FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-4957
NALCO CHEMICAL COMPANY
Incorporated in the State of Delaware
Employer Identification No. 36-1520480
One Nalco Center, Naperville, Illinois 60563-1198
Telephone 630-305-1000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
The number of shares outstanding of each of the issuer's classes of common
stock, as of September 30, 1996 was 67,356,196 shares common stock - par value
$.1875 a share.
NALCO CHEMICAL COMPANY
INDEX Page No.
Part I. Financial Information:
Item 1. Financial Statements
Condensed Consolidated Statements of
Financial Condition - September 30, 1996
(Unaudited) and December 31, 1995.......... ..............2
Condensed Consolidated Statements of
Earnings (Unaudited) - Three Months and
Nine Months Ended September 30, 1996 and 1995.............3
Condensed Consolidated Statements of
Cash Flows (Unaudited) - Three Months and
Nine Months Ended September 30, 1996 and 1995.............4
Notes to Condensed Consolidated Financial
Statements (Unaudited)....................................5
Report of Independent Accountants on
Review of Interim Financial Information...................9
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations............................................10
Part II. Other Information:
Item 6. Exhibits and Reports on Form 8-K..........................13
Exhibit (10)(a)-Performance Share Plan as Amended
Effective February 16, 1996 and
October 17, 1996..........................14
Exhibit (10)(b)-1990 Stock Option Plan as Amended
April 23, 1992, February 12, 1993
and October 17, 1996........................23
Exhibit (10)(c)-Employee Stock Compensation Plan as
Amended Effective January 1, 1996
and October 17, 1996........................27
Exhibit (10)(d- 1982 Stock Option Plan as Amended
April 26, 1984, January 30, 1987,
February 12, 1993 and October 17, 1996......34
Exhibit (11) - Statement Re: Computation
of Earnings Per Share........................38
Exhibit (15) - Awareness Letter of Independent
Accountants..................................40
Exhibit (27) - Financial Data Schedule......................41
Signatures..................................................42
PART I. FINANCIAL INFORMATION
NALCO CHEMICAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
<S> <C> <C>
September 30, December 31,
1996 1995
(Dollars in millions) (Unaudited) (Note)
ASSETS
Current assets
Cash and cash equivalents $ 45.6 $ 38.1
Accounts receivable, less allowances
of $5.0 and $4.4, respectively 232.4 220.3
Inventories
Finished products 62.9 62.4
Materials and work in process 29.6 29.0
------- --------
92.5 91.4
Prepaid expenses, taxes and other
current assets 20.8 20.2
Discontinued operations - net 43.6 -
------- -------
Total current assets 434.9 370.0
Investment in and advances
to partnership 127.2 126.2
Discontinued operations - net - 47.1
Goodwill and other intangibles,
less accumulated amortization
of $22.4 and $18.6, respectively 206.0 131.0
Other assets 163.2 175.8
Property, plant and equipment 1,152.3 1,101.6
Less allowances for depreciation (631.7) (581.6)
-------- --------
520.6 520.0
-------- --------
$1,451.9 $1,370.1
======== ========
LIABILITIES/SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt $ 89.9 $ 95.0
Accounts payable 104.1 126.9
Accrued formation and
consolidation expenses 15.9 22.7
Other current liabilities 130.5 111.2
-------- --------
Total current liabilities 340.4 355.8
Long-term debt 253.0 221.5
Deferred income taxes 52.2 53.3
Accrued postretirement benefits 99.1 97.7
Other liabilities 63.6 61.5
Shareholders' equity 643.6 580.3
-------- --------
$1,451.9 $1,370.1
======== ========
</TABLE>
Note: The Statement of Financial Condition at December 31, 1995 has been
derived from the audited financial statements at that date.
See accompanying Notes to Condensed Consolidated Financial Statements
(Unaudited).
NALCO CHEMICAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
(Amounts in millions, September 30 September 30
except per share data) 1996 1995 1996 1995
------ ------ ------ -----
Net sales $343.3 $310.0 $963.8 $904.8
Operating costs and expenses
Cost of products sold 147.0 135.9 421.6 396.5
Operating expenses 132.6 119.7 383.5 354.7
------ ------ ------ ------
279.6 255.6 805.1 751.2
------ ------ ------ ------
Operating earnings 63.7 54.4 158.7 153.6
Other income (expense)
Interest and other income - 2.0 0.2 5.3
Interest expense(4.3) (4.1) (11.3) (12.5)
Equity in earnings of partnership 5.0 3.7 18.0 11.9
------ ------ ------ ------
Earnings from continuing operations
before income taxes 64.4 56.0 165.6 158.3
Income taxes 23.4 20.5 60.1 57.5
------ ------ ------ ------
Earnings from continuing operations 41.0 35.5 105.5 100.8
Discontinued operations, net of income taxes 1.5 5.0 5.8 14.6
------ ------ ------ ------
Net earnings $ 42.5 $ 40.5 $111.3 $115.4
====== ====== ====== ======
Per common share - Primary
Earnings from continuing operations $ 0.56 $ 0.48 $ 1.43 $ 1.35
Discontinued operations,
net of income taxes 0.03 0.08 0.09 0.22
------ ------ ------ ------
Net earnings $ 0.59 $ 0.56 $ 1.52 $ 1.57
====== ====== ====== ======
Per common share - Fully diluted
Earnings from continuing operations $ 0.52 $ 0.45 $ 1.34 $ 1.26
Discontinued operations,
net of income taxes 0.02 0.07 0.08 0.20
------ ------ ------ ------
Net earnings $ 0.54 $ 0.52 $ 1.42 $ 1.46
====== ====== ====== ======
Per common share - Cash dividends $ 0.25 $ 0.25 $ 0.75 $ 0.74
====== ====== ====== ======
Average primary shares outstanding
(in thousands) 67,664 67,827 67,601 68,052
Average fully diluted shares
outstanding (in thousands) 75,710 75,851 75,693 76,107
</TABLE>
NALCO CHEMICAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
September 30 September 30
(Dollars in millions) 1996 1995 1996 1995
-------- ------- -------- ------
Cash provided by (used for)
operating activities
Net earnings $ 42.5 $ 40.5 $111.3 $115.4
Adjustments not affecting cash
Depreciation and amortization 26.5 22.2 74.3 66.0
Other, net (4.4) (2.5) (7.4) (15.7)
Changes in current assets and
liabilities 17.8 (8.9) (15.6) (24.9)
------ ----- ------ ------
Net cash provided by operations 82.4 51.3 162.6 140.8
------ ------ ------ ------
Investing activities
Additions to property,
plant and equipment (17.8) (35.7) (66.4) (96.7)
Business purchase - - (81.8) -
Other 8.9 14.5 16.2 0.3
------ ------ ------ -----
Net cash used for
investing activities (8.9) (21.2) (132.0) (96.4)
------ ------ ------ ------
Financing activities
Cash dividends (19.6) (19.7) (59.0) (58.5)
Changes in short-term debt 10.4 (1.7) (8.9) 33.1
Changes in long-term debt (52.2) 1.8 44.3 2.7
Common stock reacquired (6.4) (12.7) (6.4) (36.0)
Other 2.7 1.2 6.4 8.7
------ ------ ----- ------
Net cash used for
financing activities (65.1) (31.1) (23.6) (50.0)
------ ------ ----- ------
Effects of foreign exchange
rate changes (0.5) (0.7) 0.5 0.3
------ ------ ------ -----
Increase (decrease) in cash
and cash equivalents $ 7.9 $ (1.7) $ 7.5 $ (5.3)
====== ====== ====== ======
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
(Unaudited).
NALCO CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 1996
NOTE A -- BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been prepared,
without audit, in accordance with the instructions to Form 10-Q and therefore do
not include all information and footnotes necessary for a fair presentation of
financial position, results of operations, and cash flows in conformity with
generally accepted accounting principles. Financial information as of December
31 has been derived from the audited financial statements of the Company, but
does not include all disclosures required by generally accepted accounting
principles.
It is the opinion of management that the unaudited condensed consolidated
financial statements include all adjustments necessary to fairly state the
results of operations for the three month and nine month periods ended September
30, 1996 and 1995. The results of interim periods are not necessarily indicative
of results to be expected for the year. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1995.
The unaudited condensed consolidated financial statements and the related notes
have been reviewed by Nalco's independent accountants, Price Waterhouse LLP. The
Independent Accountants' Review Report is included on page 9.
NOTE B -- SHAREHOLDERS' EQUITY
Shareholders' equity may be further detailed as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
September 30 December 31,
(Dollars in millions, 1996 1995
------------ --------
except per share figures)
Preferred stock par value $1.00 per share; authorized
2,000,000 shares; Series B
ESOP Convertible
Preferred Stock - 394,981 shares
at September 30, 1996 and 399,400
shares at December 31, 1995 $ 0.4 $ 0.4
Series A Junior Participating
Preferred Stock - none issued at
December 31, 1995 - -
Series C Junior Participating
Preferred Stock - none issued at
September 30, 1996 - -
Capital in excess of par value
of shares 189.6 191.7
Unearned ESOP compensation (159.6) (166.6)
------- -------
30.4 25.5
Common stock -
par value $.1875 per share;
authorized 200,000,000 shares;
issued 80,287,568 shares 15.1 15.1
Capital in excess of par value
of shares 28.4 27.8
Retained earnings 968.5 916.2
Minimum pension liability adjustment (6.0) (6.0)
Foreign currency translation
adjustments (44.5) (48.0)
Common stock reacquired - at cost
12,931,372 shares at
September 30, 1996 and 13,163,155
shares at December 31, 1995 (348.3) (350.3)
------- -------
Total shareholders' equity $ 643.6 $ 580.3
======= =======
</TABLE>
NOTE C - FORMATION AND CONSOLIDATION EXPENSES
The Company adopted a worldwide consolidation plan for manufacturing and support
operations during 1994, primarily as a result of the formation of the
Nalco/Exxon Energy Chemicals, L.P. joint venture partnership. The production
volume reduction caused by redundancies associated with the joint venture
formation required the Company to downsize, close, and consolidate operations.
The Company's South Chicago plant was closed, and several European and Latin
American manufacturing and support operations have been or will be closed or
downsized. In addition, certain support functions are being regionalized on a
pan European basis in order to more efficiently serve customers. Certain
redundant assets that were not contributed to the joint venture have been
written down to net realizable value, and assets associated with other programs
have been or will be written off. Most of these activities are still in process,
and should be completed within the next year.
As a result of these plans, the Company recorded a pretax provision of $68
million ($54 million after tax, or 70 cents per share on a fully diluted basis)
in 1994. Included in this provision was the cost of termination benefits for the
elimination of over 400 positions, primarily in the United States and Europe,
including manufacturing and support personnel, totaling approximately $27
million in cash. Costs associated with facility closings and the disposition of
assets that are no longer productive totaled approximately $24 million,
including $21 million for non-cash asset write-offs and $3 million in cash
payments associated with asset disposals. The balance of the pretax costs
represented anticipated cash payments for post-closure plant environmental
remediation, legal and consulting fees, and other exit costs. Cash expenditures
charged against the provision to date have been funded through operating cash
flows, and the Company anticipates that future cash expenditures will be
similarly funded. A tax benefit of $14 million, net of tax costs associated with
the contribution of assets to various joint venture entities, was included in
the Company's 1994 income tax provision related to the formation and
consolidation expenses.
Charges against the provision for formation and consolidation expenses totaled
$25.0 million in 1994, $20.5 million in 1995, and $6.8 million in the first nine
months of 1996. Over 300 employees have been terminated as of September 30,
1996. The following table sets forth the details of activity in the accrual for
formation and consolidation expenses for the first nine months of 1996:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Balance at Balance at
December 31, Cash Noncash September 30,
(in millions) 1995 Payments Charges 1996
- --------------------------------------------------------------------------------------------------------
Termination
benefits $ 8.1 $(3.6) $ - $ 4.5
Asset
write-downs 7.1 (0.2) (2.1) 4.8
Legal and
consulting 1.5 (0.8) - 0.7
Environmental
remediation 6.0 (0.1) - 5.9
- -----------------------------------------------------------------------------------------------------------
Total $22.7 $(4.7) $(2.1) $15.9
===========================================================================================================
</TABLE>
NOTE D -- IMPAIRMENT OF LONG-LIVED ASSETS
Effective January 1, 1996, the Company implemented Statement of Financial
Accounting Standards No. 121 (SFAS 121), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which requires
companies to review long-lived assets, including identifiable intangibles and
goodwill, for indicators of impairment. The effect of adopting SFAS 121 was not
material.
NOTE E -- ACQUISITION
On June 28, 1996, the Company completed the acquisition of Diversey Water
Technologies (DWT), a supplier for the middle market water treatment business.
The purchase price was approximately $82 million, and the Company anticipates
that this acquisition will strengthen the Company's business in North America
and Europe. The pro forma impact as if this acquisition had occurred at the
beginning of 1996 is not material.
The $75.0 million increase in goodwill and other intangibles is mainly
attributable to the acquisition of DWT. The Company is in the process of
evaluating the assets that were purchased and the liabilities that were assumed
in this acquisition and accordingly will make any necessary adjustments to the
recorded value of the acquired assets and liabilities.
NOTE F -- SUBSEQUENT EVENT
On October 28, 1996, the Company announced that it had completed the sale of its
discontinued superabsorbent chemicals business to Stockhausen, GmbH & Co., KG. A
final determination of the gain from the disposal of this business has not yet
been completed, but the Company expects to realize a small gain.
REPORT OF INDEPENDENT ACCOUNTANTS ON REVIEW
OF INTERIM FINANCIAL INFORMATION
To the Board of Directors and
Shareholders of Nalco Chemical Company
We have reviewed the accompanying interim financial information of Nalco
Chemical Company and consolidated subsidiaries as of September 30, 1996, and for
the three month and nine month periods then ended. This interim financial
information is the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial information for it to be in conformity
with generally accepted accounting principles.
We previously audited in accordance with generally accepted auditing standards,
the statement of consolidated financial condition as of December 31, 1995, and
the related statements of consolidated earnings, of cash flows and of common
shareholders' equity for the year then ended (not presented herein), and in our
report dated February 2, 1996, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying condensed consolidated statement of financial condition as of
December 31, 1995, is fairly stated in all material respects in relation to the
statement of consolidated financial condition from which it has been derived.
Price Waterhouse LLP
By: Robert R. Ross
Engagement Partner
October 24, 1996
Chicago, Illinois
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Third Quarter 1996 Operations Compared to Third Quarter 1995
On February 2, 1996, Nalco announced its plan to dispose of its superabsorbent
chemicals business. The results of this business are now reported as
discontinued operations. The Unaudited Condensed Consolidated Statements of
Earnings presented in Part I, Item 1 of this Form 10-Q reflect the
superabsorbent chemicals business as discontinued operations.
During the second quarter, the Company agreed in principle to sell its
discontinued superabsorbent chemical business. The sale was completed in late
October 1996 and is expected to result in a small gain.
Sales from continuing operations increased by 11 percent over last year with
improvements reported by all five divisions. The Water and Waste Treatment
Division reported a sales increase of 17 percent which included additional sales
by the recently acquired Diversey Water Technologies (DWT). The Process
Chemicals Division reported a 10 percent sales increase with the Pulp and Paper
Chemicals Group reporting a strong double-digit percent gain for the period. The
Latin America Division posted a 17 percent sales increase for the period, as
operations in Argentina, the Caribbean, Mexico, and Venezuela reported solid
double-digit improvements over last year. The Pacific Division reported a 6
percent increase over last year. However, excluding amounts from 1995 sales for
business now with the Nalco/Exxon joint venture, Pacific Division sales were up
17 percent. Double-digit gains were posted by operations in Indonesia, Japan,
Korea, and Thailand. Sales by the Company's former affiliate in India, which
became a majority owned subsidiary in the fourth quarter of 1995, also
contributed to growth in the region. The Europe Division reported a modest 3
percent gain for the quarter. Double-digit gains by the Division's Pulp and
Paper Group and Nalfleet Group, along with sales by the European operations of
the newly acquired DWT, were partly offset by the impact of the stronger U.S.
dollar compared to last year and business now with the Nalco/Exxon joint
venture.
The gross margin of 57.2 percent for the third quarter of 1996 was up over last
year's rate of 56.2 percent, with about half the improvement attributable to
higher margins for DWT. Improved margins in North America, Europe, and the
Pacific offset a slight decline in Latin America margins.
Operating expenses (selling, service, research, etc.) were up $12.9 million or
11 percent over the third quarter of last year. Expenses of DWT and other
operations acquired since the third quarter 1995 account for most of the
increase.
Interest and other income decreased by $2.0 million from a year ago, primarily
due to a gain on sale of assets which was recognized last year. The slight
increase in interest expense over the third quarter of last year includes
financing costs associated with the acquisition of DWT.
Nalco's equity in Nalco/Exxon for the third quarter of 1996 was $5.0 million, an
increase of $1.3 million over the third quarter of 1995, which reflected
improved operating efficiencies and industry conditions.
The effective income tax rate for the third quarter 1996 was 36.3 percent,
compared to the 36.6 percent rate that was reported for the third quarter 1995.
Earnings from continuing operations as a percent to sales was 11.9 percent for
the third quarter 1996, a slight improvement compared to the 11.5 percent for
the third quarter 1995. Third quarter 1996 fully diluted earnings per share from
continuing operations was 52 cents compared to 45 cents for the third quarter
1995. Net earnings per share on a fully diluted basis for the third quarter 1996
was 54 cents compared to 52 cents for the third quarter 1995.
First Nine Months 1996 Operations Compared to First Nine Months 1995
Sales from continuing operations increased by 7 percent over last year with four
of the five divisions reporting improvements. The Water and Waste Treatment
Division reported a 7 percent gain, with slightly more than half the increase
attributable to sales by the recently acquired DWT. Modest improvements were
also reported by all four groups in the Division. The Process Chemicals Division
reported a 10 percent increase over last year, with the Pulp and Paper Group
posting a double-digit gain. The Latin American Division reported a 16 percent
sales increase, with most operations posting double-digit gains. Sales by the
Pacific Division were up 3 percent over reported sales for last year, which
reflected business that was transferred as of the beginning of 1996 to the
Nalco/Exxon joint venture. Excluding those amounts from 1995 sales, Pacific
Division sales were up 14 percent, as solid double-digit improvements were
posted by operations in Indonesia and Korea. Sales by Nalco's former affiliate
company in India, which became a majority owned subsidiary in the fourth quarter
of 1995, also contributed to the improvement in the Pacific Division. Sales by
the Europe Division were comparable to a year ago. Sales decreases due to the
stronger U.S. dollar compared to last year and business now with the Nalco/Exxon
joint venture were offset by sales by the European operations of DWT.
The gross margin for the first nine months of 1996 improved slightly to 56.3
percent compared to last year's rate of 56.2 percent. Improved margins in the
Europe and Pacific Divisions were partly offset by slightly lower margins in
North America and Latin America.
Operating expenses (selling, service, research, etc.) were up $28.8 million or 8
percent over last year. Expenses of DWT and other operations acquired since a
year ago accounted for more than one-third of the increase. Most of the
remainder was to support growth in the Pacific, Latin America, and the paper
market.
Interest and other income decreased $5.1 million from a year ago. Contributing
to this decline were translation losses resulting from the devaluation of the
Venezuelan bolivar during the second quarter of 1996, lower interest income
reflecting a decrease in invested balances, and a gain on the sale of assets
recognized last year. Interest expense was down $1.2 million from the first nine
months of last year, which was mainly attributable to lower interest rates.
Increased borrowing levels during the third quarter 1996 to finance the
acquisition of DWT partly offset the impact of those factors.
Nalco's equity in earnings of Nalco/Exxon for the first nine months of 1996 was
$18.0 million, a $6.1 million increase over the $11.9 million reported last
year.
The effective income tax rate was 36.3 percent for the first nine months of
1996, equivalent to the rate for the first nine months of 1995.
Earnings from continuing operations as a percent to sales was 10.9 percent for
the first nine months of 1996, down slightly from the 11.1 percent for the first
nine months of 1995. Fully diluted earnings per share from continuing operations
was $1.34 for the first nine months of 1996 compared to $1.26 a year ago. Net
earnings per share on a fully diluted basis for the first nine months of 1996
was $1.42 compared to $1.46 a year ago.
Changes in Financial Condition
The September 30, 1996 Unaudited Condensed Consolidated Statement of Financial
Condition reflects the acquisition of Diversey Water Technologies on June 28,
1996 for a purchase price of $82 million. The final valuation of assets that
were acquired in this acquisition has not been determined and may differ
slightly from the valuations that have been included in the September 30, 1996
Unaudited Condensed Consolidated Statement of Financial Condition.
Cash and cash equivalents increased by $7.5 million during the first nine months
of 1996 as detailed in the Unaudited Condensed Consolidated Statement of Cash
Flows.
Days sales outstanding were 63 days at September 30, 1996 compared to 64 days at
December 31, 1995. Working capital at September 30, 1996 totaled $94.5 million,
up from the $14.2 million at last year end. The reclassification of the net
assets of the discontinued superabsorbent chemical business to current assets
and a decrease in accounts payable accounted for most of this change. The ratio
of current assets to current liabilities was 1.3 to 1 at September 30, 1996
compared to a current ratio of 1 to 1 at December 31, 1995.
The $75.0 million increase in goodwill and other intangibles is mainly
attributable to the acquisition of DWT.
The acquisition of DWT was financed primarily by the issuance of commercial
paper (30-day notes). At September 30, 1996, $50.0 million of the commercial
paper outstanding has been classified as long-term debt because it currently is
management's intent to refinance these obligations on a long-term basis.
Capital investments totaled $66.4 million for the first nine months of 1996.
Domestic projects accounted for nearly 60 percent of that amount, with major
expenditures for PORTA-FEED(R) units and automobiles for the sales force.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are included herein:
(10)(a) Performance Share Plan as Amended Effective
February 16, 1996 and October 17, 1996
(10)(b) 1990 Stock Option Plan as Amended April 23,
1992, February 12, 1993 and October 17, 1996
(10)(c) Employee Stock Compensation Plan as Amended
Effective January 1, 1996 and October 17, 1996
(10)(d) 1982 Stock Option Plan as Amended April 26,
1984, January 30, 1987, February 12, 1993 and
October 17, 1996
(11) Statement Re: Computation of Earnings Per Share
(15) Awareness Letter of Independent Accountants
(27) Financial Data Schedule
(b) The Registrant did not file any reports on Form 8-K during the
three months ended September 30, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NALCO CHEMICAL COMPANY
(Registrant)
Date: November 14, 1996 /s/W. E. BUCHHOLZ
----------------------
W.E. Buchholz - Vice President,
Chief Financial Officer
Date: November 14, 1996 /s/ S. J. GIOIMO
--------------------
S. J. Gioimo - Secretary
EXHIBIT (10)(a)
Performance Share Plan
Nalco Chemical Company
As Amended Effective February 16, 1996 and October 17, 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.
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.
3.8The "Earnings erformance" 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.
SECTION 4
Eligibility
4.1Eligibility. 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
4.2Each 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
5.1The 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.
5.2Committee 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.
6.2Discretion 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.
6.3Determination 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
7.1Normal 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.
8.2Establishment 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.
8.3Establishment 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.
8.4Time 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.
8.5Limitations. 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.
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.
9.2Determination 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 invested 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 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 ss.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.
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. The participant shall have the right to request the Company to
withhold shares from any stock distribution in payment of any applicable
withholding taxes. Such shares shall be valued in accordance with Section 9.2.
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 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.
EXHIBIT (10)(b)
1990 STOCK OPTION PLAN
AS AMENDED APRIL 23,1992,
FEBRUARY 12,1993 AND OCTOBER 17, 1996
NALCO CHEMICAL COMPANY
1. Purpose. This Stock Option 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. The term "Subsidiary" means any corporation 50% or more of the voting
shares of which are owned, directly or indirectly, by the Company.
2. Stock Subject to the Plan. An aggregate of 6,000,000 shares of the
Common Stock (par value of $0.1875 per share)1 of the Company will be reserved
for use upon the exercise of Options to be granted from time to time under the
Plan. These shares may be either authorized but unissued shares, or issued
shares which shall have been reacquired by the Company.
3. Administration. The Plan shall be administered by a Stock Option
Committee (the "Committee") appointed by the Company's Board of Directors, and
consisting of not less than three of its members who are not employees of the
Company or its subsidiaries. The Committee shall have authority in its
discretion, but subject to the express provisions of the Plan, to: (a) determine
the key management employees of the Company and its subsidiaries to whom Options
shall be granted; (b) determine the number of shares to be covered by each
Option; (c) determine the type of options to be granted; (d) determine the time
or times at which Options shall be granted or may be cashed out; (e) interpret
the Plan; (f) prescribe, amend, and rescind rules and regulations relating to
the Plan; (g) hold its meetings at times and places which it deems to be
appropriate; and (h) make all other determinations deemed necessary or advisable
for the administration of the Plan.
All actions of the Committee with respect to the Plan shall be taken by a
majority of its members. Any action may be taken by a written instrument signed
by a majority 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 minutes of its meetings with respect
to the Plan, and shall make such rules and regulations for the conduct of its
business as it shall deem advisable. The Committee shall administer the Plan in
order to preserve the characterization of options which are granted pursuant to
the Plan.
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 chairman.
4. Eligibility. An Option may be granted to any key management employee of
the Company or a subsidiary, provided that no Option may be granted thereunder
to an individual who immediately after such Option is granted, owns, within the
meaning of Section 422A(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.
5. 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.
6. Granting of Options. Whenever the Committee shall designate a key
management employee to receive a Stock Option pursuant to this Plan, the
President or Secretary of the Company or the Secretary of the Committee shall
notify such employee 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 option, containing such terms and provisions as the Committee shall
prescribe.
7. 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.
8. 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. At the election of the Option, 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 this Option, except to
the extent that one or more certificates for such shares shall be delivered to
him upon the due exercise of the Option. The Option shall have the right to
surrender or deliver shares or to have shares withheld from an Option grant in
payment of applicable withholding taxes due in connection with an Option
exercise, such shares to be valued at fair market value on the date of exercise.
For purposes of this paragraph, "fair market value" shall have the meaning
described in paragraph above.
9. Non-Transferability of Options. An Option shall not be transferable
otherwise than by will or the laws of descent and distribution, and an Option
may be exercised, during the lifetime of an employee, only by him.
10. 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:
(a) Retirement. Upon retirement from the employ of the Company or a
subsidiary pursuant to the Company's retirement program, the employee may
exercise, within three years following such retirement, all or a part of the
shares which the employee was entitled to purchase immediately prior to such
retirement.
(b) Total and Permanent Disability. An employee may exercise, within three
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.
(c) Death. Upon the death of an employee or upon the death of a retired
employee within three 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 three years following his retirement or one year after his 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.
(d) For options granted after January 1, 1992, the phrase three years' set
forth in Paragraphs 10 (a), (b) and (c) shall be five years' wherever it
appears.
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.
11. Other Considerations. Nothing in the Plan or in any Option granted
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 any of its subsidiaries or interfere with the right of the
Company or of the subsidiary by which he is employed to terminate his employment
at any time.
12. Securities Registration. In the event that the Company shall deem it
necessary to register any stock, with respect to which an Option granted
hereunder has been exercised, 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 stock exchange at the
time an Option granted hereunder is exercised and registration of such stock
shall be required under the Securities Exchange Act of 1934 and listing thereof
shall be required on such stock exchange, the Company shall take such action at
its own expense.
13. Adjustments Upon Changes in Capitalization. Appropriate adjustments of
the number of shares reserved for use under the Plan and in the number of shares
and price per share covered by outstanding Options granted under the Plan shall
be made to give effect to any stock splits, stock dividends, 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.
14. 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 of the Company's outstanding shares
represented in person or by proxy at the Company's 1990 Annual Shareholders
Meeting. When so approved, the Plan shall become effective as of April 26, 1990.
The Plan shall terminate on May 1, 2000, and no Option 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.
EXHIBIT (10)(c)
Employee Stock Compensation Plan
Nalco Chemical Company
As Amended Effective January 1, 1996 and October 17, 1996
I. 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.
II. 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 l4 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.
III. 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.
IV. 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 a portion of its functions.
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.
V. 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.
VI. Grants. The Committee may grant either Stock Options or Share Units or
both to eligible persons under this Plan.
VII. 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 option, 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:
1. 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.
2. 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.
3. 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.
VIII. 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 except that no share units shall vest in less than three
years from the date of award.2 Such vesting shall occur only if the grantee on
the date of vesting has 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
1. 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."
2. 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.
3. 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.
4. 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.
5. 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 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.
6. 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.
IX. Withholding of Stock for Payment of Taxes. At the election of the
employee, shares may be withheld from a stock option grant or from an award of
Share Units in payment of applicable withholding taxes upon exercise of a stock
option or upon vesting of Share Units. Such shares shall be valued at the mean
between the highest and the lowest price of sales of shares of the Common Stock
of the Company as reported on the Composite Tape for the New York Stock
Exchange--Composite Transactions on the date for which the option is exercised
or the Share Units vest.3
X. 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.
XI. 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.
XII. 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.
XIII. 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.
XIV. 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.
XV. 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 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.
EXHIBIT 10(d)
1982 STOCK OPTION PLAN
AS AMENDED APRIL 26, 1984, JANUARY 30,
1987, FEBRUARY 12, 1993 AND OCTOBER
17, 1996
NALCO CHEMICAL COMPANY
1. Purpose. This Stock Option 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. The term "Subsidiary" means any corporation 50% or more of the voting
shares of which are owned, directly or indirectly, by the Company.
2. Stock Subject to the Plan. An aggregate of 3,000,000 shares of the
Common Stock (par value of $0.375 per share) of the Company will be reserved for
use upon the exercise of Options to be granted from time to time under the Plan.
These shares may be either authorized but unissued shares, or issued shares
which shall have been reacquired by the Company. It is intended that Options
granted pursuant to the Plan shall be "Incentive Stock Options", as defined in
Section 422A of the Internal Revenue Code (the "Code"), but where specifically
designated may instead be "Nonqualified Options" as referred to in Internal
Revenue Regulations 1.83-7 and 1.421-6.
3. Administration. The Plan shall be administered by a Stock Option
Committee (the "Committee") appointed by the Company's Board of Directors, and
consisting of not less than three of it members who are not employees of the
Company or it subsidiaries. The Committee shall have authority in its
discretion, but subject to the express provisions of the Plan, to:
(a) determine the key management employees of the Company and its
subsidiaries to whom Options shall be granted;
(b) determine the number of shares to be covered by each Option;
(c) determine whether Options granted shall be Incentive Stock Options or
Nonqualified Stock Options;
(d) determine the time or times at which Options shall be granted or may be
forfeited;
(e) interpret the Plan;
(f) prescribe, amend, and rescind rules and regulations relating to the
Plan;
(g) hold its meetings at times and places which it deems to be appropriate;
and
(h) make all other determinations deemed necessary or advisable for the
administration of the Plan.
All actions of the Committee with respect to the Plan shall be taken by a
majority of its members. Any action may be taken by a written instrument signed
by a majority 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 minutes of its meetings with respect
to the Plan, and shall make such rules and regulations for the conduct of its
business as it shall deem advisable. The Committee shall administer the Plan in
order to preserve the characterization, as such, of Options which are granted as
Incentive Stock Options pursuant to the Plan.
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 chairman.
4. Eligibility. An Option may be granted to any key management employee of
the Company or a subsidiary, provided that no Option may be granted hereunder to
an individual who immediately after such Option is granted owns, within the
meaning of Section 422A(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.
5. Option Prices. The Option price of each share of Common Stock offered
under this Plan shall be determined by the Committee, but in no event shall be
less than the greater of par value of the Company's Common Stock, or (i) in the
case of Incentive Stock Options, 100% of the fair market value of the Common
Stock at the time the Option is granted or (ii) in the case of Nonqualified
Options, 100% of the fair market value of the Common Stock 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.
6. Granting of Options. Whenever the Committee shall designate a key
management employee to receive either an Incentive Stock Option or a
Nonqualified Stock Option pursuant to this Plan, the President or Secretary of
the Company or the Secretary of the Committee, shall notify such employee in
writing with respect thereto, clearly identifying Options as being "Incentive"
and/or "Nonqualified" Stock Options, 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 Options shall expire, and shall attach a
copy of the Plan to such Notice. Such Notice shall also advise the option of any
requirement to hold Option shares for a period of time in order to receive
preferential tax treatment, and such Notice shall furthermore require the option
to give the Company prompt written notice of disposition made prior to the end
of such holding period requirement. 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 option,
containing such terms and provisions as the Committee shall prescribe.
7. 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.
8. 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. Payment of the purchase price shall be made in cash or in such other
form as the Committee may approve, including shares of Company Common Stock
valued at fair market value on the date of exercise of the Option or a
combination of cash and shares. The holder of an Option shall not have any of
the rights of a stockholder with respect to the shares covered by this Option,
except to the extent that one or more certificates for such shares shall be
delivered to him upon the due exercise of the Option. For purposes of this
paragraph, "fair market value" shall have the meaning described in paragraph 5
above.
No Incentive Stock Option granted under the Plan prior to January 1, 1987
shall be exercisable while there is outstanding any Incentive Stock Option which
was granted before the granting of such Option to the option to purchase stock
in his employer corporation or in a corporation which (at the time of granting
such Option) is a parent or subsidiary corporation of the employer corporation,
or in a predecessor corporation of any such corporations. For the purposes of
the preceding sentence, any Incentive Stock Option shall be treated as
outstanding until such Option is exercised in full or expires by reason of lapse
of time or by forfeiture.
9. Non-Transferability of Options. An Option shall not be transferable
otherwise than by will or the laws of descent and distribution, and an Option
may be exercised, during the lifetime of any employee, only by him.
10. Maximum Allotment of Options. Effective with respect to options granted
on or after January 1, 1987, the aggregate fair market value (determined as of
the date the option is granted) of the shares with respect to which Incentive
Stock Options are exercisable for the first time by an individual during any
calendar year under the Plan (and all other plans of the Company and its
subsidiaries) shall not exceed $100,000.
11. 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:
a. Retirement. Upon retirement from the employ of the Company or a
subsidiary pursuant to the Company's retirement program, the employee may
purchase, within three years following such retirement, all or a part of the
shares which the employee was entitled to purchase immediately prior to such
retirement. In order to receive preferential tax treatment of an Incentive Stock
Option an employee must exercise such Option prior to, or within three months
after, retirement.
b. Total and Permanent Disability. An employee may purchase, within one
year 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.
c. Death. Upon the death of an employee or upon the death of a retired
employee within three 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
purchase immediately prior to death may be purchased within one year after the
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.
12. Other Considerations. In order to receive preferential tax treatment of
an Incentive Stock Option, an employee must not dispose of stock acquired by
exercise of such Option within two years from the date of its grant and must
hold the stock itself for at least one year. The employee shall have the right
to surrender or deliver shares or to have shares withheld from an Option grant
in payment of applicable withholding taxes due in connection with an Option
exercise, all such shares to be valued at fair market value on the date of
exercise.
Nothing in the Plan or in any Option granted 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 is employed to terminate his employment at any time.
13. Securities Registration. In the event that the Company shall deem
it necessary to register any stock, with respect to which an Option granted
hereunder has been exercised, 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 uch 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 stock exchange at the
time an Option granted hereunder is exercised and registration of such stock
shall be required under the Securities Exchange Act of 1934 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 and in the number of shares
and price per share covered by outstanding Options granted under the Plan shall
be made to give effect to any stock splits, stock dividends, 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 Company's outstanding Common Stock. When so approved, the Plan
shall become effective as of January 29, 1982. The Plan shall terminate on
January 28, 1992, and no Option 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 vote of holders of a majority of the outstanding voting stock of
the Company or their proxies. The Board of Directors may, at any time and from
time to time, modify or amend the Plan in such respects as it shall deem
advisable to conform to any change in the law or regulations pursuant to the
law, or in any other respect which shall not change: (a) the maximum number of
shares for which Options may be granted under the Plan; or (b) the Option
prices; or (c) the periods during which Options may be granted or exercised; or
(d) the provisions relating to the determination of employees to whom Options
shall be granted and the number of shares covered by such Options; or (e) the
provisions relating to adjustments to be made upon changes in capitalization.
The termination or modification or amendment of the Plan shall not, without the
consent of an employee, affect his right under an Option theretofore granted to
him.
EXHIBIT (11)
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
NALCO CHEMICAL COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
(Amounts in thousands, September 30 September 30
except per share data) 1996 1995 1996 1995
------ ------ ------ -----
Primary
Average shares outstanding 67,393 67,409 67,318 67,596
Net effect of dilutive stock options and shares contingently
issuable-based on
the treasury stock method using
average market price 271 418 283 456
------- ------- ------- -------
TOTALS 67,664 67,827 67,601 68,052
======= ======= ======= =======
Earnings from continuing operations $ 40,990 $ 35,432 $105,468 $100,729
Earnings discontinued operations,
net of income taxes 1,550 5,046 5,829 14,692
-------- -------- -------- --------
Net earnings 42,540 40,478 111,297 115,421
Preferred stock dividends,
net of taxes (2,840) (2,797) (8,537) (8,417)
-------- -------- -------- --------
Net earnings to
common shareholders $ 39,700 $ 37,681 $102,760 $107,004
======== ======== ======== ========
Per share amounts
Earnings from continuing operations $ 0.56 $ 0.48 $ 1.43 $ 1.35
Earnings from discontinued operations,
net of taxes 0.03 0.08 0.09 0.22
------- ------- ------- -------
Net earnings to common shareholders $ 0.59 $ 0.56 $ 1.52 $ 1.57
======= ======= ======= =======
</TABLE>
EXHIBIT (11)
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
NALCO CHEMICAL COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
(Amounts in thousands, September 30 September 30
except per share data) 1996 1995 1996 1995
------ ------ ------ -----
Fully Diluted
Average shares outstanding 67,393 67,409 67,318 67,596
Average dilutive effect of
assumed conversion of ESOP
convertible Preferred shares 7,913 8,024 7,948 8,049
Additional shares assuming exercise of dilutive
stock options and shares
contingently issuable-based on the treasury
stock method using the
quarter-end market price, if higher
than average market price 404 418 427 462
-------- -------- -------- --------
TOTALS 75,710 75,851 75,693 76,107
======== ======== ======== ========
Earnings from continuing operations $ 40,990 $ 35,432 $105,468 $100,729
Earnings from discontinued operations,
net of income taxes 1,550 5,046 5,829 14,692
------- -------- -------- --------
Net earnings 42,540 40,478 111,297 115,421
Additional ESOP contribution
resulting from assumed
conversion, net of taxes (1,126) (1,144) (3,399) (3,502)
Tax adjustment on assumed
common dividends (227) (197) (688) (598)
-------- -------- -------- --------
Net earnings to
common shareholders $ 41,187 $ 39,137 $107,210 $111,321
======== ======== ======== ========
Per share amounts:
Earnings from continuing operations $ 0.52 $ 0.45 $ 1.34 $ 1.26
Earnings from discontinued operations,
net of income taxes 0.02 0.07 0.08 0.20
------- ------- ------- -------
Net earnings to common shareholders $ 0.54 $ 0.52 $ 1.42 $ 1.46
======= ======= ======= =======
</TABLE>
EXHIBIT (15)
AWARENESS LETTER OF INDEPENDENT ACCOUNTANTS
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We are aware that Nalco Chemical Company has included our report
dated October 24, 1996 (issued pursuant to the provisions of
Statement on Auditing Standards No. 71) in the Prospectuses
constituting part of its Registration Statements on Form S-3
(Nos. 33-57363, 33-53111, 33-9934, and 2-97721) and Form S-8
(Nos. 333-06955, 333-06963, 33-54377, 33-38033, 33-38032,
33-29149, 2-97721, 2-97131 and 2-82642). We are also aware of our
responsibilities under the Securities Act of 1933.
Yours very truly,
Price Waterhouse LLP
By: Robert R. Ross
Engagement Partner
November 14, 1996
Chicago, Illinois
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION AT SEPTEMBER 30, 1996
AND THE CONDENSED CONSOLIDATED STATEMENT OF EARNINGS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 OF NALCO CHEMICAL COMPANY AND SUBSIDIARIES AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 45,600,000
<SECURITIES> 0
<RECEIVABLES> 232,400,000
<ALLOWANCES> (5,000,000)
<INVENTORY> 92,500,000
<CURRENT-ASSETS> 434,900,000
<PP&E> 1,152,300,000
<DEPRECIATION> (631,700,000)
<TOTAL-ASSETS> 1,451,900,000
<CURRENT-LIABILITIES> 340,400,000
<BONDS> 253,000,000
0
400,000
<COMMON> 15,100,000
<OTHER-SE> 628,100,000
<TOTAL-LIABILITY-AND-EQUITY> 1,451,900,000
<SALES> 963,800,000
<TOTAL-REVENUES> 963,800,000
<CGS> 421,600,000
<TOTAL-COSTS> 421,600,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,300,000
<INCOME-PRETAX> 165,600,000
<INCOME-TAX> 60,100,000
<INCOME-CONTINUING> 105,500,000
<DISCONTINUED> 5,800,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 111,300,000
<EPS-PRIMARY> 1.52
<EPS-DILUTED> 1.42
</TABLE>
