<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Nalco Chemical Company
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
LOGO
March 18, 1997
Dear Stockholder:
We cordially invite you to attend the 1997 Annual Meeting of Stockholders.
It will be held at the Company's Corporate and Technical Center, One Nalco
Center, Naperville, Illinois, beginning at 10:00 A.M. on Thursday, April 17,
1997. The Corporate and Technical Center is located at the Southeast corner of
the intersection of Illinois Route 59 and the East-West Tollway (Interstate
Route 88).
The attached Notice of Meeting and Proxy Statement cover the formal business
items to be considered at this meeting. We also will report on current
operations and answer stockholder questions.
We hope you will be able to attend. If you cannot do so, we urge you to
exercise your right to vote by promptly returning your signed proxy card in
the enclosed prepaid envelope.
Sincerely yours,
LOGO
E. J. Mooney
<PAGE>
NALCO CHEMICAL COMPANY
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 17, 1997
To Nalco Stockholders:
The Annual Meeting of Stockholders of Nalco Chemical Company will be held at
the Company's Corporate and Technical Center, One Nalco Center, Naperville,
Illinois, on Thursday, April 17, 1997, at 10:00 A.M., to consider and vote
upon the following proposals:
1. Election of Four Class I Directors.
2. Approval of Independent Accountants.
3. Transaction of such other business, including a stockholder proposal
regarding endorsement of the CERES Principles, as may properly come before
the meeting.
The Board of Directors has designated the close of business on February 20,
1997 as the record date for determination of the stockholders entitled to
notice of and to vote at the meeting or any adjournment thereof.
Please complete, sign, date and return the proxy promptly in the enclosed
envelope so that your shares will be represented at the meeting.
LOGO
Suzzanne J. Gioimo
Secretary
Naperville, Illinois
March 18, 1997
<PAGE>
PROXY STATEMENT
SOLICITATION OF PROXIES
This Proxy Statement is furnished commencing approximately March 18, 1997,
in connection with the solicitation of proxies for use at the Annual Meeting
of Stockholders of Nalco Chemical Company (the "Company") to be held on April
17, 1997, at the time and place and for the purposes set forth in the
accompanying notice of the meeting. The accompanying Proxy is solicited by and
on behalf of the Board of Directors of the Company and is revocable by written
notice to the Company or by any later dated proxy at any time prior to its use
at the Annual Meeting.
The Company will bear the cost of the solicitation. The Company has retained
Georgeson & Company Inc., Wall Street Plaza, New York, N.Y. 10005 to aid in
the solicitation of proxies from banks, brokers, other custodians, nominees
and fiduciaries and institutional holders at a cost not to exceed $10,000 plus
reasonable out of pocket expenses. In addition, certain directors, officers
and other employees of the Company, not specifically employed for the purpose,
may solicit proxies, without additional remuneration therefor, by personal
interview, mail, telephone or telefax. The Company will reimburse banks,
brokers or other nominees for the expenses incurred in forwarding proxy
material to beneficial owners.
It is the Company's policy that all proxies, ballots and voting tabulations
that identify how shareholders voted be kept confidential, except when
disclosure is mandated by law, when such disclosure is expressly requested by
the shareholder, during a contested election for the Board of Directors or in
the event of a contested proxy solicitation, and that the tabulators and the
inspectors of election be independent and not employees of the Company.
PROPOSAL 1.
ELECTION OF DIRECTORS
The Board of Directors currently consists of ten directors elected for
staggered terms which expire alternately over a three-year period. The present
term of the Class I Directors expires at the 1997 Annual Meeting. The Board of
Directors therefore proposes the election of four Class I Directors to serve
for three years until the 2000 Annual Meeting, and in each case until their
successors have been elected and qualified. Shares represented by proxies,
which are returned properly signed, will be voted for the nominees named in
the following table unless the stockholder indicates on the proxy that
authority to vote the shares is withheld. Each of the nominees has consented
to serve as a director if elected. If any nominee becomes unavailable for
election, the proxy may be voted for such substitute nominee as the Board of
Directors may designate or the Board may reduce the number of directors to
eliminate the vacancy.
1
<PAGE>
<TABLE>
<CAPTION>
YEAR
BECAME
NAME PRINCIPAL OCCUPATION OR EMPLOYMENT AGE DIRECTOR
---- ---------------------------------- --- --------
The nominees for Class I Directors for election at the 1997 Annual
Meeting for a term to expire in 2000 are as follows:
<S> <C> <C> <C>
J. L. Ballesteros....... Chairman, President and Chief Executive Officer, 55 1995
Synkro, S.A. de C.V.
J. P. Frazee, Jr........ Retired; formerly President and Chief Operating 52 1985
Officer,
Sprint Corporation
A. L. Kelly............. Managing Partner, KEL Enterprises Ltd. 59 1992
F. A. Krehbiel.......... Chairman and Chief Executive Officer, 55 1990
Molex Incorporated
The Class II Directors with terms to expire in 1998 are:
H. Corless.............. Retired; formerly Chairman, ICI Americas, Inc. 68 1989
H. M. Dean.............. Chairman and Chief Executive Officer, Dean Foods 59 1987
Company
E. J. Mooney............ Chairman, Chief Executive Officer and President, 55 1988
Nalco
The Class III Directors with terms to expire in 1999 are:
H. G. Bernthal.......... Chairman, CroBern, Inc. 68 1980
J. J. Shea.............. Vice Chairman, President and Chief Executive 59 1993
Officer, Spiegel, Inc.
W. A. Pogue............. Retired; formerly Chairman and Chief Executive 69 1981
Officer,
CBI Industries, Inc. Mr. Pogue will reach
mandatory retirement age in 1998.
</TABLE>
BIOGRAPHY OF NOMINEES FOR CLASS I DIRECTORS
J. L. Ballesteros has been Chairman since 1996 and President and Chief
Executive Officer since 1988 of Synkro, S. A. de C. V. (a holding company). He
has been Chairman since 1994 for both Kayser Roth Corporation (U.S. based-
hosiery) and Revision, S. A. (Argentina based-hosiery) and Chairman since 1992
for Arcoplus, S. A. (Argentina based-hosiery). Other directorships: Grupo
Mexicano de Desarrollo, S. A.de C. V., Grupo Financiero Invermexico, S. A. de
C. V., Grupo Financiero Multivalores, S. A. de C. V., Desc Sociedad de Fomento
Industrial, S. A. de C. V., Afianzadora Lotonal, S. A. de C. V. and Kativo
Chemical Industries, S. A.
J. P. Frazee, Jr., was President and Chief Operating Officer of Sprint
Corporation (a diversified telecommunications company) from March, 1993 to
August, 1993. He was Chairman and Chief Executive Officer of Centel
Corporation (a telecommunications firm) from 1988 to 1993. Other
directorships: Dean Foods Company, Security Capital Group Incorporated, Paging
Network, Inc. and Homestead Village, Inc.
A. L. Kelly has been the Managing Partner of KEL Enterprises L.P. (a holding
and investment partnership) since 1982. Other directorships: Bayerische
Motoren Werke (BMW) A.G., Deere & Company, Northern Trust Corporation and its
principal banking subsidiary, The Northern Trust Company, Snap-on
Incorporated, Tejas Gas Corporation and Thyssen Industrie AG.
2
<PAGE>
F. A. Krehbiel has been Chairman and Chief Executive Officer of Molex
Incorporated (a manufacturer and distributor of electrical and electronic
devices) since 1993. From 1988 to 1993 he was Vice Chairman and Chief
Executive Officer. Other directorships: Tellabs, Inc., Northern Trust
Corporation and its principal banking subsidiary, The Northern Trust Company,
Molex Incorporated and DeVry Inc.
BIOGRAPHIES OF OTHER DIRECTORS
H. G. Bernthal has been Chairman of CroBern, Inc. (a healthcare investment
company) since 1986. Other directorships: Butler Manufacturing Company and
National-Standard Company.
H. Corless was Chairman of ICI Americas, Inc. (a company engaged in
manufacture and sale of chemicals and pharmaceuticals) and ICI American
Holdings, Inc. (a holding company), subsidiaries of Imperial Chemicals
Industries PLC ("ICI") (a worldwide chemical manufacturer, headquartered in
London) from 1986 to 1989 when he retired. He was director of C-I-L Inc. (a
Canadian subsidiary of ICI and manufacturer of chemicals, fertilizers,
industrial explosives, paints and plastics) from 1982 to 1989. Other
directorship: The Medical Center of Delaware, Inc.
H. M. Dean has been Chairman of Dean Foods Company (a diversified food
processor and distributor) since 1989. He became Chief Executive Officer in
1987. Other directorships: Ball Corporation, Yellow Corporation and Dean Foods
Company.
E. J. Mooney was elected Chief Executive Officer of Nalco and Chairman of
the Board in 1994. He has been President since 1990 and was Chief Operating
Officer from 1992 to 1994. Other directorships: Northern Trust Corporation and
its principal banking subsidiary, The Northern Trust Company, and Morton
International.
W. A. Pogue was Chairman and Chief Executive Officer of CBI Industries, Inc.
(a company engaged in metal plate fabrication, industrial gases, real estate
and investments), a position he held from 1982 to 1989. Other directorships:
Bethlehem Steel Corporation and Amerada Hess Corp.
J. J. Shea has served as President and Chief Executive Officer of Spiegel,
Inc. (apparel, specialty retail and catalog sales) since 1985 and as Vice
Chairman since 1989. Other directorship: Spiegel, Inc.
MEETINGS OF THE BOARD AND COMMITTEES OF THE BOARD
The Board of Directors held eight regular and special meetings in 1996. Each
director attended more than 75% of the meetings of the Board of Directors and
Committees on which he served.
The Executive Committee. The Executive Committee, composed of five
directors, four of whom are non-employee directors, may exercise all of the
authority of the Board of Directors except as provided by Delaware Law and the
Company's By-laws and those powers reserved for other committees of the Board.
Present members are E. J. Mooney (Chairman), H. G. Bernthal, H. M. Dean, J. P.
Frazee, Jr., and W. A. Pogue. The Executive Committee did not meet in 1996.
The Audit Committee. The Audit Committee, composed of five non-employee
directors, is responsible for (i) reviewing the Company's accounting and
auditing policies and practices, (ii) reviewing the appointment and discharge
of independent accountants, (iii) reviewing the independence of the
independent accountants, (iv) reviewing the scope and nature of the non-audit
related services performed by the independent
3
<PAGE>
accountants, and (v) reporting to and making recommendations to the Board with
respect to the foregoing. The Audit Committee generally meets with management,
the internal auditors, and the independent accountants. The independent
accountants and internal auditors have full and free access to the Audit
Committee without management's presence to discuss internal accounting
controls, results of audits and financial reporting matters. Present members
are J. P. Frazee, Jr. (Chairman), J. L. Ballesteros, H. Corless, H. M. Dean
and A. L. Kelly. In 1996 the Audit Committee met three times.
The Executive Compensation Committee. The Executive Compensation Committee,
composed of four non-employee directors, is responsible for (i) recommending
to the Board of Directors the compensation to be paid to the Chief Executive
Officer, (ii) approving compensation of corporate officers who are scheduled
to be listed in the proxy, (iii) consulting with the Chief Executive Officer
on matters related to executive compensation, and (iv) administering the
Company's Management Incentive Plan, stock option plans, Employee Stock
Compensation Plan, and Performance Share Plan. Present members are W. A. Pogue
(Chairman), H. G. Bernthal, J. J. Shea and F. A. Krehbiel. In 1996, this
Committee met once.
The Board Affairs and Nominating Committee. The Board Affairs and Nominating
Committee, composed of all the directors, is responsible for reviewing the
qualifications of possible directors to fill Board vacancies. Candidates for
election to the Board submitted by shareholders will be considered by the
Committee if sent to the Secretary with the candidate's qualifications. H. M.
Dean is the Chairman of the Committee. The Board Affairs and Nominating
Committee met once in 1996.
DIRECTORS' REMUNERATION AND RETIREMENT POLICIES
Compensation of non-employee directors of the Company consists of an annual
retainer of $25,000 plus $1,000 for each Board meeting attended, 200 shares of
common stock under the Non-Employee Directors Stock Compensation Plan, an
additional $6,000 per year for membership on one or more Committees of the
Board, and an additional fee of $6,000 per year to the Chairmen of the Audit
Committee, Executive Compensation Committee and Board Affairs and Nominating
Committee. Directors who are employees of the Company do not receive fees for
service on the Board or any Committees.
A deferred compensation plan is available to all non-employee directors
under which they may defer all or a part of their annual retainer and
Committee and attendance fees for any year and receive, generally following
retirement or at such earlier time as the Board approves, the amount computed
as set forth below, in five equal annual payments (or such other number of
annual payments, not more than ten, as the Company elects). Deferred
compensation accounts set up for directors who elect deferral are credited
with the deferred amounts. These amounts are converted into share units based
on the average of the month-end closing prices of the Company's common stock
during the calendar year and credited with the dividend equivalents of the
dividends a director would have received had the director owned shares of
common stock equal to the share units in the director's account, also
converted into share units on the same basis. At the end of the deferral
period, units are converted into cash based on the average of the month-end
closing prices of the Company's common stock during the year prior to or of
payment.
The Board of Directors has adopted a policy establishing the retirement date
of each member of the Board to be the date of the Annual Meeting of
Stockholders which next follows the earlier of either the date of retirement
from employment by the Company or the date of the member's 70th birthday.
Early retirement can be taken following the attainment of a non-employee
director's 68th birthday. Such policy also provides that upon retirement from
the Board, each non-employee director with at least five years of service on
the
4
<PAGE>
Board shall be paid an annual amount equal to the annual retainer paid to non-
employee directors multiplied by a factor, the numerator of which is the
number of years of service on the Board, but not exceeding ten, and the
denominator of which is ten, such annual payment to continue for the lifetime
of the retired director. In 1993 the Board adopted a new retirement policy
effective for all directors elected to the Board for the first time after
October 1993. Directors who were elected to the Board prior to that date may
choose to retire under the old policy or the new one. The new retirement
policy also provides for payment of an amount equal to the annual retainer,
multiplied by a fraction, the numerator of which is the number of years of
service on the Board but not exceeding ten, and the denominator of which is
ten, to be paid for a period not greater than ten years. However, under the
new policy, should a director die prior to retirement or after retirement but
before the ten year period has expired, the director's spouse shall receive
50% of the payment amount for the lesser of life or the remainder of the ten
year period.
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
The Stock Option Plan for Non-Employee Directors (the "Directors Plan")
provides for automatic grants of options to purchase 4,000 shares of the
Company's common stock to each non-employee director of the Company on the
date of each Annual Meeting to May 1, 2000. The option price is the fair
market value of the Company's common stock on the date of grant. Payment for
the exercise of options may be made in cash or in shares of Company common
stock that have been held by the director for at least six months. An optionee
may elect to surrender an option and receive shares of common stock of the
Company having a fair market value equal in value to the excess of the fair
market value of the unpurchased shares over the option price of such shares.
Each option extends for 10 years from the date of grant. Options terminate
upon termination of service as a director, except that an optionee may
exercise the option within five years following retirement under the Company's
retirement policy for directors or termination of service as a director
because of total and permanent disability. If the director dies while a
director or within five years of retirement as a director, the option may be
exercised within the longer of five years from the date of retirement or one
year from the date of death by any person to whom the option passes by will or
the laws of descent and distribution. For options granted before 1992, these
exercise periods are three years. In all instances, however, the option must
be exercised during the term of the grant.
NON-EMPLOYEE DIRECTORS STOCK COMPENSATION PLAN
Under the Non-Employee Directors Stock Compensation Plan each director of
the Company, after the Annual Shareholders Meeting, automatically receives 200
shares of Company common stock as part of the retainer paid for his or her
services. Receipt of the stock may be deferred until retirement from the
Company's Board of Directors. If deferred, an account will be set up for the
director containing one share unit for each share of common stock deferred.
Whenever a dividend is declared by the Company, an amount equal to the amount
of the dividend that would have been received had each share unit actually
been a share of common stock shall be converted into share units based on the
closing price on the New York Stock Exchange Composite Price Index for the
date approved by the Board for payment of dividends on the Company's common
stock. Upon a director leaving the Company's Board, the director shall receive
shares of common stock equal to the whole number of share units in his or her
account, plus cash in lieu of fractional shares.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
for each of the Company's last three fiscal years to the Company's Chief
Executive Officer and each of the Company's other four most highly compensated
executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------- ------------------
AWARDS(2) PAYOUTS
OTHER ---------- ------- ALL
ANNUAL SHARES OTHER
COMPEN- UNDERLYING LTIP COMPEN-
NAME AND PRINCIPAL SALARY BONUS SATION OPTIONS PAYOUTS SATION
POSITION YEAR ($) ($)(1) ($) (#) ($) ($)(3)
- - ------------------ ---- ------- ------- ------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
E. J. Mooney, Chairman
of the Board, 1996 510,000 284,580 9,544 47,600 0 34,334
President & Chief 1995 490,000 298,410 9,662 123,000 0 35,810
Executive Officer 1994 462,372 211,334 7,131 50,000 0 30,396
M. B. Harp, Jr. 1996 312,100 146,687 3,067 22,900 0 21,011
Executive Vice
President, 1995 297,000 149,064 3,068 58,500 0 21,705
Operations 1994 280,000 108,500 3,067 0 0 18,774
W. S. Weeber 1996 302,200 142,427 1,428 22,200 0 20,345
Executive Vice
President, 1995 292,000 145,825 3,068 57,600 0 21,340
Operations Staff 1994 280,000 110,964 3,067 0 0 18,774
P. Dabringhausen 1996 284,070 92,555 3,067 16,700 0 16,885
Group Vice President,
President 1995 283,088 95,581 3,068 42,600 0 17,114
Process Chemicals
Division 1994 270,303 72,150 3,067 0 0 14,396
J. D. Tinsley 1996 240,000 87,800 3,067 16,000 0 16,157
Group Vice President,
President 1995 233,000 92,850 3,068 41,700 0 17,028
Water & Waste Treatment
Division 1994 227,019 71,008 3,067 0 0 15,019
</TABLE>
- - ----------
(1) Amount represents Management Incentive Plan awards earned for stated year.
(2) Dividends are paid on restricted common stock issued in prior years. Based
on the closing stock price of $36.1250 on December 31, 1996, the
restricted stock holdings and their market value at the end of 1996 for
each named executive officer are: E. J. Mooney--4,540 shares, $164,008; M.
B. Harp, Jr.--2,450 shares, $88,506; W. S. Weeber--2,630 shares, $95,009;
P. Dabringhausen--1,180 shares, $42,628; J. D. Tinsley--1,140 shares,
$41,183.
(3) Allocations under the Nalco Employee Stock Ownership Plan, including
comparable amounts under Excess ERISA Agreements.
6
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information related to options to purchase
common stock of the Company granted to the named executive officers during
1996.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS(1) FOR OPTION TERMS($)(2)
- - --------------------------------------------------------- ------------------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO EXERCISE
UNDERLYING EMPLOYEES OR BASE
OPTIONS IN FISCAL PRICE EXPIRATION
NAME GRANTED YEAR ($/SH) DATE 0% 5% 10%
- - -------------- ---------- ---------- -------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
E. J. Mooney 47,600 3.05 31.6875 2/15/06 0 948,578 2,403,881
M. B. Harp,
Jr. 22,900 1.47 31.6875 2/15/06 0 456,353 1,156,489
W. S. Weeber 22,200 1.42 31.6875 2/15/06 0 442,404 1,121,137
P.
Dabringhausen 16,700 1.07 31.6875 2/15/06 0 332,800 843,379
J. D. Tinsley 16,000 1.03 31.6875 2/15/06 0 318,850 808,027
</TABLE>
- - ----------
(1) Options are always granted at fair market value on the date of grant. The
options listed for each optionee vested immediately when granted. Option
holders may pay taxes owed upon exercise by having option shares withheld
or by surrendering already owned shares.
(2) The dollar amounts under these columns are the difference between the
option exercise price and market prices at the end of the option term
assuming annual rates of stock price appreciation of 0%, 5% and 10%. The
Company did not use an alternative formula for a grant date valuation, as
the Company is not aware of any formula which will determine with
reasonable accuracy a present value based on future unknown or volatile
factors. At 5% or 10%, shareholder value would have increased by $1.34
billion or $3.38 billion, respectively.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
The following table provides information related to options exercised by the
named executive officers during 1996 and the number and value of options held
at year-end.
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
SHARES VALUE UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED ON REALIZED OPTIONS AT YEAR-END (#) AT YEAR-END ($)(1)
NAME EXERCISE (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- - -------------- ------------ -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
E. J. Mooney 9,600 207,300 240,000/82,000 1,166,817/138,375
M. B. Harp,
Jr. 0 0 70,400/39,000 138,025/65,813
W. S. Weeber 24,000 328,255 69,400/38,400 134,413/64,800
P.
Dabringhausen 0 0 42,200/28,400 99,481/47,925
J. D. Tinsley 0 0 47,900/27,800 96,706/46,913
</TABLE>
- - ----------
(1) Valued on the difference between $36.1250 (the closing price on December
31, 1996) and the exercise price of the option.
7
<PAGE>
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
The following table covers long-term incentive contingent share units
assigned to the named executive officers during 1996.
<TABLE>
<CAPTION>
PERFORMANCE
OR OTHER
PERIOD ESTIMATED FUTURE PAYOUTS
NUMBER OF UNTIL UNDER NON-STOCK PRICE BASED PLANS
SHARES, UNITS OR MATURATION ------------------------------------
NAME OTHER RIGHTS (#) OR PAYOUT THRESHOLD (#) TARGET (#) MAXIMUM (#)
- - -------------- ---------------- ----------- ------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
E. J. Mooney 10,243 1996/97/98 6,146 10,243 12,292
M. B. Harp,
Jr. 5,223 1996/97/98 3,134 5,223 6,268
W. S. Weeber 5,058 1996/97/98 3,035 5,058 6,070
P.
Dabringhausen 3,358 1996/97/98 2,015 3,358 4,030
J. D. Tinsley 3,213 1996/97/98 1,928 3,213 3,856
</TABLE>
Under the Performance Share Plan, a 6%, 10% and 12% compounded increase in
fully diluted net earnings per share of Company stock is required to earn
threshold, target and maximum payouts, respectively. If earned, half of the
awards are to be paid in cash at the end of the performance period in an
amount based on the average Company stock price during the last five trading
days of the performance period, and the remaining awards are to be paid in
Company common stock that vests three years after the end of the performance
period contingent on continued employment. In the event of termination of
employment due to death, disability, retirement or change in control, all
unvested common stock already awarded shall vest immediately and shall be
distributed to a participant or his or her beneficiary.
RETIREMENT INCOME PLAN AND SUPPLEMENTAL RETIREMENT INCOME PLAN
The following table sets forth the annual benefits payable, with respect to
specified final average earnings and years of service categories, under the
Company's Retirement Income Plan and Supplemental Retirement Income Plan,
before giving effect to any social security offset.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
FINAL AVERAGE ---------------------------------------
EARNINGS 15 20 25 30 35
- - ------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$ 200,000.............................. 63,600 84,800 106,000 121,900 137,800
300,000.............................. 95,400 127,200 159,000 182,850 206,700
400,000.............................. 127,200 169,600 212,000 243,800 275,600
500,000.............................. 159,000 212,000 265,000 304,750 344,500
600,000.............................. 190,800 254,400 318,000 365,700 413,400
700,000.............................. 222,600 296,800 371,000 426,650 482,300
800,000.............................. 254,400 339,200 424,000 487,600 551,200
900,000.............................. 286,200 381,600 477,000 548,550 620,100
1,000,000.............................. 318,000 424,000 530,000 609,500 689,000
</TABLE>
The credited years of participation at December 31, 1996 for each individual
named in the cash compensation table are: E. J. Mooney, 28; M. B. Harp, Jr.,
25; W. S. Weeber, 30; P. Dabringhausen, 11; J. D. Tinsley, 32. The credited
earnings are approximately the same as the salary and bonus set forth in the
summary compensation table.
8
<PAGE>
The Plan uses a final average earnings formula based on the average
annualized pay for the highest paid 48 months during the last 120 months
before retirement. In general, the annual retirement income in the 10-year
certain form of settlement at normal retirement date will be equal to 2% of
"final average earnings" for each of the first 25 years of Plan participation
plus 1.5% of "final average earnings" for each year over 25 years, less a
prorated offset not to exceed 50% of the primary social security benefit at
age 62, depending on years of Plan participation.
The Company has entered into agreements with its officers, including those
listed in the summary compensation table, to restore any benefits under the
Retirement Income Plan, the Profit Sharing, Investment and Pay Deferral Plan
and Employee Stock Ownership Plan ("ESOP") reduced by the Employee Retirement
Income Security Act of 1974 and the Revenue Reconciliation Act of 1993. Any
reductions in benefits will first be made in Retirement Plan accounts and then
if necessary in the Profit Sharing, Investment and Pay Deferral Plan and ESOP
accounts. Under these agreements, the Company also agrees to pay to the
beneficiary of each executive officer an amount equal to one year's salary in
the event of death.
KEY EXECUTIVE AGREEMENTS
The Company has entered into Key Executive Agreements with those individuals
listed in the summary compensation table, as an assurance to the Company and
the officers of continuity of management in the event of any actual or
threatened change in control of the Company. Under the Agreements, which
become effective upon a change in control, the Company agrees to employ each
executive for a three-year period thereafter (but not after age 62) in the
capacity in which the executive was employed immediately prior thereto
("Employment Period"). During the Employment Period, the executive will be
compensated, as detailed in the Agreements, in a manner comparable to his or
her prior compensation and will be entitled to all opportunities for bonuses
and other Company benefits provided for executives by the Company. In the
event of termination of the executive (including resignation) as a result of a
change in control or a significant change in the executive's authority or
duties in effect immediately prior to the effective date of the Agreement, a
reduction in total compensation opportunities, or a breach of the Agreement by
the Company, the executive would be paid a lump sum equivalent to anticipated
salary, bonuses and incentives for the remainder of the Employment Period, as
well as any benefits that would have accrued, including those under profit
sharing, ESOP, pension, stock option and insurance plans. The Company will pay
any expenses associated with enforcement of an executive's rights under an
Agreement, and will secure its obligations under the Agreements by an
irrevocable letter of credit for the benefit of the executive.
DEATH BENEFIT AGREEMENTS
The Company has also entered into Death Benefit Agreements ("Benefit
Agreements") with those individuals listed in the summary compensation table,
as an inducement to the executive officer to continue in the Company's employ
and to provide the benefit of his or her advice after his or her retirement.
Each Benefit Agreement provides for payment by the Company to the executive's
beneficiaries of an amount equal to the executive's base annual salary as of
his or her last day of work, if the executive dies (a) while employed by the
Company and covered by a Benefit Agreement, or (b) any time after retirement
and before reaching age 62 if a Benefit Agreement was in effect at retirement.
The Company will pay a benefit equal to twice the executive's base annual
salary as of his or her last day of work to the executive's beneficiaries if
the executive dies after retirement and after reaching age 62 if a Benefit
Agreement was in effect at the time of retirement. Payments under these
Benefit Agreements will be made by the Company from its general funds. It is
not necessary for a named executive officer to provide consulting services to
the Company after retirement to be awarded benefits under the Benefit
Agreement.
9
<PAGE>
BENEFIT PROTECTION TRUSTS
Four trust funds (the "Trusts") have been established to assist in
accumulating the amounts necessary to satisfy the Company's contractual
liabilities under the non-qualified benefit plans described herein, including
the deferred compensation plan for directors. However, the Company shall
remain primarily liable under the plans to pay benefits, and the Trusts'
assets shall remain subject to the claims of the Company's general creditors.
The Company may fund the Trusts at any time, but shall, no later than three
business days after a change in control of the Company, fund the Trusts in an
amount which at least equals the present value of all of the unpaid benefits
under the Trusts. To determine this value, the actuarial assumptions stated in
the Retirement Income Plan in effect on the first day of the Plan year in
which a change in control occurs will be used. A Trust beneficiary's benefit
under a plan shall be based on his or her service and compensation at the time
of the change in control.
CHANGE IN CONTROL
"Change in control" as used in the plans and agreements discussed herein
generally means: (a) a merger, consolidation, reorganization or sale of all or
substantially all of the Company's business or assets if less than 80% of the
outstanding voting securities or other capital interests in the surviving or
acquiring company is not owned in the aggregate by the stockholders of the
Company immediately prior thereto; (b) the reported acquisition by any person
or group of beneficial ownership of 20% or more of the outstanding voting
securities of the Company; or (c) a change during any two-year period in a
majority of the Board of Directors not approved by at least two-thirds of the
prior Directors.
EXECUTIVE COMPENSATION COMMITTEE REPORT TO SHAREHOLDERS
Executive Compensation Policy
The Executive Compensation Committee ("Committee") of Nalco Chemical Company
is comprised entirely of non-employee directors. The Committee is responsible
for establishing and administering Nalco's compensation policies.
Currently, the compensation program for executives consists of four
principal elements listed in order of importance:
1. A base salary is kept competitive by utilizing various surveys provided
or published by independent consultants from time to time. These surveys
are executive compensation surveys for groups of manufacturing and
service companies including representation from the chemical industry.
The latest survey consists of companies with average sales of
approximately $1.6 billion and total assets of approximately $1.8
billion based on 1995 numbers. This compares with the Company's 1995
sales, including Absorbent Chemicals, of $1.3 billion and assets of $1.4
billion. Various size and performance measures, including return on
equity, assets, sales and capital, are used to compare survey companies
to the Company and to judge the appropriateness of compensation
comparisons. However, the Company's sales, earnings and earnings per
share, as well as the individual executive's yearly performance and
contribution to the Company's overall performance, are primarily
considered in setting salaries. Base salaries for 1996 were set at the
end of 1995. In 1995, earnings from continuing operations increased by
7%, while corresponding earnings per share increased by 8%, excluding a
1994 pre-tax charge of $68.2 million ($54.0 million after tax) for
formation and consolidation expense. Salary increases for executive
officers for 1996 averaged 4.3%.
10
<PAGE>
2. The Management Incentive Plan ("MIP") is an annual incentive plan that
provides cash compensation based on the achievement of goals set by the
Committee for the Company and the individuals that are approved by the
Board of Directors for participation. For 1996, there were corporate
performance goals for increases in sales and earnings and for strategic
management performance, including adherence to expense budgets. The
individual management performance goals were set for each executive,
depending on his or her particular responsibilities and strategic
objectives for the year. For the MIP, sales, earnings and individual
goals are weighted at 37.5%, 37.5% and 25%, respectively. For 1996,
executive officers earned 93% of the portion of their target award
related to sales and earnings.
3. The Performance Share Plan ("PSP") provides for awards based on long-
term, per-share earnings goals of the Company that are approved by the
Board of Directors. Awards are composed of Company common stock and/or
cash and are based upon the Company's achievement of at least a
threshold compounded increase in fully diluted net earnings per share
during a three-year performance period. This plan provides for a
threshold and maximum amount below and above the respective target
amounts. For the three year performance period ended in December, 1996,
earnings goals were not met, and no contingent performance shares were
earned for this period. The Committee granted awards for the 1996-97-98
PSP cycle. A 6%, 10% and 12% compounded increase in fully diluted
earnings per share is required to earn threshold, target and maximum
payouts, respectively, for this cycle. The size of initial awards to
executive officers and the CEO is determined by the Committee.
4. Options to purchase common stock are awarded from time to time. The
Committee utilizes an outside consulting firm to provide comparative
data upon which the Committee bases the grant amounts, taking into
consideration individual positions and performance. Grants are intended
to be competitive and provide long-term incentive motivation. Option
prices are based on fair market value as of the grant date and the value
of any particular option depends on the Company's common stock price at
the time of option exercise. Grants with immediate vesting were made to
all executive officers in 1996.
The Committee tries to focus the executive compensation program to
strengthen the overall performance of the Company by integrating short-term
and long-term performance goals. PSP long-term objective goals are based 100%
on earnings performance. Once awards are made under an annual or long-term
incentive plan, the Committee has no discretion to adjust them.
The Committee believes that compensating executives by means of stock and
stock options leads to maximization of shareholder value over the long term.
The Company's ongoing stock option program is intended to align the interests
of executives and managers with those of the Company's shareholders and
encourage efforts that enhance the Company's earnings per-share and stock
price. The Committee does not consider outstanding stock options when awarding
current stock options.
The Committee continues to monitor qualifying compensation paid to its
executive officers for deductibility under the $1 million deduction limit for
executive salaries. Included compensation did not exceed this limit in 1996
and is not expected to do so in 1997.
Chief Executive Officer Compensation
The pay-for-performance philosophy of the Company's total compensation
program outlined above also applies to Mr. E. J. Mooney, Nalco's Chief
Executive Officer.
11
<PAGE>
In 1995, Nalco sales were up 9% over 1994 after adjustments for business
transferred to the Nalco/Exxon joint venture, and earnings per share from
continuing operations, excluding the 1994 formation and consolidation charge,
were up 8%. Because of this and the strength of Mr. Mooney's performance, the
Committee approved a 4.1% increase in his base salary effective January 1,
1996.
The 1996 Management Incentive Plan award was based on achievement of
corporate performance goals for sales and earnings. He earned 93% of the
portion of his target award related to sales and earnings. As a result, the
MIP award paid to Mr. Mooney was below the target amount. The total MIP
payment Mr. Mooney received for 1996 was $284,580.
Potentially, 60% to 70% of Mr. Mooney's annual compensation can come from
performance related compensation plans such as the MIP and PSP. Because the
1996 MIP payout was below the target level, and no performance shares were
earned under the PSP, 36% of Mr. Mooney's 1996 cash compensation was based on
performance related plans.
Mr. Mooney received a stock option grant for 47,600 shares in February, 1996
with an exercise price of $31.6875 per share. These options vested on grant.
The exercise price was set at the fair market value of the Company's common
stock on the date of grant. The amount of Mr. Mooney's stock option grant is
based on the recommendations of an independent compensation consulting firm in
order to provide a competitive level of stock options.
The Executive Compensation Committee
W. A. Pogue H. G. Bernthal
F. A. Krehbiel J. J. Shea
12
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The graph below compares cumulative total return of the Company, the S&P 500
Index and the Specialty Chemicals Value Line Index (dividends reinvested). The
graph assumes $100 was invested on December 31, 1991 in Nalco common stock,
the S&P 500 index and the Specialty Chemical Value Line Index.
- - --------------------------------------------------------------------------------
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
- - --------------------------------------------------------------------------------
Nalco 100.00 85.23 94.58 86.89 80.42 99.37
- - --------------------------------------------------------------------------------
S&P 500 100.00 107.62 118.46 120.03 165.13 203.05
- - --------------------------------------------------------------------------------
Specialty 100.00 112.98 128.00 126.42 156.02 176.53
Chemicals Values
Line Index
- - --------------------------------------------------------------------------------
13
<PAGE>
PROPOSAL 2.
APPROVAL OF INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP was selected by the Board of Directors upon the
recommendation of the Audit Committee to serve as independent accountants for
the Company and its consolidated subsidiaries for 1997, and the stockholders'
approval of such selection is requested. Representatives of Price Waterhouse
LLP are expected to be present at the Annual Meeting of Stockholders to make a
statement if they so desire and to respond to appropriate questions. If the
stockholders do not approve the accountants, the Audit Committee and the Board
of Directors will reconsider the selection.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2.
PROPOSAL 3.
STOCKHOLDER PROPOSAL ON ENDORSEMENT OF THE CERES PRINCIPLES
The General Board of Pension and Health Benefits of the United Methodist
Church, stockholders of the Company, have informed management of their
intention to present a proposed resolution on requesting endorsement of the
CERES principles at the Annual Meeting. The General Board of Pension and
Health Benefits of the United Methodist Church may be contacted through
Vidette K. Bullock Mixon, Director of Corporate Relations and Social Concerns,
1201 Davis Street, Evanston, Ill. 60201.
Whereas We Believe: responsible implementation of a sound, credible
environmental policy increases long-term shareholder value by raising
efficiency, decreasing clean-up costs, reducing litigation, and enhancing
public image and product attractiveness;
Adherence to public standards for environmental performance gives a company
greater public credibility than following standards created by industry alone.
For maximum credibility and usefulness, such standards should specifically
meet the concerns of investors and other stakeholders;
Companies are increasingly being expected by investors to do meaningful,
regular, comprehensive and impartial environmental reports. Standardized
environmental reports enable investors to compare performance over time. They
also attract investments from investors seeking companies which are
environmentally responsible and responsive and which minimize risk of
environmental liability.
The Coalition for Environmental Responsible Economics (CERES)--which
comprises shareholders of this company, public interest representatives, and
environmental experts--consulted with corporations to produce the CERES
Principles as comprehensive public standards for both environmental
performance and reporting. Fifty-four companies, including Sun (Sunoco),
General Motors, H. B. Fuller, Polaroid, and Bethlehem Steel have endorsed
these principles to demonstrate their commitment to public environmental
accountability. Fortune 500 endorsers say that benefits of working with CERES
are public credibility; "value-added' for the company's environmental
initiatives; and advancement for the company's own environmental program.
In endorsing the CERES Principles, a company commits to work toward:
1. Protection of the biosphere 6. Safe products & services
2. Sustainable natural resource use 7. Environmental restoration
3. Waste reduction and disposal 8. Informing the public
4. Energy conservation 9. Management commitment
5. Risk reduction 10. Audits and reports
14
<PAGE>
(Full text of the CERES Principles and accompanying CERES Report Form
obtainable from: CERES, 711 Atlantic Avenue, Boston, MA 02110; Tel: 617-451-
0927).
CERES is distinguished from other initiatives for corporate environmental
responsibility, in being (a) a successful model of shareholder relations; (2)
a leader in public accountability through standardized environmental
reporting; and (3) a catalyst for significant and measurable environmental
improvement within firms.
RESOLVED: Shareholders request the Company to endorse the CERES Principles
as a part of its commitment to be publicly accountable for its environmental
impact.
SUPPORTING STATEMENT
Many investors support this resolution. Those sponsoring similar resolutions
at various companies have portfolios totaling $75 billion. The number of
public pension funds and foundations supporting this resolution increases
every year. The objectives are: standards for environmental performance and
disclosure; methods for measuring progress toward these goals and a format for
public report of progress. We believe this is comparable to the European
Community regulation for voluntary participation in verified and publicly-
reported eco-management and auditing, and fully compatible with ISO 14000
certification.
Your vote FOR this resolution will encourage scrutiny of our Company's
environmental policies and reports, and adherence to standards upheld by
management and stakeholders.
Shareholders are asked to vote FOR this resolution.
STATEMENT BY MANAGEMENT AGAINST PROPOSAL 3.
Your Directors and management recommend a vote AGAINST the above shareholder
proposal for the following reasons:
Nalco believes responsible implementation of a sound environmental policy
increases long-term shareholder value by improving efficiency, decreasing
remediation costs, reducing waste generation and enhancing community relations
and product attractiveness. The Nalco Philosophy of Operations states our
intent to "be responsible with respect to the environment" and that "safety,
product stewardship and Responsible Care(R) are essential ingredients" in our
goal to build value for customers, employees, shareholders and communities.
Nalco was one of the first chemical companies to create a global
Environmental, Health and Safety Department in 1976 to manage its
environmental compliance and help ensure employee, customer and community
health and safety. In 1992, Nalco's Board of Directors formally adopted its
long-standing Corporate Environmental Policy "to conduct its business in a
manner to protect and enhance the environment."
As a member of the chemical industry and the Chemical Manufacturers'
Association ("CMA"), we believe that the best way to achieve our goals to
protect and enhance the environment and the health and safety of our
employees, customers and neighbors is through Responsible Care(R). This
program, which has been in existence since 1985, is the chemical industry's
voluntary, global initiative for continuous improvement in all aspects of
environmental, health and safety performance and openness in communications
about its activities and achievements.
15
<PAGE>
Responsible Care(R) is part of Nalco's corporate culture world-wide. Nalco
has made a written public commitment to Responsible Care(R) and has
implemented the six Codes of Management Practices that continually improve our
community dialogue and emergency response, pollution prevention, process
safety, distribution safety, employee health and safety, and product
stewardship. In addition, we have pledged to manage our business according to
the ten Responsible Care(R) Guiding Principles. To that end:
1. We have established an Environmental Compliance Committee that guides
Nalco policies to ensure compliance with all environmental laws and
regulations. The group has developed an Environmental Compliance
Handbook for all employees and a Site Environmental Management System to
help insure compliance for all manufacturing facilities.
2. We have created an Environmental Working Group which is a
multidisciplinary group which works to interpret and disseminate
information on environmental issues that can affect Nalco's business and
its customers.
3. We have established the Plant Operations Review Team, which visits and
reviews in detail each of our worldwide manufacturing and research
locations' operations for process and employee safety at least once
every three years. These reviews began in 1985 and continue today.
4. We have established the Environmental Assessment Processes. Each Nalco
facility in the United States regularly undergoes an Environmental
Assessment to verify it has management systems in place to assure
compliance with all environmental regulations as well as Nalco
environmental policies.
5. We have established Community Advisory Groups, consisting of community
leaders and neighbors for all Nalco U.S. research and manufacturing
facilities to facilitate understanding of our operations and their
effects on the community, foster communications and address mutual
concerns.
Some highlights of Nalco's long-term commitment to environmental health and
safety are:
I. In 1984, we developed the PORTA-FEED(R) System of returnable delivery
containers in an effort to solve waste and disposal problems related to
the use of returnable 55-gallon drums. This program has reduced by 80%
the number of 55-gallon drums we would have used. By the year 2000 the
need to dispose of 100 million pounds of residual chemical from 55-
gallon drums will have been eliminated.
II. In 1985, we helped develop and implement the CMA's Community Awareness
and Emergency Response (CAER) program, designed to help communities
identify potential sources of hazardous chemicals and prepare for
emergencies that may result from their presence.
III. In 1989, we established a Waste and Release Reduction Policy to reduce
waste and emissions. Since 1994, Nalco laboratory wastes have been
reduced by 50%; weekly water consumption in the Research & Development
group has been cut by over one million gallons; more than 16 tons of
scrap metal have been recycled, as well as 118 tons of paper, 37 tons
of cardboard, 1,430 pounds of aluminum, two tons of newspapers, eight
tons of magazines and 3.5 tons of books.
IV. At our Illinois plant, we eliminated the need to dispose of 10,000
pounds of chemical waste annually by modifying quality-testing
procedures. We reduced the quantity of hazardous waste produced at
Nalco Canada by 83% from 1989-1994.
V. In addition to participating in the EPA 33/50 program, Nalco has adopted
specific pollution prevention goals to be reached over a five year
period from 1994 to 1998. Measured from 1993 levels, by 1998 Nalco will:
A. reduce total air emissions by 30 percent;
16
<PAGE>
B. reduce toxic air emissions reported under the Toxic Release
Inventory (TRI) by 30 percent; and
C. reduce the waste per pound of product shipped by 30 percent.
We have received recognition and awards for our ongoing environmental
efforts from a number of groups including: the 1991-Illinois Governor's
Pollution Prevention Award and the 1993-Alaska Pollution Prevention Award for
development of the PORTA-FEED(R) Advanced Chemical Handling System, the 1993-
Illinois Governor's Pollution Prevention Award for Development of the Advanced
Recycle Center mobile water laboratory to aid water recycling and reuse, and
the 1994-Burlington, (Canada) Chamber of Commerce Business Award for
Outstanding Environmental Achievement.
The actions that we have undertaken in response to our own environmental
policy and our public commitment to Responsible Care(R) are part of an
extensive and ongoing process to enhance and protect the environment by
improving our environmental health and safety performance. We report the
results of our efforts annually to the Chemical Manufacturers Association, as
well as to shareholders, employees and the investment community.
While the CERES Principles appear to be a somewhat similar broad-based set
of manufacturing related environmental principles, Responsible Care(R) is a
much more specific set of Codes and Principles specifically applicable to
chemical companies and their particular operations and needs. We do not
believe it would be efficient or productive for us to undertake an additional
separate reporting requirement especially because most of the information
required by the CERES Report form is already available to the public through
Responsible Care(R) and government filings. It has become part of our culture
and we hope to make it part of the culture of the entire chemical industry
worldwide.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL 3. Unless
otherwise indicated, on the proxy, the shares represented by properly executed
proxies will be voted AGAINST Proposal 3.
SHARES OUTSTANDING AND VOTING RIGHTS
Only stockholders of record at the close of business on February 20, 1997
are entitled to vote at the meeting. On that date, the Company had outstanding
66,924,647 shares of common stock, each of which is entitled to one vote, and
391,835 shares of ESOP Preferred Stock, each of which is entitled to 20 votes
and will be converted upon retirement or separation from service into 20
shares of common stock (subject to adjustments in certain events). A quorum is
a majority of the votes represented by the outstanding shares of stock of the
Company either present at the meeting or represented by proxy. The common
stock and the ESOP Preferred Stock will vote together as a single class on
each of the Proposals. A plurality of the votes cast is necessary to elect
directors; the affirmative vote of the holders of shares constituting a
majority of votes cast is necessary to adopt Proposal 2; and the affirmative
vote of the holder of shares constituting a majority of the voting power of
all the outstanding shares is necessary to adopt Proposal 3. Abstentions and
broker non-votes will each be treated as shares that are represented at the
meeting for purposes of determining the presence of a quorum. Each is
tabulated separately. Abstentions and broker non-votes will have no effect on
Proposals 1 and 2 and will have the effect of votes against Proposal 3. Broker
non-votes are shares held by a broker or nominee in street name and
represented at the meeting but not authorized to vote on a matter.
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the number of shares of common stock and ESOP
Preferred Stock owned beneficially (as defined by the Securities and Exchange
Commission) by each director, director nominee and
17
<PAGE>
named executive officer (in each instance, amounting to less than 1% of the
outstanding class) and by all present directors and executive officers as a
group (1.6% of the outstanding common stock and less than 1% of the
outstanding ESOP Preferred Stock) as of February 20, 1997 (as of December 31,
1996, as to shares held in the Profit Sharing, Investment and Pay Deferral
Plan), with sole voting and investment power unless otherwise indicated.
<TABLE>
<CAPTION>
ESOP
COMMON PREFERRED
NAME SHARES SHARES
---- --------- ---------
<S> <C> <C>
J. L. Ballesteros..................................... 8,200 --
H. G. Bernthal........................................ 28,604 --
H. Corless............................................ 30,204 --
P. Dabringhausen...................................... 61,146 147
H. M. Dean............................................ 25,454 --
J. P. Frazee, Jr...................................... 30,838 --
M. B. Harp, Jr........................................ 123,593 205
A. L. Kelly........................................... 23,337 --
F. A. Krehbiel........................................ 32,204 --
E. J. Mooney.......................................... 324,946 211
W. A. Pogue........................................... 29,137 --
J. J. Shea............................................ 17,204 --
J. D. Tinsley......................................... 76,444 177
W. S. Weeber.......................................... 109,429 210
All Directors and Executive Officers as a Group....... 1,087,586 1,397
</TABLE>
The above amounts include common shares which are subject to outstanding
stock options exercisable within 60 days of March 18 as follows: E. J. Mooney,
281,000 shares; M. B. Harp, Jr., 89,900 shares; W. S. Weeber, 88,600 shares;
J. D. Tinsley, 61,800 shares; P. Dabringhausen, 56,400 shares; H. G. Bernthal,
H. Corless, J. P. Frazee, Jr., F. A. Krehbiel, and W. A. Pogue, 28,000 shares
each; H. M. Dean, 24,000 shares; A. L. Kelly, 20,000 shares; J. J. Shea,
16,000 shares; J. L. Ballesteros, 6,000 shares; and directors and executive
officers as a group, 929,400 shares. The table does not include ESOP Preferred
Stock not held for the account of the foregoing individuals that the ESOP
trustee is required to vote or dispose of in the manner and proportion in
which allocated shares are directed to be voted or disposed of, or common
shares into which any ESOP Preferred Stock may be converted.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
One Form 4 covering one transaction was filed 31 days late with the
Securities and Exchange Commission in 1996 by G. M. Brannon, Vice President,
President Nalco Pacific, because of a purchase by an investment manager.
18
<PAGE>
SECURITY OWNERSHIP OF CERTAIN OWNERS
Based on Schedule 13G filings received, the following companies are the only
persons known to the Company that own beneficially more than 5% of any class
of its voting securities.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
-------------- -------------------- -------------------- --------
<S> <C> <C> <C>
Common Shares......... FMR Corp. 9,079,116(1) 13.48%
82 Devonshire Street
Boston, MA 02109
Common Shares......... INVESCO PLC 4,599,159(2) 6.8%
11 Devonshire Square
London EC2M 4 YR
England
</TABLE>
- - ----------
(1) Fidelity Management and Research Company ("Fidelity"), a wholly owned
subsidiary of FMR Corp., beneficially owns 8,324,637 of these shares
(12.36%). Edward C. Johnson 3rd, Chairman, and FMR Corp., through its
control of Fidelity and the Fidelity Funds, each reports sole power to
dispose of 8,324,637 shares. Voting power over these shares resides with
the Funds' Boards of Trustees. Mr. Johnson and FMR Corp., through its
control of Fidelity Management Trust Company, report sole dispositive
power over these shares, sole power to vote or direct the voting of
208,479 shares and no power to vote or direct the voting of 546,000
shares. Members of Mr. Johnson's family and trusts for their benefit may
be deemed to form a controlling group with respect to FMR Corp.
(2) INVESCO PLC and its subsidiaries, INVESCO North American Group, Ltd.,
INVESCO, Inc., INVESCO North American Holdings, Inc., INVESCO Capital
Management, Inc., and INVESCO Group Services Inc., report shared voting
power and shared dispositive power of 4,599,159 shares.
STOCKHOLDER PROPOSAL DEADLINE
Stockholder proposals, to be considered for inclusion in the proxy statement
for the 1998 Annual Meeting of Stockholders, must be received by the Company
by November 18, 1997, and must otherwise comply with the requirements of the
Securities and Exchange Commission. Stockholders who wish to bring business
before the meeting must notify the Company 90 days prior to the date
corresponding to the date of the prior year's meeting in compliance with By-
law provisions.
DISCRETIONARY VOTING OF PROXIES ON OTHER MATTERS
The Board of Directors presently knows of no other matters scheduled to be
presented at the Annual Meeting. With respect to any other matter requiring a
vote of the stockholders that may come before the Annual Meeting, the proxies
in the enclosed form confer upon the person or persons entitled to vote the
shares represented by such proxies authority to vote the same in their
discretion in respect of any such other matter.
By Order of the Board of Directors
S. J. Gioimo
Secretary
Naperville, Illinois
March 18, 1997
19
<PAGE>
NOTICE OF
ANNUAL
MEETING
AND
PROXY
STATEMENT
THURSDAY, APRIL 17, 1997
NALCO CHEMICAL COMPANY
ONE NALCO CENTER, NAPERVILLE, ILLINOIS
60563-1198
