form 10-k -...

ECOLAB INC

FORM 10-K(Annual Report)

Filed 02/27/09 for the Period Ending 12/31/08

Address ECOLAB CORPORATE CENTER370 WABASHA STREET NORTHST PAUL, MN 55102

Telephone 6512932233CIK 0000031462

Symbol ECLSIC Code 2840 - Soap, Detergents, And Cleaning Preparations;

Industry Personal & Household Prods.Sector Consumer/Non-Cyclical

Fiscal Year 12/31

http://www.edgar-online.com© Copyright 2009, EDGAR Online, Inc. All Rights Reserved.

Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

FORM 10-K

(Mark One)

OR

For the transition period from to

ECOLAB INC. (Exact name of registrant as specified in its charter)

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

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

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.

YES � 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. � YES 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.

YES � 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. � 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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer � Non-accelerated filer � (Do not check if a smaller reporting company)

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

For the Fiscal Year Ended December 31, 2008 Commission File No. 1-9328

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

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)

Title of each class Name of each exchange on which registered

Common Stock, $1.00 par value

New York Stock Exchange, Inc. Preferred Stock Purchase Rights

New York Stock Exchange, Inc.

Smaller reporting company � Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

� YES NO

Aggregate market value of voting and non-voting common equity held by non-affiliates of registrant on June 30, 2008: $10,606,696,000 (see Item 12, under Part III hereof), based on a closing price of registrant’s Common Stock of $42.99 per share. The number of shares of registrant’s Common Stock, par value $1.00 per share, outstanding as of January 30, 2009: 236,192,852 shares.

DOCUMENTS INCORPORATED BY REFERENCE

1. Portions of the registrant’s Annual Report to Stockholders for the year ended December 31, 2008 (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 8, 2009 and to be filed within 120 days

after the registrant’s fiscal year ended December 31, 2008 (hereinafter referred to as “Proxy Statement”) are incorporated by reference into Part III.

Table of Contents

TABLE OF CONTENTS

PART I

Forward-Looking Statements

Item 1(a) General Development of Business

Item 1(b) Financial Information About Operating Segments

Item 1(c) Narrative Description of Business

Item 1(d) Financial Information About Geographic Areas

Item 1(e) Available Information

Executive Officers of the Registrant

Item 1A. Risk Factors

Item 1B. Unresolved Staff Comments

Item 2. Properties

Item 3. Legal Proceedings

Item 4. Submission of Matters to a Vote of Security Holders

PART II

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

Item 6. Selected Financial Data

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

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements and Supplementary Data

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

Item 9A. Controls and Procedures

PART III

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

Item 11. Executive Compensation

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

Item 13. Certain Relationships and Related Transactions and Director Independence

Item 14. Principal Accountant Fees and Services

PART IV

Item 15. Exhibits and Financial Statement Schedules

SIGNATURES

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

EXHIBIT INDEX

Table of Contents

PART I

Except where the context otherwise requires, references in this Form 10-K to either “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 revenue and earnings growth, raw material and delivered product costs, currency translation, business acquisitions, system implementations, restructuring charges and cost savings, cash flows, loss of customers and bad debt, debt repayments, disputes and claims, environmental and regulatory considerations, share repurchases, global economic conditions and credit risk, pension expenses and potential contributions, new accounting pronouncements, income taxes, including unrecognized tax benefits or uncertain tax positions, borrowing capacity, and liquidity requirements. 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. 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. During 2008, we continued to invest in our business to build for the future. In December 2007, subsequent to our year-end for international operations, we purchased the Irish dairy hygiene business of Novartis Animal Health Ireland Ltd. The business, which has annual sales of approximately $3 million, became part of our International operations during the first quarter of 2008. In February 2008, we acquired Ecovation, Inc., a Rochester, N.Y. area-based provider of renewable energy solutions and effluent management systems primarily for the food and beverage manufacturing industry in the U.S., including dairy, beverage and meat and poultry producers. 2007 sales were approximately $50 million. Ecovation became part of our U.S. Cleaning & Sanitizing operations during the first quarter of 2008. Following the Ecovation acquisition, we combined our Water Care Services and Ecovation businesses into our Food & Beverage division. We continued to make investments in Europe, including the establishment of our European headquarters in Zurich, Switzerland. In November 2008, our then largest shareholder, Henkel AG & Co. KGaA (“Henkel”), completed the sale of all of the 72.7 million Ecolab shares it held. We repurchased 11.3 million shares directly from Henkel for $300 million, reducing our shares outstanding by approximately 4%. Item 1(b) Financial Information About Operating Segments . The financial information about reportable segments appearing under the heading “Operating Segments” in Note 16, located on pages 49 and 50 of the Annual Report, is incorporated herein by reference.

2

Table of Contents

Item 1(c) Narrative Description of Business . General : Ecolab develops and markets premium products and services for the hospitality, foodservice, health care and industrial markets. We provide cleaning and sanitizing products and programs, as well as pest elimination, maintenance and repair services primarily to hotels and restaurants, healthcare and educational facilities, quick service (fast-food and convenience store) units, grocery stores, commercial and institutional laundries, light industry, dairy plants and farms, food and beverage processors and the vehicle wash industry. A strong commitment to customer support and sustainable solutions is a distinguishing characteristic of our business. Additional information on our business philosophy is found below under the heading “Additional Information — Competition” of this Item 1(c). The following description of our business is based upon our three reportable segments as reported in our consolidated financial statements. However, we pursue a “Circle the Customer — Circle the Globe” strategy by providing products, systems 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. Therefore, one customer may utilize the products or services of all three of the segments and there is interdependence among the operating segments. United States Cleaning & Sanitizing Segment The “United States Cleaning & Sanitizing” segment is comprised of six business units which provide cleaning and sanitizing products and programs to United States markets. Institutional : The Institutional Division is our largest division and 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, dishwasher racks and related kitchen sundries to the foodservice, lodging, educational and healthcare industries, and water filters to the foodservice industry. 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, health care and commercial facilities. The Institutional Division manufactures and markets various chemical dispensing device systems, which are made available to customers, to 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. We believe that we are the leading supplier of chemical warewashing products and programs to institutions in the United States. The Institutional Division sells its products and programs primarily through company-employed field sales personnel. However, to a significant degree, we also utilize independent, third-party foodservice distributors to market and sell our products to smaller accounts or accounts which purchase through distributors. We provide the same customer support to accounts supplied by food distributors as to direct customers. 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 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. Farm products are sold through dealers and independent, third-party distributors, while plant products are sold primarily by our field sales personnel. The Food & Beverage Division also offers water care programs primarily to treat water used for heating and cooling systems and manufacturing processes. In addition, through its Ecovation business, the Food & Beverage Division offers customized wastewater treatment solutions that also can generate energy.

3

Table of Contents

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 Division (which consists of certain wholly-owned subsidiaries of Ecolab Inc.) supplies chemical cleaning and sanitizing products primarily to national and regional quick service restaurant chains. Kay’s products include specialty and general purpose hard surface cleaners, degreasers, sanitizers, polishes, hand care products and assorted cleaning tools. Products are sold under the “Kay” brand or the customer’s private label. In addition, Kay supports its product sales with employee training programs and technical support designed to meet the special needs of its customers. Kay’s customized cleaning and sanitation programs are designed to reduce labor costs and product usage while increasing sanitation levels, cleaning performance, equipment life and safety levels. Kay employs a direct field sales force which primarily calls upon national and regional quick service restaurants and franchisees, although the sales are made to distributors who supply the chain or franchisee’s units. We believe that our Kay Division is the leading supplier of chemical cleaning and sanitizing products to the traditional quick service restaurant industry in the United States. While Kay’s customer base has been growing, Kay’s business is largely dependent upon a limited number of major quick service restaurant chains and franchisees. In addition, through Kay’s Food Retail business, the Division supplies cleaning and sanitizing products to the food retail (i.e., grocery store) industry. Food Retail products are sold primarily through distributors and include specialty and general purpose hard surface cleaners, degreasers, sanitizers, polishes, hand care products, assorted cleaning tools and floor care products. We provide the same customer support to accounts supplied by distributors as to direct 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 and equipment drapes) are sold primarily under the “Ecolab” and “Microtek” brand names to various departments within the acute care environment (Infection Control, Environmental Services, Central Sterile and Operating Room). Microtek Medical, acquired in November 2007, is a leader in niche branded specialty surgical drapes and fluid control products. 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 chemical laundry products and proprietary dispensing systems, as well as related programs, to large industrial and commercial laundries. Typically these customers include free-standing laundry plants used by institutions such as hotels, restaurants and healthcare facilities as well as industrial and textile rental laundries. Products and programs include laundry cleaning and specialty products, related dispensing equipment, plus water and energy management which are marketed primarily through company-employed field sales personnel and, to a lesser extent, through independent, third-party distributors. The Textile Care Division’s programs are designed to meet our customers’ need for exceptional cleaning, while extending the useful life of linen and reducing the customer’s overall operating cost. Vehicle Care : Our Vehicle Care Division provides vehicle appearance products which include soaps, polishes, sealants, wheel and tire treatments and air fresheners. Products are sold to vehicle rental, fleet and consumer car wash and detail operations. Brand names utilized by the Vehicle Care Division include Blue Coral , Black Magic and Rain-X . United States Other Services Segment The “United States Other Services” segment is comprised of two business units: Pest Elimination and GCS Service. In general, these businesses provide service or equipment which can augment or extend our product offering to our business customers as a part of our “Circle the Customer” approach.

4

Table of Contents

Pest Elimination : Our Pest Elimination Division provides services designed to detect, eliminate and prevent pests in restaurants, food and beverage processors, educational and healthcare facilities, hotels, quick service restaurant and grocery operations and other institutional and commercial customers. These services 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. GCS Service : GCS Service provides equipment repair and 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, GCS Service operates as a parts distributor to repair service companies and end users. International Segment We conduct business in approximately 70 countries outside of the United States through wholly-owned subsidiaries or, in the case of Israel and Venezuela, through joint ventures with local partners. 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 operations are located in Europe, Asia Pacific, Latin America and Canada, with smaller operations in Africa and the Middle East. In general, the businesses conducted internationally 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 our International locations and, compared to the United States, constitute a larger portion of the overall business. Healthcare and Textile Care are also significant businesses in our International operations, particularly in Europe. Kay also 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. Since 2001, we have entered markets in Asia, Western Europe, Latin America and South Africa, with the largest operations in France and the United Kingdom. Our other businesses are conducted less extensively in our International locations. However, in general, most of the principal businesses conducted in the United States are also operated in Canada. International businesses are subject to the usual risks of foreign operations, including possible changes in trade and foreign investment laws, 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. This has been due to the smaller scale of the International operations as well as the additional cost of operating in numerous and diverse foreign jurisdictions. Additional Information Competition : Our business units 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 our business units have numerous smaller regional or local competitors which focus on more limited geographies, product lines and/or end-user 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. Value is provided by state-of-the-art cleaning, sanitation and maintenance products and systems coupled with high customer support standards and continuing

5

Table of Contents

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.” 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 needs. Independent, third-party distributors are utilized in several markets, as described in the business unit descriptions found under the discussion of the three reportable segments above. Number of Employees : We had approximately 26,500 employees as of December 31, 2008. Customers and Classes of Products : We believe that our business is not materially dependent upon a single customer although, as described above in this Item 1(c) under the description of the Kay business, Kay is largely dependent upon a limited number of national and international quick service chains and franchisees. Additionally, although 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 negative 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 sell two classes of products which each constitute 10 percent or more of our sales. Sales of warewashing products in 2008, 2007 and 2006 approximated 21, 22 and 21 percent, respectively, of our consolidated net sales. In addition, through our Institutional and Textile Care businesses, we sell laundry products and provide customer support to a broad range of laundry customers. Sales of laundry products and services in 2008, 2007 and 2006 approximated 11, 10 and 10 percent, respectively, of our consolidated net sales. Patents and Trademarks : We own and license a number of patents, trademarks and other intellectual property, including through a license agreement with Henkel AG & Co. KGaA. 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. Seasonality : Overall our business does not have a significant degree of seasonality. However, we do experience variability in our quarterly operating results due to sales volume and business mix fluctuations in our operating segments. Note 17, entitled “Quarterly Financial Data” located on page 51 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 equipment consisting primarily of systems used by customers to dispense our cleaning and sanitizing products. Otherwise, we have no unusual working capital requirements. Manufacturing and Distribution : We manufacture most of our products and related equipment in Company-owned 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 15 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 public warehouses. We use common carriers, our own delivery vehicles, and distributors. Additional information on our plant and distribution facilities is located beginning at page 15 of this Form 10-K under the heading “Properties.”

6

Table of Contents Raw Materials : Raw materials purchased for use in manufacturing our products are inorganic chemicals, including alkalis, acids, phosphates, silicates and salts, and organic chemicals, including surfactants and solvents. These materials are generally purchased on an annual contract basis from a diverse group of chemical manufacturers. When practical, global sourcing is used so that purchasing or production locations can be shifted to control product costs at globally competitive levels. 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. Most raw materials, or substitutes for those materials, used by us, with the exception of a few specialized chemicals which we manufacture, are available from several suppliers. 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, and evaluating the environmental compatibility of products. Key disciplines include analytical and formulation chemistry, microbiology, process and packaging 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. Note 13, entitled “Research Expenditures” located on page 44 of the Annual Report, is incorporated herein by reference. 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 substances, 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. 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. “Green” chemistry 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 and Vermont. In 2009, green chemistry and ingredient disclosure legislation may be introduced at the federal level. 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 negative effect on our consolidated results of operations, financial position or cash flows to date. Re-authorization of the Toxic Substances Control Act (“TSCA”) and a re-set of the TSCA Inventory are being discussed in the U.S. Congress. Ecolab anticipates that compliance with new requirements could be similar to the costs associated with the Registration, Evaluation and Authorization of Chemicals regulation recently adopted in the European Union, which is discussed below. REACH : The European Union has developed a new regulatory framework for the Registration, Evaluation and Authorization of Chemicals (“REACH”). It established a new European Chemicals Agency 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. Under REACH, all “new” and “existing” chemicals produced or imported into the European Union in quantities above one ton per year must be

7

Table of Contents

registered in a central database. Ecolab has met the pre-registration requirements of REACH, and is on track to meet the upcoming deadlines and requirements in 2009 and beyond. To help manage this new program, Ecolab is simplifying its product line and working with chemical suppliers to comply with registration requirements. For chemicals deemed to be of most concern, industry must gain specific authorization for particular uses which have been demonstrated to be safe. Ecolab has minimized use of these chemicals which are designated as “chemicals of high concern.” The impact of REACH will also be felt by our competitors. Potential costs to us are not yet fully quantifiable, but are not expected to significantly affect our consolidated results of operations, financial position or cash flows. 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 safety labeling and safety warnings. Individual countries and regional organizations either have begun to implement GHS or are considering what portions of it will be adopted and within what timeframe. Most countries in which we operate will adopt GHS-related legislation. The primary cost of compliance will revolve around authoring of material safety data sheets and product labeling, and we are working toward a phased-in approach to mitigate risks 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, financial position or cash flows. 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 approximately 330 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 $3,308,000 in 2008 and $2,800,000 in 2007. In Europe, the Biocidal Product Directive (98/8/EC) (“BPD”) established a program to evaluate and authorize marketing of biocidal active substances and products. We are working with suppliers and industry groups to manage requirements associated with the BPD, 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 BPD phase-in period ending in 2014, 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 which 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

8

Table of Contents

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, foods and medical devices. 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 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. Other Environmental Legislation : 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 $8,900,000 in 2008 and $8,100,000 in 2007. Approximately $4,200,000 has been budgeted globally for projects in 2009. 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 applies 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 has joined U.S. EPA’s Climate Leaders program, and as part of that program we have pledged to develop a corporate-wide U.S. GHG emission inventory and work with EPA to set a GHG reduction goal. Environmental Remediation and Proceedings : Along with numerous other potentially responsible parties (“PRPs”), 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 17 sites in the United States. Additionally, we have similar liability at eight sites outside the United States. In general, under CERCLA, we and each other PRP that actually contributes 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. Pursuant to an Environmental Agreement dated December 7, 2000 with Henkel AG & Co. KGaA, Henkel agreed to indemnify us for certain environmental liabilities associated with the parties’ former joint venture in Europe. We have requested euro 261,046 (approximately $368,000 at December 31, 2008) from Henkel for environmental costs during 2008. 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

9

Table of Contents

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. Our worldwide net expenditures for contamination remediation were approximately $614,000 in 2008 and $1,060,000 in 2007. Including the ChemLawn matter described below, our worldwide accruals at December 31, 2008 for probable future remediation expenditures totaled approximately $3,751,000. 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 liquidity. In addition, we have retained responsibility for certain sites where our former ChemLawn business is a PRP. Currently there is one such location and ChemLawn is a de minimis party. Anticipated costs currently accrued for these matters were included in our loss from our discontinued ChemLawn operations in 1991. The accrual remaining reflects our best estimate of probable future costs for the one remaining site.

Item 1(d) Financial Information About Geographic Areas . The financial information about geographic areas appearing under the heading “Operating Segments” in Note 16, located on pages 49 and 50 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 at 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 website at www.ecolab.com/investor/governance and the same information is available in print to any requesting persons, free of charge, by writing to the Corporate Secretary at our headquarters address, or by submitting an e-mail request to [email protected]: (i) charters of the Audit, Compensation, Finance and Governance Committees of our Board of Directors; (ii) our Board’s Corporate Governance Principles; and (iii) our Code of Conduct and Code of Ethics for Senior Officers and Finance Associates. 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 no executive officer has been involved during the past five years in any legal proceedings described in applicable Securities and Exchange Commission regulations.

10

Name Age

Office

Positions Held Since Jan. 1, 2004

Douglas M. Baker, Jr.

50

Chairman of the Board, President and Chief Executive Officer

May 2006 – Present

President and Chief Executive Officer Jul. 2004 – Apr. 2006

President and Chief Operating Officer Jan. 2004 – Jun. 2004

Table of Contents

11

Name Age

Office


Lawrence T.

60 General Counsel and Secretary

Feb. 2008 - Present Bell

Senior Vice President, General Counsel and Secretary

Jan. 2004 – Jan. 2008 Larry L. Berger

48

Chief Technical Officer and Senior Vice President-Research, Development & Engineering

Apr. 2008 – Present (1)

John J.

43 Vice President and Corporate Controller

Apr. 2008 – Present Corkrean

Vice President and Treasurer

May 2006 – Mar. 2008

Professional Products Vice President Distributor Sales Apr. 2005 – Apr. 2006

Professional Products Vice President and Controller Jan. 2004 – Mar. 2005

Steven L.

54 Chief Financial Officer

Feb. 2008 – Present Fritze

Executive Vice President and Chief Financial Officer

Feb. 2004 – Jan. 2008

Senior Vice President and Chief Financial Officer Jan. 2004 – Jan. 2004

Robert K.

51 Senior Vice President – Global Supply Chain

Oct. 2005 – Present Gifford

Vice President – Supply Chain Management

Sep. 2004 – Sep. 2005 (2) Thomas W. Handley

54

President – Industrial and Services North America Sector

Dec. 2007 - Present

Executive Vice President – Industrial Sector Apr. 2006 – Nov. 2007

Executive Vice President – Specialty Sector Jan. 2004 – Mar. 2006

Michael A. Hickey

47

Senior Vice President – Global Business Development and General Manager GCS Service

Jan. 2009 - Present

Senior Vice President – Global Business Development

Jan. 2006 – Dec. 2008

Senior Vice President – Global / Corporate Accounts Nov. 2005 – Dec. 2005

Vice President – Global/Corporate Accounts, Institutional Division

Jan. 2004 – Oct. 2005

Phillip J. Mason

58

President – International Sector

Dec. 2007 - Present

Table of Contents

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 2 of this Form 10-K.

12

Name Age

Office


Phillip J. Mason (con’ t)

Executive Vice President – Asia Pacific and Latin America

Dec. 2004 – Nov. 2007

Senior Vice President – Strategic Business Development

May 2004 – Nov. 2004 (3)

Michael L. Meyer

51

Senior Vice President-Human Resources

Feb. 2008 – Present (4)

James A.

52 President – Institutional North America Sector

Dec. 2007 - Present Miller

Executive Vice President – Institutional Sector North America

Jan. 2004 – Nov. 2007

Susan K. Nestegard

48 Executive Vice President – Global Healthcare Sector

Apr. 2008 - Present

Senior Vice President – Research, Development and Engineering and Chief Technical Officer

Dec. 2004 – Mar. 2008

Vice President – Research, Development and Engineering and Chief Technical Officer

Jan. 2004 – Nov. 2004

Robert P. Tabb

58

Vice President and Chief Information Officer

Jan. 2004 – Present

James H. White

44

President-EMEA Sector

Dec. 2007 – Present

Executive Vice President – EMEA Apr. 2007 – Nov. 2007

Senior Vice President – Strategy and Marketing Development

May 2006 – Mar. 2007

Senior Vice President – Strategic Planning Oct. 2005 – Apr. 2006 (5)

(1)

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

(2)

Prior to joining Ecolab in 2004, Mr. Gifford served as Vice President, World Logistics and Program Manager of Hewlett Packard Corporation for three years. Prior to Hewlett Packard, Mr. Gifford was employed by Compaq and Tandem.

(3)

Mr. Mason re-joined Ecolab in 2004, where he formerly served 23 years in various management and executive positions, most recently as Vice President – Asia Pacific. Prior to re-joining Ecolab, Mr. Mason was employed by HAVI Group, LP, serving as President, HPR Partners from 1997-2004.

(4)

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.

(5)

Prior to joining Ecolab in 2005, Mr. White was employed by International Multifoods, and served as President of its U.S. Consumer Products Division. Mr. White’s employment also includes marketing experience at General Mills, and nine years at the Pillsbury Company in a succession of management positions.

Table of Contents

We may also refer to this disclosure to identify factors that may cause results to differ from those expressed in other forward-looking statements 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 foodservice, hospitality, travel, health care and food processing industries, can adversely impact our end-users who are sensitive to changes in travel and dining activities. The current decline in economic activity is adversely affecting these markets. During such downturns, these end-users typically reduce their volume of purchases of cleaning and sanitizing products, which would likely in turn have an adverse impact on our business. Our results are impacted by general worldwide economic factors: Economic factors such as the worldwide economy, interest rates and currency movements including, in particular, our exposure to foreign currency risk have affected our business in the past and are expected to have a material adverse impact on our business in the future. The global economy is currently experiencing considerable disruption and volatility, and the disruption has been particularly acute in the global credit markets. While currently these disruptions have not impaired our ability to access credit markets, there can be no assurance that there will not be a further deterioration in the markets in which we operate. As a result, ongoing disruption in the global economy could adversely affect our consolidated results of operations, financial position or cash flows. Our results can be adversely affected by fluctuations in the cost of raw materials: The prices of raw materials used in our business can fluctuate from time to time, and have increased significantly in recent years. Changes in oil or 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, recent volatility and disruption in economic activity and conditions could disrupt or delay the performance of our suppliers or otherwise impact our ability to obtain raw materials at favorable prices or on favorable terms, which may adversely affect our business. Our growth depends upon our ability to successfully compete with respect to value, product offerings and customer support: Our competitive market is made up of numerous 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 timely introduce new technologies, we may lose market share and 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: We enter into multi-year contracts with some of our customers which include terms affecting our pricing flexibility. There can be no assurance that these restraints will not have an adverse impact on our margins and operating income. Consolidation of our customers and vendors can affect our results: Customers and vendors in the foodservice, hospitality, travel, healthcare and food processing industries have been consolidating 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 operating income.

13

Table of Contents 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 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. If we are unsuccessful in executing on business investments, our business could be adversely affected: We are making investments to develop business systems and optimize our business structure as part of our ongoing efforts to improve our efficiency and returns. If the projects in which we are investing are not successfully executed, our consolidated results of operations, financial position or cash flows could be adversely affected. Our business depends on our ability to comply with governmental regulations: Our business is subject to numerous regulations relating to the environment and to the manufacture, storage, distribution, sale and use of our products. Compliance with these regulations, as well as changes in tax, fiscal, governmental and other regulatory policies expose us to potential financial liability and increase 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. In addition, changes in accounting standards, including the adoption effective January 1, 2007 of FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109”, could increase the volatility of our quarterly tax rate. 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, or (e) severe weather conditions or public health epidemics affecting the foodservice, hospitality and travel industries may have a significant, adverse impact 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 impact 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 negative effect on our consolidated 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. War (including acts of terrorism or hostilities), natural or manmade disasters or severe weather conditions or public health epidemics affecting the foodservice, hospitality and travel industries cause a downturn in the business of restaurants, motels and hotels and other of our customers, which in turn can have a material adverse impact on our consolidated results of operations, financial position, and cash flows. We depend on key personnel to lead our business: Our continued success will largely depend on

14

Table of Contents

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. Our operations could be adversely affected if for any reason such officers or key employees did not remain with us. 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 internal production processes. Currently, most products that we sell are manufactured at our facilities. Our manufacturing facilities produce chemical products or equipment for all of our businesses, although the businesses constituting the United States Other Services segment purchase the majority of their products and equipment from outside suppliers. Our chemical production process consists primarily of blending and packaging powders and liquids and casting solids. Our equipment manufacturing operations consist primarily of producing chemical product dispensers and injectors and other mechanical equipment and dishwasher racks and related sundries. The following chart profiles our main manufacturing facilities with ongoing production activities. In general, manufacturing facilities located in the United States serve the “United States Cleaning & Sanitizing” segment and facilities located outside of the United States serve the “International” segment. However, certain 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 (*).

ECOLAB OPERATIONS PLANT PROFILES

15

Location

Approximate Size (Sq. Ft.)

Types of Products

Majority Owned or

Leased

UNITED STATES

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

Hebron, OH 196,000


Greensboro, NC 193,000

Solids, Liquids, Powders Owned

San Jose, CA 175,000


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 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


Columbus, MS 49,000

Medical Devices Owned

St. Louis, MO 37,000

Equipment Leased

Table of Contents

16

Location

Approximate Size (Sq. Ft.)

Types of Products

Majority Owned or

Leased

INTERNATIONAL

Chalons, FRANCE 280,000

Liquids, Powders Owned

Nieuwegein, NETHERLANDS 168,000

Powders Owned

La Romana, DOMINICAN REPUBLIC 160,000


Tessenderlo, BELGIUM 153,000

Solids, Liquids Owned

Melbourne, AUSTRALIA 145,000


Rozzano, ITALY 126,000

Liquids Owned

Mississauga, CANADA 120,000

Liquids Leased

Johannesburg, SOUTH AFRICA 100,000


Hamilton, NEW ZEALAND 96,000


Mullingar, IRELAND 74,000

Liquids Leased

Mosta, MALTA 73,000


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


Cheadle (Hulme), UNITED KINGDOM 53,000

Liquids Leased

Guangzhou, CHINA 50,000


Baglan, UNITED KINGDOM 50,000

Liquids Leased

Noda, JAPAN 49,000


Siegsdorf, GERMANY 42,000

Equipment Owned

Zutphen, NETHERLANDS 41,000


Mexico City, MEXICO 40,000


Maribor, SLOVENIA 39,000


Pilar, ARGENTINA 30,000


Shanghai, CHINA 27,000


Perth, AUSTRALIA 27,000


Singapore, SINGAPORE 25,000


Dar es Salaam, TANZANIA 23,000


Seoul, SOUTH KOREA 22,000


Acuna, MEXICO 21,000


Racibor, POLAND 20,000

Liquids Leased

Toulon, FRANCE 20,000


Mandras, GREECE 18,000

Liquids Owned

Varssesveld, NETHERLANDS 17,000


San Jose, COSTA RICA 11,000


Bogota, COLOMBIA 11,000

Liquids Leased

Cikarang, INDONESIA 10,000


Bangkok, THAILAND 10,000


Manilla, PHILIPPINES 8,000


Table of Contents

We believe our manufacturing facilities are in good condition and are adequate to meet our existing production needs. Most of our manufacturing plants also serve as distribution centers. In addition, we operate distribution centers around the world, all of which are leased, and utilize various public warehouses to facilitate the distribution of our products and services. In the United States, our sales and service associates are located in approximately 90 leased offices. Additional sales offices are located internationally. Our 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 2011 with additional options available. The third building is owned. The corporate headquarters includes an employee training center. In 2004, we purchased a 90 acre campus in Eagan, Minnesota to provide for future growth. The acquired facility houses our research and development and data center requirements as well as several of our administrative functions. Item 3. Legal Proceedings . Note 14, entitled “Commitments and Contingencies” located on pages 44 and 45 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. Submission of Matters to a Vote of Security Holders . No matters were submitted to a vote of our security holders during the fourth quarter of 2008.

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 2008 and 2007 were as follows:

The closing Common Stock price on January 30, 2009 was $33.96. Holders : On January 30, 2009, we had 5,169 holders of Common Stock of record. Dividends : We have paid Common Stock dividends for 72 consecutive years. Quarterly cash dividends of $0.115 per share were declared in February, May and August 2007. Cash dividends of $0.13 per share were declared in December 2007, and February, May and August 2008. A dividend of $0.14 per share was declared in December 2008.

17

2008 2007

Quarter

High Low

High Low

First

$ 52.35 $ 42.52

$ 45.37 $ 37.01

Second

$ 48.91 $ 42.89

$ 44.79 $ 41.12

Third

$ 52.16 $ 42.00

$ 47.59 $ 39.01

Fourth

$ 49.99 $ 29.56

$ 52.78 $ 44.82

Table of Contents

Issuer Purchases of Equity Securities :

Item 6. Selected Financial Data . The comparative data for the years ended December 31, 2008, 2007, 2006, 2005 and 2004 inclusive, which are set forth under the heading entitled “Summary Operating and Financial Data” located on pages 54 and 55 of the Annual Report, are incorporated herein by reference. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation . The material appearing under the heading entitled “Financial Discussion,” located on pages 21 through 30 of the Annual Report, is incorporated herein by reference. Item 7A. Quantitative and Qualitative Disclosures about Market Risk . The material appearing under the heading entitled “Market Risk,” located on page 30 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 31 through 55 of the Annual Report, are incorporated herein by reference. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure . None.

18

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, 2008

376,190 $ 40.5126

375,700 3,945,862

November 1-30, 2008

11,347,098 $ 26.5327

11,346,098 (4) 3,945,862

December 1-31, 2008 0

$ 0 0

3,945,862

Total 11,723,288

$ 26.9813 11,721,798

3,945,862

(1) Includes 1,490 shares reacquired from employees and/or directors as swaps for the cost 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)(4) As announced on October 26, 2006, our Board of Directors authorized the repurchase of up to 10,000,000 shares of Common Stock,

including shares to be repurchased under Rule 10b5-1. We intend to repurchase all shares under this authorization, for which no expiration date has been established, in open market or privately negotiated transactions, subject to market conditions. As announced on November 10, 2008, our Board of Directors authorized the purchase of $300,000,000 of stock from Henkel AG & Co. KGaA and its affiliate. The authorized repurchase was completed on November 19, 2008, with the purchase of 11,346,098 shares.

Table of Contents

Item 9A. Controls and Procedures . Disclosure Controls and Procedures : As of December 31, 2008, we carried out an evaluation, under the supervision and with the participation of our management, including the Chairman of the Board, President and Chief Executive Officer and the 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, President 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, President 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, 2008. 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, 2008. Their report, and our management reports, can be found in our Annual Report, the relevant portion of which has been filed as Exhibit (13) to this Form 10-K and is incorporated into Item 8 of this Form 10-K. During the period October 1 - December 31, 2008, there were no changes in our internal control over financial reporting that has materially affected, or is 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 to Elect 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 10 through 12 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, other than as provided in this Item 11.

19

Table of Contents

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. A total of 541,813 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, 2008, which are actually issued and outstanding. Equity Compensation Plan Information : The following table presents, as of December 31, 2008, compensation plans (including individual compensation arrangements) under which our equity securities are authorized for issuance.

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

20

Plan Category

(a) Number of securities

to be issued upon exercise of

outstanding options, warrants and rights

(b) Weighted average

exercise price of outstanding options,

warrants and rights

(c) Number of securities remaining available

for future issuance under equity compensation plans

(excluding securities reflected in column (a))

Equity compensation plans approved by security holders

22,832,401(1)(2) $ 34.51(2)

4,746,982

Equity compensation plans not approved by security holders

-0- —

-0-

Total 22,832,401(1)(2)

$ 34.51(2) 4,746,982

(1)

Includes 137,276 Common Stock equivalents under our 2001 Non-Employee Director Stock Option and Deferred Compensation Plan. These Common Stock equivalents represent deferred compensation earned by non-employee directors and are excluded from the calculation of weighted average exercise price of outstanding options, warrants and rights in column (b) of this table.

(2)

Includes 3,349 shares of our Common Stock subject to stock options with a weighted-average exercise price of $30.09, which we assumed in connection with our acquisition of Alcide Corporation effective July 30, 2004. These assumed options are deemed exempt from shareholder approval under Rule 303A.08 of the New York Stock Exchange in accordance with our notice to the NYSE dated August 18, 2004. The respective Alcide plans were amended to prohibit future grants.

Table of Contents

PART IV

Item 15. Exhibits and Financial Statement Schedules .

21

(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, 2008, 2007 and 2006, Annual Report page 31.

(ii) Consolidated Balance Sheet at December 31, 2008 and 2007, Annual Report page 32.

(iii) Consolidated Statement of Cash Flows for the years ended December 31, 2008, 2007 and 2006, Annual Report page 33.

(iv) Consolidated Statement of Comprehensive Income and Shareholders’ Equity for the years ended December 31, 2008, 2007 and 2006, Annual Report page 34.

(v) Notes to Consolidated Financial Statements, Annual Report pages 35 through 52.

(vi) Report of Independent Registered Public Accounting Firm, Annual Report page 53. (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.

(3) A. Restated Certificate of Incorporation of Ecolab Inc., dated as of February 27, 2006, effective as of March 13, 2006 – Incorporated by reference to Exhibit (3)A of our Form 10-K Annual Report for the year ended December 31, 2005.

B. By-Laws, as amended through August 1, 2008 – Incorporated by reference to Exhibit (3.1) of our Form 8-K dated November 10, 2008.

(4) A. Common Stock - see Exhibits (3)A and (3)B.

B. Form of Common Stock Certificate effective February 28, 2007 – Incorporated by reference to Exhibit (4)B of our Form 10-K Annual Report for the year ended December 31, 2006.

C. Rights Agreement, dated as of February 24, 2006, between Ecolab Inc. and Computershare Investor Services, LLC, as Rights Agent, which includes the following exhibits thereto: (i) Exhibit A – Form of Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock and (ii) Exhibit B – Form of Rights Certificate – Incorporated by reference to Exhibit (4)C of our Form 10-K Annual Report for the year ended December 31, 2005.

D. 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.

Table of Contents

22

E. Officer’s Certificate establishing terms and conditions of 6.875% Notes due February 1, 2011 - Incorporated by reference to

Exhibit 4(B) of our Form 8-K dated January 23, 2001.

F. Form of 6.875% Note due February 2, 2011 - Incorporated by reference to Exhibit 4(C) of our Form 8-K dated January 23, 2001.

G. 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 Current Report on Form 8-K dated February 8, 2008.

H. Form of 4.875% Note due February 15, 2015 — Included in Exhibit (4)H 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)A. (i) Multicurrency Credit Agreement, dated as of September 29, 1993, as amended and restated as of June 1, 2006, among

Ecolab Inc., the financial institutions party thereto as Banks from time to time, the financial institutions party thereto as Issuing Banks from time to time, Citibank, N.A., as administrative agent for the Banks and Issuing Banks thereunder, Citibank International PLC, as agent for the Banks in connection with certain of the Eurocurrency Advances, and JPMorgan Chase Bank, N.A., as syndication agent — Incorporated by reference to Exhibit (10) of our Form 8-K dated June 1, 2006.

(ii) Extension Confirmation Notice, dated May 14, 2007, under the Multicurrency Credit Agreement, dated as of September 29, 1993, as amended and restated as of June 1, 2006 — Incorporated by reference to Exhibit (10) of our Form 8-K dated May 14, 2007.

(iii) Increase of Commitments Agreement dated as of October 29, 2007 by and among Ecolab Inc., Citibank, N.A., JPMorgan Chase Bank, N.A., Credit Suisse, Cayman Islands Branch, National Association, Wells Fargo Bank, National Association, ABN AMRO Bank N.A., Bank of America, N.A. and Barclays Bank PLC, as increasing banks, and Citibank, N.A., as agent — Incorporated by reference to Exhibit (10) of our Form 10-Q for the quarter ended September 30, 2007.

B. 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.

Table of Contents

23

(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. $600,000,000 U.S. Commercial Paper Program

(a) Form of Commercial Paper Dealer Agreement for 4 (2) Program. Agreements have been executed with Salomon Smith Barney, Inc. and J.P. Morgan Securities Inc., Wachovia Securities, LLC and Banc of America Securities LLC - 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 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. (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.

D. (i) 1995 Non-Employee Director Stock Option Plan — Incorporated by reference to Exhibit (10)D(i) of our Form 10-K Annual Report for the year ended December 31, 2006.

(ii) Amendment No. 1 to 1995 Non-Employee Director Stock Option Plan effective February 25, 2000 - Incorporated by reference to Exhibit (10)E(ii) of our Form 10-K Annual Report for the year ended December 31, 1999.

(iii) Amendment No. 2 to 1995 Non-Employee Director Stock Option Plan effective May 11, 2001 - Incorporated by reference to Exhibit (10)G(iii) of our Form 10-K Annual Report for the year ended December 31, 2002.

(iv) Amendment No. 3 to 1995 Non-Employee Director Stock Option Plan, adopted October 31, 2008.

E. (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.

Table of Contents

24

(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).

F. 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.

G. 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.

H. (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)N hereof.

(ii) Amendment No. 1 to Ecolab Executive Death Benefits Plan — 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. I. 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)N hereof. J. Ecolab Financial Counseling Plan (Effective January 1, 2005).

K. Ecolab Supplemental Executive Retirement Plan (Amended and Restated effective as of January 1, 2005).

L. Ecolab Mirror Savings Plan (Amended and Restated effective as of January 1, 2005).

M. Ecolab Mirror Pension Plan (Amended and Restated effective as of January 1, 2005).

Table of Contents

25

N. Ecolab Inc. Administrative Document for Non-Qualified Plans (Amended and Restated effective as of January 1, 2005).

O. (i) Ecolab Inc. Management Performance Incentive Plan, as amended and restated on February 28, 2004 — Incorporated by reference to Exhibit (10)A of our Form 10-Q for the quarter ended March 31, 2004.

(ii) Amendment No. 1 adopted February 26, 2005 to the Ecolab Inc. Management Performance Incentive Plan — Incorporated by reference to Exhibit (10)O(ii) of our Form 10-K Annual Report for the year ended December 31, 2004.

P. Ecolab Inc. Change in Control Severance Compensation Policy, effective as of January 1, 2005, adopted December 19, 2008.

Q. Description of Ecolab Management Incentive Plan.

R. Stock Purchase Agreement, dated November 10, 2008, among Henkel AG & Co. KGaA, Henkel Corporation and Ecolab Inc. — Incorporated by reference to Exhibit (10.1) of our Form 8-K dated November 10, 2008.

S. (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.

T. 2009 Named Executive Officer Summary of Base Salary, Bonus Award Opportunities, and Executive Benefits and Perquisites.

U. Non-Employee Director Compensation and Benefits Summary.

V. (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.

(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.

(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.

W. Policy on Reimbursement of Incentive Payments adopted December 4, 2008.

(13) Those portions of our Annual Report to Stockholders for the year ended December 31, 2008 which are incorporated by reference into Parts I and II hereof.

Table of Contents

26

(14)A. Code of Conduct — Incorporated by reference to Exhibit (99)A of our Form 10-K Annual Report for the year ended December 31, 2003.

(14)B. Code of Ethics for Senior Officers and Finance Associates — Incorporated by reference to Exhibit (99)B of our Form 10-K

Annual Report for the year ended December 31, 2003.

(21) List of Subsidiaries as of January 31, 2009.

(23) Consent of Independent Registered Public Accounting Firm at page 29 hereof is filed as a part hereof.

(24) Powers of Attorney.

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

(32) Section 1350 Certifications.

Table of Contents

EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS

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

27

Exhibit No. Description

(10)C.

Ecolab Inc. 1997 Stock Incentive Plan. (10)D.

1995 Non-Employee Director Stock Option Plan. (10)E.

Ecolab Inc. 2001 Non-Employee Director Stock Option and Deferred Compensation Plan. (10)G.

Form of Director Indemnification Agreement. (10)H.

Ecolab Executive Death Benefits Plan. (10)I.

Ecolab Executive Long-Term Disability Plan. (10)J.

Ecolab Executive Financial Counseling Plan. (10)K.

Ecolab Supplemental Executive Retirement Plan. (10)L.

Ecolab Mirror Savings Plan. (10)M.

Ecolab Mirror Pension Plan. (10)N.

Ecolab Inc. Administrative Document for Non-Qualified Plans. (10)O.

Ecolab Inc. Management Performance Incentive Plan. (10)P.

Ecolab Inc. Change in Control Severance Compensation Policy. (10)Q.

Description of Ecolab Inc. Management Incentive Plan. (10)S.

Ecolab Inc. 2002 Stock Incentive Plan. (10)T.

2009 Named Executive Officer Summary of Base Salary, Bonus Award Opportunities, and Executive Benefits and Perquisites.

(10)U.

Non-Employee Director Compensation and Benefits Summary. (10)V.

Ecolab Inc. 2005 Stock Incentive Plan. (10)W.

Policy on Reimbursement of Incentive Payments adopted December 4, 2008.

Table of Contents

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 27 day of February, 2009.

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 27 day of February 2009.

28

ECOLAB INC.

(Registrant)

By: /s/Douglas M. Baker, Jr.

Douglas M. Baker, Jr.

Chairman of the Board, President and Chief Executive Officer

/s/Douglas M. Baker, Jr.

Chairman of the Board, President Douglas M. Baker, Jr.

and Chief Executive Officer

(Principal Executive Officer and Director)

/s/Steven L. Fritze

Chief Financial Officer

Steven L. Fritze

(Principal Financial Officer) /s/John J. Corkrean

Vice President and Controller

John J. Corkrean

(Principal Accounting Officer) /s/Lawrence T. Bell

Directors

Lawrence T. Bell

as attorney-in-fact for:

Barbara J. Beck, Les S. Biller, Richard U. De Schutter, Jerry A. Grundhofer, Joel W. Johnson, Jerry W. Levin, Robert L. Lumpkins, Beth M. Pritchard and John J. Zillmer

th

th

Table of Contents

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; and 333-149148) and Form S-3 (Registration No. 333-149052) of Ecolab Inc. of our report dated February 27, 2009 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.

Minneapolis, Minnesota February 27, 2009

29

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Table of Contents

EXHIBIT INDEX The following documents are filed as exhibits to this Report.

30

Exhibit No. Document

Method of Filing (3)

A.

Restated Certificate of Incorporation of Ecolab Inc., dated as of February 27, 2006, effective as of March 13, 2006.

Incorporated by reference to Exhibit (3)A of our Form 10-K Annual Report for the year ended December 31, 2005.

B.

By-Laws, as amended through August 1, 2008.

Incorporated by reference to Exhibit (3.1) of our Form 8-K dated November 10, 2008.

(4)

A.

Common Stock.

See Exhibits (3)A and (3)B.

B.

Form of Common Stock Certificate effective February 28, 2007.

Incorporated by reference to Exhibit (4)B of our Form 10-K Annual Report for the year ended December 31, 2006.

C.

Rights Agreement, dated as of February 24, 2006, between Ecolab Inc. and Computershare Investor Services, LLC, as Rights Agent, which includes the following exhibits thereto: (i) Exhibit A — Form of Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock and (ii) Exhibit B — Form of Rights Certificate.

Incorporated by reference to Exhibit (4)C of our Form 10-K Annual Report for the year ended December 31, 2005.

D.

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 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.

E.

Officer’s Certificate establishing terms and conditions of 6.875% Notes due February 1, 2011.

Incorporated by reference to Exhibit 4(B) of our Form 8-K dated January 23, 2001.

F.

Form of 6.875% Note due February 2, 2011.

Incorporated by reference to Exhibit 4(C) of our Form 8-K dated January 23, 2001.

G.

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 Current Report on Form 8-K dated February 8, 2008.

Table of Contents

31

I.

Form of 4.875% Note due February 15, 2015. Included in Exhibit (4)H above.

(10)

A.

(i)

Multicurrency Credit Agreement, dated as of September 29, 1993, as amended and restated as of June 1, 2006, among Ecolab Inc., the financial institutions party thereto as Banks from time to time, the financial institutions party thereto as Issuing Banks from time to time, Citibank, N.A., as administrative agent for the Banks and Issuing Banks thereunder, Citibank International PLC, as agent for the Banks in connection with certain of the Eurocurrency Advances, and JPMorgan Chase Bank, N.A., as syndication agent.

Incorporated by reference to Exhibit (10) of our Form 8-K dated June 1, 2006.

(ii)

Extension Confirmation Notice, dated May 14, 2007, under the Multicurrency Credit Agreement, dated as of September 29, 1993, as amended and restated as of June 1, 2006.

Incorporated by reference to Exhibit (10) of our Form 8-K dated May 14, 2007.

(iii)

Increase of Commitments Agreement dated as of October 29, 2007 by and among Ecolab Inc., Citibank, N.A., JPMorgan Chase Bank, N.A., Credit Suisse, Cayman Islands Branch, National Association, Wells Fargo Bank, National Association, ABN AMRO Bank N.A., Bank of America, N.A. and Barclays Bank PLC, as increasing banks, and Citibank, N.A., as agent.

Incorporated by reference to Exhibit (10) of our Form 10-Q for the quarter ended September 30, 2007.

B.

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.

Table of Contents

32

(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. $600,000,000 U.S. Commercial Paper Program.

(a) Form of Commercial Paper Dealer Agreement

for 4 (2) Program. Agreements have been executed with Salomon Smith Barney, Inc., Wachovia Securities, LLC and Banc of America Securities LLC.

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 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.

(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.

D.

(i)

1995 Non-Employee Director Stock Option Plan.

Incorporated by reference to Exhibit (10)D(i) of our Form 10-K Annual Report for the year ended December 31, 2006.

(ii)

Amendment No. 1 to 1995 Non-Employee Director Stock Option Plan effective February 25, 2000.

Incorporated by reference to Exhibit (10)E(ii) of our Form 10-K Annual Report for the year ended December 31, 1999.

(iii)

Amendment No. 2 to 1995 Non-Employee Director Stock Option Plan effective May 11, 2001.

Incorporated by reference to Exhibit (10)G(iii) of our Form 10-K Annual Report for the year ended December 31, 2002.

Table of Contents

33

(iv)

Amendment No. 3 to 1995 Non-Employee Director Stock Option Plan, adopted October 31, 2008.

Filed herewith electronically.

E.

(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).


F.

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.

G.

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.

H.

(i)

Ecolab Executive Death Benefits Plan, as amended and restated effective March 1, 1994. See also Exhibit (10)N hereof.

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)N hereof.

Table of Contents

34

(ii)

Amendment No. 1 to Ecolab Executive Death Benefits Plan.

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.

I.

Ecolab Executive Long-Term Disability Plan, as amended and restated effective January 1, 1994. See also Exhibit (10)N hereof.

Incorporated by reference to Exhibit (10)I of our Form 10-K Annual Report for the year ended December 31, 2004.

J.

Ecolab Financial Counseling Plan (Effective January 1, 2005).


K.

Ecolab Supplemental Executive Retirement Plan (Amended and Restated effective as of January 1, 2005).


L.

Ecolab Mirror Savings Plan (Amended and Restated effective as of January 1, 2005).


M.

Ecolab Mirror Pension Plan (Amended and Restated effective as of January 1, 2005.


N.

Ecolab Inc. Administrative Document for Non-Qualified Plans (Amended and Restated effective as of January 1, 2005).


O.

(i)

Ecolab Inc. Management Performance Incentive Plan, as amended and restated on February 28, 2004.

Incorporated by reference to Exhibit (10)A of our Form 10-Q for the quarter ended March 31, 2004.

(ii)

Amendment No. 1 adopted February 26, 2005 to the Ecolab Inc. Management Performance Incentive Plan.

Incorporated by reference to Exhibit (10)O(ii) of our Form 10-K Annual Report for the year ended December 31, 2004.

P.

Ecolab Inc. Change in Control Severance Compensation Policy, effective as of January 1, 2005, adopted December 19, 2008.


Q.

Description of Ecolab Management Incentive Plan.


R.

Stock Purchase Agreement, dated November 10, 2008, among Henkel AG & Co. KGaA, Henkel Corporation and Ecolab Inc.

Incorporated by reference to Exhibit (10.1) of our Form 8-K dated November 10, 2008.

Table of Contents

35

S.

(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.

T.

2009 Named Executive Officer Summary of Base Salary, Bonus Award Opportunities, and Executive Benefits and Perquisites.


U.

Non-Employee Director Compensation and Benefits Summary.


V.

(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.


(iii)

Sample form of Non-Statutory Stock Option Agreement under the Ecolab Inc. 2005 Stock Incentive Plan.

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.


(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.

W.

Policy on Reimbursement of Incentive Payments adopted December 4, 2008


(13)

Those portions of our Annual Report to Stockholders for the year ended December 31, 2008 which are incorporated by reference into Parts I and II hereof.


Table of Contents

36

(14)A.

Code of Conduct.

Incorporated by reference to Exhibit (99)A of our Form 10-K Annual Report for the year ended December 31, 2003.

(14)B.

Code of Ethics for Senior Officers and Finance Associates.

Incorporated by reference to Exhibit (99)B of our Form 10-K Annual Report for the year ended December 31, 2003.

(21)

List of Subsidiaries as of January 31, 2009. Filed herewith electronically.

(23)

Consent of Independent Registered Public Accounting Firm at page 29 hereof is filed as a part hereof.

See page 29 hereof.

(24)

Powers of Attorney. Filed herewith electronically.

(31)

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

(32)

Section 1350 Certifications. Filed herewith electronically.

EXHIBIT (10)D(iv)

AMENDMENT NO. 3 TO ECOLAB INC. 1995 NON-EMPLOYEE DIRECTOR

STOCK OPTION PLAN

WHEREAS, Ecolab Inc. (the “Company”) adopted the 1995 Non-Employee Director Stock Option Plan, effective as of May 12, 1995 (the “Plan”);

WHEREAS, the Plan was previously amended by Amendment No. 1 to extend the term by one year and by Amendment No. 2 to effect

certain additional changes to expand the means of cashless exercises; and WHEREAS, the Company wishes to amend the terms of certain options currently outstanding under the Plan to permit cashless

exercises of such options on the terms and conditions provided below. NOW THEREFORE, pursuant to the amending power reserved to the Company’s Board of Directors by Section 7 of the Plan, the

Board of Directors adopted this Amendment No. 3 to the Plan on October 31, 2008.

Section 1

Section 5(b)(vi) of the Plan is amended and restated to read as follows:

“(vi) Payment of Exercise Price. The total purchase price of the shares to be purchased upon the exercise of an Option may be paid entirely in cash (including check, bank draft or money order), by tendering a broker exercise notice, by tendering, or by attestation as to ownership of, shares of the Company’s Common Stock already owned by the Optionee that have been held for the period of time necessary to avoid a charge to the Company’s earnings for financial reporting purposes, including shares which would otherwise be issued upon such exercise (“Previously Acquired Shares”), or by a combination thereof. For purposes of such payment, Previously Acquired Shares will be valued at their Fair Market Value on the exercise date.”

Section 2

The foregoing amendment and restatement of Section 5(b)(vi) shall only be effective with respect to the Options outstanding as of October 31, 2008 that are held by Optionees satisfying the definition of Eligible Director under Section 3 of the Plan as of such date.

IN WITNESS WHEREOF, Ecolab Inc. has executed this Amendment No. 3 this 31 day of October, 2008.

Attest:

2

ECOLAB INC.

By: /s/ Michael L. Meyer

Name: Michael L. Meyer

Title: Senior Vice President – Human Resources

/s/ Sarah Z. Erickson

Name: Sarah Z. Erickson

Title: Associate General Counsel-Corporate and Assistant Secretary

st

EXHIBIT (10)E(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)

WHEREAS, Ecolab Inc. (the “Company”) adopted an amended and restated 2001 Non-Employee Director Stock Option and Deferred

Compensation Plan, effective as of May 1, 2004 (the “Plan”); WHEREAS, the Plan was previously amended by Amendment No. 1 to address changes required by Section 409A of the Code and by

Amendment No. 2 to effect certain additional changes relating to exercisability and duration of Periodic Options granted on or after May 2, 2008;

WHEREAS, the Company wishes to adopt additional changes to the Plan to comply with the final regulations issued under

Section 409A of the Code; and WHEREAS, the Company wishes to amend certain provisions of the Plan relating to future grants of Periodic Options, and to amend

the terms of certain options currently outstanding under the Plan, in each case to permit cashless exercises of such options on the terms and conditions provided below.

NOW THEREFORE, pursuant to the amending power reserved to the Company’s Board of Directors by Section 14.1 of the Plan, the

Board of Directors adopted this Amendment No. 3 to the Plan on October 31, 2008.

Section 1

Section 8.1(b) is amended and restated to read as follows:

“(b) Time of Distribution . Distribution of a Participant’s Pre-2005 Sub-Account to a Participant will be made (to the extent a distribution is in the form of a lump sum) or commence (to the extent a distribution is in the form of installments) as soon as administratively practicable after the next Credit Date after the Participant ceases to be a member of the Board; provided that if a lump sum distribution from a Participant’s Share Account would otherwise be made after the record date for a dividend but before the payment date for such dividend, the distribution will be delayed and made as soon as administratively practicable after the earnings credits have been made to the Share Account pursuant to Section 6.2 on the payment date of the dividend. Distribution of a Participant’s Post-2004 Sub-Account will be made as soon as administratively practicable but not more than 90 days after the next Credit Date after the Participant’s Termination of Service, provided if a lump sum distribution from a Participant’s Share Account would otherwise be made after the record date for a dividend but before the payment date for such dividend, the distribution may be delayed and made as soon as administratively practicable after the earnings credit has been made to the Share Account pursuant to Section 6.2 on the payment date of the dividend, provided the distribution is made within 90 days after the next Credit Date after the Participant’s Termination of Service.

If, at his Termination of Service, a Participant is considered to be a ‘specified employee,’ as defined under Code Section 409A, no distribution will be made before the date that is six months after the Participant’s Termination of Service, or if earlier, upon the Participant’s death. The date as of which a distribution is due under this Section 8.1(b) is referred to in this Plan as the ‘Time of Distribution.’”

Section 2

Section 8.3(b) is amended by adding the following language to the end of such Section:

“Distribution of a Participant’s Post-2004 Sub-Account to a Beneficiary will be made as soon as administratively practicable but not later than 90 days after the next Credit Date after the date of the Participant’s death; provided that if a distribution from the Participant’s Share Account would otherwise be made after the record date for a dividend but before the payment date for such dividend, the distribution may be delayed and made as soon as administratively practicable after the earnings credit has been made to the Share Account pursuant to Section 6.2 on the payment date of the dividend, provided distribution is made not later than 90 days after the next Credit Date after the Participant’s death.”

Section 3

Section 11.1 is amended by adding the following sentence to the end of such Section:

“The trustee of the Trust shall not be permitted to locate any portion of the Trust assets outside of the United States in violation of Section 409A(b)(1) of the Code.”

Section 4

Section 15 is amended by adding a new Section 15.16A as follows:

“15.16A Option Exercise Shares . “Option Exercise Shares” means Shares that are issuable upon the exercise of a Periodic Option that is: (i) currently held by, or later issued to, an individual who is a Qualified Director as of October 31, 2008; or (ii) issued after October 31, 2008 to an individual who subsequently becomes a Qualified Director after October 31, 2008. For purposes of Section 9.6, Option Exercise Shares will be valued at the Market Price on the exercise date.

by amending and restating Section 15.22, to read as follows:

“15.22 Previously Acquired Shares . “Previously Acquired Shares” means Shares that (i) are already owned by the Participant and that are, by virtue of the Participant’s holding period or other attributes, acceptable to the Administrator; or (ii) are Option Exercise Shares.

and by adding a new Section 15.31A as follows:

2

“15.31A Termination of Service . For purposes of distribution of a Participant’s post-2004 Sub-Account, ‘Termination of Service’ means the individual has ceased to be a member of the Board and has ceased to provide services as an independent contractor (including as a member of the board of directors) of the Company and any other entity with whom the Company would be treated as a single employer under Section 414(b) or 414(c) of the Code. In all cases, the individual’s Termination of Service must constitute a ‘separation from service’ under Section 409A of the Code.”

Section 5

In addition to the amendments provided above, the terms of all “Elective Options” and “Reload Options” (as such terms were defined in the Plan prior to its amendment on May 1, 2004) held by individuals who are Qualified Directors as of October 31, 2008, are hereby amended to provide that the Administrator, in its sole discretion and upon terms and conditions established by the Administrator, may accept, as payment for the purchase price of the Shares to be purchased upon exercise of any such Elective Option or Reload Option, Shares that are issuable upon the exercise of such options (valued at the Market Price on the exercise date), other than in any case in which the Qualified Director will receive a Reload Option in connection with the exercise.


3

ECOLAB INC.


Michael L. Meyer

Senior Vice President – Human Resources Attest:

By: /s/ Sarah Z. Erickson

Sarah Z. Erickson

Associate General Counsel – Corporate and Assistant Secretary

st

EXHIBIT (10)J

ECOLAB EXECUTIVE FINANCIAL COUNSELING PLAN

(Effective January 1, 2005)

ARTICLE I — Name and Purpose

1

1.1 Plan Name

The name of the Plan is “Ecolab Executive Financial Counseling Plan.” 1.2

Purpose

The purpose of the Plan is to reimburse Executive Employees of the Company for certain expenses incurred by such Executives for financial counseling.

ARTICLE II — Definitions

For purposes of this Plan, each of the terms set forth in this article shall, unless the context otherwise requires, have the meaning prescribed in this article. 2.1

Plan

The “Plan” is the Ecolab Executive Financial Counseling Plan set forth in this instrument as it may be amended from time-to-time.

2.2

Company The “Company” is Ecolab Inc., a Delaware corporation, or its successor.

2.3

Executive

An “Executive” is an Employee who has been selected by the Chief Executive Officer of the Company to participate in the Plan. In the event coverage under the Plan continues for a period following the Executive’s death, the term “Executive” shall refer to the executor or other personal representative of the deceased Executive’s estate.

2.4

Annual Compensation

Effective as of January 1, 2008, an Executive’s “Annual Compensation” for a Plan Year is the rate of the Executive’s annual base compensation as of January 1 of the Plan Year, or, in the case of an Executive who was not an Employee on such January 1, the date he or she became an Employee.

2.5

Employee

“Employee” is a common-law employee of the Company or of any other corporation at least fifty percent of the outstanding stock of which is owned, directly or indirectly, by the Company.

2.6

Financial Counseling

Financial Counseling shall refer to services rendered for an Executive (or his or her estate) for financial/investment planning, estate planning, tax planning, tax return preparation and tax audit assistance by an Authorized Vendor.

2.7

Authorized Vendor

Any accounting/tax, investment and legal vendor(s), selected at the discretion of the Executive to perform Financial Counseling, with respect to whom the Executive has provided written notice to the Administrator; provided, however, that any vendor who is not licensed in the area of expertise in which he or she practices or who is a relative of the Executive shall not be an Authorized Vendor unless the Company authorizes the use of such vendor in writing.

2.8

Annual Percentage

The “Annual Percentage” with respect to an Executive for any Plan Year beginning on or after January 1, 2008, shall be an amount equal to five percent (5%) of the Chief Executive Officer’s and three percent (3%) of each other Executive’s applicable Annual Compensation for that Plan Year.

2

2.9

Annual Reimbursement Limit

The “Annual Reimbursement Limit” with respect to an Executive for any Plan Year beginning on or after January 1, 2008, shall be his or her Annual Percentage for such Plan Year.

2.10

Permanent and Total Disability

For purposes of this Plan, an Executive shall be considered to be “Permanently and Totally Disabled” only if, by reason of bodily injury or disease, he or she is entitled to receive long-term disability benefits under the Company’s long-term disability plan.

2.11

Plan Year The “Plan Year” is the calendar year.

ARTICLE III — Administration

3.1

Administrator

The Company shall be the Administrator of the Plan. The Vice President — Corporate Human Resources of the Company (or the functional equivalent of such officer in the event the title or responsibility of that office change) shall perform the duties of the Administrator on behalf of the Company. Such Vice President may, by written instrument, delegate any or all of the duties of the Administrator to any person who shall serve at the pleasure of such Vice President.

3.2

Duties

The Administrator shall take such actions and adopt such rules and procedures as shall be necessary or advisable to carry out the provisions of the Plan.

3.3

Indemnification

The Company shall indemnify the Vice President — Corporate Human Resources and each person performing duties as Administrator against all liabilities such person may incur in the administration of the plan. The Administrator shall be entitled to reimbursement from the Company for expenses incurred in the performance of the duties of Administrator.

3.4

Claims

The Administrator shall give each Executive, within a reasonable time following the Executive’s submission of a request for payment of benefits, written notice of the amount of such benefits to which the Executive is entitled. The Executive may, within thirty days after receiving such notice, file with the Administrator a written objection to the Administrator’s determination of such amount. The Administrator shall review the claim and shall respond in writing to the Executive within sixty days after receiving the objection. If the Administrator, upon review denies any part or all of the benefits claims by the Executive, the Executive may, within sixty days of receiving the Administrator’s response, appeal the Administrator’s decision by written notice to the Chief Executive Officer of the Company. Within ninety days after receiving the Executive’s notice of appeal, the Chief Executive Officer shall render a decision with respect to the claim, which decision shall be final and binding upon the company and the Executive.

3

ARTICLE IV — Benefits 4.1

Coverage

(A) Each Executive shall be covered under the Plan as of the first date on or after the Effective

Date on which he or she is an Executive.

(B) An Executive shall cease to be covered under the Plan as of the earliest of:

(1) The date his or her employment as an Executive ceases for any reason other than death or

Permanent and Total Disability;

(2) If the coverage under the Plan continued during a period of the Executive’s Permanent

and Total Disability, the end of the calendar year following the year in which the Permanent and Total Disability occurred or such earlier date as the Permanent and Total Disability ceases; and

(3) If coverage under the Plan continued as a result of the Executive’s death, the end of the

calendar year following the year in which the death occurred. 4.2

Benefits

(A) Subject to subparagraph (B), an Executive shall be entitled to reimbursement of expenses incurred for Financial Counseling by an Authorized Vendor during the Plan Year (but prior to the claims submission date of December 15 of such Plan Year) while the Coverage under the Plan was in effect Such reimbursement shall not exceed the Annual Reimbursement Limit in any Plan Year beginning on or after January 1, 2008. For any Plan Year beginning before January 1, 2008, the amount of reimbursement shall be approved by the Administrator.

(B) Notwithstanding anything to the contrary in subparagraph (A), the reimbursement amount with respect to eligible expenses incurred during the calendar year following the year in which the death or Permanent and Total Disability of the Executive occurred will be equal to, but shall not exceed, the Executive’s Annual Percentage for the Plan Year in which such death or Permanent and Total Disability occurred.

4.3

Request for Reimbursement

Within a reasonable time following the occurrence of expenses eligible for reimbursement under this Plan, the Executive shall file with the Administrator a request for reimbursement which includes the itemized statement from the Authorized Vendor to the Executive and the Executive’s written confirmation of the accuracy of the statement, and such other information as the Administrator shall from time to time deem necessary or desirable in administering the Plan. Executive’s request for expenses incurred during a Plan Year shall be made not later than December 15 of such Plan Year to permit timely processing prior to the end of such Plan Year.

4

4.4

Payment of Benefit

Benefit payments with respect to eligible expenses shall be made, at the discretion of the Administrator, directly to the Authorized Vendor or to the Executive (or the Executive’s estate in the event of his or her death) within a reasonable time following submission of a properly filed request for reimbursement. Payment or reimbursement shall in all cases be made by the last of the of Plan Year in which such eligible expenses were incurred. Notwithstanding any provision of the Plan to the contrary, the amount of expenses eligible for reimbursement with respect to any Executive during any Plan Year may not affect the expenses eligible for reimbursement in any other Plan Year, and in no event may all amounts of expenses incurred in any Plan Year to be reimbursed later than the last day of the immediately following Plan Year.

4.5

Facility of Payment

If the Administrator determines that a person entitled to benefits under the Plan is under legal disability or is otherwise unable to receipt for any benefit payment, the Administrator may, in his sole discretion, pay such benefit to a spouse, parent or adult child of such person, or to any individual whom the administrator determines to have assumed responsibility for such person’s financial affairs. The receipt of the distributee selected by the Administrator shall be a complete release of all claims of the person on whose behalf such payment is made and the payment to such distributee shall fully discharge the Company’s obligation under the plan to the extent of such payment.

4.6

Non-alienation

No Executive may in any way pledge, assign, encumber or otherwise alienate his interest in any benefit payable under the Plan. The Company shall give no effect to any instrument purporting to alienate any person’s interest in Plan benefits.

4.7

Compliance with Section 409A

It is intended that the Plan (including all Amendments thereto) comply with the provisions of Section 409A of the Code, the final regulations and any other guidance issued by the IRS or the Treasury thereunder (the “409A Guidance) to prevent the inclusion in gross income of any amount available to an Executive 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. All Plan provisions shall be interpreted in a manner consistent with the 409A Guidance. Any Plan provisions that would cause the Plan to fail to satisfy the 409A Guidance shall have no force and effect until amended to comply with the 409A Guidance (which amendment may be retroactive to the extent permitted by the 409A Guidance). Notwithstanding the foregoing, neither the Company nor the Administrator guarantee any tax consequences of any Executive’s participation in, or payments from, the Plan, and each Executive shall be solely responsible for payment of any tax obligations of such Executive incurred in connection with participation in the Plan.

ARTICLE V — Funding

5.1

Company Obligations

Benefits under the Plan shall be paid directly by the Company from its general assets. No specific property of the Company shall in any manner be dedicated to or segregated for payment of such benefits.

IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its duly authorized officer and its corporate seal to be affixed this 19 day of December, 2008.

5

5.2

Executive Rights

No Executive shall have any right to any specific assets of the Company under the Plan, but shall, to the extent the Company does not pay benefits when they are due, be a general creditor of the Company.

ARTICLE VI — Amendment and Termination

6.1

Amendment

The Plan may be amended from time-to-time by instrument signed by either the General or the Vice President — Corporate Human Resources of the Company (or the functional equivalent of such offices in the event the title or responsibilities of the office change).

6.2

Termination

The Plan may be terminated at any time by an instrument signed by either the General Counsel of the Vice President — Corporate Human Resources of the Company (of the functional equivalent of such offices in the event the title or responsibilities of the office change).

6.3

Restriction

No amendment or termination shall operate to deprive any Executive of any benefit otherwise payable during the Plan Year in which the amendment or termination occurs with respect to expenses incurred by the Executive prior to the date on which the resolution amending or terminating the Plan is adopted.

ECOLAB INC.

(Corporate Seal)

Attest: /s/ Michael L. Meyer

By: Michael L. Meyer

Senior Vice President — Human Resources /s/ Lawrence T. Bell

By: Lawrence T. Bell General Counsel and Secretary

EXHIBIT (10)K

ECOLAB SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (As Amended and Restated Effective as of January 1, 2005)

WHEREAS, the Company previously established the Ecolab Supplemental Executive Retirement Plan (the “Plan”) to provide

additional retirement benefits in consideration of services performed and to be performed by certain participants for the Company and certain related corporations; 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, before the issuance by the U.S. Treasury and the Internal Revenue Service (the “IRS”) of interpretive guidance

with respect to Code Section 409A, the Company amended the Plan to temporarily freeze the accrual of SERP Benefits hereunder as of 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 (a) reinstate the accrual of SERP Benefits, effective retroactively as of January 1, 2005 and (b) comply, with respect to the Non-Grandfathered SERP Benefits, with the requirements of Code Section 409 and guidance issued thereunder;

NOW, THEREFORE, pursuant to Section 1.3 of the Plan and 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, effective as of January 1, 2005, 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, 2005. The benefit, if

any, payable with respect to a former Executive who Retired or died 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 Sections 1.4 and 3.3(2)(c). Notwithstanding any provision of the Plan to the contrary, an Executive’s SERP Benefit (which was temporarily frozen from December 31, 2004 through December 31, 2008) shall be retroactively adjusted on January 1, 2009 to reflect the benefit that would have been accrued by the Executive under the Plan, in accordance with S ection 3.2, during the period commencing on January 1, 2005 and ending on the earlier of December 31, 2008 or the date on which the Executive terminated his services with the Employers as an employee.

Section 1.2 Purpose of the Plan . The purpose of this Plan is to provide additional retirement benefits for certain management

and highly compensated employees of the Company 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 of 2004 (AJCA) .

(1) To the extent applicable, it is intended that the Plan (including all Amendments thereto) comply with the provisions

of Code Section 409A, as enacted by the American Jobs Creation Act of 2004, P.L. 1

108-357 (the “AJCA”), so as to prevent the inclusion in gross income of any amount of SERP Benefit accrued 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 Executives. The Plan shall be administered in a manner that will comply with Code Section 409A, including 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 Code Section 409A. The

Administrator is authorized to adopt rules or regulations deemed necessary or appropriate in connection with the 409A Guidance to anticipate and/or comply with the requirements thereof (including any transition or grandfather rules thereunder).

(3) Notwithstanding any provision of the Plan, any Grandfathered SERP Benefits (including any Pre-Retirement SERP

Benefits attributable thereto) 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, except as otherwise provided herein. Notwithstanding any provision of the Plan to the contrary, neither the Company nor the Administrator guarantee to any Executive or Death Beneficiary any specific tax consequences of participation in or entitlement to or receipt of benefits from, the Plan, and each Executive or the Executive’s Death Beneficiary shall be solely responsible for payment of any taxes or penalties incurred in connection with his participation in the Plan.

ARTICLE II

DEFINITIONS

Words and phrases used herein with initial capital letters which are defined in the Pension 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 “ Actuarial Equivalent ” or “ Actuarially Equivalent .” A benefit is the “Actuarial Equivalent” of another benefit if,

on the basis of Actuarial Factors, the present values of such benefits are equal. Section 2.2 “ Actuarial Factors ” shall mean the actuarial assumptions set forth in Exhibit A which is attached to and forms a

part of this Plan. Section 2.3 “ Cash Balance Participant ” shall mean an Executive for whom a Retirement Account is maintained under the

Pension Plan. Section 2.4 “ Death Beneficiary .” The term “Death Beneficiary” shall mean the beneficiary designated under this Plan and the Mirror Pension Plan. The designation of a

Death Beneficiary 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 his 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. Any Mirror Pension Benefits remaining to be paid after the death of a Death Beneficiary (or a contingent Death Beneficiary, to the extent designated by the Executive) shall be paid to the Death Beneficiary’s estate. If no Death Beneficiary is designated by the Executive or all the designated Death Beneficiaries predeceased the Executive, the Executive’s Death Beneficiary shall be his spouse, and if there is no surviving spouse, then the Executive’s estate. The most recent Death Beneficiary designation on file

2

with the Administrator will be given effect, and in the event of conflicting forms files simultaneously under this Plan and Mirror Pension Plan, the Death Beneficiary designation under this Plan will govern.

Section 2.5 “ Disability ” or “ Disabled ” 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 position of employment or any substantially similar position of employment.

Section 2.6 “ Executive ” shall mean an Employee who is an elected corporate officer of an Employer and who is selected by

the Administrator to participate in the Plan or such other Employee who is selected by the Chief Executive Officer of the Company to participate in the Plan.

Section 2.7 “ Final Average Compensation ” shall mean the average of an Executive’s Annual Compensation (as defined in the

Administrative Document but as modified by the next sentence) for the five (5) consecutive Plan Years of employment with the Employers preceding the date on which the Executive terminated his services with all Employers as an employee or death (including the year in which the Executive so terminated his service or death) which yields the highest average compensation. Notwithstanding the foregoing, for purposes of calculating the Final Annual Compensation of a Disabled Executive, the rules applicable for determining the Final Annual Compensation for persons who accrue benefits under the Final Average Compensation formula specified in Section 4.6 of the Pension Plan shall apply. If an Executive has been employed by the Employers for a period of less than five (5) Plan Years preceding the date on which the Executive terminated his services with all Employers or death, Final Average Compensation shall be calculated using the Executive’s total period of employment with the Employers (calculated using complete months of employment).

Section 2.8 “ Grandfathered SERP Benefit ” shall mean the portion of an Executive’s SERP Benefit that is deemed to have been

deferred (within the meaning of the 409A Guidance) under the Plan before January 1, 2005 and that is equal to the present value as of December 31, 2004 of the vested SERP Benefit to which the Executive would be entitled under the Plan, as in effect on October 3, 2004, if the Executive voluntarily terminated employment with the Controlled Group without cause on December 31, 2004 and received a payment, on the earliest possible date allowed under the Plan, of his SERP Benefit in the form with the maximum value. A Grandfathered SERP Benefit shall be increased in subsequent years to equal the present value of the benefit the Executive actually becomes entitled to receive, in the form and at the time actually paid, determined under the terms of the Plan as in effect on October 3, 2004, without regard to any services rendered or Compensation increases applicable after December 31, 2004.

Section 2.9 “ Mirror Pension Benefit ” shall mean one-twelfth (1/12th) of the annual total benefit payable to an Executive under

the Ecolab Mirror Pension Plan calculated on a single life annuity basis commencing at age 65, as determined by the Administrator. Section 2.10 “ Non-Grandfathered SERP Benefit ” shall mean any SERP Benefit that is not a Grandfathered SERP Benefit. Section 2.11 “ Pension Benefit ” shall mean one-twelfth (1/12th) of the annual total pensions paid or payable to the Executive

under any pension plan (other than the Ecolab Savings Plan, as such plan may be amended from time to time) sponsored by a member of the Controlled Group which satisfies the qualification requirements of the Code calculated on a single life annuity basis commencing at age 65, as determined by the Administrator including (a) projected payments from any former pension plan or former profit sharing plan which reduces the pension payable under the Pension Plan, or (b) payments of Retirement Account benefits under the Pension Plan , but determined as if for any Plan Year beginning on or after January 1, 2005, the compensation used in computing such benefit were equal to the annual compensation limitation under Code Section 401(a)(17) as in effect for each relevant year for which annual compensation amount under the pension plan benefit formula is determined.

3

Section 2.12 “ Plan ” shall mean this Ecolab Supplemental Executive Retirement Plan, as it may be amended from time to time. Section 2.13 “ Primary Insurance Amount ” shall mean the monthly primary social security benefit to which the Executive will

be entitled at age 65, determined in accordance with Exhibit B which is attached to and forms a part of this Plan. Section 2.14 “ Retirement ” or “ Retired .” The Retirement of an Executive shall occur upon his termination of employment for

any reason other than death or Disability on or after (1) his attainment of age 55 and the completion of at least 10 Years of Eligibility Service, or (2) his attainment of age 65. For purposes of determining Retirement under this Plan, the employment of a Disabled Executive shall be deemed to have terminated “for reasons other than Disability” twelve months after the Executive becomes Disabled, provided he does not resume active employment with the Controlled Group before such date.

Section 2.15 “ Savings Plan Benefit ” shall mean the benefit payable to the Executive calculated as of July 1, 1994 in accordance

with Exhibit C which is attached to and forms a part of this Plan. 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). With respect to the terms of the Plan affecting Non-Grandfathered SERP Benefits, any reference to “termination of employment” in the Plan shall mean Separation from Service as defined in this Section. Whether an Executive has incurred a Separation from Service shall be determined in accordance with the 409A Guidance.

Section 2.17 “ SERP Benefit ” shall mean the retirement benefit determined under Article III. Section 2.18 “ SERP Pre-Retirement Benefit ” shall mean the pre-retirement benefit determined under Article IV. Section 2.19 “ Specified Employee ” shall mean “Specified Employee” as defined in the Administrative Document. Section 2.20 “ Year of Benefit Service .”

(1) An Executive shall be credited with one Year of Benefit Service for each year of “Credited Service” (or such other defined term which is used to determine service for benefit accrual purposes) as defined by and credited to the Executive under the Pension Plan. Notwithstanding the foregoing, for purposes of calculating Years of Benefit Service for a Cash Balance Participant, the rules applicable for determining Credited Service under the Pension Plan for persons who accrue benefits under the Final Average Compensation formula specified in Article 4 of the Pension Plan shall apply.

(2) A Disabled Executive shall continue to accrue Years of Benefit Service during the period of twelve months following

the date on which he becomes Disabled for purposes of determining the amount of his SERP Benefit hereunder. (3) In no event shall an Executive’s Years of Benefit Service under the Plan exceed thirty (30) years.

4

Section 2.21 “ Year of Eligibility Service .”

(1) An Executive shall be credited with one Year of Eligibility Service for each year of “Continuous Service” (or such other defined term which is used to determine service for vesting purposes) as defined by and credited to the Executive under the Pension Plan.

(2) A Disabled Executive shall continue to accrue Years of Eligibility Service during the first twelve months of his

Disability for purposes of determining his vested interest in of his SERP Benefit hereunder.

Section 2.22 “ Year of Past Service Credit ” means the excess, if any, of the thirty (30) Years of Benefit Service required to earn the maximum SERP Benefit hereunder over the number of Years of Benefit Service it would be possible for the Executive to accumulate by his attainment of age 65 or, if later, the date of his Retirement.

ARTICLE III

SERP BENEFITS

Section 3.1 Participation .

(1) Commencement of Participation . Any Employee who as of the Effective Date is a participant in the Plan, shall continue to participate, subject to Subsection (2). Any other Employee shall become a participant in the Plan as of the first date on or after the Effective Date on which he is an Executive.

(2) Termination of Participation . An Executive shall cease to be a participant in the Plan on the earliest to occur of

(a) the date the Executive ceases to be employed by the Controlled Group or dies before becoming vested in his SERP Benefit, or (b) the date on which the Executive’s SERP Benefit is distributed from the Plan.

Section 3.2 Amount of SERP Benefits. Each vested Executive shall, upon termination of employment (Separation from Service

with respect to the Non-Grandfathered SERP Benefit), be entitled to a SERP Benefit which shall be determined as hereinafter provided.

(1) The SERP Benefit shall be a monthly retirement benefit payable in the form of a fifteen-year (15) certain benefit commencing upon the Executive’s attainment of age 65 equal to the sum of (a) and (b), where:

(a) = one-twelfth (1/12 ) of the Executive’s Final Average Compensation, multiplied by two percent (2%) for each of the

Executive’s Years of Benefit Service (up to a maximum of thirty (30)), reduced by (i) the Pension Benefit, (ii) the Mirror Pension Benefit, (iii) fifty percent (50%) of the Primary Insurance Amount, and (iv) the Savings Plan Benefit; and

(b) = the difference between (i) one-twelfth (1/12 ) of the Executive’s Final Average Compensation, and (ii) one-twelfth

(1/12 ) of the Executive’s Annual Compensation for the Plan Year in which the Executive commenced employment with the Controlled Group, such difference multiplied by one percent (1%) for each of the Executive’s Years of Past Service Credit (if any).

(2) For purposes of Subsection (1)(b)(ii), if the Executive was not an Employee for the entire Plan Year, his Annual

Compensation for such Plan Year shall be annualized based on the number of days employed by the Controlled Group out of a Plan Year of 365 days.

5

th

th

th

(3) Notwithstanding anything in this Section 3.2 to the contrary, in no event will any Executive’s SERP Benefit be less

than such Executive’s Grandfathered SERP Benefit.

Section 3.3 Time of Payment .

(1) Grandfathered SERP Benefit . The provisions of this Section 3.3(1) shall apply solely with respect to the portion of an Executive’s SERP Benefit that is a Grandfathered SERP Benefit. Payment of any portion of an Executive’s SERP Benefit that is a Non-Grandfathered SERP Benefit shall be made in accordance with Section 3.3(2).

(a) In General . An Executive’s SERP Benefit shall be paid or commence to be paid within 90 days after the later of the

date the Executive attains age 65 or the date of the Executive’s Retirement. Notwithstanding the foregoing, if payment at such time is prevented due to reasons outside of the Administrator’s control, the SERP Benefits shall commence to be paid as soon as practicable after the end of such 90-day period, and the first payment hereunder shall include any SERP Benefits not paid as a result of the delay in payment.

(b) Early Commencement . Notwithstanding the provisions of Subsection (1)(a) of this Section, upon the written request

of the Executive (on a form prescribed by the Administrator) which is 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 Retirement, the Administrator may, in its complete and sole discretion, commence payment of the SERP Benefits to the Executive at a specified date which is after the Executive’s Retirement but prior to the Executive’s attainment of age 65; provided, however, that the amount of the SERP Benefit shall be reduced by one/two hundred and eightieth (1/280 ) for each month that the date of the commencement of the SERP Benefits precedes the date on which the Executive will attain age 62.

(2) Non-Grandfathered SERP Benefits . The provisions of this Section 3.3(2) shall apply solely with respect to the

portion of an Executive’s vested SERP Benefit that is a Non-Grandfathered SERP Benefit. Payment of any portion of an Executive’s SERP Benefit that is a Grandfathered SERP Benefit shall be made in accordance with Section 3.3(1).

(a) In General . Except as provided in subsection (b), an Executive’s vested Non-Grandfathered SERP Benefit shall be

paid or commence to be paid on the first day of the third month following the month in which occurs the later of the date on which the Executive (i) attains age 55 or (ii) Separates from Service, subject to Section 3.3(2)(d), Section 3.4(2)(d) and 3.4(2)(c) (as applicable). The amount of any such SERP Benefit paid before the Executive’s attainment of age 65 shall be reduced by one/two hundred and eightieth (1/280th) for each month that the date of the commencement of the SERP Benefits precedes the date on which the Executive will attain age 62.

(b) Cash Balance Participant . A Cash Balance Participant’s Non-Grandfathered SERP Benefit shall be paid or

commence to be paid on the first day of the third month following the month in which the Executive Separates from Service, subject to Section 3.3(2)(d) and Section 3.4(2)(d) (as applicable).

(c) Certain Transition Distributions to Terminated Executives .

(i) An Executive who Separated from Service after December 31, 2004 and before December 31, 2008 and has commenced payments of his Grandfathered SERP Benefits at any time before December 31, 2008, shall receive his Non-Grandfathered SERP Benefit (if any), for which the Executive’s SERP Benefit is retroactively adjusted pursuant to Section 1.1 on January 1, 2009, in the same form and at the same time as the Executive’s Grandfathered benefit, subject to Section 3.3(2)(d). Notwithstanding the foregoing, a Cash Balance

6

th

Participant’s Non-Grandfathered SERP Benefit shall be paid on March 1, 2009, subject to Section 3.3(2)(d). (ii) An Executive who Separated from Service after December 31, 2004 and before December 31, 2008 and has

not before December 31, 2008 commenced payments of his Non-Grandfathered SERP Benefit, shall receive his Non-Grandfathered SERP Benefit, for which the Executive’s SERP Benefit is retroactively adjusted pursuant to Section 1.2 on January 1, 2009, in a single lump sum on March 1, 2009.

(d) Payment Delay for Specified Employees . Notwithstanding any provision of the Plan, payments to a Specified

Employee shall be made or commence on the latest of (i) the date specified in Section 3.3(2)(a), (b) or (c), (ii) the date specified in Section 3.4(2)(d)(i), if the Executive made an election pursuant to such section, or (iii) the date that is six (6) months after the Specified Employee’s Separation From Service; provided, however, that if the Executive dies before the date specified in (i), (ii) or (iii), the Executive’s benefit shall be paid or commence on the date specified in Section 4.2. The first payment made to the Specified Employee following the 6-month delay shall include any SERP Benefit payments that were not made as a result of the delay in payment pursuant to this paragraph (d), with interest at an annual rate of five percent (5%) compounded annually. Notwithstanding the foregoing, this paragraph (d) shall not apply to any Executive if on the date of his Separation from Service, the stock of the Company and Controlled Group members is not publicly traded on an established securities market (within the meaning of the 409A Guidance).

Section 3.4 Form of Payment

(1) Grandfathered SERP Benefit . The provisions of this Section 3.4(1) shall apply solely with respect to the portion of an Executive’s SERP Benefit that is a Grandfathered SERP Benefit.

(a) In General . An Executive who does not want his SERP Benefit to be paid in the form of the 15-year certain benefit

described in Section 3.2 may elect to receive his SERP Benefit in any of the optional forms of benefit payment which are permitted under the Pension Plan. Any such optional form of benefit shall be the Actuarial Equivalent of the SERP Benefit payable to the Executive in the form specified in Section 3.2.

(b) Lump Sum Payment .

(i) Notwithstanding the provisions of Subsection (1)(a) of this Section, an Executive may elect to receive the SERP Benefit in the form of a single lump sum payment.

(ii) The lump sum payment described in paragraph (b)(i) of this Subsection shall be calculated by converting

the Executive’s SERP Benefit (calculated in accordance with the provisions of Section 3.2) at the time of the commencement of such Benefit into a lump sum amount of equivalent actuarial value when computed using the Actuarial Factors specified in Exhibit A for this purpose, and then applying the ten percent (10%) reduction, if applicable, provided for in Subsection (c) of this Section.

(iii) Notwithstanding any provision of the Plan to the contrary, in the event the equivalent actuarial value of the

Executive’s SERP Benefit, when computed using the Actuarial Factors specified in Exhibit A for this purpose, does not exceed $25,000 , such Benefit shall be paid in the form of a single lump sum payment.

(c) Form/Timing of Election . Any election of an optional form of benefit 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 Retirement. Any such election may be changed at any time and from time to time without the consent of any existing Death Beneficiary or any other person (except as

7

described in Section 2.2), 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 Retirement shall not be valid, and in such case, payment shall be made in accordance with the latest valid election of the Executive. Notwithstanding the foregoing, an Executive shall be permitted to make an election to receive his SERP Benefit in the form of a lump sum payment within the one (1) year period prior to his voluntary termination if (and only if) the amount of the SERP Benefit payable to the Executive is reduced by ten percent (10%).

(2) Non-Grandfathered SERP Benefits . The provisions of this Section 3.4(2) shall apply solely with respect to the

portion of an Executive’s SERP Benefit that is a Non-Grandfathered SERP Benefit. (a) Normal Payment Form . Unless an Executive makes an election pursuant to Section 3.4(2)(b) or (e), the Executive’s

Non-Grandfathered SERP Benefit will be paid to the Executive in the form of annual installment payments payable over a period of ten (10) years, the amount of which is Actuarially Equivalent to the SERP Benefit calculated under Section 3.2.

(b) Optional Forms of Benefit . In lieu of the normal form of payment, an Executive may make or change an election to

receive his Non-Grandfathered SERP Benefit in one of the following Actuarially Equivalent optional forms of benefit:

(i) A single life annuity payable monthly to the Executive during the Executive’s life and ending on the date of the Executive’s death.

(ii) A reduced joint and survivor annuity payable monthly to the Executive during the Executive’s life, and after

the Executive’s death, payable monthly to the Executive’s spouse who survives the Executive in the amount equal to 50%, 75% or 100% (as the Executive elects) of such reduced lifetime monthly amount.

(iii) A reduced life and period certain annuity payable monthly to the Executive during the Executive’s life, with

payment thereof guaranteed to be made for a period of five (5) or ten (10) years, as elected by the Executive, and, in the event of the Executive’s death before the end of such 5- or 10- year period, payable in the same reduced amount for the remainder of such 5- or 10-year period, to the Death Beneficiary designated by the Executive.

(iv) Annual installment payments payable to the Executive over a period of five (5) or ten (10) years, as elected

by the Executive. (v) A single lump sum payment.

(c) Mandatory Lump Sum . Notwithstanding any provision of the Plan to the contrary, in the event that the present value of the Executive’s Non-Grandfathered SERP Benefit does not exceed $25,000 at the time of distribution, such Non-Grandfathered SERP Benefit shall be paid in the form of a single lump sum payment on the date of the Executive’s Separation from Service, subject to Section 3.3(2)(d).

(d) Election of Optional Form of Payment . An election of an optional form of payment must be in writing (on a form

provided by the Administrator) and must satisfy the following requirements:

(i) Except as provided in Section 3.4(2)(e), if an Executive wishes to elect an optional form of payment under Section 3.4(2)(b) above (other than the normal form of payment) or wishes to change his election made under Section 3.4(2)(e) (other than an election change described in Section 3.4(2)(d)(ii)), the election must be filed with the Administrator 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 as of the date of Separation from Service) shall be given effect and become irrevocable on the date of the

8

Executive’s Separation from Service. No election filed less than twelve (12) months before the Executive’s Separation from Service shall have any force or effect, except as provided in Section 3.4(2)(d)(ii). The payment pursuant to an election made under this Section 3.4(2)(d)(i) shall be made or commence on the first day of the month coincident with or immediately following the fifth anniversary of the original commencement date specified in Section 3.3(2)(a) or (b) (as applicable).

(ii) An Executive who elected, pursuant to Section 3.4(2)(d)(i) or 3.4(2)(e), a life annuity form of payment

(within the meaning of the 409A Guidance) described in Section 3.4(2)(b)(i), (ii) or (iii), may, at any time before the date of Separation from Service, change that annuity form of payment to an Actuarially Equivalent life annuity form of payment, provided the commencement date for such annuity, as specified in, respectively, Section 3.4(2)(d)(i) or Section 3.4(2)(e), remains unchanged.

(e) Transition Elections . Notwithstanding any provision of the Plan, any Executive who is an active employee of the

Company or a member of the Controlled Group during the election period designated by the Administrator, ending no later than December 31, 2008, may make an election to receive his Non-Grandfathered SERP Benefit in one of the optional forms specified in Section 3.4(2)(b), commencing on the date specified in Section 3.3(2)(a) or (b) (as applicable); provided, however, that such election shall not apply if the Executive Separates from Service on or before December 31, 2008 and is subject to the provision of Section 3.3(2)(c). The transition election must be made in writing, on a form provided by the Administrator and filed with the Administrator within the designated transition election period. The transition election made pursuant to this paragraph (e) may not cause any amount to be paid in 2008 if not otherwise payable and may not delay payment of any amount that is otherwise payable in 2008.

(f) Coordination of Payment Elections with Mirror Pension Plan . If an Executive is also a participant in the Mirror

Pension Plan, the Executive’s Non-Grandfathered Mirror Pension Benefit and the Non-Grandfathered SERP Benefit will be paid in the same form and at the same time. If an Executive makes an election of an optional payment form pursuant to Section 3.4(2)(b) of the Plan or Section 3.3(2)(b) of the Mirror Pension Plan, the most recent election filed with the Administrator under either this Plan or the Mirror Pension Plan at least twelve (12) months before the Separation from Service (or, if applicable, at a date specified in paragraph (d)(ii) of this Subsection) that remains on file with the Administrator on the date of Separation from Service will govern the form and time of payment under the Plan. In the event of conflicting election forms filed simultaneously under this Plan and the Mirror Pension Plan, the election filed under this Plan shall govern.

Section 3.5 Death After Commencement of Non-Grandfathered SERP Benefits . If an Executive dies after commencing

payment of his Non-Grandfathered SERP Benefit under the Plan but before his entire Non-Grandfathered SERP Benefit is distributed, payments to the Executive’s Death Beneficiary (if any) will be made (a) in accordance with the elected optional form of payment described in Section 3.4(2)(b)(ii) or (iii) (if elected), or (b) ninety (90) days after the Executive’s death in the form of a single lump sum, calculated using the Actuarial Factors in effect on the date of distribution, if the Executive elected one of the optional forms of payment described in Section 3.4(b)(iv).

ARTICLE IV

SERP PRE-RETIREMENT BENEFITS

Section 4.1 Eligibility . The Death Beneficiary of an Executive who dies after becoming vested in his SERP Benefits (including the Death Beneficiary of an Executive who dies while he is Disabled) but prior to commencing to receive SERP Benefits hereunder shall be entitled to receive the SERP Pre-Retirement Benefits described in Section 4.2 in lieu of any other benefits described in the Plan.

9

Section 4.2 Amount, Form and Timing of SERP Pre-Retirement Benefits .

(1) Grandfathered SERP Benefit . A Death Beneficiary who is eligible for a SERP Pre-Retirement Benefit hereunder shall receive the portion of such SERP Pre-Retirement Benefit that is based on the Executive’s Grandfathered SERP Benefit in accordance with this Subsection (1). The SERP Pre-Retirement Benefit that is based on the Executive’s Grandfathered SERP Benefit shall be calculated in accordance with, and payable at the same time and (except as provided in Section 3.4(1)(b)) in the same manner as, the pre-retirement death benefits and (if applicable) the optional death benefits described in the Pension Plan, as determined by the Administrator. Notwithstanding the foregoing, the Death Beneficiary of a Cash Balance Participant who is eligible for a SERP Pre-Retirement Benefit, shall receive such Benefit in the form of a lump sum payment.

(2) Non-Grandfathered SERP Benefit . A Death Beneficiary who is eligible for a SERP Pre-Retirement Benefit

hereunder shall receive the portion of such SERP Pre-Retirement Benefit that is based on the Executive’s vested Non-Grandfathered SERP Benefit as follows.

(a) If an Executive (i) is not married on the date of his death, (ii) has been married for less than one year prior to his

death and designates a Death Beneficiary other than his spouse, or (iii) has been married for at least one year prior to his death and the Executive’s spouse consents to the Executive’s designation of a Death Beneficiary other than the spouse, the Executive’s Death Beneficiary shall receive his benefit in an amount Actuarially Equivalent to the survivor benefit determined as if the Executive had Separated from Service on the earlier of the date of his actual Separation from Service or the date of his death, elected to receive his Non-Grandfathered SERP Benefit in the form of a monthly life annuity with (A) a five (5) year certain survivor benefit if the Executive had Separated from Service before attaining age 55, or (B) a ten (10) year certain survivor benefit, if the Executive had attained age 55 while an Employee, had survived to age 55 and had died immediately following his payment commencement date. The Non-Grandfathered SERP Pre-Retirement Benefit shall be paid in the form of an Actuarially Equivalent single lump sum payment on the first day of the third month after the later of the date on which the Executive would have attained age 55 or the date of the Executive’s death.

(b) If an Executive who dies after becoming vested in his SERP Benefit is married on the date of his death and paragraph

(a) does not apply to him, then the Executive’s surviving spouse shall receive the SERP Pre-Retirement Benefit as follows:

(i) If the Executive had Separated from Service before attaining age 55, the Executive’s spouse shall receive a reduced annuity payable monthly to the Executive’s spouse during his life, commencing on the first day of the third month following the later of the date on which the Executive would have attained age 55 or the date of the Executive’s death and ending on the date of the Executive’s spouse’s death, calculated as if the Executive had Separated from Service on the earlier of the date of the Executive’s death or actual Separation from Service, elected a joint and 50% survivor annuity form of payment described in Section 3.4(2)(b)(ii), survived to age 55 and died on the date following the payment commencement date .

(ii) If the Executive had attained age 55 while an Employee, the Executive’s spouse shall receive a reduced

annuity payable monthly to the Executive’s spouse during his life, commencing on the first day of the of the third month after the date of the Executive’s death, calculated as if the Executive had died immediately after commencing payments in the form of an immediate joint and 100% survivor annuity form of payment described in Section 3.4(2)(b)(ii).

(c) Notwithstanding the foregoing, (i) if the SERP Pre-Retirement Benefit under this Subsection (2) is payable to a Cash-

Balance Participant, such benefit will be distributed to the Executive’s Death Beneficiary in the form of an Actuarially Equivalent single lump sum 90 days after the Executive’s death, and (ii) if the present value of the SERP Pre-Retirement Benefit under this Subsection (2) payable to any

10

Executive not described in (i) does not exceed $25,000, such benefit will be distributed to the Executive’s Death Beneficiary in the form of an Actuarially Equivalent single lump sum on the first day of the third month following the later of the date on which the Executive would have attained age 55 of the date of the Executive’s death.

ARTICLE V VESTING

Section 5.1 Vesting .

(1) In General . Except as provided in Subsections (2) and (3) of this Section, an Executive shall become vested in the SERP Benefits upon (a) his attainment of age 65 while in the employ of the Controlled Group, (b) his attainment of age 55 while in the employ of the Controlled Group and his completion of 10 Years of Eligibility Service, or (c) his attainment of age 55 during the first twelve-month period of his Disability and his completion of 10 Years of Eligibility Service.

(2) Forfeiture Provision . (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 SERP Benefits or SERP Pre-Retirement 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 have occurred.

(b) Notwithstanding the foregoing, an Executive shall not forfeit any portion of his SERP Benefits or SERP Pre-

Retirement 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.

(3) Acceleration of Vesting . Notwithstanding the provisions of Subsection (1) hereof, the SERP Benefits of the

Executives (a) who are employed by the Controlled Group on the date of a Change in Control or (b) whose employment with the Company was terminated prior to a Change in Control but the Executive reasonably demonstrates that the termination occurred at the request of a third party who has taken steps reasonably calculated to effect the Change in Control, shall become immediately one hundred percent (100%) vested upon the occurrence of such Change in Control.

ARTICLE VI

MISCELLANEOUS

Section 6.1 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 SERP Benefit or vested SERP Pre-Retirement Benefit under the Plan of any Executive or Death Beneficiary as such Benefit exists on the date of such amendment or termination; provided, however, that this limitation shall

11

not apply to the extent deemed necessary by the Company to comply with the requirements of the 409A Guidance.

Section 6.2 Protective Provisions . Notwithstanding any provision of the Plan to the contrary, if an Executive commits suicide during the two-year period beginning on the date of his commencement of participation in the Plan or makes any material misstatement or nondisclosure of medical history, then, in the Administrator’s sole and absolute discretion, no SERP Benefits or SERP Pre-Retirement Benefits shall be payable hereunder or such Benefits may be paid in a reduced amount (as determined by the Administrator).

Section 6.3 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 Code Section 280G, 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 Code Section 4999, 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 6.3 shall not of itself limit or otherwise affect any other rights of the Executive pursuant to this Plan. The Executive’s benefit will be reduced only to the extent that the reduction in any cash payments due to the Executive is insufficient to reduce or eliminate Excess Parachute Payment as described in this Section. The Executive’s Non-Grandfathered SERP Benefit (if any) shall be reduced if required by this section before any Grandfathered SERP Benefit is reduced.

Section 6.4 Establishment of 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 SERP Benefits and SERP Pre-Retirement 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 SERP Benefits and SERP Pre-Retirement 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:

12

(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 a termination of the Trust, all of the assets in the Trust Fund attributable to the accrued SERP Benefits and SERP Pre-Retirement Benefits shall be immediately distributed to the Executives and the remaining assets, if any, shall revert to the Company; provided, however, that distributions to the Executives will be made only to the extent and in the manner permitted by the 409A Guidance.

(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 the equivalent actuarial present value of the SERP Benefits and SERP Pre-Retirement Benefits which have been accrued as of the date of the Change in Control on behalf of all of the Executives under the Plan (using the Actuarial Factors specified in Exhibit A for this purpose).

(d) In January of each year following a funding of the Trust Fund pursuant to paragraph (c) above, the Company shall

cause to be deposited in the Trust Fund such additional amount (if any) by which the aggregate equivalent actuarial present value (determined using the Actuarial Factors specified in Exhibit A) of the sum of the SERP Benefits and SERP Pre-Retirement Benefits for all Executives under the Plan as of December 31 of the preceding year exceeds the fair market value of the assets of the Trust Fund as of such date.

(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 SERP Pension Benefits and SERP Pre-Retirement

Benefits to be paid to or on behalf of the Executive 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 6.4(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 (2) 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 6.5 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

13

be limited or eliminated by application of Code Section 162(m). 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 (i) in the first year in which the Company reasonably anticipates the payment to be deductible, or (ii) 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, Ecolab Inc. has executed this Supplemental Executive Retirement Plan and has caused its corporate seal to

be affixed this 19 day of December, 2008.

(Seal) Attest:

14

ECOLAB INC.

By: /s/ Steven L. Fritze

Steven L. Fritze


/s/ Lawrence T. Bell

Lawrence T. Bell

General Counsel and Secretary

th

EXHIBIT A

ACTUARIAL ASSUMPTIONS FOR SERP BENEFITS AND

SERP PRE-RETIREMENT BENEFITS

1. Interest Rate:

A. For Lump Sum

The interest rate will be 125% of the 10-year Treasury rate for the month of October preceding the Plan Year (i.e., January 1) (1) in which the retirement or other termination of employment is effective if the SERP Benefit is to commence immediately following such retirement or termination of employment or (2) in which the distribution becomes payable if the payment is to be deferred.

B. General Actuarial Equivalence 7.5% except as provided in item 4 below.

2. Mortality - General Actuarial Equivalence

1971 Group Annuity Table.

3. Annuity Values Weighted - General Actuarial Equivalence

75% male, 25% female.

4. Early Commencement:

If payment is in the form of a single lump sum, the lump sum amount shall be based on the lump sum interest rate defined in item 1 above, and the “early retirement benefit” immediate annuity amount as determined under Section 3.3(1)(b) or 3.3(2)(a).

EXHIBIT B

PRIMARY SOCIAL SECURITY BENEFITS

(A) For purposes of the Plan, an Executive’s monthly primary social security benefit is the estimated social security benefit amount, under the Old Age and Survivors Insurance Benefit Act of the United States in effect on the first day of the calendar year during which the Executive terminates employment, which the Executive is receiving, or would be entitled to receive, commencing at his attainment of age 65, whether or not he applies for, or actually receives, such benefits.

(B) The amounts determined under section (A) hereof shall be based upon the following assumptions:

(1) except as otherwise provided in Subsection (5) hereof, the Executive is assumed to have participated in social security starting at the later of age 22 or January 1, 1951;

(2) except as otherwise provided in Subsection (5) hereof, the Executive’s compensation on which his social security benefit is based shall be assumed to be that resulting from applying a decrease for years prior to the mid-year of the years on which the Executive’s Final Average Compensation is based, and an increase for years following such mid-year, at the same rates as the national average total wages for adjusting earnings as used in computing social security benefits, as published by the Social Security Administration for each such year, with the rate for the last published year being used for any years subsequent to such last published year;

(3) except as otherwise provided in Subsection (5) hereof, the taxable wage base, the factors for indexing wages, and the table or

formula used to determine the estimated monthly primary social security benefit amount will be assumed to remain constant following the Executive’s termination of employment;

(4) except as otherwise provided in Subsection (5) hereof, for an Executive whose employment terminates prior to his attainment

of age 65, it shall be assumed that he earned no compensation from the date of termination of his employment to his attainment of age 65; (5) for an Executive whose benefit is based, in whole or part, upon the continuing accrual of Years of Benefit Service during the

period of his Disability, it shall be assumed that, during the period for which he accrues Years of Benefit Service under those sections, he continued to earn Annual Compensation at the same rate as during the Plan Year in which he became Disabled; provided, however, that, in the event the Executive is receiving, or is entitled to receive, a primary social security disability benefit, the amount of such benefit shall be deemed to be his “primary social security benefit” for purposes of the Plan, in lieu of the amount otherwise determined under this Exhibit B;

(C) an Executive who, for any reason, is not a participant in the United States social security benefit program shall be deemed to

participate fully in such program for purposes of determining the Executive’s primary social security benefit. (D) An Executive’s primary social security benefit may be determined by reference to a schedule based upon pay brackets,

provided such schedule is prepared in accordance with the foregoing provisions of this Exhibit B.

EXHIBIT C

SAVINGS PLAN BENEFIT

The Savings Plan Benefit shall be one-twelfth (1/12 ) of the annual benefit, determined by the Administrator, that would be provided by Employer Contributions to the Ecolab Savings Plan (formerly the EL Thrift Plan) (hereafter the “Savings Plan”) made on or prior to July 1, 1994, if the Executive’s benefit under the Savings Plan as of July 1, 1994 were paid commencing at the Executive’s attainment of age 65 on a straight life annuity basis (based on an interest rate of 4.25% and the 1984 Unisex Pension Mortality Table shifted forward one year) and assuming (1) that the Employers contributed to the Savings Plan on the Executive’s behalf from (a) the later of January 1, 1977 or the date of the Executive’s first eligibility for participation in the Savings Plan until (b) the earlier of the Executive’s Retirement or July 1, 1994, an annual amount equal to three percent (3%) of the Executive’s actual Annual Compensation; provided, however, that the three percent (3%) shall be reduced by the amount, if any, which could not be contributed in each year by reason of the maximum contributions limitations of Code Section 415 and the maximum compensation limitations of Code Section 401(a)(17), and (2) that such Employer contributions to the Savings Plan on behalf of the Executive accumulated earnings at an annual rate of eight percent (8%) for all periods prior to January 1, 1991, and for each calendar year thereafter until the earlier of the Executive’s attainment of age 65 or December 31, 1993, at an interest rate established annually by the Administrator based on the PBGC’s immediate annuity rate as of the December 31 of the immediately preceding year, and for the period from January 1, 1994 until the attainment of age 65, at an interest rate of 4.25% (the December 1993 PBGC immediate rate).

th

TABLE OF CONTENTS

Page

ARTICLE I PREFACE 1

Section 1.1 Effective Date 1

Section 1.2 Purpose of the Plan 1

Section 1.3 Administrative Document 1

Section 1.4 American Jobs Creation Act of 2004 (AJCA) 1 ARTICLE II DEFINITIONS 2

Section 2.1 “Actuarial Equivalent” or “Actuarially Equivalent.” 2

Section 2.2 “Actuarial Factors” 2

Section 2.3 “Cash Balance Participant” 2

Section 2.4 “Death Beneficiary.” 2

Section 2.5 “Disability” or “Disabled” 3

Section 2.6 “Executive” 3

Section 2.7 “Final Average Compensation” 3

Section 2.8 “Grandfathered SERP Benefit” 3

Section 2.9 “Mirror Pension Benefit” 3

Section 2.10 “Non-Grandfathered SERP Benefit” 3

Section 2.11 “Pension Benefit” 3

Section 2.12 “Plan” 4

Section 2.13 “Primary Insurance Amount” 4

Section 2.14 “Retirement” or “Retired.” 4

Section 2.15 “Savings Plan Benefit” 4

Section 2.16 “Separation from Service” or to “Separate from Service” 4

Section 2.17 “SERP Benefit” 4

Section 2.18 “SERP Pre-Retirement Benefit” 4

Section 2.19 “Specified Employee” 4

Section 2.20 “Year of Benefit Service.” 4

Section 2.21 “Year of Eligibility Service.” 5

Section 2.22 “Year of Past Service Credit” 5 ARTICLE III SERP BENEFITS 5

Section 3.1 Participation 5

Section 3.2 Amount of SERP Benefits 5

Section 3.3 Time of Payment 6

TABLE OF CONTENTS (continued)

Page

Section 3.4 Form of Payment 7

Section 3.5 Death After Commencement of Non-Grandfathered SERP Benefits 9 ARTICLE IV SERP PRE-RETIREMENT BENEFITS 9

Section 4.1 Eligibility 9

Section 4.2 Amount, Form and Timing of SERP Pre-Retirement Benefits 10 ARTICLE V VESTING 11

Section 5.1 Vesting 11 ARTICLE VI MISCELLANEOUS 11

Section 6.1 Effect of Amendment and Termination 11

Section 6.2 Protective Provisions 12

Section 6.3 Limitation on Payments and Benefits 12

Section 6.4 Establishment of Trust Fund 12

Section 6.5 Delay of Payments Subject to Code Section 162(m) 13

EXHIBIT (10)L

ECOLAB MIRROR SAVINGS PLAN

(As Amended and Restated Effective as of January 1, 2005)

WHEREAS, 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 409 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, pursuant to Section 5.1 of the Ecolab Inc. Administrative Document for Non-Qualified Benefit Plans, Ecolab Inc. (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, 2005,

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 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

2

beginning on and after January 1, 2009 (and earnings thereon) that the Executive was precluded from deferring under the Savings Plan 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. 3

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 “ Plan ” shall mean the Ecolab Mirror Savings Plan, as described herein and as it may be amended from

time to time. SECTION 2.14 “ Savings Plan ” shall mean the Ecolab Savings Plan and ESOP, as such plan may be amended from time

to time. SECTION 2.15 “ 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 2.16 “ Specified Employee ” shall mean “Specified Employee” as defined in the Administrative Document. SECTION 2.17 “ 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).

4

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 dollar amount or 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 during

the Plan Year (a) by a specified dollar amount or 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 Executive’s Bonus) (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).

5

(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 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 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 a 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”) 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; provided, however, that such Matching Contributions shall be reduced by the maximum amount (as determined by the Administrator) of matching contributions that could be made to the Executive’s account under the Savings Plan for such Plan Year based on the Executive’s Base Salary for such Plan Year, assuming that the Executive has elected to contribute five percent of this Base Salary to the Savings 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 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 equal to 100% of the first 3% of the Executive’s Bonus and 50% of the next 2% of the Executive’s Bonus, 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 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.

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;

6

(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 (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 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 than 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 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

7

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 ) 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.

8

th

(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.

9

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

10

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 have 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.

11

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

12

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

13

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 a 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, Ecolab Inc. has executed this Mirror Savings Plan and has caused its corporate seal to be affixed this 19

day of December, 2008.

ECOLAB INC.

(Seal) Attest:

14


Steven L. Fritze



Lawrence T. Bell


th

TABLE OF CONTENTS

i

Page ARTICLE I PREFACE 1

Section 1.1 Effective Date 1 Section 1.2 Purpose of the Plan 1 Section 1.3 Administrative Document 1 Section 1.4 American Jobs Creation Act (AJCA) 1 Section 1.5 Excess Plan 2

ARTICLE II DEFINITIONS 2

Section 2.1 “Account” 2 Section 2.2 “Base Salary” 3 Section 2.3 “Bonus.” 3 Section 2.4 “Death Beneficiary.” 3 Section 2.5 “Disability” or “Disabled.” 3 Section 2.6 “Executive” 3 Section 2.7 “Executive Deferrals” 3 Section 2.8 “Hypothetical Investment Fund” 3 Section 2.9 “ Insolvent.” 4 Section 2.10 “Matching Contributions” 4 Section 2.11 “Minimum Benefit” 4 Section 2.12 “Mirror Savings Benefit.” 4 Section 2.13 “Plan” 4 Section 2.14 “Savings Plan” 4 Section 2.15 “Separation from Service” or to “Separate from Service” 4 Section 2.16 “Specified Employee” 4 Section 2.17 “Unforeseeable Emergency.” 4

ARTICLE III MIRROR SAVINGS BENEFIT 5

Section 3.1 Amount of Executive Deferrals 5 Section 3.2 Effect and Duration of Direction Pursuant to Section 3.1 5 Section 3.3 Matching Contributions 6 Section 3.4 Executives’ Accounts 6 Section 3.5 Statement of Account 7

TABLE OF CONTENTS

(continued)

ii

Page ARTICLE IV PAYMENT OF MIRROR SAVINGS BENEFITS 7

Section 4.1 Time of Payment 7 Section 4.2 Form of Payment 8

ARTICLE V VESTING 10

Section 5.1 Vesting 10 ARTICLE VI INVESTMENT OF ACCOUNTS 11

Section 6.1 Hypothetical Investment Funds 11 ARTICLE VII MISCELLANEOUS 12

Section 7.1 Effect of Amendment and Termination 12 Section 7.2 Limitation on Payments and Benefits 12 Section 7.3 Establishment of a Trust Fund 12 Section 7.4 Delay of Payments Subject to Code Section 162(m) 14

EXHIBIT (10)M

ECOLAB MIRROR PENSION PLAN (As Amended and Restated Effective as of January 1, 2005)

WHEREAS, Ecolab Inc. (the “Company”) has established the Ecolab Pension Plan (the “Pension Plan”), a qualified defined benefit

pension plan; and WHEREAS, Sections 401(a)(17) and 415 of the Code place certain limitations on the amount of benefits that would otherwise be made

available under the Pension Plan for certain participants; and WHEREAS, the Company previously established the Ecolab Mirror Pension Plan (the “Plan”) to provide the benefits which would

otherwise have been payable to such participants under the Pension Plan except for such limitations, in consideration of services performed and to be performed by such participants for the Company and certain related corporations.

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, before the issuance by the U.S. Treasury and the Internal Revenue Service (the “IRS”) of interpretive guidance with

respect to Code Section 409A, the Company amended the Plan to temporarily freeze the accrual of Mirror Pension Benefits hereunder as of 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

(a) reinstate the accrual of Mirror Pension Benefits, effective retroactively as of January 1, 2005 and (b) comply, with respect to the Non-Grandfathered Mirror Pension Benefits thereunder, with the requirements of Code Section 409 and guidance issued thereunder;

NOW, THEREFORE, pursuant to Section 1.3 of the Plan and 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, effective as of January 1, 2005, 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, 2005. The benefit, if

any, payable with respect to a former Executive who Retired or died 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 and 3.2(2)(c). Notwithstanding any provision of the Plan to the contrary, an Executive’s Mirror Pension Benefit (which was temporarily frozen from December 31, 2004 through December 31, 2008) shall be retroactively adjusted on January 1, 2009 to reflect the benefit that would have been accrued by the Executive under the Plan, in accordance with Section 3.1, during the period commencing on January 1, 2005 and ending on the earlier of December 31, 2008 or the date on which the Executive terminates his services with all Employers as an employee.

Section 1.2 Purpose of the Plan . The purpose of this Plan is to provide additional retirement benefits for certain management

and highly compensated employees of the Company who perform management and professional functions for the Company and certain related entities.

1

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 of 2004 (AJCA) .

(1) To the extent applicable, it is intended that the Plan (including all Amendments thereto) comply with the provisions

of Code Section 409A, as enacted by the American Jobs Creation Act of 2004, P.L. 108-357 (the “AJCA”), so as to prevent the inclusion in gross income of any amount of Mirror Pension Benefit accrued 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 Executives. The Plan shall be administered in a manner that will comply with Code Section 409A, including 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 Code Section 409A. The

Administrator is authorized to adopt rules or regulations deemed necessary or appropriate in connection with the 409A Guidance to anticipate and/or comply with the requirements thereof (including any transition or grandfather rules thereunder).

(3) Notwithstanding any provision of the Plan, any Grandfathered Mirror Pension Benefits (including any Mirror Pre-

Retirement Pension Benefits attributable thereto) 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, except as otherwise provided herein. Notwithstanding any provision of the Plan to the contrary, neither the Company nor the Administrator guarantee to any Executive or Death Beneficiary any specific tax consequences of participation in or entitlement to or receipt of benefits from, the Plan, and each Executive or the Executive’s Death Beneficiary shall be solely responsible for payment of any taxes or penalties incurred in connection with his participation in the Plan.

ARTICLE II

DEFINITIONS

Words and phrases used herein with initial capital letters which are defined in the Administrative Document or the Pension Plan 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 “ Actuarial Equivalent ” or “ Actuarially Equivalent .” A benefit is the “Actuarial Equivalent” of another benefit if,

on the basis of Actuarial Factors, the present values of such benefits are equal. Section 2.2 “ Actuarial Factors ” shall mean the actuarial assumptions set forth in Exhibit A which is attached to and forms a part

of this Plan. Section 2.3 “ Code Limitations ” shall mean the limitations imposed by Code Sections 401(a)(17) and 415, or any successor

(s) thereto, on the amount of the benefits which may be payable to or with respect to an Executive from the Pension Plan. Section 2.4 “ Death Beneficiary ”shall mean the beneficiary designated under this Plan and the SERP. The designation of a

Death Beneficiary may be made, and may be revoked or changed only by 2

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 his 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. Any Mirror Pension Benefits remaining to be paid after the death of a Death Beneficiary (or a contingent Death Beneficiary, to the extent designated by the Executive) shall be paid to the Death Beneficiary’s estate. If no Death Beneficiary is designated by the Executive or all designated Death Beneficiaries predecease the Executive, the Executive’s Death Beneficiary shall be his spouse, and if there is no surviving spouse, then the Executive’s estate. The most recent Death Beneficiary designation on file with the Administrator will be given effect, and in the event of conflicting forms files simultaneously under this Plan and the SERP, the Death Beneficiary designation under the SERP will govern.

Section 2.5 “ 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 position of employment or any substantially similar position of employment.

Section 2.6 “ Executive ” shall mean an Employee of an Employer (1) whose Annual Compensation from the Employers for the

preceding Plan Year exceeds the dollar limitation described in Code Section 401(a)(17), (2) who is a Participant in the Pension Plan, and (3) 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 sole discretion, that the Employee would fail to satisfy the requirements of a “management or highly compensated employee” under ERISA.

Section 2.7 “ Grandfathered Mirror Pension Benefit ” shall mean the portion of an Executive’s Mirror Pension Benefit that is

deemed to have been deferred (within the meaning of the 409A Guidance) under the Plan before January 1, 2005 and that is equal to the present value as of December 31, 2004 of the vested Mirror Pension Benefit to which the Executive would be entitled under the Plan, as in effect on October 3, 2004, if the Executive voluntarily terminated employment with the Controlled Group without cause on December 31, 2004, and received a payment, on the earliest possible date allowed under the Plan, of his Mirror Pension Benefit in the form with the maximum value (increased in subsequent years to equal the present value of the benefit the Executive actually becomes entitled to receive, in the form and at the time actually paid, determined under the terms of the Plan as in effect on October 3, 2004, without regard to any services rendered or Compensation increases applicable after December 31, 2004).

Section 2.8 “ Mirror Savings Plan ” shall mean the Ecolab Mirror Savings Plan, as such plan may be amended from time to time. Section 2.9 “ Mirror Pension Benefit ” shall mean the retirement benefit determined under Article III. Section 2.10 “ Mirror Pre-Retirement Pension Benefit ” shall mean the pre-retirement benefit determined under Article IV. Section 2.11 “ Non-Grandfathered Mirror Pension Benefit ” shall mean any Mirror Pension Benefit that is not a Grandfathered

Mirror Pension Benefit. Section 2.12 “ Plan ” shall mean this Ecolab Mirror Pension Plan, as it may be amended from time to time.

3

Section 2.13 “ 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). With respect to the terms of the Plan affecting Non-Grandfathered Mirror Pension Benefits, any reference to “termination of employment” in the Plan shall mean Separation from Service as defined in this Section. Whether an Executive has incurred a Separation from Service shall be determined in accordance with the 409A Guidance.

Section 2.14 “ SERP ” shall mean the Ecolab Supplemental Executive Retirement Plan, as in effect from time to time. Section 2.15 “ SERP Benefit ” shall mean an Executive’s benefit accrued under the SERP. Section 2.16 “ Specified Employee ” shall mean “Specified Employee” as defined in the Administrative Document.

ARTICLE III MIRROR PENSION BENEFITS

Section 3.1 Amount of Mirror Pension Benefits .

(1) In General . Each Executive whose benefits under the Pension Plan payable on or after the Effective Date are reduced due to the Code Limitations shall be entitled to a Mirror Pension Benefit, which shall be determined as hereinafter provided.

(2) Standard Mirror Pension Benefits . The Standard Mirror Pension Benefit shall be a monthly retirement benefit

calculated using the final average pay benefit formula specified in Article 4 of the Pension Plan equal to the difference between (a) and (b), where:

(a) = the amount of the monthly benefit payable to the Executive under the Pension Plan calculated on a single life annuity basis

commencing at age 65, determined under the Pension Plan as in effect on the date of the Executive’s termination of employment with the Controlled Group but calculated as if (i) the Pension Plan did not contain the Code Limitations, and (ii) the definition of Annual Compensation under the Pension Plan included the Executive’s deferrals under the Mirror Savings Plan or its predecessor plan; and

(b) = the amount of the monthly benefit which would be payable to the Executive under the Pension Plan calculated on a single life

annuity basis commencing at age 65, determined under the Pension Plan as in effect on the date of the Executive’s termination of employment with the Controlled Group but calculated as if the Executive’s Annual Compensation under the Pension Plan for any year beginning on or after January 1, 2005 equaled the annual compensation limitation under Code Section 401(a)(17) as in effect for each relevant year for which Annual Compensation amount under the Pension Plan benefit formula is determined.

(3) Cash Balance Mirror Pension Benefits . The Administrator shall establish an “Excess Retirement Account” for each

Executive who is accruing benefits under the cash balance formula described in Article 6 of the Pension Plan. As of the end of each calendar year (or at such other time as

4

a Contribution Credit is made to the Executive’s Retirement Account under the Pension Plan), the Administrator shall credit each Executive’s Excess Retirement Account under this Plan with an amount equal to the difference between (a) and (b) where:

(a) = the amount that would have been credited to the Executive’s Retirement Account under the Pension Plan if (i) the Pension Plan

did not contain the Code Limitations, and (ii) the definition of Annual Compensation under the Pension Plan included the Executive’s deferrals under the Mirror Savings Plan; and

(b) = the amount which would have been credited to the Executive’s Retirement Account under the Pension Plan, but determined as if

the definition of Annual Compensation under the Pension Plan for any year beginning on or after January 1, 2005 equaled the annual compensation limitation under Code Section 401(a)(17) as in effect in the year for which the credit is made pursuant to this Section 3.1(3).

The Administrator shall also credit each Executive’s Excess Retirement Account with Interest Credits in accordance with the

rules specified in the Pension Plan.

(4) Notwithstanding anything in this Section 3.1 to the contrary, in no event, will any Executive’s Mirror Pension Benefit be less than such Executive’s Grandfathered Mirror Pension Benefit.

Section 3.2 Time of Payment .

(1) Grandfathered Mirror Pension Benefit . The portion of an Executive’s vested Mirror Pension Benefit that is a Grandfathered Mirror Pension Benefit shall be paid or commence to be paid at the same time and under the same conditions as the benefits payable to the Executive under the Pension Plan. Notwithstanding the foregoing, if payment at such time is prevented due to reasons outside of the Administrator’s control, the vested Mirror Pension Benefits shall commence as soon as practicable after the benefits commence under the Pension Plan, and the first payment hereunder shall include any Mirror Pension Benefits not paid as a result of the delay in payment.

(2) Non-Grandfathered Mirror Pension Benefit . The provisions of this Section 3.2(2) shall apply solely with respect to

the portion of any Executive’s vested Mirror Pension Benefit that is a Non-Grandfathered Mirror Pension Benefit. (a) Standard Mirror Pension Benefits . The Executive’s Standard Mirror Pension Benefit shall be paid or commence to

be paid on the first day of the third month following the month in which occurs the later of the date on which the Executive (i) attains age 55 or (ii) Separates from Service, subject to Sections 3.2(2)(d), 3.3(2)(d) and 3.3(2)(c) (as applicable). The amount of any such Standard Mirror Pension Benefit paid before the Executive’s attainment of age 62 shall be actuarially reduced using the Actuarial Factors, as in effect on the date of the Executive’s Separation from Service.

(b) Cash Balance Mirror Pension Benefit . The Executive’s Cash Balance Mirror Pension Benefit shall be paid or

commence to be paid on the first day of the third month following the month in which Executive Separates from Service, subject to Sections 3.2(2)(d) and 3.3(2)(d) (as applicable).

(c) Certain Transition Distributions to Terminated Executives . Notwithstanding Section 3.2(2)(a) and 3.2(2)(b) and

subject to Section 3.2(2)(d),

(i) An Executive who Separated from Service after December 31, 2004 and before December 31, 2008 and has commenced payments of his Grandfathered

5

Mirror Pension Benefits at any time before December 31, 2008, shall receive his Non-Grandfathered Mirror Pension Benefit, for which the Executive’s Mirror Pension Benefit is retroactively adjusted pursuant to Section 1.1 on January 1, 2009, in the same form and at the same time as the Executive’s Grandfathered benefit, in the same form and at the same time as the Executive’s Grandfathered benefit, subject to Section 3.2(2)(d). Notwithstanding the foregoing, an Executive’s Cash Balance Benefit shall be paid on March 1, 2009, subject to Section 3.2(2)(d). (ii) An Executive who Separated from Service after December 31, 2004 and before December 31, 2008 and has not before December 31, 2008 commenced payments of his Grandfathered Mirror Pension Benefits shall receive his Non-Grandfathered Mirror Pension Benefits, for which the Executive’s Mirror Pension Benefit is retroactively adjusted pursuant to Section 1.1 on January 1, 2009, as follows, subject to Section 3.2(2)(d):

(A) The Executive’s Standard Mirror Pension Benefit shall be paid to the Executive in a single lump sum amount on the later of March 1, 2009 or the date on which the Executive attains age 55. (B) The Executive’s Non-Grandfathered Cash Balance Mirror Pension Benefit credited to the Executive’s Excess Retirement Account under the Plan shall be paid in a single lump sum amount on March 1, 2009.

(d) Payment Delay for Specified Employees . Notwithstanding any provision of the Plan, payments to a Specified Employee shall be made or commence on the latest of (i) the date specified in Section 3.2(2)(a), (b) or (c), (ii) the date specified in Section 3.3(2)(d)(i), if the Executive made an election pursuant to such section, or (iii) the date that is six (6) months after the Specified Employee’s Separation From Service; provided, however, that if the Executive dies before the date specified in (i), (ii) or (iii), the Executive’s benefit shall be paid or commence on the date specified in Section 4.2. The first payment made to the Specified Employee following the 6-month delay shall include any Mirror Pension Benefit payments that were not made as a result of the delay in payment pursuant to this paragraph (d), with interest at an annual rate of five percent (5%). Notwithstanding the foregoing, this paragraph (d) shall not apply to any Executive if on the date of his Separation from Service, the stock of the Company and Controlled Group members is not publicly traded on an established securities market (within the meaning of the 409A Guidance).

(e) 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 Code Section 162(m). In such event, (i) 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; (ii) 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 (iii) 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

6

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.

Section 3.3 Form of Payment of Mirror Pension Benefits .

(1) Grandfathered Mirror Pension Benefit . The provisions of this Section 3.3(1) shall apply solely with respect to the portion of an Executive’s vested Standard Mirror Pension Benefit that is a Grandfathered Mirror Pension Benefit.

(a) In General . The Standard Mirror Pension Benefit calculated in accordance with Section 3.1(2) shall be payable in

the same form and for the same duration as the benefits payable to the Executive under the Pension Plan; provided, however, that if the form of payment of the Standard Mirror Pension Benefit selected by the Executive is not a single life annuity commencing at age 65, the amount of such Benefit shall be adjusted to an amount which results in a Benefit payable which is the Actuarial Equivalent of a single life annuity commencing at age 65. An election by an Executive of a form of payment under the Pension Plan shall be deemed to be an election by such Executive of the form of his Standard Mirror Pension Benefit. In the absence of an election by the Executive of the form of his Standard Mirror Pension Benefit under the Pension Plan, the form of Standard Mirror Pension Benefit for an unmarried Executive shall be a single life annuity commencing at age 65, and for a married Executive shall be a joint and 50% survivor benefit which is the Actuarial Equivalent of such single life annuity.

(b) Lump Sum Election .

(i) Notwithstanding the foregoing, an Executive may elect to receive the Standard Mirror Pension Benefit or to have his Death Beneficiary receive a Standard Mirror Pre-Retirement Pension Benefit in the form of a single lump sum payment by filing a notice in writing on a form provided by the Administrator, signed by the Executive 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 retirement or termination of employment. Any such election may be changed at any time and from time to time without the consent of any existing Death Beneficiary or any other person other than, if applicable, his spouse, 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 retirement or termination of employment shall not be valid. An Executive’s election of a lump sum payment under this Subsection shall be controlling with respect to any payment of Standard Mirror Pre-Retirement Pension Benefits to his Death Beneficiary. Notwithstanding the foregoing, an Executive shall be permitted to make an election to receive his Standard Mirror Pension Benefit in the form of a lump sum payment within the one (1) year period prior to his voluntary termination if (and only if) the amount of the Standard Mirror Pension Benefit payable to the Executive is reduced by ten percent (10%). (ii) The lump sum payment described in paragraph (b)(i) of this Subsection shall be calculated (A) by converting the Executive’s Standard Mirror Pension Benefit (calculated in accordance with the provisions of Section 3.1(2)) at the time of the commencement of such Benefit into a lump sum amount of equivalent actuarial value when computed using the Actuarial Factors for this purpose, and then applying the ten percent (10%) reduction, if applicable, or

7

(B) by converting the Death Beneficiary’s Standard Mirror Pre-Retirement Pension Benefit (calculated in accordance with the provisions of Section 4.2(1)) at the time of the commencement of such Benefit into a lump sum amount of equivalent actuarial value when computed using the Actuarial Factors for this purpose, and then applying the ten percent (10%) reduction, if applicable. (iii) Notwithstanding any provision of this Plan to the contrary, in the event the equivalent actuarial value of the Executive’s Standard Mirror Pension Benefit, when computed using the Actuarial Factors specified in Exhibit A for this purpose, does not exceed $25,000, such Benefit shall be paid in the form of a single lump sum payment.

(c) Cash Balance Mirror Pension Benefits . Notwithstanding any provision of the Plan to the contrary, a Cash Balance Mirror Pension Benefit calculated in accordance with Section 3.1(3) shall automatically be paid to the Executive in the form of a single lump sum payment in an amount equal to the balance in the Executive’s Excess Retirement Account as the date the payment is processed.

(2) Non-Grandfathered Mirror Pension Benefits . The provisions of this Section 3.3(2) shall apply solely with respect to

the portion of an Executive’s vested Mirror Pension Benefit that is a Non-Grandfathered Mirror Pension Benefit. (a) Normal Form of Payment . Unless an Executive makes an election pursuant to Section 3.3(2)(b) or (e), the

Executive’s Non-Grandfathered Mirror Pension Benefit will be paid to the Executive in the form of annual installment payments payable over a period of ten (10) years, the amount of which is Actuarially Equivalent to the Mirror Pension Benefit calculated under Section 3.1.

(b) Optional Forms of Payment . In lieu of the normal form of payment, an Executive may make or change an election

to receive his Non-Grandfathered Mirror Pension Benefit in one of the following Actuarially Equivalent optional forms of benefit:

(i) A single life annuity payable monthly to the Executive during the Executive’s life and ending on the date of the Executive’s death. (ii) A reduced joint and survivor annuity payable monthly to the Executive during the Executive’s life, and after the Executive’s death, payable monthly to the Executive’s spouse who survives the Executive in the amount equal to 50%, 75% or 100% (as the Executive elects ) of such reduced lifetime monthly amount. (iii) A reduced life and period certain annuity payable monthly to the Executive during the Executive’s life, with payment thereof guaranteed to be made for a period of five (5) or ten (10) years, as elected by the Executive, and, in the event of the Executive’s death before the end of such 5- or 10- year period, payable in the same reduced amount for the remainder of such 5- or 10- year period, to the Death Beneficiary designated by the Executive. (iv) Annual installment payments payable to the Executive over a period of five (5) or ten (10) years, as elected by the Executive. (v) A single lump sum payment.

8

(c) Mandatory Lump Sum . Notwithstanding any provision of the Plan to the contrary, in the event that the present

value of the Executive’s Non-Grandfathered Mirror Pension Benefit does not exceed $25,000 at the time of distribution, such Non-Grandfathered Mirror Pension Benefit shall be paid in the form of a single lump sum payment on the date of the Executive’s Separation from Service, subject to Section 3.2(2)(d).

(d) Election of Optional Form of Payment . An election of an optional form of payment must be in writing (on a form

provided by the Administrator) and must satisfy the following requirements:

(i) If an Executive wishes to elect an optional form of payment under Section 3.3(2)(b) above (other than the normal form of payment) or, after December 31, 2008, wishes to change his election made under Section 3.3(2)(e) (other than an election change described in Section 3.3(2)(d)(ii)), the election must be filed with the Administrator 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 as of the date of Separation from Service) shall be given effect and become irrevocable on the date of the Executive’s Separation from Service. No election filed less than twelve (12) months before the Executive’s Separation from Service shall have any force or effect, except as provided in Section 3.3(2)(d)(ii). The payment pursuant to an election made under this Section 3.3(2)(d)(i) shall be made or commence on the first day of the month coincident with or immediately following the fifth anniversary of the original commencement date specified in Section 3.2(2)(a) or (b) (as applicable). (ii) An Executive who elected, pursuant to Section 3.3(2)(d)(i) or 3.3(2)(e), a life annuity form of payment (within the meaning of the 409A Guidance) described in Section 3.3(2)(b)(i), (ii) or (iii), may, at any time before the date of Separation from Service, change that annuity form of payment to an Actuarially Equivalent life annuity form of payment, provided the commencement date for such annuity, as specified in, respectively, Section 3.3(2)(d)(i) or Section 3.3(2)(e), remains unchanged.

(e) Transition Elections . Notwithstanding any provision of the Plan, any Executive who is an active employee of the Company or a member of the Controlled Group during the election period designated by the Administrator, ending no later than December 31, 2008, may make an election to receive his Non-Grandfathered Mirror Pension Benefit in one of the optional forms specified in Section 3.3(2)(b), commencing on the date specified in Section 3.3(2)(a) or (b) (as applicable); provided, however, that such election shall not apply if the Executive Separates from Service on or before December 31, 2008 and is subject to the provision of Section 3.2(2)(c). The transition election must be made in writing, on a form provided by the Administrator and filed with the Administrator within the designated transition election period. The transition election made pursuant to this paragraph (e) may not cause any amount to be paid in 2008 if not otherwise payable and may not delay payment of any amount that is otherwise payable in 2008.

(f) Coordination of Payment Elections with SERP . If an Executive is also a participant in the SERP, the Executive’s

Non-Grandfathered Mirror Pension Benefit and the Non-Grandfathered SERP Benefit will be paid in the same form and at the same time. If an Executive makes an election of an optional payment form pursuant to Section 3.3(2)(b) of the Plan or Section 3.4(2)(b) of the SERP, the most recent election filed with the Administrator under

9

either this Plan or the SERP at least twelve (12) months before the Separation from Service (or, if applicable, at a date specified in paragraph (d)(ii) of this Subsection) that remains on file with the Administrator on the date of Separation from Service will govern the form and time of payment under the Plan. In the event of conflicting election forms filed simultaneously under this Plan and the SERP, the election filed under the SERP shall govern.

Section 3.4 Death after Commencement of Non-Grandfathered Mirror Pension Benefits . If an Executive dies after commencing

payment of his Non-Grandfathered Mirror Pension Benefits under the Plan but before his entire Non-Grandfathered Mirror Pension Benefit is distributed, payments to the Executive’s Death Beneficiary (if any) will be made (a) in accordance with the elected optional form of payment described in Section 3.3(2)(b)(ii) or (iii) (if elected), or (b) ninety (90) days after the Executive’s death in the form of a single lump sum, calculated using the Actuarial Factors in effect on the date of distribution, if the Executive elected one of the optional forms of payment described in Section 3.3(b)(iv).

ARTICLE IV

MIRROR PRE-RETIREMENT PENSION BENEFIT

Section 4.1 Eligibility .

(1) Grandfathered Mirror Pre-Retirement Pension Benefits . The Death Beneficiary of an Executive who dies after attaining eligibility for a pre-retirement death benefit under the Pension Plan, but prior to commencing to receive Mirror Pension Benefits hereunder shall be entitled to receive the Mirror Pre-Retirement Pension Benefits described in Section 4.2(1) in lieu of any other benefits described in the Plan.

(2) Non-Grandfathered Mirror Pre-Retirement Pension Benefits . The Death Beneficiary of an Executive who dies after

becoming vested in his Mirror Pension Benefit but prior to commencing to receive Mirror Pension Benefits hereunder shall be entitled to receive the Mirror Pre-Retirement Pension Benefits described in Section 4.2(2) in lieu of any other benefits described in the Plan.

Section 4.2 Amount, Form and Timing of Mirror Pre-Retirement Pension Benefits .

(1) Grandfathered Mirror Pension Benefits . A Death Beneficiary who is eligible for a Mirror Pre-Retirement Pension Benefit hereunder shall receive the portion of such Mirror Pre-Retirement Pension Benefit that is based on the Executive’s Grandfathered Mirror Pension Benefit in accordance with this Subsection (1).

(a) Cash Balance Mirror Pre-Retirement Pension Benefits . A Death Beneficiary who is eligible for a Cash Balance

Mirror Pre-Retirement Pension Benefit shall receive a Cash Balance Mirror Pre-Retirement Pension Benefit, payable at the same time as the pre-retirement death benefits and (if applicable) the optional death benefits described in the Pension Plan, as determined by the Administrator. The Cash Balance Mirror Pre-Retirement Pension Benefit shall automatically be paid in the form of a lump sum payment in an amount equal to the balance in the Executive’s Excess Retirement Account on the date the payment is processed.

(b) Standard Mirror Pre-Retirement Pension Benefits . A Death Beneficiary who is eligible for a Standard Mirror Pre-

Retirement Pension Benefit shall receive a Standard Mirror Pre-Retirement Pension Benefit based on the Executive’s Standard Mirror Pension Benefit hereunder. The Standard Mirror Pre-Retirement Pension Benefit shall be calculated in accordance with, and payable at the same time and (except as provided in Section 3.3(1)(b)) in the same manner as, the pre-retirement death benefits and (if applicable) the optional death benefits described in the Pension Plan, as determined by the Administrator.

10

(2) Non-Grandfathered Mirror Pre-Retirement Pension Benefits . A Death Beneficiary who is eligible for a Mirror Pre-

Retirement Pension Benefit hereunder shall receive the portion of such Mirror Pre-Retirement Pension Benefit that is based on the Executive’s vested Non-Grandfathered Mirror Pension Benefit as follows:

(a) Non-Grandfathered Cash Balance Mirror Pre-Retirement Pension Benefits . A Death Beneficiary who is eligible for a Non-Grandfathered Cash Balance Mirror Pre-Retirement Pension Benefit shall receive such benefit in the form of a lump sum payment in an amount equal to the portion of the balance in the Executive’s Excess Retirement Account attributable to the Non-Grandfathered Mirror Pension Benefit on the date the payment is processed. The Non-Grandfathered Cash Balance Mirror Pre-Retirement Pension Benefit shall be paid ninety (90) days after the Executive’s death.

(b) Non-Grandfathered Standard Mirror Pre-Retirement Pension Benefits . (i) If an Executive (A) is not married on the date of his death, (B) has been married for less than one year prior to his death and designates a Death Beneficiary other than his spouse, or (C) has been married for at least one year prior to his death and the Executive’s spouse consents to the Executive’s designation of a Death Beneficiary other than the spouse, the Executive’s Death Beneficiary shall receive his benefit in an amount Actuarially Equivalent to the survivor benefit determined as if the Executive had Separated From Service on the earlier of the date of his actual Separation from Service or the date of his death, elected to receive his Non-Grandfathered Mirror Pension Benefit in the form of a monthly life annuity with a) a five (5) year certain survivor benefit if the Executive Separated from Service before attaining age 55, or b) a ten (10) year certain survivor benefit, if the Executive had attained age 55 while an Employee, had survived to age 55 and had died immediately following his payment commencement date. The Non-Grandfathered Standard Mirror Pre-Retirement Pension Benefit shall be paid in the form of an Actuarially Equivalent single lump sum payment on the first day of the third month after the later of the date on which the Executive would have attained age 55 or the date of the Executive’s death. (ii) If an Executive is married on the date of his death and paragraph (b)(i) does not apply to him , then, the Executive’s surviving spouse shall receive the Non-Grandfathered Standard Mirror Pre-Retirement Pension Benefit as follows:

(A) If the Executive Separated from Service before attaining age 55, the Executive’s spouse shall receive a reduced annuity payable monthly to the Executive’s spouse during his life, commencing on the first day of the third month following the later of the date on which the Executive would have attained age 55 or the date of the Executive’s death and ending on the date of the Executive’s spouse’s death, calculated as if the had Executive Separated from Service on the earlier of the date of the Executive’s death or actual Separation from Service, elected a joint and 50% survivor annuity form of payment described in Section 3.3(2)(b)(ii), survived to age 55 and died on the date following the payment commencement date. (B) If the Executive had attained age 55 while an Employee, the Executive’s spouse shall receive a reduced annuity payable monthly to

11

the Executive’s spouse during his life, commencing on the first day of the of the third month after the date of the Executive’s death, calculated as if the Executive had died immediately after commencing payments in the form of an immediate joint and 100% survivor annuity form of payment described in Section 3.3(2)(b)(ii). (C) Notwithstanding the foregoing, if the present value of the Non-Grandfathered Standard Mirror Pre-Retirement Pension Benefit under this paragraph (b)(ii) does not exceed $25,000, such benefit will be distributed to the Executive’s Death Beneficiary in the form of an Actuarially Equivalent single lump sum on the first day of the third month following the later of the date on which the Executive would have attained age 55 or the date of the Executive’s death.

ARTICLE V VESTING

Section 5.1 Vesting .

(1) In General . Except as provided in Subsection (2) and (3) of this Section, an Executive or Death Beneficiary shall become vested in the Mirror Pension Plan Benefits in accordance with the vesting provisions of the Pension Plan.

(2) Forfeiture Provision .

(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 Pension Benefits and Mirror Pre-Retirement Pension 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 have occurred.

(b) Notwithstanding the foregoing, an Executive shall not forfeit any portion of his Mirror Pension Benefits or Mirror

Pre-Retirement Pension 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.

(3) Acceleration of Vesting . Notwithstanding the provisions of Subsection (1) hereof, the Mirror Pension Benefits of

the Executives (a) who are employed by the Controlled Group on the date of a Change in Control or (b) whose employment with the Company was terminated prior to a Change in Control but the Executive reasonably demonstrates that the termination occurred at the request

12

of a third party who has taken steps reasonably calculated to effect the Change in Control, shall become immediately 100% vested upon the occurrence of such Change in Control.

ARTICLE VI

AMENDMENT AND TERMINATION

Section 6.1 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 Mirror Pension Benefit or vested Mirror Pre-Retirement Pension Benefit under the Plan of any Executive or Death Beneficiary as such Benefit exists on the date of such amendment or termination; provided, however, that this limitation shall not apply to the extent deemed necessary by the Company to comply with the requirements of the 409A Guidance.

Section 6.2 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 Code Section 280G, 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 Code Section 4999, 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 6.2 shall not of itself limit or otherwise affect any other rights of the Executive pursuant to this Plan. The Executive’s benefit will be reduced only to the extent that the reduction in any cash payments due to the Executive and in the Executive’s SERP Benefits is insufficient to reduce or eliminate Excess Parachute Payment as described in this Section. The Executive’s Non-Grandfathered Mirror Pension Benefit (if any) shall be reduced if required by this section before any Grandfathered Mirror Pension Benefit is reduced.

Section 6.3 Establishment of 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 Pension Benefits and Mirror Pre-Retirement Pension 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 Pension Benefits and Mirror Pre-Retirement Pension

13

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 Pension 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 the equivalent actuarial present value of the Mirror Pension Benefits and Mirror Pre-Retirement Pension Benefits which have been accrued as of the date of the Change in Control on behalf of all of the Executives under the Plan (using the Actuarial Factors specified in Exhibit A for this purpose).

(d) In January of each year following a funding of the Trust Fund pursuant to paragraph (c) above, the Company shall

cause to be deposited in the Trust Fund such additional amount (if any) by which the aggregate equivalent actuarial present value (determined using the Actuarial Factors specified in Exhibit A) of the sum of the Mirror Pension Benefits and Mirror Pre-Retirement Pension Benefits for all Executives under the Plan as of December 31 of the preceding year exceeds the fair market value of the assets of the Trust Fund as of such date.

(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.

14

(f) The Administrator shall notify the trustee of the amount of Mirror Pension Benefits and Mirror Pre-Retirement

Pension Benefits to be paid to or on behalf of the Executive 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 6.3(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 (2) 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. IN WITNESS WHEREOF, Ecolab Inc. has executed this Mirror Pension Plan and has caused its corporate seal to be affixed this 19

day of December, 2008.

15

ECOLAB INC.


Steven L. Fritze

Chief Financial Officer (Seal)

Attest:


Lawrence T. Bell


th

EXHIBIT A

ACTUARIAL ASSUMPTIONS

FOR STANDARD MIRROR PENSION BENEFITS AND STANDARD MIRROR PRE-RETIREMENT PENSION BENEFITS

1. Interest Rate:

A. For lump sum

The interest rate will be 125% of the 10-year Treasury rate for the month of October preceding the Plan Year (i.e., January 1) (1) in which the retirement or other termination of employment is effective if the Mirror Pension Benefit is to commence immediately following such retirement or termination of employment or (2) in which the distribution becomes payable if the payment is to be deferred.

B. General Actuarial Equivalence

7.5% except as provided in item 4 below. 2. Mortality:

A. For Lump Sum

Revenue Ruling 2001-62 prescribed table. (The basis is the 1994 unisex pension tables)


1971 Group Annuity Table 3. Annuity Values Weighted:

A. For Lump Sum

N/A

B. General Actuarial Equivalence 75% male, 25% female

2

4. Early Commencement

The Mirror Pension Benefit shall be reduced by one two hundred eightieth (1/280th) for each month that the date of the commencement of payment precedes the date on which the Executive will attain age sixty-two (62). If the Executive’s Ecolab Pension Plan benefit is affected by Section 415 of the Code, the Administrator shall make such further adjustments to the Mirror Pension Benefit as the Administrator, in his or her sole discretion, deems appropriate to ensure that the total early retirement benefit from the Ecolab Pension Plan and the Ecolab Mirror Pension Plan equals the early retirement benefit the Executive would have been entitled to under the Ecolab Pension Plan without regard to the Code Limitations and non-qualified deferrals.

If payment is in the form of a single lump sum, the lump sum amount shall be based on the lump sum interest rate defined in item 1 above, the mortality assumptions specified in items 2 and 3 above, and the “early retirement benefit” immediate annuity amount as determined under this item 4..

ACTUARIAL ASSUMPTIONS FOR CASH BALANCE MIRROR PENSION BENEFITS

AND CASH BALANCE MIRROR PRE-RETIREMENT PENSION BENE FITS

1. Interest Rate:

A. Convert Retirement Account into an Annuity

The applicable interest rate(s), within the meaning of Code section 417(e), as specified by the Commissioner of Internal Revenue for the second full calendar month preceding the first day of the Plan Year during which the distribution is made. (Used to determine an actuarially equivalent amount payable immediately as a single-life annuity benefit.)

B. General Actuarial Equivalence 7.5%.

2. Mortality:

A. Convert Retirement Account into an Annuity

The applicable mortality table, within the meaning of Code section 417(e), in effect as of the date of distribution as prescribed by the Commissioner of Internal Revenue (described in section 807(d)(5)(A) of the Internal Revenue Code). (Used to determine an actuarially equivalent amount payable immediately as a single-life annuity benefit.)


Revenue Ruling 2001-62 prescribed table. (The basis is the 1994 unisex pension tables.)

TABLE OF CONTENTS

i

Page

ARTICLE I Preface 1

Section 1.1 Effective Date 1 Section 1.2 Purpose of the Plan 1 Section 1.3 Administrative Document 2 Section 1.4 American Jobs Creation Act of 2004 (AJCA) 2

ARTICLE II definitions 2

Section 2.1 “Actuarial Equivalent” or “Actuarially Equivalent.” 2 Section 2.2 “Actuarial Factors” 2 Section 2.3 “Code Limitations” 2 Section 2.4 “Death Beneficiary” 2 Section 2.5 “Disability” 3 Section 2.6 “Executive” 3 Section 2.7 “Grandfathered Mirror Pension Benefit” 3 Section 2.8 “Mirror Savings Plan” 3 Section 2.9 “Mirror Pension Benefit” 3 Section 2.10 “Mirror Pre-Retirement Pension Benefit” 3 Section 2.11 “Non-Grandfathered Mirror Pension Benefit” 3 Section 2.12 “Plan” 3 Section 2.13 “Separation from Service” or to “Separate from Service” 4 Section 2.14 “SERP” 4 Section 2.15 “SERP Benefit” 4 Section 2.16 “Specified Employee” 4

ARTICLE III MIRROR PENSION BENEFITS 4

Section 3.1 Amount of Mirror Pension Benefits 4 Section 3.2 Time of Payment 5 Section 3.3 Form of Payment of Mirror Pension Benefits 7 Section 3.4 Death after Commencement of Non-Grandfathered Mirror Pension Benefits 10

ARTICLE IV MIRROR PRE-RETIREMENT PENSION BENEFIT 10

Section 4.1 Eligibility 10

TABLE OF CONTENTS

(continued)

ii

Page

Section 4.2 Amount, Form and Timing of Mirror Pre-Retirement Pension Benefits 10 ARTICLE V VESTING 12

Section 5.1 Vesting 12 ARTICLE VI AMENDMENT AND TERMINATION 13

Section 6.1 Effect of Amendment and Termination 13 Section 6.2 Limitation on Payments and Benefits 13 Section 6.3 Establishment of Trust Fund 13

EXHIBIT (10)N

ECOLAB INC. ADMINISTRATIVE DOCUMENT FOR NON-QUALIFIED BENEFIT P LANS

(As Amended and Restated Effective as of January 1, 2005) Ecolab Inc. (the “Company”) hereby amends and completely restates this Administrative Document (the “Administrative

Document”) which provides for the administration of the non-qualified benefit plans listed on Exhibit A hereto (collectively, the “Plans” and individually, a “Plan”) which have been established by the Company for purposes of providing benefits to certain management and highly compensated employees who perform management and professional functions for the Company and certain related entities. This Administrative Document is incorporated by reference in and is a part of each of the Plans.

ARTICLE I

DEFINITIONS

Words and phrases used in this Administrative Document and in the Plans with initial capital letters which are defined in the Pension Plan are used in this Administrative Document and in the Plans as so defined, unless otherwise specifically defined herein or in the Plans or the context clearly indicates otherwise. Words and phrases used in this Administrative Document with initial capital letters which are defined in the Plans are used herein as so defined. The following words and phrases when used in this Administrative Document or in the Plans with initial capital letters shall have the following respective meanings, unless the context clearly indicates otherwise or a particular Plan provides differently with respect to its own provisions:

Section 1.1 “ Administrator ” shall mean the person authorized to perform the administrative duties under the Plans pursuant to

Section 4.1. Section 1.2 “ Annual Compensation ” for a Plan Year shall mean the sum of (1) the Executive’s base salary, commission and

annual incentive bonuses paid in cash (but not long term incentive bonuses) which are reportable by the Employer for federal income tax purposes as “wages” for such Plan Year, (2) any salary reductions caused as a result of participation in an Employer-sponsored plan which is governed by Section 401(k), 132(f)(4) or 125 of the Code, and (3) any salary reductions caused as a result of participation in the Ecolab Mirror Savings Plan or its precessor plan , and (4) severance pay (not in excess of 52 weeks’ duration effective as of January 1, 2002) which will be deemed to have been paid in regular, payroll dates at the Executive’s regular rate of compensation in effect prior to his termination of employment even if such severance pay is, in fact, paid in a lump sum or other accelerated manner.

Section 1.3 “ Benefit ” shall mean a Mirror Pension Benefit, a Mirror Pre-Retirement Pension Benefit, a SERP Benefit, a SERP

Pre-Retirement Benefit, a Mirror Savings Benefit, an Executive Death Benefit or an Executive Disability Benefit, as applicable. Section 1.4 “Change in Control .” A “Change in Control “ shall be deemed to have occurred if the event set forth in any one of

the following Subsections shall have occurred: (1) any “person” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended

(“Exchange Act”) (other than the Company, any trustee or

other fiduciary holding securities under any employee benefit plan of the Company, or any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes, including pursuant to a tender or exchange offer for shares of the common stock of the Company (“Common Stock”) pursuant to which purchases are made, the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company’s then outstanding securities, other than in a transaction arranged or approved by the Board of Directors of the Company (the “Board”) prior to its occurrence; provided, however, that if any such person will become the beneficial owner, directly or indirectly, of securities of the Company representing 34% or more of the combined voting power of the Company’s then outstanding securities, a Change in Control will be deemed to occur whether or not any or all of such beneficial ownership is obtained in a transaction arranged or approved by the Board prior to its occurrence, and other than in a transaction in which such person will have executed a written agreement with the Company (and approved by the Board) on or prior to the date on which such person becomes the beneficial owner of 25% or more of the combined voting power of the Company’s then outstanding securities, which agreement imposes one or more limitations on the amount of such person’s beneficial ownership of shares of Common Stock, if, and so long as, such agreement (or any amendment thereto approved by the Board provided that no such amendment will cure any prior breach of such agreement or any amendment thereto) continues to be binding on such person and such person is in compliance (as determined by the Board in its sole discretion) with the terms of such agreement (including such amendment); provided, however that if any such person will become the beneficial owner, directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding securities, a Change in Control will be deemed to occur whether or not such beneficial ownership was held in compliance with such a binding agreement, and provided further that the provisions if this Subsection (1) shall not be applicable to a transaction in which a corporation becomes the owner of all the Company’s outstanding securities in a transaction which complies with the provisions of Subsection (3) of this Section (e.g., a reverse triangular merger); or

(2) during any thirty-six consecutive calendar months, individuals who constitute the Board on the first day of such period or any

new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest including, but not limited to, a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company’s stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who were either directors on the first day of such period, or whose appointment, election or nomination for election was previously so approved or recommended, shall cease for any reason to constitute at least a majority thereof; or

(3) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any

other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) more than 50% of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or

2

consolidation, and in which no “person” (as defined under Subsection (1) above) acquires 50% or more of the combined voting power of the securities of the Company or such surviving entity or parent thereof outstanding immediately after such merger or consolidation; or

(4) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is

consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, more than 50% of the combined voting power of the voting securities of which are owned by stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale.

Section 1.5 “ Code ” shall mean the Internal Revenue Code of 1986, as amended. Section 1.6 “ Company ” shall mean Ecolab Inc., a Delaware corporation or its successor(s). Section 1.7 “ Controlled Group ” shall mean the Company and any other corporation or entity, the employees of which, together

with employees of the Company, are required by subsection (b) or (c) of Code Section 414 to be treated as if they were employed by a single employer. For purposes of determining whether a “Separation from Service” has occurred, members of the Controlled group will be identified in accordance with Code Section 414(b) or (c), except that in applying Code Section 1563(a)(1), (2), and (3) for purposes of Code Section 414(b) or in applying Treas. Reg. §1.414(c)-2 for purposes of Code Section 414(c), the language “at least 50 percent” shall be used instead of the language “at least 80 percent” each place it appears in such Code and regulations sections.

Section 1.8 “ Employee ” shall mean any person who is designated by an Employer as a common-law employee and who is

employed on a full-time or substantially full-time basis. Section 1.9 “ Employer ” shall mean the Company and any other member of the Controlled Group that adopts or has adopted

one or more of the Plans pursuant to Section 6.3. Section 1.10 “ 409A Guidance ” means Section 409A of the Code and proposed, temporary or final regulations or any other

guidance issued thereunder. Section 1.11 “ Pension Plan ” shall mean the Ecolab Pension Plan, as such plan may be amended from time to time. Section 1.12 “ Plans ” shall mean those non-qualified benefit plans listed on Exhibit A hereto, as they may be amended from time

to time. Section 1.13 “ Plan Year ” shall mean a calendar year. Section 1.14 “ 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 an Employee (1) is on military leave, sick leave, or other bona fide leave of absence that does not

3

exceed six (6) months (or, in the case of disability, twelve (12) months), or if longer, the period during which the Employee’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 (whether as an employee or as an independent contractor) 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 Employee provided services if the Employee 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 Employee to be unable to perform the duties of his or her position of employment or any substantially similar position of employment. Whether an Employee has incurred a Separation from Service shall be determined in accordance with the 409A Guidance.

Section 1.15 “ Specified Employee ” shall have the meaning set forth in Section 6.8.

ARTICLE II PAYMENT OF BENEFITS

Section 2.1 Special Offset Provision . Notwithstanding any provision of the Plans to the contrary, if the Administrator (in his or

her sole discretion) determines that an Executive or Death Beneficiary is indebted to the Controlled Group at the time of a Benefit payment, the Administrator (in his or her sole discretion) may reduce any such Benefit by the amount of the indebtedness, provided, however, that such reduction does not exceed $5,000 in any Plan Year and the reduction is made at the same time and in the same amount as the debt otherwise would have been due from the Executive. An election by the Administrator not to reduce any such Benefit shall not constitute a waiver of the Controlled Group’s claim for such indebtedness.

Section 2.2 Withholding/Taxes . To the extent required by applicable law, the Company shall withhold (or cause to be

withheld) from the Benefit payments any taxes required to be withheld by any federal, state or local government. Section 2.3 Adjustments . Notwithstanding any provision of the Plans to the contrary, if an Executive or Death Beneficiary

receives Benefits for any period that exceed the aggregate Benefits properly payable for such period, the Administrator (in his or her sole discretion) may, to the extent permitted by the 409A Guidance, make any adjustment he or she deems advisable to future Benefits due to the Executive or Death Beneficiary under the Plans until the aggregate amount of such adjustments equals the aggregate amount of the excess Benefits paid. The provisions of this Section shall not be construed to provide the exclusive means of recovering excess payments to an Executive or Death Beneficiary, and the Administrator may take such other action as he or she deems advisable to recover the amount of excess Benefits that were paid to the Executive or Death Beneficiary.

Section 2.4 Death Beneficiary Designations .

(1) Absence of Designation . If the Executive fails to designate a Death Beneficiary under the Plans, or at any other time when there is no existing Death Beneficiary

4

designated by the Executive, the Executive’s Death Beneficiary shall be his surviving spouse or, if none, his estate.

(2) Ambiguous Death Beneficiary Designation . In the event that the most recent Death Beneficiary designation filed

prior to the Executive’s death is ambiguous or incapable of reasonable construction, the Administrator may (in his or her sole discretion) (a) construe such designation in such manner as the Administrator deems closest to the Executive’s intent, (b) determine that such designation is void and distribute the Benefits as if the Executive had not filed any designation, or (c) institute proceedings in a court of competent jurisdiction for construction of such designation and charge any expenses incurred in such proceedings, including reasonable attorney’s fees, against the Executive’s Benefits. Notwithstanding the foregoing, in the event that any benefits under the Plans are provided by insurance contracts which are owned by the Executive and under which the Executives are required to designate a Death Beneficiary, the terms of such insurance contracts shall govern Death Beneficiary designations with respect to such Benefits.

Section 2.5 Protective Provisions . Notwithstanding any provision of the Plans to the contrary, as a condition to receiving any

Benefit under any Plan, the Executive and, where applicable, the Death Beneficiary, shall be required to cooperate with the Company by furnishing any and all information requested by the Company in order to facilitate the payment of the Benefit and taking any other action(s) as may be requested by the Company. If an Executive or Death Beneficiary refuses to cooperate, no Benefits shall be payable under the Plans and neither the Company nor the Executive’s Employer shall have any further obligation to the Executive or his Death Beneficiary under the Plans.

Section 2.6 Liability for Payment .

(1) The Employer by which the Executive was most recently employed at the time of his termination of employment with the Controlled Group shall pay the Benefits (or cause the Benefits to be paid) to the Executive or his Death Beneficiary under the Plans. In the event that an executive transfers employment from one Employer to another, the Executive’s Benefits (and the underlying assets and liabilities related thereto) shall automatically be transferred from the Executive’s former Employer to the Executive’s new Employer.

(2) Notwithstanding subsection (1) above, the Company may (but shall not be required to) guarantee some or all of the

obligations of one or more Employers under any one or all of the Plans, with respect to one or more Executives or Death Beneficiaries, to the extent determined by the Company in its sole and absolute discretion.

(3) The Company hereby guarantees all of the Employer obligations of Ecolab USA Inc. (formerly named Ecolab

Finance Inc.) under all of the Plans, with respect to Executives or Death Beneficiaries. 5

ARTICLE III

FUNDING

Section 3.1 Obligation of Employers .

(1) The Plans are designed to be unfunded, nonqualified plans and the entire cost of the Plans shall be paid from the general assets of the Employers. Notwithstanding the foregoing, the Employers may establish one or more trusts pursuant to an agreement with a trustee under which some or all of the Benefits under the Plans shall be paid or the Employers may otherwise purchase insurance for the purpose of providing Benefits under the Plans. In furtherance of, but without limiting, the foregoing, an Employer may, in its sole discretion, satisfy its obligation to provide Executive Death Benefits or Executive Disability Benefits by delivering to the Executive an insurance contract which provides substantially the same benefits.

(2) Any payment by a trustee pursuant to a trust agreement of Benefits payable pursuant to a Plan shall, to the extent

thereof, discharge an Employer’s obligation to pay Benefits thereunder.

Section 3.2 Limitation on Rights of Executives and Death Beneficiaries - No Lien . Nothing contained in the Plans shall be deemed to create a lien in favor of any Executive or Death Beneficiary on any trust account or on any assets of the Employers. The Employers shall have no obligation to purchase any assets that do not remain subject to the claims of the creditors of the Employers for use in connection with the Plans. Any assets contributed to a trust shall remain subject to the claims of the Employers’ creditors. No Executive, Death Beneficiary or any other person shall have any preferred claim on, or any beneficial ownership interest in, any assets of the Employers prior to the time that such assets are paid to the Executive or Death Beneficiary as provided in the Plans. Each Executive and Death Beneficiary shall have the status of a general unsecured creditor of the Employers and, except as provided in the preceding sentence, shall have no right to, prior claim to, or security interest in, any assets of the Employers or any trust account. No liability for the payment of benefits under the Plans shall be imposed upon any officer, director, employee, or stockholder of an Employer.

ARTICLE IV

ADMINISTRATION

Section 4.1 Responsibility for Administration . The Company shall be responsible for the general administration of the Plans and for carrying out the provisions thereof. The Vice President - Human Resources of the Company shall perform the duties of the Administrator on behalf of the Company. Such Vice President may, from time to time, delegate all or part of the administrative powers, duties and authorities delegated to him or her under the Plans to such person or persons, office or committee as he or she shall select. Any such delegation shall be in writing and will be terminable upon such notice as the Vice President - Human Resources deems reasonable under the circumstances.

Section 4.2 Authority/Duties . The Administrator shall have the sole and absolute discretion to interpret the provisions of the

Plans (including, without limitation, by supplying omissions from, and correcting deficiencies in, or resolving inconsistencies or ambiguities in, the

6

language of the Plans) and, except as otherwise provided in the Plans, shall determine the rights and status of Executives and Death Beneficiaries thereunder (including, without limitation, the amount of any Benefit to which an Executive or Death Beneficiary may be entitled under the Plans). The Administrator shall have the power to make reasonable rules and regulations required in the administration of the Plans, to make all determinations necessary for their administration (except those determinations which the Plans requires others to make) and to facilitate their administration.

Section 4.3 Indemnification . The Company shall indemnify and defend to the fullest extent permitted by law the Vice President

- Human Resources and each person performing duties as the Administrator against all liabilities such person may incur in the administration of the Plans. The Administrator shall be entitled to reimbursement from the Company for all expenses incurred in the performance of the duties of the Administrator.

Section 4.4 Expenses . Except as described in the following sentence, the Company shall pay all expenses incurred in the

administration and operation of the Plans. Notwithstanding the foregoing, and except as provided in the Ecolab Mirror Savings Plan, the expenses of administering the Ecolab Mirror Savings Plan shall be payable from such Plan, unless the Company determines, in its sole discretion, to pay part or all thereof directly.

Section 4.5 Claims . Any Executive or Death Beneficiary who believes that he is entitled to receive a Benefit under a Plan

which he has not received may file with the Administrator a written claim specifying the basis for his claim and the facts upon which he relies in making such claim. The Administrator shall review the claim and shall respond in writing to the claimant within sixty (60) days after receiving the claim. Such written notice shall be written in a manner calculated to be understood by the claimant and shall contain a statement of the specific reasons for the Administrator’s decision. During the review process, the claimant (or his authorized representative) will be given the opportunity to review the Plan under which he is claiming Benefits and any other documents pertinent thereto and to submit issues and comments in writing. If the Administrator, upon review, denies any part or all of the Benefits claimed by the claimant, the claimant may, within sixty (60) days after receiving the Administrator’s denial, appeal the Administrator’s decision to the Chief Financial Officer (“CFO”) of the Company. Within ninety (90) days after receiving the claimant’s notice of appeal, the CFO (or his delegate) shall render a decision with respect to the claim, which decision shall be final and binding on all interested parties. The Administrator or CFO may, by written notice to the claimant, extend the 60-day or 90-day periods during which such Administrator or CFO must respond if special circumstances (as determined by the Administrator or CFO) require such an extension.

Section 4.6 American Jobs Creation Act (AJCA) .

(1) To the extent applicable, it is intended that each Non-Qualified Plan (including all amendments thereto) comply with the provisions of Section 409A of the Code, as enacted by the AJCA, so as to prevent the inclusion in gross income of any amount of benefit accrued 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 Executives. Each Non-Qualified Plan shall be administered in a manner that will comply with the 409A Guidance. All

7

provisions of the Administrative Document shall be interpreted in a manner consistent with the 409A Guidance. Any provisions of this Administrative Document that would cause any Non-Qualified Plan to fail to satisfy Section 409A of the Code (including, without limitation, those added or amended by this Amendment No. 1) shall have no force and effect until amended to comply with Code Section 409A (which amendment may be retroactive to the extent permitted by the 409A Guidance).

(2) The Administrator shall not take any action under the Non-Qualified Plans that would violate any provision of

Section 409A of the Code. The Administrator is authorized to adopt rules or regulations deemed necessary or appropriate in connection with the 409A Guidance to anticipate and/or comply with the requirements thereof (including any transition or grandfather rules thereunder).

(3) Any benefit under a Non-Qualified Plan that is deemed to have been deferred prior to January 1, 2005 and that

qualifies 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 Administrative Document as in effect prior to January 1, 2005.

(4) Notwithstanding any provision of this Administrative Document or any Plan, nothing herein or in any such Plan shall

be construed as a guarantee of favorable tax consequences of the provision of Benefits under any of the Plans.

ARTICLE V AMENDMENT AND TERMINATION

Section 5.1 Amendment . The Board of Directors of the Company reserves the right to amend, at any time, any or all of the

provisions of any or all of the Plans (including this Administrative Document) for all Employers, without the consent of any other Employer or any Executive, Death Beneficiary or any other person, provided, however, that the President and CFO of the Company each individually may amend any or all of the Plans (including this Administrative Document) as determined necessary or appropriate by such individual to improve administration of the Plan or Plans, to coordinate with qualified plans or to comply with the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), tax, securities or other similar laws or regulatory requirements. Any such amendment shall be expressed in an instrument executed by an authorized officer of the Company and shall become effective as of the date designated in such instrument or, if no such date is specified, on the date of its execution.

Section 5.2 Termination . The Board of Directors of the Company does hereby reserve the right to terminate any or all of the

Plans at any time for any or all Employers, without the consent of any other Employer or of any Executive, Death Beneficiary or any other person. Such termination shall be expressed in an instrument executed by an authorized officer of the Company and shall become effective as of the date designated in such instrument, or if no date is specified, on the date of its execution. Any Employer which shall have adopted a Plan may, pursuant to the action of its Board of Directors and with the written consent of the Company,

8

elect separately to withdraw from such Plan and such withdrawal shall constitute a termination of such Plan as to it, but it shall continue to be an Employer for the purposes thereof as to Executives or Death Beneficiaries to whom it owes obligations thereunder. Any such withdrawal and termination shall be expressed in an instrument executed by an officer of the terminating Employer and shall become effective as of the date designated in such instrument or, if no date is specified, on the date of its execution.

Section 5.3 Effect of Amendment and Termination .

(1) Except as specifically provided in a particular Plan, the Board of Directors of the Company (or an Employer, if applicable) shall have the authority, in its action to amend or terminate a particular Plan, to determine the effect of such amendment or termination, including, but not limited to, the authority to reduce or eliminate Benefits for Executives who have terminated employment with the Controlled Group, died or became disabled prior to the date of such amendment or termination.

(2) Notwithstanding anything in the Plans and this Administrative Document to the contrary, in the event of a

termination of a Plan, the Company, in its sole and absolute discretion, shall have the right to change the time and/or manner of distribution of Benefits, including, without limitation, by providing for the payment of a single lump sum payment to each Executive or Death Beneficiary then entitled to a Mirror Pension Benefit or SERP Benefit in an amount equal to the actuarially equivalent present value of such benefit (as determined under the respective Plan); provided, however, that to the extent the requirements of Code Section 409A apply to such Plan, any such changes in the time and manner of payment may be made only to the extent and in a manner permitted by the 409A Guidance.

Section 5.4 Board of Directors Action . Any action which is required to be taken by an Employer’s Board of Directors or which

a Board of Directors is authorized to take, may be taken by any committee of such Board of Directors which is appointed in accordance with the laws of the state of incorporation of the Employer. A Board of Directors may, by resolution, delegate to such person or persons as the Board deems advisable any one or more of the powers reserved to the Board under the Plan, subject to the revocation of such delegation by the Board at any time.

ARTICLE VI

MISCELLANEOUS

Section 6.1 Nonalienation . No right or interest of an Executive or his Death Beneficiary under any Plan shall be anticipated, assigned (either in law or in equity) or alienated by the Executive or his Death Beneficiary, nor shall any such right or interest be subject to attachment, garnishment, levy, execution or other legal or equitable process or in any manner be liable for or subject to the debts of any Executive or Death Beneficiary. The Company shall give no effect to any instrument purporting to alienate any person’s interest in any Benefits under the Plans. Notwithstanding the foregoing, in the event that any Benefits under the Plans are provided by insurance contracts which are owned by the Executives, such Executives may assign ownership of such contracts to any other person(s), to the extent permitted by law.

9

Section 6.2 Employment Rights . Employment rights shall not be enlarged or affected hereby. The Employers shall continue to

have the right to discharge an Executive, with or without cause. Section 6.3 Adoption of Plans by Employers . Any member of the Controlled Group may become an Employer under any of the

Plans with the prior approval of the Administrator by furnishing a certified copy of a resolution of its Board of Directors adopting the Plan(s). Any adoption of a Plan by an Employer, however, must either be authorized by the Board of Directors of the Company in advance or be ratified by such Board prior to the end of the Plan Year in which the Employer adopted the Plan(s). An Employer that ceases to exist or ceases to be a member of the Controlled Group shall automatically cease being a participating Employer under the Plans.

Section 6.4 Effect on other Benefits . Except as specifically provided in the Plans or in any other Employer-sponsored plan,

benefits payable to or with respect to an Executive under the Pension Plan or any other Employer-sponsored (qualified or nonqualified) plan, if any, are in addition to those provided under the Plans.

Section 6.5 Payment to Guardian . If the Administrator (in his sole discretion) determines that a Benefit payable under a Plan is

payable to a minor, to a person declared incompetent or to a person incapable of handling the disposition of his property, the Administrator may (in his or her sole discretion) direct payment of such Benefit to the spouse, parent, adult child, guardian, custodian under the Uniform Transfers to Minors Act of any state, legal representative or person or institution having the care and custody of such minor, incompetent or person. The Administrator may require such proof of incompetency, minority, incapacity or guardianship as it may deem appropriate prior to distribution of the Benefit. Such distribution shall completely discharge the Company and the Employers from all liability with respect to such Benefit.

Section 6.6 Notice . Any notice required or permitted to be given to the Administrator under the Plan shall be deemed sufficient

if in writing and hand delivered, or sent by registered or certified mail, to the General Counsel of the Company. Such notice shall be deemed given as of the date of receipt by the General Counsel (if delivery is made by hand) or as of the date shown on the postmark on the receipt for registration or certification (if delivery is made by mail).

Section 6.7 Officers . Any reference in the Plan to a particular officer of the Company shall also refer to the functional

equivalent of such officer in the event the title or responsibilities of that office change. Section 6.8 Specified Employee . For purposes of Code Section 409A and all plans, programs, policies and arrangements that

constitute plans of deferred compensation (within the meaning of the 409A Guidance), a “Specified Employee” shall mean an Employee who at any time during the calendar year immediately preceding the Employee’s Separation from Service was (1) a corporate officer of (a) the Company, (b) any Controlled Group member in the U.S., (c) any Controlled Group member outside the U.S., to which such individual was seconded by the Company or its U.S. Controlled Group member, or (d) an Employer outside the U.S.; (2) a

10

five-percent (5%) owner of the Company; or (3) a one-percent (1%) owner of the Company having annual compensation in excess of $150,000.” For purposes of this Section, an “officer” means any officer elected by the Board of Directors of the Company.

Section 6.9 Governing Law . The Plans shall be regulated, construed and administered under the laws of the State of Minnesota,

except when preempted by federal law. Section 6.10 Gender and Number . For purposes of interpreting the provisions of the Plans (including this Administrative

Document), the masculine gender shall be deemed to include the feminine, the feminine gender shall be deemed to include the masculine, and the singular shall include the plural, unless otherwise clearly required by the context.

Section 6.11 Severability . If any provision of a Plan (including this Administrative Document) or the application thereof to any

circumstances(s) or person(s) is held to be invalid by a court of competent jurisdiction, the remainder of such Plan and the application of such provision to other circumstances or persons shall not be affected thereby.

Section 6.12 Integration . The Plans (including this Administrative Document) constitute the entire agreement of the parties, and

no change, amendment or modification thereof shall be valid and binding unless made in writing in accordance with the provisions of Article V.

IN WITNESS WHEREOF, Ecolab Inc. has executed this Administrative Document and has caused its corporate seal to be affixed this 19 day of December, 2008.

11

ECOLAB INC.

By /s/ Steven L. Fritze

Steven L. Fritze

Chief Financial Officer (Seal)

Attest:


Lawrence T. Bell


th

EXHIBIT A

1. Ecolab Executive Death Benefits Plan 2. Ecolab Executive Long-Term Disability Plan 3. Ecolab Mirror Pension Plan 4. Ecolab Supplemental Executive Retirement Plan 5. Ecolab Mirror Savings Plan

EXHIBIT (10)P

ECOLAB INC.

CHANGE IN CONTROL SEVERANCE COMPENSATION POLICY

ARTICLE I - INTRODUCTION

Section 1.1 Background . The Board of Directors (the “Board”) of Ecolab Inc. (the “Company”) has considered the effect a Change in Control of the Company may have on certain Executives of the Company. The Board recognizes and understands the concern such Executives have for their careers and their personal financial security in the event of a Change in Control of the Company. As a result, absent appropriate assurances, such Executives are likely to seek more secure career opportunities elsewhere if a Change in Control of the Company is perceived to be a real possibility, or if a Change in Control transaction is proposed or threatened.

Section 1.2 Purpose . This Policy is designed to encourage Executives to remain employees of the Company and its Subsidiaries notwithstanding the time pressure and financial uncertainty which may result from a proposed or threatened Change in Control transaction and notwithstanding the outcome of any such proposed transaction, to enable Executives to make career decisions and to assure fair treatment of such Executives in the event of a Change in Control of the Company.

ARTICLE II - ESTABLISHMENT OF THE POLICY

Section 2.1 Establishment of Policy . As of February 22, 2002, the Company established this severance compensation Policy known as the “Change in Control Severance Compensation Policy” (this “policy”). The Company is hereby amending and restating the Policy effective as of the Effective Date.

Section 2.2 Applicability of Policy . The benefits provided by this Policy shall be available to all Executives who, at or after the Effective Date, meet the eligibility requirements of Article IV hereof.

Section 2.3 Contractual Right to Benefits . Subject to the provisions of Article VIII hereof, this Policy establishes and vests in each Participant a contractual right to the benefits to which he or she is entitled hereunder, enforceable by the Participant against the Company on the terms and subject to the conditions hereof.

ARTICLE III - DEFINITIONS AND CONSTRUCTION

Section 3.1 Definitions . The following terms shall have the following meanings when used in this Policy with initial capital letters:

(a) “ Base Pay ” of a Participant means the Participant’s annual base salary rate as in effect on the Termination Date from the Participant’s Employer(s); provided, however, that any reductions in Base Pay following the date of the Change in Control will not be taken into account when determining Base Pay hereunder.

(b) “ Board ” means the Board of Directors of the Company.

(c) “ Change in Control ” of the Company shall be deemed to have occurred if the events set forth in anyone of the following paragraphs shall have occurred:

(i) any “person” as such term is used in Sections B(d) and 14(d) of the Exchange Act (other than the Company, any trustee or other fiduciary holding securities under any employee benefit Policy of the Company or any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes, including pursuant to a tender or exchange offer for shares of Common Stock pursuant to which purchases are made, the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company’s then outstanding securities, other than in a transaction arranged or approved by the Board prior to its occurrence; provided, however, that if any such person will become the beneficial owner, directly or indirectly, of securities of the Company representing 34% or more of the combined voting power of the Company’s then outstanding securities, a Change in Control will be deemed to occur whether or not any or all of such beneficial ownership is obtained in a transaction arranged or approved by the Board prior to its occurrence, and other than in a transaction in which such person will have executed a written agreement with the Company (and approved by the Board) on or prior to the date in which such person becomes the beneficial owner of 25% or more of the combined voting power of the Company’s then outstanding securities, which agreement imposes one or more limitations on the amount of such person’s beneficial ownership of shares of Common Stock, if, and so long as, such agreement (or any amendment thereto approved by the Board provided that no such amendment will cure any prior breach of such agreement or any amendment thereto) continues to be binding on such person and such person is in compliance (as determined by the Board in its sole discretion) with the terms of such agreement (including such amendment); provided, however, that if any such person will become the beneficial owner, directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding securities, a Change in Control will be deemed to occur whether or not such beneficial ownership was held in compliance with such a binding agreement, and provided further that the provisions of this subparagraph (i) shall not be applicable to a transaction in which a corporation becomes the owner of all the Company’s outstanding securities in a transaction which complies with the provisions of subparagraph (iii) of this Section 3.1(c) (e.g., a reverse triangular merger); or

(ii) during any thirty-six consecutive calendar months, individuals who constitute the Board on the first day of such period or any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest including, but not limited to, a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company’s stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who were either directors on the first day of such

2

period, or whose appointment, election or nomination for election was previously so approved or recommended, shall cease for any reason to constitute at least a majority thereof; or (iii) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) more than 50% of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, and in which no “person” (as defined under Subsection (i) above) acquires 50% or more of the combined voting power of the securities of the Company or such surviving entity or parent thereof outstanding immediately after such merger or consolidation; or (iv) the stockholders of the Company approve a Policy of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, more than 50% of the combined voting power of the voting securities of which are owned by stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale.

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

(e) “ Company ” means Ecolab Inc., a Delaware corporation, and any successor thereto as provided in Section 7.1 hereof.

(f) “ Effective Date ” means January 1, 2005.

(g) “ Employer ” means the Company, any Subsidiary or any “affiliated organization” which employs an Executive. For purposes of this Policy, an “affiliated organization” is the Company and (i) any corporation that is a member of a controlled group of corporations (within the meaning of Code Section 1563(a) without regard to Code Sections 1563(a)(4) and 1563(e)(3)(C) that includes the Company, (ii) any trade or business (whether or not incorporated) that is controlled (within the meaning of Code Section 414(c)) by the Company, (iii) any member of an “affiliated service group” (within the meaning of Code Section 414(m) of which the Company is a member or (iv) any other organization that, together with the Company, is treated as a single employer pursuant to Code Section 414(o) or the regulations thereunder; provided that the provisions of Code Section 1563(a) shall be applied by substituting the phrase “more than 50 percent” for the phrase “at least 80 percent” wherever it appears in such Code Section.

(h) “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

3

(i) “ Executive ” means any person who is designated as an officer of the Company by the Board and who is employed by an Employer as a salaried employee on a substantially full-time basis, other than a person who is designated solely as an assistant officer.

(j) “ Good Reason ” means, without the express written consent of the Participant:

(i) the assignment to the Participant of any duties inconsistent in any substantial respect with the Participant’s position, authority or responsibilities as in effect during the 90-day period immediately preceding the Change in Control which assignment results in a substantial diminution in such position, authority or responsibilities or any other substantial adverse change in such position (including titles), authority or responsibilities, excluding an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Employer as set forth below.

(ii) any failure by the Employer to furnish the Participant with compensation and benefits at a level substantially equal to or exceeding those received by the Participant from the Employer during the 90-day period preceding the Change in Control, other than (A) an insubstantial and inadvertent failure remedied by the Employer as set forth below, (B) a reduction in compensation which is applied to all non-union employees of the Employer in the same dollar amount or percentage or (C) a reduction or modification of any employee benefit program covering substantially all of the employees of the Employer, which reduction or modification generally applies to all employees covered under such program; or

(iii) the Employer’s requiring the Participant to be based or to perform services at any office or location that is in excess of 50 miles from the principal location of the Participant’s work during the 90-day period immediately preceding the Change in Control, except for travel reasonably required in the performance of the Participant’s responsibilities.

Before a termination by the Participant under this Section 3.1(j) will constitute termination for Good Reason, the Participant must give the Company a Notice of Termination within 30 calendar days of the occurrence of the event that constitutes Good Reason. Failure to provide such Notice of Termination within such 30-day period shall be conclusive proof that the Participant shall not have Good Reason to terminate employment. For purposes of this Section 3.1(j), Good Reason shall exist only if the Employer fails to remedy the event or events constituting Good Reason within 30 calendar days after receipt of the Notice of Termination from the Participant. If the Participant determines that Good Reason for termination exists and timely files a Notice of Termination, such determination shall be presumed to be true and the Company will have the burden of proving that Good Reason does not exist. (k) “ Incentive Pay ” means the target bonus as notified to the Participant for the year in which the Termination Date occurs under the Management Incentive Plan or the

4

Management Performance Incentive Plan, as applicable to the Participant, or if such Plan or Plans are no longer in effect, the annual bonus, incentive or other payment of compensation in addition to Base Pay, made or to be made in regard to services rendered in any year or other annual measurement period pursuant to any bonus, incentive, performance, or similar agreement, policy, Policy, program or arrangement of the Employer or any successor thereto.

(l) “ Just Cause ” means without the written consent of the Company, the Participant (i) participates in dishonesty, fraud, misrepresentation, embezzlement or deliberate injury or attempted injury, in each case related to the Company, an Employer or a Subsidiary, (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 Participant’s overall duties or (iv) materially breaches any confidentiality or noncompete agreement entered into with the Company or an Employer. The Company shall have the burden of proving that Just Cause exists. For purposes of this Policy, the Participant shall not be deemed to have been terminated for “Just Cause” hereunder unless (A) the Participant receives a Notice of Termination setting forth the grounds for the termination at least 30 calendar days prior to the specified Termination Date, (B) if requested by the Participant, the Participant (and/or the Participant’s counsel or other representative) is granted a hearing before the full Board and (C) a majority of the members of the full Board determine that the Participant violated one or more of the provisions of the definition of “Just Cause” set forth above. (m) “ Notice of Termination ” means (i) a written notice of termination by the Company to the Executive or (ii) a written notice of termination for Good Reason by the Executive to the Company, in either case, setting forth in reasonable detail the specific reason for termination and the facts and circumstances claimed to provide a basis for termination of employment under the provision indicated. (n) “ Participant ” means an Executive who meets the eligibility requirements of Article IV hereof, other than an Executive who has entered into an employment, severance or other similar agreement with the Company (other than a stock option or restricted stock agreement or other form of participation document entered into pursuant to an Employer-sponsored plan which may incidentally refer to accelerated vesting or accelerated payment upon a change in control (as defined in such separate plan or document)) which becomes operative upon the occurrence of a change in control of the Company (as defined in such agreement). (o) “ Policy ” means this Change in Control Severance Compensation Policy. (p) “ Protection Period ” means the period of time commencing on the date of the first occurrence of a Change in Control and continuing until the second anniversary of the occurrence of the Change in Control. (q) “ Severance Payment ” means the payment of severance compensation as provided in Article V hereof.

5

(r) “ Subsidiary ” means any corporation or other legal entity a majority of the securities entitled to vote generally in the election of directors of which are owned by the Company or another Subsidiary of the Company.

(s) “ Termination Date ” means, (i) with respect to a termination by the Employer, the date on which the Participant’s employment is terminated as stated in the Notice of Termination and (ii) with respect to a termination by the Participant for Good Reason, the date that is 15 calendar days following the Company’s receipt of the Notice of Termination.

Section 3.2 Status of Policy/Applicable Law .

(a) This Policy is classified as a “payroll practice” under Department of Labor Regulation Section 2510.3-1(b) and, as such is not subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended. The Policy will be interpreted and administered accordingly.

(b) This Policy shall be administered, construed and enforced according to the laws of the State of Minnesota.

Section 3.3 Severability . If a provision of this Policy shall be held illegal or invalid, the illegality or invalidity shall not affect the remaining parts of this Policy and this Policy shall be construed and enforced as if the illegal or invalid provision had not been included.

ARTICLE IV - ELIGIBILITY

Section 4.1 Participation . Each person who is an Executive on the Effective Date shall be a Participant on the Effective Date. Thereafter, each other person who becomes an Executive prior to both (a) a Change in Control and (b), unless specifically provided for by the Board at the time a Participant is elected as an Executive, the date a notice of termination of the Policy is provided under Section 8.1(a), shall automatically become a Participant on the day on which such person becomes an Executive. Section 4.2 Duration of Participation . A Participant shall cease to be a Participant and shall have no rights hereunder, without further action, when he or she ceases to be an Executive, unless such Participant is then entitled to payment of a Severance Payment as provided in Section 5.1 hereof. A Participant entitled to a Severance Payment shall remain a Participant in this Policy until the full amount of the Severance Payment has been paid to the Participant.

ARTICLE V - SEVERANCE PAYMENTS

Section 5.1 Right to Severance Payment .

(a) Subject to Subsection (c) hereof, a Participant shall be entitled to receive from the Company a Severance Payment in the amount provided in Section 5.2 hereof if there has been a Change in Control and if, after a Change in Control and within the Protection Period, (i) the Participant’s employment by an Employer shall be terminated by the

6

Employer without Just Cause or (ii) the Participant shall terminate employment with an Employer for Good Reason.

(b) Notwithstanding anything to the contrary contained in this Policy, any termination of employment of the Participant or removal of the Participant from the office or position in the Company that occurs prior to a Change in Control but which the Participant reasonably demonstrates occurred at the request of a third party who had taken steps reasonably calculated to effect the Change in Control shall be deemed to be a termination or removal of the Participant after a Change in Control for purposes of this Policy.

(c) Notwithstanding anything to the contrary contained in this Policy, a Participant shall not be entitled to receive any Severance Payment hereunder unless, no later than by March 10 of the calendar year following the calendar year of the Participant’s Termination Date (i) he or she has signed and returned to the Company a release in the form prescribed by the Company and (ii) the applicable rescission period for such release has expired.

Section 5.2 Amount of Severance Payment .

(a) Each Participant entitled to a Severance Payment under this Policy shall receive the following Severance Payment from the Company.

(i) A lump sum cash payment in an amount equal to two times the sum of (A) the Participant’s Base Pay plus (B) Incentive Pay; provided, however, that the amount of such cash payment determined pursuant to this Section 5.2(a)(i) shall be reduced by an amount equal to the aggregate amount of any other cash payments in the nature of severance payments paid or payable by the Company or the Employer or any Subsidiary pursuant to any agreement, policy, program, arrangement or requirement of statutory or common law (other than this Policy or cash payments received in lieu of stock incentives); (ii) A lump sum cash payment in an amount equal to (A) the Incentive Pay for the year in which the Termination Date occurs, pro rated to reflect time worked during the year in which the Termination Date occurs, days worked during the year divided by 365 days times the Incentive Pay expressed as a dollar amount) and (B) reduced by any amounts paid under the terms of the applicable incentive bonus Policy itself for the same period of time; (iii) Reasonable fees for outplacement services, by a firm selected by the Company and at the expense of the Company, in an amount not in excess of 20% of Base Pay; provided, however, that all such fees shall be incurred by the Participant no later than the last day of the second calendar year, and all amounts under this paragraph (iii) shall be paid no later than the last day of the third calendar year, following the year in which the Participant’s Termination Date occurs; and

(iv) Eligibility for continuation coverage pursuant to Section 4980B of the Code (or any successor provision thereto) under the Employer’s medical, dental

7

and other group health plans, or successor plans as in effect from time to time; provided, however, that (A) the Company shall reimburse the Participant, on a semi-annual basis, for any costs incurred in securing such continuation coverage that are in excess of the costs that would have been incurred by the Participant immediately prior to the Termination Date to obtain such coverage and (B) such reimbursements shall in no event continue beyond a period of eighteen (18) months following the Termination Date.

(b) Notwithstanding any provision of this Policy to the contrary, if any amount or benefit to be paid or provided under this Policy or any other plan or agreement between the Participant and an Employer 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 Policy 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 Participant, 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 Participant or the Employer, the determination of whether any reduction in such payments or benefits to be provided under this Policy 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 accounts shall be final and binding on all persons. The fact that the Participant’s right to payments or benefits may be reduced by reason of the limitations contained in this Section 5.2(b) shall not of itself limit or otherwise affect any other rights of the Participant pursuant to this Policy. In the event that any payment or benefit intended to be provided under this Policy or otherwise is required to be reduced pursuant to this Section, payment under this Policy shall be reduced before payments under any other arrangements are reduced and the Participant (in his or her sole discretion) shall be entitled to designate the payments and/or benefits under this Policy to be so reduced in order to give effect to this Section. The Employer shall provide the Participant with all information reasonably requested by the Participant to permit the Participant to make such designation. In the event that the Participant fails to make such designation within ten business days of receiving such information, the Employer may effect such reduction in any manner it deems appropriate. (c) The Participant shall not be required to mitigate damages or the amount of his or her Severance Payment by seeking other employment or otherwise, nor shall the amount of such payment be reduced by any compensation earned by the Participant as a result of employment after the termination of his or her employment by an Employer.

Section 5.3 Time of Severance Payment . The Severance Payment to which a Participant is entitled under Section 5.2(a)(i) and (ii) shall be paid to the Participant by the Company in cash and in full, not later than March 15 of the calendar year following the calendar year in which the Participant’s Termination Date occurs, subject to Section 5.1(c). If such a Participant should die

8

before all amounts payable to him have been paid, such unpaid amounts shall be paid to the Participant’s spouse, if living, otherwise to the personal representative of the Participant’s estate. Section 5.4 Liability for Payment . The Company shall be solely liable for and shall pay the Severance Payments (or cause the Severance Payments to be paid) to the Executive.

ARTICLE VI - OTHER RIGHTS AND BENEFITS NOT AFFECTED

Section 6.1 Other Benefits . Except as provided in Section 5.2(b), neither the provisions of this Policy nor the Severance Payment provided for hereunder shall reduce or increase any amounts otherwise payable, or in any other way affect a Participant’s rights as an employee of an Employer, whether existing now or hereafter, under any benefit, incentive, retirement, stock option, stock bonus, stock purchase or employment agreement, policy (other than this Policy), program or arrangement (collectively, the “Other Plans”), except to the extent specifically provided under such Other Plans. Section 6.2 Certain Limitations . This Policy does not constitute a contract of employment or impose on any Participant, the Company or any other Employer any obligation to retain any Participant as an employee or in any other capacity, to change or not change the status, terms or conditions of any Participant’s employment, or to change or not change the Employer’s policies regarding termination of employment.

ARTICLE VII - SUCCESSORS SECTION

Section 7.1 Successors . Without limiting the obligations of any person or entity under applicable law, the Company shall require any successor or assignee, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all the business or assets of the Company, expressly and unconditionally to assume and agree to perform the Company’s obligations under this Policy, in the same manner and to the same extent that the Company would be required to perform if no such succession or assignment had taken place. In such event, the term “Company,” as used in this Policy, shall mean the Company as hereinbefore defined and any successor assignee to the business or assets which by reason hereof becomes bound by the terms and provisions of this Policy.

ARTICLE VIII - DURATION, AMENDMENT AND TERMINATION Section 8.1 Duration/Termination .

(a) This Policy will terminate as to all Participants: (i) if a Change in Control has not occurred, the date that is 2 years following the giving of notice to each Executive who is a Participant on the date of the notice that the Board has determined (by resolution adopted by a majority of the members of the Board) that the Policy will terminate; and (ii) if a Change in Control has occurred, the expiration of the Protection Period. (b) Notwithstanding the foregoing, if a Change in Control occurs, this Policy shall continue in full force and effect, and shall not terminate or expire until after all Participants who were Participants on the date of the Change in Control who became entitled to a Severance Payment hereunder shall have received such payment in full.

9

Section 8.2 Amendment . Unless a Change in Control has previously occurred, this Policy may be amended in any respect by resolution adopted by a majority of the members of the Board; provided, however, that no such amendment shall adversely affect the rights of a Participant under this Policy without the Participant’s consent unless such amendment does not become effective until the date that is two years following the giving of notice to all Participants of the adoption of such amendment by the Board. If a Change in Control occurs, notwithstanding the foregoing, this Policy no longer shall be subject to amendment, change, substitution, deletion or revocation in any respect. Section 8.3 Form of Amendment/Termination . The form of any proper amendment or termination of this Policy shall be a written instrument signed by a duly authorized officer or officers of the Company, certifying that the amendment or termination has been approved by the Board as provided in Sections 8.1 or 8.2 hereof. A proper amendment of this Policy automatically shall effect a corresponding amendment to all Participants’ rights hereunder. A proper termination of this Policy automatically shall effect a termination of all Participants’ rights and benefits hereunder without further action.

ARTICLE IX - MISCELLANEOUS SECTION

Section 9.1 Legal Fees and Expenses/Binding Arbitration .

(a) It is the intent of the Company that Participants not be required to incur any expenses associated with the enforcement of rights under this Policy because the cost and expense thereof would substantially detract from the benefits intended to be extended to Participants hereunder. Accordingly, if the Company or any Employer, as the case may be, has failed to comply with any of its obligations under this Policy or in the event that the Company or any Employer, or any other person takes any action to declare this Policy void or unenforceable, or institutes any litigation designed to deny, or to recover from, a Participant the benefits intended to be provided to the Participant hereunder, the Company and each Employer irrevocably authorizes the Participant from time to time to retain counsel of his or her choice, at the expense of the Company, as hereafter provided, to represent the Participant in connection with the initiation or defense of any legal action, whether by or against the Company or any Employer, in any jurisdiction. The Company shall pay or cause to be paid and shall be solely responsible for any and all reasonable attorneys’ fees and expenses incurred by the Participant in enforcing his or her rights hereunder individually (but not as a representative of any class) as a result of the Company’s or any Employer’s, failure to perform this Policy or any provision hereof or as a result of the Company or any Employer, or any person contesting the validity or enforceability of this Policy or any provision hereof. (b) Notwithstanding any provision of this Policy to the contrary, (including, without limitation, determining whether a termination is for Just Cause or with Good Reason) any dispute or controversy arising under or in connection with this Policy shall be settled by binding arbitration, conducted before a panel of three arbitrators sitting in a location selected by the Participant within 50 miles from the location of his or her job with his or her Employer, in accordance with current Employment Dispute rules of the American Arbitration Association (“AAA”) then in effect. Within fifteen days after the

10

commencement of arbitration, each of the Company and the Participant shall select one person to act as arbitrator, and the two selected shall select a third arbitrator within ten days of their appointment. If the arbitrators are unable or fail to agree upon the third arbitrator, the third arbitrator shall be selected by the AAA. Judgment shall be entered on the award of the arbitrator in any court having jurisdiction. All expenses of such arbitration, including the fees and expenses of the counsel for the Participant, shall be borne by the Company. (c) Notwithstanding any provision of the Policy to the contrary, all fees and expenses subject to payment or reimbursement pursuant to this Section 9.1 shall be paid not later than the last day of the calendar year following the calendar year in which the Participant incurs such fees or expenses. The Participant shall be solely responsible for timely providing to the Company sufficient proof of the fees and expenses to be paid or reimbursed pursuant to this Section.

Section 9.2 Withholding of Taxes . The Employer may withhold from any amounts payable under this Policy all foreign, federal, provincial, state, city or other taxes as shall be required pursuant to any law or government regulation or ruling. Section 9.3 Successors .

(a) This Policy shall inure to the benefit of and be enforceable by the Participant’s personal or legal representatives, executors, administrators, successors, heirs, distributees and/or legatees. (b) The rights under this Policy are personal in nature and neither the Company nor any Participant shall, without the consent of the other, assign, transfer or delegate any rights or obligations hereunder except as expressly provided in Section 7.2 hereof. Without limiting the generality of the foregoing, the Participant’s right to receive a Severance Payment hereunder shall not be assignable, transferable or delegable, whether by pledge, creation of a security interest or otherwise, other than by a transfer by his or her will or by the laws of descent and distribution and, in the event of any attempted assignment or transfer contrary to this Section 9.3(b), the Company, shall have no liability to pay any amount so attempted to be assigned, transferred or delegated. (c) The Company and each Participant recognize that each party will have no adequate remedy at law for breach by the other of any of the agreements contained herein and, in the event of any such breach, the Company, and each Participant hereby agree and consent that the other shall be entitled to a decree of specific performance, mandamus or other appropriate remedy to enforce performance of this Policy.

Section 9.4 Notices . For all purposes of this Policy, all communications, including without limitation notices, consents, requests or approvals provided for herein shall be in writing and shall be deemed to have been duly given when delivered or five business days after having been mailed by registered or certified mail, return receipt requested, postage prepaid, addressed to the Company, (to the attention of the General Counsel of the Company), at its principal executive office and to any Participant at his or her principal residence as shown in the relevant records of

11

the Employer, or to such other address as any party may have furnished to the other in writing and in accordance herewith, except that notices of change of address shall be effective only upon receipt

Executed this 19 day of December, 2008, to be effective on the Effective Date.

12

ECOLAB INC.


Steven L. Fritze

Chief Financial Officer Attest: /s/ Lawrence T. Bell

Lawrence T. Bell


th

Exhibit (10)Q

DESCRIPTION OF ECOLAB INC. MANAGEMENT INCENTIVE PLAN

Ecolab Inc. (the “Company”) maintains annual cash incentive plans for executives that are designed to motivate executives to achieve annual business and individual goals. These plans are referred to as the Management Incentive Plan (“MIP”) and the Management Performance Incentive Plan (the “MPIP”). The MPIP is a stockholder-approved plan designed and administered in a manner intended to preserve the Company’s federal income tax deductions. It is set forth in a plan document filed with other management agreements as an exhibit to the Company’s Annual Report on Form 10-K. The MIP is not set forth in a formal plan document. Set forth below is a summary of the MIP as it applies to the executive officers of the Company who do not otherwise receive awards under the MPIP. Target Award Opportunities — Under the MIP, the Compensation Committee of the Company’s Board of Directors establishes the annual target award opportunities expressed as a percentage of base salary paid during the fiscal year, and threshold and maximum award payment limits expressed as a percentage of the target award for each executive officer. Performance Measures — Under the MIP, performance is measured using a mix of overall corporate, business unit, and individual measures to foster cross-divisional cooperation and to assure that executives have a reasonable measure of control over the factors that affect their awards. This performance measure mix varies by executive position. Performance Goals — Under the MIP, overall corporate performance is based on pro forma diluted earnings per share goals. In establishing the goals the Company takes into consideration prior year results, expected economic and market influences, other large companies’ performance expectations and anticipated business opportunities, investment requirements and competitive situation. Under the MIP, business unit performance is generally measured based on, but not limited to, the achievement of revenue and operating income goals. In establishing these goals the Company takes into consideration prior year results and growth opportunities, investment requirements and market influences. Generally, the Compensation Committee sets the threshold, target and maximum levels under the MIP such that the intended relative difficulty of achieving the target level is consistent from year to year. Under the MIP, individual performance goals are specific, qualitative, achievable with significant effort and, if achieved, provide benefit to the Company. Payout Approval — As soon as practicable after the end of the plan year and after the Compensation Committee has received the appropriate financial and other data, the Compensation Committee will, for each executive officer, approve the achievement of performance goals and the corresponding amount of the award earned. The Compensation Committee reviews and approves all adjustments to the Company’s overall corporate and business unit performance results. Discretionary Adjustments — To recognize individual performance, the Compensation Committee also may increase or decrease an executive officer’s MIP award, with input from the principal executive officer, based on the individual performance of the executive officer. This is done to recognize either inferior or superior individual performance in cases where this performance is not fully represented by the performance measures.

EXHIBIT (10)T

2009 NAMED EXECUTIVE OFFICER SUMMARY OF BASE SALARY, BONUS AWARD OPPORTUNITIES,

AND EXECUTIVE BENEFITS AND PERQUISITES

Base Salary The table below sets forth the base salaries established for the 2009 fiscal year for the Company’s Principal Executive Officer and Principal Financial Officer and the next three most-highly compensated executive officers who were serving in those capacities at December 31, 2008 (the “NEOs”).

Bonus Award Opportunities The Company maintains annual cash incentive programs for executives referred to as the Management Incentive Plan or MIP and Management Performance Incentive Plan or MPIP. The Company’s stockholders approved the current version of the MPIP in 2004, an annual incentive plan under which awards should qualify as performance based under Internal Revenue Code Section 162(m). The Company is asking its shareholders to re-approve the MPIP at the 2009 Annual Meeting of Shareholders. On February 25, 2009, as required under the terms of the MPIP, the Compensation Committee of the Board (“Committee”) selected each of the NEOs to participate in the MPIP for 2009 and established the 2009 performance goal based upon the performance criteria of diluted earnings per share (“EPS”), and EPS performance target of a designated earnings per share, and a cash award of 300% of the base salary of each such officer for 2009 to the extent the goal is achieved. The award is subject to and interpreted in accordance with the terms and conditions of the MPIP and no amount will be paid under the MPIP unless and until the Committee has determined the extent to which the performance goal has been met and the corresponding amount of the award earned by the participant. The MPIP permits the Committee to exercise downward discretion so as to pay an amount which is less than the amount of the award earned by the participant. In applying this downward discretion, the Committee considers underlying operable metrics communicated to the participant, which are noted in the table below. Although the chart below indicates a threshold payment, a named executive officer may receive no

Name and Principal Position Amount

Douglas M. Baker, Jr. Chairman of the Board, President and Chief Executive Officer

$ 1,000,000

Steven L. Fritze Chief Financial Officer

$ 500,000

James A. Miller President Institutional North America Sector

$ 437,500

Thomas W. Handley President Industrial and Services North America Sector

$ 425,000

Lawrence T. Bell General Counsel and Secretary

$ 400,000

payment as determined by results and approved by the Compensation Committee.

Executive Benefits and Perquisites

The Company’s named executive officers participate in all the same health care, disability, life insurance, pension, and 401(k) benefit plans made available generally to the Company’s U.S. Employees. In addition, the Company’s named executive officers are eligible to participate in a deferred compensation program, restoration plans for the qualified 401(k) and pension plans, a supplement retirement benefit and an executive disability and life benefit. Our named executive officers receive the following perquisites: an executive cash allowance in lieu of a company automobile, executive physical examinations, financial planning, spousal travel in limited circumstances.

Target Award

Opportunity (% of base

salary)

Potential Award Payouts at Different Levels of Performance (% of Target Award)

Performance Measure Mix

Name Threshold

Target Max

EPS

Business Unit

Individual

Douglas M. Baker, Jr. 130 % 40 % 100 % 200 % 100 % 0 % 0 %

Steven L. Fritze 70 % 40 % 100 % 200 % 70 % 0 % 30 %

James A. Miller 70 % 40 % 100 % 200 % 30 % 70 % 0 %

Lawrence T. Bell 60 % 40 % 100 % 200 % 70 % 0 % 30 %

Thomas W. Handley 70 % 40 % 100 % 200 % 30 % 70 % 0 %

EXHIBIT (10)U

NON-EMPLOYEE DIRECTOR COMPENSATION AND BENEFITS SUM MARY

COMPENSATION Annual Payments

In addition, a number of shares of stock units are credited annually to each director’s deferred stock unit account. The Board has fixed the annual value of the stock units to one-half the value of the annual retainer, or $35,000. All reasonable travel, telephone and other expenses incurred on behalf of Ecolab are reimbursable. Directors may choose, at the time of initial election to the Board and annually thereafter, to have the portions of their compensation which are paid in cash deferred into an interest bearing deferred account or the stock unit account. Deferred Accounts Deferred accounts are of two types: (i) stock unit accounts which are comprised of stock equivalents, which increase/decrease with Ecolab’s stock price and are credited with dividend equivalents; and (ii) interest-bearing accounts, which are credited with interest at the prime rate. Deferred accounts for a director are tax deferred until the director ceases Board service. At that time, the proceeds are paid in a lump sum or in equal annual installments for up to 10 years depending on the director’s election, which can be made, generally, as late as one year prior to leaving the Board for amounts deferred before 2005. Amounts deferred in 2005 or later must be paid in a lump sum. Amounts deferred to the interest-bearing account, are paid in cash. Amounts in the stock unit account are paid in Ecolab stock. Upon death, a lump sum of any remaining amounts will be paid to the director’s beneficiary. BENEFITS Stock Option Plan Directors receive a non-qualified option to purchase a number of shares of Common Stock, as fixed from time-to-time by the fair market value on such date. The right to exercise the option vests 25% at the end of each three-month period following the grant date. Currently, the Board has fixed the value of the annual stock option grant at $55,000.

Annual Retainer $ 70,000

Committee Chair Fee

• Audit $ 15,000 / 7,500 (for other members)

• Compensation and Finance $ 10,000

• Governance / Presiding Director $ 15,000

Options may be exercised for a period of 10 years from grant. However, in the event a director ceases to be a director, the exercise period is shortened to the lesser of five years from the date the director terminates director status or the remaining term of the original option period. Matching Gifts Ecolab will match, up to $1,000 per fiscal year, a director’s contributions to accredited U.S. educational institutions and an additional $100 for contributions to qualifying U.S. public radio and television stations. Eligibility for this program continues through the calendar year in which a director ceases to be a director. Travel Insurance Directors are covered by $150,000 business travel accident coverage while traveling on Ecolab business. Director Liability Protection • The current D&O coverage is $75 million. There is no individual deductible. • Ecolab’s Certificate of Incorporation eliminates the ability of Ecolab or its stockholders to recover monetary damages resulting from good-

faith breaches of certain fiduciary duties by a director. • Directors are entitled to indemnification by Ecolab for actions as a director taken in good faith and in a manner reasonably believed to be in,

or not opposed to, the best interests of Ecolab.

EXHIBIT (10)V(ii)

AMENDMENT NO. 1 TO ECOLAB INC. 2005 STOCK INCENTIVE PLAN

WHEREAS, Ecolab Inc. (the “Company”) adopted the 2005 Stock Incentive Plan, effective as of May 6, 2005 (the “Plan”);

WHEREAS, the Company wishes to adopt changes to the Plan with respect to the exercise period following termination of employment

due to death or disability;

NOW THEREFORE, pursuant to the amending power reserved to the Company’s Board of Directors by Section 18 of the Plan, the Board of Directors adopted this Amendment No. 1 to the Plan on October 31, 2008.

Section 1

Section 11.1(a) is amended and restated to read as follows:

“(a) All outstanding Options and Stock Appreciation Rights then held by the Participant will become immediately exercisable in full and will remain exercisable for a period of five years after such termination (but in no event after the expiration date of any such Option or Stock Appreciation Right);”

Section 2

In addition to the amendment provided above, the terms of all Options outstanding as of October 31, 2008 for Participants satisfying the definition of employee under Statement of Financial Accounting Standards No. 123 (revised 2004) as of such date are hereby amended to provide that in the event the Participant’s employment or other service with the Company and all Subsidiaries is terminated by reason of death or Disability such Options will become immediately exercisable in full and will remain exercisable for a period of five years after such termination (but in no event after the expiration date of any such Option).


ECOLAB INC.


Michael L. Meyer

Senior Vice President — Human Resources Attest:

By: /s/ Sarah Z. Erickson

Sarah Z. Erickson

Associate General Counsel — Corporate and Assistant Secretary

st

EXHIBIT (10)V(iv)

NON-STATUTORY STOCK OPTION AGREEMENT THIS AGREEMENT is entered into and effective as of this day of , (the “Date of Grant”), by and between Ecolab Inc. (the “Company”) and «Firstnamefirst» (the “Optionee”).

A. The Company has adopted the Ecolab Inc. 2005 Stock Incentive Plan (the “Plan”), authorizing the Board of Directors of the Company, or a committee as provided for in the Plan (the Board or such a committee to be referred to as the “Committee”), to grant non-statutory stock options to employees, consultants, advisors and independent contractors of the Company and its Subsidiaries.

B. The Company desires to give the Optionee an inducement to acquire a proprietary interest in the Company and an added

incentive to advance the interests of the Company by granting to the Optionee an option to purchase shares of common stock of the Company pursuant to the Plan.

Accordingly, the parties agree as follows:

ARTICLE 1. GRANT OF OPTION .

The Company hereby grants to the Optionee the option (the “Option”) to purchase «Long_Type» («Shares») shares (the “Option Shares”) of the Company’s common stock, $1.00 par value (the “Common Stock”), according to the terms and subject to the conditions hereinafter set forth and as set forth in the Plan. The Option is not intended to be an “incentive stock option,” as that term is used in Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).

ARTICLE 2. OPTION EXERCISE PRICE .

The per share price to be paid by Optionee in the event of an exercise of the Option will be $«Price».

ARTICLE 3. DURATION OF OPTION AND TIME OF EXERCISE .

3.1 Initial Period of Exercisability . The Option will be exercisable, on a cumulative basis, as to one-third of the Option Shares (excluding any fractional portion less than one share), on each of the first and second anniversaries of the Date of Grant and as to the remaining Option Shares on the third anniversary of the Date of Grant. This Option will remain exercisable as to all unexercised Option Shares until 5:00 p.m. (St. Paul, Minnesota time) on the tenth anniversary of the Date of Grant (“Time of Termination”).

3.2 Termination of Employment or Other Service . (a) In the event that the Optionee’s employment or other service with the Company and all Subsidiaries is terminated by reason of

the Optionee’s death or Disability, this Option will become immediately exercisable in full and will remain exercisable for a period of five years after such termination (but in no event will this Option be exercisable after the Time of Termination).

(b)(i) In the event that the Optionee’s employment or other service with the Company and all Subsidiaries is terminated by reason of the Optionee’s Retirement, then, subject to clause (ii) hereof, this Option, if it has been outstanding at least six months from the Date of Grant, will become exercisable in full immediately prior to such termination and remain exercisable for a period of five years after such termination (but in no event will this Option be exercisable after the Time of Termination); (ii) The acceleration of exercisability of the Option provided for in clause (i) hereof will not occur in the event that the Optionee has committed an act which constitutes Cause, which shall be determined by the Committee acting in its sole discretion, irrespective of whether such action or the Committee’s determination occurs before or after termination of the Optionee’s employment with the Company or any Subsidiary. (c) In the event the Optionee’s employment or other service with the Company and all Subsidiaries is terminated for any reason

other than death, Disability or Retirement, all rights of the Optionee under the Plan and this Agreement will immediately terminate without notice of any kind, and this Option will no longer be exercisable; provided, however that if such termination is due to any reason other than termination by the Company or any Subsidiary for Cause, this Option will remain exercisable to the extent exercisable as of such termination for a period of three months after such termination (but in no event will this Option be exercisable after the Time of Termination).

3.3 Change in Control . In the event of a Change in Control, then this Option, if it has been outstanding for at least six months

from the Date of Grant, will become immediately exercisable in full and will remain exercisable in accordance with the provisions of this Agreement.

3.4 Effects of Actions Constituting Cause . Notwithstanding anything in this Agreement to the contrary, in the event that the

Optionee is determined by the Committee, acting in its sole discretion, to have committed any action which would constitute Cause, irrespective of whether such action or the Committee’s determination occurs before or after termination of the Optionee’s employment with the Company or any Subsidiary, all rights of the Optionee under the Plan and this Agreement shall terminate and be forfeited without notice of any kind. The Company may defer the

exercise of this Option for up to forty-five (45) days in order for the Committee to make any determination as to the existence of Cause.

ARTICLE 4. MANNER OF OPTION EXERCISE

4.1 Notice . This Option may be exercised by the Optionee in whole or in part from time to time, subject to the conditions contained in the Plan and in this Agreement, by delivery, in person, by facsimile or electronic transmission or through the mail, to the Company at its principal executive office in St. Paul, Minnesota (Attention: Sr. Vice President-Human Resources), of a written notice of exercise. Such notice will be in a form satisfactory to the Committee, will identify the Option, will specify the number of Option Shares with respect to which the Option is being exercised, and will be signed by the person or persons so exercising the Option. Such notice will be accompanied by payment in full of the total purchase price of the Option Shares purchased. In the event that the Option is being exercised, as provided by the Plan and Section 3.2 above, by any person or persons other than the Optionee, the notice will be accompanied by appropriate proof of right of such person or persons to exercise the Option. As soon as practicable after the effective exercise of the Option, the Optionee will be recorded on the stock transfer books of the Company as the owner of the Option Shares purchased, and the Company will deliver to the Optionee certificated or uncertificated (“book entry”) shares. In the event that the Option is being exercised, as provided by resolutions of the Committee and Section 4.2 below, by tender of a Broker Exercise Notice, the Company will deliver such shares directly to the Optionee’s broker or dealer or their nominee.

4.2 Payment . At the time of exercise of this Option, the Optionee will pay the total purchase price of the Option Shares to be purchased solely in cash (including a check, bank draft or money order, payable to the order of the Company); provided, however, that the Committee, in its sole discretion, may allow such payment to be made, in whole or in part, by tender of a Broker Exercise Notice, by tender, or attestation as to ownership, of Previously Acquired Shares that have been held for the period of time necessary to avoid a charge to the Company’s earnings for financial reporting purposes and that are otherwise acceptable to the Committee, by a “net exercise” as described in the Plan, or by a combination of such methods. In the event the Optionee is permitted to pay the total purchase price of this Option in whole or in part by tender or attestation as to ownership of Previously Acquired Shares, the value of such shares will be equal to their Fair Market Value on the date of exercise of this Option.

ARTICLE 5. NONTRANSFERABILITY .

Neither this Option nor the Option Shares acquired upon exercise may be transferred by the Optionee, either voluntarily or involuntarily, or subjected to any lien, directly or indirectly, by operation of law or otherwise, except as provided in the Plan. Any attempt to transfer or encumber this Option or the Option Shares other than in accordance with this Agreement and the Plan will be null and void and will void this Option.

ARTICLE 6. EMPLOYMENT OR OTHER SERVICE .

Nothing in this Agreement will be construed to (a) limit in any way the right of the Company to terminate the employment or service of the Optionee at any time, or (b) be evidence of any agreement or understanding, express or implied, that the Company will retain the Optionee in any particular position, at any particular rate of compensation or for any particular period of time.

ARTICLE 7. WITHHOLDING TAXES .

7.1 General Rules . The Company is entitled to (a) withhold and deduct from future wages of the Optionee (or from other amounts which may be due and owing to the Optionee from the Company), or make other arrangements for the collection of, all legally required amounts necessary to satisfy any federal, state or local withholding and employment-related tax requirements attributable to the grant or exercise of this Option or otherwise incurred with respect to this Option, (b) withhold shares of Common Stock from the shares issued or otherwise issuable to the Optionee in connection with this Option, or (c) require the Optionee promptly to remit the amount of such withholding to the Company before acting on the Optionee’s notice of exercise of this Option. In the event that the Company is unable to withhold such amounts, for whatever reason, the Optionee must promptly pay the Company an amount equal to the amount the Company would otherwise be required to withhold under federal, state or local law.

7.2 Special Rules . The Committee may, in its sole discretion and upon terms and conditions established by the Committee,

permit or require the Optionee to satisfy, in whole or in part, any withholding or tax obligation as described in Section 7.1 above by electing to tender, or by attestation as to ownership of, Previously Acquired Shares that have been held for the period of time necessary to avoid a charge to the Company’s earnings for financial reporting purposes and that are otherwise acceptable to the Committee, or by a Broker Exercise Notice, or by a combination of such methods. For purposes of satisfying a Participant’s withholding or employment-related tax obligation, Previously Acquired Shares tendered or covered by an attestation will be valued at their Fair Market Value.

ARTICLE 8. ADJUSTMENTS .

In the event of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering, divestiture or extraordinary dividend (including a spin-off), or any other change in the corporate structure or shares of the Company, the Committee (or, if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation), in order to prevent dilution or enlargement of the rights of the

Optionee, will make appropriate adjustment (which determination will be conclusive) as to the number, kind and exercise price of securities subject to this Option.

ARTICLE 9. SUBJECT TO PLAN .

9.1 Terms of Plan Prevail . The Option has been and the Option Shares granted and issued pursuant to this Agreement will be granted and issued under, and are subject to the terms of, the Plan. The terms of the Plan are incorporated by reference in this Agreement in their entirety, and the Optionee, by execution of this Agreement, acknowledges having received a copy of the Plan. The provisions of this Agreement will be interpreted as to be consistent with the Plan, and any ambiguities in this Agreement will be interpreted by reference to the Plan. In the event that any provision of this Agreement is inconsistent with the terms of the Plan, the terms of the Plan will prevail.

9.2 Definitions . Unless otherwise defined in this Agreement, the terms capitalized in this Agreement have the same meanings as

given to such terms in the Plan. ARTICLE 10. MISCELLANEOUS .

10.1 Binding Effect . This Agreement will be binding upon the heirs, executors, administrators and successors of the parties to this Agreement.

10.2 Governing Law . This Agreement and all rights and obligations under this Agreement will be construed in accordance with

the Plan and governed by the laws of the State of Minnesota without regard to conflicts of laws provisions. Any legal proceedings related to this Agreement will be brought in an appropriate Minnesota court, and the parties to this Agreement consent to the exclusive jurisdiction of the court for this purpose.

10.3 Entire Agreement . This Agreement and the Plan set forth the entire agreement and understanding of the parties to this

Agreement with respect to the grant and exercise of this Option and the administration of the Plan and supersede all prior agreements, arrangements, plans and understandings relating to the grant and exercise of this Option and the administration of the Plan.

10.4 Amendment and Waiver . Other than as provided in the Plan, this Agreement may be amended, waived, modified or canceled

only by a written instrument executed by the parties hereto or, in the case of a waiver, by the party waiving compliance. 10.5 Captions . The Article, Section and paragraph captions in this Agreement are for convenience of reference only, do not

constitute part of this Agreement and are not to be deemed to limit or otherwise affect any of the provisions of this Agreement.

10.6 Counterparts . For convenience of the parties hereto, this Agreement may be executed in any number of counterparts, each

such counterpart to be deemed an original instrument, and all such counterparts together to constitute the same agreement. The parties to this Agreement have executed this Agreement effective the day and year first above written.

ECOLAB INC.

By

(Signature)

Its

[By execution of this Agreement, OPTIONEE the Optionee acknowledges having

received a copy of the Plan.]

By

(Signature)

«Firstnamefirst» «Address_Line_1» «Address_Line_2» «Address_Line_3» «City», «State» «Zip_Code»

SSN: «Ssn»

EXHIBIT (10)W

POLICY ON REIMBURSEMENT OF INCENTIVE PAYMENTS

T he Board shall, in all appropriate circumstances and to the extent permitted by governing law, require reimbursement of any improper annual incentive payment or long-term incentive payment to an Executive. If the Board determines any Executive has received an improper payment to the Executive due to such Executive’s Misconduct, the Executive must return the improper payment to the extent it would not have been paid or awarded had the misconduct not occurred. Improper payments can include an incentive payment, a stock grant paid or awarded, or gain from a stock grant. All Executives are required to agree to this policy in writing. “Misconduct” means any material violation of the Ecolab Code of Conduct or other fraudulent or illegal activity for which the Executive is personally responsible, as determined by the Board. “Executive” means executive officer for purposes of the Securities Exchange Act of 1934, as amended.

Agreed to this day of , 20 .

Signature:

Print Name:

Exhibit 13

FINANCIAL DISCUSSION EXECUTIVE SUMMARY This Financial Discussion should be read in conjunction with the information on Forward-Looking Statements and Risk Factors found at the end of this Financial Discussion. Ecolab enjoyed another year of record sales and earnings in 2008. We achieved strong financial performance despite increasingly challenging economic conditions and rapidly increasing delivered product costs. We overcame these challenges and continued to invest in our business to build for the future while delivering in the present. FINANCIAL PERFORMANCE

Consolidated net sales increased 12% reaching a record $6.1 billion in 2008.

Operating income increased 7% in 2008 to a record $713 million compared to $667 million in 2007.

Diluted earnings per share increased 6% to $1.80 per share for 2008, compared to $1.70 per share in 2007. Special gains and charges and discrete tax items negatively impacted 2008 by $0.06 per share and favorably impacted 2007 by $0.04 per share.

Cash flow from operating activities was $753 million in 2008, despite making a $75 million voluntary contribution to our U.S.

pension plan. We continue to generate strong cash flow from operations, allowing us to continue to invest in our business while providing returns to our shareholders through cash dividends and share repurchases.

We repurchased 12.1 million shares of our common stock in 2008, reducing our shares outstanding by 4%. In November 2008,

Henkel AG & Co. KGaA (“Henkel”) completed the sale of all 72.7 million Ecolab shares it held. We repurchased 11.3 million shares directly from Henkel for $300 million.

Our balance sheet remained within the “A” categories of the major rating agencies during 2008 and exceeded our investment

grade objective.

Our return on beginning shareholders’ equity was 23.1% in 2008, the 17th consecutive year we achieved our long-term financial objective of a 20% return on beginning shareholders’ equity.

In December 2008, we increased our quarterly cash dividend 8% to an indicated

annual rate of $0.56 per share for 2009. The increase represents our 17th consecutive annual dividend rate increase and the 72nd consecutive year we have paid cash dividends. The increase reflects our solid performance in 2008, our strong financial position and cash flow, and our commitment to delivering superior returns for our shareholders through both our business progress and dividend growth.

We expanded our U.S. Food & Beverage offerings by acquiring Ecovation Inc., a provider of renewable energy solutions and effluent management systems primarily in the food and beverage manufacturing industry in the U.S.

We made significant investments in Europe, including the establishment of our European headquarters in Zurich, Switzerland, and began the rollout of Ecolab Business Solution (EBS), an extensive project to implement a common set of business processes and systems across all of Europe.

OUTLOOK

21

We experienced significant increases and volatility in our delivered product costs during 2008. We were able to offset these increases with pricing and cost-saving initiatives, but were not able to fully offset the negative impact on our gross margin.

Despite the challenging economic outlook, we expect continued annual earnings growth in 2009, excluding the impacts of any special gains and charges and discrete tax events. We expect modest revenue growth in 2009 at fixed currency exchange rates. We expect raw material costs to be above 2008 levels for at least the first half of 2009, and expect unfavorable foreign currency exchange. We will work hard to offset these headwinds with new products, new account growth, better customer penetration and a more aggressive drive to reduce costs and improve operational efficiency.

In January 2009, we announced a restructuring plan to streamline operations and improve efficiency and effectiveness. The restructuring includes a global workforce reduction and optimization of our supply chain, including the reduction of plant and distribution center locations.

We will remain focused on achieving sustainable growth and returns for our shareholders.

We will continue our successful Circle the Customer - Circle the Globe growth strategy.

We intend to continue to make targeted acquisitions, following our disciplined approach, to ensure strong strategic business fit and solid financial performance.

We intend to continue to invest in the rollout of EBS in Europe.

CRITICAL ACCOUNTING ESTIMATES Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (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, changes in 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 and 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 title to the product and risk of loss transfers to the customer. We recognize revenue on services as they are performed. Our sales policies do not provide for general rights of return. 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. 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 the most recent 12 months’ sales data 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 trend rates. In addition, our estimates also include separately providing for specific customer balances 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 $44 million and $43 million, as of December 31, 2008 and 2007, respectively. These amounts include our allowance for sales returns and credits of $9 million as of December 31, 2008 and 2007. Our bad debt expense as a percent of net sales was 0.4% in 2008 and 0.3% in 2007 and 2006. If the financial condition of our customers were to deteriorate, resulting in an inability to make payments, or if unexpected events or significant changes in future trends were to occur, additional allowances may be required. 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 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 position. ACTUARIALLY DETERMINED LIABILITIES 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 or earnings on assets. The discount rate assumption for the U.S. Plans is calculated using a bond yield curve constructed from a population of high-quality, non-callable, corporate bond issues with maturity dates of six months to 30 years. Bond issues in the population are rated no less than 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 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 the 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. The unrecognized actuarial loss on our U.S. qualified and nonqualified pension plans increased to $546 million (before tax) as of December 31, 2008, primarily due to lower than expected return on plan assets. Significant differences in actual experience or significant changes in assumptions may materially affect pension and other post-retirement obligations. In determining our U.S. pension and postretirement obligations for 2008, our discount rate increased to 6.26% from 5.99% at year-end 2007, and our projected salary increase was unchanged at 4.32%. The mortality table used was updated from the RP-2000 table used in prior years to the RP-2000 Combined Healthy projected to December 31, 2008, with Scale AA table. Our expected return on plan assets, used for determining 2009 expense,

was decreased to 8.50% from 8.75% in prior years to reflect lower expected long-term returns on plan assets.

22

The effect on 2009 expense of a decrease in the discount rate or expected return on assets assumption as of December 31, 2008 is shown below assuming no changes in benefit levels and no amortization of gains or losses for our major plans:

We use similar assumptions to measure our international pension obligations. However, the assumptions used vary by country based on specific local country requirements. 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. We are self-insured in North America for most workers compensation, general liability and automotive liability losses, subject to per occurrence and aggregate annual liability limitations. 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 also self-insured for health care claims for eligible participating employees, subject to certain deductibles and limitations. We determine our liabilities for claims incurred but not reported on an actuarial basis. A change in these assumptions would cause reported results to differ. Outside of North America, we are fully insured for losses, subject to annual insurance deductibles. SHARE-BASED COMPENSATION We measure compensation expense for share-based awards at fair value at the date of grant and recognize compensation expense over the service period for awards expected to vest. Determining the fair value of share-based awards at the grant date requires judgment, including estimating expected volatility, exercise and post-vesting termination behavior, expected dividends and risk-free rates of return. Additionally, the expense that is recorded is dependent on the amount of share-based awards expected to be forfeited. If actual forfeiture results differ significantly from these estimates, share-based compensation expense and our results of operations could be impacted. For additional information on our stock incentive and option plans, including significant assumptions used in determining fair value, see Note 10. 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 opportunities available in the various jurisdictions in which we operate. Effective January 1, 2007, we adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statements No. 109 (“FIN 48”). FIN 48 requires us to recognize the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement with a taxing authority. Our annual effective income tax rate includes the impact of reserve provisions. 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 one-time item recognized in our interim operating results, the tax attributable to that item would be separately calculated and recorded in the same period as the one-time item. 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 deduction or credit. 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. Undistributed earnings of foreign subsidiaries are considered to have been 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 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

MILLIONS EFFECT ON U.S. PENSION PLAN

INCREASE IN

HIGHER

ASSUMPTION RECORDED

2009

ASSUMPTION CHANGE

OBLIGATION EXPENSE

Discount rate

-0.25 pts

$32.3

$4.1

Expected return on assets -0.25 pts

N/A

$2.1

EFFECT ON U.S. POSTRETIREMENT

MILLIONS HEALTH CARE BENEFITS PLAN

INCREASE IN

HIGHER

ASSUMPTION RECORDED

2009

ASSUMPTION CHANGE

OBLIGATION EXPENSE

Discount rate

-0.25 pts

$4.3

$0.7

Expected return on assets -0.25 pts

N/A

$0.1

(IRS) has completed its examinations of our U.S. income tax returns for the years 1999 through 2006. It is reasonably possible for specific open positions within the 1999 through 2006 tax years to be settled in the next 12 months. We anticipate a final settlement of the audit of tax years 2005 and 2006 in early 2009. In addition, it is reasonably possible that we will settle an income tax audit for Germany covering the years 2003 through 2006 in the next 12 months. Unfavorable settlement of any particular issue could result in offsets to other balance sheet accounts, cash payments and/or additional tax expense. Favorable resolution could result in reduced income tax expense reported in the financial statements in the future. The majority of our tax reserves are presented in the balance sheet within other non-current liabilities. For additional information on income taxes, see Note 11. LONG-LIVED AND INTANGIBLE ASSETS We periodically review our long-lived and intangible assets for impairment and assess whether significant events or changes in business circumstances indicate that the carrying value of the assets may not be recoverable. This 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

23

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. We test our goodwill for impairment on an annual basis for all reporting units. If circumstances change significantly, we would test for impairment during interim periods between our annual tests. Goodwill and certain intangible assets are assessed for impairment using fair value measurement techniques. Specifically, goodwill impairment is determined using a two-step process. Both the first step of determining the fair value of a reporting unit and the second step of determining the fair value of individual assets and liabilities of a reporting unit (including unrecognized intangible assets) are judgmental in nature and often involve 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 rate reflecting the risk inherent in future cash flows, perpetual growth rate, and determination of appropriate market comparables. No impairments were recorded in 2008, 2007 or 2006 as a result of the tests performed. Due to a sales decline at GCS Service in the second half of 2008, we updated our impairment analysis of GCS Service as of December 31, 2008. The updated analysis indicated there has been no impairment. Of the total goodwill included in our consolidated balance sheet, 35% is recorded in our U.S. Cleaning & Sanitizing reportable segment, 4% in our U.S. Other Services segment and 61% in our International segment. FUNCTIONAL CURRENCIES In preparing the consolidated financial statements, we are required to translate the financial statements of our foreign subsidiaries from the currency in which they keep their accounting records, the local currency, into United States dollars. 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 in shareholders’ equity. Income statement accounts are translated at average rates of exchange prevailing during the year. We evaluate our International operations based on fixed rates of exchange; however, the different exchange rates from period to period impact the amount of reported income from our consolidated operations. RESULTS OF OPERATIONS CONSOLIDATED

NET SALES The components of the year-over-year net sales increases are as follows:

GROSS MARGIN Our consolidated gross profit margin (defined as net sales less cost of sales, divided by net sales) decreased in 2008 compared to 2007. Our gross profit margin decline was driven by higher delivered product costs, which more than offset the margin impact of sales leverage, pricing and cost savings initiatives. Our gross profit margin was also negatively impacted by our Microtek and Ecovation acquisitions which, by their business models, both operate at lower gross profit margins than our historical business. In 2008, we experienced significant increases in our raw material costs, and we expect high raw material costs to continue in 2009. The gross profit margin increase in 2007 compared to 2006 was primarily driven by pricing and cost savings initiatives, more than offsetting the margin impact of higher delivered product costs and acquisition dilution. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses as a percentage of sales decreased to 36.8% in 2008 from 38.2% in 2007. The

MILLIONS, PERCENT CHANGE

EXCEPT PER SHARE

2008 2007

2006 2008

2007

Net sales

$6,138 $5,470

$4,896 12 %

12 %

Operating income 713

667 612

7 9

Net income

448 427

369 5

16

Diluted net income per common share $ 1.80

$ 1.70 $ 1.43

6 % 19 %

2008

2007

2006

Gross profit as a percent of net sales

48.8%

50.8%

50.7%

Selling, general & administrative expenses as a percent of net sales

36.8%

38.2%

38.2%

2008

2007

Volume growth 3 %

5 %

Price changes 3

2

Foreign currency exchange 3

4

Acquisitions and divestitures 3

1

Total net sales growth 12 %

12 %

decrease in the ratio reflected leverage from our sales volume and pricing growth, cost controls, reductions of variable compensation and the impact of acquisitions. This leverage more than offset investments in business systems and efficiency, R&D and information technology. Selling, general and administrative expenses as a percentage of sales was 38.2% for both 2007 and 2006. Leverage from sales growth was fully offset by investments made in business systems, new product solutions and business efficiency initiatives. SPECIAL GAINS AND CHARGES Special gains and charges were $25.9 million in 2008 and include a charge of $19.1 million, recorded in the fourth quarter, for the write-down of investments in an energy management business and closure of two small non-strategic health care businesses, as well as costs to optimize our business structure, including costs related to establishing our new European headquarters in Zurich, Switzerland. These charges were partially offset by a gain of $24.0 million from the sale of a plant in Denmark recorded in the second quarter and a $1.7 million gain related to the sale of a business in the United Kingdom (U.K.) recorded in the first quarter. Special gains and charges were $19.7 million in 2007 and included a $27.4 million charge for an arbitration settlement recorded in the third quarter of 2007, as well as costs related to establishing our European headquarters and other non-recurring charges. These charges were partially offset by a $6.3 million gain on the sale of a minority investment located in the U.S. and a $4.7 million gain on the sale of a business in the U.K., which were both recorded in the fourth quarter of 2007. For segment reporting purposes, special gains and charges have been included in our corporate segment, which is consistent with our internal management reporting.

24

OPERATING INCOME

Operating income increased 7% in 2008 compared to 2007. Special gains and charges did not have a significant impact on operating income growth. Excluding the negative impact from acquisitions and divestitures and favorable impact of foreign currency exchange, operating income grew 5% in 2008. The increase in operating income was due to sales volume and pricing gains, improved cost efficiencies and reductions of variable compensation, which more than offset higher delivered product costs and investments in the business. Special gains and charges reduced reported operating income margins for both 2008 and 2007. Excluding special gains and charges, our 2008 operating income margin decreased to 12.0% compared to 12.6% in 2007 as the negative margin impact of acquisitions and higher delivered product costs were not fully offset by pricing and cost savings initiatives. Operating income increased 9% in 2007 over 2006. Excluding special gains and charges, operating income increased 12%. The increase in operating income in 2007 was due to sales volume, pricing and cost savings initiatives, partially offset by special gains and charges, higher delivered product costs and investments in the business. Operating income as a percent of sales decreased from 2006 due to special gains and charges of $19.7 million. Excluding special gains and charges, our 2007 operating income margin increased to 12.6%. INTEREST Net interest expense totaled $62 million, $51 million and $44 million in 2008, 2007 and 2006, respectively. The increase in our net interest expense is due to higher debt levels, primarily to fund share repurchases and acquisitions. INCOME TAXES The following table provides a summary of our reported tax rate:

Our reported tax rate includes discrete impacts from special gains and charges and discrete tax events. Reductions in our effective income tax rates (excluding discrete impacts) over the last three years have primarily been due to tax planning efforts and international rate reductions. The 2008 reported tax rate was impacted by $11.0 million of non-recurring tax items including $9.1 million of net tax benefits on special gains and charges as well as $1.9 million of discrete tax benefits. Discrete tax items in 2008 included $4.8 million of discrete tax benefits recorded in the first quarter due to enacted tax legislation and an international rate change. 2008 also included $2.1 million of discrete tax expense recorded in the third quarter related to recognizing adjustments from filing our 2007 U.S. federal income tax return and $0.8 million of discrete tax expense recorded in the fourth quarter. The 2007 reported tax rate was impacted by $29.5 million of non-recurring tax items, including $10.2 million of net tax benefits on special gains and charges, as well as $19.3 million of discrete tax benefits. Discrete tax benefits in 2007 included $5.4 million of discrete tax benefits recorded in the second quarter for tax audit settlements, $8.6 million of discrete tax benefits recorded in the third quarter for reductions in net deferred tax liabilities related to international tax rate changes and $5.3 million of tax benefits recorded in the fourth quarter primarily due to tax audit settlements. The 2006 reported tax rate included the benefit of a $1.8 million tax settlement and a $0.5 million benefit related to prior years. NET INCOME AND EARNINGS PER SHARE Net income increased 5% to $448 million in 2008 compared to $427 million in 2007. Net income in both years included items of a non-recurring nature that are not necessarily indicative of future operating results. Net income in 2008 was negatively impacted by $16.8 million, net of tax benefit, of special gains and charges, partially offset by $1.9 million of discrete tax benefits. Net income in 2007 was negatively impacted by $9.5 million, net of tax benefit, of special gains and charges, which was more than offset by $19.3 million of discrete tax benefits. These items decreased net income growth in 2008 by 6%. Our 2008 net income growth was also favorably impacted by currency translation of approximately $13 million and a lower overall effective income tax rate compared to 2007 (excluding the impact of discrete tax items). Diluted earnings per share increased 6% to $1.80 per share in 2008, compared to $1.70 per share in 2007. Special gains and charges and discrete tax items negatively impacted 2008 by $0.06 per share and favorably impacted 2007 by $0.04 per share. Net income increased 16% in 2007 to $427 million compared to $369 million in 2006. Net income in both years included items of a non-recurring nature that are not necessarily indicative of future operating results. Net income in 2007 includes $9.5 million, net of tax benefit, of special gains and charges and $19.3 million of discrete tax benefits. Net income in 2006 included a discrete tax benefit of $1.8 million which was offset by a $1.8 million charge, net of tax benefit, in selling, general and administrative expense to

2008

2007

2006

Operating income as a percent of net sales

11.6%

12.2%

12.5%

2008

2007

2006

Reported tax rate

31.2%

30.7%

35.0%

Decrease due to discrete items

(0.4)%

(3.7)%

(0.4)%

recognize minimum royalties under a licensing agreement with no future benefit. These items increased net income growth in 2007 by 3%. Our 2007 net income was positively impacted by favorable currency translation of approximately $15 million and also benefited when compared to 2006 due to a lower overall effective income tax rate. Diluted earnings per share increased 19% to $1.70 per share in 2007, compared to $1.43 per share in 2006. The 2007 per share amount was favorably impacted by $0.04 per share of special gains and charges and discrete tax benefits recorded in 2007. SEGMENT PERFORMANCE Our operating segments have been aggregated into three reportable segments: U.S. Cleaning & Sanitizing, U.S. Other Services and International. We evaluate the performance of our International operations based on fixed management rates of currency exchange. Therefore, International sales and operating income totals, as well as the International financial information included in this financial discussion, are based on translation into U.S. dollars at the fixed currency exchange rates used by management for 2008. The difference between actual currency exchange rates and the fixed currency exchange rates used by management is included in “Effect of Foreign Currency Translation” within our operating segment results. All other accounting policies of the reportable segments are consistent with U.S. GAAP and the accounting policies of the company described in Note 2. Additional information about our reportable segments is included in Note 16.

25

SALES BY REPORTABLE SEGMENT

U.S. Cleaning & Sanitizing sales increased 13% in 2008. Acquisitions added 7% of the 13% year-over-year sales growth. Sales growth was led by Kay, Healthcare and Food & Beverage gains. Institutional sales increased 5% in 2008 as we saw very strong sales of our new Apex warewashing system due to customer demand for energy and cost saving solutions. New business gains also continued, but were partially offset by lower consumption among our foodservice and lodging customers as they experienced a softening of their traffic trends due to the current economic environment. Beginning in the first quarter of 2008, following the Ecovation acquisition, we combined our Water Care Services and Ecovation businesses into our Food & Beverage division. Food & Beverage customers are the primary targets for our Water Care sales and there are potential synergies and efficiencies available between Water Care and Ecovation. Combined Food & Beverage sales, including Water Care and Ecovation, increased 17% in 2008 compared to 2007. The acquisition of Ecovation added 8% to the sales growth. Sales were led by strong growth in the agri, meat & poultry and dairy market segments. New business gains, growth at existing accounts and customer retention continue to fuel organic growth in spite of more difficult market conditions in 2008. Kay sales grew 15% in 2008. Kay’s strong sales growth reflected new account gains and success with new products and programs. Business trends remain strong with very good ongoing demand from new and existing quick service restaurant customers. Sales for our Healthcare business increased significantly in 2008, reflecting the impact of the Microtek acquisition in the fourth quarter of 2007. Excluding the impact of the Microtek acquisition, Healthcare sales rose 11% for the year reflecting continued end-market demand for our infection prevention and skin care products. The Microtek business reported strong sales growth for the year led by sales of their infection control barriers.

U.S. Other Services sales increased 4% in 2008. Pest Elimination reported 7% sales growth for the year led by continued growth in contract services due to the addition of new customer locations and new programs. Sales growth slowed beginning in the fourth quarter of 2008 as we saw reduced discretionary spending by our Pest Elimination customers due to the current recession. GCS Service sales declined 1% in 2008 compared to 2007. Moderate service sales growth was offset by a decline in direct parts sales during the year. GCS Service sales declined beginning in the fourth quarter due to softness in the foodservice market and reduced

PERCENT CHANGE

MILLIONS

2008 2007

2006 2008

2007

Net sales

United States

Cleaning & Sanitizing

$ 2,661 $ 2,351

$ 2,152 13 %

9 %

Other Services 469

450 411

4 10

Total United States

3,130 2,801

2,563 12

9

International 2,975

2,794 2,630

6 6

Total

6,105 5,595

5,193 9

8

Effect of foreign currency translation 33

(125 ) (297 )

Consolidated

$ 6,138 $ 5,470

$ 4,896 12 %

12 %

TM

discretionary spending on equipment maintenance.

We evaluate the performance of our International operations based on fixed management rates of currency exchange. Fixed management rate sales of our International operations grew 6% in 2008. The net impact of acquisitions and divestitures did not have a significant impact on International year-over-year sales growth in 2008. Sales in Europe/Middle East/Africa (EMEA) increased 3% in 2008 led by sales growth in Germany, U.K., Turkey and South Africa. The net impact of acquisitions and divestitures reduced EMEA sales growth by 2% compared to last year, primarily due to the divestiture of a business in the U.K. Asia Pacific sales grew 8% in 2008 led by double-digit growth in China and Hong Kong, as well as good growth in Australia and New Zealand. Asia Pacific sales benefited from new corporate accounts and good results in the beverage and brewery market. Latin America sales continued to be strong, rising 15% in 2008 as sales were strong throughout the region. The increase over last year was led by double-digit growth in Brazil, Chile and the Caribbean. Sales benefited from new account gains, growth of existing accounts and success with new programs. In the fourth quarter of 2008 we began to experience some softening in the Latin America region, primarily Mexico and the Caribbean, due to the current economic environment. Sales in Canada increased 6% in 2008. Sales growth in Canada continued to be led by Institutional growth due to new products and good account retention.

26

OPERATING INCOME BY REPORTABLE SEGMENT

U.S. Cleaning & Sanitizing operating income increased 10% in 2008. As a percentage of net sales, operating income decreased to 16.2% in 2008 from 16.8% in 2007. Acquisitions reduced operating income growth by 2%. Operating income increased as sales volume, pricing, improved cost efficiencies and variable compensation reductions more than offset higher delivered product costs. U.S. Other Services operating income increased 27% in 2008. Operating income growth was driven by continued operating income growth at Pest Elimination. GCS operating results improved in the fourth quarter of 2008, but were flat for the full year. As a percentage of net sales, operating income increased to 11.1% in 2008 from 9.1% in 2007. The increase in the ratio was primarily due to continued profit growth at Pest Elimination, as well as a favorable comparison to 2007, which included legal charges at Pest Elimination and system implementation costs at GCS. International management-rate based operating income decreased 3% in 2008. The International operating income margin was 9.4% in 2008 compared to 10.4% in 2007. Higher delivered product costs and investments in our international business more than offset sales gains, driving the decline in operating income in 2008. When measured at public currency rates, operating income increased 3% in 2008. Acquisitions and divestitures did not have a significant impact on International operating income. Operating income margins of our International operations are generally less than those realized for our U.S. operations. The lower International margins are due to (i) the additional costs caused by the difference in scale of International operations where many operating locations are smaller in size, (ii) the additional cost of operating in numerous and diverse foreign jurisdictions and (iii) higher costs of importing raw materials and finished goods. Proportionately larger investments in sales, technical support and administrative personnel are also necessary in order to facilitate the growth of our International operations. CORPORATE Consistent with our internal management reporting, the corporate segment in 2008 included $25.9 million of special gains and charges reported on the Consolidated Statement of Income. It also included investments in the development of business systems and other corporate investments we made as part of our ongoing efforts to improve our efficiency and returns. In 2007, the corporate segment included $19.7 million of special gains and charges reported on the Consolidated Statement of Income. It also included investments we made in business systems and to optimize our business structure. We did not report any items in our corporate segment in 2006. 2007 COMPARED WITH 2006 U.S. Cleaning & Sanitizing sales increased 9% in 2007 compared to 2006, led by Institutional, Food & Beverage and Kay gains. Acquisitions added 1% to the year-over-year sales growth. Institutional sales increased 8% in 2007 resulting from new account gains and good sales growth into its various end-market segments including travel, restaurant and healthcare. Food & Beverage sales increased 9% in 2007. An acquisition in 2006 added 2% and the remaining increase was due to sales growth in the meat & poultry, food and beverage markets. Kay sales grew 9% in 2007 led by solid ongoing food retail and quick service restaurant demand from major existing customers, strong new account gains and success with new products and programs. U.S. Other Services sales increased 10% in 2007 compared to 2006. Pest Elimination reported strong growth as its sales increased 10%, driven by strong contract sales with significant new corporate account gains, supplemented by strong non-contract sales. GCS Service sales increased a strong 8% in 2007 showing improved sales momentum driven by corporate account gains. Management rate sales of our International operations grew 6% in 2007 compared to 2006. Acquisitions and divestitures did not

MILLIONS

2008

2007

2006

Operating income

United States


$ 432 $ 394

$ 329

Other Services 52

41 39

Total United States

484 435

368

International 280

290 283

Total

764 725

651

Corporate (55 ) (40 ) –

Effect of foreign currency translation

4 (18 ) (39 )

Consolidated $ 713

$ 667 $ 612

Operating income as a percent of net sales

United States


16.2 % 16.8 % 15.3 % Other Services

11.1 9.1

9.5

Total United States 15.5

15.5 14.4

International

9.4 10.4

10.8

Consolidated 11.6 % 12.2 % 12.5 %

have a significant impact on the year-over-year sales growth in 2007. Sales in EMEA increased 5% in 2007 as good sales gains in the U.K., South Africa and Turkey were partially offset by weak results in Germany and France. EMEA also achieved geographic growth in 2007 through further expansion in eastern Europe. Asia Pacific sales grew 9% primarily driven by significant growth in China and Hong Kong, as well as good growth in Japan and Australia. Asia Pacific sales benefited from new corporate accounts and good results in the beverage and brewery market. Latin America sales rose 14% in 2007. The growth over last year was led by double-digit growth in Brazil, Mexico and the Caribbean. Sales benefited from new account gains, growth of existing accounts and success with new programs. Sales in Canada increased 7% in 2007, led by Institutional growth due to corporate account gains, new products and excellent account retention. U.S. Cleaning & Sanitizing operating income increased 20% in 2007. As a percentage of net sales, operating income increased to 16.8% in 2007 from 15.3% in 2006. Operating income increased due to pricing, higher sales volume and cost efficiencies which more than offset rising delivered product costs and investments in the business. Acquisitions and divestitures had minimal effect on the overall percentage increase in operating income.

27

U.S. Other Services operating income increased 4% in 2007. Operating income increased due to pricing and higher sales volume which were partially offset by investments in the business and costs associated with the implementation of a new business platform for GCS. As a percentage of net sales, operating income decreased to 9.0% in 2007 from 9.5% in 2006. The decrease in the ratio was primarily due to legal charges at Pest Elimination as well as system implementation costs at GCS. International management-rate based operating income rose 2% in 2007. The International operating income margin was 10.4% in 2007 compared to 10.8% in 2006. Operating income increased due to higher sales volume and pricing. However, operating income margin decreased due to higher delivered product costs and significant investment in our international business. When measured at public currency rates, operating income increased 12% in 2007. Acquisitions and divestitures did not have a significant impact on operating income growth. FINANCIAL POSITION & LIQUIDITY FINANCIAL POSITION Significant changes in our financial position during 2008 included the following: Total assets increased to $4.8 billion as of December 31, 2008 from $4.7 billion at December 31, 2007. Increases due to acquisitions, investment in the business and working capital growth were partially offset by foreign currency exchange impacts which reduced total assets by approximately $0.4 billion as the U.S. dollar strengthened against foreign currencies. Total liabilities increased to $3.2 billion at December 31, 2008 from $2.8 billion at December 31, 2007, primarily due to an increase in our long-term debt and our U.S. pension liability due to significant losses on plan assets during 2008.

Total debt was $1.1 billion at December 31, 2008, and increased from total debt of $1.0 billion at December 31, 2007. Our debt continued to be rated within the “A” categories by the major rating agencies during 2008. The increase in total debt was primarily due to an increase in borrowings to fund the $300 million share repurchase from Henkel in November 2008. In February 2008, we issued and sold $250 million of 4.875% senior unsecured notes that mature in 2015. The proceeds were used to refinance outstanding commercial paper related to acquisitions and for general corporate purposes. The ratio of total debt to capitalization (total debt divided by the sum of shareholders’ equity and total debt) was 42% at year-end 2008 and 34% at year-end 2007. The debt to capitalization ratio was higher at year-end 2008 due to a $135 million increase in debt, as well as a $364 million decrease in shareholders’ equity due to share repurchases, cumulative translation and losses on our U.S. pension plan. We view our debt to capitalization ratio as an important indicator of our creditworthiness.

Cash used for investing activities decreased in 2008 primarily due to decreased acquisition activity, partially offset by increased capital and software investments as we continue to invest in our business to support our long-term growth. Cash used for investing activities in 2008 also includes a $21 million deposit into an indemnification escrow for a portion of the purchase price for the Ecovation acquisition. We continue to acquire strategic businesses which complement our growth strategy. We also continue to invest in merchandising equipment consisting primarily of systems used by our customers to dispense our cleaning and sanitizing products. We expect to continue to make significant capital investments and acquisitions in the future to support our long-term

CASH FLOWS Cash provided by operating activities declined $45 million or 6% to $753 million in 2008 compared to 2007. The decrease in operating cash flow for 2008 reflects a $75 million voluntary contribution to our U.S. pension plan and an increase in accounts receivable, excluding the effects of currency exchange, which more than offset our increased earnings, lower tax payments and $30 million of proceeds from the sale of Ecovation lease receivables. Our bad debt expense increased to $23 million or 0.4% of net sales in 2008 from $16 million or 0.3% of net sales in 2007. The increase in bad debt occurred primarily during the second half of 2008 due to the current economic environment. We continue to monitor the creditworthiness of our customers closely and do not expect our future cash flow to be materially impacted. Historically, we have had strong operating cash flow, and we anticipate this will continue. We expect to continue to use this cash flow to pay dividends, acquire new businesses, repurchase our common stock, pay down debt and meet our ongoing obligations and commitments.

growth.

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. 2008 financing activities included the issuance of $250 million 4.875% senior notes and $337 million of share repurchases. 2007 financing activities included the repayment of our euro 300 million ($390 million) 5.375% euronotes in February 2007 and $371 million of share repurchases, offset partially by short-term borrowings. Share repurchases in both years were funded with operating cash flows, short-term borrowing and cash from the exercise of employee stock options. In November 2008, our Board authorized the purchase of $300 million of our common stock from Henkel. The authorized repurchase was completed with the purchase of 11.3 million shares from Henkel in November 2008. In October 2006, we announced an authorization to repurchase up to 10 million shares of Ecolab common stock. As of December 31, 2008, approximately 3.9 million shares remain to be purchased under this authorization. Shares are repurchased for the purpose of offsetting the dilutive effect of stock options and incentives, to efficiently return capital to shareholders and for general corporate purposes. We do not expect to repurchase a significant amount of shares in 2009. Cash proceeds and tax benefits from option exercises provide a portion of the funding for repurchase activity.

28

In 2008, we increased our indicated annual dividend rate for the 17th consecutive year. We have paid dividends on our common stock for 72 consecutive years. Cash dividends declared per share of common stock, by quarter, for each of the last three years were as follows:

LIQUIDITY AND CAPITAL RESOURCES We currently expect to fund all of our cash requirements which are reasonably foreseeable for 2009, including scheduled debt repayments, new investments in the business, share repurchases, dividend payments, possible business acquisitions and pension contributions from operating cash flow, cash reserves and short-term and/or long-term borrowing. In the event of a significant acquisition or other significant funding need, funding may occur through additional short and/or long-term borrowing or through the issuance of the company’s common stock. In the third quarter of 2008, global credit markets, including the commercial paper markets, began experiencing adverse conditions, and volatility within these markets temporarily increased the costs associated with issuing debt due to increased spreads over relevant interest rate benchmarks. Despite this volatility and disruption, we continued to have access to the commercial paper market and we are well positioned to weather the current volatility in the credit markets. We have a $600 million U.S. commercial paper program and a $200 million European commercial paper program. Both programs are rated A-1 by Standard & Poor’s and P-1 by Moody’s. To support our commercial paper programs and other general business funding needs, we maintain a $600 million multi-year committed credit agreement with a diverse portfolio of banks which expires in June 2012. We can draw directly on the credit facility on a revolving credit basis. As of December 31, 2008, $316 million of this credit facility was committed to support outstanding U.S. commercial paper, leaving $284 million available for other uses. In addition, we have other committed and uncommitted credit lines of $140 million with major international banks and financial institutions to support our general global funding needs. Approximately $120 million of these credit lines were undrawn and available for use as of our 2008 year end. Additional details on our credit facilities are included in Note 6. 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:

As of December 31, 2008, our gross liability for uncertain tax positions under FIN 48 was $111 million. We are not able to reasonably estimate the amount by which the liability will increase or decrease over an extended period of time. 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 health care benefit plans in 2009, based on plan asset values as of December 31, 2008. We expect to make a voluntary contribution of approximately $50 million to our U.S. pension plan in the beginning of April 2009. We are in compliance with all funding requirements of our pension and postretirement health care plans. 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 $25 million in 2009. These amounts have been excluded from the schedule of contractual obligations.

We lease sales and administrative office facilities, distribution center 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 $57 million of letters of credit supporting domestic and international commercial relationships and transactions, primarily our North America self-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,

FIRST SECOND

THIRD FOURTH

QUARTER

QUARTER QUARTER

QUARTER YEAR

2008

$0.1300 $0.1300

$0.1300 $0.1400

$0.5300

2007 0.1150

0.1150 0.1150

0.1300 0.4750

2006

0.1000 0.1000

0.1000 0.1150

0.4150

MILLIONS PAYMENTS DUE BY PERIOD

LESS

MORE

Contractual THAN

1–3 3–5

THAN

obligations TOTAL 1 YEAR YEARS YEARS 5 YEARS Notes payable

$ 334 $ 334

$ – $ –

$ –

Long-term debt

804 5

159 164

476

Operating leases

174 56

68 27

23

Interest*

221 42

73 61

45

Benefit payments**

929 70

139 184

536

Total contractual cash obligations

$ 2,462

$ 507

$ 439

$ 436

$ 1,080

* Interest on variable rate debt was calculated using the interest rate at year-end 2008. ** Benefit payments are paid out of the company’s pension and postretirement health care benefit plans.

standby repurchase obligations or other commercial commitments.

As of December 31, 2008, we are in compliance with all covenants and other requirements of our credit agreements and indentures. Our $600 million multicurrency credit agreement, as amended and restated, no longer includes a covenant regarding the ratio of total debt to capitalization. Our euro 300 million senior notes include covenants regarding the amount of indebtedness secured by liens and subsidiary indebtedness allowed.

29

A downgrade in our credit rating could limit or preclude our ability to issue commercial paper under our current programs. A credit rating downgrade 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 term notes or bonds. In addition, we have the ability at our option to draw upon our $600 million committed credit facilities prior to their termination. 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 “structured finance” or “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 See Note 2 for information on new accounting pronouncements. 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 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 forward contracts, swaps and foreign currency options to hedge certain intercompany financial arrangements, and to hedge against the effect of exchange rate fluctuations on transactions related to cash flows and net investments denominated in currencies other than U.S. dollars. At December 31, 2008, we had approximately $486 million notional amount of foreign currency forward exchange contracts with face amounts denominated primarily in euros. These contracts are recorded on our balance sheet at fair-value of $14 million. Under SFAS 157, fair value is determined using foreign currency exchange rates (level 2 - significant other observable inputs) as of 2008 year end. 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, 2008, we do 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. SUBSEQUENT EVENT In January 2009, we announced plans to undertake restructuring and other cost-saving actions during 2009 in order to streamline our operations and improve our efficiency and effectiveness. The restructuring includes a reduction of our global workforce by approximately 1,000 positions or 4%, and the reduction of plant and distribution center locations. We estimate these anticipated actions will result in pretax restructuring special charges of approximately $65 million to $75 million ($42 million to $49 million after tax) in 2009. These actions are expected to provide annualized pretax savings of approximately $70 million to $80 million ($45 million to $50 million after tax), with pretax savings of approximately $50 million to be realized in 2009. We anticipate that approximately $55 million to $65 million of the restructuring special charges represent cash expenditures.

FORWARD-LOOKING STATEMENTS AND RISK FACTORS This financial discussion 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:

revenue and earnings growth

raw material and delivered product costs

currency translation

business acquisitions

system implementations

restructuring charges and cost savings

cash flows

loss of customers and bad debt

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. 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, 2008, 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.

30

debt repayments

disputes and claims

environmental and regulatory considerations

share repurchases

global economic conditions and credit risk

pension expenses and potential contributions

new accounting pronouncements

income taxes, including unrecognized tax benefits or uncertain tax positions

borrowing capacity

and liquidity requirements.

CONSOLIDATED STATEMENT OF INCOME

The accompanying notes are an integral part of the consolidated financial statements.

31

YEAR ENDED DECEMBER 31 (MILLIONS, EXCEPT PER SHARE) 2008

2007 2006

Net sales

$ 6,137.5 $ 5,469.6

$ 4,895.8

Operating expenses

Cost of sales 3,141.6

2,691.7 2,416.1

Selling, general and administrative expenses

2,257.5 2,090.9

1,868.1

Special gains and charges 25.9

19.7

Operating income 712.5

667.3 611.6

Interest expense, net

61.6 51.0

44.4

Income before income taxes 650.9

616.3 567.2

Provision for income taxes

202.8 189.1

198.6

Net income $ 448.1

$ 427.2 $ 368.6

Net income per common share

Basic

$ 1.83 $ 1.73

$ 1.46

Diluted $ 1.80

$ 1.70 $ 1.43

Dividends declared per common share

$ 0.5300 $ 0.4750

$ 0.4150

Weighted-average common shares outstanding

Basic

245.4 246.8

252.1

Diluted 249.3

251.8 257.1

CONSOLIDATED BALANCE SHEET

(a) Common stock, 400 million shares authorized, $1.00 par value, 236.2 million shares outstanding at December 31, 2008, 246.8

million shares outstanding at December 31, 2007. The accompanying notes are an integral part of the consolidated financial statements.

32

DECEMBER 31 (MILLIONS) 2008

2007

ASSETS

Current assets

Cash and cash equivalents $ 66.7

$ 137.4

Accounts receivable, net 971.0

974.0

Inventories 467.2

450.8

Deferred income taxes 94.7

89.4

Other current assets 91.5

65.7

Total current assets 1,691.1

1,717.3

Property, plant and equipment, net 1,135.2

1,083.4

Goodwill 1,267.7

1,279.2

Other intangible assets, net 326.7

328.9

Other assets 336.2

314.0

Total assets $ 4,756.9

$ 4,722.8

LIABILITIES AND SHAREHOLDERS ’ EQUITY

Current liabilities

Short-term debt

$ 338.9 $ 403.5

Accounts payable

359.6 343.7

Compensation and benefits

261.1 280.2

Income taxes

46.3 27.7

Other current liabilities

436.0 463.2

Total current liabilities

1,441.9 1,518.3

Long-term debt

799.3 599.9

Postretirement health care and pension benefits

680.2 418.5

Other liabilities

263.9 250.4

Shareholders’ equity (a)

Common stock

328.0 326.5

Additional paid-in capital

1,090.5 1,015.2

Retained earnings

2,617.0 2,298.4

Accumulated other comprehensive income (loss)

(359.1 ) 63.1

Treasury stock

(2,104.8 ) (1,767.5 )

Total shareholders’ equity 1,571.6

1,935.7

Total liabilities and shareholders’ equity $ 4,756.9

$ 4,722.8

CONSOLIDATED STATEMENT OF CASH FLOWS


33

YEAR ENDED DECEMBER 31 (MILLIONS) 2008

2007 2006

OPERATING ACTIVITIES

Net income

$ 448.1 $ 427.2

$ 368.6

Adjustments to reconcile net income to cash provided by operating activities:

Depreciation and amortization 334.7

291.9 268.6

Deferred income taxes

80.6 2.5

(18.8 ) Share-based compensation expense

33.6 37.9

36.3

Excess tax benefits from share-based payment arrangements (8.2 )

(20.6 ) (19.8 ) Gain on sale of plant

(24.5 )

Disposal (gains) losses, net (1.7 )

(11.0 ) 0.4

Write-down of business investments 19.1

Other, net

7.0 6.9

1.3

Changes in operating assets and liabilities:

Accounts receivable (89.9 )

(34.4 ) (66.8 ) Inventories

(57.5 ) (19.3 ) (18.0 )

Other assets 6.8

20.7 (27.1 )

Accounts payable 30.0

(10.0 ) 44.5

Other liabilities (24.9 )

105.8 58.4

Cash provided by operating activities

753.2 797.6

627.6

INVESTING ACTIVITIES

Capital expenditures

(326.7 ) (306.5 ) (287.9 )

Capitalized software expenditures (67.8 )

(55.0 ) (33.1 ) Property sold

36.4 7.4

25.6

Businesses acquired and investments in affiliates, net of cash acquired (203.8 )

(329.4 ) (65.5 ) Sale of businesses

2.2 19.8

1.8

Deposit into indemnification escrow (21.0 )

Proceeds from sales and maturities of short-term investments

125.1

Cash used for investing activities (580.7 )

(663.7 ) (234.0 ) FINANCING ACTIVITIES

Net (repayments) issuances of notes payable

(67.8 ) 279.9

(47.7 ) Long-term debt borrowings

257.7 396.2

Long-term debt repayments

(3.9 ) (394.2 ) (86.3 )

Reacquired shares (337.2 )

(371.4 ) (282.8 ) Cash dividends on common stock

(128.5 ) (114.0 ) (101.2 )

Exercise of employee stock options 36.4

96.7 87.9

Excess tax benefits from share-based payment arrangements

8.2 20.6

19.8

Other, net (0.5 )

(2.3 ) Cash used for financing activities

(235.6 ) (482.4 ) (16.4 )

Effect of exchange rate changes on cash and cash equivalents

(7.6 ) 1.9

2.4

(Decrease) increase in cash and cash equivalents

(70.7 ) (346.6 ) 379.6

Cash and cash equivalents, beginning of year

137.4 484.0

104.4

Cash and cash equivalents, end of year $ 66.7

$ 137.4 $ 484.0

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AND SHAREHOLDERS’ EQUITY

COMMON STOCK ACTIVITY


34

MILLIONS

COMMON STOCK

ADDITIONAL PAID-IN CAPITAL

RETAINED EARNINGS

ACCUMULATED OTHER

COMPREHENSIVE INCOME (LOSS)

TREASURY

STOCK TOTAL

Balance December 31, 2005

$ 318.6 $ 727.4

$ 1,719.2 $ 9.8

$ (1,125.8 ) $ 1,649.2

Net income

368.6 368.6

Cumulative translation adjustment

65.8 65.8

Derivative instruments

(3.4 ) (3.4 )

Minimum pension liability (0.6 )

(0.6 ) Total comprehensive income

430.4

Cumulative effect adjustment for adoption of SFAS 158

(168.1 ) (168.1 )

Cash dividends declared (104.6 )

(104.6 ) Stock options and awards

4.0 140.8

1.0 145.8

Reacquired shares

(272.5 ) (272.5 )

Balance December 31, 2006 322.6

868.2 1,983.2

(96.5 ) (1,397.3 )

1,680.2

Net income

427.2 427.2


128.8 128.8

Derivative instruments

(2.3 ) (2.3 )

Pension and postretirement benefits

33.1 33.1

Total comprehensive income

586.8

Cumulative effect adjustment for adoption of FIN 48

5.1 5.1

Cash dividends declared

(117.1 ) (117.1 )

Stock options and awards 3.9

147.0 0.5

151.4


(370.7 ) Balance December 31, 2007

326.5 1,015.2

2,298.4 63.1

(1,767.5 ) 1,935.7

Net income

448.1 448.1


(233.6 ) (233.6 )

Derivative instruments 13.4

13.4

Pension and postretirement benefits

(202.0 ) (202.0 )

Total comprehensive income 25.9

Cash dividends declared

(129.5 ) (129.5 )

Stock options and awards 1.5

75.3 (0.1 )

76.7


(337.2 ) Balance December 31, 2008

$ 328.0 $ 1,090.5

$ 2,617.0 $ (359.1 )

$ (2,104.8 ) $ 1,571.6

2008

2007 2006

YEAR ENDED DECEMBER 31 (SHARES)

COMMON

STOCK

TREASURY STOCK

COMMON

STOCK

TREASURY STOCK

COMMON

STOCK

TREASURY STOCK

Shares, beginning of year

326,530,856 (79,705,760 )

322,578,427 (71,241,560 ) 318,602,705

(64,459,800 ) Stock options

1,422,526 60,932

3,952,429 49,197

3,975,722 172,665

Stock awards, net issuances

45,336 50,702

49,519

Reacquired shares (12,174,341 )

(8,564,099 ) (7,003,944 )

Shares, end of year 327,953,382

(91,773,833 ) 326,530,856

(79,705,760 ) 322,578,427 (71,241,560 )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Ecolab Inc. (the “company”) develops and markets premium products and services for the hospitality, foodservice, health care and industrial markets. The company provides cleaning and sanitizing products and programs, as well as pest elimination, maintenance and repair services primarily to hotels and restaurants, health care and educational facilities, quick service (fast-food and convenience store) units, grocery stores, commercial and institutional laundries, light industry, dairy plants and farms, food and beverage processors and the vehicle wash industry.

PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the company and all majority-owned subsidiaries. International subsidiaries are included in the financial statements on the basis of their 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. 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. FOREIGN CURRENCY TRANSLATION Financial position and 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. Cumulative translation included cumulative losses of $39 million and gains of $171 million as of December 31, 2008 and 2007, respectively. Income statement accounts are translated at the average rates of exchange prevailing during the year. The different exchange rates from period to period impact the amount of reported income from the company’s international operations. Foreign currency translation positively impacted net income by approximately $13 million, $15 million and $2 million for the years ended December 31, 2008, 2007 and 2006, respectively. CASH AND CASH EQUIVALENTS Cash equivalents include highly-liquid investments with a maturity of three months or less when purchased. ALLOWANCE FOR DOUBTFUL ACCOUNTS The company estimates the balance of allowance for doubtful accounts by analyzing accounts receivable balances by age and applying historical write-off trend rates. The company’s estimates include separately providing for specific customer balances when it is deemed probable that the balance is uncollectible. Account balances are charged off against the allowance when it is probable 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 $9 million as of December 31, 2008 and 2007, and $7 million as of December 31, 2006. Returns and credit activity is recorded directly to sales. The following table summarizes the activity in the allowance for doubtful accounts:

* Other amounts are primarily the effects of changes in currency and acquisitions. INVENTORY VALUATIONS Inventories are valued at the lower of cost or market. Domestic chemical inventory costs are determined on a last-in, first-out (LIFO) basis. LIFO inventories represented 24% and 23% of consolidated inventories at year-end 2008 and 2007, respectively. All other inventory costs are determined on a first-in, first-out (FIFO) basis. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost. Merchandising equipment consists principally of various systems that dispense the company’s cleaning and sanitizing products and dishwashing machines. The dispensing systems 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

1. NATURE OF BUSINESS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

MILLIONS 2008

2007 2006

Beginning balance

$43 $38

$39

Bad debt expense 23

16 13

Write-offs

(20 ) (17 )

(17 )

Other* (2 )

6 3

Ending balance

$44 $43

$38

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. 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 leaseholds, 3 to 11 years for machinery and equipment and 3 to 7 years for merchandising equipment and capital software. Total depreciation expense was $286 million, $261 million and $236 million for 2008, 2007 and 2006, respectively. Expenditures for repairs and maintenance are charged to expense as incurred. Expenditures for major renewals and improvements, which significantly extend the useful lives of existing plant and equipment, are capitalized and depreciated. 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. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill and other intangible assets arise principally from business acquisitions. Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired. Other intangible assets primarily include customer relationships, intellectual property, trademarks 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 13 years as of December 31, 2008, and 14 years as of December 31, 2007.

35

The weighted-average useful life by type of asset at December 31, 2008 is as follows:

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. Total amortization expense related to other intangible assets during the years ended December 31, 2008, 2007 and 2006, was $48 million, $30 million and $25 million, respectively. Amortization expense has increased significantly primarily due to the Microtek and Ecovation acquisitions. As of December 31, 2008, future estimated amortization expense related to amortizable other identifiable intangible assets will be: MILLIONS

The company tests goodwill for impairment on an annual basis during the second quarter for all reporting units. If circumstances change significantly, the company would also test a reporting unit for impairment during interim periods between our annual tests. The company’s reporting units are its operating segments. An impairment charge is recognized for the amount, if any, by which the carrying amount of goodwill exceeds its implied fair value. Fair values of reporting units are established using a discounted cash flow method. Where available and as appropriate, comparative market multiples are used to corroborate the results of the discounted cash flow method. Based on the company’s testing, there has been no impairment of goodwill during the three years ended December 31, 2008. Due to a sales decline at GCS Service in the second half of 2008, the company updated the impairment analysis of GCS Service as of December 31, 2008. The updated analysis indicated there has been no impairment. LONG-LIVED ASSETS The company periodically reviews its long-lived 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. REVENUE RECOGNITION The company recognizes revenue as services are performed or on product sales at the time title to the product and risk of loss transfers to the customer. The company’s sales policies do not provide for general rights of return. Trade accounts receivable are recorded at the invoiced amount and generally do not bear interest. 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. INCOME PER COMMON SHARE The computations of the basic and diluted net income per share amounts were as follows:

Restricted stock awards of 88,250 shares for 2008, 68,180 shares for 2007 and 24,670 shares for 2006 were excluded from the computation of basic weighted-average shares outstanding because such shares were not yet vested at those dates. Stock options to purchase 5.5 million shares for 2008, 5.3 million shares for 2007, and 2.6 million shares for 2006, were not dilutive and, therefore, were not included in the computations of diluted common shares outstanding. SHARE-BASED COMPENSATION

NUMBER OF YEARS

Customer relationships 12

Intellectual property

12

Trademarks 19

Other

7

2009 $42

2010

39

2011 38

2012

36

2013 35

MILLIONS EXCEPT PER SHARE

2008 2007

2006

Net income

$ 448.1 $ 427.2

$ 368.6


Basic 245.4

246.8 252.1

Effect of dilutive stock options and awards

3.9 5.0

5.0

Diluted 249.3

251.8 257.1


Basic

$ 1.83 $ 1.73

$ 1.46

Diluted $ 1.80

$ 1.70 $ 1.43

Effective October 1, 2005, the company adopted Statement of Financial Accounting Standard No. 123 (Revised 2004), Share-Based Payment (“SFAS 123R”) under the modified retrospective application method. As part of the transition to the new standard, all prior period financial statements were restated to recognize share-based compensation expense historically reported in the notes to the consolidated financial statements. SFAS 123R requires the company to measure compensation expense for share-based awards at fair value at the date of grant and recognize compensation expense over the service period for awards expected to vest. Stock option grants to retirement eligible recipients are attributed to expense using the non-substantive vesting method and are fully expensed by the time recipients attain age 55, with at least five years of service. 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. The company has used the actual tax effects of stock options and the transition guidance prescribed within SFAS 123R for establishing the pool of excess tax benefits (APIC Pool). COMPREHENSIVE INCOME Comprehensive income includes net income, foreign currency translation adjustments, unrecognized actuarial gains and losses on pension and postretirement liabilities, gains and losses on derivative instruments designated and effective as cash flow hedges and nonderivative instruments designated and effective as foreign currency net investment hedges that are charged or credited to the accumulated other comprehensive income (loss) account in shareholders’ equity.

36

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES 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. On the date that the company enters into a derivative contract, it designates the derivative as (1) a hedge of (a) the fair value of a recognized asset or liability or (b) an unrecognized firm commitment (a “fair value” hedge), (2) a hedge of (a) a forecasted transaction or (b) the variability of cash flows that are to be received or paid in connection with a recognized asset or liability (a “cash flow” hedge) or (3) a foreign-currency fair-value or cash flow hedge (a “foreign currency” hedge). The company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. The company also formally assesses (both at the hedge’s inception and on an ongoing basis) whether the derivatives that are used in hedging transactions have been highly effective in offsetting changes in the fair value or cash flows of hedged items and whether those derivatives may be expected to remain highly effective in future periods. When it is determined that a derivative is not (or has ceased to be) highly effective as a hedge, the company will discontinue hedge accounting prospectively. The company believes that on an ongoing basis its portfolio of derivative instruments will generally be highly effective as hedges. 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 September 2006, the FASB issued SFAS 157, Fair Value Measurements (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value and expanded disclosures about fair value measurement. Additionally, in February 2008, the FASB announced it will defer for one year the effective date of SFAS 157 for nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. The FASB also amended SFAS 157 to add a scope exception for leasing transactions subject to SFAS 13 Accounting for Leases from its application. The company adopted SFAS 157 effective January 1, 2008, for financial assets and liabilities measured on a recurring basis. The adoption did not have a material impact on the company’s consolidated results of operations and financial condition. The company’s financial assets measured on a recurring basis as of December 31, 2008, include foreign exchange contracts with fair market value of approximately $14 million, which are valued using foreign currency exchange rates as of the balance sheet date (level 2 - significant other observable inputs). In addition, the company has concluded that it does not have any amounts of financial assets and liabilities measured using the company’s own assumptions of fair market value (level 3 - unobservable inputs). The company does not expect the future adoption for non-financial assets and liabilities to have a material impact on the company’s consolidated results of operations and financial position. In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities - including an amendment of FASB Statement No. 115 (“SFAS 159”). SFAS 159 provides companies with an option to report selected financial assets and financial liabilities at fair value, which can be elected on an instrument-by-instrument basis. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings at each subsequent reporting date. The company adopted SFAS 159 effective January 1, 2008. The adoption did not have an impact on the company’s consolidated results of operations and financial position because the company did not elect the fair value option for any of its financial assets or liabilities. In December 2007, the FASB issued SFAS 141 (revised 2007), Business Combinations (“SFAS 141R”). SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. SFAS 141R also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. In preparation for the adoption, the company has chosen to expense acquisition costs as incurred. The company’s 2008 results include immaterial amounts of acquisition costs. The company adopted SFAS 141R effective January 1, 2009. The adoption did not have a material impact on the company’s consolidated results of operations and financial position. In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial Statements-an amendment of Accounting Research Bulletin No. 51 (“SFAS 160”). SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest, and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. The company adopted SFAS 160 effective January 1, 2009. The adoption did not have a material impact on the company’s consolidated results of operations and financial position. In March 2008, the FASB issued SFAS 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment to FASB Statement 133 (“SFAS 161”). SFAS 161 requires companies to provide greater transparency through disclosures about how and why the company uses derivative instruments. This includes how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, the level of derivative activity entered into by the company and how derivative instruments and related hedged items affect the company’s financial position, results of operations, and cash flows. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. The company will include the required disclosures upon adoption of SFAS 161 in the first quarter of 2009. In December 2008, the FASB issued FSP FAS 132(R)-1, Employers’ Disclosures about Postretirement Benefit Plan Assets (“FSP FAS 132(R)-1”) which amends SFAS 132(R) to require more detailed disclosures regarding employers’ plan assets, including their investment strategies, major categories of plan assets, concentration of risk, and valuation methods used to measure the fair value of plan assets. FSP FAS 132(R)-1 is effective for fiscal years ending after December 15, 2009. The company is currently evaluating

the impact of adoption. No other new accounting pronouncement issued or effective has had or is expected to have a material impact on the company’s consolidated financial statements.

37

3. SPECIAL GAINS AND CHARGES Special gains and charges were $25.9 million in 2008 and include a charge of $19.1 million recorded in the fourth quarter, for the write-down of investments in an energy management business and the closure of two small non-strategic health care businesses, as well as costs to optimize the company’s business structure, including costs related to establishing the new European headquarters in Zurich, Switzerland. These charges were partially offset by a gain of $24.0 million from the sale of a plant in Denmark recorded in the second quarter and a $1.7 million gain related to the sale of a business in the U.K. recorded in the first quarter. Special gains and charges were $19.7 million in 2007 and include a $27.4 million charge for an arbitration settlement related to two California class-action lawsuits involving wage/hour claims affecting former and current Pest Elimination employees recorded in the third quarter of 2007. Special gains and charges also include costs related to establishing the company’s European headquarters and other non-recurring charges. These charges were partially offset by a $6.3 million gain on the sale of a minority investment located in the U.S. and a $4.7 million gain on the sale of a business in the U.K. which were recorded in the fourth quarter of 2007. For segment reporting purposes, these items have been included in the company’s corporate segment, which is consistent with the company’s internal management reporting. In January 2009, the company announced plans to undertake restructuring and other cost-saving actions during 2009 in order to streamline operations and improve efficiency and effectiveness. The restructuring includes a reduction of the company’s global workforce by approximately 1,000 positions or 4%, and the reduction of plant and distribution center locations. The company estimates these anticipated actions will result in pretax restructuring special charges of approximately $65 million to $75 million ($42 million to $49 million after tax) in 2009. These actions are expected to provide annualized pretax savings of approximately $70 million to $80 million ($45 million to $50 million after tax), with pretax savings of approximately $50 million to be realized in 2009. The company anticipates that approximately $55 million to $65 million of the restructuring special charges represent cash expenditures. 4. RELATED PARTY TRANSACTIONS Henkel AG & Co. KGaA (“Henkel”) beneficially owned 72.7 million Ecolab common shares, or approximately 29.4%, of the company’s outstanding common shares on December 31, 2007. In February 2008, Henkel announced its intention to sell some or all of its Ecolab shares. In November 2008, Henkel completed the sale of all 72.7 million shares. As part of the sale transaction, the company repurchased 11.3 million shares directly from Henkel for $300 million. The company and its affiliates sold products and services in the aggregate amounts of $8 million, $5 million and $6 million in 2008, 2007 and 2006, respectively, to Henkel or its affiliates. The company purchased products and services in the amounts of $73 million, $65 million and $66 million in 2008, 2007 and 2006, respectively, from Henkel or its affiliates. The transactions with Henkel and its affiliates were made in the ordinary course of business and were negotiated at arm’s length. 5. BUSINESS ACQUISITIONS AND DISPOSITIONS BUSINESS ACQUISITIONS Business acquisitions made by the company during 2008, 2007 and 2006 were as follows:

ESTIMATED

ANNUAL SALES

BUSINESS DATE OF

PRE-ACQUISITION

ACQUIRED ACQUISITION

SEGMENT (MILLIONS)

(UNAUDITED)

2008

Ecovation, Inc. February

U.S. C&S $ 50

(Food & Beverage)

Novartis-Ireland dairy

hygiene business

January

International (EMEA)

3

2007

Microtek

November U.S. C&S

150

Medical Holdings, Inc.

International (Healthcare)

Eagle

June International

4

Environmental (Asia Pacific)

Systems

In February 2008, the company acquired Ecovation Inc., a Rochester, N.Y. area-based provider of renewable energy solutions and effluent management systems primarily for the food and beverage manufacturing industry in the U.S., including dairy, beverage, and meat and poultry producers. The total purchase price was approximately $210 million, of which $21 million remains payable and was placed in escrow for indemnification purposes. In November 2007, the company acquired Microtek Medical Holdings Inc., a manufacturer and marketer of infection prevention products for health care and acute care facilities. Microtek’s specialized product lines include infection barrier equipment drapes, patient drapes, fluid control products and operating room cleanup systems. The total purchase price was approximately $277 million, net of cash acquired. In September 2007, the company made a minority investment in Site Controls, LLC, a leading provider of energy management and business intelligence solutions.

38

Fuma Pest May

International 2

(Asia Pacific)

Green Harbour

March International

4

(Asia Pacific)

Apprise

February U.S. C&S

1

Technologies, Inc. (Institutional)

Wotek

January International

3

(EMEA)

2006

DuChem Industries, Inc.

September

U.S. C&S (Food &

10

Beverage)

Powles Hunt & Sons

International Ltd.

September

International (EMEA)

5

Shield

June International

19

Medicare Ltd. (EMEA)

The business acquisitions have been accounted for as purchases and, accordingly, the results of their operations have been included in the financial statements of the company from the dates of acquisition. Acquisitions in 2008, 2007 and 2006 were not material to the company’s consolidated financial statements; therefore pro forma financial information is not presented. The aggregate purchase price of acquisitions and investments in affiliates has been reduced for any cash or cash equivalents acquired with the acquisitions. Based upon preliminary purchase price allocations and subsequent adjustments thereto, the components of the aggregate purchase prices of the acquisitions and investment in affiliates made were as follows:

The allocation of purchase price includes preliminary allocations and adjustments to prior period allocations, if any. Amounts in the table above include immaterial purchase accounting adjustments to prior period acquisitions. The changes in the carrying amount of goodwill for each of the company’s reportable segments for the years ended December 31, 2008 and 2007, are as follows:

MILLIONS 2008

2007 2006

Net tangible assets acquired (liabilities assumed)

$ 36 $ 61

$ (6 ) Identifiable intangible assets

Customer relationships

11 55

20

Intellectual property 26

5 1

Trademarks

16 27

5

Other intangibles 10

31 2

Total

63 118

28

Goodwill

126 150

44

Total aggregate purchase price 225

329 66

Liability for indemnification

(21 ) - -

Net cash paid for acquistions

$ 204 $ 329

$ 66

MILLIONS

U.S. CLEANING & SANITIZING

U.S. OTHER

SERVICES

TOTAL U.S.

INTERNATIONAL CONSOLIDATED

Balance

December 31,

2006

$ 197.0 $ 50.5

$ 247.5 $ 788.4

$ 1,035.9

Goodwill

acquired

during year* 121.7

121.7 28.2

149.9

Goodwill

allocated

to business

dispositions

(2.9) (2.9 )

Foreign

currency

translation 96.3

96.3

Balance

December 31,

2007

318.7 50.5

369.2 910.0

1,279.2

Goodwill

acquired

during year* 124.9

124.9 1.5

126.4

Goodwill

allocated

to business

dispositions

(0.4) (0.4 )

Foreign

currency

translation (137.5)

(137.5 )

BUSINESS DISPOSITIONS In the fourth quarter of 2007, the company completed the sale of Peter Cox Ltd., a leading U.K. provider of damp proofing, water proofing, timber preservation and wall stabilization for residential, commercial and public properties. The company acquired Peter Cox Ltd. in connection with the company’s 2002 purchase of the Terminix Pest Control business in the U.K. Sales of the Peter Cox business were approximately $32 million in 2006 and were included in the company’s International reportable segment. The company recognized tax-free gains on the sale of $4.7 million and $1.7 million in the fourth quarter of 2007 and first quarter of 2008, respectively. The gains were reported in special gains and charges. In December 2007, the company sold a minority investment located in the U.S. and realized a gain of $6.3 million ($4.8 million after tax). The gain was reported in special gains and charges. The company had no significant business dispositions in 2008 or 2006.

39

Balance

December 31,

2008

$ 443.6 $ 50.5

$ 494.1 $ 773.6

$ 1,267.7

* For 2008, goodwill acquired is not expected to be tax deductible. For 2007, goodwill of $18.6 million is expected to be tax deductible. Goodwill acquired in 2008 and 2007 also includes adjustments to prior year acquisitions including earnout payments.

6. BALANCE SHEET INFORMATION DECEMBER 31 (MILLIONS)

2008 2007

Accounts receivable, net

Accounts receivable

$ 1,014.8 $ 1,016.7

Allowance for doubtful accounts

(43.8 ) (42.7 ) Total

$ 971.0 $ 974.0

Inventories

Finished goods

$ 263.8 $ 241.9

Raw materials and parts

232.8 224.9

Excess of fifo cost over lifo cost

(29.4 ) (16.0 ) Total

$ 467.2 $ 450.8

Property, plant and equipment, net

Land

$ 26.5 $ 30.7

Buildings and leaseholds

330.6 331.9

Machinery and equipment

673.5 683.7

Merchandising equipment

1,333.3 1,330.1

Capitalized software

162.9 129.0

Construction in progress

125.5 113.0

2,652.3 2,618.4

Accumulated depreciation

(1,517.1 ) (1,535.0 ) Total

$ 1,135.2 $ 1,083.4

Other intangible assets, net

Cost


$ 266.9 $ 291.6

Intellectual property

78.3 52.2

Trademarks

111.9 102.5

Other intangibles

54.0 45.8

511.1 492.1

Accumulated amortization


(120.3 ) (108.5 ) Intellectual property

(22.8 ) (20.0 ) Trademarks

(31.1 ) (29.1 ) Other intangibles

(10.2 ) (5.6 ) Total

$ 326.7 $ 328.9

Other assets


$ 157.9 $ 137.6

Pension

12.1 23.2

Other

166.2 153.2

Total

$ 336.2 $ 314.0

Short -term debt

Notes payable

$ 333.8 $ 400.3

Long-term debt, current maturities

5.1 3.2

Total

$ 338.9 $ 403.5


Discounts and rebates

$ 211.5 $ 223.7

Dividends payable

33.1 32.1

Interest payable

26.3 25.0

Other

165.1 182.4

Total

$ 436.0 $ 463.2

Long -term debt

4.875% senior notes, due 2015

$ 248.2 $ -

4.355% series A senior notes, due 2013

158.6 182.9

4.585% series B senior notes, due 2016

222.1 256.1

6.875% notes, due 2011

149.7 149.6

Other

25.8 14.5

804.4 603.1

Long-term debt, current maturities

(5.1 ) (3.2 ) Total

$ 799.3 $ 599.9

Other liabilities


$ 74.2 $ 86.1

Income taxes payable - noncurrent

65.4 57.3

Other

124.3 107.0

Total

$ 263.9 $ 250.4

Accumulated other comprehensive income

The company has a $600 million multicurrency credit agreement with a consortium of banks that has a term through June 1, 2012. This agreement was increased from $450 million to $600 million and the term was extended from June 1, 2011, to June 1, 2012, during 2007. The company may borrow varying amounts in different currencies from time to time on a revolving credit basis. The company has the option of borrowing based on various short-term interest rates. No amounts were outstanding under this agreement at year-end 2008 and 2007. The multicurrency credit agreement supports the company’s $600 million U.S. commercial paper program and its $200 million European commercial paper program. The U.S. commercial paper program was increased during 2007 from $450 million to $600 million. The company had $316 million in outstanding U.S. commercial paper at December 31, 2008, with an average annual interest rate of 0.9%. The company had $345 million in outstanding U.S. commercial paper at December 31, 2007, with an average annual interest rate of 4.5%. The company had no commercial paper outstanding under its European commercial paper program at December 31, 2008 or 2007. Both programs were rated A-1 by Standard & Poor’s and P-1 by Moody’s as of December 31, 2008. 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 4.875%. The proceeds were used to refinance outstanding commercial paper and for general corporate purposes. The notes are not subject to prepayment except where there is a Change of Control as defined in the Supplemental Indenture dated February 8, 2008, and there is a resulting ratings downgrade to below investment grade. Upon consolidation or merger, the company will offer to prepay all of the notes at 101% of the principal outstanding, plus accrued interest. In the event of a default by the company under the Supplemental Indenture, the notes may immediately become due and payable for the unpaid principal amount and accrued interest. The notes are subject to covenants regarding the amount of indebtedness secured by liens and certain sale and leaseback transactions. In December 2006, the company issued and sold in a private placement euro 300 million ($381 million as of December 31, 2008) aggregate principal amount of the company’s senior notes in two series: 4.355% Series A Senior Notes due 2013 in the aggregate principal amount of euro 125 million and 4.585% Series B Senior Notes due 2016 in the aggregate principal amount of euro 175 million, pursuant to a Note Purchase Agreement dated July 26, 2006, between the company and the purchasers. The company used the proceeds to repay its euro 300 million 5.375% euronotes which became due in February 2007. As of December 31, 2008, the aggregate annual maturities of long-term debt for the next five years were: MILLIONS

As of December 31, the weighted-average interest rate on notes payable was 1.3% in 2008, and 4.1% in 2007.

40

Unrealized gain (loss) on derivative financial instruments $ 8.0

$ (5.4 ) Unrecognized pension and postretirement benefit expense

(364.7 ) (162.7 ) Cumulative translation

(2.4 ) 231.2

Total $ (359.1 ) $ 63.1

2009 $ 5

2010

5

2011 154

2012

3

2013 161

7. INTEREST Total cash paid for interest was $64 million in 2008, $76 million in 2007, and $51 million in 2006.

8. FINANCIAL INSTRUMENTS FOREIGN CURRENCY FORWARD CONTRACTS The company has entered into foreign currency forward contracts to hedge transactions related to intercompany debt, subsidiary royalties, product purchases, firm commitments and other intercompany transactions. The company uses these contracts to hedge against the effect of foreign currency exchange rate fluctuations on forecasted cash flows. These contracts generally relate to the company’s European operations and are denominated primarily in euros. The company had foreign currency forward exchange contracts with notional values that totaled approximately $486 million at December 31, 2008, and $366 million at December 31, 2007. These contracts generally expire within one year. The gains and losses related to these contracts are included as a component of other comprehensive income until the hedged item is reflected in earnings. As of December 31, 2008, other comprehensive income includes a cumulative gain of $10 million related to these contracts. INTEREST RATE SWAP AGREEMENTS The company enters into interest rate swap agreements to manage interest rate exposures and to achieve a desired proportion of variable and fixed rate debt. In May 2006, the company entered into two forward starting interest rate swap agreements in connection with the senior note private placement offering that converted euro 250 million (euro 125 million due December 2013 and euro 125 million due December 2016) of the private placement funding from a variable interest rate to a fixed interest rate. The interest rate swap agreements were designated as, and effective as a cash flow hedge of the private placement offering. In June 2006, the company closed the swap agreements. The decline in fair value of $2 million, net of tax, was recorded in other comprehensive income and is recognized in earnings as part of interest expense as the forecasted transactions occur. NET INVESTMENT HEDGES The company designates all euro 300 million senior notes and related outstanding interest as a hedge of existing foreign currency exposures related to net investments the company has in certain European subsidiaries. Prior to repayment in 2007, the company had also previously designated its euro 300 million euronotes as a hedge of existing foreign currency exposures related to net investments the company has in certain European subsidiaries. Accordingly, the transaction gains and losses that are designated and effective as hedges of the company’s net investments have been included as a component of the cumulative translation account within accumulated other comprehensive income (loss). Total transaction gains and losses charged to this shareholders’ equity account were gains of $37 million, net of tax, and losses of $26 million, net of tax, in 2008 and 2007, respectively. CREDIT RISK 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 selecting major international banks and financial institutions as counterparties. The company does not anticipate nonperformance by any of these counterparties. FAIR VALUE OF OTHER FINANCIAL INSTRUMENTS The carrying amount and the estimated fair value of other financial instruments held by the company were:

The carrying amounts of cash equivalents, accounts receivable, notes payable and commercial paper approximate fair value because of their short maturities. The carrying amount of foreign exchange contracts is at fair value, which is determined based on foreign currency exchange rates as of the balance sheet date (level 2 - significant other observable inputs).

MILLIONS 2008

2007 2006

Interest expense

$ 70.8 $ 58.9

$ 51.3

Interest income (9.2 ) (7.9 ) (6.9 )

Total interest expense, net $ 61.6

$ 51.0 $ 44.4


2007

Carrying amount

Cash and cash equivalents

$ 66.7 $ 137.4

Accounts receivable, net

971.0 974.0

Foreign exchange contracts

14.4 (5.3 )

Notes payable

17.8 55.5

Commercial paper

316.0 344.8

Long-term debt

(including current maturities) 804.4

603.1

Fair value

Long-term debt (including current maturities)

$ 713.8 $ 572.7

The fair value of long-term debt is based on quoted market prices for the same or similar debt instruments. 9. SHAREHOLDERS’ EQUITY Authorized common stock, par value $1.00 per share, was 400 million shares in 2008, 2007 and 2006. Treasury stock is stated at cost. Dividends declared per share of common stock were $0.53 for 2008, $0.475 for 2007 and $0.415 for 2006. The company has 15 million shares, without par value, of authorized but unissued preferred stock. Of these 15 million shares, 0.4 million shares were designated as Series A Junior Participating Preferred Stock and 14.6 million shares were undesignated as of December 31, 2008. In February 2006, the company’s Board of Directors authorized the renewal of the company’s shareholder rights plan. Under the company’s renewed shareholder rights plan, one preferred stock purchase right is issued for each outstanding share of the company’s common stock. A right entitles the holder, upon occurrence of certain events, to buy one one-thousandth of a share of Series A Junior Participating Preferred Stock at a purchase price of $135, subject to adjustment. The rights, however, do not become exercisable unless and until, among other things, any person or group acquires 15% or more of the outstanding common stock of the company, or the company’s board of directors declares a holder of 10% or more of the outstanding common stock to be an “adverse person” as defined in the rights plan. Upon the occurrence of either of these events, the rights will become exercisable for common stock of the company (or in certain cases common stock of an acquiring company) having a market value of twice the

41

exercise price of a right. The rights are redeemable under certain circumstances at one cent per right and, unless redeemed earlier, will expire on March 10, 2016. The company reacquired 12,111,836 shares, 8,214,400 shares, and 6,875,400 shares of its common stock in 2008, 2007 and 2006, respectively, through open and private market purchases. The 2008 reaquired shares include 11,346,098 shares purchased from Henkel as discussed in Note 4. The company also reacquired 62,505 shares, 349,699 shares, and 128,544 shares of its common stock in 2008, 2007 and 2006, respectively, related to the exercise of stock options and the vesting of stock awards. In October 2006, the company’s board of directors authorized the repurchase of up to 10 million shares of common stock, including shares to be repurchased under Rule 10b5-1. Shares are repurchased to offset the dilutive effect of stock options and incentives and for general corporate purposes. As of December 31, 2008, 3,945,862 shares remained to be purchased under the company’s repurchase authority. The company intends to repurchase all shares under this authorization, for which no expiration date has been established, in open market or privately negotiated transactions, subject to market conditions.

The company’s stock incentive and option plans provide for grants of stock options, stock awards and other incentives. Common shares available for grant as of December 31 were 4,746,982 for 2008, 9,110,757 for 2007 and 11,689,435 for 2006. Common shares available for grant reflect 12 million shares approved by shareholders in 2005 for issuance under the plans. Almost all of the awards granted are non-qualified stock options granted to employees that vest annually in equal amounts over a three year service period. 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, in accordance with SFAS 123R. 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:

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 2008, 2007 and 2006, was $34 million, $86 million and $80 million, respectively. Information related to stock options outstanding and stock options exercisable as of December 31, 2008, is as follows: OPTIONS OUTSTANDING

OPTIONS EXERCISABLE

10. STOCK INCENTIVE AND OPTION PLANS

SHARES 2008

2007 2006

Granted

3,938,035 3,083,536

2,669,223

Exercised (1,535,554 ) (4,084,837 ) (4,215,387 )

Canceled (196,165 ) (163,033 ) (368,984 )

December 31:

Outstanding

22,695,125 20,488,809

21,653,143

Exercisable 16,314,069

15,106,637 15,804,403

AVERAGE PRICE

PER SHARE 2008

2007 2006

Granted

$ 36.35 $ 48.82

$ 44.93

Exercised 25.33

24.60 21.57

Canceled

45.24 37.37

33.36

December 31:

Outstanding

34.51 33.57

29.74

Exercisable 32.04

29.47 26.36

WEIGHTED- WEIGHTED-

RANGE OF AVERAGE

AVERAGE EXERCISE

OPTIONS REMAINING

EXERCISE PRICES

OUTSTANDING CONTRACTUAL LIFE

PRICE $ 14.78-24.90

4,328,122

3.1 years

$22.14

25.21-32.99

3,107,579

5.1 years

28.17

33.04-34.08

3,073,583

6.9 years

34.05

34.26-35.52

2,741,586

5.9 years

34.51

35.63-36.67

3,674,632

9.9 years

35.63

37.91-45.24

2,927,698

8.0 years

44.84

45.52-51.52

2,841,925

8.9 years

49.32

22,695,125

6.7 years

34.51

The total aggregate intrinsic value of in-the-money options outstanding as of December 31, 2008, was $79 million. The total aggregate intrinsic value of in-the-money options exercisable as of December 31, 2008, was also $79 million. The lattice (binomial) option-pricing model was used to estimate the fair value of options at grant date beginning upon adoption of SFAS 123R in the fourth quarter of 2005. The company’s primary employee option grant occurs during the fourth quarter. The weighted-average grant-date fair value of options granted in 2008, 2007 and 2006, and the significant assumptions used in determining the underlying fair value of each option grant, on the date of grant were as follows:

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. The decrease in option fair value in 2008 compared to prior years is primarily due to a lower average share price during 2008 and a lower risk-free rate of return.

42

WEIGHTED- WEIGHTED-

RANGE OF AVERAGE

AVERAGE EXERCISE

OPTIONS REMAINING

EXERCISE PRICES

EXERCISABLE CONTRACTUAL LIFE

PRICE $ 14.78-24.90

4,328,122

3.1 years

$22.14

25.21-32.99

3,107,579

5.1 years

28.17

33.04-34.08

3,073,583

6.9 years

34.05

34.26-35.52

2,741,586

5.9 years

34.51

35.63-36.67

12,864

7.1 years

36.44

37.91-45.24

2,000,241

8.0 years

44.75

45.52-51.52

1,050,094

8.9 years

49.41

16,314,069

5.7 years

32.04

2008

2007

2006

Weighted-average grant-date fair value of options granted at market prices

$7.75

$12.63

$ 12.92 Assumptions

Risk-free rate of return 1.9%

3.6%

4.5% Expected life

6 years

6 years

6 years Expected volatility

23.5%

24.2%

24.4% Expected dividend yield

1.5%

1.0%

1.0%

The expense associated with shares of restricted stock issued under the company’s stock incentive plans is based on the average daily share price of the company’s stock at the date of grant and is amortized on a straight-line basis over the periods during which the restrictions lapse. The company currently has restricted stock outstanding that vests over periods between 12 and 36 months. Stock awards are not performance based and vest with continued employment. Stock awards are subject to forfeiture in the event of termination of employment. The company granted 49,724 shares in 2008, 46,510 shares in 2007 and 14,845 shares in 2006 under its restricted stock award program. A summary of non-vested stock option and stock award activity is as follows: NON-VESTED STOCK OPTIONS AND STOCK AWARDS

Total compensation expense related to share-based compensation plans was $34 million, ($22 million net of tax benefit), $38 million, ($24 million net of tax benefit) and $36 million, ($23 million net of tax benefit) for 2008, 2007 and 2006, respectively. As of December 31, 2008, there was $52 million of total measured but unrecognized compensation expense related to non-vested share-based compensation arrangements granted under the company’s plans. That cost is expected to be recognized over a weighted-average period of 1.9 years. Total cash received from the exercise of share-based instruments in 2008 was $36 million. The company generally issues authorized but previously unissued shares to satisfy stock option exercises. The company typically repurchases shares on the open market to offset the dilutive effect of stock options.

Income before income taxes consisted of:

The provision for income taxes consisted of:

As of December 31, 2008, the company has federal net operating loss carryforwards, acquired with the Microtek and Ecovation acquisitions, of approximately $26 million, which will be available to offset future taxable income. If not used, these carryforwards will expire between 2018 and 2027. The company also has various state net operating loss carryforwards, acquired with the Microtek and Ecovation acquisitions, that expire from 2009 to 2027. The company has recorded a valuation allowance on the state net operating loss carryforwards because it is more likely than not that they will not be utilized. As of December 31, 2008, the company has an unrealized capital loss of $15 million related to an investment impairment. The company has recorded a valuation allowance on the unrealized capital loss because it is more likely than not that it will not be realized. The company’s overall net deferred tax assets and deferred tax liabilities were comprised of the following:

WEIGHTED- WEIGHTED-

AVERAGE

AVERAGE

FAIR VALUE FAIR VALUE

STOCK

AT GRANT STOCK

AT GRANT

OPTIONS DATE

AWARDS DATE

December 31, 2007 5,382,172

$ 12.40 68,180

$ 43.95

Granted

3,938,035 7.75

49,724 42.71

Vested/Earned (2,753,334 )

11.70 (15,258 )

37.83

Cancelled

(185,817 ) 12.43

(14,396 ) 46.11

December 31, 2008 6,381,056

$ 9.84 88,250

$ 43.95

11. INCOME TAXES

MILLIONS 2008

2007

2006

Domestic $ 402.8

$ 344.2

$ 321.1

Foreign 248.1

272.1

246.1

Total $ 650.9

$ 616.3

$ 567.2

MILLIONS 2008

2007

2006

Federal and state $ 59.1

$ 129.3

$ 143.6

Foreign 63.1

57.3

73.8

Total currently payable 122.2

186.6

217.4

Federal and state

79.1

(2.6 ) (15.8 ) Foreign

1.5

5.1 (3.0 )

Total deferred 80.6

2.5

(18.8 ) Provision for income taxes

$ 202.8

$ 189.1 $ 198.6


2007

A reconciliation of the statutory U.S. federal income tax rate to the company’s effective income tax rate is as follows:

As of December 31, 2008, the company had undistributed earnings of international affiliates of approximately $745 million. 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 that might arise if all undistributed earnings were distributed.

43

Deferred tax assets Other accrued liabilities $ 71.5

$ 70.3

Loss carryforwards 18.2

33.9

Share-based compensation 58.0

49.5

Other comprehensive income 231.8

127.5

Other, net 37.8

30.8

Valuation allowance (11.4)

(4.1 ) Total 405.9

307.9

Deferred tax liabilities

Property, plant and equipment basis differences 80.9

39.6

Intangible assets 135.8

128.0

Postretirement healthcare and pension benefits 11.9

Other, net 5.1

6.0

Total 233.7

173.6

Net deferred tax assets $ 172.2

$ 134.3

2008

2007

2006 Statutory U.S. rate

35.0 % 35.0 %

35.0 % State income taxes, net of federal benefit

2.3

2.1

2.3

Foreign operations (4.1 )

(3.2 )

(1.8 ) Non taxable sale of plant and business

(1.5 )

U.S.-German tax treaty ratification (0.8 )

Valuation allowance on investment impairment 0.9

Germany and United Kingdom tax rate changes

(1.4 )

Audit settlements/refunds

(1.6 )

Other, net (0.6 )

(0.2 )

(0.5 ) Effective income tax rate

31.2 % 30.7 %

35.0 %

Cash paid for income taxes was approximately $100 million in 2008, $161 million in 2007 and $182 million in 2006. Effective January 1, 2007, the company adopted the provisions of FIN 48. As a result of the implementation of FIN 48, the company recognized a $5 million decrease in the liability for unrecognized tax benefits, which was accounted for as an increase to the January 1, 2007, balance of retained earnings. 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 2002. The Internal Revenue Service (IRS) has completed examinations of the company’s U.S. income tax returns for the years 1999 through 2006. It is reasonably possible for specific open positions within the 1999 through 2006 U.S. federal examinations to be settled in the next 12 months. The company anticipates a final settlement of the audit of tax years 2005 and 2006 in early 2009. In addition, it is reasonably possible that the company will settle an income tax audit for Germany covering the years 2003 through 2006 in the next 12 months. The company believes these settlements could result in a decrease in the company’s gross liability for unrecognized tax benefits of up to $71 million during the next 12 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 12 months could change depending on a variety of factors and result in amounts different from above. During 2008, the company recognized a discrete $5.2 million reduction in income tax expense resulting from a new tax treaty between the U.S. and Germany that went into effect after ratification by the U.S. Senate. As a result of the treaty ratification, the company has greater assurance of favorable resolution on potential disputes between these two countries. During 2007, specific tax positions relating to the company’s U.S. income tax returns for 2002 through 2004 were settled and a partial settlement payment was made to the IRS. The company also received final audit settlement for tax years 1999 through 2002 in Germany. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits as of December 31, 2008 and 2007, is as follows:

Included in the balance at December 31, 2008 and 2007 are $54 million and $53 million, respectively, of tax positions that would affect the annual effective tax rate if such benefits were recognized. The company recognizes both penalties and interest accrued related to unrecognized tax benefits in the company’s provision for income taxes. During the year ended December 31, 2008, the company accrued approximately $3 million in interest. The company had approximately $10 million and $7 million for the payment of interest and penalties accrued at December 31, 2008 and 2007, respectively.

The company leases sales and administrative office facilities, distribution center facilities, automobiles and other equipment under operating leases. Rental expense under all operating leases was approximately $129 million in 2008, $120 million in 2007 and $104 million in 2006. As of December 31, 2008, future minimum payments under operating leases with noncancelable terms in excess of one year were: MILLIONS

The company enters into operating leases for vehicles whose noncancelable 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 $54 million in 2009. These automobile leases have guaranteed residual values that have historically been satisfied primarily by the proceeds on the sale of the vehicles. $0.5 million of estimated losses have been recorded in 2008 for

MILLIONS 2008

2007

Balance at beginning of year $ 98.6

$ 98.3

Additions based on tax positions related to the current year 10.9

14.9

Additions for tax positions of prior years 9.9

7.5

Reductions for tax positions of prior years (4.7 )

(11.9 ) Reductions for tax positions due to statute of limitations (0.9 )

(1.2 ) Settlements (0.3 )

(11.4 ) Foreign currency translation (2.9 )

2.4

Balance at end of year $ 110.6

$ 98.6

12. RENTALS AND LEASES

2009 $ 56

2010 42

2011 26

2012 16

2013 11

Thereafter 23

Total $ 174

these guarantees as the company believes, based upon the results of previous leasing arrangements, that the potential recovery of value from the vehicles when sold will be less than the residual value guarantee.

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 $86 million in 2008, $83 million in 2007 and $73 million in 2006.

The company is self-insured in North America for most workers compensation, general liability and automotive liability losses subject to per occurrence and aggregate annual liability limitations. The company is insured for losses in excess of these limitations. The company has recorded both a liability and an offsetting receivable for amounts in excess of these limitations. The company is self-insured for health care claims for eligible participating employees subject to certain deductibles and limitations. The company determines its liability for claims incurred but not reported on an actuarial basis. Outside of North America, the company is fully insured for losses, subject to annual deductibles. 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 antitrust, patent infringement, wage hour lawsuits and possible obligations to investigate and

44

13. RESEARCH EXPENDITURES

14. COMMITMENTS AND CONTINGENCIES

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. 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 charge, if any, would not have a material adverse effect on the company’s consolidated financial position. In accordance with SFAS 5, Accounting for Contingencies (“SFAS 5”) and related guidance, 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. As previously disclosed, an arbitration decision in conjunction with a settlement was rendered on September 24, 2007, concerning two California class-action lawsuits involving wage hour claims affecting former and current employees of the company’s Pest Elimination Division. If upheld, the company will pay approximately $27.4 million, plus post-award interest in settlement of the cases. The company has appealed the decision and thereby the settlement. The company has fully accrued for this award and the related interest as of December 31, 2008. One other wage hour lawsuit has been certified for class-action status. The company has completed an analysis and established an accrual for this claim in accordance with SFAS 5. The company believes that there is not a reasonably possible risk of material loss related to this lawsuit. The company is also a defendant in other wage hour lawsuits, none of which have been certified for class-action status. The company is also currently participating in environmental assessments and remediation at a number of locations and environmental liabilities have been accrued reflecting management’s best estimate of future costs. The company’s reserve for environmental remediation costs was approximately $4 million at December 31, 2008 and 2007. Potential insurance reimbursements are not anticipated in the company’s accruals for environmental liabilities. While the final resolution of these contingencies could result in expenses different than current accruals, and therefore have an impact on the company’s consolidated financial results in a future reporting period, management believes the ultimate outcome will not have a significant effect on the company’s financial position. However, legal matters are subject to inherent uncertainties and there exists the possibility that the ultimate resolution of these matters could have a material adverse impact on the company’s financial position, results of operations and cash flows in the period in which any such effect is recorded.

PENSION AND POSTRETIREMENT HEALTH CARE BENEFITS PLA NS The company has a noncontributory defined benefit pension plan covering most of its U.S. employees. Effective January 1, 2003, the U.S. pension plan was amended to provide a cash balance type pension benefit to employees hired on or after the effective date. For employees hired prior to January 1, 2003, plan benefits are based on years of service and highest average compensation for five consecutive years of employment. For employees hired after December 31, 2002, plan benefits are based on contribution credits equal to a fixed percentage of their current salary and interest credits. The company also has U.S. noncontributory non-qualified defined benefit plans, which provide for benefits to employees in excess of limits permitted under its U.S. pension plan. 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. 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 information following includes all of the company’s U.S. and international defined benefit pension plans. The company provides postretirement health care benefits to certain U.S. employees. The plan is 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 is not significant. Effective December 31, 2006, the company prospectively adopted SFAS 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans - An Amendment of FASB Statements No. 87, 88, 106 and 132(R) (“SFAS 158”). As a result of the adoption of SFAS 158, the company recorded a cumulative effect adjustment as a component of other comprehensive income within shareholders’ equity. The company’s disclosures reflect the revised accounting and disclosure requirements of SFAS 158.

45

15. RETIREMENT PLANS

The following table sets forth information related to the company’s plans:

(a) Includes qualified and non-qualified plans Estimated amounts in accumulated other comprehensive income expected to be reclassified to net period cost during 2009 are as follows:

(a) Includes qualified and non-qualified plans.

46

U.S.

INTERNATIONAL U.S. POSTRETIREMENT

PENSION PENSION

HEALTH CARE

MILLIONS 2008

2007 2008

2007 2008

2007

Accumulated Benefit Obligation, end of year

$ 782.0 $ 718.2

$ 347.0 $ 465.1

$ 157.0 $ 164.9

Projected Benefit Obligation

Projected benefit obligation, beginning of year

$ 882.7 $ 833.8

$ 506.0 $ 477.9

$ 164.9 $ 169.4

Service cost

44.7 43.2

20.7 20.3

2.3 2.6

Interest

51.8 47.5

26.1 22.4

9.6 9.6

Participant contributions

2.6 2.5

3.0 3.0

Medicare subsidies received

0.2 0.4

Curtailments and settlements

(2.3)

Plan amendments

0.2 1.0

0.1

Actuarial loss (gain)

12.0 (17.7)

(91.3 ) (36.1)

(12.6 ) (7.6)

Benefits paid

(28.1 ) (24.3)

(17.6 ) (19.6)

(10.4 ) (12.5)

Foreign currency translation

(74.4 ) 40.8

Projected benefit obligation, end of year

$ 963.1 $ 882.7

$ 373.1 $ 506.0

$ 157.0 $ 164.9

Plan Assets

Fair value of plan assets, beginning of year

$ 811.8 $ 793.4

$ 311.3 $ 269.6

$ 29.6 $ 30.2

Actual returns on plan assets

(289.6 ) 40.6

(46.3 ) 6.9

(9.4 ) 1.6

Company contributions

78.6 2.1

26.8 29.6

7.0 9.0

Participant contributions

2.6 2.5

1.4 1.3

Settlements

(0.1)

Benefits paid

(28.1 ) (24.3)

(17.6 ) (19.6)

(10.4 ) (12.5)

Foreign currency translation

(51.6 ) 22.4

Fair value of plan assets, end of year

$ 572.7 $ 811.8

$ 225.2 $ 311.3

$ 18.2 $ 29.6

Funded Status, end of year

$ (390.4 ) $ (70.9)

$ (147.9 ) $ (194.7)

$ (138.8 ) $ (135.3)

Amounts recognized in Consolidated Balance Sheet:

Other assets

$ 12.1 $ 23.2


$ (8.2 ) $ (5.7)

(7.6 ) (7.6)

$ (1.3 ) $ (1.2)

Post retirement health care and pension benefits

(382.2 ) (65.2)

(152.4 ) (210.3)

(137.5 ) (134.1)

Net liability

$ (390.4 ) $ (70.9)

$ (147.9 ) $ (194.7)

$ (138.8 ) $ (135.3)

Amounts recognized in Accumulated

Other Comprehensive Loss:

Unrecognized net actuarial loss

$ 546.4 $ 183.4

$ 26.9 $ 60.5

$ 31.0 $ 36.3

Unrecognized net prior service costs (benefits)

3.1 4.4

0.1 (0.5)

(6.6 ) (13.0)

Tax benefit

(212.9 ) (72.8)

(10.3 ) (21.3)

(13.0 ) (14.3)

Accumulated other comprehensive loss, net of tax

$ 336.6 $ 115.0

$ 16.7 $ 38.7

$ 11.4 $ 9.0

Change in Accumulated Other Comprehensive Loss:

Amortization of net actuarial loss

$ (8.9 ) $ (1.1 )

$ (4.7 )

Amortization of prior service benefits (costs) (1.3 )

(0.4 ) 6.4

Current period net actuarial loss (gain)

371.9 (26.2 )

(0.6 )

Current period prior service costs 1.0

Tax expense (benefit)

(140.1 ) 9.5

1.3

Foreign currency translation (4.8 )

Other comprehensive loss (income)

$ 221.6 $ (22.0 )

$ 2.4

U.S.


MILLIONS PENSION

PENSION HEALTH CARE

Net actuarial loss

$ 15.9

$ 1.5 $ 4.4

Net prior service costs/(benefits)

0.5

0.2 (6.4 )

Total

$ 16.4

$ 1.7 $ (2.0 )

(a)

(a)

The aggregate projected benefit obligation, accumulated benefit obligation and fair value of plan assets for plans with accumulated benefit obligations in excess of plan assets were as follows:

In 2007, these plans included various international plans and the U.S. non-qualified pension and postretirement health care plans, which are funded consistent with local practices and requirements. Beginning in 2008, these amounts also include the U.S. qualified pension plan. As of December 31, 2008, there were approximately $30 million of future postretirement benefits covered by insurance contracts. PLAN ASSETS UNITED STATES The company’s plan asset allocations for its U.S. defined benefit pension and postretirement health care benefits plans at December 31, 2008 and 2007, and target allocation for 2009, are as follows:

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 pension plan demographic characteristics generally reflect a younger plan population relative to an average pension plan. Therefore, 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. Since diversification is widely recognized as important to reduce unnecessary risk, 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’s U.S. investment policies prohibit investing in letter stock, warrants and options, and engaging in short sales, margin transactions, private placements, or other specialized investment activities. The use of derivatives is also prohibited for the purpose of speculation, circumventing the investment guidelines or taking risks that are inconsistent with the fund’s guidelines. INTERNATIONAL The company’s plan asset allocations for its international defined benefit pension plans at December 31, 2008 and 2007, are as follows:

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 target asset allocation for 2009 is presented. The funds are invested in a variety of stocks, fixed income and real estate investments and, in some cases, the assets are managed by insurance companies which may offer a guaranteed rate of return.

47


2007 Aggregate projected benefit obligation

$1,220.3 $ 356.9

Accumulated benefit obligation 1,027.4

322.8 Fair value of plan assets

678.7 95.7

2009

TARGET PERCENTAGE

ASSET OF PLAN ASSETS

ASSET

ALLOCATION

CATEGORY PERCENTAGE

2008 2007

Large cap equity

43 % 42 %

42 %

Small cap equity 12

11 11

International equity

15 14

15

Fixed income 25

26 26

Real estate

5 7

6

Total 100 %

100 % 100 %

PERCENTAGE

OF PLAN ASSETS

ASSET

CATEGORY 2008

2007

Equity securities 38 %

42 %

Fixed income 42

40

Insurance contracts 14

8

Real estate 3

3

Other 3

7

Total 100 %

100 %

NET PERIODIC BENEFIT COSTS Pension and postretirement health care benefits expense for the company’s operations was:

(a) Includes qualified and non-qualified plans PLAN ASSUMPTIONS

(a) Includes qualified and non-qualified plans The expected long-term rate of return is generally based on the pension plan’s asset mix. Assumptions of returns are based on historical long-term returns on asset categories, expectations for inflation, and estimates of the impact of active management of the assets. For postretirement benefit measurement purposes as of December 31, 2008, 8% (for pre-age 65 retirees) and 9% (for post-age 65 retirees) annual rates of increase in the per capita cost of covered health care were assumed. The rates were assumed to decrease by 1% each year until they reach 5% in 2012 for pre-age 65 retirees and 5% in 2013 for post-age 65 retirees and remain at those levels thereafter. Health care costs which are eligible for subsidy by the company are limited to a maximum 4% annual increase beginning in 1996 for certain employees. Assumed health care cost trend rates have a significant 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:

U.S.


PENSION PENSION

HEALTH CARE

MILLIONS

2008 2007

2006 2008

2007 2006

2008 2007

2006

Service cost - employee

benefits earned during the year

$ 44.7 $ 43.2

$ 40.6 $ 20.7

$ 20.3 $ 18.9

$ 2.3 $ 2.6

$ 3.1

Interest cost on benefit obligation

51.8 47.5

43.6 26.1

22.4 19.0

9.6 9.6

9.0

Expected return on plan assets

(70.3 ) (65.8 )

(62.1 ) (18.8 )

(16.1 ) (13.1 )

(2.5 ) (2.5 )

(2.5 )

Recognition of net actuarial loss

8.9 13.0

16.6 1.1

3.2 3.1

4.7 7.3

8.3

Amortization of prior service cost (benefit)

1.3 2.0

2.0 0.4

0.2 (6.4 )

(6.4 ) (6.4 )

Curtailment loss (gain)

0.4 (0.2 )

Total expense

$ 36.4

$ 39.9 $ 40.7

$ 29.5

$ 30.4 $ 27.7

$ 7.7

$ 10.6 $ 11.5

U.S.


PENSION PENSION

HEALTH CARE

2008 2007

2006 2008

2007 2006

2008 2007

2006

Weighted-average

actuarial assumptions used to determine benefit obligations as of December 31:

Discount rate

6.26 % 5.99 %

5.79 % 6.39 %

5.34 % 4.65 %

6.26 % 5.99 %

5.79 %

Projected salary increase

4.32 4.32

4.32 3.23

3.25 3.27

Weighted-average

actuarial assumptions used to determine net cost:

Discount rate

5.99 5.79

5.57 5.03

4.64 4.56

5.99 5.79

5.57

Expected return on plan assets

8.75 8.75

8.75 5.85

5.87 5.80

8.75 % 8.75 %

8.75 %

Projected salary increase

4.32 % 4.32 %

4.30 % 3.14 %

3.32 % 3.21 %

1-PERCENTAGE POINT

MILLIONS

INCREASE DECREASE

(a)

(a)

48

Effect on total of service and interest cost components $ 0.5

$ (0.4)

Effect on postretirement benefit obligation

7.8

(6.8)

AMENDMENTS During 2004, the American Jobs Creation Act of 2004 (the “Act”) added a new Section 409A to the Internal Revenue Code (the “Code”) which significantly changed the federal tax law applicable to amounts deferred after December 31, 2004, under nonqualified deferred compensation plans. In December 2004 the company amended the Supplemental Executive Retirement Plan (“SERP”) and the Mirror Pension Plan to (1) allow amounts deferred prior to January 1, 2005, to qualify for “grandfathered” status and to continue to be governed by the law applicable to nonqualified deferred compensation prior to the Act, and (2) temporarily freeze benefits as of December 31, 2004, due to the uncertainty regarding the effect of the Act on such benefits. The Secretary of Treasury and the Internal Revenue Service issued final regulations with respect to the provisions of the Act in April 2007, and final amendments to comply with the Act were adopted by the company prior to the end of 2008. The final amendments restored benefits retroactive to January 1, 2005, and otherwise made changes to ensure compliance with Code Section 409A for post 2004 benefit accruals. Additionally, the company made minor amendments to the Non-Employee Director Stock Option and Deferred Compensation Plan and Mirror Savings Plan to allow for compliance with Code Section 409A. These amendments did not impact the company’s reported results of operations or financial position. CASH FLOWS As of year-end 2008, 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:

The company’s funding policy for the U.S. pension plan is to achieve and maintain a return on assets 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. During 2008, the company made a $75 million voluntary contribution to the U.S. pension plan. The company expects to make an additional voluntary contribution of approximately $50 million to the U.S. pension plan in the beginning of April 2009. The company is in compliance with all funding requirements of its pension and postretirement health care plans. Certain international pension benefit plans are required to be funded in accordance with local government requirements. The company contributed approximately $27 million to its international pension benefit plans during 2008. The company estimates that it will contribute approximately $25 million to the international pension benefit plans during 2009. The company is not aware of any expected refunds of plan assets within the next 12 months from any of its existing U.S. or international pension or postretirement benefit plans. SAVINGS PLAN AND ESOP The company provides a 401(k) savings plan for substantially all U.S. employees. Employee before-tax contributions of up to 3% of eligible compensation are matched 100% by the company and employee before-tax contributions between 3% and 5% of eligible compensation are matched 50% by the company. The company’s matching contributions are invested in Ecolab common stock and are 100% vested immediately. Employees are allowed to immediately re-allocate company matching contributions in Ecolab common stock to other investment funds within the plan. Effective January 1, 2009, the plan was amended to allow the company’s matching contributions to be invested in the same investment funds as employee before tax contributions. The company’s contributions amounted to $23 million in 2008, $20 million in 2007 and $19 million in 2006. 16. OPERATING SEGMENTS The company’s 12 operating segments have been aggregated into three reportable segments. The “U.S. Cleaning & Sanitizing” reportable segment provides cleaning and sanitizing products to U.S. markets through its Institutional, Food & Beverage, Kay, Textile Care, Healthcare and Vehicle Care operating segments. Beginning in 2008, following the Ecovation acquisition, the company combined its Water Care and Ecovation divisions into its Food & Beverage division. These operating segments exhibit similar products, manufacturing processes, customers, distribution methods and economic characteristics. The “U.S. Other Services” reportable segment includes all other U.S. operations of the company. This segment provides pest elimination and kitchen equipment repair and maintenance through its Pest Elimination and GCS Service operating segments. These two operating segments are primarily fee-for-service businesses. Since the primary focus of these segments is service, they have not been combined with the company’s “U.S. Cleaning & Sanitizing” reportable segment. These operating segments are combined and disclosed as an “all other” category in accordance with SFAS 131. Total service revenue for this segment was $395 million, $371 million and $334 million for 2008, 2007 and 2006, respectively.

MEDICARE

SUBSIDY

MILLIONS ALL PLANS

RECEIPTS

2009

$ 70 $ 1

2010

66 1

2011

73 1

2012

85 1

2013

99 1

2014-2018

536 10

The company’s “International” reportable segment includes four operating segments; Europe/Middle East/Africa (EMEA), Asia Pacific, Latin America and Canada. These segments provide cleaning and sanitizing products, as well as pest elimination service. International operations are managed by geographic region and exhibit similar products, manufacturing processes, customers, distribution methods and economic characteristics. Total service revenue, at public rates, for international pest elimination was $186 million, $193 million and $175 million for 2008, 2007 and 2006, respectively. Information on the types of products and services of each of the company’s operating segments is included in Item 1 (c) Narrative Description of Business of our Form 10-K for the year ended December 31, 2008. The company evaluates the performance of its International operations based on fixed management currency exchange rates. The difference between the fixed management currency exchange rates and the actual currency exchange rates is reported as “foreign currency translation” in operating segment reporting. 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 profitability of the company’s operating segments is evaluated by management based on operating income.

49

Financial information for each of the company’s reportable segments is as follows:

Consistent with the company’s internal management reporting, corporate operating income (loss) for 2008 and 2007 includes $25.9 million and $19.7 million, respectively, of special gains and charges included on the Consolidated Statement of Income as well as investments the company is making in business systems and the company’s business structure. Corporate assets are principally cash and cash equivalents and deferred taxes. The company has two classes of products within its U.S. Cleaning & Sanitizing and International operations which comprise 10% or more of consolidated net sales. Sales of warewashing products were approximately 21%, 22% and 21% of consolidated net sales in 2008, 2007 and 2006, respectively. Sales of laundry products were approximately 11%, 10% and 10% of consolidated net sales in 2008, 2007 and 2006, respectively. Property, plant and equipment, net, of the company’s U.S. and International operations were as follows:

50

U.S.

U.S. FOREIGN

CLEANING & OTHER

TOTAL CURRENCY

MILLIONS

SANITIZING SERVICES

U.S. INTERNATIONAL

TRANSLATION CORPORATE

CONSOLIDATED

NET SALES

2008

$ 2,660.8

$ 469.3

$ 3,130.1

$ 2,974.7

$ 32.7

$ 6,137.5

2007 2,351.4

449.9 2,801.3

2,793.9 (125.6 )

5,469.6

2006 2,152.3

410.5 2,562.8

2,630.4 (297.4 )

4,895.8

OPERATING INCOME (LOSS)

2008

431.5

51.8

483.3

280.1

4.2

$ (55.1 )

712.5

2007 394.0

40.7 434.7

289.7 (16.7 )

(40.4 ) 667.3

2006

329.2 38.9

368.1 282.6

(39.1 ) 611.6

DEPRECIATION & AMORTIZATION

2008

184.3

6.2

190.5

140.9

3.3

334.7

2007 153.4

6.1 159.5

136.8 (4.4 )

291.9

2006 139.7

6.4 146.1

133.2 (10.7 )

268.6

TOTAL ASSETS

2008

1,979.0

205.8

2,184.8

2,675.2

(352.4 )

249.3

4,756.9

2007 1,652.4

197.6 1,850.0

2,658.0 37.8

177.0 4,722.8

CAPITAL EXPENDITURES (INCLUDING CAPITALIZED SOFTWARE)

2008

251.1

4.4

255.5

138.6

0.4

394.5

2007 216.5

11.8 228.3

138.9 (5.7 )

361.5

2006 188.4

14.7 203.1

132.2 (14.3 )

321.0


2007 United States

$ 782.5

$ 685.6

International

352.7 397.8

Consolidated

$ 1,135.2

$ 1,083.4

17. QUARTERLY FINANCIAL DATA (UNAUDITED)

Per share amounts do not necessarily sum due to changes in the calculation of shares outstanding for each discrete period and rounding.

51

FIRST SECOND

THIRD FOURTH

MILLIONS, EXCEPT PER SHARE

QUARTER QUARTER

QUARTER QUARTER

YEAR

2008

Net sales

United States Cleaning & Sanitizing

$ 653.4

$ 663.7

$ 695.5 $ 648.2

$ 2,660.8

United States Other Services 110.4

120.9

124.7 113.3

469.3

International 683.4

740.7

767.3 783.3

2,974.7

Effect of foreign currency translation 10.7

44.7

38.8 (61.5 )

32.7

Total 1,457.9

1,570.0

1,626.3 1,483.3

6,137.5

Cost of sales 738.3

798.8

834.3 770.2

3,141.6

Selling, general and administrative expenses 557.2

580.0

578.5 541.8

2,257.5

Special (gains) and charges 1.9

(19.3 )

11.8 31.5

25.9

Operating income

United States Cleaning & Sanitizing 105.5

107.5

121.2 97.3

431.5


13.0

17.9 13.9

51.8

International 53.9

73.7

78.5 74.0

280.1

Corporate (6.8 )

9.9

(19.4 ) (38.8 )

(55.1 )

Effect of foreign currency translation 0.9

6.4

3.5 (6.6 )

4.2

Total 160.5

210.5

201.7 139.8

712.5

Interest expense, net 14.8

15.3

16.0 15.5

61.6


195.2

185.7 124.3

650.9

Provision for income taxes 42.8

56.2

59.5 44.3

202.8

Net income $ 102.9

$ 139.0

$ 126.2 $ 80.0

$ 448.1


Basic

$ 0.42

$ 0.56

$ 0.51 $ 0.33

$ 1.83

Diluted $ 0.41

$ 0.55

$ 0.50 $ 0.33

$ 1.80


Basic 247.0

247.1

247.5 239.9

245.4

Diluted 251.5

251.4

251.8 242.9

249.3

2007

Net sales


$ 568.2 $ 589.3

$ 604.5 $ 589.4

$ 2,351.4


113.7 119.3

114.8 449.9

International

634.8 701.7

720.7 736.7

2,793.9

Effect of foreign currency translation (50.9 )

(42.3 ) (31.3 )

(1.1 ) (125.6 )

Total

1,254.2 1,362.4

1,413.2 1,439.8

5,469.6

Cost of sales 615.7

669.5 690.1

716.4 2,691.7

Selling, general and administrative expenses

490.1 519.9

523.7 557.2

2,090.9

Special (gains) and charges -

- 27.8

(8.1 ) 19.7

Operating income


99.2 99.8

111.5 83.5

394.0


11.0 12.9

7.5 40.7

International

47.8 72.4

86.2 83.3

289.7

Corporate (2.2 )

(4.3 ) (34.2 )

0.3 (40.4 )

Effect of foreign currency translation

(5.7 ) (5.9 )

(4.8 ) (0.3 )

(16.7 )

Total 148.4

173.0 171.6

174.3 667.3

Interest expense, net

11.7 13.4

12.8 13.1

51.0


159.6 158.8

161.2 616.3


47.2 49.3

44.8 47.8

189.1

Net income $ 89.5

$ 110.3 $ 114.0

$ 113.4 $ 427.2


Basic

$ 0.36 $ 0.45

$ 0.46 $ 0.46

$ 1.73

Diluted $ 0.35

$ 0.44 $ 0.46

$ 0.45 $ 1.70


Basic

249.7 246.0

245.2 246.3

246.8

Diluted 254.5

250.7 249.7

251.3 251.8

REPORTS OF MANAGEMENT To our Shareholders: MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENT S 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 financial control of operations. 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 FINANC IAL 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, 2008. 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, 2008, as stated in their report which is included herein.



52

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Directors of Ecolab Inc.: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, comprehensive income, shareholders’ equity and of cash flows present fairly, in all material respects, the financial position of Ecolab Inc. and its subsidiaries at December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008, 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, 2008, 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. As discussed in Note 15 to the consolidated financial statements, Ecolab Inc. changed the manner in which it accounts for defined benefit pension and other postretirement plans effective December 31, 2006. As discussed in Note 11 to the consolidated financial statements, Ecolab Inc. changed its method of accounting for uncertain income tax positions effective January 1, 2007. 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 27, 2009

53

SUMMARY OPERATING AND FINANCIAL DATA DECEMBER 31 (MILLIONS, EXCEPT PER SHARE AND EMPLOYEES)

2008 2007

2006 2005

OPERATIONS

Net sales

United States

$ 3,130.1 $ 2,801.3

$ 2,562.8 $ 2,327.4

International (at average rates of currency

exchange during the year) 3,007.4

2,668.3 2,333.0

2,207.4

Total 6,137.5

5,469.6 4,895.8

4,534.8

Cost of sales (including special (gains) and charges of $(0.1) in 2004, $(0.1) in 2003, $9.0 in 2002, $(0.6) in 2001 and $1.9 in 2000) 3,141.6 2,691.7 2,416.1 2,248.8

Selling, general and administrative expenses 2,257.5

2,090.9 1,868.1

1,743.6

Special (gains) and charges 25.9

19.7

Operating income 712.5

667.3 611.6

542.4

Gain on sale of equity investment

Interest expense, net 61.6

51.0 44.4

44.2

Income from continuing operations before income taxes, equity earnings and changes in accounting principle

650.9 616.3

567.2 498.2


202.8 189.1

198.6 178.7

Equity in earnings of Henkel-Ecolab

Income from continuing operations

448.1 427.2

368.6 319.5

Gain from discontinued operations

Changes in accounting principle

Net income, as reported

448.1 427.2

368.6 319.5

Adjustments

Adjusted net income

$ 448.1 $ 427.2

$ 368.6 $ 319.5

Income per common share, as reported

Basic - continuing operations

$ 1.83 $ 1.73

$ 1.46 $ 1.25

Basic - net income

1.83 1.73

1.46 1.25

Diluted - continuing operations

1.80 1.70

1.43 1.23

Diluted - net income

1.80 1.70

1.43 1.23

Adjusted income per common share

Basic - continuing operations

1.83 1.73

1.46 1.25

Basic - net income

1.83 1.73

1.46 1.25

Diluted - continuing operations

1.80 1.70

1.43 1.23

Diluted - net income

$ 1.80 $ 1.70

$ 1.43 $ 1.23

Weighted-average common shares outstanding -

basic 245.4

246.8 252.1

255.7

Weighted-average common shares outstanding - diluted

249.3 251.8

257.1 260.1

SELECTED INCOME STATEMENT RATIOS

Gross profit

48.8 % 50.8 % 50.7 % 50.4 % Selling, general and administrative expenses

36.8 38.2

38.2 38.4

Operating income

11.6 12.2

12.5 12.0

Income from continuing operations before

income taxes 10.6

11.3 11.6

11.0

Income from continuing operations 7.3

7.8 7.5

7.0

Effective income tax rate 31.2 % 30.7 % 35.0 % 35.9 %

FINANCIAL POSITION

Current assets $ 1,691.1

$ 1,717.3 $ 1,853.6

$ 1,421.7

Property, plant and equipment, net 1,135.2

1,083.4 951.6

868.0

Investment in Henkel-Ecolab

Goodwill, intangible and other assets

1,930.6 1,922.1

1,614.2 1,506.9

Total assets

$ 4,756.9 $ 4,722.8

$ 4,419.4 $ 3,796.6

Current liabilities

$ 1,441.9 $ 1,518.3

$ 1,502.8 $ 1,119.4

Long-term debt

799.3 599.9

557.1 519.4

Postretirement health care and pension benefits

680.2 418.5

420.2 302.0

Other liabilities

263.9 250.4

259.1 206.6

Shareholders’ equity

1,571.6 1,935.7

1,680.2 1,649.2

Total liabilities and shareholders’ equity

$ 4,756.9 $ 4,722.8

$ 4,419.4 $ 3,796.6

SELECTED CASH FLOW INFORMATION

Cash provided by operating activities

$ 753.2 $ 797.6

$ 627.6 $ 590.1

Depreciation and amortization

334.7 291.9

268.6 256.9

Capital expenditures

326.7 306.5

287.9 268.8

Property, plant and equipment amounts for the years 2005 through 1998 have been restated to include capital software which was previously classified in other assets. Results for 2004 through 1998 have been restated to reflect the effect of retroactive application of SFAS 123R, “Share-Based Payment.” The former Henkel-Ecolab joint venture is included as a consolidated subsidiary effective November 30, 2001. Adjusted net income results for 2001 through 1998 reflect the pro forma effect of the discontinuance of the amortization of goodwill as if SFAS 142 had been in effect since January 1, 1998. All per share, shares outstanding and market price data reflect the two-for-one stock splits declared in 2003. Return on beginning equity is net income divided by beginning shareholders’ equity.

54

Cash dividends declared per common share $ 0.5300

$ 0.4750 $ 0.4150

$ 0.3625

SELECTED FINANCIAL MEASURES/OTHER

Total debt $ 1,138.2

$ 1,003.4 $ 1,066.1

$ 746.3

Total debt to capitalization 42.0 % 34.1 % 38.8 % 31.2 %

Book value per common share $ 6.65

$ 7.84 $ 6.69

$ 6.49

Return on beginning equity 23.1 % 25.4 % 22.4 % 20.0 %

Dividends per share/diluted net income per common share

29.4 % 27.9 % 29.0 % 29.5 % Net interest coverage

11.6 13.1

13.8 12.3

Year end market capitalization

$ 8,301.7 $ 12,639.9

$ 11,360.4 $ 9,217.8

Annual common stock price range

$ 52.35-29.56 $ 52.78-37.01

$ 46.40-33.64 $ 37.15-30.68

Number of employees

26,568 26,052

23,130 22,404

2004

2003 2002

2001 2000

1999 1998

$ 2,135.7 $ 2,014.8

$ 1,923.5 $ 1,821.9

$ 1,746.7 $ 1,605.4

$ 1,429.7

2,049.3

1,747.0 1,480.1

498.8 484.0

444.4 431.4

4,185.0

3,761.8 3,403.6

2,320.7 2,230.7

2,049.8 1,861.1

2,033.5 1,846.6

1,688.7 1,121.1

1,056.9 963.9

875.1

1,657.1 1,459.8

1,304.3 898.2

864.1 804.4

730.2

4.5 0.4

37.0 0.8

(20.7 )

489.9 455.0

373.6 300.6

330.4 281.5

255.8

11.1

45.3 45.3

43.9 28.4

24.6 22.7

21.7

444.6

420.8 329.7

272.2 305.8

258.8 234.1

161.9

160.2 131.3

110.5 124.4

106.4 99.3

15.8

19.5 18.3

16.0

282.7 260.6

198.4 177.5

200.9 170.7

150.8

1.9 38.0

(4.0 )

(2.5 )

282.7 260.6

196.3 177.5

198.4 170.7

188.8

18.5 17.8

16.6 14.9

$ 282.7

$ 260.6 $ 196.3

$ 196.0 $ 216.2

$ 187.3 $ 203.7

$ 1.10 $ 1.00

$ 0.77 $ 0.70

$ 0.79 $ 0.66

$ 0.58

1.10 1.00

0.76 0.70

0.78 0.66

0.73

1.09 0.99

0.76 0.68

0.76 0.63

0.56

1.09 0.99

0.75 0.68

0.75 0.63

0.70

1.10

1.00 0.77

0.77 0.86

0.72 0.64

1.10

1.00 0.76

0.77 0.85

0.72 0.79

1.09

0.99 0.76

0.75 0.83

0.70 0.62

$ 1.09

$ 0.99 $ 0.75

$ 0.75 $ 0.82

$ 0.70 $ 0.76

257.6 259.5

258.2 254.8

255.5 259.1

258.3

260.4

262.7 261.6

259.9 263.9

268.8 268.1

51.4 % 50.9 % 50.4 % 51.7 % 52.6 % 53.0 % 53.0 % 39.6

38.8 38.3

38.7 38.7

39.2 39.2

11.7

12.1 11.0

13.0 14.8

13.7 13.7

10.6 11.2

9.7 11.7

13.7 12.6

12.6

6.8 6.9

5.8 7.7

9.0 8.3

8.1

36.4 % 38.1 % 39.8 % 40.6 % 40.7 % 41.1 % 42.4 %

$ 1,279.1 $ 1,150.3

$ 1,015.9 $ 929.6

$ 600.6 $ 577.3

$ 503.5

867.0 769.1

716.1 668.4

512.6 454.4

423.9

199.6 219.0

253.7

1,570.1 1,309.5

1,133.9 943.4

411.9 342.0

293.5

$ 3,716.2 $ 3,228.9

$ 2,865.9 $ 2,541.4

$ 1,724.7 $ 1,592.7

$ 1,474.6

$ 939.6

$ 851.9 $ 853.8

$ 828.0 $ 532.0

$ 470.7 $ 399.8

645.5

604.4 539.7

512.3 234.4

169.0 227.0

270.9

249.9 207.6

183.3 117.8

97.5 85.8

262.1

201.6 145.0

121.1 72.8

86.7 67.8

1,598.1

1,321.1 1,119.8

896.7 767.7

768.8 694.2

$ 3,716.2

$ 3,228.9 $ 2,865.9

$ 2,541.4 $ 1,724.7

$ 1,592.7 $ 1,474.6

$ 570.9 $ 523.9

$ 412.7 $ 358.5

$ 309.8 $ 290.1

$ 233.7

247.0 228.1

220.6 158.8

143.2 129.2

117.6

275.9 212.0

212.8 157.9

150.0 145.6

147.7

$ 0.3275 $ 0.2975

$ 0.2750 $ 0.2625

$ 0.2450 $ 0.2175

$ 0.1950

$ 701.6

$ 674.6 $ 699.8

$ 745.7 $ 371.0

$ 281.1 $ 295.0

55

30.5 % 33.8 % 38.5 % 45.4 % 32.6 % 26.8 % 29.8 % $ 6.21

$ 5.13 $ 4.31

$ 3.51 $ 3.02

$ 2.97 $ 2.68

21.4 % 23.3 % 21.9 % 23.1 % 25.8 % 24.6 % 34.1 %

30.0 % 30.1 % 36.7 % 38.6 % 32.7 % 34.5 % 27.9 % 10.8

10.0 8.5

10.6 13.4

12.4 11.8

$ 9,047.5

$ 7,045.5 $ 6,432.0

$ 5,148.0 $ 5,492.1

$ 5,063.4 $ 4,685.5

$ 35.59-26.12

$ 27.92-23.08 $ 25.20-18.27

$ 22.10-14.25 $ 22.85-14.00

$ 22.22-15.85 $ 19.00-13.07

21,338

20,826 20,417

19,326 14,250

12,870 12,007

EXHIBIT (21)

Registrant ECOLAB INC.

Name of Affiliate

State or Other Jurisdiction of Incorporation

Percentage of

Ownership Ecolab (Antigua) Ltd.

Antigua 100

Ecolab S.A.

Argentina 100

Ecolab (Aruba) NV

Aruba 100

Ecolab Australia Pty Ltd.

Australia 100

Eagle Environmental Systems Pty Limited

Australia 100

Ecolab Pty Ltd.

Australia 100

Ecolab Water Care Services Pty Limited

Australia 100

Gibson Chemical Industries Pty Ltd.

Australia 100

Gibson Chemicals Fiji Pty Limited

Australia 100

Gibson Chemicals Pty Limited

Australia 100

Robust Chemicals Pty Limited

Australia 100

Vessey Chemicals (Holdings) Pty Limited

Australia 95

Vessey Chemicals Pty Limited

Australia 95

Vessey Chemicals (Vic.) Pty Limited

Australia 95

Vessey Chemicals (WA) Pty Limited

Australia 95

Ecolab AT 2 GmbH

Austria 100

Ecolab GmbH

Austria 100

Ecolab Holding Europe GmbH (in liqu.)

Austria 100

Ecolab Limited

Bahamas 100

Ecolab (Barbados) Limited

Barbados 100

Ecolab B.V.B.A./S.P.R.L.

Belgium 100

Ecolab Production Belgium BVBA

Belgium 100

Kay N.V.

Belgium 100

Name of Affiliate


Percentage of

Ownership Ecolab BM 1 Limited

Bermuda 100

Ecolab BM 2 Limited

Bermuda 100

Ecolab Emprecendimentos E Participacoes Ltda.

Brazil 100

Ecolab Quimica Ltda.

Brazil 100

Ecolab EOOD

Bulgaria 100

Ecolab Co.

Canada 100

Arlington International Limited

Cayman Islands 100

Mystique Management Limited

Cayman Islands 100

Ecolab S.A.

Chile 100

Ecolab Colombia S.A.

Colombia 100

Ecolab, Sociedad Anonima

Costa Rica 100

Ecolab d.o.o.

Croatia 100

Ecolab Holding (Cyprus) Limited

Cyprus 100

Ecolab Hygiene s.r.o.

Czech Republic 100

Ecolab ApS

Denmark 100

Ecolab Holding Denmark ApS

Denmark 100

Microtek Dominicana S.A.

Dominican Republic 100

Ecolab Ecuador CIA. LTDA.

Ecuador 100

Ecolab, S.A. de C.V.

El Salvador 100

Oy Ecolab AB

Finland 100

Ecolab Pest IDF SAS

France 100

Alpha Holding SAS

France 100

Amboile Services SAS

France 100

Amperia SARL

France 100

Centre Régional de Désinfectisation et de Dératisation SAS

France 100

Name of Affiliate


Percentage of

Ownership Ecolab SAS

France 100

Ecolab Pest IDF SAS

France 100

Ecolab Production France SAS

France 100

Ecolab SNC

France 100

Eurobiopsy SAS

France 100

Europlak SAS

France 100

Hygiene Champenoise SAS

France 100

Lorillou Hygiene SAS

France 100

Omniser SARL

France 100

SCI Eliomys

France 100

SCI Erebia

France 100

SCI Louvette

France 100

SCI Orly

France 100

Shield Medicare sarl

France 100

Ecolab Beteiligungs GmbH

Germany 100

Ecolab Deutschland GmbH

Germany 100

Ecolab Engineering GmbH

Germany 100

Ecolab Export GmbH

Germany 100

Ecolab Holding GmbH

Germany 100

Ecolab GmbH & Co. OHG

Germany 100

Ecolab Hygiene Systems GmbH

Germany 100

Microtek Medical GmbH

Germany 100

Ecolab A.E.B.E.

Greece 100

Ecolab (Guam) LLC

Guam 100

Ecolab, Sociedad Anonima

Guatemala 100

Name of Affiliate


Percentage of

Ownership Peter Cox Insurance Co. Limited

Guernsey 100

Quimicas Ecolab, S.A.

Honduras 100

Ecolab Limited

Hong Kong 100

Green Harbour Mainland Holdings Ltd

Hong Kong 100

Ecolab Holding Hungary LLC

Hungary 100

Ecolab Hygiene Kft.

Hungary 100

P.T. Ecolab Indonesia

Indonesia 100

Ecolab Food Safety and Hygiene Solutions Private Limited

India 100

Eclab Export Limited

Ireland 100

Ecolab Co.

Ireland 100

Ecolab Finance Company Limited

Ireland 100

Ecolab (Holdings) Limited

Ireland 100

Ecolab Limited

Ireland 100

Ecolab JVZ Limited

Israel 100

Ecolab-Zohar Dalia L.P.

Israel 51

Ecolab-Zohar Dalia Management Company Ltd.

Israel 51

Ecolab Holding Italy Srl

Italy 100

Ecolab Srl

Italy 100

Elton Srl

Italy 100

Findesadue Srl

Italy 100

Ecolab Limited

Jamaica 100

Ecolab K.K.

Japan 100

Ecolab East Africa (Kenya) Limited

Kenya 100

Ecolab Korea Ltd.

Korea 100

Ecolab SIA

Latvia 100

Ecolab LUX 1 Sarl

Luxembourg 100

Ecolab LUX 2 Sarl

Luxembourg 100

Name of Affiliate


Percentage of

Ownership Ecolab-Importacao E Exportacao Limitada

Macau 100

Ecolab Sdn Bhd

Malaysia 100

Microtek Medical Malta Limited

Malta 100

Microtek Medical Malta Holding Limited

Malta 100

Ecolab, S. de R.L. de C.V.

Mexico 100

Ecolab Holdings Mexico, S.A. de C.V.

Mexico 100

Ecolab Maroc S. A.

Morocco 100

Ecolab Finance N.V.

Netherlands Antilles (Curacao) 100

Ecolabone B.V.

Netherlands 100

Ecolabtwo B.V.

Netherlands 100

Ecolab Holdings B.V.

Netherlands 100

Ecolab B.V.

Netherlands 100

Ecolab NL 3 BV

Netherlands 100

Ecolab NL 4 BV

Netherlands 100

Ecolab NL 5 BV

Netherlands 100

Ecolab Production Netherlands BV

Netherlands 100

Microtek Medical Holding BV

Netherlands 100

Microtek Medical BV

Netherlands 100

Ecolab Limited

New Zealand 100

Ecolab Nicaragua, S.A.

Nicaragua 100

Ecolab A/S

Norway 100

Ecolab S.A.

Panama 100

Ecolab Chemicals Ltd.

People’s Republic of China 100

Ecolab China Ltd.


Ecolab (GZ) Chemicals Limited


Name of Affiliate


Percentage of

Ownership Guangzhou Green Harbour Environmental Operations


Guangzhou Green Harbour Termite


Ecolab Perú Holdings S.R.L.

Peru 100

Ecolab Philippines Inc.

Philippines 100

Ecolab Sp.z o.o.

Poland 100

Ecolab S.R.L.

Romania 100

ZAO Ecolab

Russia 100

Ecolab Hygiene d.o.o.

Serbia 100

Ecolab Pte. Ltd.

Singapore 100

Ecolab s.r.o.

Slovakia 100

Ecolab d.o.o.

Slovenia 100

Ecolab (Proprietary) Ltd.

South Africa 100

Ecolab Hispano-Portuguesa, S.A.

Spain 100

Ecolab (St. Lucia) Limited

St. Lucia 100

Ecolab AB

Sweden 100

Ecolab CH 1 GmbH

Switzerland 100

Ecolab CH 2 GmbH

Switzerland 100

Ecolab Europe GmbH

Switzerland 100

Ecolab (Schweiz) GmbH

Switzerland 100

Ecolab Ltd.

Taiwan 100

Ecolab East Africa (Tanzania) Limited

Tanzania 100

Ecolab Ltd.

Thailand 100

Ecolab (Trinidad & Tobago) Limited

Trinidad & Tobago 100

Ecolab Temizleme Sistemleri Limited Sirketi

Turkey 100

Ecolab East Africa (Uganda) Limited

Uganda 100

Name of Affiliate


Percentage of

Ownership Ecolab LLC

Ukraine 100

Ecolab Emirates General Trading LLC

UAE 49

Ecolab Gulf FZE

UAE 100

Ecolab Limited

United Kingdom 100

Ecolab (U.K.) Holdings Limited

United Kingdom 100

Microtek Medical Europe, Ltd.

United Kingdom 100

Shield Holdings Limited

United Kingdom 100

Shield Medicare Limited

United Kingdom 100

Shield Salvage Associates Limited

United Kingdom 100

Ecolab S. A.

Uruguay 100

Ecolab S.A.

Venezuela 74

United States

Ecolabeight Inc.

Delaware 100

Ecolab AP Holdings LLC

Delaware 100

Ecolab USA Inc.

Delaware 100

Ecolab Holdings Inc.

Delaware 100

Ecolab Holdings (Europe) Inc.

Delaware 100

Ecolab Investment LLC

Delaware 100

Ecolab Israel Holdings LLC

Delaware 100

Ecolab Manufacturing Inc.

Delaware 100

Ecolab Marketing LLC

Delaware 100

Ecovation, Inc.

Delaware 100

GCS Service, Inc.

Delaware 100

Krofta Technologies, LLC

Delaware 100

Microtek Medical Inc.

Delaware 100

Certain additional subsidiaries, which are not significant in the aggregate, are not shown.

Name of Affiliate


Percentage of

Ownership Total Enterprise Control LLC

Delaware 60

Wabasha Leasing LLC

Delaware 100

Microtek Medical Holdings Inc.

Georgia 100

Kay Chemical Company

North Carolina 100

Kay Chemical International, Inc.

North Carolina 100

Daydots Inc.

Texas 100

Exhibit (24)

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 LAWRENCE T. BELL 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, 2008, 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 27 day of February, 2009.

/s/Barbara J. Beck

Barbara J. Beck

/s/Les S. Biller

Les S. Biller

/s/Richard U. De Schutter

Richard U. De Schutter

/s/Jerry A. Grundhofer

Jerry A. Grundhofer

/s/Joel W. Johnson

Joel W. Johnson

/s/Jerry W. Levin

Jerry W. Levin

/s/Robert L. Lumpkins

Robert L. Lumpkins

/s/Beth M. Pritchard

Beth M. Pritchard

/s/John J. Zillmer

John J. Zillmer

th

EXHIBIT (31)

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: February 27, 2009

/s/Douglas M. Baker, Jr.


I, Steven L. Fritze, 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: February 27, 2009

/s/Steven L. Fritze


EXHIBIT (32)

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, 2008 (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: February 27, 2009 /s/Douglas M. Baker, Jr.


Dated: February 27, 2009 /s/Steven L. Fritze
