<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 [_]
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
Nalco Chemical Company
- --------------------------------------------------------------------------------
(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] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $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 (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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[NALCO LOGO]
March 18, 1996
Dear Stockholder:
We cordially invite you to attend the 1996 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 Thursday, April 18,
1996. 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 OF E. J. MOONEY]
E. J. Mooney
<PAGE>
NALCO CHEMICAL COMPANY
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 18, 1996
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 Thursday, April 18, 1996, at 10:00 A.M., to consider and vote
upon the following proposals:
1. Election of Three Class III Directors.
2. Approval of Independent Accountants.
3. Approval of the Employee Stock Compensation Plan.
4. Approval of the Performance Share Plan.
5. Approval of the Management Incentive Plan.
6. Approval of the Non-employee Directors Stock Compensation Plan.
The Board of Directors has designated the close of business on February 20,
1996 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 OF SUZZANNE J. GIOIMO]
Suzzanne J. Gioimo
Secretary
Naperville, Illinois
March 18, 1996
<PAGE>
PROXY STATEMENT
SOLICITATION OF PROXIES
This Proxy Statement is furnished commencing approximately March 18, 1996,
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
18, 1996, 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 telefax. 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 ten directors elected for
staggered terms which expire alternately over a three-year period. The present
term of the Class III Directors expires at the 1996 Annual Meeting. The Board
of Directors therefore proposes the election of three Class III Directors to
serve for three years until the 1999 Annual Meeting, and in each case until
their successors have been elected and qualified. W. A. Pogue, if elected,
will serve only two years of the three year term since he will reach the
Board's mandatory retirement age. 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 III Directors for election at the 1996 Annual
Meeting for a term to expire in 1999 are as follows:
<S> <C> <C> <C>
H. G. Bernthal.......... Chairman, CroBern, Inc. 67 1980
W. A. Pogue............. Retired; formerly Chairman and Chief Executive 68 1981
Officer, CBI Industries, Inc.
J. J. Shea.............. Vice Chairman, President and Chief Executive 58 1993
Officer, Spiegel, Inc.
The present directors whose terms continue after the 1996 Annual
Meeting are as follows:
The Class I Directors with terms to expire in 1997 are:
J. L. Ballesteros....... Executive Vice Chairman, President and Chief 54 1995
Executive Officer, Grupo Synkro, S.A. de C.V.
J. P. Frazee, Jr........ Retired; formerly President and Chief Operating 51 1985
Officer, Sprint Corporation
A. L. Kelly............. Managing Partner, KEL Enterprises Ltd. 58 1992
F. A. Krehbiel.......... Chairman and Chief Executive Officer, Molex 54 1990
Incorporated
The Class II Directors with terms to expire in 1998 are:
H. Corless.............. Retired; formerly Chairman, ICI Americas, Inc. 67 1989
H. M. Dean.............. Chairman and Chief Executive Officer, Dean Foods 58 1987
Company
E. J. Mooney............ Chairman, Chief Executive Officer and President, 54 1988
Nalco
</TABLE>
BIOGRAPHY OF NOMINEES FOR CLASS III 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. 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 and Amerada Hess Corp.
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.
BIOGRAPHIES OF OTHER DIRECTORS
J. L. Ballesteros has been Executive Vice Chairman since 1983 and President
and Chief Executive Officer since 1988 of Grupo Synkro, S. A. de C. V. (a
holding company). He has been Executive Vice Chairman, President and Chief
Executive Officer since 1994 for both Kayser Roth Corporation (U.S. based-
hosiery) and Arcoplus, S. A. (Argentina based-hosiery), and for Cannon Mills,
S. A. de C. V. (producer of men's and women's hosiery), Calzado Puma, S. A. de
C. V. (shoe manufacturer) and Grupo Prolar, S. A. de C. V. (manufacturer of
home cleaning products and home and garden products) since 1988, all of which
companies
2
<PAGE>
are subsidiaries of Grupo Synkro, S. A. de C. V. Other directorships: Grupo
Mexicano de Desarrollo, S. A. de C. V., Corporacion Mexicana de Aviacion, S.
A. de C. V., Grupo Financiero Inverlat, S. A. de C. V., Grupo Financiero
Invermexico, S. A. de C. V., Grupo Financiero Multivalores, S. A. de C. V.,
Fimsa Grupo Financiero, S. A. de C. V. and Kativo Chemical Industries, S. A.
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: Meridian Bancorp, Inc., Uniroyal Chemical Corporation and the
Medical Center of Delaware, Inc.
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 Corporation and Dean Foods
Company.
E. J. Mooney was elected Chief Executive Officer of Nalco effective April,
1994 and Chairman of the Board effective July, 1994. He has been President
since 1990 and was Chief Operating Officer from 1992 to 1994. Other
directorship: Morton International.
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 1988 to 1993. Other
directorships: Dean Foods Company, Security Capital Group Incorporated and
Paging Network, Inc.
A. L. Kelly has been the Managing Partner of KEL Enterprises L.P. (a holding
and investment partnership) since 1982. Other directorships: Bayerische
Motoren Werke (BMW) A.G., Deere & Company, Northern Trust Corporation and its
principal banking subsidiary, The Northern Trust Company, Snap-on Incorporated
and Tejas Gas Corporation.
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,
and Molex Incorporated.
MEETINGS OF THE BOARD AND COMMITTEES OF THE BOARD
The Board of Directors held six regular and special meetings in 1995. Each
director attended more than 75% of the meetings of the Board of Directors and
Committees on which he served.
The Executive Committee. The Executive Committee, composed of five
directors, four 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 E. J. Mooney (Chairman), H. G. Bernthal, H. M.
Dean, J. P. Frazee, Jr., and W. A. Pogue. The Executive Committee did not meet
in 1995.
3
<PAGE>
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 accountants, (iii) reviewing the independence of the
independent accountants, (iv) reviewing the scope and nature of the non-audit
related services performed by the independent accountants, 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 accountants. The independent accountants 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 J. P. Frazee, Jr. (Chairman), J. L.
Ballesteros, H. Corless,
F. A. Krehbiel and J. J. Shea. In 1995 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, and
Performance Share Plan. Present members are W. A. Pogue (Chairman), H. G.
Bernthal, H. M. Dean and A. L. Kelly. In 1995 this Committee met two times.
The Board Affairs and Nominating Committee. The Board Affairs and Nominating
Committee, composed of four 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, E. J. Mooney and W. A. Pogue. The Board Affairs and Nominating
Committee met two times in 1995.
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.
4
<PAGE>
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 exceeding ten, and the
denominator of which is ten, such annual payment to continue for the lifetime
of the retired director. In 1993 the Board adopted a new retirement policy
effective for all directors elected to the Board for the first time after
October 1993. Directors, who were elected to the Board prior to that date, 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 automatic grants of options to purchase 4,000 shares of the
Company's common stock to each non-employee director of the Company on the
date of each Annual Meeting to May 1, 2000. The option price is the fair
market value of the Company's common stock on the date of grant. Payment for
the exercise of options may be made in cash or in shares of Company common
stock that have been held by the director for at least six months. 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.
Each option extends 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.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
for 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
ANNUAL COMPENSATION COMPENSATION
---------------------------- ------------------
AWARDS(2) PAYOUTS
OTHER ---------- ------- ALL
ANNUAL SHARES OTHER
COMPEN- UNDERLYING LTIP COMPEN-
NAME AND PRINCIPAL SALARY BONUS SATION OPTIONS PAYOUTS SATION
POSITION YEAR ($) ($)(1) ($) (#) ($) ($)(3)
- ------------------ ---- ------- ------- ------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
E. J. Mooney, Chairman
of the Board, 1995 490,000 298,410 9,662 123,000 0 35,810
President & Chief 1994 462,372 211,334 7,131 50,000 0 30,396
Executive Officer 1993 390,000 176,982 7,969 0 230,693 27,508
M. B. Harp 1995 297,000 149,064 3,068 58,500 0 21,705
Executive Vice
President, 1994 280,000 108,500 3,067 0 0 18,774
Operations 1993 265,000 106,344 1,459 0 108,316 18,692
W. S. Weeber 1995 292,000 145,825 3,068 57,600 0 21,340
Executive Vice
President, 1994 280,000 110,964 3,067 0 0 18,774
Operations Staff 1993 265,000 106,344 1,459 0 113,849 18,692
P. Dabringhausen 1995 283,088 95,581 3,068 42,600 0 17,114
Group Vice President,
President 1994 270,303 72,150 3,067 0 0 14,396
Process Chemicals
Division 1993 253,525 68,695 1,459 0 63,746 9,794
J. D. Tinsley 1995 233,000 92,850 3,068 41,700 0 17,028
Group Vice President,
President 1994 227,019 71,008 3,067 0 0 15,019
Water & Waste Treatment
Division 1993 212,000 68,688 1,459 0 91,262 13,692
</TABLE>
- ----------
(1) Amount represents Management Incentive Plan awards earned for stated year.
(2) Dividends are paid on restricted stock share units. Based on the closing
stock price of $30.1250 on December 29, 1995, the restricted stock
holdings and their market value at the end of 1995 for each named
executive officer are: E. J. Mooney--6,650 shares, $200,331; M. B. Harp--
3,550 shares, $106,944; W. S. Weeber--3,800 shares, $114,475; P.
Dabringhausen--1,630 shares, $49,104; J. D. Tinsley--1,560 shares,
$46,995.
(3) Allocations under the Nalco Employee Stock Ownership Plan, (ESOP),
including comparable amounts under Excess ERISA Agreements.
6
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information related to options granted to the
named executive officers during 1995.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS(1) FOR OPTION TERM($)(2)
- --------------------------------------------------------- ------------------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO EXERCISE
UNDERLYING EMPLOYEES OR BASE
OPTIONS IN FISCAL PRICE EXPIRATION
NAME GRANTED YEAR ($/SH) DATE 0% 5% 10%
- -------------- ---------- ---------- -------- ---------- --- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
E. J. Mooney 123,000 4.45 34.4375 2/16/05 0 2,668 ,562 6,734,942
M. B. Harp 58,500 2.12 34.4375 2/16/05 0 1,269,194 3,203,204
W. S. Weeber 57,600 2.08 34.4375 2/16/05 0 1,249,668 3,153,924
P.
Dabringhausen 42,600 1.54 34.4375 2/16/05 0 924,234 2,332,590
J. D. Tinsley 41,700 1.51 34.4375 2/16/05 0 904,708 2,283,310
</TABLE>
- ----------
(1) The grants listed for each optionee vest in thirds over a three year
period on March 1, 1996, 1997 and 1998. All options become exercisable
immediately upon termination due to death, disability or in the event of a
change in control.
(2) The dollar amounts under these columns are the difference between the
option exercise price and market prices at the end of the option term
assuming annual rates of stock price appreciation of 0%, 5% and 10%. The
Company did not use an alternative formula for a grant date valuation, as
the Company is not aware of any formula which will determine with
reasonable accuracy a present value based on future unknown or volatile
factors. At 5% or 10%, shareholder value would have gone up $ 1.47 billion
or $3.71 billion, respectively.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
The following table provides information related to options exercised by the
named executive officers during 1995 and the number and value of options held
at year-end.
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE OPTIONS AT YEAR-END (#) AT YEAR-END ($)(1)
EXERCISE REALIZED ------------------------- -------------------------
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- -------------- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
E. J. Mooney 0 0 161,000/123,000 584,579/0
M. B. Harp 0 0 28,000/58,500 0/0
W. S. Weeber 9,200 144,037 52,000/57,600 239,249/0
P.
Dabringhausen 6,000 86,812 11,300/42,600 0/0
J. D. Tinsley 0 0 18,000/41,700 0/0
</TABLE>
- ----------
(1) Valued on the difference between $30.1250 (the closing price on December
29, 1995) and the exercise price of the option.
7
<PAGE>
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
The following table covers long term-incentive contingent share units
assigned to the named executive officers during 1995.
<TABLE>
<CAPTION>
PERFORMANCE
OR OTHER
PERIOD ESTIMATED FUTURE PAYOUTS
NUMBER OF UNTIL UNDER NON-STOCK PRICE BASED PLANS
SHARES, UNITS OR MATURATION ------------------------------------
NAME OTHER RIGHTS (#) OR PAYOUT THRESHOLD (#) TARGET (#) MAXIMUM (#)
- -------------- ---------------- ----------- ------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
E. J. Mooney 8,743 1995/96/97 5,246 8,743 10,492
M. B. Harp 4,416 1995/96/97 2,650 4,416 5,299
W. S. Weeber 4,342 1995/96/97 2,605 4,342 5,210
P.
Dabringhausen 2,826 1995/96/97 1,696 2,826 3,391
J. D. Tinsley 2,772 1995/96/97 1,663 2,772 3,326
</TABLE>
Under the Performance Share Plan ("PSP"), a 6%, 10% and 12% compounded
increase in fully diluted net earnings per share of Company Stock 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 shall be distributed to a
participant or his or her beneficiary.
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>
FINAL YEARS OF SERVICE
AVERAGE --------------------------------------------
EARNINGS 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
</TABLE>
The credited years of participation at December 31, 1995 for each individual
named in the cash compensation table are: E. J. Mooney, 27; M. B. Harp, 24; W.
S. Weeber, 29; P. Dabringhausen, 10; J. D. Tinsley, 31. The credited earnings
are approximately the same as the salary and bonus set forth in the summary
compensation table.
8
<PAGE>
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
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.
9
<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
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 groups of
manufacturing and service companies including representation from the
chemical industry. The latest survey consists of companies with average
sales of approximately $1.5 billion and total market value of
approximately $1.7 billion based on 1994 numbers. This compares with the
Company's 1994 sales, including Absorbent Chemicals, of $1.3 billion and
market capitalization of $2.3 billion. Various size and performance
measures, including return on equity, assets, sales and capital, are
used to compare survey companies to the Company and to judge the
appropriateness of compensation comparisons. However, 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 primarily considered in setting salaries. Base salaries
for 1995 were set at the end of 1994. In 1994, earnings from continuing
operations, excluding a 1994 pre-tax charge of $68.2 million ($54.0
million after tax) for formation and consolidation expense, decreased by
1%, while corresponding earnings per share increased by 1%. Salary
increases for Executive Officers averaged 4.5%.
10
<PAGE>
2. The Management Incentive Plan ("MIP") is an annual incentive plan that
provides cash compensation based on the achievement of goals set by the
Committee for the Company and the individuals that are approved by the
Board of Directors for participation. For 1995, there were corporate
performance goals for increases in sales and earnings and for strategic
management performance. The individual management performance goals were
set for each executive, depending on his or her particular
responsibilities and strategic objectives for the year. For the MIP,
sales, earnings and individual goals are weighted at 37.5%, 37.5% and
25%, respectively. For 1995, Executive Officers earned about 100% of the
portion of their target award related to sales and earnings.
3. 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 net earnings per share
during a three-year performance period. This plan provides for a
threshold and maximum amount below and above the respective target
amounts. For the three year performance period ended in December, 1995,
earnings goals were not met, and no contingent performance shares were
earned for this period. The Committee granted awards for the 1995-96-97
PSP cycle. A 6%, 10% and 12% compounded increase in fully diluted
earnings per share is required to earn threshold, target and maximum
payouts, respectively, for this cycle. The size of initial awards to
Executive Officers and the CEO is determined by the Committee.
4. Stock options are awarded from time to time. The Committee utilizes an
outside consulting firm to provide comparative data upon which the
Committee bases 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
depends on the Company's common stock price at the time of option
exercise. Grants with a three year proportionate vesting period were
made to all Executive Officers in 1995.
The Committee tries to focus the executive compensation program to
strengthen the overall performance of the Company by integrating short-term
and long-term performance goals. PSP long-term objective goals are based 100%
on earnings performance. Once awards are made under an annual or long-term
incentive plan, the Committee has no discretion to adjust them.
The Committee believes that rewarding executives through stock ownership
leads to maximization of shareholder value over the long term. The Company's
ongoing stock option program is intended to link the interests of executives
and managers with those of the Company's shareholders and direct their efforts
toward enhancing the Company's 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. E. J. Mooney, Nalco's Chief
Executive Officer.
In 1994, without impact by the Nalco/Exxon joint venture, Nalco sales were
up 2% and earnings per share, excluding the joint venture formation charge,
were up 1%. Because of the strength of Mr. Mooney's performance, the Committee
approved a 4.3% increase in his base salary effective January 1, 1995.
11
<PAGE>
The 1995 Management Incentive Plan award was based primarily on achievement
of corporate performance goals for sales and earnings and Mr. Mooney's
performance as determined by the Committee. Mr. Mooney met his individual
goals for 1995. He earned 100% of the portion of his target award related to
sales and earnings. As a result, the MIP award paid to Mr. Mooney was at the
target amount. The total MIP payment Mr. Mooney received for 1995 was
$298,410.
Potentially, 60% to 70% of Mr. Mooney's annual compensation can come from
performance related compensation plans such as the MIP and PSP. Because the
1995 MIP payout was at the target level, but no performance shares were earned
under the PSP, 38% of Mr. Mooney's cash compensation was based on performance
related plans during 1995.
Mr. Mooney received a stock option grant for 123,000 shares in February,
1995 at an exercise price of $34.4375 per share. This grant vests in equal
portions in 1996, 1997 and 1998. The exercise price was set at the fair market
value of the Company's common stock on the date of grant. The amount of Mr.
Mooney's stock option grant is based on the recommendations of an independent
compensation consulting firm in order to provide a competitive level of stock
options. No adjustments are permitted for grants except for the Committee's
right to reduce any unvested portions of a grant, should Mr. Mooney's
performance decline, in the opinion of the Committee.
The Committee continues to monitor qualifying compensation paid to its
Executive Officers for deductibility under the $1 million deduction limit for
executive salaries. Included compensation did not exceed this limit in 1995
and is not expected to do so in 1996.
The Executive Compensation Committee
W. A. Pogue H. G. Bernthal
H. M. Dean A. L. Kelly
12
<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, 1990 in Nalco stock, the S&P
500 index and the Specialty Chemical Value Line Index.
[GRAPH APPEARS HERE]
Nalco S&P 500 Specialty Chemical
----------------------------------------------
1990 $100.00 $100.00 $100.00
1991 151.34 130.47 147.62
1992 128.98 140.41 166.78
1993 143.14 154.56 188.95
1994 131.49 156.60 186.62
1995 121.70 215.45 230.31
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.
13
<PAGE>
PROPOSAL 2.
APPROVAL OF INDEPENDENT ACCOUNTANTS
Price Waterhouse was selected by the Board of Directors upon the
recommendation of the Audit Committee to serve as independent accountants for
the Company and its consolidated subsidiaries for 1996, 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 accountants, the Audit Committee and the Board
of Directors will reconsider the selection.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2.
PROPOSAL 3.
ADOPTION OF EMPLOYEE STOCK COMPENSATION PLAN
On February 16, 1996, the Board of Directors approved the Employee Stock
Compensation Plan (the "Plan") and authorized its submission to the Company's
stockholders for approval at the 1996 Annual Meeting. Therefore, the
stockholders are being asked to approve the Plan and the Board recommends its
approval. The Board of Directors and the management of the Company believe
that the Plan will help attract and retain competitively superior employees,
provide long term incentive and encourage stock ownership by employees of the
Company and its subsidiaries, so that such employees have a proprietary
interest in the Company's success. The Plan provides for the granting of Stock
Options for Company Common Stock and Share Units that will be converted into
Company Common Stock upon vesting.
A summary of the essential features of the Plan is provided below. All
defined terms used below have the meaning set forth in the Plan, unless
otherwise indicated. The text of the Plan is set forth in Exhibit A annexed to
this Proxy Statement. If approved, the 1996 Plan will be effective as of
January 1, 1996 and will terminate on December 31, 2005.
PURPOSE AND ELIGIBILITY
The purpose of the Plan is to encourage ownership of stock of the Company by
employees of the Company and its subsidiaries and to provide additional long
term incentive for them to continue their association with the Company and to
promote the success of the business by using their maximum efforts in its
behalf. Approximately 330 employees have been selected to receive Stock
Options under the Plan in 1996 contingent on approval of the Plan by the
shareholders. There is no present intention to grant Share Units to employees
in 1996. It is not possible to state the names or number of all employees who
may be eligible to receive future grants under the Plan as this is determined
by the committee administering the Plan. However, approximately 650 present
employees (including the executive officers) have received grants under the
1990 Stock Option Plan, and it is likely that some of these individuals and
others would be eligible under the Plan.
SHARES SUBJECT TO PLAN
The aggregate number of shares of the Company's Common Stock that may be
granted under the Plan is 8,000,000 shares. A grant to an employee is limited
to a maximum of 200,000 shares pursuant to a Stock
14
<PAGE>
Option and 50,000 Share Units during a year, subject to any adjustments upon
changes in capitalization. Shares subject to grants that are canceled or
terminated will again become available for use under the Plan. In the event
there is any change in capitalization of the Company, such as stock splits,
stock dividends or spin-off, the number of shares reserved for use under the
Plan, and the number of Stock Options or Share Units covered by outstanding
grants shall be appropriately adjusted.
ADMINISTRATION
The Plan shall be administered by the Executive Compensation Committee (the
"Committee"), which shall consist of two or more disinterested directors
appointed by the Board. A member of the Board shall be deemed to be
disinterested if he or she satisfies such requirements as the Securities and
Exchange Commission may establish for disinterested administrators acting
under plans intended to qualify for exemption under Rule 16b-3 of the
Securities Exchange Act of 1934, as amended, (the "Exchange Act") and
satisfies Section 162(m) of the Internal Revenue Code of 1986, as amended,
(the "Code"). The Committee is authorized to interpret the terms and
provisions of the Plan and to adopt rules and regulations for the
administration of the Plan. To the extent permitted by law, the Committee may
delegate its powers.
STOCK OPTION GRANTS AND EXERCISES
The Committee may grant non-qualified Stock Options or incentive Stock
Options subject to Section 422(b) of the Code. Options will be granted for
such terms as the Committee shall determine, but not longer than ten years
from the date of grant. The option price will be the fair market value of the
Company's Common Stock on the date of grant, or par value if greater. The
option exercise price can be paid in cash or in shares of Company Common Stock
that have been held by the employee for at least six months. The reported
closing price for the Company's Common Stock on March 11, 1996 was $30.50 per
share.
TERMINATION OF STOCK OPTION GRANTS
Options terminate upon termination of employment, except that an optionee
may exercise the option for five years following retirement under the
Company's retirement program or termination of employment for total and
permanent disability. If the employee dies while employed or within five years
of retirement, 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. In
all instances, however, the option must be exercised during the term
established at the time of grant.
SHARE UNITS
The Committee will select the employees to be granted Share Units, determine
the number of such units to be granted, establish the date of grant, and
determine the time and conditions under which the Share Units would become
vested. The Company shall record in a separate account set up for each grantee
the number of Share Units awarded. Whenever the Company pays a cash dividend
or makes any cash distribution with respect to issued and outstanding Company
Common Stock, it will promptly pay to each grantee of Share Units the fair
value of such dividends or distributions in respect to the number of Share
Units held on a one-to-one basis. Whenever the Company pays a Common Stock
Dividend or makes a Common Stock distribution with respect to issued and
outstanding Company Common Stock that does not result in an adjustment of
Share Units, it will promptly pay to each grantee a number of Dividend Units
as shall be allocable to the Share
15
<PAGE>
Units held on a one-to-one basis. If any dividends on Common Stock are payable
in a form other than cash, the applicable Dividend Units for the Qualified
Share Units shall not be currently distributable to the grantee, but shall be
reinvested in additional Share Units that are credited to the grantee's
account, subject to the vesting restrictions applicable to that account.
VESTING OF SHARE UNITS
Awards of Common Stock will be made to Share Unit grantees within 45 days of
vesting. Vesting shall only occur if on the date of vesting the grantee has
continuously been an employee of the Company or its subsidiaries since the
date of award. The Committee, subject to the approval of the Board of
Directors, may cancel in whole or part any grant of Share Units not yet vested
if it determines the grantee is not performing satisfactorily. In the event of
death, total and permanent disability, or retirement of a grantee before
vesting, all Share Units shall automatically become vested.
QUALIFIED SHARE UNITS
The Committee, at its discretion, may designate Share Units being granted to
any grantee as "Qualified Share Units" intended to be "performance-based
compensation" as that term is used in section 162 (m) of the Code. No grantee
may receive both Share Units and Qualified Share Units in the same year.
Performance targets applicable to a grant of Qualified Share Units shall be
established by the Committee. Such performance targets shall be objective and
established in writing by the Committee not later than 90 days after the
beginning of the performance period (but in no event after 25% of the
performance period has elapsed) and while the outcome as to the performance
targets is substantially uncertain. The performance targets established by the
Committee shall be based on one or more of the following specific performance
goals: quality, customer satisfaction, profitability, return on sales, return
on equity, return on capital, productivity, net margin as a percentage of
revenue, or debt to capitalization. These goals may be in lieu of or in
addition to vesting requirements that are based on continued employment.
With certain exceptions described below, Qualified Share Units shall not
become vested unless and until the Committee has determined that the
applicable performance target(s) have been attained. To the extent the
Committee exercises discretion in making such a determination, such exercise
may not result in an increase in the amount of the benefit that would
otherwise be provided to the grantee. Should the grantee's employment
terminate because of death or total and permanent disability prior to the end
of a performance period, the grantee's Qualified Share Units shall become
vested without regard to whether the Qualified Share Units would be
"performance-based compensation." If a grantee's employment terminates because
of retirement prior to the end of a performance period, the grantee's
Qualified Share Units shall not vest until the end of the performance period
and then only to the extent that vesting would have occurred if the grantee's
retirement had occurred immediately after the end of the performance period.
MODIFICATION AND TERMINATION OF PLAN
The Plan may be terminated at any time or may be modified or amended by the
Board of Directors except that no change shall be made that would disqualify
the Plan from the exemption provided by Rule 16b-3 under the Exchange Act or
that would disqualify the options as "performance-based compensation" under
Section 162(m) of the Code.
TAXES
The grant of a non-qualified Stock Option will not result in taxable income
to the employee. The employee will realize ordinary income at the time of
exercise in an amount equal to the excess of the fair
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<PAGE>
market value of the shares acquired at the time income is realized over the
exercise price for those shares, and the Company will be entitled to a
corresponding deduction. The Committee has no present intention to grant
incentive Stock Options and has not done so for the last ten years. A grant of
Share Units will not result in any taxable income. However, vesting of the
Share Units and receipt of Common Stock by an employee will result in taxable
compensation. Federal income tax laws are complex and subject to change and
interpretation; their applications may vary in individual cases.
CHANGE OF CONTROL
The Committee shall have the right, in its sole discretion, to include with
respect to any grant, provisions accelerating any vesting of such grant upon a
Change of Control as defined under the heading "Executive Compensation--Change
of Control," subject to securities law restrictions. Such acceleration rights
may be included as part of the agreement relating to such grants or may be
included at any time thereafter.
TRANSFERABILITY
Neither Stock Options nor Share Units are transferable other than by the
laws of descent and distribution or by will. Stock Options may be exercised
during his or her lifetime only by the employee to whom they are granted.
NEW PLAN BENEFITS
The employees of the Company and its subsidiaries who will receive grants
under the Plan and the size of the grants are generally to be determined by
the Committee in its discretion. Therefore, it is not possible either to
predict the benefits or amounts that will be received by or allocated to
particular employees under the Plan or that would have been received or
allocated to such persons for 1995 if the Plan had been in effect.
The following table sets forth awards that have been made under the Plan to
non-executive employees subject to stockholder approval. No awards are
expected to be made to executive officers under the Plan during 1996.
EMPLOYEE STOCK COMPENSATION PLAN
<TABLE>
<CAPTION>
NUMBER OF
NAME OPTIONS GRANTED PRICE/SHARE
---- --------------- -----------
<S> <C> <C>
Non-Executive Officers Employee Group......... 1,113,600 $31.6875
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE EMPLOYEE STOCK
COMPENSATION PLAN.
PROPOSAL 4.
ADOPTION OF AMENDED PERFORMANCE SHARE PLAN
On February 16, 1996, the Board of Directors approved amendment of the
Company's Performance Share Plan (the "Plan") and submission to the Company's
shareholders both for approval of the amendment and reapproval of the Plan as
required by Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"). The Plan was originally approved by the shareholders in 1992 and
was effective as of January 1, 1992, terminating on December 31, 2001. The
Board believes that this amended Plan is of benefit to the Company and its
subsidiaries and recommends its adoption. This Plan provides for assignment of
contingent performance shares to key management employees of the Company and
its subsidiaries which, if earned, will result in awards of cash and Company
Common Stock.
17
<PAGE>
A summary of the essential features of the Plan is provided below. All
defined terms used below have the meaning set forth in the Plan, unless
otherwise indicated. The text of the Plan is set forth in Exhibit B annexed to
this Proxy Statement. The amended Plan will be effective as of January 1, 1996
if approved by the shareholders and terminates on December 31, 2001.
PURPOSE AND ELIGIBILITY
The purpose of the Plan is to provide incentive for the achievement of long
term financial results, to tie personal financial opportunities to long-term
corporate financial performance and to reinforce management's identification
with shareholder interests. Approximately 55 officers and other key management
employees have been assigned contingent performance shares under the Plan for
the 1996/97/98 performance period. It is not possible to state the names or
number of all employees who may be eligible to receive such contingent
performance shares in the future as this is determined by the Committee
administering the Plan. However, it is likely that many of the present
participants would continue to be eligible under the Plan.
NEW PLAN BENEFITS
The following table states the threshold, target and maximum number of
contingent performance shares which may be earned pursuant to assignments for
the 1996/97/98 performance period. There is no determinable dollar value
attached to these performance shares unless awards are earned. No awards have
been earned under the Plan as of the end of 1995.
PERFORMANCE SHARE PLAN
<TABLE>
<CAPTION>
NUMBER OF CONTINGENT
PERFORMANCE SHARES
------------------------
NAME THRESHOLD TARGET MAXIMUM
---- --------- ------ -------
<S> <C> <C> <C>
E. J. Mooney..................................... 6,146 10,243 12,292
M. B. Harp....................................... 3,134 5,223 6,268
W. S. Weeber..................................... 3,035 5,058 6,070
P. Dabringhausen................................. 2,015 3,358 4,030
J. D. Tinsley.................................... 1,928 3,213 3,856
Executive Group.................................. 19,532 32,553 39,064
Non-Executive Officer Employee Group............. 42,383 70,638 84,766
</TABLE>
SHARES SUBJECT TO PLAN AND ADJUSTMENTS
The aggregate number of shares of the Company's Common Stock available under
the Plan is 1,000,000 shares subject to adjustment. Adjustments will be made
in the number of contingent performance shares held by participants and the
maximum number of shares of Common Stock which may be used to pay performance
awards in the event of a stock dividend or split, recapitalization, merger,
consolidation, or exchange of shares.
ADMINISTRATION
The Plan will be administered by a Committee of not less than three "outside
directors" as that term is defined in the Code. The Committee is authorized by
the Plan to assign contingent performance shares annually to designated
officers and other key executives and has complete discretion as to the number
of contingent performance shares assigned, subject to the above limitations.
The Committee has full authority to
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<PAGE>
execute its responsibilities under the Plan and all its determinations,
rulings or interpretations are final and binding. The Committee may make such
rules and regulations concerning administration of the Plan as it deems
necessary or appropriate.
ASSIGNMENT OF CONTINGENT PERFORMANCE SHARES
The number of contingent performance shares that may be assigned to each
participant by the Committee may not exceed a participant's base salary as of
the Anniversary Date divided by the value of one share of Common Stock. Stock
valuation for this purpose shall equal the average of the New York Stock
Exchange Composite Transactions daily closing prices for such stock during the
last five days during which there were transactions immediately preceding the
Anniversary Date as of which shares are assigned for a performance period.
PERFORMANCE GOALS
Each year the Committee shall establish an Earnings Performance Goal for the
performance period applicable to the contingent performance shares assigned.
Achievement of this goal will earn the participants 100% of the contingent
performance shares assigned them. The Committee may also establish a schedule
that permits participants to earn less than or greater than 100% of the
contingent performance shares assigned, if the Company's financial performance
is less than or greater than the Earnings Performance Goal. No participant
will earn an award for any performance period for which the Earnings
Performance of the Company is less than the minimum threshold compounded
annual growth rate as set by the Committee for the applicable performance
period. The maximum number of performance shares which may be earned by a
participant is 120% of the contingent performance shares initially assigned.
After the close of a performance period, the Committee will examine the
Company's Earnings Performance and shall determine the number of performance
shares earned by the participants according to the criteria described above.
The Committee may adjust the Earnings Performance or Goal in order to reflect
any changes associated with the purchase or sale of assets or stock or any
extraordinary occurrence. The value of a performance award earned by a
participant is equal to the value of one share of Common Stock. The value of a
share of Common Stock for the purpose of computing awards for a performance
period is equal to the average of the New York Stock Exchange Composite
Transactions daily closing prices for such stock during the last five days of
the performance period during which there were transactions.
PERFORMANCE AWARDS
Performance awards shall be paid one-half in cash and one-half in Company
Common Stock to the nearest whole share, except that any payments made after
1,000,000 shares have been issued shall be made only in cash and only with
respect to contingent performance shares already assigned. The cash portion of
an award shall be paid within 60 days after determination of the award;
however, the right to receive shares of Common Stock shall not vest to a
participant until three years after the end of a performance period. The
participants will receive a quarterly amount equal to dividends that would
have been paid if the unvested shares were actual vested shares of Common
Stock.
TERMINATION OF EMPLOYMENT
A participant whose employment terminates because of death, disability or
retirement with at least one calendar year of the performance period completed
shall receive a pro-rated award based on estimated results to the date
employment terminates. Also, in the event of termination of a participant's
employment due to death, disability, retirement or change in control, all
unvested Common Stock shall vest immediately and shall
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<PAGE>
be distributed as soon as possible. A participant whose employment terminates
for any other reason shall forfeit any outstanding contingent performance
shares, any performance awards not yet earned and any unvested Common Stock.
QUALIFIED PERFORMANCE SHARES
The Plan has been amended by adding Section 15 to permit the Committee, at
its discretion, to designate the performance shares being assigned to any
Participant under the Plan as "Qualified Performance Shares." Qualified
Performance Shares are intended to be "performance-based compensation" as that
term is used in Section 162(m) of the Code. A participant may not be assigned
Qualified Performance Shares and other performance shares in the same year.
Goals established for the performance period shall be objective and
established in writing by the Committee not later than 90 days after the
beginning of the performance period and while the outcome as to the
performance goals is substantially uncertain.
A participant holding Qualified Performance Shares shall not receive a
settlement of the shares until the Committee has determined that the
applicable performance goals have been attained. Any discretion exercised by
the Committee in making this determination may not result in an increase in
the amount of the award. If a participant's employment terminates because of
death, disability, or a change in control, the participant's Qualified
Performance Shares shall become vested without regard to whether they would be
"performance-based compensation" under Code Section 162(m). However, if a
participant retires prior to the end of a performance period, any pro-rata
settlement of Qualified Performance Shares shall not be made until the end of
the performance period and shall not exceed the settlement that the
participant would have received if retirement had occurred immediately after
the end of the performance period.
AMENDMENT AND TERMINATION OF PLAN
The Board of Directors has the right to amend or terminate the Plan except
in any way that would change the exempt status of the performance shares under
Section 16 of the Securities and Exchange Act of 1934 or Section 162 (m) of
the Code.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PERFORMANCE SHARE PLAN AS
AMENDED.
PROPOSAL 5.
ADOPTION OF MANAGEMENT INCENTIVE PLAN
The Board of Directors approved the Management Incentive Plan of Nalco
Chemical Company (the "MIP") as amended on February 15, 1996, and authorized
its submission to the Company's shareholders for approval at the 1996 Annual
Meeting. The Board believes that the MIP is of benefit to the Company and
recommends its approval. The MIP provides for awards to key management
employees of the Company. The amended MIP is intended to permit certain awards
to qualify as "performance-based compensation" under Section 162(m) of the
Internal Revenue Code, as amended (the "Code").
A summary of the essential features of the MIP is provided below. All
defined terms used below have the meaning set forth in the MIP, unless
otherwise indicated. The text of the MIP is set forth in Exhibit C annexed to
this Proxy Statement.
PURPOSE AND ELIGIBILITY
The purpose of the MIP is to assure that the key managers of the Company
have an opportunity to earn competitive levels of total direct compensation,
in accordance with the total compensation policies of the Company, and to
reward the key managers of the Company for their contributions to its growth
and
20
<PAGE>
profitability. It is not possible to state the names or number of all
employees who may be eligible to receive such awards in the future as this is
determined by the Committee administering the MIP. However, approximately 329
employees have received awards under the MIP, and it is likely that some of
these individuals would also be eligible in future years. The following table
details the MIP awards that were paid out for the 1995 performance period.
NEW PLAN BENEFITS
MANAGEMENT INCENTIVE PLAN
<TABLE>
<CAPTION>
AMOUNT OF
NAME AWARD ($)
---- ---------
<S> <C>
E. J. Mooney.................................................... 298,410
M. B. Harp...................................................... 149,064
W. S. Weeber.................................................... 145,825
P. Dabringhausen................................................ 95,581
J. D. Tinsley................................................... 92,850
Executive Group................................................. 938,386
Non-Executive Officer Employee Group............................ 3,940,146
</TABLE>
ADMINISTRATION
The MIP will be administered in accordance with administrative rules
recommended by the Chief Executive Officer as adopted and/or modified from
time to time by the Executive Compensation Committee (the "Committee") of the
Company's Board of Directors. The rules will contain the specific terms of
eligibility, the basis for individual awards, maximum award levels,
performance measurement and calculation of award payments applicable to the
MIP in each year of operation. Any conflicts in interpretation of the MIP or
the administrative rules will be resolved by the Committee. The Committee
consists of two or more outside Directors, as such term is defined under
Section 162 (m) of the Code.
AWARDS
The Committee will designate annually, upon the recommendation of the CEO, a
select group of management employees to participate in the MIP for one year.
Employees who participate in other Company-sponsored bonus or sales incentive
plans, with the exception of the Employee Stock Ownership Plan, the
Performance Share Plan and the Employee Stock Compensation Plan will not be
eligible to participate in the MIP.
The Committee will assign each participant a target award as a percentage of
base pay (as defined in the administrative rules) earned by a participant
during an applicable calendar year. The award actually earned will depend on
the attainment of performance goals set by the Committee. Such goals may
include the performance of the Company, its operating groups, divisions and
subsidiaries and/or a particular participant. Amounts payable under the MIP
will be paid in cash within 90 days of the end of the applicable fiscal year
of the Company. No award may exceed 115% of the base pay earned by the
participant during the applicable fiscal year. In the case of Qualified
Management Incentive Awards (described below), the determination of base pay
will be made using the rate in effect at the beginning of the fiscal year.
Total awards under the Plan may not exceed 4% of the Company's earnings before
income tax.
SPECIAL AWARDS
The Committee may reserve a fund for special awards under the MIP. These
awards may be granted to any employee of the Company, whether or not they are
otherwise eligible for other MIP payments, in recognition of a unique
contribution to the Company beyond the employee's usual and customary
21
<PAGE>
responsibilities. Special awards may be paid at any time upon recommendation
of the CEO and approval of the Committee.
QUALIFIED MANAGEMENT INCENTIVE AWARDS
The Committee may, in its discretion, designate an award to be made to an
individual under the Plan as a "Qualified Management Incentive Award."
Qualified Management Incentive Awards are intended to be "performance-based
compensation" as that term is used in Section 162(m) of the Code.
Performance goals established for Qualified Management Incentive Awards
shall be objective and established in writing by the Committee not later than
90 days after the beginning of the performance period while the outcome of the
performance goals is substantially uncertain. Performance targets with respect
to corporate performance, operating group, subgroup performance, division
performance, and/or international Company performance, shall be based on one
or more of the specific performance goals of sales and net earnings. No
participant shall receive a settlement of a Qualified Management Incentive
Award until the Committee has determined that the applicable performance
goal(s) have been attained. Any exercise of discretion by the Committee in
making this determination shall not result in an increase in the amount of the
target award percentage. In the event of termination of a participant's
employment because of death or disability, the participant's Qualified
Management Incentive Award shall become vested in accordance with the Plan
without regard to whether the Qualified Management Incentive Award would be
"performance-based compensation," but in the event of retirement prior to the
end of a performance period, any pro-rata settlement shall not be made until
the end of a performance period and shall not exceed the settlement that would
have been received if the participant had retired immediately after the end of
the performance period.
DEFERRAL AND FEDERAL INCOME TAXES
An eligible employee has the right to defer receipt of any U.S. paid portion
of the award in accordance with administrative rules for a particular year.
When paid out, an award will be taxed under Federal Income Tax regulations as
compensation to the participant.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE MANAGEMENT INCENTIVE
PLAN.
PROPOSAL 6.
ADOPTION OF NON-EMPLOYEE DIRECTORS STOCK COMPENSATION PLAN
On December 21, 1995, the Board of Directors approved the Non-employee
Directors Stock Compensation Plan (the "Plan") and authorized its submission
to the Company's stockholders for adoption at the 1996 Annual Meeting.
Therefore, the stockholders are being asked to approve the Plan at the
recommendation of the Board.
A summary of the essential features of the Plan is provided below. All
defined terms used below have the meaning set forth in the Plan, unless
otherwise indicated. The text of the Plan is set forth in Exhibit D annexed to
this Proxy Statement.
PURPOSE AND AWARDS
The purpose of the Plan is to increase the stock ownership of the directors
in the Company as an incentive to superior performance and to more closely
align their interests with those of the Company's other
22
<PAGE>
shareholders. There are presently nine non-employee directors who would be
eligible to participate in the Plan. If the Plan is approved by the
shareholders, each year it is in effect a director who is a director of the
Company after the Annual Shareholders Meeting will receive 200 shares of
Company Common Stock. No right under the Plan is transferable except by will
or the laws of descent and distribution.
NEW PLAN BENEFITS
The following table indicates the number of shares of Common Stock that will
be received under the New Plan during 1996 if it is approved by the
stockholders.
NON-EMPLOYEE DIRECTORS STOCK COMPENSATION PLAN
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
Non-Employee Director Group:
Stock Compensation............................................ 1,800
</TABLE>
DEFERRAL
A director may elect by notice to the Company to defer receipt of the shares
of stock until leaving the Company's Board. Upon election to defer, an account
shall be set up on the Company's books in the director's name. This account
shall contain one Share Unit for each share of Common Stock deferred. Whenever
the Company declares a dividend on its Common Stock, the Company shall pay to
the director an amount equal to the amount of the dividend that he would have
received had each Share Unit been a share of Common Stock. The amount of cash
dividends shall be converted into Share Units based on the closing price on
the New York Stock Exchange Composite Price Transactions for the date approved
by the Board for payment of dividends on the Company's Common Stock. Stock
dividends shall be converted on the basis of one share of Common Stock for
each Share Unit. Upon a director's leaving the Board, the Company shall within
a reasonable time period issue to the director shares of Common Stock equal to
the number of Share Units in his or her account.
SHARES SUBJECT TO PLAN AND ADJUSTMENTS
The aggregate number of shares that can be granted under the Plan is 50,000
shares. In the event of any recapitalization, stock split, stock dividend or
merger, the number of shares subject to the Plan and the number and kind of
shares of Common Stock to be awarded thereunder and any Share Units in
accounts of directors shall be equitably adjusted to reflect the occurrence of
such event and preserve the value of future awards.
AMENDMENTS AND TERMINATION
The Board of Directors may terminate, modify or amend this Plan, except
where such modifications or amendments would affect the status of the Plan or
the directors under Section 16 of the Securities and Exchange Act of 1934, as
amended. However, this Plan may not be amended more often than once every six
months, other than in compliance with the rules or regulations issued
thereunder.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NON-EMPLOYEE DIRECTORS
STOCK COMPENSATION PLAN.
23
<PAGE>
SHARES OUTSTANDING AND VOTING RIGHTS
Only stockholders of record at the close of business on February 20, 1996
are entitled to vote at the meeting. On that date, the Company had outstanding
67,277,099 shares of common stock, each of which is entitled to one vote, and
399,258 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 and broker non-votes have the effect of
votes against proposals presented to shareholders. Broker non-votes are shares
held by a broker or nominee in street name and not authorized to vote on a
matter.
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 and
by all present directors and executive officers as a group (in each instance,
amounting to less than 1% of the outstanding class) as of February 20, 1996
(as of December 31, 1995, as to shares held in the Profit Sharing, Investment
and Pay Deferral Plan).
<TABLE>
<CAPTION>
ESOP
COMMON PREFERRED
NAME SHARES SHARES
---- ------- ---------
<S> <C> <C>
J. L. Ballesteros....................................... 4,000 --
H. G. Bernthal.......................................... 24,400 --
H. Corless.............................................. 26,000 --
P. Dabringhausen........................................ 27,817 108
H. M. Dean.............................................. 25,000 --
J. P. Frazee, Jr........................................ 26,634 --
M. B. Harp.............................................. 83,410 163
A. L. Kelly............................................. 19,099 --
F. A. Krehbiel.......................................... 28,000 --
E. J. Mooney............................................ 243,466 168
W. A. Pogue............................................. 24,917 --
J. J. Shea.............................................. 13,000 --
J. D. Tinsley........................................... 46,439 137
W. S. Weeber............................................ 86,929 168
All Directors and Executive Officers as a Group......... 723,960 888
</TABLE>
The above amounts include common shares which are subject to outstanding
stock options exercisable within 60 days of March 18 as follows: E. J. Mooney,
202,000 shares; W. S. Weeber, 71,200 shares; M. B. Harp, 47,500 shares; J. D.
Tinsley, 31,900 shares; P. Dabringhausen, 25,500 shares; H. G. Bernthal, H.
Corless, H. M. Dean, J. P. Frazee, Jr., F. A. Krehbiel, and W. A. Pogue,
24,000 shares each; A. L. Kelly, 16,000 shares; J. J. Shea, 12,000 shares; J.
L. Ballesteros, 2,000 shares; and directors and executive officers as
24
<PAGE>
a group, 591,400 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.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
One Form 4 covering one transaction was filed 14 days late by the Company
with the Securities and Exchange Commission in 1995 for Gilberto Pinzon, Group
Vice President, President, Nalco Latin America.
SECURITY OWNERSHIP OF CERTAIN OWNERS
Based on Schedule 13G filings received, the following listed companies are
the only 5% or greater owners of its securities known to the Company.
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OF AMOUNT AND NATURE OF OF
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
-------------- -------------------- -------------------- -------
<S> <C> <C> <C>
Common Shares........... FMR Corp. 8,201,116(1) 12.19%
82 Devonshire Street
Boston, MA 02109
Common Shares........... INVESCO PLC 6,727,686(2) 10.002%
11 Devonshire Square
London EC2M 4 YR
England
Common Shares........... The State Teachers 3,920,237(3) 5.83%
Retirement Board
of Ohio ("STRS")
275 East Broad St.
Columbus, OH 43215
</TABLE>
- ----------
(1) Fidelity Management and Research Company, a wholly owned subsidiary of
FMR, beneficially owns 7,831,037 shares (11.64%). One of the investment
companies, Fidelity Puritan Fund, owns 3,945,700 of these shares or 5.87%.
Edward C. Johnson, Chairman, and FMR Corp., through its control of
Fidelity Management and Research Company and the Fidelity Funds, each
reports sole power to dispose of 7,831,037 shares. Voting power over these
shares resides with the Funds' Boards of Trustees. Fidelity Management
Trust Company, a wholly owned subsidiary of FMR Corp., is the beneficial
owner of 370,079 shares (0.55%). Edward C. Johnson and FMR Corp. report
sole dispositive power over these shares, sole power to vote or direct the
voting of 252,179 shares and no power to vote 117,900 shares. Members of
the Edward C. Johnson 3d family and trusts for their benefit are the
predominant owners of Class B shares of common stock of FMR Corp.,
representing approximately 49% of the voting power of FMR Corp. Mr.
Johnson 3d owns 12.0% and Abigail P. Johnson owns 24.5% of the aggregate
outstanding voting stock of FMR Corp. Mr. Johnson 3d is chairman of FMR
Corp. and Abigail P. Johnson is a Director of FMR Corp. The Johnson family
group and all other Class B shareholders have entered into a shareholder's
voting agreement under which all Class B shares will be voted in
accordance with the majority vote of Class B shares. Accordingly, through
their ownership of voting common stock and the execution of the
shareholder's voting agreement, members of the Johnson family may be
deemed, under the Investment Company Act of 1940, to form a controlling
group with respect to FMR Corp.
(2) INVESCO PLC and its subsidiaries, INVESCO North American Group, Ltd.,
INVESCO, Inc., INVESCO North American Holdings, Inc., INVESCO Capital
Management, Inc., and INVESCO Group Services Inc., report shared voting
power and shared dispositive power of 6,727,686 shares.
(3) STRS reports sole voting and investment power over 3,920,237 shares.
25
<PAGE>
STOCKHOLDER PROPOSAL DEADLINE
Stockholder proposals, to be considered for inclusion in the proxy statement
for the 1997 Annual Meeting of Stockholders, must be received by the Company
by November 18, 1996.
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, 1996
26
<PAGE>
EXHIBIT A
EMPLOYEE STOCK COMPENSATION PLAN
NALCO CHEMICAL COMPANY
1. PURPOSE. This Stock Compensation Plan (the "Plan") is intended to
encourage ownership of stock of Nalco Chemical Company (the "Company") by key
management employees of the Company and its subsidiaries, and to provide
additional long term incentive for them to continue their association with the
Company and to promote the success of the business by using their maximum
efforts in its behalf.
2. DEFINITIONS.
a) "Common Stock" means the Common Stock of the Company (par value of
$0.1875 per share).
b) "Dividend Unit" means, in the case of a cash dividend, the cash
equivalent thereof and, in the case of any other dividend or
distribution, the "fair value" thereof as such amount shall be
determined in good faith by the Committee.
c) "Share Unit" means, subject to the provisions of Paragraph 14 hereof,
the equivalent of one share of Common Stock.
d) "Stock Option" means a right to purchase a share of Common Stock at a
set price for a stated period of time.
e) "Subsidiary" means any corporation 50% or more of the voting shares of
which are owned, directly or indirectly, by the Company.
3. STOCK SUBJECT TO THE PLAN. An aggregate of 8,000,000 shares of the Common
Stock will be reserved for use under the Plan. Shares subject to stock options
or restricted stock awards that lapse or are forfeited for any reason shall
again be available for use under the Plan. These shares may be either
authorized but unissued shares, or issued shares which shall have been
reacquired by the Company.
4. ADMINISTRATION. The Plan shall be administered by the Executive
Compensation Committee of the Board of Directors (the "Committee") appointed
by the Company's Board of Directors, and consisting of not less than two
members who are not employees of the Company or its subsidiaries. The
Committee is authorized to interpret the terms and provisions of the Plan, to
accelerate the exercisability of any option or the vesting of any restricted
stock awards, and to adopt such rules and regulations for the administration
of the Plan as it may deem advisable. The Committee shall administer the Plan
in a manner that it determines to be necessary or appropriate to preserve the
benefits and potential benefits of the Plan for the grantees, the Company and
its subsidiaries. Such administration shall conform to the requirements of
Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code").
All actions of the Committee with respect to the Plan shall be taken by a
majority of its members if more than two. Any action may be taken by a written
instrument signed by all of the members, and action so taken shall be fully
effective as if it had been taken by a vote of a majority of the members at a
meeting duly called and held. The Committee shall keep adequate records
concerning the Plan and concerning its proceedings and acts in such form and
detail as the Committee may decide, and shall make such rules and regulations
for the conduct of its business as it shall deem advisable. At its discretion
and to the extent permitted by applicable legal rules, the Committee may
delegate administrative functions to the Company's staff.
The Board of Directors may, from time to time, appoint members of the
Committee in substitution for or in addition to members previously appointed
and may fill vacancies, however caused, in the Committee. The Board of
Directors shall select one of the members of the Committee as its chairperson.
27
<PAGE>
5. ELIGIBILITY. To be eligible for grants under this Plan a person must be
an employee of the Company or a Subsidiary. No member of the Committee, while
serving as such, shall be eligible to receive grants under this Plan. No grant
may be made to an individual who immediately after such grant owns, within the
meaning of Section 422(b)(6) of the Code, shares possessing more than 10% of
the total combined voting power of all classes of stock of the Company or its
Subsidiaries.
6. GRANTS. The Committee may grant either Stock Options or Share Units or
both to eligible persons under this Plan.
7. STOCK OPTIONS.
a) Granting of Options. Whenever the Committee shall designate an eligible
person to receive a Stock Option pursuant to this Plan, the Committee or
Company shall notify such person in writing with respect thereto, giving
the number of shares subject to the Option, the price per share, the
dates on and after which such Option may be exercised, and the date on
which such Option shall expire, and shall attach a copy of this Plan to
such Notice. The date of the Committee's designation shall be the date
such Option is granted. Such Notice may be accompanied by or be in the
form of an agreement to be signed by the Company and the optionee,
containing such terms and provisions as the Committee shall prescribe.
The Committee may award both Incentive Stock Options and Non-qualified
Stock Options within the meaning of the Code. However, the maximum
number of shares subject to an option that may be granted to a key
management employee during a fiscal year is 250,000 shares.
b) Option Prices. The Option price of each share of Common Stock offered
under this Plan shall be the fair market value of the Common Stock, or
par value if greater, at the time the Option is granted. Such fair
market value shall be the mean between the highest and the lowest price
of sales of shares of the Common Stock of the Company as reported on
Composite Tape for the New York Stock Exchange--Composite Transactions
on the date on which the Option is granted, or if no Composite Tape
transactions occurred on that date, on the last preceding date on which
such transactions occurred.
c) Term of Options. The term of each Option shall be for such period as the
Committee shall determine, but not more than ten years from the date of
granting thereof, and shall be subject to earlier termination as
hereinafter provided.
d) Exercise of Options. Subject to specific terms thereof, an Option may be
exercised, at any time or from time to time, as to any part of or all of
the shares which shall be covered thereby; the purchase price of the
shares as to which an Option shall be exercised shall be paid in full at
the time of exercise. The exercise date shall be the date of receipt of
the signed exercise notice by the Company. At the election of the
employee, payment of the purchase price shall be made in cash or mature
shares of Company Common Stock valued at fair market value on the date
of exercise of the Option or a combination of cash and mature shares.
Mature shares are shares that have been held by the employee for a
period of six months. The holder of an Option shall not have any of the
rights of a stockholder with respect to the shares covered by the
Option, except to the extent that one or more certificates for such
shares shall be delivered to him or to his broker upon the due exercise
of the Option. For purposes of this paragraph, "fair market value" shall
have the meaning described in Paragraph 7(b) above.
e) Exercise of Options After Termination of Employment. An Option granted
to an employee shall terminate upon the termination, for any reason, of
the person's employment with the Company or a Subsidiary, and no shares
may thereafter be purchased under such Option except in the case of:
28
<PAGE>
(i) Retirement. Upon retirement from the employ of the Company or a
Subsidiary pursuant to the Company's or Subsidiary's retirement
program, the employee may exercise, within five years following such
retirement, all or a part of the shares which the employee was
entitled to purchase immediately prior to such retirement.
(ii) Total and Permanent Disability. An employee may exercise, within
five years after termination due to total and permanent disability,
all or a part of the shares which the employee was entitled to
purchase immediately prior to such termination.
(iii) Death. Upon the death of an employee or upon the death of a
retired employee within five years following retirement from the
employ of the Company or a Subsidiary, all or a part of the shares
which such employee was entitled to exercise immediately prior to
death may be exercised within the longer of either the five years
following his or her retirement or one year after his or her death
by any person or persons (including the legal representatives of
such employee's estate) to whom the rights of the deceased
employee under the Option shall pass by will or the laws of
descent and distribution.
In no event, however, may any Option be exercised after ten years from
the date it was granted or after expiration of the term of the Option
specifically provided for at the time of its grant.
8. RESTRICTED STOCK AWARDS.
a) Share Unit Grants. Subject to the terms, provisions, and conditions of
this Plan, the Committee is hereby authorized to (a) select the eligible
persons to be granted Share Units (it being understood that more than
one award may be granted to the same person), (b) determine the number
of Share Units covered by each grant, (c) determine the time or times
when Share Units will be granted, (d) determine the time or times when,
and the conditions under which, amounts may become payable with respect
to Share Units within the limits stated in this Plan, and (e) prescribe
the form, which shall be consistent with this Plan, of the instruments
evidencing any Share Units granted under this Plan. However, the maximum
number of Share Units that may be granted to a key management employee
in one year is 50,000.
b) Share Unit Accounts. The Company shall record in an account with respect
to each grantee the number of Share Units awarded to such grantee. A
separate account shall be maintained with respect to each award of Share
Units to each grantee. Whenever the Company shall pay any cash dividend
upon issued and outstanding Common Stock, or shall make any cash
distribution with respect thereto, there shall be promptly paid to each
grantee Dividend Units in an amount equal to the amount that would be
paid if such Share Units then allocable to his account were shares of
Common Stock. Such payment shall be made wholly in cash. Whenever the
Company shall pay any dividend in Common Stock upon issued and
outstanding Common Stock, or make any distribution, that does not adjust
Share Units in accordance with Paragraph 14, there shall be promptly
paid to each grantee a number of Dividend Units as shall be allocable to
the Share Units then credited to such account or accounts. The amount to
be paid to the grantee with respect to any account established in his
name under this Plan shall be reduced by any amount which the Company is
required to withhold with respect to such payment under the then
applicable provisions of the Code or state or local income tax laws.
c) Vesting of Share Units. All of the Share Units credited to each
grantee's account or accounts (each account being considered separately
for this purpose) shall become vested on the date or dates selected by
the Committee at the time of the award of Share Units to which such
account relates, subject to Section 8(e) hereof. Such vesting shall
occur only if the grantee on the date of vesting has
29
<PAGE>
continuously been an employee of the Company or a Subsidiary of the
Company since the date of the award. A leave of absence, unless
otherwise determined by the Committee, shall not constitute a cessation
of employment. The Committee, subject to the approval of the Board of
Directors, may cancel in whole or in part such portion of any grant as
has not yet become vested at the time of such cancellation, if it
determines that that grantee is not performing satisfactorily the duties
to which he was assigned on the date of the grant or duties of at least
equal responsibility. In the event of the death, total and permanent
disability, or retirement of a grantee before the vesting date of an
award of Share Units, all Share Units relating thereto shall be fully
vested.
d) Payment of Share Unit Value. Awards of Common Stock in respect of all
vested Share Units in a grantee's account plus cash in lieu of any
fractional Share Units shall be made by the Company as soon as
practicable but in any event not more than 45 days after vesting. The
Committee may in its discretion require each Grantee receiving Common
Stock pursuant to this Plan to represent to the Company at the time of
such receipt that he is acquiring such stock for investment and not with
a view to the distribution thereof.
e) Qualified Share Units
(i) Designation. The Committee, in its discretion, may, at the time of
grant, designate the Share Units being granted to any grantee under
the Plan as "Qualified Share Units". Qualified Share Units are
intended to be "performance-based compensation" as that term is used
in Section 162(m) of the Code, and shall comply with the
requirements of this Section 8(e) to the extent such compliance is
required to be treated as "performance-based compensation."
(ii) Maximum Award. The award of Qualified Share Units shall be subject
to the maximum annual award limit of Section 8(a); provided,
however, that if a grantee is granted Qualified Share Units for any
year, the grantee may not be granted Share Units that are not
Qualified Share Units for the same year.
(iii) Performance Goals. The Committee shall establish performance
targets with respect to the grant of any Qualified Share Units for
the performance period(s) established by the Committee that is
applicable to the Qualified Share Units. Such performance targets
shall be objective (as that term is described in regulations under
Code Section 162(m)), and shall be established in writing by the
Committee not later than 90 days after the beginning of the
performance period (but in no event after 25% of the performance
period has elapsed), and while the outcome as to the performance
targets is substantially uncertain. The performance targets
established by the Committee shall be based on one or more of the
following specific performance goals: sales increases, earnings
increases, quality, customer satisfaction, profitability, return
on sales, return on equity, return on capital, productivity, net
margin as a percentage of revenue, or debt to capitalization. In
the Committee's discretion, the establishment of performance goals
may be in lieu of, or may be in addition to, the vesting
requirements described in Section 8(c) that are based on continued
employment.
(iv) Attainment of Performance Goals. Except as otherwise provided in
Section 8(e)(v), Qualified Share Units shall not become vested
unless and until the Committee has determined that the applicable
performance target(s) have been attained. To the extent that the
Committee exercises discretion in making the determination required
by this Section 8(e)(iv), such exercise of discretion may not
result in an increase in the amount of the benefit that would
otherwise be provided to the grantee.
(v) Exceptions to Performance Goal Requirement. Notwithstanding Section
8(c), if a grantee's employment terminates because of death or total
and permanent disability prior to the end of a
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performance period, the grantee's Qualified Share Units shall become
vested without regard to whether the Qualified Share Units would be
"performance-based compensation" under Code Section 162(m).
Notwithstanding Section 8(c), if a grantee's employment terminates
because of retirement prior to the end of a performance period, the
grantee's Qualified Share Units shall not vest until the end of the
performance period, in accordance with the foregoing provisions of
this Section 8(e), and then only to the extent such vesting would
have occurred if the grantee's retirement had occurred immediately
after the end of the performance period.
(vi) Stock Dividends. Notwithstanding the provisions of Section 8(b), if
any dividends on Common Stock are payable in a form other than
cash, the applicable Dividend Units for the Qualified Share Units
shall not be currently distributable to the grantee, but shall be
deemed to be reinvested in additional Stock Units that are credited
to the grantee's account, subject the vesting restrictions
applicable to that account.
9. RIGHT OF COMPANY TO TERMINATE EMPLOYMENT. Nothing contained in the Plan
or in any grant pursuant to the Plan shall interfere in any way with the right
of the Company or a Subsidiary to terminate the employment of the grantee at
any time for any reason.
10. NONTRANSFERABILITY. No amounts payable under this Plan shall be
transferable by the grantee prior to payment otherwise than by will or by the
laws of descent and distribution.
11. OTHER CONSIDERATIONS. Nothing in the Plan or in any grant pursuant to
the Plan shall confer upon any employee any right to continue in the employ of
the Company or any of its subsidiaries or interfere with the right of the
Company or of the Subsidiary by which he/she is employed to terminate his/her
employment at any time.
12. EXCLUSION FROM PENSION COMPUTATION. By acceptance of a grant under this
Plan, each grantee shall be deemed to agree that it is special incentive
compensation and that it will not be taken into account as "wages" or "salary"
in determining the amount of any payment under any pension, retirement, or
deferred profit sharing plan of the Company or any Subsidiary. In addition,
each beneficiary of a deceased grantee shall be deemed to agree that such
award will not affect the amount of any life insurance coverage available to
such beneficiary under any life insurance plan covering employees of the
Company or any Subsidiary.
13. SECURITIES REGISTRATION. In the event that the Company shall deem it
necessary to register any stock, with respect to which a Stock Option granted
hereunder has been exercised, or a Share Unit vested, under the Securities Act
of 1933, or other applicable federal or state law, or to qualify any such
shares for exemption from registration under any such law, or under any
regulation issued under any such law, the Company shall take such action at
its own expense before delivery of such stock. If such stock shall be listed
on a national securities exchange at the time a Stock Option granted hereunder
is exercised or Share Unit vested and listing thereof shall be required on
such stock exchange, the Company shall take such action at its own expense.
14. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. Appropriate adjustments of
the number of shares reserved for use under the Plan, of the maximum grants
referred to in Paragraphs 7(a) and 8(a) of this Plan, and in the number of
shares and price per share covered by outstanding Stock Options or Share Units
granted under the Plan shall be made to give effect to any stock splits, stock
dividends, spin-off, or other relevant changes in capitalization occurring on
or after the effective date of the Plan. The decisions of the Board of
Directors of the Company as to the amount and timing of any such adjustments
shall be conclusive.
15. APPROVAL, TERMINATION, AND AMENDMENT OF THE PLAN. The Plan will not go
into effect unless approved by the affirmative vote of the holders of at least
a majority of the votes entitled to be cast thereon of
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the Company's outstanding shares represented in person or by proxy at the
Company's 1996 Annual Shareholders Meeting. When so approved, the Plan shall
become effective as of January 1, 1996. The Plan shall terminate on December
31, 2005, and no Stock Options or Share Units shall be granted under the Plan
after that date. The Plan may be terminated at any time or may, from time to
time, be modified or amended by the Board of Directors of the Company, except
that no change shall be made that would disqualify the Plan from the exemption
provided by Rule 16b-3 under the Exchange Act or that would disqualify Options
or Qualified Share Units awarded under the Plan from being treated as
"performance-based compensation" under Code Section 162(m). Should any
provision of the Plan not comply with the requirements of Rule 16b-3 under the
Exchange Act or Code Section 162(m), such provision shall be construed or
deemed amended to the extent necessary to conform to such requirements.
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EXHIBIT B
PERFORMANCE SHARE PLAN
NALCO CHEMICAL COMPANY
AS AMENDED EFFECTIVE FEBRUARY 16, 1996
SECTION 1
PURPOSE
The purposes of this Plan are:
(a) to provide additional incentive for the achievement of long-term
financial results consistent with the Company's long-range business
plans,
(b) to reinforce management's identification with stockholder interests by
providing direct remuneration in shares of Company Common Stock, and
(c) to integrate short-term and long-term business goals by creating
personal financial opportunities tied to long-term corporate financial
performance.
SECTION 2
EFFECTIVE DATE AND TERMINATION DATE
2.1 EFFECTIVE DATE. The Plan shall be effective as of January 1, 1992,
subject to approval by the stockholders of the Company.
2.2 TERMINATION DATE. The Plan shall terminate with respect to the
assignment of contingent performance shares on December 31, 2001, provided,
however, that the Committee may terminate the Plan or assignment of contingent
performance shares at any time prior to that date. Except as provided in
Section 10, termination of the Plan shall not cancel, reduce or otherwise
impair the rights of participants to receive any performance awards based upon
contingent performance shares assigned prior to termination of the Plan.
SECTION 3
DEFINITIONS
3.1 THE "COMPANY" is Nalco Chemical Company.
3.2 AN "AFFILIATED ORGANIZATION" is any corporation which is a subsidiary of
the Company, provided that the Company owns stock possessing 50% or more of
the total combined voting power of all classes of stock of such corporation or
50% or more of the total value of all classes of stock of such corporation.
3.3 THE "PLAN" is the Nalco Chemical Company Performance Share Plan adopted
on February 14, 1992, by the Board of Directors of the Company, and approved
by the Shareholders on April, 1992, as amended by the Board on February 16,
1996.
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3.4 THE "COMMITTEE" is the administrative committee constituted pursuant to
Section 5 of the Plan.
3.5 THE "BOARD" is the Board of Directors of the Company.
3.6 AN "ANNIVERSARY DATE" is the effective date of the Plan and January 1 of
each year thereafter.
3.7 THE "BASE SALARY" of a participant is the annual rate of base pay in
effect for such participant on the Anniversary Date as of which contingent
performance shares are assigned to such participant.
3.8 THE "EARNINGS PERFORMANCE" of the Company for a performance period is
the sum of the net earnings per share, on a fully diluted basis, for all years
included in the performance period. Subject to Section 15.4, the Committee, in
its sole discretion, may adjust the Earnings Performance for purposes of this
Plan and/or the Earnings Performance goal and schedule for any performance
period in order to reflect any changes associated with the purchase or sale of
assets or shares of stock or any other extraordinary occurrence during the
performance period.
3.9 "COMMON STOCK" means the shares of Common Stock of the Company (par
value of $0.1875 per share) which may be used under this Plan.
3.10 "NORMAL RETIREMENT DATE" has the same meaning as set forth in the
Retirement Income Plan for eligible employees of Nalco Chemical Company and
participating companies, as the same may be amended from time to time.
3.11 "CHANGE IN CONTROL" shall mean the occurrence at any time of any of the
following events:
(a) The Company is merged or consolidated or reorganized into or with
another corporation or other legal person and as a result of such
merger, consolidation or reorganization less than 80% of the
outstanding voting securities or other capital interests of the
surviving, resulting or acquiring corporation or other legal person
are owned in the aggregate by the stockholders of the Company
immediately prior to such merger, consolidation or reorganization;
or
(b) The Company sells all or substantially all of its business and/or
assets to any other corporation or other legal person, less than
80% of the outstanding voting securities or other capital interests
of which are owned in the aggregate by the stockholders of the
Company, directly or indirectly, immediately prior to or after such
sale; or
(c) A report is filed on Schedule 13D or Schedule 14D-1 (or any
successor schedule, form or report) each as promulgated pursuant to
the Securities Exchange Act of 1934 ("Exchange Act") disclosing
that any person (as the term "person" is used in Section 13(d)(3)
or Section 14(d)(2) of the Exchange Act) has become the beneficial
owner (as the term "beneficial owner" is defined under Rule 13d-3
or any successor rule or regulation promulgated under the Exchange
Act) of 20% or more of the issued and outstanding voting securities
of the Company; or
(d) During any period of two consecutive years, individuals who at the
beginning of any such period constitute the Board of Directors of
the Company 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 of the Company was
approved by a vote of at least two-thirds of such Directors of the
Company then still in office who were Directors of the Company at
the beginning of any such period.
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SECTION 4
ELIGIBILITY
4.1 ELIGIBILITY. Except as provided in Section 4.2, the officers who hold
the following positions in the Company on the Anniversary Date in a given year
may be chosen by the Committee to participate in the Plan as members of that
year's eligibility class:
(a) Chairman of the Board
(b) Chief Executive Officer
(c) President
(d) Executive Vice President
(e) Group Vice President
(f) Corporate Vice President
4.2 Each year, after consultation with the Chief Executive Officer of the
Company, the Committee may in its discretion choose a limited number of other
key executives of the Company or an Affiliated Organization who have primary
responsibility for or significant influence upon the long-term consolidated
financial performance of the Company to participate in the Plan as members of
that year's eligibility class.
SECTION 5
ADMINISTRATION
5.1 THE COMMITTEE. The Plan shall be administered by a Committee designated
by the Board and composed of members (not less than three) of the Company's
Board who are not employed by the Company or by an Affiliated Organization,
and have not been so employed for the last year.
5.2 COMMITTEE AUTHORITY. Except as otherwise specifically provided by the
Plan, the Committee shall have full and exclusive authority to execute the
responsibilities given to it by the Plan. Any determinations, rulings, or
interpretations made by the Committee shall be final and binding on all
persons, including the Company, stockholders of the Company, participants, and
other employees. The Committee may make such reasonable rules and regulations
concerning the administration of the Plan as it deems necessary or
appropriate, including the modification of existing awards. In its
administration of the Plan the Committee shall apply such rules and
regulations and shall otherwise interpret the provisions of the Plan in a
reasonable and consistent manner.
SECTION 6
ASSIGNMENT OF CONTINGENT PERFORMANCE SHARES
6.1 NORMAL ASSIGNMENTS. Each year, as of the Anniversary Date, the Committee
shall assign to each participant in that year's eligibility class as many
contingent performance shares as it deems appropriate for such participant,
provided that the number of contingent performance shares so assigned shall
not exceed a participant's Base Salary as of such Anniversary Date divided by
the value of one share of Common Stock, determined as provided in Section 6.3.
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6.2 DISCRETION IN ASSIGNMENT. Subject to Section 6.1, the Committee shall
have complete discretion in determining the number of contingent performance
shares to assign to each participant, and such number may be different for
different participants.
6.3 DETERMINATION OF VALUE OF STOCK. The value of one share of Common Stock
for purposes of determining the maximum number of contingent performance
shares that may be assigned under Sections 6.1 and 6.2 is equal to the average
of the New York Stock Exchange Composite Transactions daily closing prices for
such stock during the last five days during which there were transactions
immediately preceding the Anniversary Date as of which shares are assigned for
a performance period.
SECTION 7
PERFORMANCE PERIODS
7.1 NORMAL PERFORMANCE PERIODS. The performance period over which a class of
contingent performance shares will be earned begins on the Anniversary Date as
of which such shares are assigned and ends on the day before the Anniversary
Date three years later.
SECTION 8
PERFORMANCE GOALS
8.1 CRITERION FOR MEASURING PERFORMANCE. The criterion to be used to measure
the financial performance of the Company shall be Earnings Performance.
8.2 ESTABLISHMENT OF AN EARNINGS PERFORMANCE GOAL AND RELATED PERFORMANCE
SHARES. Each year, after consultation with the Chief Executive Officer of the
Company, the Committee shall establish an Earnings Performance Goal for the
performance period which is applicable to the contingent performance shares
assigned during that year. If the Earnings Performance Goal for the
performance period is achieved, the participant will have earned 100% of the
contingent performance shares assigned for the performance period.
8.3 ESTABLISHMENT OF A SCHEDULE. The Committee may also establish a schedule
for each performance period which would permit participants to earn less than
100% of the contingent performance shares assigned to them if the Company's
financial performance is less than the Earnings Performance Goal, and to earn
more than 100% of the contingent performance shares assigned to them if the
Company's financial performance exceeds the Earnings Performance Goal.
8.4 TIME OF ESTABLISHMENT. The Committee shall establish the Earnings
Performance Goal under Section 8.2 and any schedule under Section 8.3 within a
reasonable time after the Anniversary Date as of which the contingent
performance shares to which they relate are assigned.
8.5 LIMITATIONS. In no event will a participant earn performance shares for
any performance period for which the Earnings Performance is less than the
minimum threshold compounded annual growth rate as set by the Committee for
that three-year performance period. No participant shall earn more than 120%
of the contingent performance shares assigned to the participant for a
particular performance period.
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SECTION 9
PERFORMANCE AWARDS
9.1 EVALUATING PERFORMANCE AND COMPUTING AWARDS. Within a reasonable time
following the close of a performance period, the Committee shall examine the
Company's Earnings Performance. The participants in the eligibility class to
which the performance period relates shall earn the number of performance
shares which correspond to the Earnings Performance of the Company, in
accordance with the relationship established under Section 8. The value of a
performance award earned by a participant is equal to the number of
performance shares earned multiplied by the value of one share of Common Stock
determined in accordance with Section 9.2.
9.2 DETERMINATION OF VALUE OF STOCK. The value of one share of Common Stock
for purposes of computing awards is equal to the average of the New York Stock
Exchange Composite Transactions daily closing prices for such stock during the
last five days of the performance period during which there were transactions.
SECTION 10
PAYMENT OF PERFORMANCE AWARDS
10.1 TIME OF PAYMENTS. Within a reasonable time following the close of each
performance period, the performance awards to which the participants in the
related eligibility class are entitled shall be determined. Payment of the
cash portion to such participants shall be made within sixty days thereafter.
Except for the provisions of Section 11.1, the right to receive shares of
Common Stock shall not vest to the participant until three years from the end
of the performance period. During this three-year period, the Company will pay
to the participant, on a quarterly basis, an amount equal to the Nalco
dividend which would have been paid on the unvested shares as if they were
vested and issued shares of Common Stock. Subject to Section 11, distribution
of the vested Common Stock shall be made within 30 days after three years from
the end of the performance period.
10.2 MANNER OF PAYMENT. Subject to the limitations of Sections 10.1 and
10.3, performance awards shall be paid in equal portions of cash and Common
Stock to the nearest whole share (with the number of shares of Common Stock
being determined in accordance with Section 9.2); provided that with respect
to an eligibility class for which there is not enough Common Stock under the
Plan to pay in such equal portions, cash shall be utilized in lieu of Common
Stock for that portion of the award which would have been paid in Common
Stock.
10.3 SHARES OF COMMON STOCK SUBJECT TO THE PLAN. The maximum number of
shares of Common Stock that may be used to pay performance awards is 1,000,000
shares. Once 1,000,000 shares of Common Stock are used for the payment of such
awards, no additional assignments of contingent performance shares shall be
made, and subsequent awards shall be paid entirely in cash and only with
respect to contingent performance shares already assigned.
SECTION 11
TERMINATION OF EMPLOYMENT
11.1 TERMINATION FOR DEATH, DISABILITY, RETIREMENT OR CHANGE IN CONTROL. In
the event of termination of a participant's employment due to death,
disability or retirement prior to the end of a
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performance period that applies to contingent performance shares that have
been assigned to such participant, and in the event at least one calendar year
has been completed during the performance period before such termination of
employment, the participant or beneficiary shall be entitled to receive a pro-
rata share of the performance awards that would, in the estimation of the
Committee, be earned by such participant if employment continued until the end
of the performance period. Proration of a performance award shall be
calculated by multiplying the contingent shares by a fraction, the numerator
of which shall be the number of calendar months during the performance period
that had lapsed prior to the participant's termination, and the denominator of
which shall be the number of months in the performance period. Such prorated
performance award shall be calculated and paid to the participant or
beneficiary as soon as practicable.
In the event of termination of participant's employment due to death,
disability, retirement or Change in Control, all unvested Common Stock already
awarded shall vest immediately without the three-year vesting period provided
for in Section 10.1. All vested Common Stock shall be distributed to the
participant or beneficiary as soon as practicable in the event of termination
due to death, disability, retirement or in the event of a Change in Control.
11.2 TERMINATION FOR OTHER REASONS. If a participant's employment is
terminated for reasons other than death, disability, retirement or Change in
Control, any contingent performance shares or awards that are outstanding as
of the day of such termination shall be canceled, any performance awards that
have not yet been earned by such participant shall be immediately forfeited,
and any Common Stock that has not been vested pursuant to Section 10.1 shall
be forfeited.
SECTION 12
AMENDMENTS AND TERMINATION
12.1 The Board of Directors shall have the right to suspend, terminate,
modify or amend the Plan from time to time, except in any way that would
change the exempt status of the performance shares under Rule 16b-3 of the
Exchange Act, or that would disqualify awards from being treated as
"performance-based compensation" under Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code").
SECTION 13
DILUTION AND OTHER ADJUSTMENTS
13.1 In the event of any change in the outstanding shares of Common Stock by
reason of stock dividend or split, recapitalization, merger, consolidation,
combination or exchange of shares, spin-off or other similar change, the
number of contingent performance shares held at such time by participants, and
the maximum number of shares of Common Stock which may be used to pay
performance awards shall be automatically adjusted to give effect to the
change in the outstanding shares.
SECTION 14
OTHER CONSIDERATIONS
14.1 RIGHT TO EMPLOYMENT. Neither this Plan nor any action taken under the
Plan shall be construed as granting any employee of the Company or an
Affiliated Organization the right to an assignment of contingent performance
shares under the Plan or as guaranteeing employment by the Company or an
Affiliated Organization.
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14.2 WITHHOLDING FOR TAXES. The Company shall have the right to deduct from
amounts paid under the Plan any federal, state or local taxes required by law
to be withheld with respect to awards made hereunder. For the Common Stock
distribution, the Company shall have the right, as a condition of receipt of
the award, to require the participant to pay to the Company any amount
necessary to cover such taxes.
14.3 ADMINISTRATIVE EXPENSES. The Company shall bear the expenses of
administering the Plan.
14.4 GOVERNING LAW. This Plan shall be construed, administered, and governed
in all respects in accordance with the laws of the State of Illinois.
14.5 TRANSFERABILITY. Contingent performance shares which have been assigned
to participants under this Plan shall not be subject to debts or other
obligations of participants or beneficiaries nor shall they be voluntarily or
involuntarily sold, transferred, altered, assigned, or encumbered other than
by will or the laws of descent and distribution.
14.6 REGULATIONS. Unless the Common Stock which is to be a portion of any
award granted under this Plan is covered by an effective registration
statement under the Securities Act of 1933 at the time of distributing such
stock, the participant must agree, as a condition of receipt of such stock,
that the Common Stock to be received will not be transferred in violation of
any applicable securities law or regulation; and the Company may where
appropriate include proper legends to that effect on the certificate of Common
Stock to be delivered under this Plan.
SECTION 15
QUALIFIED PERFORMANCE SHARES
15.1 DESIGNATION. The Committee, in its discretion, may, at the time of the
assignment, designate the performance shares being assigned to any participant
under the Plan as "Qualified Performance Shares." Qualified Performance Shares
are intended to be "performance-based compensation" as that term is used in
Section 162(m) of the Code, and shall comply with the requirements of this
Section 15 to the extent such compliance is required to be treated as
"performance-based compensation."
15.2 MAXIMUM AWARD. The award of Qualified Performance Shares shall be
subject to the limitations of Section 6 and Section 8.5; provided, however,
that if a participant is assigned Qualified Performance Shares for any year,
the participant may not be assigned performance shares that are not Qualified
Performance Shares for the same year.
15.3 PERFORMANCE GOALS. Notwithstanding the provisions of Section 8.3, for
Qualified Performance Shares, goals established for the performance period
under Section 8 (including the schedule described in Section 8.3) shall be
objective (as that term is described in regulations under Code Section
162(m)), and shall be established in writing by the Committee not later than
90 days after the beginning of the performance period (but in no event after
25% of the performance period has elapsed), and while the outcome as to the
performance goals is substantially uncertain.
15.4 ATTAINMENT OF PERFORMANCE GOALS. Subject to Section 15.5, a participant
holding Qualified Performance Shares shall not receive a settlement of the
shares until the Committee has determined that the
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applicable performance goal(s) have been attained. To the extent that the
Committee exercises discretion in making the determination required by this
Section 15.4, such exercise of discretion may not result in an increase in the
amount of the contingent performance shares.
15.5 EXCEPTIONS TO PERFORMANCE GOAL REQUIREMENT. If a participant's
employment terminates because of death, disability, or a Change in Control,
the participant's Qualified Performance Shares shall become vested in
accordance with Section 11.1 without regard to whether the Qualified
Performance Shares would be "performance-based compensation" under Code
Section 162(m). However, if a participant's employment terminates because of
retirement prior to the end of a performance period, any pro-rata settlement
of Qualified Performance Shares described in Section 11.1 shall not be made
until the end of the performance period, and such settlement shall not exceed
the settlement that the participant would have received if the participant's
retirement had occurred immediately after the end of the performance period.
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EXHIBIT C
THE MANAGEMENT INCENTIVE PLAN
OF NALCO CHEMICAL COMPANY
AS AMENDED EFFECTIVE JANUARY 1, 1996
A. PURPOSE
The purpose of this Plan is twofold: (1) To assure that the key managers of
Nalco Chemical Company (the "Company") have an opportunity to earn competitive
levels of total direct compensation, in accordance with the total compensation
policies of the Company, and (2) to reward the key managers of the Company for
their contributions to its growth and profitability.
B. EFFECTIVE DATE AND TERMINATION
This Plan is effective as of January 1, 1980, and will remain in effect
until such time as the Board of Directors at its sole discretion, may elect to
suspend or terminate it.
C. ADMINISTRATION OF THE PLAN
This Plan will be administered in accordance with administrative rules
recommended by the Chief Executive Officer ("CEO") as adopted and/or modified
from time to time by the Executive Compensation Committee (the Committee) of
the Company's Board of Directors. These rules will cover the basis for
individual awards, maximum award levels, performance measurement, and
calculation of award payments applicable to this Plan in each year of its
operation. The Committee will resolve any conflicts in interpretation of this
Plan or the administrative rules, and its resolution shall be final.
D. ELIGIBILITY
The Committee will designate annually a select group of management
employees, upon the recommendation of the CEO, to participate in this Plan for
one year. Employees who participate in other Company-sponsored bonus or sales
incentive plans, with the exception of the Employee Stock Ownership Plan, the
Performance Share Plan, and the Employee Stock Compensation Plan, will not be
eligible to participate in this Plan. The Chairman and CEO of the Company are
automatically eligible, subject to Committee approval.
E. MAXIMUM AWARDS
No award under this Plan may exceed 115% of the base pay earned by the award
recipient during the applicable fiscal year. Generally, the maximum amount
payable to an eligible employee will vary also by level of responsibility.
Total awards under this Plan in any one year may not exceed 4% of the
Company's earnings before income taxes, and before provision for awards under
this Plan.
F. CALCULATION OF INDIVIDUAL AWARDS
Individual awards to participants (other than the Chairman and CEO of the
Company) will be calculated in accordance with the administrative rules
adopted annually by the Committee. At the Committee's sole discretion, these
calculations may take into account the performance of the Company, its groups,
divisions,
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subsidiaries, and/or the performance of the employee for whom the award is
calculated. The Chairman and CEO will have the flexibility to adjust the
individual performance portion for all participants other than Executive Vice
Presidents and above, based on his judgment of the participant's performance.
The Committee, at its sole discretion, will determine the basis for any
amounts payable to the Chairman and the CEO of the Company under this Plan,
subject to the maximum stipulated in Section E above. In addition, the
Committee will have the flexibility to adjust the individual performance
portion for Executive Vice Presidents and above, based on the Committee's
judgment of the participant's performance.
G. FORM AND TIMING OF PAYMENT
Amounts payable under the provisions of this Plan will be paid in cash
within 90 days of the end of the applicable fiscal year of the Company.
H. SPECIAL AWARD FUND
Notwithstanding Section E of this Plan, the Committee will reserve a fund
each year for the payment of special awards under this Plan. A special award
may be granted to any employee of the Company, whether or not eligible for
other payments under this Plan, in recognition of a unique contribution to the
Company beyond the employee's usual and customary responsibilities.
Such awards may be paid at any time, upon the recommendation of the CEO and
the approval of the Committee. The sum of all such awards may not exceed the
fund reserved by the Committee for the year to which the awards are
applicable.
I. TERMINATION OF EMPLOYMENT
If an eligible employee is terminated prior to year-end by reason of death,
disability, or retirement, a prorated award will be payable on the basis of
the portion of base salary earned by the terminee during the year of
termination. If an eligible employee is terminated prior to year-end for any
reason other than death, disability, or retirement, the amount then payable to
the terminee under this Plan will be subject to the sole discretion of the
Committee, upon the recommendation of the CEO.
In the latter case, however, such amount may not exceed a pro-rata share of
the maximum individual award payable to that individual under this Plan, where
the pro-rata share is the number of months of employment for that year divided
by 12.
J. TRANSFERS, PROMOTIONS, AND NEW HIRES
The CEO may recommend to the Committee the degree and basis of participation
by an employee whose eligibility for participation may change during the year
as a result of transfer, promotion or beginning of employment by the Company.
K. PARTICIPANTS' RIGHTS
The payment of an award to an employee with respect to any one year
guarantees the employee neither future employment by the Company nor future
payments under this Plan. Employees' rights under this Plan are not
assignable.
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L. RIGHT TO DEFER RECEIPT OF AN AWARD
An eligible employee has the right to defer receipt of an Award, prior to
the time it is earned, to a chosen date, not later than termination, death,
total and permanent disability, or retirement. The deferred portion of the
award would appreciate in value using a changing three-month federal treasury
bill rate adopted at the first auction of each calendar quarter and no taxes
would be payable until the award and earnings were received by the
participant.
M. AMENDMENT OF THE PLAN
This Plan may be amended by the Committee, subject to ratification by the
Company's Board of Directors.
N. QUALIFIED MANAGEMENT INCENTIVE AWARDS
(i) DESIGNATION. The Committee, in its discretion, may at the time any
individual is designated for participation in the Plan for the fiscal year,
designate the award to be made to the individual under the Plan as a
"Qualified Management Incentive Award." Except as otherwise provided in this
Section N, Qualified Management Incentive Awards are intended to be
"performance-based compensation" as that term is used in Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), and shall comply with
the requirements of this Section N to the extent such compliance is determined
by the Committee to be required for the Qualified Management Incentive Awards
to be treated as "performance-based compensation." The Committee, at the time
of grant of a Qualified Management Incentive Award, may make settlement of a
portion of the award contingent on the achievement of such strategic
individual goals as may be established by the Committee; provided, however,
that the portion of the award that is contingent on achievement of strategic
individual goals is not intended to be "performance-based compensation." To
the extent that the provisions of this Section N reflect the requirements
applicable to "performance-based compensation," such provisions shall not
apply to the portion of the award, if any, which is not intended to satisfy
the "performance-based compensation" requirements.
(ii) MAXIMUM AWARD. Each Qualified Management Incentive Award shall be
subject to the limitations of Section E; provided, however, that the
determination of base pay for the year shall be made using the rate as in
effect at the beginning of the fiscal year, without regard to changes made
during the year; and further provided that if a participant is designated as
eligible for a Qualified Management Incentive Award for any year, the
participant may not be granted a management incentive award that is not a
Qualified Management Incentive Award for the same year.
(iii) PERFORMANCE GOALS. Notwithstanding the provisions of Section F (or the
related administrative rules), for any Qualified Management Incentive Award,
the performance goals established for the fiscal year under Section F shall be
objective (as that term is described in regulations under Code Section
162(m)), and shall be established in writing by the Committee not later than
90 days after the beginning of the performance period (but in no event after
25% of the fiscal year has elapsed), and while the outcome as to the
performance goals is substantially uncertain. The performance targets
established by the Committee with respect to corporate performance, operating
group or subgroup performance, individual international company performance or
division performance shall be based on one or more of the following specific
performance goals: sales and earnings.
(iv) ATTAINMENT OF PERFORMANCE GOALS. Subject to Section N(v), a participant
otherwise entitled to receive a Qualified Management Incentive Award for any
year shall not receive a settlement of the award
43
<PAGE>
until the Committee has determined that the applicable performance goal(s)
have been attained. To the extent that the Committee exercises discretion in
making the determination required by this Section N(iv), such exercise of
discretion may not result in an increase in the amount of the target award
percentage.
(v) EXCEPTIONS TO PERFORMANCE GOAL REQUIREMENT. If a participant's
employment terminates because of death or disability, the participant's
Qualified Management Incentive Award shall become vested in accordance with
Section I without regard to whether the Qualified Management Incentive Award
would be "performance-based compensation" under Code Section 162(m). However,
if a participant's employment terminates because of retirement prior to the
end of a performance period, any pro-rata settlement of a Qualified Management
Incentive Award described in Section I shall not be made until the end of the
performance period, and such settlement shall not exceed the settlement that
the participant would have received if the participant's retirement had
occurred immediately after the end of the performance period.
(vi) SPECIAL AWARDS. A special award described in Section H may be
designated as a Qualified Management Incentive Award, provided that the award
otherwise satisfies the foregoing requirements of this Section N.
44
<PAGE>
EXHIBIT D
THE NON-EMPLOYEE DIRECTORS STOCK COMPENSATION PLAN
NALCO CHEMICAL COMPANY
1. PURPOSE
The Non-employee Directors Stock Compensation Plan (the "Plan") of Nalco
Chemical Company (the "Company") is intended to provide Company Common Stock
to the Non-employee Directors, to increase their stock ownership in the
Company as an incentive to superior performance and to more closely align
their interests with those of the Company's other shareholders.
2. DEFINITIONS
a) "Company" means Nalco Chemical Company.
b) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
c) "Non-employee Director" means any member of the Board of Directors who
is not an employee of the Company or of any of its subsidiaries or
affiliates.
d) "Common Stock" means shares of Common Stock of the Company, $.1875 par
value per share, as may from time to time be adjusted according to
Paragraph 7.
e) "Share Unit" means the equivalent of one share of Common Stock.
3. SHARES SUBJECT TO PLAN
Subject to Paragraph 7, the aggregate number of shares of Common Stock that
may be awarded under this Plan shall not exceed 50,000 shares. Common Stock
awarded pursuant to this Plan shall be Treasury shares (shares of Common Stock
reacquired by the Company).
4. PARTICIPATION
Only Non-employee Directors shall be eligible to participate in the Plan.
5. AWARDS
As soon as practicable following the annual meeting of shareholders each
year, the Company shall deliver 200 shares of Common Stock to each person who
is a new or continuing Non-employee Director as of such meeting. Such shares
shall be considered as part of the retainer paid to each Non-employee Director
for his or her services as a director.
6. DEFERRAL
A Non-employee Director may elect, by notice to the Company, to defer
receipt of the shares of Common Stock until his or her retirement from the
Company's Board of Directors. Upon such election an account shall be set up on
the Company's books in the Non-employee Director's name. This account shall
contain one Share Unit for each share of Common Stock deferred. Whenever the
Company declares a dividend on its Common Stock, an amount equal to the amount
of the dividend that the Non-employee Director would have received had each
Share Unit in his account been a share of Common Stock shall be converted into
Share Units based on the closing price on the New York Stock Exchange
Composite Price Index for the date approved by the Board for payment of
dividends on the Company's Common Stock. Stock dividends shall be converted on
the basis of one Share Unit for each share of Common Stock.
45
<PAGE>
Upon leaving the Company's Board, the Company shall within a reasonable time
period have issued to the Non-employee Director shares of Common Stock equal
to the whole number of Share Units in his or her account, plus cash in lieu of
any fractional Share Units.
7. SHARE ADJUSTMENTS
In the event of any reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger, consolidation, spin-off, or any other
change in the capital structure of the Company, the number of shares subject
to the Plan and the number and kind of shares of Common Stock to be awarded
thereunder and any Share Units in accounts of Non-employee Directors shall be
equitably adjusted to reflect the occurrence of such event and to preserve the
value of future awards.
8. NON-TRANSFERABILITY
No right under this Plan shall be transferable or otherwise subject to
anticipation, sale, assignment, pledge, encumbrance or charge except by will
or the laws of descent and distribution. No Non-employee Director or other
person claiming under or through a Non-employee Director shall have any right,
title or interest by reason of this Plan to any particular assets of the
Company.
9. REGISTRATION OR QUALIFICATION OF SHARES
The Company shall arrange, at its expense, for any required listing,
approval or notice of issuance of shares subject to this Plan on any stock
exchange on which the Common Stock may be traded, and shall register or
qualify the shares under any state or federal law or regulation that is
necessary in order for the shares to be sold.
10. TAXES
The issuance of shares of Common Stock under this Plan shall be subject to
any applicable taxes or other laws or regulations of the United States of
America and any state or local authority having jurisdiction thereover.
11. EFFECTIVE DATE
The effective date of the Plan (subject to shareholder approval) is January
1, 1996. No awards may be made after December 31, 2005.
12. TERMINATION AND AMENDMENT
The Board of Directors may terminate this Plan or make such modifications or
amendments to this Plan as it may deem advisable, except where such amendments
or modifications would affect the status of the Plan or the Non-employee
Directors under Exchange Act Section 16. However, the Plan may not be amended
more often than once every six months, other than to conform with changes in
Section 16 of the Exchange Act, the Internal Revenue Act of 1986, as amended,
or the rules and regulations issued thereunder.
If any provision of this Plan would cause a Non-employee Director not to be
a "disinterested person" within the meaning of Rule 16b-3 under the Exchange
Act as then applicable to any employee benefit plan of the Company, or such
provision does not comply with the requirements of Rule 16b-3 as then
applicable to an award of shares hereunder, such provision shall be construed
or deemed amended to the extent necessary to preserve such Non-employee
Director's status as a "disinterested person" or to conform to such
requirements.
46
<PAGE>
NOTICE OF
ANNUAL
MEETING
AND
PROXY
STATEMENT
THURSDAY, APRIL 18, 1996
NALCO CHEMICAL COMPANY
ONE NALCO CENTER, NAPERVILLE, ILLINOIS
60563-1198
<PAGE>
- -------------------------------------------------------------------------------
P R O X Y / D I R E C T I O N
||
||
NALCO CHEMICAL COMPANY
ONE NALCO CENTER, NAPERVILLE, ILLINOIS 60563-1198
PROXY/DIRECTION SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR THE 1996 ANNUAL MEETING
The undersigned hereby appoints M. B. Harp, E. J. Mooney and W. S. Weeber, and
each of them, attorneys and proxies of the undersigned, with full power of sub-
stitution, to represent and vote all the shares held in the undersigned's name
and shares held by agents in Plans, hereafter described, subject to the voting
direction of 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 Thursday, April 18, 1996, at 10:00 A.M., local time, or at any ad-
journments thereof, on all matters coming before said meeting.
ALL SHARES VOTABLE HEREBY BY THE UNDERSIGNED INCLUDE SHARES, IF ANY, HELD IN
THE NAME OF AGENTS, FOR THE BENEFIT OF THE UNDERSIGNED, IN THE COMPANY'S PROFIT
SHARING, ESOP AND DIVIDEND REINVESTMENT PLANS.
ELECTION OF CLASS III DIRECTORS: (Change of address/comments)
H. G. Bernthal ------------------------------------
W. A. Pogue ------------------------------------
J. J. Shea ------------------------------------
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.
<PAGE>
- -------------------------------------------------------------------------------
[X] Please mark your __ | 7824
votes as in this | |___
example.
THIS PROXY/DIRECTION WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY/DIRECTION WILL BE VOTED FOR PROPOSALS 1, 2, 3, 4, 5, AND 6 AND IN THE
DISCRETION OF THE PROXIES ON ALL OTHER MATTERS PROPERLY COMING BEFORE THE
MEETING.
- --------------------------------------------------------------------------------
DIRECTORS RECOMMEND A VOTE "FOR"
- --------------------------------------------------------------------------------
1. Election of Directors
FOR* WITHHOLD
[_] [_]
*FOR, except vote withheld from the following nominee(s):
- --------------------------------------------------------
2. Approval of Independent Accountants
FOR AGAINST ABSTAIN
[_] [_] [_]
3. Approval of the Employee Stock Compensation Plan
FOR AGAINST ABSTAIN
[_] [_] [_]
4. Approval of the Performance Share Plan
FOR AGAINST ABSTAIN
[_] [_] [_]
5. Approval of the Management Incentive Plan
FOR AGAINST ABSTAIN
[_] [_] [_]
6. Approval of the Non-employee Directors Stock Compensation Plan
FOR AGAINST ABSTAIN
[_] [_] [_]
- -------------------------------------------------------------------------------
------------------------------
If you have noted [_]
comments on the other
side of the card, please
mark box at right.
------------------------------
SIGNATURE(S) ___________________________ DATE _______________, 1996
NOTE: 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 .
