-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ERjaHe9lkNMgtXnLX5Uo3a/LB61+ti5EUDAUZsNUTqoMZBXZvBii216mXmWDjH0V Rs7owUBOKyNbFn3lKGHBwQ== 0000069598-96-000025.txt : 19961118 0000069598-96-000025.hdr.sgml : 19961118 ACCESSION NUMBER: 0000069598-96-000025 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: CSE SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NALCO CHEMICAL CO CENTRAL INDEX KEY: 0000069598 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS CHEMICAL PRODUCTS [2890] IRS NUMBER: 361520480 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04957 FILM NUMBER: 96663690 BUSINESS ADDRESS: STREET 1: ONE NALCO CTR CITY: NAPERVILLE STATE: IL ZIP: 60563 BUSINESS PHONE: 7083051000 MAIL ADDRESS: STREET 1: ONE NALCO CENTER CITY: NAPERVILLE STATE: IL ZIP: 60563-1198 10-Q 1 DOCUMENT 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
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 ======== ========
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)
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
NALCO CHEMICAL COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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) ====== ====== ====== ======
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:
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 ======= =======
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:
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 ===========================================================================================================
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 EX-10 2 EXHIBIT 10 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. EX-10 3 EXHIBIT 10 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. EX-10 4 EXHIBIT 10 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. EX-10 5 EXHIBIT 10 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. EX-11 6 EXHIBIT 11 EXHIBIT (11) STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE NALCO CHEMICAL COMPANY AND SUBSIDIARIES
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 ======= ======= ======= =======
EX-11 7 EXHIBIT 11 EXHIBIT (11) STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE NALCO CHEMICAL COMPANY AND SUBSIDIARIES
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 ======= ======= ======= =======
EX-15 8 EXHIBIT 15 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 EX-27 9 FDS --
5 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. 9-MOS DEC-31-1996 SEP-30-1996 45,600,000 0 232,400,000 (5,000,000) 92,500,000 434,900,000 1,152,300,000 (631,700,000) 1,451,900,000 340,400,000 253,000,000 0 400,000 15,100,000 628,100,000 1,451,900,000 963,800,000 963,800,000 421,600,000 421,600,000 0 0 11,300,000 165,600,000 60,100,000 105,500,000 5,800,000 0 0 111,300,000 1.52 1.42
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