ECOLAB INC (Form: 10-K, Received: 02/26/2013 16:45:36)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2012

Commission File No. 1-9328

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

ECOLAB INC.

(Exact name of registrant as specified in its charter)

Delaware		41-0231510
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

370 Wabasha Street North, St. Paul, Minnesota		55102
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: 1-800-232-6522

Securities registered pursuant to Section 12(b) of the Act:

	Title of each class		Name of each exchange on which registered
	Common Stock, $1.00 par value		New York Stock Exchange, Inc.

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. x YES o NO

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o YES x NO

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. x YES o NO

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. x YES o NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x		Accelerated filer o
Non-accelerated filer o		Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o YES x NO

Aggregate market value of voting and non-voting common equity held by non-affiliates of registrant on June 29, 2012: $19,976,543,000 (see Item 12, under Part III hereof), based on a closing price of registrant’s Common Stock of $68.53 per share.

The number of shares of registrant’s Common Stock, par value $1.00 per share, outstanding as of January 31, 2013: 294,954,864 shares.

DOCUMENTS INCORPORATED BY REFERENCE

1. Portions of the registrant’s Annual Report to Stockholders for the year ended December 31, 2012 (hereinafter referred to as “Annual Report”) are incorporated by reference into Parts I and II.

2. Portions of the registrant’s Proxy Statement for the Annual Meeting of Stockholders to be held May 2, 2013 and to be filed within 120 days after the registrant’s fiscal year ended December 31, 2012 (hereinafter referred to as “Proxy Statement”) are incorporated by reference into Part III.

PART I

Except where the context otherwise requires, references in this Form 10-K to “Ecolab,” “Company,” “we” and “our” are to Ecolab Inc. and its subsidiaries, collectively.

Forward-Looking Statements

This Annual Report on Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results of Operation” incorporated by reference into Item 7 of this Form 10-K, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include expectations concerning items such as closing of the Champion (as hereinafter defined) acquisition; scope, timing, costs, cash expenditures, benefits and headcount impact of our restructuring and cost savings initiatives; objective to improve credit rating; ability to deliver superior shareholder returns; long-term potential of our business; impact of changes in exchange rates and interest rates; losses due to concentration of credit risk; Cleantec escrow settlement; recognition of share-based compensation expense; future benefit plan payments; amortization expense; European economic uncertainty, including euro currency issues; demographic trends and their impact on end-markets; outlook for growth; special (gains) and charges; benefits of and synergies from the Nalco merger; bad debt experiences and customer credit worthiness; disputes, claims and litigation; environmental contingencies; returns on pension plan assets; currency gains and losses; investments; potential for margin improvement in our non-U.S. business; cash flow and uses for cash; business acquisitions and sources of funding; dividends; share repurchases; debt repayments; contributions to pension and post retirement healthcare plans; liquidity requirements and borrowing methods; impact of credit rating downgrade; impact of new accounting pronouncements; tax deductibility of goodwill; non-performance of counterparties; timing of hedged transactions; and income taxes, including loss carryforwards, unrecognized tax benefits and uncertain tax positions. Without limiting the foregoing, words or phrases such as “will likely result,” “are expected to,” “will continue,” “is anticipated,” “we believe,” “we expect,” “estimate,” “project” (including the negative or variations thereof) or similar terminology, generally identify forward-looking statements. Forward-looking statements may also represent challenging goals for us. These statements, which represent the Company’s expectations or beliefs concerning various future events, are based on current expectations that involve a number of risks and uncertainties that could cause actual results to differ materially from those of such forward-looking statements. We caution that undue reliance should not be placed on such forward-looking statements, which speak only as of the date made. Some of the factors which could cause results to differ from those expressed in any forward-looking statement are set forth under Item 1A of this Form 10-K, entitled Risk Factors.

Item 1. Business .

Item 1(a) General Development of Business .

Ecolab was incorporated as a Delaware corporation in 1924. Our fiscal year is the calendar year ending December 31.

In 2012, we took the following actions to continue to build our business:

· Throughout the year, we made significant progress in integrating Nalco Holding Company (“Nalco”), which we acquired by means of a merger in December 2011.

· In January 2012, we announced that we are undertaking a restructuring and other cost-saving actions in connection with the integration of the Nalco business, which includes a reduction of our global workforce and the streamlining of our supply chain footprint. We expect total charges relating to these actions to be approximately $180 million and this restructuring plan to be substantially completed by the end of 2013.

· Also in January, we redeemed $1.7 billion of Nalco outstanding senior notes.

· In August, we announced the opening of a manufacturing plant and distribution center in Taicang, China, as part of an expanding Company presence within the country. The facility is our third-largest in the world and our largest in the Asia Pacific region, capable of producing 150,000 tons of product annually.

· Also in August, we issued $500 million of 1.00% senior notes due in 2015 in order to repay a portion of our outstanding commercial paper borrowings and for general corporate purposes.

· In September, we announced an agreement to purchase Quimiproductos, a Mexico-based producer and supplier of cleaning, sanitizing and water treatment products and services to breweries and beverage companies. This acquisition was completed in January of 2013. With annual sales of approximately $43 million, Quimiproductos will help strengthen our core product offerings and improve service capabilities to our beverage processing customers in the fast growing Latin America region.

· In October, we announced an agreement to acquire Champion Technologies, a Houston-based global energy specialty products and services company, to further strengthen our position in the fast-growing energy services market. Champion’s 2012 sales were approximately $1.4 billion. The acquisition remains subject to various closing conditions, including regulatory approvals.

· In December we issued $500 million of 1.45% senior notes due in 2017 in order to finance a portion of the pending Champion acquisition and for general corporate purposes.

· In December, we completed the sale of our Vehicle Care division to Zep Inc. Vehicle Care had sales of approximately $65 million in 2011. This sale enables us to sharpen our strategic focus on our core business areas.

Item 1(b) Financial Information About Operating Segments .

The financial information about reportable segments appearing under the heading “Operating Segments and Geographic Information” in Note 16, located on pages 58 to 60 of the Annual Report, is incorporated herein by reference.

Item 1(c) Narrative Description of Business .

General : With 2012 world-wide sales of $11.8 billion, we are the global leader in water, hygiene and energy technologies and services that provide and protect clean water, safe food, abundant energy and healthy environments. We develop and market premium programs, products and services for the hospitality, foodservice, healthcare, industrial and energy markets in approximately 170 countries. Our cleaning and sanitizing programs and products, pest elimination services, and equipment maintenance and repair services support customers in the foodservice, food and beverage processing, hospitality, healthcare, government and education, retail, textile care and commercial facilities management sectors. Our chemicals and technologies are also used in water treatment, pollution control, energy conservation, oil production and refining, steelmaking, papermaking, mining and other industrial processes.

The following description of our business is based upon six reportable segments as reported in our consolidated financial statements for the year ended December 31, 2012, as incorporated by reference into Part II of this Form 10-K. We aggregated our 14 operating units into the following six reportable segments: U.S. Cleaning & Sanitizing; U.S. Other Services; International Cleaning, Sanitizing & Other Services; Global Water; Global Paper; and Global Energy.

We pursue a “Circle the Customer — Circle the Globe” strategy by providing an array of programs, products and services which serve our customer base, and do so on a global basis to meet the needs of our customers’ various operations around the world. Through this strategy and our varied product and service mix, one customer may utilize the offerings of several of our reportable segments.

U.S. Cleaning & Sanitizing Segment

Our U.S. Cleaning & Sanitizing segment is comprised of five operating units which provide cleaning and sanitizing products and programs to United States markets.

Institutional : Our Institutional Division sells specialized cleaners and sanitizers for washing dishes, glassware, flatware, foodservice utensils and kitchen equipment (“warewashing”), for on premise laundries (typically used by hotel and healthcare customers) and for general housekeeping functions, as well as food safety products and equipment, water filters, dishwasher racks and related kitchen sundries to the foodservice, lodging, educational and healthcare industries. The Institutional Division also provides pool and spa treatment programs for hospitality and other commercial customers, as well as a broad range of janitorial cleaning and floor care products and programs to customers in hospitality, healthcare and commercial facilities. The Institutional Division develops various chemical dispensing systems which are used by our customers to efficiently and safely dispense our cleaners and sanitizers. In addition, the Institutional Division markets a lease program comprised of energy-efficient dishwashing machines, detergents, rinse additives and sanitizers, including full machine maintenance.

Our Institutional Division sells its products and programs primarily through Company-employed field sales personnel. Corporate account sales personnel establish relationships and negotiate contracts with larger multi-unit or “chain” customers. We also utilize independent, third-party foodservice, broad-line and janitorial distributors to provide logistics to end customers for accounts that prefer to purchase through these distributors. Many of these distributors also participate in marketing our product and service offerings to the end customers. Through our Company-employed field sales and service personnel, we generally provide the same customer support to end-use customers supplied by these distributors as we do to direct customers.

We believe that we are the leading supplier of chemical warewashing products and programs to institutions in the United States.

Food & Beverage : Our Food & Beverage Division addresses cleaning and sanitation at the beginning of the food chain to facilitate the processing of products for human consumption. The Food & Beverage Division provides detergents, cleaners, sanitizers, lubricants and animal health products, as well as cleaning systems, electronic dispensers and chemical injectors for the application of chemical products, primarily to dairy plants, dairy farms, breweries, soft-drink bottling plants, and meat, poultry and other food processors. The Food & Beverage Division is also a leading developer and marketer of antimicrobial products used in direct contact with meat, poultry, seafood and produce during processing in order to reduce microbial contamination. The Food & Beverage Division also designs, engineers and installs CIP (“clean-in-place”) process control systems and facility cleaning systems for its customer base. Products for use on farms are sold through dealers and independent, third-party distributors, while products for use in processing facilities are sold primarily by our corporate account and field sales employees.

We believe that we are one of the leading suppliers of cleaning and sanitizing products to the dairy plant, dairy farm, food, meat and poultry, and beverage/brewery processor industries in the United States.

Kay : Our Kay business unit supplies cleaning and sanitizing chemical products and related items primarily to regional, national and international quick service restaurant (QSR) chains and to regional and national food retailers (i.e., supermarkets and grocery stores). Its products include specialty and general purpose hard surface cleaners, degreasers, sanitizers, polishes, hand care products and assorted cleaning tools and equipment which are primarily sold under the “Kay” and “Ecolab” brand names. Kay’s cleaning and sanitation programs are customized to meet the needs of the market segments it serves and are designed to

provide highly effective cleaning performance, promote food safety, reduce labor costs and enhance user and guest safety. A number of product dispensing options are available for products in the core product range. Kay supports its product sales with employee training programs and technical support designed to meet the special needs of its customers.

Both Kay’s QSR business and its food retail business utilize a corporate account sales force which establishes relationships and negotiates contracts with customers at the corporate headquarters and regional office levels (and, in the QSR market segment, at the franchisee level) and a field sales force which provides program support at the individual restaurant or store level. Customers in the QSR market segment are primarily supplied through third party distributors while most food retail customers utilize their own distribution networks.

We believe that Kay is the leading supplier of chemical cleaning and sanitizing products to the QSR market segment and a leading supplier of chemical cleaning and sanitizing products to the food retail market segment in the United States. While Kay’s customer base has grown over the years, Kay’s business remains largely dependent upon a limited number of major QSR chains and franchisees and large food retail customers.

Healthcare : Our Healthcare Division provides infection prevention and other healthcare related offerings to acute care hospitals, surgery centers, dental offices and veterinary clinics. The Healthcare Division’s proprietary infection prevention products (hand hygiene, hard surface disinfectants, instrument cleaners, patient drapes, fluid control products, equipment drapes and surgical fluid, warming and cooling systems) are sold primarily under the “Ecolab”, “Microtek” and “OR Solutions” brand names to various departments within the acute care environment (Infection Control, Environmental Services, Central Sterile and Operating Room). The Healthcare Division’s Microtek Medical business is a leader in niche branded specialty surgical drapes and fluid control products. The Healthcare Division’s OR Solutions business is a leading developer and marketer of surgical fluid warming and cooling systems. The Healthcare Division sells its products and programs primarily through Company-employed field sales personnel but also sells through healthcare distributors.

Textile Care : Our Textile Care Division provides products and services that manage the entire wash process through custom-designed programs, premium products, dispensing equipment, water and energy management, and real-time data management for large-scale, complex commercial operations including uniform rental, hospitality, linen rental and healthcare laundries. The Textile Care Division’s programs are designed to meet our customers’ needs for exceptional cleaning, while extending the useful life of linen and reducing the customers’ overall operating cost. Products and programs are marketed primarily through Company-employed field sales personnel and, to a lesser extent, through distributors.

Vehicle Care: Prior to its sale on December 1, 2012, the Vehicle Care Division provided vehicle appearance products which included soaps, polishes, sealants, wheel and tire treatments and air fresheners. The Vehicle Care Division sold to vehicle rental, fleet and consumer car wash and detail operations using brands that include Blue Coral Ò , Black Magic Ò and Rain-X Ò .

U.S. Other Services Segment

Our U.S. Other Services segment is comprised of two operating units: Pest Elimination and Equipment Care (formerly GCS Service). In general, these businesses provide service which can augment or extend our product offerings to our business customers as a part of our “Circle the Customer” approach and, in particular, by enhancing our food safety capabilities.

Pest Elimination : Our Pest Elimination Division provides services designed to detect, eliminate and prevent pests, such as rodents and insects, in restaurants, food and beverage processors, educational and healthcare facilities, hotels, quick service restaurant and grocery operations and other institutional and commercial customers. The services of the Pest Elimination Division are sold and performed by Company-employed field sales and service personnel. In addition, through our EcoSure Food Safety Management business, we provide customized on-site evaluations, training and quality assurance services to foodservice operations.

Equipment Care : Our Equipment Care Division provides equipment repair, maintenance and preventive maintenance services for the commercial food service industry. Repair services are offered for in-warranty repair, acting as the manufacturer’s authorized service agent, as well as after warranty repair. In addition, Equipment Care operates as a parts distributor to repair service companies and end-use customers.

International Cleaning, Sanitizing & Other Services Segment

Our International Cleaning, Sanitizing & Other Services segment directly operates in approximately 75 countries outside of the United States through wholly-owned subsidiaries or, in the case of Venezuela, through a joint venture with a local partner. In other countries, selected products are sold by our export operations to distributors, agents or licensees, although the volume of those sales is not significant in terms of our overall revenues. Our largest International Cleaning, Sanitizing & Other Services operations are located in Europe, Asia Pacific, Latin America and Canada, with smaller operations in Africa and the Middle East.

In general, our International Cleaning, Sanitizing & Other Services businesses are similar to those conducted in the United States but are managed on a geographic basis. The businesses which are similar to the United States’ Institutional and Food & Beverage businesses are the largest businesses in our International operations. They are conducted in virtually all of our International locations and, compared to the United States, constitute a larger portion of the overall business. Healthcare and Textile Care are also meaningful businesses in our International operations, particularly in Europe. Kay has sales in a number of International locations. A significant portion of Kay’s international sales are to international units of United States-based quick service restaurant chains. Consequently, a substantial portion of Kay’s international sales are made either to domestic or internationally-located third-party distributors who serve these chains.

Our Pest Elimination business continues to expand its geographic coverage. We operate this business in various countries in Asia Pacific, Western Europe, Latin America and South Africa, with the largest operations in France, the United Kingdom and Brazil.

Our other cleaning and sanitizing businesses are conducted less extensively internationally. However, in general, most of the principal businesses conducted in the United States are also operated in Canada.

Our International Cleaning, Sanitizing & Other Services businesses are subject to the usual risks of foreign operations, including possible changes in trade and foreign investment laws, international business laws and regulations, tax laws, currency exchange rates and economic and political conditions abroad. The profitability of our International operations has historically been lower than the profitability of our businesses in the United States, due to (i) the additional cost of operating in numerous and diverse foreign jurisdictions, (ii) higher costs of importing certain raw materials and finished goods in some regions and (iii) the smaller scale of International operations where certain operating locations are smaller in size. Proportionately larger investments in sales and technical support are also necessary in order to facilitate the growth of our International operations.

Global Water Segment

Our Global Water segment serves customers across industrial and institutional markets, with the exception of the pulp and paper industry which is serviced by our Global Paper business and the energy industries which are served by our Global Energy business. Within Global Water, we provide products and programs for water treatment and process applications aimed at combining environmental benefits with economic gains for our customers. Typically, water savings, energy savings, maintenance and capital expenditure avoidance are among the primary sources of value to our customers, with product quality and production enhancement improvements also providing a key differentiating feature for many of our offerings.

Our Global Water offerings are organized according to the customer end-markets we serve so we can address the unique drivers faced by each market. We serve customers in the aerospace, chemical, pharmaceutical, mining and primary metals, power, food and beverage and medium and light manufacturing, as well as institutional clients such as hospitals, universities, commercial buildings and hotels. Our on-site experts, industry technical consultants and researchers develop appropriate solutions for a broad range of customer requirements, such as single process optimization, system-wide program implementation, troubleshooting or increasing efficiencies. As a part of our chemicals program we provide numerous plant, process and application audits and surveys in water treatment and customer production. In addition, we offer consulting for all water use and discharge areas and make recommendations for improvements, cost reductions or efficiency improvements through our Advanced Recycle Technology programs. Our offerings are sold primarily by our field sales employees.

We believe that we have the leading market position among suppliers of products and programs for chemical treatment applications for industrial water treatment.

The following descriptions include water treatment applications used across all of our segments.

Cooling Water Applications: Our cooling water treatment programs are designed to control the main problems associated with cooling water systems — corrosion, scale and microbial fouling and contamination — in open recirculating, once-through and closed systems. Our 3D TRASAR ® technology for cooling water is an automated system for simultaneous control of corrosion, scale and microbial fouling and contamination.

Boiler Water Applications: We provide integrated chemical solutions, process improvements and mechanical component modifications to optimize boiler performance and control corrosion and scale build-up.

Raw Water/Potable Water Preparation: Our programs assist the production of potable water or water for plant processes by optimizing the performance of treatment chemicals and equipment in order to minimize costs and maximize return on investment.

Wastewater Applications: Our wastewater products and programs focus on improving overall plant economics, addressing compliance issues, optimizing equipment efficiency and improving operator capabilities and effectiveness. Our offerings combine practical engineering approaches and hands-on knowledge of system operations to design, build, operate and/or maintain the optimal reuse solution for each application and customer.

Global Paper Segment

Our Global Paper segment provides water and process applications for the pulp and paper industries. Our Global Paper segment offers a comprehensive portfolio of programs that are used in all principal steps of the papermaking process and across all grades of paper, including graphic grades, board and packaging, and tissue and towel. We believe that we are one of the leading suppliers of water treatment products and process aids to the pulp and papermaking industry. Our offerings are sold primarily by our field sales employees.

Global Paper provides its customers the same types of products and programs for water treatment and wastewater treatment as those offered by Global Water. In addition, Global Paper offers the following specialty applications.

Pulp Applications: Our programs maximize process efficiency and increase pulp cleanliness and brightness in bleaching operations, as well as predict and monitor scaling potential utilizing on-line monitoring to design effective treatment programs and avoid costly failures.

Paper Applications: Our paper process applications focus on the key business drivers that are critical to the success of our customers’ businesses. We integrate the entire papermaking process through mechanical, operational and chemical means to concentrate specifically on what our customers need to succeed in their market segments and improve their overall operational efficiency. Advanced sensing, monitoring and automation combine with innovative chemistries and detailed process knowledge to provide a broad range of customer solutions.

Global Energy Segment

Our Global Energy segment provides on-site, technology-driven solutions to the global drilling, oil and gas production, refining, and petrochemical industries. Our customers include nearly all of the largest publicly traded oil companies. Our Global Energy offerings are sold primarily by our corporate account and field sales employees. The Global Energy segment is divided into an Upstream group composed of our Adomite, Oilfield Chemicals and Enhanced Oil Recovery businesses and a Downstream refinery and petrochemical processing business. We believe that our Global Energy segment enjoys a leading market position in the markets it serves.

Well Stimulation and Completion: Our Adomite group offers a range of product solutions specifically designed to enhance performance even in the most severe environments. We supply chemicals for the cementing, drilling, fracturing and acidizing phases of well drilling and stimulation. Our integrated approach to product development combines marketing and research efforts supported with process simulation, pilot plants and full-scale manufacturing capabilities. Importantly, we are committed to the development of sustainable solutions to meet the demanding environmental requirements in the industry.

Oilfield Applications: Our Oilfield Chemicals business provides solutions to the oil and gas production sector. We have expertise in crude oil and natural gas production, pipeline gathering/transmission systems, gas processing, and heavy oil and bitumen upgrading. Our priority is to safely manage the critical challenges facing today’s oil and gas producers throughout the lifecycle of their assets. Starting with the design/capital investment phase to asset decommission, a lifecycle approach to chemical solutions and offerings help our customers minimize risk, achieve their production targets and maximize profitability.

Our Asset Integrity team uses processes and technologies to help producers mitigate corrosion. We work with our customers to utilize state-of-the-art laboratory methods to design best-in-class chemistries to mitigate corrosion of the equipment, and we monitor oil and gas systems to track the success of corrosion mitigation programs. We also deploy the latest molecular monitoring tools to measure and control microbiological influenced corrosion and provide environmentally friendly chemistries worldwide.

Enhanced Oil Recovery: We provide custom-engineered chemical solutions that increase production of crude oil and gas from existing fields, which are marketed primarily through our TIORCO® joint venture with Stepan Company. TIORCO integrates enhanced oil recovery (“EOR”) processes by leveraging our polymer and reservoir expertise and Stepan’s global surfactant technology and manufacturing capabilities. Our offerings include reservoir screening, target validation, laboratory and reservoir simulation work, secondary flood optimization, tertiary recovery flood design and implementation and, when needed, a produced water treatment solution.

Downstream Refining Applications: Our industry-focused sales engineers provide products and programs for process and water treatment applications specific to the petroleum refining and fuels industry, enabling our customers to profitably refine and upgrade hydrocarbons. Our heavy oil upgrading programs minimize operation costs and mitigate fouling, corrosion, foaming and the effects of heavy metals when refining opportunity crudes.

Clean fuels regulations require drastic reduction in the level of sulfur allowed in fuels. Our H2S Scavengers, such as the SULFA-CHECK ® system, help our customers to comply with regulatory standards. We offer an entire line of fuel additives, including corrosion inhibitors, to protect engine fuel systems and pre-market underground storage tanks and piping. In addition, we offer fuel stabilizers, pour point depressants, cetane improvers, detergents and antioxidants for home heating oil and premium diesel and gasoline packages.

Downstream Chemical Processing Applications: We work with customers globally to overcome the increasing challenges associated with capacity increases, plant revamps and constantly changing feedstocks. Our customized process and water treatment programs are delivered by onsite technical experts who are focused on providing improved system reliability, reduced total cost of operations, environmental compliance, sustainability in the form of energy and water savings and reduced carbon emissions.

Water Treatment Applications: We provide total water and wastewater management solutions specific to customers’ refining and chemical processing needs including boiler treatment, cooling water treatment and wastewater treatment. See “Global Water Segment.”

Additional Information

Competition : Our businesses in our U.S. Cleaning & Sanitizing, U.S. Other Services and International Cleaning, Sanitizing & Other Services segments have two significant classes of competitors. First, each business unit competes with a small number of large companies selling directly or through distributors on a national or international scale. Second, all of these business units have numerous smaller regional or local competitors which focus on more limited geographies, product lines and/or end-use customer segments. Our objective is to achieve a significant presence in each of our business markets. In general, competition is based on customer support, product performance and price. We believe we compete principally by providing superior value, premium customer support and differentiated products to help our customers protect their brand reputation. We create value by providing state-of-the-art cleaning, sanitation, water treatment and maintenance products and systems coupled with high customer support standards and continuing dedication to customer satisfaction. This is made possible, in part, by our significant on-going investment in training and technology and by our standard practice of advising customers on ways to lower operating costs and helping them comply with safety, environmental and sanitation regulations. In addition to our consultative approach, we emphasize our ability to uniformly provide a variety of related premium cleaning and sanitation programs to our customers and to provide that level of customer support to multiple locations of chain customer organizations worldwide. This approach is succinctly stated in our “Circle the Customer - Circle the Globe” strategy which is discussed above in this Item 1(c) under the heading “General.”

Our businesses in our Global Water, Global Paper and Global Energy segments compete on the basis of their demonstrated value, technical expertise, chemical formulations, customer support, detection equipment, monitoring services, and dosing and metering equipment. In general, some of the markets in which these businesses compete are led by a few large companies, with the rest of the market served by smaller entities focusing on more limited geographic regions.

With respect to Global Water, the market for water treatment chemicals is highly fragmented, but is led by Ecolab. Four other companies are present in at least two of the major geographic regions of the globe, with one present in all regions. These global or regional service providers tend to focus either on a limited geographic region or a smaller subset of products and services. The remainder of the market is comprised of local competitors. Collectively, local players have the largest share of the market, but are individually much smaller and tend to focus on servicing local businesses typically requiring less sophisticated applications.

With respect to our Global Paper business, the market for specialty and water treatment chemicals used in the pulp and paper industry is fragmented. We are one of the leading suppliers with four other multi-nationals having significant presence. The remainder of the market is comprised of smaller, regional participants.

The largest participants in portions of the Energy Services sector are Ecolab’s Global Energy business and three other multi-nationals. The remainder of the market consists of smaller, regional niche companies focused on limited geographic areas.

Sales : Products, systems and services are primarily marketed in domestic and international markets by Company-trained field sales personnel who also advise and assist our customers in the proper and efficient use of the products and systems in order to meet a full range of cleaning and sanitation, water treatment and process chemistry needs. Independent, third-party distributors are utilized in several markets, as described in the business unit descriptions found under the discussion of the six reportable segments above.

Number of Employees : We had approximately 40,860 employees as of December 31, 2012.

Customers and Classes of Products : We believe that our business is not materially dependent upon a single customer. Additionally, although we have a diverse customer base and no customer or distributor constitutes 10 percent or more of our 2012 consolidated revenues, we do have customers and independent, third-party distributors, the loss of which could have a material adverse effect on results of operations for the affected earnings periods; however, we consider it unlikely that such an event would have a material adverse impact on our financial position. No material part of our business is subject to renegotiation or termination at the election of a governmental unit.

We sold two classes of products within the U. S. Cleaning & Sanitizing and International Cleaning, Sanitizing & Other Services segments which comprised 10% or more of consolidated net sales in any of the last three years. Sales of warewashing products were approximately 11% of consolidated 2012 net sales, and approximately 18% in 2011 and approximately 19% in 2010. In addition, through our Institutional and Textile Care businesses around the world, we sell laundry products to a broad range of laundry customers. Sales of laundry products were approximately 10% of consolidated net sales in 2011 and 2010.

Patents and Trademarks : We own and license a number of patents, trademarks and other intellectual property. While we have an active program to protect our intellectual property by filing for patents or trademarks, and pursuing legal action, when appropriate, to prevent infringement, we do not believe that our overall business is materially dependent on any individual patent or trademark except patents related to our TRASAR and 3D TRASAR technology, which are material to our Global Water and Global Paper segments, and trademarks related to Ecolab, Nalco Company and 3D TRASAR. The Ecolab trademarks are material to the U.S. Cleaning & Sanitizing, U.S. Other Services and International Cleaning, Sanitizing & Other Services segments and the Nalco trademarks are material to the Global Water, Global Paper and Global Energy

segments. The 3D TRASAR trademarks predominantly relate to our Global Water and Global Paper segments. U.S. and foreign patents protect aspects of our key TRASAR and 3D TRASAR technology until at least 2024. The Ecolab, Nalco Company and 3D TRASAR trademarks are registered or applied for in all of our key markets, and we anticipate maintaining them indefinitely.

Seasonality : We experience variability in our quarterly operating results due to seasonal sales volume and business mix fluctuations in our operating segments. Note 17, entitled “Quarterly Financial Data” located on page 61 of the Annual Report, is incorporated herein by reference.

Working Capital : We have invested in the past, and will continue to invest in the future, in merchandising and customer equipment consisting primarily of systems used by customers to dispense our products as well as to monitor water systems. Otherwise, we have no unusual working capital requirements.

Manufacturing and Distribution : We manufacture most of our products and related equipment in Company-operated manufacturing facilities. Some products are also produced for us by third-party contract manufacturers. Other products and equipment are purchased from third-party suppliers. Additional information on product/equipment sourcing is found in the segment discussions above and additional information on our manufacturing facilities is located beginning at page 27 of this Form 10-K under the heading “Properties.”

Deliveries to customers are made from our manufacturing plants and a network of distribution centers and third-party logistics service providers. We use common carriers, our own delivery vehicles, and distributors for transport. Additional information on our plant and distribution facilities is located beginning at page 27 of this Form 10-K under the heading “Properties.”

Raw Materials : Raw materials purchased for use in manufacturing our products are inorganic chemicals, including alkalis, acids, biocides, phosphonates, phosphorous materials, silicates and salts; and organic chemicals, including acids, amines, fatty acids, surfactants, solvents, monomers and polymers. Our Healthcare Division purchases plastic films and parts to manufacture medical devices that serve the surgical and infection prevention markets. Pesticides used by our Pest Elimination Division are purchased as finished products under contract or purchase order from the producers or their distributors. We also purchase packaging materials for our manufactured products and components for our specialized cleaning equipment and systems. We purchase more than 8,000 raw materials, with the largest single raw material representing less than 3% of raw material purchases. Our raw materials, with the exception of a few specialized chemicals which we manufacture, are generally purchased on an annual contract basis and are ordinarily available in adequate quantities from a diverse group of suppliers globally. When practical, global sourcing is used so that purchasing or production locations can be shifted to control product costs at globally competitive levels.

Research and Development : Our research and development program consists principally of devising and testing new products, processes, techniques and equipment, improving the efficiency of existing ones, improving service program content, evaluating the environmental compatibility of products and technical support. Key disciplines include analytical and formulation chemistry, microbiology, process and packaging engineering, remote monitoring engineering and product dispensing technology. Substantially all of our principal products have been developed by our research, development and engineering personnel. At times, technology has also been licensed from third parties to develop offerings.

We believe that continued research and development activities are critical to maintaining our leadership position within the industry and will provide us with a competitive advantage as we seek additional business with new and existing customers.

Note 13, entitled “Research Expenditures” located on page 50 of the Annual Report, is incorporated herein by reference.

Joint Ventures : Over time, certain of our businesses have entered into general partnerships or joint ventures for limited scope business opportunities. In 2004, we entered into a joint venture with Katayama Chemical, Inc. for the marketing and sale of our water treatment and process chemicals in Japan. In 2008 we formed a joint venture with Stepan Company operating under the TIORCO brand to globally market custom-engineered chemical solutions for increased production of crude oil and gas from existing fields. In 2010, we formed new joint ventures in South Africa with a subsidiary of Protea Chemicals and in Russia with a subsidiary of Lukoil. We also have long-standing partnerships in Saudi Arabia (Global Water and Global Energy), Spain (Global Water) and Venezuela (International Cleaning, Sanitizing & Other Services), and we also maintain joint ventures in jurisdictions requiring local participation in our business. We will continue to evaluate the potential for partnerships and joint ventures that can assist us in increasing our geographic, technological and product reach.

Environmental and Regulatory Considerations : Our businesses are subject to various legislative enactments and regulations relating to the protection of the environment and public health. While we cooperate with governmental authorities and take commercially practicable measures to meet regulatory requirements and avoid or limit environmental effects, some risks are inherent in our businesses. Among the risks are costs associated with transporting and managing hazardous materials and waste disposal and plant site clean-up, fines and penalties if we are found to be in violation of law, as well as modifications, disruptions or discontinuation of certain operations or types of operations including product recalls and reformulations. Similarly, the need for certain of our products and services is dependent upon or might be limited by governmental laws and regulations. Changes in such laws and regulations, including among others, air pollution regulations and regulations relating to oil and gas production (including those related to hydraulic fracturing), could impact the sales of some of our products or services. In addition to an increase in costs of manufacturing and delivering products, a change in production regulations or product regulations could result in interruptions to our business and potentially cause economic or consequential losses should we be unable to meet the demands of our customers for products.

Additionally, although we are not currently aware of any such circumstances, there can be no assurance that future legislation or enforcement policies will not have a material adverse effect on our consolidated results of operations, financial position or cash flows. Environmental and regulatory matters most significant to us are discussed below.

Ingredient Legislation : Various laws and regulations have been enacted by state, local and foreign jurisdictions pertaining to the sale of products which contain phosphorous, volatile organic compounds, or other ingredients that may impact human health or the environment. Under California Proposition 65, label disclosures are required for certain products containing chemicals listed by California. Chemical management initiatives that promote pollution prevention through research and development of safer chemicals and safer chemical processes are being advanced by certain states, including California, Maine, Massachusetts, Minnesota and Oregon. Environmentally preferable purchasing programs for cleaning products have been enacted in nine states to date, and in 2012 were considered by several other state legislatures. Cleaning product ingredient disclosure legislation has been introduced in the U.S. Congress in each of the past few years but has not passed, and several states including California and New York are considering further regulations in this area. The California Safer Consumer Products Act regulations are expected to be enacted in 2013 and will focus on ingredients in consumer products that have the potential for widespread public exposure. Ecolab’s Institutional cleaning products will be subject to the regulations and can incur additional stay-in-market expenses associated with conducting the required alternatives analyses for chemicals of concern. To date, we generally have been able to comply with such legislative requirements by reformulation or labeling modifications. Such legislation has not had a material adverse effect on our consolidated results of operations, financial position or cash flows to date.

TSCA : Re-authorization of the Toxic Substances Control Act (“TSCA”) and an update of the chemicals on the TSCA Inventory (the so-called “reset” of the TSCA Inventory) are again being discussed in the U.S. Congress. The U.S. Environmental Protection Agency (EPA) also is more aggressively using the existing TSCA tools to manage chemicals of concern. We anticipate that compliance with new requirements under TSCA could be similar to the costs associated with REACH in the European Union, which is discussed below.

REACH : The European Union has enacted a regulatory framework for the Registration, Evaluation and Authorization of Chemicals (“REACH”). It established a new European Chemicals Agency (“ECHA”) in Helsinki, Finland, which is responsible for evaluating data to determine hazards and risks and to manage this program for authorizing chemicals for sale and distribution in Europe. We have met the pre-registration requirements of REACH, the 2010 registration deadline, and are on track to meet the upcoming registration deadlines and requirements in 2013. To help manage this new program, we are simplifying our product line and working with chemical suppliers to comply with registration requirements. Potential costs to us are not yet fully quantifiable, but are not expected to have a material adverse effect on our consolidated results of operations or cash flows in any one reporting period or on our financial position.

GHS : In 2003, the United Nations issued a standard on hazard communication and labeling of chemical products known as the Globally Harmonized System of Classification and Labeling of Chemicals (“GHS”). GHS is designed to facilitate international trade and increase safe handling and use of hazardous chemicals through a worldwide system that classifies chemicals based on their intrinsic hazards and communicates information about those hazards through standardized product labels and safety data sheets (“SDSs”). Most countries in which we operate will adopt GHS-related legislation, and numerous countries already have done so. The primary cost of compliance revolves around reclassifying products and revising SDSs and product labels, and we are working toward a phased-in approach to mitigate the costs of GHS implementation. Potential costs to us are not yet fully quantifiable, but are not expected to have a material adverse effect on our consolidated results of operations or cash flows in any one reporting period or on our financial position.

Pesticide and Biocide Legislation : Various international, federal and state environmental laws and regulations govern the manufacture and/or use of pesticides. We manufacture and sell certain disinfecting and sanitizing products which kill or reduce microorganisms (bacteria, viruses, fungi) on hard environmental surfaces and on certain food products. Such products constitute “pesticides” or “antimicrobial pesticides” under the current definitions of the Federal Insecticide, Fungicide, and Rodenticide Act (“FIFRA”), as amended by the Food Quality Protection Act of 1996, the principal federal statute governing the manufacture, labeling, handling and use of pesticides. We maintain several hundred product registrations with the U.S. Environmental Protection Agency (“EPA”). Registration entails the necessity to meet certain efficacy, toxicity and labeling requirements and to pay on-going registration fees. In addition, each state in which these products are sold requires registration and payment of a fee. In general, the states impose no substantive requirements different from those required by FIFRA. However, California and certain other states have adopted additional regulatory programs, and California imposes a tax on total pesticide sales in that state. While the cost of complying with rules as to pesticides has not had a material adverse effect on our consolidated results of operations, financial condition, or cash flows to date, the costs and delays in receiving necessary approvals for these products continue to increase. Total fees paid to the EPA and the states to obtain or maintain pesticide registrations, and for the California tax, were approximately $3.7 million in 2012 and $3.0 million in 2011.

In Europe, the Biocidal Product Directive and the more recent Biocidal Products Regulation established a program to evaluate and authorize marketing of biocidal active substances and products. We are working with suppliers and industry groups to manage these requirements and have met the first relevant deadline of the program by the timely submission of dossiers for active substances. Anticipated registration costs, which will be incurred through the multi-year phase-in period, will be significant; however, these costs are not expected to significantly affect our consolidated results of operations or cash flows in any one reporting period or our financial position.

In addition, our Pest Elimination Division applies restricted-use pesticides that it generally purchases from third parties. That Division must comply with certain standards pertaining to the use of such pesticides and to the licensing of employees who apply such pesticides. Such regulations are enforced primarily by the states or local jurisdictions in conformity with federal regulations. We have not experienced material difficulties in complying with these requirements.

FDA Antimicrobial Product Requirements : Various laws and regulations have been enacted by federal, state, local and foreign jurisdictions regulating certain products manufactured and sold by us for controlling microbial growth on humans, animals and foods. In the United States, these requirements generally are administered by the U.S. Food and Drug Administration (“FDA”). However, the U.S. Department of Agriculture and EPA also may share in regulatory jurisdiction of antimicrobials applied to food. The FDA codifies “Good Manufacturing Practices” for these products in order to ensure product quality, safety and effectiveness. The FDA also has been expanding requirements applicable to such products, including proposing regulations in a Tentative Final Monograph for Healthcare Antiseptic Drug Products dated June 17, 1994, which may impose additional requirements associated with antimicrobial hand care products and associated costs when finalized by the FDA. To date, such requirements have not had a material adverse effect on our consolidated results of operations, financial position or cash flows.

Medical Device and Drug Product Requirements : As a manufacturer, distributor and marketer of medical devices, we also are subject to regulation by the FDA and corresponding regulatory agencies of the state, local and foreign governments in which we sell our products. These regulations govern the development, testing, manufacturing, packaging, labeling, distribution and marketing of medical devices. We also are required to register with the FDA as a medical device manufacturer, comply with post-market reporting (e.g., MDR and Recall) requirements, and to comply with the FDA’s Quality System Regulations which require that we have a quality system for the design and production of our products intended for commercial distribution in the United States and satisfy recordkeeping requirements with respect to our manufacturing, testing and control activities. Countries in the European Union require that certain products being sold within their jurisdictions obtain a “CE mark”, an international symbol of adherence to quality assurance standards, and be manufactured in compliance with certain requirements (e.g., Medical Device Directive 93/42/ECC, as amended by 2007/47/EC, and ISO 13485). We have CE mark approval to sell various medical device products in Europe. Our other international non-European operations also are subject to government regulation and country-specific rules and regulations. Regulators at the federal, state and local level have imposed, are currently considering and are expected to continue to impose regulations on medical devices and drug products. No prediction can be made of the potential effect of any such future regulations, and there can be no assurance that future legislation or regulations will not increase the costs of our products or prohibit the sale or use of certain products.

Other Environmental Legislation; Capital Expenditures : Our manufacturing plants are subject to federal, state, local or foreign jurisdiction laws and regulations relating to discharge of hazardous substances into the environment and to the transportation, handling and disposal of such substances. The primary federal statutes that apply to our activities in the United States are the Clean Air Act, the Clean Water Act and the Resource Conservation and Recovery Act. We are also subject to the Superfund Amendments and Reauthorization Act of 1986, which imposes certain reporting requirements as to emissions of hazardous substances into the air, land and water. Similar legal requirements apply to Ecolab’s facilities globally. We make capital investments and expenditures to comply with environmental laws and regulations, to ensure employee safety and to carry out our announced environmental sustainability principles. To date, such expenditures have not had a significant adverse effect on our consolidated results of operations, financial position or cash flows. Our capital expenditures for environmental, health and safety projects worldwide were approximately $20 million in 2012 and $10 million in 2011. Approximately $18 million has been budgeted globally for projects in 2013.

Climate Change : Various laws and regulations pertaining to climate change have been implemented or are being considered for implementation at the international, national, regional and state levels, particularly as they relate to the reduction of greenhouse gas (“GHG”) emissions. None of these laws and regulations directly apply to Ecolab at the present time; however, as a matter of corporate policy, Ecolab supports a balanced approach to reducing GHG emissions while sustaining economic growth and competitiveness. Ecolab is committed to reducing its carbon footprint. To help manage risks from GHG emissions and identify cost-effective reduction opportunities, Ecolab joined EPA’s Climate Leaders program in 2005. Though EPA announced in 2010 that it was dissolving the program, Ecolab has continued with much of its work to reduce its carbon footprint. For example, Ecolab has developed a U.S.-based GHG inventory of the six major greenhouse gases and reported progress against Ecolab’s goal of reducing GHG emissions by 20% per dollar sales from 2006 to 2012. In 2013, Ecolab plans to introduce new comprehensive environmental goals. We also leverage over one million customers globally to reduce energy and greenhouse gas emissions through high-efficiency solutions in cleaning and sanitation, water, paper and energy services. These actions directly reduce greenhouse gas emissions by lessening the demand for energy. Likewise, we can indirectly reduce energy demand by recognizing the critical connection of water and energy, especially in industrial processes reliant on water to transmit thermal energy. We have made progress on our goals to reduce water consumption, disposed waste and effluent water by 18 percent per metric ton of shipped product by 2015. Our customers, likewise, employ our technologies and expertise in an exponentially greater scale to improve their own overall energy demand.

Environmental Remediation and Proceedings : Along with numerous other potentially responsible parties (“PRP”), we are currently involved with waste disposal site clean-up activities imposed by the federal Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) or state equivalents at 33 sites in the United States. Additionally, we have similar liability at four sites outside the United States. In general, under CERCLA, we and each other PRP that actually contributed hazardous substances to a Superfund site are jointly and severally liable for the costs associated with cleaning up the site. Customarily, the PRPs will work with the EPA to agree and implement a plan for site remediation.

Based on an analysis of our experience with such environmental proceedings, our estimated share of all hazardous materials deposited on the sites referred to in the preceding paragraph, and our estimate of the contribution to be made by other PRPs which we believe have the financial ability to pay their shares, we have accrued our best estimate of our probable future costs relating to such known sites. Unasserted claims are not reflected in the accrual. In establishing accruals, potential insurance reimbursements are not included. The accrual is not discounted. It is not feasible to predict when the amounts accrued will be paid due to the uncertainties inherent in the environmental remediation and associated regulatory processes.

We have also been named as a defendant in lawsuits where our products have not caused injuries, but the claimants wish to be monitored for potential future injuries. We cannot predict with certainty the outcome of any such tort claims or the involvement we or our products might have in such matters in the future and there can be no assurance that the discovery of previously unknown conditions will not require significant expenditures. In each of these chemical exposure cases, our insurance carriers have accepted the claims on our behalf (with or without reservation) and our financial exposure should be limited to the amount of our deductible; however, we cannot predict the number of claims that we may have to defend in the future and we may not be able to continue to maintain such insurance.

We have also been named as a defendant in a number of lawsuits alleging personal injury due to exposure to hazardous substances, including multi-party lawsuits alleging personal injury in connection with our products and services. While we do not believe that any of these suits will be material to us based upon present information, there can be no assurance that these environmental matters could not have, either individually or in the aggregate, a material adverse effect on our consolidated results of operations, financial position or cash flows.

Our worldwide net expenditures for contamination remediation were approximately $2.4 million in 2012 and $1 million in 2011. Our worldwide accruals at December 31, 2012 for probable future remediation expenditures, excluding potential insurance reimbursements, totaled approximately $10 million. We review our exposure for contamination remediation costs periodically and our accruals are adjusted as considered appropriate. While the final resolution of these issues could result in costs below or above current accruals and, therefore, have an impact on our consolidated financial results in a future reporting period, we believe the ultimate resolution of these matters will not have a material effect on our consolidated results of operations, financial position or cash flows.

Disclosure of Certain Activities Related to Iran

Ecolab has had a long-standing policy and practice of prohibiting all activity in countries subject to comprehensive U.S. economic sanctions, including Iran (the “Sanctioned Countries”). This policy was in place prior to passage of the Iran Threat Reduction and Syria Human Rights Act of 2012, pursuant to which all entities owned or controlled by U.S. companies are prohibited from engaging in activities in Iran. Effective December 1, 2011, Ecolab acquired Nalco, which at the time of the acquisition had foreign subsidiaries that engaged in sales in Iran. Shortly following the closing of the Nalco acquisition, Ecolab instructed all Nalco subsidiaries to cease all activities in the Sanctioned Countries by March 31, 2012. Consistent with Ecolab’s directive and policy, Nalco’s sales in Iran ceased, and all in-country activity was terminated. The limited activities in Iran described below were made within the context of the process of winding down the business.

First, Nalco’s foreign subsidiaries received payments from entities owned or controlled by the Government of Iran in connection with product sold in 2011 before Ecolab acquired Nalco. Non-U.S. subsidiaries of Nalco received the following payments in 2012:

· On January 26, 2012, the Mazandaran Wood and Paper Industries Company, an entity owned or controlled by the Government of Iran, made a payment of approximately €36,500 (approximately $49,800). The payment related to a 2011 sale of Nalco’s water processing products and net profit before taxes associated with this sale is estimated to be between $10,000 and $14,900.

· On January 31, 2012, the Iranian Offshore Oil Company, an entity owned or controlled by the Government of Iran, made a payment of approximately 53,800 AED (approximately $14,600). The payment related to a 2011 sale of Nalco’s water processing products and the net profit before taxes associated with this sale is estimated to be between $2,900 and $4,400.

· On February 16, 2012 the Aryasasol Polymer Company, an entity owned or controlled by the Government of Iran, made a payment of €96,800 (approximately $132,000). The payment related to a 2011 sale of Nalco’s water processing products and the net profit before taxes associated with this sale is estimated to be between $26,400 and $39,600.

· On March 27, 2012, Pars Lian, a distributor working in Iran that likely re-sold Nalco products to an entity owned or controlled by the Government of Iran, made a payment of approximately 319,300 AED (approximately $86,600). The payment related to a 2011 sale of Nalco’s energy services products and the net profit before taxes associated with this sale is estimated to be between $26,000 and $34,700.

In addition, one Nalco non-U.S. subsidiary made various payments in 2012 to entities that it knows or has reason to believe are owned or controlled by the Government of Iran in connection with the costs associated with the closing of its former branch in Iran and the branch’s operation costs from January to March 2012. This branch sold water processing products and services. Nalco’s foreign subsidiary held accounts with two banks that are owned or controlled by the Government of Iran and which are also designated under the Iranian Financial Sanctions Regulations and the Weapons of Mass Destruction Proliferation Sanctions Regulations (Bank Tejerat and Bank Melli) and these payments were made through these two banks before the accounts were closed in April 2012. The payments included various taxes, bank charges, fuel expenses, postage, telecommunications, and utilities, and totaled approximately $30,000.

Item 1(d) Financial Information About Geographic Areas .

The financial information about geographic areas appearing under the heading “Operating Segments and Geographic Information” in Note 16, located on pages 58 to 60 of the Annual Report, is incorporated herein by reference.

Item 1(e) Available Information.

Our Internet address is www.ecolab.com. Copies of our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to these reports, are available free of charge on our website www.ecolab.com/investor as soon as reasonably practicable after such material is filed with, or furnished to, the Securities and Exchange Commission.

In addition, the following governance materials are available on our web site at www.ecolab.com/investors/corporate-governance: (i) charters of the Audit, Compensation, Finance, Governance and Safety, Health and Environment Committees of our Board of Directors; (ii) our Board’s Corporate Governance Principles; and (iii) our Code of Conduct.

Executive Officers of the Registrant .

The persons listed in the following table are our current executive officers. Officers are elected annually. There is no family relationship among any of the directors or executive officers, and except as otherwise noted, no executive officer has been involved during the past ten years in any legal proceedings described in applicable Securities and Exchange Commission regulations.

Name	Age	Office	Positions Held Since Jan. 1, 2008

Douglas M. Baker, Jr.	54	Chairman of the Board and Chief Executive Officer	Dec. 2011 - Present

		Chairman of the Board, President and Chief Executive Officer	Jan. 2008 — Nov. 2011

Christophe Beck	45	Executive Vice President and President — Regions	Oct. 2012 - Present

		Executive Vice President — Global Integration	Dec. 2011 — Sep.2012

		Executive Vice President — Institutional	May 2009 — Nov. 2011

		Senior Vice President and General Manager — Institutional North America Full Service Restaurants	Jan. 2008 — Apr. 2009

Larry L. Berger	52	Executive Vice President and Chief Technical Officer	Oct. 2011 - Present

		Senior Vice President and Chief Technical Officer	Apr. 2008 — Sep.2011 (1)

Alex N. Blanco	52	Executive Vice President and Chief Supply Chain Officer	Jan. 2013 — Present (2)

John J. Corkrean	47	Senior Vice President and Corporate Controller	Oct. 2011 - Present

		Vice President and Corporate Controller	Apr. 2008 — Sep.2011

		Vice President and Treasurer	Jan. 2008 — Mar. 2008

Thomas W. Handley	58	President and Chief Operating Officer	Sep. 2012 - Present

		Senior Executive Vice President and President — Global Food & Beverage and Asia Pacific Latin America	Oct. 2011 — Aug.2012

		President, Global Food & Beverage and APLA Sectors	Jan. 2011 — Sep. 2011

		President, Global Food & Beverage	Sep. 2009 — Dec. 2010

		President — Industrial and Services North America Sector	Jan. 2008 — Aug. 2009

Michael A. Hickey	51	Executive Vice President and President — Global Institutional	Oct. 2012 — Present

		Executive Vice President and President — Institutional	Aug. 2011 — Sep.2012

		Executive Vice President Global Services Sector	Jan. 2011 — Jul. 2011

		Executive Vice President, Service Sector	Jan. 2010 — Dec. 2010

Name	Age	Office	Positions Held Since Jan. 1, 2008

Michael A. Hickey (con’t.)		Senior Vice President — Global Business Development and General Manager GCS Service	Jan. 2009 — Dec. 2009

		Senior Vice President — Global Business Development	Jan. 2008 — Dec. 2008

Michael L. Meyer	55	Executive Vice President — Human Resources	Oct. 2011 — Present

		Senior Vice President-Human Resources	Feb. 2008 — Sep. 2011(3)

Timothy P. Mulhere	50	Executive Vice President and President — Global Water and Process Services	Oct. 2012 — Present

		Executive Vice President and President — Global Healthcare	Feb. 2012 — Sep.2012

		Senior Vice President and General Manager — Food & Beverage North America	Apr. 2008 — Jan. 2012

		Senior Vice President and General Manager — Healthcare North America	Jan. 2008 — Mar. 2008

Daniel J. Schmechel	53	Chief Financial Officer	Oct. 2012 - Present

		Senior Vice President — Services and Systems	Jun. 2012 — Sep.2012

		Senior Vice President and Chief Transformation Officer — EMEA	Apr. 2008 — May 2012

		Senior Vice President and Corporate Controller	Jan. 2008 — Mar. 2008

James J. Seifert	56	Executive Vice President, General Counsel and Secretary	Oct. 2011 — Present

		General Counsel & Secretary	May 2010 — Sep. 2011(4)

Steven M. Taylor	51	Executive Vice President and President — Global Energy Services	Oct. 2012 - Present

		Executive Vice President — Energy Services	Dec. 2011 — Sep.2012 (5)

Jill S. Wyant	41	Executive Vice President and President — Global Food & Beverage	Oct. 2012 — Present

		Senior Vice President and General Manager — North America and Latin America	Jan. 2012 — Sep. 2012

		Senior Vice President — Food & Beverage Asia Pacific and Latin America	May 2010 — Dec. 2011

		Vice President — Global Strategic Planning	Jun. 2009 — Apr. 2010 (6)

(1) Prior to joining Ecolab in 2008, Dr. Berger spent 22 years with E.I. du Pont de Nemours and Company, most recently as Chief Technical Officer for du Pont Nonwovens.

(2) Prior to joining Ecolab in 2013, Mr. Blanco was employed by Procter & Gamble Co., for 30 years, most recently as Vice President, Product Supply Global Beauty Sector.

(3) Prior to joining Ecolab in 2008, Mr. Meyer was employed for 24 years by Abbott Laboratories, most recently as Vice President Vascular Business Latin America and Canada. Mr. Meyer’s management and executive experience includes 22 years in Human Resources and assignments in Canada and Hong Kong.

(4) Prior to joining Ecolab in 2010, Mr. Seifert was Vice President, General Counsel and Secretary of Bemis Company, Inc. since 2002.

(5) Prior to joining Ecolab in 2011 upon closing of the Nalco merger, Mr. Taylor was employed by Nalco for 17 years. Mr. Taylor led Nalco’s Energy Services Division since 2007 after a series of leadership roles in the division.

(6) Prior to joining Ecolab in 2009, Ms. Wyant held multiple leadership positions at General Electric.

Item 1A. Risk Factors .

The following are important factors which could affect our financial performance and could cause our actual results for future periods to differ materially from our anticipated results or other expectations, including those expressed in any forward-looking statements made in this Form 10-K. See the section entitled Forward-Looking Statements located on page 1 of this Form 10-K.

We may also refer to this disclosure to identify factors that may cause results to differ from those expressed in other forward-looking statements including those made in oral presentations, including telephone conferences and/or webcasts open to the public.

Except as may be required under applicable law, we undertake no duty to update our Forward-Looking Statements.

Our results depend upon the continued vitality of the markets we serve : Economic downturns, and in particular downturns in the energy, foodservice, hospitality, travel, health care, food processing, pulp and paper, mining and steel industries, can adversely impact our end-users. In recent years, the weak global economic environment, particularly in the United States and Europe, has negatively impacted many of our end-markets. The on-going uncertainty regarding the federal budget and fiscal policy in the United States may further weaken the U.S. and global economy. Further decline in economic activity may continue to adversely affect these markets. During such downturns, these end-users typically reduce their volume of purchases of cleaning and sanitizing products and water treatment and process chemicals, which has had, and may continue to have, an adverse effect on our business.

Our results are impacted by general worldwide economic factors: Economic factors such as the worldwide economy, capital flows, interest rates and currency movements including, in particular, our exposure to foreign currency risk have affected our business in the past and may have a material adverse impact on our business in the future. In 2008 and 2009, the global economy experienced considerable disruption and volatility, and the disruption was particularly acute in the global credit markets. In 2011 and 2012, the European Union’s sovereign debt crisis negatively impacted economic activity in that region as well as the strength of the euro versus the U.S. dollar. The current economic conditions in several European countries (particularly Italy, Spain, Portugal, Greece and Ireland) deteriorated during 2012. Further weakening of the European economy may cause a drop in the value of the European currencies including the euro. One potential extreme outcome of the European financial situation is the re-introduction of individual currencies in one or more Eurozone countries or the dissolution of the euro entirely. The potential dissolution of the euro, or market perceptions concerning this and related issues, could adversely affect the value of our euro-denominated assets and obligations. Further turmoil in the European Union’s sovereign debt market, or a similar financial crisis, could have a material adverse impact on our consolidated results of operations, financial position and cash flows by negatively impacting economic activity, including in our key end-markets, and by further weakening the euro versus the U.S. dollar, resulting in reduced sales and earnings from our European operations, which are generated in euros and other European currencies, and then translated to U.S. dollars.

Other regions of the world also expose us to foreign currency risk. For example, we do business in Venezuela, which experienced a currency devaluation in 2010 and again in 2013. A similar currency devaluation in other countries could have a negative impact on our financial performance.

We may encounter difficulties completing the Nalco integration and fail to fully realize the anticipated benefits of the merger: On December 1, 2011, we completed the Nalco merger. The merger involves the combination of two companies that historically operated as independent public companies. We have devoted, and will need to continue to devote, significant management attention and resources to integrating the business and operations of Nalco. Potential difficulties that we may encounter as part of the integration process, which may preclude us from fully realizing the anticipated benefits of the merger, including expected synergies, include the following:

· complexities associated with managing the combined businesses, including the challenge of integrating complex information technology systems, communications systems, financial reporting systems, supply chain and procurement arrangements and other assets of Nalco in a seamless manner that minimizes any adverse impact on customers, suppliers, employees and other constituencies;

· the possibility that our businesses may suffer as a result of uncertainty surrounding the impact of the integration on employees and customers;

· potential unknown liabilities in the legacy Nalco business or arising out of the integration;

· unforeseen increased expenses or delays associated with the integration;

· the inability to successfully combine the businesses of Ecolab and Nalco in a manner that permits us to achieve the full revenue and cost synergies anticipated to result from the merger;

· problems that may arise in integrating the workforces of the two companies, including the possible loss of key employees;

· potential problems in maintaining and integrating effective disclosure controls and procedures and internal control over financial reporting for the combined company; and

· the disruption of, or the loss of momentum in, our ongoing businesses or inconsistencies in standards, controls, procedures and policies, any of which could adversely affect our ability to maintain relationships with customers, suppliers, employees and other constituencies or our ability to achieve the anticipated benefits of the merger or could reduce the combined company’s earnings or otherwise adversely affect the business and financial results of the combined company.

The pending acquisition of Champion may present certain risks to the business and operations of Ecolab and to the combined company following the acquisition: On October 11, 2012, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) among Ecolab, OFC Technologies Corp., a Texas corporation and a wholly-owned subsidiary of Ecolab, and Permian Mud Service, Inc., a Texas corporation (“Permian”). Permian is the parent company of Champion Technologies, Inc. and Corsicana Technologies, Inc. (together with Permian, “Champion”). Pursuant to the Merger Agreement, which has been approved by the Boards of Directors of each of Ecolab and Permian and the shareholders of Permian, we will acquire Champion by way of a merger. Subject to the terms and conditions of the Merger Agreement, at the closing of the acquisition, the shares of common stock of Permian issued and outstanding immediately prior to the effective time (other than shares with respect to which appraisal rights are properly exercised and not withdrawn) will be converted into the right to receive merger consideration of approximately $2.16 billion, subject to customary adjustments for cash, debt and working capital and certain additional adjustments as set out in the Merger Agreement. Subject to certain adjustments, the merger consideration will be paid

approximately 75% in cash and 25% in shares of Ecolab common stock. Additionally, we will be required to pay to the Permian stockholders an additional amount in cash, up to $100 million in the aggregate, equal to 50% of the incremental federal tax on the merger consideration as a result of increases in applicable capital gains and investment taxes after December 31, 2012.

The consummation of the Champion acquisition is subject to the satisfaction or waiver of various closing conditions, including, among others, the receipt of required regulatory approvals, including approval of the transaction under the Hart-Scott-Rodino Anti-trust Improvements Act of 1976, as amended (“HSR Act”).

The closing of the pending Champion acquisition is subject to a number of risks, including, among other things, risks that:

· the regulatory approvals or clearances required for the acquisition, including clearance under the HSR Act, may not be obtained, or required regulatory approvals may delay the transaction or result in the imposition of conditions that could have a material adverse effect on the Company or cause the Company to abandon the transaction, in which case it will not realize the potential benefits associated with the acquisition;

· the other conditions to the closing of the acquisition may not be satisfied resulting in the Company abandoning the transaction, in which case it will not realize the potential benefits associated with the acquisition;

· a material adverse change, event or occurrence may affect the Company or Champion prior to the closing of the transaction and may delay the acquisition or cause the Company to abandon the transaction, in which case it will not realize the potential benefits associated with the acquisition;

In addition, if the acquisition is completed, the anticipated success of the acquisition is subject to a number of risks, including, among other things, risks that:

· problems may arise in successfully integrating the businesses of the Company and Champion, particularly in light of the continuing integration efforts and challenges resulting from the Nalco merger, which may result in the combined business not operating as effectively and efficiently as expected;

· the acquisition may involve unexpected costs, unexpected liabilities or unexpected delays;

· the credit ratings of the Company may be different from what the Company currently expects;

· the businesses of the Company or Champion may suffer as a result of uncertainty surrounding the acquisition; and

· disruptions from the transaction could harm relationships with customers, employees and suppliers.

Other unknown or unpredictable factors could also have material adverse effects on future results, performance or achievements of the Company and the combined business.

We expect to incur significant expenses in connection with our proposed acquisition of Champion, including professional fees and other fees, costs and expenses. If the Merger Agreement is terminated under certain circumstances, we may be required to pay Champion a termination fee of $100 million. We also expect to incur significant integration and restructuring fees and costs following completion of the acquisition.

We depend on key personnel to lead our business : Our continued success will largely depend on our ability to attract and retain a high caliber of talent and on the efforts and abilities of our executive officers and certain other key employees, particularly those with sales and sales management responsibilities. This is especially crucial as we continue to integrate Nalco and potentially integrate Champion as important resources are shifted to planning and executing key integration initiatives as well as cost and growth synergies. During this stage in the integration, experienced business and financial leaders and experts are critical to the success of these and other acquisitions. Our operations could be adversely affected if for any reason such officers or key employees did not remain with us.

If we are unsuccessful in executing on key business initiatives, our business could be adversely affected : In addition to the Nalco merger and the potential Champion acquisition, we continue to make investments and execute business initiatives to develop business systems and optimize our business structure as part of our ongoing efforts to improve our efficiency and returns. In particular, in 2011 we announced various initiatives to capture financial and operational benefits in our European business, in part, by leveraging our ERP system, and to improve our competitiveness in the region. Those initiatives remain in progress, and integration activities could impact our ability to timely execute these initiatives. If the projects in which we are investing or the initiatives which we are pursuing are not successfully executed, our consolidated results of operations, financial position or cash flows could be adversely affected.

We may be subject to information technology system failures, network disruptions and breaches in data security: We rely to a large extent upon information technology systems and infrastructure to operate our business. The size and complexity of our computer systems make them potentially vulnerable to breakdown, malicious intrusion and random attack. Recent acquisitions, including the Nalco merger, have resulted in further de-centralization of systems and additional complexity in the system’s infrastructure. Likewise, data privacy breaches by employees and others with permitted access to our systems may pose a risk that sensitive data may be exposed to unauthorized persons or to the public. While we have invested in protection of data and information technology, there can be no assurance that our efforts will prevent breakdowns or breaches in our systems that could adversely affect our business.

Our significant non-U.S. operations expose us to global economic, political and legal risks that could impact our profitability: We have significant operations outside the United States, including joint ventures and other alliances. We conduct business in approximately 170 countries and, in 2012, approximately 50% of our net sales originated outside the United States. There are inherent risks in our international operations, including:

· exchange controls and currency restrictions;

· currency fluctuations and devaluations;

· tariffs and trade barriers;

· export duties and quotas;

· changes in the availability and pricing of raw materials, energy and utilities;

· changes in local economic conditions;

· changes in laws and regulations;

· difficulties in managing international operations and the burden of complying with foreign laws;

· difficulties in collecting receivables or realizing other assets;

· requirements to include local ownership or management in our business;

· exposure to possible expropriation, nationalization or other government actions;

· restrictions on our ability to repatriate dividends from our subsidiaries;

· unsettled political conditions, military action, civil unrest, acts of terrorism, force majeure, war or other armed conflict; and

· countries whose governments have been hostile to U.S.-based businesses.

Also, because of uncertainties regarding the interpretation and application of laws and regulations and the enforceability of intellectual property and contract rights, we face risks in some countries that our intellectual property rights and contract rights would not be enforced by local governments. We are also periodically faced with the risk of economic uncertainty, which has impacted our business in some countries. Other risks in international business also include difficulties in staffing and managing local operations, including managing credit risk to local customers and distributors.

Further, our operations outside the United States require us to comply with a number of United States and international regulations, including anti-corruption laws such as the United States Foreign Corrupt Practices Act and the United Kingdom Bribery Act, as well as U.S. economic sanctions regulations. We have internal policies and procedures relating to such regulations; however, there is risk that such policies and procedures will not always protect us from the reckless acts of employees or representatives, particularly in the case of recently acquired operations that may not have significant training in applicable compliance policies and procedures. Violations of such laws and regulations could result in investigations of the Company and sanctions, which could adversely affect our consolidated results of operations, financial position or cash flows.

Our overall success as a global business depends, in part, upon our ability to succeed in differing economic, social, legal and political conditions. We may not continue to succeed in developing and implementing policies and strategies that are effective in each location where we do business, which could adversely affect our consolidated results of operations, financial position or cash flows.

Our business depends on our ability to comply with laws and governmental regulations, and we may be adversely affected by changes in laws and regulations : Our business is subject to numerous laws and regulations relating to the environment, including evolving climate change standards, and to the manufacture, storage, distribution, sale and use of our products as well as to the conduct of our business generally, including employment and labor laws. Compliance with these laws and regulations exposes us to potential financial liability and increases our operating costs. Regulation of our products and operations continues to increase with more stringent standards, causing increased costs of operations and potential for liability if a violation occurs. The potential cost to us relating to environmental and product registration laws and regulations is uncertain due to factors such as the unknown magnitude and type of possible contamination and clean-up costs, the complexity and evolving nature of laws and regulations, and the timing and expense of compliance. Changes to current laws (including tax laws), regulations and policies could impose new restrictions, costs or prohibitions on our current practices which would adversely affect our consolidated results of operations, financial position or cash flows.

We are a defendant in seven wage hour lawsuits claiming violations of the Fair Labor Standards Act (“FLSA”) or a similar state law. One of the cases, Doug Ladore v. Ecolab Inc., et al., United States District Court for the Central District of California, case no. CV 11-9386 GAF (FMOx), is a putative wage hour class action brought on behalf of California Pest Elimination employees. The case has been certified for class treatment, and on January 22, 2013, the plaintiffs’ motion for summary judgment was granted and the court found that the class of employees was entitled to overtime pay. On February 22, 2013, we reached a preliminary settlement with the plaintiffs, which remains subject to court approval.

There can be no assurance that other pending or future wage hour lawsuits can be successfully defended or settled.

Our subsidiaries are defendants in pending lawsuits alleging negligence and injury resulting from the use of our COREXIT dispersant in response to the Deepwater Horizon oil spill, which could expose us to monetary damages or settlement costs: Our subsidiaries were named as defendants in pending lawsuits alleging negligence and injury resulting from the use of our COREXIT dispersant in response to the Deepwater Horizon oil spill, which could expose us to monetary damages or settlement costs. On April 22, 2010, the deepwater drilling platform, the Deepwater Horizon, operated by a subsidiary of BP plc, sank in the Gulf of Mexico after a catastrophic explosion and fire that began on April 20, 2010. A massive oil spill resulted. Approximately one week following the incident, subsidiaries of BP plc, under the authorization of the responding federal agencies, formally requested our indirect subsidiary, Nalco Company, to supply large quantities of COREXIT 9500, a Nalco oil dispersant product listed on the U.S. EPA National Contingency Plan Product Schedule. Nalco Company responded immediately by providing available COREXIT and increasing production to supply the product to BP’s subsidiaries for use, as authorized and directed by agencies of the federal government.

Nalco Company and certain affiliates (collectively “Nalco”) was named as a defendant in a series of class action and individual plaintiff lawsuits arising from this event. The plaintiffs in these matters claimed damages under products liability, tort and other theories. Nalco was also named as a third party defendant in certain matters. Nalco was indemnified in these matters by another of the defendants.

All but one of these cases have been administratively transferred to a judge in the United States District Court for the Eastern District of Louisiana with other related cases under In Re: Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico, on April 20, 2010, Case No. 10-md-02179 (E.D. La.) (the “MDL”). The remaining case is Franks v. Sea Tow of South Miss, Inc., et al, Cause No. A2402-10-228 (Circuit Court of Harrison County Mississippi) (the “Remaining Case”).

Nalco Company , the incident defendants and the other responder defendants have been named as third party defendants by Transocean Deepwater Drilling, Inc. and its affiliates (the “Transocean Entities”) (In re the Complaint and Petition of Triton Asset Leasing GmbH, et al, MDL No. 2179, Civil Action 10-2771). In April and May 2011, the Transocean Entities, Cameron International Corporation, Halliburton Energy Services, Inc., M-I L.L.C., Weatherford U.S., L.P. and Weatherford International, Inc. (collectively, the “Cross Claimants”) filed cross claims in MDL 2179 against Nalco Company and other unaffiliated cross defendants. The Cross Claimants generally allege, among other things, that if they are found liable for damages resulting from the Deepwater Horizon explosion, oil spill and/or spill response, they are entitled to indemnity or contribution from the cross defendants.

On November 28, 2012, the Federal Court in the MDL entered an order dismissing all claims against Nalco. Because claims remain pending against other defendants, the Court’s decision is not a “final judgment” for purposes of appeal. Plaintiffs will have 30 days after entry of final judgment to appeal the Court’s decision. Nalco will request that the Remaining Case be similarly dismissed for the reasons accepted in the MDL. We cannot predict whether there will be an appeal of the dismissal, the involvement we might have in these matters in the future or the potential for future litigation. However, if an appeal by plaintiffs in these lawsuits is brought and won, or if the remaining state court case is not dismissed, these suits could have a material adverse affect on our consolidated result of operations, financial position and cash flows.

Our growth depends upon our ability to successfully compete with respect to value, innovation and customer support : Our competitive market is made up of numerous global, national, regional and local competitors. Our ability to compete depends in part upon our ability to maintain a superior technological capability and to continue to identify, develop and commercialize innovative, high value-added products for niche applications. There can be no assurance that we will be able to accomplish this or that technological developments by our competitors will not place certain of our products at a competitive disadvantage in the future. In addition, certain of the new products that we have under development will be offered in markets in which we do not currently compete, and there can be no assurance that we will be able to compete successfully in those new markets. If we fail to introduce new technologies on a timely basis, we may lose market share and our consolidated results of operations, financial position or cash flows could be adversely affected.

Our results can be adversely affected by difficulties in securing the supply of certain raw materials or by fluctuations in the cost of raw materials : The prices of raw materials used in our business can fluctuate from time to time, and in recent years we have experienced periods of increased raw material costs. Changes in raw material prices, unavailability of adequate and reasonably priced raw materials or substitutes for those raw materials, or the inability to obtain or renew supply agreements on favorable terms can adversely affect our consolidated results of operations, financial position or cash flows. In addition, volatility and disruption in economic activity and conditions could disrupt or delay the performance of our suppliers and thus impact our ability to obtain raw materials at favorable prices or on favorable terms, which may adversely affect our business.

We have substantial indebtedness which will impact our financial flexibility: As of December 31, 2012, we had net debt (total debt minus cash and cash equivalents) of $5.4 billion. Our substantial indebtedness may adversely affect our business, consolidated results of operations and financial position including in the following respects:

· requiring us to dedicate a substantial portion of our cash flows to debt service obligations, thereby potentially reducing the availability of cash flows to pay cash dividends and to fund working capital, capital expenditures, acquisitions, investments and other general operating requirements and opportunities;

· limiting our ability to obtain additional financing to fund our working capital requirements, capital expenditures, acquisitions, investments, debt service obligations and other general operating requirements;

· placing us at a relative competitive disadvantage compared to competitors that have less debt;

· limiting flexibility to plan for, or react to, changes in the businesses and industries in which we operate, which may adversely affect our operating results and ability to meet our debt service obligations; and

· increasing our vulnerability to adverse general economic and industry conditions.

In addition, approximately $750 million of our debt is floating rate debt. A one percentage point increase in the average interest rate on our floating rate debt would increase future interest expense by approximately $7.5 million per year. Accordingly a significant spike in interest rates would adversely affect our consolidated results of operations and cash flows.

If we incur additional indebtedness, the risks related to our substantial indebtedness may intensify.

If we are unsuccessful in integrating acquisitions, our business could be adversely affected : As part of our long-term strategy, we seek to acquire complementary businesses. There can be no assurance that we will find attractive acquisition candidates or succeed at effectively managing the integration of acquired businesses into existing businesses. If the underlying business performance of such acquired businesses

deteriorates, the expected synergies from such transactions do not materialize or we fail to successfully integrate new businesses into our existing businesses, our consolidated results of operations, financial position or cash flows could be adversely affected.

We enter into multi-year contracts with customers that can impact our results : Our multi-year contracts with some of our customers include terms affecting our pricing flexibility. There can be no assurance that these restraints will not have an adverse impact on our margins and consolidated results of operations.

Consolidation of our customers and vendors can affect our results : Customers and vendors in the foodservice, hospitality, travel, healthcare, food processing and pulp and paper industries as well as other industries we serve have consolidated in recent years and that trend may continue. This consolidation could have an adverse impact on our ability to retain customers and on our margins and consolidated results of operations.

Severe public health outbreaks may adversely impact our business : Our business could be adversely affected by the effect of a public health epidemic. The United States and other countries have experienced, and may experience in the future, public health outbreaks such as Avian Flu, SARS and H1N1 influenza. A prolonged occurrence of a contagious disease such as these could result in a significant downturn in the foodservice, hospitality and travel industries and also may result in health or other government authorities imposing restrictions on travel further impacting our end markets. Any of these events could result in a significant drop in demand for some of our products and services and adversely affect our business.

We incur significant expenses related to the amortization of intangible assets and may be required to report losses resulting from the impairment of goodwill or other assets recorded in connection with the Nalco merger and other acquisitions: The Nalco merger is treated as an acquisition of Nalco by Ecolab for accounting purposes. Both Ecolab and Nalco have in the past expanded their operations through other acquisitions and joint ventures involving businesses owned by third parties. Ecolab expects to continue to complete selected acquisitions, including the pending Champion acquisition, and joint venture transactions in the future. In connection with acquisition and joint venture transactions, applicable accounting rules generally require the tangible and intangible assets of the acquired business to be recorded on the balance sheet of the acquiring company at their fair values. Intangible assets other than goodwill are required to be amortized over their estimated useful lives and this expense may be significant. Any excess in the purchase price paid by the acquiring company over the fair value of tangible and intangible assets of the acquired business is recorded as goodwill. As of December 31, 2012, we had goodwill of $5.9 billion which is maintained in various reporting units. If it is later determined that the anticipated future cash flows from the acquired business may be less than the carrying values of the assets and goodwill of the acquired business, the assets or goodwill may be deemed to be impaired. In this case, the acquiring company may be required under applicable accounting rules to write down the value of the assets or goodwill on its balance sheet to reflect the extent of the impairment. This write-down of assets or goodwill is generally recognized as a non-cash expense in the statement of operations of the acquiring company for the accounting period during which the write down occurs. If we determine that any of the assets or goodwill recorded in connection with the Nalco merger or any other prior or future acquisitions or joint venture transactions have become impaired, we will be required to record a loss resulting from the impairment. Impairment losses could be significant and could adversely affect our consolidated results of operations and financial position.

Future events may impact our deferred tax position, including the utilization of foreign tax credits and undistributed earnings of international affiliates that are considered to be reinvested indefinitely: We evaluate the recoverability of deferred tax assets and the need for deferred tax liabilities based on available evidence. This process involves significant management judgment about assumptions that are subject to change from period to period based on changes in tax laws or variances between future projected operating performance and actual results. We are required to establish a valuation allowance for deferred tax assets if we determine, based on available evidence at the time the determination is made, that it is more

likely than not that some portion or all of the deferred tax assets will not be realized. In making this determination, we evaluate all positive and negative evidence as of the end of each reporting period. Future adjustments (either increases or decreases), to the deferred tax asset valuation allowance are determined based upon changes in the expected realization of the net deferred tax assets. The realization of the deferred tax assets ultimately depends on the existence of sufficient taxable income in either the carry-back or carry-forward periods under the tax law. Due to significant estimates used to establish the valuation allowance and the potential for changes in facts and circumstances, it is reasonably possible that we will be required to record adjustments to the valuation allowance in future reporting periods. Changes to the valuation allowance or the amount of deferred tax liabilities could adversely affect our consolidated results of operations or financial position. Further, should the Company change its assertion regarding the permanent reinvestment of the undistributed earnings of international affiliates, a deferred tax liability may need to be established.

Extraordinary events may significantly impact our business : The occurrence of (a) litigation or claims, (b) the loss or insolvency of a major customer or distributor, (c) war (including acts of terrorism or hostilities which impact our markets), (d) natural or manmade disasters, (e) water shortages or (f) severe weather conditions affecting the foodservice, hospitality and travel industries may have a material adverse effect on our business.

Defense of litigation, particularly certain types of actions such as antitrust, patent infringement, wage hour and class action lawsuits, can be costly and time consuming even if ultimately successful, and if not successful could have a material adverse effect on our consolidated results of operations, financial position or cash flows.

While we have a diverse customer base and no customer or distributor constitutes 10 percent or more of our consolidated revenues, we do have customers and independent, third-party distributors, the loss of which could have a material adverse effect on our consolidated results of operations or cash flows for the affected earnings periods; however, we consider it unlikely that such an event would have a material adverse effect on our financial position.

War (including acts of terrorism or hostilities), natural or manmade disasters, water shortages or severe weather conditions affecting the energy, foodservice, hospitality, travel, health care, food processing, pulp and paper, mining, steel and other industries cause a downturn in the business of our customers, which in turn can have a material adverse effect on our consolidated results of operations, financial position or cash flows.

Item 1B. Unresolved Staff Comments .

We have no unresolved comments from the staff of the Securities and Exchange Commission.

Item 2. Properties .

Our manufacturing philosophy is to manufacture products wherever an economic, process or quality assurance advantage exists or where proprietary manufacturing techniques dictate in-house production. Currently, most products that we sell are manufactured at our facilities. We position our manufacturing locations and warehouses in a manner to permit ready access to our customers.

Our manufacturing facilities produce chemical products as well as medical devices and equipment for all of our businesses, although the businesses constituting the U.S. Other Services segment purchase the majority of their products and equipment from outside suppliers. Our chemical production process consists of producing intermediates via basic reaction chemistry and subsequently blending and packaging those intermediates with other purchased raw materials into finished products in powder, solid and liquid form. Our devices and equipment manufacturing operations consist of producing chemical product

dispensers and injectors and other mechanical equipment, medical devices, dishwasher racks, related sundries, dish machine refurbishment and water monitoring and maintenance equipment system from purchased components and subassemblies.

The following table profiles our main manufacturing facilities with ongoing production activities. In general, with respect to our cleaning and sanitizing businesses, manufacturing facilities located in the United States serve the U.S. Cleaning & Sanitizing segment and facilities located outside of the United States serve the International Cleaning, Sanitizing & Other Services segment. However, certain of these United States facilities do manufacture products for export which are used by the International segment. The facilities having export involvement are marked with an asterisk (*). With respect to our Global Water, Global Paper and Global Energy segments, facilities that serve one of these segments typically serve each of them and manufacture product for export.

PLANT PROFILES

Location	Approximate Size (Sq. Ft.)	Types of Products	Majority Owned or Leased
U.S. CLEANING & SANITIZING SEGMENT
Joliet, IL *	610,000	Solids, Liquids, Emulsions, Powders	Owned
South Beloit, IL *	313,000	Equipment	Owned
Garland, TX *	239,000	Solids, Liquids, Emulsions	Owned
Martinsburg, WV	228,000	Liquids, Emulsions	Owned
Greensboro, NC	193,000	Solids, Liquids, Powders	Owned
McDonough, GA*	141,000	Solids, Liquids, Emulsions	Owned
Eagan, MN *	133,000	Solids, Liquids, Emulsions, Powders	Owned
Huntington, IN *	127,000	Liquids	Owned
City of Industry, CA	125,000	Liquids, Emulsions	Owned
Elk Grove Village, IL *	115,000	Equipment	Leased
Fort Worth, TX	101,000	Equipment	Leased
Jacksonville, FL *	88,000	Medical Devices	Leased
Carrollton, TX	70,000	Liquids	Owned
Tyler, TX *	63,000	Medical Devices	Leased
Columbus, MS	49,000	Medical Devices	Owned
St. Louis, MO	37,000	Equipment	Leased

INTERNATIONAL CLEANING, SANITIZING & OTHER SERVICES SEGMENT
Taicang, CHINA	450,000	Solids, Liquids, Powders	Owned
Chalons, FRANCE	280,000	Liquids, Powders	Owned
Nieuwegein, NETHERLANDS	168,000	Powders	Owned
La Romana, DOMINICAN REPUBLIC	160,000	Medical Devices	Leased
Tessenderlo, BELGIUM	153,000	Solids, Liquids	Owned
Melbourne, AUSTRALIA	145,000	Liquids, Powders	Owned
Darra, AUSTRALIA	138,000	Liquids	Owned
Brisbane, AUSTRALIA	131,000	Liquids, Powders	Owned
Rozzano, ITALY	126,000	Liquids	Owned
Guacara, VENEZUELA	125,000	Liquids	Owned
Mississauga, CANADA	120,000	Liquids	Leased

Location	Approximate Size (Sq. Ft.)	Types of Products	Majority Owned or Leased
Monterey, MEXICO	106,000	Liquids, Powders	Leased
Johannesburg, SOUTH AFRICA	100,000	Liquids, Powders	Owned
Hamilton, NEW ZEALAND	96,000	Solids, Liquids, Powders	Owned
Rovigo, ITALY	77,000	Liquids, Medical Devices	Owned
Mullingar, IRELAND	74,000	Liquids	Leased
Mosta, MALTA	73,000	Medical Devices	Leased
Sao Paulo, BRAZIL	62,000	Solids, Liquids	Leased
Shika, JAPAN	60,000	Liquids	Owned
Santiago, CHILE	60,000	Liquids, Powders	Leased
Revesby, AUSTRALIA	59,000	Liquids, Powders	Owned
Cheadle (Hulme), UNITED KINGDOM	53,000	Liquids	Leased
Guangzhou, CHINA	50,000	Liquids, Powders	Leased
Baglan, UNITED KINGDOM	50,000	Liquids	Leased
Noda, JAPAN	49,000	Solids, Liquids, Powders	Owned
Siegsdorf, GERMANY	42,000	Equipment	Owned
Zutphen, NETHERLANDS	41,000	Medical Devices	Leased
Mexico City, MEXICO	40,000	Liquids, Powders	Owned
Maribor, SLOVENIA	39,000	Liquids, Powders	Owned
Leeds, UNITED KINGDOM	35,000	Liquids	Owned
Pilar, ARGENTINA	30,000	Liquids, Powders	Owned
Shanghai, CHINA	27,000	Solids, Liquids, Powders	Owned
Perth, AUSTRALIA	27,000	Liquids, Powders	Owned
Singapore, SINGAPORE	25,000	Liquids, Powders	Owned
Seoul, SOUTH KOREA	22,000	Liquids, Powders	Owned
Acuna, MEXICO	21,000	Medical Devices	Leased
Racibor, POLAND	20,000	Liquids	Leased
Mandras, GREECE	18,000	Liquids	Owned
Varssesveld, NETHERLANDS	17,000	Medical Devices	Leased
San Jose, COSTA RICA	11,000	Liquids, Powders	Owned
Bogota, COLOMBIA	11,000	Liquids	Leased
Cikarang, INDONESIA	10,000	Solids, Liquids, Powders	Owned
Bangkok, THAILAND	10,000	Liquids, Powders	Owned
Manilla, PHILIPPINES	8,000	Liquids, Powders	Owned

GLOBAL WATER, GLOBAL PAPER AND GLOBAL ENERGY SEGMENTS
United States
Sugar Land, TX	350,000	Reactions and Blending	Owned
Clearing, IL	270,000	Reactions and Blending	Owned
Elwood City, PA	222,000	Reactions and Blending	Owned
Garyville, LA	122,000	Reactions and Blending	Owned

Location	Approximate Size (Sq. Ft.)	Types of Products	Majority Owned or Leased
Tulsa, OK	62,000	Reactions and Blending	Owned
Carson, CA	60,000	Reactions and Blending	Owned
Freeport, TX	43,000	Reactions and Blending	Owned
Evansville, WY	25,000	Blending	Owned
Odessa, TX	25,000	Blending	Owned
Texarkana, TX	21,000	Blending	Owned
Scott, LA	18,000	Blending	Owned
Montgomery, AL	17,000	Blending	Owned
Port Allen, LA	15,000	Blending	Owned
Vancouver, WA	14,000	Blending	Owned
International
Weavergate, UNITED KINGDOM	222,000	Blending	Owned
Burlington, ONTARIO	136,000	Reactions and Blending	Owned
Biebesheim, GERMANY	109,000	Reactions and Blending	Owned
Suzano, BRAZIL	87,000	Reactions and Blending	Owned
Cisterna, ITALY	80,000	Reactions and Blending	Owned
Botany, AUSTRALIA	68,000	Reactions and Blending	Owned
Nanjing, CHINA	60,000	Reactions and Blending	Owned
Citeureup, INDONESIA	53,000	Blending	Owned
Calamba, PHILIPPINES	50,000	Blending	Owned
Konnagar, INDIA	48,000	Reactions and Blending	Owned
Kagalym, RUSSIA	47,000	Blending	Leased
Tesjoki, FINLAND	43,000	Reactions and Blending	Owned
Rayong, THAILAND	38,000	Blending	Owned
Fawley, UNITED KINGDOM	37,000	Reactions and Blending	Owned
Hu Kou, TAIWAN	34,000	Blending	Owned
Lerma, MEXICO	32,000	Reactions and Blending	Owned
Pilar, ARGENTINA	30,000	Reactions and Blending	Owned
Celra, SPAIN	27,000	Reactions and Blending	Owned
Soledad, COLOMBIA	27,000	Reactions and Blending	Owned
Nisku, Alberta, CANADA	26,000	Blending	Owned
Singapore, SINGAPORE	25,000	Reactions and Blending	Owned
Yangsan, KOREA	22,000	Reactions and Blending	Owned
Barcelona, SPAIN	21,000	Blending	Owned
Suzhou, CHINA	18,000	Reactions and Blending	Owned
Kwinana, AUSTRALIA	18,000	Reactions and Blending	Owned
Auckland, NEW ZEALAND	13,000	Blending	Owned
Anaco, VENEZUELA	10,000	Reactions and Blending	Owned
Quilicura, CHILE	6,000	Blending	Owned
Alexandria, EGYPT	5,000	Blending	Owned
Dammam, SAUDI ARABIA	5,000	Blending	Owned

Generally, our manufacturing facilities are adequate to meet our existing in-house production needs. We continue to invest in our plant sites to maintain viable operations and to add capacity as necessary to meet business imperatives. A new manufacturing plant in Singapore is currently under construction which will primarily serve our Global Energy segment.

Most of our manufacturing plants also serve as distribution centers. In addition, we operate distribution centers around the world, most of which are leased, and utilize third party logistics service providers to facilitate the distribution of our products and services.

Ecolab’s corporate headquarters is comprised of three adjacent multi-storied buildings located in downtown St. Paul, Minnesota. The main 19-story building was constructed to our specifications and is leased through 2013. Thereafter, it is subject to multiple renewals at our option. The second building is leased through 2019 with additional options available. The third building is owned. The corporate headquarters includes an employee training center. A 90 acre campus in Eagan, Minnesota is owned and provides for future growth. The Eagan facility houses a significant research and development center, a data center and training facilities as well as several of our administrative functions.

We also have a significant business presence in Naperville, Illinois, where our Global Water and Global Paper segments maintain their principal administrative offices and research center. These facilities are leased. Our Global Energy business maintains administrative and research facilities in Sugar Land, Texas. Significant regional administrative and/or research facilities are located in Leiden, Netherlands, Campinas, Brazil, and Pune, India, which we own, and in Monheim, Germany, Singapore, Shanghai, China, and Zurich, Switzerland, which we lease. We also have a network of small leased sales offices in the United States and, to a lesser extent, in other parts of the world.

Item 3. Legal Proceedings .

Note 14, entitled “Commitments and Contingencies” located on pages 50 through 53 of the Annual Report, is incorporated herein by reference.

Other matters arising under laws relating to protection of the environment are discussed at Item 1(c) above, under the heading “Environmental and Regulatory Considerations.”

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities .

Market Information : Our Common Stock is listed on the New York Stock Exchange under the symbol “ECL.” The Common Stock is also traded on an unlisted basis on certain other United States exchanges. The high and low sales prices of our Common Stock on the consolidated transaction reporting system during 2012 and 2011 were as follows:

	2012				2011
Quarter	High		Low		High		Low
First	$	62.86	$	57.44	$	51.08	$	46.80
Second	$	68.55	$	59.81	$	56.45	$	49.97
Third	$	68.96	$	61.66	$	57.19	$	43.81
Fourth	$	72.79	$	63.42	$	58.13	$	47.27

The closing Common Stock price on the New York Stock Exchange on February 1, 2013 was $73.87.

Holders : On February 1, 2013, we had 7,394 holders of Common Stock of record.

Dividends : We have paid Common Stock dividends for 76 consecutive years. Quarterly cash dividends of $0.175 per share were declared in February, May and August 2011. Cash dividends of $0.20 per share were declared in December 2011, and February, May and August 2012. A dividend of $0.23 per share was declared in December 2012.

Issuer Purchases of Equity Securities :

Period	(a) Total number of shares purchased(1)	(b) Average price paid per share (2)		(c) Number of shares purchased as part of publicly announced plans or programs(3)	(d) Maximum number of shares that may yet be purchased under the plans or programs(3)
October 1-31, 2012	10,523	$	69.3814	0	15,810,096
November 1-30, 2012	124,301	$	71.2211	0	15,810,096
December 1-31, 2012	101,422	$	71.8367	0	15,810,096
Total	236,246	$	71.4034	0	15,810,096

(1) Represents shares reacquired from employees and/or directors to satisfy the exercise price of stock options or shares surrendered to satisfy minimum statutory tax obligations under our stock incentive plans.

(2) The average price paid per share includes brokerage commissions associated with publicly announced plan purchases plus the value of such other reacquired shares.

(3) As announced on May 5, 2011, our Board of Directors authorized the repurchase of up to 15,000,000 shares of Common Stock, including shares to be repurchased under Rule 10b5-1. As announced on August 23, 2011, the Finance Committee, via delegation by our Board of Directors, authorized the repurchase of up to an additional 10,000,000 shares contingent upon completion of the merger with Nalco. On September 6, 2011, the Company announced a $1 billion share repurchase program under the existing Board authorizations of which approximately $279 million of shares remained as of December 31, 2012 to be purchased. Ecolab expects to complete the remaining portion of its announced $1 billion share repurchase program in 2013. We intend to repurchase all shares under these authorizations, for which no expiration date has been established, in open market or privately negotiated transactions, subject to market conditions.

Item 6. Selected Financial Data .

The comparative data for the years ended December 31, 2012, 2011, 2010, 2009 and 2008 inclusive, which are set forth under the heading entitled “Summary Operating and Financial Data” located on pages 64 and 65 of the Annual Report, are incorporated herein by reference.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations .

The material appearing under the heading entitled “Management’s Discussion & Analysis,” located on pages 9 through 27 of the Annual Report, is incorporated herein by reference.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk .

The material appearing under the headings entitled “Market Risk” and “European Economy” located on pages 25 and 26 of the Annual Report is incorporated herein by reference.

Item 8. Financial Statements and Supplementary Data .

The financial statements and material which are an integral part of the financial statements listed under Item 15(a)(1) below and located on pages 28 through 65 of the Annual Report, are incorporated herein by reference.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure .

None.

Item 9A. Controls and Procedures .

Disclosure Controls and Procedures : As of December 31, 2012, we carried out an evaluation, under the supervision and with the participation of our management, including our Chairman of the Board and Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 as amended). Based upon that evaluation, our Chairman of the Board and Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures are effective.

Internal Control Over Financial Reporting : Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision and with the participation of our management, including our Chairman of the Board and Chief Executive Officer and our Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under this framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2012.

On December 1, 2011, the Company completed the Nalco merger (see Note 4, Acquisitions and Dispositions, beginning on page 39 of the Annual Report for additional information). The legacy Nalco businesses have been included in management’s assessment of internal controls over financial reporting as of December 31, 2012.

The Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, has audited the effectiveness of the Company’s internal control over financial reporting as of December 31, 2012. Their report, and our management reports, can be found in our Annual Report, the relevant portion of which has been filed as Exhibit (13.1) to this Form 10-K and is incorporated into Item 8 of this Form 10-K.

During the period October 1 - December 31, 2012 we included Nalco within our assessment of internal control over financial reporting. There were no other changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART III

Item 10. Directors, Executive Officers of the Registrant and Corporate Governance .

Information about our directors is incorporated by reference from the discussion under the heading “Proposal 1: Election of Directors” located in the Proxy Statement. Information about compliance with Section 16(a) of the Securities Exchange Act of 1934, as amended, is incorporated by reference from the discussion under the heading “Section 16(a) Beneficial Ownership Reporting Compliance” located in the Proxy Statement. Information about our Audit Committee, including the members of the Committee, and our Audit Committee financial experts, is incorporated by reference from the discussion under the heading “Corporate Governance,” and sub-headings “Board Committees” and “Audit Committee,” located in the Proxy Statement. Information about our Code of Conduct is incorporated by reference from the discussion under the heading “Corporate Governance Materials and Code of Conduct” located in the Proxy Statement. Information regarding our executive officers is presented under the heading “Executive Officers of the Registrant” in Part I on pages 17 and 18 of this Form 10-K, and is incorporated herein by reference.

Item 11. Executive Compensation .

Information appearing under the headings entitled “Executive Compensation” and “Director Compensation” located in the Proxy Statement is incorporated herein by reference. However, pursuant to Instructions to Item 407(e)(5) of Securities and Exchange Commission Regulation S-K, the material appearing under the sub-heading “Compensation Committee Report” shall not be deemed to be “filed” with the Commission.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .

Information appearing under the heading entitled “Security Ownership” located in the Proxy Statement is incorporated herein by reference. Information appearing under the heading entitled “Equity Compensation Plan Information” located in the Proxy Statement is incorporated herein by reference.

A total of 1,011,586 shares of Common Stock held by our directors and executive officers, some of whom may be deemed to be “affiliates” of the Company, have been excluded from the computation of market value of our Common Stock on the cover page of this Form 10-K. This total represents that portion of the shares reported as beneficially owned by our directors and executive officers as of June 30, 2012 which are actually issued and outstanding.

Item 13. Certain Relationships and Related Transactions, and Director Independence .

Information appearing under the headings entitled “Director Independence Standards and Determinations” and “Related Person Transactions” located in the Proxy Statement is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services .

Information appearing under the heading entitled “Audit Fees” located in the Proxy Statement is incorporated herein by reference.

PART IV

Item 15. Exhibits, Financial Statement Schedules .

(a)(1)		The following financial statements of the Company, included in the Annual Report, are incorporated into Item 8 hereof.

		(i)	Consolidated Statement of Income for the years ended December 31, 2012, 2011 and 2010, Annual Report page 28.

		(ii)	Consolidated Statement of Comprehensive Income for the years ended December 31, 2012, 2011 and 2010, Annual Report page 29.

		(iii)	Consolidated Balance Sheet at December 31, 2012 and 2011, Annual Report page 30.

		(iv)	Consolidated Statement of Cash Flows for the years ended December 31, 2012, 2011 and 2010, Annual Report page 31.

		(v)	Consolidated Statement of Equity for the years ended December 31, 2012, 2011 and 2010, Annual Report page 32.

		(vi)	Notes to Consolidated Financial Statements, Annual Report pages 33 through 62.

		(vii)	Report of Independent Registered Public Accounting Firm, Annual Report page 63.

(b)(2)	All financial statement schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or the accompanying notes to the consolidated financial statements. All significant majority-owned subsidiaries are included in the filed consolidated financial statements.

	The following documents are filed as exhibits to this Report. We will, upon request and payment of a fee not exceeding the rate at which copies are available from the Securities and Exchange Commission, furnish copies of any of the following exhibits to stockholders.

	(2.1)	Agreement and Plan of Merger dated as of July 19, 2011, among Ecolab Inc., Sustainability Partners Corporation and Nalco Holding Company — Incorporated by reference to Exhibit (2.1) of our Form 8-K dated July 19, 2011.

	(2.2)	Agreement and Plan of Merger, dated as of October 11, 2012, among Ecolab Inc., OFC Technologies Corp. and Permian Mud Service, Inc. — Incorporated by reference to Exhibit (2.1) of our Form 8-K dated October 12, 2012.

	(2.3)	First Amendment dated as of November 28, 2012 to Agreement and Plan of Merger, dated as of October 11, 2012, among Ecolab Inc., OFC Technologies Corp. and Permian Mud Service, Inc.

	(2.4)	Second Amendment dated as of November 30, 2012 to Agreement and Plan of Merger, dated as October 11, 2012, among Ecolab Inc., OFC Technologies Corp. and Permian Mud Service, Inc. — Incorporated by reference to Exhibit (2.1) of our Form 8-K dated November 30, 2012.

	(3.1)	Restated Certificate of Incorporation of Ecolab Inc., dated as of January 2, 2013 — Incorporated by reference to Exhibit (3.2) of our Form 8-K dated January 2, 2013.

	(3.2)	By-Laws, as amended through February 26, 2010 — Incorporated by reference to Exhibit (3.2) of our Form 10-K Annual Report for the year ended December 31, 2011.

	(4.1)	Common Stock - see Exhibits (3.1) and (3.2).

	(4.2)	Form of Common Stock Certificate effective January 2, 2013.

	(4.3)	Amended and Restated Indenture, dated as of January 9, 2001, between Ecolab Inc. and The Bank of New York Trust Company, N.A. (as successor in interest to J.P. Morgan Trust Company, National Association and Bank One, NA) as Trustee - Incorporated by reference to Exhibit (4)(A) of our Current Report on Form 8-K dated January 23, 2001.

	(4.4)	Supplemental Indenture, dated as of February 8, 2008, between Ecolab Inc. and The Bank of New York Trust Company, N.A., as Trustee — Incorporated by reference to Exhibit 4.2 of our Form 8-K dated February 8, 2008.

	(4.5)	Form of 4.875% Note due February 15, 2015 — Included in Exhibit (4.4) above.

	(4.6)	Second Supplemental Indenture, dated as of December 8, 2011, between the Company, Wells Fargo Bank, National Association, as Trustee and the Bank of New York Mellon Trust Company, N.A. (formerly known as The Bank of New York Trust Company, N.A., as successor in interest to J.P. Morgan Trust Company, National Association and Bank One, National Association), as original trustee — Incorporated by reference to Exhibit (4.2) of our Current Report on Form 8-K dated December 5, 2011.

	(4.7)	Forms of 2.375% Notes due 2014 Notes, 3.000% Notes due 2016, 4.350% Notes due 2021 and 5.500% Notes due 2041 — Included in Exhibit (4.6) above.

	(4.8)	Third Supplement Indenture, dated as of August 9, 2012, between The Company, Wells Fargo Bank National Association, as Trustee and The Bank of New York Mellon Trust Company, N.A. (formerly known as The Bank of New York Trust Company, N.A., as successor in interest to J.P. Morgan Trust Company, National Association and Bank One, National Associated as original trustee — Incorporated by reference to Exhibit (4.1) of our Form 10-Q for the quarter ended September 30, 2012.

	(4.9)	Form of 1.000% Note due August 9, 2015 — Included in Exhibit (4.8) above.

	(4.10)	Fourth Supplemental Indenture, dated as of December 13, 2012, between The Company, Wells Fargo Bank National Association, as Trustee and The Bank of New York Mellon Trust Company, N.A. (formerly known as The Bank of New York Trust Company, N.A., as successor in interest to J.P. Morgan Trust Company, National Association and Bank One, National Associated as original trustee — Incorporated by reference to Exhibit (4.2) of our Form 8-K dated December 13, 2012.

	(4.11)	Form of 1.450% Note due December 8, 2017 — Included in Exhibit (4.10) above.

		Copies of other constituent instruments defining the rights of holders of our long-term debt are not filed herewith, pursuant to Section (b)(4)(iii) of Item 601 of Regulation S-K, because the aggregate amount of securities authorized under each of such instruments is less than 10% of our total assets on a consolidated basis. We will, upon request by the Securities and Exchange Commission, furnish to the Commission a copy of each such instrument.

	(10.1)	$1.5 billion 5-Year Revolving Credit Facility, dated as of September 8, 2011, among Ecolab Inc., the lenders party thereto, the issuing banks party thereto, Bank of America, N.A., as administrative agent and swingline bank, and Citibank, N.A., JPMorgan Chase Bank, N.A. and The Bank of Tokyo-Mitsubishi UFJ, Ltd., as co-syndication agents — Incorporated by reference to Exhibit (10.2) of our Form 8-K dated September 8, 2011.

	(10.2)	First Amendment to Note Purchase Agreement dated July 26, 2006, dated as of October 27, 2011, by and among Ecolab Inc. and the Noteholders party thereto — Incorporated by

	reference to Exhibit (10.2) of our Form 8-K dated October 27, 2011.

(10.3)	Note Purchase Agreement dated October 27, 2011, by and among Ecolab Inc. and the Purchasers party thereto — Incorporated by reference to Exhibit (10.1) of our Form 8-K dated October 27, 2011.

(10.4)	$500 million 364-Day Revolving Credit Facility, dated as of August 10, 2012, among Ecolab Inc., the lenders party thereto, Bank of America, N.A., as administrative agent, and JPMorgan Chase Bank, N.A., Sumitomo Mitsui Banking Corporation and The Bank of Tokyo-Mitsubishi UFJ, Ltd. and Credit Suisse AG, Cayman Islands Branch, as co-syndication agents — Incorporated by reference to Exhibit (10.1) of our Form 8-K dated August 10, 2012.

(10.5)	Documents comprising global Commercial Paper Programs

	(i)	U.S. $200,000,000 Euro-Commercial Paper Programme

		(a)	Amended and Restated Dealer Agreement dated 2 December 2005 between Ecolab Inc. (as Guarantor), Ecolab B.V. and Ecolab Holding GmbH (as Issuers), Ecolab Inc., Credit Suisse First Boston (Europe) Limited (as Arranger), and Citibank International plc and Credit Suisse First Boston (Europe) Limited (as Dealers) — Incorporated by reference to Exhibit (10)B(i)(a) of our Form 10-K Annual Report for the year ended December 31, 2005.

		(b)	Amended and Restated Note Agency Agreement dated as of 2 December 2005 between Ecolab Inc., Ecolab B.V. and Ecolab Holding GmbH (as Issuers) and Citibank, N.A. as Issue and Paying Agent — Incorporated by reference to Exhibit (10)B(i)(b) of our Form 10-K Annual Report for the year ended December 31, 2005.

		(c)	Deed of Covenant made on 2 December 2005 by Ecolab Inc., Ecolab B.V. and Ecolab Holding GmbH — Incorporated by reference to Exhibit (10)B(i)(c) of our Form 10-K Annual Report for the year ended December 31, 2005.

		(d)	Deed of Guarantee made on 2 December 2005 — Incorporated by reference to Exhibit (10)B(i)(d) of our Form 10-K Annual Report for the year ended December 31, 2005.

	(ii)	U.S. $2,500,000,000 U.S. Commercial Paper Program

		(a)	Form of Commercial Paper Dealer Agreement for 4 (2) Program. The dealers for the program are Citigroup Global Markets Inc., J.P. Morgan Securities LLC, Wells Fargo Securities, LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse Securities (USA) LLC and RBS Securities Inc. — Incorporated by reference to Exhibit (10)A(ii)(a) of our Form 10-Q for the quarter ended June 30, 2003.

		(b)	Issuing and Paying Agency Agreement dated as of July 10, 2000 between Ecolab Inc. and JPMorgan Chase Bank, N.A. (as successor to Bank One, National Association) as Issuing and Paying Agent - Incorporated by reference to Exhibit (10)A(ii)(b) of our Form 10-Q for the quarter ended June 30, 2003.

		(c)	Corporate Commercial Paper — Master Note dated July 10, 2000 — Incorporated by reference to Exhibit (10.5)(ii)(c) of our Form 10-K Annual Report for the year ended December 31, 2011.

		(d)	Annex to Corporate Commercial Paper — Master Note dated July 10, 2000 effective January 9, 2012 — Incorporated by reference to Exhibit (10.5)(ii)(d) of our Form 10-K Annual Report for the year ended December 31, 2011.

(10.6)		$900 million Term Loan Agreement, dated as of November 15, 2012, among Ecolab Inc., the lenders party thereto, Bank of America, N.A., as administrative agent and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as sole lead arranger — Incorporated by reference to Exhibit (10.1) of our Form 8-K dated November 15, 2012.

(10.7)	(i)	Ecolab Inc. 1997 Stock Incentive Plan, as Amended and Restated as of August 18, 2000 - Incorporated by reference to Exhibit (10) of our Form 10-Q for the quarter ended September 30, 2000.

	(ii)	Non-Statutory Stock Option Agreement as in effect for grants through May 12, 2000 — Incorporated by reference to Exhibit (10)B(i) of our Form 10-Q for the quarter ended June 30, 2004.

	(iii)	Non-Statutory Stock Option Agreement as in effect for grants beginning May 13, 2000 through May 10, 2002 — Incorporated by reference to Exhibit (10)B(ii) of our Form 10-Q for the quarter ended June 30, 2004.

(10.8)	(i)	Ecolab Inc. 2001 Non-Employee Director Stock Option and Deferred Compensation Plan as amended effective May 1, 2004 — Incorporated by reference to Exhibit (10)H(ii) of our Form 10-K Annual Report for the year ended December 31, 2003.

	(ii)	Amendment No. 1 adopted December 15, 2004 to Ecolab Inc. 2001 Non-Employee Director Stock Option and Deferred Compensation Plan, as amended and restated effective May 1, 2004, with respect to the American Jobs Creation Act of 2004 — Incorporated by reference to Exhibit (10)F(ii) of our Form 10-K Annual Report for the year ended December 31, 2004.

	(iii)	Master Agreement Relating to Options (as in effect through May 7, 2004) — Incorporated by reference to Exhibit (10)D(i) of our Form 10-Q for the quarter ended June 30, 2004.

	(iv)	Master Agreement Relating to Periodic Options, as amended effective as of May 1, 2004 — Incorporated by reference to Exhibit (10)D(ii) of our Form 10-Q for the quarter ended June 30, 2004.

	(v)	Amendment No. 2 to Ecolab Inc. 2001 Non-Employee Director Stock Option and Deferred Compensation Plan, as amended effective May 2, 2008 — Incorporated by reference to Exhibit (10)A of our Form 10-Q for the quarter ended September 30, 2008.

	(vi)	Amendment No. 1 to Master Agreement Relating to Periodic Options, as amended effective May 2, 2008 — Incorporated by reference to Exhibit (10)B of our Form 10-Q for the quarter ended September 30, 2008.

	(vii)	Amendment No. 3 to Ecolab Inc. 2001 Non-Employee Director Stock Option and Deferred Compensation Plan (as Amended and Restated Effective as of May 1, 2004) — Incorporated by reference to Exhibit (10)E(vii) of our Form 10-K Annual Report for the year ended December 31, 2008.

(10.9)	(i)	Note Purchase Agreement, dated as of July 26, 2006 by and among Ecolab Inc. and the Purchasers party thereto — Incorporated by reference to Exhibit (10) of our Form 8-K dated July 26, 2006.

	(ii)	First Amendment to Note Purchase Agreement dated July 26, 2006, dated as of October 27, 2011, by and among Ecolab Inc. and the Noteholders party thereto —

		Incorporated by reference to Exhibit (10.2) of our Form 8-K dated October 27, 2011.

(10.10)	Form of Director Indemnification Agreement. Substantially identical agreements are in effect as to each of our directors — Incorporated by reference to Exhibit (10)I of our Form 10-K Annual Report for the year ended December 31, 2003.

(10.11)	(i)	Ecolab Executive Death Benefits Plan, as amended and restated effective March 1, 1994 — Incorporated by reference to Exhibit (10)H(i) of our Form 10-K Annual Report for the year ended December 31, 2006. See also Exhibit (10.16) hereof.

	(ii)	Amendment No. 1 to Ecolab Executive Death Benefits Plan, effective July 1, 1997 — Incorporated by reference to Exhibit (10)H(ii) of our Form 10-K Annual Report for the year ended December 31, 1998.

	(iii)	Second Declaration of Amendment to Ecolab Executive Death Benefits Plan, effective March 1, 1998 - Incorporated by reference to Exhibit (10)H(iii) of our Form 10-K Annual Report for the year ended December 31, 1998.

	(iv)	Amendment No. 3 to the Ecolab Executive Death Benefits Plan, effective August 12, 2005 — Incorporated by reference to Exhibit (10)B of our Form 8-K dated December 13, 2005.

	(v)	Amendment No. 4 to the Ecolab Executive Death Benefits Plan, effective January 1, 2005 — Incorporated by reference to Exhibit (10)H(v) of our Form 10-K Annual Report for the year ended December 31, 2009.

(10.12)	Ecolab Executive Long-Term Disability Plan, as amended and restated effective January 1, 1994 — Incorporated by reference to Exhibit (10)I of our Form 10-K Annual Report for the year ended December 31, 2004. See also Exhibit (10.16) hereof.

(10.13)	Ecolab Supplemental Executive Retirement Plan (As Amended and Restated effective as of January 1, 2011) — Incorporated by reference to Exhibit (10.12) of our Form 10-K of Annual Report for the year ended December 31, 2011. See also Exhibit (10.16) hereof.

(10.14)	Ecolab Mirror Savings Plan (As Amended and Restated effective as of January 1, 2013). See also Exhibit (10.16) hereof.

(10.15)	Ecolab Mirror Pension Plan (As Amended and Restated effective as of January 1, 2011) - Incorporated by reference to Exhibit (10.15) of our Form 10-K Annual Report for the year ended December 31, 2011. See also Exhibit (10.16) hereof.

(10.16)	Ecolab Inc. Administrative Document for Non-Qualified Plans (Amended and Restated effective as of January 1, 2011) — Incorporated by reference to Exhibit (10.16) of our Form 10-K Annual Report for the year ended December 31, 2011.

(10.17)	Ecolab Inc. Management Performance Incentive Plan, as amended and restated on February 27, 2009 — Incorporated by reference to Exhibit (10) of our Form 8-K dated May 8, 2009.

(10.18)	(i)	Ecolab Inc. Change in Control Severance Compensation Policy, as amended and restated effective February 26, 2010 — Incorporated by reference to Exhibit (10) of our Form 8-K dated February 26, 2010.

	(ii)	Amendment No. 1 to Ecolab Inc. Change-in-Control Severance Policy (as Amended and Restated effective as of February 26, 2010) — Incorporated by reference to Exhibit (10-18)(ii) of our Form 10-K Annual Report for the year ended December 31, 2011.

(10.19)	Description of Ecolab Management Incentive Plan — Incorporated by reference to Exhibit (10)Q of our Form 10-K Annual Report for the year ended December 31, 2008.

(10.20)	(i)	Ecolab Inc. 2002 Stock Incentive Plan — Incorporated by reference to Exhibit (10) of our Form 10-Q for the quarter ended June 30, 2002.

	(ii)	Non-Statutory Stock Option Agreement as in effect for grants beginning May 11, 2002 through August 12, 2003 — Incorporated by reference to Exhibit (10)A(i) of our Form 10-Q for the quarter ended June 30, 2004.

	(iii)	Non-statutory Stock Option Agreement as in effect for grants beginning August 13, 2003 — Incorporated by reference to Exhibit (10)A(ii) of our Form 10-Q for the quarter ended June 30, 2004.

(10.21)	(i)	Ecolab Inc. 2005 Stock Incentive Plan — Incorporated by reference to Exhibit (10)A of our Form 8-K dated May 6, 2005.

	(ii)	Amendment No. 1 to Ecolab Inc. 2005 Stock Incentive Plan, adopted October 31, 2008 — Incorporated by reference to Exhibit (10)V(ii) of our Form 10-K Annual Report for the year ended December 31, 2008.

	(iii)	Sample form of Non-Statutory Stock Option Agreement under the Ecolab Inc. 2005 Stock Incentive Plan in effect for grants prior to October 31, 2008 — Incorporated by reference to Exhibit (10)B of our Form 8-K dated May 6, 2005.

	(iv)	Sample form of Non-Statutory Stock Option Agreement under the Ecolab Inc. 2005 Stock Incentive Plan in effect for grants after October 31, 2008 — Incorporated by reference to Exhibit (10)V(iv) of our Form 10-K Annual Report for the year ended December 31, 2008.

	(v)	Sample form of Restricted Stock Award Agreement under the Ecolab Inc. 2005 Stock Incentive Plan — Incorporated by reference to Exhibit (10)W(iii) of our Form 10-K Annual Report for the year ended December 31, 2006.

	(vi)	Sample form of Performance Based Restricted Stock Unit Agreement under the Ecolab Inc. 2005 Stock Incentive Plan — Incorporated by reference to Exhibit (10) of our Form 10-Q for the quarter ended September 30, 2009.

(10.22)	(i)	Ecolab Inc. 2010 Stock Incentive Plan — Incorporated by reference to Exhibit (10)A of our Form 8-K dated May 6, 2010.

	(ii)	Sample form of Non-Statutory Stock Option Agreement under the Ecolab Inc. 2010 Stock Incentive Plan — Incorporated by reference to Exhibit (10)B of our Form 8-K dated May 6, 2010.

	(iii)	Sample form of Restricted Stock Award Agreement under the 2010 Stock Incentive Plan — Incorporated by reference to Exhibit (10)C of our Form 8-K dated May 6, 2010.

	(iv)	Sample form of Performance-Based Restricted Stock Award Agreement under the Ecolab Inc. 2010 Stock Incentive Plan — Incorporated by reference to Exhibit (10)D of our Form 8-K dated May 6, 2010.

	(v)	Sample form of Restricted Stock Unit Award Agreement under the Ecolab Inc. 2010 Stock Incentive Plan — Incorporated by reference to Exhibit (10)A of our Form 10-Q for the quarter ended September 30, 2010.

(10.23)	Policy on Reimbursement of Incentive Payments adopted December 4, 2008 — Incorporated by reference to Exhibit (10)W of our Form 10-K Annual Report for the year ended December 31, 2008.

(10.24)	Second Amended and Restated Nalco Holding Company 2004 Stock Incentive Plan — Incorporated by reference to Exhibit (4.3) of our Post-Effective Amendment No. 1 on Form S-8 to Form S-4 Registration Statement dated December 2, 2011.

(10.25)	(i)	Severance Agreement dated January 1, 2011 between Stephen M. Taylor and Nalco Company, a subsidiary of Nalco Holding Company.

	(ii)	Modification dated May 2, 2011 to Severance Agreement dated January 1, 2011 between Stephen M. Taylor and Nalco Company.

	(iii)	Change of Control Agreement dated January 1, 2011 between Stephen M. Taylor and Nalco Holding Company.

	(iv)	Notification dated July 16, 2012 to Stephen M. Taylor regarding termination effective July 31, 2013 of the Change of Control Agreement dated January 1, 2011 and the Severance Agreement dated January 1, 2011.

(10.26)	Form of Nalco Company Death Benefit Agreement and Addendum to Death Benefit Agreement — Incorporated by reference from Exhibit (99.2) on Form 8-K of Nalco Holding Company filed on May 11, 2005 (File No. 001-32342).

(10.27)	Sublease Agreement, dated as of November 4, 2003 between Leo Holding Company, as sub-landlord and Ondeo Nalco Company, as subtenant — Incorporated by reference from Exhibit (10.6) of the Registration Statement on Form S-4 of Nalco Company filed on May 17, 2004 (File No. 333-115560).

(13.1)	Those portions of our Annual Report to Stockholders for the year ended December 31, 2012 which are incorporated by reference into Parts I and II hereof.

(14.1)	Ecolab Code of Conduct, as amended November 29, 2012.

(21.1)	List of Subsidiaries.

(23.1)	Consent of Independent Registered Public Accounting Firm at page 44 hereof is filed as a part hereof.

(24.1)	Powers of Attorney.

(31.1)	Rule 13a-14(a) Certifications.

(32.1)	Section 1350 Certifications.

(99.1)	Exhibit (99.1) of our Form 8-K filed on April 27, 2012 — Incorporated by reference to unaudited pro forma condensed combined statement of income for the twelve-months ended December 31, 2011 and corresponding footnotes included as part of Exhibit (99.1) of our Form 8-K filed on April 27, 2012.

(101.1)	Interactive Data File.

EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS

Included in the preceding list of exhibits are the following management contracts or compensatory plans or arrangements:

Exhibit No.		Description

(10.8)		Ecolab Inc. 2001 Non-Employee Director Stock Option and Deferred Compensation Plan.

(10.10)		Form of Director Indemnification Agreement.

(10.11)		Ecolab Executive Death Benefits Plan.

(10.12)		Ecolab Executive Long-Term Disability Plan.

(10.13)		Ecolab Supplemental Executive Retirement Plan.

(10.14)		Ecolab Mirror Savings Plan.

(10.15)		Ecolab Mirror Pension Plan.

(10.16)		Ecolab Inc. Administrative Document for Non-Qualified Plans.

(10.17)		Ecolab Inc. Management Performance Incentive Plan.

(10.18)		Ecolab Inc. Change in Control Severance Compensation Policy.

(10.19)		Description of Ecolab Inc. Management Incentive Plan.

(10.20)		Ecolab Inc. 2002 Stock Incentive Plan.

(10.21)		Ecolab Inc. 2005 Stock Incentive Plan.

(10.22)		Ecolab Inc. 2010 Stock Incentive Plan.

(10.23)		Policy on Reimbursement of Incentive Payments.

(10.24)		Second Amended and Restated Nalco Holding Company 2004 Stock Incentive Plan.

(10.25)		Change of Control and Severance Agreements between Stephan M. Taylor and Nalco Holding Company.

(10.26)		Nalco Company Death Benefit Agreement and Addendum to Death Benefit Agreement.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Ecolab Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 26 th day of February, 2013.

	ECOLAB INC.
	(Registrant)


	By:	/s/Douglas M. Baker, Jr.
		Douglas M. Baker, Jr.
		Chairman of the Board
		and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Ecolab Inc. and in the capacities indicated, on the 26 th day of February 2013.

/s/Douglas M. Baker, Jr.		Chairman of the Board and Chief Executive Officer
Douglas M. Baker, Jr.		(Principal Executive Officer and Director)

/s/Daniel J. Schmechel		Chief Financial Officer
Daniel J. Schmechel		(Principal Financial Officer)

/s/John J. Corkrean		Senior Vice President and Corporate Controller
John J. Corkrean		(Principal Accounting Officer)

/s/James J. Seifert		Directors
James J. Seifert

as attorney-in-fact for:
Barbara J. Beck, Les S. Biller, Jerry A. Grundhofer, Arthur J. Higgins, Joel W. Johnson, Michael Larson, Jerry W. Levin, Robert L. Lumpkins, Michael Larson, C. Scott O’Hara, Victoria J. Reich, Daniel S. Sanders, Mary M. VanDeWeghe and John J. Zillmer

EXHIBIT INDEX

The following documents are filed as exhibits to this Report.

Exhibit No.	Document	Method of Filing

(2.1)	Agreement and Plan of Merger dated as of July 19, 2011, among Ecolab Inc., Sustainability Partners Corporation and Nalco Holding Company.	Incorporated by reference to Exhibit (2.1) of our Form 8-K dated July 19, 2011.

(2.2)	Agreement and Plan of Merger, dated as of October 11, 2012, among Ecolab Inc., OFC Technologies Corp. and Permian Mud Service, Inc.	Incorporated by reference to Exhibit (2.1) of our Form 8-K dated October 12, 2012.

(2.3)	First Amendment dated as of November 28, 2012 to Agreement and Plan of Merger, dated as of October 11, 2012, among Ecolab Inc., OFC Technologies Corp. and Permian Mud Service, Inc.	Filed herewith electronically.

(2.4)	Second Amendment dated as of November 30, 2012 to Agreement and Plan of Merger, dated as October 11, 2012, among Ecolab Inc., OFC Technologies Corp. and Permian Mud Service, Inc.	Incorporated by reference to Exhibit (2.1) of our Form 8-K dated November 30, 2012.

(3.1)	Restated Certificate of Incorporation of Ecolab Inc., dated as of January 2, 2013.	Incorporated by reference to Exhibit (3.2) of our Form 8-K dated January 2, 2013.

(3.2)	By-Laws, as amended through February 26, 2010.	Incorporated by reference to Exhibit (3.2) of our Form 10-K Annual Report for the year ended December 31, 2011.

(4.1)	Common Stock.	see Exhibits (3.1) and (3.2).

(4.2)	Form of Common Stock Certificate effective January 2, 2013.	Filed herewith electronically.

(4.3)	Amended and Restated Indenture, dated as of January 9, 2001, between Ecolab Inc. and The Bank of New York Trust Company, N.A. (as successor in interest to J.P. Morgan Trust Company, National Association and Bank One, NA) as Trustee.	Incorporated by reference to Exhibit (4)(A) of our Current Report on Form 8-K dated January 23, 2001.

(4.4)	Supplemental Indenture, dated as of February 8, 2008, between Ecolab Inc. and The Bank of New York Trust Company, N.A., as Trustee.	Incorporated by reference to Exhibit 4.2 of our Form 8-K dated February 8, 2008.

(4.5)	Form of 4.875% Note due February 15, 2015.	Included in Exhibit (4.4) above.

(4.6)	Second Supplemental Indenture, dated as of December 8, 2011, between the Company, Wells Fargo Bank, National Association, as Trustee and the Bank of New York Mellon Trust Company, N.A. (formerly known as The Bank of New York Trust Company, N.A., as successor in interest to J.P. Morgan Trust Company, National Association and Bank One, National Association), as original trustee.	Incorporated by reference to Exhibit (4.2) of our Current Report on Form 8-K dated December 5, 2011.

(4.7)		Forms of 2.375% Notes due 2014 Notes, 3.000% Notes due 2016, 4.350% Notes due 2021 and 5.500% Notes due 2041.	Included in Exhibit (4.6) above.

(4.8)		Third Supplement Indenture, dated as of August 9, 2012, between The Company, Wells Fargo Bank National Association, as Trustee and The Bank of New York Mellon Trust Company, N.A. (formerly known as The Bank of New York Trust Company, N.A., as successor in interest to J.P. Morgan Trust Company, National Association and Bank One, National Associated as original trustee.	Incorporated by reference to Exhibit (4.1) of our Form 10-Q for the quarter ended September 30, 2012.

(4.9)		Form of 1.000% Note due August 9, 2015.	Included in Exhibit (4.8) above.

(4.10)		Fourth Supplemental Indenture, dated as of December 13, 2012, between The Company, Wells Fargo Bank National Association, as Trustee and The Bank of New York Mellon Trust Company, N.A. (formerly known as The Bank of New York Trust Company, N.A., as successor in interest to J.P. Morgan Trust Company, National Association and Bank One, National Associated as original trustee.	Incorporated by reference to Exhibit (4.2) of our Form 8-K dated December 13, 2012.

(4.11)		Form of 1.450% Note due December 8, 2017.	Included in Exhibit (4.10) above.

(10.1)		$1.5 billion 5-Year Revolving Credit Facility, dated as of September 8, 2011, among Ecolab Inc., the lenders party thereto, the issuing banks party thereto, Bank of America, N.A., as administrative agent and Swingline Bank, and Citibank, N.A., JPMorgan Chase Bank, N.A. and The Bank of Tokyo-Mitsubishi UFJ, Ltd., as co-syndication agents.	Incorporated by reference to Exhibit (10.2) of our Form 8-K dated September 8, 2011.

(10.2)		First Amendment to Note Purchase Agreement dated July 26, 2006, dated as of October 27, 2011, by and among Ecolab Inc. and the Noteholders party thereto.	Incorporated by reference to Exhibit (10.2) of our Form 8-K dated October 27, 2011.

(10.3)		Note Purchase Agreement dated October 27, 2011, by and among Ecolab Inc. and the Purchasers party thereto.	Incorporated by reference to Exhibit (10.1) of our Form 8-K dated October 27, 2011.

(10.4)		$500 million 364-Day Revolving Credit Facility, dated as of August 10, 2012, among Ecolab Inc., the lenders party thereto, Bank of America, N.A., as administrative agent, and JPMorgan Chase Bank, N.A., Sumitomo Mitsui Banking Corporation and The Bank of Tokyo-Mitsubishi UFJ, Ltd. and Credit Suisse AG, Cayman Islands Branch, as co-syndication agents.	Incorporated by reference to Exhibit (10.1) of our Form 8-K dated August 10, 2012.

(10.5)		Documents comprising global Commercial Paper Programs.

(i)		U.S. $200,000,000 Euro-Commercial Paper Programme.

	(a)	Amended and Restated Dealer Agreement dated 2 December 2005 between Ecolab Inc. (as Guarantor), Ecolab B.V. and Ecolab Holding GmbH (as Issuers), Ecolab Inc., Credit Suisse First Boston (Europe) Limited (as Arranger), and Citibank International plc and Credit Suisse First Boston (Europe) Limited (as Dealers).	Incorporated by reference to Exhibit (10)B(i)(a) of our Form 10-K Annual Report for the year ended December 31, 2005.

	(b)	Amended and Restated Note Agency Agreement dated as of 2 December 2005 between Ecolab Inc., Ecolab B.V. and Ecolab Holding GmbH (as Issuers) and Citibank, N.A. as Issue and Paying Agent.	Incorporated by reference to Exhibit (10)B(i)(b) of our Form 10-K Annual Report for the year ended December 31, 2005.

	(c)	Deed of Covenant made on 2 December 2005 by Ecolab Inc., Ecolab B.V. and Ecolab Holding GmbH.	Incorporated by reference to Exhibit (10)B(i)(c) of our Form 10-K Annual Report for the year ended December 31, 2005.

	(d)	Deed of Guarantee made on 2 December 2005.	Incorporated by reference to Exhibit (10)B(i)(d) of our Form 10-K Annual Report for the year ended December 31, 2005.

(ii)		U.S. $2,500,000,000 U.S. Commercial Paper Program.

	(a)	Form of Commercial Paper Dealer Agreement for 4 (2) Program. The dealers for the program are Citigroup Global Markets Inc., J.P. Morgan Securities LLC, Wells Fargo Securities, LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse Securities (USA) LLC and RBS Securities Inc.	Incorporated by reference to Exhibit (10)A(ii)(a) of our Form 10-Q for the quarter ended June 30, 2003.

	(b)	Issuing and Paying Agency Agreement dated as of July 10, 2000 between Ecolab Inc. and JPMorgan Chase Bank, N.A. (as successor to Bank One, National Association) as Issuing and Paying Agent.	Incorporated by reference to Exhibit (10)A(ii)(b) of our Form 10-Q for the quarter ended June 30, 2003.

	(c)	Corporate Commercial Paper — Master Note dated July 10, 2000.	Incorporated by reference to Exhibit (10.5)(ii)(c) of our Form 10-K Annual Report for the year ended December 31, 2011.

	(d)	Annex to Corporate Commercial Paper — Master Note dated July 10, 2000 effective January 9, 2012.	Incorporated by reference to Exhibit (10.5)(ii)(d) of our Form 10-K Annual Report for the year ended December 31, 2011.

(10.6)		$900 million Term Loan Agreement, dated as of November 15, 2012, among Ecolab Inc., the lenders party thereto, Bank of America, N.A., as administrative agent and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as sole lead arranger.	Incorporated by reference to Exhibit (10.1) of our Form 8-K dated November 15, 2012.

(10.7)	(i)	Ecolab Inc. 1997 Stock Incentive Plan, as Amended and Restated as of August 18, 2000.	Incorporated by reference to Exhibit (10) of our Form 10-Q for the quarter ended September 30, 2000.

	(ii)	Non-Statutory Stock Option Agreement as in effect for grants through May 12, 2000.	Incorporated by reference to Exhibit (10)B(i) of our Form 10-Q for the quarter ended June 30, 2004.

	(iii)	Non-Statutory Stock Option Agreement as in effect for grants beginning May 13, 2000 through May 10, 2002.	Incorporated by reference to Exhibit (10)B(ii) of our Form 10-Q for the quarter ended June 30, 2004.

(10.8)	(i)	Ecolab Inc. 2001 Non-Employee Director Stock Option and Deferred Compensation Plan as amended effective May 1, 2004.	Incorporated by reference to Exhibit (10)H(ii) of our Form 10-K Annual Report for the year ended December 31, 2003.

	(ii)	Amendment No. 1 adopted December 15, 2004 to Ecolab Inc. 2001 Non-Employee Director Stock Option and Deferred Compensation Plan, as amended and restated effective May 1, 2004, with respect to the American Jobs Creation Act of 2004.	Incorporated by reference to Exhibit (10)F(ii) of our Form 10-K Annual Report for the year ended December 31, 2004.

	(iii)	Master Agreement Relating to Options (as in effect through May 7, 2004).	Incorporated by reference to Exhibit (10)D(i) of our Form 10-Q for the quarter ended June 30, 2004.

	(iv)	Master Agreement Relating to Periodic Options, as amended effective as of May 1, 2004.	Incorporated by reference to Exhibit (10)D(ii) of our Form 10-Q for the quarter ended June 30, 2004.

	(v)	Amendment No. 2 to Ecolab Inc. 2001 Non-Employee Director Stock Option and Deferred Compensation Plan, as amended effective May 2, 2008.	Incorporated by reference to Exhibit (10)A of our Form 10-Q for the quarter ended September 30, 2008.

	(vi)	Amendment No. 1 to Master Agreement Relating to Periodic Options, as amended effective May 2, 2008.	Incorporated by reference to Exhibit (10)B of our Form 10-Q for the quarter ended September 30, 2008.

	(vii)	Amendment No. 3 to Ecolab Inc. 2001 Non-Employee Director Stock Option and Deferred Compensation Plan (as Amended and Restated Effective as of May 1, 2004).	Incorporated by reference to Exhibit (10)E(vii) of our Form 10-K Annual Report for the year ended December 31, 2008.

(10.9)	(i)	Note Purchase Agreement, dated as of July 26, 2006 by and among Ecolab Inc. and the Purchasers party thereto.	Incorporated by reference to Exhibit (10) of our Form 8-K dated July 26, 2006.

	(ii)	First Amendment to Note Purchase Agreement dated July 26, 2006, dated as of October 27, 2011, by and among Ecolab Inc. and the Noteholders party thereto.	Incorporated by reference to Exhibit (10.2) of our Form 8-K dated October 27, 2011.

(10.10)		Form of Director Indemnification Agreement. Substantially identical agreements are in effect as to each of our directors.	Incorporated by reference to Exhibit (10)I of our Form 10-K Annual Report for the year ended December 31, 2003.

(10.11)	(i)	Ecolab Executive Death Benefits Plan, as amended and restated effective March 1, 1994.	Incorporated by reference to Exhibit (10)H(i) of our Form 10-K Annual Report for the year ended December 31, 2006. See also Exhibit (10.16) hereof.

	(ii)	Amendment No. 1 to Ecolab Executive Death Benefits Plan, effective July 1, 1997.	Incorporated by reference to Exhibit (10)H(ii) of our Form 10-K Annual Report for the year ended December 31, 1998.

	(iii)	Second Declaration of Amendment to Ecolab Executive Death Benefits Plan, effective March 1, 1998.	Incorporated by reference to Exhibit (10)H(iii) of our Form 10-K Annual Report for the year ended December 31, 1998.

	(iv)	Amendment No. 3 to the Ecolab Executive Death Benefits Plan, effective August 12, 2005.	Incorporated by reference to Exhibit (10)B of our Form 8-K dated December 13, 2005.

	(v)	Amendment No. 4 to the Ecolab Executive Death Benefits Plan, effective January 1, 2005.	Incorporated by reference to Exhibit (10)H(v) of our Form 10-K Annual Report for the year ended December 31, 2009.

(10.12)		Ecolab Executive Long-Term Disability Plan, as amended and restated effective January 1, 1994.	Incorporated by reference to Exhibit (10)I of our Form 10-K Annual Report for the year ended December 31, 2004. See also Exhibit (10.16) hereof.

(10.13)		Ecolab Supplemental Executive Retirement Plan (As Amended and Restated effective as of January 1, 2011).	Incorporated by reference to Exhibit (10.12) of our Form 10-K of Annual Report for the year ended December 31, 2011. See also Exhibit (10.16) hereof.

(10.14)		Ecolab Mirror Savings Plan (As Amended and Restated effective as of January 1, 2013).	Filed herewith electronically.

(10.15)		Ecolab Mirror Pension Plan (As Amended and Restated effective as of January 1, 2011).	Incorporated by reference to Exhibit (10.15) of our Form 10-K Annual Report for the year ended December 31, 2011. See also Exhibit (10.16) hereof.

(10.16)		Ecolab Inc. Administrative Document for Non-Qualified Plans (Amended and Restated effective as of January 1, 2011).	Incorporated by reference to Exhibit (10.16) of our Form 10-K Annual Report for the year ended December 31, 2011.

(10.17)		Ecolab Inc. Management Performance Incentive Plan, as amended and restated on February 27, 2009.	Incorporated by reference to Exhibit (10) of our Form 8-K dated May 8, 2009.

(10.18)	(i)	Ecolab Inc. Change in Control Severance Compensation Policy, as amended and restated effective February 26, 2010.	Incorporated by reference to Exhibit (10) of our Form 8-K dated February 26, 2010.

	(ii)	Amendment No. 1 to Ecolab Inc. Change-in-Control Severance Policy (as Amended and Restated effective as of February 26, 2010).	Incorporated by reference to Exhibit (10-18)(ii) of our Form 10-K Annual Report for the year ended December 31, 2011.

(10.19)		Description of Ecolab Management Incentive Plan.	Incorporated by reference to Exhibit (10)Q of our Form 10-K Annual Report for the year ended December 31, 2008.

(10.20)	(i)	Ecolab Inc. 2002 Stock Incentive Plan.	Incorporated by reference to Exhibit (10) of our Form 10-Q for the quarter ended June 30, 2002.

	(ii)	Non-Statutory Stock Option Agreement as in effect for grants beginning May 11, 2002 through August 12, 2003.	Incorporated by reference to Exhibit (10)A(i) of our Form 10-Q for the quarter ended June 30, 2004.

	(iii)	Non-statutory Stock Option Agreement as in effect for grants beginning August 13, 2003.	Incorporated by reference to Exhibit (10)A(ii) of our Form 10-Q for the quarter ended June 30, 2004.

(10.21)	(i)	Ecolab Inc. 2005 Stock Incentive Plan.	Incorporated by reference to Exhibit (10)A of our Form 8-K dated May 6, 2005.

	(ii)	Amendment No. 1 to Ecolab Inc. 2005 Stock Incentive Plan, adopted October 31, 2008.	Incorporated by reference to Exhibit (10)V(ii) of our Form 10-K Annual Report for the year ended December 31, 2008.

	(iii)	Sample form of Non-Statutory Stock Option Agreement under the Ecolab Inc. 2005 Stock Incentive Plan in effect for grants prior to October 31, 2008.	Incorporated by reference to Exhibit (10)B of our Form 8-K dated May 6, 2005.

	(iv)	Sample form of Non-Statutory Stock Option Agreement under the Ecolab Inc. 2005 Stock Incentive Plan in effect for grants after October 31, 2008.	Incorporated by reference to Exhibit (10)V(iv) of our Form 10-K Annual Report for the year ended December 31, 2008.

	(v)	Sample form of Restricted Stock Award Agreement under the Ecolab Inc. 2005 Stock Incentive Plan.	Incorporated by reference to Exhibit (10)W(iii) of our Form 10-K Annual Report for the year ended December 31, 2006.

	(iv)	Sample form of Performance Based Restricted Stock Unit Agreement under the Ecolab Inc. 2005 Stock Incentive Plan.	Incorporated by reference to Exhibit (10) of our Form 10-Q for the quarter ended September 30, 2009.

(10.22)	(i)	Ecolab Inc. 2010 Stock Incentive Plan.	Incorporated by reference to Exhibit (10)A of our Form 8-K dated May 6, 2010.

	(ii)	Sample form of Non-Statutory Stock Option Agreement under the Ecolab Inc. 2010 Stock Incentive Plan.	Incorporated by reference to Exhibit (10)B of our Form 8-K dated May 6, 2010.

	(iii)	Sample form of Restricted Stock Award Agreement under the 2010 Stock Incentive Plan.	Incorporated by reference to Exhibit (10)C of our Form 8-K dated May 6, 2010.

	(iv)	Sample form of Performance-Based Restricted Stock Award Agreement under the Ecolab Inc. 2010 Stock Incentive Plan.	Incorporated by reference to Exhibit (10)D of our Form 8-K dated May 6, 2010.

	(v)	Sample form of Restricted Stock Unit Award Agreement under the Ecolab Inc. 2010 Stock Incentive Plan.	Incorporated by reference to Exhibit (10)A of our Form 10-Q for the quarter ended September 30, 2010.

(10.23)		Policy on Reimbursement of Incentive Payments adopted December 4, 2008.	Incorporated by reference to Exhibit (10)W of our Form 10-K Annual Report for the year ended December 31, 2008.

(10.24)		Second Amended and Restated Nalco Holding Company 2004 Stock Incentive Plan.	Incorporated by reference to Exhibit (4.3) of our Post-Effective Amendment No. 1 on Form S-8 to Form S-4 Registration Statement dated December 2, 2011.

(10.25)	(i)	Severance Agreement dated January 1, 2011 between Stephen M. Taylor and Nalco Company, a subsidiary of Nalco Holding Company.	Filed herewith electronically.

	(ii)	Modification dated May 2, 2011 to Severance Agreement dated January 1, 2011 between Stephen M. Taylor and Nalco Company.	Filed herewith electronically.

	(iii)	Change of Control Agreement dated January 1, 2011 between Stephen M. Taylor and Nalco Holding Company.	Filed herewith electronically.

	(iv)	Notification dated July 16, 2012 to Stephen M. Taylor regarding termination effective July 31, 2013 of the Change of Control Agreement dated January 1, 2011 and the Severance Agreement dated January 1, 2011.	Filed herewith electronically.

(10.26)		Form of Nalco Company Death Benefit Agreement and Addendum to Death Benefit Agreement.	Incorporated by reference from Exhibit (99.2) on Form 8-K of Nalco Holding Company filed on May 11, 2005 (File No. 001-32342).

(10.27)		Sublease Agreement, dated as of November 4, 2003 between Leo Holding Company, as sub-landlord and Ondeo Nalco Company, as subtenant.	Incorporated by reference from Exhibit (10.6) of the Registration Statement on Form S-4 of Nalco Company filed on May 17, 2004 (File No. 333-115560).

(13.1)		Those portions of our Annual Report to Stockholders for the year ended December 31, 2012 which are incorporated by reference into Parts I and II hereof.	Filed herewith electronically.

(14.1)		Ecolab Code of Conduct, as amended November 29, 2012.	Filed herewith electronically.

(21.1)		List of Subsidiaries.	Filed herewith electronically.

(23.1)		Consent of Independent Registered Public Accounting Firm at page 44 hereof is filed as a part hereof.	See page 44 hereof.

(24.1)	Powers of Attorney.	Filed herewith electronically.

(31.1)	Rule 13a-14(a) Certifications.	Filed herewith electronically.

(32.1)	Section 1350 Certifications.	Filed herewith electronically.

(99.1)	Exhibit (99.1) of our Form 8-K filed on April 27, 2012.	Incorporated by reference to unaudited pro forma condensed combined statement of income for the twelve-months ended December 31, 2011 and corresponding footnotes included as part of Exhibit (99.1) of our Form 8-K filed on April 27, 2012.

(101.1)	Interactive Data File.	Filed herewith electronically.

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Registration Nos. 2-90702; 33-18202; 33-55986; 33-56101; 333-95043; 333-109890; 33-34000; 33-56151; 333-18627; 333-109891; 33-39228; 33-56125; 333-70835; 33-60266; 333-95041; 333-18617; 333-79449; 333-40239; 333-95037; 333-50969; 333-58360; 333-97927; 333-115567; 333-129427; 333-129428; 333-140988; 333-115568; 333-132139; 333-147148; 333-163837; 333-163838; 333-165130; 333-165132; 333-166646; 333-174028; 333-176601; 333-178300; 333-178302; and 333-184650) and Form S-3 (Registration Nos. 333-178273 and 333-185379) of Ecolab Inc. of our report dated February 26, 2013 relating to the consolidated financial statements and the effectiveness of internal control over financial reporting, which appears in the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K.

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 26, 2013

Exhibit 2.3

FIRST AMENDMENT

AGREEMENT AND PLAN OF MERGER

This First Amendment to Agreement and Plan of Merger is entered into as of the 28th day of November, 2012 (this “ Amendment ”), by and among PERMIAN MUD SERVICE, INC., a Texas corporation (the “ Company ”), ECOLAB INC., a Delaware corporation (“ Parent ”), OFC TECHNOLOGIES CORP., a Texas corporation and wholly owned subsidiary of Parent (“ Merger Subsidiary ”), and John W. Johnson, Steven J. Lindley and J. Loren Ross, solely in their capacity as the Representatives.

Recitals :

WHEREAS , the parties hereto (the “ Parties ”) entered into that certain Agreement and Plan of Merger, dated as of October 11, 2012 (the “ Agreement ”);

WHEREAS , Parent desires to have the Company establish a retention bonus program (the “ Retention Bonus Program ”) for certain designated employees of the Company and its subsidiaries which Retention Bonus Program would be independent of, and in addition to, the Bonus Plan referenced in Section 6.2 of the Agreement; and

WHEREAS , Parent and the Company have agreed to establish the Retention Bonus Program and that any and all costs associated with the Retention Bonus Program will be paid by the Company after the closing of the transaction contemplated in the Agreement and shall be borne indirectly by Parent through Parent’s ownership of the Company;

NOW, THEREFORE , in consideration of the mutual covenants, representations, warranties and agreements contained herein, and or other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Parties hereby agree as follows:

1. Recitals; Definitions . The recitals set forth above are true and correct and are incorporated herein by this reference. Capitalized terms used herein and not otherwise defined shall have the meaning set forth in the Agreement.

2. Amendments .

(a) The Agreement is hereby amended to add a new Section 6.14 which reads as follows:

“6.14 Retention Bonus Program .

(a) The Company shall as soon as reasonably practicable after the date hereof send a retention bonus offer letter substantially in the form attached hereto as Exhibit I (the “ Retention Bonus Offer Letter ”) to those individuals set forth on Schedule 6.14 (each a “ Retention Bonus Participant ” and collectively the “ Retention Bonus Participants ”) offering to pay such Retention Bonus Participant the retention bonus set forth opposite such Retention Bonus Participant’s name on Schedule 6.14 (each a “ Retention Bonus Payment ” and collectively, the “ Retention Bonus Payments ”), in each case subject to the terms and conditions set forth in the Retention Bonus Offer Letter.

(b) The Retention Bonus Payments and the payment by the Company of any Retention Bonus Payment to any Retention Bonus Participant shall be independent of and in addition to any payment that will be made by the Company to the Retention Bonus Participant pursuant to the Bonus Plan.

(c) Notwithstanding any term set forth in this Agreement to the contrary (including the definitions of Current Assets and Current Liabilities herein), the Retention Bonus Payments set forth on Schedule 6.14 shall not:

(i) be reflected on the Closing Balance Sheet or included in the calculation of Estimated Cash, Estimated Debt, Estimated Closing Tax Amount or the amount of any Estimated Working Capital Surplus or Estimated Working Capital Deficiency;

(ii) be reflected on the Final Balance Sheet or included in the calculation of Closing Cash, Closing Debt, Closing Tax Amount, Closing Working Capital or the amount of any Closing Working Capital Surplus or Closing Working Capital Deficiency;

(iii) form the basis for any Objection Notice;

(iv) under any circumstances be deducted, or form the basis of any deduction, from the Closing Merger Consideration; and

(v) constitute an update to the Company Disclosure Schedules and the amount thereof shall not be applied towards the Basket or the Special Deductible.”

(b) The Agreement is hereby amended to add a new Exhibit I in the form attached as Exhibit I hereto.

3. References. All references to the Agreement in any document, instrument, agreement, or writing delivered pursuant to the Agreement (as amended hereby) shall hereafter be deemed to refer to the Agreement as amended hereby.

4. Miscellaneous Provisions. The provisions of Article XI of the Agreement are incorporated herein by this reference as if set out fully herein and shall apply in all respects to this Amendment.

5. Counterparts . This Amendment may be executed in any number of counterparts and each such counterpart hereof shall be deemed to be an original instrument, but all of such counterparts shall constitute for all purposes one agreement. Any signature hereto delivered by a party hereto by facsimile transmission shall be deemed an original signature hereto.

6. Ratification. The terms and conditions of the Agreement, as amended hereby, are hereby ratified, confirmed and approved in their entirety by the Parties, shall continue in full force and effect and are enforceable in accordance therewith.

IN WITNESS WHEREOF, the Parties have executed this Amendment as of the date first above written.

	COMPANY:

	PERMIAN MUD SERVICE, INC.


	By:	/s/Steven J. Lindley
	Name:	Steven J. Lindley
	Title:	President


	PARENT:

	ECOLAB INC.


	By:	/s/Douglas M. Baker, Jr.
	Name:	Douglas M. Baker, Jr.
	Title:	Chairman and Chief Executive Officer


	MERGER SUBSIDIARY:

	OFC TECHNOLOGIES CORP.


	By:	/s/Douglas M. Baker, Jr.
	Name:	Douglas M. Baker, Jr.
	Title:	Chief Executive Officer


	REPRESENTATIVES:


	/s/John W. Johnson
	John W. Johnson, as a Representative


	/s/Steven J. Lindley
	Steven J. Lindley, as a Representative


	/s/J. Loren Ross
	J. Loren Ross, as a Representative

EXHIBITS

Exhibit I		Retention Bonus Offer Letter

Schedule 6.14		Retention Bonus Payments

Ecolab undertakes to furnish supplementally a copy of the foregoing omitted exhibits and schedules to the Commission upon request.

Exhibit 4.2

THIS CERTIFIES THAT is the owner of CUSIP DATED COUNTERSIGNED AND REGISTERED: COMPUTERSHARE TRUST COMPANY, N.A . TRANSFER AGENT AND REGISTRAR, By AUTHORIZED SIGNATURE FULLY-PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF Ecolab Inc. transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this certificate properly endorsed. This certificate is not valid unless countersigned by the Transfer Agent and registered by the Registrar. Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. COMMON STOCK PAR VALUE $1.00 COMMON STOCK THIS CERTIFICATE IS TRANSFERABLE IN CANTON, MA AND NEW YORK, NY SEE REVERSE FOR CERTAIN DEFINITIONS Certificate Number Shares . ECOLAB INC. INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE Chairman of the Board Secretary 016570| 003590|127C|RESTRICTED||4|057-423 278865 10 0 <<Month Day, Year>> WWWW 00000000 * * 600620* * * * * * * * * 600620* * * * * * * * * 600620* * * * * * * * * 600620* * * * * * * * * 600620* * ** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Sample **** Mr. Sample **600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares*** *600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares**** 600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****6 00620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****60 0620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600 620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares***600620**Shares****600620**Shares****60062 0**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620 **Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620* *Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620** Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**S hares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Shares****600620**Sh * * * SIX HUNDRED THOUSAND SIX HUNDRED AND TWENTY* * * MR. SAMPLE & MRS. SAMPLE & MR. SAMPLE & MRS. SAMPLE NNNNN . Certificate Numbers 1234567890/1234567890 1234567890/1234567890 1234567890/1234567890 1234567890/1234567890 1234567890/1234567890 1234567890/1234567890 Total Transaction Num/No. 123456 Denom. 123456 Total 1234567 MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 PO Box A3480 Chicago IL 60690-3480 CUSIP 278865 10 0 Holder ID XXXXXXXXXX Insurance Value 1,000,000.00 Number of Shares 123456 DTC 12345678 123456789012345

THE CORPORATION WILL FURNISH, WITHOUT CHARGE, TO EACH STOCKHOLDER WHO SO REQUESTS, A PRINTED STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF WHICH THE CORPORATION IS AUTHORIZED TO ISSUE AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS. REQUESTS MAY BE DIRECTED TO THE SECRETARY OF ECOLAB INC. AT ITS PRINCIPAL OFFICE, OR THE TRANSFER AGENT NAMED ON THE FACE OF THIS CERTIFICATE. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT- . . . . . . . . . .Custodian . . . . . . . . . . . . . . . TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act . . . . . . . . . . . . . JT TEN - as joint tenants with right of survivorship UNIF TRF MIN ACT . . . . . . . . . . . . . . .Custodian (until age. . . ). . . . . . . . . . . and not as tenants in common (Cust) (Minor) under Uniform Transfers to Minors Act. . . . . . . . . . (State) Additional abbreviations may also be used though not in the above list. For value received, hereby sell, assign and transfer unto Shares Attorney Dated: 20 Signature: Signature: Notice: The signature to this assignment must correspond with the name as written upon the face of the certificate, in every particular, without alteration or enlargement, or any change whatever. (Cust) (Minor) (State) PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF ASSIGNEE) of the common stock represented by the within Certificate, and do hereby irrevocably constitute and appoint to transfer the said stock on the books of the within-named Corporation with full power of substitution in the premises. . ECOLAB INC. Signature(s) Guaranteed: Medallion Guarantee Stamp THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions) WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15.

Exhibit (10.14)

ECOLAB MIRROR SAVINGS PLAN

(As Amended and Restated Effective January 1, 2013)

ECOLAB MIRROR SAVINGS PLAN

(As Amended and Restated Effective as of January 1, 2013)

WHEREAS, Ecolab Inc. (the “Company”) previously established the Ecolab Mirror Savings Plan (the “Plan”) to provide additional deferred compensation benefits for certain management and highly compensated employees who perform management and professional functions for the Company and certain related entities; and

WHEREAS, the American Jobs Creation Act of 2004, P.L. 108-357 (the “AJCA”) added a new Section 409A to the Code, which significantly changed the Federal tax law applicable to “amounts deferred” under the Plan after December 31, 2004; and

WHEREAS, the IRS and U.S. Treasury subsequently issued regulations and other guidance regarding the requirements of and compliance with Code Section 409A; and

WHEREAS, the Board of Directors of the Company directed and authorized appropriate officers of the Company to amend the Plan to comply, with respect to the Executives’ Post-2004 Sub-Accounts, with the requirements of Code Section 409A and guidance issued thereunder; and

WHEREAS, the Company desires to bifurcate the Plan into an “excess plan” (referred to in the Plan as “Primary Deferrals”) and a deferred savings plan (referred to in the Plan as “Secondary Deferrals”), with the former constituting an “excess plan” for purposes of Minnesota state income tax; and

WHEREAS, on December 19, 2008 the Plan was amended and restated in its entirety, effective as of January 1, 2005; and

WHEREAS, on December 21, 2011 the Plan was amended and restated in its entirety, effective as of January 1, 2012 to clarify ambiguous language in the Plan document; and

WHEREAS, the Company wishes to amend the Plan effective as of January 1, 2013 to modify the determination of matching credits under the Plan to conform with the formulas under the qualified plans and extend certain references to the Ecolab Savings Plan and ESOP to include references to the Ecolab Savings Plan and ESOP for Traditional Benefit Employees and the Nalco Company Profit Sharing and Savings Plan.

NOW, THEREFORE, pursuant to Section 5.1 of the Ecolab Inc. Administrative Document for Non-Qualified Benefit Plans, the Company hereby amends and restates the Plan in its entirety to read as follows:

ARTICLE I
PREFACE

SECTION 1.1 Effective Date . The effective date of this amendment and restatement of the Plan is January 1, 2013, except as otherwise provided in this amendment and restatement. The benefit, if any, payable with respect to a former Executive who terminated employment prior to the Effective Date (and who is not rehired by a member of the Controlled Group thereafter) shall be

determined by, and paid in accordance with, the terms and provisions of the Plan as in effect prior to the Effective Date, subject to Section 1.4.

SECTION 1.2 Purpose of the Plan . The purpose of this Plan is to provide additional deferred compensation benefits for certain management and highly compensated employees who perform management and professional functions for the Company and certain related entities.

SECTION 1.3 Administrative Document . This Plan includes the Ecolab Inc. Administrative Document for Non-Qualified Benefit Plans (the “Administrative Document”), which is incorporated herein by reference.

SECTION 1.4 American Jobs Creation Act (AJCA) .

(1) It is intended that the Plan (including all Amendments thereto) comply with the provisions of Section 409A of the Code, as enacted by the AJCA, to prevent the inclusion in gross income of any amount credited to an Executive’s Account hereunder in a taxable year that is prior to the taxable year or years in which such amounts would otherwise be actually distributed or made available to the Executive. It is intended that the Plan shall be administered in a manner that will comply with Section 409A of the Code, including proposed, temporary or final regulations or any other guidance issued by the Secretary of the Treasury and the Internal Revenue Service with respect thereto (collectively with the AJCA, the “409A Guidance”). All Plan provisions shall be interpreted in a manner consistent with the 409A Guidance.

(2) The Administrator shall not take any action hereunder that would violate any provision of the 409A Guidance. It is intended that all Executives’ elections hereunder will comply with the 409A Guidance. The Administrator is authorized to adopt rules or regulations deemed necessary or appropriate in connection therewith to anticipate and/or comply with the requirements thereof (including any transition or grandfather rules thereunder). In this regard, the Administrator is authorized to permit Executive elections with respect to amounts deferred after December 31, 2004 and is also permitted to give the Executives the right to amend or revoke such elections in accordance with the 409A Guidance. Notwithstanding the foregoing, neither the Company nor the Administrator guarantee any tax consequences of any Participant’s participation in, deferrals or contributions under, or payments from, the Plan, and each Participant shall be solely responsible for payment of any tax obligations of such Participant incurred in connection with participation in the Plan.

(3) In furtherance of, but without limiting the foregoing, any Executive Deferrals and Matching Contributions (and the earnings thereon) that are deemed to have been deferred prior to January 1, 2005 and that qualify for “grandfathered status” under Section 409A of the Code shall continue to be governed by the law applicable to nonqualified deferred compensation prior to the addition of Section 409A to the Code and shall be subject to the terms and conditions specified in the Plan as in effect prior to January 1, 2005. In particular, to the extent permitted under the 409A Guidance, the Bonus Deferrals relating to a Bonus that is earned during 2004, but paid in 2005, shall be allocated to the Executive’s Pre-2005 Sub-Account hereunder.

SECTION 1.5 Excess Plan . Effective January 1, 2009, (a) all Account balances under the Plan that are attributable to Executive and Company contributions to the Plan made with respect to Plan Years beginning on and after January 1, 2009 (as adjusted for earnings, losses, expenses and distributions) that were not permitted under the Savings Plan, Traditional Savings Plan, or Nalco PSSP due to contribution limitations imposed on “qualified plans” by the Internal Revenue Code, specifically including Code Sections 401(a)(17), 401(k), 401(m), 402(g) and 415, shall be accounted for separately and shall be, for purposes of any applicable federal and state tax law, an “excess plan” (the “Primary Deferrals”); and (b) all Account balances other than the Primary Deferrals Account balances shall be accounted for separately and shall be a deferred savings plan (the “Secondary Deferrals”).

ARTICLE II
DEFINITIONS

Words and phrases when used herein with initial capital letters which are defined in the Savings Plan or the Administrative Document are used herein as so defined, unless otherwise specifically defined herein or the context clearly indicates otherwise. The following words and phrases when used in this Plan with initial capital letters shall have the following respective meanings, unless the context clearly indicates otherwise:

SECTION 2.1 “ Account ” shall mean the record maintained in accordance with Section 3.4 by the Company for each Executive’s Mirror Savings Benefit. The Executive’s Account shall be further divided into the following two Sub-Accounts: (a) the “Pre-2005 Sub-Account” for amounts that are “deferred” (as such term is defined in the 409A Guidance) as of December 31, 2004 ( and earnings thereon), which includes the Minimum Benefit, and (b) the “Post-2004 Sub-Account” for amounts that are deferred after December 31, 2004 (and earnings thereon). Effective as of January 1, 2009, each Executive’s Pre-2005 Sub-Account shall be part of the Secondary Deferrals. Effective as of January 1, 2009, the Administrator shall establish, under the Executive’s Post-2004 Sub-Account, (i) the Primary Deferrals Sub-Account consisting of (A) the Executive’s Deferrals with respect to Base Salary and Bonus earned in Plan Years beginning on and after January 1, 2009 (and earnings thereon) that the Executive was precluded from deferring under the Traditional Savings Plan or Nalco PSSP due to contribution limitations imposed on “qualified plans” by the Code, and (B) Matching Contributions made on the Executive’s behalf with respect to Plan Years beginning on or after January 1, 2009 (and earnings thereon), and (ii) the Secondary Deferrals Sub-Account consisting of the Executive’s Post-2004 Sub-Account balances other than the Primary Deferrals Sub-Account balances.

SECTION 2.2 “ Base Salary ” shall mean an Executive’s base salary for the Plan Year (including, for this purpose, any salary reductions caused as a result of participation (1) in an Employer-sponsored plan which is governed by Sections 401(k), 132(f)(4) or 125 of the Code or (2) in this Plan).

SECTION 2.3 “ Bonus .” An Executive’s Bonus for a Plan Year is equal to the sum of (1) the annual cash incentive bonus under the Company’s Management Incentive Plan and/or, if applicable, the Company’s Management Performance Incentive Plan, and (2) any similar annual cash incentive bonus under any other equivalent Employer-sponsored bonus program (as determined by the Administrator), which, in either case, is earned with respect to services performed by the Executive during such Plan Year, whether or not such Bonus is actually paid to

the Executive during such Plan Year. An election to defer a Bonus under this Plan must be made before the period in which the service is performed which gives rise to such Bonus.

SECTION 2.4 “ Death Beneficiary .”

(1) The term “Death Beneficiary” shall mean the person or persons designated by the Executive to receive Mirror Savings Benefits hereunder in the event of his death. The designation of a Death Beneficiary under the Plan may be made, and may be revoked or changed only by an instrument (in form prescribed by Administrator) signed by the Executive and delivered to the Administrator during the Executive’s lifetime. If the Executive is married on the date of his death and has been married to such spouse throughout the one-year period ending on the date of death, his designation of a Death Beneficiary other than, or in addition to, his spouse under the Plan shall not be effective unless such spouse has consented in writing to such designation.

(2) Any Mirror Savings Benefits remaining to be paid after the death of a Death Beneficiary shall be paid to the Death Beneficiary’s estate, except as otherwise provided in the Executive’s Death Beneficiary designation.

SECTION 2.5 “ Disability ” or “ Disabled .” With respect to an Executive’s Pre-2005 Sub-Account, an Executive shall be deemed to have a “Disability” or be “Disabled” if the Executive’s employment with an Employer terminates due to a disability that entitles the Executive to benefits under (1) any long-term disability plan sponsored by the Company, or (2) in the event that the Executive is not a participant in any such plan, the Social Security Act of the United States.

SECTION 2.6 “ Executive ” shall mean an Employee (1) whose annualized Annual Compensation (excluding severance pay) and target bonus for any Plan Year exceeds the limitation described in Code Section 401(a)(17), and (2) who is selected by the Administrator to participate in the Plan. Once an Employee has satisfied the requirements of an Executive and commenced participation in the Plan, his participation may continue, notwithstanding the fact that his Annual Compensation is reduced below the limitation described in Code Section 401(a)(17), until the Administrator determines, in his or her sole discretion, that the Employee would fail to satisfy the requirements of a “management or highly compensated employee” under ERISA.

SECTION 2.7 “ Executive Deferrals ” shall mean the amounts described in Section 3.1.

SECTION 2.8 “ Hypothetical Investment Fund ” shall mean the investment funds designated by the Company pursuant to Section 6.1.

SECTION 2.9 “ Insolvent .” For purposes of this Plan, an Employer shall be considered Insolvent at such time as it (1) is unable to pay its debts as they mature, or (2) is subject to a pending voluntary or involuntary proceeding as a debtor under the United States Bankruptcy Code.

SECTION 2.10 “ Matching Contributions ” shall mean the amounts described in Section 3.3.

SECTION 2.11 “ Minimum Benefit ” shall mean the sum of the portions of the Executive’s Account attributable to amounts credited under a prior plan (the “Prior Plan”), including (1) his or her Account balance as of September 1, 1994, and (2) any deferral of his Bonus payable with respect to calendar 1994 and the Matching Contribution thereon.

SECTION 2.12 “ Mirror Savings Benefit .” An Executive’s Mirror Savings Benefit at any particular time shall be equal to the vested amounts credited to his Account at such time, as determined under Articles III and V.

SECTION 2.13 “ Nalco PSSP shall mean the Nalco Company Profit Sharing and Savings Plan, as such plan may be amended from time-to-time.

SECTION 2.14 “ Plan ” shall mean the Ecolab Mirror Savings Plan, as described herein and as it may be amended from time to time.

SECTION 2.15 “ Savings Plan ” shall mean the Ecolab Savings Plan and ESOP, as such plan may be amended from time to time.

SECTION 2.16 “ Separation from Service ” or to “ Separate from Service ” shall mean any termination of employment with the Controlled Group due to retirement, death, disability or other reason; provided, however, that no Separation from Service is deemed to occur while the Executive (1) is on military leave, sick leave, or other bona fide leave of absence that does not exceed six (6) months (or, in the case of disability, twelve (12) months), or if longer, the period during which the Executive’s right to reemployment with the Controlled Group is provided either by statute or by contract, or (2) continues to perform services for the Controlled Group at an annual rate of fifty percent (50%) or more of the average level of services performed over the immediately preceding 36-month period (or the full period in which the Executive provided services (whether as an employee or as an independent contractor) if the Executive has been providing services for less than 36 months). For purposes of this Section, “disability” shall mean any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than six months, where such impairment causes the Executive to be unable to perform the duties of his or her position of employment or any substantially similar position of employment. Whether an Executive has incurred a Separation from Service shall be determined in accordance with the 409A Guidance.

SECTION 2.17 “ Specified Employee ” shall mean “Specified Employee” as defined in the Administrative Document.

SECTION 2.18 “ Traditional Savings Plan ” means the Ecolab Savings and ESOP for Traditional Benefit Employees, as such Plan may be amended from time to time.

SECTION 2.19 “ Unforeseeable Emergency .” With respect to an Executive’s Post-2004 Sub-Account, “Unforeseeable Emergency” shall mean an event which results in a severe financial hardship to the Executive as a consequence of (1) an illness or accident of the Executive, the Executive’s spouse, Death Beneficiary or a dependent (as defined in Section 152(a) of the Code, without regard to Section 152(b)(1), (b)(2), and (d)(1)(B)), (2) loss of the Executive’s property due to casualty (including the need to rebuild a home following damage to a home not otherwise covered by insurance, for example, not as a result of a natural disaster) or (3) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of

the Executive. With respect to an Executive’s Pre-2005 Sub-Account, “Unforeseeable Emergency” shall mean an event which results (or will result) in severe financial hardship to the Executive as a consequence of an unexpected illness or accident or loss of the Executive’s property due to casualty or other similar extraordinary or unforeseen circumstances out of the control of the Executive, determined in accordance with Treas. Reg. § 1.409A-2(i)(3).

ARTICLE III
MIRROR SAVINGS BENEFIT

SECTION 3.1 Amount of Executive Deferrals . Each Executive may, within 30 days after the Plan becomes effective as to him and, thereafter, prior to the first day of any subsequent Plan Year, by written notice to the Administrator on a form provided by the Administrator, direct his Employer:

(1) to reduce (in accordance with rules established by the Administrator) the Executive’s Base Salary for the balance of the Plan Year in which the Plan becomes effective as to him (but only with respect to Base Salary payable for periods of service commencing after the Executive so directs) or for any following Plan Year (a) by a specified percentage, and/or (b) by an amount determined by the Administrator that is equal to five percent of Executive’s Base Salary in excess of the limitation described in Code Section 401(a)(17) for the Plan Year (limited to a maximum Salary Deferral of 25% of the Executive’s Base Salary in the deferral period) (the “Salary Deferrals”), and

(2) to reduce (in accordance with rules established by the Administrator) the Executive’s Bonus which is earned with respect to services performed by the Executive for the balance of the Plan Year in which the Plan becomes effective as to him (but only with respect to Bonus payable for period of service commencing after the Executive’s direction becomes irrevocable) or for any following Plan Year (a) by a specified percentage, and/or (b) by an amount determined by the Administrator, that is equal to five percent of the portion of the Executive’s Bonus earned during the deferral period which, when added to the Executive’s Base Salary for the deferral period, is in excess of the limitation described in Code Section 401(a)(17) of the Plan Year (up to a maximum of 100% of the net amount of the Executive’s Bonus after payment of applicable FICA and related federal and state income tax withholdings) (the “Bonus Deferrals”), and

(3) to credit the amounts described in Subsections (1) and (2) of this Section (collectively, the “Executive Deferrals”) to the Account described in Section 3.4 at the times described therein.

SECTION 3.2 Effect and Duration of Direction Pursuant to Section 3.1 .

(1) Plan Year to Plan Year . Any direction by an Executive to make Executive Deferrals under Section 3.1 shall be effective with respect to the Base Salary and Bonus otherwise earned by the Executive with respect to the period to which the direction relates, and the Executive shall not be eligible to receive such Executive Deferrals. Instead, such Executive Deferrals shall be credited to the Executive’s Account as provided in Section 3.4. Any direction made in accordance with Section 3.1 shall remain in effect until changed or revoked, except that such direction shall become irrevocable on the last day of the Plan Year immediately preceding the Plan Year with respect to which the Base Salary and Bonus

subject to such direction are earned (or, with respect to the first period of eligibility, such direction shall be irrevocable on the last day of the 30-day election period with respect to Base Salary and Bonus earned during the same Plan Year after the election). An Executive may change or revoke a direction with respect to the deferral of Base Salary and Bonus earned in a subsequent Plan Year at any time prior to such direction becoming irrevocable. Notwithstanding the foregoing, all Executives shall be required to make a deferral election for the 2005 Plan Year by December 31, 2004, and prior elections shall not be given any further force or effect (except that the Executive’s Bonus Deferral election for the Bonus that is earned in the 2004 Plan Year shall continue in effect in accordance with its terms).

(2) Automatic Termination/Suspension of Deferral Election .

(a) An Executive Deferral direction pursuant to Section 3.1 shall automatically terminate on the date of the Executive’s Separation from Service and with respect to any compensation for services performed after such Executive’s Separation from Service or, to the extent permitted by the 409A Guidance, on the date the Plan is terminated.

(b) An Executive’s direction pursuant to Section 3.1 shall automatically be cancelled from the first day of the first payroll period in which the Executive receives a hardship distribution under the Traditional Savings Plan, Nalco PSSP, or Savings Plan or a distribution due to an Unforeseeable Emergency under this Plan through the last day of the Plan Year containing the six-month anniversary date of such hardship distribution or such distribution due to an Unforeseeable Emergency, but will automatically be reinstated thereafter (unless otherwise changed in accordance with Subsection (1) hereof).

SECTION 3.3 Matching Contributions .

(1) Matching Contributions With Respect to Salary Deferrals .

(a) The Employers shall credit the Account of an Executive with an amount (the “Matching Contributions”) determined as follows: (i) with respect to an Executive who is participating in the Traditional Savings Plan, the Matching Contribution shall be equal to the sum of (1) 100% of the Salary Deferrals which do not exceed 3% of the Executive’s Base Salary and (2) 50% of the Salary Deferrals which exceed 3% of the Executive’s Base Salary but do not exceed 5% of the Executive’s Base Salary, or (ii) with respect to an Executive who is participating in the Savings Plan or Nalco PSSP, the Matching Contribution shall be equal to the sum of (1) 100% of the Salary Deferrals which do not exceed 4% of the Executive’s Base Salary and (2) 50% of the Salary Deferrals which exceed 4% of the Executive’s Base Salary but do not exceed 8% of the Executive’s Base Salary; provided, however, that the amount of the Executive’s Base Salary that shall be taken into account under this Section 3.3(1)(a) shall be the amount of the Executive’s Base Salary for such Plan Year that exceeds the maximum compensation which could be considered under the Savings Plan, Traditional Savings Plan or Nalco PSSP under Section 401(a)(17) of the Code. Executives employed by Nalco Company who are eligible to participate in the Plan during the

2013 Plan Year will be deemed to have elected to contribute 8% of their Base Salary to this Plan.

(b) The Employers shall also credit the Account of an Executive with an additional Matching Contribution in an amount determined by the Administrator, which amount is equal to the amount of matching contributions (plus earnings allocable thereto) which the Executive is required to forfeit under the Savings Plan, Traditional Savings Plan or Nalco PSSP due to the application of the before-tax nondiscrimination requirements of the Code (the “True-Up Matching Contributions”).

(2) Matching Contributions With Respect to Bonus Deferrals . The Employers shall credit the Account of an Executive with a Matching Contribution determined as follows: (i) with respect to an Executive who is participating in the Traditional Savings Plan, the Matching Contribution shall be equal to the sum of (1) 100% of the first 3% of the Executive’s Bonus Deferral and (2) 50% of the next 2% of the Executive’s Bonus Deferral, or (ii) with respect to an Executive who is participating in the Savings Plan or the Nalco PSSP, the Matching Contribution shall be equal to the sum of (1) 100% of the first 4% of the Executive’s Bonus Deferral and (2) 50% of the next 4% of the Executive’s Bonus Deferral; provided, however, the amount of the Executive’s Bonus that shall be taken into account under this Section 3.3(2) shall not exceed the excess of the Executive’s Base Salary and Bonus in respect of the Plan Year in which the Bonus was earned (excluding severance) over the maximum compensation which could be considered under the Savings Plan, Nalco PSSP, or Traditional Savings Plan in such Plan Year under Section 401(a)(17) of the Code, and further provided that an Executive’s Bonus shall be taken into account under this Section 3.3(2) only to the extent the Executive has elected to defer payment of such Bonus under Section 3.1(2) for the Plan Year. Executives employed by Nalco Company who are eligible to participate in the Plan during the 2013 Plan Year will be deemed to have elected to defer 8% of their Bonus paid in the 2013 Plan Year.

SECTION 3.4 Executives’ Accounts . Each Employer shall establish and maintain on its books an Account for each Executive which shall contain the following entries:

(1) Credits for the Executive Deferrals described in Section 3.1, which Executive Deferrals shall be credited to the Executive’s Account at the time such Executive Deferrals would otherwise have been paid to the Executive;

(2) Credits for the Matching Contributions described in Section 3.3(1)(a), which Matching Contributions shall be credited to the Executive’s Account at the same time as the underlying Salary Deferrals are credited thereto; but no earlier than when the Executive has received (or has been deemed to receive) the maximum Matching Contribution available under the Savings Plan, Traditional Savings Plan or the Nalco PSSP (as determined by the Administrator);

(3) Credits for the True-Up Matching Contributions described in Section 3.3(1)(b) at the time designated by the Administrator following the end of the Plan Year when the nondiscrimination test results under the Savings Plan, Traditional Savings Plan or Nalco PSSP are known;

(4) Credits for the Matching Contributions described in Section 3.3(2), which Matching Contributions shall be credited to the Executive’s Account at the same time as the underlying Bonus Deferrals are credited thereto;

(5) Credits or charges (including income, expenses, gains and losses) equal to the amounts which would have been attributable to the Executive Deferrals and Matching Contributions if such amounts had been invested on a tax deferred basis in the Hypothetical Investment Fund(s) in which such amounts are deemed to have been invested under Section 6.1. The entries provided by this Subsection (5) shall continue to be made until the Executive’s entire vested Account has been distributed pursuant to Article IV;

(6) Debits for any distributions made from the Account pursuant to Article IV;

(7) The Employers shall make the above-described credits and debits to the Executive’s Pre-2005 Sub-Account or the Post-2004 Sub-Account, as applicable, in accordance with the 409A Guidance; and

(8) Effective as of January 1, 2009, separate debits and credits shall be made to the Primary Deferrals Sub-Account and the Secondary Deferrals Sub-Account of each Participant.

SECTION 3.5 Statement of Account . The Company shall deliver to each Executive a written statement of his Account not less frequently that annually as of the end of each Plan Year.

ARTICLE IV
PAYMENT OF MIRROR SAVINGS BENEFITS

SECTION 4.1 Time of Payment .

(1) Payment to Executives .

(a) An Executive shall be entitled to receive his Account upon the earlier of (i) with respect to the Executive’s Pre-2005 Sub-Account, the date on which his or her employment terminates due to Disability or (ii) the date of his or her termination of employment with the Controlled Group for any reason, including retirement (or, with respect to amounts that are allocated to an Executive’s Post-2004 Sub-Account, thirty (30) days after the date of his or her Separation from Service (or, in the case of the Executive’s election pursuant to Section 4.2(3)(b)(ii)(B), on the date specified in such Section); provided, however, that distribution made on account of Separation from Service shall be made, or commence to be made, with respect to a Specified Employee on the first day of the month coincident with or next following the date that is six months after the date of the Separation from Service of the Specified Employee (or, if earlier, the date of death), to the extent that Code Section 409A(a)(2)(B)(i) is applicable, except that where the Executive makes an election pursuant to Section 4.2(3)(b)(ii)(B), payment will be made on the date specified in such Section). In the case of installment payments, the first payment made to the Specified Employee following the 6-month delay shall be made on the first day of the seventh month following the Separation from Service and shall include any Mirror Savings Benefit payments

that were not made as a result of the delay in payment pursuant to this paragraph (a).

(b) Notwithstanding the foregoing, the Company may at any time, upon written request of the Executive, cause to be paid to such Executive an amount equal to all or any part of the Executive’s vested Account, other than the portion of his or her Account attributable to Matching Contributions, if the Administrator determines, in its sole and absolute discretion based on such reasonable evidence as it may require, that such a payment or payments is necessary for the purpose of alleviating the consequences of an Unforeseeable Emergency. Payments made on account of an Unforeseeable Emergency shall be permitted only to the extent the amount does not exceed the amount reasonably necessary to satisfy the emergency need (plus, with respect to payments made from an Executive’s Post-2004 Sub-Account, an amount necessary to pay taxes reasonably anticipated as a result of the distribution) and may not be made to the extent such Unforeseeable Emergency is or may be relieved through reimbursement or compensation by insurance or otherwise, by liquidation of the Executive’s assets (to the extent such liquidation would not itself cause severe financial hardship) or, to the extent permitted by the 409A Guidance, by cessation of the Executive Deferrals under this Plan. However, the determination of amounts reasonably necessary to satisfy the emergency need is not required to take into account any additional compensation that due to the Unforeseeable Emergency is available under another nonqualified deferred compensation plan but has not actually been paid.

(c) Notwithstanding any provision of the Plan to the contrary, if the payment of all or any portion of an Executive’s Account would, in the sole opinion of the Company on the advice of its counsel, result in a profit recoverable by the Company under Section 16(b) of the Securities Exchange Act of 1934, but for the operation of this paragraph, then such payment (or portion thereof) shall be deferred and made at the earliest time that such payment (or portion thereof) would no longer be subject to Section 16(b), to the extent permitted by the 409A Guidance.

(2) Payment to Death Beneficiaries . The Death Beneficiary of a deceased Executive shall be entitled to receive the vested Account of the Executive upon the death of the Executive. The Executive’s vested Account shall be distributed to the Death Beneficiary on the sixtieth (60 th ) day after the Executive’s death.

SECTION 4.2 Form of Payment .

(1) Payment in Cash . All distributions under the Plan shall be made in the form of cash.

(2) Normal Forms of Payment .

(a) Payments to Executives .

(i) Pre-2005 Sub-Accounts . Unless otherwise elected pursuant to Section 4.2(3), an Executive’s Pre-2005 Sub-Account shall be distributed to the Executive in the form of a single lump sum payment.

(ii) Post-2004 Sub-Accounts . Unless otherwise elected pursuant to Section 4.2(3), an Executive’s Post-2004 Sub-Account shall be distributed to the Executive in the form of annual installment payments payable over a period of ten (10) years.

(b) Payments to Death Beneficiaries . An Executive’s Mirror Savings Benefit (or the remaining installments thereof if payment to the Executive had commenced) shall be distributed to his or her Death Beneficiary in the form of a single lump sum payment.

(c) Small Benefits . Notwithstanding any provision of the Plan to the contrary, in the event that (i) an Executive’s Pre-2005 Sub-Account does not exceed $25,000, such Sub-Account shall be paid to the Executive in the form of a single lump sum payment at termination of employment with the Controlled Group, and (ii) an Executive’s Post-2004 Sub-Account does not exceed $25,000, such Sub-Account shall be paid to the Executive in the form of a single lump sum payment at Separation from Service.

(d) Payment of Minimum Benefits . Notwithstanding the foregoing, an Executive’s Minimum Benefit shall be paid in the form previously elected by the Executive under the Prior Plan, and such election shall remain in full force and effect through the date of distribution.

(3) Optional Forms of Payment for Executives .

(a) In General . An Executive who does not want his or her Mirror Savings Benefit to be paid in the normal form of benefit described in Section 4.2(2)(a) may elect to receive his Pre-2005 Sub-Account in the form of annual installment payments payable over a period not exceeding ten years (as elected by the Executive) and may elect to receive his Post-2004 Sub-Account in the form of a single lump sum payment or in the form of annual installment payments payable over a period of five (5) or ten (10) years (as elected by the Executive); provided, however, the election provided by this Section 4.2(3) shall not apply to the Executive’s Minimum Benefit. The amount of each installment payment will be determined by dividing the balance of the Executive’s Mirror Savings Benefit as of the distribution date for such installment payment by the total number of remaining

payments (including the current payment). Effective as of January 1, 2009, an Executive may make separate payment elections under this Section 4.2(3) with respect to the Executive’s Primary Deferrals Sub-Account and Secondary Deferrals Sub-Account.

(b) Form/Timing of Election .

(i) Pre-2005 Sub-Accounts . Any election of an optional form of benefit made with respect to the Pre-2005 Sub-Account must be in writing (on a form provided by the Administrator) and filed with the Administrator prior to the Executive’s termination of employment with the Controlled Group because of involuntary termination, death or Disability or at least one (1) year prior to the Executive’s voluntary termination of employment or retirement. Any such election may be changed at any time and from time to time without the consent of any other person (except as described in Section 2.4), by filing a later signed written election with the Administrator; provided that any election made less than one (1) year prior to the Executive’s voluntary termination of employment shall not be valid, and in such case, payment shall be made in the normal form as provided in Section 4.2(2).

(ii) Post-2004 Sub-Accounts .

(A) In General . Any election of an optional form of benefit made with respect to the Post-2004 Sub-Account must be in writing (on a form provided by the Administrator) and filed with the Administrator at the time the Executive first becomes eligible to participate in the Plan and makes his initial Executive Deferral election pursuant to Section 3.1. Effective as of January 1, 2009, an Executive may make separate payment elections under this Section 4.2(3)(b)(ii) with respect to the Executive’s Primary Deferrals Sub-Account and Secondary Deferrals Sub-Account.

(B) Subsequent Elections . An Executive may change his election of an optional form of benefit made pursuant to Section 4.2(3)(b)(ii)(A) at any time and from time to time at least twelve (12) months before the Executive’s Separation from Service. The most recent election on file with the Administrator (that was filed at least twelve (12) months before the Executive’s Separation from Service and that remains on file with the Administrator on the date of the Executive’s Separation from Service) shall be given effect and shall become irrevocable on the date of the Executive’s Separation from Service. No prior or subsequent election shall have any force or effect. The payment of the Executive’s Post-2004 Sub-Account (or, effective January 1, 2009, the Executive’s Primary Deferrals Sub-Account and Secondary Deferrals Sub-Account) pursuant to such subsequent election shall be made or commence to be made on the date that is five (5) years after the originally scheduled date of payment.

(C) Transition Elections . Notwithstanding any provision of the Plan to the contrary, an Executive may elect, without regard to the five-year delay (as would be required under Section 4.2(3)(b)(ii)(B)), to receive each of his or her Primary Deferrals Sub-Account and Secondary Deferrals Sub-Account in a lump sum payment or in the form of five-year or ten-year annual installment payments, to be made or commence on the date of his or her Separation from Service. The transition election made under this clause (C) must be made no later than December 31, 2008 and may not cause any amount to be paid in 2008 if not otherwise payable and may not delay beyond 2008 payment of any amount that is otherwise payable in 2008.

ARTICLE V
VESTING

SECTION 5.1 Vesting .

(1) In General . An Executive shall always be 100% vested in both his Executive Deferrals and his Minimum Benefit under the Plan. Subject to the provisions of Subsection (2) of this Section, an Executive who is credited with an Hour of Service on or after March 1, 2002 shall be immediately 100% vested in all Matching Contributions hereunder.

(2) Forfeiture Provisions .

(a) Notwithstanding the provisions of Subsection (1) hereof, but subject to the requirements of paragraph (b) of this Subsection, the Employers shall be relieved of any obligation to pay or provide any future Mirror Savings Plan Benefits under this Plan and shall be entitled to recover amounts already distributed if, without the written consent of the Company, the Executive, whether before or after termination with the Controlled Group (i) participates in dishonesty, fraud, misrepresentation, embezzlement or deliberate injury or attempted injury, in each case related to the Company or a Controlled Group member, (ii) commits any unlawful or criminal activity of a serious nature, (iii) commits any intentional and deliberate breach of a duty or duties that, individually or in the aggregate, are material in relation to the Executive’s overall duties or (iv) materially breaches any confidentiality or noncompete agreement entered into with the Company or a Controlled Group member. The Employers shall have the burden of proving that one of the foregoing events has occurred. Notwithstanding the foregoing, the provisions of this Subsection 2(a) shall not apply to an Executive’s Minimum Benefit or the portion of the Executive’s Account which is attributable to his Executive Deferrals.

(b) Notwithstanding the foregoing, an Executive shall not forfeit any portion of his Mirror Savings Plan Benefits under paragraph (a) of this Subsection unless (i) the Executive receives reasonable notice in writing setting forth the grounds for the forfeiture, (ii) if requested by the Executive, the Executive (and/or the Executive’s counsel or other representative) is granted a hearing before the full Board of Directors of the Company (the “Board”) and (iii) a majority of the

members of the full Board determine that the Executive violated one or more of the provisions of paragraph (a) of this Subsection.

ARTICLE VI
INVESTMENT OF ACCOUNTS

SECTION 6.1 Hypothetical Investment Funds .

(1) Hypothetical Investment Fund for Matching Contributions on or after January 1, 2006 . Matching Contributions made on or after January 1, 2006 shall be deemed to be made in cash and invested in accordance with the Hypothetical Investment Fund election(s) in effect from time to time for Executive Deferrals under Subsection (2) below.

(2) Hypothetical Investment Funds for Executive Deferrals . To the extent permitted by the 409A Guidance, the Hypothetical Investment Funds for purposes of the portion of an Executive’s Account which is attributable to his Executive Deferrals shall be those same Investment Funds designated by the Company under the Savings Plan, provided, however that effective January 1, 2006, the Ecolab Stock Fund will not be a Hypothetical Investment Fund with respect to the investment of Executive Deferrals made on or after January 1, 2006. Each Executive (or his Death Beneficiary) may elect, in a manner prescribed by the Administrator from time to time, one or more Hypothetical Investment Funds in which his Executive Deferrals are deemed to have been invested for purposes of crediting earnings and losses to the portion of the Executive’s Account which is attributable to Executive Deferrals, provided, however, that effective January 1, 2006, no Executive or Death Beneficiary may elect the Ecolab Stock Fund as a Hypothetical Investment Fund with respect to Executive Deferrals. The Company may deem an Executive’s Executive Deferrals to have been invested in the Hypothetical Investment Fund elected by the Executive, if any, or may instead, in its sole discretion, deem such Executive Deferrals to have been invested in one or more Hypothetical Investment Funds selected by the Company. Earnings on any amounts deemed to have been invested in any Hypothetical Investment Fund shall be deemed to have been reinvested in such Hypothetical Investment Fund. Notwithstanding the foregoing, any Executive who is subject to Section 16(b) of the Securities Exchange Act of 1934 may not elect and shall not be deemed to have directed any Executive Deferrals to the Ecolab Stock Fund. An Executive shall be deemed, on the day prior to becoming subject to Section 16(b) or at such other time as he is subject to Section 16(b), to have elected to have Executive Deferrals then deemed to be invested in the Ecolab Stock Fund invested in the Hypothetical Investment Fund that under the Savings Plan is designated as a default investment fund, unless another permitted election is in place.

(3) Expenses of Hypothetical Investment Funds . The Hypothetical Investment Funds shall bear and be charged with actual or hypothetical expenses to the same extent that the corresponding Ecolab Stock Fund and other Investment Funds in the Savings Plan bear and are charged with such expenses, as determined by the Administrator.

ARTICLE VII
MISCELLANEOUS

SECTION 7.1 Effect of Amendment and Termination . Notwithstanding any provision of the Plan (including the Administrative Document) to the contrary, no amendment or

termination of the Plan shall, without the consent of the Executive (or, in the case of his death, his Death Beneficiary), adversely affect the vested Account under the Plan of any Executive or Death Beneficiary as such Account exists on the date of such amendment or termination; provided, however, that this limitation shall not apply to any amendment or termination that is deemed necessary or reasonable (as determined in the sole discretion of the Committee) to comply with the requirements of the 409A Guidance.

SECTION 7.2 Limitation on Payments and Benefits . Notwithstanding any provision of this Plan to the contrary, if any amount or benefit to be paid or provided under this Plan or any other plan or agreement between the Executive and a Controlled Group member would be an “Excess Parachute Payment,” within the meaning of Section 280G of the Code, or any successor provision thereto, but for the application of this sentence, then the payments and benefits to be paid or provided under this Plan shall be reduced to the minimum extent necessary (but in no event to less than zero) so that no portion of any such payment or benefit, as so reduced, constitutes an Excess Parachute Payment; provided, however, that the foregoing reduction shall be made only if and to the extent that such reduction would result in an increase in the aggregate payment and benefits to be provided to the Executive, determined on an after-tax basis (taking into account the excise tax imposed pursuant to Section 4999 of the Code, or any successor provision thereto, any tax imposed by any comparable provision of state law, and any applicable federal, state and local income taxes). If requested by the Executive or the Company, the determination of whether any reduction in such payments or benefits to be provided under this Plan or otherwise is required pursuant to the preceding sentence shall be made by the Company’s independent accountants, at the expense of the Company, and the determination of the Company’s independent accountants shall be final and binding on all persons. The fact that the Executive’s right to payments or benefits may be reduced by reason of the limitations contained in this Section 7.2 shall not of itself limit or otherwise affect any other rights of the Executive pursuant to this Plan. The Executive’s Mirror Savings Benefit will be reduced only to the extent that the reduction in any cash payments due to the Executive, the Executive’s SERP Benefits (if any) and the Executive’s Mirror Pension Plan Benefits is insufficient to reduce or eliminate Excess Parachute Payment as described in this Section. The Executive’s Post-2004 Sub-Account (if any) shall be reduced if required by this section before any Pre-2005 Sub-Account is reduced.

SECTION 7.3 Establishment of a Trust Fund .

(1) In General . The Plan is intended to be an unfunded, non-qualified retirement plan. However, the Company may enter into a trust agreement with a trustee to establish a trust fund (the “Trust Fund”) and to transfer assets thereto (or cause assets to be transferred thereto), subject to the claims of the creditors of the Employers, pursuant to which some or all of the Mirror Savings Plan Benefits shall be paid. Payments from the Trust Fund shall discharge the Employers’ obligation to make payments under the Plan to the extent that Trust Fund assets are used to satisfy such obligations.

(2) Upon a Change in Control .

(a) Within thirty (30) business days of the occurrence of a Change in Control, to the extent it has not already done so, the Company shall be required to establish an irrevocable Trust Fund for the purpose of paying Mirror Savings Plan Benefits. Except as described in the following sentence, all contributions to the Trust Fund shall be irrevocable and the Company shall not have the right to direct

the trustee to return to the Employers, or divert to others, any of the assets of the Trust Fund until after satisfaction of all liabilities to all of the Executives and their Death Beneficiaries under the Plan. Any assets deposited in the Trust Fund shall be subject to the claims of the creditors of the Employers and any excess assets remaining in the Trust Fund after satisfaction of all liabilities shall revert to the Company.

(b) In addition to the requirements described in paragraph (a) above, the Trust Fund which becomes effective on the Change in Control shall be subject to the following additional requirements:

(i) the trustee of the Trust Fund shall be a third party corporate or institutional trustee;

(ii) the Trust Fund shall satisfy the requirements of a grantor trust under the Code; and

(iii) the Trust Fund shall automatically terminate (A) in the event that it is determined by a final decision of the United States Department of Labor (or, if an appeal is taken therefrom, by a court of competent jurisdiction) that by reason of the creation of, and a transfer of assets to, the Trust, the Trust is considered “funded” for purposes of Title I of ERISA or (B) in the event that it is determined by a final decision of the Internal Revenue Service (or, if an appeal is taken therefrom, by a court of competent jurisdiction) that (I) a transfer of assets to the Trust is considered a transfer of property for purposes of Code Section 83 or any successor provision thereto, or (II) pursuant to Code Section 451 or 409A or any successor provision thereto, amounts are includable as compensation in the gross income of a Trust Fund beneficiary in a taxable year that is prior to the taxable year or years in which such amounts would otherwise be actually distributed or made available to such beneficiary by the trustee. Upon such termination of the Trust, all of the assets in the Trust Fund attributable to the accrued Mirror Savings Plan Benefits shall be immediately distributed to the Executives (but only to the extent and in the manner permitted by the 409A Guidance), and the remaining assets, if any, shall revert to the Company.

(c) Within five (5) days following establishment of the Trust Fund, the Company shall transfer (or cause the Employers to transfer) to the trustee of such Trust Fund an amount equal to all 100% of the Account balances of all of the Executives under the Plan.

(d) Following the funding of the Trust Fund pursuant to paragraph (a) above, the Company shall cause to be deposited in the Trust Fund additional Executive Deferrals and Matching Contributions, as such amounts are credited to the Accounts of the Executives pursuant to Section 3.4 hereof.

(e) Notwithstanding the foregoing, an Employer shall not be required to make any contributions to the Trust Fund if the Employer is Insolvent at the time such contribution is required.

(f) The Administrator shall notify the trustee of the amount of Mirror Savings Plan Benefits to be paid to the Executive (or his Death Beneficiary) from the Trust Fund and shall assist the trustee in making distribution thereof in accordance with the terms of the Plan.

(g) Notwithstanding any provision of the Plan or the Administrative Document to the contrary, the provisions of this Section 7.3(2) hereof (i) may not be amended following a Change in Control and (ii) prior to a Change in Control may only be amended (A) with the written consent of each of the Executives or (B) if the effective date of such Amendment is at least two years following the date the Executives were given written notice of the adoption of such amendment; provided, however, that this limitation shall not apply to any amendment that is deemed necessary or reasonable (as determined in the sole discretion of the Committee) to comply with the requirements of the 409A Guidance.

SECTION 7.4 Delay of Payments Subject to Code Section 162(m) . The Company may delay the distribution of any amount otherwise required to be distributed under the Plan if, and to the extent that, the Company reasonably anticipates that the Company’s deduction with respect to such distribution otherwise would be limited or eliminated by application of Section 162(m) of the Code. In such event, (1) if any payment is delayed during any year on account of Code Section 162(m), then all payments that could be delayed on account of Code Section 162(m) during such year must also be delayed; (2) such delayed payments must be paid either (a) in the first year in which the Company reasonably anticipates the payment to be deductible, or (b) the period beginning on the date of the Executive’s Separation From Service and ending on the later of the end of the Executive’s year of separation or the fifteenth (15th) day of the third month after such separation; and (3) if payment is delayed to the date of Separation from Service with respect to an Executive who is a Specified Employee, such payment shall commence after such Executive’s Separation from Service on the date immediately following the six-month anniversary of the Separation from Service, or if earlier, on the date of the Executive’s death.

IN WITNESS WHEREOF , the Company has caused this instrument to be executed by its authorized officers and its corporate seal to be affixed, on the date written below.

Dated: December 21, 2012		ECOLAB INC.

	By:	/s/Daniel J. Schmechel
(Seal)		Daniel J. Schmechel
		Chief Financial Officer

Attest:
/s/James J. Seifert
James J. Seifert
Executive Vice President, General Counsel and Secretary

TABLE OF CONTENTS

			Page

ARTICLE I	PREFACE		1

Section 1.1		Effective Date	1

Section 1.2		Purpose of the Plan	2

Section 1.3		Administrative Document	2

Section 1.4		American Jobs Creation Act (AJCA)	2

Section 1.5		Excess Plan	3

ARTICLE II	DEFINITIONS		3

Section 2.1		“Account”	3

Section 2.2		“Base Salary”	3

Section 2.3		“Bonus”	3

Section 2.4		“Death Beneficiary”	4

Section 2.5		“Disability” or “Disabled”	4

Section 2.6		“Executive”	4

Section 2.7		“Executive Deferrals”	4

Section 2.8		“Hypothetical Investment Fund”	4

Section 2.9		“Insolvent”	4

Section 2.10		“Matching Contributions”	4

Section 2.11		“Minimum Benefit”	5

Section 2.12		“Mirror Savings Benefit”	5

Section 2.13		“Nalco PSSP”	5

Section 2.14		“Plan”	5

Section 2.15		“Savings Plan”	5

Section 2.16		“Separation from Service” or to “Separate from Service”	5

Section 2.17		“Specified Employee”	5

Section 2.18		“Traditional Savings Plan”	5

Section 2.19		“Unforeseeable Emergency”	5

ARTICLE III	MIRROR SAVINGS BENEFIT		6

Section 3.1		Amount of Executive Deferrals	6

Section 3.2		Effect and Duration of Direction Pursuant to Section 3.1	6

Section 3.3		Matching Contributions	7

TABLE OF CONTENTS

(continued)

				Page

Section 3.4			Executives’ Accounts	8

Section 3.5			Statement of Account	9

ARTICLE IV	PAYMENT OF MIRROR SAVINGS BENEFITS			9

Section 4.1			Time of Payment	9

Section 4.2			Form of Payment	10

ARTICLE V	VESTING			13

Section 5.1			Vesting	13

ARTICLE VI		INVESTMENT OF ACCOUNTS		13

Section 6.1			Hypothetical Investment Funds	13

ARTICLE VII	MISCELLANEOUS			14

Section 7.1			Effect of Amendment and Termination	14

Section 7.2			Limitation on Payments and Benefits	14

Section 7.3			Establishment of a Trust Fund	15

Section 7.4			Delay of Payments Subject to Code Section 162(m)	17

Exhibit 10.25(i)

SEVERANCE AGREEMENT

AGREEMENT executed on January 1, 2011, between Nalco Company, (the “Company”) and Stephen M. Taylor (“Executive”).

WHEREAS, Executive is an officer of the Company or one of its affiliates; and

WHEREAS, the Company desires to promote the good performance of Executive by offering this Severance Agreement; and

WHEREAS, the parties desire to enter into this Severance Agreement;

NOW, THEREFORE, in consideration of the premises and mutual covenants herein and for other good and valuable consideration, the parties agree as follows:

1. Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated.

“Agreement” means this Severance Agreement.

“Base Salary” means Executive’s annual base salary immediately prior to the Termination Date.

“Board” means the Board of Directors of the Company.

“Cause” means any of the following:

(a) gross or willful misconduct (which includes insubordination) in the performance of Executive’s duties or intentional failure to comply with a specific, written directive of the CEO, a supervisor or the Board, as reasonably determined by the Board;

(b) commission by Executive of a felony, perpetration of a fraud against the Company, or perpetration of a dishonest act, in the reasonable judgment of the Board;

(c) breach of Executive’s employment agreement as reasonably determined by the Company, which is not cured with five (5) days of notice;

(d) violation of any elements of the Company’s policies and procedures, including, without limitation, the Company’s Code of Ethical Business Conduct or Officers Ethics Code as determined in the reasonable judgment of the Board; or

(e) failure to cooperate in any audit or investigation of the Company’s financial statements or reports and filings with the Securities and Exchange Commission, or the business practices of the Company or its direct or indirect subsidiaries.

“Code” means the Internal Revenue Code of 1986, as amended.

“Company” means Nalco Company and any successor (whether direct or indirect) to all or substantially all of the stock, assets or business of Nalco Company.

“Employment Agreement” means any agreement between Executive and the Company, as may be amended from time to time.

“Executive” shall have the meaning indicated above.

“Good Reason” means the following change in circumstances relating to the Executive’s employment a reduction in either Base Salary or aggregate total compensation by more than 10% - other than as a result of a change in ex-patriate status (a “Good Reason Event”). For purposes of this Agreement, the Executive must notify the Company within ninety (90) days of a claimed Good Reason Event that Executive intends to terminate his or her employment, and the Company shall have thirty (30) days from the time of such notice to cure the claimed Good Reason Event. Executive shall be required to terminate employment within sixty (60) days following expiration of the cure period in order for such termination of employment to be on account of a claimed Good Reason Event.

“Permanent Disability” means inability, to perform the functions of the Executive’s regular responsibilities as defined under the Company’s long-term disability policies.

“Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

“Target Bonus” means, with respect to any fiscal year of the Company, the target annual bonus, assuming achievement of 100% of target(s), under the applicable Company annual cash incentive plan, (currently known as the Amended and Restated Management Incentive Plan) for Executive for such year.

“Term” has the meaning set forth in Section 2 of this Agreement.

“Termination Date” has the meaning set forth in Section 3 of this Agreement.

2. Term of Agreement and Termination of All Other Severance Benefits. This Agreement shall be in effect from January 1, 2011 until December 31, 2012 (the “Initial Term”). After the expiration of the Initial Term, provided no Notice (defined below) has been given, this Agreement shall be automatically extended for a two-year period, (the “Additional Term”). If the Company notifies Executive during the six month period immediately before the expiration of the Initial Term that the Company has determined in its discretion that the benefits offered in this Agreement will no longer be provided (the “Notice”), this Agreement shall expire without further renewal one year after the date of the Notice. Notwithstanding the foregoing, Executive’s employment at all times shall be deemed to be an employment at-will and Executive’s employment may be terminated by Executive or the Company for any reason or no reason. While in force, this Agreement shall represent the only severance benefit for Executive. All other severance agreements for Executive, including without limitation the Severance Agreement

dated November 26, 2008), are hereby terminated, and Executive shall have no claim under any severance policy.

3. Severance Upon Termination Without Cause by the Company or by the Executive for Good Reason. If Executive’s employment with the Company or any affiliates is terminated during the Term by the Company without Cause or by the Executive for Good Reason (the effective date of either such termination hereafter referred to as the “ Termination Date ”), Executive shall be entitled to the following payments and benefits subject to the Executive’s timely execution of a General Release as provided in Section 6 herein:

(a) The Company shall pay Executive, within fifteen business days after the Termination Date in a lump sum payment (i) accrued but unpaid Base Salary through the Termination Date, and (ii) any prior year bonus earned but not paid.

(b) The Company shall pay Executive, six months and one day after the Termination Date, severance equal to one and one half (1 ½ ) times his Base Salary and Target Bonus. Notwithstanding the above, to the extent permitted by Section 409A of the Code, a portion of the payment equal to two times the compensation limit specified in Code Section 401(a)(17) shall be paid within fifteen days of the Termination Date.

(c) In addition, the Executive shall be entitled to a pro-rata portion of the annual management incentive plan amount for the year of termination based on the portion of the year elapsed through the termination and the pro-rata portion shall be calculated based on actual performance over the entire performance period and any such payment shall be made on or before March 15 of the year following termination or, to the extent required by Section 409A of the Code, six months and one day following termination, if later.

(d) Except as otherwise indicated herein, Executive shall receive any other benefits he is otherwise eligible for under other plans or programs of the Company in accordance with their terms. Executive shall have the right to continue medical and/or dental benefits for a period of three months following the Termination Date at the active employee rate.

(e) The Company will provide the Executive with reasonable outplacement services during the twenty-four (24) month period following the Termination Date (for these purposes, reasonable outplacement services would not exceed a cost to the Company of $25,000).

(f) Other than the benefits set forth in this Section 3, the terms of which are expressly incorporated herein by reference, the Company and its affiliates will have no further obligations hereunder with respect to Executive following the Termination Date and Executive shall have no further claim for any other severance benefit.

(g) Executive shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this

Section 3 be reduced by any compensation earned as a result of Executive’s employment with another employer.

For clarity, a termination shall meet the conditions Treas. Reg. Sec 1.409(A)(1)(h), excluding a bona fide leave of absence meeting the requirements in that Treas. Reg. Sec.

4. Other Terminations. Nothing in this Agreement shall be construed to prevent the Company or any of its subsidiaries from terminating Executive’s employment for any reason or no reason. If Executive’s employment is terminated (a) by the Company for Cause, (b) due to Executive’s death or Permanent Disability, or (c) due to Executive’s resignation, the Company shall have no obligation to make any payments or provide any benefits under this Agreement.

5. Covenants and Release. As a condition precedent to payment under this Agreement or payment of severance or grant of any other benefit hereunder, Executive must comply with, and continue to comply with, the Covenants and Terms attached hereto as Exhibit A , and sign and deliver a general release to the Company within one week after the termination of Executive’s employment in the form of General Release , attached hereto as Exhibit B (or such other Release as reasonably requested by the Company), it being understood and agreed that the Executive shall not be entitled to any benefits provided hereunder unless and until he has signed and delivered such General Release to the Company and any revocation period applicable to such General Release expires without revocation by the Executive.

6. Miscellaneous.

(a) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of Illinois without reference to the principles of conflict of laws.

(b) Entire Agreement/Amendments. This Agreement contains the entire understanding of the parties with respect to the subject matter herein. There are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties with respect to the subject matter herein other than those expressly set forth herein. This Agreement may not be altered, modified, or amended except by written instrument signed by the parties hereto.

(c) No Waiver. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of such party’s rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.

(d) Severability. If any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby.

(e) Assignment. This Agreement shall not be assignable by Executive. This Agreement may be assigned by the Company to any successor to all or substantially all of the business and/or assets of the Company provided the

Company shall require such successor to expressly assume and agree to perform this Agreement.

(f) Successors; Binding Agreement. This Agreement shall inure to the benefit of and be binding upon the personal or legal representatives, executors, administrators, successors, including successors to all or substantially all of the stock, business and/or assets of the Company, heirs, distributees, assignees, devisees and legatees of the parties.

(g) Notice. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Executive:

At the address (or to facsimile number) shown on the records of the Company

If to the Company:

Nalco Company

1601 West Diehl Road

Naperville, IL 60563-1198

Attention: Vice President and General Counsel

Fax No.: 630-305-2840

(h) Withholding Taxes. The Company may withhold from any amounts payable under this Agreement such U.S. federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.

(i) Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

(j) Resignations. Executive agrees to immediately resign any positions held by him with the Company and its affiliates upon the termination of Executive’s employment.

(k) Award of Fees Against Executive. If either party files suit to enforce any provision of the Agreement and a court of competent jurisdiction, then the substantially prevailing party shall be entitled to an award of its court costs, litigation expenses and reasonable attorneys fees incurred in prosecuting and maintaining such suit, in addition to any other remedies or relief.

* * * * *

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.

		NALCO COMPANY

		By:	/s/ Laurie Marsh
		Name: Laurie Marsh
		Title: Vice President – Human Resources


		Executive

		/s/ Stephen Taylor
		Stephen Taylor

EXHIBIT A

Covenants of the Executive

1. As a condition for the payments under this Agreement, during the Executive’s employment with the Company hereunder and for a period of two (2) years thereafter, (i) the Executive shall not, within any jurisdiction or marketing area in which the Company (or its subsidiaries and affiliates) is doing business, directly or indirectly, own, manage, operate, control, consult with, profit from, be employed by, or participate in the ownership, management, operation or control of any business of the type and character engaged in or competitive with that conducted by the Company (or its subsidiaries and affiliates); (ii) the Executive shall not, directly or indirectly, employ, solicit for employment or otherwise contract for the services of (or assist any other company, business or person in employing, soliciting for employment or otherwise contracting for the services of) any individual who is an employee of the Company (or its subsidiaries and affiliates) at the time of this Agreement or who shall subsequently become an employee of the Company (or its subsidiaries and affiliates).

2. During the Executive’s employment with the Company hereunder and thereafter, (i) the Executive will not divulge, transmit or otherwise disclose (except as legally compelled by court order, and then only to the extent required, after prompt notice to the Company of any such order), directly or indirectly, other than in the regular and proper course of business of the Company, any confidential knowledge or information with respect to the operations, finances, organization or employees of the Company (or its subsidiaries and affiliates) or with respect to confidential or secret processes, services, techniques, customers or plans with respect to the Company (or its subsidiaries and affiliates); and (ii) the Executive will not use, directly or indirectly, any confidential information for the benefit of anyone other than the Company (or its subsidiaries and affiliates); provided, however, that the Executive has no obligation, express or implied, to refrain from using or disclosing to others any such knowledge or information which is or hereafter shall become available to the public other than through disclosure by the Executive. All new processes, techniques, know-how, inventions, plans, products, patents and devices developed, made or invented by the Executive, alone or with others, while an employee of the Company which are related to the business of the Company (or its subsidiaries and affiliates) shall be and become the sole property of the Company, unless released in writing by the Company, and the Executive hereby assigns any and all rights therein or thereto to the Company.

3. All files, records, correspondence, memoranda, notes or other documents (including, without limitation, those in computer-readable form) or property relating or belonging to the Company (or its affiliates and subsidiaries), whether prepared by the Executive or otherwise coming into his possession in the course of the performance of his services under this Agreement, shall be the exclusive property of Company and shall be delivered to Company and not retained by the Executive (including, without limitations, any copies thereof) upon termination of this Agreement for any reason whatsoever.

(a) The Executive will communicate and disclose in writing to the Company both during the term of his Agreement and thereafter, all inventions, discoveries, improvements,

machines, devices, designs, processes, products, software, treatments, formulae, mixtures and/or compounds whether patentable or not as well as patents and patent applications (all collectively referred to as “Inventions”) made, conceived, developed or acquired by the Executive or under which the Executive acquired the right to grant licenses or become licensed, whether alone or jointly with others, during the term of this Agreement. All of the Executive’s right, title and interest in, to and under such Inventions, including licenses and right to grant licenses shall be the sole property of the Company and the same are hereby assigned to the Company. Any Invention disclosed by the Executive to have been made and conceived and developed after the termination of this Agreement.

(b) For all of the Executive’s Inventions, the Executive will, upon request of the Company, during the term of this Agreement and thereafter:

(i) execute and deliver all documents which the Company shall deem necessary or appropriate to assign, transfer and convey to the Company, all of the Executive’s right, title, interest in and to such Inventions, and enable the Company to file and prosecute applications for Letters Patent of the United States and any foreign countries on Inventions as to which the Company wishes to file patent applications; and

(ii) do all other things (including the giving of evidence in suits and other proceedings) which the Company shall deem necessary or appropriate to obtain, maintain, and assert patents for any and all such Inventions and to assert its rights in any Inventions not patented.

(c) The Executive’s obligation under paragraphs (a) and (b) above do not apply to Inventions for which no equipment, supplies, facility or confidential information of the Company was used, and which were developed entirely on the Executive’s own time unless:

(i) the Inventions relate

(A) to the business of the Company; or,

(B) to the Company’s actual or demonstrably anticipated research or development; or,

(d) The Executive herby assigns to the Company the copyright in all works prepared by the Executive which are either:

(i) within the scope of the Executive’s employment; or,

(ii) based upon information acquired from the Company not normally made available to the public; or,

(iii) commissioned by the Company but not within the Executive’s scope of employment.

The Executive agrees to submit all such works to the Board for approval prior to publication or oral dissemination. The Executive also agrees to do all things (including the giving of evidence in suits and other proceedings) which the Company shall deem necessary or appropriate to obtain, maintain, and enable the Company to protect its rights and to such works.

(e) The Executive hereby releases and allows the Company to use, for any lawful purpose, any voice reproduction, photograph, or other video likeness of the Executive made in the scope of the Executive’s employment.

(f) All expenses incident to any action required by the Company to assign Inventions or copyrights to the Company or so taken in its behalf pursuant to the terms of this Agreement shall be borne by the Company, including a reasonable payment for the Executives time and expenses involved if not then in the Company’s employ, which payment for such time at the rate being paid to the Executive by the Company at the time termination of employment.

5. The Executive acknowledges that a breach of his covenants contained herein may cause irreparable damage to the Company (or its subsidiaries and affiliates), the exact amount of which will be difficult to ascertain, that the remedies at law for any such breach will be inadequate and that the payments and other benefits, in the Agreement, are additional consideration for the covenants contained in herein. Accordingly, the Executive agrees that if he breaches any of the covenants contained herein, in addition to any other remedy which may be available at law or in equity, the Company shall be entitled to specific performance and injunctive relief. In addition, the breach of any of the covenants contained herein shall entitle the Company to permanently withhold, and, if applicable, to recover from the Executive any payments, benefits, or other than entitlements, of any type owed or paid by the Company to Executive under the Employment Letter Agreement or this Agreement, any other agreement or plan. The Company and the Executive further acknowledge that the time, scope, geographic area and other provisions herein have been specifically negotiated by sophisticated commercial parties and agree that all such provisions are reasonable under the circumstances of the activities contemplated by this Agreement. In the event that the covenants herein shall be determined by any court of competent jurisdiction to be unenforceable by reason of their extending for too great a period of time or over too great a geographical area or by reason of their being too extensive in any other respect, they shall be interpreted to extend only over the maximum period of time for which they may be enforceable and/or over the maximum geographical area as to which they may be enforceable and/or to the maximum extent in all other respects as to which they may be enforceable, all as determined by such court in such action.

6. The Executive agrees to cooperate with the Company during his employment hereunder and thereafter (including following the Executive’s termination of employment for any reason), by making himself reasonably available to testify on behalf of the Company in any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, and to assist the Company, in any such action, suit, or proceeding, by providing information and meeting and consulting with the Company’s Board of Directors or its representatives or counsel, or representatives or counsel to the Company, as reasonably requested; provided however that the

same does not materially interfere with his then current professional activities or important personal activities. The Company agrees to reimburse the Executive, on an after-tax basis, for all expenses, including pre-approved legal expense, actually incurred in connection with his provision of testimony or assistance.

7. The Executive agrees that, during his employment and thereafter (including following the Executive’s termination of employment for any reason) he will not make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may, directly or indirectly, disparage the Company, its subsidiaries or its respective officers, directors, employees, advisors, business or reputations. Notwithstanding the foregoing, nothing in this Agreement shall preclude the Executive from making truthful statements or disclosures that are required by applicable law, regulation or legal process.

8. The covenants, agreements and restrictions undertaken by or imposed on Executive in this Agreement, which are stated to exist or continue after termination of his employment with the Company shall exist and continue irrespective of the method or circumstances of such termination.

9. Executive agrees that, (except for benefits in which Executive has become vested under the terms of a benefit plan or as required by law) the Company, in its sole discretion may modify or eliminate any or all employment benefits plans which now or hereafter may exist.

EXHIBIT B

General Release

I, , do hereby release and forever discharge as of the date hereof (i) Nalco Holding Company, a Delaware corporation (the “ Company ”) and all of its affiliates and (ii) all present and former directors, officers, agents, representatives, employees, successors and assigns of the Company and its affiliates (collectively, the “ Released Parties ”) to the extent provided below.

1. I understand that my Severance Agreement with the Company (the “Agreement”) includes consideration for signing this General Release and such consideration is not salary, wages or benefits to which I was already entitled. I also acknowledge and represent that I have received all payments and benefits that I am entitled to receive (as of the date hereof) by virtue of any employment by the Company.

2. Except as provided in paragraphs 4 and 11 below, I knowingly and voluntarily (for myself, my heirs, executors, administrators and assigns) release and forever discharge the Company and the other Released Parties from any and all claims, suits, controversies, actions, causes of action, cross-claims, counter-claims, demands, debts, compensatory damages, liquidated damages, punitive or exemplary damages, other damages, claims for costs and attorneys’ fees, or liabilities of any nature whatsoever in law and in equity, both past and present (through the date this General Release becomes effective and enforceable) and whether known or unknown, suspected, or claimed against the Company or any of the Released Parties which I, my spouse, or any of my heirs, executors, administrators or assigns, may have, which arise out of or are connected with my employment with, compensation by, or my separation or termination from, the Company; Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Age Discrimination in Employment Act of 1967, as amended (including the Older Workers Benefit Protection Act); the Equal Pay Act of 1963, as amended; the Americans with Disabilities Act of 1990; the Family and Medical Leave Act of 1993; the Worker Adjustment Retraining and Notification Act; the Employee Retirement Income Security Act of 1974 (“ERISA”); any applicable Executive Order Programs; the Fair Labor Standards Act; or their state or local counterparts; or under any other federal, state or local civil or human rights law, or under any other local, state, or federal law, regulation or ordinance; or under any public policy, contract or tort, or under common law; or arising under any policies, practices or procedures of the Company; or any claim for wrongful discharge, breach of contract, infliction of emotional distress, defamation; or any claim for costs, fees, or other expenses, including attorneys’ fees incurred in these matters) (all of the foregoing collectively referred to herein as the “ Claims ”).

3. I represent that I have made no assignment or transfer of any right, claim, demand, cause of action, or other matter covered by paragraph 2 above.

4. I agree that this General Release does not waive or release any rights or claims that I may have under the Age Discrimination in Employment Act of 1967 which arise after the date I execute this General Release. I acknowledge and agree that my separation from employment with the Company in compliance with the terms of the Agreement shall not

serve as the basis for any claim or action (including, without limitation, any claim under the Age Discrimination in Employment Act of 1967).

5. I agree that I am waiving all rights to sue or obtain equitable, remedial or punitive relief from any or all Released Parties of any kind whatsoever, including, without limitation, reinstatement, back pay, front pay, attorneys’ fees and any form of injunctive relief. Notwithstanding the above, I further acknowledge that I am not waiving and am not being required to waive any right that cannot be waived under law, including the right to file an administrative charge or participate in an administrative investigation or proceeding; provided, however, that I disclaim and waive any right to share or participate . in any monetary award resulting from the prosecution of such charge or investigation or proceeding.

6. In signing this General Release, I acknowledge and intend that it shall be effective as a bar to each and every one of the Claims hereinabove mentioned or implied. I expressly consent that this General Release shall be given full force and effect according to each and all of its express terms and provisions, including those relating to unknown and unsuspected Claims (notwithstanding any state statute that expressly limits the effectiveness of a general release of unknown, unsuspected and unanticipated Claims), if any, as well as those relating to any other Claims hereinabove mentioned or implied. I acknowledge and agree that this waiver is an essential and material term of this General Release and that without such waiver the Company would not have agreed to the terms of the Agreement. I further agree that in the event I should bring a Claim seeking damages against the Company, or in the event I should seek to recover against the Company in any Claim brought by a governmental agency on my behalf, this General Release shall serve as a complete defense to such Claims to the maximum extent permitted by law. I further agree that I am not aware of any pending claim of the type described in paragraph 2 as of the execution of this General Release.

7. I agree that neither this General Release, nor the furnishing of the consideration for this General Release, shall be deemed or construed at any time to be an admission by the Company, any Released Party or myself of any improper or unlawful conduct.

8. I agree that I will forfeit all amounts payable by the Company pursuant to the Agreement if I challenge the validity of this General Release. I also agree that if I violate this General Release by suing the Company or the other Released Parties, I will pay all costs and expenses of defending against the suit incurred by the Released Parties, including reasonable attorneys’ fees, and return all payments received by me pursuant to the Agreement.

9. I agree to reasonably cooperate with the Company in any internal investigation, any administrative, regulatory, or judicial proceeding or any dispute with a third party. I understand and agree that my cooperation may include, but not be limited to, making myself available to the Company upon reasonable notice for interviews and factual investigations; appearing at the Company’s request to give testimony without requiring service of a subpoena or other legal process; volunteering to the Company pertinent information; and turning over to the Company all relevant documents which are or may

come into my possession all at times and on schedules that are reasonably consistent with my other permitted activities and commitments. I understand that in the event the Company asks for my cooperation in accordance with this provision, the Company will reimburse me solely for reasonable travel expenses, (including lodging and meals), upon my submission of receipts.

10. I agree not to disparage the Company, its past and present investors, officers, directors or employees or its affiliates and to keep all confidential and proprietary information about the past or present business affairs of the Company and its affiliates confidential unless a prior written release from the Company is obtained. I further agree that as of the date hereof, I have returned to the Company any and all property, tangible or intangible, relating to its business, which I possessed or had control over at any time (including, but not limited to, company-provided credit cards, building or office access cards, keys, computer equipment, manuals, files, documents, records, software, customer data base and other data) and that I shall not retain any copies, compilations, extracts, excerpts, summaries or other notes of any such manuals, files, documents, records, software, customer data base or other data.

11. Notwithstanding anything in this General Release to the contrary, this General Release shall not relinquish, diminish, or in any way affect any rights or claims arising out of any breach by the Company or by any Released Party of the Agreement after the date hereof and nothing herein shall release the Company from its obligations under the Agreement or impair the Executive’s right to enforce the Agreement. Additionally, nothing contained herein shall in any way diminish or affect any right or claim for the payment of any vested pension benefits to which Executive may be entitled, if any, under the express provisions of the Company pension plan(s), subject to ERISA’s vesting requirements.

12. Whenever possible, each provision of this General Release shall be interpreted in, such manner as to be effective and valid under applicable law, but if any provision of this General Release is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this General Release shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

BY SIGNING THIS GENERAL RELEASE, I REPRESENT AND AGREE THAT:

A. I HAVE READ IT CAREFULLY;

B. I UNDERSTAND ALL OF ITS TERMS AND KNOW THAT I AM GIVING UP IMPORTANT RIGHTS, INCLUDING BUT NOT LIMITED TO, RIGHTS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, AS AMENDED; THE EQUAL PAY ACT OF 1963, THE AMERICANS WITH DISABILITIES ACT OF 1990; AND THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED;

C. I VOLUNTARILY CONSENT TO EVERYTHING IN IT;

D. I HAVE BEEN ADVISED TO CONSULT WITH AN ATTORNEY BEFORE EXECUTING IT AND I HAVE DONE SO OR, AFTER CAREFUL READING AND CONSIDERATION I HAVE CHOSEN NOT TO DO SO OF MY OWN VOLITION;

E. I HAVE HAD AT LEAST 21 DAYS FROM THE DATE OF MY RECEIPT OF THIS RELEASE SUBSTANTIALLY IN ITS FINAL FORM ON, TO CONSIDER IT;

F. I UNDERSTAND THAT I HAVE SEVEN DAYS AFTER THE EXECUTION OF THIS RELEASE TO REVOKE IT AND THAT THIS RELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE REVOCATION PERIOD HAS EXPIRED;

G. I HAVE SIGNED THIS GENERAL RELEASE KNOWINGLY AND VOLUNTARILY AND WITH THE ADVICE OF ANY COUNSEL RETAINED TO ADVISE ME WITH RESPECT TO IT; AND

H. I AGREE THAT THE PROVISIONS OF THIS GENERAL RELEASE MAY NOT BE AMENDED, WAIVED, CHANGED OR MODIFIED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE COMPANY AND BY ME.

DATE:

Exhibit 10.25(ii)



	Nalco Company
May 2, 2011	1601 West Diehl Road
	Naperville, IL 60563-1198
	www.nalco.com

Mr. Steve Taylor

Dear Steve:

We have made an administrative modification to your January 1, 2011 Severance Agreement that will expand the length of time you will be eligible for benefits coverage. Your current agreement states that you will receive three months of medical and dental benefits continuation. However, as an officer of the Company, your eligibility has been extended to eighteen months of benefits continuation. The modified statement, which overrides section (d) on page 3 of your January 1, 2011 Severance Agreement, is shown below:

(d) Except as otherwise indicated herein, Executive shall receive any other benefits he is otherwise eligible for under other plans or programs of the Company in accordance with their terms. Executive shall have the right to continue medical and/or dental benefits for a period of eighteen months following the Termination Date at the active employee rate.

Please retain this information for future reference. A copy will also be placed in your Human Resources file. Please let me know if you have questions or would like additional information.

Sincerely,

/s/ Laurie Marsh		/s/ Stephen Landsman
Laurie Marsh		Stephen Landsman
Vice President, Human Resources		Vice President, General Counsel and Corporate Secretary

Exhibit 10.25(iii)

CHANGE OF CONTROL AGREEMENT

AGREEMENT executed on January 1, 2011 between Nalco Holding Company, (the “Company”) and Stephen M. Taylor (“Executive”).

WHEREAS, Executive is an officer of the Company or one of its affiliates under an at-will employment agreement; and

WHEREAS, the Company desires to promote the good performance of the Executive and provide some protection to the Executive in the event of a Change of Control; and

WHEREAS, the parties desire to enter into this Control Agreement;

NOW, THEREFORE, in consideration of the premises and mutual covenants herein and for other good and valuable consideration, the parties agree as follows:

1 . Definitions . For purposes of this Agreement, the following terms shall have the meanings indicated.

“Agreement” means this Change of Control Agreement.

“Beneficial Owner” or “Beneficial Ownership” shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended from time to time.

“Board” means the Board of Directors of the Company.

“Cause” means any of the following:

(b) commission by Executive of a felony, perpetration of a fraud against the Company, or perpetration of a dishonest act, in the reasonable judgment of the Board;

(c) breach of Executive’s employment agreement as reasonably determined by the Company, which is not cured with five (5) days of notice;

“Change of Control” shall mean the occurrence of any of the following:

(a) a sale of assets representing fifty percent (50%) or more of the net book value or the fair market value of the Company’s consolidated assets (in a single transaction or in a series of related transactions);

(b) a merger or consolidation involving the Company or the primary operating subsidiary of the Company after the completion of which: (i) in the case of a merger (other than a triangular merger) or a consolidation involving the Company, the shareholders of the Company immediately prior to the completion of such merger or consolidation beneficially own (within the meaning of Rule 13d-3) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or comparable successor rules), directly or indirectly, outstanding voting securities representing less than sixty percent (60%) of the combined voting power of the surviving entity in such merger or consolidation, and (ii) in the case of a triangular merger involving the Company or a subsidiary of the Company, the shareholders of the Company immediately prior to the completion of such merger beneficially own (within the meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable successor rules), directly or indirectly, outstanding voting securities representing less than sixty percent (60%) of the combined voting power of the surviving entity in such merger and less than sixty percent (60%) of the combined voting power of the parent of the surviving entity in such merger;

(c) an acquisition by any person, entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act or any comparable successor provisions), other than any employee benefit plan, or related trust, sponsored or maintained by the Company or an affiliate of the Company and other than in a merger or consolidation of the type referred to in clause “(b)” of this sentence, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable successor rules) of outstanding voting securities of the Company representing more than thirty percent (30%) of the combined voting power of the Company (in a single transaction or series of related transactions);

(d) in the event that the individuals who, at any date during this Agreement, are members of the Company’s Board of Directors (the “Incumbent Board”), cease for any reason to constitute at least fifty percent (50%) of the Company’s Board of Directors within a one year period from such date. (If the election, or nomination for election by the Company’s shareholders, of any new member of the Board of Directors is approved by a vote of at least fifty percent (50%) of the Incumbent Board, such new member of the Board of Directors shall be considered as a member of the Incumbent Board.); or

(e) any other transaction or series of transactions that would have substantially the same effect as the change of control events described in (a) through (d) above.

“Code” means the Internal Revenue Code of 1986, as amended.

“Company” means Nalco Holding Company and any successor (whether direct or indirect) to all or substantially all of the stock, assets or business of Nalco Company.

“Employment Agreement” means any agreement between Executive and the Company, as may be amended from time to time.

“Executive” shall have the meaning indicated above.

“Permanent Disability” means inability, to perform the functions of the Executive’s regular responsibilities as defined under the Company’s long-term disability policies.

“Term” has the meaning set forth in Section 2 of this Agreement.

“Termination Date” has the meaning set forth in Section 3 of this Agreement.

2. Term of Agreement . This Agreement shall be in effect from January 1, 2011 until December 31, 2012 (the “Initial Term”). After the expiration of the Initial Term, provided no Notice (defined below) has been given, this Agreement shall be automatically extended for a two-year period, (the “Additional Term”). If the Company notifies Executive during the six month period immediately before the expiration of the Initial Term that the Company has determined in its discretion that the benefits offered in this Agreement will no longer be provided (the “Notice”), this Agreement shall expire without further renewal one year after the date of the Notice. Notwithstanding the foregoing, Executive’s employment at all times shall be deemed to be an employment at-will and Executive’s employment may be terminated by Executive or the Company for any reason or no reason. While in force, this Agreement shall represent the only change of control benefit for Executive. All other change of control agreements for Executive, including without limitation the Change of Control Agreement dated November 26, 2008, are hereby terminated, and Executive shall have no claim under any severance policy.

3. Acceleration of Vesting Upon a Change of Control . In the event of a Change of Control, Executive shall be entitled to the following benefit:

(a) Any unvested stock options in Nalco Holding Company Stock or any unvested restricted shares (which do not contain any performance conditions or restrictions)

in Nalco Holding Company Stock under the Amended and Restated 2004 Stock Incentive Plan shall have their vesting accelerated in full so as to become one hundred percent (100%) vested and immediately exercisable as of the time immediately before the Change of Control.

(b) Any unvested restricted shares in Nalco Holding Company Stock under the Amended and Restated 2004 Stock Incentive Plan which contain performance restrictions or conditions (“Performance Shares”) shall have their vesting accelerated on a Pro-Rated basis if, in addition to the Change of Control, (i) Executive’s employment with Nalco Company (and all of its affiliates) is terminated during the Period by the employer and such termination is not a result Cause or (ii) Executive terminates his or her employment with Nalco Company (and all of its affiliates) during the Period and such termination is for Good Reason. For purposes of this subsection, Period means the Period beginning 90 days before the triggering Change of Control Event and ending 2 years after the triggering Change of Control Event. And “Pro-Rated” shall mean the period of time during between the grant of the subject Performance Shares and the day of the Change of Control Event and the total vesting period for the subject Performance Shares.

4. Other Terminations . Nothing in this Agreement shall be construed to prevent the Company or any of its subsidiaries from terminating Executive’s employment for any reason or no reason.

5. Miscellaneous .

(a) Governing Law . This Agreement shall be governed by and construed in accordance with the laws of Illinois without reference to the principles of conflict of laws.

(b) Entire Agreement/Amendments . This Agreement contains the entire understanding of the parties with respect to the subject matter herein. There are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties with respect to the subject matter herein other than those expressly set forth herein. This Agreement may not be altered, modified, or amended except by written instrument signed by the parties hereto.

(c) No Waiver . The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of such party’s rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.

(d) Severability . If any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby.

(e) Assignment . This Agreement shall not be assignable by Executive. This Agreement may be assigned by the Company to any successor to all or substantially all of the business and/or assets of the Company provided the Company shall require such successor to expressly assume and agree to perform this Agreement.

(f) Successors; Binding Agreement . This Agreement shall inure to the benefit of and be binding upon the personal or legal representatives, executors, administrators, successors, including successors to all or substantially all of the stock, business and/or assets of the Company, heirs, distributees, assignees, devisees and legatees of the parties.

(g) Notice . For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Executive:

At the address (or to facsimile number) shown on the records of the Company

If to the Company:

Nalco Company

1601 West Diehl Road

Naperville, IL 60563-1198

Attention: Vice President and General Counsel

Fax No.: 630-305-2840

(h) Withholding Taxes . The Company may withhold from any amounts payable under this Agreement such U.S. federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.

(i) Counterparts . This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

(j) Resignations . Executive agrees to immediately resign any positions held by him with the Company and its affiliates upon the termination of Executive’s employment.

(k) Award of Fees Against Executive . If either party files suit to enforce any provision of the Agreement and a court of competent jurisdiction, then the substantially prevailing party shall be entitled to an award of its court costs, litigation expenses and reasonable attorneys fees incurred in prosecuting and maintaining such suit, in addition to any other remedies or relief.

* * * * *

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.

		NALCO COMPANY

		By:	/s/ Laurie Marsh
		Name: Laurie Marsh
		Title: Vice President – Human Resources


		Executive


		/s/ Stephen Taylor
		Stephen Taylor

Exhibit 10.25(iv)

		Michael L. Meyer
		EXECUTIVE VICE PRESIDENT
		HUMAN RESOURCES

	651 293 2344	370 WABASHA STREET NORTH
	651 225 3111	ST. PAUL, MN 55102-1390
		mike.meyer@ecolab.com

July 16, 2012

Mr. Stephen Taylor

c/o Nalco Gulf LTD

PO Box 17063

Jebel Ali

United Arab Emirates

Dear Mr. Taylor:

On January 1, 2011, you entered into a Change of Control and Severance Agreement with Nalco Company. Pursuant to Section 2 of that Agreement, the Company is providing this notice that the Change of Control and Severance Agreement will terminate on July 31, 2013. A copy of the original agreement is attached for your reference.

Effective August 1, 2013, you will be eligible for severance and change of control benefits in accordance with the Ecolab Change of Control and Severance Plans. A copy of the Plan document as well as a Question and Answers document is also attached for your reference.

If you any questions regarding this change feel free to contact me directly.

Sincerely,

/s/ Mike Meyer
Mike Meyer
Executive Vice President, Human Resources

Attachments

Exhibit 13.1

MANAGEMENT’S DISCUSSION & ANALYSIS

The following management discussion and analysis (“MD&A”) provides information that we believe is useful in understanding our operating results, cash flows and financial condition. The discussion should be read in conjunction with the consolidated financial information and related notes included in this Annual Report and the unaudited pro forma condensed combined statement of income for the twelve months ended December 31, 2011 and corresponding footnotes (the “2011 Merger Pro Formas”) included as a part of Exhibit 99.1 to our Current Report on Form 8-K filed on April 27, 2012. The 2011 Merger Pro Formas are incorporated herein by reference.

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). This discussion contains various “Non-GAAP Financial Measures” and various “Forward-Looking Statements” within the meaning of the Private Securities Litigation Reform Act of 1995. We refer readers to the information on Non-GAAP Financial Measures, Forward-Looking Statements and Risk Factors found on pages 26 and 27.

Comparability of Results

2012 versus 2011

On December 1, 2011, Nalco Holding Company (“Nalco”) merged into a wholly-owned subsidiary of Ecolab Inc. (“Ecolab”, “the company”, “we” or “our”), creating the global leader in water, hygiene and energy technologies and services that provide and protect clean water, safe food, abundant energy and healthy environments.

Our results of operations include Nalco since the close of the merger on December 1, 2011. Because Nalco’s operations had such a significant impact on our operations, a comparison of our reported results for the twelve months ended December 31, 2012 against our reported results for the twelve months ended December 31, 2011 is not entirely meaningful. In order to provide a meaningful comparison of our results of operations, where applicable (generally net sales through operating income), we have supplemented our historical financial data with discussion and analysis that compares reported and adjusted results for the twelve months ended December 31, 2012 against the 2011 Merger Pro Formas.

The 2011 Merger Pro Formas are based on the historical consolidated financial statements and accompanying notes of both Ecolab and Nalco and were prepared to illustrate the effects of our merger with Nalco, assuming the merger had been consummated on January 1, 2010. The 2011 Merger Pro Formas also include the movement of certain legacy Ecolab water treatment related businesses from the U.S. Cleaning & Sanitizing and International Cleaning, Sanitizing & Other Services reportable segments to the Global Water reportable segment, which resulted from changes in how we internally manage and report results within our legacy Ecolab Food & Beverage and Asia Pacific operating units. The movement of the water treatment related business did not significantly impact year-over-year comparability; therefore, prior year reported segment information has not been restated to reflect this change.

The unaudited 2012 adjusted results and 2011 adjusted pro forma results exclude special (gains) and charge items that are unusual in nature and significant in amount. The exclusion of such items help provide a better understanding of underlying business performance.

The unaudited pro forma and adjusted pro forma results are not necessarily indicative of the results of operations that would have actually occurred had the merger been completed as of the date indicated, nor are they indicative of future operating results of the combined company.

Reported data for both 2012 and 2011 and comparison against applicable unaudited pro forma data for 2011 included within this MD&A are shown in the following tables. Reconciliations of reported, pro forma, adjusted and pro forma adjusted amounts are provided on pages 14-18 of this MD&A.

Selected Statement of Income Data

	REPORTED		REPORTED		PRO FORMA
MILLIONS	2012		2011		2011
Net sales	$	11,838.7	$	6,798.5	$	11,283.9
Cost of sales	6,483.5		3,475.6		6,126.4
Selling, general and administrative expenses	3,920.2		2,438.1		3,920.6
Special (gains) and charges	145.7		131.0		(19.8)
Operating income	$	1,289.3	$	753.8	$	1,256.7

Special (Gains) and Charges

	REPORTED		REPORTED		PRO FORMA
MILLIONS	2012		2011		2011
Net sales
Customer agreement modification	$	-	$	29.6	$	29.6
Cost of sales
Restructuring charges	22.7		5.3		5.3
Recognition of Nalco inventory fair value step-up	71.2		3.6		3.6
Subtotal	93.9		8.9		8.9
Special (gains) and charges
Restructuring charges	116.6		69.0		77.9
Champion acquisition costs	18.3		-		-
Nalco merger and integration costs	70.9		57.7		34.0
Gain on sales of businesses, litigation related charges and other	(60.1)		4.3		(131.7)
Subtotal	145.7		131.0		(19.8)
Total special (gains) and charges within operating expense	$	239.6	$	169.5	$	18.7

Reportable Segments

	REPORTED		REPORTED		PRO FORMA
MILLIONS	2012		2011		2011
Net sales
U.S. Cleaning & Sanitizing	$	2,992.9	$	2,930.3	$	2,839.0
U.S. Other Services	474.6		457.1		457.1
International Cleaning, Sanitizing & Other Services	3,175.8		3,075.1		3,027.4
Global Water	2,087.4		67.2		2,014.0
Global Paper	805.4		33.9		811.8
Global Energy	2,268.0		92.3		1,873.4
Corporate	-		(29.6)		(29.6)
Subtotal at fixed currency rates	11,804.1		6,626.3		10,993.1
Effect of foreign currency translation	34.6		172.2		290.8
Consolidated	$	11,838.7	$	6,798.5	$	11,283.9

Operating Income
U.S. Cleaning & Sanitizing	$	651.4	$	556.7	$	568.5
U.S. Other Services	70.8		69.7		69.7
International Cleaning, Sanitizing & Other Services	340.8		285.8		280.3
Global Water	235.9		11.0		196.7
Global Paper	86.3		6.2		75.9
Global Energy	360.1		17.7		264.0
Corporate	(459.9)		(211.6)		(226.6)
Subtotal at fixed currency rates	1,285.4		735.5		1,228.5
Effect of foreign currency translation	3.9		18.3		28.2
Consolidated	$	1,289.3	$	753.8	$	1,256.7

2011 versus 2010

Based on the December 1, 2011 completion of the Nalco merger, one month of legacy Nalco U.S. subsidiary activity was included in the

consolidated Ecolab results during 2011. Consistent with our historical practice, International subsidiaries are included in the financial statements on the basis of their U.S. GAAP November 30 fiscal year-ends.

In order to provide the most meaningful comparisons of 2011 results of operations versus 2010 results of operations, where applicable, comparisons made throughout the MD&A of 2011 results against 2010 results have been presented excluding the 2011 post merger Nalco activity. In addition, the unaudited 2011 and 2010 adjusted results exclude special (gains) and charge items that are unusual in nature and significant in amount. The exclusion of such items help provide a better understanding of underlying business performance.

Reconciliations of reported and adjusted amounts are provided on pages 14-22 of this MD&A.

Fixed Currency Foreign Exchange Rates

We evaluate the performance of our international operations based on fixed currency exchange rates, which eliminate the impact of exchange rate fluctuations on our international operations. Fixed currency amounts for all years presented are updated annually based on translation into U.S. dollars at fixed foreign currency exchange rates established by management at the beginning of 2012.

EXECUTIVE SUMMARY

In 2012, Ecolab significantly outpaced continued mixed conditions in our end markets to deliver strong double-digit adjusted earnings growth. We also made key investments in growth drivers for the future and achieved another year of outstanding shareholder returns.

We realized strong fixed currency organic growth as our teams emphasized our innovative product and service strengths to help customers obtain better results and lower costs, and through these, we drove new account gains across our customer segments. We continued to implement appropriate price increases to help offset higher delivered product costs and investments in our business. We also used new products, cost efficiencies and merger synergies to leverage margins and deliver the strong earnings gain.

Global hospitality markets continued to show improving trends and food and beverage and healthcare were generally steady, while foodservice markets in the U.S. and Europe remained soft. Regionally, Latin America continued to show very good growth, the U.S. and Asia Pacific showed steady trends and Europe softened. Global industrial end markets showed improving trends, light end markets were mixed and mining slowed throughout the year. Regionally, all water markets showed steady trends in the Americas and Asia Pacific and general softness in Europe, Middle East and Africa (“EMEA”); paper end markets remained soft, especially in the U.S. and Asia Pacific. Energy upstream end markets were strong in the Americas, the Middle East and Africa (“MEA”) and North Sea and downstream end markets were steady globally. Within this backdrop, we continued to focus on driving our sales, working to expand our shares in all markets and regions; investing in new product development that provide outstanding results and enable customers to save labor, water and energy; making smart investments to sustain our growth in the future; strengthening our safety culture; and employing strategic acquisitions to bolster the current business and to develop new areas of growth.

We also made important investments for the future, including announcing the creation of a new organization model to support global growth, developing common employee benefits and other key policies and mapping a global shared services organization model. We announced our intent to make a major investment in the energy market, with the pending acquisition of Champion Technologies and its related company Corsicana Technologies (collectively “Champion”). Champion is a Houston, Texas-based global energy specialty products and services company with approximately 3,300 employees in more than 30 countries delivering product and service-based offerings to the oil and gas industry. Champion’s sales for the business to be acquired were approximately $1.4 billion in 2012. The Champion acquisition remains subject to various closing conditions.

Through these focused actions, we once again delivered outstanding results for our shareholders in 2012 while building opportunity for the future. Our performance underscored the strength and long term potential of our business, our people and our strategies.

Sales: Reported 2012 sales of $11.8 billion increased 74% compared to reported 2011 sales of $6.8 billion and 5% compared to 2011 pro forma sales of $11.3 billion. Sales were negatively impacted by foreign currency exchange compared to the prior year, as 2012 fixed currency sales increased 7% when compared to 2011 adjusted pro forma fixed currency sales. See the section entitled Non-GAAP Financial Measures on page 26 for further information on our Non-GAAP measures, the Net Sales table on page 14, and the Sales by Reportable Segment tables on page 19.

Gross Margin: Our reported gross margin was 45.2% of sales for 2012, which compared against a 2011 reported gross margin of 48.9% and a 2011 pro forma gross margin of 45.7%. Excluding the impact of special (gains) and charges included in sales from 2011 and in cost of sales from both 2012 and 2011, our 2012 adjusted gross margin was 46.0% and our 2011 pro forma adjusted gross margin was 45.9%. See the section entitled Non-GAAP Financial Measures on page 26 for further information on our Non-GAAP measures, and the Gross Margin table on page 14.

Operating Income: Reported operating income increased 71% to $1,289 million in 2012 when compared to $754 million in 2011. Reported 2012 operating income increased 3% when compared to 2011 pro forma operating income of $1,257 million. Excluding the impact of special (gains) and charges from 2012 reported operating income and from 2011 pro forma operating income, 2012 adjusted operating income increased 20% when compared against 2011 adjusted pro forma operating income. Foreign currency had a negative impact on operating income growth, as 2012 adjusted fixed currency operating income increased 22% when compared to 2011 adjusted pro forma fixed currency operating income. See the section entitled Non-GAAP Financial Measures on page 26 for further information on our Non-GAAP measures, the Operating Income table on page 17, and Operating Income by Reportable Segment tables on pages 21 and 22.

Earnings Per Share: Reported diluted earnings per share increased 23% to $2.35 in 2012 compared to $1.91 in 2011. Special (gains) and charges had a significant impact on both years, driven by restructuring charges and Nalco integration costs incurred in both 2012 and 2011, Champion acquisition costs, the gain on sale of our Vehicle Care business and litigation related charges in 2012, and the modification of a long-term customer agreement in 2011. Nalco merger related activity also negatively impacted 2011 reported diluted earnings per share. Non-GAAP adjusted earnings per share, which exclude the impact of special (gains) and charges and discrete tax items from both 2012 and 2011 and Nalco merger related activity from 2011, increased 17% to $2.98 in 2012 compared to $2.54 in 2011. See the section entitled Non-GAAP Financial Measures on page 26 for further information on our Non-GAAP measures, and the Diluted Earnings Per Common Share (“EPS”) table on page 18.

Cash Flow: Cash flow from operating activities was $1.2 billion in 2012. We continued to generate strong cash flow from operations, allowing us to fund our ongoing operations, investments in the business, acquisitions and pension obligations and return cash to our shareholders through share repurchases and dividend payments.

Balance Sheet: We remain committed to our stated objective of having an investment grade balance sheet, supported by our current rating of BBB+/Baa1 by the major ratings agencies. We expect to return to “A” ratings metrics by the end of 2015. Our strong balance sheet has allowed us continued access to capital at attractive rates.

Dividends: We increased our quarterly cash dividend 15% in December 2012 to an indicated annual rate of $0.92 per share. The increase represents our 21st consecutive annual dividend rate increase and the 76th consecutive year we have paid cash dividends. We have achieved this outstanding dividend record through our excellent business model and strong financial position, and we believe our recent actions have strengthened our growth prospects, cash flow and ability to deliver superior shareholder returns going forward.

Restructuring Initiatives: In February 2011, we commenced a comprehensive plan to improve substantially the efficiency and effectiveness of our European business, sharpen its competitiveness and accelerate its growth and profitability. Despite the very slow conditions in Europe, we grew our sales and expanded operating margins, benefiting from our work to leverage our scale, improve process efficiency, consolidate facilities, and simplify and enhance our product portfolio. We expect the restructuring activities related to this plan will be substantially completed by the end of 2013.

Following the completion of the Nalco merger, we commenced plans in January 2012 to undertake restructuring actions related to the reduction of our global workforce and optimization of our supply chain and office facilities. We expect that restructuring activities related to the Nalco merger will be substantially completed by the end of 2013.

Nalco Merger Integration: The integration of Ecolab and Nalco continues to be on track. Our teams came together quickly and smoothly, meeting or beating all of our merger goals for the first year. Customer reaction to our combined offering was excellent, allowing us to be more confident than ever in the value we will create through the merger. We were also successful using joint innovation processes to introduce several new products across our legacy platforms.

CRITICAL ACCOUNTING ESTIMATES

Our consolidated financial statements are prepared in accordance with U.S. GAAP. We have adopted various accounting policies to prepare the consolidated financial statements in accordance with U.S. GAAP. Our most significant accounting policies are disclosed in Note 2 of the Notes to the Consolidated Financial Statements.

Preparation of our consolidated financial statements, in conformity with U.S. GAAP, requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Estimates are considered to be critical if they meet both of the following criteria: (1) the estimate requires assumptions to be made about matters that are highly uncertain at the time the accounting estimate is made, and (2) different estimates that the company reasonably could have used for the accounting estimate in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, have a material impact on the presentation of the company’s financial condition or results of operations.

Besides estimates that meet the “critical” estimate criteria, we make many other accounting estimates in preparing our financial statements and related disclosures. All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenues or expenses as well as disclosures of contingent assets and liabilities. Estimates are based on experience and other information available prior to the issuance of the financial statements. Materially different results can occur as circumstances change and additional information becomes known, even from estimates not deemed critical. Our critical accounting estimates include the following:

Revenue Recognition

We recognize revenue on product sales at the time evidence of an arrangement exists, title to the product and risk of loss transfers to the customer, the price is fixed and determinable and collection is reasonably assured. We recognize revenue on services as they are performed. While we employ a sales and service team to ensure our customer’s needs are best met in a high quality way, the vast majority of our revenue is generated from product sales. Outside of the service businesses discussed in Note 16, any other services are either incidental to a product sale and not sold separately or are insignificant.

Our sales policies do not provide for general rights of return. Critical estimates used in recognizing revenue include the delay between the time that products are shipped, when they are received by customers, when title transfers and the amount of credit memos issued in subsequent periods. We record estimated reductions to revenue for customer programs and incentive offerings including pricing arrangements, promotions and other volume-based incentives at the time the sale is recorded. We also record estimated reserves for anticipated uncollectible accounts and for product returns and credits at the time of sale. Depending on market conditions, we may increase customer incentive offerings, which could reduce gross profit margins at the time the incentive is offered.

Valuation Allowances and Accrued Liabilities

We estimate sales returns and allowances by analyzing historical returns and credits, and apply these trend rates to calculate estimated reserves for future credits. We estimate the allowance for doubtful accounts by analyzing accounts receivable balances by age and applying historical write-off and collection trend rates. In addition, our estimates also include separately providing for customer balances based on specific circumstances and credit conditions, and when it is deemed probable that the balance is uncollectible. Actual results could differ from these estimates under different assumptions. Our allowance for doubtful accounts balance was $73 million and $49 million, as of December 31, 2012 and 2011, respectively. These amounts include our allowance for sales returns and credits of $13 million and $12 million as of December 31, 2012 and 2011, respectively. Our bad debt expense as a percent of net sales was 0.3%, 0.2% and 0.3% in 2012, 2011 and 2010, respectively. We believe that it is reasonably likely that future results will be consistent with historical trends and experience. However, if the financial condition of our customers were to deteriorate, resulting in an inability to make payments, or if unexpected events, economic downturns, or significant changes in future trends were to occur, additional allowances may be required.

Our business and operations are subject to extensive environmental laws and regulations governing, among other things, air emissions, wastewater discharges, the use and handling of hazardous substances, waste disposal and the investigation and remediation of soil and groundwater contamination. As with other companies

engaged in similar manufacturing activities and providing similar services, some risk of environmental liability is inherent in our operations. Estimates used to record liabilities related to pending litigation and environmental claims are based on our best estimate of probable future costs. We record the amounts that represent the points in the range of estimates that we believe are most probable or the minimum amount when no amount within the range is a better estimate than any other amount. Potential insurance reimbursements generally are not anticipated in our accruals for environmental liabilities or other insured losses. Expected insurance proceeds are recorded as receivables when recovery is probable. While the final resolution of litigation and environmental contingencies could result in amounts different than current accruals, and therefore have an impact on our consolidated financial results in a future reporting period, we believe the ultimate outcome will not have a significant effect on our financial or liquidity position.

Actuarially Determined Liabilities

As part of the merger with Nalco, we assumed sponsorship of the Nalco qualified and non-qualified pension and other postretirement benefit plans.

The measurement of our pension and postretirement benefit obligations are dependent on a variety of assumptions determined by management and used by our actuaries. These assumptions affect the amount and timing of future contributions and expenses.

The assumptions used in developing the required estimates include, among others, discount rate, projected salary and health care cost increases, and expected return on assets. The discount rate assumptions for the U.S. Plans are assessed using a yield curve constructed from a subset of bonds yielding greater than the median return from a population of non-callable, corporate bond issues rated Aa by Moody’s Investor Services or AA by Standard & Poors. The discount rate is calculated by matching the Plans’ projected cash flows to the bond yield curve. Projected salary and health care cost increases are based on our long-term actual experience, the near-term outlook and assumed inflation. The expected return on plan assets reflects asset allocations, investment strategies and views of investment advisors.

The effects of actual results differing from our assumptions, as well as changes in assumptions, are reflected in the unrecognized actuarial loss and amortized over future periods and, therefore, generally affect our recognized expense in future periods. Significant differences in actual experience or significant changes in assumptions may materially affect pension and other post-retirement obligations. The unrecognized actuarial loss on our U.S. qualified and non-qualified pension plans increased from $690 million to $769 million (before tax) as of December 31, 2011 and 2012, respectively, primarily due to a decrease in our discount rate. The assumptions used to estimate our U.S. pension and postretirement obligations vary by plan. In determining our U.S. pension obligations for 2012, our discount rate decreased to 4.14% from a weighted average 4.86% at year-end 2011 and our weighted-average projected salary increase increased from 4.08% as of December 31, 2011 to 4.32% as of December 31, 2012. In determining our U.S. postretirement health care obligation for 2012, our discount rate decreased to 3.95% from a weighted-average 4.80% at year-end 2011. Our weighted-average expected return on U.S. plan assets, which reflects our expected long-term returns on plan assets used for determining 2012 and 2013 U.S. pension expense, was 8.25%. Our weighted-average expected return on plan assets used for determining 2012 and 2013 U.S. postretirement health care expense was 8.25%.

The effect on December 31, 2012 funded status and 2013 expense of a decrease in the discount rate or expected return on assets assumption as of December 31, 2012 is shown below assuming no changes in benefit levels and no amortization of gains or losses for our major plans:

MILLIONS	EFFECT ON U.S. PENSION PLANS
ASSUMPTION	ASSUMPTION CHANGE	INCREASE IN RECORDED OBLIGATION	HIGHER 2013 EXPENSE
Discount rate	-0.25 pts	$60.2	$5.0
Expected return on assets	-0.25 pts	N/A	$3.9

MILLIONS	EFFECT ON U.S. POSTRETIREMENT HEALTH CARE BENEFITS PLANS
ASSUMPTION	ASSUMPTION CHANGE	INCREASE IN RECORDED OBLIGATION	HIGHER 2013 EXPENSE
Discount rate	-0.25 pts	$8.2	$0.6
Expected return on assets	-0.25 pts	N/A	$0.1

Our international pension obligations and underlying plan assets are approximately one third of our global pension plans, with the majority of the amounts held in the U.K. and Eurozone countries. We use similar assumptions to measure our international pension obligations. However, the assumptions used vary by country based on specific local country requirements and information.

See Note 15 for further discussion concerning our accounting policies, estimates, funded status, planned contributions and overall financial positions of our pension and post-retirement plan obligations.

In the U.S. we have high deductible insurance policies for casualty and property losses, subject to per occurrence and liability limitations. Globally, we have high deductible insurance policies for property losses. We are insured for losses in excess of these limitations and have recorded both a liability and an offsetting receivable for amounts in excess of these limitations. We are self-insured for health care claims for eligible participating employees, subject to certain deductibles and limitations. We determine our liabilities for claims on an actuarial basis. A change in these assumptions would cause reported results to differ.

Restructuring

We incur costs for restructuring activities associated with plans to enhance our efficiency and effectiveness and sharpen the competitiveness of our businesses. These restructuring plans include costs associated with significant actions involving employee-related severance charges, contract termination costs and asset write-downs. Employee termination costs are largely based on policies and severance plans, and include personnel reductions and related costs for severance, benefits and outplacement services. These charges are reflected in the quarter in which the actions are probable and the amounts are estimable, which is generally when management approves the associated actions. Contract termination costs include charges to terminate leases prior to the end of their respective terms and other contract termination costs. Asset write-downs include leasehold improvement write-downs and other asset write-downs associated with combining operations.

Restructuring charges have been included as a component of both cost of sales and special (gains) and charges on the Consolidated Statement of Income. Amounts included as a component of cost of sales include supply chain and manufacturing related actions. Restructuring liabilities have been classified as a component of other current liabilities on the Consolidated Balance Sheet. We

expect to incur a total of $330 million in charges for our two active restructuring plans from 2011 to 2013 and at December 31, 2012, we had a restructuring liability of $117 million. For additional information on our current restructuring activities, see Note 3.

Income Taxes

Judgment is required to determine the annual effective income tax rate, deferred tax assets and liabilities and any valuation allowances recorded against net deferred tax assets. Our effective income tax rate is based on annual income, statutory tax rates and tax planning available in the various jurisdictions in which we operate. Our annual effective income tax rate includes the impact of reserve provisions. We recognize the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement with a taxing authority. We adjust these reserves in light of changing facts and circumstances. During interim periods, this annual rate is then applied to our year-to-date operating results. In the event that there is a significant discrete item recognized in our interim operating results, the tax attributable to that item would be separately calculated and recorded in the same period.

Tax regulations require items to be included in our tax returns at different times than the items are reflected in our financial statements. As a result, the effective income tax rate reflected in our financial statements differs from that reported in our tax returns. Some of these differences are permanent, such as expenses that are not deductible on our tax return, and some are temporary differences, such as depreciation expense.

Temporary differences create deferred tax assets and liabilities. Deferred tax assets generally represent items that can be used as a tax deduction or credit in our tax return in future years for which we have already recorded the tax benefit in our income statement. We establish valuation allowances for our deferred tax assets when the amount of expected future taxable income is not likely to support the utilization of the entire deduction or credit. Relevant factors in determining the realizability of deferred tax assets include future taxable income, the expected timing of the reversal of temporary differences, tax planning strategies and the expiration dates of the various tax attributes. Deferred tax liabilities generally represent items for which we have already taken a deduction in our tax return, but have not yet recognized that tax benefit in our financial statements.

U.S. deferred income taxes are not provided on certain unremitted foreign earnings that are considered permanently reinvested. Undistributed earnings of foreign subsidiaries are considered to have been reinvested indefinitely or are available for distribution with foreign tax credits available to offset the amount of applicable income tax and foreign withholding taxes that might be payable on earnings. It is impractical to determine the amount of incremental taxes on an ongoing basis that might arise if all undistributed earnings were distributed.

A number of years may elapse before a particular tax matter, for which we have established a reserve, is audited and finally resolved. The number of tax years with open tax audits varies depending on the tax jurisdiction. The Internal Revenue Service (IRS) has completed its examinations of our federal income tax returns through 2004. The legacy Ecolab U.S. income tax returns for the years 2009 and 2010 are currently under audit. The legacy Nalco U.S. income tax returns for the years 2005 through 2010 are currently under audit. In addition to the U.S. federal examinations, we have limited audit activity in several U.S. state and foreign jurisdictions. The tax positions we take are based on our interpretations of tax laws and regulations in the applicable federal, state and international jurisdictions. We believe that our tax returns properly reflect the tax consequences of our operations, and that our reserves for tax contingencies are appropriate and sufficient for the positions taken. Because of the uncertainty of the final outcome of these examinations, we have reserved for potential reductions of tax benefits (including related interest and penalties) for amounts that do not meet the more-likely-than-not thresholds for recognition and measurement as required by authoritative guidance. The tax reserves are reviewed throughout the year, taking into account new legislation, regulations, case law and audit results. Settlement of any particular issue could result in offsets to other balance sheet accounts, cash payments or receipts and/or adjustments to tax expense. The majority of our tax reserves are presented in the balance sheet within other non-current liabilities. As of December 31, 2012, our gross liability for uncertain tax positions was $93 million. For additional information on income taxes, see Note 11.

Long-Lived, Intangible Assets and Goodwill

We periodically review our long-lived and intangible assets, the total value of which were $6.8 billion as of December 31, 2012, for impairment and assess whether significant events or changes in business circumstances indicate that the carrying value of the assets may not be recoverable. Such circumstances may include, for example, a significant decrease in the market price of an asset, a significant adverse change in the manner in which the asset is being used or in its physical condition or history of operating or cash flow losses associated with the use of the asset. Impairment losses could occur when the carrying amount of an asset exceeds the anticipated future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. The amount of the impairment loss to be recorded, if any, is calculated as the excess of the asset’s carrying value over its estimated fair value.

We also periodically reassess the estimated remaining useful lives of our long-lived assets. Changes to estimated useful lives would impact the amount of depreciation and amortization expense recorded in earnings. We have experienced no significant changes in the carrying value or estimated remaining useful lives of our long-lived assets. As part of the Nalco merger, we added intangible asset trade names with indefinite useful lives. The carrying value of the indefinite life trade names were subject to annual impairment testing during the second quarter of 2012. Based on this testing, no adjustment to the carrying value was necessary.

As of December 31, 2012, we had total goodwill of $5.9 billion. We test our goodwill for impairment on an annual basis during the second quarter. Our reporting units are our operating segments. If circumstances change significantly, we would also test a reporting unit for impairment during interim periods between the annual tests. Goodwill impairment has historically been determined using a two-step process. However, in September 2011, the Financial Accounting Standards Board (“FASB”) amended its guidance on the testing of goodwill impairment to allow an entity the option to first assess qualitative factors to determine whether performing the current two-step process is necessary. Under the new option, the calculation of the reporting unit’s fair value is not required unless as a result of the qualitative assessment, it is more likely than not that the fair value of the reporting unit is less than the unit’s carrying amount. We adopted this guidance effective with our annual goodwill impairment testing during the second quarter of 2012.

In spite of the change in accounting guidance, assessing goodwill for impairment remains judgmental in nature and often involves the use of significant estimates and assumptions. Fair values of reporting units are established using a discounted cash flow method. Where available and as appropriate, comparable market multiples are used to corroborate the results of the discounted cash flow method.

These valuation methodologies use estimates and assumptions, which include projected future cash flows (including timing), discount rates reflecting the risk inherent in future cash flows, perpetual growth rates, and determination of appropriate market comparables.

Our merger with Nalco resulted in the addition of $4.5 billion of goodwill. Subsequent performance of the reporting units holding the additional goodwill relative to projections used in our purchase price allocation could result in impairment if there is either underperformance by the reporting unit or if the carrying value of the reporting unit were to fluctuate due to working capital changes or other reasons that did not proportionately increase fair value.

Based on our testing, there has been no impairment of goodwill during the three years ended December 31, 2012. Additionally, based on the ongoing performance of our operating units, updating the impairment testing during the second half of 2012 was not deemed necessary.

RESULTS OF OPERATIONS

Net Sales

							PERCENT								PERCENT
MILLIONS	2012			2011			CHANGE		2011			2010			CHANGE

Reported GAAP net sales	$	11,838.7		$	6,798.5		74	%	$	6,798.5		$	6,089.7		12	%
Adjustments:
Nalco merger pro forma adjustment	—			4,485.4					—			—
Net sales	11,838.7			11,283.9		*	5		6,798.5			6,089.7			12
Adjustments:
Special (gains) and charges	—			29.6					29.6			—
Nalco merger impact to 2011 reported results	—			—					(193.4		)	—
Non-GAAP adjusted sales	11,838.7			11,313.5		*	5		6,634.7			6,089.7			9
Effect of foreign currency translation	(34.6		)	(290.8		)*			(172.2		)	(20.0		)
Non-GAAP adjusted fixed currency sales	$	11,804.1		$	11,022.7	*	7	%	$	6,462.5		$	6,069.7		6	%

*Amounts represent the pro forma equivalent to the 2012 amounts presented.

The increase in reported sales for 2012 is due primarily to the inclusion of the Nalco business in our results. Reported sales for 2012 increased 5% when compared to both 2011 pro forma sales and 2011 adjusted pro forma sales. Foreign currency negatively impacted sales growth in 2012.

The increase in reported sales for 2011 was also impacted by the Nalco merger. Excluding Nalco merger related activity and special (gains) and charges from 2011 results, adjusted sales increased 9% when compared to 2010 reported sales. Foreign currency positively impacted sales growth in 2011.

The change components of the year-over-year 2012 reported net sales versus 2011 adjusted pro forma sales and the year-over-year 2011 adjusted sales versus 2010 reported sales are as follows:

PERCENT	2012		2011

Volume	5	%	3	%
Price changes	2		1
Acquisitions and divestitures	—		2
Non-GAAP adjusted fixed currency sales increase	7		6
Foreign currency translation	(2	)	2
Non-GAAP adjusted sales increase	5	%	9	%

Note: Amounts in the table above do not necessarily sum due to rounding.

Gross Margin

PERCENT	2012		2011		2011		2010

Reported gross margin	45.2	%	48.9	%	48.9	%	50.5	%
Adjustments:
Nalco merger pro forma adjustment	—		(3.2	)	—		—
Gross margin	45.2	%	45.7	%*	48.9	%	50.5	%
Adjustments:
Special gains and charges	0.8		0.2		0.3		—
Nalco merger impact to reported 2011 results	—		—		0.2		—
Non-GAAP adjusted gross margin	46.0	%	45.9	%*	49.4	%	50.5	%

*Amounts represent the pro forma equivalent to the 2012 amounts presented.

Our gross profit margin (“gross margin”) is defined as the difference between sales less cost of sales, divided by sales. Our reported gross margin was 45.2% and 48.9% for 2012 and 2011, respectively. The inclusion of Nalco’s business mix in 2012 negatively impacted our 2012 reported gross margin when comparing against our reported 2011 gross margin. Our 2012 reported gross margin was also negatively impacted by special (gains) and charges including the recognition of fair value step-up in Nalco inventory of $71.2 million and restructuring charges of $22.7 million. Our 2011 gross margin was negatively impacted by restructuring charges of $5.3 million, recognition of fair value step-up in Nalco inventory of $3.6 million and $29.6 million related to the modification of a customer agreement.

Adjusting 2011 for the pro forma effect of the Nalco merger and excluding the impact of restructuring charges and the recognition of fair

value step-up inventory from 2012 and 2011 results and the impact of the customer agreement modification from our 2011 results, our 2012 adjusted gross margin was 46.0%, which compared against an adjusted pro forma gross margin of 45.9% for 2011. The increase in the 2012 adjusted gross margin as compared to the 2011 adjusted pro forma gross margin was driven by pricing gains, sales volume increases, synergies and cost savings which outpaced increased delivered product costs (including raw materials, freight and fuel) as well as the negative business mix impact of increased Global Energy sales, which on average have a lower gross margin compared to our other businesses.

Our reported gross margin was 48.9% and 50.5% for 2011 and 2010, respectively. As previously discussed, our 2011 gross margin was negatively impacted by restructuring charges, recognition of fair value step-up in Nalco inventory and a customer agreement modification. Additionally, the Nalco merger had a negative impact on our gross margins subsequent to the close of the merger in December of 2011. Our 2010 gross margin was not impacted by special gains and charges or the Nalco merger.

Excluding the impact of restructuring charges, the recognition of fair value step-up in Nalco inventory, the impact of the customer agreement modification and the negative impact of Nalco’s post-merger results, our 2011 adjusted gross margin was 49.4%, which compared against a reported gross margin of 50.5% for 2010. The decrease when comparing the 2011 adjusted gross margin to the reported 2010 gross margin was driven by significantly higher delivered product costs which more than offset sales and pricing gains.

Selling, General and Administrative Expenses

PERCENT	2012		2011		2011		2010

Reported SG&A ratio	33.1	%	35.9	%	35.9	%	37.1	%
Adjustments:
Nalco merger pro forma adjustment	—		(1.2	)	—		—
SG&A ratio	33.1	%	34.7	%*	35.9	%	37.1	%
Adjustments:
Nalco merger impact to reported 2011 results	—		—		(0.2	)	—
Non-GAAP adjusted SG&A ratio	33.1	%	34.7	%*	35.7	%	37.1	%

*Amounts represent the pro forma equivalent to the 2012 amounts presented.

Reported selling, general and administrative (“SG&A”) expenses as a percentage of reported net sales were 33.1% during 2012 compared to the reported equivalent of 35.9% in 2011. The inclusion of Nalco’s business mix in 2012 positively impacted our 2012 reported SG&A expense ratio when comparing against our reported 2011 SG&A expense ratio.

Adjusting 2011 results for the pro forma effect of the Nalco merger, our reported 2012 SG&A expense ratio of 33.1% compared against a 2011 pro forma SG&A expense ratio of 34.7%. The decrease in expense percentage during 2012 was driven by leverage from sales gains, along with cost savings efforts including those associated with restructuring actions, which more than offset investments and other cost increases. We continued to make key business investments that drive innovation and efficiency, through R&D and information technology systems.

Reported SG&A expenses as a percentage of reported net sales decreased to 35.9% in 2011 compared to 37.1% in 2010. As shown in the previous table, the impact on the SG&A expense ratio in 2011 from the Nalco merger was minimal. The decrease in the expense ratio from 2010 to 2011 was driven by leverage from sales gains and acquisitions, along with savings from restructuring in 2011, which more than offset investments in the business and cost increases.

Special (Gains) and Charges

Special (gains) and charges reported on the Consolidated Statement of Income included the following items:

MILLIONS	2012		2011		2010


Net sales
Customer agreement modification	$ —		$	29.6	$	—
Cost of sales
Restructuring charges	22.7		5.3		—
Recognition of Nalco inventory fair value step-up	71.2		3.6		—
Subtotal	93.9		8.9		—
Special (gains) and charges
Restructuring charges	116.6		69.0		—
Champion acquisition costs	18.3		—		—
Nalco merger and integration costs	70.9		57.7		—
Gain on sale of businesses, litigation related charges and other	(60.1	)	4.3		3.3
Venezuela currency devaluation	—		—		4.2
Subtotal	145.7		131.0		7.5
Operating income subtotal	239.6		169.5		7.5
Interest expense, net
Debt extinguishment costs	18.2		—		—
Merger and acquisition debt costs	1.1		1.5		—
Subtotal	19.3		1.5		—
Net income attributable to noncontrolling interest
Recognition of Nalco inventory fair value step-up	(4.5	)	—		—

Total special (gains) and charges	$ 254.4		$	171.0	$	7.5

For segment reporting purposes, special (gains) and charges have been included in our corporate segment, which is consistent with our internal management reporting.

Restructuring Charges

2011 Restructuring Plan

In February 2011, we commenced a comprehensive plan to substantially improve the efficiency and effectiveness of our European business, sharpen its competitiveness and accelerate its growth and profitability. Additionally through this Plan, restructuring has been and will continue to be undertaken outside of Europe (collectively the “2011 Restructuring Plan”). As a result of restructuring activities under the 2011 Restructuring Plan, we recorded restructuring charges of $66.2 million ($46.1 million after tax) or $0.15 per diluted share and $68.1 million ($54.2 million after tax) or $0.22 per diluted share during 2012 and 2011, respectively.

We expect to incur pretax restructuring charges of approximately $150 million ($125 million after tax) under the 2011 Restructuring Plan through the completion of the Plan in 2013. We anticipate that approximately $140 million of the pre-tax charges will represent cash expenditures. The remaining $10 million of the pre-tax charges represent estimated asset disposals or other non-cash expenses. No decisions have been made for any remaining asset disposals and estimates could vary depending on the actual actions taken.

Actions under the 2011 Restructuring Plan are expected to result in approximately $120 million in annualized cost savings when fully realized, with approximately $70 million of cost savings realized through 2012.

Merger Restructuring Plan

In January 2012, following the completion of the Nalco merger, we formally commenced plans to undertake restructuring actions related to the reduction of our global workforce and optimization of our supply chain and office facilities, including planned reduction of plant and distribution center locations (the “Merger Restructuring Plan”). In anticipation of the Plan, a limited number of actions were taken in 2011, and as a result, we recorded restructuring charges of $6.6 million ($4.1 million after tax) or $0.02 per diluted share in 2011. During 2012, as a result of restructuring activities under the Plan, we recorded restructuring charges of $73.2 million ($54.5 million after tax) or $0.18 per diluted share.

We expect that restructuring activities under the Merger Restructuring Plan will be completed by the end of 2013, with total cost through the end of 2013 anticipated to be approximately $180 million ($120 million after tax). We anticipate that approximately $160 million of the pre-tax restructuring charges will represent cash expenditures. The remaining $20 million of the pre-tax charges represent estimated asset disposals or other non-cash expenses. No decisions have been made for any remaining asset disposals and estimates could vary depending on the actual actions taken.

We anticipate savings from the Merger Restructuring Plan, along with synergies achieved in connection with the merger, will be approximately $250 million on an annual basis with the run rate achieved by the end of 2014. The corresponding savings and synergies were approximately $75 million in 2012, with $135 million expected in 2013.

Restructuring charges have been included as a component of both cost of sales and special (gains) and charges on the Consolidated Statement of Income. Further details related to our restructuring charges are included in Note 3.

Non-restructuring special (gains) and charges

Nalco merger and integration costs

As a result of the Nalco merger, during 2012 and 2011, we incurred charges of $155.8 million ($113.7 million after tax), or $0.38 per diluted share and $62.8 million ($45.6 million after tax), or $0.19 per diluted share, respectively. Nalco merger and integration charges have been included as a component of cost of sales, special (gains) and charges, net interest expense and net income (loss) attributable to noncontrolling interest on the Consolidated Statement of Income. Amounts included in cost of sales and net income (loss) attributable to noncontrolling interest include recognition of fair value step-up in Nalco international inventory which is maintained on a FIFO basis. Amounts included in special (gains) and charges include merger and integration charges, closing costs and advisory fees. Amounts included in net interest expense include a loss on the extinguishment of Nalco’s senior notes, which were assumed as part of the merger, and fees to secure short-term credit facilities to initially fund the Nalco merger.

Champion acquisition costs

As a result of the pending acquisition of Champion, during 2012 we incurred charges of $19.4 million ($16.7 million after tax), or $0.06 per diluted share. Champion acquisition charges have been included as a component of special (gains) and charges and net interest expense on the Consolidated Statement of Income. Amounts included in special (gains) and charges include acquisition costs and advisory fees. Amounts included in net interest expense include fees to secure term loans and short-term debt and the interest expense impact of our $500 million public debt issuance in December 2012, all of which were initiated to fund the Champion acquisition.

Other special (gains) and charges

During 2012, we recorded a net gain of $60.1 million ($35.7 million after tax), or $0.12 per diluted share related to the sale of our Vehicle Care division, the receipt of additional payments related to the sale of an investment in a U.S. business, originally sold prior to 2012 and litigation related charges.

In the fourth quarter of 2011, we modified a long-term customer agreement that was assumed as part of a previous acquisition. The impact of the modification was included in net sales on the Consolidated Statement of Income, resulting in a sales reduction of $29.6 million ($18.4 million after tax), or $0.08 per diluted share.

In the first quarter of 2011, we completed the purchase of the assets of the Cleantec business of Campbell Brothers Ltd., Brisbane, Queensland, Australia (“Cleantec”). Special (gains) and charges in 2011 included acquisition integration costs incurred to optimize the Cleantec business structure.

As shown in the pro forma table on page 9, pro forma 2011 special (gains) and charges include the impact of the sale of Nalco’s personal care products business and its marine chemicals business, which resulted in a gain of $136.0 million.

Special (gains) and charges in 2010 include costs to optimize the company’s business structures of $10.9 million, of which $8.5 million were recorded in the fourth quarter. In the third quarter of 2010, we sold an investment in a small U.S. business and recognized a $5.9 million gain on the sale. The investment was not material to our consolidated results of operations or financial position.

Beginning in 2010, Venezuela was designated hyper-inflationary and as such all foreign currency fluctuations are recorded in income. On January 8, 2010 the Venezuelan government devalued its currency (Bolivar Fuerte). We are remeasuring the financial statements of our Venezuelan subsidiary using the official exchange rate of 4.30 Bolivars to U.S. dollar. As a result of the devaluation, we recorded a charge of $4.2 million in the first quarter of 2010 due to the remeasurement of the local balance sheet. We are unable to predict the ongoing currency gains and losses for the remeasurement of the balance sheet.

Further details related to our non-restructuring special (gains) and charges are included in Note 3.

Operating Income

							PERCENT							PERCENT
MILLIONS	2012			2011			CHANGE		2011			2010		CHANGE

Reported GAAP operating income	$	1,289.3		$	753.8		71	%	$	753.8		$	806.8	(7	)%
Adjustments:
Nalco merger pro forma adjustment	—			502.9					—			—
Operating income	1,289.3			1,256.7		*	3		753.8			806.8		(7	)
Adjustments:
Special (gains) and charges	239.6			18.7		*			169.5			7.5
Nalco merger impact to 2011 reported results	—			—					(13.8		)	—
Non-GAAP adjusted operating income	1,528.9			1,275.4		*	20		909.5			814.3		12
Effect of foreign currency translation	(3.9		)	(28.2		)*			(18.3		)	2.5
Non-GAAP adjusted fixed currency operating income	$	1,525.0		$	1,247.2	*	22	%	$	891.2		$	816.8	9	%

*Amounts represent the pro forma equivalent to the 2012 amounts presented.

Reported operating income in 2012 increased 71% compared to reported operating income in 2011. Reported operating income in 2012 increased 3% against 2011 pro forma operating income. Our 2012 reported operating income and 2011 pro forma operating income were both impacted by special (gains) and charges. Excluding the impact of special (gains) and charges from 2012 reported and 2011 pro forma operating income, 2012 adjusted operating income increased 20% when compared against 2011 adjusted pro forma operating income. Foreign currency had a negative impact on operating income growth as shown in the previous table. The 2012 adjusted fixed currency operating income increase of 22% as compared to 2011 adjusted pro forma fixed currency operating income was driven by sales volume and pricing gains, as well as synergies and other cost savings, which more than offset higher delivered product costs and investments in the business.

Reported operating income decreased 7% in 2011 compared to 2010. The operating income decrease was impacted by the year-over-year comparison of special (gains) and charges, offset partially by the impact of including Nalco merger related activity in our consolidated results in December 2011. Excluding the impact of special (gains) and charges and Nalco merger related activity, adjusted operating income increased 12% in 2011. Foreign currency had a positive impact on operating income growth as shown in the previous table. The 2011 adjusted fixed currency operating increase of 9% as compared to 2010 adjusted fixed currency operating income was driven by sales volume gains, pricing and cost savings which more than offset increased delivered product costs and investments in the business.

Interest Expense, Net

							PERCENT CHANGE
MILLIONS	2012		2011		2010		2012		2011
Reported GAAP interest expense, net	$	276.7	$	74.2	$	59.1	273	%	26	%
Less adjustments:
Special (gains) and charges	19.3		1.5		—
Nalco merger impact	—		17.4		—
Non-GAAP adjusted interest expense, net	$	257.4	$	55.3	$	59.1	365	%	(6	)%

Reported net interest expense totaled $276.7 million, $74.2 million and $59.1 million during 2012, 2011 and 2010, respectively.

Special (gains) and charges reported within net interest expense during 2012 included a net loss on the extinguishment of Nalco’s senior notes, which were assumed as part of the merger. Special (gains) and charges within net interest during 2012 also included fees to secure term loans and short-term debt and the interest expense impact of our $500 million public debt issuance in December 2012, all of which were initiated to fund the Champion acquisition. Special (gains) and charges reported within net interest expense during 2011 include short-term credit facility costs incurred to initially finance the Nalco merger. Both reported and adjusted net interest expense increased from 2011 to 2012, due primarily to debt issued to fund the cash portion of the Nalco merger consideration, the repayment of Nalco debt and share repurchases.

The year-over-year comparability of 2011 compared to 2010 was also impacted by inclusion of Nalco’s merger related activity in our consolidated results in 2011, which includes the interest expense impact of our $3.75 billion public debt issuance in December 2011 as well as interest expense on the Nalco senior notes outstanding as of December 31, 2011. Excluding the impact of special (gains) and charges and the Nalco merger impact, 2011 adjusted net interest expense decreased 6% compared to 2010 due primarily to the repayment of our $150 million 6.875% notes in February 2011.

Provision for Income Taxes

The following table provides a summary of our tax rate:

PERCENT	2012		2011		2010
Reported tax rate	30.7	%	31.8	%	29.0	%
Tax rate impact of:
Special gains and charges	(1.5	)	(0.9	)	(0.1	)
Discrete tax items	0.7		(1.0	)	1.0
Nalco merger impact	—		0.0		—
Non-GAAP adjusted effective tax rate	29.9	%	29.9	%	29.9	%

Our reported tax rate for 2012, 2011 and 2010 includes the tax impact of special (gains) and charges and discrete tax items. Depending on the nature of our special gains and charges and discrete tax items, our reported tax rate may not be consistent on a period to period basis, as amounts included in our special gains and charges are derived from tax jurisdictions with rates that vary from our overall non-GAAP adjusted

tax rate. Additionally, our 2011 reported tax rate includes the impact of including Nalco’s U.S. activity in our consolidated results beginning in December 2011.

Our 2012 reported tax rate includes $59.4 million of net tax benefits on special (gains) and charges and $9.2 million of discrete tax net benefit. The corresponding impact of these items to the reported tax rate is shown in the previous table.

Discrete tax benefits in 2012 are based largely on benefits of $11 million related to remeasurement of certain deferred tax assets and liabilities resulting from changing tax jurisdictions, recognizing adjustments from filing the company’s 2011 U.S. federal tax return as well as a release of a valuation allowance related to a capital loss carryforward. Discrete benefits were partially offset by the remeasurement of certain deferred tax assets and liabilities resulting from changes in local country tax rates and state and foreign country audit settlements and adjustments.

Our 2011 reported tax rate includes $45.4 million of net tax benefits on special (gains) and charges, $1.5 million of tax benefits related to U.S. Nalco activity included in our consolidated results beginning in December 2011, and $7.4 million of discrete tax net expense. The corresponding impact of these items to the reported tax rate is shown in the previous table.

Discrete tax items in 2011 include an $8 million charge recorded in the fourth quarter related to the realizability of foreign net operating loss carryforwards, as well as discrete tax net expense related to the remeasurement of our deferred tax assets due to the impact of a change in our blended state tax rate. These items were partially offset by net benefits related to recognizing adjustments from filing our 2010 U.S. federal returns and other International income tax returns and recognizing settlements and adjustments related to our 1999 through 2001 U.S. income tax returns. We also had benefits from prior year state refund claims and benefits from recognizing settlements and adjustments related to our 2007 through 2008 U.S. income tax returns.

Our 2010 reported tax rate included $0.9 million of net tax benefits on special (gains) and charges as well as $8.0 million of discrete tax net benefits. The corresponding impact of these items to the reported tax rate is shown in the previous table.

Discrete tax benefits in 2010 primarily include recognizing favorable settlements related to our 2002 through 2004 IRS appeals case and adjustments related to our prior year tax reserves. The discrete tax net benefit for the year also includes a $6 million tax benefit from the settlement of an international tax audit recorded in the first quarter, offset by a $5 million charge also recorded in the first quarter due to the passage of the U.S. Patient Protection and Affordable Care Act which changes the tax deductibility related to federal subsidies and resulted in a reduction of the value of our deferred tax assets related to the subsidies, as well as a $2 million charge in the second quarter for the impact of international tax costs from optimizing our business structure.

Our adjusted effective tax rate has been consistent at 29.9% across 2012, 2011 and 2010.

Net Income Attributable to Ecolab

									PERCENT CHANGE
MILLIONS	2012			2011		2010			2012		2011
Reported GAAP net income	$	703.6		$	462.5	$	530.3		52	%	(13	)%
Adjustments:
Special (gains) and charges	195.0			125.6		6.6
Discrete tax expense (benefit)	(9.2		)	7.4		(8.0		)
Nalco merger impact	—			2.1		—
Non-GAAP adjusted net income	$	889.4		$	597.6	$	528.9		49	%	13	%

Diluted Earnings Per Common Share (“EPS”)

										PERCENT CHANGE
DOLLARS	2012				2011		2010			2012		2011
Reported GAAP EPS	$		2.35		$	1.91	$	2.23		23	%	(14	)%
Adjustments:
Special (gains) and charges	0.65				0.52		0.03
Discrete tax expense (benefit)	(0.03			)	0.03		(0.03		)
Nalco merger impact	—				0.08		—
Non-GAAP adjusted EPS	$	2.98			$	2.54	$	2.23		17	%	14	%

Note: Per share amounts do not necessarily sum due to rounding.

Reported net income attributable to Ecolab totaled $704 million, $463 million and $530 million during 2012, 2011 and 2010, respectively, which resulted in reported earnings per share of $2.35, $1.91 and $2.23 for the corresponding periods.

Amounts for 2012, 2011 and 2010 include special (gains) and charges and discrete tax items. Additionally, 2011 amounts include Nalco merger related activity in our consolidated results beginning in December 2011, as well as shares issued as consideration for the equity portion of the Nalco merger.

Excluding special (gains) and charges and the impact of discrete items from 2012, 2011 and 2010, and the impact of the Nalco merger from 2011, adjusted net income and adjusted earnings per share increased 49% and 17%, respectively, when comparing 2012 to 2011 and increased 13% and 14%, respectively, when comparing 2011 to 2010.

Currency translation had an unfavorable impact of approximately $0.06 per share on diluted earnings per share for 2012 compared to 2011. Currency translation had a favorable impact of approximately $0.06 per share on diluted earnings per share for 2011 compared to 2010.

Segment Performance

Effective with the Nalco merger, we added Nalco’s three legacy operating units (Water Services, Paper Services and Energy Services) as additional reportable segments to the merged company’s reporting structure.

Beginning in the first quarter of 2012, the Water Services, Paper Services and Energy Services reportable segments were renamed as the Global Water, Global Paper and Global Energy reportable segments, respectively. With the exception of the water treatment related business change discussed in the following paragraphs, the underlying structure of the Global Water, Global Paper and Global Energy segments remains the same as 2011.

Beginning in the first quarter of 2012, the International reportable segment was renamed as the International Cleaning, Sanitizing & Other Services reportable segment. With the exception of the water treatment related business change discussed below, the underlying structure of the International Cleaning, Sanitizing & Other Services segment remains the same as 2011.

Beginning in the first quarter of 2012, due to changes in how we internally manage and report results within our legacy Ecolab Food & Beverage and Asia Pacific operating units, certain water treatment related businesses were moved from the U.S. Cleaning & Sanitizing and International Cleaning, Sanitizing & Other Services reportable segments to the Global Water reportable segment. The movement of these businesses did not significantly impact year-over-year comparability; therefore, prior year reported segment information has not been restated to reflect this change.

Our fourteen operating units are aggregated into six reportable segments: U.S. Cleaning & Sanitizing, U.S. Other Services, International Cleaning, Sanitizing & Other Services, Global Water, Global Paper and Global Energy.

We evaluate the performance of our international operations within our International Cleaning, Sanitizing & Other Services, Global Water, Global Paper and Global Energy reportable segments based on fixed currency exchange rates used by management for 2012. The difference between the fixed currency exchange rates and the actual currency exchange rates is reported as “effect of foreign currency translation” in the following tables. All other accounting policies of the reportable segments are consistent with accounting principles generally accepted in the United States of America and the accounting policies of the company described in Note 2. Additional information about our reportable segments is included in Note 16.

Sales by Reportable Segment

Reported sales for 2012, 2011 and 2010 for each of our reportable segments were as follows:

								PERCENT CHANGE
MILLIONS	2012		2011			2010		2012		2011
U.S. Cleaning & Sanitizing	$	2,992.9	$	2,930.3		$	2,721.9	2	%	8	%
U.S. Other Services	474.6		457.1			448.5		4		2
Int’l Cleaning, Sanitizing & Other Services	3,175.8		3,075.1			2,899.4		3		6
Global Water	2,087.4		67.2			—
Global Paper	805.4		33.9			—
Global Energy	2,268.0		92.3			—
Corporate	—		(29.6		)	—
Subtotal at fixed currency	11,804.1		6,626.3			6,069.8		78		9

Effect of foreign currency translation	34.6		172.2			19.9
Consolidated	$	11,838.7	$	6,798.5		$	6,089.7	74	%	12	%

Reported sales for 2012 and pro forma sales, including Nalco’s results and reclassification of certain water treatment related businesses, for 2011 for each of our reportable segments were as follows:

						PERCENT
MILLIONS	2012		2011			CHANGE
U.S. Cleaning & Sanitizing	$	2,992.9	$	2,839.0	*	5	%
U.S. Other Services	474.6		457.1			4
Int’l Cleaning, Sanitizing & Other Services	3,175.8		3,027.4		*	5
Global Water	2,087.4		2,014.0		*	4
Global Paper	805.4		811.8		*	(1	)
Global Energy	2,268.0		1,873.4		*	21
Corporate	—		(29.6		)
Subtotal at fixed currency	11,804.1		10,993.1		*	7

Effect of foreign currency translation	34.6		290.8		*
Consolidated	$	11,838.7	$	11,283.9	*	5	%

*Amounts represent the pro forma equivalent of the 2012 amounts presented.

As discussed previously in this MD&A, in order to provide the most meaningful comparison of results by reportable segment, in addition to discussing changes in 2012 reported results versus 2011 reported results, the following sales discussions also provide analysis on 2012 reported results versus 2011 pro forma results. Discussions around comparisons of 2011 versus 2010 focus on the reported results for those respective periods.

U.S. CLEANING & SANITIZING

Reported U.S. Cleaning & Sanitizing sales increased 2% in 2012 compared to reported 2011 sales. Reported 2012 sales increased 5% when compared to 2011 pro forma sales. Reported 2011 sales increased 8% when compared to reported sales from 2010. Excluding the impact of acquisitions and divestitures from all periods, 2012 sales increased 5% when compared to 2011 pro forma sales and 2011 sales increased 5% against 2010 sales.

Sales for our largest U.S. Cleaning & Sanitizing businesses were as follows:

Institutional - Reported sales increased 4% in 2012 compared to 2011 reported sales. Sales initiatives, targeting new accounts, and effective product programs continued to lead our results. Demand from our lodging customers continued to show modest growth, while overall foodservice foot traffic remained soft.

Reported sales grew 4% in 2011 compared to 2010 reported sales. Sales initiatives, pricing gains, new accounts and effective product programs led our results. Demand from our lodging customers showed good growth, while overall foodservice foot traffic was soft.

Food & Beverage - Reported sales increased 4% in 2012 compared to 2011 pro forma sales. Sales growth was led by gains in the dairy, food and agri market segments. Food & Beverage remains focused on pricing as well as customer and new product penetration.

Reported sales increased 7% in 2011 compared to reported sales from 2010. The dairy and food market segments drove the increase, led by corporate account wins, pricing and product penetration. 2011 sales also benefited from a large project sale through our Ecovation business during the second quarter of 2011.

Kay - Reported sales grew 9% in 2012 compared to 2011 reported sales. The increase was led by double-digit growth from our food retail business which benefited from new accounts, and solid results from our quick service business.

Reported sales for 2011 increased 7% compared to 2010 reported sales. The sales increase for 2011 was led by our food retail business. Sales at Kay benefited from good demand from existing and new food retail and quick service accounts.

Healthcare - Reported sales increased 9% in 2012 compared to 2011 reported sales. Excluding the impact of acquisitions, sales increased 6% in 2012. Sales growth was led by our patient temperature management business, environmental hygiene and our infection barrier solutions, which offset general softness in the overall U.S. healthcare market.

Reported sales increased 28% in 2011 compared to reported sales from 2010. Excluding the impact of the acquisitions, sales increased 4% in 2011. Growth in sales of hand hygiene and surgical instrument cleaning products were partially offset by slower growth in patient and equipment drapes. Comparison sales in 2011 for hand hygiene were against slower sales in 2010 due to the increase in 2009 from H1N1 preparations.

U.S. OTHER SERVICES

U.S. Other Services sales increased 4% in 2012 compared to 2011 and increased 2% in 2011 compared to 2010.

Sales for our U.S. Other Services businesses were as follows:

Pest Elimination - Sales for 2012 grew 4% when compared to the prior year. Gains in the food & beverage and healthcare segment and improved results in the foodservice segment led the growth. Contract sales showed modest improvements, while non-contract sales growth was strong.

Sales were flat in 2011 compared to 2010. Gains in the food & beverage plant, healthcare, hospitality and grocery segments were offset by slow conditions in other major segments. Contract sales increased marginally, offset by a decrease in non-contract sales.

Equipment Care - Sales grew 4% in 2012 compared to the prior year. Service and installed parts sales increased, benefiting from new accounts and pricing gains. Direct parts sales decreased compared to results from 2011.

Sales increased 6% in 2011 compared to 2010. Pricing gains and new accounts helped drive service and installed parts sales increases during 2011. Direct parts sales decreased slightly in 2011 compared to 2010.

INTERNATIONAL CLEANING, SANITIZING & OTHER SERVICES

Fixed currency sales for our International Cleaning, Sanitizing & Other Services segment increased 3% for 2012 compared to fixed currency sales from 2011. 2012 fixed currency sales increased 5% when compared to 2011 pro forma fixed currency sales. Fixed currency sales from 2011 increased 6% when compared to 2010 fixed currency sales.

Excluding the impact of acquisitions and divestitures from all periods, 2012 fixed currency sales increased 4% compared to 2011 pro forma fixed currency sales and 2011 fixed currency sales increased 4% when compared to 2010 fixed currency sales.

When measured at public currency rates, 2012 reported International Cleaning, Sanitizing & Other Services sales decreased 1% against public currency reported sales from 2011 and were flat compared to public currency pro forma sales from 2011. Public currency reported sales from 2011 increased 11% when compared to 2010 public currency reported sales.

Fixed currency sales changes for our International Cleaning, Sanitizing & Other Services operating units were as follows:

Europe, Middle East and Africa - Sales increased 3% in 2012 compared to 2011. Excluding the impact of acquisitions, sales increased 2% in 2012. Solid results in MEA and moderate growth in the UK, Italy and Germany led the increase. From a divisional perspective, Healthcare, Pest Elimination and Food & Beverage showed good results, while Institutional sales were flat to the prior year. Textile Care sales declined slightly.

Sales increased 2% in 2011 compared to 2010. Sales growth in MEA, Germany and the U.K. were partially offset by lower sales in France and Italy. From a divisional perspective, Europe’s Healthcare sales showed a solid increase based on gains in the pharmaceutical and infection prevention markets. Food & Beverage and Pest Elimination sales both increased modestly. Institutional sales increased slightly, while Textile Care sales declined slightly.

Asia Pacific - Sales for 2012 increased 5% compared to 2011 pro forma sales. Sales growth was driven by increases in China and emerging Asian countries, with modest gains in Japan, Australia and New Zealand. From a divisional perspective, both Institutional and Food & Beverage continued to show good growth driven by new account gains and increased product penetration.

Sales increased 15% in 2011 compared to 2010. Excluding the impact of acquisitions, sales increased 5% in 2011. Natural disasters within the region in 2011 reduced sales growth by approximately two percentage points. Sales growth was driven primarily by increases in China and Australia. From a divisional perspective, Institutional sales

were strong driven by new programs and a focus on expansion in emerging Asian markets. Food & Beverage also continued to report strong sales growth, driven by new accounts and improved product penetration.

Latin America - We continued to experience strong sales growth in Latin America as sales in the region increased 18% in 2012 compared to 2011. Excluding the impact of acquisitions, sales increased 14% in 2012. At a country level, Brazil, Chile and Mexico all produced double-digit sales growth. Sales growth in our Institutional, Food & Beverage and Pest businesses all continued to be strong, as new accounts and continued successes with existing customers benefited all three divisions.

Sales in the region increased 14% in 2011 compared to 2010. At a country level, Brazil, Chile and Mexico all showed strong sales gains. Our Institutional, Food & Beverage and Pest Elimination businesses all reported double-digit increases in sales. Institutional sales growth was driven by increased product penetration and new accounts, while Food & Beverage benefited from strong demand in the beverage and brewing markets.

Canada - Sales grew 7% in 2012 compared to the prior year. Continued solid performances in Food & Beverage and Institutional led to the sales increase.

Sales increased 4% in 2011 compared to 2010. Solid gains in Food & Beverage, good growth in Institutional and a strong recovery in Healthcare led the sales increase.

GLOBAL WATER

Global Water had $2,087 million of fixed currency sales in 2012, which based on the closing date of the merger, compared against 2011 sales of $67 million, and no sales in 2010.

2012 Global Water fixed currency sales increased 4% compared to 2011 pro forma fixed currency sales of $2,014 million. Acquisitions and divestitures did not have a significant impact when comparing 2012 fixed currency sales against 2011 pro forma fixed currency results. When comparing fixed currency sales for 2012 against pro forma fixed currency sales for 2011, growth was led by increases in the food & beverage, power and primary metals businesses. 2011 pro forma sales also benefited from a wastewater project sale, impacting the comparison against the current year. At a regional level, sales growth in the U.S., Latin America and Asia Pacific offset general softness in EMEA, which continues to reflect the weak economic conditions in that region.

When measured at public currency exchange rates, 2012 reported Global Water sales increased 1% when compared to 2011 pro forma sales.

GLOBAL PAPER

Global Paper had $805 million of fixed currency sales in 2012, which based on the closing date of the merger, compared against 2011 sales of $34 million, and no sales in 2010.

Global Paper 2012 sales, when measured in fixed rates of currency exchange, decreased 1% when compared against 2011 pro forma fixed currency sales of $812 million. When comparing fixed currency sales for 2012 against pro forma fixed currency sales for 2011, the decrease was driven by lower customer plant utilization and down time, as well as the strategic elimination of certain low margin business. From a regional perspective, modest growth in Latin America and EMEA was more than offset by sales declines in the U.S. and Asia Pacific.

When measured at public currency exchange rates, 2012 reported Global Paper sales decreased 3% against 2011 pro forma sales.

GLOBAL ENERGY

Global Energy had $2,268 million of fixed currency sales in 2012, which based on the closing date of the merger, compared against 2011 sales of $92 million, and no sales in 2010.

When measured in fixed rates of currency exchange, 2012 Global Energy sales increased 21% versus 2011 pro forma fixed currency sales of $1,873 million. When comparing fixed currency sales for 2012 against pro forma fixed currency sales for 2011, the increase in sales reflected strong volume growth in our upstream business resulting from good market conditions, share gains and continued focus on high growth energy sources, including deepwater and shale accounts. Upstream end markets were strong in the Americas and the Middle East. We continued to see steady sales growth and market share gains in our downstream business across all regions.

When measured at public currency exchange rates, 2012 reported Global Energy sales increased 19% against 2011 pro forma sales.

CORPORATE

The corporate segment includes $30 million of sales reductions in 2011 related to the modification of a customer agreement.

Operating Income by Reportable Segment

Reported operating income for 2012, 2011 and 2010 for each of our reportable segments was as follows:

							PERCENT CHANGE
MILLIONS	2012		2011		2010		2012		2011
U.S. Cleaning & Sanitizing	$	651.4	$	556.7	$	513.9	17	%	8	%
U.S. Other Services	70.8		69.7		71.4		2		(2	)
Int’l Cleaning, Sanitizing & Other Services	340.8		285.8		254.5		19		12
Global Water	235.9		11.0		—
Global Paper	86.3		6.2		—
Global Energy	360.1		17.7		—
Corporate	(459.9)		(211.6)		(30.5)
Subtotal at fixed currency	1,285.4		735.5		809.3		75		(9	)
Effect of foreign currency translation	3.9		18.3		(2.5)
Consolidated	$	1,289.3	$	753.8	$	806.8	71	%	(7	)%

Reported operating income for 2012 and pro forma operating income, including Nalco’s results and reclassification of certain water treatment related businesses, for 2011 for each of our reportable segments was as follows:

							PERCENT
MILLIONS	2012			2011			CHANGE
U.S. Cleaning & Sanitizing	$	651.4		$	568.5	*	15	%
U.S. Other Services	70.8			69.7			2
Int’l Cleaning, Sanitizing & Other Services	340.8			280.3		*	22
Global Water	235.9			196.7		*	20
Global Paper	86.3			75.9		*	14
Global Energy	360.1			264.0		*	36
Corporate	(459.9		)	(226.6		)*
Subtotal at fixed currency	1,285.4			1,228.5		*	5
Effect of foreign currency translation	3.9			28.2		*
Consolidated	$	1,289.3		$	1,256.7	*	3	%

*Amounts represent the pro forma equivalent to the 2012 amounts presented.

Operating income as a percentage of reported net sales (“operating income margin”) for each of our reportable segments was as follows:

	REPORTED		REPORTED		PRO FORMA		REPORTED
PERCENTAGE	2012		2011		2011		2010
U.S. Cleaning & Sanitizing	21.8	%	19.0	%	20.0	%	18.9	%
U.S. Other Services	14.9		15.2		15.2		15.9
Int’l Cleaning, Sanitizing & Other Services	10.7		9.3		9.3		8.8
Global Water	11.3		*		9.8		—
Global Paper	10.7		*		9.3		—
Global Energy	15.9		*		14.1		—
Consolidated	10.9	%	11.1	%	11.1	%	13.2	%

*The 2011 operating margins for the legacy Nalco segments have not been included as they are not necessarily indicative of full year or future trends, as based on the close date of the merger, they include only one month of U.S. activity.

Operating income margins of our segments that have international operations (Int’l Cleaning, Sanitizing & Other Services, Global Water, Global Paper and Global Energy) are generally less than those realized within our U.S. Cleaning & Sanitizing and U.S. Other Services segments. The lower international margins are due to (i) the additional cost of operating in numerous and diverse foreign jurisdictions, (ii) higher costs of importing certain raw materials and finished goods in some regions and (iii) the smaller scale of International operations where certain operating locations are smaller in size. Proportionately larger investments in sales and technical support are also necessary in order to facilitate the growth of our International operations. However, we believe all have margin improvement potential and have implemented actions to attain them.

As discussed previously in this MD&A, in order to provide the most meaningful comparison of results by reportable segment, in addition to discussing changes in 2012 reported results versus 2011 reported results, the following operating income discussions also provide analysis on 2012 reported results versus 2011 pro forma results. Discussions around comparisons of 2011 versus 2010 focus on the reported results for those respective periods.

U.S. Cleaning & Sanitizing - Reported operating income increased 17% to $651 million for 2012 compared to 2011 reported operating income. 2012 reported operating income increased 15% when compared to 2011 pro forma operating income of $569 million. Excluding the impact of acquisitions and divestitures, 2012 operating income increased 14% when compared to 2011 pro forma operating income. Reported operating income margins for 2012 showed improvement against both reported and pro forma 2011 operating income margins. The increase in operating income was driven by sales volume, pricing gains, synergies and cost savings, which more than offset delivered product cost increases.

U.S. Cleaning & Sanitizing operating income increased 8% to $557 million in 2011 compared to 2010. Excluding the impact of acquisitions, operating income increased 2% in 2011. Our reported operating income margin improved slightly in 2011 compared to 2010. The increase in acquisition adjusted operating income was driven primarily by sales volume and pricing gains which more than offset increases in delivered product costs.

U.S. Other Services - Operating income increased 2% in 2012 compared to 2011. The increase in operating income was driven primarily by sales volume and pricing gains, which more than offset higher service delivery costs and investments in the field sales organization. Our operating income margin decreased slightly in 2012 compared to 2011.

U.S. Other Services operating income decreased 2% to $70 million in 2011 compared to 2010. Our operating income margin decreased in 2011 compared to 2010. The operating income decrease was driven by higher service delivery costs which outpaced sales gains and cost savings actions.

International Cleaning, Sanitizing & Other Services - Operating income at fixed currency rates increased 19% in 2012 compared to 2011. 2012 fixed currency operating income increased 22% when compared to 2011 pro forma fixed currency operating income. Acquisitions did not have a significant impact on operating income growth. Operating income margins for 2012 showed improvement against both reported and pro forma 2011 operating income margins. Operating income growth was driven by sales volume and pricing gains as well as savings from our 2011 Restructuring Plan and other synergies, which more than offset higher delivered product costs and investments in the business. When measured at public currency rates, 2012 International Cleaning, Sanitizing & Other Services reported operating income increased 13% against reported operating income for 2011 and 15% against pro forma operating for 2011.

International Cleaning, Sanitizing & Other fixed currency operating income increased 12% to $286 million in 2011 compared to 2010. Excluding the impact of acquisitions and divestitures, fixed currency operating income increased 11% during 2011 when compared to 2010. Our operating income margin showed improvement in 2011 compared to 2010. Operating income growth was driven by volume and pricing gains and cost savings actions from our 2011 Restructuring Plan, which more than offset higher delivered product and other costs. When measured at public currency rates, operating income increased 21% to $304 million in 2011 compared to 2010.

Global Water - Global Water had $236 million of fixed currency operating income in 2012, which based on the closing date of the merger, compared against 2011 operating income of $11 million, and no operating income in 2010.

2012 Global Water fixed currency operating income increased 20% compared to 2011 pro forma fixed currency operating income of $197 million. Excluding the impact of acquisitions and divestitures, 2012 fixed currency operating income increased 23% when compared to 2011 pro forma fixed currency operating. Our 2012 reported operating income margin improved compared to our 2011 pro forma operating income margin. When comparing fixed currency operating income for 2012 against pro forma fixed currency operating income for 2011, operating income growth was driven by pricing and sales volume gains, as well as synergies and other cost savings, which more than offset higher delivered product costs.

When measured at public currency exchange rates, 2012 Global Water reported operating income increased 18% compared to 2011 pro forma operating income.

Global Paper - Global Paper had $86 million of fixed currency operating income in 2012, which based on the closing date of the merger, compared against 2011 operating income of $6 million, and no operating income in 2010.

2012 Global Paper operating income, when measured in fixed rates of currency exchange, increased 14% when compared against 2011 pro forma fixed currency operating income of $76 million. Our 2012 reported operating income margin improved compared to our 2011 pro forma operating income margin. When comparing fixed currency results for 2012 against pro forma fixed currency results for 2011, operating income growth was driven by pricing gains, synergies and other cost savings which more than offset decreased sales volume from the strategic elimination of low margin business and higher delivered product costs.

When measured at public currency exchange rates, 2012 Global Paper reported operating income increased 11% compared to 2011 pro forma operating income.

Global Energy - Global Energy had $360 million of fixed currency operating income in 2012, which based on the closing date of the merger, compared against 2011 operating income of $18 million, and no operating income in 2010.

When measured in fixed rates of currency exchange, 2012 Global Energy operating income increased 36% versus 2011 pro forma fixed currency operating income of $264 million. Our 2012 reported operating income margin improved compared to our 2011 pro forma operating income margin. When comparing fixed currency results for 2012 against pro forma results for 2011, operating income growth was driven by strong sales volume growth, pricing gains and synergies, which more than offset higher delivered product costs and investments in the business.

When measured at public currency exchange rates, 2012 Global Energy reported operating income increased 34% compared to 2011 pro forma operating income.

Corporate - Consistent with our internal management reporting, the Corporate segment includes amortization specifically from the Nalco merger intangible assets, merger integration costs and investments we are making in business systems and structure.

The Corporate segment also includes special (gains) and charges reported on the Consolidated Statement of Income. Items included within reported special (gains) and charges are shown in the table on page 15, and items included in pro forma special (gains) and charges are shown in the table on page 9.

FINANCIAL POSITION & LIQUIDITY

Financial Position

Total assets were $17.6 billion as of December 31, 2012, compared to total assets of $18.2 billion as of December 31, 2011. The decrease in assets is primarily due to a net reduction in cash, related to the redemption of $1.7 billion of Nalco’s senior notes in January 2012, partially offset by a buildup of cash at the end of 2012 in anticipation of the Champion acquisition. The negative impact of foreign currency exchange rates on the value of our international assets was offset by the increase of assets through general business activities. Acquisitions and divestitures during 2012 did not have a significant impact on our total assets.

Total liabilities were $11.4 billion as of December 31, 2012, compared to total liabilities of $12.4 billion as of December 31, 2011. Total debt was $6.5 billion as of December 31, 2012 and $7.6 billion as of December 31, 2011. The ratio of total debt to capitalization (total debt divided by the sum of total equity and total debt) was 52% at year-end 2012 and 57% at year-end 2011, reflecting the redemption of $1.7 billion of Nalco’s senior notes in January 2012, offset by debt issued in 2012 to fund the pending Champion acquisition and for other general corporate purposes. We view our debt to capitalization ratio as an important indicator of our creditworthiness.

Cash Flows

Operating Activities – Cash provided by operating activities totaled $1,203 million, $686 million, and $950 million in 2012, 2011 and 2010, respectively. Fluctuations in earnings, primarily driven by the Nalco merger, timing of voluntary and required contributions to our U.S. pension plans and cash activity related to restructuring impacted comparability of operating cash flows. In addition to required contributions, we made voluntary contributions to our U.S. pension plans of $150 million and $100 million in 2012 and 2011, respectively, and no contributions in 2010. Operating cash flows were impacted by $73 million, $25 million and $17 million of payments made under our restructuring plans in 2012, 2011 and 2010, respectively. In addition, operating cash flows in 2011 were reduced by Nalco merger related financial advisory service payments of $48 million, a Nalco lease payment of $31 million and a payment on the customer agreement modification of $30 million.

The cash flow impact across the three years from accounts receivable was driven by increased sales volumes and timing of collections. Our bad debt expense was $37 million or 0.3% of sales in 2012, $15 million or 0.2% of net sales in 2011 and $18 million or 0.3% of net sales in 2010. We continue to monitor our receivable portfolio and the creditworthiness of our customers closely and do not expect our future cash flow to be materially impacted.

We continue to generate strong cash flow from operations. We expect to continue to use this cash flow to fund our ongoing operations and investments in the business, to fund acquisitions, to return cash to shareholders through dividend payments and share repurchases and to repay debt.

Investing Activities - Cash used for investing activities was $488 million in 2012, $2.0 billion in 2011 and $304 million in 2010. The fluctuation across the three years is driven primarily by the timing of business acquisitions and dispositions. Total cash received from dispositions, net of acquisitions during 2012 was $88 million, driven primarily by the sale of our Vehicle Care division. Total cash paid for acquisitions, net of cash acquired, in 2011 was $1.6 billion, with the

Nalco merger accounting for $1.3 billion of this total. Other significant acquisitions in 2011 included the Cleantec business of Campbell Brothers Ltd. and O.R. Solutions, Inc. Cash paid for acquisitions in 2010 was driven by the purchase of the commercial laundry division of Dober Chemical. We continue to target strategic business acquisitions which complement our growth strategy and expect to continue to make capital investments and acquisitions in the future to support our long-term growth. See Note 4 for further information on our business acquisition and disposition activity.

Increases in capital expenditures compared to the prior year were due primarily to investments in Nalco business units. We continue to make investments in the business including equipment used by our customers to dispense our cleaning and sanitizing products as well as chemical feed, process control and process monitoring equipment.

Financing Activities - Cash used for financing activities was $1.4 billion and $462 million in 2012 and 2010, respectively. Cash provided by financing activities was $2.9 billion in 2011. Our cash flows from financing activities reflect issuances and repayment of debt, common stock repurchases, dividend payments and proceeds from common stock issuances related to our equity incentive programs.

Our 2012 financing activities included $1.7 billion of long-term debt repayments, primarily related to the redemption of Nalco’s senior notes in January 2012. Partially offsetting the debt repayment, we separately issued $500 million of senior notes in public debt offerings in August 2012 and December 2012. Net repayments of commercial paper and notes payable led to a decrease in debt of $387 million during 2012.

Our 2011 financing activities included the issuance of $3.75 billion of senior notes through a public debt offering completed in December 2011 and the issuance of $500 million of private placement senior notes, completed in November 2011. Our 2011 financing activities also included the scheduled repayment of our $150 million 6.875% notes and the repayment of $1.3 billion of long-term debt assumed as part of the Nalco merger. Net borrowings of commercial paper and notes payable led to an increase of $907 million during 2011.

Our 2010 financing activities included a $67 million pay down of commercial paper and notes payable.

Shares are repurchased for the purpose of partially offsetting the dilutive effect of stock options and incentives and stock issued in acquisitions and to efficiently return capital to shareholders. Cash proceeds and tax benefits from option exercises provide a portion of the funding for repurchase activity. During 2012, 2011, and 2010, we had $210 million, $690 million and $349 million of share repurchases, respectively.

In September 2011, we announced a $1.0 billion share repurchase program, contingent upon closing the merger with Nalco. As part of this program, in December 2011, we entered into an accelerated share repurchase agreement (“ASR”) with a financial institution to repurchase $500 million of our common stock. Under the ASR, we received 8,330,379 shares of our common stock in December 2011. The final per share purchase price and the total number of shares to be repurchased under the ASR agreement were generally based on the volume weighted average price of the company’s common stock during the term of the agreement. The ASR agreement ended in the first quarter of 2012. In connection with the finalization of the accelerated share repurchase agreement we received an additional 122,314 shares of common stock, with no additional cash impact in 2012. As of December 31, 2012, approximately $279 million remained to be purchased as part of the $1.0 billion share repurchase program. The company expects to complete this remaining portion of the $1.0 billion share repurchase program in 2013.

In December 2012, we increased our indicated annual dividend rate by 15%. This represents the 21st consecutive year we have increased our dividend. We have paid dividends on our common stock for 76 consecutive years. Cash dividends declared per share of common stock, by quarter, for each of the last three years were as follows:

	FIRST		SECOND		THIRD		FOURTH
	QUARTER		QUARTER		QUARTER		QUARTER		YEAR
2012	$	0.2000	$	0.2000	$	0.2000	$	0.2300	$	0.8300
2011	0.1750		0.1750		0.1750		0.2000		0.7250
2010	0.1550		0.1550		0.1550		0.1750		0.6400

Liquidity and Capital Resources

We currently expect to fund all of our cash requirements which are reasonably foreseeable for 2013, including scheduled debt repayments, new investments in the business, share repurchases, dividend payments, possible business acquisitions and pension contributions with cash from operating activities, cash reserves and additional short-term and/or long-term borrowings.

As of December 31, 2012, we had $1.2 billion of cash and cash equivalents on hand, of which $300 million was held outside of the U.S. We continue to expect our operating cash flow to remain strong.

As of December 31, 2012, we had a $1.5 billion multi-year credit facility, which expires in September 2016. In August 2012, we replaced our existing $1.0 billion 364 day credit facility (which in April 2012 had been reduced from $2.0 billion to $1.0 billion) with a $500 million 364 day credit facility, which expires in August 2013. Both the $1.5 billion and $500 million credit facilities have been established with a diverse portfolio of banks. There were no borrowings under the credit facilities as of December 31, 2012 or 2011.

The credit facilities support our U.S. commercial paper program, which was reduced to $2.0 billion subsequent to the replacement of our 364 day credit facility discussed above, and our $200 million European commercial paper program. Combined borrowing under these two commercial paper programs may not exceed $2.0 billion. As of December 31, 2012, we had $594 million in outstanding U.S. commercial paper, with an average annual interest rate of 0.5%, and no amounts outstanding under our European commercial paper program. As of December 31, 2012, both programs were rated A-2 by Standard & Poor’s and P-2 by Moody’s.

Additionally, we have other committed and uncommitted credit lines of $501 million with major international banks and financial institutions to support our general global funding needs. Approximately $346 million of these credit lines were undrawn and available for use as of year-end 2012.

In November 2012, we entered into a $900 million term loan credit agreement with various banks. Under the agreement, which had not been drawn upon as of December 31, 2012, the term loan will bear interest at a floating base rate plus a credit rating based margin. Proceeds from the term loan are expected to be used to fund a portion of the pending Champion acquisition. Funding under the agreement will be available through April 15, 2013 and, to the extent funded, the term loan will expire on the third anniversary of the funding date.

In December 2012, in a public offering, we issued $500 million of debt securities that mature in 2017 at a rate of 1.45%. We anticipate that the proceeds will be used to finance a portion of the cash consideration to be paid in connection with the pending Champion acquisition. If the Champion acquisition is not completed by May 3, 2013, or if the Champion acquisition merger agreement is terminated on or before such date, we may redeem these debt securities in whole but not in part, at a price equal to 101% of the principal amount

thereof, plus any accrued and unpaid interest to the redemption date.

In August 2012, in a public offering, the company issued $500 million of debt securities that mature in 2015 at a rate of 1.00%. The proceeds were used to refinance outstanding commercial paper and for general corporate purposes.

As of December 31, 2012, Standard & Poor’s and Moody’s rated our long-term credit at BBB+ (stable outlook) and Baa1 (negative review), respectively. A reduction in our long-term credit ratings could limit or preclude our ability to issue commercial paper under our current programs. A credit rating reduction could also adversely affect our ability to renew existing, or negotiate new, credit facilities in the future and could increase the cost of these facilities. Should this occur, we could seek additional sources of funding, including issuing additional term notes or bonds. In addition, we have the ability, at our option, to draw upon our $2.0 billion of committed credit facilities prior to termination.

We are in compliance with our debt covenants and other requirements of our credit agreements and indentures.

A schedule of our obligations under various notes payable, long-term debt agreements, operating leases with noncancelable terms in excess of one year, interest obligations and benefit payments are summarized in the following table:

MILLIONS			PAYMENTS DUE BY PERIOD
CONTRACTUAL OBLIGATIONS	TOTAL		LESS THAN 1 YEAR		2-3 YEARS		4-5 YEARS		MORE THAN 5 YEARS
Notes payable	$	44	$	44	$	—	$	—	$	—
Commercial paper	594		594		—		—		—
Long-term debt	5,890		163		1,255		1,979		2,493
Capital lease obligations	14		5		6		1		2
Operating leases	525		108		154		108		155
Interest*	2,157		209		378		291		1,279
Total contractual cash obligations	$	9,224	$	1,123	$	1,793	$	2,379	$	3,929

*	Interest on variable rate debt was calculated using the interest rate at year-end 2012.

As of December 31, 2012, our gross liability for uncertain tax positions was $93 million. We are not able to reasonably estimate the amount by which the liability will increase or decrease over an extended period of time or whether a cash settlement of the liability will be required. Therefore, these amounts have been excluded from the schedule of contractual obligations.

We are not required to make any contributions to our U.S. pension and postretirement healthcare benefit plans in 2013, based on plan asset values as of December 31, 2012. We are required to fund certain international pension benefit plans in accordance with local legal requirements. We estimate contributions to be made to our international plans will approximate $51 million in 2013. These amounts have been excluded from the schedule of contractual obligations.

We lease certain sales and administrative office facilities, distribution centers, research and manufacturing facilities and other equipment under longer-term operating leases. Vehicle leases are generally shorter in duration. Vehicle leases have guaranteed residual value requirements that have historically been satisfied primarily by the proceeds on the sale of the vehicles.

Except for approximately $82 million of letters of credit supporting domestic and international commercial relationships and transactions, primarily for our North America high deductible insurance program, we do not have significant unconditional purchase obligations, or significant other commercial commitments, such as commitments under lines of credit, standby letters of credit, guarantees, standby repurchase obligations or other commercial commitments.

Off-Balance Sheet Arrangements

Other than operating leases, we do not have any off-balance sheet financing arrangements. See Note 12 for information on our operating leases. We do not have relationships with unconsolidated entities or financial partnerships, such as entities often referred to as “special purposes entities”, which are sometimes established for the purpose of facilitating off-balance sheet financial arrangements or other contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

New Accounting Pronouncements

Information regarding new accounting pronouncements is included in Note 2.

Market Risk

We enter into contractual arrangements (derivatives) in the ordinary course of business to manage foreign currency exposure and interest rate risks. We do not enter into derivatives for speculative or trading purposes. Our use of derivatives is subject to internal policies that provide guidelines for control, counterparty risk and ongoing monitoring and reporting and is designed to reduce the volatility associated with movements in foreign exchange and interest rates on our income statement and cash flows.

We enter into foreign currency forward contracts to hedge certain intercompany financial arrangements, and to hedge against the effect of exchange rate fluctuations on transactions related to cash flows denominated in currencies other than U.S. dollars. See Note 8 for further information on our hedging activity.

We manage interest expense using a mix of fixed and floating rate debt. To help manage borrowing costs, we may enter into interest rate swap agreements. Under these arrangements, we agree to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount. As of December 31, 2012 and 2011, we did not have any interest rate swaps outstanding.

Based on a sensitivity analysis (assuming a 10% adverse change in market rates) of our foreign exchange and interest rate derivatives and other financial instruments, changes in exchange rates or interest rates would not materially affect our financial position and liquidity. The effect on our results of operations would be substantially offset by the impact of the hedged items.

European Economy

The current economic conditions in several European countries (particularly Italy, Spain, Portugal, Greece and Ireland) deteriorated during 2012. Further weakening of the European economy may cause a decline in the value of the European currencies, including the euro. One potential extreme outcome of the European financial situation is the re-introduction of individual currencies in one or more Eurozone countries or the dissolution of the euro entirely. The potential dissolution of the euro, or market perceptions concerning this and related issues, could adversely affect the value of our euro-denominated assets and obligations and impact our future results of operations. As of year end 2012, net assets of the five European countries listed above represented 3% of our consolidated net assets. During 2012, sales in the five European countries listed above represented approximately 4% of our consolidated net sales.

Additionally, this crisis has caused instability in European credit markets, including diminished liquidity and credit availability, which could negatively impact our customers located in these and other geographic areas. We continue to monitor the situation and the creditworthiness of our customers. Although we do not currently foresee a credit risk associated with a material portion of our customers’ receivables, repayment is dependent upon the financial stability of the economies of those countries.

Subsequent Events

Acquisitions

In January 2013, we completed the acquisition of Mexico-based Quimiproductos S.A. de C.V., a wholly-owned subsidiary of Fomanto Economico Mexicano, S.A.B. de C.V. Annual sales of the business are approximately $43 million.

Venezuela Foreign Currency Translation

Venezuela is a highly inflationary economy under U.S. GAAP. As a result, the U.S. dollar is the functional currency for our subsidiaries in Venezuela. Any currency remeasurement adjustments for non-dollar denominated monetary assets and liabilities held by these subsidiaries and other transactional foreign exchange gains and losses are reflected in earnings. Our net monetary assets and liabilities included in our Venezuelan subsidiary balance sheets as of year end 2012 was approximately $69 million. On February 8, 2013 the Venezuelan government devalued its currency (Bolivar Fuerte). As a result of the devaluation, we will record a charge of approximately $20 million, net of tax, in the first quarter of 2013 due to the remeasurement of the local balance sheet.

Our ability to effectively manage sales and profit levels in Venezuela will be impacted by several factors, including our ability to mitigate the effect of any potential future devaluation, further actions of the Venezuelan government, economic conditions in Venezuela, the availability of raw materials, utilities and energy and the future state of exchange controls in Venezuela including the availability of U.S. dollars at the official foreign exchange rate. Sales and profit levels in Venezuela could also be impacted by any actions taken by the government under the recently passed law aimed at controlling market prices. We expect that the ongoing impact related to measuring our Venezuelan statement of income at the new exchange rate will not have a material impact to our results of operations. During 2012, sales in Venezuela represented approximately 1% of our consolidated net sales.

Segment Structure

Effective in 2013, we have a new organizational model to support global growth. This will result in a change to our segment structure with a focus on global businesses. These changes will result in the establishment of ten global operating units, including Global Energy, Global Institutional, Global Specialty, Global Healthcare, Global Food & Beverage, Global Water, Global Paper, Global Textile Care and Global Pest Elimination and Equipment Care. These operating units will be aggregated into four reportable segments which include Global Energy, Global Institutional, Global Industrial and Other. Our internal budgeting and reporting will be realigned in 2013 to reflect these changes. The movement of these businesses will impact year-over-year comparability; therefore, prior year segment information will be recast during the first quarter of 2013 to reflect this change.

Non-GAAP Financial Measures

This MD&A includes financial measures that have not been calculated in accordance with U.S. GAAP. These Non-GAAP measures include:

· Adjusted sales

· Adjusted pro forma sales

· Fixed currency sales

· Adjusted fixed currency sales

· Adjusted pro forma fixed currency sales

· Pro forma sales

· Pro forma fixed currency sales

· Adjusted gross margin

· Adjusted pro forma gross margin

· Pro forma SG&A ratio

· Adjusted SG&A ratio

· Fixed currency operating income

· Pro forma operating income

· Pro forma fixed currency operating income

· Adjusted operating income

· Adjusted pro forma operating income

· Adjusted fixed currency operating income

· Adjusted pro forma fixed currency operating income

· Adjusted net interest expense

· Adjusted effective income tax rate

· Adjusted net income attributable to Ecolab

· Adjusted diluted earnings per share attributable to Ecolab

We provide these measures as additional information regarding our operating results. We use these Non-GAAP measures internally to evaluate our performance and in making financial and operational decisions, including with respect to incentive compensation. We believe that our presentation of these measures provides investors with greater transparency with respect to our results of operations and that these measures are useful for period-to-period comparison of results.

We include in special (gains) and charges items that are unusual in nature and significant in amount. In order to better allow investors to compare underlying business performance period-to-period, we provide adjusted sales, adjusted pro forma sales, adjusted fixed currency sales, adjusted pro forma fixed currency sales, adjusted gross margin, adjusted pro forma gross margin, adjusted operating income, adjusted fixed currency operating income, adjusted pro forma operating income, adjusted pro forma fixed currency operating income, adjusted net interest expense, adjusted net income attributable to Ecolab and adjusted diluted earnings per share, which exclude special (gains) and charges and discrete tax items. The exclusion of special (gains) and charges and discrete tax items in such adjusted amounts help provide a better understanding of underlying business performance. In addition, to allow for a more meaningful comparison against 2010 results, where applicable, we have excluded the impact of Nalco’s post-merger results in our 2011 non-GAAP measures.

The adjusted effective tax rate measure promotes period-to-period comparability of the underlying effective tax rate because the amounts excluded do not necessarily reflect costs associated with historical trends or expected future costs.

We evaluate the performance of our international operations based on fixed currency rates of foreign exchange. Fixed currency sales, adjusted fixed currency sales, fixed currency operating income and adjusted fixed currency operating income measures (and the 2011 pro forma equivalent for each) eliminate the impact of exchange rate fluctuations on our sales, adjusted sales, operating income and adjusted operating income, respectively, and promote a better understanding of our underlying sales and operating income trends. Fixed currency amounts are based on translation into U.S. dollars at

fixed foreign currency exchange rates established by management at the beginning of 2012.

In order to provide a meaningful comparison of our results of operations, where applicable, we have supplemented our 2011 historical financial data with discussion and analysis that compares reported and adjusted results for 2012 against the 2011 Merger Pro Formas. The unaudited pro forma results are based on the historical consolidated results of operations of both Ecolab and Nalco and were prepared to illustrate the effects of our merger with Nalco, assuming the merger had been consummated on January 1, 2010. The unaudited pro forma and adjusted pro forma results are not necessarily indicative of the results of operations that would have actually occurred had the merger been completed as of the date indicated, nor are they indicative of future operating results of the combined company.

These measures are not in accordance with, or an alternative to U.S. GAAP, and may be different from Non-GAAP measures used by other companies. Investors should not rely on any single financial measure when evaluating our business. We recommend that investors view these measures in conjunction with the U.S. GAAP measures included in this MD&A and have provided reconciliations of reported U.S. GAAP amounts to the Non-GAAP amounts.

Forward-Looking Statements and Risk Factors

This MD&A and other portions of this Annual Report to Shareholders contain various “Forward-Looking Statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include expectations concerning items such as:

scope, timing, costs, cash expenditures, benefits and headcount impact of our restructuring initiatives

closing of the Champion acquisition

objective to improve credit rating

ability to deliver superior shareholder returns

long-term potential of our business

impact of changes in exchange rates and interest rates

losses due to concentration of credit risk

Cleantec escrow settlement

recognition of share-based compensation expense

future benefit plan payments

amortization expense

European economic uncertainty including euro currency issues

demographic trends and their impact on end-markets

outlook for growth

special (gains) and charges

benefits of and synergies from the Nalco merger

bad debt experiences and customer credit worthiness

disputes, claims and litigation

environmental contingencies

returns on pension plan assets

currency gains and losses

investments

potential for margin improvement in our non-U.S. business

cash flow and uses for cash

business acquisitions and sources of funding

dividends

share repurchases

debt repayments

contributions to pension and postretirement healthcare plans

liquidity requirements and borrowing methods

impact of credit rating downgrade

impact of new accounting pronouncements

tax deductibility of goodwill

non performance of counterparties

timing of hedged transactions

income taxes, including loss carryforwards, unrecognized tax benefits and uncertain tax positions

Without limiting the foregoing, words or phrases such as “will likely result,” “are expected to,” “will continue,” “is anticipated,” “we believe,” “we expect,” “estimate,” “project” (including the negative or variations thereof) or similar terminology, generally identify forward-looking statements. Forward-looking statements may also represent challenging goals for us. These statements, which represent the company’s expectations or beliefs concerning various future events, are based on current expectations that involve a number of risks and uncertainties that could cause actual results to differ materially from those of such forward-looking statements. We caution that undue reliance should not be placed on such forward-looking statements, which speak only as of the date made. Some of the factors which could cause results to differ from those expressed in any forward-looking statements are set forth under Item 1A of our Form 10-K for the year ended December 31, 2012, entitled Risk Factors.

In addition, we note that our stock price can be affected by fluctuations in quarterly earnings. There can be no assurances that our earnings levels will meet investors’ expectations. Except as may be required under applicable law, we undertake no duty to update our Forward-Looking Statements.

CONSOLIDATED STATEMENT OF INCOME

YEAR ENDED DECEMBER 31 (MILLIONS, EXCEPT PER SHARE AMOUNTS)	2012		2011		2010

Net sales (including special charges of $29.6 in 2011)	$	11,838.7	$	6,798.5	$	6,089.7
Operating expenses
Cost of sales (including special charges of $93.9 in 2012 and $8.9 in 2011)	6,483.5		3,475.6		3,013.8
Selling, general and administrative expenses	3,920.2		2,438.1		2,261.6
Special (gains) and charges	145.7		131.0		7.5
Operating income	1,289.3		753.8		806.8
Interest expense, net (including special charges of $19.3 in 2012 and $1.5 in 2011)	276.7		74.2		59.1
Income before income taxes	1,012.6		679.6		747.7
Provision for income taxes	311.3		216.3		216.6
Net income including noncontrolling interest	701.3		463.3		531.1
Less: Net income (loss) attributable to noncontrolling interest (including special charges of $4.5 in 2012)	(2.3)		0.8		0.8
Net income attributable to Ecolab	$	703.6	$	462.5	$	530.3

Earnings attributable to Ecolab per common share
Basic	$	2.41	$	1.95	$	2.27
Diluted	$	2.35	$	1.91	$	2.23

Dividends declared per common share	$	0.8300	$	0.7250	$	0.6400

Weighted-average common shares outstanding
Basic	292.5		236.9		233.4
Diluted	298.9		242.1		237.6

The accompanying notes are an integral part of the consolidated financial statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

YEAR ENDED DECEMBER 31 (MILLIONS)	2012			2011			2010

Net income including noncontrolling interest	$	701.3		$	463.3		$	531.1
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments
Foreign currency translation	4.8			34.0			(111.6		)
Gain (loss) on net investment hedges	9.8			(9.5		)	37.6
	14.6			24.5			(74.0		)
Derivatives and hedging instruments
Unrealized losses during the period	(1.9		)	(15.1		)	(2.5		)
Reclassification adjustment for losses included in net income	1.8			4.9			2.9
	(0.1		)	(10.2		)	0.4
Pension and postretirement benefits
Current period net actuarial loss	(184.0		)	(113.2		)	(9.3		)
Pension and postretirement prior period service costs and benefits adjustments	21.8			2.6			25.1
Amortization of net actuarial loss and prior service cost included in net periodic pension and postretirement costs	31.0			23.3			17.8
	(131.2		)	(87.3		)	33.6
Subtotal	(116.7		)	(73.0		)	(40.0		)

Total comprehensive income, including noncontrolling interest	584.6			390.3			491.1
Less: Comprehensive income (loss) attributable to noncontrolling interest	(4.2		)	0.8			(0.2		)
Comprehensive income attributable to Ecolab	$	588.8		$	389.5		$	491.3

The accompanying notes are an integral part of the consolidated financial statements.

CONSOLIDATED BALANCE SHEET

DECEMBER 31 (MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)	2012			2011

ASSETS
Current assets
Cash and cash equivalents	$	1,157.8		$	1,843.6
Accounts receivable, net	2,225.1			2,095.3
Inventories	1,088.1			1,069.6
Deferred income taxes	205.2			164.0
Other current assets	215.8			223.5
Total current assets	4,892.0			5,396.0
Property, plant and equipment, net	2,409.1			2,295.4
Goodwill	5,920.5			5,855.3
Other intangible assets, net	4,044.1			4,275.2
Other assets	306.6			362.8
Total assets	$	17,572.3		$	18,184.7

LIABILITIES AND EQUITY
Current liabilities
Short-term debt	$	805.8		$	1,023.0
Accounts payable	879.7			815.7
Compensation and benefits	518.8			497.2
Income taxes	77.4			81.7
Other current liabilities	771.0			748.7
Total current liabilities	3,052.7			3,166.3
Long-term debt	5,736.1			6,613.2
Postretirement health care and pension benefits	1,220.5			1,173.4
Other liabilities	1,402.9			1,490.7
Total liabilities	11,412.2			12,443.6
Equity(a)
Common stock	342.1			336.1
Additional paid-in capital	4,249.1			3,980.8
Retained earnings	4,020.6			3,559.9
Accumulated other comprehensive loss	(459.7		)	(344.9		)
Treasury stock	(2,075.1		)	(1,865.2		)
Total Ecolab shareholders’ equity	6,077.0			5,666.7
Noncontrolling interest	83.1			74.4
Total equity	6,160.1			5,741.1
Total liabilities and equity	$	17,572.3		$	18,184.7

(a) Common stock, 800.0 million shares authorized, $1.00 par value, 294.7 million shares outstanding at December 31, 2012, 292.0 million shares outstanding at December 31, 2011.

The accompanying notes are an integral part of the consolidated financial statements.

CONSOLIDATED STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31 (MILLIONS)	2012			2011			2010

OPERATING ACTIVITIES
Net income including noncontrolling interest	$	701.3		$	463.3		$	531.1
Adjustments to reconcile net income including noncontrolling interest to cash provided by operating activities:
Depreciation	468.2			331.4			306.4
Amortization	246.3			64.3			41.5
Deferred income taxes	(3.2		)	41.7			(31.1		)
Share-based compensation expense	65.8			39.9			29.2
Excess tax benefits from share-based payment arrangements	(50.1		)	(13.7		)	(16.9		)
Pension and postretirement plan contributions	(254.9		)	(156.6		)	(46.6		)
Pension and postretirement plan expense	114.6			83.1			90.8
Restructuring, net of cash paid	66.6			49.5			—
Gain on sale of businesses	(89.3		)	—			—
Other, net	5.6			8.9			1.8
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable	(189.7		)	(106.0		)	(39.3		)
Inventories	(2.0		)	(36.1		)	18.6
Other assets	18.6			(60.2		)	42.4
Accounts payable	79.0			60.9			6.8
Other liabilities	26.2			(84.9		)	15.7
Cash provided by operating activities	1,203.0			685.5			950.4

INVESTING ACTIVITIES
Capital expenditures	(574.5		)	(341.7		)	(260.5		)
Capitalized software expenditures	(33.0		)	(24.3		)	(37.2		)
Property and other assets sold	15.9			3.0			2.6
Businesses acquired and investments in affiliates, net of cash acquired	(43.0		)	(1,633.2		)	(43.4		)
Sale of businesses	130.7			—			16.0
Deposit into indemnification escrow	(1.3		)	(28.1		)	(2.1		)
Release from indemnification escrow	17.3			—			21.0
Cash used for investing activities	(487.9		)	(2,024.3		)	(303.6		)

FINANCING ACTIVITIES
Net issuances (repayments) of commercial paper and notes payable	(387.3		)	907.1			(66.6		)
Long-term debt borrowings	1,001.2			4,238.7			—
Long-term debt repayments	(1,694.9		)	(1,420.4		)	(7.4		)
Reacquired shares	(209.9		)	(690.0		)	(348.8		)
Cash dividends paid on common stock	(306.8		)	(162.9		)	(145.5		)
Exercise of employee stock options	163.7			89.0			89.2
Excess tax benefits from share-based payment arrangements	50.1			13.7			16.9
Other, net	(9.7		)	(41.4		)	—
Cash provided by (used for) financing activities	(1,393.6		)	2,933.8			(462.2		)

Effect of exchange rate changes on cash and cash equivalents	(7.3		)	6.3			(15.9		)

Increase (decrease) in cash and cash equivalents	(685.8		)	1,601.3			168.7
Cash and cash equivalents, beginning of year	1,843.6			242.3			73.6
Cash and cash equivalents, end of year	$	1,157.8		$	1,843.6		$	242.3

SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid	$	222.6		$	224.2		$	209.6
Interest paid	279.0			71.1			63.3

The accompanying notes are an integral part of the consolidated financial statements.

CONSOLIDATED STATEMENT OF EQUITY

	ECOLAB SHAREHOLDERS
									ACCUMULATED
			ADDITIONAL						OTHER						TOTAL ECOLAB			NON-
	COMMON		PAID-IN			RETAINED			COMPREHENSIVE			TREASURY			SHAREHOLDERS’			CONTROLLING			TOTAL
MILLIONS	STOCK		CAPITAL			EARNINGS			INCOME (LOSS)			STOCK			EQUITY			INTEREST			EQUITY

Balance December 31, 2009	$	329.8	$	1,179.3		$	2,898.1		$	(232.9	)	$	(2,173.4	)	$	2,000.9		$	8.7		$	2,009.6
Net income						530.3									530.3			0.8			531.1
Comprehensive income activity									(39.0		)				(39.0		)	(1.0		)	(40.0		)
Total comprehensive income															491.3			(0.2		)	491.1
Sale of noncontrolling interests																		(4.7		)	(4.7		)
Cash dividends declared						(149.3		)							(149.3		)				(149.3		)
Stock options and awards	3.3		130.9									0.9			135.1						135.1
Reacquired shares												(348.8		)	(348.8		)				(348.8		)
Balance December 31, 2010	333.1		1,310.2			3,279.1			(271.9		)	(2,521.3		)	2,129.2			3.8			2,133.0
Net income						462.5									462.5			0.8			463.3
Comprehensive income activity									(73.0		)				(73.0		)				(73.0		)
Total comprehensive income															389.5			0.8			390.3
Cash dividends declared						(181.7		)							(181.7		)	(0.6		)	(182.3		)
Nalco merger			2,573.2									1,300.0			3,873.2			70.4			3,943.6
Stock options and awards	3.0		142.1									1.4			146.5						146.5
Reacquired shares			(44.7		)							(645.3		)	(690.0		)				(690.0		)
Balance December 31, 2011		336.1		3,980.8			3,559.9			(344.9	)		(1,865.2	)		5,666.7			74.4			5,741.1

Net income						703.6									703.6			(2.3		)	701.3
Comprehensive income activity									(114.8		)				(114.8		)	(1.9		)	(116.7		)
Total comprehensive income															588.8			(4.2		)	584.6
Cash dividends declared						(242.9		)							(242.9		)	(3.9		)	(246.8		)
Nalco merger			0.3												0.3			16.8			17.1
Stock options and awards	6.0		260.7									7.3			274.0						274.0
Reacquired shares			7.3									(217.2		)	(209.9		)				(209.9		)
Balance December 31, 2012	$	342.1	$	4,249.1		$	4,020.6		$	(459.7	)	$	(2,075.1	)	$	6,077.0		$	83.1		$	6,160.1

COMMON STOCK ACTIVITY

	2012			2011			2010
YEAR ENDED DECEMBER 31	COMMON	TREASURY		COMMON	TREASURY		COMMON	TREASURY
(SHARES)	STOCK	STOCK		STOCK	STOCK		STOCK	STOCK

Shares, beginning of year	336,088,243	(44,113,799	)	333,141,410	(100,628,659	)	329,825,650	(93,230,909	)
Stock options, shares	5,430,997	208,239		2,946,833	93,771		3,315,760	98,332
Stock awards, net issuances	587,341	(21,257	)		114,064			112,080
Nalco merger					68,316,283
Reacquired shares		(3,457,740	)		(12,009,258	)		(7,608,162	)
Shares, end of year	342,106,581	(47,384,557	)	336,088,243	(44,113,799	)	333,141,410	(100,628,659	)

The accompanying notes are an integral part of the consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF BUSINESS

Ecolab Inc. (“Ecolab” or “the company”) is the global leader in water, hygiene and energy technologies and services that provide and protect clean water, safe food, abundant energy and healthy environments. The company delivers comprehensive programs and services to the food, energy, healthcare, industrial and hospitality markets in approximately 170 countries.

The company’s cleaning and sanitizing programs and products, pest elimination services, and equipment maintenance and repair services support customers in the foodservice, food and beverage processing, hospitality, healthcare, government and education, retail, textile care and commercial facilities management sectors. The company’s chemicals and technologies are also used in water treatment, pollution control, energy conservation, oil production and refining, steelmaking, papermaking, mining and other industrial processes.

2. SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of the company and all subsidiaries in which the company has a controlling financial interest. Investments in companies or partnerships in which the company does not have control, but has the ability to exercise significant influence over operating and financial policies, are reported using the equity method. International subsidiaries are included in the financial statements on the basis of their U.S. GAAP November 30 fiscal year-ends to facilitate the timely inclusion of such entities in the company’s consolidated financial reporting. All intercompany transactions and profits are eliminated in consolidation.

Revisions

In connection with its quarterly report on Form 10-Q for the quarter ended June 30, 2012, the company has revised its consolidated balance sheet as of December 31, 2011 to correct the jurisdictional netting of long-term deferred tax assets and liabilities. This revision decreased other assets and other liabilities by $56.1 million and does not impact the consolidated statements of income or comprehensive income or the consolidated statement of cash flows for any period. This correction also impacted the March 31, 2012 interim financial statements. In addition to jurisdictional netting, additional classification differences primarily related to the repayment of debt in January 2012 were identified between deferred income taxes and income taxes payable which together had the net effect of reducing other assets by $57.1 million, income taxes payable by $64.9 million, and increasing other liabilities by $7.8 million as of March 31, 2012. There was no impact to total cash provided by operations on the statement of cash flows for the three months ended March 31, 2012, but cash used by deferred income taxes was reduced by $64.9 million with an offsetting impact to other liabilities within the components of operating cash flows. There was no impact on the consolidated statements of income or comprehensive income. The company believes that these revisions were immaterial to previously issued financial statements.

Use of Estimates

The preparation of the company’s financial statements requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates. The company’s critical accounting estimates include revenue recognition, valuation allowances and accrued liabilities, actuarially determined liabilities, income taxes, restructuring and long-lived assets, intangible assets and goodwill.

Foreign Currency Translation

Financial position and reported results of operations of the company’s international subsidiaries are measured using local currencies as the functional currency. Assets and liabilities of these operations are translated at the exchange rates in effect at each fiscal year end. The translation adjustments related to assets and liabilities that arise from the use of differing exchange rates from period to period are included in accumulated other comprehensive income (loss) in shareholders’ equity. Income statement accounts are translated at average rates of exchange prevailing during the year. The company evaluates its International operations based on fixed rates of exchange; however, the different exchange rates from period to period impact the amount of reported income from consolidated operations. The foreign currency fluctuations of any foreign subsidiaries that operate in highly inflationary environments are included in results of operations.

Concentration of Credit Risk

Credit risk represents the accounting loss that would be recognized at the reporting date if counterparties failed to perform as contracted. The company believes the likelihood of incurring material losses due to concentration of credit risk is remote. The principal financial instruments subject to credit risk are as follows:

Cash and Cash Equivalents - The company maintains cash deposits with major banks, which from time to time may exceed insured limits. The possibility of loss related to financial condition of major banks has been deemed minimal. Additionally, the company’s investment policy limits exposure to concentrations of credit risk and changes in market conditions.

Accounts Receivable - A large number of customers in diverse industries and geographies, as well as the practice of establishing reasonable credit lines, limits credit risk. Based on historical trends and experiences, the allowance for doubtful accounts is adequate to cover potential credit risk losses.

Foreign Currency Contracts and Derivatives - Exposure to credit risk is limited by internal policies and active monitoring of outstanding positions. In addition, the company selects a diversified group of major international banks and financial institutions as counterparties. The company does not anticipate nonperformance by any of these counterparties.

Cash and Cash Equivalents

Cash equivalents include highly-liquid investments with a maturity of three months or less when purchased. The company’s cash and cash equivalent balances as of December 31, 2012 and 2011 were higher than its historical trend. The increased balance as of year end 2012 was due primarily to a buildup in cash in anticipation of the pending Champion acquisition. The increased balance as of year end 2011 was due primarily to the timing of proceeds from the company’s public debt offering in December 2011 coupled with the redemption of Nalco’s senior notes in January 2012.

Accounts Receivable and Allowance For Doubtful Accounts

Accounts receivable are carried at their face amounts less an allowance for doubtful accounts. Accounts receivable are recorded at the invoiced amount and generally do not bear interest. The

company estimates the balance of allowance for doubtful accounts by analyzing accounts receivable balances by age and applying historical write-off and collection trend rates. The company’s estimates include separately providing for customer balances based on specific circumstances and credit conditions, and when it is deemed probable that the balance is uncollectible. Account balances are charged off against the allowance when it is determined the receivable will not be recovered.

The company’s allowance for doubtful accounts balance includes an allowance for the expected return of products shipped and credits related to pricing or quantities shipped of approximately $13 million, $12 million and $7 million as of December 31, 2012, 2011 and 2010, respectively. Returns and credit activity is recorded directly to sales.

The following table summarizes the activity in the allowance for doubtful accounts:

MILLIONS	2012			2011			2010
Beginning balance	$	49		$	45		$	52
Bad debt expense	37			15			18
Write-offs	(13		)	(16		)	(20		)
Other (a)	—			5			(5		)
Ending balance	$	73		$	49		$	45

(a)	Other amounts are primarily the effects of changes in currency translations and the impact of allowance for returns and credits.

Inventory Valuations

Inventories are valued at the lower of cost or market. Certain U.S. inventory costs, are determined on a last-in, first-out (LIFO) basis. LIFO inventories represented 31% and 30% of consolidated inventories as of December 31, 2012 and 2011, respectively. All other inventory costs are determined using either the average cost or first-in, first-out (FIFO) methods. Inventory values at FIFO, as shown in Note 5, approximate replacement cost.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Merchandising and customer equipment consists principally of various systems that dispense the company’s cleaning and sanitizing products, dishwashing machines and process control and monitoring equipment. Certain dispensing systems capitalized by the company are accounted for on a mass asset basis, whereby equipment is capitalized and depreciated as a group and written off when fully depreciated. The company capitalizes both internal and external costs of development or purchase of computer software for internal use. Costs incurred for data conversion, training and maintenance associated with capitalized software are expensed as incurred. Expenditures for major renewals and improvements, which significantly extend the useful lives of existing plant and equipment, are capitalized and depreciated. Expenditures for repairs and maintenance are charged to expense as incurred. Upon retirement or disposition of plant and equipment, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in income.

Depreciation is charged to operations using the straight-line method over the assets’ estimated useful lives ranging from 5 to 40 years for buildings and leasehold improvements, 3 to 18 years for machinery and equipment and 3 to 10 years for merchandising and customer equipment and capitalized software. Total depreciation expense was $468 million, $331 million and $306 million for 2012, 2011 and 2010, respectively.

Goodwill and Other Intangible Assets

Goodwill

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired. The company’s reporting units are its operating segments. The company tests goodwill for impairment on an annual basis during the second quarter. If circumstances change significantly, the company would also test a reporting unit for impairment during interim periods between the annual tests. An impairment charge is recognized for the amount, if any, by which the carrying amount of goodwill exceeds its implied fair value.

The current year goodwill impairment review incorporated the new qualitative assessment guidance as discussed in Note 2 for certain reporting units. In addition to the qualitative analysis, the company performed quantitative procedures including a review of sensitivities around key inputs, assumptions and business projections for certain reporting units. Supplemental quantitative procedures were performed on the EMEA reporting unit given the European economic conditions as well as the Global Water, Global Paper and Global Energy reporting units given the recent closing of the merger with Nalco on December 1, 2011.

As expected, the estimated fair value exceeded the carrying value of Global Water, Global Paper and Global Energy reporting units by a low margin as these separate reporting units were acquired on December 1, 2011 when the carrying value equaled the fair value. As part of this analysis the company updated the discount rate assumptions used in the quantitative procedures for the reduction in risk free rates in 2012 and other reductions in risk given the successful integration to date. The company used a range of discount rates from 9.6% to 10.4% compared to the 11.5% discount rate used in the original Nalco purchase price allocation. The combined effect of lower discount rates and the updated projections drove an increase in estimated fair value for these reporting units in all cases.

Based on the company’s testing, no adjustment to the carrying value of goodwill was necessary. Additionally, based on the ongoing performance of the company’s operating units, updating the impairment testing during the second half of 2012 was not deemed necessary. There has been no impairment of goodwill since the adoption of FASB guidance for goodwill and other intangibles on January 1, 2002.

The merger with Nalco resulted in the addition of $4.5 billion of goodwill. Subsequent performance of the reporting units holding the additional goodwill relative to projections used in the purchase price allocation of goodwill could result in an impairment if there is either underperformance by the reporting unit or if the carrying value of the reporting unit were to fluctuate due to working capital changes or other reasons that did not proportionately increase fair value.

The changes in the carrying amount of goodwill for each of the company’s reportable segments are as follows:

	U.S.			U.S.		INTERNATIONAL
	CLEANING &			OTHER		CLEANING, SANITIZING		GLOBAL		GLOBAL		GLOBAL
MILLIONS	SANITIZING			SERVICES		& SERVICES		WATER (b)		PAPER (b)		ENERGY (b)		TOTAL
December 31, 2010	$	454.4		$	50.5	$	824.4	$	—	$	—	$	—	$	1,329.3
Business acquisitions (a)	89.2			—		5.1		1,933.0		179.3		2,291.6		4,498.2
Effect of foreign currency translation	—			—		27.8		—		—		—		27.8
December 31, 2011	543.6			50.5		857.3		1,933.0		179.3		2,291.6		5,855.3
Current year business acquisitions (a)	—			—		17.1		6.1		—		—		23.2
Prior year business acquisitions	—			—		—		22.9		9.6		20.5		53.0
Business disposals	(17.1		)	—		—		—		—		—		(17.1		)
Effect of foreign currency translation	—			—		(19.2)		11.1		1.0		13.2		6.1
Reclassifications (c)	(12.6		)	—		(7.5)		20.1		—		—		—
December 31, 2012	$	513.9		$	50.5	$	847.7	$	1,993.2	$	189.9	$	2,325.3	$	5,920.5

(a)	For 2012, none of the goodwill acquired is expected to be tax deductible. For 2011, $89.2 million of goodwill acquired is expected to be tax deductible.

(b)	The company completed its segment goodwill allocation related to the Nalco merger during the second quarter of 2012. As such, goodwill acquired through the Nalco merger has been disclosed for each legacy Nalco reportable segment above as of the date of the merger (December 1, 2011).

(c)	The reclassifications line represents the transfer of certain water treatment related goodwill into the Global Water reportable segment.

Other Intangible Assets

As part of the Nalco merger, the company added the “Nalco” trade name as an indefinite life intangible asset. The $1.2 billion carrying value of this asset was subject to impairment testing during the second quarter of 2012. Based on this testing, no adjustment to the carrying value was necessary.

Other intangible assets subject to amortization primarily include customer relationships, trademarks, patents and other technology. The fair value of identifiable intangible assets is estimated based upon discounted future cash flow projections and other acceptable valuation methods. Other intangible assets are amortized on a straight-line basis over their estimated economic lives. The weighted-average useful life of other intangible assets was 14 years as of December 31, 2012 and 2011.

The weighted-average useful life by type of amortizable asset at December 31, 2012 is as follows:

NUMBER OF YEARS

Customer relationships		15
Trademarks		16
Patents		14
Other technology		8

The straight-line method of amortization reflects an appropriate allocation of the cost of the intangible assets to earnings in proportion to the amount of economic benefits obtained by the company in each reporting period. The company evaluates the remaining useful life of its intangible assets that are being amortized each reporting period to determine whether events and circumstances warrant a change to the remaining period of amortization. If the estimate of an intangible asset’s remaining useful life is changed, the remaining carrying amount of the intangible asset will be amortized prospectively over that revised remaining useful life. Total amortization expense related to other intangible assets during the last three years and future estimated amortization is as follows:

MILLIONS

2010	$	41
2011	62
2012	237
2013	240
2014	224
2015	223
2016	217
2017	214

The significant increase in amortization from 2011 to 2012 is due primarily to the amortizable intangible assets acquired through the Nalco merger.

Long-Lived Assets

The company periodically reviews its long-lived and amortizable intangible assets for impairment and assesses whether significant events or changes in business circumstances indicate that the carrying value of the assets may not be recoverable. An impairment loss may be recognized when the carrying amount of an asset exceeds the anticipated future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. The amount of the impairment loss to be recorded, if any, is calculated by the excess of the asset’s carrying value over its fair value.

Asset Retirement Obligations

The fair value of a liability for an asset retirement obligation associated with the retirement of tangible long-lived assets is recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The liability is adjusted to its present value in subsequent

periods as accretion expense is recorded. The corresponding asset retirement costs are capitalized as part of the carrying amount of the related long-lived asset and depreciated over the asset’s useful life. The company’s asset retirement obligation liability was $13.0 million and $11.0 million, respectively, at December 31, 2012 and 2011.

Income Taxes

Income taxes are recognized during the period in which transactions enter into the determination of financial statement income, with deferred income taxes being provided for the tax effect of temporary differences between the carrying amount of assets and liabilities and their tax bases. The company records a valuation allowance to reduce its deferred tax assets when uncertainty regarding their realizability exists. Deferred income taxes are provided on the undistributed earnings of foreign subsidiaries except to the extent such earnings are considered to be permanently reinvested in the subsidiary.

The company records liabilities for income tax uncertainties in accordance with the recognition and measurement criteria prescribed in authoritative guidance issued by the FASB.

Restructuring Activities

The company incurs costs for restructuring activities associated with plans to enhance its efficiency and effectiveness and sharpen its competitiveness. These restructuring plans include costs associated with significant actions involving employee-related severance charges, contract termination costs and asset write-downs. Employee termination costs are largely based on policies and severance plans, and include personnel reductions and related costs for severance, benefits and outplacement services. These charges are reflected in the quarter in which the actions are probable and the amounts are estimable, which is generally when management approves the associated actions. Contract termination costs include charges to terminate leases prior to the end of their respective terms and other contract termination costs. Asset write-downs include leasehold improvement write-downs and other asset write-downs associated with combining operations.

Revenue Recognition

The company recognizes revenue on product sales at the time evidence of an arrangement exists, title to the product and risk of loss transfers to the customer, the price is fixed and determinable and collection is reasonably assured. The company recognizes revenue on services as they are performed. While the company employs a sales and service team to ensure customer’s needs are best met in a high quality way, the vast majority of the company’s revenue is generated from product sales. Outside of the service businesses discussed in Note 16, any other services are either incidental to a product sale and not sold separately, or insignificant.

The company’s sales policies do not provide for general rights of return. Critical estimates used in recognizing revenue include the delay between the time that products are shipped, when they are received by customers, when title transfers and the amount of credit memos issued in subsequent periods. The company records estimated reductions to revenue for customer programs and incentive offerings, including pricing arrangements, promotions and other volume-based incentives at the time the sale is recorded. The company also records estimated reserves for anticipated uncollectible accounts and for product returns and credits at the time of sale. Depending on market conditions, we may increase customer incentive offerings, which could reduce gross profit margins at the time the incentive is offered.

Share-Based Compensation

The company measures compensation expense for share-based awards at fair value at the date of grant and recognizes compensation expense over the service period for awards expected to vest. Grants to retirement eligible recipients (age 55 with required years of service) are attributed to expense using the non-substantive vesting method and are fully expensed over a six month period following the date of grant. In addition, the company includes a forfeiture estimate in the amount of compensation expense being recognized based on an estimate of the number of outstanding awards expected to vest.

Earnings Per Common Share

The computations of the basic and diluted earnings attributable to Ecolab per share amounts were as follows:

MILLIONS EXCEPT PER SHARE	2012		2011		2010
Net income attributable to Ecolab	$	703.6	$	462.5	$	530.3
Weighted-average common shares outstanding
Basic	292.5		236.9		233.4
Effect of dilutive stock options, units and awards	6.4		5.2		4.2
Diluted	298.9		242.1		237.6
Earnings attributable to Ecolab per common share
Basic	$	2.41	$	1.95	$	2.27
Diluted	$	2.35	$	1.91	$	2.23
Anti-dilutive securities excluded from the computation of earnings per share	2.6		4.7		6.2

Comprehensive Income

Comprehensive income includes net income, foreign currency translation adjustments, unrecognized gains and losses on securities, defined benefit pension and postretirement plan adjustments, gains and losses on derivative instruments designated and effective as cash flow hedges and non-derivative instruments designated and effective as foreign currency net investment hedges that are charged or credited to the accumulated other comprehensive loss account in shareholders’ equity.

Derivative Instruments and Hedging

The company uses foreign currency forward contracts, interest rate swaps and foreign currency debt to manage risks generally associated with foreign exchange rates, interest rates and net investments in foreign operations. The company does not hold derivative financial instruments of a speculative nature or for trading purposes.

All of the company’s derivatives are recognized on the balance sheet at their fair value. The earnings impact resulting from the change in fair value of the derivative instruments is recorded in the same line item in the consolidated statement of income as the underlying exposure being hedged.

New Accounting Pronouncements

In May 2011, the FASB issued updated accounting guidance on fair value measurements. The updated guidance resulted in common fair value measurement and disclosure requirements between U.S. GAAP and International Financial Reporting Standards (“IFRS”). The company adopted this guidance effective January 1, 2012. The adoption did not have a material impact on the disclosures of the company’s consolidated financial information.

In June 2011, and subsequently amended in December 2011, the FASB issued final guidance on the presentation of comprehensive income. Under the newly issued guidance, net income and comprehensive income may only be presented either as one continuous statement or in two separate, but consecutive statements. The company adopted this guidance effective January 1, 2012, with comprehensive income shown on a separate statement immediately following the Consolidated Statement of Income.

In September 2011, the FASB amended its guidance on the testing of goodwill impairment to allow an entity the option to first assess qualitative factors to determine whether performing the current two-step process is necessary. Under the new option, the calculation of the reporting unit’s fair value is not required unless as a result of the qualitative assessment, it is more likely than not that the fair value of the reporting unit is less than the unit’s carrying amount. The company adopted this guidance effective with its annual goodwill impairment testing during the second quarter of 2012. The adoption did not have a material impact on the company’s consolidated financial statements.

In December 2011, the FASB issued a final standard on balance sheet offsetting disclosures. A clarification in the scope of the final standard was issued in January 2013 and requires disclosures to provide information to help reconcile differences in the offsetting requirements under U.S. GAAP and IFRS. This guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The company is currently evaluating the impact of adoption.

In July 2012, the FASB amended its guidance on testing of indefinite-lived intangible assets for impairment. Under the amended guidance, companies may perform a qualitative assessment to determine whether further impairment testing is necessary, similar to the amended goodwill impairment testing guidance discussed above. The guidance for indefinite-lived intangible assets is effective for annual and interim tests performed for fiscal years beginning after September 15, 2012, with an option for early adoption. As the company performed its impairment testing on indefinite life intangible assets during the second quarter of 2012, the amended guidance will be applied to the testing performed in 2013. The adoption of this guidance is not expected to have a material impact on the company’s financial statements.

In August 2012, the U.S. Securities and Exchange Commission (the “SEC”) adopted a rule mandated by the Dodd-Frank Act to require companies to publicly disclose their use of conflict minerals that originated in the Democratic Republic of the Congo or an adjoining country. The final rule applies to a company that uses minerals including tantalum, tin, gold or tungsten. The final rule requires companies to provide disclosure on a new form filed with the SEC, with the first specialized disclosure report due on May 31, 2014, for the 2013 calendar year, and annually on May 31 each year thereafter. The company is currently evaluating the impact of adoption.

In February 2013, the FASB issued a final standard on reporting amounts reclassified out of accumulated other comprehensive income. The standard requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. This guidance is effective for reporting periods beginning after December 15, 2012. The company is currently evaluating the impact of adoption.

No other new accounting pronouncements issued or effective have had or are expected to have a material impact on the company’s consolidated financial statements.

3. SPECIAL (GAINS) AND CHARGES

Special (gains) and charges reported on the Consolidated Statement of Income included the following:

MILLIONS	2012			2011		2010

Net sales
Customer agreement modification	$	—		$	29.6	$	—
Cost of sales
Restructuring charges	22.7			5.3		—
Recognition of Nalco inventory fair value step-up	71.2			3.6		—
Subtotal	93.9			8.9		—
Special (gains) and charges
Restructuring charges	116.6			69.0		—
Champion acquisition costs	18.3			—		—
Nalco merger and integration costs	70.9			57.7		—
Gain on sale of businesses, litigation
related charges and other	(60.1		)	4.3		3.3
Venezuela currency devaluation	—			—		4.2
Subtotal	145.7			131.0		7.5
Operating income subtotal	239.6			169.5		7.5
Interest expense, net
Debt extinguishment costs	18.2			—		—
Merger and acquisition debt costs	1.1			1.5		—
Subtotal	19.3			1.5		—
Net income attributable to noncontrolling interest
Recognition of Nalco inventory fair value step-up	(4.5		)	—		—
Total special (gains) and charges	$	254.4		$	171.0	$	7.5

For segment reporting purposes, special (gains) and charges are included in the Corporate segment, which is consistent with the company’s internal management reporting.

Restructuring charges

Restructuring charges have been included as a component of both cost of sales and special (gains) and charges on the Consolidated Statement of Income. Amounts included as a component of cost of sales include supply chain related severance. Restructuring liabilities have been classified as a component of other current liabilities on the Consolidated Balance Sheet.

2011 Restructuring Plan

In February 2011, the company commenced a comprehensive plan to improve substantially the efficiency and effectiveness of its European business, sharpen its competitiveness and accelerate its growth and profitability. Additionally, restructuring has been and will continue to be undertaken outside of Europe (collectively, the “2011 Restructuring Plan”). Through the 2011 Restructuring Plan, over 750 positions are expected to be eliminated.

The company expects to incur pretax restructuring charges of approximately $150 million ($125 million after tax) under the 2011 Restructuring Plan through the completion of the Plan in 2013. The company anticipates that approximately $140 million of the pre-tax charge will represent cash expenditures. The remaining $10 million of the pre-tax charges represent estimated asset disposals or other non-cash expenses. No decisions have been made for any remaining asset disposals and estimates could vary depending on the actual actions taken.

As a result of restructuring activities under the 2011 Restructuring Plan, the company has recorded restructuring charges of $134.3 million ($100.3 million after tax) since the inception of the Plan. During 2012 and 2011, the company recorded restructuring charges of $66.2 million ($46.1 million after tax) and $68.1 million ($54.2 million after tax), respectively.

Merger Restructuring Plan

In January 2012, following the merger with Nalco, the company formally commenced plans to undertake restructuring actions related to the reduction of its global workforce and optimization of its supply chain and office facilities, including planned reductions of plant and distribution center locations (the “Merger Restructuring Plan”). Actions associated with the merger to improve efficiency and effectiveness have led to a reduction of the company’s workforce by approximately 500 positions during 2012, with additional productivity and efficiency actions beyond 2012 expected to reduce the need for future positions by approximately 1,500.

The company expects that restructuring activities under the Merger Restructuring Plan will be completed by the end of 2013, with total costs through the end of 2013 anticipated to be approximately $180 million ($120 million after tax). The company anticipates that approximately $160 million of the pre-tax restructuring charges will represent cash expenditures. The remaining $20 million of the pretax charges represent estimated asset disposals and other non-cash expenses. No decisions have been made for any remaining asset disposals and estimates could vary depending on the actual actions taken.

As a result of restructuring activities under the Merger Restructuring Plan, the company has recorded restructuring charges of $79.8 million ($58.6 million after tax) since the inception of the Plan. During 2012 and 2011, the company recorded restructuring charges of $73.2 million ($54.5 million after tax) and $6.6 million ($4.1 million after tax), respectively.

Restructuring charges and subsequent activity related to the 2011 Restructuring Plan and the Merger Restructuring Plan, since the inception of each respective Plan, include the following:

	2011 Restructuring Plan										Merger Restructuring Plan
	EMPLOYEE										EMPLOYEE
	TERMINATION		ASSET								TERMINATION		ASSET
MILLIONS	COSTS		DISPOSALS			OTHER		SUBTOTAL			COSTS		DISPOSALS		OTHER			SUBTOTAL			TOTAL
2011 Activity
Recorded expense and accrual	$	60.5	$	0.5		$	7.1	$	68.1		$	6.6	$	—	$	—		$	6.6		$	74.7
Cash payments	(22.2)		—			(2.6)		(24.8		)	(0.3)		—		—			(0.3		)	(25.1		)
Non-cash charges	—		(0.5		)	—		(0.5		)	—		—		—						(0.5		)
Effect of foreign currency translation	(2.2)		—			—		(2.2		)	—		—		—			—			(2.2		)
Restructuring liability December 31, 2011	36.1		—			4.5		40.6			6.3		—		—			6.3			46.9
2012 Activity
Recorded expense and accrual	60.7		—			5.5		66.2			65.4		3.2		4.6			73.2			139.4
Cash payments	(33.6)		—			(1.5)		(35.1		)	(28.4)		—		(1.8		)	(30.2		)	(65.3		)
Non-cash charges	—		—			(3.9)		(3.9		)	—		(3.2)		—			(3.2		)	(7.1		)
Effect of foreign currency translation	(0.8)		—			—		(0.8		)	0.1		—		—			0.1			(0.7		)
Restructuring liability December 31, 2012	$	62.4	$	—		$	4.6	$	67.0		$	43.4	$	—	$	2.8		$	46.2		$	113.2

Nalco Restructuring Plan

Prior to the Nalco merger, Nalco conducted various restructuring programs to redesign and optimize its business and work processes (the “Nalco Restructuring Plan”). As part of the Nalco merger, Ecolab assumed the Nalco Restructuring Plan liability balance of $10.6 million, which was primarily related to accrued severance and termination benefits. As of December 31, 2012 and 2011, the remaining liability balance related to the Nalco Restructuring Plan was $3.4 million and $10.6 million, respectively. Cash payments during 2012 related to this Plan were $7.4 million. The company expects to utilize the remaining liability through 2013 as part of the run out of this Plan.

Non-restructuring special (gains) and charges

Nalco merger and integration costs

As a result of the Nalco merger, during 2012 and 2011, the company incurred charges of $155.8 million ($113.7 million after tax) and $62.8 million ($45.6 million after tax), respectively. Nalco merger charges have been included as a component of cost of sales, special (gains) and charges, net interest expense and net income (loss) attributable to noncontrolling interest on the Consolidated Statement of Income. Amounts included in cost of sales and net income (loss) attributable to noncontrolling interest include recognition of fair value step-up in Nalco international inventory which is maintained on a FIFO basis. Amounts included in special (gains) and charges include merger and integration charges, closing costs and advisory fees. Amounts included in net interest expense include a loss on the extinguishment of Nalco’s senior notes, which were assumed as part of the merger, and fees to secure short-term credit facilities to initially fund the Nalco merger. Further details related to the Nalco merger are included in Note 4.

Champion acquisition costs

As a result of the pending Champion acquisition, during 2012 the company incurred charges of $19.4 million ($16.7 million after tax). Champion acquisition charges have been included as a component of special (gains) and charges and net interest expense on the Consolidated Statement of Income. Amounts included in special (gains) and charges include acquisition costs and advisory fees. Amounts included in net interest expense include fees to secure term loans and short-term debt and the interest expense impact of our $500 million public debt issuance in December 2012, all of which were initiated to fund the Champion acquisition. Further details related to the Champion acquisition are included in Note 4.

Other special (gains) and charges

During 2012, the company recorded a net gain of $60.1 million ($35.7 million after tax) related to the sale of its Vehicle Care division, the receipt of additional payments related to the sale of an investment in a U.S. business, originally sold prior to 2012 and litigation related charges.

In the fourth quarter of 2011, the company modified a long-term customer agreement that was assumed as part of a previous acquisition. The impact of the modification was included in net sales on the Consolidated Statement of Income, resulting in a sales reduction of $29.6 million ($18.4 million after tax).

In the first quarter of 2011, the company completed the purchase of the assets of the Cleantec business of Campbell Brothers Ltd., Brisbane, Queensland, Australia (“Cleantec”). Special (gains) and charges in 2011 included acquisition integration costs incurred to optimize the Cleantec business structure. Further details related to the Cleantec acquisition are included in Note 4.

Special (gains) and charges in 2010 include costs to optimize the company’s business structures. Special (gains) and charges during 2010 also include the recognition of a gain on the sale of an investment in a U.S. business. The investment was not material to the company’s consolidated results of operations or financial position.

Beginning in 2010, Venezuela was designated hyper-inflationary and as such all foreign currency fluctuations are recorded in income. On January 8, 2010 the Venezuelan government devalued its currency, the Bolivar Fuerte. As a result of the devaluation, the company recorded a charge in the first quarter of 2010 due to the remeasurement of the local balance sheet using the “official” rate of exchange for the Bolivar Fuerte.

4. ACQUISITIONS AND DISPOSITIONS

Acquisitions

Ecolab makes acquisitions from time to time that align with the company’s strategic business objectives. In accordance with authoritative guidance on business combination accounting, the assets and liabilities of the acquired entities have been recorded as of the acquisition date, at their respective fair values, and consolidated with the company. The purchase price allocation is based on estimates of the fair value of assets acquired and liabilities assumed. The results of operations related to each acquired entity have been included in the results of the company from the date each entity was acquired. The aggregate purchase price of acquisitions has been reduced for any cash or cash equivalents acquired with the acquisition.

Nalco merger

On December 1, 2011, the company completed its merger with Nalco, the world’s leading water treatment and process improvement company. Based in Naperville, Illinois, Nalco provides water management sustainability offerings focused on industrial, energy and institutional market segments. Nalco’s programs are used in water treatment applications to prevent corrosion, contamination and the buildup of harmful deposits and extend asset life, among other functions, and in production processes to enhance process efficiency, extend asset life and improve customers’ end products. Nalco also helps customers reduce energy, water and other natural resource consumption, minimizing environmental releases. Effective with the Nalco merger, the company added Nalco’s three legacy operating units (Water Services, Paper Services and Energy Services) as individual reportable segments. Beginning in the first quarter of 2012, the Water Services, Paper Services and Energy Services reportable segments were renamed as the Global Water, Global Paper and Global Energy reportable segments, respectively.

Under the terms of the merger agreement, each share of Nalco common stock issued and outstanding immediately prior to the effective time of the merger was converted into the right to receive, at the election of the stockholder, either 0.7005 shares of Ecolab common stock or $38.80 in cash, without interest, provided that approximately 70% of the issued and outstanding Nalco common stock immediately prior to the effective date was converted into the right to receive Ecolab common stock and approximately 30% of issued and outstanding shares of Nalco common stock immediately prior to the effective date was converted into the right to receive cash. In order to achieve this 70%/30% stock-cash consideration mix, the merger agreement provided for pro-rata adjustments to and reallocation of the stock consideration paid to Nalco stockholders, and cash elections made by Nalco stockholders, as well as the allocation of cash as the default consideration paid for Nalco shares owned by stockholders who failed to make an election. Those Nalco stockholders making stock elections received approximately 94% of their consideration in Ecolab shares while those electing cash received 100% cash consideration. Nalco stockholders did not receive any fractional shares of Ecolab common stock in the merger. Instead, they received cash in lieu of any fractional shares of Ecolab common stock.

The final consideration transferred to acquire all of Nalco’s stock is as follows:

MILLIONS, EXCEPT PER SHARE

Cash consideration
Number of Nalco common shares outstanding receiving cash consideration	41.9
Cash consideration per common share outstanding	$	38.80
Total cash paid to Nalco shareholders electing cash consideration	$	1,623.9
Stock consideration
Number of Nalco common shares outstanding receiving stock consideration	97.5
Exchange ratio	0.7005
Ecolab shares issued to Nalco shareholders electing stock consideration	68.3
Ecolab’s closing stock price on December 1, 2011	$	55.62
Total fair value of stock consideration	$	3,799.7
Fair value of Nalco equity compensation awards converted to Ecolab awards	$	73.5
Total fair value of cash and stock consideration	$	5,497.1

The company incurred certain merger and integration costs associated with the transaction that were expensed as incurred and are reflected in the Consolidated Statements of Income. A total of $155.8 million and $62.8 million were incurred during 2012 and 2011, respectively. Amounts included in cost of sales and net income (loss) attributable to noncontrolling interest include recognition of fair value step-up in Nalco international inventory which is maintained on a FIFO basis. Amounts included in special (gains) and charges include merger and integration charges, closing costs and advisory fees. Amounts included in net interest expense include a loss on the extinguishment of Nalco’s senior notes, which were assumed as part of the merger, and fees to secure short-term credit facilities to initially fund the Nalco merger.

The company initially financed the merger through commercial paper borrowings backed by its $1.5 billion, 5 year credit facility and a $2.0 billion 364 day credit facility the company had in place at the close of the merger, as well as through proceeds from its $500 million private placement senior notes. See Note 6 for further discussion on the company’s debt. The company also issued 68.3 million

shares of Ecolab common stock as part of the merger transaction. In addition, certain outstanding Nalco equity compensation awards were converted into Ecolab equity compensation awards of which the consideration portion was $73.5 million. See Notes 9 and 10 for further discussion on equity and equity compensation, respectively.

The merger has been accounted for using the acquisition method of accounting which requires, among other things, that most assets acquired and liabilities assumed be recognized at fair value as of the acquisition date. The following table summarizes the value of Nalco assets acquired and liabilities assumed as of the merger date. Also summarized in the table, subsequent to the merger, net adjustments of $53.0 million have been made to the preliminary purchase price allocations of the assets acquired and liabilities assumed, with a corresponding adjustment to goodwill. Purchase price allocations were finalized in the fourth quarter of 2012.

		2012
	INITIAL	ADJUSTMENTS		FINAL
MILLIONS	VALUATION	TO FAIR VALUE		VALUATION

Current assets	$1,869.6	$(0.1	)	$1,869.5
Property, plant and equipment	1,069.2	(1.2	)	1,068.0
Other assets	97.3	(3.3	)	94.0
Identifiable intangible assets:
Customer relationships	2,160.0	—		2,160.0
Patents	321.0	—		321.0
Trade names	1,230.0	—		1,230.0
Trademarks	79.0	—		79.0
Other technology	91.0	—		91.0
Total assets acquired	6,917.1	(4.6	)	6,912.5
Current liabilities	1,105.5	(0.1	)	1,105.4
Long-term debt	2,858.4	—		2,858.4
Pension and postretirement benefits	505.7	5.6		511.3
Net deferred tax liability	1,188.7	5.3		1,194.0
Noncontrolling interests and other liabilities	167.7	35.5		203.2
Total liabilities and noncontrolling interests assumed	5,826.0	46.3		5,872.3
Goodwill	4,403.9	53.0		4,456.9
Total consideration transferred	$5,495.0	$2.1		$5,497.1

The additional consideration of $2.1 million transferred in 2012 relates to the resolution of an appraisal action with respect to dissenting Nalco shares.

The customer relationships, patents, finite-lived trademarks and other technology are being amortized over weighted average lives of 15, 14, 15 and 8 years, respectively. The Nalco trade name has been determined to have an indefinite life.

In-process research and development associated with the Nalco merger was not significant.

Goodwill is calculated as the excess of the consideration transferred over the fair value of identifiable net assets acquired and represents the expected synergies and other benefits from combining the operations of Nalco with the operations of Ecolab. The company expects that the merger will produce revenue growth synergies through the cross-selling of products in complementary markets and also expand geographic and market breadth, while adding scale to operations in smaller countries, thus creating a stronger more globally diversified and strategically well-positioned combined entity. Key areas of cost synergies include increased purchasing power for raw materials, supply chain consolidation and elimination of corporate general and administrative functions overlap.

The results of Nalco’s operations have been included in the company’s consolidated financial statements from the close of the merger. The following table provides net sales and operating income from the Nalco business included in the company’s results during 2011 following the December 1, 2011 merger.

MILLIONS


Net sales	$	193.4
Operating income	13.8

The following table provides unaudited pro forma net sales and reported results of operations for the years ended December 31, 2011 and 2010, assuming the Nalco merger had been completed on January 1, 2010. The historical financial information has been adjusted to give effect to pro forma events that are directly attributable to the merger, supportable and expected to have a continuing impact on the combined results. The unaudited pro forma results do not include any anticipated cost savings from operating efficiencies or synergies that could result from the merger. Accordingly, such pro forma amounts are not necessarily indicative of the results that actually would have occurred had the merger been completed on January 1, 2010, nor are they indicative of future operating results of the combined company.

MILLIONS	2011		2010
(unaudited)
Net sales	$	11,283.9	$	10,326.0
Net income attributable to Ecolab	665.5		621.4
Earnings attributable to Ecolab per
common share
Basic	2.22		2.06
Diluted	2.17		2.02

Champion acquisition

In October 2012, the company entered into an agreement and plan of merger under which the company has agreed to acquire Champion. In December 2012, the company announced that it amended the acquisition agreement, such that Champion’s downstream process and water solutions business will not be acquired by the company.

Based in Houston, Texas, Champion is a global specialty products and services company delivering products and service-based offerings to the oil and gas industry. Champion’s sales for the business to be acquired by the company were approximately $1.4 billion in 2012. Subject to certain adjustments set out in the merger agreement, the total transaction value is expected to be approximately $2.2 billion. After adjustments for net cash and other items, the consideration will be paid approximately 75% in cash and 25% in shares of Ecolab common stock. Additionally, Ecolab will be required to pay an additional amount in cash, up to $100 million in the aggregate, equal to 50% of the incremental federal tax on the merger consideration as a result of increases in applicable capital gains and investment taxes after December 31, 2012. The consummation of the Champion acquisition remains subject to the satisfaction or waiver of various closing conditions, including, among others, the receipt of required regulatory approvals.

Financing for the transaction is expected to come from a combination of term loan funding, issuances under the company’s U.S. commercial paper program and proceeds from the $500 million public offering debt securities issued in December 2012.

Other significant acquisition activity

Subsequent Event Activity

In January 2013 the company completed the acquisition of Mexico-based Quimiproductos S.A. de C.V., a wholly-owned subsidiary of Fomento Econominco Mexicano, S.A.B. de C.V. Quimiproductos produces and supplies cleaning, sanitizing and water treatment goods and services to breweries and beverage companies located in Central and South America. Annual sales of the business are approximately $43 million.

2012 Activity

In December 2011, subsequent to the company’s fiscal year end for international operations, the company completed the acquisition of Esoform, an independent Italian healthcare manufacturer focused on infection prevention and personal care. Based outside of Venice, Italy, with annual sales of approximately $12 million, the business became part of the company’s International Cleaning, Sanitizing & Other Services reportable segment during the first quarter of 2012.

Also in December 2011, the company completed the acquisition of the InsetCenter pest elimination business in Brazil. Annual sales of the acquired business are approximately $6 million. The business operations and staff have been integrated with the company’s existing Brazil Pest Elimination business, and became part of the company’s International Cleaning, Sanitizing & Other Services reportable segment during the first quarter of 2012.

In March 2012, the company acquired Econ Indústria e Comércio de Produtos de Higiene e Limpeza Ltda., a provider of cleaning and sanitizing products and services to the Brazilian foodservice industry. Based in Sao Paulo, Brazil, its annual sales are approximately $9 million. The business operations have been integrated within the company’s existing Brazil Institutional business and became part of the company’s International Cleaning, Sanitizing & Other Services reportable segment during the second quarter of 2012.

2011 Activity

In December 2010, subsequent to the company’s fiscal year end for international operations, the company completed the purchase of the assets of Cleantec located in Brisbane, Queensland, Australia. Cleantec is a developer, manufacturer and marketer of cleaning and hygiene products principally within the Australian food and beverage processing, foodservice, hospitality and textile care markets. The business, which had annual sales of approximately $55 million, became part of the company’s International Cleaning, Sanitizing & Other Services segment during the first quarter of 2011. The total purchase price was approximately $43 million, of which $2 million was placed in an escrow account for indemnification purposes. During the third quarter of 2012, the $2 million escrow balance was paid to the seller.

In March 2011, the company closed on the purchase of the assets of O.R. Solutions, Inc., a privately-held developer and marketer of surgical fluid warming and cooling systems in the U.S. The business, which had annual sales of approximately $55 million, became part of the company’s U.S. Cleaning & Sanitizing segment during the first quarter of 2011. The total purchase price was approximately $260 million, of which $26 million was placed in an escrow account for indemnification purposes related to general representations and warranties. During the third quarter of 2012, $13 million of the escrow balance was paid to the seller. Assuming the general representations and warranties continue to be met, the remaining $13 million escrow balance is expected to be paid to the seller in the first quarter of 2013.

2010 Activity

In September 2010, the company acquired the commercial laundry division of Dober Chemical Corp. The acquisition strengthens the company’s U.S. and Canada Textile Care business by adding customer relationships and business scale, as well as important customer technology. The business, which had annual sales of approximately $37 million, became part of the company’s U.S. Cleaning & Sanitizing segment during the third quarter of 2010.

Other Significant Acquisition Summary

Excluding the Nalco merger, the pro forma impact of all other acquisitions during 2012, 2011, and 2010 was not material to the company’s consolidated financial statements; therefore pro forma financial information is not presented. Based upon purchase price allocations, excluding the Nalco merger which is shown previously in this note, the components of the aggregate purchase prices of 2012, 2011 and 2010 acquisitions are shown in the following table. The contingent consideration relates to immaterial acquisitions completed during 2012 and 2011.

MILLIONS	2012			2011			2010

Net tangible assets acquired (liabilities assumed)	$	(1.0	)	$	58.6		$	17.4
Identifiable intangible assets
Customer relationships	8.4			145.5			11.3
Patents	2.8			0.3			—
Trademarks	0.5			11.2			0.7
Other technology	0.3			8.4			5.7
Total intangible assets	12.0			165.4			17.7
Goodwill	23.3			94.3			8.3
Total aggregate purchase price	34.3			318.3			43.4
Contingent consideration	(2.6		)	(5.0		)	—
Liability for indemnification	16.0			(28.1		)	—
Net cash paid for acquisitions	$	47.7		$	285.2		$	43.4

Excluding the Nalco merger, the weighted average useful lives of intangible assets acquired was 13 years as of December 31, 2012, 2011 and 2010.

Dispositions

In December 2012, the company completed the sale of its Vehicle Care division for $116.9 million, resulting in a gain of $76.3 million ($47.5 million after tax), recorded in special (gains) and charges. Vehicle Care sales were approximately $65 million in 2011, the majority of which were within the company’s U.S. Cleaning & Sanitizing reportable segment. Net cash proceeds were used to repay debt and for general corporate purposes.

During the third quarter of 2012, the company received additional payments of $13.0 million related to the sale of an investment in a U.S. business, originally sold prior to 2012. The corresponding gain of $13.0 million recognized during the third quarter of 2012 was recorded in special (gains) and charges.

During the third quarter of 2010, the company sold an investment in a U.S. business and realized a gain of $5.9 million, which was reported in special (gains) and charges. The investment was not material to the company’s consolidated results of operations or financial position.

During the second quarter of 2010, the company sold a small joint venture in its international segment. The impact of this divestiture and the joint venture were not material to the company’s consolidated results of operations or financial position.

The company had no business dispositions in 2011.

5. BALANCE SHEET INFORMATION

DECEMBER 31 (MILLIONS)	2012			2011

Accounts receivable, net
Accounts receivable	$	2,298.3		$	2,144.6
Allowance for doubtful accounts	(73.2		)	(49.3		)
Total	$	2,225.1		$	2,095.3
Inventories
Finished goods	$	774.3		$	745.5
Raw materials and parts	338.3			351.4
Inventories at FIFO cost	1,112.6			1,096.9
Excess of FIFO cost over LIFO cost	(24.5		)	(27.3		)
Total	$	1,088.1		$	1,069.6
Property, plant and equipment, net
Land	$	158.9		$	158.8
Buildings and improvements	562.1			483.8
Leasehold improvements	80.5			77.3
Machinery and equipment	1,281.2			1,206.1
Merchandising and customer equipment	1,812.5			1,682.7
Capitalized software	385.7			385.7
Construction in progress	207.2			182.7
	4,488.1			4,177.1
Accumulated depreciation	(2,079.0		)	(1,881.7		)
Total	$	2,409.1		$	2,295.4
Other intangible assets, net
Cost of intangible assets not subject to amortization:
Trade names	$	1,230.0		$	1,230.0
Cost of intangible assets subject to amortization:
Customer relationships	$	2,588.6		$	2,593.2
Trademarks	185.2			201.0
Patents	414.7			404.4
Other technology	174.8			174.6
	3,363.3			3,373.2
Accumulated amortization:
Customer relationships	(373.1		)	(204.8		)
Trademarks	(51.2		)	(48.6		)
Patents	(65.6		)	(36.3		)
Other technology	(59.3		)	(38.3		)
Total	$	4,044.1		$	4,275.2
Other assets
Deferred income taxes	$	51.0		$	61.9
Pension	7.0			22.3
Other	248.6			278.6
Total	$	306.6		$	362.8
Other current liabilities
Discounts and rebates	$	244.4		$	239.9
Dividends payable	—			60.0
Interest payable	19.5			51.0
Taxes payable, other than income	97.3			74.1
Derivative liabilities	9.9			3.3
Restructuring	116.6			57.5
Other	283.3			262.9
Total	$	771.0		$	748.7
Other liabilities
Deferred income taxes	$	1,174.2		$	1,249.2
Income taxes payable - noncurrent	81.5			80.8
Other	147.2			160.7
Total	$	1,402.9		$	1,490.7
Accumulated other comprehensive loss
Unrealized gain (loss) on derivative financial instruments, net of tax	$	(13.6	)	$	(13.5	)
Unrecognized pension and postretirement benefit expense, net of tax	(613.8		)	(481.3		)
Cumulative translation, net of tax	167.7			149.9
Total	$	(459.7	)	$	(344.9	)

6. DEBT AND INTEREST

The following table provides the components of the company’s short-term debt obligations, along with applicable interest rates as of December 31, 2012 and 2011:

MILLIONS,	2012				2011
EXCEPT INTEREST RATES			AVERAGE				AVERAGE
			INTEREST				INTEREST
	PAYABLE		RATE		PAYABLE		RATE

Short-term debt
Commercial paper	$	593.7	0.46	%	$	916.1	0.67	%
Notes payable	44.5		10.04	%	100.3		7.52	%
Long-term debt, current maturities	167.6				6.6
Total	$	805.8			$	1,023.0

In September 2011, the company replaced its existing $600 million multi-year credit facility with a $1.5 billion multi-year credit facility, which expires in September 2016. During 2011, the company also entered into a $2.0 billion, 364 day credit facility. In April 2012, the company reduced its 364 day credit facility from $2.0 billion to $1.0 billion. In August 2012, the company replaced the $1.0 billion 364 day credit facility, which was to expire in September 2012, with a $500 million 364 day credit facility. Both of the $1.5 billion and $500 million credit facilities have been established with a diverse portfolio of banks. No amounts were outstanding under any of these agreements at year end 2012 or 2011.

The credit facilities support the company’s U.S. commercial paper program, which was reduced to $2.0 billion subsequent to the replacement of the 364 day credit facility discussed above, and the company’s $200 million European commercial paper program. Combined borrowing under these two commercial paper programs may not exceed $2.0 billion. The company had $594 million and $916 million in outstanding U.S. commercial paper at December 31, 2012 and 2011, respectively. The company had no commercial paper outstanding under its European program at December 31, 2012 or 2011. As of December 31, 2012, the company’s short-term borrowing program was rated A-2 by Standard & Poor’s and P-2 by Moody’s.

The following table provides the components of the company’s long-term debt obligations, along with applicable interest rates as of December 31, 2012 and 2011:

MILLIONS, EXCEPT INTEREST RATES					2012							2011
					AVERAGE		EFFECTIVE					AVERAGE		EFFECTIVE
	MATURITY	CARRYING			INTEREST		INTEREST		CARRYING			INTEREST		INTEREST
	BY YEAR	VALUE			RATE		RATE		VALUE			RATE		RATE

Long-term debt
Description / 2012 Principal Amount
Series A private placement senior notes (125 million euro)	2013	$	162.3		4.36	%	4.51	%	$	168.1		4.36	%	4.51	%
Series B private placement senior notes (175 million euro)	2016	227.3			4.59	%	4.67	%	235.3			4.59	%	4.67	%
Seven year 2008 senior notes ($250 million)	2015	249.4			4.88	%	4.99	%	249.1			4.88	%	4.99	%
Series A private placement senior notes ($250 million)	2018	250.0			3.69	%	5.15	%	250.0			3.69	%	5.15	%
Series B private placement senior notes ($250 million)	2023	250.0			4.32	%	4.32	%	250.0			4.32	%	4.32	%
Three year 2011 senior notes ($500 million)	2014	499.8			2.38	%	2.40	%	499.7			2.38	%	2.40	%
Five year 2011 senior notes ($1.25 billion)	2016	1,248.1			3.00	%	3.04	%	1,247.6			3.00	%	3.04	%
Ten year 2011 senior notes ($1.25 billion)	2021	1,249.3			4.35	%	4.36	%	1,249.2			4.35	%	4.36	%
Thirty year 2011 senior notes ($750 million)	2041	742.6			5.50	%	5.53	%	742.3			5.50	%	5.53	%
Three year 2012 senior notes ($500 million)	2015	499.8			1.00	%	1.02	%	—
Five year 2012 senior notes ($500 million)	2017	499.6			1.45	%	1.47	%	—
Nalco senior notes ($0)	2019	—							838.7			6.63	%	5.13	%
Nalco senior euro notes ($0)	2019	—							300.7			6.88	%	5.53	%
Nalco senior notes ($0)	2017	—							558.5			8.25	%	6.30	%
Capital lease obligations		13.8							18.3
Other		11.7							12.3
Total debt		5,903.7							6,619.8
Long-term debt, current maturities		(167.6		)					(6.6		)
Total long-term debt		$	5,736.1						$	6,613.2

Term Loans

In November 2012, the company entered into a $900 million term loan credit agreement with various banks. Under the agreement, which had not been drawn upon as of December 31, 2012, the term loan will bear interest at a floating base rate plus a credit rating based margin. Proceeds from the term loan are expected to be used to fund a portion of the pending Champion acquisition. Funding under the agreement will be available through April 15, 2013 and, to the extent funded, the term loan will expire on the third anniversary of the funding date.

Public Notes

In December 2012, in a public offering, the company issued $500 million of debt securities that mature in 2017 at a rate of 1.45%. The company anticipates that the proceeds will be used to finance a portion of the cash consideration to be paid in connection with the pending Champion acquisition, or for general corporate purposes.

In December 2011, the company issued $3.75 billion of debt securities in a public debt offering. The offering was a multi-tranche transaction consisting of three, five, ten and thirty year maturities. Interest rates range from 2.38% to 5.50%. The proceeds were used to repay outstanding commercial paper, which was issued to fund a portion of the cash component of the Nalco merger and repay the Nalco term loans, and fund share repurchases.

In February 2008, the company issued and sold $250 million aggregate principal amount of senior unsecured notes that mature in 2015 at a rate of 4.88% in a public debt offering. The proceeds were used to refinance outstanding commercial paper and for general corporate purposes.

The series of notes issued by the company in December 2012, August 2012, December 2011 and February 2008, pursuant to public debt offerings (the “Public Notes”) may be redeemed by the company at its option at redemption prices that include accrued and unpaid interest and a make-whole premium. Additionally, if the Champion acquisition is not completed by May 3, 2013, or if the Champion acquisition merger agreement is terminated on or before such date, the company may redeem the $500 million series of notes issued by the company in December 2012, in whole but not in part, at a price equal to 101% of the principal amount thereof, plus any accrued and unpaid interest to the redemption date. Upon the occurrence of a change of control accompanied by a downgrade of the Public Notes below investment grade rating, within a specified time period, the company will be required to offer to repurchase the Public Notes at a price equal to 101% of the aggregate principal amount thereof, plus any accrued and unpaid interest to the date of repurchase.

The Public Notes are senior unsecured and unsubordinated obligations of the company and rank equally with all other senior and unsubordinated indebtedness of the company from time to time outstanding.

Private Notes

In October 2011, the company entered into a Note Purchase Agreement to issue and sell $500 million private placement senior notes, split into two series: $250 million of seven year notes that mature in 2018 at a rate of 3.69% and $250 million of twelve year notes that mature in 2023 at a rate of 4.32%. Both series of the notes were funded in November 2011. The proceeds were used for general corporate purposes, including partially funding the Nalco merger.

The company has outstanding euro 300 million ($390 million as of December 31, 2012) aggregate principal amount of the company’s private placement senior notes in two series: 4.36% Series A Senior Notes due 2013 in the aggregate principal amount of euro 125 million and 4.59% Series B Senior Notes due 2016 in the aggregate principal amount of euro 175 million, issued in December 2006, pursuant to a Note Purchase Agreement dated July 26, 2006.

The series of notes issued by the company in December 2006 and November 2011 pursuant to private debt offerings (the “Private Notes”) may be redeemed by the company at its option at redemption prices that include accrued and unpaid interest and a make-whole premium. Upon the occurrence of specified changes of control involving the company, the company will be required to offer to repurchase the Private Notes at a price equal to 100% of the aggregate principal amount thereof, plus any accrued and unpaid interest to the date of repurchase. Additionally, the company will be required to make a similar offer to repurchase the Private Notes upon the occurrence of specified merger events or asset sales involving the company, when accompanied by a downgrade of the Private Notes below investment grade rating, within a specified time period.

The Private Notes are senior obligations of the company and rank equal in right of payment with all other senior indebtedness of the company. The Private Notes shall be unconditionally guaranteed by subsidiaries of the company in certain circumstances, as described in the note purchase agreements as amended.

Covenants, Repayments and Net Interest Expense

The company is in compliance with all covenants at December 31, 2012.

In January 2012, the company redeemed $1.7 billion of Nalco senior notes, which were assumed in 2011 as part of the merger. As of December 31, 2011, the Nalco senior notes were fully and unconditionally guaranteed by certain Nalco subsidiaries. In conjunction with the redemption in January 2012, all guarantees in place as of December 31, 2011 were extinguished.

In February 2011, the company repaid its $150 million 6.875% notes when they became due.

As of December 31, 2012, the aggregate annual maturities of long-term debt for the next five years were:

MILLIONS
2013	$	168
2014	506
2015	755
2016	1,479
2017	501

Interest expense and interest income incurred during 2012, 2011 and 2010 were as follows:

MILLIONS	2012			2011			2010
Interest expense	$	285.6		$	82.1		$	65.6
Interest income	(8.9		)	(7.9		)	(6.5		)
Interest expense, net	$	276.7		$	74.2		$	59.1

Interest expense generally includes the expense associated with the interest on the company’s outstanding borrowings. Interest expense also includes the amortization of debt issuance costs and debt discounts, which are both recognized over the term of the related debt. The increase in interest expense in 2012 was driven primarily by debt issued to fund the cash portion of the Nalco merger consideration, the repayment of Nalco debt and share repurchases. Interest expense for 2012 also includes an $18.2 million loss on extinguishment of Nalco debt, recognized in the first quarter.

7. FAIR VALUE MEASUREMENTS

The company’s financial instruments include cash and cash equivalents, money market funds in a rabbi trust, accounts receivable, accounts payable, contingent consideration obligations, commercial paper, notes payable, foreign currency forward contracts and long-term debt.

Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. A hierarchy has been established for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The hierarchy is broken down into three levels:

Level 1 - Inputs are quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities.

Level 2 - Inputs include observable inputs other than quoted prices in active markets.

Level 3 - Inputs are unobservable inputs for which there is little or no market data available.

The carrying amount and the estimated fair value for assets and liabilities measured on a recurring basis were:

DECEMBER 31 (MILLIONS)

2012

CARRYING

FAIR VALUE MEASUREMENTS

AMOUNT

LEVEL 1

LEVEL 2

LEVEL 3

Assets:

Money market funds held in rabbi trusts

2.2

—

Foreign currency forward contracts

6.5

—

6.5

—

Liabilities:

Foreign currency forward contracts

9.9

—

9.9

—

Contingent consideration obligations

23.2

—

23.2

DECEMBER 31 (MILLIONS)	2011
	CARRYING		FAIR VALUE MEASUREMENTS
	AMOUNT		LEVEL 1		LEVEL 2		LEVEL 3
Assets:
Money market funds held in rabbi trusts	$	0.9	$	0.9	$	—	$	—
Foreign currency forward contracts	10.4		—		10.4		—

Liabilities:
Foreign currency forward contracts	3.3		—		3.3		—
Contingent consideration obligations	25.1		—		—		25.1

Money market funds held in rabbi trusts are classified within level 1 because they are valued using quoted prices in active markets. The carrying value of foreign currency forward contracts is at fair value, which is determined based on foreign currency exchange rates as of the balance sheet date, and is classified within level 2.

For business acquisitions after December 31, 2008, contingent consideration obligations are recognized and measured at fair value at the acquisition date. Contingent consideration liabilities are classified within level 3 because fair value is measured based on the probability-weighted present value of the consideration expected to be transferred. The consideration expected to be transferred is based on the company’s expectations of various financial measures. The ultimate payment of contingent consideration could deviate from current estimates based on the actual results of these financial measures. Changes in the fair value of contingent consideration obligations during 2012 and 2011 were as follows:

MILLIONS	2012			2011
Balance at beginning of year	$	25.1		$	2.4
Liabilities recognized at acquistion date	2.6			5.0
Losses (gains) recognized in earnings	(1.9		)	0.8
Settlements	(2.5		)	—
Assumed through Nalco merger	—			16.9
Foreign currency translation	(0.1		)	—
Balance at end of year	$	23.2		$	25.1

The carrying values of accounts receivable and accounts payable approximate fair value because of their short maturities. The carrying value of cash and cash equivalents, commercial paper and notes payable approximate fair value because of their short maturities, and as such are classified within level 1.

The fair value of long-term debt, including current maturities, is based on quoted market prices for the same or similar debt instruments. The carrying amount and the estimated fair value of long-term debt, including current maturities, held by the company were:

DECEMBER 31 (MILLIONS)

2012

2011

CARRYING

FAIR

CARRYING

FAIR

AMOUNT

VALUE

AMOUNT

VALUE

Long-term debt

(including current maturities)

5,903.7

6,488.8

6,619.8

6,885.3

8. DERIVATIVES AND HEDGING TRANSACTIONS

Derivative Instruments and Hedging

The company uses foreign currency forward contracts, interest rate swaps and foreign currency debt to manage risks associated with foreign currency exchange rates, interest rates and net investments in foreign operations. The company does not hold derivative financial instruments of a speculative nature or for trading purposes. The company records all derivatives as assets and liabilities on the balance sheet at fair value. Changes in fair value are recognized immediately in earnings unless the derivative qualifies and is designated as a hedge. For derivatives designated as cash flow hedges, the effective portion of changes in fair value of hedges is initially recognized in accumulated other comprehensive income (“AOCI”) on the Consolidated Balance Sheet. Amounts recorded in AOCI are reclassified into earnings in the same period or periods during which the hedged transactions affect earnings. The company evaluates hedge effectiveness at inception and on an ongoing basis. If a derivative is no longer expected to be effective, hedge accounting is discontinued. Hedge ineffectiveness, if any, is recorded in earnings.

The company is exposed to credit loss in the event of nonperformance of counterparties for foreign currency forward exchange contracts and interest rate swap agreements. The company monitors its exposure to credit risk by using credit approvals and credit limits and by selecting major international banks and financial institutions as counterparties. The company does not anticipate nonperformance by any of these counterparties, and therefore recording a valuation allowance against the company’s derivative balance is not considered necessary.

Derivatives Designated as Cash Flow Hedges

The company utilizes foreign currency forward contracts to hedge the effect of foreign currency exchange rate fluctuations on forecasted foreign currency transactions, including: inventory purchases and intercompany royalty and management fee payments. These forward contracts are designated as cash flow hedges. The effective portions of the changes in fair value of these contracts are recorded in AOCI until the hedged items affect earnings, at which time the gain or loss is reclassified into the same line item in the Consolidated Statement of Income as the underlying exposure being hedged. All hedged transactions are forecasted to occur within the next twelve months.

The company occasionally enters into interest rate swap contracts to manage interest rate exposures. In 2011, the company entered into six forward starting swap contracts in connection with the issuance of its private placement debt during the fourth quarter of 2011. The interest rate swap agreements were designated and effective as a cash flow hedge of the expected interest payments related to the anticipated debt issuance. In 2006, the company entered into and subsequently closed two forward starting swap contracts related to the issuance of its senior euro notes with the net settlement recorded in AOCI. The amounts in AOCI for both the 2011 and 2006 transactions are recognized in earnings as part of interest expense over the remaining life of the notes as the forecasted interest transactions occur. The company did not have any forward starting interest rate swap agreements outstanding at December 31, 2012, 2011 or 2010.

Derivatives Not Designated as Hedging Instruments

The company also uses foreign currency forward contracts to offset its exposure to the change in value of assets and liabilities held at foreign subsidiaries, primarily receivables and payables which are remeasured at the end of each period. Although the contracts are effective economic hedges, they are not designated as accounting hedges. Therefore, changes in the value of these derivatives are recognized immediately in earnings, thereby offsetting the current earnings effect of the related foreign currency denominated assets and liabilities.

Derivative Summary

The following table summarizes the fair value of the company’s outstanding derivatives as of December 31. The amounts are included in other current assets and other current liabilities on the company’s balance sheet.

	ASSET DERIVATIVES				LIABILITY DERIVATIVES
MILLIONS	2012		2011		2012		2011

Derivatives designated as hedging instruments :

Foreign currency forward contracts	$	0.8	$	3.8	$	1.7	$	1.2

Derivatives not designated as hedging instruments :

Foreign currency forward contracts	5.7		6.6		8.2		2.1
Total	$	6.5	$	10.4	$	9.9	$	3.3

The company had foreign currency forward exchange contracts with notional values that totaled $1.3 billion and $586 million at December 31, 2012 and 2011, respectively. The increase from December 31, 2011 is primarily driven by increased hedging activity as a result of the inclusion of Nalco operations in 2012.

The impact on AOCI and earnings from derivative contracts that qualified as cash flow hedges was as follows:

MILLIONS	LOCATION	2012			2011			2010
Unrealized gain (loss) recognized into AOCI (effective portion)

Foreign currency forward contracts	AOCI (equity)	$	(1.9	)	$	0.2		$	(2.5	)

Interest rate swap contracts	AOCI (equity)	—			(15.3		)	—

Gain (loss) recognized in income (effective portion)

Foreign currency forward contracts	Sales	(0.1		)	(0.3		)	—
	Cost of sales	2.0			(4.7		)	(4.1		)
	SG&A	0.2			(1.5		)	0.5
		2.1			(6.5		)	(3.6		)

Interest rate swap contracts	Interest expense, net	(2.7		)	(0.8		)	(0.4		)
	Total	$	(0.6	)	$	(7.3	)	$	(4.0	)
Gain (loss) recognized in income (ineffective portion)

Foreign currency forward contracts	Interest expense, net	$	(1.2	)	$	(1.8	)	$	(1.2	)

The impact on earnings from derivative contracts that are not designated as hedging instruments was as follows:

MILLIONS	LOCATION	2012			2011			2010

Gain (loss) recognized in income

Foreign currency forward contracts	SG&A	$	(0.9	)	$	2.9		$	(5.4	)
	Interest expense, net	(7.0		)	(5.4		)	(5.5		)
	Total	$	(7.9	)	$	(2.5	)	$	(10.9	)

The amounts recognized in SG&A above offset the earnings impact of the related foreign currency denominated assets and liabilities. The amounts recognized in interest expense above represent the component of the hedging gains (losses) attributable to the difference between the spot and forward rates of the hedges as a result of interest rate differentials.

Net Investment Hedge

The company designates its euro 300 million ($390 million as of December 31, 2012) senior notes and related accrued interest as a hedge of existing foreign currency exposures related to net investments the company has in certain Euro functional subsidiaries. Prior to redemption in January 2012, the Nalco euro denominated borrowings were also designated as a hedge of existing foreign currency exposures.

In the third quarter of 2012, the company entered into a forward contract with a notional amount of euro 100 million to hedge an additional portion of the company’s net investments in euro functional subsidiaries. The forward contract was renewed in the fourth quarter of 2012 and remained open as of December 31, 2012.

The revaluation gains and losses on the euronotes and forward contract, which are designated and effective as hedges of the company’s net investments, have been included as a component of the cumulative translation adjustment account.

Total revaluation gains and losses related to the euronotes and forward contract charged to shareholders’ equity were as follows:

MILLIONS	2012		2011			2010
Revaluation gains (losses), net of tax	$	9.8	$	(9.5	)	$	37.6

The company formally assesses, on a quarterly basis, whether the euro-denominated debt is effective at offsetting changes in the value of the underlying exposure. No hedge ineffectiveness was recorded in earnings during 2012, 2011 and 2010.

9. SHAREHOLDERS’ EQUITY

Authorized common stock, par value $1.00 per share, was 400 million shares in 2010. Effective December 1, 2011, following approval by the company’s shareholders, the company’s authorized common stock was increased to 800 million shares. Authorized common stock remained at 800 million shares in 2012. Treasury stock is stated at cost. Dividends declared per share of common stock were $0.8300 for 2012, $0.7250 for 2011 and $0.6400 for 2010.

On December 1, 2011, the company issued 68,316,283 shares of common stock for the stock consideration portion of the Nalco merger (see Note 4). In addition, as part of the consideration, each outstanding Nalco stock option was converted into an option to purchase the company’s common stock with both the number of options and the exercise price adjusted accordingly based on the stock award exchange ratio. Pursuant to change-in-control agreements, Nalco’s existing restricted stock awards to non-employee directors and certain officers, in general, fully vested as a result of the merger. For those awards that did not vest as a result of the merger, each Nalco unvested restricted stock award was converted based on the stock award exchange ratio into a

restricted stock award of the company, with vesting subject to continued employment. In conjunction with the merger, the level of attainment of the performance criteria applicable to converted Nalco performance based restricted stock awards was fixed based on actual and target financial performance and such awards were converted based on the stock award exchange ratio into a time based restricted stock award of the company based on such performance level, with vesting subject to continued employment.

The company has 15 million shares, without par value, of authorized but unissued and undesignated preferred stock. The company’s former shareholder rights agreement was amended in December 2012 to accelerate the expiration date of the former rights issued pursuant to the rights agreement from March 10, 2016 to December 31, 2012. Accordingly, the rights agreement terminated as of that date.

In May 2011, the company’s Board of Directors authorized the repurchase of up to 15 million additional shares of common stock, including shares to be repurchased under Rule 10b5-1. In August 2011, the Finance Committee of the company’s Board of Directors, via delegation by the company’s Board of Directors, authorized the repurchase of an additional 10 million common shares which was contingent upon completion of the merger with Nalco.

In September 2011, under the existing Board authorization, subject to the completion of the Nalco merger, the company announced a $1.0 billion share repurchase program. As part of this program, in December 2011, the company entered into an accelerated share repurchase (“ASR”) agreement with a financial institution to repurchase $500 million of its common stock. Under the ASR, the company received 8,330,379 shares of its common stock in December 2011. The final per share purchase price and the total number of shares to be repurchased under the ASR agreement were generally based on the volume weighted average price of the company’s common stock during the term of the agreement. The ASR agreement ended in the first quarter of 2012. In connection with the finalization of the ASR agreement, the company received an additional 122,314 shares of common stock. All shares acquired under the ASR agreement were recorded as treasury stock.

In addition to the ASR, the company reacquired 2,600,569 shares, 3,491,425 shares and 7,366,001 shares of its common stock in 2012, 2011 and 2010, respectively, through its share repurchase program through open market or private purchases. The company intends to repurchase all shares under its authorizations, for which no expiration date has been established, in open market or privately negotiated transactions, subject to market conditions. As of December 31, 2012, 15,810,096 shares remained to be repurchased under the company’s repurchase authorization and approximately $279 million remained to be purchased as part of the $1.0 billion program discussed above. The company expects to complete this remaining portion of the $1.0 billion share repurchase program in 2013.

The company also reacquired 734,857 shares, 187,454 shares and 242,161 shares of its common stock in 2012, 2011 and 2010, respectively, related to the exercise of stock options and the vesting of stock awards.

10. EQUITY COMPENSATION PLANS

The company’s equity compensation plans provide for grants of stock options, restricted stock awards and restricted stock unit awards. Common shares available for grant as of December 31, 2012, 2011 and 2010 were 5,316,532, 8,813,059 and 11,608,387, respectively. Common shares available for grant reflect 12 million shares approved by shareholders in 2010 for issuance under the plans. Following the Nalco merger in 2011, 1,405,530 common shares on a converted basis, formerly reserved for grant under Nalco’s 2004 Stock Incentive Plan, were added to the shares available for grant by the company. The company generally issues authorized but previously unissued shares to satisfy stock option exercises. The company has a share repurchase program and generally repurchases shares on the open market to help offset the dilutive effect of share-based compensation.

The company’s annual long-term incentive share-based compensation program is made up of 50% stock options and 50% performance-based restricted stock unit (“PBRSU”) awards. The company also grants a limited number of non-performance based restricted stock awards (“RSA”) and restricted stock unit awards (“RSU”).

Prior to the Nalco merger, Nalco had outstanding stock options, restricted stock awards and performance share awards that were issued pursuant to its incentive compensation plan, as well as certain non-plan inducement stock options and restricted stock awards. For each of the converted awards discussed below, the stock award exchange ratio of .67959 was used to convert Nalco awards into Ecolab awards. As a result of the merger, the majority of Nalco’s existing stock options fully vested. Each outstanding Nalco option was converted into an option to purchase the company’s common stock with both the number of options and the exercise price adjusted accordingly based on the stock award exchange ratio. Pursuant to change-in-control agreements, Nalco’s existing restricted stock awards to non-employee directors and certain officers, in general, fully vested as a result of the merger. For those awards that did not vest as a result of the merger, each unvested restricted stock award was converted based on the stock award exchange ratio into a restricted stock award of the company, with vesting subject to continued employment. In conjunction with the merger, the level of attainment of the performance criteria applicable to converted Nalco performance based restricted stock awards was fixed based on actual and target financial performance. As such, each Nalco performance share award converted based on the stock award exchange ratio into a time based restricted award of the company based on such performance level, with vesting subject to continued employment. The total fair value of Nalco’s converted equity compensation as of the merger dates was $111 million, of which $73 million was included in the consideration transferred to acquire Nalco, with the remaining $38 million subject to expense recognition over the remainder of the vesting term. As of December 31, 2012, $10 million of the $38 million remains to be expensed.

Total compensation expense related to all share-based compensation plans was $66 million, ($45 million net of tax benefit), $40 million ($27 million net of tax benefit) and $29 million ($19 million net of tax benefit) for 2012, 2011 and 2010, respectively.

As of December 31, 2012, there was $115 million of total measured but unrecognized compensation expense related to non-vested share-based compensation arrangements granted under all of the company’s plans. That cost is expected to be recognized over a weighted-average period of 1.9 years.

Stock Options

Options are granted to purchase shares of the company’s stock at the average daily share price on the date of grant. These options generally expire within ten years from the grant date. The company recognizes compensation expense for these awards on a straight-line basis over the three year vesting period. Stock option grants to retirement eligible recipients are attributed to expense using the non-substantive vesting method.

A summary of stock option activity and average exercise prices is as follows:

	2012				2011				2010
	NUMBER OF		EXERCISE		NUMBER OF		EXERCISE		NUMBER OF		EXERCISE
	OPTIONS		PRICE (a)		OPTIONS		PRICE (a)		OPTIONS		PRICE (a)

Outstanding, beginning of year	20,126,579		$	41.45	19,988,025		$	38.66	22,262,204		$	36.22
Granted	2,238,267		71.17		2,661,551		55.38		1,783,293		48.03
Issued in connection with Nalco merger	—		—		883,173		29.35		—		—
Exercised	(6,774,032	)	35.16		(3,331,926	)	32.59		(3,813,865	)	28.46
Canceled	(465,658	)	53.61		(74,244	)	43.68		(243,607	)	43.86
Outstanding, end of year	15,125,156		$	48.29	20,126,579		$	41.45	19,988,025		$	38.66
Exercisable, end of year	11,036,700		$	42.77	15,885,276		$	38.57	16,091,416		$	37.42
Vested and expected to vest, end of year	14,770,288		$	48.01

(a) Represents weighted average price.

The total intrinsic value of options (the amount by which the stock price exceeded the exercise price of the option on the date of exercise) that were exercised during 2012, 2011 and 2010 was $211 million, $69 million and $76 million, respectively.

The total aggregate intrinsic value of options outstanding as of December 31, 2012 was $346 million, with a corresponding weighted-average remaining contractual life of 6.5 years. The total aggregate intrinsic value of options exercisable as of December 31, 2012 was $313 million, with a corresponding weighted-average remaining contractual life of 4.0 years. The total aggregate intrinsic value of options vested and expected to vest as of December 31, 2012 was $342 million, with a corresponding weighted-average remaining contractual life of 6.4 years.

The lattice (binomial) option-pricing model is used to estimate the fair value of options at grant date. The company’s primary employee option grant occurs during the fourth quarter. The weighted-average grant-date fair value of options granted and the significant assumptions used in determining the underlying fair value of each option grant, on the date of grant were as follows:

	2012			2011			2010
Weighted-average grant-date fair value of options granted at market prices	$	13.77		$	11.01		$	10.11
Assumptions
Risk-free rate of return	0.9		%	1.4		%	2.0		%
Expected life	6 years			6 years			6 years
Expected volatility	22.8		%	22.8		%	23.1		%
Expected dividend yield	1.3		%	1.4		%	1.4		%

The risk-free rate of return is determined based on a yield curve of U.S. treasury rates from one month to ten years and a period commensurate with the expected life of the options granted. Expected volatility is established based on historical volatility of the company’s stock price. The expected dividend yield is determined based on the company’s annual dividend amount as a percentage of the average stock price at the time of the grant.

Restricted Stock Awards and Restricted Stock Units

The expense associated with PBRSU awards is based on the average of the high and low share price of the company’s common stock on the date of grant, adjusted for the absence of future dividends. The awards vest based on the company achieving a defined performance target and with continued service for a three year period. Upon vesting, the company issues shares of its common stock such that one award unit equals one share of common stock. The company assesses the probability of achieving the performance target and recognizes expense over the three year vesting period when it is probable the performance target will be met. PBRSU awards granted to retirement eligible recipients are attributed to expense using the non-substantive vesting method. The awards are generally subject to forfeiture in the event of termination of employment.

The expense associated with shares of non-performance based RSAs and RSUs is based on the average of the high and low share price of the company’s common stock on the date of grant, adjusted for the absence of future dividends and is amortized on a straight-line basis over the periods during which the restrictions lapse. The company currently has RSAs and RSUs that vest over periods between 12 and 60 months. The awards are generally subject to forfeiture in the event of termination of employment.

A summary of non-vested PBRSU awards and restricted stock activity is as follows:

			GRANT				GRANT
	PBRSU		DATE FAIR		RSAs AND		DATE FAIR
	AWARDS		VALUE (a)		RSUs		VALUE (a)
December 30, 2010	845,630		$	44.70	167,171		$	43.54
Granted	572,350		52.96		126,121		51.02
Issued in connection with Nalco merger	857,366		55.62		808,883		55.62
Vested / Earned	(13,360	)	55.62		(81,874	)	48.71
Canceled	(121,321	)	54.07		(3,641	)	41.80
December 31, 2011	2,140,665		50.68		1,016,660		53.67
Granted	454,620		68.63		230,193		64.10
Vested / Earned	(285,249	)	55.62		(362,926	)	53.80
Canceled	(218,764	)	53.14		(86,714	)	52.03
December 31, 2012	2,091,272		$	53.65	797,213		$	56.79

(a) Represents weighted average price.

11. INCOME TAXES

Income before income taxes consisted of:

MILLIONS	2012		2011		2010
United States	$	594.8	$	440.0	$	497.5
International	417.8		239.6		250.2
Total	$	1,012.6	$	679.6	$	747.7

The provision for income taxes consisted of:

MILLIONS	2012			2011		2010
Federal and state	$	141.3		$	104.9	$	173.5
International	173.2			69.7		74.2
Total current	314.5			174.6		247.7
Federal and state	31.7			25.2		(26.3		)
International	(34.9		)	16.5		(4.8		)
Total deferred	(3.2		)	41.7		(31.1		)
Provision for income taxes	$	311.3		$	216.3	$	216.6

The company’s overall net deferred tax assets and deferred tax liabilities were comprised of the following:

DECEMBER 31 (MILLIONS)	2012			2011
Deferred tax assets
Other accrued liabilities	$	136.1		$	112.4
Loss carryforwards	110.4			112.0
Share-based compensation	71.6			82.5
Pension and other comprehensive income	337.8			346.3
Foreign tax credits	47.6			44.7
Debt fair value adjustment	—			79.4
Other, net	138.9			120.4
Valuation allowance	(86.8		)	(73.1		)
Total	755.6			824.6
Deferred tax liabilities
Property, plant and equipment basis differences	246.8			289.6
Intangible assets	1,331.4			1,412.1
Unremitted foreign earnings	68.3			98.0
Other, net	30.5			60.9
Total	1,677.0			1,860.6
Net deferred tax liabilities balance	$	(921.4	)	$	(1,036.0	)

As of December 31, 2012 the company has tax effected federal, state and international net operating loss carryforwards of approximately $1 million, $14 million and $95 million, respectively, which will be available to offset future taxable income. The state loss carryforwards expire from 2013 to 2032. For the international loss carryforwards, $46 million expire from 2014 to 2022 and $49 million have no expiration.

The company has recorded an $87 million valuation allowance on certain deferred tax assets based on management’s determination that it is more likely than not that the tax benefits will not be utilized. The company’s U.S. foreign tax credit carryforward of $48 million has a ten-year carryforward period and will expire between 2018 and 2023 if not utilized.

A reconciliation of the statutory U.S. federal income tax rate to the company’s effective income tax rate is as follows:

	2012		2011		2010
Statutory U.S. rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal benefit	1.1		2.0		1.9
Foreign operations	(3.0	)	(3.2	)	(4.5	)
Domestic manufacturing deduction	(2.6	)	(2.9	)	(2.0	)
Change in valuation allowance	—		1.2		—
Nondeductible deal costs	0.5		0.8		—
Audit settlements and refunds	0.1		(0.5	)	(1.3	)
Other, net	(0.4	)	(0.6	)	(0.1	)
Effective income tax rate	30.7	%	31.8	%	29.0	%

As of December 31, 2012 and 2011, the company has recorded a deferred tax liability of $68 million and $98 million, respectively, on legacy Nalco foreign earnings that the company intends to repatriate. This deferred tax liability originated based on purchase accounting decisions made in connection with the Nalco merger and was the result of an extensive study required to calculate the impact at the purchase date.

U.S. deferred income taxes are not provided on certain other unremitted foreign earnings that are considered permanently reinvested which as of December 31, 2012 and 2011 were approximately $1.4 billion and $1.2 billion, respectively. These earnings are considered to be reinvested indefinitely or available for distribution with foreign tax credits available to offset the amount of applicable income tax and foreign withholding taxes that might be payable on earnings. It is impractical to determine the amount of incremental taxes on an ongoing basis that might arise if all undistributed earnings were distributed.

The company files income tax returns in the U.S. federal jurisdiction and various U.S. state and international jurisdictions. With few exceptions, the company is no longer subject to state and foreign income tax examinations by tax authorities for years before 2005. The Internal Revenue Service (IRS) has completed examinations of the company’s U.S. federal income tax returns through 2004. The legacy Ecolab U.S. income tax returns for the years 2009 and 2010 are currently under audit. The legacy Nalco U.S. income tax returns for the years 2005 through 2010 are currently under audit. In addition to the U.S. federal examination, there is limited audit activity in several U.S. state and foreign jurisdictions. The company anticipates changes to its uncertain tax positions due to closing of various audit years mentioned above. The company believes these changes could result in a decrease in the company’s gross liability for unrecognized tax benefits of up to $13 million during the next twelve months. Decreases in the company’s gross liability could result in offsets to other balance sheet accounts, cash payments, and/or adjustments to tax expense. The occurrence of these events and/ or other events not included above within the next twelve months could change depending on a variety of factors and result in amounts different from above.

During 2012, the company recognized a net discrete tax benefit of $9.2 million. The net benefit in 2012 is based largely on benefits related to remeasurement of certain deferred tax assets and liabilities resulting from changing tax jurisdictions, recognizing adjustments from filing the company’s 2011 U.S. federal tax return as well as a release of a valuation allowance related to a capital loss carryforward. Discrete benefits were partially offset by the remeasurement of certain deferred tax assets and liabilities resulting from changes in local country tax rates, state and foreign country audit settlements and adjustments.

During 2011, the company recognized a net discrete tax expense of $7.4 million. The net expense in 2011 is largely made up of favorable settlements and adjustments related to prior year returns and reserves which were more than offset by the impact of a charge related to the realizability of foreign net operating loss carryforwards as well as a change in the blended state tax rate. The settlements are related to the company’s 1999 through 2001 and 2007 through 2008 U.S. income tax returns and various state and other international returns.

During 2010, the company recognized a net discrete tax benefit of $8.0 million. The net discrete tax benefit in 2010 primarily included recognizing favorable settlements related to the company’s 2002 through 2004 U.S. Federal IRS appeals case, a favorable settlement of an income tax audit in Germany for the years 2003 through 2006

and adjustments related to prior year tax reserves. These benefits were partially offset by a $5 million charge due to the passage of the U.S. Patient Protection and Affordable Care Law which changes the tax deductibility related to federal subsidies and resulted in a reduction of the value of the company’s deferred tax assets related to the subsidies, as well as the negative impact of international tax costs from optimizing the company’s business structure.

A reconciliation of the beginning and ending amount of gross liability for unrecognized tax benefits is as follows:

MILLIONS	2012			2011			2010

Balance at beginning of year	$	89.5		$	66.2		$	116.7
Additions based on tax positions related to the current year	7.5			7.3			10.4
Additions for tax positions of prior years	5.0			1.4			0.2
Reductions for tax positions of prior years	(3.4		)	(27.0		)	(9.1		)
Reductions for tax positions due to statute of limitations	(0.8		)	(0.8		)	(6.8		)
Settlements	(8.0		)	(8.0		)	(44.6		)
Assumed in connection with the Nalco merger	7.8			50.1			—
Foreign currency translation	(4.5		)	0.3			(0.6		)
Balance at end of year	$	93.1		$	89.5		$	66.2

Included in the gross liability for unrecognized tax benefits balance at December 31, 2012 is $91 million of tax positions that, depending on the ultimate resolution, could impact the annual effective tax rate in future periods.

The company recognizes both penalties and accrued interest related to unrecognized tax benefits in the company’s provision for income taxes. During the year ended December 31, 2012 the company accrued approximately $3 million in interest. The company had approximately $11 million and $6 million of interest and penalties accrued at December 31, 2012 and 2011, respectively.

12. RENTALS AND LEASES

The company leases sales and administrative office facilities, distribution centers, research and manufacturing facilities, as well as vehicles and other equipment under operating leases. Total rental expense under the company’s operating leases was $183 million in 2012, $130 million in 2011 and $121 million in 2010. As of December 31, 2012, identifiable future minimum payments with non-cancelable terms in excess of one year were:

MILLIONS
2013	$	108
2014	84
2015	70
2016	59
2017	49
Thereafter	155
Total	$	525

The company enters into operating leases for vehicles whose non-cancelable terms are one year or less in duration with month-to-month renewal options. These leases have been excluded from the table above. The company estimates payments under such leases will approximate $46 million in 2013. These vehicle leases have guaranteed residual values that have historically been satisfied primarily by the proceeds on the sale of the vehicles.

13. RESEARCH EXPENDITURES

Research expenditures that related to the development of new products and processes, including significant improvements and refinements to existing products are expensed as incurred. Such costs were $183 million in 2012, $96 million in 2011 and $88 million in 2010.

14. COMMITMENTS AND CONTINGENCIES

The company is subject to various claims and contingencies related to, among other things, workers’ compensation, general liability (including product liability), automobile claims, health care claims, environmental matters and lawsuits. The company is also subject to various claims and contingencies related to income taxes, which are covered in Note 11. The company also has contractual obligations including lease commitments, which are covered in Note 12.

The company records liabilities where a contingent loss is probable and can be reasonably estimated. If the reasonable estimate of a probable loss is a range, the company records the most probable estimate of the loss or the minimum amount when no amount within the range is a better estimate than any other amount. The company discloses a contingent liability even if the liability is not probable or the amount is not estimable, or both, if there is a reasonable possibility that a material loss may have been incurred.

Insurance: In the U.S. the company has high deductible insurance policies for casualty and property losses, subject to per occurrence and liability limitation. Globally, the company has high deductible insurance policies for property losses. The company is insured for losses in excess of these deductibles, subject to policy terms and conditions and has recorded both a liability and an offsetting receivable for amounts in excess of these deductibles. The company is self-insured for health care claims for eligible participating employees, subject to certain deductibles and limitations. The company determines its liabilities for claims on an actuarial basis.

Environmental matters: The company is currently participating in environmental assessments and remediation at 37 locations and environmental liabilities have been accrued reflecting management’s best estimate of future costs. Potential insurance reimbursements are not anticipated in the company’s accruals for environmental liabilities.

Litigation: The company and certain subsidiaries are party to various lawsuits, claims and environmental actions that have arisen in the ordinary course of business. These include from time to time antitrust, commercial, patent infringement, product liability and wage hour lawsuits, as well as possible obligations to investigate and mitigate the effects on the environment of the disposal or release of certain chemical substances at various sites, such as Superfund sites and other operating or closed facilities. The company has established accruals for certain lawsuits, claims and environmental matters. The company currently believes that there is not a reasonably possible risk of material loss in excess of the amounts accrued related to these legal matters. Because litigation is inherently uncertain, and unfavorable rulings or developments could occur, there can be no certainty that the company may not ultimately incur charges in excess of presently recorded liabilities. A future adverse ruling, settlement or unfavorable development could result in future charges that could have a material adverse effect on the company’s results of operations or cash flows in the period in which they are recorded. The company currently believes that such future charges related to suits and legal claims, if any, would not have a material adverse effect on the company’s consolidated financial position.

Matters Related to Wage Hour Claims

The company is a defendant in seven wage hour lawsuits claiming violations of the Fair Labor Standards Act (“FLSA”) or a similar state law. Of the seven suits, two have been certified for class action status, three seek class certification and the remaining two have reached tentative settlements. Doug Ladore v. Ecolab Inc., et al., United States District Court for the Central District of California, case no. CV 11-9386 GAF (FMOx), is a putative wage hour class action brought on behalf of California Pest Elimination employees. The case has been certified for class treatment, and on January 22, 2013, the plaintiffs’ motion for summary judgment was granted and the court found that the class of employees was entitled to overtime pay. On February 22, 2013, pursuant to court ordered mediation, the Company reached a preliminary settlement with the plaintiffs, which remains subject to court approval. The company has established an accrual for the settlement amount, which is not material to its operations or financial position. A second suit, a California state action, has been certified for class treatment of California Institutional employees. Three of the other wage hour suits seek certification of a state class of certain Institutional or Pest Elimination division associates with two of those matters also seeking nationwide certification of alleged FLSA violations in Pest Elimination and Institutional. One suit also seeks certification of a purported class of terminated California employees of any business for alleged violation of statutory obligations regarding payment of accrued vacation upon termination. Tentative settlements have been reached in the remaining two matters, one involving a national class of certain independent contractors in the company’s U.S. Other Services segment, and the other a California class of technicians in the company’s Equipment Care subsidiary (formerly GCS). These cases have been class certified for settlement purposes only. The settlement amounts are not material to the company’s operations or financial position.

Matters Related To Deepwater Horizon Incident Response

On April 22, 2010, the deepwater drilling platform, the Deepwater Horizon, operated by a subsidiary of BP plc, sank in the Gulf of Mexico after a catastrophic explosion and fire that began on April 20, 2010. A massive oil spill resulted. Approximately one week following the incident, subsidiaries of BP plc, under the authorization of the responding federal agencies, formally requested Nalco Company, now an indirect subsidiary of Ecolab, to supply large quantities of COREXIT® 9500, a Nalco oil dispersant product listed on the U.S. EPA National Contingency Plan Product Schedule. Nalco Company responded immediately by providing available COREXIT and increasing production to supply the product to BP’s subsidiaries for use, as authorized and directed by agencies of the federal government throughout the incident. Prior to the incident, Nalco and its subsidiaries had not provided products or services or otherwise had any involvement with the Deepwater Horizon platform. On July 15, 2010, BP announced that it had capped the leaking well, and the application of dispersants by the responding parties ceased shortly thereafter.

On May 1, 2010, the President appointed retired U.S. Coast Guard Commandant Admiral Thad Allen to serve as the National Incident Commander in charge of the coordination of the response to the incident at the national level. The EPA directed numerous tests of all the dispersants on the National Contingency Plan Product Schedule, including those provided by Nalco Company, “to ensure decisions about ongoing dispersant use in the Gulf of Mexico are grounded in the best available science.” Nalco Company cooperated with this testing process and continued to supply COREXIT, as requested by BP and government authorities. After review and testing of a number of dispersants, on June 30, 2010, and on August 2, 2010, the EPA released toxicity data for eight oil dispersants.

The use of dispersants by the responding parties was one tool used by the government and BP to avoid and reduce damage to the Gulf area from the spill. Since the spill occurred, the EPA and other federal agencies have closely monitored conditions in areas where dispersant has been applied. Nalco Company has encouraged ongoing monitoring and review of COREXIT and other dispersants and has cooperated fully with the governmental review and approval process. However, in connection with its provision of COREXIT, Nalco Company has been named in several lawsuits as described below.

Putative Class Action Litigation

In June, July and August 2010, in April 2011 and in April 2012, Nalco Company was named, along with other unaffiliated defendants, in nine putative class action complaints filed in either the United States District Court for the Eastern District of Louisiana (Parker, et al. v. Nalco Company, et al., Civil Action No. 2:10-cv-01749-CJB-SS; Harris, et al. v. BP, plc, et al., Civil Action No. 2:10-cv-02078-CJB-SS; Irelan v. BP Products, Inc., et al., Civil Action No. 11-cv-00881; Adams v. Louisiana, et al., Civil Action No. 11-cv-01051; Elrod, et al. v. BP Exploration & Production Inc., et al., 12-cv-00981), the United States District Court for the Southern District of Alabama, Southern Division (Lavigne, et al. v. BP PLC, et al., Civil Action No. 1:10-cv-00222-KD-C; Wright, et al. v. BP, plc, et al., Civil Action No. 1:10-cv-00397-B) or the United States District Court for the Northern District of Florida, Pensacola Division (Walsh, et al. v. BP, PLC, et al., Civil Action No. 3:10-cv-00143- RV-MD; Petitjean, et al. v. BP, plc, et al., Case No. 3:10-cv-00316-RS-EMT) on behalf of various potential classes of persons who live and work in or derive income from the Coastal Zone. The Parker, Lavigne and Walsh cases have since been voluntarily dismissed. Each of the remaining actions contains substantially similar allegations, generally alleging, among other things, negligence relating to the use of our COREXIT dispersant in connection with the Deepwater Horizon oil spill. The plaintiffs in each of these putative class action lawsuits are generally seeking awards of unspecified compensatory and punitive damages, and attorneys’ fees and costs.

Other Related Federal Claims

In July, August, September, October and December 2010, Nalco Company was also named, along with other unaffiliated defendants, in eight complaints filed by individuals in either the United States District Court for the Eastern District of Louisiana (Ezell v. BP, plc, et al., Case No. 2:10-cv-01920-KDE-JCW), the United States District Court for the Southern District of Alabama, Southern Division (Monroe v. BP, plc, et al., Case No. 1:10-cv-00472-M; Hill v. BP, plc, et al., Civil Action No. 1:10-cv-00471-CG-N; Hudley v. BP, plc, et al., Civil Action No. 10-cv-00532-N), the United States District Court for the Northern District of Florida, Tallahassee Division (Capt Ander, Inc. v. BP, plc, et al., Case No. 4:10-cv-00364-RH-WCS), the United States District Court for the Southern District of Mississippi, Southern Division (Trehern v. BP, plc, et al., Case No. 1:10-cv-00432-HSO-JMR) or the United States District Court for the Southern District of Texas (Chatman v. BP Exploration & Production, Civil Action No. 10-cv-04329; Brooks v. Tidewater Marine LLC, et al., Civil Action No. 11-cv-00049).

In April 2011, Nalco Company was also named in Best v. British Petroleum plc, et al., Civil Action No. 11-cv-00772 (E.D. La.); Black v. BP Exploration & Production, Inc., et al. Civil Action No. 2:11-cv-867, (E.D. La.); Pearson v. BP Exploration & Production, Inc., Civil Action No. 2:11-cv-863, (E.D. La.); Alexander, et al. v. BP Exploration & Production, et al., Civil Action No. 11-cv-00951 (E.D. La.); and Coco v. BP Products North America, Inc., et al. (E.D. La.)

In October 2011, Nalco Company was also named in Toups, et al. v Nalco Company, et al., No. 59-121 (25th Judicial District Court, Parish

of Plaquemines, Louisiana). In November 2011, Toups was removed to the United States District Court for the Eastern District of Louisiana. In April 2012, Nalco Company was named in Esponge v. BP, P.L.C., et al., Case No. 0166367 (32nd Judicial District Court, Parish of Terrebonne, Louisiana); and Hogan v. British Petroleum Exploration & Production, Inc., et al., Case No. 2012-22995 (District Court, Harris County, Texas). In April 2012, Esponge was removed to the United States District Court for the Eastern District of Louisiana. In May 2012, Hogan was removed to the United States District Court for the Southern District of Texas. In June 2012, the Judicial Panel for Multidistrict Litigation transferred Hogan to the United States District Court for the Eastern District of Louisiana.

The complaint in Esponge generally alleges, among other things, that oil and dispersants have caused and will continue to cause plaintiffs to lose revenue and/or earning capacity. The remaining complaints generally allege, among other things, negligence and injury resulting from the use of COREXIT dispersant in connection with the Deepwater Horizon oil spill. The complaints seek unspecified compensatory and punitive damages, and attorneys’ fees and costs. The Chatman case was voluntarily dismissed.

In January 2012, Nalco Company was named, along with other unaffiliated defendants, in Top Water Charters, LLC v. BP, P.L.C., et al., No. 0165708 (32nd Judicial District Court, Parish of Terrebonne, Louisiana). The complaint generally alleges, among other things, negligence and gross negligence relating to the Deepwater Horizon oil spill and use of chemical dispersants. The plaintiffs allege that the oil and dispersants have harmed their fishing charter businesses and seek unspecified compensatory damages, punitive damages and attorneys’ fees and costs. In February 2012, Top Water Charters was removed to the United States District Court for the Eastern District of Louisiana.

In August and September 2012, Nalco Company was named, along with other unaffiliated defendants, in Doom v. BP Exploration & Production, et al., Case No. 12-cv-2048 (E.D. La.) and Kolian v. BP Exploration & Production, et al., Case No. 12-cv-2338 (E.D. La.). The complaints generally allege, among other things, negligence and strict liability relating to the Deepwater Horizon oil spill and use of chemical dispersants. The complaints seek unspecified compensatory and punitive damages.

All of the above-referenced cases pending against Nalco Company have been administratively transferred for pre-trial purposes to a judge in the United States District Court for the Eastern District of Louisiana with other related cases under In Re: Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico, on April 20, 2010, Civil Action No. 10-md-02179 (E.D. La.) (“MDL 2179”). Pursuant to orders issued by Judge Barbier in MDL 2179, the claims have been consolidated in several master complaints, including one naming Nalco Company and others who responded to the Gulf Oil Spill (known as the “B3 Bundle”). Plaintiffs are required by Judge Barbier to prepare a list designating previously-filed lawsuits that assert claims within the B3 Bundle regardless of whether the lawsuit named each defendant named in the B3 Bundle master complaint. Nalco Company has received a draft list from the plaintiffs’ steering committee. The draft list identifies fifteen cases in the B3 Bundle, some of which are putative class actions. Six cases previously filed against Nalco Company are not included in the B3 Bundle.

Pursuant to orders issued by Judge Barbier in MDL 2179, claimants wishing to assert causes of action subject to one or more of the master complaints were permitted to do so by filing a short-form joinder. A short-form joinder is deemed to be an intervention into one or more of the master complaints in MDL 2179. The deadline for filing short form joinders was April 20, 2011. Of the individuals who have filed short form joinders that intervene in the B3 Bundle, Nalco Company has no reason to believe that these individuals are different from those covered by the putative class actions described above. These plaintiffs who have intervened in the B3 Bundle seek to recover damages for alleged personal injuries, medical monitoring and/or property damage related to the oil spill clean-up efforts.

On May 18, 2012, Nalco filed a motion for summary judgment against the claims in the “B3” Master Complaint, on the grounds that: (i) Plaintiffs’ claims are preempted by the comprehensive oil spill response scheme set forth in the Clean Water Act and National Contingency Plan; and (ii) Nalco is entitled to derivative immunity from suit. On November 28, 2012, the Court granted Nalco’s motion and dismissed with prejudice the claims in the “B3” Master Complaint asserted against Nalco. The Court held that such claims were preempted by the Clean Water Act and National Contingency Plan. Because claims in the “B3” Master Complaint remain pending against other defendants, the Court’s decision is not a “final judgment” for purposes of appeal. Under Federal Rule of Appellate Procedure 4(a), plaintiffs will have 30 days after entry of final judgment to appeal the Court’s decision.

On April 18, 2012, BP and the Plaintiffs’ Steering Committee (“PSC”) for MDL 2179 filed motions for preliminary approval of two proposed class action settlements: (1) a proposed Medical Benefits Class Action Settlement; and (2) a proposed Economic and Property Damages Class Action Settlement. Pursuant to the proposed settlements, class members agree to release claims against BP and other released parties, including Nalco Energy Services, LP, Nalco Holding Company, Nalco Finance Holdings LLC, Nalco Finance Holdings Inc., Nalco Holdings LLC and Nalco Company. Potential class members were permitted to opt-out of the settlements. The opt-out period closed November 1, 2012. The court permitted potential class members to revoke their opt-outs until the date final settlement approval was entered.

On May 2, 2012, the Court preliminarily approved the Medical Benefits Class Action Settlement and Economic and Property Damages Class Action Settlement. A hearing to consider the fairness, reasonableness and adequacy of the proposed settlements took place on November 8, 2012. On December 24, 2012, the Court granted final approval of the Economic and Property Damages Class Action Settlement. On January 11, 2013, the Court granted final approval of the Medical Benefits Class Action Settlement.

Nalco Company, the incident defendants and the other responder defendants have been named as third party defendants by Transocean Deepwater Drilling, Inc. and its affiliates (the “Transocean Entities”) (In re the Complaint and Petition of Triton Asset Leasing GmbH, et al, MDL No. 2179, Civil Action 10-2771). In April and May 2011, the Transocean Entities, Cameron International Corporation, Halliburton Energy Services, Inc., M-I L.L.C., Weatherford U.S., L.P. and Weatherford International, Inc. (collectively, the “Cross Claimants”) filed cross claims in MDL 2179 against Nalco Company and other unaffiliated cross defendants. The Cross Claimants generally allege, among other things, that if they are found liable for damages resulting from the Deepwater Horizon explosion, oil spill and/or spill response, they are entitled to indemnity or contribution from the cross defendants.

In April and June 2011, in support of its defense of the claims against it, Nalco Company filed counterclaims against the Cross Claimants. In its counterclaims, Nalco Company generally alleges that if it is found liable for damages resulting from the Deepwater Horizon explosion, oil spill and/or spill response, it is entitled to contribution or indemnity from the Cross Claimants.

Other Related Actions

In March 2011, Nalco Company was named, along with other unaffiliated defendants, in an amended complaint filed by an individual in the Circuit Court of Harrison County, Mississippi, Second Judicial District (Franks v. Sea Tow of South Miss, Inc., et al., Cause No. A2402-10-228 (Circuit Court of Harrison County, Mississippi)). The amended complaint generally asserts, among other things, negligence and strict product liability claims relating to the plaintiff’s alleged exposure to chemical dispersants manufactured by Nalco Company. The plaintiff seeks unspecified compensatory damages, medical expenses, and attorneys’ fees and costs.

In August 2012, Jambon Supplier, L.L.C. and Jambon Marine Holdings, L.L.C. (“Third-Party Plaintiffs”), petitioners-in-limitation in re of Jambon Supplier II, L.L.C., et al., Civil Action No. 12-426 (E.D. La.), filed a third-party complaint against Nalco and other, unaffiliated defendants (collectively, “Third-Party Defendants”). The third-party complaint generally alleges, among other things, that one of Third-Party Plaintiffs’ employees filed a claim against them in the underlying limitation action. In his claim, he alleged that he was exposed to oil and dispersants while working as a crew member aboard Third-Party Plaintiffs’ vessel during the Deepwater Horizon oil spill response. The third-party complaint asserts that if the employee suffered injuries as alleged, the Third-Party Defendants are strictly liable.

The company believes the claims asserted against Nalco Company are without merit and intends to defend these lawsuits vigorously. The company also believes that it has rights to contribution and/ or indemnification (including legal expenses) from third parties. However, the company cannot predict the outcome of these lawsuits, the involvement it might have in these matters in the future, or the potential for future litigation.

15. RETIREMENT PLANS

Pension and Postretirement Health Care Benefits Plans

As part of the merger with Nalco, the company assumed sponsorship of the Nalco qualified and non-qualified pension and other postretirement benefit plans. The Nalco U.S. qualified pension plan merged into the Ecolab U.S. qualified pension plan effective December 31, 2012, and certain Nalco employees became eligible to participate in the merged plan.

The company has a non-contributory qualified defined benefit pension plan covering most of its U.S. employees. The company also has U.S. non-contributory non-qualified defined benefit plans, which provide for benefits to employees in excess of limits permitted under its U.S. pension plan. The non-qualified plans are not funded and the recorded benefit obligation for the non-qualified plans was $110 million and $94 million at December 31, 2012 and 2011, respectively. The measurement date used for determining the U.S. pension plan assets and obligations is December 31.

Various international subsidiaries also have defined benefit pension plans. International plans are funded based on local country requirements. The measurement date used for determining the international pension plan assets and obligations is November 30, the fiscal year-end of the company’s international affiliates.

The company provides postretirement health care benefits to certain U.S. employees. The corresponding plans are contributory based on years of service and family status, with retiree contributions adjusted annually. The measurement date used to determine the U.S. postretirement health care plan assets and obligations is December 31. Certain employees outside the U.S. are covered under government-sponsored programs, which are not required to be fully funded. The expense and obligation for providing international postretirement health care benefits are not significant.

The following table sets forth financial information related to the company’s pension and postretirement health care plans:

	U.S. PENSION (a)						INTERNATIONAL PENSION						U.S. POSTRETIREMENT HEALTH CARE
MILLIONS	2012			2011			2012			2011			2012			2011
Accumulated Benefit Obligation, end of year	$	1,889.2		$	1,683.5		$	1,075.2		$	896.0		$	281.5		$	277.3
Projected Benefit Obligation
Projected benefit obligation, beginning of year	1,892.4			1,154.7			978.6			579.4			277.3			159.4
Service cost	50.5			46.7			29.6			23.1			5.1			2.2
Interest	89.3			63.4			48.3			28.2			12.9			9.0
Participant contributions							4.1			3.7			10.0			4.4
Medicare subsidies received													1.9			0.7
Curtailments and settlements							(4.8		)	(5.4		)
Plan amendments	(24.8		)				(8.3		)	(3.7		)	(1.8		)	0.1
Actuarial loss (gain)	173.0			128.9			165.5			(43.0		)	0.7			(6.2		)
Assumed through acquisitions				537.4			6.9			402.8						121.4
Benefits paid	(75.3		)	(38.7		)	(35.2		)	(26.3		)	(24.6		)	(13.7		)
Foreign currency translation							(4.1		)	19.8
Projected benefit obligation, end of year	2,105.1			1,892.4			1,180.6			978.6			281.5			277.3
Plan Assets
Fair value of plan assets, beginning of year	1,352.1			988.9			612.6			318.5			16.6			19.6
Actual returns on plan assets	174.0			7.3			57.3			9.7			1.9			0.2
Company contributions	182.7			104.4			52.5			44.0			19.7			8.2
Participant contributions							4.1			3.7			1.5			2.3
Assumed through acquisitions				290.2						257.6
Settlements							(3.5		)	(4.3		)
Benefits paid	(75.3		)	(38.7		)	(35.2		)	(26.3		)	(24.6		)	(13.7		)
Foreign currency translation							1.5			9.7
Fair value of plan assets, end of year	1,633.5			1,352.1			689.3			612.6			15.1			16.6
Funded Status, end of year	(471.6		)	(540.3		)	(491.3		)	(366.0		)	(266.4		)	(260.7		)

Amounts recognized in Consolidated Balance Sheet:
Other assets							7.0			22.3
Other current liabilities	(9.8		)	(10.6		)	(13.1		)	(11.4		)	(7.4		)	(8.0		)
Postretirement healthcare and pension benefits	(461.8		)	(529.7		)	(485.2		)	(376.9		)	(259.0		)	(252.7		)
Net liability	(471.6		)	(540.3		)	(491.3		)	(366.0		)	(266.4		)	(260.7		)

Amounts recognized in Accumulated
Other Comprehensive Loss:
Unrecognized net actuarial loss	769.1			690.4			241.3			102.8			12.3			12.9
Unrecognized net prior service costs (benefits)	(54.5		)	(33.9		)	(7.1		)	(2.5		)	(1.5		)	0.3
Tax benefit	(273.0		)	(251.7		)	(67.1		)	(30.8		)	(5.7		)	(6.2		)
Accumulated other comprehensive loss, net of tax	441.6			404.8			167.1			69.5			5.1			7.0

Change in Accumulated Other Comprehensive Loss:
Amortization of net actuarial loss (gain)	(45.1		)	(31.8		)	(6.2		)	(8.1		)	(0.4		)	(0.2		)
Amortization of prior service costs (benefits)	4.2			4.2			(0.3		)	(0.1		)	(0.1		)	(0.1		)
Current period net actuarial loss (gain)	126.2			222.2			143.4			(30.2		)	(0.1		)	(5.0		)
Current period prior service costs (benefits)	(24.8		)				(4.3		)	(3.7		)	(1.8		)	0.1
Settlement	(2.4		)
Tax expense (benefit)	(21.3		)	(72.4		)	(36.3		)	10.5			0.5			1.9
Foreign currency translation							1.3			6.6
Other comprehensive loss (income)	36.8			122.2			97.6			(25.0		)	(1.9		)	(3.3		)

(a) Includes qualified and non-qualified plans

Estimated amounts in accumulated other comprehensive loss expected to be reclassified to net period cost during 2013 are as follows:

	U.S.		INTERNATIONAL		U.S. POSTRETIREMENT
MILLIONS	PENSION (a)		PENSION		HEALTH CARE

Net actuarial loss	$	62.3	$	11.1	$	0.6
Net prior service costs/(benefits)	(6.9)		(0.5)		(0.3)
Total	$	55.4	$	10.6	$	0.3

(a) Includes qualified and non-qualified plans

The aggregate projected benefit obligation, accumulated benefit obligation and fair value of pension plan assets for plans with accumulated benefit obligations in excess of plan assets were as follows:

DECEMBER 31 (MILLIONS)	2012		2011
Aggregate projected benefit obligation	$	2,931.8	$	2,638.2
Accumulated benefit obligation	2,635.0		2,378.2
Fair value of plan assets	1,972.1		1,727.8

These plans include the U.S. non-qualified pension plans which are not funded, as well as the U.S. qualified pension plan. These plans also include various international pension plans, which are funded consistent with local practices and requirements.

Plan Assets

The fair value hierarchy of plan assets is determined by using a methodology that categorizes the inputs used to measure fair value. The first category is for unadjusted quoted prices in an active market that are accessible at the measurement date for identical assets or liabilities (Level 1). The second category is for values measured using other observable inputs, such as quoted prices for a similar asset or liability in an active market (Level 2). The third category is for fair value measurements based on significant unobservable inputs (Level 3).

Cash, and certain equity securities and fixed income (Level 1) : Valued at the quoted market prices of shares held by the plans at year-end in the active market on which the individual securities are traded.

Real estate, insurance contracts, and certain equity securities and fixed income (Level 2) : Valued based on inputs other than quoted prices that are observable for the securities.

Hedge funds and private equity (Level 3) : Valued based on the net asset values of the underlying partnerships. The net asset values of the partnerships are based on the fair values of the underlying investments of the partnerships. Quoted market prices are used to value the underlying investments of the partnerships, where available.

United States

The allocation and fair value of the company’s U.S. plan assets for its defined benefit pension and postretirement health care benefit plans are as follows:

ASSET CATEGORY	TARGET ASSET ALLOCATION PERCENTAGE				PERCENTAGE OF PLAN ASSETS
DECEMBER 31 (%)	2012		2011		2012		2011
Equity securities:
Large cap equity	34	%	34	%	36	%	38	%
Small cap equity	9		9		10		10
International equity	13		13		14		12
Fixed income:
Core fixed income	18		22		19		22
High-yield bonds	5		2		5		2
Emerging markets	2		—		2		—
Other:
Real estate	4		4		3		4
Hedge funds	9		10		8		9
Private equity	6		6		3		3
Total	100	%	100	%	100	%	100	%

MILLIONS

FAIR VALUE AS OF
DECEMBER 31, 2012

LEVEL 1

LEVEL 2

LEVEL 3

TOTAL

Cash

8.8

Equity securities:

Large cap equity

594.2

Small cap equity

159.9

International equity

223.7

Fixed income:

Core fixed income

308.9

High-yield bonds

81.8

Emerging markets

32.6

Other:

Real estate

55.5

Hedge funds

134.6

Private equity

48.2

Other

0.4

Total

1,409.9

55.9

182.8

1,648.6

MILLIONS	FAIR VALUE AS OF DECEMBER 31, 2011
	LEVEL 1		LEVEL 2		LEVEL 3		TOTAL
Equity securities:
Large cap equity	$	525.1					525.1
Small cap equity	131.0						131.0
International equity	161.8						161.8
Fixed income:
Core fixed income	303.5						303.5
High-yield bonds	21.0						21.0
Emerging markets	6.1						6.1
Other:
Real estate			$	49.4			49.4
Hedge funds					$	127.1	127.1
Private equity					41.5		41.5
Other	1.7		0.5				2.2
Total	$	1,150.2	$	49.9	$	168.6	$	1,368.7

For those assets that are valued using significant unobservable inputs (level 3), the following is a rollforward of the significant activity for the year:

MILLIONS	HEDGE FUNDS		PRIVATE EQUITY
Balance at December 31, 2010	$	55.4	$	10.6
Assumed through Nalco merger	25.9		21.0
Unrealized gains (losses)	(0.9)		2.7
Purchases, sales and settlements, net	46.7		7.2
Transfers in and/or out	—		—
Balance at December 31, 2011	$	127.1	$	41.5
Unrealized gains	7.5		1.0
Realized gains	—		3.3
Purchases, sales and settlements, net	—		2.4
Transfers in and/or out	—		—
Balance at December 31, 2012	$	134.6	$	48.2

The company is responsible for the valuation process and seeks to obtain quoted market prices for all securities. When quoted market prices are not available, a number of methodologies are used to establish fair value estimates, including discounted cash flow models, prices from recently executed transactions of similar securities or broker/dealer quotes using market observable information to the extent possible. The company reviews the values generated by those models for reasonableness and, in some cases, further analyzes and researches values generated to ensure their accuracy, which includes reviewing other publicly available information.

The company’s U.S. investment strategy and policies are designed to maximize the possibility of having sufficient funds to meet the long-term liabilities of the pension fund, while achieving a balance between the goals of asset growth of the plan and keeping risk at a reasonable level. Current income is not a key goal of the plan. The asset allocation position reflects the ability and willingness to accept relatively more short-term variability in the performance of the pension plan portfolio in exchange for the expectation of better long-term returns, lower pension costs and better funded status in the long run.

The pension fund is diversified across a number of asset classes and securities. Selected individual portfolios within the asset classes may be undiversified while maintaining the diversified nature of total plan assets. The company has no significant concentration of risk in its U.S. plan assets.

International

The allocation of plan assets and fair value of the company’s international plan assets for its defined benefit pension plans are as follows:

ASSET CATEGORY	PERCENTAGE OF PLAN ASSETS
	2012		2011
DECEMBER 31 (%)
Cash	1	%	1	%
Equity securities:
International equity	42		41
Fixed income:
Corporate bonds	23		22
Government bonds	18		20
Total fixed income	41		42
Other:
Insurance contracts	14		15
Real estate	2		1
Other	—		—
Total	100	%	100	%

MILLIONS

FAIR VALUE AS OF
DECEMBER 31, 2012

LEVEL 1

LEVEL 2

LEVEL 3

TOTAL

Cash

8.0

Equity securities:

International equity

288.8

288.8

Fixed income:

Corporate bonds

5.2

150.7

155.9

Government bonds

8.1

117.4

125.5

Other:

Insurance contracts

96.4

Real estate

10.7

Other

0.5

3.5

4.0

Total

21.8

667.5

689.3

MILLIONS	FAIR VALUE AS OF DECEMBER 31, 2011
	LEVEL 1		LEVEL 2		LEVEL 3	TOTAL
Cash	$	6.7				$	6.7
Equity securities:
International equity			$	248.0		248.0
Fixed income:
Corporate bonds	10.9		126.1			137.0
Government bonds	17.1		102.3			119.4
Other:
Insurance contracts			92.5			92.5
Real estate			9.0			9.0
Total	$	34.7	$	577.9		$	612.6

Assets of funded retirement plans outside the U.S. are managed in each local jurisdiction and asset allocation strategy is set in accordance with local rules, regulations and practice. Therefore, no overall target asset allocation is presented. Although equity securities are all considered international for the company, some equity securities are considered domestic for the local plan. The funds are invested in a variety of equities, bonds and real estate investments and, in some cases, the assets are managed by insurance companies which may offer a guaranteed rate of return. The company has no investments that are level 3 in its international plan assets. The company has no significant concentration of risk in its international plan assets. During fiscal year 2012, the company reviewed the hierarchy classification of international pension assets. The company determined certain investments previously classified as level 1 assets had valuation characteristics more consistent with level 2 assets. These investments are primarily funds invested in traded securities. The 2011 hierarchy classification of these investments has been revised to correct the presentation. There were no transfers from level 1 or 2 to level 3 during the fiscal years ended December 31, 2012 and 2011.

Net Periodic Benefit Costs

Pension and postretirement health care benefits expense for the company’s operations are as follows:

	U.S. PENSION (a)									INTERNATIONAL PENSION									U.S. POSTRETIREMENT HEALTH CARE
MILLIONS	2012			2011			2010			2012			2011			2010			2012			2011			2010
Service cost - employee benefits earned during the year	$	50.5		$	46.7		$	50.6		$	29.6		$	23.1		$	18.9		$	5.1		$	2.2		$	2.0
Interest cost on benefit obligation	89.3			63.4			62.6			48.3			28.2			26.7			12.9			9.0			8.8
Expected return on plan assets	(127.1		)	(100.6		)	(90.1		)	(42.3		)	(22.5		)	(17.0		)	(1.2		)	(1.4		)	(1.5		)
Recognition of net actuarial loss	45.1			31.8			24.7			3.9			5.7			4.0			0.4			0.2			0.2
Amortization of prior service cost (benefit)	(4.2		)	(4.2		)	0.5			0.2			0.1			0.4			0.1			0.1			(0.4		)
Settlements/Curtailments	2.4			—			0.3			1.6			1.3			0.1			—			—			—
Total expense	$	56.0		$	37.1		$	48.6		$	41.3		$	35.9		$	33.1		$	17.3		$	10.1		$	9.1

(a) Includes qualified and non-qualified plans

Plan Assumptions

	U.S. PENSION (a)						INTERNATIONAL PENSION						U.S. POSTRETIREMENT HEALTH CARE
PERCENT	2012		2011		2010		2012		2011		2010		2012		2011		2010
Weighted-average actuarial assumptions used to determine benefit obligations as of year end:
Discount rate	4.14	%	4.86	%	5.41	%	4.04	%	5.02	%	4.62	%	3.95	%	4.80	%	5.41	%
Projected salary increase	4.32		4.08		4.32		2.74		2.98		3.40
Weighted-average actuarial assumptions used to determine net cost:
Discount rate	4.85		5.23		5.84		5.66		4.26		5.21		4.80		5.34		5.84
Expected return on plan assets	8.25		8.44		8.50		6.87		6.37		6.22		8.25		8.50		8.50
Projected salary increase	4.08		4.07		4.32		3.59		3.62		3.38

(a) Includes qualified and non-qualified plans

The discount rate assumptions for the U.S. plans are developed using a bond yield curve constructed from a population of high-quality, non-callable, corporate bond issues with maturities ranging from six months to thirty years. A discount rate is estimated for the U.S. plans and is based on the durations of the underlying plans.

The expected long-term rate of return used for the U.S. plans is generally based on the pension plan’s asset mix. The company considers expected long-term real returns on asset categories, expectations for inflation, and estimates of the impact of active management of the assets in coming to the final rate to use. The company also considers actual historical returns.

The expected long-term rate of return used in the company’s international plans is determined in each local jurisdiction and is based on the assets held in that jurisdiction, the expected rate of returns for the type of assets held and any guaranteed rate of return provided by the investment. The other assumptions used to measure the international pension obligations, including discount rate, vary by country based on specific local requirements and information. As previously noted, the measurement date for these plans is November 30.

For postretirement benefit measurement purposes as of December 31, 2012, the annual rates of increase in the per capita cost of covered health care were assumed to be 7.5%. The rates were assumed to decrease each year until they reach 5% in 2019 and remain at those levels thereafter. Health care costs for certain employees which are eligible for subsidy by the company are limited by a cap on the subsidy.

Assumed health care cost trend rates have an effect on the amounts reported for the company’s U.S. postretirement health care benefits plan. A one-percentage point change in the assumed health care cost trend rates would have the following effects:

	1-PERCENTAGE POINT
MILLIONS	INCREASE			DECREASE
Effect on total of service and interest cost components	$	(0.1	)	$	0.1
Effect on postretirement benefit obligation	2.3			(2.9		)

Multiemployer Plan

The company contributes to a multiemployer defined benefit pension plan under the terms of a collective-bargaining agreement that covers certain of its union-represented employees. Participation in the multiemployer pension plan is not considered significant to the company as a whole. The risks of participating in a multiemployer plan are different from single-employer pension plans such that assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers. Additionally, if a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers. The company contributed $0.5 million during 2012, $0.4 million during 2011 and $0.5 million during 2010 to its multiemployer defined benefit pension plan. If the company chooses to stop participating in the multiemployer plan, the company may be required to pay the plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability. During the fourth quarter of 2012 the company determined that a withdrawal from the multiemployer plan was probable and recorded an estimated liability of $4.7 million.

Cash Flows

As of year-end 2012, the company’s estimate of benefits expected to be paid in each of the next five fiscal years and in the aggregate for the five fiscal years thereafter for the company’s pension and postretirement health care benefit plans are as follows:

			MEDICARE SUBSIDY
MILLIONS	ALL PLANS		RECEIPTS
2013	$	169	$	2
2014	170		2
2015	171		—
2016	184		—
2017	200		—
2018-2022	1,075		—

Depending on plan funding levels, the U.S. defined benefit qualified pension plan provides certain terminating participants with an option to receive their pension benefits in the form of lump sum payments. This option resulted in a settlement charge of $2.4 million, recorded in special (gains) and charges in the fourth quarter of 2012.

The company is currently in compliance with all funding requirements of its U.S. pension and postretirement health care plans.

Based on plan asset values as of December 31, 2011, the company was required to make contributions of $38 million to its Nalco U.S. pension plan during 2012. During 2012, a total of $180 million was funded to the Nalco U.S. pension plan. In the first quarter of 2011, the company made a $100 million voluntary contribution to its Ecolab U.S. pension plan.

The company’s funding policy for the U.S. pension plan is to maintain an asset balance that meets the long-term funding requirements identified by the projections of the pension plan’s actuaries while simultaneously satisfying the fiduciary responsibilities prescribed in ERISA. The company also takes into consideration the tax deductibility of contributions to the benefit plans.

The company is not aware of any expected refunds of plan assets within the next twelve months from any of its existing U.S. or international pension or postretirement benefit plans.

Savings Plan, ESOP and Profit Sharing

Legacy Ecolab

The company provides a 401(k) savings plan for substantially all legacy Ecolab U.S. employees. A new plan benefiting active employees accruing a final average pay or legacy cash balance pension benefit was spun off from the Ecolab 401(k) plan as of January 1, 2013. Under this plan, employee 401(k) contributions of up to 3% of eligible compensation are matched 100% by the company and employee 401(k) contributions over 3% and up to 5% of eligible compensation are matched 50% by the company. All other active legacy Ecolab U.S. employees remain in the Ecolab 401(k) plan but will receive a 100% match on 401(k) contributions of up to 4% of eligible compensation and a 50% match on 401(k) contributions of over 4% and up to 8% of eligible compensation. The company’s matching contributions are 100% vested immediately. The company’s matching contribution expense amounted to $26 million in 2012, $24 million in 2011 and $23 million in 2010.

Legacy Nalco

The company sponsors a defined contribution profit sharing and savings plan for most legacy Nalco U.S. employees. Under the legacy Nalco plan, annual profit sharing contributions are made to the accounts of participating employees that vary based on the company’s financial performance. Profit sharing and 401(k) matching contribution expenses during 2012 were $13 million and $17 million, respectively. Profit sharing and 401(k) matching contribution expenses from December 1, 2011 through the end of 2011 were $2 million and $1 million, respectively. The company had a payable to the plan of $14 million at December 31, 2012, primarily related to profit sharing, which will be paid during 2013.

Profit sharing contributions will no longer be made for plan years after December 31, 2012. Prior to January 1, 2013, the legacy Nalco plan provided for matching contributions of up to 4% of eligible compensation for employees who elect to contribute to 401(k) accounts. Beginning January 1, 2013, eligible legacy Nalco employees will receive a 100% match on 401(k) contributions of up to 4% of eligible compensation and a 50% match on 401(k) contributions of over 4% and up to 8% of eligible compensation.

16. OPERATING SEGMENTS AND GEOGRAPHIC INFORMATION

Effective with the Nalco merger, the company added Nalco’s three legacy operating units (Water Services, Paper Services and Energy Services) as additional reportable segments to the merged company’s reporting structure.

Beginning in the first quarter of 2012, the Water Services, Paper Services and Energy Services reportable segments were renamed as the Global Water, Global Paper and Global Energy reportable segments, respectively. With the exception of the water treatment related business change discussed below, the underlying structure of the Global Water, Global Paper and Global Energy segments remains the same as 2011.

Beginning in the first quarter of 2012, due to changes in how the company internally manages and reports results within its legacy Ecolab Food & Beverage and Asia Pacific operating units, certain water treatment related businesses were moved from the U.S. Cleaning & Sanitizing and International Cleaning, Sanitizing & Other Services reportable segments to the Global Water reportable segment. The movement of these businesses did not significantly impact year-over-year comparability; therefore, prior year reported segment information has not been restated to reflect this change.

The profitability of the company’s operating units is evaluated by management based on operating income. The company has no intersegment revenues. The company’s fourteen operating units are aggregated into six reportable segments: U.S. Cleaning & Sanitizing, U.S. Other Services, International Cleaning, Sanitizing & Other Services, Global Water, Global Paper and Global Energy.

U.S. Cleaning & Sanitizing - This reportable segment provides cleaning and sanitizing products to U.S. markets through its Institutional, Food & Beverage, Kay, Healthcare and Textile Care operating units. Prior to its disposition in the fourth quarter of 2012, the Vehicle Care operating unit was also part of U.S. Cleaning & Sanitizing reportable segment. These operating units exhibit similar products, manufacturing processes, customers, distribution methods and economic characteristics.

U.S. Other Services - This reportable segment includes all other U.S. operations of the legacy Ecolab company. This segment provides pest elimination and kitchen equipment repair and maintenance through its Pest Elimination and Equipment Care operating units, respectively. These two operating units are primarily fee for service businesses. Since the primary focus of these businesses is service, they have not been combined with the company’s U.S. Cleaning & Sanitizing reportable segment. These operating units are combined and disclosed as an “all other” category.

International Cleaning, Sanitizing & Other Services - This reportable segment includes four regional operating units from the legacy Ecolab company: EMEA, Asia Pacific, Latin America and Canada. These operating units provide cleaning and sanitizing products as well as pest elimination service. Legacy Ecolab International operations are managed by geographic region and exhibit similar products, manufacturing processes, customers, distribution methods and economic characteristics.

Global Water - This reportable segment utilizes technologically advanced solutions, chemical products and equipment to provide integrated global water treatment and process improvement offerings for industrial and institutional markets.

Global Paper - This reportable segment serves the process chemicals and water treatment needs of the global pulp and paper industry through the use of technologically advanced solutions, chemical products and equipment.

Global Energy - This reportable segment serves the process chemicals and water treatment needs of the global petroleum and petrochemical industries in both upstream and downstream applications.

Corporate - Consistent with the company’s internal management reporting, the Corporate segment includes amortization specifically from the Nalco merger intangible assets, merger integration costs and investments the company is making in business systems and structure. The Corporate segment also includes special (gains) and charges reported on the Consolidated Statement of Income.

Operating Segment Information

The company evaluates the performance of its international operations within its International Cleaning, Sanitizing & Other Services, Global Water, Global Paper and Global Energy reportable segments based on fixed currency exchange rates. The difference between the fixed currency exchange rates and the actual currency exchange rates is reported as “effect of foreign currency translation” in the following tables. All other accounting policies of the reportable segments are consistent with accounting principles generally accepted in the United States of America and the accounting policies of the company described in Note 2.

The following tables present net sales and operating income (loss) by reportable segment.

	Net Sales							Operating Income (Loss)
MILLIONS	2012		2011			2010		2012			2011			2010

U.S. Cleaning & Sanitizing	$	2,992.9	$	2,930.3		$	2,721.9	$	651.4		$	556.7		$	513.9
U.S. Other Services	474.6		457.1			448.5		70.8			69.7			71.4
Int’l Cleaning, Sanitizing & Other Services	3,175.8		3,075.1			2,899.4		340.8			285.8			254.5
Global Water	2,087.4		67.2			—		235.9			11.0			—
Global Paper	805.4		33.9			—		86.3			6.2			—
Global Energy	2,268.0		92.3			—		360.1			17.7			—
Corporate	—		(29.6		)	—		(459.9		)	(211.6		)	(30.5		)
Subtotal at fixed currency	11,804.1		6,626.3			6,069.8		1,285.4			735.5			809.3
Effect of foreign currency translation	34.6		172.2			19.9		3.9			18.3			(2.5		)
Consolidated	$	11,838.7	$	6,798.5		$	6,089.7	$	1,289.3		$	753.8		$	806.8

The following tables present the company’s depreciation and amortization, capital expenditures (including capitalized software expenditures) and total assets by reportable segment. The Global Water, Global Paper and Global Energy amounts are presented in total as discretely identifiable amounts by reportable segment are not identifiable and are not produced internally. Corporate assets are principally cash and cash equivalents and deferred taxes. All amounts presented are measured in public exchange rates.

							Capital Expenditures
	Depreciation & Amortization						(Including Capitalized Software)						Total Assets
(MILLIONS)	2012		2011		2010		2012		2011		2010		2012		2011
U.S. Cleaning & Sanitizing	$	202.7	$	199.8	$	184.3	$	214.2	$	163.4	$	148.7	$	2,146.0	$	2,270.7
U.S. Other Services	5.4		5.3		5.4		8.1		4.5		2.5		162.2		154.2
Int’l Cleaning, Sanitizing & Other Services	167.9		174.0		158.2		168.5		176.3		146.5		2,634.6		2,607.9
Global Water, Paper & Energy	154.8		5.6		—		216.7		21.8		—		11,215.4		11,082.4
Corporate	183.7		11.0		—		—		—		—		1,414.1		2,069.5
Consolidated	$	714.5	$	395.7	$	347.9	$	607.5	$	366.0	$	297.7	$	17,572.3	$	18,184.7

The company had two classes of products within its U.S. Cleaning & Sanitizing and International Cleaning, Sanitizing & Other Services operations which comprised 10% or more of consolidated net sales in any of the last three years. Sales of warewashing products were approximately 11% of consolidated net sales in 2012, approximately 18% of consolidated net sales in 2011, and approximately 19% in 2010. Sales of laundry products were approximately 10% of consolidated net sales in 2011 and 2010.

The vast majority of the company’s revenue is driven by the sale of its chemical products, with any corresponding service considered incidental to the product sale. The company has two operating segments (Pest Elimination and Equipment Care) within which the underlying revenue driver is fee for service as opposed to chemical products. Total service revenue at public exchange rates for the Pest Elimination and Equipment Care operating units within the company’s operating segments is shown below. All other service based revenue is insignificant.

	Service Revenue
(MILLIONS)	2012		2011		2010

U.S. Other Services	$	401.1	$	384.5	$	379.0
International Cleaning, Sanitizing & Other Services	212.1		202.4		183.0

Geographic Information

Net sales and long-lived assets at public exchange rates by geographic region are as follows:

	Net Sales						Long-Lived Assets, net
(MILLIONS)	2012		2011		2010		2012		2011

United States	$	5,865.3	$	3,551.2	$	3,170.4	$	7,100.3	$	7,202.8
EMEA	3,027.9		1,955.5		1,843.2		1,908.4		1,990.6
Asia Pacific	1,586.8		721.4		575.7		2,377.1		2,339.6
Latin America	849.7		321.2		272.5		714.3		687.4
Canada	509.0		249.2		227.9		580.2		568.3
Consolidated	$	11,838.7	$	6,798.5	$	6,089.7	$	12,680.3	$	12,788.7

Net sales by geographic region were determined based on origin of sale. Geographic data for long-lived assets is based on physical location of those assets.

17. QUARTERLY FINANCIAL DATA (UNAUDITED)

	FIRST			SECOND			THIRD		FOURTH
MILLIONS, EXCEPT PER SHARE	QUARTER			QUARTER			QUARTER		QUARTER		YEAR

2012
Net sales	$	2,810.9		$	2,958.7		$	3,023.3	$	3,045.8	$	11,838.7
Cost of sales (including special charges of $76.0, $3.1, $3.2 and $11.6 in Q1, Q2, Q3 and Q4, respectively)	1,614.0			1,608.9			1,616.4		1,644.2		6,483.5
Selling, general and administrative expenses	989.7			981.7			977.7		971.1		3,920.2
Special (gains) and charges	41.4			41.6			28.0		34.7		145.7
Operating income	165.8			326.5			401.2		395.8		1,289.3
Interest expense, net (including special charges of $18.2 and $1.1 in Q1 and Q4, respectively)	86.1			63.9			64.2		62.5		276.7
Income before income taxes	79.7			262.6			337.0		333.3		1,012.6
Provision for income taxes	35.6			79.2			97.7		98.8		311.3
Net income including noncontrolling interest	44.1			183.4			239.3		234.5		701.3
Less: Net income attributable to noncontrolling interest (including special charges of $4.5 in Q1)	(5.6		)	(1.1		)	1.3		3.1		(2.3		)
Net income attributable to Ecolab	$	49.7		$	184.5		$	238.0	$	231.4	$	703.6
Earnings attributable to Ecolab per common share
Basic	$	0.17		$	0.63		$	0.81	$	0.79	$	2.41
Diluted	$	0.17		$	0.62		$	0.80	$	0.77	$	2.35
Weighted-average common shares outstanding
Basic	291.5			291.9			292.7		293.8		292.5
Diluted	297.9			298.2			298.6		299.9		298.9
2011
Net sales (including special charges of $29.6 in Q4)	$	1,518.3		$	1,698.8		$	1,736.1	$	1,845.3	$	6,798.5
Cost of sales (including special charges of $0.8, $4.5 and $3.6 in Q1, Q3 and Q4, respectively)	770.4			860.8			877.9		966.5		3,475.6
Selling, general and administrative expenses	581.6			609.6			595.3		651.6		2,438.1
Special (gains) and charges	14.6			30.1			23.3		63.0		131.0
Operating income	151.7			198.3			239.6		164.2		753.8
Interest expense, net (including special charges of $1.5 in Q4)	13.5			13.1			13.2		34.4		74.2
Income before income taxes	138.2			185.2			226.4		129.8		679.6
Provision for income taxes	44.4			59.0			71.9		41.0		216.3
Net income including noncontrolling interest	93.8			126.2			154.5		88.8		463.3
Less: Net income attributable to noncontrolling interest	0.2			0.3			0.2		0.1		0.8
Net income attributable to Ecolab	$	93.6		$	125.9		$	154.3	$	88.7	$	462.5
Earnings attributable to Ecolab per common share
Basic	$	0.40		$	0.54		$	0.67	$	0.35	$	1.95
Diluted	$	0.40		$	0.53		$	0.65	$	0.34	$	1.91
Weighted-average common shares outstanding
Basic	232.0			231.6			231.9		252.2		236.9
Diluted	235.9			236.1			236.1		257.5		242.1

Per share amounts do not necessarily sum due to changes in the calculation of shares outstanding for each discrete period and rounding.

REPORTS OF MANAGEMENT

To our Shareholders:

Management’s Responsibility for Financial Statements

Management is responsible for the integrity and objectivity of the consolidated financial statements. The statements have been prepared in accordance with accounting principles generally accepted in the United States of America and, accordingly, include certain amounts based on management’s best estimates and judgments.

The Board of Directors, acting through its Audit Committee composed solely of independent directors, is responsible for determining that management fulfills its responsibilities in the preparation of financial statements and maintains internal control over financial reporting. The Audit Committee recommends to the Board of Directors the appointment of the company’s independent registered public accounting firm, subject to ratification by the shareholders. It meets regularly with management, the internal auditors and the independent registered public accounting firm.

The independent registered public accounting firm has audited the consolidated financial statements included in this annual report and have expressed their opinion regarding whether these consolidated financial statements present fairly in all material respects our financial position and results of operation and cash flows as stated in their report presented separately herein.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of management, including the principal executive officer and principal financial officer, an evaluation of the design and operating effectiveness of internal control over financial reporting was conducted based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the evaluation under the framework in Internal Control — Integrated Framework, management concluded that internal control over financial reporting was effective as of December 31, 2012.

On December 1, 2011, Nalco Holding Company merged into a wholly-owned subsidiary of the company. See Note 4 to the Consolidated Financial Statements for additional information. The legacy Nalco businesses have been included in management’s assessment of internal controls over financial reporting as of December 31, 2012.

The company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, has audited the effectiveness of the company’s internal control over financial reporting as of December 31, 2012 as stated in their report which is included herein.

Douglas M. Baker, Jr.		Daniel J. Schmechel
Chairman and Chief Executive Officer		Chief Financial Officer

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of Ecolab Inc.:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, comprehensive income, equity and of cash flows present fairly, in all material respects, the financial position of Ecolab Inc. and its subsidiaries at December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2012 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


PricewaterhouseCoopers LLP
Minneapolis, Minnesota February 26, 2013

Summary Operating and Financial Data

DECEMBER 31 (MILLIONS, EXCEPT PER SHARE AND EMPLOYEES)	2012			2011			2010			2009
OPERATIONS
Net sales
United States (including special (gains) and charges (1) )	$	5,865.3		$	3,551.2		$	3,170.4		$	3,112.7
International (at average rates of currency exchange)	5,973.4			3,247.3			2,919.3			2,787.9
Total	11,838.7			6,798.5			6,089.7			5,900.6
Cost of sales (including special (gains) and charges (2) )	6,483.5			3,475.6			3,013.8			2,978.0
Selling, general and administrative expenses	3,920.2			2,438.1			2,261.6			2,174.2
Special (gains) and charges	145.7			131.0			7.5			67.1
Operating income	1,289.3			753.8			806.8			681.3
Gain on sale of equity investment
Interest expense, net (including special (gains) and charges (3) )	276.7			74.2			59.1			61.2
Income from continuing operations before income taxes, equity earnings and changes in accounting principle	1,012.6			679.6			747.7			620.1
Provision for income taxes	311.3			216.3			216.6			201.4
Income from continuing operations	701.3			463.3			531.1			418.7
Gain from discontinued operations
Changes in accounting principle
Net income including noncontrolling interest	701.3			463.3			531.1			418.7
Less: Net income attributable to noncontrolling interest (including special (gains) and charges (4) )	(2.3		)	0.8			0.8			1.4
Net income attributable to Ecolab	$	703.6		$	462.5		$	530.3		$	417.3
Earnings per share, as reported (GAAP)
Diluted - continuing operations	$	2.35		$	1.91		$	2.23		$	1.74
Diluted - net income	2.35			1.91			2.23			1.74
Earnings per share, as adjusted (Non-GAAP) (5)
Diluted - continuing operations	2.98			2.54			2.23			1.99
Diluted - net income	$	2.98		$	2.54		$	2.23		$	1.99
Weighted-average common shares outstanding - basic	292.5			236.9			233.4			236.7
Weighted-average common shares outstanding - diluted	298.9			242.1			237.6			239.9
SELECTED INCOME STATEMENT RATIOS
Gross profit	45.2		%	48.9		%	50.5		%	49.5		%
Selling, general and administrative expenses	33.1			35.9			37.1			36.8
Operating income	10.9			11.1			13.2			11.5
Income from continuing operations before income taxes	8.6			10.0			12.3			10.5
Income from continuing operations	5.9			6.8			8.7			7.1
Effective income tax rate	30.7		%	31.8		%	29.0		%	32.5		%
FINANCIAL POSITION
Current assets	$	4,892.0		$	5,396.0		$	1,869.9		$	1,814.2
Property, plant and equipment, net	2,409.1			2,295.4			1,148.3			1,176.2
Goodwill, intangible and other assets	10,271.2			10,493.3			1,854.0			2,030.5
Total assets	$	17,572.3		$	18,184.7		$	4,872.2		$	5,020.9
Current liabilities	$	3,052.7		$	3,166.3		$	1,324.8		$	1,250.2
Long-term debt	5,736.1			6,613.2			656.4			868.8
Postretirement health care and pension benefits	1,220.5			1,173.4			565.8			603.7
Other liabilities	1,402.9			1,490.7			192.2			288.6
Total liabilities	11,412.2			12,443.6			2,739.2			3,011.3
Ecolab shareholders’ equity	6,077.0			5,666.7			2,129.2			2,000.9
Noncontrolling interest	83.1			74.4			3.8			8.7
Total equity	6,160.1			5,741.1			2,133.0			2,009.6
Total liabilities and equity	$	17,572.3		$	18,184.7		$	4,872.2		$	5,020.9
SELECTED CASH FLOW INFORMATION
Cash provided by operating activities	$	1,203.0		$	685.5		$	950.4		$	695.0
Depreciation and amortization	714.5			395.7			347.9			334.3
Capital expenditures	574.5			341.7			260.5			252.5
Cash dividends declared per common share	$	0.8300		$	0.7250		$	0.6400		$	0.5750
SELECTED FINANCIAL MEASURES/OTHER
Total debt	$	6,541.9		$	7,636.2		$	845.6		$	967.3
Total debt to capitalization	51.5		%	57.1		%	28.4		%	32.5		%
Book value per common share	$	20.62		$	19.41		$	9.16		$	8.46
Return on beginning equity	12.2		%	21.7		%	26.5		%	26.6		%
Dividends per share/diluted earnings per common share	35.3		%	38.0		%	28.7		%	33.1		%
Net interest coverage	4.7			10.2			13.7			11.1
Year end market capitalization	$	21,190.5		$	16,879.0		$	11,723.3		$	10,547.4
Annual common stock price range	$	72.79-57.44		$	58.13-43.81		$	52.46-40.66		$	47.88-29.27
Number of employees	40,860			40,200			26,494			25,931

DECEMBER 31 (MILLIONS, EXCEPT PER SHARE AND EMPLOYEES)	2008		2007		2006		2005		2004		2003		2002
OPERATIONS
Net sales
United States (including special (gains) and charges (1) )	$3,130.1		$2,801.3		$2,562.8		$2,327.4		$2,135.7		$2,014.8		$1,923.5
International (at average rates of currency exchange)	3,007.4		2,668.3		2,333.0		2,207.4		2,049.3		1,747.0		1,480.1
Total	6,137.5		5,469.6		4,895.8		4,534.8		4,185.0		3,761.8		3,403.6
Cost of sales (including special (gains) and charges (2) )	3,141.6		2,691.7		2,416.1		2,248.8		2,033.5		1,846.6		1,688.7
Selling, general and administrative expenses	2,257.2		2,089.2		1,866.7		1,743.0		1,656.1		1,458.7		1,302.9
Special (gains) and charges	25.9		19.7						4.5		0.4		37.0
Operating income	712.8		669.0		613.0		543.0		490.9		456.1		375.0
Gain on sale of equity investment											11.1
Interest expense, net (Including special (gains) and charges (3) )	61.6		51.0		44.4		44.2		45.3		45.3		43.9
Income from continuing operations before income taxes, equity earnings and changes in accounting principle	651.2		618.0		568.6		498.8		445.6		421.9		331.1
Provision for income taxes	202.8		189.1		198.6		178.7		161.9		160.2		131.3
Income from continuing operations	448.4		428.9		370.0		320.1		283.7		261.7		199.8
Gain from discontinued operations													1.9
Changes in accounting principle													(4.0	)
Net income including noncontrolling interest	448.4		428.9		370.0		320.1		283.7		261.7		197.7
Less: Net income attributable to noncontrolling interest (4)	0.3		1.7		1.4		0.6		1.0		1.1		1.4
Net income attributable to Ecolab	$448.1		$427.2		$368.6		$319.5		$282.7		$260.6		$196.3
Earnings per share, as reported (GAAP)
Diluted - continuing operations	$1.80		$1.70		$1.43		$1.23		$1.09		$0.99		$0.76
Diluted - net income	1.80		1.70		1.43		1.23		1.09		0.99		0.75
Earnings per share, as adjusted (Non-GAAP) (5)
Diluted - continuing operations	1.86		1.66		1.43		1.24		1.09		0.96		0.88
Diluted - net income	$1.86		$1.66		$1.43		$1.24		$1.09		$0.96		$0.87
Weighted-average common shares outstanding - basic	245.4		246.8		252.1		255.7		257.6		259.5		258.2
Weighted-average common shares outstanding - diluted	249.3		251.8		257.1		260.1		260.4		262.7		261.6
SELECTED INCOME STATEMENT RATIOS
Gross profit	48.8	%	50.8	%	50.7	%	50.4	%	51.4	%	50.9	%	50.4	%
Selling, general and administrative expenses	36.8		38.2		38.1		38.4		39.6		38.8		38.3
Operating income	11.6		12.2		12.5		12.0		11.7		12.1		11.0
Income from continuing operations before income taxes	10.6		11.3		11.6		11.0		10.6		11.2		9.7
Income from continuing operations	7.3		7.8		7.6		7.1		6.8		7.0		5.9
Effective income tax rate	31.1	%	30.6	%	34.9	%	35.8	%	36.3	%	38.0	%	39.7	%
FINANCIAL POSITION
Current assets	$1,691.1		$1,717.3		$1,853.6		$1,421.7		$1,279.1		$1,150.3		$1,015.9
Property, plant and equipment, net	1,135.2		1,083.4		951.6		868.0		867.0		769.1		716.1
Goodwill, intangible and other assets	1,930.6		1,922.1		1,614.2		1,506.9		1,570.1		1,309.5		1,133.9
Total assets	$4,756.9		$4,722.8		$4,419.4		$3,796.6		$3,716.2		$3,228.9		$2,865.9
Current liabilities	$1,441.9		$1,518.3		$1,502.8		$1,119.4		$939.6		$851.9		$853.8
Long-term debt	799.3		599.9		557.1		519.4		645.5		604.4		539.7
Postretirement health care and pension benefits	680.2		418.5		420.2		302.0		270.9		249.9		207.6
Other liabilities	256.5		243.2		252.7		201.7		257.3		195.9		140.5
Total liabilities	3,177.9		2,779.9		2,732.9		2,142.5		2,113.3		1,902.1		1,741.6
Ecolab shareholders’ equity	1,571.6		1,935.7		1,680.2		1,649.2		1,598.1		1,321.1		1,119.8
Noncontrolling interest	7.4		7.2		6.4		4.9		4.8		5.7		4.5
Total equity	1,579.0		1,942.9		1,686.6		1,654.1		1,602.9		1,326.8		1,124.3
Total liabilities and equity	$4,756.9		$4,722.8		$4,419.4		$3,796.6		$3,716.2		$3,228.9		$2,865.9
SELECTED CASH FLOW INFORMATION
Cash provided by operating activities	$753.2		$797.6		$627.6		$590.1		$570.9		$523.9		$412.7
Depreciation and amortization	334.7		291.9		268.6		256.9		247.0		228.1		220.6
Capital expenditures	326.7		306.5		287.9		268.8		275.9		212.0		212.8
Cash dividends declared per common share	$0.5300		$0.4750		$0.4150		$0.3625		$0.3275		$0.2975		$0.2750
SELECTED FINANCIAL MEASURES/OTHER
Total debt	$1,138.2		$1,003.4		$1,066.1		$746.3		$701.6		$674.6		$699.8
Total debt to capitalization	41.9	%	34.1	%	38.7	%	31.1	%	30.4	%	33.7	%	38.4	%
Book value per common share	$6.65		$7.84		$6.69		$6.49		$6.21		$5.13		$4.31
Return on beginning equity	23.1	%	25.4	%	22.4	%	20.0	%	21.4	%	23.3	%	21.9	%
Dividends per share/diluted earnings per common share	29.4	%	27.9	%	29.0	%	29.5	%	30.0	%	30.1	%	36.7	%
Net interest coverage	11.6		13.1		13.8		12.3		10.8		10.1		8.5
Year end market capitalization	$8,301.7		$12,639.9		$11,360.4		$9,217.8		$9,047.5		$7,045.5		$6,432.0
Annual common stock price range	$52.35-29.56		$53.78-37.01		$46.40-33.64		$37.15-30.68		$35.59-26.12		$27.92-23.08		$25.20-18.27
Number of employees	26,568		26,052		23,130		22,404		21,338		20,826		20,417

On December 1, 2011, the company completed its merger with Nalco, which significantly impacts the comparability of certain 2012 and 2011 financial data against prior years. Results for 2004 through 2000 have been restated to reflect the effect of retroactive application of ASC 718 Compensation - Stock Compensation . (1) U.S. Net sales includes special charges of $29.6 in 2011. (2) Cost of sales includes special charges of $93.9 in 2012, $8.9 in 2011, $12.6 in 2009, ($0.1) in 2004, ($0.1) in 2003 and $9.0 in 2002. (3) Interest expense, net includes special charges of $19.3 in 2012 and $1.5 in 2011. (4) Net income attributable to noncontrolling interest includes special charges of $4.5 in 2012. (5) Earnings per share, as adjusted (Non-GAAP) amounts exclude the impact of special (gains) and charges, discrete tax items and for 2011, post merger legacy Nalco activity. All per share, shares outstanding and market price data reflect the two-for-one stock split declared in 2003.

Exhibit 14.1

Table of Contents

How We Work Matters: A Message from Doug Baker, Chairman and CEO	3

1. Committing to the Highest Ethical and Legal Standards	4

2. Fostering a Respectful Workplace	8

3. Promoting Safety, Health and a Sustainable Environment	11

4. Acting in the Interests of Ecolab	14

5. Giving and Receiving Gifts, Entertainment and Hospitality	17

6. Preventing Bribery and Corruption	19

7. Doing Business with the U.S. Government	22

8. Transacting Business across Borders	25

9. Competing Fairly	28

10. Avoiding Insider Trading	31

11. Protecting and Properly Using Ecolab Assets and Property	33

12. Ensuring Data Privacy and Data Security	36

13. Communicating with the Public, Investors and Media	38

14. Keeping Accurate Financial and Business Records	40

15. Questions or Concerns: Finding Ecolab Resources	43

How We Work Matters:

A Message from Doug Baker, Chairman and CEO

Dear Colleagues:

Day to day, as we work to build a stronger Ecolab, we are focused on what we need to do — win new customers, expand existing accounts, be first with new products and services and provide exceptional customer service.

But just as important as what we do is how we work. Our actions must align with Ecolab’s values and adhere to our Code of Conduct and company policies. “How we work” means that we act with integrity — that we continuously behave in ways that earn the trust of associates, customers, communities and others. Much is at stake in how we work: our relationships, our reputation and even our ability to continue to do business.

As we serve new markets, welcome new associates and expand globally, we need to welcome diversity. As we do so, we also must strive to act as “one” Ecolab, defined and guided by our shared values:

· We reach our goals: We deliver results for our customers, our shareholders and each other.

· We do what’s right: We’re honest, reliable and genuine in our actions. We act with integrity.

· We challenge ourselves: We go beyond the status quo, learn and grow, and innovate to improve processes and deliver better outcomes.

· We work together with diverse perspectives: We work together for the good of the team and the Company — across functions and geographies. We share knowledge and support each other.

· We make a difference. We make a positive impact on people around us, our community and our world. We inspire others to make a positive difference too.

· We do all this with care, putting safety first.

The daily actions of all Ecolab associates ultimately define who we are as a company, so each of us must take responsibility for complying with the Ecolab Code of Conduct. Our Code of Conduct — augmented by our policies, procedures and manuals — sets forth guiding principles for how we are to behave and how we are to interact with our customers, colleagues, suppliers, competitors and communities. All associates, officers and directors are required to comply with the Code of Conduct.

I urge you to become familiar with the latest edition of our “Code,” which covers a broader range of issues than previous versions. If you find that our Code does not address a particular issue, question or concern, please consult your manager, a supervisor or the Ecolab Law Department. To identify other sources of information, turn to the directory at the back of the Code, entitled Questions or Concerns: Finding Ecolab Resources .

The excellent reputation Ecolab enjoys is one of our greatest assets. It is a reflection of the attitudes and actions of associates who have consistently demonstrated the Company’s values and upheld our Code of Conduct over the years. I am counting on you to protect and strengthen our reputation by living our values, committing to the Code’s high standards and always being mindful that we strive to do what’s right, what’s fair and what’s honest

Sincerely,

/s/ Douglas M. Baker, Jr.
Douglas M. Baker, Jr.
Chairman of the Board and Chief Executive Officer

Committing to the Highest Ethical and Legal Standards

Ecolab is committed to upholding the highest legal and ethical standards, regardless of when and where we conduct our business. Our Code of Conduct (Code) provides basic guidelines to assist us in making good decisions on behalf of the Company, in doing our jobs ethically and in compliance with Ecolab policies and the laws of the countries where we do business.

As an Ecolab employee or an employee of an Ecolab subsidiary or affiliate, you are required to read, understand and abide by the Code - and you are encouraged to refer to it when you have a concern or face a difficult ethical dilemma. You also are obligated to be familiar with and abide by the Company’s policies and procedures, some of which are referenced in the Code.

The Code and our policies provide guidance in many situations. However, no set of guidelines can anticipate every concern or question. Thus, Ecolab relies on you to use good judgment in all actions - and to seek guidance when you face issues not addressed in the Code.

Upholding the Code and Following the Law

No matter where you work or what your position, as an employee of Ecolab, you are obligated to:

· Follow the tenets of the Code. The Code applies company-wide and worldwide to all Ecolab employees, officers and directors, as well as to employees of our majority-owned subsidiaries and joint ventures. In addition, we expect our agents, independent contractors, consultants and employees of minority-owned joint ventures to act in a manner consistent with applicable Code tenets.

· Comply with the laws and regulations of the countries in which we do business. You are expected to meet the ethical and legal standards that apply in the countries where we do business. If you are concerned that the laws or regulations in your location appear more strict than, or seem to differ from, our Code, you should seek guidance from your supervisor or the Ecolab Law Department. When two standards are in place—for instance, the Code and the law—you should follow the stricter standard. Any failure to comply with the law will be considered a Code violation.

· Become familiar with and abide by all of the Company’s policies, procedures and manuals that apply to your job.

Good-Faith Reporting and Asking Questions

You are required to report promptly, and in good faith, any conduct of any employee or third-party agent (that is, a supplier or business partner) that could constitute a violation of the Code. If you deliberately fail to report a potential violation, or withhold relevant and material information concerning a violation, you may be subject to discipline, up to and including termination of employment.

If you have questions regarding the appropriateness of a particular action, discuss it with your supervisor, Human Resources or the Law Department. You also may make a good-faith report of suspected violations or seek guidance by calling the Code of Conduct Helpline for your employment location. A comprehensive list of reporting options may be found in the Questions and Concerns: Finding Ecolab Resources section of our Code.

Whether you are permitted to report violations anonymously to the Code of Conduct Helpline depends on the laws in your location. Some countries

Ethical Roadmap

Our Code is a set of guidelines to assist you in making decisions on behalf of Ecolab. Because no guidelines can be all-inclusive, we are all ultimately responsible for acting ethically and in compliance with the law.

When you are faced with a difficult situation, consider these questions:

· Is my action or decision the right thing to do?

· Could my action or decision withstand public review?

· Will my action or decision protect Ecolab’s reputation as an ethical company?

If the answer to any of these questions is “no,” stop and carefully consider the situation. Refer to the Code or Ecolab policies, or consult a compliance resource so you can be sure you take the correct course of action.

We Must Remember

Disciplinary action could be taken against any Ecolab employee who:

· Authorizes or participates directly in actions which are a violation of the Code.

· Deliberately fails to report a violation, or deliberately withholds relevant and material information, concerning a violation of the Code.

· As a supervisor, inadequately supervises his or her direct reports.

· Retaliates directly or indirectly, or encourages others to do so, against the person who reports a violation, or potential violation, of the Code.

where we do business limit, or do not allow, reporting certain issues or concerns without identifying yourself. If you are an employee in the European Union, and you make a report to the Code of Conduct Helpline, the following guidelines will apply:

· You will be asked to allow your name to be used in the report.

· You should only name an employee suspected of wrongdoing if it is absolutely necessary.

· Any employee you name will be informed within three business days of your report.

· Ecolab will use the information you provide to the Code of Conduct Helpline solely to investigate your specific report and not for any other purpose.

Non-Retaliation and Confidentiality

We are committed to protecting employees who, in good faith, make reports, seek advice or ask questions. Our anti-retaliation policy aims to ensure that no employee will suffer undue harm because he or she raises an issue, reports a Code violation or cooperates with an investigation. It is designed to protect you from unwarranted actions by the Company, fellow Ecolab employees or a manager or supervisor. If you believe you are the victim of retaliatory action, you should contact your manager or supervisor, the Law Department or the Code of Conduct Helpline, as appropriate.

When you make a good-faith report or seek help in addressing an issue or concern, Ecolab will promptly respond. We will also strive to ensure that your concern is handled with sensitivity and confidentiality, to the fullest extent possible. In return, we expect you to help protect the confidentiality of the report, as well as any subsequent investigation processes, by not discussing the matter with co-workers.

Failure to Comply with the Code

Any failure to comply with the standards contained in the Code will result in appropriate discipline, up to and including termination of employment, referral for criminal prosecution and restitution for any losses or damages resulting from the violation. The extent of the discipline will be based on factors such as the severity and frequency of the offense.

In very rare instances, Ecolab may allow certain provisions of the Code to be waived by Company employees, officers or directors. A waiver to an executive officer or member of the Board of Directors may only be made by the Board (or a committee of the Board) and, in that case, the Company will promptly and publicly disclose the waiver granted and explain the reason for allowing it.

Manager’s Responsibilities

As an Ecolab supervisor or manager, you are responsible for understanding and complying with the Code, applying it daily and being aware of the ethical standard of your business behavior. In addition, you are responsible for enforcing the Code within your areas of responsibility. If you have direct reports, ensure that they read and abide by the Code, as well as the policies, procedures and manuals referred to in the Code.

You also are obligated to direct any questions, concerns or issues that require additional guidance to other Ecolab resources, such as Human Resources and the Law Department.

Updates

Ecolab regularly reviews the content of our Code, as well as related corporate policies. We will make modifications to the Code as required by changes in law, policy or other significant developments.

Fostering a Respectful Workplace

At Ecolab, we aspire to create an inclusive and respectful work environment; one in which employees recognize one another’s worth and dignity. Any conduct that detracts from the worth and dignity of our employees is contrary to our values and has no place in our culture.

We also are committed to showing respect to people and cultures in the countries where we do business. As a representative of the Company, you should strive to be sensitive to the cultures and customs of those with whom you work.

Diversity and Equal Employment Opportunities

Ecolab is committed to maintaining a diverse workforce, a culture of mutual respect and an appreciation for the differences of others. Providing equal employment opportunities is the right thing to do - and it is important to our success.

To ensure that we comply with applicable labor and employment law and never discriminate, Ecolab’s recruitment, hiring, compensation, promotion, transferring, training, corrective action and termination practices are based exclusively on an individual’s qualifications and ability to perform the job. Only criteria which are relevant to the job are considered. Ecolab has in place a proactive set of programs to ensure that we provide equal employment opportunities.

Because laws and regulations differ among the locations in which we operate, you should consult your manager, Human Resources or the Law Department if you have questions or concerns related to diversity or discrimination.

Harassment and Workplace Respect

Respect for one another is basic to Ecolab’s culture. Disrespect can disrupt the productivity of our employees and threaten Ecolab’s success. To help ensure an environment of mutual respect, Ecolab will not tolerate any form of harassment or other intimidating behavior, including physical, emotional or verbal abuse. We prohibit any form of harassment, whether by an employee, a temporary employee or an external vendor, in which:

· submission to the harassment or abusive conduct is an explicit or implicit term or condition of employment;

· submission to, or rejection of, the harassment or abusive conduct is used as the basis for an employment decision; or

· the harassment or abusive conduct has the purpose or effect of interfering with an individual’s work performance or creating an intimidating, hostile or offensive working environment.

Violating this policy will subject an individual to disciplinary action, up to and including termination of employment.

We Must Remember

In order to maintain a work environment that is free from discrimination, all employment-related decisions must be made without regard to:

· Gender

· Race

· Ethnic origin

· Nationality

· Sexual orientation

· Gender identity

· Religion

· Age

· Disability

· Marital status

· Veteran status

· Other personal characteristics or conditions protected by national, state or local law

Q&A

Q: I occasionally overhear my colleagues telling sexually suggestive jokes or making racial slurs or other inappropriate remarks about Ecolab employees. What should I do?

A: It doesn’t matter if your colleagues are “just joking.” The impact of what they say is more important than their intent. If you are uncomfortable discussing your concerns directly with your colleagues, you should speak with your supervisor or a representative from Human Resources. In addition, you may contact the Law Department.

If you have questions or concerns regarding harassment or would like more information on Ecolab’s harassment policy, please see the applicable policy manual for your location. Your local Human Resources representative can provide you with a copy.

Workplace Violence

All Ecolab employees have the right to perform their jobs in an environment that is free from violence, bullying, threats or intimidation. Whether at work on Ecolab property or in work-related relationships, no Ecolab employee should cause others to reasonably fear for their personal safety or the safety of their families, friends or property. If you encounter a situation of violence, bullying or threats, you should speak to your manager or a Human Resources representative or, if necessary, call the appropriate emergency authorities.

Unless contrary to local law, Ecolab prohibits the possession or use of weapons on Company property or while conducting Company business.

If you have questions or concerns regarding workplace violence or would like more information on Ecolab’s policy, please see the applicable policy manual for your location.

Corporate Social Responsibility

Ecolab takes seriously our responsibility to the communities we serve. We believe in compensating our employees fairly and in compliance with local laws. We promote the well-being of our employees, our customers and our customers’ customers by contributing to programs and initiatives that enhance the quality of life in the communities in which they work and live. We respect the rights of all people and hold our suppliers to the same high standard of social responsibility. The Company does not engage in the use of forced or child labor, nor do we condone the mistreatment of any individuals who conduct business with, or on behalf of, Ecolab.

Promoting Safety, Health and a Sustainable Environment

Commitment to a Safe and Healthy Workplace

Ecolab places the highest value on the safety and well-being of our employees, as well as the safety and well-being of the communities and environments in which we operate. Each of us is responsible for complying fully with applicable health and safety laws and knowing, understanding and following the Company’s safety policies, practices and procedures. Each of us has a personal responsibility to maintain a safe workplace and to use Ecolab’s equipment and materials in a safe manner, always exercising good judgment in our daily work life.

As an employee, if you observe or learn about conditions or practices at your work location that could threaten your health and safety or that of your colleagues, please report your concerns immediately to your supervisor, your regional or local Safety, Health and Environment representative, a Human Resources representative, or if necessary, the appropriate emergency authorities.

We Must Remember

Safety at Ecolab is never optional. All of us have an obligation to:

· Work safely at all times

· Wear appropriate protective equipment for the job or task

· Avoid distractions while working or driving

· Report all injury incidents promptly

· Cooperate with safety-related investigations

Drugs and Alcohol

The abuse of alcohol and drugs can threaten the health and safety of our employees and have adverse effects on job performance and Company reputation. Whether working on Ecolab property or performing Company business off-site, you are prohibited from the unlawful manufacture, sale, distribution, dispensing, possession or use of controlled substances.

Ecolab will not tolerate employees consuming or being under the influence of alcohol or drugs while performing their jobs, including driving on business. Exceptions may be made to allow the consumption of alcohol at sanctioned social events for which prior approval has been granted and at which employees maintain proper behavior.

If you suspect that an employee may be under the influence of alcohol or a controlled substance in violation of Ecolab policy, you should report it immediately to your supervisor. Employees who violate our drug and alcohol policy may be subject to potential criminal liability as well as appropriate disciplinary action, up to, and including termination of employment. If you have questions or concerns regarding Ecolab’s policy on drugs or alcohol, or if you would like more information, please see the applicable policy manual for your location or talk with your Human Resources representative.

Product Quality and Safety

Ecolab complies with all laws and regulations concerning product quality and safety. We are committed to product safety, from concept and manufacture through customer use and disposal, recycle or reuse. By complying with the laws, regulations and Company policies that govern the development, manufacturing, testing, inspection, storage, transportation, use and disposal of our products, we help ensure the integrity of the Ecolab brand. No employee should take any action that could jeopardize our customers’ confidence or trust in the quality and safety of our products. If you have any concerns or notice anything out of the ordinary that could adversely affect the quality and safety of our products or services, contact your manager or the Law Department immediately.

Commitment to Sustainability and Protecting the Environment

At Ecolab, we are committed to providing and protecting what is vital: clean water, safe food, abundant energy and healthy environments. Strengthened by the expertise of our employees and combined with our dedication to social responsibility, our offerings provide value to our customers and the global economy - and help foster a more sustainable world. Ecolab manages its global operations with concern for the health, safety and prosperity of our employees, customers, the communities which we serve and the environment. Our commitment to sustainable development is articulated in a document called Our Principles . We should all strive to follow and promote these principles.

Q&A

Q: I work closely with the site operator at a customer’s worksite. He is always in a hurry and takes a lot of risks when working with equipment and chemicals, such as not wearing gloves or goggles and handling chemical transfers carelessly. Whenever I make suggestions or question his judgment, he brushes me off and says I need to keep up the pace in order to get the work done. What should I do?

A: You are right to address the safety concerns raised by this individual’s actions. Our precautions are intended to safeguard the well-being of our co-workers, customers and communities. If mentioning your concerns to the site operator does not cause him to be more mindful of safe operations while working, you should immediately speak with your supervisor or your Safety, Health and Environment or Human Resources representatives. This fulfills your obligations under the Code and also helps us ensure a healthy and safe work environment for all.

Q: When I got home, I realized I had some excess product samples as well as customer site process samples in my car. I wanted to get my car cleaned, so I quickly poured all the samples into one container and then placed it in my garbage bin. There is no real problem here, correct?

A: First, mixing products can cause a dangerous chemical reaction. Second, releasing what may be hazardous substances into the environment, particularly in your residential area, can lead to significant environmental problems over time. Product and process samples should be disposed of responsibly. Material Safety Data Sheets (MSDS) available on Ecolab.com contain typical disposal information for our products and that guidance should be adhered to at all times. If you are unsure of how to dispose of samples or residual products, please contact your local/regional Safety, Health and Environment representative. Responsible management of unused or expired chemical products is part of Ecolab’s commitment to safeguarding the environment and the communities in which we operate.

Acting in the Interests of Ecolab

Ecolab expects employees to avoid situations that could create conflicts between their personal interests and the interests of the Company.

Conflicts of Interest

Conflicts of interest arise when your personal activity or interest interferes with the business interests of the Company. In many cases, even the appearance of a conflict of interest can have serious consequences for you and the Company.

Conflicts of interest can arise in many different situations, both direct (you are involved) and indirect (someone with whom you have a personal relationship is involved). You should take care to properly address any conflicts of interest. For instance:

· Outside Employment or Activities: You should not engage in employment outside of the Company if that employment (i) interferes with your duties to the Company, (ii) causes you to compete with, or work with an organization that competes with, Ecolab, or (iii) leads you to provide services or assistance to an Ecolab competitor. Outside employment that requires you to use Ecolab time, facilities or property to perform the job would be considered a conflict of interest. To assess whether a second job will create a conflict of interest, employees are required to obtain approval from their supervisors before accepting additional employment outside the Company.

· Directorships: If you wish to serve as a director of any company or non-profit organization, you should disclose your plans to your supervisor for prior approval. Approval from Ecolab’s Chief Executive Officer is required before taking a position as a board member for a public company. As part of the approval process, the Company will determine if your involvement creates a conflict of interest. Of course, you should never serve as a director, officer, or consultant to a competitor of the Company.

· Investments: If you or a member of your immediate family who lives with you owns more than one percent (1%) of the outstanding stock of any Ecolab competitor, supplier or customer, you must disclose that ownership to the Company. Even a minority ownership in an Ecolab competitor, supplier, or customer can be a conflict of interest. Under Ecolab policy, the business or financial interests of family members living with you are considered your financial interests as well.

· Corporate Opportunities: As an employee, you should never take personal advantage of any business opportunities in which the Company would have an interest. You also should not make those opportunities available to others when you know Ecolab has an interest in the opportunity. For example, employees should avoid purchasing real estate or financial interests in firms that Ecolab has a known interest in acquiring.

Q&A

Q: My wife works for a local company that often provides goods and services to our plant. Given that I am now involved in purchasing supplies for Ecolab, could selecting my wife’s company as our vendor create a conflict of interest?

A: Yes. You need to let your manager and the Law Department know about your wife’s affiliation with an Ecolab supplier and receive approval to order from that company. If you don’t, it might appear that your decisions to purchase supplies from your wife’s company show bias or favoritism. By disclosing your wife’s role with our supplier, you ensure that the Company’s reputation for fairness and objectivity remains intact.

· Family Members: If members of your family or other close personal relations work at Ecolab or provide services to the Company or a competitor, supplier or customer, you should immediately disclose those relationships to your supervisor to avoid actual or perceived conflicts of interest. Ecolab will not purchase any goods or services from a firm employing a Company employee, or a close relative of a Company employee, unless there is prior approval from a supervisor or member of the Law Department. Special care should be taken when you participate in the procurement decision involving a company which employs a relative.

· Government Service: Ecolab encourages employees to be active in the community and participate in government, but holding certain roles or responsibilities in government could present a conflict of interest. If you plan to seek election or appointment to a government position while remaining an Ecolab employee during your government service, you should first request written approval from your supervisor. If you hold a government office, Ecolab expects you to abstain from any vote or decision that could materially affect the interests of the Company.

If you are not sure whether your relationship with another organization or person conflicts with your job or with Ecolab’s interests, you should discuss the circumstances with your supervisor or a member of the Law Department. It is always best to raise your concern or seek help, as most potential conflict situations can be resolved.

Giving and Receiving Gifts, Entertainment and Hospitality

The exchange of gifts, entertainment and other favors may be customary and appropriate in certain circumstances, locations or cultures. However, to safeguard the reputation of the Company, we must be sure that gift exchange is consistent with applicable law, our customer contracts, good business practices and custom. Follow these guidelines whenever offering or accepting anything of value.

· If it is a gift, it should be of only nominal value.

· If it is entertainment or hospitality, it should be reasonable in cost, amount, quantity and frequency.

· It should not be offered or given in an effort to influence a business decision.

· It should not violate the normal and accepted business ethics of the country in which it is provided.

· It should not violate Ecolab policy or the laws of the United States or the country in which it is provided.

· It should not reasonably be construed as a bribe, payoff or kickback.

· It should involve no element of concealment.

· Its public disclosure should not embarrass Ecolab or damage the Company’s reputation.

· Under no circumstances may you, as an employee, provide or accept cash, cash equivalents or personal loans in conjunction with Ecolab business.

For specific requirements applicable to our dealings with government customers, employees and contractors, please see the sections of our Code entitled Doing Business with the U.S. Government and Preventing Bribery and Corruption .

Local Ecolab country management may have more specific guidelines on giving and receiving gifts. Consult your local policy manual or your local Human Resources representative for further guidance. In addition, the Law Department is available to guide you through specific instances.

We Must Remember

Whenever giving or receiving any gift, entertainment or other favor in connection with Ecolab business, certain guidelines must be followed:

· Customers: Purchasing decisions must be based on the merit of our offering and the quality and value of Ecolab’s products and services. You may not attempt to influence a customer’s or potential customer’s decision by giving or furnishing gifts, favors or entertainment.

· Suppliers: To foster strong relationships with our suppliers and potential suppliers, you should never claim or suggest that Ecolab will purchase from a supplier if the supplier purchases from Ecolab.

Likewise, under no circumstances may a personal benefit influence the purchasing decision.

· Government Representatives: When dealing with any government customer, contractor or employee, you must never directly or indirectly authorize, provide or offer to provide anything of value to a government official for purposes of influencing the award, renewal or modification of a contract or to secure or reward favorable treatment in connection with procurement activities.

It can be difficult to determine when gifts and entertainment are appropriate or inappropriate. Consider these examples:

· Giving an Ecolab-branded tote bag to a supplier is clearly acceptable.

· Giving an Ecolab-branded tote bag containing several expensive bottles of wine to a current customer is on the borderline. Seek guidance from your Human Resources representative or the Law Department before proceeding.

· Giving a customer an all-expenses-paid trip for two to an expensive resort where no business will be conducted is not acceptable.

Preventing Bribery and Corruption

Ecolab strives to do business through proper means and actions. Therefore, we must avoid any behavior that could be perceived as a form of bribery or corruption. Bribery arises when one party, directly or indirectly, offers something of value to another party in order to improperly gain business or obtain favorable treatment. The laws of many countries, including the U.S. Foreign Corrupt Practices Act (“FCPA”), as well as Ecolab policy, prohibit you from engaging in bribery. Violating this policy not only could result in significant disciplinary action from the Company, but also could result in serious criminal and civil penalties for both Ecolab and you (including imprisonment and monetary fines). To help ensure that Ecolab’s assets and resources are not used for purposes of bribery or corruption, the Company must maintain accurate books and records that fairly reflect our transactions and dispositions of assets.

We Must Remember

Ecolab employees, and anyone acting on behalf of Ecolab, are prohibited from directly or indirectly providing, offering or authorizing the giving of anything of value to a government official for the purpose of obtaining or keeping business or otherwise obtaining an improper business advantage. Below are some examples of items of value that could violate Company policy or even the law:

· Gifts

· Money (including cash equivalents)

· Stocks, bonds or other securities

· Entertainment

· Meals or lodging

· Transportation

· Offers of employment for a government official or a relative of a government official

· Payment or reimbursement of travel expenses

· Discounts on Ecolab products not otherwise generally available

· Assumption or forgiveness of debt

· Political contributions

· Charitable contributions

· Personal favors

The term “government official” means any person acting in an official capacity for, or on behalf of, the government, a public international organization or any government-related department, agency or instrumentality, including:

· Any entity hired to review and accept bids for a government agency

· An officer or employee of a state-owned company

· A member of a royal family who is an officer or who otherwise maintains managerial interest in government-controlled industries or companies

· Political parties or party officials

· Candidates for political office

If someone has the ability to influence a government decision, that person is most likely a government official. You should consult the Law Department any time you have a question as to whether someone is a “government official.”

Bribery of Government Officials

Our relationships with government entities are critical to the success of our operations all over the world. That is why Ecolab complies with the FCPA and the anti-bribery laws of the countries in which we do business. These laws aim to prevent payments of anything of value to government officials in order to gain an improper business advantage. “Government officials” includes people acting in official capacities for governments, state-owned enterprises or public international organizations. It is important to be aware that anyone who has the ability to influence a government decision can be considered a “government official.”

Ecolab’s anti-bribery policies also prohibit “facilitating” payments to government officials to expedite or secure the performance of routine government action. These payments, also known as “speed money” or “grease payments,” are small, infrequent payments that are made to expedite routine, non-discretionary governmental actions, such as work permits and visas, customs clearance, product registration or inspections.

The Company’s anti-bribery policy also applies to any agents, representatives, distributors or intermediaries who do business on our behalf. Under the FCPA and the anti-corruption laws of other countries, Ecolab and its employees could be liable for corrupt payments made to government officials by third parties with whom we work. To avoid liability and potential damage to our reputation, Ecolab employees must follow the Procedures for Dealing with Intermediaries which can be found in our Anti-Corruption Policy and Procedures before retaining a third party who may have dealings with a government official on our behalf.

For more information on the Company’s anti-bribery and anti-corruption policies, please review the Anti-Corruption Policy and Procedures . If you have concerns about behavior that may not comply with our policy or anti-corruption laws by anyone at Ecolab or any third party working on behalf of Ecolab, you should contact the Law Department or make a report through the Code of Conduct Helpline.

Commercial Bribery

In addition to prohibiting bribery of government officials, Ecolab also prohibits bribery and corruption in our commercial dealings. Employees should never offer anything of value to, or accept anything of value from, existing or potential customers, suppliers or other third parties in order to improperly obtain business or an unfair advantage for the Company. Our reputation for integrity is more important than the potential gains to be made in dealing inappropriately with other individuals and organizations. For additional information, please refer the section of our Code, entitled Giving and Receiving Gifts, Entertainment and Hospitality .

Political Activities and Lobbying

Ecolab will not contribute to a political party or political candidate or permit the use of Ecolab facilities for political activity unless doing so is legally permissible and approved in advance in accordance with the Political Contributions Policy . Likewise, you should not make any political contributions in Ecolab’s name or the names of our affiliates. If you make a political contribution, you will not be directly or indirectly reimbursed for it by Ecolab or any affiliate.

Ecolab encourages employees to be active in their communities and to participate in the political process. As an employee, you should always make clear that your personal views and political actions are yours and not those of the Company.

In the United States, all lobbying activities, including giving testimony or making major contacts with government personnel on behalf of Ecolab, must be coordinated in advance by the Government Relations Department. Outside of the U.S., all activities that could constitute lobbying or attempts to influence government officials should first be reviewed with local Company management and the Law Department.

If you have questions or concerns regarding Ecolab’s policy on lobbying or political activities, you should contact the Law Department or Government Relations Department. For additional information, please also review the Political Contributions Policy , the Ecolab Anti-Corruption Policy and Procedures and the section of our Code entitled Doing Business with the U.S. Government .

Q&A

Q: As part of my job, I often work with an agent in another country to help navigate the government contracting process. I suspect that he may be providing bribes to government officials in order to expedite things. What should I do?

A: If you believe an agent is acting improperly by paying bribes while working on behalf of Ecolab, you must cease further payments to the agent and immediately report the matter to the Law Department.

Doing Business with the U.S. Government

As a supplier to the U.S. government, Ecolab operates in a highly regulated environment. To help ensure the best value for taxpayer money, and that all procurements are made in accordance with current public policy, the U.S. government imposes strict requirements on its contractors and subcontractors.

In doing business with the U.S. government, Ecolab must maintain strict compliance with all applicable statutes, regulations and contractual requirements, whether we are a prime contractor or a subcontractor. It is crucial that we meet all contract terms and that we do not deviate from those terms without timely notice to, or approval of, the applicable government officials, as required.

Contract Negotiation and Pricing

When Ecolab contracts with the U.S. government, we always must submit complete, current and accurate pricing and other factual information. As part of our contract negotiations, we must not knowingly make any false or misleading representation or statement in connection with a government contract or subcontract. During the negotiation process, we should be prepared to explain the significance of all important facts concerning a contract proposal and be able to certify the accuracy of the information we provide. Extra care is required in preparing submissions to the U.S. government. And any changes affecting pricing data must be reported immediately to our Government Sales Department.

All invoices to the U.S. government must accurately reflect the correct product or service, quantity and price for the order. Discrepancies in our pricing or information could lead to serious consequences, including financial penalties and possible criminal charges, for the Company and employees.

Product Specifications and Testing

In fulfilling the provisions of our government contracts, our products, materials and processes always must conform to the specifications called for in the contract. Before there can be any change in the contract’s requirements, you must obtain advance written approval from an authorized government official.

Hiring of United States Officials

The U.S. government has specific rules to help prevent a conflict of interest, or the appearance of conflict of interest, on the part of its employees who look to leave, or do in fact leave, their U.S. government positions to work for government contractors. Prior to discussing employment or consulting opportunities with a current or recent government employee, whether civilian or military, Ecolab requires you to receive clearance from Human Resources and the Law Department.

No Gifts, Meals or Gratuities

Something that is considered a normal business courtesy in the commercial marketplace can, in the government marketplace, be construed as an attempt to improperly influence. Therefore, you must not provide anything of value to a federal government employee or contractor, or their immediate family members. Permissible exceptions are limited to the following: (a) providing Ecolab-branded promotional items of nominal value, such as a

Q&A

Q: Although our contract with the U.S. government requires that we use a specific supplier for one of our components, we found another supplier that can provide the component for less money and in faster time. May we use this new supplier?

A: No, not without prior written approval from an authorized government official. As a U.S. contractor, we must abide by the terms of our contracts and use the components as specified under those contracts. Making changes without first getting prior written approval from an authorized government official could lead to serious consequences for you and for Ecolab, including fines and potential criminal charges.

coffee mug, calendar or similar item displaying the Ecolab name or logo, (b) providing modest refreshments such as soft drinks, coffee or doughnuts on an occasional basis in connection with legitimate business activity, and (c) engaging in other activities that have been approved in advance and in writing by the Law Department. In addition, you must not offer, provide, solicit or accept anything of value from anyone in return for favorable consideration on a United States government contract or subcontract.

Procurement Integrity

Ecolab employees must not seek bid or proposal information or source selection information (as described in the Ecolab Federal Government Policies and Procedures Manual) from any source prior to the award of any government contract or subcontract to which that information pertains. If you believe that you have received this type of information or other improper, confidential or proprietary information, you must refrain from using it for any purpose and from disclosing it to others. You also should contact the Law Department immediately.

Mandatory Disclosure

In order to promote public transparency and accountability, federal regulations require that Ecolab disclose any credible evidence that the Company (including its principals, personnel, agents or subcontractors) has committed a violation of a federal criminal law involving fraud, conflict of interest, bribery or gratuity violations or has violated the False Claims Act. We also must make timely disclosure of any government overpayments that we receive. If you learn of any overpayments or other conduct that is inconsistent with Ecolab’s obligations as a government contractor or subcontractor, you must report it immediately to the Law Department or through the Ecolab Code of Conduct Helpline.

Audits and Investigations

It is our policy to cooperate fully with any investigations or audits by the U.S. government. Therefore, you must never alter, destroy or conceal any documents relating to a government audit or investigation. Likewise, you must not take any action that could hinder a government audit or investigation.

If you have any questions or concerns regarding Ecolab’s policy on working with the U.S. government, you should contact the Government Sales Department or the Law Department. For additional information, please review the Federal Government Contracts Policies and Procedures Manual .

Transacting Business Across Borders

Export Compliance

It is Ecolab’s policy to comply with the export laws and regulations of the countries in which we do business. These laws and regulations include documentation requirements for export shipments as well as regulations that restrict the export or re-export of certain commodities, technology and software. Export control regulations may restrict - or require prior government authorization or licensing of - certain exports, depending upon what is being exported, where it is being exported, who will receive the exported item and for what purpose the exported item will be used.

There can be differences among the export control laws of the various countries in which Ecolab conducts its business. While a primary concern of export control regulations is exports of commodities, software or technology that may have military or weapons uses, restrictions also apply to “dual use” items and technologies which may have both commercial and military or weapons applications. For example, certain chemicals may be used to manufacture commercial products, but also could be misused to produce chemical weapons or illegal drugs.

U.S. export control laws also apply to the re-export of U.S. origin products, technology and software from the countries to which they were previously exported. In some cases, these laws even apply to products made outside the United States that have U.S. content, or that are the direct product of controlled U.S. origin technology. These rules also extend to the “deemed export” of technology to foreign nationals, even if that person is present in the United States. For example, a “deemed export” of technology may occur - and may require a license - in a technical exchange with a citizen of another country when that person tours Ecolab’s U.S. facilities.

Trade Sanctions and Embargos

It is Ecolab’s policy to comply with U.S. economic sanctions and trade embargos, and to comply with similar laws of other countries, to the extent they are not inconsistent with U.S. law. Economic sanctions and trade embargos serve to promote foreign policy and national security interests and may target designated individuals, entities or countries. For example, the United States maintains broad sanctions against specific countries that have been identified as supporters of terrorism, as well as designated persons and entities who are associated with those countries or who are sanctioned for other foreign policy or national security reasons.

Import Compliance

Ecolab imports a variety of items worldwide, and we are required to comply with the customs laws and regulations of each country into which those items are imported. These laws and regulations require complete and accurate documentation of the country of origin, tariff classification and value of imported items. Additional requirements may apply to the import of highly regulated items, such as biocides, drugs and medical devices. Special marking or labeling requirements may apply, and chemical imports must conform to applicable chemical inventory laws in the U.S. and elsewhere.

Anti-boycott Provisions

Ecolab is prohibited from participating in or cooperating with foreign boycotts that have not been sanctioned or approved by the United States, including the Arab League boycott of Israel. Examples of prohibited behavior include:

· Refusing or agreeing to refuse to do business with a boycotted firm or in a boycotted country

· Refusing or requiring another person to refuse to employ - or to otherwise discriminate against - a U.S. person on the basis of race, religion, sex/gender or national origin

· Furnishing information about the race, religion, sex/gender or national origin of any U.S. person

· Furnishing information about whether any person has business relationships within a boycotted country.

We are required to report to the U.S. Government any boycott requests, including receipt of documents containing boycott-related language.

As employees, we must adhere to Ecolab policies and procedures which apply to transacting business across borders. If you are involved in the exporting or importing process, you must be aware of and follow our trade compliance policies and procedures. For further information or if you have questions, contact the Regulatory Affairs Department or the Law Department.

Competing Fairly

Fair Competition

At Ecolab, we believe in free competition and strive to outdo our competitors through honest and fair business practices. In our relationships with customers, distributors, suppliers and competitors, we should never seek any unfair advantages or misrepresent facts about our business or our products. Likewise, we should avoid making false or misleading statements about our competitors or their products. Ecolab’s reputation for fairness and honesty is too valuable to risk by behaving otherwise.

It is our policy that employees have no inappropriate contact with our competitors. Any business activity which involves repeated or unusual contact with competitors - whether at meetings (such as trade association meetings), in telephone calls or by correspondence - must be approved by your supervisor and the Law Department.

To help ensure a competitive and fair marketplace, many countries (including the U.S.) have laws that preserve the free enterprise system and make competition the primary regulator of the economy. These laws prohibit business practices that could hinder or interfere with free competition.

At Ecolab, we must comply fully with these laws, including U.S. antitrust laws, and keep them in mind while doing our jobs. Regardless of whether you work in sales or simply have a friend who works for a competitor, you should remember that certain business-related discussions between competitors are improper.

The laws of some countries, including the U.S., impose harsh criminal penalties on individuals who violate antitrust or competition laws. Antitrust or competition law violations also can result in substantial fines for both the Company and employees.

Before acting, and especially before hiring former or current employees of our competitors, consult the Law Department. For additional information on antitrust and competition law, please review Ecolab’s Antitrust Policy and Guide to Compliance with the Antitrust Laws .

We Must Remember

Ecolab employees should never engage in anti-competitive actions or activities with competitors, including:

· Equipment tampering

· Wrongful interference with existing contractual relationships

· Bid rigging

· Price discrimination

· Boycotts of territories

· Allocation of customers or markets

· Price fixing

· Production limits or quotas

· Unfair pricing practices

· Attempts to monopolize certain markets

· Reciprocal dealing

· Tie-in sales

· Resale price maintenance

If you ever have a question about a particular activity or practice, you should speak with your supervisor or the Law Department.

Q&A

Q: I work in the field and interact with customers and prospective customers on a regular basis. To better understand the tactics of our competitors, am I permitted to pose as a potential customer and collect information from Ecolab’s competitors?

A: No. You must never use illegal or unethical means to gather information about our competitors, including posing as a prospective customer. Instead, you should always compete fairly and that includes not misrepresenting yourself. You should consult the Law Department immediately if you learn of any improper means of intelligence gathering.

Q: I will be attending a trade association meeting next month and I know that many of our competitors are also planning to attend. Would it be appropriate for me to ask our competitors about their new products?

A: Probably not. While trade association meetings and conferences do serve an important function in promoting information sharing and the discussion of new developments, they also raise serious competition law and antitrust concerns. As an attendee on behalf of the Company, you should avoid any discussion of prices, discounts, terms or conditions of sale, product specifications or warranties. If you become aware of such discussions, excuse yourself immediately and contact the Law Department.

Gathering Competitor Information

Keeping up with competitive developments and reviewing publicly available information about our competitors are important. There are a variety of legitimate sources of information about competitors that can help us evaluate their products, services and marketing methods. Proper sources could include information from customers, information published or in the public domain, and information or product samples lawfully received from the owner or an authorized third party.

However, in staying abreast of competitive developments, you must respect the trade secrets of others and avoid any inappropriate or illegal means of gathering information about competitors or customers. You must understand what is ethical and unethical or legal and illegal in gathering and using trade information. Espionage, burglary, wiretapping and stealing are wrong and prohibited. Likewise, interviewing or hiring a competitor’s employees to get confidential information or gaining unauthorized access to electronic mail or other confidential competitor communications is not permitted. If you gain possession of competitor information that is marked confidential, or which is believed to be confidential, consult with the Law Department immediately.

A common means of gathering information about competitors and customers is through trade associations. Ecolab encourages participation in trade associations for the legitimate purposes of setting industry standards as long as discussions remain limited to appropriate topics. In particular, you should not belong to any association that disseminates current or future pricing or statistical information, attempts to stabilize an industry through improper coordination among competitors or encourages price uniformity or the reduction of competition. For more information about participation in trade associations, contact the Law Department.

Avoiding Insider Trading

During the course of your job, you may become aware of information that is not yet publicly available that could be important enough to influence someone’s decision to buy or sell Ecolab stock. Information of this type is often referred to as “material inside information.”

As an employee, you must never buy or sell Ecolab stock while possessing material inside information about Ecolab. Similarly, if during the course of your job you become aware of material, non-public information about companies with whom we do business, you should not trade in those companies’ securities until the information has been made public. Failure to observe this prohibition could expose you and the Company to civil and criminal penalties.

We Must Remember

Inside information can take many forms. As Ecolab employees, we must never make decisions to buy or sell stock on the basis of material inside information. Below are some common examples of material inside information:

· Significant curtailment or expansion of operations

· Financial results or information that indicate whether financial results will exceed or fall short of expectations

· Important new products or services

· Significant or potential acquisitions or dispositions (e.g., mergers, tender offers or joint venture proposals)

· Major changes in management or control

· Pending sales of debt or equity securities

· Gain or loss of significant supplier, customer or contract

· Initiation or settlement of litigation

· Impending bankruptcy or receivership

· Significant environmental issues

For additional examples of potential inside information, please review our Insider Trading Policy .

You also are prohibited from passing along inside information to others (including other employees, relatives or friends) who have no work-related reason to know. If you have material, non-public information that could influence an employee or any other individual to purchase or sell the Company’s stock, you should not disclose it.

For additional information, please review our Insider Trading Policy . If you have any questions about whether a particular course of action might violate the policy, contact the Law Department.

MATERIAL INSIDE INFORMATION CHECKLIST

In determining whether information is material, non-public information, you should ask yourself the following questions:

· Has the information been disclosed to the public by press release or by other means?

· Does information I have learned about the Company (or another company) make me want to buy or sell that company’s securities?

· If the newspaper published what I know, would it cause the value of the securities of the Company (or another company) to rise or fall?

· How would the proposed trade appear to government prosecutors if it became the subject of an investigation?

Protecting and Properly Using Ecolab Assets and Property

Physical Assets

Each of us is responsible for conserving and protecting Ecolab’s assets, including financial assets, trade secrets and other proprietary information as well as its physical property. Resources such as raw materials, equipment, office supplies and technology are intended exclusively for business purposes and their theft, loss, abuse or misuse must be prevented. It is up to each of us to help identify when the use of our physical assets is not in accordance with Ecolab’s policies. Ecolab managers have a heightened obligation to maintain good controls and protect our physical assets.

Q&A

Q: I am a new employee and noticed that my co-workers take product from flat-fee customers and give it to other customers to satisfy cost concerns. Is this allowed?

A: No. This is an improper use of company assets and it impacts customer profitability and reporting metrics. You should raise this issue with your supervisor or the Law Department.

Q: In addition to my role at Ecolab, I volunteer for the fundraising committee at my daughter’s school. May I print out materials and flyers for school-related events while at work?

A: No. While Ecolab may permit employees to maintain certain roles outside of their positions with the Company, you should not use Company resources such as printers or printer paper for non-work use unless you have the prior approval of your supervisor.

Communication Systems

For many of us, the use of the Company’s Internet, phone and email systems is critical to our jobs. Employees who have access to the Company’s communication systems and networks are responsible for adhering to the highest standards of behavior at all times. These systems are intended for business purposes. While limited personal use may be acceptable, it should never be inappropriate or interfere with your ability to perform your job. For additional information, see Ecolab’s Electronic Communication Policy and Social Media Policy .

To ensure that our communication systems and networks are being used for legitimate business purposes, Ecolab reserves the right to regularly access, monitor or suspend their use. These monitoring practices will be conducted only in accordance with Company policy and to the extent permitted by local law. Any Ecolab employee who regularly misuses our systems or networks is subject to discipline, up to and including termination of employment.

For additional information regarding the proper use of our information technology assets, please review the Corporate IT Assets Policy .

Confidential and Proprietary Information

Information to which we have access may be proprietary or confidential in nature. Ecolab places great value on its confidential and proprietary information. As employees, we must protect and guard against its unauthorized use or disclosure. Examples of Ecolab’s confidential and proprietary information could include our:

· Long-term strategies

· Product development plans

· Personnel records

· Sales plans

· Marketing plans

· Communications plans

· Financial information

· Competitive intelligence

· Customer buying habits

· Acquisition or divestiture plans

· Manufacturing methods

As an employee, you should never use the Company’s confidential or proprietary information for personal gain either during your employment with Ecolab or after you leave the Company. Unauthorized disclosure of confidential or proprietary information could destroy its value and/or give unfair advantage to others. Thus, it is your responsibility to make sure the necessary confidentiality/non-disclosure agreements are in place and limit disclosure of proprietary information only to those who have a business need to know. You also are obligated to respect and protect the confidences of our suppliers and customers by not divulging their proprietary or confidential business information.

If you become aware of a situation in which Ecolab’s proprietary information has or may have been compromised, you should report it immediately to the Law Department.

Intellectual Property

Ecolab’s product plans, patents, trademarks, copyrights, trade secrets and know-how — its intellectual property — are valuable assets that we must safeguard. All Ecolab employees have an obligation to comply with applicable laws and regulations that help us protect our intellectual property. By following the law, we help protect Ecolab’s research, ideas, processes and products from theft or misuse — and in doing so, we help ensure that they are available to us for future innovation.

As an employee, you also are obligated to respect the intellectual property rights of others. It is our policy never to knowingly violate another company’s intellectual property and always to obtain the necessary licenses and permissions before copying, using or distributing the intellectual property of others.

Violations of intellectual property laws can be costly to the Company. You should check with a supervisor or the Law Department if any questions or concerns arise about how to safeguard and use Ecolab’s intellectual property.

Q&A

Q: I recently noticed that a colleague in my department spends a lot of work time on social networking sites, despite a backlog of incomplete projects. Is this permissible under Ecolab policy?

A: No. Personal use of Company resources (including Internet and email) should be limited and should never interfere with job responsibilities. In the case of your colleague, his or her use of social networking sites is likely excessive and could even lead to damaging computer viruses. You should report the issue to your supervisor or to a Human Resources representative.

Ensuring Data Privacy and Data Security

Information and Data Security

Ecolab maintains sensitive data and other information that is valuable to the Company. It is imperative that this data not end up in the wrong hands. Ecolab has strict policies and procedures to help protect sensitive or confidential information, including electronic data stored in our systems.

All employees are responsible for complying with Ecolab’s data privacy and security policies. Only employees who have a need to use confidential data or sensitive information as part of their jobs will be granted access to it. Whenever Ecolab receives requests to disclose or share potentially sensitive or confidential information stored on our systems, any disclosure must be both appropriate and legally necessary.

Customer and Supplier Information

We have an obligation to protect the privacy of data that our customers and suppliers share with us. In accordance with Ecolab policy and data protection laws, only Ecolab employees who have a business need should access or use customer or supplier information. When you need to access or use customer or supplier information as part of your job, you should do so only within the limited scope of your business need, taking great care to never jeopardize the security or sensitivity of the information we maintain. This policy also applies to the limited number of vendors and other third parties to whom Ecolab authorizes access to supplier or customer information.

Employee Privacy

To conduct our operations effectively, Ecolab may collect, maintain and appropriately share certain personal information about you. We will respect and protect your personal information to the fullest extent required under applicable data protection laws. We understand that any loss or improper use of sensitive information belonging to you could lead to unwanted consequences, including identity theft and disclosure of harmful or embarrassing information.

Just as the Company respects and protects your personal information, it is your responsibility to handle the personal information of co-workers with utmost care in order to protect their privacy.

Q&A

Q: As part of my job, I save certain sensitive information belonging to our customers and suppliers on my laptop. During a recent business trip, I mistakenly left my laptop in a taxi, and I’m afraid that certain confidential information may now be accessible to outside parties. What should I do?

A: You should immediately contact Ecolab’s IT department and inform your manager or the Law Department that your laptop has been lost. You are correct in believing that sensitive information saved on your laptop may be lost, stolen or misappropriated. When saving sensitive information to your laptop, always take appropriate measures to safeguard it. Such measures include using strong passwords and encryption.

Communicating with the Public, Investors and Media

To help protect and build the Company’s reputation as an ethical global leader, it is critical that we communicate accurately and consistently with external audiences, including the news media, investors and members of the general public.

You always should be cautious when discussing Company matters in public forums or with anyone outside of the Company. As discussed elsewhere in the Code, you should never share confidential information with outsiders unless authorized to do so.

With the rise of social media and social networking sites, it is important to understand that any information you share online about Ecolab becomes public. Thus, you always should use discretion and never disclose confidential or proprietary information without prior authorization.

If you have access to, or knowledge of, confidential or non-public information concerning Ecolab, you must use that information for proper business purposes only. For additional information on this topic, please review the Social Media Policy .

As a publicly-traded company, Ecolab must comply with government requirements regarding information disclosure. If you receive questions or requests for information from securities analysts, Ecolab investors or other interested parties, you should refer them to the Investor Relations Department.

If you receive requests for information about the Company from the media or any other outside party, you should direct the inquiries to the Global Communications Department. Only individuals who are authorized to comment publicly on the Company’s behalf may do so.

Q&A

Q: I received a phone call from a reporter seeking information about a new Ecolab product that is expected to hit the market next year. Am I allowed to talk to him about it?

A: No. Unless you have prior authorization from your supervisor and Global Communications to speak on the Company’s behalf, you should refrain from commenting and direct the media request to the executive in charge of Global Communications. Talking to a member of the media without knowing all the facts could be harmful to the Company and could mislead the public.

Keeping Accurate Financial and Business Records

Fair, Full and Accurate Financial Accounting and Recordkeeping

Ecolab’s accounting records and financial statements should always accurately reflect the nature and purpose of our transactions. You should never make false or misleading entries in our accounting records or financial statements.

We must maintain our accounting records and financial statements in reasonable detail and ensure that they conform to applicable legal requirements and generally accepted accounting principles. The Company must not maintain unrecorded or “off the books” funds or assets.

The Company uses its accounting records to produce reports to management, shareholders, creditors, governmental entities, the investment community and others. All accounting records, and reports produced from these records, must be kept and presented in accordance with applicable laws. They must accurately and fairly reflect, in reasonable detail, Ecolab’s income, cash flow, assets and liabilities and financial condition. Accounting estimates, including accruals, will be based on good faith judgment and on any applicable Ecolab policy.

Financial Reporting and Disclosure

Shares of our stock are publicly traded on the New York Stock Exchange (“NYSE”). As a publicly-traded company, Ecolab is subject to U.S. securities laws administered by the Securities and Exchange Commission (“SEC”) and to the rules of the NYSE, and we all must comply with these laws and rules.

If any disclosures made by Ecolab in financial statements, communications or filings with the SEC or NYSE are false or misleading, both the Company and employees who are involved could face civil and criminal penalties. Accordingly, disclosures to the investing public, including periodic reports, press releases and analyst and stockholder communications, must be accurate and timely. We should never make willful or knowingly false or misleading statements or omissions in any Ecolab disclosures, reports or registration statements filed with the SEC or NYSE or any other stock exchange on which Ecolab securities are listed. In addition, each of us is obligated to cooperate if internal or external auditors ask questions or request information.

Ecolab’s senior officers and finance and accounting professionals, led by our Chief Financial Officer and our Controller, play an important role in ensuring that our financial records and disclosures are always fair, full, complete, accurate, objective, relevant, timely and understandable. In addition to adhering to all provisions of this Code and those of any related policies, procedures and manuals, our senior officers and finance and accounting employees must act in good faith, responsibly, with due care, competence and diligence, without misrepresenting material facts or allowing their independent judgment to be subordinated.

Q&A

Q: When it comes to expense reporting, what should I keep in mind?

A: Here are some things to keep in mind:

· If you send a gift basket to a customer, your reimbursement request must specify the purpose of the expenditure with particular detail to ensure accurate expense recording.

· If you make a withdrawal from petty cash for valid business purposes, it must be supported by appropriate documentation so that accounting entries can be accurately recorded.

· Please refer to our Expense Report Policy for additional guidance. If you have questions or concerns relating to Ecolab’s expense or accounting procedures, please contact your supervisor or a member of the Company’s finance and accounting team.

Q&A

Q: As part of my job at Ecolab, I am required to file service reports for all of my customer visits in the field. Although I always ensure that my service reports are timely, accurate and complete, my colleague sometimes files reports that are late, exaggerated and incomplete. What should I do?

A: You should raise this issue with your supervisor or with the Law Department. Service reports are a Company record and are highly critical to our success as a business and to the sustainability of our customer relationships. Employees who fail to adhere to the Company’s records policies and procedures risk serious consequences.

Managing Ecolab Records

Company records — ranging from the emails we send to the contracts we sign — capture the data and information that drive our business and protect our legal rights as an organization. Our records include all forms of media on which information may be stored, including paper, electronic, microfiche, magnetic, photographic, video and audio.

Ecolab records must be accurate and never include false or misleading information. It is your responsibility to follow our Records Management Guidelines when creating, maintaining or destroying any business records or communications. All records generated in connection with Ecolab business are, and will remain, the property of Ecolab.

In the event of litigation or an investigation, Ecolab may notify you that certain records are under a “legal hold.” Generally, this requires you to save all records associated with a certain project or topic, and to avoid altering, editing, or disposing of them. If you are under a legal hold, you should consult the Law Department before taking any action with the associated records.

Questions or Concerns: Finding Ecolab Resources

Ecolab’s Compliance & Ethics Resources

Ecolab encourages a work environment in which our employees feel free to ask questions and raise concerns. If you observe something that seems questionable or if you have any doubt as to whether certain activity or behavior complies with the Code of Conduct, you should consult one of the resources listed below.

Whom You Should Contact…

· Your immediate supervisor or manager

· Human Resources

· Law Department

· Corporate Compliance Officer or, if you are outside North America, the Compliance Officer for your region

· General Counsel

· The Ecolab Code of Conduct Helpline

How to Make Reports through Ecolab’s Code of Conduct Helpline…

If talking with your supervisor, Human Resources or the Law Department is not practical, you can make good-faith reports of suspected violations or seek guidance by calling the Code of Conduct Helpline telephone number for your employment location listed on the back cover of this Code of Conduct, or by submitting a report online using the reporting form available on the Law Department section of the Inside Ecolab web portal for employees.

Whether or not you are allowed to anonymously report suspected violations depends on the laws in your location. The laws of some jurisdictions limit or prohibit the anonymous reporting of certain issues or concerns. If you are an employee in the EU, and you make a report to the Code of Conduct Helpline, the following guidelines will apply:

· You will be asked to allow your name to be used in the report.

· Only if it is absolutely necessary should you name an employee suspected of wrongdoing.

· Any employee you name will be informed within three business days of your report.

· Ecolab will use the information you provide to the Code of Conduct Helpline solely to investigate your specific report and not for any other purpose.

Locating Ecolab Policies

Policies referenced in this Code of Conduct, as well as other Ecolab policies, can be found on the Inside Ecolab web portal for employees.

Follow these steps to reach the Code of Conduct Helpline:

· U.S., Canada and Puerto Rico : Simply dial 800-299-9442.

· Dominican Republic : Simply dial: 880-299-9442.

· Other countries

1. Find your country in the list below.

2. Dial the toll-free number listed.

3. Then dial 800-299-9442.

Argentina - Telecom
0-800-555-4288

Argentian Telefonica
0-800-222-1288

Argentina ALA
0-800-288-5288

Australia - Telstra
1-800-881-011

Australia Optus
1-800-551-155

Austria
0-800-200-288

Belgium
0-800-100-10

Brazil
0-800-890-0288
0-800-888-8288

Bulgaria
00-800-0010

Chile - AT&T Node
800-225-288

Chile ENTEL
800-360-311

Chile Telefonica
0-800-222-1288

Chili AT&T
171 00 311

Chile Easter Island
800-800-311

China, PRC - Beijing
108-888

China, PRC - Macau
0-800-111

China, PRC - South, Shanghai - China Telecom
10-811

Colombia
01-800-911-0010
800-101-111

Costa Rica
0-800-011-4114

Croatia
0800-220-111

Czech Republic - New
00-800-222-55288

Czech Republic - Old
00-420-001-01

Denmark
800-100-10

Ecuador - Andinatel
1-999-119

Ecuador - Pacifictel -1
1-800-225-528

Ecuador - Pacifictel - 2
1-800-999-119

El Salvador
800-1288
800-101-111

Fiji
004-890-1001

Finland
0-800-11-0015

France Telecom
0-800-99-0011

France Telecom Development
0805-701-288

Germany
0-800-225-5288

Greece
00-800-1311

Guatemala
999-9190
800-101-111

Guatemala All Carriers
138-120

Honduras
800-0123
800-101-111

Hong Kong - Telephone
800-96-1111

Hong Kong - World Telephone
800-93-2266

Hungary
06-800-011-11

India
000-117

Indonesia
001-801-10

Ireland
1-800-550-000

Ireland UIFN**
00-800-222-55288

Israel - Bezeq
1-80-949-4949

Israel - Golden Lines
1-80-922-2222

Israel - Barak
1-80-933-3333

Italy
800-172-444

Japan
00-539-111

Latvia
800-2288

Malaysia
1-800-80-0011

Mexico - New
01-800 288-2872

Mexico Por Cobrar
01-800-112-2020

Mexico
800-101-111

Morocco
002-11-0011

Netherlands
0800-022-9111

New Zealand
000-911

Nicaragua
1-800-0174
800-101-111

Norway
800-190-11

Panama
800-0109
800-101-111

Peru - Telephonica
0-800-50-288
0-800-50-000

Peru - Americatel
0-800-70-088

Philippines
105-11
105-12

Poland
0-0-800-111-1111

Portugal
800-800-128

Romania
080803-4288

Russia
8^10-800-110-1011
8^10-800-120-1011

Russia - Moscow
755 5042

Saudi Arabia
1-800-10

Serbia***
770-776-5624

Singapore - SingTel
800-011-1111

Singapore StarHub
800-001-0001

Slovakia
0-800-000-101

Slovenia***
678-250-7571

South Africa
0-800-99-0123

South Korea - ONSE
00-369-11

South Korea - Dacom
00-309-11

Spain
900-99-0011

Sweden
020-799-111

Switzerland
0-800-890011

Taiwan
00-801-102-880

Thailand - New
1-800-0001-33

Thailand
800-101-111

Turkey
0811-288-0001

Ukraine
8^100-11

United Kingdom - British Telecom
0-800-89-0011

United Kingdom C&W
0-500-89-0011

United Kingdom NTL
0-800-013-0011

Uruquay
000-410

Venezuela
0-800-225-5288

Vietnam
1-201-0288

** Ireland only. Universal International Freephone Numbering (UIFN) - Callers dial a country-specific access code before dialing the toll-free Code of Conduct Helpline number.

***Serbia and Slovenia only. First, dial the operator and say that you are placing a collect call to the number.

Exhibit (21.1)

Registrant

ECOLAB INC.

Entity Name		Domestic Jurisdiction
1712279 Alberta ULC		Alberta
NLC PROCESS AND WATER SERVICES SARL		Algeria
NALCO ANGOLA PRESTACAO DE SERVICOS, LIMITADA		Angola
ONES WEST AFRICA LLC, ANGOLA BRANCH		Angola
Ecolab (Antigua) Ltd.		Antigua & Barbuda
Ecolab S.A.		Argentina
NALCO ARGENTINA S.R.L.		Argentina
Ecolab (Aruba) N.V.		Aruba
Ecolab (Fiji) Pty Limited		Australia
Ecolab AU2 Pty Ltd		Australia
Ecolab Pty Ltd.		Australia
Gibson Chemicals Pty Ltd		Australia
NALCO AUSTRALIA WORLDWIDE HOLDINGS PTY. LTD.		Australia
Ecolab AT 2 GmbH		Austria
Ecolab GmbH		Austria
Ecolab Holding Europe GmbH		Austria
NALCO HOLDINGS G.m.b.H.		Austria
NALCO OSTERREICH Ges m.b.H.		Austria
NALCO OSTERREICH SERVICES GES.M.B.H.		Austria
Nalco Azerbaijan LLC		Azerbaijan
Ecolab Limited		Bahamas
Ecolab (Barbados) Limited		Barbados
Ecolab B.V.B.A./S.P.R.L.		Belgium
Ecolab Production Belgium B.V.B.A.		Belgium
Kay BVBA		Belgium
NALCO BELGIUM BVBA		Belgium
NALCO BELGIUM SERVICES BVBA		Belgium
Ecolab BM 1 Limited		Bermuda
ADECOM QUIMICA LTDA		Brazil
Ecolab Quimica Ltda.		Brazil
Ecolab EOOD		Bulgaria
GO2 WATER LLC		California
Ecolab Cayman 1 Limited		Cayman Islands
Ecolab Cayman 2 Limited		Cayman Islands
MOBOTEC PRC CO. LTD.		Cayman Islands
Ecolab S.A.		Chile
NALCO INDUSTRIAL SERVICES CHILE LIMITADA		Chile
Ecolab (China) Investment Co., Ltd		China
Ecolab (GZ) Chemicals Limited		China
Ecolab (Taicang) Technology Co., Ltd.		China
Ecolab Chemicals Limited		China
Guangzhou Green Harbour Environmental Operation Ltd.		China
Guangzhou Green Harbour Termite Control Ltd.		China
Jiaxiang Medical Electronics and Technology Company		China
Nalco (China) Environmental Solution Co. Ltd.		China
NALCO (SHANGHAI) TRADING CO. LTD.		China
NALCO INDUSTRIAL SERVICES (NANJING) CO., LTD.		China
NALCO INDUSTRIAL SERVICES (SUZHOU) CO., LTD.		China
NALCO MOBOTEC ENVIRONMENT PROTECTION TECHNOLOGY (SHANGHAI) CO., LTD.		China
SHANGHAI BRANCH OF NALCO INDUSTRIAL SERVICES (SUZHOU) CO. LTD.		China
Shanghai Likang Biological High-Tech Co., Ltd.		China
Shanghai Likang Disinfectant High-Tech Company, Limited		China
Ecolab Colombia S. A.		Colombia
NALCO DE COLOMBIA LTDA		Colombia
Quimiproductos Colombia, S.A.S.		Colombia
Ecolab SRL		Costa Rica
Ecolab d.o.o.		Croatia
NALCO CYPRUS HOLDINGS LIMITED		Cyprus
Ecolab Hygiene s.r.o.		Czech Republic
NALCO CZECHIA s.r.o.		Czech Republic
CALGON LLC		Delaware

Century LLC		Delaware
Ecolab AP Holdings LLC		Delaware
Ecolab Holdings (Europe) LLC		Delaware
Ecolab Holdings Inc.		Delaware
Ecolab Inc.		Delaware
Ecolab Investment LLC		Delaware
Ecolab Israel Holdings LLC		Delaware
Ecolab Lux Partner LLC		Delaware
Ecolab Manufacturing Inc.		Delaware
Ecolab MT Holdings LLC		Delaware
Ecolab MX Partner LLC		Delaware
Ecolab US 1 GP		Delaware
Ecolab U.S. 2 Inc.		Delaware
Ecolab USA Inc.		Delaware
Ecolabeight Inc.		Delaware
Ecovation, Inc.		Delaware
GCS Service, Inc.		Delaware
Krofta Technologies, LLC		Delaware
MAGMILL CO. LLC		Delaware
Microtek Medical Inc.		Delaware
MinPlus, Inc.		Delaware
Nalco Cal Water, LLC		Delaware
NALCO CHINA HOLDINGS LLC		Delaware
NALCO COMPANY		Delaware
Nalco Crossbow Water LLC		Delaware
NALCO DELAWARE COMPANY		Delaware
Nalco Energy Services Equatorial Guinea LLC		Delaware
NALCO ENERGY SERVICES MIDDLE EAST HOLDINGS, INC.		Delaware
Nalco Environmental Solutions LLC		Delaware
NALCO EUROPEAN HOLDING LLC		Delaware
Nalco Fab-Tech LLC		Delaware
NALCO FINANCE HOLDINGS INC.		Delaware
NALCO FINANCE HOLDINGS LLC		Delaware
NALCO GLOBAL HOLDINGS LLC		Delaware
NALCO HOLDING COMPANY		Delaware
NALCO HOLDINGS LLC		Delaware
NALCO INDUSTRIAL OUTSOURCING COMPANY		Delaware
NALCO INTERNATIONAL HOLDINGS LLC		Delaware
NALCO IP HOLDER LLC		Delaware
NALCO IRAQ HOLDING LLC		Delaware
NALCO LEASING CORPORATION		Delaware
NALCO MOBOTEC LLC		Delaware
NALCO PWS, INC.		Delaware
NALCO RECEIVABLES II LLC		Delaware
NALCO RECEIVABLES LLC		Delaware
NALCO TEXAS LEASING LLC		Delaware
Nalco Tiorco Middle East Holdings, LLC		Delaware
NALCO TWO, INC.		Delaware
NALCO U.S. HOLDINGS LLC		Delaware
NALCO WORLDWIDE HOLDINGS LLC		Delaware
NALFIRST HOLDING, INC.		Delaware
NALFIRST LEASING CORPORATION		Delaware
NALFLEET, INC.		Delaware
NALTECH, INC.		Delaware
NDC LLC		Delaware
NI ACQUISITION HOLDING LLC		Delaware
ONES WEST AFRICA LLC		Delaware
Quantum Technical Services, LLC		Delaware
Res-Kem General Water LLC		Delaware
RES-KEM LLC		Delaware
TIORCO LLC		Delaware
Total Enterprise Control LLC		Delaware
TREATED WATER OUTSOURCING LLC		Delaware
TWO LLC		Delaware
Wabasha Leasing LLC		Delaware
Ecolab ApS		Denmark

NALCO DANMARK APS		Denmark
Dominican Republic Branch of Nalco Company		Dominican Republic
Microtek Dominicana S.A.		Dominican Republic
Ecolab Ecuador		Ecuador
NALCO EGYPT TRADING		Egypt
NALCO EGYPT, LTD.		Egypt
NALCO ENERGY SERVICES MARKETING LIMITED, EGYPT (BRANCH)		Egypt
Ecolab, S.A. de C.V.		El Salvador
Ecolab Co.		Federally Chartered
NALCO FINLAND MANUFACTURING OY		Finland
NALCO FINLAND OY		Finland
NALCO FINLAND SERVICES OY		Finland
Oy Ecolab AB		Finland
Linkwell Tech Group, Inc.		Florida
Amboile Services SAS		France
Ecolab Production France SAS		France
Ecolab SAS		France
Ecolab SNC		France
Europlak S.A.S.		France
NALCO FRANCE		France
NALCO FRANCE SERVICES S.A.S.		France
NALCO FRANCE SNC		France
Shield Medicare sarl		France
Global Resources International, Inc.		Georgia
Microtek Medical Holdings Inc.		Georgia
Ecolab Deutschland GmbH		Germany
Ecolab Engineering GmbH		Germany
Ecolab Export GmbH		Germany
J. F. Knauer Industrie-Elektronik GmbH		Germany
NALCO DEUTSCHLAND GMBH		Germany
NALCO DEUTSCHLAND MANUFACTURING GMBH UND CO. KG		Germany
NALCO DEUTSCHLAND SERVICE GMBH UND CO KG		Germany
Nalco Grundbesitz GmbH & Co. KG		Germany
NALCO MANUFACTURING BETEILIGUNGS GMBH		Germany
Nalco Real Estate GmbH		Germany
NALCO SERVICE BETEILIGUNGS GMBH		Germany
NALCO ENERGY SERVICES (GHANA) LIMITED		Ghana
Ecolab A.E.B.E.		Greece
NALCO HELLAS S.A.		Greece
Ecolab (Guam) LLC		Guam
Ecolab, Sociedad Anonima		Guatemala
Quimicas Ecolab, S.A. de C.V.		Honduras
Ecolab Limited		Hong Kong
Ecolab Name Holding Limited		Hong Kong
Green Harbour Mainland Holdings Ltd		Hong Kong
NALCO HONG KONG LIMITED		Hong Kong
Ecolab Hygiene Kft.		Hungary
NALCO HUNGARY INDUSTRIAL COMMERCIAL LLC		Hungary
Ecolab Food Safety & Hygiene Solutions Private Limited		India
Nalco Water India Limited		India
P.T. NALCO INDONESIA		Indonesia
PT Ecolab Indonesia		Indonesia
Nalco Iraq Holding Limited, Representative Office		Iraq
Ecolab (Holdings) Limited		Ireland
Ecolab Finance Company Limited		Ireland
Ecolab Limited		Ireland
Kilco Chemicals (Ireland) Limited		Ireland
Ecolab JVZ Limited		Israel
NALCO ISRAEL INDUSTRIAL SERVICES LTD		Israel
Ecolab Holding Italy S.r.l.		Italy
Ecolab Production Italy Srl		Italy
Ecolab Srl		Italy
Esoform Manufacturing S.R.L.		Italy
ESOFORM S.R.L		Italy
Findesadue Srl		Italy
NALCO ITALIANA HOLDINGS S.R.L.		Italy

NALCO ITALIANA MANUFACTURING S.R.L.		Italy
NALCO ITALIANA SERVICES S.R.L.		Italy
NALCO ITALIANA SrL		Italy
NALCO TECNOLOGIE DIVERSIFICATE SrL		Italy
Ecolab Limited		Jamaica
Ecolab G.K.		Japan
KATAYAMA NALCO INC.		Japan
Nalco Japan G.K.		Japan
NALCO GULF LIMITED		Jersey
Ecolab East Africa (Kenya) Limited		Kenya
Ecolab Korea Ltd.		Korea, Republic Of
NALCO KOREA LIMITED		Korea, Republic Of
Ecolab, SIA		Latvia
Nalco Libya		Libya
Nalco Limited - Libya Branch		Libya
Ecolab LUX & Co Holdings S.C.A.		Luxembourg
Ecolab LUX 1 Sarl		Luxembourg
Ecolab LUX 2 Sarl		Luxembourg
Ecolab LUX 3 Sarl		Luxembourg
Ecolab LUX 4 Sarl		Luxembourg
Ecolab LUX 5 S.a.r.l.		Luxembourg
Ecolab LUX 7 Sarl		Luxembourg
Ecolab Lux 9 S.a.r.l.		Luxembourg
Ecolab LUX Sarl		Luxembourg
NALCO LUXEMBOURG HOLDINGS SARL		Luxembourg
Ecolab-Importacao E. Exportacao Limitada		Macau
CHEMASIA INDUSTRIES SDN. BHD.		Malaysia
CSC KEMICO (SOUTH EAST ASIA) SDN BHD.		Malaysia
Ecolab Sdn Bhd		Malaysia
NALCO INDUSTRIAL SERVICES MALAYSIA SDN. BHD		Malaysia
Ecolab MT Limited		Malta
Microtek Medical Malta Holding Limited		Malta
Microtek Medical Malta Limited		Malta
Ecolab Holdings Mexico, S. de R. L. de C. V.		Mexico
Ecolab MX 2 S de RL de CV		Mexico
Ecolab, S. de R.L. de C.V.		Mexico
Industria Mexicana de Químicos, S.A. de C.V.		Mexico
NALCO DE MEXICO, S. de R. L. de C.V.		Mexico
NALCO HOLDINGS, S.N.C. DE C.V.		Mexico
Quimiproductos, S.A. de C.V.		Mexico
Nalco Gulf Response Corp.		Michigan
Ecolab Foundation		Minnesota
Ecolab Maroc S.A.		Morocco
DERYSHARES B.V.		Netherlands
Ecolab B.V.		Netherlands
ECOLAB NL 10 B.V.		Netherlands
Ecolab NL 11 B.V.		Netherlands
Ecolab NL 3 BV		Netherlands
Ecolab NL 4 BV		Netherlands
Ecolab NL 5 BV		Netherlands
Ecolab NL 6 BV		Netherlands
Ecolab NL 7 C.V.		Netherlands
Ecolab NL 8 B.V.		Netherlands
ECOLAB NL 9 B.V.		Netherlands
Ecolab Production Netherlands B.V.		Netherlands
Ecolabone B.V.		Netherlands
Ecolabtwo B.V.		Netherlands
INTERNATIONAL WATER CONSULTANT B.V.		Netherlands
Microtek Medical B.V.		Netherlands
Microtek Medical Holding B.V.		Netherlands
NALCO DUTCH HOLDINGS B.V.		Netherlands
NALCO EMEA HOLDINGS BV		Netherlands
NALCO EUROPE B.V.		Netherlands
NALCO EUROPEAN FINANCE B.V.		Netherlands
NALCO GLOBAL HOLDINGS B.V.		Netherlands
NALCO HOLDING B.V.		Netherlands

NALCO INTERNATIONAL HOLDINGS B.V.		Netherlands
NALCO ITALY HOLDINGS B.V.		Netherlands
NALCO NETHERLANDS BV		Netherlands
Nalco Netherlands Services B.V.		Netherlands
NALCO OVERSEAS HOLDING B.V.		Netherlands
Nalco Russian Holding B.V.		Netherlands
NALCO UNIVERSAL HOLDINGS BV		Netherlands
NALCO VENEZUELA HOLDING B.V.		Netherlands
NALCO WORLDWIDE HOLDINGS B. V.		Netherlands
Ecovation Wastewater Treatment Company, Inc.		New York
Ecolab New Zealand		New Zealand
NALCO NEW ZEALAND		New Zealand
Ecolab Nicaragua, S.A.		Nicaragua
NALCO ENERGY SERVICES NIGERIA LIMITED		Nigeria
Kay Chemical Company		North Carolina
Kay Chemical International, Inc.		North Carolina
MOBOTEC AB, LLC		North Carolina
Ecolab a.s.		Norway
NALCO NORGE AS		Norway
Ecolab CDN 2 Co.		Nova Scotia
NALCO CANADA CO.		Nova Scotia
Nalco Tiorco Middle East LLC		Oman
NALCO PAKISTAN (PRIVATE) LIMITED		Pakistan
Claria Panamá, S.A.		Panama
Ecolab S.A.		Panama
NANOSPECIALTIES, LLC		Pennsylvania
Ecolab Perú Holdings S.R.L.		Peru
Ecolab Philippines Inc.		Philippines
NALCO PHILIPPINES INC.		Philippines
NLS REALTY CORPORATION		Philippines
Ecolab Production Poland sp. z o.o.		Poland
Ecolab Services Poland Sp. z o o		Poland
Ecolab Sp. z o o		Poland
NALCO MOBOTEC POLSKA Sp. z o. o.		Poland
Ecolab Hispano Portuguesa, S.A. (Portuguese Branch)		Portugal
NALCO PORTUGUESA (QUIMICA INDUSTRIAL) LTD.		Portugal
Les Produits Chimiques ERPAC Inc.		Quebec
Nalco Osterreich Gesellschaft M.B.H. Belgrade, Republic of Serbia		Republic of Serbia
Ecolab s.r.l.		Romania
NALCO COMPANY OOO		Russian Federation
NALCO ZAO		Russian Federation
ONDEO NALCO ENERGY SERVICES (KAZAN)		Russian Federation
OOO Kogalym Chemicals Plant		Russian Federation
ZAO Ecolab		Russian Federation
Ecolab (St. Lucia) Limited		Saint Lucia
NALCO SAUDI CO. LTD.		Saudi Arabia
Ecolab Hygiene d.o.o.		Serbia
AQUAZUR PTE LTD		Singapore
Ecolab Pte. Ltd.		Singapore
ECOLAB SG 2 PTE. LTD.		Singapore
NALCO ASIA HOLDING COMPANY PTE. LTD.		Singapore
NALCO PACIFIC PTE. LTD.		Singapore
Ecolab s.r.o.		Slovakia (Slovak Republic)
Nalco Osterreich Gesellschaft m. b. h. - Branch Office Slovakia		Slovakia (Slovak Republic)
Ecolab d.o.o.		Slovenia
Ecolab (Proprietary) Limited		South Africa
NALCO AFRICA (PTY.) LTD.		South Africa
NALCO AUSTRALIA PTY LTD		South Wales
NALCO HOLDINGS AUSTRALIA PTY. LIMITED		South Wales
NALCO INVESTMENTS AUSTRALIA PTY LIMITED		South Wales
DERYPOL SA		Spain
Ecolab Hispano Portuguesa, S.L.		Spain
Hicopla SL		Spain
NALCO ESPANOLA MANUFACTURING, S.L.U.		Spain
NALCO ESPANOLA SERVICES, S.L.U.		Spain
NALCO ESPAÑOLA, S.L.		Spain

NALCO HOLDING S.L.U.		Spain
Ecolab AB		Sweden
MOBOTEC EUROPE AB		Sweden
NALCO AB		Sweden
NALCO SERVICES AB		Sweden
Ecolab (Schweiz) GmbH		Switzerland
Ecolab CH 1 GmbH		Switzerland
Ecolab CH 2 GmbH		Switzerland
Ecolab CH 3 GmbH		Switzerland
Ecolab Europe GmbH		Switzerland
Nalco Europe Sàrl		Switzerland
Nalco Schweiz AG branch		Switzerland
Nalco Schweiz GmbH (Nalco Switzerland LLC)		Switzerland
Ecolab Taiwan Limited		Taiwan
NALCO TAIWAN CO., LTD.		Taiwan
Ecolab East Africa (Tanzania) Limited		Tanzania
Century Products, Inc.		Texas
Ecolab Food Safety Specialties Inc.		Texas
OFC Technologies Corp		Texas
Ecolab Limited		Thailand
NALCO INDUSTRIAL SERVICES (THAILAND) CO. LTD.		Thailand
Ecolab (Trinidad and Tobago) Unlimited		Trinidad And Tobago
Trinidad Branch of Nalco Company		Trinidad And Tobago
NALCO ITALIANA SRL (TUNISIA BRANCH)		Tunisia
Ecolab Temizleme Sistemleri Limited Sirketi		Turkey
Nalco Anadolu Kimya Sanayi ve Ticaret Limited Sirketi		Turkey
Ecolab East Africa (Uganda) Limited		Uganda
Ecolab LLC		Ukraine
Ecolab Emirates General Trading LLC		United Arab Emirates
Ecolab Gulf FZE		United Arab Emirates
CALGON EUROPE LIMITED		United Kingdom
Ecolab (U.K.) Holdings Limited		United Kingdom
Ecolab Limited		United Kingdom
Ecolab Powels Hunt		United Kingdom
Enviroflo Engineering Limited		United Kingdom
HOUSEMAN LIMITED		United Kingdom
HYDROSAN LIMITED		United Kingdom
LHS (UK) Limited		United Kingdom
Microtek Medical Europe Limited		United Kingdom
Midland Research Laboratories UK Limited		United Kingdom
NALCO ACQUISITION ONE		United Kingdom
NALCO ACQUISITION TWO LIMITED		United Kingdom
NALCO ENERGY SERVICES LIMITED		United Kingdom
NALCO ENERGY SERVICES MARKETING LIMITED		United Kingdom
NALCO HOLDINGS UK LIMITED		United Kingdom
NALCO INVESTMENTS U.K. LIMITED		United Kingdom
NALCO LIMITED		United Kingdom
NALCO MANUFACTURING LTD.		United Kingdom
Nalco Mobotec (UK) Limited		United Kingdom
NALCO NORTH AFRICA LIMITED		United Kingdom
NALCO SERVICES, LTD.		United Kingdom
NALFLOC LIMITED		United Kingdom
Powles Hunt & Sons International Limited		United Kingdom
Shield Holdings Limited		United Kingdom
Shield Medicare Limited		United Kingdom
Shield Salvage Associates Limited (UK)		United Kingdom
Ecolab S.A.		Uruguay
Ecolab S.A.		Venezuela
NALCO VENEZUELA S. C. A.		Venezuela
VENEZOLANA DE PRODUCTOS QUIMICOS VEPROCA C.A.		Venezuela
Nalco Vietnam Company Limited		Viet Nam
NALCO ENERGY SERVICES FSC, INC.		Virgin Islands (US)
NALCO FOREIGN SALES CORPORATION		Virgin Islands (US)
Ecolab Zimbabwe (Pvt) Ltd.		Zimbabwe

Certain additional subsidiaries, which are not significant in the aggregate, are not shown.

EXHIBIT (24.1)

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS , That the undersigned, a director of Ecolab Inc., a Delaware corporation, does hereby make, nominate and appoint DOUGLAS M. BAKER, JR., JAMES J. SEIFERT and MICHAEL C. McCORMICK, and each of them, to be my attorney-in-fact, with full power and authority to sign his name to the Annual Report on Form 10-K of Ecolab Inc. for the fiscal year ended December 31, 2012, and all amendments thereto, provided that the Annual Report and any amendments thereto, in final form, be approved by said attorney-in-fact; and his name, when thus signed, shall have the same force and effect as though I had manually signed said document.

IN WITNESS WHEREOF , I have hereunto affixed my signature this 22 nd day of February, 2013.

	/s/Barbara J. Beck
	Barbara J. Beck

	/s/Les S. Biller
	Les S. Biller

	/s/Jerry A. Grundhofer
	Jerry A. Grundhofer

	/s/Arthur J. Higgins
	Arthur J. Higgins

	/s/Joel W. Johnson
	Joel W. Johnson

	/s/Jerry W. Levin
	Jerry W. Levin

	/s/Robert L. Lumpkins
	Robert L. Lumpkins

	/s/Michael Larson
	Michael Larson

	/s/C. Scott O’Hara
	C. Scott O’Hara

	/s/Victoria J. Reich
	Victoria J. Reich

	/s/Daniel S. Sanders
	Daniel S. Sanders

	/s/Mary M. VanDeWeghe
	Mary M. VanDeWeghe

	/s/John J. Zillmer
	John J. Zillmer

EXHIBIT (31.1)

CERTIFICATIONS

I, Douglas M. Baker, Jr., certify that:

1. I have reviewed this annual report on Form 10-K of Ecolab Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: 26 February 2013

/s/Douglas M. Baker, Jr.
Douglas M. Baker, Jr.
Chairman of the Board and
Chief Executive Officer

I, Daniel J. Schmechel, certify that:

1. I have reviewed this annual report on Form 10-K of Ecolab Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: 26 February 2013

/s/Daniel J. Schmechel
Daniel J. Schmechel
Chief Financial Officer

EXHIBIT (32.1)

SECTION 1350 CERTIFICATIONS

Pursuant to 18 U.S.C. Section 1350, each of the undersigned officers of Ecolab Inc. does hereby certify that:

(a) the Annual Report on Form 10-K of Ecolab Inc. for the year ended December 31, 2012 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(b) information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Ecolab Inc.

Dated: 26 February 2013	/s/Douglas M. Baker, Jr.
	Douglas M. Baker, Jr.
	Chairman of the Board and
	Chief Executive Officer


	/s/Daniel J. Schmechel
Dated: 26 February 2013	Daniel J. Schmechel
	Chief Financial Officer