Mr. Schuman, $838,094 with 40.2 years; Mr.
Shannon, $657,303 with 13 years; Mr. McCarty, $331,997 with 34.9 years; Mr.
Carlson, $373,490 with 31.5 years; and Mr. Spooner, $381,703 with 3 years.
Covered compensation is based on the executive officer's average annual earnings
during the five continuous years of highest earnings. In general, there is no
material variation between compensation used to determine covered compensation
and the base salary and bonus compensation of executive officers as reported in
the Summary Compensation Table at page 14 hereof.
18
<PAGE>
DIRECTOR REMUNERATION
Members of the Board of Directors who are not employees of the Company are paid
an annual retainer of $22,000 and a fee of $1,000 for each Board or committee
meeting they attend. Committee chairs each receive an additional fee of $4,500
per annum. One-half of the annual retainer amount is paid in the form of stock
units (which are described on page 2).
In addition, non-employee directors receive 600 stock units per annum. One
current director is grandfathered in a former cash-based retirement plan and
will be eligible to receive, upon leaving the Board, an annual fee equal to his
final retainer for a period equal to his period of Board service up to a maximum
of 15 years. That director does not receive the 600 stock units which are
granted annually. In addition, that director continues to participate in a term
insurance package which provides $75,000 group term life insurance and $75,000
accidental death and dismemberment coverage.
Under a deferred compensation plan, non-employee directors may elect to defer
some, or all, of the cash portion of their director's fees until cessation of
Board service. Amounts deferred are not subject to federal income tax until
received by the participant and are co-mingled with the Company's general
operating funds. Deferred amounts either earn interest at market rates or are
invested in the stock unit account at the election of the director. Upon
cessation of Board service, deferred amounts are paid in a lump sum or in equal
installments to a maximum of ten years as elected by the director.
Each non-employee director participates in the Company's 1995 Non-Employee
Director Stock Option Plan. Under that Plan, each such director elected at an
annual meeting of stockholders to a full three-year term receives a
non-statutory option to purchase 12,000 shares of Common Stock at the fair
market value of the Common Stock on such date. The option becomes exercisable,
on a cumulative basis, as to 4,000 shares on each of the next three subsequent
annual meetings of stockholders. A director elected or appointed to less than a
full three-year term receives a pro rated grant. In the event a director ceases
to serve due to death or disability, all shares subject to the option become
immediately exercisable.
An option may be exercised for a period of ten years from grant. However, in the
event the director ceases to be a director due to death or disability, or for
any other reason, the exercise period is shortened to the lesser of five years
from such date or the expiration of the original term.
CERTAIN TRANSACTIONS
The Company and Henkel KGaA ("Henkel") each have a 50% economic interest in a
joint venture engaged in industrial and institutional cleaning and sanitizing
businesses throughout Europe ("Joint Venture"). Neither partner may transfer its
interest in the Joint Venture without the other's consent. Henkel, 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 the Company and Henkel. The Company and Henkel
are equally represented on the governing board for the Joint Venture, which
includes Messrs. Schuman, Shannon and Schulz. The Company includes the
operations of the Joint Venture in its financial statements using the equity
method of accounting.
While the Joint Venture has its own manufacturing, training and research and
development facilities, it also has access to the basic technology of both the
Company and Henkel for which it pays each company an equal royalty based on net
sales. The Joint Venture operates on a stand alone basis but obtains certain
administrative support from Henkel and its affiliates and acquires certain
products from the Company and Henkel as well as from third parties. All such
royalties and prices for administrative services and products are based on arm's
length negotiations. Mr. Schulz is an Executive Vice President of Henkel and Mr.
Woeste is Chairman of the Shareholder's Committee and the Supervisory Board of
Henkel.
As part of the 1991 transaction with Henkel in which the Joint Venture was
formed, the Company, as described under the heading "Company Transactions" at
page 21, acquired Henkel businesses in 19
19
<PAGE>
countries outside of Europe. The Company also acquired options, exercisable
through July 11, 2001, to acquire Henkel's interest in cleaning and sanitizing
businesses in certain other countries at formula prices, in general, based on
earnings of the businesses. An option to acquire such businesses remains for
Korea.
STOCKHOLDER AGREEMENT
As of March 17, 1998, Henkel KGaA and its affiliates owned approximately 31.24
million shares of the Company's Common Stock as set forth in the table of
Security Ownership of Certain Beneficial Owners located on page 2 hereof.
Henkel's equity ownership in the Company is subject to an agreement
("Stockholder's Agreement") containing certain restrictions pertaining to, among
other things, maximum shareholding, transfer and voting rights. Generally, the
Stockholder's Agreement terminates on June 26, 2009. During the year second
preceding such date, Henkel and the Company will commence negotiations for an
extension of the term. If an agreement to extend such term is not reached,
Henkel would have the right, and in certain circumstances the obligation, to
purchase the Company's interest in the Henkel-Ecolab Joint Venture operated by
the Company and Henkel in Europe. The Joint Venture conducts industrial and
institutional cleaning and sanitizing business in Europe. The purchase price
shall be paid by Henkel in the Company's Common Stock owned by it, with any
excess price payable in cash. If the value of Henkel's Common Stock ownership
exceeds the purchase price, then the Company may acquire such remaining Common
Stock at market value. After any such purchase, the Stockholder's Agreement
would remain in effect for an additional two years. In addition, the
Stockholder's Agreement provides that if the Joint Venture is terminated or
Henkel owns less than one percent of the Company's Common Stock, the
Stockholder's Agreement will terminate two years after the later of such events.
Pursuant to the Stockholder's Agreement, Henkel is precluded from acquiring more
than 26% of the Company's outstanding Common Stock prior to July 11, 2000 and
30% thereafter through the period of the Stockholder's Agreement, or from
acting, alone or in concert with others, to control or influence the Company.
Henkel may sell its shares of the Company's Common Stock under certain
conditions specified in the Stockholder's Agreement subject to the Company's
right of first refusal. In addition, Henkel has agreed to vote its shares, in
the case of election of directors of the Company or certain stockholder
proposals, in accordance with the recommendation or directions of the Board. In
all other cases, except with respect to certain "strategic transactions," Henkel
may vote, at its option, either in accordance with the recommendation of the
Board or pro rata in the same manner and proportion that votes of the
stockholders of the Company (other than Henkel and officers or directors of the
Company) have been cast. Any vote with respect to "strategic transactions"
(among other things, an increase in the authorized shares or an amendment to the
Certificate of Incorporation, as well as a disposition, recapitalization or
dissolution of the Company or other transactions which could have a material
effect upon Henkel's investment in the Common Stock) may be cast at Henkel's
sole discretion. Henkel also is entitled to designate nominees for election to
the Company's Board of Directors proportionate to the percentage of its holding
of voting securities in the Company (rounded to the nearest whole number).
Currently, Henkel has designated for election three of the Company's 13
directors. Those directors are: Roland Schulz, Albrecht Woeste and Hugo
Uyterhoeven. Further information concerning Henkel directorships is found at
page 5 hereof under the heading "Election of Directors."
COMPANY TRANSACTIONS
During 1997, the Company sold products and services in the amount of
approximately $533,000 to Henkel or its affiliates, and purchased products and
services in the amount of approximately $2,043,000 from Henkel or its
affiliates. The sales were made at prices comparable to prices charged to other
customers and the Company believes that the amounts paid for products and
services purchased were comparable with prices charged by other suppliers for
similar products.
20
<PAGE>
In 1991, as part of the transaction with Henkel in which the Joint Venture was
formed, the Company acquired Henkel's industrial and institutional cleaning and
sanitizing businesses in 19 countries outside of Europe. The Company received
the right, in return for the annual payment of 2.5 million Deutsche marks
(approximately $1,400,000), to have access to certain technology of Henkel which
is relevant to most of the Company's businesses. The payment obligation has been
extended to continue until 1999 and was determined through arm's length
negotiation. In addition, pursuant to options granted to the Company by Henkel
as part of the 1991 transaction, and described under the heading "Certain
Transactions" on page 20 hereof, the Company has acquired additional
non-European businesses from Henkel, including in some cases from joint ventures
controlled by Henkel. During calendar 1997, the Company acquired Henkel's
cleaning and sanitizing businesses in China, Morocco, Kenya, Tanzania and Japan
for purchase prices aggregating approximately $16 million. The businesses
acquired from Henkel obtain certain administrative services and products from
Henkel. These arrangements were determined through arm's length negotiations as
part of the overall 1991 transaction with Henkel or as a part of the
arrangements under which they were purchased pursuant to the options described
above. During 1997, the non-European businesses paid Henkel or its affiliates
approximately $1,097,000 for administrative services and approximately
$3,680,000 for products under supply arrangements.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Upon the recommendation of its Audit Committee, the Board of Directors has
appointed Coopers & Lybrand L.L.P. as independent accountants to audit the
consolidated financial statements of the Company for the year ending December
31, 1998, and to perform other appropriate audit, accounting and consulting
services. Coopers & Lybrand L.L.P. has served as independent accountants for the
Company since 1970. Representatives of Coopers & Lybrand L.L.P. are expected to
be present at the Annual Meeting of Stockholders. They will have an opportunity
to make a statement if they desire to do so, and are expected to be available to
respond to appropriate questions.
Under the laws of the State of Delaware, stockholder ratification of the
appointment of independent accountants is not required. However, the Company
deems it advisable to submit the appointment of Coopers & Lybrand L.L.P. for
stockholder consideration and ratification.
The Board of Directors recommends a vote FOR the ratification of the appointment
of Coopers & Lybrand L.L.P. as independent accountants for the Company. The
affirmative vote of the majority of the total votes cast by holders of shares
present in person or represented by Proxy at the Annual Meeting and entitled to
vote shall constitute ratification. In accordance with the By-Laws of the
Company, abstentions will not be counted as votes cast for purposes of
calculating votes for or against ratification of the appointment of Coopers &
Lybrand L.L.P. Unless a contrary choice is specified, proxies solicited by the
Board of Directors will be voted FOR ratification of the appointment. If the
appointment is not ratified, the Board of Directors will reconsider the matter.
OTHER MATTERS
FUTURE STOCKHOLDER PROPOSALS -- ANNUAL MEETING
Any stockholder proposal to be considered by the Company for inclusion in the
Proxy Statement and form of proxy for the Annual Meeting of Stockholders in
respect of the year ending December 31, 1998, expected to be held on May 14,
1999, must be received by the Secretary of the Company at the Company's
principal executive offices located at the address found at the top of page 1,
no later than November 27, 1998.
Stockholder proposals not included in a proxy statement for an annual meeting
must comply with advance notice procedures set forth in the By-Laws of the
Company (which procedures include both timing and informational content
requirements) in order to be properly brought before that Annual Meeting of
Stockholders. In addition, notice of proposed stockholder nominations for the
election of directors at an annual meeting must be given in accordance with
similar notice procedures set forth in
21
<PAGE>
the By-Laws of the Company. In general the advance notice procedures require
that written notice of a stockholder proposal or a director nomination be
delivered to the Secretary of the Company not less than 90 days nor more than
135 days prior to the anniversary date of the preceding Annual Meeting of
Stockholders which was held on May 9, 1997.
If the presiding officer of the Annual Meeting of Stockholders determines that
business, or a nomination, was not brought before the meeting in accordance with
the By-Law provisions such business shall not be transacted or such defective
nomination shall not be accepted. A copy of the By-Law provisions governing
these procedures may be obtained by writing to the Secretary of the Company at
the Company's principal executive offices at the address found at the top of
page 1.
OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors and management do
not intend to present, and have no knowledge that other persons will present,
any matters at the meeting in addition to those described herein. Should any
other matters properly come before the meeting which call for a vote of the
stockholders, the persons named in the accompanying proxy will have
discretionary authority to vote all proxies with respect to such matters in
accordance with their best judgment.
By Order of the Board of Directors
KENNETH A. IVERSON,
Vice President and Secretary
March 30, 1998
22
<PAGE>
[MAP]
<PAGE>
P R O X Y
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ECOLAB INC.
ANNUAL MEETING OF STOCKHOLDERS
MAY 8, 1998
The undersigned hereby appoints Allan L. Schuman and Kenneth A. Iverson, or
either of them, with full power of substitution to each as proxies to represent
the undersigned at the Annual Meeting of Stockholders of Ecolab Inc., to be held
in the Ecolab Theater of The Culinary Institute of America at Greystone, 2555
Main Street, St. Helena, California on Friday, May 8, 1998 at 10:00 a.m. and at
any adjournment(s) thereof, and to vote all shares of stock which the
undersigned may be entitled to vote at said meeting as directed below with
respect to the proposals as set forth in the Proxy Statement, and in their
discretion, upon any other matters that may properly come before the meeting.
Nominees for election to Board of Directors:
1. Joel Johnson 2. Philip Smith 3. Hugo Uyterhoeven 4. Albrecht Woeste
You are encouraged to specify your choices by marking the appropriate boxes, SEE
REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance
with the Board of Directors' recommendations. The tabulator cannot vote your
shares unless you sign and return this card.
SEE REVERSE SIDE
/X/ Please mark your votes as in this example.
Unless you indicate otherwise, this proxy will be voted in accordance with the
Board of Directors' recommendations.
- - --------------------------------------------------------------------------
Directors recommend a vote FOR all Nominees and FOR Proposal 2.
- ----------------------------------------------------------------------------
FOR WITHHELD
1. Election of 4 Directors. / / / /
(see reverse)
For all except the following nominee(s):
- ----------------------------------------------------
- --------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. Ratify appointment of / / / / / /
independent accountants.
<PAGE>
Please sign name(s) exactly as printed hereon. Joint owners should each
sign. In signing as attorney, administrator, executor, guardian or
trustee, please give full title as such.
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
SIGNATURE(S) DATE
ECOLAB
New Telephone Voting Service / 1-800-OK2-VOTE
As an alternative to returning your proxy by mail, Ecolab shareholders may now
vote by telephone 24 hours a day. To access the telephone voting system, you
must use a touch-tone telephone and follow the instructions below:
- - Shareholders calling from the United States, Canada, Puerto Rico, and
the U.S. Virgin Islands may dial toll-free 1-800-652-8683
(1-800-OK2-VOTE). Shareholders calling from other locations may dial
201-324-0377; these shareholders must bear the normal cost of
international telephone access charges to use the telephone voting
service.
- - When prompted for your "Voter Control Number," enter the series of
numbers printed in the box above using your touch-tone telephone.
Telephone voting authorizes the named proxies to represent you at the meeting in
the same manner as if you completed, signed, dated and mailed your proxy card.
