<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Nalco Chemical Company
.............................................................................
(Name of Registrant as Specified In Its Charter)
Suzzanne J. Gioimo
..............................................................................
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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: _/
.......................................................................
4) Proposed maximum aggregate value of transaction:
.......................................................................
_/ Set forth the amount on which the filing fee is calculated and state how
it was determined.
[ ] 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:
......................................................
Notes:
<PAGE>
NALCO LOGO
W. H. Clark
Chairman
and Chief Executive Officer
March 18, 1994
Dear Stockholder:
We cordially invite you to attend the 1994 Annual Meeting of Stockholders.
It will be held at the Company's Corporate and Technical Center, One Nalco
Center, Naperville, Illinois, beginning at 10:00 A.M. on Wednesday, April 20,
1994. The Corporate and Technical Center is located at the Southeast corner of
the intersection of Illinois Route 59 and the East-West Tollway (Interstate
Route 88).
The attached Notice of Meeting and Proxy Statement cover the formal business
items to be considered at this meeting. We also will report on current
operations and answer stockholder questions.
We hope you will be able to attend. If you cannot do so, we urge you to
exercise your right to vote by promptly returning your signed proxy card in
the enclosed prepaid envelope.
Sincerely yours,
LOGO
W. H. Clark
<PAGE>
NALCO CHEMICAL COMPANY
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 20, 1994
To Nalco Stockholders:
The Annual Meeting of Stockholders of Nalco Chemical Company will be held at
the Company's Corporate and Technical Center, One Nalco Center, Naperville,
Illinois, on Wednesday, April 20, 1994, at 10:00 A.M., to consider and vote
upon the following proposals:
1. Election of three Class I directors; and
2. Approval of Independent Auditors.
The Board of Directors has designated the close of business on February 21,
1994 as the record date for determination of the stockholders entitled to
notice of and to vote at the meeting or any adjournment thereof.
Please complete, sign, date and return the proxy promptly in the enclosed
envelope so that your shares will be represented at the meeting.
LOGO
Suzzanne J. Gioimo
Secretary
Naperville, Illinois
March 18, 1994
<PAGE>
PROXY STATEMENT
SOLICITATION OF PROXIES
This Proxy Statement is furnished commencing approximately March 18, 1994, in
connection with the solicitation of proxies for use at the Annual Meeting of
Stockholders of Nalco Chemical Company (the "Company") to be held on April 20,
1994, at the time and place and for the purposes set forth in the accompanying
notice of the meeting. The accompanying Proxy is solicited by and on behalf of
the Board of Directors of the Company and is revocable by written notice to the
Company or by any later dated proxy at any time prior to its use at the Annual
Meeting.
The Company will bear the cost of the solicitation. The Company has retained
Georgeson & Company Inc., Wall Street Plaza, New York, N.Y. 10005 to aid in the
solicitation of proxies from banks, brokers, other custodians, nominees and
fiduciaries and institutional holders at a cost not to exceed $10,000 plus
reasonable out of pocket expenses. In addition, certain directors, officers and
other employees of the Company, not specifically employed for the purpose, may
solicit proxies, without additional remuneration therefor, by personal
interview, mail, telephone or telegraph. The Company will reimburse banks,
brokers or other nominees for the expenses incurred in forwarding proxy
material to beneficial owners.
It is the Company's policy that all proxies, ballots and voting tabulations
that identify how shareholders voted be kept confidential, except when
disclosure is mandated by law, when such disclosure is expressly requested by a
shareholder, during a contested election for the Board of Directors or in the
event of a contested proxy solicitation, and that the tabulators and the
inspectors of election be independent and not employees of the corporation.
PROPOSAL 1.
ELECTION OF DIRECTORS
The Board of Directors currently consists of eleven directors elected for
staggered terms which expire alternately over a three-year period. W. H. Clark,
Chief Executive Officer and Chairman of the Board of the Company, is scheduled
to retire at his normal retirement age from the Company and the Board in July,
1994. The present term of the Class I directors expires at the 1994 Annual
Meeting. The Board of Directors therefore proposes the election of three Class
I directors to serve for three years until the 1997 Annual Meeting, and in each
case until their successors have been elected and qualified. Shares represented
by proxies, which are returned properly signed, will be voted for the nominees
named in the following table unless the stockholder indicates on the proxy that
authority to vote the shares is withheld. Each of the nominees has consented to
serve as a director if elected. If any nominee becomes unavailable for
election, the proxy may be voted for such substitute nominee as the Board of
Directors may designate or the Board may reduce the number of directors to
eliminate the vacancy.
1
<PAGE>
<TABLE>
<CAPTION>
YEAR
BECAME
NAME PRINCIPAL OCCUPATION OR EMPLOYMENT AGE DIRECTOR
--------------- -------------------------------------------- --- --------
The nominees for Class I Directors for election at the 1994 Annual Meeting for
a term to expire in 1997 are as follows:
<C> <S> <C> <C>
J. P. Frazee... Retired; formerly President and Chief 49 1985
Operating Officer, Sprint Corporation
A. L. Kelly.... Managing Partner, KEL Enterprises Ltd. 56 1992
F. A. Krehbiel. Chairman and Chief Executive Officer, Molex 52 1990
Incorporated
The present directors whose terms continue after the 1994 Annual Meeting are
as follows:
The Class II Directors with terms to expire in 1995 are:
H. Corless..... Retired; formerly Chairman, ICI Americas, 65 1989
Inc.
H. M. Dean..... Chairman and Chief Executive Officer, Dean 56 1987
Foods Company
E. J. Mooney... President and Chief Operating Officer, Nalco 52 1988
C. W. Parry.... Retired; formerly Chairman and Chief 69 1985
Executive Officer, Aluminum Company of
America
The Class III Directors with terms to expire in 1996 are:
H. G. Bernthal. Chairman, CroBern, Inc. 65 1980
W. H. Clark.... Chairman and Chief Executive Officer, Nalco 61 1980
W. A. Pogue.... Retired; formerly Chairman and Chief 66 1981
Executive Officer, CBI Industries, Inc.
J. J. Shea..... Vice Chairman, President and Chief Executive 56 1993
Officer, Spiegel, Inc.
</TABLE>
BIOGRAPHY OF NOMINEES FOR CLASS I DIRECTORS
J. P. Frazee, Jr., was President and Chief Operating Officer of Sprint
Corporation (a diversified telecommunications company) from March, 1993 to
August, 1993. He was Chairman and Chief Executive Officer of Centel Corporation
(a telecommunications firm) from April, 1988 to March, 1993. Other
directorships: Dean Foods Company and Security Capital Group Incorporated.
A. L. Kelly has been Managing Partner of KEL Enterprises Ltd. (a holding and
investment company) since 1982. Other directorships: Bayerische Motoren Werke
(BMW) A.G., Northern Trust Corporation and its principal banking subsidiary,
The Northern Trust Company, Snap-on Tools Corporation and Deere & Company.
2
<PAGE>
F. A. Krehbiel has been Chairman and Chief Executive Officer of Molex
Incorporated (a manufacturer and distributor of electrical and electronic
devices) since 1993. From 1988 to 1993 he was Vice Chairman and Chief Executive
Officer. Other directorships: Tellabs, Inc., Northern Trust Corporation and its
principal banking subsidiary, The Northern Trust Company, A. M. Castle & Co.
and Molex Incorporated.
BIOGRAPHIES OF OTHER DIRECTORS
H. G. Bernthal has been Chairman of CroBern, Inc. (a healthcare investment
company) since 1986. Other directorships: Butler Manufacturing Company and
National-Standard Company.
W. H. Clark has been Chief Executive Officer of the Company since 1982 and
Chairman of the Board since 1984 and was President from 1982 until 1990. Other
directorships: Northern Trust Corporation and its principal banking subsidiary,
The Northern Trust Company, NICOR Inc. and its principal subsidiary, Northern
Illinois Gas Company, USG Corporation and its subsidiary, United States Gypsum
Co., James River Corporation, Bethlehem Steel Corporation and Diamond Shamrock
Inc.
H. Corless was Chairman of ICI Americas, Inc. (a company engaged in
manufacture and sale of chemicals and pharmaceuticals) and ICI American
Holdings, Inc. (a holding company), subsidiaries of Imperial Chemicals
Industries PLC ("ICI") (a worldwide chemical manufacturer, headquartered in
London) from 1986 to 1989 when he retired. He was director of C-I-L Inc. (a
Canadian subsidiary of ICI and manufacturer of chemicals, fertilizers,
industrial explosives, paints and plastics) from 1982 to 1989. Other
directorships: Delaware Trust Company, Meridian Bancorp, Inc. and Uniroyal
Chemical Corporation.
H. M. Dean has been Chairman of Dean Foods Company (a diversified food
processor and distributor) since 1989. He became Chief Executive Officer in
1987. Other directorships: Ball Corporation, Yellow Freight Systems Inc. and
Dean Foods Company.
E. J. Mooney became Chief Operating Officer of Nalco in 1992. He has been
President since 1990 and was Executive Vice President, U.S. Operations from
1988 to 1990. Other directorship: CBI Industries, Inc.
W. A. Pogue was Chairman and Chief Executive Officer of CBI Industries, Inc.
(a company engaged in metal plate fabrication, industrial gases, real estate
and investments), a position he held from 1982 to 1989. Other directorships:
Bethlehem Steel Corporation, Northern Trust Corporation and its principal
banking subsidiary, The Northern Trust Company, and Amerada Hess Corp.
3
<PAGE>
C. W. Parry was Chairman and Chief Executive Officer of Aluminum Company of
America (an aluminum and advanced materials company) from 1983 until his
retirement in 1987. Other directorship: Goodyear Tire and Rubber Company.
J. J. Shea has served as President and Chief Executive Officer of Spiegel,
Inc. (apparel, specialty retail and catalog sales) since 1985 and as Vice
Chairman since 1989. Other directorship: Spiegel, Inc.
MEETINGS OF THE BOARD AND COMMITTEES OF THE BOARD
The Board of Directors held eight regular and special meetings in 1993. Each
director attended more than 75% of the meetings of the Board of Directors and
Committees on which he served, except for F. A. Krehbiel who attended 64% of
the meetings.
The Executive Committee. The Executive Committee, composed of five directors,
three of whom are non-employee directors, may exercise all of the authority of
the Board of Directors except for, among other items, the amendment or repeal
of the Company's Restated Certificate of Incorporation or By-laws and the
exercise of those powers reserved for other committees of the Board. Present
members are W. H. Clark (Chairman), H. G. Bernthal, E. J. Mooney, C. W. Parry
and W. A. Pogue. The Executive Committee did not meet in 1993.
The Audit Committee. The Audit Committee, composed of five non-employee
directors, is responsible for (i) reviewing the Company's accounting and
auditing policies and practices, (ii) reviewing the appointment and discharge
of independent auditors, (iii) reviewing the independence of the independent
auditors, (iv) reviewing the scope and nature of the non-audit related services
performed by the independent auditors, and (v) reporting to and making
recommendations to the Board with respect to the foregoing. The Audit Committee
generally meets with management, the internal auditors, and the independent
auditors. The independent auditors and internal auditors have full and free
access to the Audit Committee without management's presence to discuss internal
accounting controls, results of audits, and financial reporting matters.
Present members are C. W. Parry (Chairman), H. Corless, J. P. Frazee, Jr., F.
A. Krehbiel and J. J. Shea. In 1993 the Audit Committee met three times.
The Executive Compensation Committee. The Executive Compensation Committee,
composed of four non-employee directors, is responsible for (i) recommending to
the Board of Directors the compensation to be paid to the Chief Executive
Officer, (ii) approving compensation of corporate officers who are also
directors, (iii) consulting with the Chief Executive Officer on matters related
to executive compensation, and (iv) administering the Company's Management
Incentive Plan, stock option plans, Restricted Stock Plan, Performance Unit
Plan and Performance Share Plan. Present members are W. A. Pogue (Chairman), H.
G. Bernthal, H. M. Dean and A. L. Kelly. In 1993 this Committee met two times.
4
<PAGE>
The Board Affairs and Nominating Committee. The Board Affairs and Nominating
Committee, composed of five directors, three of whom are non-employee
directors, is responsible for reviewing the qualifications of possible
directors and submitting its recommendations to the Board of Directors to fill
Board vacancies. Candidates for election to the Board submitted by shareholders
will be considered by the Committee if sent to the Secretary with the
candidate's qualifications. Present members are H. M. Dean (Chairman), H. G.
Bernthal, W. H. Clark, W. A. Pogue, and E. J. Mooney. The Board Affairs and
Nominating Committee met three times in 1993.
DIRECTORS' REMUNERATION AND RETIREMENT POLICIES
Compensation of non-employee directors of the Company consists of an annual
retainer of $25,000 plus $1,000 for each Board meeting attended, an additional
$6,000 per year for membership on one or more Committees of the Board, and an
additional fee of $6,000 per year to the Chairmen of the Audit Committee,
Executive Compensation Committee and Board Affairs and Nominating Committee.
Directors who are employees of the Company do not receive fees for service on
the Board or any Committees.
A deferred compensation plan is available to all non-employee directors under
which they may defer all or a part of their annual retainer and committee and
attendance fees for any year and receive, generally following retirement or at
such time as the Board approves, the amount computed as set forth below, in
five equal annual payments (or such other number of annual payments, not more
than ten, as the Company elects). Deferred compensation accounts set up for
directors who elect deferral are credited with the deferred amounts. These
amounts are converted into share units based on the average of the month-end
closing prices of the Company's common stock during the calendar year and
credited with the dividend equivalents of the dividends a director would have
received had the director owned shares of common stock equal to the share units
in the director's account, also converted into share units on the same basis.
At the end of the deferral period, units are converted into cash based on the
average of the month-end closing prices of the Company's common stock during
the year prior to or of payment.
The Board of Directors has adopted a policy establishing the retirement date
of each member of the Board to be the date of the Annual Meeting of
Stockholders which next follows the earlier of either the date of retirement
from employment by the Company or the date of the member's 70th birthday. Early
retirement can be taken following the attainment of a non-employee director's
68th birthday. Such policy also provides that upon retirement from the Board,
each non-employee director with at least five years of service on the Board
shall be paid an annual amount equal to the annual retainer paid to non-
employee directors multiplied by a factor, the numerator of which is the number
of years of service on the Board, but not
5
<PAGE>
exceeding ten, and the denominator of which is ten, such annual payment to
continue for the lifetime of the retired director. In October, 1993 the Board
adopted a new retirement policy effective for all directors elected to the
Board for the first time after October 31, 1993. Present directors may choose
to retire under the old policy or the new one. The new retirement policy also
provides for payment of an amount equal to the annual retainer, multiplied by a
fraction, the numerator of which is the number of years of service on the Board
but not exceeding ten, and the denominator of which is ten, to be paid for a
period not greater than ten years. However under the new policy, should a
Director die prior to retirement or after retirement but before the ten year
period has expired, the Director's spouse shall receive 50% of the payment
amount for the lesser of life or the remainder of the ten year period.
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The Stock Option Plan for Non-Employee Directors (the "Directors Plan")
provides for the grant of options to purchase up to 500,000 shares of Company
common stock, subject to adjustment in certain events, to non-employee
directors of the Company. Automatic grants of options to purchase 4,000 shares
of the Company's common stock are made to each non-employee director of the
Company on the date of each Annual Meeting from April, 1990 to May 1, 2000. The
option price will be the fair market value of the Company's common stock on the
date of grant. Payment may be made in cash or in shares of Company common stock
that have been held by the director for at least six months.
Each option will extend for 10 years from the date of grant. Options
terminate upon termination of service as a director, except that an optionee
may exercise the option within five years following retirement under the
Company's retirement policy for directors or termination of service as a
director because of total and permanent disability. If the director dies while
a director or within five years of retirement as a director, the option may be
exercised within the longer of five years from the date of retirement or one
year from the date of death by any person to whom the option passes by will or
the laws of descent and distribution. For options granted before 1992, these
exercise periods are three years. In all instances, however, the option must be
exercised during the term of the grant.
An optionee may elect to surrender an option and receive shares of common
stock of the Company having a fair market value equal in value to the excess of
the fair market value of the unpurchased shares over the option price of such
shares. Any shares covered by an option which is surrendered shall not be
available for future grant under the Directors Plan (but shares subject to
options that are otherwise canceled or terminated will again become available
for use under the Directors Plan). The Directors Plan may be terminated at any
time or may, from time to time, be modified or amended by the Board of
Directors except that Plan provisions shall not be amended more than once every
six months other than to comport with changes in the Internal Revenue Code, the
Employee Retirement Security Act or the rules thereunder.
6
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid during each of the Company's last three fiscal years to the Company's
Chief Executive Officer and each of the Company's other four most highly
compensated executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------- --------------------- -------
OTHER ALL
ANNUAL RESTRICTED SHARES OTHER
COMPEN- STOCK UNDERLYING LTIP COMPEN-
NAME AND PRINCIPAL SALARY BONUS SATION AWARDS OPTIONS PAYOUTS SATION
POSITION YEAR ($) ($)(1) ($) ($)(2) (#) ($) ($)(3)
- ----------------------- ---- ------- ------- ------- ---------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
W. H. Clark 1993 610,000 328,119 30,501 0 0 426,933 43,026
Chairman of the Board 1992 570,000 376,086 10,318 0 104,520 417,311 40,023
& Chief Executive Offi-
cer 1991 540,000 310,000 7,419 203,575 0 0 37,233
E. J. Mooney 1993 390,000 176,982 7,969 0 0 230,693 27,508
President & Chief 1992 364,000 200,200 8,887 0 58,000 225,494 25,558
Operating Officer 1991 337,000 159,637 6,983 126,336 0 0 23,236
W. S. Weeber 1993 265,000 106,344 1,459 0 0 113,849 18,692
Executive Vice Presi-
dent, 1992 247,000 97,318 719 0 28,000 111,284 17,343
Operations Staff 1991 234,000 74,529 758 70,054 0 0 16,134
M. B. Harp 1993 265,000 106,344 1,459 0 0 108,316 18,692
Executive Vice Presi-
dent, 1992 235,000 92,825 719 0 28,000 105,876 16,501
International 1991 220,000 72,270 758 65,863 0 0 15,169
Operations
J. R. Sutley 1993 325,995(4) 75,071 1,459 0 0 92,184 15,094
Group Vice President, 1992 318,635(4) 76,060 719 0 21,000 90,108 14,043
President, Nalco Europe 1991 292,407(4) 57,734 758 55,684 0 0 12,825
</TABLE>
- ----------
(1) Amount represents Management Incentive Plan awards earned for stated year.
(2) Value of awards is based on market price at date of grant. Dividends are
paid on restricted stock share units. Based on the closing stock price of
$37.50 on December 31, 1993, the restricted stock holdings and their market
value at the end of 1993 for each named executive officer are: W. H.
Clark--16,240 shares, $609,000; E. J. Mooney--9,080 shares, $340,500; W. S.
Weeber--5,260 shares, $197,250; M. B. Harp--4,900 shares, $183,750; J. R.
Sutley--3,240 shares, $121,500. In the event of death, disability, change
of control or retirement under the Retirement Income Plan, all restricted
stock units automatically become vested.
(3) Allocations under the Nalco Employee Stock Ownership Plan, (ESOP),
including comparable amounts under Excess ERISA Agreements. ESOP
allocations are respectively: $16,635, $16,635, $16,635, $16,635, and
$15,094 for 1993. Amounts allocated under Excess ERISA agreements are
respectively: $26,391, $10,873, $2,057, $2,057, and $0 for 1993.
(4) A portion of this amount represents costs & allowances associated with
residing in Europe.
7
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR, AND YEAR-END OPTION VALUES
No stock options were granted to the named executive officers during 1993.
The following table provides information related to options exercised by the
named executive officers during 1993 and the number and value of options held
at year-end.
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF SHARES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS AT
OPTIONS AT YEAR-END
SHARES YEAR-END (#) ($)(1)
ACQUIRED ON VALUE ---------------------- -------------
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
- ------------ ----------- --------- ---------------------- -------------
<S> <C> <C> <C> <C>
W. H. Clark 74,216 1,546,054 115,240--Exercisable 1,446,693
69,680--Unexercisable 104,520
E. J. Mooney -0- -0- 91,534--Exercisable 1,470,249
38,666--Unexercisable 57,999
W. S. Weeber 5,299 113,597 56,835--Exercisable 923,872
18,666--Unexercisable 27,999
M. B. Harp 6,400 150,800 55,534--Exercisable 917,624
18,666--Unexercisable 27,999
J. R. Sutley 2,000 41,875 29,600--Exercisable 455,126
14,000--Unexercisable 21,000
</TABLE>
- ----------
(1) Valued on the difference between $37.50 (the closing price on December 31,
1993) and the exercise price of the option.
8
<PAGE>
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
The following table covers long term incentive compensation awards granted to
the named executive officers during 1993.
<TABLE>
<CAPTION>
PERFORMANCE
OR OTHER ESTIMATED FUTURE PAYOUTS
NUMBER OF PERIOD UNDER NON-STOCK PRICE BASED PLANS
SHARES, UNITS UNTIL ----------------------------------------
OR OTHER MATURATION THRESHOLD
NAME RIGHTS (#) OR PAYOUT (#) TARGET (#) MAXIMUM (#)
- ------------ ------------- ----------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
W. H. Clark 11,377 Shares 1993-94-95 6,826 Shares 11,377 Shares 13,652 Shares
E. J. Mooney 6,155 Shares 1993-94-95 3,693 Shares 6,155 Shares 7,386 Shares
W. S. Weeber 3,802 Shares 1993-94-95 2,281 Shares 3,802 Shares 4,562 Shares
M. B. Harp 3,802 Shares 1993-94-95 2,281 Shares 3,802 Shares 4,562 Shares
J. R. Sutley 2,456 Shares 1993-94-95 1,474 Shares 2,456 Shares 2,947 Shares
</TABLE>
- ----------
Awards are denominated in shares of common stock of the Company under the
Performance Share Plan ("PSP"). A 6%, 10% and 12% compounded increase in net
earnings per share is required to earn threshold, target and maximum payouts,
respectively. If earned, half of the awards are to be paid in cash at the end
of the performance period in an amount based on the average Company stock price
during the last five days of the performance period, and the remaining shares
to be paid in Company Common Stock are to vest three years after the end of the
performance period contingent on continued employment. In the event of
termination of employment due to death, disability, retirement or change in
control, all unvested Common Stock already awarded shall vest immediately and
all vested Common Stock shall be distributed to a participant or his
beneficiary.
9
<PAGE>
RETIREMENT INCOME PLAN AND SUPPLEMENTAL RETIREMENT INCOME PLAN
The following table sets forth the annual benefits payable, with respect to
specified final average earnings and years of service categories, under the
Company's Retirement Income Plan and Supplemental Retirement Income Plan,
before giving effect to any social security offset.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
FINAL AVERAGE ----------------------------------------------
EARNING 15 20 25 30 35
- ------------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
$ 125,000....................... $ 39,750 $ 53,000 $ 66,250 $ 76,188 $ 86,125
150,000....................... 47,700 63,600 79,500 91,425 103,350
170,000....................... 54,060 72,080 90,100 103,615 117,130
200,000....................... 63,600 84,800 106,000 121,900 137,800
300,000....................... 95,400 127,200 159,000 182,850 206,700
400,000....................... 127,200 169,600 212,000 243,800 275,600
500,000....................... 159,000 212,000 265,000 304,750 344,500
600,000....................... 190,800 254,400 318,000 365,700 413,400
700,000....................... 222,600 296,800 371,000 426,650 482,300
800,000....................... 254,400 339,200 424,000 487,600 551,200
900,000....................... 286,200 381,600 477,000 548,550 620,100
1,000,000....................... 318,000 424,000 530,000 609,500 689,000
1,200,000....................... 381,600 508,800 636,000 731,400 826,800
1,300,000....................... 413,400 551,200 689,000 792,350 895,700
1,400,000....................... 445,200 593,600 742,000 853,300 964,600
1,500,000....................... 477,000 636,000 795,000 914,250 1,033,500
</TABLE>
The credited years of participation at December 31, 1993 for each individual
named in the cash compensation table are: W. H. Clark, 33; E. J. Mooney, 25; W.
S. Weeber, 27 M. B. Harp, 22; and J. R. Sutley, 26. The credited earnings are
approximately the same as the salary and bonus set forth in the summary
compensation table.
The Plan uses a final average earnings formula based on the average
annualized pay for the highest paid 48 months during the last 120 months before
retirement. In general, the annual retirement income in the 10-year certain
form of settlement at normal retirement date will be equal to 2% of "final
average earnings" for each of the first 25 years of Plan participation plus
1.5% of "final average earnings" for each year over 25 years, less a prorated
offset not to exceed 50% of the primary social security benefit at age 62,
depending on years of Plan participation.
The Company has entered into agreements with its officers, including those
listed in the summary compensation table, to restore any benefits under the
Retirement Income Plan and the Profit Sharing, Investment and Pay Deferral Plan
and Employee Stock Ownership Plan ("ESOP") reduced by the Employee Retirement
Income Security Act of 1974 and the Revenue Reconciliation Act of 1993. Any
reductions in benefits will first be made in Retirement Plan
10
<PAGE>
accounts and then if necessary in the Profit Sharing, Investment and Pay
Deferral Plan and ESOP accounts. Under these agreements, the Company also
agrees to pay to the beneficiary of each executive officer an amount equal to
one year's salary in the event of death.
KEY EXECUTIVE AGREEMENTS
The Company has entered into Key Executive Agreements with those individuals
listed in the summary compensation table, as an assurance to the Company and
the officers of continuity of management in the event of any actual or
threatened change in control of the Company. Under the Agreements, which become
effective upon a change in control, the Company agrees to employ each executive
for a three-year period thereafter (but not after age 62) in the capacity in
which the executive was employed immediately prior thereto ("Employment
Period"). During the Employment Period, the executive will be compensated, as
detailed in the Agreements, in a manner comparable to his or her prior
compensation and will be entitled to all opportunities for bonuses and other
Company benefits provided for executives by the Company. In the event of
termination of the executive (including resignation) as a result of a change in
control or a significant change in the executive's authority or duties in
effect immediately prior to the effective date of the Agreement, a reduction in
total compensation opportunities, or a breach of the Agreement by the Company,
the executive would be paid a lump sum equivalent to anticipated salary,
bonuses and incentives for the remainder of the Employment Period, as well as
any benefits that would have accrued, including those under profit sharing,
ESOP, pension, stock option and insurance plans. The Company will pay any
expenses associated with enforcement of an executive's rights under an
Agreement, and will secure its obligations under the Agreements by an
irrevocable letter of credit for the benefit of the executive.
DEATH BENEFIT AGREEMENTS
The Company has also entered into Death Benefit Agreements ("Benefit
Agreements") with those individuals listed in the summary compensation table,
as an inducement to the executive officer to continue in the Company's employ
and to provide the benefit of his or her advice after his or her retirement.
Each Benefit Agreement provides for payment by the Company to the executive's
beneficiaries of an amount equal to the executive's base annual salary as of
his or her last day of work, if the executive dies (a) while employed by the
Company and covered by a Benefit Agreement, or (b) any time after retirement
and before reaching age 62 if a Benefit Agreement was in effect at retirement.
The Company will pay a benefit equal to twice the executive's base annual
salary as of his or her last day of work to the executive's beneficiaries if
the executive dies after retirement and after reaching age 62 if a Benefit
Agreement was in effect at the time of retirement. Payments under these Benefit
Agreements will be made by the Company from its general funds. It is not
necessary for a named executive officer to provide consulting services to the
Company after retirement to be awarded benefits under the Benefit Agreement.
11
<PAGE>
BENEFIT PROTECTION TRUSTS
Four trust funds (the "Trusts") have been established to assist in
accumulating the amounts necessary to satisfy the Company's contractual
liabilities under the non-qualified benefit plans described herein, including
the deferred compensation plan for directors. However, the Company shall remain
primarily liable under the plans to pay benefits, and the Trusts' assets shall
remain subject to the claims of the Company's general creditors.
The Company may fund the Trusts at any time, but shall, no later than three
business days after a change in control of the Company, fund the Trusts in an
amount which at least equals the present value of all of the unpaid benefits
under the Trusts. To determine this value, the actuarial assumptions stated in
the Retirement Income Plan in effect on the first day of the Plan year in which
a change in control occurs will be used. A Trust beneficiary's benefit under a
plan shall be based on his or her service and compensation at the time of the
change in control.
CHANGE IN CONTROL
"Change in control" as used in the plans and agreements discussed herein
generally means: (a) a merger, consolidation, reorganization or sale of all or
substantially all of the Company's business or assets if less than 80% of the
outstanding voting securities or other capital interests in the surviving or
acquiring company is not owned in the aggregate by the stockholders of the
Company immediately prior thereto; (b) the reported acquisition by any person
or group of beneficial ownership of 20% or more of the outstanding voting
securities of the Company; or (c) a change during any two-year period in a
majority of the Board of Directors not approved by at least two-thirds of the
prior Directors.
EXECUTIVE COMPENSATION COMMITTEE REPORT TO SHAREHOLDERS
Executive Compensation Policy
The Executive Compensation Committee ("Committee") of Nalco Chemical Company
is comprised entirely of non-employee directors. The Committee is responsible
for establishing and administering Nalco's compensation policies.
Currently, the compensation program for executives consists of four principal
elements listed in order of importance:
1. A base salary that is kept competitive by utilizing various surveys
provided or published by independent consultants from time to time.
These surveys are executive compensation surveys for a variety of
industries including representation from the chemical industry. A
number of the companies included in the performance graph were part
of these compensation surveys. In 1993, average salary levels were
close to the middle ranges in these surveys. The Company's sales,
earnings and earnings per share, as well as the individual
executive's yearly performance and contribution to the Company's
overall performance, are considered in setting salaries.
12
<PAGE>
2. The Management Incentive Plan ("MIP") is an annual incentive plan that
provides cash compensation based on the achievement of goals set for
the Company and the individuals that are approved by the Board of
Directors. For 1993 there were corporate performance goals for
increases in sales and earnings. Individual performance goals were set
for each executive, depending on his or her particular
responsibilities and strategic objectives. For the MIP, sales,
earnings and individual goals are weighted at 37.5%, 37.5% and 25%
respectively.
3. (a) The Performance Share Plan ("PSP") provides for awards based on
long-term per share earnings goals of the Company that are approved by
the Board of Directors. Awards are composed of Company common stock
and/or cash and are based upon the Company's achievement of at least a
threshold compounded increase in fully diluted earnings per share
during a three-year performance period. The first three year
performance period in this plan will end in December, 1994.
(b) The Performance Unit Plan ("PUP"), the predecessor to the PSP,
provided for cash awards if corporate performance goals for compounded
increase in consolidated per share earnings from continuing operations
exceeded minimum threshold amounts. The Company's performance for the
cycle ending in 1993, as well as the award payments, exceeded the
threshold level but were below target. The PUP cycle ending in 1993
was the last cycle for this Plan and no future grants or awards will
be made.
Each of these two plans provides for a threshold and maximum amount
below and above the respective target amounts.
4. Stock options are awarded from time to time. The Committee utilized an
outside consulting firm to provide data upon which the Committee based
the grant amounts, taking into consideration individual positions and
performance. Grants are intended to be competitive and provide long
term incentive motivation. Option prices are based on fair market
value as of the grant date and the value of any particular option when
exercised depends on the performance of the Company's common stock
during the interim. Since the last major grant in 1992 that included
most of the officers vests over a three year period, no grants were
made to the five named Executive Officers in 1993.
The Committee tries to focus the executive compensation program to strengthen
the overall performance of the Company by integrating both short-term and long-
term performance goals. PUP and PSP goals are based on 100% earnings
performance which is an objective goal. Once awards are made under an annual or
long-term incentive plan, the Committee has no discretion to adjust them. No
restricted stock grants have been awarded to Executive Officers since 1991
because the PSP took the place of the Restricted Stock Plan in providing stock
based compensation.
13
<PAGE>
The Committee believes that rewarding executives through stock ownership
tends to maximize shareholder value over the long term. Having an ongoing stock
option program that provides stock to executives not only ties their financial
well-being to that of the Company, but also allows them to realize the benefits
of an enhanced stock price. The Committee does not consider outstanding stock
options when awarding current stock option grants.
Chief Executive Officer Compensation
The pay-for-performance philosophy of the Company's total compensation
program outlined above also applies to Mr. W. H. Clark, Nalco's Chief Executive
Officer.
In 1992 Nalco sales, earnings from continuing operations and net earnings
were up 11.1%, 7.7% and 5.2% respectively. This represented a record year in
both sales and earnings for the Company. Because of the increase in Company
performance and Mr. Clark's performance, the Committee approved a 7.02%
increase in Mr. Clark's base salary in January, 1993.
The 1993 Management Incentive Plan award was based primarily on achievement
of corporate performance goals for sales and earnings and Mr. Clark's
performance as determined by the Committee. Combined sales and earnings for the
Company were 97% of target for 1993. Mr. Clark met his individual goals for
1993. As a result, the MIP award paid to Mr. Clark was below the target amount.
The total MIP payment Mr. Clark received for 1993 was $328,119, and the payment
that he received for 1992 was $376,086.
Mr. Clark also earned an award from the Performance Unit Plan, since the
Company's consolidated earnings from continuing operations exceeded the minimum
threshold for the performance cycle ending in 1993. However because the
Company's performance was below the target amount in the Plan, the amount of
his award was based on 95% of his target.
Over 50% of Mr. Clark's cash compensation was based on Nalco's sales and
earnings performance compared to performance objectives, as well as his
individual performance. This variable portion of his compensation was derived
from the annual incentive plan and long-term incentive plan described earlier.
Mr. Clark did not receive a stock option grant in 1993. The grant he received
in 1992 becomes exercisable in equal portions beginning in 1993, 1994 and 1995.
The exercise price of $36 per share was the fair market value of the Company's
common stock on the date of grant. The size of the stock option grant was based
on the recommendation of an independent compensation consulting firm in order
to provide a competitive level of stock options. No adjustments are permitted
for this award except for the Committee's right to reduce any unvested portions
of the award, should Mr. Clark's performance decline, in the opinion of the
Committee.
14
<PAGE>
During 1993, Mr. Clark exercised stock options and realized value as stated
in the table on page 8. These options were granted in 1985, 1986 and 1987. All
options were issued at fair market value on the date of grant. Since the first
grant date, the Company's stock has appreciated by 187%.
The Committee is considering the question of qualifying compensation paid to
its executive officers for deductibility under the $1 million deduction limit
contained in recently enacted tax legislation. Included compensation is not
expected to exceed this limit in 1994. The Committee plans to monitor this
issue.
The Executive Compensation Committee
W. A. Pogue H. G. Bernthal
H. M. Dean A. L. Kelly
15
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
THE GRAPH BELOW COMPARES CUMULATIVE TOTAL RETURN OF THE COMPANY, THE S&P 500
INDEX AND THE SPECIALTY CHEMICALS VALUE LINE INDEX (DIVIDENDS REINVESTED). THE
GRAPH ASSUMES $100 WAS INVESTED ON DECEMBER 31, 1988 IN NALCO STOCK, THE S&P
500 INDEX AND THE SPECIALTY CHEMICAL VALUE LINE INDEX.
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG NALCO CHEMICAL, S&P 500 INDEX AND SPECIALTY CHEMICAL VALUE LINE INDEX
<CAPTION>
Measurement Period S&P Specialty Chemical
(Fiscal Year Covered) Nalco 500 Index Value Line Index
- ------------------- ---------- --------- -------------------
<S> <C> <C> <C>
Measurement Pt-
12/31/88 $100 $100 $100
FYE 12/31/89 $145.21 $131.59 $123.72
FYE 12/31/90 $170.67 $127.49 $126.22
FYE 12/31/91 $258.28 $166.17 $185.94
FYE 12/31/92 $220.13 $178.81 $214.28
FYE 12/31/93 $244.30 $196.75 $242.99
</TABLE>
There can be no assurance that the Company's stock performance will continue
into the future with the same or similar trends depicted in the graph above.
The Company does not make or endorse any predictions as to future stock
performance.
16
<PAGE>
PROPOSAL 2.
APPROVAL OF INDEPENDENT AUDITORS
Price Waterhouse was selected by the Board of Directors upon the
recommendation of the Audit Committee, to serve as independent auditors for the
Company and its consolidated subsidiaries for 1994, and the stockholders'
approval of such selection is requested. Representatives of Price Waterhouse
are expected to be present at the Annual Meeting of Stockholders to make a
statement if they so desire and to respond to appropriate questions. If the
stockholders do not approve the auditors, the Audit Committee and the Board of
Directors will reconsider the selection.
The Board of Directors recommends a vote FOR Proposal 2.
SHARES OUTSTANDING AND VOTING RIGHTS
Only stockholders of record at the close of business on February 21, 1994 are
entitled to vote at the meeting. On that date the Company had outstanding
68,985,285 shares of common stock, each of which is entitled to one vote, and
407,655 shares of ESOP Preferred Stock, each of which is entitled to 20 votes
and will be converted upon retirement or separation from service into 20 shares
of common stock (subject to adjustments in certain events). A quorum is a
majority of the votes represented by the outstanding shares of stock of the
Company either present at the meeting or represented by proxy. The common stock
and the ESOP Preferred Stock will vote together as a single class on each of
these Proposals, and the affirmative vote of a majority of the quorum is
necessary to adopt any of the Proposals referred to herein. Abstentions and
broker non-votes will each be treated as shares that are represented at the
meeting for purposes of determining the presence of a quorum. Each is tabulated
separately. Abstentions are counted in the tabulation of votes cast on
proposals presented to shareholders, whereas broker non-votes are not counted
for purposes of determining whether a proposal has been approved.
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the number of shares of common stock and ESOP
Preferred Stock owned beneficially (as defined by the Securities and Exchange
Commission) by each director, director nominee and named executive officer (in
each instance, amounting to less than 1% of the outstanding class) and by all
present directors and executive officers as a group
17
<PAGE>
(1.2% of the outstanding common stock and less than 1% of the outstanding ESOP
Preferred Stock) as of February 21, 1994 (as of December 31, 1993, as to shares
held in the Profit Sharing, Investment and Pay Deferral Plan).
<TABLE>
<CAPTION>
ESOP
COMMON PREFERRED
NAME SHARES SHARES
---- ------- ---------
<S> <C> <C>
H. G. Bernthal.......................................... 16,400
W. H. Clark............................................. 247,163 136
H. Corless.............................................. 18,000
H. M. Dean.............................................. 17,000
J. P. Frazee, Jr........................................ 18,634
M. B. Harp.............................................. 92,602 132
A. L. Kelly............................................. 11,038
F. A. Krehbiel.......................................... 20,000
E. J. Mooney............................................ 130,479 136
C. W. Parry............................................. 16,400
W. A. Pogue............................................. 16,888
J. J. Shea.............................................. 4,500
J. R. Sutley............................................ 50,125 109
W. S. Weeber............................................ 67,290 136
All Directors and Executive Officers as a Group......... 814,911 839
</TABLE>
The above amounts include common shares which are subject to outstanding
stock options exercisable within 60 days of March 18 as follows: W. H. Clark,
150,080 shares; M. B. Harp, 54,667 shares; E. J. Mooney, 91,667 shares; W. S.
Weeber, 51,867 shares; J. R. Sutley, 36,600 shares; H. G. Bernthal, H. Corless,
H. M. Dean, J. P. Frazee, Jr., F. A. Krehbiel, C. W. Parry, and W. A. Pogue,
16,000 shares each; A. L. Kelly, 8,000 shares; J. J. Shea, 4,000 shares; and
directors and executive officers as a group, 574,915 shares. The table does not
include ESOP Preferred Stock not held for the account of the foregoing
individuals that the ESOP trustee is required to vote or dispose of in the
manner and proportion in which allocated shares are directed to be voted or
disposed of, or common shares into which any ESOP Preferred Stock may be
converted.
18
<PAGE>
SECURITY OWNERSHIP OF CERTAIN OWNERS
<TABLE>
<CAPTION>
TITLE OF NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) CLASS
-------- ------------------- ----------------------- ----------
<S> <C> <C> <C>
INVESCO PLC
11 Devonshire Square
London EC2M 4 YR
England
Common Shares................ 3,982,275 5.8%
</TABLE>
- ----------
(1) INVESCO PLC and its subsidiaries, INVESCO North American Group, Ltd.,
INVESCO, Inc., INVESCO North Amercian Holdings, Inc., INVESCO Capital
Management, Inc., and INVESCO Management & Research, Inc., have shared
voting power and shared dispositive power of 3,982,275 shares.
STOCKHOLDER PROPOSAL DEADLINE
Stockholder proposals, to be considered for inclusion in the proxy statement
for the 1995 Annual Meeting of Stockholders, must be received by the Company by
November 18, 1994.
DISCRETIONARY VOTING OF PROXIES ON OTHER MATTERS
The Board of Directors presently knows of no other matters scheduled to be
presented at the Annual Meeting. With respect to any other matter requiring a
vote of the stockholders that may come before the Annual Meeting, the proxies
in the enclosed form confer upon the person or persons entitled to vote the
shares represented by such proxies authority to vote the same in respect of any
such other matter in their discretion.
By Order of the Board of Directors
S. J. Gioimo
Secretary
Naperville, Illinois
March 18, 1994
19
<PAGE>
NOTICE OF
ANNUAL
MEETING
AND
PROXY
STATEMENT
WEDNESDAY, APRIL 20, 1994
NALCO CHEMICAL COMPANY
ONE NALCO CENTER, NAPERVILLE, ILLINOIS
60563-1198
--------
<PAGE>
Please mark your votes as in this example.
7824
----
X
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 AND 2, AND IN THE DISCRETION OF THE PROXIES ON ALL OTHER
MATTERS PROPERLY COMING BEFORE THE MEETING.
DIRECTORS RECOMMEND A VOTE "FOR"
- --------------------------------------------------------------------------------
FOR*
WITHHOLD
FOR
AGAINST
ABSTAIN
1. Election of Directors
Nominees for Director:
J. P. Frazee, Jr.
A. L. Kelly
F. A. Krehbiel
2. Approval of Auditors
*FOR, except vote
withheld from the
following nominee(s):
- --------------------------------------------------------------------------------
If you have noted comments on the other side of the card, please mark box at
right.
SIGNATURE(S) _________________DATE _____________________________________ , 1994
Please sign exactly as name appears
hereon and return promptly. Joint
owners should each sign. When signing
as attorney, executor, administrator,
trustee or guardian, please give full
title as such.
FOLD AND DETACH HERE
<PAGE>
NALCO CHEMICAL COMPANY
ONE NALCO CENTER, NAPERVILLE, ILLINOIS 60563-1198
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR THE 1994 ANNUAL MEETING
The undersigned hereby appoints W. H. Clark and E. J. Mooney, and each of them,
attorneys and proxies of the undersigned, with full power of substitution, to
represent and vote all the shares held by the undersigned at the Annual Meeting
of Stockholders to be held at the Company's Corporate and Technical Center, One
Nalco Center, Naperville, Illinois on Wednesday, April 20, 1994, at 10:00 A.M.,
local time, or at any adjournments thereof, on all matters coming before said
meeting.
(Change of
address/comments)
ELECTION OF CLASS I DIRECTORS:
J. P. Frazee, Jr.
A. L. Kelly -------------------------
F. A. Krehbiel -------------------------
-------------------------
P R O X Y
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 PROXY COMMITTEE
CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
SEE REVERSE
SIDE
FOLD AND DETACH HERE
IT IS IMPORTANT THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL
MEETING WHETHER OR NOT YOU PLAN TO ATTEND IN PERSON. WE URGE
YOU TO COMPLETE AND MAIL YOUR PROXY CARD IN THE ENCLOSED
ENVELOPE.
