FORM 10-K

ECOLAB INC

(Annual Report)

Filed 3/5/2004 For Period Ending 12/31/2003

Address ECOLAB CTR 370 WABASHA ST NORTH

ST PAUL, Minnesota 55102

Telephone 651-293-2233

CIK 0000031462

Industry Personal & Household Prods.

Sector Consumer/Non-Cyclical

Fiscal Year 12/31

SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

FORM 10-K (Mark One)

For the transition period from to

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

Registrant’s telephone number, including area code: (651) 293-2233 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 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 an accelerated filer (as defined in Rule 12b-2 of the Act). Yes � No � Aggregate market value of voting and non-voting common equity held by non-affiliates of Registrant on June 30, 2003: $6,634,889,062 (see Item 12, under Part III hereof). The number of shares of Registrant’s Common Stock, par value $1.00 per share, outstanding as of February 27, 2004: 257,215,105 shares.

DOCUMENTS INCORPORATED BY REFERENCE 1. Portions of the Registrant’s Annual Report to Stockholders for the year ended December 31, 2003 (hereinafter referred to as “Annual

Report”) are incorporated by reference into Parts I, II and IV. 2. Portions of the Registrant’s Proxy Statement for the Annual Meeting of Stockholders to be held May 7, 2004 and to be filed within

120 days after the Registrant’s fiscal year ended December 31, 2003 (hereinafter referred to as “Proxy Statement”) are incorporated by reference into Part III.

�

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

For the Fiscal Year Ended December 31, 2003

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.

Pacific Exchange, Inc. Preferred Stock Purchase Rights

New York Stock Exchange, Inc.

Pacific Exchange, Inc.

TABLE OF CONTENTS

PART I Forward-Looking Statements and Risk Factors Item 1. Business 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 Company Item 2. Properties Item 3. Legal Proceedings Item 4. Submission of Matters to a Vote of Security Holders PART II Item 5. Market for the Company's Common Equity and Related Stockholder Matters Item 5(a) Market Information Item 5(b) Holders Item 5(c) Dividends Item 5(d) Issuer Purcases of Equity Securities Item 6. Selected Financial Data Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 and Executive Officers of the Company Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management Item 13. Certain Relationships and Related Transactions Item 14. Principal Accounting Fees and Services PART IV Item 15. Exhibits, Financial Statements, Schedules, and Reports on Form 8-K SIGNATURES REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULE CONSENT OF INDEPENDENT ACCOUNTANTS SCHEDULE II —VALUATION AND QUALIFYING ACCOUNTS OF ECOLAB INC. EXHIBIT INDEX

PART I

Except where the context otherwise requires, references in this report to either “Ecolab”, “Company”, “we” and “our” are to Ecolab Inc. and its subsidiaries, collectively. Forward-Looking Statements and Risk Factors The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In this Report on Form 10-K (including Management’s Discussion and Analysis of Financial Condition and Results of Operations incorporated into Item 7 hereof), Management discusses expectations regarding our future performance which include anticipated business progress and expansion, business acquisitions, debt repayments, susceptibility to changes in technology, global economic conditions and liquidity requirements. Without limiting the foregoing, words or phrases such as “will likely result,” “are expected to,” “will continue,” “is anticipated,” “we believe,” “estimate,” “project” (including the negative or variations thereof) or similar terminology, generally identify forward-looking statements. Additionally, we may refer to this section of the Form 10-K to identify risk factors related to other forward looking statements made in oral presentations, including telephone conferences and/or webcasts open to the public. Forward-looking statements represent challenging goals for us. As such, they are based on current expectations and are subject to certain risks and uncertainties. We caution that undue reliance should not be placed on such forward-looking statements which speak only as of the date made. In order to comply with the terms of the safe harbor, we identify for investors important factors which could affect our financial performance and could cause actual results for future periods to differ materially from the anticipated results or other expectations expressed in the forward-looking statements. Risks and uncertainties that may affect operating results and business performance include: the vitality of the foodservice, hospitality and travel industries; restraints on pricing flexibility due to competitive factors and customer and vendor consolidations; changes in oil or raw material prices or unavailability of adequate and reasonably priced raw materials; the occurrence of capacity constraints or the loss of a key supplier; the effect of future acquisitions or divestitures or other corporate transactions; our ability to achieve plans for past acquisitions; the costs and effects of complying with: (i) laws and regulations relating to the environment and to the manufacture, storage, distribution, efficacy and labeling of our products, and (ii) changes in tax, fiscal, governmental and other regulatory policies; economic factors such as the worldwide economy, interest rates, and currency movements including, in particular, our exposure to foreign currency risk; the occurrence of (a) litigation or claims, (b) the loss or insolvency of a major customer or distributor, (c) war, (d) natural or manmade disasters (including material acts of terrorism or hostilities which impact our markets) and (e) severe weather conditions or public health epidemics affecting the foodservice, hospitality and travel industries; loss of, or changes in, executive management; our ability to continue product introductions and technological innovations; and other uncertainties or risks reported from time to time in our reports to the Securities and Exchange Commission. 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. Ecolab undertakes no duty to update its Forward-Looking Statements.

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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. On November 30, 2001, we acquired the 50 percent of the Henkel-Ecolab joint venture (“Henkel-Ecolab”) which we did not previously own (the “JV Acquisition”), from our former joint venture partner, Henkel KGaA, Düsseldorf, Germany (“Henkel”). Prior to the JV Acquisition, we accounted for our interest in Henkel-Ecolab under the equity method of accounting. As a result of the JV Acquisition, the legal entities constituting Henkel-Ecolab became wholly-owned entities of Ecolab. Following the JV Acquisition, the assets, liabilities, revenues, expenses and cash flows of Henkel-Ecolab are reflected in our consolidated financial statements as a part of the International Cleaning & Sanitizing reportable segment. During 2003, we continued to make business acquisitions and divestitures to broaden our product and service offerings, or to dispose of non-strategic businesses, in line with our “Circle the Customer – Circle the Globe” strategy. These transactions included:

• Subsequent to the 2002 year-end of our International Operations, we entered the hospital hygiene market in the U.K. by acquiring the Adams Healthcare business of Medical Solutions plc in December 2002.

• In December 2002, we sold Darenas, a U.K. janitorial products distribution business.

• In June 2003, we sold our investment in Comac S.p.A. of Italy, a floor care machine manufacturing company.

• In September 2003, we sold a U.K. consumer dermatology business obtained as part of Adams Healthcare.

Additional details regarding the JV Acquisition and these other transactions are found in Notes 5 and 6, located on pages 38 through 40 of the Annual Report and incorporated into Item 8 hereof. Effective January 2004, we reorganized our businesses serving janitorial and healthcare customers by splitting the Professional Products group into two divisions, Professional Products and Healthcare. In January 2004, we expanded our Pest Elimination business into France by acquiring Nigiko, a Paris-based business that primarily operates through Amboile Services. In February 2004, we acquired Daydots International, a provider of food safety products, for our U.S. Cleaning & Sanitizing Operations. 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 page 48 of the Annual Report, is incorporated herein by reference.

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Item 1(c) Narrative Description of Business General: Ecolab develops and markets premium products and services for the hospitality, foodservice, institutional and industrial markets. We provide cleaning, sanitizing, pest elimination, maintenance and repair products, systems and services primarily to hotels and restaurants, healthcare and educational facilities, quick-service (fast-food and other convenience store) units, grocery stores, commercial and institutional laundries, light industry, dairy plants and farms, food and beverage processors, pharmaceutical and cosmetics facilities and the vehicle wash industry. A strong commitment to customer support is a distinguishing characteristic of Ecolab. Additional information on our business philosophy is found below under the heading “Additional Information - Competition” of this Item 1(c). The following description of business is based upon our three reportable segments (“segments”) as reported in Ecolab’s consolidated financial statements. However, the Company pursues a “Circle the Customer - Circle the Globe” strategy by providing products, systems and services which serve our customer base, and does so on a global basis to meet the needs of our customers’ various operations around the world. Therefore, one customer may utilize the services of all three of the segments and there is a degree of interdependence among the operating segments - particularly between the International Cleaning & Sanitizing and the United States Cleaning & Sanitizing businesses. United States Cleaning & Sanitizing Segment The “United States Cleaning & Sanitizing” segment is comprised of seven divisions which provide cleaning and sanitizing services to United States markets. Institutional : Our 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 health care customers) and for general housekeeping functions, as well as 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 commercial and hospitality customers and, through its Facilitec business, provides rooftop grease filter products and kitchen exhaust cleaning services for restaurants and other foodservice operations. The Institutional Division also manufactures and markets various chemical dispensing device systems, which are made available to customers, to dispense the Company’s cleaners and sanitizers. In addition, the Institutional Division markets primarily to smaller and mid-size customer units, a program comprised of energy-efficient dishwashing machines, detergents, rinse additives and sanitizers, including full machine maintenance. We believe we are the leading supplier of chemical warewashing products to institutions in the United States. The Institutional Division sells its products and services primarily through Company-employed field sales-and-service 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 food distributors. We provide the same service to accounts served by food distributors as to direct customers. Kay : Our Kay Division (which consists of certain wholly-owned subsidiaries of Ecolab Inc.) supplies chemical cleaning and sanitizing products primarily to the quick-service restaurant industry. This includes traditional fast-food restaurants but also other retail locations where “fast food” is

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prepared and served, such as convenience stores, airport and shopping center kiosks and other public venues typically serviced by national or regional restaurant chains. Kay also sells cleaning and sanitizing products to the food retail (i.e., grocery store) industry. 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 restaurant and food retail chains 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. Food & Beverage : Our Food & Beverage Division addresses cleaning and sanitation at the start of the food chain to facilitate the production 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 as well as to pharmaceutical and cosmetic plants. The Division also markets food irradiation services through an alliance with Ion Beam Applications (IBA). 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. 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. Textile Care : Our Textile Care Division provides chemical laundry products and proprietary dispensing systems, as well as related services, to large industrial and commercial laundries. Typically these customers process a minimum of 1,000,000 pounds of linen each year and include free-standing laundry plants used by institutions such as hotels, restaurants and healthcare facilities as well as industrial and textile rental laundries. The Division also serves the shirt laundry market, typically comprised of smaller laundry units. Products and services include laundry cleaning and specialty products and related dispensing equipment, which are marketed primarily through a Company-employed sales force and, to a lesser extent, through independent, third-party distributors. The Division’s programs are designed to meet our customer’s need for exceptional cleaning, while extending the useful life of linen and reducing the customer’s overall operating cost. Professional Products: The Professional Products Division provides a broad range of janitorial and infection prevention/healthcare offerings to the janitorial and medical markets in the United States. Effective January 2004, we reorganized our businesses serving janitorial and healthcare customers by splitting the Professional Products group into two divisions, Professional Products and Healthcare. Professional Products’ proprietary janitorial products (detergents, general purpose cleaners, carpet care, furniture polishes, disinfectants, floor care products, hand soaps and odor counteractants) are sold primarily under the brand name “Airkem.” These products are sold

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primarily through a network of independent, third-party distributors, supported by a Company-employed sales force. Healthcare’s proprietary infection prevention/healthcare products (skin care, disinfectants and instrument sterilants) are sold primarily under the “Huntington” brand name. Vehicle Care: Our Vehicle Care Division provides vehicle appearance products which include soaps, polishes, 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 . Water Care Services : Our Water Care Services Division supplements our “Circle the Customer - Circle the Globe” strategy by offering water treatment programs that are critical to our customer base. Water Care Services provides water and wastewater treatment products, services and systems for commercial/institutional customers (full service hotels, cruise ships, hospitals, healthcare, commercial real estate, government, and commercial laundries), food and beverage customers (dairies, meat, poultry, food processing and beverage) and other light industry. Water Care Services works closely with the our Institutional, Textile Care and Food & Beverage Divisions to offer customized water care strategies to their accounts that have water care needs, primarily to treat water used in heating and cooling systems and manufacturing processes and to treat wastewater. 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. Pest Elimination : Our Pest Elimination Division provides services for the detection, elimination and prevention of pests to 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 sales and service personnel. In addition, through our EcoSure Food Safety Management business, the Division provides customized on-site evaluations, training and quality assurance services to foodservice operations. GCS Service : GCS provides commercial kitchen parts and equipment repair services including parts distribution. GCS offers these services to restaurant and other foodservice operations, while providing warranty service for equipment manufacturers. In addition, GCS offers parts at a wholesale level to repair services companies and end users. International Cleaning & Sanitizing Segment The Company conducts business in approximately 70 countries outside of the United States through wholly-owned subsidiaries or, in the case of China, Israel and Venezuela, through majority-owned 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, although we customize our products and services to meet unique local requirements. 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

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business. 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. We expanded our Pest Elimination business to the United Kingdom and the Republic of Ireland in September 2002, and to France in January 2004, through acquisitions. In addition, we entered the hospital hygiene market in the United Kingdom by acquiring a supplier of hospital hygiene products in December 2002. 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 operated in Canada and Mexico. 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 service, product performance and price. We believe we compete principally by providing superior value and differentiated products. Value is provided by state-of-the-art cleaning, sanitation and maintenance products and systems coupled with high customer support standards and continuing dedication to customer satisfaction. This is made possible, in part, by our significant on-going investment in training and technology and by our standard practice of advising customers on means to lower operating costs and comply with safety, environmental and sanitation regulations. In addition, we emphasize our ability to uniformly provide a variety of related premium cleaning and sanitation services to our customers and to provide that level of service 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 and Service : Products, systems and services are primarily marketed in domestic and international markets by Company-trained sales and service 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. Customers and Classes of Service : 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 ten percent or more of our consolidated revenues, we do have customers and independent, third-party distributors (for example, ARAMARK, Compass, Sodexho, Sysco and U.S. Foodservice), the loss of which could have a material negative effect on results of operations

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for the affected earnings periods; however, we consider it unlikely that such an event would have a material adverse impact on the financial position of the Company. 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 2003, 2002 and 2001 approximated 23, 23 and 26 percent, respectively, of our consolidated net sales. In addition, through our Institutional and Textile Care businesses, we sell laundry products and services to a broad range of laundry customers. Sales of laundry products and services in 2003, 2002 and 2001 approximated 10, 11 and 10 percent, respectively, of our consolidated net sales. Sales of our European operations are reflected in these percentages beginning in 2002. Patents and Trademarks : We own and license a number of patents, trademarks and other intellectual property, including a license agreement with Henkel 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. 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. The investment in merchandising equipment is discussed under the heading “Cash Flows” located on page 28 of the Annual Report and incorporated into Item 7 hereof. 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, including Henkel KGaA. 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 14 hereof 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 14 hereof under the heading “Properties.” Raw Materials : Raw materials purchased for use in manufacturing our products are inorganic chemicals, including phosphates, silicates, alkalies, 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, we use global sourcing for production as well as for purchasing raw materials so that our operations can be shifted among locations worldwide 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

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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 managing hazardous substances, waste disposal or plant site clean-up, fines and penalties if we were found to be in violation of law, as well as modifications, disruptions or discontinuation of certain operations or types of operations including product recalls. 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 condition or liquidity. 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. 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 condition or liquidity to date. Pesticide Legislation: Various 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 microorganisms (bacteria, viruses, fungi) on 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 400 product registrations with the United States 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 financial condition, liquidity or the results of our operations to date, the costs and delays in receiving necessary approvals for these products have increased in recent years. Total fees paid to the EPA and the states to obtain or maintain pesticide registrations, and for the California tax, were approximately $2,400,000 in 2003 and $2,500,000 in 2002. Congress is evaluating legislation that would increase these fees. Absent such a change, anticipated registration costs are not expected to significantly affect our consolidated results of operations, financial condition or liquidity.

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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 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, processed foods, and medical devices. In the United States, these requirements generally are administered by the U.S. Food and Drug Administration (“FDA”). The FDA 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 that may impose additional requirements and associated costs when finalized by the FDA. To date, such requirements have not had a material negative effect on our consolidated results of operations, financial condition or liquidity. 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 are the Clean Air Act, the Clean Water Act and the Resource Conservation and Recovery Act (“RCRA”). We are also subject to the Superfund Amendments and Reauthorization Act of 1986, which imposes certain reporting requirements as to emissions of toxic substances into the air, land and water. We make capital investments and expenditures to comply with environmental laws and regulations, to ensure employee safety and to carry out its announced environmental stewardship principles. To date, such expenditures have not had a significant adverse effect on our consolidated results of operations, financial condition or liquidity. Our capital expenditures for environmental health and safety projects were approximately $1,800,000 for 2003 and $1,600,000 for 2002. Approximately $3,600,000 has been budgeted globally for 2004.

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 approximately 20 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 which 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.

Based on an analysis of our experience with such environmental proceedings, our estimated share of all hazardous materials deposited on the sites referred to in the preceding paragraph, and our estimate of the contribution to be made by other PRPs which we believe have the financial ability to pay their shares, we have accrued our best estimate of our probable future costs relating to such known sites. Unasserted claims are not reflected in the accrual. In establishing accruals, potential insurance

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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 $500,000 in 2003 and $500,000 in 2002. Including the ChemLawn matters described below, our worldwide accruals at December 31, 2003 for probable future remediation expenditures totaled approximately $3,900,000. 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 condition or liquidity. In connection with the JV Acquisition, we entered into an Environmental Agreement dated December 7, 2000 with Henkel under which Henkel agreed to indemnify us for certain environmental liabilities associated with the former JV. As of December 31, 2003, Henkel’s earlier outstanding reimbursement obligation to us for such environmental liabilities of 108,319 euro (or approximately $116,000) was paid. In addition, we have retained responsibility for certain sites where our former ChemLawn business is a PRP. Currently there are five such locations and, at each, 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.

Number of Employees : We currently have approximately 20,800 employees. Item 1(d) Financia l Information About Geographic Areas The financial information about geographic areas appearing under the heading “Operating Segments” in Note 16, located on page 48 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.

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

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Name

Age

Office

Positions Held Since Jan. 1, 1999 A. L. Schuman

69

Chairman of the Board and Chief Executive Officer

Aug. 2002 - Present

Chairman of the Board, President and Chief Executive Officer

Mar. 2002 – Jul. 2002

Chairman of the Board and Chief Executive Officer

Jan. 2001 - Feb. 2002

Chairman of the Board, President and Chief Executive Officer

Jan. 2000 - Dec. 2000

President and Chief Executive Officer

Jan. 1999 – Dec. 1999 D. M. Baker, Jr.

45

President and Chief Operating Officer

Aug. 2002 - Present

President - Institutional Sector

Mar. 2002 – Jul. 2002

Senior Vice President - Institutional Sector

Jan. 2001 - Feb. 2002

Vice President and General Manager, Kay Chemical Company

Jan. 1999 - Dec. 2000

L. T. Bell

56

Senior Vice President-Law, General Counsel and Secretary

Jul. 2002 – Present

Senior Vice President-Law and General Counsel

Jan. 2001 – Jun. 2002

Vice President-Law and General Counsel

Jan. 1999 - Dec. 2000 S. L. Fritze

49

Executive Vice President and Chief Financial Officer

Feb. 2004 - Present

Senior Vice President and Chief Financial Officer

Mar. 2002 - Jan. 2004

13

Name

Age

Office

Positions Held Since Jan. 1, 1999

Senior Vice President - Finance and Controller

May 2001 – Feb. 2002

Vice President and Controller

Jul. 1999 – Apr. 2001

Vice President and Treasurer

Jan. 1999 – Jun. 1999 T. W. Handley

49

Executive Vice President-Specialty Sector

Jan. 2004 - Present

Senior Vice President - Strategic Planning

Aug. 2003 - Dec. 2003 (1) L. Iannuzzi

47

Executive Vice President - Europe, Africa and Middle East

Jan. 2004 to Present

Vice President and General Manager - Europe

Jun. 2002 - Dec. 2003

Vice President - Region West & Region South Europe

Jan. 2002 - May 2002

Vice President Region South Europe - Henkel-Ecolab

Dec. 1999 - Dec. 2001 (2) D. D. Lewis

57

Senior Vice President - Human Resources

Jan. 2001 - Present

Vice President - Human Resources

Jan. 1999 - Dec. 2000 J. A. Miller

47

Executive Vice President -Institutional Sector North America

Jan. 2004 - Present

Vice President and General Manager - Institutional

Sept. 2002 - Dec. 2003

Institutional Vice President-Marketing North America

Oct. 2001 - Aug. 2002 (3) S. K. Nestegard

43

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

Mar. 2003 - Present (4)

S. D. Newlin

51

President-Industrial Sector

Jul. 2003 - Present (5) M. Nisita

63

Senior Vice President- Global Operations

Jan. 1999 - Present

1 Prior to joining Ecolab in August, 2003, Mr. Handley was employed by the Procter & Gamble Company for 22 years in various management, marketing and executive positions including assignments in Japan and Mexico. Mr. Handley’s last position at P&G was Vice President - Feminine Care Strategic Planning.

2 Mr. Iannuzzi joined Ecolab’s European operations in December 1999. Prior to that, Mr. Iannuzzi was employed by O.C.E. SpA of

Italy as Managing Director and General Manager. 3 From April 1998 to April 2000, Mr. Miller served as Senior Vice President and General Manager, The Minute Maid Co. (a subsidiary

of The Coca Cola Company). In May 2000, Mr. Miller was hired as President and CEO of Busy Body, Inc., a privately held retailer of home fitness equipment in the western U.S., to remedy operations that were underperforming the owners’ expectations. Busy Body, Inc. filed for Chapter 11 protection under federal bankruptcy laws in May 2001 and was subsequently liquidated. Mr. Miller re-joined the Company in October 2001.

4 Prior to joining Ecolab in March 2003, Ms. Nestegard was employed by 3M Company for 20 years, most recently as Business

Director of Optical Components. Ms. Nestegard’s experience includes product and process development and technical management as Director Engineering Systems Technology Center and as Technical Director of the Electronic Products Division of 3M in Austin, Texas.

5 Prior to joining Ecolab in July 2003, Mr. Newlin was an executive with Nalco Company, a manufacturer of specialty chemicals,

services and systems, where he was employed for 23 years. Following various executive assignments, Mr. Newlin became President and a Director of Nalco Chemical Company in December 1998, and served as President, Director, Chief Operating Officer and Vice Chairman from February 2000 to June 2001. From January 2000 to June 2001, Mr. Newlin also was Chairman of Nalco Exxon Energy Chemicals, a joint venture of Nalco and Exxon Energy Chemicals.

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 sold by us 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 ejectors and other mechanical equipment and dishwasher racks and related sundries.

14

Name

Age

Office

Positions Held Since Jan. 1, 1999 D. J. Schmechel

44

Vice President and Controller

Apr. 2002 - Present

Vice President and Treasurer

Jul. 1999 - Mar. 2002

Assistant Treasurer

Jan. 1999 - Jun. 1999 J. P. Spooner

57

President - International

Mar. 2002 - Present

Executive Vice President- International

Dec. 2001 - Feb. 2002

Chief Executive Officer – Henkel – Ecolab

Jan. 2001 – Nov. 2001

Executive Vice President – International Group

Jan. 1999 – Dec. 2000

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 Cleaning & Sanitizing” segment. However, certain of the United States facilities do manufacture products for export and which are used by the International segment. The facilities having export involvement are marked with an asterisk(*).

ECOLAB OPERATIONS PLANT PROFILES

15

Location

Size (Sq. Ft.)

Types of Products

Majority Owned or Leased

UNITED STATES

Joliet, IL *

610,000

Solids, Liquids, Powders

Owned

South Beloit, IL *

313,000

Equipment

Owned

Garland, TX *

239,000

Solids, Liquids

Owned

Martinsburg, WV

228,000

Liquids

Owned

Hebron, OH

225,000

Liquids

Owned

Greensboro, NC

193,000

Liquids, Powders

Owned

San Jose, CA

175,000

Liquids

Owned

McDonough, GA*

141,000

Solids, Liquids

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

Cairo, IL

11,000

Liquids

Owned

Dallas, TX

24,000

Liquids, Powders

Owned

Baldwin Park, CA

14,000

Equipment

Leased

INTERNATIONAL

Chalons, FRANCE

280,000

Liquids, Powders

Owned

Nieuwegein, NETHERLANDS

168,000

Powders

Owned

Tessenderlo, BELGIUM

153,000

Solids, Liquids

Owned

Melbourne, AUSTRALIA

145,300

Liquids, Powders

Owned

Santa Cruz, BRAZIL

142,000

Liquids, Powders

Owned

Rozzano, ITALY

126,000

Liquids

Owned

Mississauga, CANADA

120,400

Liquids

Owned

Siegsdorf, GERMANY

114,000

Equipment

Owned

Johannesburg, SOUTH AFRICA

100,000

Liquids, Powders

Owned

Hamilton, NEW ZEALAND

96,000

Solids, Liquids, Powders

Owned

Valby, DENMARK

70,000

Liquids

Owned

Shika, JAPAN

60,000

Liquids

Owned

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, around the world, we operate distribution centers, 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 60 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 2008. Thereafter, it is subject to multiple renewals at our option. The second building is also subject to a long-term lease by us and the third building is owned. The corporate headquarters includes an employee training center. We also own a computer center in St. Paul and a research facility located in a suburb of St. Paul. Item 3. Legal Proceedings Proceedings arising under laws relating to protection of the environment are discussed at Item 1(c) above, under the heading “Environmental Considerations.”

16

Location

Size (Sq. Ft.)

Types of Products

Majority Owned or Leased

Santiago, CHILE

60,000

Liquids, Powders

Leased

Revesby, AUSTRALIA

59,200

Liquids, Powders

Owned

Cheadle (Hulme), UK

52,575

Liquids

Leased

Noda, JAPAN

49,000

Solids, Liquids, Powders

Owned

Mexico City, MEXICO

40,000

Liquids, Powders

Owned

Maribor, SLOVENIA

39,000

Liquids, Powders

Owned

Leeds, U.K.

35,000

Liquids

Owned

Pilar, ARGENTINA

30,000

Liquids, Powders

Owned

Shanghai, CHINA

27,000

Solids, Liquids, Powders

Owned

Perth, AUSTRALIA

26,900

Liquids, Powders

Owned

Dorado, PUERTO RICO

25,000

Liquids, Powders

Leased

Singapore, SINGAPORE

25,000

Liquids, Powders

Owned

Dar es Salaam, TANZANIA

22,900

Liquids, Powders

Leased

Seoul, SOUTH KOREA

22,160

Liquids, Powders

Owned

Mandras, GREECE

18,000

Liquids

Owned

Dublin, IRELAND

17,000

Liquids

Leased

San Jose, COSTA RICA

11,000

Liquids, Powders

Owned

Cikarang, INDONESIA

10,000

Solids, Liquids, Powders

Owned

Bangkok, THAILAND

10,000

Liquids, Powders

Owned

Manilla, PHILIPPINES

7,600

Liquids, Powders

Owned

The Company and certain of our subsidiaries are defendants in various lawsuits and claims arising out of the normal course of business. Accruals have been established reflecting our best estimate of probable future costs relating to such matters. The estimated effects of the future results of existing litigation is subject to certain estimates, assumptions and uncertainties and should be considered in light of the discussion of Forward-Looking Statements and Risk Factors found under Part I at the beginning of this Report. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of our security holders, through the solicitation of proxies, or otherwise, during the fourth quarter of 2003.

PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities All per share and number of share information in Item 5, including dividends per share in Item 5(c), reflect a two-for-one stock split paid June 6, 2003 in the form of a 100 percent stock dividend to shareholders of record on May 23, 2003. Item 5(a) Market Information Our Common Stock is listed on the New York Stock Exchange and the Pacific Exchange, Inc. 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 2003 and 2002 were as follows:

The closing Common Stock price on February 27, 2004 was $27.31. Item 5(b) Holders On February 27, 2004, we had 4,725 holders of Common Stock of record. Item 5(c) Dividends We have paid Common Stock dividends for 67 consecutive years. Quarterly cash dividends of $0.0675 per share were declared in February, May and August 2002. Cash dividends of $0.0725 per share were declared in December 2002, and February, May and August 2003. A dividend of $0.08 per share was declared in December 2003.

17

2003

2002

Quarter

High

Low

High

Low

First

$ 26.00 $ 23.08

$ 23.94 $ 19.43

Second

$ 27.92 $ 24.21

$ 24.00 $ 21.25

Third

$ 26.80 $ 23.78

$ 24.51 $ 18.27

Fourth

$ 27.89 $ 25.15

$ 25.20 $ 20.71

Item 5(d) Issuer Purchases of Equity Securities

(1) On December 7, 2000, we announced that our Board of Directors authorized us to repurchase up to 10,000,000 shares of Common Stock in open market or privately negotiated transactions. As a part of this repurchase authorization, we announced on March 18, 2003 that we may also repurchase shares under Rule 10b5-1 of the Securities Exchange Act of 1934, during times when we ordinarily would not be in the market because of self-imposed trading blackout periods. On October 17, 2003, we announced that our Board of Directors authorized the repurchase of up to 10,000,000 additional shares of Common Stock, including shares to be repurchased under Rule 10b5-1. We intend to repurchase all shares under the aforementioned authorizations, for which no expiration dates have been established, subject to market conditions.

Item 6. Selected Financial Data The comparative data for the years ended December 31, 2003, 2002, 2001, 2000 and 1999 inclusive, which are set forth under the heading entitled “Summary Operating and Financial Data” located on pages 52 and 53 of the Annual Report, are incorporated herein by reference. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The material appearing under the heading entitled “Financial Discussion,” located on pages 20 through 51 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 pages 29 and 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.I(1). below and located on pages 31 through 51 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

(b) Average price paid per

share

(c) Number of shares

purchased as part of publicly announced

plans or programs(1)

(d) Maximum number of shares that may yet be purchased under the plans or programs

Month #1 (October 2003)

595,300 $ 26.7104

595,300 10,815,400

Month #2 (November 2003)

288,600 $ 26.1302

288,600 10,526,800

Month #3 (December 2003)

169,700 $ 27.2460

169,700 10,357,100

Total

1,053,600 $ 26.6377

1,053,600 10,357,100

Item 9A. Controls and Procedures As of December 31, 2003, we carried out an evaluation, under the supervision and with the participation of our management, including the Chairman of the Board and Chief Executive Officer and the Executive Vice President and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our Chairman of the Board and Chief Executive Officer and the Executive Vice President and Chief Financial Officer concluded that our disclosure controls and procedures are effective, among other things, in timely alerting them to material information relating to us (including its consolidated subsidiaries) required to be included in our reports filed under the Securities Exchange Act of 1934, as amended. During the period October 1 - December 31, 2003, there were no changes in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, Ecolab’s internal control over financial reporting.

PART III Item 10. Directors and Executive Officers of the Company The biographical material regarding our directors and the paragraph relating to understandings concerning the election of directors between Henkel KGaA and the Company located in the Proxy Statement appearing under the heading entitled “Proposal to Elect Directors,” is incorporated herein by reference. Information regarding executive officers is presented under the heading “Executive Officers of the Company” in Part I on pages 12 through 14 hereof. Disclosures concerning policies of our Board of Directors, corporate governance principles and corporate ethics practices, including our Code of Conduct, are available on our website at www.ecolab.com/investor/governance. Copies of our Code of Conduct as last amended in 1995 and the Code of Ethics for Senior Officers and Finance Associates adopted in 2003, also are filed as Exhibit (99) to this Annual Report on Form 10-K, and will be mailed free of charge to any shareholder upon request to the Corporate Secretary at our headquarters in St. Paul. We intend to promptly disclose on our website should there be any amendments to, or waivers by the Board of Directors of, the Code of Conduct or the Code of Ethics for Senior Officers and Finance Associates. The material appearing under the heading entitled “Section 16(a) Beneficial Ownership Reporting Compliance” located in the Proxy Statement is incorporated herein by reference. The material appearing under the heading entitled “Board of Directors” located in the Proxy Statement pertaining to the identity of Audit Committee members and the designation of the “audit committee financial expert” is incorporated herein by reference. Item 11. Executive Compensation The material appearing under the heading entitled “Executive Compensation” located in the Proxy Statement is incorporated herein by reference. However, pursuant to Securities and Exchange Commission Regulation S-K, Item 402(a)(9), the material appearing under the headings entitled “Report of the Compensation Committee on Executive Compensation” and “Comparison of Five Year Cumulative Total Return” located in the Proxy Statement is not incorporated herein.

19

Item 12. Security Ownership of Certain Beneficial Owners and Management The material appearing under the headings entitled “Security Ownership” located in the Proxy Statement is incorporated herein by reference. The holdings of Henkel Chemie VmbH and HC Investments, Inc. are subject to certain limitations with respect to the Company’s voting securities as more fully described in the Company’s Proxy Statement under the heading “Stockholder Agreement,” which is incorporated herein by reference. The material appearing under the heading “Executive Compensation” pertaining to “Equity Compensation Plan Information” located in the Proxy Statement is incorporated herein by reference. A total of 1,311,042 shares of Common Stock held by the Company’s current directors and executive officers, some of whom may be affiliates of the Company, have been excluded from the computation of market value of the Company’s Common Stock on the cover page of this Report. This total represents that portion of the shares reported as beneficially owned by directors and executive officers of the Company as of June 30, 2003, which are actually issued and outstanding. Item 13. Certain Relationships and Related Transactions The material appearing under the heading entitled “Director Independence,” located in the Proxy Statement pertaining to “Stockholder Agreement” and “Related Party Transactions”, as well as the paragraph relating to understandings concerning the election of directors between Henkel KGaA and the Company and the biographical material pertaining to Messrs. Stefan Hamelmann, Jochen Krautter and Ulrich Lehner, both located in the Proxy Statement under the heading “Proposal to Elect Directors,” are incorporated herein by reference. Item 14. Principal Accounting Fees and Services The material appearing under the heading entitled “Independent Auditors’ Fees” located in the Proxy Statement is incorporated herein by reference.

20

PART IV

Item 15. Exhibits , Financial Statement Schedules, and Reports on Form 8-K I(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, 2003, 2002 and 2001, Annual Report page 31.

(ii) Consolidated Balance Sheet at December 31, 2003, 2002 and 2001, Annual Report page 32.

(iii) Consolidated Statement of Cash Flows for the years ended December 31, 2003, 2002 and 2001, Annual Report page 33.

(iv) Consolidated Statement of Comprehensive Income and Shareholders’ Equity for the years ended December 31,

2003, 2002 and 2001, Annual Report page 34.

(v) Notes to Consolidated Financial Statements, Annual Report pages 35 through 50.

(vi) Report of Independent Auditors, Annual Report page 51.

I(2). The following financial statement schedule to the Company’s financial statements listed in Item 15.I(1). for the years ended December 31, 2003, 2002 and 2001 located on page 32 hereof, and the Report of Independent Auditors on Financial Statement Schedule at page 30 hereof, are filed as part of this Report.

(i) Schedule II – Valuation and Qualifying Accounts for the years ended December 31, 2003, 2002 and 2001.

All other schedules, for which provision is made in the applicable regulations of the Securities and Exchange Commission, are not required under the related instructions or are inapplicable and therefore have been omitted. All significant majority-owned subsidiaries are included in the filed consolidated financial statements.

21

II. 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 - Incorporated by reference to Exhibit (3) to our Current Report on Form 8-K

dated May 9, 2003.

B. By-Laws, as amended through February 18, 1999 - Incorporated by reference to Exhibit (3)B of our Form 10-K Annual Report for the year ended December 31, 1998.

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

B. Form of Common Stock Certificate.

C. (i) Rights Agreement dated as of February 24, 1996 - Incorporated by reference to Exhibit (4) of our Current

Report on Form 8-K dated February 24, 1996.

(ii) Amendment, dated November 5, 2001 to the Rights Agreement dated as of February 24, 1996 - Incorporated by reference to Exhibit (1) of our Form 8A/A filed November 6, 2001.

D. Second Amended and Restated Stockholder’s Agreement between Henkel KGaA and Ecolab Inc., dated

November 30, 2001 - Incorporated by reference to Exhibit (4) of our Current Report on Form 8-K dated November 30, 2001.

E. Amended and Restated Indenture, dated as of January 9, 2001, between Ecolab Inc. and Bank One, NA (formerly

known as The First National Bank of Chicago) as Trustee - Incorporated by reference to Exhibit (4)(A) of our Current Report on Form 8-K dated January 23, 2001.

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

reference to Exhibit 4(B) of our Current Report on Form 8-K dated January 23, 2001.

G. Form of 6.875% Note due February 2, 2011 - Incorporated by reference to Exhibit 4(c) of our Current Report on Form 8-K dated January 23, 2001.

H. (i) Trust Deed, dated 7 February 2002, constituting €300,000,000 5.375% Notes due 2007 between Ecolab

Inc. and JP Morgan Chase Bank, London Branch - Incorporated by reference to Exhibit (4)H(i) of our Form 10-K Annual Report for the year ended December 31, 2001.

22

(ii) Paying Agency Agreement, dated 7 February 2002, relating to €300,000,000 5.375% Notes due 2007

among Ecolab Inc., JPMorgan Chase Bank, London Branch, J. P. Morgan Bank Luxembourg S.A. and others - Incorporated by reference to Exhibit (4)H(ii) of our Form 10-K Annual Report for the year ended December 31, 2001.

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 (“Credit Agreement”) dated as of September 29, 1993, as Amended and Restated

as of December 13, 2000, among Ecolab Inc., the financial institutions party thereto from time to time, Citicorp USA, Inc. as Administrative Agent, Citibank International Plc, as Euro-Agent and Bank One, NA and Credit Suisse First Boston as Co-Agents - Incorporated by reference to Exhibit (10)A of our Current Report on Form 8-K dated January 23, 2001.

(ii) Australian Dollar Local Currency Addendum to the Credit Agreement, dated October 17, 1997 - Incorporated by

reference to Exhibit (4)B of our Form 10-Q for the quarter ended September 30, 1997.

(iii) Australian Dollar Local Currency Addendum dated as of June 23, 1998 among Ecolab Finance PTY Limited, Ecolab Inc., Citibank, N.A., the Local Currency Agent named therein and the Local Currency Banks party thereto - Incorporated by reference to Exhibit (4)B of our Form 10-Q for the quarter ended June 30, 1998.

B. (i) Credit Agreement (364 Day Facility) dated December 7, 2001, among Ecolab Inc., the banks parties thereto (the

“Banks”) and Citicorp USA, Inc. as Agent for the Banks - Incorporated by reference to Exhibit (99)B of our Current Report on Form 8-K dated November 30, 2001.

(ii) Amendment No. 1 to Credit Agreement (364 Day Facility) dated as of October 31, 2002, among Ecolab Inc., the

bank parties thereto (the “Banks”) and Citicorp USA, Inc. as Agent for the Banks - Incorporated by reference to Exhibit (10)B(iii) of our Form 10-K for the year ended December 31, 2002.

(iii) Amendment No. 2 to Credit Agreement (364 Day Facility) dated as of October 30, 2003, among Ecolab Inc., the

bank parties thereto (the “Banks”) and Citicorp USA, Inc. as Agent for the Banks.

C. Documents comprising global Commercial Paper Programs

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

(a) Dealer Agreement dated as of 10 June 2003 among Ecolab Inc., Credit Suisse First Boston (Europe) Limited as Arranger, and Citibank International plc and Credit Suisse First Boston (Europe) Limited as

23

Dealers - Incorporated by reference to Exhibit (10)A(i)(a) of our Form 10-Q for the quarter ended June 30, 2003.

(b) Note Agency Agreement dated as of 10 June 2003 between Ecolab Inc. and Citibank, N.A. as Issue and

Paying Agent. - Incorporated by reference to Exhibit (10)A(i)(b) our Form 10-Q for the quarter ended June 30, 2003.

(c) Deed of Covenant made as of 10 June 2003 by Ecolab Inc. - Incorporated by reference to Exhibit (10)A(i)

(c) of our Form 10-Q for the quarter ended June 30, 2003.

(ii) U.S. $450,000,000 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 Banc One Capital Markets, Inc - Incorporated by reference to Exhibit (10)A(ii)(a) of our Form 10-Q for the quarter ended June 30, 2003.

(b) Issuing and Paying Agency Agreement dated as of July 10, 2000 between Ecolab Inc. and 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.

(iii) AUD 200,000,000 Australian Commercial Paper and Medium Term Note Programme

(a) Dealer Agreement dated as of 10 July 1998 among Ecolab Finance Pty Limited as Issuer, Citisecurities

Limited as Arranger, and the Dealers Parties thereto - Incorporated by reference to Exhibit (10)A(iii)(a) of our Form 10-Q for the quarter ended June 30, 2003.

(b) Guarantee and Negative Pledge made by our on 10 July 1998 - Incorporated by reference to Exhibit (10)A

(iii)(b) of our Form 10-Q for the quarter ended June 30, 2003.

(c) Issuing and Paying Agency Agreement dated as of 10 July 1998 between Ecolab Finance Pty Limited as Issuer and Perpetual Trustee Company Limited as Agent - Incorporated by reference to Exhibit (10)A(iii)(c) of our Form 10-Q for the quarter ended June 30, 2003.

(d) MTN Program Master Note dated as of 10 July 1998 by Ecolab Finance Pty Limited - Incorporated by

reference to Exhibit (10)A(iii)(d) of our Form 10-Q for the quarter ended June 30, 2003.

(e) Registry Services Deed dated as of 10 July 1998 between Ecolab Finance Pty Limited as Issuer and Perpetual Trustee Company as Registrar - Incorporated by reference to Exhibit (10)A(iii)(e) of our Form 10-Q for the quarter ended June 30, 2003.

D. Ecolab Inc. 1993 Stock Incentive Plan, as Amended and Restated as of May 12, 2000 - Incorporated by reference to Exhibit

(10)D of our Form 10-K Annual Report for the year ended December 31, 2002.

24

E. 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.

F. (i) 1988 Non-Employee Director Stock Option Plan as amended through February 23, 1991 - Incorporated by reference to Exhibit (10)D of our Form 10-K Annual Report for the year ended December 31, 1990.

(ii) Amendment to 1988 Non-Employee Director Stock Option Plan effective May 11, 2001 - Incorporated by reference

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

G. (i) 1995 Non-Employee Director Stock Option Plan - Incorporated by reference to Exhibit (10)D of our Form 10-K Annual Report for the year ended December 31, 1994.

(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 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.

H. (i) Ecolab Inc. 2001 Non-Employee Director Stock Option and Deferred Compensation Plan. Incorporated by

reference to Exhibit (10) of our Form 10-Q for the quarter ended March 31, 2001.

(ii) Ecolab Inc. 2001 Non-Employee Director Stock Option and Deferred Compensation Plan, as amended effective May 1, 2004.

I. Form of Director Indemnification Agreement. Substantially identical agreements are in effect as to each of our directors.

J. (i) Ecolab Executive Death Benefits Plan, as amended and restated effective March 1, 1994 - Incorporated by reference

to Exhibit (10)J of our Form 10-K Annual Report for the year ended December 31, 1994. See also Exhibit (10)P 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.

K. Ecolab Executive Long-Term Disability Plan, as amended and restated effective January 1, 1994 - Incorporated by reference

to Exhibit (10)K of our 10-K Annual Report for the year ended December 31, 1994. See also Exhibit (10)P hereof.

25

L. Ecolab Executive Financial Counseling Plan - Incorporated by reference to Exhibit (10)K of our Form 10-K Annual Report

for the year ended December 31, 1992.

M. Ecolab Supplemental Executive Retirement Plan, as amended and restated effective January 1, 2003.

N. Ecolab Mirror Savings Plan, as amended and restated effective as of March 1, 2002 - Incorporated by reference to Exhibit (10)N of our Form 10-K Annual Report for the year ended December 31, 2002.

O. Ecolab Mirror Pension Plan, as amended and restated effective as of January 1, 2003 - Incorporated by reference to Exhibit

(10)B of our Form 10-Q for the quarter ended June 30, 2003. See also Exhibit (10)P hereof. P. Ecolab Inc. Administrative Document for Non-Qualified Benefit Plans, as amended and restated effective as of January 1,

2003.

Q. 1999 Ecolab Inc. Management Performance Incentive Plan - Incorporated by reference to Exhibit (10)O of our Form 10-K Annual Report for the year ended December 31, 1998.

R. Ecolab Inc. Change in Control Severance Compensation Policy, effective February 22, 2002 - Incorporated by reference to

Exhibit (10)R of our Form 10-K Annual Report for the year ended December 31, 2002.

S. (i) Master Agreement, dated as of December 7, 2000, between Ecolab Inc. and Henkel KGaA - Incorporated by reference to Exhibit 18 of HC Investments, Inc.’s and Henkel KGaA’s Amendment No. 5 to Schedule 13D dated December 14, 2000.

(ii) Amendment No. 1 to the Master Agreement, dated December 7, 2000, between Ecolab Inc. and Henkel KGaA-

Incorporated by reference to Exhibit (10) of our Form 10-Q for the quarter ended September 30, 2001.

(iii) Intellectual Property Agreement dated November 30, 2001, between Ecolab and Henkel KGaA-Incorporated by reference to Exhibit (10) of our Current Report on Form 8-K dated November 30, 2001.

T. Description of Ecolab Inc. Management Incentive Plan - Incorporated by reference to Exhibit (10)R of our Form 10-K for the

year ended December 31, 2001.

U. (i) Hiring Letter of Bruno Deschamps - Incorporated by reference to Exhibit (10)T of our Form 10-K for the year ended December 31, 2000.

(ii) Separation Agreement between the Company and Bruno Deschamps effective March 11, 2002 - Incorporated by

reference to Exhibit (10) of our Form 10-Q for the quarter ended March 31, 2002. V. Ecolab Inc. 2002 Stock Incentive Plan - Incorporated by reference to Exhibit (10) of our Form 10-Q for the quarter ended

June 30, 2002.

(13) Those portions of our Annual Report to Stockholders for the year ended December 31, 2003 which are incorporated by reference into Parts I, II and IV hereof.

26

(21) List of Subsidiaries as of February 27, 2004.

(23) Consent of Independent Accountants at page 31 hereof is filed as a part hereof.

(24) Powers of Attorney.

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

(32) Section 1350 Certifications.

(99) A. Ecolab Code of Conduct.

B. Code of Ethics for Senior Officers and Finance Associates.

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)D.

Ecolab Inc. 1993 Stock Incentive Plan. (10)E.

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

1988 Non-Employee Director Stock Option Plan. (10)G.

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

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

Form of Director Indemnification Agreement. (10)J.

Ecolab Executive Death Benefits Plan. (10)K.

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

Ecolab Executive Financial Counseling Plan. (10)M.

Ecolab Supplemental Executive Retirement Plan. (10)N.

Ecolab Mirror Savings Plan. (10)O.

Ecolab Mirror Pension Plan. (10)P.

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

1999 Ecolab Inc. Management Performance Incentive Plan. (10)R.

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

Ecolab Management Incentive Plan. (10)U.

Hiring Letter and Separation Agreement of Bruno Deschamps. (10)V.

Ecolab Inc. 2002 Stock Incentive Plan.

III. Reports on Form 8-K: We filed one Current Report on Form 8-K during the quarter ended December 31, 2003, on October 17, 2003 to announce under Item 5 that our Board of Directors authorized the repurchase of up to 10,000,000 shares of common stock to fund stock incentive plans and for general corporate purposes. Subsequent to December 31, 2003, we filed two Current Reports on Form 8-K, dated February 26 and February 28, 2004, to report under Item 5 the appointment of three new members of Ecolab’s Board of Directors and to report the announcement of a leadership transition plan.

28

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 5 th day of March, 2004.

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 5 th day of March, 2004.

29

ECOLAB INC.

(Registrant)

By /s/ Allan L. Schuman

Allan L. Schuman

Chairman of the Board and Chief Executive Officer

/s/ Allan L. Schuman

Chairman of the Board and Allan L. Schuman

Chief Executive Officer (Principal Executive Officer and Director)

/s/ Steven L. Fritze

Executive Vice President and Steven L. Fritze

Chief Financial Officer (Principal Financial Officer)

/s/ Daniel J. Schmechel

Vice President and Controller Daniel J. Schmechel

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

Directors Lawrence T. Bell

as attorney-in-fact for: Douglas M. Baker, Jr., Les S. Biller, Stefan Hamelmann, Jerry A. Grundhofer, James J. Howard, William L. Jews, Joel W. Johnson, Jochen Krautter, Jerry W. Levin, Ulrich Lehner and Robert L. Lumpkins

Directors not signing: Richard U. De Schutter Beth M. Pritchard

REPORT OF INDEPENDENT AUDITORS

ON FINANCIAL STATEMENT SCHEDULE

To the Shareholders and Directors of Ecolab Inc.: Our audits of the consolidated financial statements referred to in our report dated February 26, 2004 appearing in the 2003 Annual Report to Shareholders of Ecolab Inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedule listed in Item 15.I(2).(i) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

Minneapolis, Minnesota February 26, 2004

30

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration Statements of Ecolab Inc. on Form S-8 (Registration Nos. 2-

60010; 2-74944; 33-1664; 33-41828; 2-90702; 33-18202; 33-55986; 33-56101; 333-95043; 333-109890; 33-26241; 33-34000; 33-56151; 333-18627; 333-109891; 33-39228; 33-56125; 333-70835; 33-60266; 333-95041; 33-65364; 333-18617; 333-79449; 333-40239; 333-95037; 333-50969; 333-58360; and 333-97927) of our report dated February 26, 2004 relating to the consolidated financial statements of Ecolab Inc. as of December 31, 2003, 2002 and 2001 and for the years then ended, which appears in the 2003 Annual Report to Shareholders of Ecolab Inc., which is incorporated by reference in this Annual Report on Form 10-K of Ecolab Inc. We also consent to the inclusion in this Annual Report on Form 10-K of our report dated February 26, 2004 relating to the financial statement schedule of Ecolab Inc. as of December 31, 2003, 2002 and 2001 and for the years then ended, which also appears in this Form 10-K.

Minneapolis, Minnesota March 5, 2004

31

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

ECOLAB INC. (In Thousands)

(A) Included the effects of changes in currency translation and business acquisition, including Henkel-Ecolab in 2001 (B) Uncollectible accounts charged off, net of recovery of accounts previously written off.

32

COL. A

COL. B COL. C

COL. D COL. E

Additions

Description

Balance at Beginning of Period

Charged to Costs and Expenses

Charged to Other

Accounts (A)

Deductions (B)

Balance at End

of Period

Allowance for Doubtful Accounts:

Year Ended December 31, 2003

$ 35,995 $ 18,403

$ 3,669 $ (14,056 ) $ 44,011

Year Ended December 31, 2002

$ 30,297 $ 17,220

$ 2,232 $ (13,754 ) $ 35,995

Year Ended December 31, 2001

$ 15,330 $ 10,941

$ 12,527 $ (8,501 ) $ 30,297

EXHIBIT INDEX

The following documents are filed as exhibits to this Report.

Exhibit No.

Document

Method of Filing (3)

A.

Restated Certificate of Incorporation.

Incorporated by reference to Exhibit (3) to our Current Report on Form 8-K dated May 9, 2003.

B.

By-Laws, as amended through February 18, 1999.

Incorporated by reference to Exhibit (3)B of our Form 10-K Annual Report, for the year ended December 31, 1998.

(4)

A.

Common Stock.

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

B.

Form of Common Stock Certificate.

Filed herewith electronically.

C.

(i)

Rights Agreement dated as of February 24, 1996.

Incorporated by reference to Exhibit (4) of our Current Report on Form 8-K dated February 24, 1996.

(ii)

Amendment, dated November 5, 2001, to the Rights Agreement dated as of February 24, 1996.

Incorporated by reference to Exhibit (1) of our Form 8A/A filed November 6, 2001.

D.

Second Amended and Restated Stockholder’s Agreement between Henkel KGaA and Ecolab Inc., dated November 30, 2001.

Incorporated by reference to Exhibit (4) of our Current Report on Form 8-K dated November 30, 2001.

Exhibit No.

Document

Method of Filing

E.

Amended and Restated Indenture dated as of January 9, 2001 between Ecolab Inc. and Bank One, N.A. (formerly known as The First National Bank of Chicago) as Trustee.

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

F.

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

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

G.

Form of 6.875% Note due February 2, 2011.

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

H.

(i)

Trust Deed dated 7 February 2002, constituting €300,000,000 5.375% Notes due 2007 between Ecolab Inc. and JPMorgan Chase Bank, London Branch.

Incorporated by reference to Exhibit (4)H(i) of our Form 10-K Annual Report for the year ended December 31, 2001.

(ii)

Paying Agency Agreement, dated 7 February 2002, relating to €300,000,000 5.375% Note due 2007 among Ecolab Inc., JPMorgan Chase Bank, London Branch, J.P. Morgan Bank Luxembourg S.A. and others.

Incorporated by reference to Exhibit (4)H(ii) of our Form 10-K Annual Report for the year ended December 31, 2001.

(10)

A.

(i)

Multicurrency Credit Agreement (“Credit Agreement”) dated as of September 29, 1993, as Amended and Restated as of December 13, 2000, among Ecolab Inc., the financial institutions party thereto, Citicorp USA, Inc. as Administrative Agent, Citibank International Plc, as Euro-Agent and Bank One, NA and Credit Suisse First Boston as Co-Agents.

Incorporated by reference to Exhibit (10)A of our Current Report on Form 8-K dated January 23, 2001.

Exhibit No.

Document

Method of Filing

(ii)

Australian Dollar Local Currency Addendum to the Credit Agreement, dated October 17, 1997.

Incorporated by reference to Exhibit (4)B of our Form 10-Q for the quarter ended September 30, 1997.

(iii)

Australian Dollar Local Currency Addendum dated as of June 23, 1998 among Ecolab Finance PTY Limited, Ecolab Inc., Citibank, N.A., the Local Currency Agent named therein and the Local Currency Banks party thereto.

Incorporated by reference to Exhibit (4)B of our Form 10-Q for the quarter ended June 30, 1998.

B.

(i)

Credit Agreement (364 Day Facility) dated December 7, 2001 among Ecolab Inc., the Banks and Citicorp USA, Inc.

Incorporated by reference to Exhibit (99)B of our Form 8-K for the quarter ended November 30, 2001.

(ii)

Amendment No. 1 to Credit Agreement (364 Day Facility) dated as of October 31, 2002, among Ecolab Inc., the bank parties thereto (the “Banks”) and Citicorp USA, Inc. as Agent for the Banks.

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

(iii)

Amendment No. 2 to Credit Agreement (364 Day Facility) dated as of October 30, 2003, among Ecolab Inc., the bank parties thereto (the “Banks”) and Citicorp USA, Inc. as Agent for the Banks.

Filed herewith electronically.

C.

Documents comprising global Commercial Paper Programs.

(i)

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

(a) Dealer Agreement dated as of 10 June 2003 among 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)A(i)(a) of our Form 10-Q for the quarter ended June 30, 2003.

Exhibit No.

Document

Method of Filing

(b) Note Agency Agreement dated as of 10 June 2003 between Ecolab Inc. and Citibank, N.A. as Issue and Paying Agent.

Incorporated by reference to Exhibit (10)A(i)(b) our Form 10-Q for the quarter ended June 30, 2003.

(c) Deed of Covenant made as of 10 June 2003 by Ecolab Inc.

Incorporated by reference to Exhibit (10)A(i)(c) of our Form 10-Q for the quarter ended June 30, 2003.

(ii)

U.S. $450,000,000 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 Banc One Capital Markets, Inc.

Incorporated by reference to Exhibit (10)A(ii)(a) of our Form 10-Q for the quarter ended June 30, 2003.

(b) Issuing and Paying Agency Agreement dated as of July 10, 2000 between Ecolab Inc. and 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.

(iii)

AUD 200,000,000 Australian Commercial Paper and Medium Term Note Programme.

(a) Dealer Agreement dated as of 10 July 1998 among Ecolab Finance Pty Limited as Issuer, Citisecurities Limited as Arranger, and the Dealers Parties thereto.

Incorporated by reference to Exhibit (10)A(iii)(a) of our Form 10-Q for the quarter ended June 30, 2003.

(b) Guarantee and Negative Pledge made by our on 10 July 1998.

Incorporated by reference to Exhibit (10)A(iii)(b) of our Form 10-Q for the quarter ended June 30, 2003.

Exhibit No.

Document

Method of Filing

(c) Issuing and Paying Agency Agreement dated as of 10 July 1998 between Ecolab Finance Pty Limited as Issuer and Perpetual Trustee Company Limited as Agent.

Incorporated by reference to Exhibit (10)A(iii)(c) of our Form 10-Q for the quarter ended June 30, 2003.

(d) MTN Program Master Note dated as of 10 July 1998 by Ecolab Finance Pty Limited.

Incorporated by reference to Exhibit (10)A(iii)(d) of our Form 10-Q for the quarter ended June 30, 2003.

(e) Registry Services Deed dated as of 10 July 1998 between Ecolab Finance Pty Limited as Issuer and Perpetual Trustee Company as Registrar.

Incorporated by reference to Exhibit (10)A(iii)(e) of our Form 10-Q for the quarter ended June 30, 2003.

D.

Ecolab Inc. 1993 Stock Incentive Plan, as amended and restated as of May 12, 2000.

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

E.

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.

F.

(i)

1988 Non-Employee Director Stock Option Plan as amended through February 23, 1991.

Incorporated by reference to Exhibit (10)D of our Form 10-K Annual Report for the year ended December 31, 1990.

Exhibit No.

Document

Method of Filing

(ii)

Amendment to 1988 Non-Employee Director Stock Option Plan effective May 11, 2001.

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

G.

(i)

1995 Non-Employee Director Stock Option Plan.

Incorporated by reference to Exhibit (10)D of our Form 10-K Annual Report for the year ended December 31, 1994.

(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 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.

H.

(i)

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

Incorporated by reference to Exhibit (10) of our Form 10-Q for the quarter ended March 31, 2001.

(ii)

Ecolab Inc. 2001 Non-Employee Director Stock Option and Deferred Compensation Plan, as amended effective May 1, 2004.

Filed herewith electronically.

I.

Form of Director Indemnification Agreement. Substantially identical agreements are in effect as to each director of Ecolab Inc.

Filed herewith electronically.

Exhibit No.

Document

Method of Filing

J.

(i)

Ecolab Executive Death Benefits Plan, as amended and restated effective March 1, 1994.

Incorporated by reference to Exhibit (10)J of our 10-K Annual Report for the year ended December 31, 1994. See also Exhibit (10)P hereof.

(ii)

Amendment No. 1 to Ecolab Executive Death Benefits Plan.

Incorporated by reference to Exhibit (10)H(ii) of our 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 10-K Annual Report for the year ended December 31, 1998.

K.

Ecolab Executive Long-Term Disability Plan, as amended and restated effective January 1, 1994.

Incorporated by reference to Exhibit (10)K of our 10-K Annual Report for the year ended December 31, 1994. See also Exhibit (10)P hereof.

L.

Ecolab Executive Financial Counseling Plan.

Incorporated by reference to Exhibit (10)K of our Form 10-K Annual Report for the year ended December 31, 1992.

M.

Ecolab Supplemental Executive Retirement Plan, as amended and restated effective January 1, 2003.

Filed herewith electronically.

N.

Ecolab Mirror Savings Plan, as amended and restated effective March 1, 2002.

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

Exhibit No.

Document

Method of Filing

O.

Ecolab Mirror Pension Plan, as amended and restated effective as of January 1, 2003.

Incorporated by reference to Exhibit (10)B of our Form 10-Q for the quarter ended June 30, 2003. See also Exhibit (10)P hereof.

P.

Ecolab Inc. Administrative Document for Non-Qualified Benefit Plans, as amended and restated effective as of January 1, 2003.

Filed herewith electronically.

Q.

1999 Ecolab Inc. Management Performance Incentive Plan.

Incorporated by reference to Exhibit (10)O of our Form 10-K Annual Report for the year ended December 31, 1998.

R.

Ecolab Inc. Change in Control Severance Compensation Policy, effective February 22, 2002.

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

S.

(i)

Master Agreement, dated as of December 7, 2000, between Ecolab Inc. and Henkel KGaA.

Incorporated by reference to Exhibit 18 of HC Investments, Inc.’s and Henkel KGaA’s Amendment No. 5 to Schedule 13D dated December 14, 2000.

(ii)

Amendment No. 1 to the Master Agreement, dated December 7, 2000, between Ecolab Inc. and Henkel KGaA.

Incorporated by reference to Exhibit (10) of our Form 10-Q for the quarter ended September 30, 2001.

(iii)

Intellectual Property Agreement dated November 30, 2001, between Ecolab Inc. and Henkel KGaA.

Incorporated by reference to Exhibit (10) of our Current Report on Form 8-K dated November 30, 2001.

EXHIBIT (4)B Number NCU Common Stock Par Value $1.00 [Graphic] Shares Incorporated under the laws of the State of Delaware [Logo] CUSIP 278865 10 0 See Reverse for Certain Definitions ECOLAB INC. This Certifies that [SPECIMEN] is the owner of Fully Paid and Non Assessable Shares of the Common Stock of Ecolab Inc. transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this certificate properly endorsed. This certificate is not valid unless countersigned by the Transfer Agent and registered by the Registrar. Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. [Seal] Dated:

Exhibit No.

Document

Method of Filing

T.

Description of Ecolab Inc. Management Incentive Plan.

Incorporated by reference to Exhibit (10)R of our Form 10-K for the year ended December 31, 2001.

U.

(i)

Hiring Letter of Bruno Deschamps.

Incorporated by reference to Exhibit (10)T of our Form 10-K for the year ended December 31, 2000.

(ii)

Separation Agreement between Ecolab Inc. and Bruno Deschamps effective March 11, 2002.

Incorporated by reference to Exhibit (10) of our Form 10-Q for the quarter ended March 31, 2002.

V.

Ecolab Inc. 2002 Stock Incentive Plan.

Incorporated by reference to Exhibit (10) of our Form 10-Q for the quarter ended June 30, 2002.

(13)

Those portions of our Annual Report to Stockholders for the year ended December 31, 2003 which are incorporated by reference into Parts I, II and IV hereof.

Filed herewith electronically.

(21)

List of Subsidiaries as of February 27, 2004.

Filed herewith electronically. (23)

Consent of Independent Accountants at page 31 hereof is filed as a part hereof.

See page 31 hereof.

(24)

Powers of Attorney.

Filed herewith electronically. (31)

Rule 13a-14(a) Certifications.

Filed herewith electronically. (32)

Section 1350 Certifications.

Filed herewith electronically. (99)

A.

Ecolab Code of Conduct.

Filed herewith electronically.

B.

Code of Ethics for Senior Officers and Finance Associates.

Filed herewith electronically.

/s/ A. L. Schuman

Chairman of the Board /s/ L. T. Bell

Secretary

Countersigned and Registered: EquiServe Trust Company, N.A., By Transfer Agent and Registrar. Authorized Signature.

ECOLAB INC .

The corporation will furnish, without charge, to each stockholder who so requests, a printed statement of the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof which the corporation is authorized to issue and the qualifications, limitations or restrictions of such preferences and/or rights. Requests may be directed to the Secretary of ECOLAB INC. at its principal office, or the Transfer Agent named on the face of this certificate.

This Certificate also evidences and entitles the holder hereof to certain Rights as set forth in the Rights Agreement between Ecolab Inc. (the “Company”) and First Chicago Trust Company of New York (the “Rights Agent”) dated as of February 24, 1996, as the same may be amended from time to time (the “Rights Agreement”), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal offices of the Company. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. The Company will mail to the holder of this certificate a copy of the Rights Agreement, as in effect on the date of mailing, without charge promptly after receipt of a written request therefor. Under certain circumstances set forth in the Rights Agreement, Rights issued to, or held by, any Person who is, was or becomes an Acquiring Person or an Adverse Person or any Affiliate or Associate thereof (as such terms are defined in the Rights Agreement), whether currently held by or on behalf of such Person or by any subsequent holder, may become null and void.

The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:

For value received, hereby sell, assign and transfer unto

NOTICE: The signature to this assignment must correspond with the name as written upon the face of the Certificate, in every particular, without alteration, or enlargement, or any change whatever.

EXHIBIT (10)B(iii)

AMENDMENT NO. 2 to

CREDIT AGREEMENT (364 Day Facility)

Dated as of October 30, 2003

This AMENDMENT NO. 2 TO CREDIT AGREEMENT (“ Amendment ”), dated as of October 30, 2003, is entered into by and among Ecolab Inc., a Delaware corporation (the “ Borrower ”), the financial institutions party hereto (the “ Banks ”), and Citicorp USA, Inc. (“ Citicorp ”), as administrative agent (the “ Agent ”) for the Banks. Each capitalized term used herein and not defined herein shall have the meaning ascribed thereto in the below-defined “Credit Agreement” .

TEN COM - as tenants in common

UNIF GIFT MIN ACT - Custodian TEN ENT - as tenants by the entireties

(Cust) (Minor) JT TEN - as joint tenants with right of

survivorship and not as tenants in common

under Uniform Gifts to Minors Act

(State)

Additional abbreviations may also be used though not in the above list.

Please insert Social Security or other identifying number of assignee

Please print or typewrite name and address including postal zip code of assignee

Shares of the capital stock

represented by the within Certificate, and do hereby irrevocably constitute

and appoint

Attorney to transfer the said stock on the books of the within-named Corporation with full

power of substitution in the premises.

Dated,

PRELIMINARY STATEMENT

The Borrower, the Banks and the Agent are parties to the Credit Agreement (364 Day Facility) dated as of December 7, 2001

(as the same may be amended, restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”). The Borrower, the Banks and the Agent have agreed to amend the Credit Agreement pursuant to the terms of this Amendment.

SECTION 1. Amendments to the Credit Agreement . Effective as of the date hereof, subject to the satisfaction of the

condition precedent set forth in Section 2 below, the Credit Agreement is hereby amended as follows: 1.1 The definition of “ Stated Termination Date ” in Section 1.01 is hereby amended by deleting “October 30, 2003” and

substituting “October 28, 2004” therefor. 1.2 Clause (iii) of Section 9.02(a) is hereby amended and restated in its entirety as follows:

(iii) if to the Agent, at its address at Bank Loan Syndications, Two Penns Way, Suite 200, New Castle, Delaware

19720, Attention: Lisa Rodriguez, Telecopier No. 212-994-0961, with a copy to Citicorp Securities, Inc., 388 Greenwich Street, New York City, New York 10013, Attention: Carolyn Sheridan, Telecopier No. 212-816-8185;

1.3 Section 9.13 is hereby amended to insert the following sentence at the end thereof:

Notwithstanding anything to the contrary set forth herein, e ach party hereto (and each officer, director, employee, accountant, attorney, advisor, agent and representative of each such party) may disclose to any and all Persons, without limitation of any kind, the U.S. tax treatment and U.S. tax structure of the transactions evidenced hereby and all materials of any kind (including opinions and other tax analyses) that are provided to any of them relating to such U.S. tax treatment and U.S. tax

structure.

1.4 Schedule I is hereby deleted in its entirety and replaced with Schedule I hereto.

1.5 Schedule II is hereby deleted in its entirety and replaced with Schedule II hereto.

SECTION 2. Condition Precedent . This Amendment shall become effective and be deemed effective as of the date hereof

(or if such items are not received until a later date, on such later date) upon the Agent’s receipt of duly executed originals of this Amendment from the Borrower and each Bank.

SECTION 3. Covenants, Representations and Warranties of the Borrower . 3.1 Upon the effectiveness of this Amendment, the Borrower hereby reaffirms all covenants, representations and warranties

made by it in the Credit Agreement, as amended hereby, and agrees that all such covenants, representations and warranties shall be deemed to have been re-made as of the effective date of this Amendment.

3.2 The Borrower hereby represents and warrants that (i) this Amendment constitutes a legal, valid and binding obligation of

the Borrower, enforceable against the Borrower in accordance with its terms, except as enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting creditor’s rights generally and by the effect of general principles of equity and (ii) upon the effectiveness of this Amendment, no Event of Default or Default shall exist with respect to the Borrower.

SECTION 4. Reference to and Effect on the Credit Agreement . 4.1 Upon the effectiveness of this Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”,

“hereof”, “herein” or words of like import shall mean and be a reference to the Credit Agreement, as amended hereby, and each reference to the Credit Agreement in any other document, instrument or agreement executed and/or delivered in connection with the Credit Agreement shall mean and be a reference to the Credit Agreement as amended hereby.

4.2 Except as specifically amended above, the Credit Agreement, the Notes and all other documents, instruments and

agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed. 4.3 The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy

of any party under the Credit Agreement, the Notes or any other document, instrument or agreement executed in connection therewith, nor constitute a waiver of any provision contained therein, except as specifically set forth herein.

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SECTION 5. Execution in Counterparts . This Amendment may be executed in any number of counterparts and by different

parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute one and the same instrument.

SECTION 6. Governing Law . This Amendment shall be governed by, and construed in accordance with, the laws of

the State of New York. SECTION 7. Headings . Section headings in this Amendment are included herein for convenience of reference only and

shall not constitute a part of this Amendment for any other purpose. The remainder of this page is intentionally blank.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers

thereunto duly authorized, as of the date first above written.

ECOLAB INC.

By: /s/ Mark D. Vangsgard

Name: Mark D. Vangsgard

Title: Vice President and Treasurer

CITICORP USA, INC., as Administrative Agent

By: /s/ Carolyn A. Sheridan

Name: Carolyn A. Sheridan

Title: Managing Director & Vice President

Banks

CITICORP USA, INC .

By: /s/ Carolyn A. Sheridan

Name: Carolyn A. Sheridan

Title: Managing Director & Vice President

JPMORGAN CHASE BANK

By: /s/ Stacey L. Haimes

Name: Stacey L. Haimes

Title: Vice President

CREDIT SUISSE FIRST BOSTON

Cayman Islands Branch

By: /s/ Karl Studer

Name: Karl Studer

Title: Director

By: /s/ Cedric Evard

Name: Cedric Evard

Title: Assistant Vice President

BANK ONE, NA (Main Office Chicago)

By: /s/ Jenny A. Gilpin

Name: Jenny A. Gilpin

Title: Managing Director

WELLS FARGO BANK,

NATIONAL ASSOCIATION

By: /s/ James D. Heinz

Name: James D. Heinz

Title: Senior Vice President

By: /s/ Allison S. Gelfman

Name: Allison S. Gelfman

Title: Vice President

WACHOVIA BANK,

NATIONAL ASSOCIATION

By: /s/ Steven L. Hipsman

Name: Steven L. Hipsman

Title: Director

BANK OF AMERICA, N.A.

By: /s/ Wendy J. Gorman

Name: Wendy J. Gorman

Title: Managing Director

BARCLAYS BANK PLC

By: /s/ Nicholas Bell

Name: Nicholas Bell

Title: Director

SCHEDULE I

Applicable Lending Offices and Notice Addresses

CITICORP USA, INC.

Notice Address:

Citicorp USA, Inc. c/o Citicorp Securities, Inc. 388 Greenwich Street New York City, New York 10013 Attn: Carolyn Sheridan Telecopier No.: 212-816-8185

Domestic Lending Office and Eurodollar Lending Office:

Citicorp USA, Inc. Bank Loan Syndications Two Penns Way, Suite 200 New Castle, Delaware 19720 Attn: Lisa Rodriguez Telecopier No.: 212-994-0961

JPMORGAN CHASE BANK

Notice Address:

JPMorgan Chase Bank 227 West Monroe Street, 27 th Floor Chicago, Illinois 60606 Attn: Laura Born Telecopier No.: 312-541-3441 Confirmation No.: 312-541-3379 E-mail: laura born@jpmorgan.com

Domestic Lending Office and Eurodollar Lending Office:

JPMorgan Chase Bank 1111 Fanin, 10 th Floor Houston, TX 77002 Attn: Danette Espinoza Telecopier No.: 713-750-2782

WELLS FARGO BANK, NATIONAL ASSOCIATION Notice Address and Domestic Lending Office:

Wells Fargo Bank, National Association Sixth & Marquette – MAC N305-031 Minneapolis, MN 55479 Attn: Ethel Philips Telecopier No.: 612-667-4145 and to: Allison Gelfman Telecopier No.: 612-667-4145 E-Mail: allison.s.gelfman@wellsfargo.com

Eurodollar Lending Office:

Wells Fargo Bank, National Association Sixth & Marquette – MAC N305-031 Minneapolis, MN 55479 Attn: Ethel Philips Telecopier No.: 612-667-4145 and to: Allison Gelfman Telecopier No.: 612-667-4145

CREDIT SUISSE FIRST BOSTON

Notice Address:

Eleven Madison Avenue New York, NY 10010 Attn: Karl Studer, Corporate Banking Telecopier: 212-743-1894 E-Mail: karl.studer@csfb.com

Domestic Lending Office and Eurodollar Lending Office: Credit Suisse First Boston One Madison Avenue New York, New York 10010 Attn: Ed Markowski and to: Hazel Leslie Telecopier No.: 212-538-6851 (With a copy to the Notice Address)

BANK ONE, NA Notice Address:

Bank One, NA Suite 0173, 14th Floor 1 Bank One Plaza Chicago, Illinois 60670-0324 Attn: Jenny Gilpin Telecopier No.: 312-732-3888 E-Mail: jenny gilpin@bankone.com

Domestic Lending Office and Eurodollar Lending Office:

Bank One, NA 1 Bank One Plaza Chicago, Illinois 60670 Attn: Deanna Lee Telecopier No.: 312-732-4303

WACHOVIA BANK, NATIONAL ASSOCIATION

Notice Address:

Wachovia Bank, N.A. 191 Peachtree Street Mail Code GA8050 Atlanta, Georgia 30303 Attn: Steven Hipsman Ms. Teresa Howard (Operations/Administration) Telecopier No.: 404-332-4048 (Credit Matters)

404-332-1118 (Operations/Administration) E-Mail: stevenhipsman@wachovia.com

Domestic Lending Office and Eurodollar Lending Office:

Wachovia Bank, N.A. 201 South College Street Attn: Sharon Gibson Telecopier No.: 704-715-0094

BANK OF AMERICA, N.A.

Notice Address:

Bank of America, N.A. 100 North Tryon Street Charlotte, North Carolina 28255-0001 Attn: Lawrence Saunders Telecopier No.: 704-386-1447 E-Mail: lawrence.saunders@bankofamerica.com

With a copy to: Bank of America, N.A. 335 Madison Avenue, 5 th Floor New York, New York 10017 Attn: Colleen Briscoe Telecopier No.: 212-503-7878 E-Mail: colleen.m.briscoe@bankofamerica.com

Domestic Lending Office and Eurodollar Lending Office:

Bank of America, N.A. 101 North Tryon Street Charlotte, North Carolina 28255-0001 Attn: Curtis Lancy Telecopier No.: 888-969-9252

BARCLAYS BANK PLC

Notice Address:

Administrative Matters Barclays Bank PLC 200 Park Avenue, 4 th Floor New York, New York 10188 Attn: David Barton Telecopier No.: 212-412-7511 E-Mail: Davide.Barton@barcap.com

Operations Matters Barclays Bank PLC 222 Broadway - 7 th Floor New York, New York 10038 Attn: Eddie Cotto Telecopier No: 212-412-5306 E-Mail: eddie.cotto@barcap.com

Domestic Lending Office and Eurodollar Lending Office:

Barclays Bank PLC 200 Park Avenue New York, New York 10188 (Notices to be addressed as specified above)

SCHEDULE II

Commitments

EXHIBIT (10)H(ii)

ECOLAB INC.

2001 NON-EMPLOYEE DIRECTOR STOCK OPTION AND

DEFERRED COMPENSATION PLAN

(as amended effective as of May 1, 2004)

1. Description .

1.1. Name . The name of the Plan is the “ Ecolab Inc. 2001 Non-Employee Director Stock Option and Deferred Compensation Plan .”

1.2. Purposes . The purpose of the Plan is to attract and retain the services of experienced and knowledgeable non-employee

directors by providing such directors with greater flexibility in the form and timing of receipt of compensation for their service on the Board of Directors and an opportunity to obtain a greater proprietary interest in the Company’s long-term success and progress through the receipt of Periodic Options and Annual Share Units and the deferral of cash compensation in the form of credits to their Share Accounts or Cash Accounts, thereby aligning such directors’ interests more closely with the interests of the Company’s stockholders.

1.3. Type . The Plan is maintained primarily for the purpose of compensating Qualified Directors and providing them with the

opportunity to obtain equity-based compensation and to defer cash compensation. The Plan is intended to be unfunded for tax purposes. It will be construed and administered in a manner that is consistent with and gives effect to the foregoing.

1.4. Components of Director Compensation . Qualified Directors who are eligible pursuant to Section 2.1 will receive Periodic

Options, Share Unit Compensation and Other Director Compensation as part of their annual compensation for services rendered as directors of the Company, as determined by the Board from time to time. Qualified Directors who are eligible pursuant to Section 2.1 may defer the receipt of some or all of their Other Director Compensation in the form of credits to their Cash Accounts and Share Accounts.

2. Participation .

2.1. Eligibility .

(a) Each individual who is a Participant under any of the Prior Deferred Compensation Plans will be eligible to have credits made to his or her Cash Account and Share Account pursuant to Section 4.

(b) Each individual who is a Qualified Director at any point during a Credit Period with respect to which a credit is

made pursuant to Section 5.1 is eligible to have such credit made to his or her Share Account pursuant to Section 5.1.

Institution

Commitment

Citicorp USA, Inc.

$ 32,500,000

JPMorgan Chase Bank

$ 32,500,000

Credit Suisse First Boston

$ 30,000,000

Bank One, NA (Main Office Chicago)

$ 20,000,000

Wells Fargo Bank, National Association

$ 20,000,000

Wachovia Bank, N.A.

$ 20,000,000

Bank of America, N.A.

$ 10,000,000

Barclays Bank PLC

$ 10,000,000

Total

$ 175,000,000

(c) Each individual who is a Qualified Director on the first day of an Election Period is eligible to make deferral

elections pursuant to Section 5.2 with respect to such Election Period. An individual who becomes a Qualified Director after the first day of the Election Period is eligible to make a deferral election pursuant to Section 5.2 with respect to the remainder of such Election Period. Any deferral election under Section 5.2 by a Participant who receives a distribution pursuant to Section 8.2(a) or 8.2(c) will be suspended, and no further amounts will be deferred under such section, until the first anniversary of such distribution. Each individual who has made a valid election pursuant to Section 5.2 and is a Qualified Director at any point during a Credit Period with respect to which a credit is made pursuant to Section 5.2 is eligible to have such credit made to his or her Account pursuant to Section 5.2.

(d) Each Qualified Director is eligible to receive Periodic Options pursuant to Section 7.

2.2. Ceasing to be Eligible . An individual who ceases to be a Qualified Director is not eligible to receive Periodic Options pursuant to Section 7 or to make any elections or receive further credits pursuant to Section 5, other than such credits relating to the period prior to such cessation.

2.3. Condition of Participation . Each Participant, as a condition of participation in the Plan, is bound by all the terms and

conditions of the Plan and the Plan Rules, including but not limited to the reserved right of the Company to amend or terminate the Plan, and must furnish to the Administrator such pertinent information, and execute such election forms and other instruments, as the Administrator or Plan Rules may require by such dates as the Administrator or Plan Rules may establish.

2.4. Termination of Participation . An individual will cease to be a Participant as of the date on which he or she is neither eligible to receive Periodic Options pursuant to Sections 2.2 and 7, nor to make any elections or receive further credits pursuant to Sections 2.2, 5 and 6 and his or her outstanding Periodic Options have been exercised, cancelled or expired and his or her entire Account balances have been distributed.

3. Participant Cash and Share Accounts . For each Participant, the Administrator will establish and maintain a Cash Account and a Share Account to evidence amounts credited with respect to the Participant pursuant to Sections 4, 5 and 6. Subject to Section 8.2(c), each Participant will always have a fully vested nonforfeitable interest in his or her Account. 4. Carryover Credits from Prior Deferred Compensation Plans . As of the 2001 Annual Meeting Date, the Cash Account and Share Account of each then-current Participant were credited with the amount of cash or Share Units, if any, in such Participant’s corresponding cash account and share account under the Prior Deferred Compensation Plans, and such accounts were reduced to zero. 5. Compensation and Deferral Credits .

5.1. Share Unit Compensation: Credits to Share Account. Each Qualified Director will receive additional annual compensation (the “Share Unit Compensation”) in the form of

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credits to the Qualified Director’s Share Account. The amount of the Share Unit Compensation will be expressed in U.S. dollars and determined from time to time by the Board. A Qualified Director’s Share Account will be credited pursuant to this section on the last day of each Credit Period (a “Credit Date”) with the number of whole and fractional Share Units equal to the quotient of: (a) the dollar amount of the Share Unit Compensation allocated to such full Credit Period, divided by (b) the Market Price on the Credit Date. If a Qualified Director has not served for the entire Credit Period for which the Share Unit Compensation relates, the amount credited to the Qualified Director’s Share Account will be based on the dollar amount of the Share Unit Compensation earned by the Qualified Director during the portion of the Credit Period for which he or she served.

5.2. Other Director Compensation: Credits to Cash and Share Accounts. Elective deferrals of Other Director Compensation will

be made in accordance with the following rules:

(a) Election to Defer Other Director Compensation . Each Qualified Director may elect, in accordance with this section to defer the receipt of all or a portion (in increments of ten percent) of his or her Other Director Compensation relating to an Election Period in the form of credits to his or her Cash Account and/or Share Account. Any such deferral election will automatically apply to the Participant’s Other Director Compensation, as the amount of such Other Director Compensation is adjusted from time to time.

(b) Time of Filing Election . A deferral election pursuant to this section will not be effective unless it is made on a

properly completed election form received by the Administrator before the first day of the Election Period to which the deferral election relates or, in the case of an individual who becomes a Qualified Director on or after the first day of the Election Period, within 30 days after the date such individual becomes a Qualified Director. Any election delivered or deemed to be delivered under this Section 5.2(b) applies only to Other Director Compensation relating to services performed after the effective date of the election.

(c) Allocation of Deferral . In conjunction with each deferral election made pursuant to this section, a Qualified

Director must elect, in accordance with and subject to the Plan Rules, how the deferral is to be allocated (in increments of ten percent only) among his or her Cash Account and Share Account. The sum of such percentages must not exceed 100 percent. Any portion of the deferral for which no election is made will be allocated to the Qualified Director’s Cash Account.

(d) Credits . Other Director Compensation deferred pursuant to this section will be credited to a Qualified Director’s

Cash Account and/or Share Account, as elected, as of the last day of each Credit Period. Such credits to the Qualified Director’s Cash Account will be in United States dollars equal to the amount of the deferral allocated to each such Account. Such credits to a Qualified Director’s Share Account will be the number of whole and fractional Share Units determined by dividing the United States dollar amount of the deferral allocated to the Share Account by the Market Price of a Share on the Credit Date. If a Qualified Director has not served or will not serve for the entire Credit Period for which the Other Director Compensation relates, the amounts

3

credited to the Qualified Director’s Cash Account and/or Share Account, as elected, on the last day of the Credit Period will be based on the amount of the deferral allocated to each such Account that the Qualified Director has earned during the portion of the Credit Period for which he or she served.

(e) Succeeding Election Periods . A deferral election pursuant to this section will remain in effect until revoked or

modified for future Election Periods by the Qualified Director by delivering a new deferral election not later than the day before the first Election Period to which the new deferral election relates.

(f) Irrevocability . A deferral election for a given Election Period is irrevocable after the latest date by which the

deferral election is required to be given to the Administrator for such Election Period.

6. Earnings Credits .

6.1. Earnings Credits to Cash Accounts. As of the last day of each Credit Period, and before any credits have been made pursuant to Section 5 on such date, a Participant’s Cash Account will be credited with interest, calculated on the balance in the Cash Account as of the last day of the immediately preceding calendar month and on the Credit Date at the Prime Rate in effect on each such date.

6.2. Earnings Credits to Share Accounts . A Participant’s Share Account will be credited as of the date on which dividends are

paid on Shares with that number of whole and fractional Share Units determined by dividing the dollar amount of the dividends that would have been payable to the Participant if the number of Share Units credited to the Participant’s Share Account on the record date for such dividend payment had then been Shares registered in the name of such Participant by the Market Price of a Share on the date as of which the credit is made.

7. Periodic Options .

A Qualified Director may be granted from time to time one or more options to purchase that number of whole Shares as determined by the Board in its sole discretion (“Periodic Options”). Periodic Options will be deemed to be granted as of the date specified in the grant resolution of the Board. The terms of the Periodic Options are set forth in Section 9.

8. Distributions .

8.1. Distribution of Cash and Share Accounts to a Participant Upon Termination of Service .

(a) Form of Distribution . A Participant’s Cash Account and Share Account will be distributed as provided in this section in a lump sum payment unless (i) the Participant elects, on a properly completed election form, to receive his or her distribution in the form of annual installment payments for a period of not more than 10 years and (ii) except when cessation results from Disability, the date on which he or she ceases to be a member of the Board follows by more than one year the date on which a

4

properly completed election form is received by the Administrator. Any election made pursuant to this section may be changed from time to time upon the Administrator’s receipt of a properly completed election form, provided that, unless cessation results from Disability, such change will not be valid and will not have any effect unless it is made more than one year prior to a Participant’s cessation of service as member of the Board. A new election to change has no effect on any previous election until the new election becomes effective, at which time any previous election will automatically be void. (For example, if the Administrator receives an election to change on July 1 of year 1 and another election on September 1 of year 1, the July 1 election will become effective on July 1 of year 2 and will remain in effect through August 30 of year 2. On September 1 of year 2, the September 1 election will become effective.) Any election made pursuant to this section will apply to the entire balance of the Participant’s Cash and Share Accounts attributable to credits with respect to the period through the date on which he or she ceases to be a member of the Board. If a Participant has a valid election in effect under any Prior Deferred Compensation Plan, such Participant’s prior election will automatically be deemed to be the Participant’s election under this section unless and until a new election is made and has become effective. Any distribution from a Participant’s Cash Account will be made in cash only. Subject to Section 13, any distribution from a Participant’s Share Account will be made in whole Shares only, rounded up to the next whole Share.

(b) Time of Distribution . Distribution to a Participant will be made (if in lump sum) or commence (if in 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 (the “Time of Distribution”).

(c) Amount of Distribution for Cash Account .

(i) Lump Sum . The amount of a lump sum payment from a Participant’s Cash Account will be equal to the balance of the Cash Account as of the Time of Distribution.

(ii) Installments . The amount of each installment payment from a Participant’s Cash Account will be

determined by dividing the balance of the Cash Account as of the distribution date for such installment payment by the total number of remaining payments (including the current payment).

(d) Amount of Distribution for Share Account .

(i) Lump Sum . A lump sum distribution from a Participant’s Share Account will consist of the number of Shares equal to the number of Share Units credited to the Share Account as of the Time of Distribution, rounded up to the next whole Share.

5

(ii) Installments . Each installment distribution from a Participant’s Share Account will consist of the number

of Shares determined by dividing the number of whole Share Units credited to the Share Account as of the distribution date for such installment distribution by the total number of remaining payments (including the current payment) and rounding the quotient to the next whole Share.

(e) Reduction of Account Balance . The balance of the Cash or Share Account from which a distribution is made will

be reduced, as of the date of the distribution, by the cash amount or number of Shares distributed.

8.2. Other Distributions from Cash and Share Accounts to a Participant . The provisions of this section will apply notwithstanding Section 8.1 or any election by a Participant to the contrary.

(a) Withdrawals Due to Unforeseeable Emergency . A distribution will be made to a Participant from his or her

Account if the Participant submits a written distribution request to the Administrator and the Administrator determines that the Participant has experienced an Unforeseeable Emergency. The amount of the distribution may not exceed the lesser of (a) the amount necessary to satisfy the emergency, as determined by the Administrator, or (b) the sum of the balances of the Participant’s Accounts as of the date of the distribution, as the case may be. Payments made on account of an Unforeseeable Emergency will not be made to the extent that such Unforeseeable Emergency is or may be relieved through reimbursement or compensation by insurance or otherwise, by liquidation of the Participant’s assets (to the extent that such liquidation would not itself cause severe financial hardship) or by cessation of deferrals under Section 5.2. Any distribution pursuant to this section will be made as soon as administratively practicable after the Administrator’s determination that the Participant has experienced an Unforeseeable Emergency and in the form of a lump sum payment that is (a) in cash from the Cash Account and (b) in Shares from the Share Account (rounded up to the next whole Share). Any distribution pursuant to this section will be made first from the Participant’s Cash Account and then from the Participant’s Share Account.

(b) Small Benefits .

(i) Cash Account . Each installment distribution to a Participant who has ceased to be a member of the Board will be at least $2,500 or such smaller amount that equals the balance of the Participant’s Cash Account.

(ii) Share Account . If the balance of the Share Account of a Participant who has ceased to be a member of the

Board is fewer than 100 Share Units as of the day of any installment distribution pursuant to Section 8.1(d)(ii), such remaining balance will be distributed to the Participant in the form of a lump sum distribution, that will consist of the number of Shares equal to the number of Share Units credited to the Share Account as of that date, rounded up to the next whole Share, as soon as administratively practicable. Each installment

6

distribution to a Participant who has ceased to be a member of the Board must be at least 100 Share Units or such smaller number of Share Units that remains in the Participant’s Share Account.

(c) Accelerated Distribution . A Participant may, at any time, elect an immediate distribution of his or her Cash and

Share Accounts in an amount equal to 90 percent of the sum of the balances of the Cash and Share Accounts as of the date of the distribution, in which case the remaining balances of such Accounts will be forfeited. The distribution will be made in the form of a lump sum payment as soon as administratively practicable after the Administrator’s receipt of a written application in form prescribed by the Administrator. Any distribution pursuant to this section from a Participant’s Cash Account will be made in cash. Any distribution pursuant to this section from a Participant’s Share Account will be made in whole Shares (rounded up to the next whole Share). The balance of the Cash or Share Accounts from which a distribution is made will be reduced to zero as of the date of the distribution.

(d) Payment in Event of Incapacity . If any individual entitled to receive any payment under the Plan is, in the

judgment of the Administrator, physically, mentally or legally incapable of receiving or acknowledging receipt of the payment, and no legal representative has been appointed for the individual, the Administrator may (but is not required to) cause the payment to be made to any one or more of the following as may be chosen by the Administrator: the Beneficiary (in the case of the incapacity of a Participant); the institution maintaining the individual; a custodian for the individual under the Uniform Transfers to Minors Act of any state; or the individual’s spouse, child, parent, or other relative by blood or marriage. The Administrator is not required to see to the proper application of any such payment, and the payment completely discharges all claims under the Plan against the Company, the Plan and the Trust to the extent of the payment.

(e) Reduction of Account Balance . Except in the case of accelerated distributions pursuant to Section 8.2(c), the

balance of the Cash or Share Account from which a distribution is made will be reduced, as of the date of the distribution, by the cash amount or number of Shares distributed, as the case may be.

8.3. Distribution of Cash and Share Accounts to a Beneficiary Upon Death of a Participant .

(a) Form . Following a Participant’s death, the balances of the Participant’s Cash and Share Accounts will be distributed to the Participant’s Beneficiary in a lump sum payment whether or not payments had commenced to the Participant in the form of installments prior to his or her death. Any distribution from a Participant’s Cash Account will be made in cash and any distribution from a Participant’s Share Account will be made in whole Shares, rounded up to the next whole Share.

(b) Time . Distribution to a Beneficiary will be made as soon as administratively practicable after the next Credit Date

after the date on which the Administrator receives notice of the Participant’s death; provided that if a distribution 7

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 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.

(c) Amount . The amount of the lump sum payment from a Participant’s Cash Account will be equal to the sum of the

balances of the Cash Account on the date of distribution. A lump sum distribution from a Participant’s Share Account will consist of the number of Shares equal to the number of Share Units credited to the Share Account, rounded up to the next whole Share.

(d) Reduction of Account Balance . The balances of the Participant’s Cash and Share Accounts will be reduced, as of

the date of the distribution, to zero. (e) Beneficiary Designation .

(i) Each Participant may designate, in form prescribed by the Administrator, one or more primary Beneficiaries or alternative Beneficiaries to receive all or a specified part of the balance of his or her Cash or Share Accounts after his or her death, and the Participant may change or revoke any such designation from time to time. No such designation, change or revocation is effective unless signed by the Participant and received by the Administrator during the Participant’s lifetime. If a Participant has a valid designation in effect under any Prior Deferred Compensation Plan, such Participant’s prior designation will automatically be deemed to be the Participant’s designation under this section unless and until a new designation is made and has become effective.

(ii) Any portion of a Participant’s Cash and Share Accounts for which the Participant fails to designate a

Beneficiary, revokes a Beneficiary designation without naming another Beneficiary or designates one or more Beneficiaries, none of whom survives the Participant or exists at the time in question, will be paid to the Participant’s surviving spouse or, if the Participant is not survived by a spouse, to the representative of the Participant’s estate.

(iii) The automatic Beneficiaries specified above and, unless the designation otherwise specifies, the

Beneficiaries designated by the Participant, become fixed as of the Participant’s death so that, if a Beneficiary survives the Participant but dies before the receipt of the payment due such Beneficiary, the payment will be made to the representative of such Beneficiary’s estate. Any designation of a Beneficiary by name that is accompanied by a description of the relationship or only by a statement of relationship to the Participant is effective only to designate the person or persons standing in such relationship to the Participant at the Participant’s death.

9. Terms of Options Granted Under the Plan . All Periodic Options granted under the Plan will be governed by the following terms and conditions:

8

9.1. Non-Statutory Options . All Periodic Options granted under the Plan will be non-statutory stock options not entitled to

special tax treatment under Section 422 of the Internal Revenue Code of 1986, as amended to date and as may be amended from time to time (the “Code”).

9.2. Option Exercise Price . The exercise price per Share purchasable under a Periodic Option granted under the Plan will be

equal to 100% of the Market Price on the date of grant of the Periodic Option. 9.3. Exercisability of Options . Each Periodic Option granted under the Plan will be immediately exercisable. 9.4. Duration of Options . Each Periodic Option granted under the Plan will terminate ten years after its Date of Grant. If the

Participant ceases to serve as a director of the Company for any reason, then the Periodic Option will remain exercisable until the earlier of the expiration of five years after the date the Participant ceased to serve as a director of the Company or the remaining term of the Periodic Option.

9.5. Manner of Option Exercise . A Periodic Option granted under the Plan may be exercised by a Participant in whole or in part

from time to time, subject to the conditions contained in the Plan, by delivering in person, by facsimile or electronic transmission or through the mail notice of exercise to the Company at its principal executive office in St. Paul, Minnesota, and by paying in full the total exercise price for the Shares to be purchased in accordance with Section 9.6. Such notice will specify the particular Periodic Option that is being exercised (by the date of grant and total number of Shares subject to the Periodic Option) and the number of Shares with respect to which the Periodic Option is being exercised.

9.6. Payment of Exercise Price . The total purchase price of the shares to be purchased upon exercise of a Periodic Option

granted under the Plan will be paid entirely in cash (including check, bank draft or money order); provided, however, that the Administrator, in its sole discretion and upon terms and conditions established by the Administrator, may allow such payments 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, or by a combination of such methods. For purposes of such payment, Previously Acquired Shares tendered or covered by an attestation will be valued at the Market Price on the exercise date.

9.7. Restrictions on Transfer .

(a) Except pursuant to testamentary will or the laws of descent and distribution or as otherwise expressly permitted by Sections 9.7(b) and (c), no right or interest of any Participant in a Periodic Option granted under the Plan prior to the exercise of such Periodic Option will be assignable or transferable, or subjected to any lien, during the lifetime of the Participant, either voluntarily or involuntarily, directly or indirectly, by operation of law or otherwise.

(b) A Participant will be entitled to designate a beneficiary to receive a Periodic Option granted under the Plan upon

such Participant’s death, and in the event of a Participant’s death, payment of any amounts due under the Plan will be made to, and 9

exercise of any Periodic Options (to the extent permitted pursuant to Section 13) may be made by, the Participant’s legal representatives, heirs and legatees.

(c) A Participant who is a director of the Company will be entitled to transfer all or a portion of a Periodic Option

granted under the Plan, other than for value, to such Participant’s child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, any person sharing such Participant’s household (other than a tenant or employee), a trust in which any of the foregoing have more than fifty percent of the beneficial interests, a foundation in which any of the foregoing (or the Participant) control the management of assets, and any other entity in which these persons (or the Participant) own more than fifty percent of the voting interests. Any permitted transferee will remain subject to all the terms and conditions applicable to the Participant prior to the transfer. A permitted transfer may be conditioned upon such requirements as the Administrator may, in its sole discretion, determine, including, but not limited to execution and/or delivery of appropriate acknowledgements, opinion of counsel, or other documents by the transferee.

9.8. Rights as a Stockholder . No Participant will have any rights as a stockholder with respect to any Shares covered by a

Periodic Option granted under the Plan until the Participant has exercised such Periodic Option, paid the exercise price and become the holder of record of such Shares, and, except as otherwise provided in Section 17.3, no adjustments will be made for dividends or other distributions or other rights as to which there is a record date preceding the date the Participant becomes the holder of record of such Shares.

9.9. Cash Payment for Options . If a Change in Control of the Company occurs, then the Board, without the consent of any

Participant affected thereby, may determine that some or all Participants holding outstanding Periodic Options granted under the Plan will receive, with respect to some or all of the Shares subject to such Periodic Options, as of the effective date of any Change in Control of the Company, cash in an amount equal to the excess of the Market Price of such Shares immediately prior to the effective date of such Change in Control of the Company over the exercise price per share of such Periodic Options.

10. Effects of Actions Constituting Cause . Notwithstanding anything in the Plan to the contrary, if a Participant is determined by the Board, acting in its sole discretion, to have committed any action which would constitute Cause as defined in Section 15.8, irrespective of whether such action or the Board’s determination occurs before or after such Participant ceases to serve as a director of the Company, all rights of the Participant under the Plan attributable to unexercised Periodic Options granted under Section 8 and any agreements evidencing a Periodic Option then held by the Participant will terminate and be forfeited without notice of any kind. Benefits attributable to amounts credited to a Participant’s Account pursuant to Sections 4 and 5 and any earnings credited with respect to such amounts pursuant to Sections 6.1 and 6.2 will not be forfeited.

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11. Source of Payments: Nature of Interest .

11.1. Establishment of Trust . The Company may establish a Trust with an independent corporate trustee. The Trust must be a grantor trust with respect to which the Company is treated as grantor for purposes of Code Section 677 and must provide that, upon the insolvency of the Company, Trust assets will be used to satisfy claims of the Company’s general creditors. The Company will pay all taxes of any and all kinds whatsoever payable in respect of the Trust assets or any transaction with respect to the Trust assets. The Company may from time to time transfer to the Trust cash, marketable securities or other property acceptable to the Trustee in accordance with the terms of the Trust.

11.2. Source of Payments . The Trustee will make distributions to Participants and Beneficiaries from the Trust in satisfaction of

the Company’s obligations under the Plan in accordance with the terms of the Trust. The Company is responsible for paying, from its general assets, any benefits attributable to a Participant’s Account that are not paid by the Trust.

11.3. Status of Plan . Nothing contained in the Plan or Trust is to be construed as providing for assets to be held for the benefit of

any Participant or any other person or persons to whom benefits are to be paid pursuant to the terms of the Plan, the Participant’s or other person’s only interest under the Plan being the right to receive the benefits set forth herein. The Trust is established only for the convenience of the Company and the Participants, and no Participant has any interest in the assets of the Trust prior to distribution of such assets pursuant to the Plan. Until such time as Shares are distributed to a Participant, Beneficiary of a deceased Participant or other person, he or she has no rights as a shareholder with respect to any Share Units credited to a Share Account pursuant to the Plan. To the extent that the Participant or any other person acquires a right to receive benefits under the Plan or the Trust, such right is no greater than the right of any unsecured general creditor of the Company.

11.4. Non-Assignability of Benefits . The benefits payable under the Plan and the right to receive future benefits under the Plan

may not be anticipated, alienated, sold, transferred, assigned, pledged, encumbered, or subjected to any charge or legal process.

12. Payment of Withholding Taxes .

12.1. General Rules . The Company and the Trustee are entitled to (a) withhold and deduct from any compensation, deferral and/or benefit payment pursuant to the Plan and other amounts that may be due and owing to the Participant or Beneficiary from the Company, or make other arrangements for the collection of, all legally required amounts necessary to satisfy any and all federal, state and local withholding and other tax requirements attributable to the Plan and a Periodic Option, including, without limitation, the grant or exercise of a Periodic Option, or (b) require the Participant promptly to remit the amount of such withholding to the Company before taking any action, including issuing any Shares, with respect to a Periodic Option.

12.2. Special Rules . The Company or the Trustee, as the case may be, in its sole discretion and upon terms and conditions

established by the Company or the Trustee, as the case may be, may permit or require a Participant to satisfy, in whole or in part, any withholding or other tax obligation described in Section 12.1 by having such amounts withheld from any compensation, deferral and/or benefit payment pursuant to the Plan, by remitting such amounts to the Company or the Trustee, by electing to tender, or attest as to ownership of, Previously

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Acquired Shares, by delivery of a Broker Exercise Notice or a combination of such methods. For purposes of satisfying a Participant’s withholding or other tax obligation, Previously Acquired Shares tendered or covered by an attestation will be valued at their Market Price.

13. Securities Law and Other Restrictions . Notwithstanding any other provision of the Plan or any agreements entered into pursuant to the Plan to the contrary, neither the Company nor the Trustee is required to issue or distribute any Shares under the Plan, and a Participant or distributee may not sell, assign, transfer or otherwise dispose of Shares issued or distributed pursuant to the Plan, unless (a) there is in effect with respect to such Shares a registration statement under the Securities Act and any applicable securities laws of a state or foreign jurisdiction or an exemption from such registration under the Securities Act and applicable state or foreign securities laws, and (b) there has been obtained any other consent, approval or permit from any other regulatory body which the Company, in its sole discretion, deems necessary or advisable. The Company or the Trustee may condition such issuance, distribution, sale or transfer upon the receipt of any representations or agreements from the parties involved, and the placement of any legends on certificates representing Shares, as may be deemed necessary or advisable by the Company in order to comply with such securities law or other restrictions. 14. Amendment and Termination .

14.1. Amendment .

(a) The Company reserves the right to amend the Plan at any time to any extent that it may deem advisable. To be effective, an amendment must be stated in a written instrument approved in advance or ratified by the Board and executed in the name of the Company by its Chief Executive Officer or President and attested by the Secretary or an Assistant Secretary.

(b) An amendment adopted in accordance with Section 14.1(a) is binding on all interested parties as of the effective

date stated in the amendment; provided, however, that no amendment will have any retroactive effect so as to deprive any Participant, or the Beneficiary of a deceased Participant, of any benefit to which he or she is entitled under the terms of the Plan in effect immediately prior to the effective date of the amendment, determined as if such Participant had terminated service as a director immediately prior to the effective date of the amendment. Without limiting the foregoing, the amendments to this Plan effective May 1, 2004: (i) will not affect the rights of Participants to receive a grant of Elective Options on the Annual Meeting Date in 2004 (or on any earlier termination of service) with respect to deferrals into their Option Cash Accounts, and (ii) will not affect the terms of Elective Options so granted or otherwise outstanding at the time of amendment (including the right to receive Reload Options upon exercise), subject, in each case, to the terms and conditions of the Plan as previously in effect (including definitions of the foregoing capitalized terms not otherwise defined in this amended Plan).

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(c) Without limiting Section 14.1(a), the Company reserves the right to amend the Plan to change the method of

determining the earnings credited to Participants’ Accounts pursuant to Sections 6.1 and 6.2 and to apply such new method not only with respect to the portion of the Accounts attributable to credits made after the date on which such amendment is adopted but also with respect to the portion of the Accounts attributable to credits made prior to the date on which such amendment is adopted and regardless of whether such new method would result in materially lower earnings credits than the old method.

(d) The provisions of the Plan in effect at the termination of a Participant’s service as a director will, except as

otherwise expressly provided by a subsequent amendment, continue to apply to such Participant.

14.2. Termination . The Company reserves the right to terminate the Plan at any time. The Plan will terminate as of the date specified by the Company in a written instrument by its authorized officers to the Administrator, adopted in the manner of an amendment. Upon the termination of the Plan, any benefits to which Participants have become entitled prior to the effective date of the termination will continue to be paid in accordance with the provisions of Section 8. No termination, suspension or amendment of the Plan may adversely affect any outstanding Periodic Option without the consent of the affected Participant; provided, however, that this sentence will not impair the right of the Administrator to take whatever action it deems appropriate under Sections 9 and 17.3 of the Plan. Periodic Options outstanding upon termination of the Plan may continue to be exercised in accordance with their terms.

15. Definitions .

The definitions set forth in this Section 15 apply unless the context otherwise indicates.

15.1. Account . “Account” means the bookkeeping account or accounts maintained with respect to a Participant pursuant to

Section 3. 15.2. Administrator . The “Administrator” of the Plan is the Compensation Committee of the Board or such other committee or

person to whom administrative duties are delegated pursuant to the provisions of Section 16.1, as the context requires. 15.3. Annual Meeting Date . “Annual Meeting Date” means the date on which the annual meeting of the Company’s stockholders

is held. 15.4. Beneficiary . “Beneficiary” with respect to a Participant is the person designated or otherwise determined under the

provisions of Section 8.3 as the distributee of benefits payable after the Participant’s death. A person designated or otherwise determined to be a Beneficiary under the terms of the Plan has no interest in or right under the Plan until the Participant in question has died. A person will cease to be a Beneficiary on the day on which all benefits to which he, she or it is entitled under the Plan have been distributed.

15.5. Board . “Board” means the board of directors of the Company.

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15.6. Broker Exercise Notice . “Broker Exercise Notice” means a written notice pursuant to which a Participant, upon exercise of

an Option, irrevocably instructs a broker or dealer to sell a sufficient number of shares or loan a sufficient amount of money to pay all or a portion of the exercise price of the Option and/or any related withholding tax obligations and remit such sums to the Company and directs the Company to deliver stock certificates to be issued upon such exercise directly to such broker or dealer or their nominee.

15.7. Cash Account . “Cash Account” means an Account to which deferred amounts are credited pursuant to Sections 4 and 5.2

and earnings thereon are credited pursuant to Section 6.1 in U.S. dollars. 15.8. Cause . “Cause” means dishonesty, fraud, misrepresentation, embezzlement or deliberate injury or attempted injury, in each

case related to the Company or any subsidiary or any material breach of any confidentiality or non-compete agreement entered into with the Company or any subsidiary.

15.9. Change in Control . “Change in Control” will be deemed to have occurred if the event set forth in any one of the following

paragraphs will have occurred:

(a) any “person” as such term is used in Sections 13(d) and 14(d) of the 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 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 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

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agreement, and provided further that the provisions of this subparagraph (a) will 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 (c) of this section (e.g., a reverse triangular merger); or

(b) during any 36 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 either were 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

(c) 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 subparagraph (a) 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

(d) 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.

15.10. Code . “Code” means the Internal Revenue Code of 1986, as amended. Any reference to a specific provision of the Code

includes a reference to that provision as it may be amended from time to time and to any successor provision. 15.11. Company . “Company” means Ecolab Inc. 15.12. Credit Date . “Credit Date” means the date on which compensation, deferral and earnings credits to a Cash or Share

Account are made pursuant to Sections 5 and 6, which is usually on the last day of a Credit Period.

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15.13. Credit Period . “Credit Period” means a period of one calendar quarter, beginning on each January 1, April 1, July 1, and

October 1 and ending on each March 31, June 30, September 30 and December 31; provided, however, that the first Credit Period following the May 1, 2004 amendments to this Plan shall commence as of such date and end on June 30, 2004.

15.14. Disability . “Disability” means the total disability of a Qualified Director. Such total disability will be deemed to have

occurred if the Administrator finds on the basis of medical evidence satisfactory to it that the Qualified Director is prevented from engaging in any suitable gainful employment or occupation and that such disability will be permanent and continuous during the remainder of his or her life.

15.15. Election Period . “Election Period” means a period of one calendar year, commencing on each January 1 and ending on

each December 31; provided, however, that the first Election Period following the May 1, 2004 amendments to this Plan shall commence as of such date and end on December 31, 2004.

15.16. Market Price . “Market Price” means the average of the high and low sale prices of a Share during the regular trading

session on a specified date or, if Shares were not then traded, during the regular trading session on the most recent prior date when Shares were traded, all as quoted in The Wall Street Journal reports of New York Stock Exchange - Composite Transactions.

15.17. Other Director Compensation . “Other Director Compensation” means all cash amounts payable by the Company to a

Qualified Director for his or her services to the Company as a Qualified Director, (a) including, without limitation, the Retainer and fees specifically paid for attending regular or special meetings of the Board and Board committees or for acting as the chair of a committee, but (b) excluding expense allowances or reimbursements and insurance premiums.

15.18. Participant . “Participant” is a current or former Qualified Director who has been granted a Periodic Option under the Plan

or whose Account amounts have been credited pursuant to Section 4, 5 or 6 and who has not ceased to be a Participant pursuant to Section 2.4. 15.19. Periodic Option . “Periodic Option” means an option to purchase Shares granted to Qualified Directors from time to time

pursuant to Section 7. 15.20. Plan . “Plan” means the Ecolab Inc. 2001 Non-Employee Director Stock Option and Deferred Compensation Plan, as from

time to time amended or restated. 15.21. Plan Rules . “Plan Rules” are rules, policies, practices or procedures adopted by the Administrator pursuant to Section 16.2. 15.22. Previously Acquired Shares . “Previously Acquired Shares” means Shares that are already owned by the Participant 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 Administrator.

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15.23. Prime Rate . “Prime Rate” means the Bloomberg Prime Rate Composite (“Prime Rate by Country US—BB Comp”). 15.24. Prior Deferred Compensation Plans . “Prior Deferred Compensation Plans” means the Company’s 1997 Non-Employee

Director Deferred Compensation Plan, as amended, and the Company’s Deferred Compensation Plan for Non-Employee Directors, as amended.

15.25. Qualified Director . “Qualified Director” means an individual who is a member of the Board and who is not an employee of

the Company or any of its subsidiaries. 15.26. Retainer . “Retainer” means the amount payable by the Company to a Qualified Director for holding office as a Qualified

Director, exclusive of fees specifically paid for attending regular or special meetings of the Board and Board committees, fees for acting as chair of the Board or a Board committee, expense allowances or reimbursements, insurance premiums, charitable gift matching contributions and any other payments that are determined by reference to factors other than holding office as a Qualified Director.

15.27. Securities Act . “Securities Act” means the Securities Act of 1933, as amended. Any reference to a specific provision of the

Securities Act includes a reference to that provision as it may be amended from time to time and to any successor provision. 15.28. Share Account . “Share Account” means an Account to which credits are made pursuant to Section 5.1, deferred amounts

are credited pursuant to Sections 4 and 5.2 and earnings are credited pursuant to Section 6.2 in Share Units. 15.29. Share Unit Compensation . “Share Unit Compensation” means the compensation paid to Qualified Directors in the form of

credits to their Share Accounts pursuant to Section 5.1. 15.30. Share Units . “Share Units” means a unit credited to a Participant’s Share Account pursuant to Sections 4, 5.1, 5.2 and 6.2,

each of which represents the economic equivalent of one Share. A Participant will not have any rights as a stockholder with respect to Share Units until the Participant is distributed Shares pursuant to Section 8 of the Plan.

15.31. Shares . “Shares” means shares of common stock of the Company, $1.00 par value, or such other class or kind of shares or

other securities as may be applicable pursuant to Section 17.3. 15.32. Trust . “Trust” means any trust or trusts established by the Company pursuant to Section 11.1 of the Plan. 15.33. Trustee . “Trustee” means the independent corporate trustee or trustees that at the relevant time has or have been appointed

to act as Trustee of the Trust. 15.34. Unforeseeable Emergency . “Unforeseeable Emergency” means an unanticipated emergency that is caused by an event

beyond the Participant’s control resulting in a severe financial hardship that cannot be satisfied through other means. The existence of an unforeseeable emergency will be determined by the Administrator.

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16. Administration .

16.1. Administrator . The general administration of the Plan and the duty to carry out its provisions will be vested in the Compensation Committee of the Board or such other Board committee as may be subsequently designated as Administrator by the Board. Such committee may delegate such duty or any portion thereof to a named person and may from time to time revoke such authority and delegate it to another person.

16.2. Plan Rules and Regulations . The Administrator has the discretionary power and authority to make such Plan Rules as the

Administrator determines to be consistent with the terms, and advisable in connection with the administration, of the Plan and to modify or rescind any such Plan Rules. In addition, the Administrator has the discretionary power and authority to limit or modify application of Plan provisions and Plan Rules as the Administrator determines to be advisable to facilitate tax deferral treatment (or accommodate the unavailability thereof) for Options granted to, or amounts credited with respect to, non-U.S. resident Participants.

16.3. Administrator’s Discretion . The Administrator has the sole discretionary power and authority to make all determinations

necessary for administration of the Plan, except those determinations that the Plan requires others to make, and to construe, interpret, apply and enforce the provisions of the Plan and Plan Rules whenever necessary to carry out its intent and purpose and to facilitate its administration, including, without limitation, the discretionary power and authority to remedy ambiguities, inconsistencies, omissions and erroneous benefit calculations. In the exercise of its discretionary power and authority, the Administrator will treat all similarly situated persons uniformly.

16.4. Specialist’s Assistance . The Administrator may retain such actuarial, accounting, legal, clerical and other services as may

reasonably be required in the administration of the Plan, and may pay reasonable compensation for such services. All costs of administering the Plan will be paid by the Company.

16.5. Indemnification . The Company agrees to indemnify and hold harmless, to the extent permitted by law, each director, officer

and employee of the Company and any subsidiary or affiliate of the Company against any and all liabilities, losses, costs and expenses (including legal fees) of every kind and nature that may be imposed on, incurred by, or asserted against such person at any time by reason of such person’s services in connection with the Plan, but only if such person did not act dishonestly or in bad faith or in willful violation of the law or regulations under which such liability, loss, cost or expense arises. The Company has the right, but not the obligation, to select counsel and control the defense and settlement of any action for which a person may be entitled to indemnification under this provision.

17. Shares Available for Issuance .

17.1. Maximum Number of Shares Available . Subject to adjustment as provided in Section 17.2, the maximum number of Shares that will be available for issuance or distribution under the Plan will be 500,000 Shares, plus any Shares which, as of the 2001 Annual Meeting Date, were reserved for issuance under the 1997 Non-Employee Director Deferred Compensation Plan, as amended, and the Company’s 1995 Non-Employee Director Stock

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Option Plan and which were not thereafter issued or are not hereafter issued, or which have been issued but are subsequently forfeited and which would otherwise have been available for further issuance under such plans. The Shares available for issuance or distribution under the Plan may, at the election of the Administrator, be either treasury shares or shares authorized but unissued, and, if treasury shares are used, all references in the Plan to the issuance or distribution of Shares will, for corporate law purposes, be deemed to mean the transfer of shares from treasury.

17.2. Accounting . Shares that are issued or distributed under the Plan or that are subject to outstanding Periodic Options granted

under the Plan or Share Units will be applied to reduce the maximum number of Shares remaining available for issuance or distribution under the Plan. Any Shares that are subject to a Periodic Option granted under the Plan that lapses, expires, is forfeited or for any reason is terminated unexercised and any Shares that are subject to Share Units in a Share Account that are forfeited pursuant to Section 8.2(c) will automatically again become available for issuance or distribution under the Plan. To the extent that the exercise price of any Periodic Option granted under the Plan and/or associated tax withholding obligations are paid by tender or attestation as to ownership of Previously Acquired Shares, or to the extent that such tax withholding obligations are satisfied by withholding of shares otherwise issuable upon exercise of the Periodic Option, only the number of Shares issued net of the number of Shares tendered, attested to or withheld will be applied to reduce the maximum number of Shares remaining available for issuance under the Plan.

17.3. Adjustment to Shares, Share Units and Options . 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 similar change in the Company’s corporate structure or the Shares, the Administrator (or, if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation) will make appropriate adjustment (which determination will be conclusive) as to the number and kind of securities or other property (including cash) available for issuance or distribution under the Plan and as to the number and kind of Share Units credited to Share Accounts and the number and kind of securities as to which Periodic Options are to be granted and, in order to prevent dilution or enlargement of the rights of Participants holding Periodic Options, the number, kind and exercise price of securities subject to outstanding Periodic Options.

18. Miscellaneous .

18.1. Other Benefits . Neither amounts deferred nor amounts paid pursuant to the Plan constitute salary or compensation for the purpose of computing benefits under any other benefit plan, practice, policy or procedure of the Company unless otherwise expressly provided thereunder.

18.2. No Warranties Regarding Treatment . The Company makes no warranties regarding the tax treatment to any person of any

deferrals or payments made pursuant to the Plan, and each Participant will hold the Administrator and the Company and their officers, directors, employees, agents and advisors harmless from any liability resulting from any tax position taken in good faith in connection with the Plan.

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18.3. No Rights to Continued Service Created . Neither the establishment of or participation in the Plan gives any individual the

right to continued service on the Board or limits the right of the Company or its stockholders to terminate or modify the terms and conditions of service of such individual on the Board or otherwise deal with any individual without regard to the effect that such action might have on him or her with respect to the Plan.

18.4. Successors . Except as otherwise expressly provided in the Plan, all obligations of the Company under the Plan are binding

on any successor to the Company whether the successor is the result of a direct or indirect purchase, merger, consolidation or otherwise of all of the business and/or assets of the Company.

18.5. Cross Reference . References in the Plan to a particular section refer to that section within the Plan, references within a

section of the Plan to a particular subsection refer to that subsection within the same section, and references within a section or subsection to a particular clause refer to that clause within the same section or subsection, as the case may be.

18.6. Number and Gender . Wherever appropriate, the singular may be read as the plural, the plural may be read as the singular,

and one gender may be read as the other gender. 18.7. Governing Law . Except in connection with matters of corporate governance and authority (which shall be governed by the

laws of the Company’s jurisdiction of incorporation), questions pertaining to the construction, validity, effect and enforcement of the Plan will be determined in accordance with the internal, substantive laws of the State of Minnesota without regard to the conflict of laws rules of the State of Minnesota or any other jurisdiction.

18.8. Headings . The headings of sections are included solely for convenience of reference; if there exists any conflict between

such headings and the text of the Plan, the text will control.

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EXHIBIT (10)I

INDEMNIFICATION AGREEMENT

AGREEMENT, effective as of , , between Ecolab Inc., a Delaware corporation (the “Company”), and (the “Director”), a director of the Company;

WHEREAS, in recognition of Director’s need for substantial protection against personal liability in order to enhance Director’s

service to the Company in an effective manner and Director’s reliance on the provisions of the By - Laws requiring indemnification of the Director under certain circumstances, and in part to provide Director with specific contractual assurance that the protection promised by such By - Laws will be available to Director (regardless of, among other things, any amendment to or revocation of such By - Laws or any change in the composition of the Company’s Board of Directors or acquisition transaction relating to the Company), the Company wishes to provide in this Agreement for the indemnification of and the advancing of expenses to Director to the full extent (whether partial or complete) permitted by law and as set forth in this Agreement, and, to the extent insurance is maintained, for the continued coverage of Director under the Company’s directors’ and officers’ liability insurance policies.

NOW THEREFORE, in consideration of the premises and of Director agreeing to serve or continuing to serve the Company directly

or, at its request, with another enterprise, and intending to be legally bound hereby, the parties hereto agree as follows: 1. Basic Indemnification Arrangement .

(a) In the event Director was, is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, a Claim by reason of (or arising in part out of) an Indemnifiable Event, the Company shall indemnify Director to the fullest extent permitted by law as soon as practicable but in any event no later than 30 days after written demand is presented to the Company, against any and all Expenses, judgments, fines, penalties and amounts paid in settlement of such Claim. If so requested by Director, the Company shall advance (within ten business days of such written request) any and all Expenses to Director (an “Expense Advance”). Notwithstanding anything in this Agreement to the contrary, and except as provided in Section 3, prior to a Change in Control Director shall not be entitled to indemnification pursuant to this Agreement in connection with any Claim initiated by Director against the Company or any director or officer of the Company unless the Company has joined in or consented to the initiation of such Claim.

(b) Notwithstanding the foregoing, (i) the obligations of the Company under Section 1(a) shall be subject to the

condition that the Reviewing Party shall not have determined (in a written opinion, in any case in which the special independent counsel referred to in Section 2 hereof is involved) that Director would not be permitted to be

indemnified under applicable law, and (ii) the obligation of the Company to make an Expense Advance pursuant to Section 1(a) shall be subject to the condition that, if, when and to the extent that the Reviewing Party determines that Director would not be permitted to be so indemnified under applicable law, the Company shall be entitled to be reimbursed by Director (who hereby agrees to reimburse the Company) for all such amounts theretofore paid; provided, however, that if Director has commenced legal proceedings in a court of competent jurisdiction to secure a determination that Director should be indemnified under applicable law, any determination made by the Reviewing Party that Director would not be permitted to be indemnified under applicable law shall not be binding and Director shall not be required to reimburse the Company for any Expense Advance until a final judicial determination is made with respect thereto (as to which all rights of appeal there from have been exhausted or lapsed). If there has not been a Change in Control, the Reviewing Party shall be selected by the Board of Directors, and if there has been such a Change in Control, the Reviewing Party shall be the special independent counsel referred to in Section 2 hereof. If there has been no determination by the Reviewing Party or if the Reviewing Party determines that Director substantively would not be permitted to be indemnified in whole or in part under applicable law, Director shall have the right to commence litigation in any court in the states of Minnesota or Delaware having subject matter jurisdiction thereof and in which venue is proper seeking an initial determination by the court or challenging any such determination by the Reviewing Party or any aspect thereof, and the Company hereby consents to service of process and to appear in any such proceeding. Any determination by the Reviewing Party otherwise shall be conclusive and binding on the Company and Director.

2. Change in Control .

The Company agrees that if there is a Change in Control of the Company, then with respect to all matters thereafter arising concerning the rights of Director to indemnity payments and Expense Advances under this Agreement or any other agreement or Company By - Law now or hereafter in effect relating to Claims for Indemnifiable Events, the Company shall seek legal advice only from special independent counsel selected by Director and approved by the Company (which approval shall not be unreasonably withheld), and who has not otherwise performed services for the Company within the last five years (other than in connection with such matters) or Director. Such counsel, among other things, shall render its written opinion to the Company and Director as to whether and to what extent the Director would be permitted to be indemnified under applicable law. The Company agrees to pay the reasonable fees of the special, independent counsel referred to above and to fully indemnify such counsel against any and all expenses (including attorneys’ fees), claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

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3. Indemnification for Additional Expenses .

The Company shall indemnify Director against any and all expenses (including attorneys’ fees) and, if requested by Director, shall (within ten business days of such written request) advance such expenses to Director, which are incurred by Director in connection with any claim asserted against or action brought by Director for (i) indemnification or advance payment of Expenses by the Company under this Agreement or any other agreement or Company By-Law now or hereafter in effect relating to Claims for Indemnifiable Events and/or (ii) recovery under any directors’ and officers’ liability insurance policies maintained by the Company, regardless of whether Director ultimately is determined to be entitled to such indemnification, advance expense payment or insurance recovery, as the case may be.

4. Partial Indemnity, Etc.

If Director is entitled under any provision of this Agreement to indemnification by the Company of some or a portion of the Expenses, judgments, fines, penalties and amounts paid in settlement of a Claim but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify Director for the portion thereof to which Director is entitled. Moreover, notwithstanding any other provision of this Agreement, to the extent that Director has been successful on the merits or otherwise in defense of any or all Claims relating in whole or in part to an Indemnifiable Event or in defense of any issue or matter therein, including dismissal without prejudice, Director shall be indemnified against all Expenses incurred in connection therewith. In connection with any determination by the Reviewing Party or otherwise as to whether Director is entitled to be indemnified hereunder the burden of proof shall be on the Company to establish that Director is not so entitled.

5. No Presumption .

For purposes of this Agreement, the termination of any action, suit or proceeding by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Director did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law.

6. Non - exclusivity, Etc.

The rights of the Director hereunder shall be in addition to any other rights Director may have under the Company’s By - Laws or the Delaware General Corporation Law or otherwise. To the extent that a change in the Delaware General Corporation Law (whether by statute or judicial decision), or the Company’s By - Laws, permits greater indemnification by agreement than would be afforded currently under the Company’s By - Laws and this

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Agreement, it is the intent of the parties hereto that Director shall enjoy by this Agreement the greater benefits so afforded by such change.

7. Liability Insurance .

To the extent the Company maintains an insurance policy or policies providing directors’ and officers’ liability insurance, Director shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any Company director.

8. Certain Definitions:

(a) Change in Control : For purposes of this Agreement, a “Change in Control” shall be deemed to have occurred if at any time any of the following events shall occur:

(i) any “person,” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as

amended (the “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 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 shall 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 shall 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 shall 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 (“Shareholder Agreement”), if, and so long as, such Shareholder Agreement (or any amendment thereto approved by the Board provided that no such amendment shall 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 discretion) with the terms of such Shareholder Agreement (including such amendment); provided, however, that if any such person shall 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

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outstanding securities, a Change in Control shall be deemed to occur whether or not such beneficial ownership was held in compliance with a binding Shareholder Agreement;

(ii) during any period of two consecutive years (not including any period prior to the execution of this Agreement),

individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction which would constitute a Change in Control pursuant to clause (i), (iii) or (iv) of this Section 8(a)) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two - thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof;

(iii) the stockholders of the Company approve a merger or consolidation of the Company with any other

corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 80% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person acquires a percentage of the combined voting power of the Company’s then outstanding securities which would constitute a Change in Control pursuant to Section 8(a)(i).

(iv) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for

the sale or disposition by the Company of all or substantially all of the Company’s assets.

(b) Claim : any threatened, pending or completed action, suit or proceeding, or any inquiry or investigation whether conducted by the Company or any other party, whether civil, criminal, administrative, or investigative.

(c) Expenses : include attorneys’ fees and all other costs, expenses and obligations paid or incurred in connection with

investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness in or participate in any Claim relating to any Indemnifiable Event.

(d) Indemnifiable Event : any event or occurrence related to the fact that Director is or was a director, officer,

employee, agent or fiduciary of the Company, or is or was serving at the request of the Company as a director, officer, employee, trustee, agent or

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fiduciary of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, or by reason of anything done or not done by Director in any such capacity.

(e) Reviewing Party : any appropriate person or body consisting of a member or members of the Company’s Board of

Directors or any other person or body appointed by the Board (including the special independent counsel referred to in Section 2) who is not a party to the particular Claim for which Director is seeking indemnification.

(f) Voting Securities : any securities of the Company which vote generally in the election of directors.

9. Amendments and Waiver .

No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

10. Subrogation .

In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Director, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.

11. No Duplication of Payments .

The Company shall not be liable under this Agreement to make any payment in connection with any claim made against Director to the extent Director has otherwise actually received payment (under any insurance policy, By - Law or otherwise) of the amounts otherwise indemnifiable hereunder.

12. Binding Effect, Etc.

This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company, spouses, heirs, and personal and legal representatives. This Agreement shall continue in effect regardless of whether Director continues to serve as a director (or in one of the capacities enumerated in Section 8(d) hereof) of the Company or of any other enterprise at the Company’s request.

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13. Severability .

The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law.

14. Governing Law .

This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in such state without giving effect to the principles of conflicts of laws.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above

written.

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EXHIBIT (10)M

ECOLAB SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (As Amended and Restated Effective as of January 1, 2003)

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.

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 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, 2003. 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.

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 Plans

(the “Administrative Document”), which is incorporated herein by reference.

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 Factors ” shall mean the actuarial assumptions set forth in Exhibit A which is attached to and forms a part of this Plan.

Section 2.2 “ Death Beneficiary .”

(1) The term “Death Beneficiary” shall mean the person or persons designated by the Executive to receive SERP Benefits hereunder in the event of his death. The designation of a Death Beneficiary under the Plan may be made, revoked or changed only by an instrument (in form prescribed by the 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 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

ECOLAB INC. Director

By:

consented in writing to such designation. (2) Any SERP 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 2.3 “ Cash Balance Participant ” shall mean an Executive for whom a Retirement Account is maintained under the

Pension Plan. Section 2.4 “ Disability ” or “ Disabled .” An Executive shall be deemed to have a “Disability” or be “Disabled” if the

Executive’s active employment with an Employer ceased due to a disability that entitles the Executive to benefits under any long-term disability plan sponsored by the Company. An Executive’s Disability shall continue until the earliest to occur of (1) the date on which the Executive’s employment with the Controlled Group as an Executive terminates, (2) the date the Executive recovers from the Disability, or (3) the date of termination of payments under the Company’s long-term disability plan for any reason.

Section 2.5 “ 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 2.6 “ 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 Executive’s Retirement or death (including the year of the Executive’s Retirement or death) which yields the highest average compensation. Notwithstanding the foregoing, for purposes of calculating the Final Average Compensation of a Disabled Executive, the rules applicable for determining the Final Average 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 his Retirement 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 2.7 “ Minimum Benefit ” shall mean one-twelfth (1/12) of the sum of the Executive’s:

(1) benefit as of June 30, 1994, if any, as a result of the crediting of Years of Past Service Credit; and (2) annual SERP Benefit (a) based on Final Average Compensation, Years of Eligibility Service, and Years of Benefit

Service as of June 30, 1994 (i.e., frozen target benefit), reduced by (b) the reductions under the SERP for the Executive’s (i) Pension Benefit, fifty percent (50%) of Primary Insurance Amount, and Savings Plan Benefit, as those terms were defined in the SERP on June 30, 1994, but based on actual benefit levels at the Executive’s retirement, and (ii) Mirror Pension Benefit, as that term was defined in SERP on July 1, 1994, but based on the actual benefit level at the Executive’s retirement to the extent it is actually payable from the Mirror Pension Plan (i.e., current benefit level offsets).

Section 2.8 “ Mirror Pension Benefit ” shall mean one-twelfth (1/12) 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 2.9 “ Pension Benefit ” shall mean one-twelfth (1/12) 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.

Section 2.10 “ Plan ” shall mean this Ecolab Supplemental Executive Retirement Plan, as it may be amended from time to time.

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Section 2.11 “ Primary Insurance Amount ” shall mean the monthly primary social security benefit the Executive will be entitled

to at age 65, determined in accordance with Exhibit B which is attached to and forms a part of this Plan. Section 2.12 “ Retirement ” or “ Retired .” The Retirement of an Executive shall occur upon his termination of employment with

the Controlled Group 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” at such time as he ceases to meet the definition of Disability, provided he does not resume active employment with the Controlled Group.

Section 2.13 “ 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 2.14 “ SERP Benefit ” shall mean the retirement benefit determined under Article III. Section 2.15 “ SERP Pre-Retirement Benefit ” shall mean the pre-retirement benefit determined under Article IV. Section 2.16 “ 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 his Disability 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.

Section 2.17 “ 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 period of his Disability for

purposes of determining the amount of his SERP Benefit hereunder.

Section 2.18 “ 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.

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ARTICLE III

SERP BENEFITS

Section 3.1 Coverage .

(1) Commencement of Coverage . An Employee shall become covered under the Plan as of the first date on or after the Effective Date on which he is an Executive.

(2) Termination of Coverage . An Executive shall cease to be covered under the Plan on the earliest to occur of (a) the

date the Executive ceases to be employed by the Controlled Group for any reason other than death, Disability or Retirement, or (b) with respect to a Disabled Executive, the date the Executive is no longer Disabled, provided he does not resume active employment as an Executive or incur a Retirement.

Section 3.2 Amount of SERP Benefits.

(1) Each Executive shall, upon Retirement, be entitled to a SERP Benefit which shall be determined as hereinafter provided. The SERP Benefit shall be a monthly retirement benefit payable in the form of a 15 year certain benefit commencing upon the Executive’s attainment of age 65 equal to the sum of (a) and (b), where:

(a) = one-twelfth (1/12th) 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 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 (1/12th) of the Executive’s Final Average Compensation, and (ii) one-twelfth (1/12

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

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.

(2) In no event shall an Executive’s monthly SERP Benefit be less than the amount of his Minimum Benefit.

Section 3.3 Time of Payment .

(1) 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 made as a result of the delay in payment.

(2) Early Commencement . Notwithstanding the provisions of Subsection (1) 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

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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 (1/280th) for each month that the date of the commencement of the SERP Benefits precedes the date on which the Executive will attain age 62.

Section 3.4 Form of Payment

(1) 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.

(2) Lump Sum Payment . (a) Notwithstanding the provisions of Subsection (1) of this Section, an Executive may elect to receive the SERP

Benefit in the form of a single lump sum payment.

(b) The lump sum payment described in paragraph (a) 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 (3) of this Section.

(c) 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.

(3) 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 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%).

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.

Section 4.2 Amount, Form and Timing of SERP Pre-Retirement Benefits . A Death Beneficiary who is eligible for a SERP Pre-

Retirement Benefit shall receive a SERP Pre-Retirement Benefit based on the Executive’s SERP Benefit hereunder. The SERP Pre-Retirement Benefit shall be calculated in accordance with, and payable at the same time and (except as provided in Section 3.4(2)) in the same manner as, the pre-

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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, and who is eligible for a SERP Pre-Retirement Benefit, shall receive such Benefit in the form of a lump sum payment.

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, or (b) his attainment of age 55 while in the employ of the Controlled Group 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 clause (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. Notwithstanding the foregoing, the provisions of Subjection (2)(a) shall not apply to the Executive’s Minimum Benefit.

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

Retirement Benefits under clause (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 clause (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 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.

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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 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 accounts 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. In the event that any payment or benefit intended to be provided under this Plan or otherwise is required to be reduced pursuant to this Section, the Executive (in his or her sole discretion) shall be entitled to designate the payments and/or benefits to be so reduced in order to give effect to this Section. The Company shall provide the Executive with all information reasonably requested by the Executive to permit the Executive to make such designation. In the event that the Executive fails to make such designation within ten (10) business days of receiving such information, the Company may effect such reduction in any manner it deems appropriate.

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 Subsection (a) above, the Trust Fund which becomes effective on the

Change in Control shall be subject to the following additional requirements: 7

(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 Stated 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 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 actually be 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.

(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 clause (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

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 6.4(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 years following the date the Executives were given written notice of the adoption of such amendment.

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IN WITNESS WHEREOF, Ecolab Inc. has executed this Supplemental Executive Retirement Plan and has caused its corporate seal to be affixed this 11 th day of November, 2003.

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ECOLAB INC.

By: /s/Steven L. Fritze

Steven L. Fritze

Senior Vice President and

Chief Financial Officer (Seal)

Attest:

/s/Lawrence T. Bell

Lawrence T. Bell

Senior Vice President, General Counsel and Secretary

EXHIBIT A

ACTUARIAL ASSUMPTIONS FOR SERP BENEFITS AND

SERP PRE-RETIREMENT BENEFITS

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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. Lump Sum Early Commencement:

If payment is in the form of a single lump sum, the lump sum interest 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(2).

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 his 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 clause (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 clause (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 clause (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 clause (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.

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EXHIBIT C

SAVINGS PLAN BENEFIT

The Savings Plan Benefit shall be one-twelfth (1/12th) 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).

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EXHIBIT (10)P

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

(As Amended and Restated Effective as of January 1, 2003)

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

2

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 (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 included with the Company in a

controlled group of corporations as determined under Section 414 of the Code. 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 “ Pension Plan ” shall mean the Ecolab Pension Plan, as such plan may be amended from time to time. Section 1.11 “ Plans ” shall mean those non-qualified benefit plans listed on Exhibit A hereto, as they may be amended from

time to time. Section 1.12 “ Plan Year ” shall mean a calendar year.

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. 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.

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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 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 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.

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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 Finance Inc. under all of the Plans, with

respect to Executives or Death Beneficiaries.

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.

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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 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

6

(“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.

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, 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.

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(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).

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.

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.

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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 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 6.9 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 6.10 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 6.11 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.

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IN WITNESS WHEREOF, Ecolab Inc. has executed this Administrative Document and has caused its corporate seal to be

affixed this 11 th day of November, 2003.

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ECOLAB INC.

By: /s/ Steven L. Fritze

Steven L. Fritze

Senior Vice President and Chief Financial Officer

(Seal)

Attest:

/s/ Lawrence T. Bell

Lawrence T. Bell

Senior Vice President, General Counsel and Secretary

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

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Exhibit 13 financial discussion OVERVIEW FOR 2003 This Financial Discussion should be read in conjunction with the information on Forward-Looking Statements and Risk Factors found at the end of the Financial Discussion.

Despite being faced with continuing challenges from the global economic environment, we delivered a very strong financial performance in 2003. Our ability to leverage our wide range of offerings resulted in double-digit earnings per share growth, strong operating cash flow, a healthy return on investment and an improved balance sheet for 2003. We continue to successfully implement our Circle the Customer – Circle the Globe growth strategy to generate strong financial results.

Several important items impacted our financial results in 2003.

Operating Performance • We continued to find new markets in which to grow our business. Strong sales growth in Kay resulted from servicing the developing fast-casual restaurant market segment and food retail business. Professional Products introduced the first solid-based product offering for surgical instrument cleaning in the acute care market segment. Our International locations continue to expand the successful Pest Elimination business to new geographies. • We made appropriate decisions to improve the profitability of certain business units. We have exited low-margin accounts within Professional Products, Textile Care and areas in Europe. This has negatively impacted sales growth in 2003. • We continued to invest in future growth during 2003. This included investing in our sales-and-service force and in acquiring such businesses as Adams Healthcare. We also made investments to improve the service efficiency of GCS Service. While GCS Service had lower sales and an operating loss in 2003, we have better positioned the business for the long term. • Our sales associates grew our business by gaining new independent and chain accounts, as well as growing business at existing customers. • We faced competition in our markets and we countered with our innovative product offerings and our superior customer service. Financial Performance • Operating cash flow in 2003 continued to be very strong and allowed us to make acquisitions, pay down $108 million of debt, reacquire over $227 million of our common stock and make $75 million in additional voluntary contributions to our U.S. pension plan. • Currency translation had a positive impact on our financial results in 2003, adding approximately $12 million to net income. • An improvement in our annual effective income tax rate from 39.8 percent in 2002 to 38.1 percent in 2003 added approximately $7 million to net income. The acquisition of our former European joint venture business at the end of fiscal year 2001 has allowed us to have a more tax efficient structure.

The combination of all of these factors helped us exceed all three of our long-term financial objectives in 2003. These objectives are (i) 15

percent growth in diluted income per common share, (ii) 20 percent return on beginning shareholders’ equity and (iii) an investment grade or “A” rated balance sheet. Specifically, here is what we accomplished: • Diluted net income per share was $1.06 for 2003, up 33 percent from $0.80 in 2002. Included in 2003 net income is a gain of $11.1

million, or $6.7 million net of tax, from the sale of an equity investment. For 2002, net income includes (i) a transitional impairment charge of $4.0 million after tax ($0.02 per diluted share) from the adoption of Statement of Financial Accounting Standards (SFAS) No. 142, (ii) a one-time gain of $3.5 million after tax from benefit plan changes, (iii) special charges of $32.4 million after-tax related to restructuring activities and the integration of our European operations and (iv) a gain of $1.9 million after tax ($0.01 per diluted share) from discontinued operations. These items are of a non-recurring nature and are not necessarily indicative of future operating results. • Return on beginning shareholders’ equity was 25 percent for 2003 compared with 24 percent in 2002. The items discussed above affected the return for 2002. Adjusting for these items, return on beginning shareholders’ equity was 27 percent. This was the twelfth consecutive year we exceeded our long-term financial objective of a 20 percent return on beginning shareholders’ equity.

• We maintained our debt rating within the “A” categories of the major rating agencies during 2003. • As a result of our continued strong financial performance and related stock price increases, on June 6, 2003, we paid a two-for-one stock split in the form of a 100 percent stock dividend to shareholders of record on May 23, 2003. All per share, shares outstanding and market price data have been adjusted to reflect the stock split. 2004 Expectations • We expect to acquire additional businesses which fit with our Circle the Customer – Circle the Globe growth strategy. • We remain concerned about the possible adverse impact of global terrorism, unforeseen hostilities and public health epidemics on the sensitive travel and tourism industries. • We expect currency translation to have a favorable impact on 2004 but to a lesser extent than we experienced in 2003.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES In May 2002, the Securities & Exchange Commission (SEC) issued a proposed rule: Disclosure in Management’s Discussion and Analysis about the Application of Critical Accounting Policies . Although the SEC has not issued a final rule yet, the following discussion has been prepared on the basis of the guidelines in the SEC rule proposal. If adopted as proposed, the rule would require disclosures connected with “estimates a company makes in applying its accounting policies.” However, such discussion would be limited to “critical accounting estimates,” or those that management believes meet two criteria in the proposal: “First, the accounting estimate must require a company to make assumptions about matters that are highly uncertain at the time the accounting estimate is made. Second, 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, must 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, the company makes many other accounting estimates in preparing its 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” under the SEC rule proposal. Revenue Recognition We recognize revenue as services are performed or on product sales at the time title transfers to the customer. We record estimated reductions to revenue for customer programs and incentive offerings including pricing arrangements, promotions and other volume-based incentives at the time of sale. If market conditions were to decline, we may increase customer incentive offerings, which could reduce sales and 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, applying historical trend rates to the most recent 12 months’ sales, less actual write-offs to date. In addition, our estimates also include separately providing for 100 percent of specific customer balances when it is deemed probable that the balance is uncollectible. Actual results could differ from these estimates under different assumptions.

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 amounts 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. 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 consolidated results of operations, financial position or cash flows.

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 discount rate, projected salary and health care cost increases, expected

return or earnings on assets, retirement rates and mortality rates. The discount rate assumption is based on the investment yields available at year-end on corporate long-term bonds rated AA. 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 managers over a long-term perspective. Retirement and mortality rates are based primarily on actual plan experience. The effects of actual results differing from our assumptions are accumulated and amortized over future periods and, therefore, generally affect our recognized expense in future periods. For 2003, our discount rates and projected salary increases used to determine our pension and postretirement obligations were lower than in 2002, while our expected return on plan assets remained unchanged.

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. 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. 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. We establish liabilities or reserves when we believe that certain positions are likely to be challenged by authorities and we may not succeed, despite our belief that our tax return positions are fully supportable. We adjust these reserves in light of changing facts and circumstances, such as the progress of a tax audit. Our annual effective income tax rate includes the impact of reserve provisions and changes to reserves that we consider appropriate. This annual rate is then applied to our quarterly operating results. In the event that there is a significant one-time item recognized in our 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

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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. We have not recognized any deferred tax liabilities on undistributed international earnings because if those earnings were remitted to the United States, we believe any applicable income taxes would be substantially offset by available foreign tax credits.

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. In the United States, the Internal Revenue Service is currently examining our tax returns for 1999 through 2001. While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, we believe that our reserves reflect the probable outcome of known tax contingencies. Unfavorable settlement of any particular issue would require the use of cash. Favorable resolution could result in reduced income tax expense reported in the financial statements in the future. Our tax reserves are generally presented in the balance sheet within other non-current liabilities. 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 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 of our long-lived assets.

Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets , requires that goodwill and certain

intangible assets be 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. Estimates of fair value are primarily determined using discounted cash flows, market comparisons and recent transactions. These valuation methodologies use significant 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. Of the total goodwill included in our consolidated balance sheet, 15 percent is recorded in our U.S. Cleaning & Sanitizing reportable segment, 6 percent in our U.S. Other Services segment and 79 percent in our International Cleaning & Sanitizing segment.

In 2002, SFAS No. 142 became effective and as a result, we ceased to amortize goodwill in 2002. We were required to perform an initial impairment review of our goodwill at the beginning of 2002 under the guidelines of SFAS No. 142. The result of testing goodwill for impairment was a non-cash charge of $4.0 million after-tax ($0.02 per share). All of the impairment charge related to our Africa/Export operations due to the difficult economic environment in that region. We have continued to review our goodwill for impairment on an annual basis for all reporting units, including businesses reporting losses such as GCS Service, under the guidelines of SFAS No. 142. 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, generally 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 (loss) in shareholders’ equity. Income statement accounts are translated at the 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. OPERATING RESULTS Consolidated (thousands, except per share)

2003

2002

2001

Net sales

$ 3,761,819 $ 3,403,585

$ 2,320,710

Operating income

$ 482,658 $ 395,866

$ 318,179

Income

Continuing operations before change in accounting

$ 277,348 $ 211,890

$ 188,170

Change in accounting

(4,002 )

Discontinued operations 1,882

Net income

$ 277,348 $ 209,770

$ 188,170

Diluted income per common share

Continuing operations before change in accounting

$ 1.06 $ 0.81

$ 0.72

Change in accounting

(0.02 )

Our consolidated net sales reached $3.8 billion for 2003, an increase of 11 percent over net sales of $3.4 billion in 2002. Excluding acquisitions and divestitures, consolidated net sales increased 10 percent. Changes in currency translation positively impacted the consolidated sales growth rate by 6 percentage points, primarily due to the strength of the euro against the U.S. dollar. Sales also benefited from aggressive new account sales, new products and selling more to existing customers.

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Discontinued operations 0.01

Net income

$ 1.06 $ 0.80

$ 0.72

Our consolidated gross profit margin in 2003 increased over 2002. In 2002, cost of sales included $9.0 million of restructuring costs. If

these costs were excluded, the gross profit margin for 2002 would have been 50.7 percent. The increase in the margin for 2003 also benefited from business mix and cost reduction actions, partially offset by poor results in GCS Service during 2003.

Selling, general and administrative expenses for 2003 increased as a percentage of sales over 2002. The increase in the 2003 expense ratio

is primarily due to an increase in sales-and-service investments, rising insurance costs, increased headcount and health care costs and startup expenses related to legal entity restructuring, partially offset by cost savings initiatives.

In the first quarter of 2002, we approved plans to undertake restructuring cost-saving actions. Restructuring savings were approximately

$31 million and $16 million in 2003 and 2002, respectively. Most of these savings were reinvested in the business.

Operating income for 2003 increased 22 percent over 2002. Excluding special charges in 2002 of $46 million, operating income in 2003

increased 9 percent over 2002. Adjusting for special charges, operating income in 2002 would have been 13.0 percent of net sales. The decline in 2003 operating income margins from this level reflects increased headcount and benefit costs and investments in the sales force partially offset by favorable sales volume increases and cost reduction initiatives.

Our net income was $277 million in 2003 as compared to $210 million in 2002, an increase of 32 percent. Net income in 2003 included a

gain on the sale of an equity investment of $6.7 million after tax and a reduction in previously recorded restructuring expenses of $0.8 million after tax, offset by a write-off of $1.7 million of goodwill related to an international business sold in 2003. Net income in 2002 included a gain from discontinued operations of $1.9 million after tax, offset by special charges of $28.9 million after tax and a SFAS No. 142 transitional impairment charge of $4.0 million after tax. These items are of a non-recurring nature and are not necessarily indicative of future operating results. If these items are excluded from both 2003 and 2002, net income increased 13 percent for 2003. This improvement in net income reflected good fixed-rate operating income growth in our International segment, particularly in Europe. Currency translation also positively impacted net income by approximately $12 million due primarily to the strength of the euro against the U.S. dollar. The comparison of net income also benefited from a lower effective income tax rate in 2003 which was the result of cost savings initiatives, a lower overall international rate and improved international mix. Excluding the items of a non-recurring nature previously mentioned, net income for 2003 was 7.2 percent of net sales, up slightly from 7.1 percent in 2002. 2002 compared with 2001 Our consolidated net sales reached $3.4 billion for 2002, an increase of 47 percent over net sales of $2.3 billion in 2001. Business acquisitions, primarily the acquisition of the European joint venture, contributed to the overall sales growth for 2002. Excluding acquisitions, primarily the European joint venture, consolidated net sales increased 4 percent in 2002. Sales growth was experienced in most of our divisions. Changes in currency translation negatively impacted the consolidated sales growth rate by approximately 1 percentage point for 2002. Sales results reflected aggressive selling efforts, the benefits of investments in sales force training and productivity tools and new products, which were partially offset by the poor economic environment.

Our consolidated gross profit margin in 2002 decreased from 2001. Cost of sales included restructuring costs of $9.0 million for the year

ended December 31, 2002. Excluding these restructuring charges, the gross profit margin would have been 50.7 percent for 2002. The gross profit margin was also negatively affected by the acquisition and consolidation of the European joint venture. The gross profit margin for 2001 on a pro forma basis (reflecting the European joint venture on a consolidated basis) was 50.2 percent. Our gross profit margin benefited from product mix improvements and cost reduction actions.

Selling, general and administrative expenses as a percent of sales for 2002 decreased when compared to 2001. The selling, general and

administrative expense ratio on a pro forma basis (reflecting the consolidation of our European joint venture and the elimination of goodwill amortization) for 2001 was 37.5 percent. The increase in 2002 over the prior year pro forma expense ratio is partially due to stronger sales, which resulted in higher commissions and incentive-based compensation. This increase was partially offset by tight cost controls and savings related to restructuring activities in 2002.

During the first quarter of 2002, management approved various restructuring and other cost-saving actions, including costs to integrate our

European operations, to streamline and improve our global operations. These actions resulted in pre-tax charges of approximately $51.8 million ($32.4 million after tax) in 2002. These charges were partially offset by a curtailment gain of $5.8 million ($3.5 million after tax) attributable to certain benefit plan changes. The restructuring included (i) a reduction of our global workforce during 2002, (ii) the closing of several facilities, (iii) the discontinuance of selected product lines and (iv) other actions. The expected cost savings related to restructuring activities began in 2002. Restructuring savings were approximately $16 million ($10 million after tax) in 2002. We have reinvested most of these savings in our business. Further details related to these restructuring expenses are included in Note 3 of the notes to consolidated financial statements.

2003

2002

2001

Gross profit as a percent of net sales

50.9 % 50.4 % 51.7 % Selling, general & administrative expenses as a percent of net sales

38.1 % 37.7 % 38.0 %

(thousands)

2003

2002

2001

Operating income

$ 482,658 $ 395,866

$ 318,179

Operating income as a percent of net sales

12.8 % 11.6 % 13.7 %

Operating income for 2002 increased by 24 percent over 2001. Excluding special charges of $46 million, operating income for 2002 was 13.0 percent of net sales. This compared to 2001 pro forma operating income (reflecting the consolidation of our European joint venture and elimination of goodwill amortization) of $404 million, or 12.7 percent of net sales. This comparison of operating income margins reflects tight cost controls, savings from cost reduction initiatives and the sale of new products.

In addition to continuing operations, a legal issue related to the disposal of a business in 1992 was resolved during 2002, resulting in

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the recognition of a gain from discontinued operations of approximately $1.9 million (net of income tax benefit of $1.1 million) or $0.01 per diluted share.

Our net income for 2002 was $210 million. Net income included restructuring charges of $32.4 million after tax, a curtailment gain of $3.5

million after tax, a gain from discontinued operations of $1.9 million after tax and a SFAS No. 142 transitional impairment charge of $4.0 million after tax. Excluding these items, our net income for 2002 increased 28 percent over net income of $188 million in 2001. This improvement reflected good operating income growth in most of our divisions, the additional operating income generated by the acquisition of the European joint venture and the elimination of goodwill amortization. This was partially offset by higher net interest expense due to increased borrowings primarily to finance our acquisition of the European joint venture. Currency translation benefited diluted net income by $0.01 per share for 2002. As a percentage of net sales, net income for 2002 was 6.2 percent. Excluding the items of a nonrecurring nature previously mentioned, net income for 2002 was 7.1 percent of net sales, down from 8.1 percent in 2001 due to the addition of the European joint venture. OPERATING SEGMENT PERFORMANCE Our operating segments have similar products and services and we are organized to manage our operations geographically. Our operating segments have been aggregated into three reportable segments: United States Cleaning & Sanitizing, United States Other Services, and International Cleaning & Sanitizing. 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 2003. 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 of the notes to consolidated financial statements. Additional information about our reportable segments is included in Note 16 of the notes to consolidated financial statements. Sales by Operating Segment

The following chart presents the comparative percentage change in net sales for each of our operating segments for 2003 and 2002

(excluding Europe in 2002). European operations have been excluded in the percent change for 2002 since they were consolidated for the first time in 2002, making the percentage comparison not meaningful. Sales Growth Information

(thousands)

2003

2002

2001

Net sales

United States

Cleaning & Sanitizing

$ 1,694,323 $ 1,615,171

$ 1,548,882

Other Services

320,444 308,329

273,020

Total United States

2,014,767 1,923,500

1,821,902

International Cleaning & Sanitizing

1,560,557 1,497,935

474,089

Total

3,575,324 3,421,435

2,295,991

Effect of foreign currency translation

186,495 (17,850 ) 24,719

Consolidated

$ 3,761,819 $ 3,403,585

$ 2,320,710

Percent Change from Prior Year

2003

2002

Net sales

United States Cleaning & Sanitizing

Institutional

5 % 6 % Kay

12 9

Textile Care

(10 ) 3

Professional Products

9 (4 )

Water Care Services

4 (3 )

Vehicle Care

4 3

Food & Beverage

3 1

Total United States Cleaning & Sanitizing

5 % 4 % United States Other Services

Pest Elimination

11 % 7 % GCS Service

(7 ) 19

Total United States Other Services

4 % 13 % Total United States

5 % 6 % International Cleaning & Sanitizing

Europe

4 % —% Asia Pacific

3 2

Latin America

7 9

Sales of our United States Cleaning & Sanitizing operations were $1.7 billion in 2003 and increased 5 percent over net sales of $1.6 billion in 2002. Business acquisitions had no effect on the growth in sales for 2003. Sales benefited from good growth in our Kay and Professional Products operations, which were partially offset by lower sales in Textile Care. The increase in our Institutional division reflected its continued efforts to generate new accounts, the successful introduction of new products and improved customer service. Trends in the foodservice, hospitality and healthcare industries were challenging in early 2003 but showed signs of improvement late in the year. Kay's sales increase reflects solid growth in its food retail services business and to quickservice restaurants as well as through the introduction of new products and programs. Textile Care sales decreased, particularly to distributors, due

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Canada

4 8

Other

21 25

Total International Cleaning & Sanitizing (excluding Europe in 2002)

4 % 7 % Consolidated (excluding Europe in 2002)

11 % 5 %

to soft industry demand and strong competition within the industry. Textile Care is focusing on improving its service and reestablishing its relationships with distributors in an effort to increase sales growth. Textile Care is also continuing to take a selective approach to new customers to ensure they meet our profit guidelines. Sales of Professional Products increased due to strong gains in the healthcare market offsetting the continuing phase-out of the specialty business. Our introduction of the first solid-based product offering to the acute care market in the second quarter of 2003 helped drive the sales growth in the healthcare market. Professional Products’ janitorial sales were also positively impacted in 2003 by a long-term supply agreement that began in December 2002. Effective January 2004, our Professional Products division was reorganized to better serve janitorial and healthcare customers by splitting the Professional Products division into two divisions, Professional Products and Healthcare. Our Food & Beverage sales were driven by improved retention and corporate account growth in the dairy, soft drink, meat and poultry and food markets. This increase was partially offset by a decrease in agricultural sales due to overall market weakness. Water Care Services had good growth in sales to the food and beverage, hospitality, healthcare and commercial accounts due to solid gains in new customer accounts. Vehicle Care sales were again driven by new business with major oil companies and successful new product introductions.

Sales of our United States Other Services operations increased 4 percent to $320 million in 2003, from $308 million in 2002. Business acquisitions had no effect on the growth in sales for 2003. Pest Elimination’s sales in 2003 reflected strong growth in both contract sales, due to the addition of new large accounts, and non-contract services, due to the aggressive efforts of the sales force. GCS Service sales decreased in 2003 due to service interruptions caused by the restructuring of field operations and the transition to a new centralized administration center, which began operation in 2003. In an effort to increase sales going forward, GCS Service implemented productivity improvement measures in the fourth quarter of 2003.

Management rate sales for our International Cleaning & Sanitizing segment were $1.6 billion for 2003, an increase of 4 percent over sales in 2002. Excluding the effects of acquisitions and divestitures, sales increased 3 percent. Sales in Europe, excluding the effects of acquisitions and divestitures, increased 2 percent. Successful new housekeeping and Ecotemp programs were partially offset by a weak European economy

and strong competition. We are focusing on expanding our Pest Elimination business in Europe through acquisitions such as the Terminix operations in the United Kingdom, which was purchased in December 2002, and Nigiko with operations in France, acquired in January 2004. We expect to leverage the success of this business in the United States to become a global provider of pest elimination services. The increase in Asia Pacific was driven by Japan, New Zealand and Northeast Asia. In Japan, sales to chain restaurants and resort hotel customers improved and New Zealand is showing strong growth in its pest elimination services business. In Northeast Asia, Korea's growth was propelled by strong Institutional sales while China experienced excellent growth in its Food & Beverage sales. Good growth in these areas was partially offset by a sales decline in Australia due to soft Food & Beverage and Water Care business. Sales in Latin America, excluding acquisitions, grew 6 percent in 2003 and most Latin America countries experienced good growth except Venezuela, where a country-wide strike at the beginning of 2003 resulted in virtually no sales for the first two fiscal months of 2003. Mexico, the Caribbean and Central America all had double-digit sales growth in 2003. Growth in Latin America is being fueled by good growth in food retail programs, a demand for improved sanitation and expansion of pest elimination services. Sales in Canada increased due to continued focus on obtaining new customers and selling additional solutions to existing customers, partially offset by the impact of the Severe Acute Respiratory Syndrome (SARS) outbreak in Canada.

25

Operating Income by Operating Segment

Operating income of our United States Cleaning & Sanitizing operations increased 5 percent in 2003. Operating income as a percent of sales remained the same in 2003 as 2002 due to the investments in developing the sales force and higher operating costs being offset by cost savings initiatives. We added 100 sales-and-service associates to our United States Cleaning & Sanitizing operations during 2003.

Operating income of United States Other Services operations decreased 36 percent. As a percentage of net sales, operating income

decreased significantly as well. Pest Elimination had strong operating income growth, while GCS Service results reflected an operating loss. Strong growth in both contract and non-contract services, coupled with tight expense control, has helped fuel Pest Elimination’s growth. GCS Service results reflected an operating loss due to a decrease in sales resulting from operational issues encountered with a transition to a centralized administration center and the related costs invested in this initiative. This lost revenue adversely impacted operating income due to the relatively fixed nature of GCS Service’s expenses. During 2003, we added 95 sales-and-service associates to our United States Other Services operations.

Operating income of our International Cleaning & Sanitizing operations rose 16 percent in 2003 at management rates. Excluding the

effects of acquisitions and divestitures, operating income increased 13 percent. Our international operating income margin also increased in 2003 over 2002. Operating income as a percent of net sales excluding acquisitions and divestitures was 10.7 in 2003 versus 9.7 in 2002. This result was due to good operating income growth and margin improvement in our European, Asia Pacific and Canadian businesses. Operating income growth was also good in Latin America. The primary reason for these significant improvements was due to the successful introduction of new products and programs as well as careful cost management. We added 80 sales-and-service associates to our International Cleaning & Sanitizing operations during 2003.

Operating income margins of our International operations are less than those realized for our U.S. operations. The lower International

margins are due to (i) higher costs of importing raw materials and finished goods, (ii) the additional costs caused by the difference in scale of International operations where many operating locations are smaller in size and (iii) the additional cost of operating in numerous and diverse foreign jurisdictions. Proportionately larger investments in sales, technical support and administrative personnel are also necessary in order to facilitate the growth of our International operations.

2002 compared with 2001 Sales of our United States Cleaning & Sanitizing operations were $1.6 billion in 2002 and increased 4 percent over net sales of $1.5 billion in 2001. Business acquisitions had no effect on the growth in sales for 2002. Sales benefited from good growth in sales of U.S. Institutional and Kay operations. U.S. Institutional operations sales growth during 2002 reflected good growth driven primarily by the non-travel portion of the business. Trends in sales to the travel-related business also showed improvement over the course of 2002. Sales of Kay’s U.S. operations increased over 2001 with strong growth in both its food retail business and sales to the quickservice market. Textile Care sales increased from 2001 due to increased sales to existing customers as well as sales to new customers. Professional Products sales decreased in 2002 due to both a decline in the core sales of the Janitorial market and a decrease in the non-core specialty business reflecting a planned restructuring of the JaniSource business. Professional Products’ sales, however, were positively impacted at the end of 2002 due to a long-term supply agreement that became effective in December 2002. Water Care Services sales decreased from 2001 due to customer cost cutting and consolidations. Water Care also continued to exit non-core markets. Vehicle Care sales growth for 2002 was primarily due to new business with major oil companies as well as new product introductions. Food & Beverage sales increased slightly from 2001 with good growth in sales to the dairy, beverage and meat & poultry markets which were partially offset by weak agricultural sales.

Sales of United States Other Services operations increased 13 percent to $308 million in 2002, from $273 million in 2001. Excluding the

effects of business acquisitions, sales increased 4 percent for 2002. Pest Elimination’s sales in 2002 included strong growth in non-contract services, and were partially offset by a slowdown in the growth of contract services. GCS Service sales growth increased over 2001, reflecting the continued expansion of its operations through acquisitions and a focus on integrating past acquisitions. Excluding the effects of businesses

(thousands)

2003

2002

2001

Operating income

United States

Cleaning & Sanitizing

$ 285,212 $ 271,838

$ 246,936

Other Services

21,031 33,051

29,338

Total United States

306,243 304,889

276,274

International Cleaning & Sanitizing

159,866 138,373

44,575

Total

466,109 443,262

320,849

Corporate

(4,834 ) (46,008 ) (4,938 ) Effect of foreign currency translation

21,383 (1,388 ) 2,268

Consolidated

$ 482,658 $ 395,866

$ 318,179

Operating income as a percent of net sales

United States

Cleaning & Sanitizing

16.8 % 16.8 % 15.9 % Other Services

6.6 10.7

10.7

Total

15.2 15.9

15.2

International Cleaning & Sanitizing

10.2 9.2

9.4

Consolidated

12.8 % 11.6 % 13.7 %

acquired, GCS Service sales decreased 1 percent for 2002. The results reflected the division’s focus on standardizing operating procedures and the impact of the hospitality slowdown on the GCS business. United States Other Services also includes modest sales from the addition of EcoSure operations in January 2002.

Management rate-based sales of our International Cleaning & Sanitizing operations reached $1.5 billion for 2002, an increase of 216

percent over sales of $0.5 billion in 2001. International Cleaning & Sanitizing includes European sales of $1.0 billion for 2002. Prior to 2002, we included the results of our former European joint venture operations in our financial statements using the equity method of accounting. Excluding Europe’s sales, International Cleaning & Sanitizing sales growth was 7 percent for 2002. Excluding all business acquisitions and divestitures, sales also increased 7 percent in 2002. European sales, although not consolidated prior to 2002, increased 8 percent over 2001 due to good growth in sales to the food and beverage markets and European acquisitions. For the Asia Pacific region, Japan, New Zealand

26

and China showed good sales growth for the year while Australia’s sales declined due to the sale of its Hygiene Services business. Asia Pacific’s sales increased 3 percent in 2002, excluding business acquisitions and divestitures. The increase in Asia Pacific sales was primarily from the institutional and food and beverage markets. Latin America sales increased 7 percent in 2002, excluding business acquisitions, with good growth in all countries except Venezuela due to the economic impact of the devaluation of its currency. Sales in Canada increased over the prior year due to good growth in sales to the institutional market.

Operating income of our United States Cleaning & Sanitizing operations was $272 million in 2002, an increase of 10 percent from

operating income of $247 million in 2001. As a percentage of net sales, operating income increased from 15.9 percent in 2001 to 16.8 percent in 2002. The improvement in reported operating income margins reflected tight cost controls, savings from cost reduction initiatives, the sale of new products and the impact of adopting SFAS No. 142. Operating income in 2001 does not reflect the effect of SFAS No. 142, and thus includes amortization expenses related to goodwill of $10.6 million. If the provisions of SFAS No. 142 had been applied retroactively to January 1, 2001, operating income for our United States Cleaning & Sanitizing operations would have increased 6 percent and the operating income margin for our U.S. Cleaning & Sanitizing operations would have been 16.6 percent for 2001. We added 105 sales-and-service associates to our United States Cleaning & Sanitizing operations during 2002.

Operating income of our United States Other Services operations increased 13 percent to $33 million in 2002. The operating income

margin for United States Other Services was 10.7 percent for both 2002 and 2001. Operating income in 2001 does not reflect the effect of SFAS No. 142 and includes $1.9 million of amortization expense related to goodwill. Excluding acquisitions and the effects of SFAS No. 142, operating income increased 3 percent over 2001. Excluding acquisitions and including the pro forma effects of SFAS No. 142 on 2001, the operating income margin for United States Other Services was 11.4 percent for both 2002 and 2001. Pest Elimination had strong operating income growth due to increased productivity and cost controls. Operating income for GCS Service declined due to investments in the division’s infrastructure and systems. During 2002, we added 75 sales-and-service associates to our United States Other Services operations.

Operating income of our International Cleaning & Sanitizing operations rose 210 percent to $138 million in 2002 from operating income

of $45 million in 2001. The International operating income margin decreased from 9.4 percent in 2001 to 9.2 percent in 2002. Operating income in 2001 does not reflect the effect of SFAS No. 142 and includes $5.3 million of amortization expense related to goodwill. Excluding acquisitions and including the pro forma effects of SFAS No. 142 on 2001, operating income increased 15 percent over 2001. Excluding acquisitions (primarily Europe) and including the pro forma effects on SFAS No. 142 on 2001, the operating income margin for International increased to 10.3 percent of net sales from 9.6 percent in 2001. Significant operating income growth and margin improvement from Asia Pacific, Latin America and Canada contributed to the increase. We added 510 sales-and-service associates to our International Cleaning & Sanitizing operations, including Europe, during 2002. Henkel-Ecolab Prior to November 30, 2001, we operated cleaning and sanitizing businesses in Europe through a 50 percent economic interest in the Henkel-Ecolab joint venture. On November 30, 2001, we purchased from Henkel KGaA the remaining 50 percent interest of Henkel-Ecolab that we did not already own. Additional details related to this purchase are included in Note 5 of the notes to consolidated financial statements.

We consolidated Henkel-Ecolab’s operations effective with the November 30,2001 acquisition date and the end of Henkel-Ecolab’s fiscal

year for 2001. Because we consolidate our International operations on the basis of their November 30 fiscal year ends, Henkel-Ecolab’s balance sheet was consolidated with our balance sheet as of year-end 2001. The income statement for the European operations was consolidated with our operations beginning in 2002. Corporate Our corporate operating expenses totaled $4.8 million in 2003, compared with $46.0 million in 2002 and $4.9 million in 2001. Corporate operating expense in 2003 included a write-off of $1.7 million of goodwill related to an International business sold in 2003, $1.4 million of income for reductions in restructuring accruals and $4.5 million of expense for postretirement death benefits for retired executives. In 2002, the amount in corporate operating expense included restructuring and merger integration costs of $51.8 million, which were partially offset by a curtailment gain of $5.8 million related to benefit plan changes. Prior to 2002, corporate operating expense included overhead costs directly related to the European joint venture. In 2002 and 2003, these expenses were included in our International Cleaning & Sanitizing operating segment. Interest and Income Taxes Net interest expense for 2003 was $45 million, an increase of 3 percent over net interest expense of $44 million in 2002. The increase was primarily due to our euro-denominated debt and the strength of the euro against the U.S. dollar partially offset by lower debt levels.

Net interest expense of $44 million for 2002 increased 54 percent over net interest expense of $28 million in 2001. This increase was

primarily due to higher debt levels incurred at year-end 2001 to finance the acquisition of the remaining 50 percent interest of our European joint venture which we did not already own.

Our effective income tax rate was 38.1 percent for 2003, compared with effective income tax rates of 39.8 percent and 40.5 percent in

2002 and 2001, respectively. Excluding the effects of the gain on the sale of an equity investment and the effect of special charges, the effective income tax rate was 38.0 percent for 2003. Excluding the effects of special charges in 2002, the estimated annual effective income tax rate was 39.5 percent. The reduction in the 2003 effective income tax rate was primarily due to a lower overall international rate and favorable international mix, as well as the tax savings opportunities that were available after the company’s acquisition of its European operations at the

end of fiscal year 2001. The decrease in 2002 from prior years was principally due to the adoption of SFAS No. 142 at the beginning of 2002, which eliminated the amortization of goodwill and related income tax effects. Overall effective rates on International operations were higher in 2002 than in prior years, principally due to the addition of the European joint venture. This was partially offset by lower state income tax rates in 2002.

27

FINANCIAL POSITION Our debt continued to be rated within the “A” categories by the major rating agencies during 2003. Significant changes in our financial position during 2003 and 2002 included the following: • Total assets reached $3.2 billion at December 31, 2003, an increase of 13 percent over total assets of $2.9 billion at year-end 2002. Approximately $290 million of this increase was related to the strengthening of foreign currencies, primarily the euro. For example, 87 percent of the increase in accounts receivable was related to currency. The increase in goodwill in 2003 over 2002 was almost entirely related to currency. Other assets also increased significantly in 2003 due to a $75 million contribution to fund our U.S. pension plan.

In the liability section of the balance sheet, short-term debt was down significantly due to strong operating cash flow, which allowed us to

pay down approximately $94 million of our short-term debt. Income taxes payable increased in 2003 over 2002 due to higher current income tax expense for 2003 as compared to 2002 and lower income tax payments made during the year compared to the prior year. Long-term debt also increased in 2003 due to currency as a large portion of our debt is denominated in euros.

During 2002 total assets increased to $2.9 billion from $2.5 billion at year-end 2001. Accounts receivable increased 8 percent over year

end 2001, primarily due to the effect of business acquisitions during 2002, as well as due to the effect of exchange rates. Other assets also increased significantly from year-end 2001 due to payments totaling approximately $125 million to fund our U.S. pension plan during 2002. Other current liabilities increased from year-end 2001 primarily due to an increase in restructuring accruals and due to the effect of exchange rates.

• Total debt was $675 million at December 31, 2003 and decreased from total debt of $700 million at year-end 2002. This decrease in total debt during 2003 was principally due to debt repayments made during the year, which were partially offset by the increase in debt due to the strengthening of foreign currencies, primarily the euro, during 2003. As of December 31,2003 the ratio of total debt to capitalization was 34 percent, down from 39 percent at year-end 2002 and 46 percent at year-end 2001. The lower debt to capitalization rate in 2003 and 2002 was due to debt repayments made during those years and increasing shareholders’ equity levels. CASH FLOWS Cash provided by operating activities reached a new record high of $529 million for 2003, an increase from $423 million in 2002 and $364 million in 2001. The operating cash flow for 2003 increased over 2002 due to higher sales in 2003 and a lower contribution to the pension plan compared to 2002. Operating cash flows for 2003 were also higher than 2002 due to reduced payments on restructuring liabilities and lower estimated tax payments due to tax benefits on options exercised during 2003. The increase in operating cash flows for 2002 over 2001 reflected the additional cash flows from businesses acquired, primarily the European joint venture, as well as the improvement in accounts receivable and days sales outstanding. Historically, we have had strong operating cash flows and we anticipate this will continue. We expect to continue to use this cash flow to acquire new businesses, repurchase our common stock, invest in merchandising equipment and other capital assets and pay down debt.

Cash flows used for investing activities included capital expenditures of $212 million in 2003, $213 million in 2002 and $158 million in 2001. Worldwide additions of merchandising equipment, primarily cleaning and sanitizing product dispensers, accounted for approximately 70 percent of each year’s capital expenditures. Merchandising equipment is depreciated over 3 to 7 year lives. Cash used for businesses acquired included Adams Healthcare in 2003, Terminix Ltd. and Kleencare Hygiene in 2002 and Henkel-Ecolab in 2001.

Financing cash flow activity included cash used to reacquire shares and pay dividends and cash provided and used through our debt

arrangements. Share repurchases totaled $227 million in 2003, $9 million in 2002 and $32 million in 2001. These repurchases were funded with operating cash flows and cash from the exercise of employee stock options. In October 2003, we announced a new authorization to repurchase up to 10 million additional shares of Ecolab common stock for the purpose of offsetting the dilutive effect of shares issued for stock option exercises and incentives and general corporate purposes.

In 2003, we increased our annual dividend rate for the twelfth consecutive year. We have paid dividends on our common stock for 67

consecutive years. Cash dividends declared per share of common stock, by quarter, for each of the last three years were as follows:

28

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Year

2003

$ 0.0725 $ 0.0725

$ 0.0725 $ 0.0800

$ 0.2975

2002

0.0675 0.0675

0.0675 0.0725

0.2750

2001

0.0650 0.0650

0.0650 0.0675

0.2625

LIQUIDITY AND CAPITAL RESOURCES We currently expect to fund all of the requirements which are reasonably foreseeable for 2004, including new program investments, scheduled debt repayments, dividend payments, possible acquisitions and share repurchases from operating activities, cash reserves and short-term borrowings. In the event of a significant acquisition, funding may occur through additional long-term borrowings. Cash provided by operating activities reached an all time high of $529 million in 2003. While cash flows could be negatively affected by a decrease in revenues, we do not believe that our revenues are highly susceptible, over the short run, to rapid changes in technology within our industry. We have a $450 million U.S. commercial paper program and a 200 million Australian dollar commercial paper program. In June 2003, we established a $200 million European commercial paper program to provide a source of funding for our European and other international acquisitions and working capital requirements. All three 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 $275 million multi-year committed credit agreement which expires in December 2005 and a $175 million 364 day credit facility which expires in October 2004. We can draw directly on both credit facilities on a revolving credit basis. As of December 31, 2003, approximately $36 million of these credit facilities were committed to support outstanding commercial paper, leaving $414 million available for other uses. In January 2004, we issued 85 million euro (approximately $109 million at the date of the transaction) of commercial paper primarily to finance acquisitions subsequent to year-end. In addition, we have other committed and uncommitted credit lines of approximately $200 million with major international banks and financial institutions to support our general funding needs. Additional details on our credit facilities are included in Note 7 of the notes to consolidated financial statements.

During 2003, we voluntarily contributed $75 million to our U.S. pension plan. In making this contribution, we considered the normal

growth in accrued plan benefits, the impact of lower year-end discount rates on the plan liability, our intent to improve the projected benefit obligation funding ratio and the 29 percent actual asset return on our pension plan in 2003. Our contributions to the pension plan did not have a material effect on our consolidated results of operations, financial condition or liquidity. We do not expect expense for our U.S. pension plan to increase significantly for 2004.

As described further in Note 5 of the consolidated financial statements, Henkel KGaA owns 28.2 percent of our common stock outstanding

at December 31, 2003. In a December 2003 filing, Henkel reported that it may sell a portion or all of its holdings of Ecolab common stock and/or its holdings of common stock of The Clorox Company, or a combination of both, in connection with refinancing their pending acquisition of The Dial Corporation. Any dispositions by Henkel of any shares of Ecolab common stock would be done in accordance with the stockholder’s agreement between Henkel and Ecolab, including our right of first refusal, and applicable law.

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.

A schedule of our obligations under various long-term debt agreements and operating leases with noncancelable terms in excess of one

year are summarized in the following table:

We lease sales and administrative office facilities, distribution center facilities, computers and other equipment under longer-term

operating leases. Vehicle leases are generally shorter in duration. The U.S. vehicle leases have guaranteed residual value requirements that have historically been satisfied by the proceeds on the sale of the vehicles. No amounts have been recorded for these guarantees in the table above as we believe that the potential recovery of value from the vehicles when sold will be greater than the residual value guarantee.

We do not have significant unconditional purchase obligations, or significant other commercial commitments, such as commitments under

lines of credit, standby letters of credit, guarantees, standby repurchase obligations or other commercial commitments. We are in compliance with all covenants and other requirements of our credit agreements and indentures. Additionally, we do not have any

rating triggers that would accelerate the maturity dates of our debt. 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 $450 million committed credit facilities prior to their termination. 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

(thousands)

Payments due by Period

Contractual obligations

Total

Less than

1 year

1-3 years

3-5 years

More than 5 years

Long-term debt

$ 608,394 $ 3,953

$ 82,135 $ 367,021

$ 155,285

Operating leases

138,525 35,726

51,136 29,392

22,271

Total contractual cash obligations

$ 746,919 $ 39,679

$ 133,271 $ 396,413

$ 177,556

exchange and interest rates on our income statement. 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, 2003, we had approximately $239 million of foreign currency forward exchange contracts with face amounts denominated primarily in euros.

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. At year-end 2003, we had an interest rate swap that converts approximately euro 78 million (approximately $94 million U.S. dollars) of our Euronote debt from a fixed interest rate to a floating or variable

29

interest rate. This swap agreement is effective until February 2007. We also have an interest rate swap agreement on 50 million Australian dollars (approximately $36 million U.S. dollars) of Australian floating rate debt. This agreement is effective through November 2004 and has a fixed annual pay rate of approximately 6 percent. In September 2003, we entered into an interest rate swap agreement that converts $30 million of the 7.19% senior notes from a fixed interest rate to a floating or variable interest rate. This agreement is effective until January 2006.

Based on a sensitivity analysis (assuming a 10 percent 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 EVENTS In January 2004, we acquired Nigiko, a Paris-based provider of commercial pest elimination services throughout France. Nigiko pest elimination has annual sales of approximately $55 million. These operations will become part of our International Cleaning & Sanitizing operations in 2004.

In February 2004, we acquired Daydots International, a Texas-based provider of food safety products. Daydots has annual sales of

approximately $22 million. These operations will become part of our U.S. Cleaning & Sanitizing operations in 2004. 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 include expectations concerning business progress and expansion, business acquisitions, currency translation, cash flows, debt repayments, susceptibility to changes in technology, global economic conditions and liquidity requirements. These statements, which represent our expectations or beliefs concerning various future events, are based on current expectations. Therefore, they involve a number of risks and uncertainties that could cause actual results to differ materially from those of such Forward-Looking Statements. These risks and uncertainties include the vitality of the foodservice, hospitality and travel industries; restraints on pricing flexibility due to competitive factors and customer and vendor consolidations; changes in oil or raw material prices or unavailability of adequate and reasonably priced raw materials; the occurrence of capacity constraints or the loss of a key supplier; the effect of future acquisitions or divestitures or other corporate transactions; our ability to achieve plans for past acquisitions; the costs and effects of complying with: (i) laws and regulations relating to the environment and to the manufacture, storage, distribution, efficacy and labeling of our products and (ii) changes in tax, fiscal, governmental and other regulatory policies; economic factors such as the worldwide economy, interest rates and currency movements, including, in particular, our exposure to foreign currency risk; the occurrence of (a) litigation or claims, (b) the loss or insolvency of a major customer or distributor, (c) war, (d) natural or manmade disasters (including acts of terrorism or hostilities which impact our markets) and, (e) severe weather conditions or public health epidemics affecting the foodservice, hospitality and travel industries; loss of, or changes in, executive management; our ability to continue product introductions and technological innovations; and other uncertainties or risks reported from time-to-time in our reports to the Securities and Exchange Commission. 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. We undertake no duty to update our Forward-Looking Statements.

30

consolidated statement of income

The accompanying notes are an integral part of the consolidated financial statements.

31

Year ended December 31 (thousands, except per share)

2003

2002

2001

Net sales

$ 3,761,819 $ 3,403,585

$ 2,320,710

Operating expenses

Cost of sales (including special charges (income) of ($76) in 2003, $8,977 in 2002 and ($566) in 2001)

1,845,202 1,687,597

1,120,254

Selling, general and administrative expenses

1,433,551 1,283,091

881,453

Special charges

408 37,031

824

Operating income

482,658 395,866

318,179

Gain on sale of equity investment

11,105

Interest expense, net

45,345 43,895

28,434

Income from continuing operations before income taxes and equity in earnings of Henkel-Ecolab

448,418 351,971

289,745

Provision for income taxes

171,070 140,081

117,408

Equity in earnings of Henkel-Ecolab 15,833

Income from continuing operations before cumulative effect of change in accounting

277,348 211,890

188,170

Cumulative effect of change in accounting

(4,002 )

Gain from discontinued operations 1,882

Net income

$ 277,348 $ 209,770

$ 188,170

Basic income per common share

Income from continuing operations before change in accounting

$ 1.07 $ 0.82

$ 0.74

Change in accounting

(0.02 )

Gain from discontinued operations 0.01

Net income

$ 1.07 $ 0.81

$ 0.74

Diluted income per common share

Income from continuing operations before change in accounting

$ 1.06 $ 0.81

$ 0.72

Change in accounting

(0.02 )

Gain from discontinued operations

0.01

Net income

$ 1.06 $ 0.80

$ 0.72

Weighted-average common shares outstanding

Basic

259,454 258,147

254,832

Diluted

262,737 261,574

259,855

consolidated balance sheet

The accompanying notes are an integral part of the consolidated financial statements.

32

December 31 (thousands, except per share)

2003

2002

2001

ASSETS

Current assets

Cash and cash equivalents

$ 85,626 $ 49,205

$ 41,793

Accounts receivable, net

626,002 553,154

514,074

Inventories

309,959 291,506

279,785

Deferred income taxes

75,820 71,147

53,781

Other current assets

52,933 50,925

40,150

Total current assets

1,150,340 1,015,937

929,583

Property, plant and equipment, net

736,797 680,265

644,323

Goodwill, net

797,211 695,700

596,925

Other intangible assets, net

203,859 188,670

178,951

Other assets, net

340,711 285,335

175,218

Total assets

$ 3,228,918 $ 2,865,907

$ 2,525,000

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities

Short-term debt

$ 70,203 $ 160,099

$ 233,393

Accounts payable

212,287 205,665

199,772

Compensation and benefits

190,386 184,239

132,720

Income taxes

59,829 12,632

18,887

Other current liabilities

319,237 291,193

243,180

Total current liabilities

851,942 853,828

827,952

Long-term debt

604,441 539,743

512,280

Postretirement health care and pension benefits

249,906 207,596

183,281

Other liabilities

227,203 164,989

121,135

Shareholders’ equity (common stock, par value $1.00 per share; shares outstanding: 2003 – 257,417; 2002 – 129,940 and 2001 – 127,900)

1,295,426 1,099,751

880,352

Total liabilities and shareholders’ equity

$ 3,228,918 $ 2,865,907

$ 2,525,000

consolidated statement of cash flows

The accompanying notes are an integral part of the consolidated financial statements.

33

Year ended December 31 (thousands)

2003

2002

2001

OPERATING ACTIVITIES

Net income

$ 277,348 $ 209,770

$ 188,170

Cumulative effect of change in accounting 4,002

Gain from discontinued operations

(1,882 )

Income from continuing operations

277,348 211,890

188,170

Adjustments to reconcile income from continuing operations to cash provided by operating activities:

Depreciation

201,512 194,840

128,020

Amortization

28,144 28,588

34,970

Deferred income taxes

42,455 49,923

(2,950 ) Gain on sale of equity investment

(11,105 )

Equity in earnings of Henkel-Ecolab (15,833 )

Henkel-Ecolab royalties and dividends 23,928

Special charges – asset disposals

1,684 6,180

(566 ) Other, net

1,837 1,835

(1,373 ) Changes in operating assets and liabilities:

Accounts receivable

(5,547 ) 78 20,570

Inventories

(2,902 ) (3,567 ) (8,014 ) Other assets

(39,224 ) (141,926 ) (26,049 ) Accounts payable

(13,329 ) (8,860 ) (7,451 ) Other liabilities

48,326 84,345

31,059

Cash provided by operating activities

529,199 423,326

364,481

INVESTING ACTIVITIES

Capital expenditures

(212,035 ) (212,757 ) (157,937 ) Property disposals

8,502 6,788

3,027

Capitalized software expenditures

(8,951 ) (4,490 )

Businesses acquired and investments in affiliates

(31,726 ) (62,825 ) (469,804 ) Sale of businesses and assets

27,130

Cash used for investing activities

(217,080 ) (273,284 ) (624,714 ) FINANCING ACTIVITIES

Net issuances (repayments) of notes payable

(94,412 ) (368,834 ) 204,218

Long-term debt borrowings

5,959 261,039

149,817

Long-term debt repayments

(13,270 ) (1,257 ) (16,283 ) Reacquired shares

(227,145 ) (8,894 ) (32,164 ) Cash dividends on common stock

(75,413 ) (69,583 ) (66,456 ) Exercise of employee stock options

126,615 45,531

19,356

Other, net

(313 ) (1,746 ) (975 ) Cash provided by (used for) financing activities

(277,979 ) (143,744 ) 257,513

Effect of exchange rate changes on cash

2,281 1,114

548

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

36,421 7,412

(2,172 ) Cash and cash equivalents, beginning of year

49,205 41,793

43,965

Cash and cash equivalents, end of year

$ 85,626 $ 49,205

$ 41,793

consolidated statement of comprehensive income and shareholders’ equity

COMMON STOCK ACTIVITY

The accompanying notes are an integral part of the consolidated financial statements.

34

(thousands)

Common Stock

Additional Paid-in Capital

Retained Earnings

Deferred Compensation

Accumulated Other

Comprehensive Income (Loss)

Treasury Stock

Total

BALANCE DECEMBER 31, 2000

$ 148,170 $ 283,587

$ 899,959 $ (7,895 ) $ (89,075 ) $ (477,739 ) $ 757,007

Net income

188,170 188,170

Foreign currency translation

(5,962 ) (5,962 )

Other comprehensive loss (586 )

(586 ) Comprehensive income

181,622

Cash dividends declared

(67,080 ) (67,080 )

Stock options, including tax benefits

1,564 34,985

36,549

Stock awards, net issuances 880

14 (180 ) 714

Business acquisitions

(501 ) (501 ) Reacquired shares

(32,164 ) (32,164 ) Amortization

4,205 4,205

BALANCE DECEMBER 31, 2001

149,734 319,452

1,021,049 (3,676 ) (95,623 ) (510,584 ) 880,352

Net income

209,770 209,770

Foreign currency translation

20,500 20,500

Other comprehensive income

67 67

Minimum pension liability

(1,052 ) (1,052 )

Comprehensive income 229,285

Cash dividends declared

(71,156 ) (71,156 )

Stock options, including tax benefits

2,216 64,617

66,833

Stock awards, net issuances 2,139

(827 ) (658 ) 654

Business acquisitions

(116 ) (116 ) Reacquired shares

(8,894 ) (8,894 ) Amortization

2,793 2,793

BALANCE DECEMBER 31, 2002

151,950 386,208

1,159,663 (1,710 ) (76,108 ) (520,252 ) 1,099,751

Net income

277,348 277,348

Foreign currency translation

90,601 90,601

Other comprehensive loss

(865 ) (865 )

Minimum pension liability (9,530 )

(9,530 ) Comprehensive income

357,554

Cash dividends declared

(77,132 ) (77,132 )

Stock options, including tax benefits

3,596 136,941

140,537

Stock awards, net issuances

604

(253 ) (43 ) 308

Reacquired shares

(227,145 ) (227,145 ) Amortization

1,553 1,553

Stock dividend

154,738 (154,738 )

—

BALANCE DECEMBER 31, 2003

$ 310,284 $ 369,015

$ 1,359,879 $ (410 ) $ 4,098

$ (747,440 ) $ 1,295,426

2003

2002

2001

Year ended December 31 (shares)

Common Stock

Treasury Stock

Common Stock

Treasury Stock

Common Stock

Treasury Stock

Shares, beginning of year

151,950,428

(22,010,334 ) 149,734,067

(21,833,949 ) 148,169,930

(21,009,195 ) Stock options

3,595,961 2,216,361

1,564,137

Stock awards, net issuances

12,241

25,065

21,382

Business acquisitions

(2,672 )

(15,017 ) Reacquired shares

(6,666,861 )

(198,778 )

(831,119 ) Stock dividend

154,737,694

(24,202,607 )

Shares, end of year

310,284,083

(52,867,561 ) 151,950,428

(22,010,334 ) 149,734,067

(21,833,949 )

notes to consolidated financial statements NOTE 1 NATURE OF BUSINESS Ecolab Inc. (the “company”) develops and markets premium products and services for the hospitality, foodservice, institutional and industrial markets. The company provides cleaning, sanitizing, pest elimination, maintenance and repair products, systems and services primarily to hotels and restaurants; healthcare and educational facilities; quickservice (fast-food and convenience stores) units; grocery stores; commercial and institutional laundries; light industry; dairy plants and farms; food and beverage processors; pharmaceutical and cosmetic facilities and the vehicle wash industry. NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of the company and all majority-owned subsidiaries. Prior to November 30, 2001, the company accounted for its investment in Henkel-Ecolab under the equity method of accounting. As discussed further in Note 5, on November 30, 2001, the company acquired the remaining 50 percent interest of the European joint venture that it did not previously own, and Henkel-Ecolab became a wholly-owned subsidiary of the company. Because the company consolidates its international operations on the basis of their November 30 fiscal year ends, the balance sheet of the European operations was consolidated with the company’s balance sheet beginning with year-end 2001. The income statement for the European operations was consolidated with the company’s operations beginning in 2002. 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. Foreign Currency Translation Financial position and results of operations of the company’s international subsidiaries generally 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. The cumulative translation gain as of year-end 2003 was $16,064,000. The cumulative translation loss as of year-end 2002 and 2001 was $74,537,000 and $95,037,000, 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. Cash and Cash Equivalents Cash equivalents include highly-liquid investments with a maturity of three months or less when purchased. 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 29 percent, 30 percent and 29 percent of consolidated inventories at year-end 2003, 2002 and 2001, 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. Depreciation is charged to operations using the straight-line method over the assets’ estimated useful lives ranging from 5 to 50 years for buildings, 3 to 7 years for merchandising equipment and 3 to 11 years for machinery and equipment. 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 include primarily customer relationships, trademarks, patents and other technology. 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 12 years as of December 31, 2003.

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, 2003, 2002 and 2001 was approximately $21.2 million, $16.9 million and $5.1 million, respectively. As of December 31, 2003, future estimated amortization expense related to amortizable other identifiable intangible assets for each of the next five years will be: (thousands)

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 is 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.

35

2004

$ 21,341

2005

19,696

2006

19,236

2007

18,692

2008

17,266

Revenue Recognition The company recognizes revenue as services are performed or on product sales at the time title transfers to the customer. 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 of sale. Income Per Common Share The computations of the basic and diluted income from continuing operations per share amounts were as follows:

All number of share and per share data for all periods presented have been adjusted to reflect the two-for-one stock split described in Note

9. Restricted stock awards of approximately 52,800 shares for 2003, 203,550 shares for 2002 and 347,100 shares for 2001 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 approximately 4.3 million shares for 2003, 8.4 million shares for 2002 and 7.9 million shares for 2001 were not

dilutive and, therefore, were not included in the computations of diluted common shares outstanding. Stock-Based Compensation The company measures compensation cost for its stock incentive and option plans using the intrinsic value-based method of accounting.

Had the company used the fair value-based method of accounting to measure compensation expense for its stock incentive and option

plans and charged compensation cost against income, over the vesting periods, based on the fair value of options at the date of grant, net income and the related basic and diluted per common share amounts for 2003,2002 and 2001 would have been reduced to the pro forma amounts in the following table:

Note 10 to the consolidated financial statements contains the significant assumptions used in determining the underlying fair value of

options. Comprehensive Income For the company, comprehensive income includes net income, foreign currency translation adjustments, minimum pension 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.

(thousands, except per share)

2003

2002

2001

Income from continuing operations before change in accounting

$ 277,348 $ 211,890

$ 188,170

Weighted-average common shares outstanding

Basic

259,454 258,147

254,832

Effect of dilutive stock options and awards

3,283 3,427

5,023

Diluted

262,737 261,574

259,855

Income from continuing operations before change in accounting per

common share

Basic

$ 1.07 $ 0.82

$ 0.74

Diluted

$ 1.06 $ 0.81

$ 0.72

(thousands, except per share)

2003

2002

2001

Net income, as reported

$ 277,348 $ 209,770

$ 188,170

Add: Stock-based employee compensation expense included in reported net income, net of tax

941 1,688

2,542

Deduct: Total stock-based employee compensation expense under fair value - based method, net of tax

(17,699 ) (15,145 ) (13,172 ) Pro forma net income

$ 260,590 $ 196,313

$ 177,540

Basic net income per common share

As reported

$ 1.07 $ 0.81

$ 0.74

Pro forma

1.00 0.76

0.70

Diluted net income per common share

As reported

1.06 0.80

0.72

Pro forma

$ 0.99 $ 0.75

$ 0.68

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”

36

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. Hedge ineffectiveness during the years ended December 31, 2003, 2002 and 2001 was not significant.

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. 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. New Accounting Pronouncements In January 2003, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN 46”). FIN 46 was subsequently revised in December 2003 by the issuance of FIN 46R to provide additional guidance on the application and scope of FIN 46. FIN 46 and FIN 46R provide accounting requirements for a business enterprise to consolidate related entities in which it is determined to be the primary beneficiary as a result of its variable economic interests. The interpretation provides guidance in judging multiple economic interests in an entity and in determining the primary beneficiary.

The interpretations outline consolidation and disclosure requirements for variable interest entities (“VIEs”). The company has reviewed the

consolidation and disclosure requirements of FIN 46 and FIN 46R and determined that they have no current impact on the company. In April 2003, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 149, Amendment of Statement 133 on

Derivative Instruments and Hedging Activities . This statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities . The company has reviewed the requirements of this standard and it has no current impact on the company.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and

Equity . This statement established standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. The company does not have any financial instruments subject to SFAS No. 150 as of December 31, 2003.

In December 2003, the FASB issued a revision to SFAS 132, Employers’ Disclosures about Pensions and Other Postretirement Benefits ,

which requires additional disclosures about the assets, obligations, cash flows, and periodic benefit costs of defined benefit pension plans and other defined benefit postretirement plans. Note 15 presents the new disclosure requirements for the company’s domestic plans. Disclosure of additional information about foreign plans is not required until the company’s next fiscal year. Reclassifications The consolidated balance sheet as of December 31, 2002 includes a reclassification of $12,522,000 of accumulated amortization to a long-lived asset that was previously classified as an other current liability to be consistent with the current period presentation. NOTE 3 SPECIAL CHARGES In the first quarter of 2002, management approved plans to undertake restructuring and cost saving actions during 2002, including costs related to the integration of the company’s European operations. These actions included global workforce reductions, facility closings and product line discontinuations. As a result, the company recorded restructuring expense of $47,767,000 ($29,867,000 after tax) for the year ended December 31, 2002. This includes $36,366,000 for employee termination benefits, $6,180,000 for asset disposals and $5,221,000 for other charges. The company also incurred merger integration costs of $4,032,000 ($2,521,000 after tax) related to European and other operations. Restructuring and merger integration costs have been included as “special charges” on the consolidated statement of income with a portion of restructuring expenses included as a component of “cost of sales”. Amounts included as a component of “cost of sales” include asset disposals of $6,180,000 and manufacturing related severance of $2,797,000 for the year ended December 31, 2002.

Also included in “special charges” on the consolidated statement of income for the year ended December 31, 2002 is a one-time

curtailment gain of $5,791,000 ($3,501,000 after tax), related to changes to postretirement healthcare benefits made in the first quarter of 2002. Restructuring liabilities are classified as a component of other current liabilities. Employee termination benefit expenses in 2002 included 695 net personnel reductions through voluntary and involuntary terminations,

with the possibility that some of these people may be replaced. Individuals were affected through facility closures and consolidation primarily within the corporate administrative, operations and research and development functions.

Asset disposals include inventory and property, plant, and equipment charges. Inventory charges for the year ended December 31, 2002

were $2,391,000 and reflect the discontinuance of product lines which are not consistent with the company’s long-term strategies. Property, plant and equipment charges during the year ended December 31, 2002 were $3,789,000 and reflect the downsizing and closure of production facilities as well as global changes to manufacturing and distribution operations in connection with the integration of European operations.

Other charges of $5,221,000 for the year ended December 31, 2002, include lease termination costs and other miscellaneous exit costs. The company recorded restructuring and merger integration charges throughout 2002 and completed these activities by December 31,

2002. During 2003, restructuring activity includes the reversal of

37

$1,359,000 of previously accrued severance costs as project expenses were favorable to previous estimates. Of this amount, $76,000 is included as a component of cost of sales and $1,283,000 is included as a component of “special charges”.

Also included in “special charges” is a write-off of $1,691,000 of goodwill related to an International business which was sold in 2003. During the fourth quarter of 2001, the company incurred $940,000 in special charges to facilitate the acquisition of Henkel-Ecolab and to

begin the integration process following the acquisition. Management also approved various actions during the fourth quarter of 2000 to improve the long-term efficiency and competitiveness of

the company and to reduce costs. These actions, which were completed in 2001, included personnel reductions, discontinuance of certain product lines, changes to certain manufacturing and distribution operations and the closing of selected sales and administrative offices. During 2001, revisions of prior year estimates related to inventory write-downs and severance amounts reduced 2001 cost of sales by $566,000 and special charges by $116,000, respectively.

For segment reporting purposes, each of these items has been included in the company’s corporate segment, which is consistent with the

company’s internal management reporting. Changes to the restructuring liability accounts included the following:

Subject to further revisions to estimates, the remaining liability balance will be settled through periodic contractual payments.

NOTE 4 GAIN FROM DISCONTINUED OPERATIONS During the first quarter of 2002, the company resolved a legal issue related to the disposal of its ChemLawn business in 1992. This resulted in the recognition of a gain from discontinued operations of $1,882,000 (net of income tax benefit of $1,079,000), or $0.01 per diluted share during the year ended December 31, 2002. NOTE 5 HENKEL -ECOLAB Prior to November 30, 2001, the company and Henkel KGaA, Düsseldorf, Germany (“Henkel”), each owned 50 percent of Henkel-Ecolab, a joint venture of their respective European institutional and industrial cleaning and sanitizing businesses. The company accounted for this investment in Henkel-Ecolab under the equity method of accounting. On November 30, 2001, Ecolab purchased the remaining 50 percent interest of this joint venture it did not already own from Henkel. Because the company consolidates its international operations on the basis of their November 30 fiscal year ends, the balance sheet of Henkel-Ecolab as of November 30, 2001 was consolidated with the company’s balance sheet beginning with year-end 2001. The income statement for the European operations was consolidated with the company’s operations beginning in 2002.

For 2001, Henkel-Ecolab results of operations and the company’s equity in earnings of Henkel-Ecolab included:

(thousands)

Employee Termination

Benefits

Asset Disposals

Other

Total

Restructuring liability, December 31, 2000

$ 2,763 $ 0

$ 1,290 $ 4,053

Cash payments

(2,594 )

(1,343 ) (3,937 ) Revisions to prior estimates

(169 ) (566 ) 53 (682 )

Non-cash credits 566

566

Restructuring liability, December 31, 2001

0 0

0 0

Initial expense and accrual

36,366 6,180

5,221 47,767

Cash payments

(16,033 )

(1,711 ) (17,744 ) Non-cash charges

(6,180 ) (6,180 )

Restructuring liability, December 31, 2002

20,333 0

3,510 23,843

Cash payments

(16,770 )

(2,471 ) (19,241 ) Non-cash credits

7 7

Revisions to prior estimates

(1,352 ) (7 )

(1,359 ) Effect of foreign currency translation

1,222 670

1,892

Restructuring liability, December 31, 2003

$ 3,433 $ 0

$ 1,709 $ 5,142

(thousands)

2001

Henkel-Ecolab

Net sales

$ 869,487

Gross profit

419,635

Income before income taxes

67,286

Net income

$ 40,043

Ecolab equity in earnings

Ecolab equity in net income

$ 20,022

Prior to November 30, 2001, the company’s investment in Henkel-Ecolab included the unamortized excess of the company’s investment

over its equity in Henkel-Ecolab net assets. This excess was $92 million at November 30, 2001 and was included in goodwill, net at year-end 2001. The excess was being amortized on a straight-line basis over estimated economic useful lives of up to 30 years.

The company acquired the remaining 50 percent of Henkel-Ecolab for approximately 483.5 million euros, equal to approximately $432.7

million at rates of exchange prevailing at November 30, 2001, plus approximately $6.5 million of direct transaction related expenses. The acquisition of Henkel-Ecolab was accounted for under the purchase method of accounting as a step-acquisition. Accordingly, the

purchase price was applied to the 50 percent interest of Henkel-Ecolab being acquired. The following table summarizes the estimated fair value of assets acquired and liabilities initially assumed at the date of acquisition and

the final allocation made during 2002.

38

Ecolab royalty income from Henkel-Ecolab, net of income taxes

2,123

Amortization expense for the excess of cost over the underlying net assets of Henkel-Ecolab

(6,312 ) Equity in earnings of Henkel-Ecolab

$ 15,833

Identifiable intangible assets have a weighted-average useful life of approximately 14 years. Identifiable intangible assets included

customer relationships of $83 million and intellectual property of $31 million. Goodwill was assigned to the International Cleaning & Sanitizing reportable segment. Approximately 30 percent of the goodwill will be deductible for income tax purposes.

Subsequent to the initial allocation of the purchase price, approximately $28.0 million of restructuring charges were incurred in connection

with the acquisition of Henkel-Ecolab. These costs consisted of $24.1 million for employee termination benefits, $0.4 million for asset disposals, including inventory and property, plant and equipment, and $3.5 million for lease termination and other costs. Because the company acquired only 50 percent of Henkel-Ecolab, $14.0 million of these costs were treated as a liability assumed at the date of acquisition and have been treated as additional goodwill in 2002. The remaining $14.0 million, along with $1.9 million of merger integration costs, were treated as operating expenses during 2002 and are included in the “special charges” discussed in Note 3 to the consolidated financial statements.

The following unaudited pro forma financial information reflects the consolidated results of the company and Henkel-Ecolab assuming the

acquisition had occurred at the beginning of 2001.

These unaudited pro forma results are presented for information purposes only. These unaudited pro forma results also do not include the

benefits of improvements from synergies the company anticipates it will realize. The results are not necessarily indicative of results that would have occurred had the acquisition been completed at the beginning of 2001, nor are they necessarily indicative of future operating results.

As part of the transaction, the stockholder’s agreement between the company and Henkel was amended and extended. The amended

stockholder’s agreement provides, among other things, that Henkel is permitted to increase its ownership in the company to 35 percent of the company’s outstanding common stock. Henkel remains entitled to proportionate representation on the company’s board of directors.

Henkel beneficially owned 72.7 million shares, or approximately 28.2 percent, of the company’s outstanding common stock on December

31, 2003.

In 2003, 2002 and 2001, the company and its affiliates sold products and services in the amount of $3,426,000, $6,986,000 and $507,000 to Henkel or its affiliates, and purchased products and services in the amount of $71,265,000, $74,192,000 and $4,628,000 from Henkel or its affiliates. Prior to 2002, Henkel-Ecolab also acquired and sold products to Henkel. Transactions between Henkel and Ecolab’s European operations acquired on November 30, 2001, are reflected in the consolidated financial statements beginning in 2002. The transactions were made at prices comparable to prices charged to unrelated third parties. NOTE 6 BUSINESS ACQUISITIONS AND DISPOSITIONS Business Acquisitions Business acquisitions made by the company during 2003, 2002 and 2001, excluding the acquisition of Henkel-Ecolab, were as follows:

November 30, 2001 (thousands)

Initial Allocation

Final Allocation

Current assets

$ 178,705 $ 178,201

Property, plant and equipment

66,538 67,966

Identifiable intangible assets

119,257 119,203

Goodwill

239,737 252,017

Other assets

9,185 29,678

Total assets acquired

613,422 647,065

Current liabilities

115,559 130,199

Postretirement health care and pension benefits

38,614 38,219

Other liabilities

19,860 39,423

Total liabilities assumed

174,033 207,841

Purchase price

$ 439,389 $ 439,224

(thousands, except per share)

2001

(unaudited)

Net sales

$ 3,182,271

Income from continuing operations before cumulative effect of change in accounting

192,009

Diluted income from continuing operations before change in accounting per common share

$ 0.74

Business Acquired

Date of Acquisition

Ecolab Operating

Segment-Type of Business

Estimated Annual sales

Prior to Acquisition (millions)

(unaudited)

2003

Adams Healthcare

Dec. 2002 Europe

$ 19

The total cash consideration paid by the company for these acquisitions and cash adjustments to prior year acquisitions was approximately

$32 million and $63 million for 2003 and 2002, respectively. The total cash consideration paid by the company for the 2001 acquisitions, excluding Henkel-Ecolab, was approximately $30 million, of which approximately $18 million was allocated to goodwill.

These 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. Net sales and operating income of these businesses were not significant to the company’s consolidated results of operations, financial position and cash flows.

In January 2004, the company acquired Nigiko, a Paris-based provider of commercial pest elimination services throughout France. Nigiko

pest elimination has annual sales of approximately $55 million. These operations will become part of the company’s International Cleaning & Sanitizing operations in 2004.

In February 2004, the company acquired Daydots International, a Texas-based provider of food safety products. Daydots has annual sales

of approximately $22 million. These operations will become part of the company’s U.S. Cleaning & Sanitizing operations in 2004.

39

2002

Kleencare Hygiene

Jan. 2002 Europe

30

Audits International

Jan. 2002

Pest Elimination

3

Terminix Ltd.

Sept. 2002 Europe

65

2001

Ecolab S.A. – 23.5% interest in addition to prior 51% interest

Dec. 2000 Latin America

8

Randall International LLC – 25% interest

Jan. 2001 Institutional

8

Envirocare Service Pte. Ltd.

March 2001 Asia Pacific

1

Microbiotecnica

July 2001 Latin America

3

Commercial Parts & Services, Inc.

Oct. 2001 GCS

28

NOTE 6 BUSINESS ACQUISITIONS AND DISPOSITIONS The changes in the carrying amount of goodwill for each of the company’s reportable segments for the years ended December 31, 2003 and 2002 are as follows:

* All of the goodwill related to businesses acquired in 2003 and 2002 is expected to be tax deductible. Goodwill acquired in 2003 and 2002 also includes adjustments to prior year acquisitions. United States Other Services goodwill acquired during 2003 includes a reduction of $0.4 million for an adjustment related to the Audits International acquisition. International Cleaning and Sanitizing goodwill acquired during 2003 includes a reduction of $4.7 million for the Terminix acquisition primarily related to a finalization of the pension valuation at the date of acquisition. Business Dispositions In December 2002, the company sold its Darenas janitorial products distribution business based in Birmingham, United Kingdom. This sale resulted in a loss of approximately $1.7 million principally due to the amount of goodwill allocated to the disposed business. The annualized sales of this entity were approximately $30 million. In June 2003, the company sold its minority interest investment in Comac S.p.A., a floor care machine manufacturing company based in Verona, Italy, for a gain of approximately $11.1 million ($6.7 million after tax).The company accounted for this investment under the equity method of accounting. In September 2003, the company sold the consumer dermatology business of its recently acquired Adams Healthcare business at a nominal gain. Goodwill allocated to the sale of the dermatology business was approximately $1.0 million. The annualized sales of the dermatology business that was sold were approximately $2.5 million. These operations and investment were a part of the company’s International Cleaning & Sanitizing segment. NOTE 7 BALANCE SHEET INFORMATION

United States

(thousands)

Cleaning & Sanitizing

Other Services

Total United States

International Cleaning & Sanitizing

Consolidated

Balance

December 31, 2001

$ 121,046 $ 44,796

$ 165,842 $ 431,083

$ 596,925

Goodwill acquired during year*

3,532 4,510

8,042 58,862

66,904

Foreign currency translation

38,472 38,472

Impairment losses upon adoption of SFAS No. 142 on January 1, 2002

(4,002 ) (4,002 )

Impairment losses during 2002

(2,599 )

(2,599 ) (2,599 )

Balance

December 31, 2002

121,979 49,306

171,285 524,415

695,700

Goodwill acquired during year*

367 (377 ) (10 ) 825

815

Goodwill allocated to business dispositions

(2,708 ) (2,708 ) Foreign currency translation

103,404 103,404

Balance

December 31, 2003

$ 122,346 $ 48,929

$ 171,275 $ 625,936

$ 797,211

December 31 (thousands)

2003

2002

2001

ACCOUNTS RECEIVABLE, NET

Accounts receivable

$ 670,013 $ 589,149

$ 544,371

Allowance for doubtful accounts

(44,011 ) (35,995 ) (30,297 ) Total

$ 626,002 $ 553,154

$ 514,074

INVENTORIES

Finished goods

$ 159,633 $ 136,721

$ 124,657

Raw materials and parts

152,127 156,628

156,754

Excess of fifo cost over lifo cost

(1,801 ) (1,843 ) (1,626 ) Total

$ 309,959 $ 291,506

$ 279,785

40

PROPERTY, PLANT AND EQUIPMENT, NET

Land

$ 26,921 $ 21,914

$ 20,349

Buildings and leaseholds

243,795 231,119

221,054

Machinery and equipment

589,620 525,359

452,611

Merchandising equipment

949,553 821,109

743,404

Construction in progress

21,488 18,830

22,217

1,831,377

1,618,331 1,459,635

Accumulated depreciation and amortization

(1,094,580 ) (938,066 ) (815,312 ) Total

$ 736,797 $ 680,265

$ 644,323

GOODWILL, NET

Goodwill

$ 992,622 $ 871,208

$ 763,211

Accumulated amortization

(195,411 ) (175,508 ) (166,286 ) Total

$ 797,211 $ 695,700

$ 596,925

OTHER INTANGIBLE ASSETS, NET

Cost

Customer relationships

$ 153,479 $ 120,324

$ 104,277

Intellectual property

77,793 71,104

66,418

Trademarks

52,283 50,308

48,540

Other intangibles

16,012 13,502

16,292

299,567

255,238 235,527

Accumulated amortization

Customer relationships

(27,565 ) (9,238 ) (2,758 ) Intellectual property

(45,809 ) (39,641 ) (35,800 ) Trademarks

(9,313 ) (5,947 ) (5,097 ) Other intangibles

(13,021 ) (11,742 ) (12,921 ) Total

$ 203,859 $ 188,670

$ 178,951

OTHER ASSETS, NET

Deferred income taxes

$ 43,168 $ 36,797

$ 56,952

Pension

161,098 106,314

Other

136,445 142,224

118,266

Total

$ 340,711 $ 285,335

$ 175,218

SHORT-TERM DEBT

Notes payable

$ 66,250 $ 146,947

$ 230,306

Long-term debt, current maturities

3,953 13,152

3,087

Total

$ 70,203 $ 160,099

$ 233,393

OTHER CURRENT LIABILITIES

Discounts and rebates

$ 145,508 $ 127,418

$ 125,123

Other

173,729 163,775

118,057

Total

$ 319,237 $ 291,193

$ 243,180

LONG-TERM DEBT

6.875% notes, due 2011

$ 149,101 $ 148,974

$ 148,847

5.375% Euronotes, due 2007

364,399 299,777

Commercial paper

265,860

7.19% senior notes, due 2006

75,017 75,000

75,000

Other

19,877 29,144

25,660

608,394

552,895 515,367

Long-term debt, current maturities

(3,953 ) (13,152 ) (3,087 ) Total

$ 604,441 $ 539,743

$ 512,280

The company has a $275 million Multicurrency Credit Agreement with a consortium of banks that has a term through 2005 and a

$175 million 364-day Credit Agreement with a consortium of banks that has a term through October 2004. 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. Each agreement includes a covenant regarding the ratio of total debt to capitalization. No amounts were outstanding under these agreements at year-end 2003, 2002 and 2001.

These credit agreements support the company’s $450 million U.S. commercial paper program and its 200 million Australian dollar

commercial paper program. The company had $64.1 million and $355.7 million in outstanding U.S. commercial paper at December 31, 2002 and 2001, respectively, with average annual interest rates of 1.4 percent and 2.0 percent, respectively. There was no U.S. commercial paper outstanding at December 31, 2003. The company also had 50.0 million, 50.0 million and 132.5 million of Australian dollar denominated commercial paper (in U.S. dollars, approximately $36 million, $28 million and $69 million, respectively) outstanding at December 31, 2003, 2002 and 2001, respectively, with average annual interest rates of 5.1 percent, 4.8 percent and 4.5 percent, respectively.

In June 2003, the company established a $200 million European commercial paper program to provide a source of funding for

European and other international acquisitions and working capital requirements. The program is in addition to the company’s $450 million U.S. and 200 million Australian dollar programs. As of December 31, 2003, the company had not issued any European commercial paper. All three programs were rated A-1 by Standard & Poor’s and P-1 by Moody’s as of December 31,2003 and were supported by the company’s $275 million and $175 million committed credit facilities.

In February 2002, the company issued euro 300 million ($265.9 million at rates prevailing at that time) of 5.375 percent Euronotes,

due February 2007. The proceeds from this debt issuance were used to repay a portion of the U.S. commercial paper outstanding as of December 31, 2001. Therefore, $265.9 million of commercial paper outstanding at December 31, 2001 was classified as long-term debt. As described further in Note 8, the company accounts for a majority of the transaction gains and losses related to the Euronotes as a component of the cumulative translation account within accumulated other comprehensive income (loss).

As of December 31, the weighted-average interest rate on notes payable was 6.3 percent in 2003, 4.6 percent in 2002 and 4.4 percent

in 2001. As of December 31, 2003, the aggregate annual maturities of long-term debt for the next five years were: 2004 - $3,953,000; 2005 -

$4,136,000; 2006 - $77,999,000; 2007 - $366,267,000 and 2008 -$754,000. Interest expense was $49,342,000 in 2003, $47,210,000 in 2002 and $31,477,000 in 2001. Interest income was $3,997,000 in 2003,

$3,315,000 in 2002 and $3,043,000 in 2001. Total interest paid was $47,428,000 in 2003, $45,056,000 in 2002 and $26,402,000 in 2001. NOTE 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 in euros. The company had foreign currency forward exchange contracts that totaled approximately $239 million at December 31, 2003, $199 million at December 31, 2002 and $130 million at December 31, 2001. These contracts generally expire within one year. In addition, at December 31, 2001 the company had approximately $190 million of foreign currency forward exchange contracts outstanding related to short-term financing of the Henkel-Ecolab acquisition. These contracts matured in February 2002. The gains and losses related to these contracts were included as a component of other comprehensive income until the hedged item is reflected in earnings. 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 2003, the company entered into an interest rate swap agreement that converts $30 million of the 7.19% senior notes from a fixed

interest rate to a floating or variable interest rate. This agreement is effective until January 2006. The interest rate swap was designated as a fair value hedge and had an insignificant value as of December 31, 2003. The mark to market gain on this agreement has been recorded as part of interest expense and has been offset by the market to market on this portion of the 7.19% senior notes.

During 2002, the company entered into an interest rate swap agreement in connection with the issuance of its Euronotes. This

agreement converts approximately euro 78 million (approximately $94 million at year-end 2003) of the Euronote debt from a fixed interest rate to a floating or variable interest rate and is effective until February 2007. This interest rate swap was designated as a fair value hedge and had a value of $6.4 million and $3.5 million as of December 31, 2003 and 2002, respectively. The mark to market gain on this agreement has been recorded as part of interest expense and has been offset by the loss recorded in interest expense on the mark to market on this portion of the Euronotes. There is no hedge ineffectiveness on this interest rate swap.

The company has also entered into an interest rate swap agreement to provide for a fixed rate of interest on the first 50 million

Australian dollars (approximately $36 million at year-end 2003) of Australian floating-rate debt. This agreement is effective through November 2004 and has a fixed annual pay rate of approximately 6 percent. This interest rate swap agreement was designated as, and effective as, a cash

flow hedge of the outstanding debt. The change in fair value of the interest rate swap is recorded in other comprehensive income and recognized as earnings to offset the forecasted hedged transactions as they occur. Net Investment Hedges In February 2002, the company issued euro 300 million of 5.375 percent Euronotes, due 2007. The company designated a portion (approximately euro 200 million at year-end 2002 and euro 290 million at year-end 2003) of this Euronote debt 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 on this portion of the Euronotes 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 losses related to the Euronotes and charged to this shareholders’ equity account were $52.5 million and $26.0 million for the years ended December 31, 2003 and 2002,

41

respectively. Transaction gains and losses on the remaining portion of the Euronotes have been included in earnings and were offset by transaction gains and losses related to other euro denominated assets held by the company’s U.S. operations. 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’s risk is limited to the fair value of these contracts. 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 counter-parties. 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, notes payable and commercial paper approximate fair value because of their short

maturities. The fair value of long-term debt is based on quoted market prices for the same or similar debt instruments.

NOTE 9 SHAREHOLDERS’ EQUITY The company’s common stock was split two-for-one in the form of a 100 percent stock dividend paid June 6, 2003 to shareholders of record on May 23, 2003. All per share data have been adjusted to reflect the stock split, except for prior year data in the Consolidated Balance Sheet and the Consolidated Statement of Comprehensive Income and Shareholders’ Equity.

Authorized common stock, par value $1.00 per share, was 400 million shares in 2003, and 200 million shares in 2002 and 2001.

Treasury stock is stated at cost. Dividends declared per share of common stock were $0.2975 for 2003, $0.275 for 2002 and $0.2625 for 2001. The company has 15 million shares, without par value, of authorized but unissued preferred stock. Each share of outstanding common stock entitles the holder to one-fourth of a preferred stock purchase right. A right entitles the

holder, upon occurrence of certain events, to buy one one-hundredth of a share of Series A Junior Participating Preferred Stock at a purchase price of $115, subject to adjustment. The rights, however, will not become exercisable unless and until, among other things, any person or group acquires 15 percent or more of the outstanding common stock of the company, or the company’s board of directors declares a holder of 10 percent 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 exercise price of a right. The rights provide that the holdings by Henkel or its affiliates, subject to compliance by Henkel with certain conditions, will not cause the rights to become exercisable nor cause Henkel to be an “adverse person.” The rights are redeemable under certain circumstances at one cent per right and, unless redeemed earlier, will expire on March 11, 2006.

The company reacquired 6,218,000 shares of its common stock in 2003,165,000 shares in 2002 and 621,700 shares in 2001 through

open and private market purchases under prior board authorizations. The equivalent number of shares reacquired on a post stock-split basis were 8,014,500 in 2003, 330,000 in 2002 and 1,243,000 shares in 2001. In October 2003, the company approved a new authorization to repurchase up to 10 million additional shares of Ecolab common stock for the purpose of offsetting the dilutive effect of shares issued for stock incentive plans and for general corporate purposes. As of December 31, 2003, 10.4 million shares remained to be purchased under all of the company’s repurchase programs. On a pre-split basis, the company also reacquired 448,861 shares of its common stock in 2003, 33,778 shares in 2002 and 209,419 shares in 2001 related to the exercise of stock options and the vesting of stock awards. NOTE 10 STOCK INCENTIVE AND OPTION PLANS The company’s stock incentive and option plans provide for grants of stock options and stock awards. Common shares available for grant as of December 31 were 8,674,459 for 2003, 12,305,052 for 2002 and 3,799,142 for 2001. Common shares available for grant reflect 12 million shares approved by shareholders during 2002 for issuance under the plans.

Options may be granted to purchase shares of the company’s stock at not less than fair market value at the date of grant. Options

granted in 2003, 2002 and 2001 generally become exercisable over three years from date of grant and expire within ten years from date of grant. A summary of stock option activity and average exercise prices is as follows:

December 31 (thousands)

2003

2002

2001

Carrying amount

Cash and cash equivalents

$ 85,626 $ 49,205

$ 41,793

Notes payable

30,050 54,847

71,466

Commercial paper

36,200 92,100

424,700

Long-term debt (including current maturities)

608,394 552,895

249,507

Fair value

Long-term debt (including current maturities)

$ 656,576 $ 588,003

$ 260,518

42

Shares

2003

2002

2001

Granted

4,765,823 4,912,674

5,334,052

Exercised

(6,383,227 ) (4,432,722 ) (3,128,274 ) Canceled

(379,634 ) (1,473,670 ) (1,112,668 ) December 31:

Outstanding

21,867,726 23,864,764

24,858,482

Exercisable

12,823,743 14,444,562

15,393,806

Average exercise price per share

2003 2002

2001

Granted

$ 27.18 $ 24.24

$ 19.32

Exercised

19.84 10.27

6.19

Canceled

21.87 21.08

22.34

December 31:

Outstanding

20.87 19.35

16.87

Exercisable

$ 17.96 $ 17.77

$ 15.46

Information related to stock options outstanding and stock options exercisable as of December 31, 2003, is as follows:

The weighted-average grant-date fair value of options granted in 2003, 2002 and 2001, and the significant assumptions used in determining

the underlying fair value of each option grant, on the date of grant, utilizing the Black-Scholes option-pricing model, were as follows:

The expense associated with shares of restricted stock issued under the company’s stock incentive plan is based on the market 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. Restricted stock awards generally vest over a 4-year period with 50 percent vesting 2 years after grant and the remaining 50 percent vesting 4 years after grant. 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 10,500 shares in 2003, 67,200 shares in 2002 and 11,600 shares in 2001 under its restricted stock award program.

The company uses the intrinsic value-based method of accounting to measure compensation expense for its stock incentive and option

plans. See Note 2 to the consolidated financial statements for the pro forma net income and related basic and diluted per common share amounts had the company used the fair value-based method of accounting to measure compensation expense. NOTE 11 INCOME TAXES Income from continuing operations before income taxes and equity in earnings of Henkel-Ecolab consisted of:

The provision for income taxes consisted of:

Options Outstanding

Range of Exercise Prices

Options Outstanding

Weighted-Average Remaining

Contractual Life

Weighted-Average Exercise

Price

$ 5.38-$ 10.31

1,418,002 1.9 years

$ 7.07

$ 10.95-$ 18.96

5,370,187 6.9 years

17.81

$ 19.27-$ 20.06

5,176,870 6.4 years

19.49

$ 20.23-$ 24.34

5,206,844 8.7 years

23.98

$ 24.55-$ 27.39

4,695,823 10.0 years

$ 27.23

Options Exercisable

Range of Exercise Prices

Options Exercisable

Weighted-Average

Exercise Price

$ 5.38-$ 10.31

1,418,002 $ 7.07

$ 10.95-$ 18.96

4,060,166 17.40

$ 19.27-$ 20.06

5,151,290 19.48

$ 20.23-$ 24.34

2,072,012 23.56

$ 24.55-$ 27.39

122,273 $ 25.29

2003

2002

2001

Weighted-average grant date fair value of options granted

Granted at market prices

$ 7.85 $ 7.10

$ 5.63

Granted at prices exceeding market

— —

$ 2.37

Assumptions

Risk-free interest rate

3.5 % 3.6 % 4.7 % Expected life

6 years 6 years

6 years

Expected volatility

26.8 % 26.5 % 24.8 % Expected dividend yield

1.2 % 1.1 % 1.3 %

(thousands)

2003

2002

2001

Domestic

$ 286,003 $ 258,779

$ 249,026

Foreign

162,415 93,192

40,719

Total

$ 448,418 $ 351,971

$ 289,745

(thousands)

2003 2002

2001

Federal and state

$ 78,928 $ 59,601

$ 107,055

Foreign

49,687 30,557

13,303

Currently payable

128,615 90,158

120,358

Federal and state

33,178 43,974

(1,940 )

The company’s overall net deferred tax assets and deferred tax liabilities were comprised of the following:

A reconciliation of the statutory U.S. federal income tax rate to the company’s effective income tax rate was:

Cash paid for income taxes was approximately $90 million in 2003, $95 million in 2002 and $99 million in 2001.

43

Foreign

9,277 5,949

(1,010 ) Deferred

42,455 49,923

(2,950 ) Provision for income taxes

$ 171,070 $ 140,081

$ 117,408

December 31 (thousands)

2003 2002

2001

Deferred tax assets

Postretirement health care and pension benefits

$ 1,008 $ 19,249

$ 47,792

Other accrued liabilities

53,924 52,399

55,758

Loss carryforwards

11,756 13,932

18,679

Other, net

27,856 28,090

17,552

Valuation allowance

(2,719 ) (1,462 ) (1,462 ) Total

91,825 112,208

138,319

Deferred tax liabilities

Property, plant and equipment basis differences

61,062 53,320

40,956

Intangible assets

49,465 38,696

26,381

Other, net

4,714 3,273

5,403

Total

115,241 95,289

72,740

Net deferred tax assets (liabilities)

$ (23,416 ) $ 16,919 $ 65,579

2003

2002

2001

Statutory U.S. rate

35.0 % 35.0 % 35.0 % State income taxes, net of federal benefit

2.7 3.2

4.2

Foreign operations

0.5 1.0

—

Other, net

(0.1 ) 0.6 1.3

Effective income tax rate

38.1 % 39.8 % 40.5 %

No provision has been made for income taxes on the undistributed earnings of foreign subsidiaries. In the event of a distribution of

these earnings, foreign tax credits would be available to substantially offset any amount of applicable income tax and foreign withholding taxes that might be payable on these earnings. NOTE 12 RENTALS AND LEASES The company leases sales and administrative office facilities, distribution center facilities, automobiles, computers and other equipment under operating leases. Rental expense under all operating leases was $81,781,000 in 2003, $77,593,000 in 2002 and $60,365,000 in 2001. As of December 31, 2003, future minimum payments under operating leases with noncancelable terms in excess of one year were:

The company enters into operating leases in the U.S. for vehicles whose noncancellable terms are one year or less in duration with

month-to-month renewal options. These leases have been excluded from the table above. The automobile leases have guaranteed residual values that have historically been satisfied primarily by the proceeds on the sale of the vehicles. No estimated losses have been recorded for 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 greater than the residual value guarantee. NOTE 13 RESEARCH EXPENDITURES Research expenditures that related to the development of new products and processes, including significant improvements and refinements to existing products, were $53,171,000 in 2003, $49,860,000 in 2002 and $33,103,000 in 2001. NOTE 14 COMMITMENTS AND CONTINGENCIES The company and certain subsidiaries are party to various environmental actions that have arisen in the ordinary course of business. These include possible obligations to investigate and mitigate the effects on the environment of the disposal or release of certain chemical substances at various sites, such as Superfund sites and other operating or closed facilities. The effect of these actions on the company’s financial position, results of operations and cash flows to date has not been significant. The company is 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. At December 31, 2003, the accrual for environmental remediation costs was approximately $3.9 million. Potential insurance reimbursements are not anticipated in the company’s accruals for environmental liabilities.

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 is also 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.

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 consolidated results of operations, financial position or cash flows. NOTE 15 RETIREMENT PLANS Pension and Postretirement Health Care Benefits Plans 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 participants enrolled prior to January 1, 2003, plan benefits are based on years of service and highest average compensation for five consecutive years of employment. For participants enrolled after December 31, 2002, plan benefits are based on contribution credits equal to a fixed percentage of their current salary and interest credits. The measurement date used for determining the U.S. Pension Plan assets and obligations was December 31. Various international subsidiaries also have defined benefit pension plans. Prior to the acquisition of Henkel-Ecolab at the end of fiscal 2001, the international plans were not significant. Beginning in 2002, the information below includes all of the company’s significant 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 healthcare plan assets and obligations was December 31. Certain employees outside the U.S. were covered under government-sponsored programs, which are not required to be fully funded. The expense and obligation for providing International postretirement healthcare benefits was not significant.

(thousands)

2004

$ 35,726

2005

29,470

2006

21,666

2007

15,805

2008

13,587

Thereafter

22,271

Total

$ 138,525

44

A reconciliation of changes in the benefit obligations and fair value of assets of the company’s plans is as follows:

A reconciliation of the funded status for the pension and postretirement plans is as follows:

The net amount recognized in the balance sheet and the accumulated benefit obligation is as follows:

45

U.S. Pension Benefits

International Pension Benefit

U.S. Postretirement Health Care Benefits

(thousands)

2003

2002

2001

2003

2002

2003

2002

2001

Benefit obligation, beginning of year

$ 485,155

$ 396,827

$ 347,430

$ 245,876

$ 172,328

$ 131,206

$ 134,116

$ 110,002

Service cost

26,442 21,635

18,925 11,997

9,412 7,447

2,814 7,342

Interest cost

32,208 29,237

26,461 14,633

10,973 8,597

7,651 8,826

Company contributions

— —

— —

137 —

— —

Participant contributions

— —

— 1,515

68 1,856

1,214 1,045

Acquisitions

— —

— 1,086

43,135 —

— —

Plan amendments, settlements

and curtailments

— —

726 (948 ) 1,522

(1,930 ) (40,760 ) —

Changes in assumptions

33,397 53,467

14,723 —

— 8,675

24,588 5,001

Actuarial loss (gain)

(5,232 ) (1,889 ) 1,064 13,007

(2,554 ) 7,828 8,659

7,531

Benefits paid

(15,894 ) (14,122 ) (12,502 ) (11,892 ) (8,913 ) (8,649 ) (7,076 ) (5,631 ) Foreign currency translation

— —

— 46,632

19,768 —

— —

Benefit obligation, end of year

$ 556,076 $ 485,155

$ 396,827 $ 321,906

$ 245,876 $ 155,030

$ 131,206 $ 134,116

Fair value of plan assets,

beginning of year

$ 378,504 $ 311,164

$ 317,027 $ 134,089

$ 108,485 $ 18,911

$ 23,811 $ 27,128

Actual gains (losses) on plan

assets

107,192 (43,112 ) (19,244 ) 9,400

(9,438 ) 5,054 (2,866 ) (1,627 )

Acquisitions

— —

— 263

23,331 —

— —

Company contributions

75,000 124,574

25,883 12,743

7,794 4,807

3,828 2,896

Participant contributions

— —

— 1,407

1,052 1,856

1,214 1,045

Settlements

— —

— (547 ) —

— —

—

Benefits paid

(15,894 ) (14,122 ) (12,502 ) (11,892 ) (7,800 ) (8,649 ) (7,076 ) (5,631 ) Foreign currency translation

— —

— 25,512

10,665 —

— —

Fair value of plan assets, end of

year

$ 544,802 $ 378,504

$ 311,164 $ 170,975

$ 134,089 $ 21,979

$ 18,911 $ 23,811

U.S. Pension Benefits

International Pension Benefit

U.S. Postretirement Health Care

Benefits

(thousands)

2003 2002

2001 2003

2002 2003

2002 2001

Funded status

$ (11,274 ) $ (106,651 ) $ (85,663 ) $ (150,931 ) $ (111,787 ) $ (133,051 ) $ (112,295 ) $ (110,305 ) Unrecognized actuarial loss

160,939 201,006

73,641 44,123

25,881 63,559

56,823 20,644

Unrecognized prior service

cost (benefit)

7,400 9,329

11,258 2,265

(55 ) (34,059 ) (37,431 ) (6,893 ) Unrecognized net transition

(asset) obligation

(2,105 ) (3,508 ) (4,911 ) 627 833

— —

—

Net amount recognized

$ 154,960 $ 100,176

$ (5,675 ) $ (103,916 ) $ (85,128 ) $ (103,551 ) $ (92,903 ) $ (96,554 )

U.S. Pension Benefits

International Pension Benefit

U.S. Postretirement Health Care

Benefits

(thousands)

2003 2002

2001 2003

2002 2003

2002 2001

Prepaid benefit cost

$ 154,960 $ 100,176

$ — $ 26,533

$ 13,175 $ —

$ — $ —

Accrued benefit cost

— —

(5,675 ) (146,180 ) (99,355 ) (103,551 ) (92,903 ) (96,554 ) Accumulated other

comprehensive loss

— —

— 15,731

1,052 —

— —

Net amount recognized

$ 154,960 $ 100,176

$ (5,675 ) $ (103,916 ) $ (85,128 ) $ (103,551 ) $ (92,903 ) $ (96,554 ) Accumulated benefit

obligation

$ 441,488 $ 375,406

$ 305,780

$ 155,030

$ 131,206 $ 134,116

For certain international pension plans, the accumulated benefit obligation exceeded the fair value of plan assets. Therefore, the company recognized a minimum pension liability in other comprehensive income of $14.5 million pre-tax ($9.5 million net of deferred tax asset) during 2003 and $1.1 million during 2002.

The aggregate projected benefit obligation, accumulated benefit obligation and fair value of plan assets for those plans with accumulated

benefit obligations in excess of plan assets were $261,138,000, $238,819,000 and $95,655,000, respectively, at December 31, 2003, and $103,063,000, $90,428,000 and $14,163,000, respectively, at December 31, 2002. These plans relate to various international subsidiaries and are funded consistent with local practices and requirements. As of December 31, 2003 there were approximately $4.5 million of future post retirement benefits covered by insurance contracts. Plan Assets The company’s plan asset allocations for its U.S. defined benefit pension and postretirement health care benefits plans at December 31, 2003, 2002 and 2001, and target allocation for 2004 are as follows:

As of year-end 2003, the fixed income securities mature in periods up to 30 years, with a weighted average maturity of 5.6 years. 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 growing the assets of the plan and keeping risk at a reasonable level. Current income is not a key goal of the plan. The pension and health care plans’ demographic characteristics generally reflect a younger workforce 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 a better funded status, better long-term returns and lower pension costs in the long run.

Since diversification is widely recognized as necessary to reduce risk, the pension fund is diversified across several asset classes and

securities. Selected individual portfolios may be undiversified while maintaining the diversified nature of total plan assets.

The plan prohibits investing in letter stock, warrants and options, and engaging in short sales, margin transactions, or other specialized investment activities. The use of derivatives is also prohibited for the purpose of speculation or introducing leverage in the portfolio, circumventing the investment guidelines or taking risks that are inconsistent with the fund’s guidelines. Selected derivatives may only be used for hedging and transactional efficiency. Cash Flows The company’s funding policy for the U.S. pension plan is to achieve 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 by ERISA. The company is not required to make any contributions to the U.S. pension plan and postretirement health care benefit plans in 2004. Net Periodic Benefit Costs Pension and postretirement health care benefits expense for the company’s operations was:

Asset

2004 Target Asset Allocation

Percentage of Plan Assets

Category

Percentage

2003

2002

2001

Large Cap Equity

43 % 46 % 43 % 39 % Small Cap Equity

12 13

12 10

International Equity

15 15

15 20

Fixed Income

25 22

25 24

Real Estate

5 4

5 7

Total

100 % 100 % 100 % 100 %

U.S. Pension Benefits

International Pension Benefits

U.S. Postretirement Health Care Benefits

(thousands)

2003

2002

2001

2003

2002

2003

2002

2001

Service cost - employee benefits earned

during the year

$ 26,442 $ 21,635

$ 18,925 $ 11,997

$ 9,412 $ 2,945

$ 2,814 $ 7,342

Interest cost on benefit obligation

32,208 29,237

26,461 14,633

10,973 8,597

7,651 8,826

Adjustments for death benefits for

retired executives

— —

— —

— 4,502

— —

Expected return on plan assets

(42,411 ) (32,675 ) (28,862 ) (9,908 ) (8,556 ) (1,580 ) (2,071 ) (2,363 ) Recognition of net actuarial loss (gain)

3,451 —

— 932

394 6,293

2,005 —

Amortization of prior service cost

(benefit)

1,929 1,929

1,881 41

204 (5,302 ) (4,431 ) (551 )

Amortization of net transition (asset)

46

obligation

(1,403 ) (1,403 ) (1,403 ) 493 272

— —

—

Curtailment (gain) loss

— —

— —

1,522 —

(5,791 ) —

Total expense

$ 20,216 $ 18,723

$ 17,002 $ 18,188

$ 14,221 $ 15,455

$ 177 $ 13,254

Total international pension expense, excluding the 50 percent owned Henkel-Ecolab operations, was $1,641,000 in 2001.

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 recorded obligation for these plans was approximately $19 million at December 31, 2003. The annual expense for these plans was approximately $4 million in 2003, $3 million in 2002 and $3 million in 2001. Plan Assumptions

The expected long-term rate of return is generally based on the pension plan’s asset mix, assumptions of equity returns 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, 9.0 percent (for pre-age 65 retirees) and 11.0 percent (for post-age 65 retirees) annual

rates of increase in the per capita cost of covered health care were assumed for 2003. The rates were assumed to decrease by 1 percent each year until they reach 5 percent in 2008 for pre-age 65 retirees and 5 percent in 2010 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 4 percent 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:

Effective March 2002, the company changed its postretirement health care benefits plan to discontinue the employer subsidy for

postretirement health care benefits for most active employees. These subsidized benefits will continue to be provided to certain defined active employees and all existing retirees. As a result of these actions, the company recorded a curtailment gain of approximately $6 million in the first quarter of 2002.

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act) introduces a prescription drug benefit under

Medicare as well as a federal subsidy to sponsors of retiree health care benefit plans. The company’s U.S. Postretirement Health Care Benefits plan offers prescription drug benefits. In accordance with FASB Staff Position No. FAS 106-1 Accounting and Disclosure Requirements Related to the Medicare Prescription Drug Benefits, Improvement and Modernization Act of 2003 , the company has elected to defer recognition of the effects of the Act and any measures of benefit cost or benefit obligation in the financial statements or accompanying notes. Specific authoritative guidance on the accounting for the federal subsidy is pending and that guidance, when issued, could require the company to change previously reported information. The company does not anticipate that its plan will need to be amended in order to benefit from the new legislation and expects a favorable impact on future benefit expenses and the future financial status of the plan. Savings Plan and ESOP The company provides a 401(k) savings plan for substantially all U.S. employees. Prior to March 2002, employee contributions of up to 6 percent of eligible compensation were matched 50 percent by the company. In March 2002, the company changed its 401(k) savings plan and added an employee stock ownership plan (ESOP) feature to the existing plan. Employee before-tax contributions of up to 3 percent of eligible compensation are matched 100 percent by the company and employee before-tax contributions between 3 percent and 5 percent of eligible compensation are matched 50 percent by the company. The match is 100 percent vested immediately. Effective January 2003, the plan was amended to provide that all employee contributions which are invested in Ecolab stock will be part of the employee’s ESOP account while so invested. The company’s contributions are invested in Ecolab common stock and amounted to $14,854,000 in 2003, $12,905,000 in 2002 and

U.S. Pension Benefits

International Pension Benefits

U.S. Postretirement Health Care Benefits

2003

2002

2001

2003

2002

2003

2002

2001

Weighted-average actuarial

assumptions used to determine benefit obligations as of December 31:

Discount rate

6.25 % 6.75 % 7.50 % 5.39 % 5.42 % 6.25 % 6.75 % 7.50 % Projected salary increase

4.30 4.80

4.80 3.31

3.40

Weighted-average actuarial

assumptions used to determine net cost:

Discount rate

6.75 7.50

7.75 5.11

5.37 6.75

7.50 7.75

Expected return on plan assets

9.00 9.00

9.00 5.97

5.26 9.00 % 9.00 % 9.00 %

Projected salary increase

4.80 % 4.80 % 4.80 % 3.25 % 3.36 %

1-Percentage Point

(thousands)

Increase

Decrease

Effect on total of service and interest cost components

$ 593 $ (575 )

Effect on postretirement benefit obligation

10,115 (9,834 )

$9,491,000 in 2001.

47

NOTE 16 OPERATING SEGMENTS The company’s operating segments have generally similar products and services and the company is organized to manage its operations geographically. The company’s operating segments have been aggregated into three reportable segments.

The “United States Cleaning & Sanitizing” segment provides cleaning and sanitizing products and services to United States markets

through its Institutional, Kay, Textile Care, Professional Products, Vehicle Care, Water Care Services and Food & Beverage operations.

The “United States Other Services” 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 operations.

The company’s “International Cleaning & Sanitizing” segment provides cleaning and sanitizing product and service offerings to

international markets in Europe, Asia Pacific, Latin America and Canada. Effective November 30, 2001, Henkel-Ecolab’s total assets were included in the company’s International Cleaning & Sanitizing operations. European operating data has been included beginning in 2002.

Information on the types of products and services of each of the company’s operating segments is included on the inside front cover under

“Services/Products Provided” of the Ecolab Overview section of this Annual Report.

The company evaluates the performance of its international operations based on fixed management currency exchange rates. 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 of these notes to consolidated financial statements. The profitability of the company’s operating segments is evaluated by management based on operating income. Intersegment sales and transfers were not significant.

Financial information for each of the company’s reportable segments is as follows:

Consistent with the company’s internal management reporting, corporate operating income includes special charges recorded for 2003,

2002 and 2001. In addition, corporate expense includes an adjustment made for death benefits for retired executives in 2003 and corporate overhead costs directly related to the Henkel-Ecolab joint venture in 2001. Corporate assets are principally cash and cash equivalents.

The company has two classes of products and services within its United States and International Cleaning & Sanitizing operations which

comprise 10 percent or more of consolidated net sales. Sales of ware-washing products were approximately 23 percent, 23 percent and 26 percent of consolidated net sales in 2003, 2002 and 2001, respectively. Sales of laundry products and services were approximately 10 percent, 11 percent and 10 percent of consolidated net sales in 2003, 2002 and 2001, respectively. Sales of the Henkel-Ecolab operations acquired on November 30, 2001 are reflected in these percentages beginning in 2002.

Property, plant and equipment of the company’s United States and International operations were as follows:

United States

Other

(thousands)

Cleaning & Sanitizing

Other Services

Total United States

International Cleaning & Sanitizing

Foreign Currency

Translation

Corporate Consolidated

Net sales

2003

$ 1,694,323 $ 320,444

$ 2,014,767 $ 1,560,557

$ 186,495 $ 3,761,819

2002

1,615,171 308,329

1,923,500 1,497,935

(17,850 ) 3,403,585

2001

1,548,882 273,020

1,821,902 474,089

24,719 2,320,710

Operating income (loss)

2003

285,212 21,031

306,243 159,866

21,383 $ (4,834 ) 482,658

2002

271,838 33,051

304,889 138,373

(1,388 ) (46,008 ) 395,866

2001

246,936 29,338

276,274 44,575

2,268 (4,938 ) 318,179

Depreciation & amortization

2003

114,516 4,903

119,419 85,521

17,766 6,950

229,656

2002

112,303 4,615

116,918 105,765

(6,703 ) 7,448 223,428

2001

118,298 5,384

123,682 28,587

4,782 5,939

162,990

Total assets

2003

1,112,994 143,552

1,256,546 1,560,978

302,756 108,638

3,228,918

2002

1,067,226 129,498

1,196,724 1,423,309

173,497 72,377

2,865,907

2001

983,109 128,338

1,111,447 1,378,574

(39,377 ) 74,356 2,525,000

Capital expenditures

2003

117,361 3,726

121,087 80,271

10,536 141

212,035

2002

111,349 3,105

114,454 134,591

(36,777 ) 489 212,757

2001

$ 114,427 $ 6,911

$ 121,338 $ 33,628

$ 2,271 $ 700

$ 157,937

December 31 (thousands)

2003

2002

2001

United States

$ 404,209 $ 418,973

$ 424,478

International

288,951 230,196

219,807

Corporate

0 4,653

4,429

Effect of foreign currency translation

43,637 26,443

(4,391 )

48

Consolidated

$ 736,797 $ 680,265

$ 644,323

NOTE 17 CHANGE IN ACCOUNTING Effective January 1, 2002, the company adopted the provisions of SFAS No. 142, Goodwill and Other Intangible Assets . This statement discontinued the amortization of goodwill, subject to periodic impairment testing. The adjusted amounts shown below reflect the effect of retroactive application of the discontinuance of the amortization of goodwill as if the new method of accounting had been in effect during 2001. The adjusted information for 2001 presents the historical information prior to the acquisition of the former European joint venture.

Per share amounts do not necessarily sum due to rounding.

The company was required to test all existing goodwill for impairment as of January 1,2002 on a reporting unit basis. Generally, the company’s reporting units are its operating segments. Under SFAS No. 142, the fair value approach is used to test goodwill for impairment. This method differed from the company’s prior policy of using an undiscounted cash flows method for testing goodwill impairment. 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 were established using a discounted cash flow method. Where available and as appropriate, comparative market multiples were used to corroborate the results of the discounted cash flow method.

The result of testing goodwill for impairment in accordance with the adoption of SFAS No. 142, was a non-cash charge of $4.0 million

after tax, or $0.02 per share, which is reported on the accompanying consolidated statement of income as a cumulative effect of a change in accounting in 2002. The impairment charge relates to the Africa/Export operations, which is part of the International Cleaning & Sanitizing reportable segment. The primary factor resulting in the impairment charge was the difficult economic environment in the region.

Under SFAS No. 142, goodwill must be tested annually for impairment. Based on the company’s testing in 2003 and 2002, there has been

no additional impairment of goodwill. The company performs its annual goodwill impairment test during the second quarter. If circumstances change significantly within a reporting unit, the company would test it for impairment prior to the annual test for impairment.

49

As Reported

Adjusted

(thousands, except per share)

2003

2002

2001

Reported net income

$ 277,348 $ 209,770

$ 188,170

Goodwill amortization (net of tax)

18,471

Adjusted net income

$ 277,348 $ 209,770

$ 206,641

Basic earnings per share Net income, as reported

$ 1.07 $ 0.81

$ 0.74

Goodwill amortization (net of tax)

— —

0.07

Adjusted basic earnings per share

$ 1.07 $ 0.81

$ 0.81

Diluted earnings per share Net income, as reported

$ 1.06 $ 0.80

$ 0.72

Goodwill amortization (net of tax)

— —

0.07

Adjusted diluted earnings per share

$ 1.06 $ 0.80

$ 0.80

NOTE 18 QUARTERLY FINANCIAL DATA (UNAUDITED)

(thousands, except per share)

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Year

2003

Net sales

United States Cleaning & Sanitizing

$ 417,299 $ 430,901

$ 444,791 $ 401,332

$ 1,694,323

United States Other Services

73,329 82,963

83,497 80,655

320,444

International Cleaning & Sanitizing

360,558 389,596

399,967 410,436

1,560,557

Effect of foreign currency translation

24,666 43,275

54,511 64,043

186,495

Total

875,852 946,735

982,766 956,466

3,761,819

Cost of sales (including special charges (income) of $(45) and $(31) in first and fourth quarters)

430,482 466,734

478,163 469,823

1,845,202

Selling, general and administrative expenses

344,033 358,783

357,923 372,812

1,433,551

Special charges (income)

(197 ) (147 ) 1,224 (472 ) 408

Operating income

United States Cleaning & Sanitizing

69,906 71,943

82,472 60,891

285,212

United States Other Services

3,647 6,785

8,755 1,844

21,031

International Cleaning & Sanitizing

25,717 38,147

48,694 47,308

159,866

Corporate

242 106

(1,184 ) (3,998 ) (4,834 ) Effect of foreign currency translation

2,022 4,384

6,719 8,258

21,383

Total

101,534 121,365

145,456 114,303

482,658

Gain on sale of equity investment

— —

10,877 228

11,105

Interest expense, net

10,703 11,752

12,051 10,839

45,345

Income before income taxes

90,831 109,613

144,282 103,692

448,418

Provision for income taxes

35,513 42,458

56,843 36,256

171,070

Net income

$ 55,318 $ 67,155

$ 87,439 $ 67,436

$ 277,348

Basic net income per common share

$ 0.21 $ 0.26

$ 0.34 $ 0.26

$ 1.07

Diluted net income per common share

$ 0.21 $ 0.25

$ 0.33 $ 0.26

$ 1.06

Weighted-average common shares outstanding

Basic

260,448 261,246

258,694 257,428

259,454

Diluted

263,637 264,553

261,609 260,628

262,737

2002

Net sales

United States Cleaning & Sanitizing

$ 392,349 $ 402,113

$ 426,339 $ 394,370

$ 1,615,171

United States Other Services

70,490 78,824

81,629 77,386

308,329

International Cleaning & Sanitizing

340,933 373,151

380,328 403,523

1,497,935

Effect of foreign currency translation

(17,663 ) (14,858 ) 6,570 8,101

(17,850 ) Total

786,109 839,230

894,866 883,380

3,403,585

Cost of sales (including special charges of $5,184, $1,908, $301 and $1,584 in first, second, third and fourth quarters)

395,945 413,425

434,195 444,032

1,687,597

Selling, general and administrative expenses

304,945 315,363

327,666 335,117

1,283,091

Special charges

12,296 11,818

2,109 10,808

37,031

Operating income

United States Cleaning & Sanitizing

64,940 68,979

80,361 57,558

271,838

United States Other Services

5,262 9,224

10,761 7,804

33,051

International Cleaning & Sanitizing

21,402 35,360

41,711 39,900

138,373

Corporate

(17,480 ) (13,726 ) (2,411 ) (12,391 ) (46,008 ) Effect of foreign currency translation

(1,201 ) (1,213 ) 474 552

(1,388 ) Total

72,923 98,624

130,896 93,423

395,866

Interest expense, net

10,512 11,955

10,988 10,440

43,895

Income from continuing operations before income taxes

62,411 86,669

119,908 82,983

351,971

Provision for income taxes

25,370 35,008

47,826 31,877

140,081

Income from continuing operations before change in accounting

37,041 51,661

72,082 51,106

211,890

Change in accounting for goodwill

(4,002 ) (4,002 )

Gain from discontinued operations

1,882 1,882

Net income

$ 34,921 $ 51,661

$ 72,082 $ 51,106

$ 209,770

Basic income per common share

Income from continuing operations

$ 0.14 $ 0.20

$ 0.28 $ 0.20

$ 0.82

Change in accounting for goodwill

(0.02 ) (0.02 )

Gain from discontinued operations

0.01 0.01

Special charges are included in corporate operating income. Per share amounts do not necessarily sum due to changes in share outstanding and rounding.

50

Net income

0.14 0.20

0.28 0.20

0.81

Diluted income per common share

Income from continuing operations

0.14 0.20

0.28 0.19

0.81

Change in accounting for goodwill

(0.02 ) (0.02 )

Gain from discontinued operations

0.01 0.01

Net income

$ 0.13 $ 0.20

$ 0.28 $ 0.19

$ 0.80

Weighted-average common shares outstanding

Basic

256,812 257,810

258,575 259,391

258,147

Diluted

260,361 261,225

261,223 262,416

261,574

management and auditors’ reports REPORT OF MANAGEMENT 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.

To meet its responsibility, management has established and maintains a system of internal controls that provides reasonable assurance regarding the integrity and reliability of the financial statements and the protection of assets from unauthorized use or disposition. These systems are supported by qualified personnel, by an appropriate division of responsibilities and by an internal audit function. There are limits inherent in any system of internal controls since the cost of monitoring such systems should not exceed the desired benefit. Management believes that the company’s system of internal controls is effective and provides an appropriate cost/benefit balance.

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 accountants, subject to ratification by the shareholders. It meets regularly with management, the internal auditors and the independent auditors.

The independent auditors provide an objective, independent review as to management’s discharge of its responsibilities insofar as they

relate to the fair presentation of the consolidated financial statements. Their report is presented separately.

Allan L. Schuman Chairman of the Board and Chief Executive Officer

Steven L. Fritze Executive Vice President and Chief Financial Officer REPORT OF INDEPENDENT AUDITORS To the Shareholders and Directors Ecolab Inc. In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, of comprehensive income and shareholders’ equity and of cash flows present fairly, in all material respects, the consolidated financial position of Ecolab Inc. as of December 31, 2003, 2002 and 2001, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of Ecolab Inc.’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes 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. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 17 to the consolidated financial statements, Ecolab Inc. changed the manner in which it accounts for goodwill and other intangible assets as of January 1, 2002.

PricewaterhouseCoopers LLP Minneapolis, Minnesota February 26, 2004

51

summary operating and financial data

December 31 (thousands, except per share)

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

OPERATIONS

Net sales

United States

$ 2,014,767

$ 1,923,500 $ 1,821,902

$ 1,746,698 $ 1,605,385

$ 1,429,711 $ 1,251,517

$ 1,127,281 $ 1,008,910

$ 923,667 $ 850,648

International (at

average rates of currency exchange during the year)

1,747,052 1,480,085

498,808 483,963

444,413 431,366

364,524 341,231

310,755 265,544

234,981

Total

3,761,819 3,403,585

2,320,710 2,230,661

2,049,798 1,861,077

1,616,041 1,468,512

1,319,665 1,189,211

1,085,629

Cost of sales (including special charges (income) of $(76) in 2003, $8,977 in 2002, $(566) in 2001 and $1,948 in 2000)

1,845,202

1,687,597 1,120,254

1,056,263 963,476

874,793 745,256

694,791 622,342

550,308 505,836

Selling, general and

administrative expenses

1,433,551

1,283,091 881,453

851,995 796,371

724,304 652,281

588,404 534,637

493,939 450,342

Special charges, sale of

business and merger expenses

408 37,031

824 (20,736 )

8,000

Operating income

482,658 395,866

318,179 343,139

289,951 261,980

218,504 185,317

162,686 136,964

129,451

Gain on sale of equity investment

11,105

Interest expense, net

45,345 43,895

28,434 24,605

22,713 21,742

12,637 14,372

11,505 12,909

21,384

Income from continuing operations before income taxes, equity earnings and changes in accounting principle

448,418

351,971 289,745

318,534 267,238

240,238 205,867

170,945 151,181

124,055 108,067

Provision for income

taxes

171,070 140,081

117,408 129,495

109,769 101,782

85,345 70,771

59,694 50,444

33,422

Equity in earnings of Henkel-Ecolab

15,833 19,516

18,317 16,050

13,433 13,011

7,702 10,951

8,127

Income from continuing operations

277,348

211,890 188,170

208,555 175,786

154,506 133,955

113,185 99,189

84,562 82,772

Gain from discontinued

operations 1,882

38,000

Changes in accounting principles

(4,002 ) (2,428 )

715

Net income, as reported

277,348 209,770

188,170 206,127

175,786 192,506

133,955 113,185

99,189 84,562

83,487

Adjustments 18,471

17,762 16,631

14,934 11,195

10,683 8,096

12,757 3,658

Adjusted net income

$ 277,348 $ 209,770

$ 206,641 $ 223,889

$ 192,417 $ 207,440

$ 145,150 $ 123,868

$ 107,285 $ 97,319

$ 87,145

Income per common share, as reported

Basic - continuing

operations

$ 1.07 $ 0.82

$ 0.74 $ 0.82

$ 0.68 $ 0.60

$ 0.52 $ 0.44

$ 0.38 $ 0.31

$ 0.31

Basic - net income

1.07 0.81

0.74 0.81

0.68 0.75

0.52 0.44

0.38 0.31

0.31

Diluted - continuing operations

1.06

0.81 0.72

0.79 0.65

0.58 0.50

0.43 0.37

0.31 0.30

Diluted - net income

1.06

0.80 0.72

0.78 0.65

0.72 0.50

0.43 0.37

0.31 0.30

Adjusted income per

common share

Basic - continuing operations

1.07

0.82 0.81

0.89 0.74

0.66 0.56

0.48 0.41

0.36 0.32

Basic - net income

1.07

0.81 0.81

0.88 0.74

0.80 0.56

0.48 0.41

0.36 0.32

Diluted - continuing

operations

1.06 0.81

0.80 0.86

0.72 0.63

0.54 0.47

0.40 0.35

0.31

Diluted - net income

$ 1.06 $ 0.80

$ 0.80 $ 0.85

$ 0.72 $ 0.77

$ 0.54 $ 0.47

$ 0.40 $ 0.35

$ 0.32

Weighted-average common shares outstanding – basic

259,454

258,147 254,832

255,505 259,099

258,314 258,891

257,983 264,387

270,200 270,112

Weighted-average

common shares outstanding – diluted

262,737

261,574 259,855

263,892 268,837

268,095 267,643

265,634 269,912

274,612 274,842

SELECTED INCOME

STATEMENT RATIOS

Gross profit

50.9 % 50.4 % 51.7 % 52.6 % 53.0 % 53.0 % 53.9 % 52.7 % 52.8 % 53.7 % 53.4 %

Selling, general and administrative expenses

38.1

37.7 38.0

38.2 38.9

38.9 40.4

40.1 40.5

41.5 41.5

Operating income

12.8

11.6 13.7

15.4 14.1

14.1 13.5

12.6 12.3

11.5 11.9

Income from continuing

operations before income taxes

11.9

10.3 12.5

14.3 13.0

12.9 12.7

11.6 11.5

10.4 10.0

Income from continuing

operations

7.4 6.2

8.1 9.3

8.6 8.3

8.3 7.7

7.5 7.1

7.6

Effective income tax rate

38.1 % 39.8 % 40.5 % 40.7 % 41.1 % 42.4 % 41.5 % 41.4 % 39.5 % 40.7 % 30.9 %

FINANCIAL

POSITION

Current assets

$ 1,150,340 $ 1,015,937

$ 929,583 $ 600,568

$ 577,321 $ 503,514

$ 509,501 $ 435,507

$ 358,072 $ 401,179

$ 311,051

Property, plant and equipment, net

736,797

680,265 644,323

501,640 448,116

420,205 395,562

332,314 292,937

246,191 219,268

Investment in Henkel-

Ecolab 199,642

219,003 253,646

239,879 285,237

302,298 284,570

255,804

Goodwill, intangible and other assets

1,341,781 1,169,705

951,094 412,161

341,506 293,630

271,357 155,351

107,573 88,416

105,607

Total assets

$ 3,228,918 $ 2,865,907

$ 2,525,000 $ 1,714,011

$ 1,585,946 $ 1,470,995

$ 1,416,299 $ 1,208,409

$ 1,060,880 $ 1,020,356

$ 891,730

Current liabilities

$ 851,942 $ 853,828

$ 827,952 $ 532,034

$ 470,674 $ 399,791

$ 404,464 $ 327,771

$ 310,538 $ 253,665

$ 201,498

Long-term debt

604,441 539,743

512,280 234,377

169,014 227,041

259,384 148,683

89,402 105,393

131,861

Postretirement health care and pension benefits

249,906

207,596 183,281

117,790 97,527

85,793 76,109

73,577 70,666

70,882 72,647

Other liabilities

227,203

164,989 121,135

72,803 86,715

67,829 124,641

138,415 133,616

128,608 93,917

Shareholders’ equity

1,295,426 1,099,751

880,352 757,007

762,016 690,541

551,701 519,963

456,658 461,808

391,807

Total liabilities and shareholders’ equity

$ 3,228,918 $ 2,865,907

$ 2,525,000 $ 1,714,011

$ 1,585,946 $ 1,470,995

$ 1,416,299 $ 1,208,409

$ 1,060,880 $ 1,020,356

$ 891,730

SELECTED CASH FLOW

The former Henkel-Ecolab is included as a consolidated subsidiary effective November 30, 2001. Adjusted results for 1993 through 2001 reflect the effect of retroactive application of the discontinuance of the amortization of goodwill as if SFAS No. 142 had been in effect since January 1, 1993. For 1993 through 1994 the adjustments also reflect adjustments to eliminate unusual items associated with Ecolab’s acquisition of Kay Chemical Company in December 1994. All per share, shares outstanding and market price data reflect the two-for-one stock splits declared in 2003,1997 and 1993. Return on beginning equity is net income divided by beginning shareholders’ equity.

52 - 53

EXHIBIT (21)

Registrant

ECOLAB INC.

INFORMATION

Cash provided by operating activities

$ 529,199

$ 423,326 $ 364,481

$ 315,486 $ 293,494

$ 235,642 $ 235,098

$ 254,269 $ 166,463

$ 169,346 $ 175,674

Depreciation and

amortization

229,656 223,428

162,990 148,436

134,530 121,971

100,879 89,523

76,279 66,869

60,609

Capital expenditures

212,035 212,757

157,937 150,009

145,622 147,631

121,667 111,518

109,894 88,457

68,321

Cash dividends declared per common share

$ 0.2975

$ 0.2750 $ 0.2625

$ 0.2450 $ 0.2175

$ 0.1950 $ 0.16750

$ 0.1450 $ 0.1288

$ 0.1138 $ 0.0988

SELECTED

FINANCIAL MEASURES/OTHER

Total debt

$ 674,644

$ 699,842 $ 745,673

$ 370,969 $ 281,074

$ 295,032 $ 308,268

$ 176,292 $ 161,049

$ 147,213 $ 151,281

Total debt to

capitalization

34.2 % 38.9 % 45.9 % 32.9 % 26.9 % 29.9 % 35.8 % 25.3 % 26.1 % 24.2 % 27.9 % Book value per common

share

$ 5.03 $ 4.23

$ 3.44 $ 2.98

$ 2.94 $ 2.67

$ 2.14 $ 2.01

$ 1.76 $ 1.71

$ 1.45

Return on beginning equity

25.2 % 23.8 % 24.9 % 27.1 % 25.5 % 34.9 % 25.8 % 24.8 % 21.5 % 21.6 % 23.3%

Dividends per share/diluted net income per common share

28.1 % 34.4 % 36.2 % 31.4 % 33.2 % 27.1 % 33.5 % 34.1 % 35.3 % 36.7 % 32.4%

Annual common stock price range

$ 27.92-23.08

$ 25.20-18.27 $ 22.10-14.25

$ 22.85-14.00 $ 22.22-15.85

$ 19.00-13.07 $ 14.00-9.07

$ 9.88-7.28 $ 7.94-5.00

$ 5.88-4.82 $ 5.96-4.54

Number of employees

20,826 20,417

19,326 14,250

12,870 12,007

10,210 9,573

9,026 8,206

7,822

Name of Affiliate

State or Other Jurisdiction of Incorporation

Percentage of

Ownership

Ecolab (Antigua) Ltd.

Antigua

100

Ecolab S.A.

Argentina

100

Ecolab Australia Pty Ltd.

Australia

100

Ecolab Finance Pty Ltd.

Australia

100

Ecolab Pty Ltd.

Australia

100

Ecolab Water Care Services Pty Limited

Australia

100

Gibson Chemical Industries Pty Ltd.

Australia

100

Gibson Chemicals (NSW) Pty Limited

Australia

100

Gibson Chemicals Fiji Pty Limited

Australia

100

Gibson Chemicals Great Britain Pty Limited

Australia

100

Gibson Chemicals Pty Limited

Australia

100

Vessey Chemicals (Holdings) Pty Limited

Australia

95

Vessey Chemicals Pty Limited

Australia

100

Vessey Chemicals (Vic.) Pty Limited

Australia

100

Ecolab Ges.m.b.H

Austria

100

Ecolab Holding Europe GmbH

Austria

100

Ecolab Limited

Bahamas

100

Ecolab (Barbados) Limited

Barbados

100

Ecolab B.V.B.A./S.P.R.L.

Belgium

100

Kay N.V.

Belgium

100

Ecolab Emprecendimentos E Participacoes Ltda.

Brazil

100

Ecolab Quimica Ltda.

Brazil

100

Name of Affiliate

State or Other Jurisdiction of Incorporation

Percentage of

Ownership

Ecolab EOOD

Bulgaria

100

Ecolab Co.

Canada

100

Ecolabone ULC

Canada

100

Ecolab Canada L.P.

Canada

100

Ecolab (Ontario) Holdings Ltd.

Canada

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

Ecolab, S.A. de C.V.

El Salvador

100

Oy Ecolab AB

Finland

100

ABP SA

France

100

Aedes SA

France

100

Aidamort SA

France

100

Artois Chimie SA

France

100

Alpha Holding S.A.S.

France

100

Amboile Services SA

France

100

Amperia SARL

France

100

Assainissement Charpentes Batiment SA

France

100

Biophyte SARL

France

100

Name of Affiliate

State or Other Jurisdiction of Incorporation

Percentage of

Ownership

Blue River SA

France

100

Centre de Dératisation et de Désinsectisation SARL

France

100

Centre Régional de Désinfectisation et de Dératisation SAS

France

100

Compagnie Française de Services SARL

France

100

Ecolab SAS

France

100

Ecolab SNC

France

100

Etablissements Enval et Cie SARL

France

100

Ets Lorillou SA

France

100

Figap SARL

France

100

France Nuisibles SARL

France

100

HIE Piguy SA

France

100

Hygiene Champenoise SA

France

100

Hygiène Service SAS

France

100

L’hygiene De l’Est SA

France

100

Laboratoires Aufra SA

France

100

Lorillou Hygiene SA

France

100

Muliser SA

France

100

Nicol Hygiene SARL

France

100

Nigiko SA

France

100

Omniser SARL

France

100

Paragerm SNC

France

100

Sanigiène SARL

France

100

SCI Aphomia

France

100

SCI Dugard

France

100

Name of Affiliate

State or Other Jurisdiction of Incorporation

Percentage of

Ownership

SCI Dumoulin

France

100

SCI Eliomys

France

100

SCI Erebia

France

100

SCI La Louvette

France

100

SCI Marco

France

100

SCI Orly

France

100

SCI Société Civile Immobilière de la Source Hodan

France

100

SNC Parly

France

100

Société des Eaux de Sources des Roches SA

France

100

Bionagro Natureprodukte GmbH

Germany

100

Ecolab Asset Administration GmbH & Co. KG

Germany

100

Ecolab Beteiligungs GmbH

Germany

100

Ecolab Deutschland Holding GmbH & Co. OHG

Germany

100

Ecolab Export GmbH

Germany

100

Ecolab GmbH

Germany

100

Ecolab GmbH & Co. OHG

Germany

100

Ecolab Management GmbH

Germany

100

Ecolab NFK Beteilgungen Management GmbH

Germany

100

Ecolab NFK R&D GmbH & Co. OHG

Germany

100

Ecolab NFK R&D Verwaltungs GmbH

Germany

100

Lang Apparatebau GmbH

Germany

100

Lang Engineering GmbH

Germany

100

Lang Hygiene Systeme GmbH

Germany

100

Ecolab A.E.B.E.

Greece

100

Name of Affiliate

State or Other Jurisdiction of Incorporation

Percentage of

Ownership

Ecolab, Sociedad Anonima

Guatemala

100

Peter Cox Insurance Services Limited

Guernsey

100

Quimicas Ecolab, S.A.

Honduras

100

Ecolab Limited

Hong Kong

100

Ecolab Holding Hungary Ltd.

Hungary

100

Ecolab Hygiene Kft.

Hungary

100

P.T. Ecolab Indonesia

Indonesia

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

Elton Chemical Srl

Italy

100

Ecolab Holding Italy Srl

Italy

100

Ecolab Srl

Italy

100

Findesadue Srl

Italy

80

H. E. Distribution 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

Name of Affiliate

State or Other Jurisdiction of Incorporation

Percentage of

Ownership

Ecolab Sdn Bhd

Malaysia

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 (Proprietary) Limited

Namibia

100

Ecolab Finance N.V.

Netherlands Antilles (Curacao)

100

Ecolabtwo B.V.

Netherlands

100

Ecolab Holdings B.V.

Netherlands

100

Ecolab International B.V.

Netherlands

100

Ecolab B.V.

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

85

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 / Montenegro

100

Ecolab Pte. Ltd.

Singapore

100

Ecolab s.r.o.

Slovak Republic

100

Ecolab d.o.o.

Slovenia

100

Ecolab (Proprietary) Ltd.

South Africa

100

Name of Affiliate

State or Other Jurisdiction of Incorporation

Percentage of

Ownership

Ecolab Hispano-Portuguesa, S.A.

Spain

100

Ecolab (St. Lucia) Limited

St. Lucia

100

Ecolab AB

Sweden

100

Ecolab GmbH

Switzerland

100

Ecolab Ltd.

Taiwan

100

Ecolab East Africa (Tanzania) Limited

Tanzania

100

Ecolab Ltd.

Thailand

100

Ecolab Temizleme Sistemleri A.S.

Turkey

100

Ecolab East Africa (Uganda) Limited

Uganda

100

Ecolab LLC

Ukraine

100

Ecolab Limited

United Kingdom

100

Ecolab Services Limited

United Kingdom

100

Ecolab (U.K.) Holdings Limited

United Kingdom

100

LHS (UK) Limited

United Kingdom

100

Ecolab S. A.

Uruguay

100

Ecolab Foreign Sales Corp.

U.S. Virgin Islands

100

Ecolab S.A.

Venezuela

74

Ecolab Zimbabwe (Pvt) Ltd.

Zimbabwe

100

United States

Daydots Inc.

Delaware

100

Ecolabone LLC

Delaware

100

Ecolabtwo LLC

Delaware

100

Ecolabthree LLC

Delaware

100

Ecolabfour LLC

Delaware

100

Certain additional subsidiaries, which are not significant in the aggregate, are not shown.

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 TIMOTHY P. DORDELL and LAWRENCE T. BELL, 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, 2002, 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 28 th day of February, 2004.

Name of Affiliate

State or Other Jurisdiction of Incorporation

Percentage of

Ownership

Ecolabfive LLC

Delaware

100

Ecolabsix LLC

Delaware

100

Ecolabseven LLC

Delaware

100

Ecolab Finance Inc.

Delaware

100

Ecolab Finance (Australia) Inc.

Delaware

100

Ecolab Holdings Inc.

Delaware

100

Ecolab Holdings (Europe) Inc.

Delaware

100

Ecolab Investment Inc.

Delaware

100

Ecolab Israel Holdings LLC

Delaware

100

Ecolab Leasing Corporation

Delaware

100

Ecolab Manufacturing Inc.

Delaware

100

Ecolab Marketing LLC

Delaware

100

Facilitec Inc.

Delaware

100

GCS Service, Inc.

Delaware

100

Ecolab Foundation

Minnesota

100

Kay Chemical Company

North Carolina

100

Kay Chemical International, Inc.

North Carolina

100

ProForce Inc.

North Carolina

100

SSDC, Inc.

Texas

100

/s/Les S. Biller

Les S. Biller

/s/Jerry A. Grundhofer

Jerry A. Grundhofer

/s/Stefan Hamelmann

Stefan Hamelmann

/s/James J. Howard

James J. Howard

IN WITNESS WHEREOF, I have hereunto affixed my signature this 29 th day of February, 2004.

EXHIBIT (31)

CERTIFICATIONS

I, Allan L. Schuman, 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)) 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) 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

(c) 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

/s/William L. Jews

William L. Jews

/s/Joel W. Johnson

Joel W. Johnson

/s/Jochen Krautter

Jochen Krautter

/s/Ulrich Lehner

Ulrich Lehner

/s/Jerry W. Levin

Jerry W. Levin

/s/Robert L. Lumpkins

Robert L. Lumpkins

/s/Douglas M. Baker, Jr.

Douglas M. Baker, Jr.

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: March 5, 2004

/s/Allan L. Schuman

Allan L. Schuman

Chairman of the Board and Chief Executive Officer

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)) 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) 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

(c) 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: March 5, 2004

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, 2003 (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.

1

EXHIBIT (99)A

Code of Conduct

The Fabric

Of Our Company

i

/s/Steven L. Fritze

Steven L. Fritze

Executive Vice President and Chief Financial Officer

Dated: March 5, 2004 /s/Allan L. Schuman

Allan L. Schuman

Chairman of the Board and Chief Executive Officer

Dated: March 5, 2004 /s/Steven L. Fritze

Steven L. Fritze

Executive Vice President and Chief Financial Officer

Table of Contents

i

Upholding the Code of Conduct

Enforcing the Code

Conducting Ecolab Business

Working with Customers

Working with Suppliers, Agents and Consultants

Contact with Competitors

General

Comparisons with Competition

Gathering Competitor Information

Legal Compliance

Working with Government Officials

Outside the United States

Doing Business with the United States Government

Lobbying Government Officials

Working with Each Other

Equal Employment Opportunity

Workplace Respect

Entertainment/Gifts and Monetary Payments

Customers

Suppliers

Payments for Goods or Services Outside the United States

Payments to Employees Working Outside the United States

Accounting/Financial and Corporate Information

ii

Securities

Antitrust

General

Compliance

Implementation

International Operations

Transacting Business Globally

Compliance with United States Anti boycott Laws

Compliance with Export Control Laws

Compliance with Customs Laws and Regulations

Political Contributions

Protecting the Environment

Your Responsibility to Ecolab

Dealing Honestly

Safeguarding Assets

Avoiding Conflict of Interest

Gifts and Entertainment

Insider Trading

Outside Employment

Outside Directorships and Investments

Speculation or Competition with Ecolab

Purchases from Employees or Family Members

Government Service

Complying with the Code

Upholding the Code of Conduct

Our “Quest for Excellence” provides a clear, ethical standard of conduct: Our Company’s business will be conducted in accordance with the law and stated corporate and societal standards of conduct . It follows that, as employees, we are held to the highest standard of integrity, and are expected to avoid situations which conflict with our Company responsibilities.

The Code of Conduct is a set of guidelines which are intended to assist in making decisions on behalf of Ecolab and in avoiding

conflicts of interest. No guidelines can be all-inclusive. However, the guidelines which follow are particularly important.

Ultimately, the responsibility for proper conduct rests with each of us. There is no substitute for personal integrity and good judgment. When faced with a difficult situation, consider these questions:

• Is my action or decision the right thing to do?

• Could my action or decision withstand public review?

• Will my action or decision protect Ecolab’s reputation as an ethical company?

If the answer to each question is “yes,” the action or decision is probably the correct one.

Do not hesitate to ask your supervisor or a more senior manager if you have questions concerning our Code of Conduct . The Ecolab

Law Department (651-293-2836) should also be asked to help interpret or apply the Code in general, or in a specific situation. 1

Reference to Ecolab or the Company in the Code of Conduct means Ecolab Inc. and all majority-owned United States and

international subsidiaries and joint ventures, unless stated otherwise. Enforcing the Code

Failure to comply with the standards contained in the Code will result in appropriate discipline of the offending employee, up to and including termination, referral for criminal prosecution, and restitution for any losses or damages resulting from the violation.

Disciplinary action will be taken:

• If you authorize or participate directly in actions which are a violation of the Code ;

• If you deliberately fail to report a violation or deliberately withhold relevant and material information concerning a violation of

the Code ;

• Against a supervisor, to the extent that the circumstances of the violation reflect inadequate supervision or a lack of diligence;

• Against any employee who retaliates, directly or indirectly, or encourages others to do so, against the person who reports a violation of the Code .

Nothing in the Code is intended to create enforceable employee contract rights

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Conducting Ecolab Business

Conducting the business of Ecolab means that we deal with a variety of people and organizations including customers, suppliers, competitors, community and government representatives, and other employees. These relationships will be based on honesty and fairness. We will be truthful in representing Ecolab.

Working with Customers

The company that fails its customers, fails! We will stay close to our customers, tell them the truth and earn their business every day. There will be no bribes, illegal payments or pricing practices. We will only promise what we can deliver. Our services, products and systems will be truthfully represented and ethically sold.

Working with Suppliers , Agents and Consultants

We will obtain materials, supplies, equipment, consulting and other services at the lowest total cost from suppliers who are able to meet Ecolab quality and service requirements. Source selection, negotiation, determination of contract awards and the administration of all purchasing activities will be ethically conducted. Mutually beneficial relationships with reliable suppliers and consultants will be sought.

Competition will be encouraged and maintained. Compliance with applicable government regulations and Company policies and

procedures is required.

Payments to agents, consultants, brokers, professionals or other parties representing Ecolab must be limited to reasonable compensation for services rendered plus

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reimbursement for legitimate expenses incurred. Contracts entered into with these parties will fully disclose the fees to be paid and the services to be rendered, and will require compliance with the Code of Conduct . No one may be hired by Ecolab to make payments or take any action which would be in conflict with any provisions of the Code .

Contact with Competitors General

The basic policy is for Ecolab employees to have no inappropriate contacts with our competitors. That way, we comply with the law and also maintain full independence and freedom to act. Any business activity which involves repeated or unusual contact with competitors - whether at meetings, in telephone calls or by correspondence - must be approved by your supervisor and the Law Department.

Also avoid unfair acts against competitors. Prohibited activities include:

• Threats and harassment, physical abuse, and equipment tampering directed against a competitor;

• Unlawfully interfering with an existing contractual relationship between a competitor and its customer; and

• Raiding key employees with the intent to drive a competitor out of business.

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Conducting Ecolab Business Comparisons with Competition

Ecolab sells its services and systems on merit - not by making false or misleading comparisons with the competition. Specifically, in comparing Ecolab to the competition, we will not intentionally:

• Misappropriate or misuse the trade names or trademarks of a competitor;

• Make false or misleading statements about a competitor or its products, business practices, financial status or reliability; or

• Engage in false or misleading advertising.

Gathering Competitor Information

Ecolab keeps up with competitive developments and reviews all pertinent public information concerning competitors. Information

about competitors is collected from a variety of legitimate sources to help evaluate our products, services and marketing methods. Proper sources include information from customers or which is published or in the public domain, or information or product samples lawfully received from the owner or from an authorized third party.

Ecolab respects the trade secrets of others. There are limits to the ways that information can be ethically acquired and used.

Espionage, burglary, wire tapping 5

and stealing are wrong. But so is hiring a competitor’s employees solely to get confidential information. So is gaining unauthorized access to electronic mail or other confidential competitor communications.

If possession is gained of competitor information that is marked confidential, or which is believed to be confidential, consult with the

Law Department immediately. Legal Compliance

A number of laws apply to dealings with competitors and the use of competitive information. Some impose harsh criminal penalties on employees and all impose substantial financial fines on both employees and their employers.

Whether specific conduct is lawful or violates the rights of a competitor or violates Ecolab’s Code of Conduct , will depend upon an

analysis of each situation. Before acting, especially before hiring former or current employees of Ecolab competitors, consult the Law Department. Also see Antitrust, page 18.

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Working with Government Officials Outside the United States

Ecolab is prohibited by United States law from directly or indirectly offering, promising to pay or authorizing the payment of money or anything of value to a government official, employee or politician (“official”) outside the United States for the purpose of:

• Influencing the acts or decisions of that official;

• Inducing that official to act or fail to act in violation of his or her lawful duties; or

• Inducing the official to use his or her influence to assist in obtaining or retaining business, or for directing business to any person.

Intermediaries, such as affiliates, agents, consultants or distributors, also may not be used to channel payments to officials outside the

United States.

A payment of a nominal amount to a low-ranking government employee outside the United States, made to expedite or secure the performance of a routine government action, might not violate United States law if Ecolab can prove that such a payment is made for the purpose of expediting (rather than influencing) that particular decision. A “routine government action” is a non-discretionary function or service which the low- ranking government employee is obliged to perform as part of his or her responsibilities. Examples of such

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services would be the issuing of visas or customs documents. However, such a “facilitating” payment could well violate other laws or damage Ecolab’s reputation. Therefore, such a payment is discouraged.

If absolutely necessary, such payment should be made only after consultation with the senior corporate officer in charge of

Ecolab’s international operations and with the Law Department. Any such payment must be properly accounted for in the corporate books and records.

Doing Business with the United States Government

Special Nature of Government Business : To ensure receiving the best goods and services for the taxpayer’s money, the United States government has imposed stringent requirements on contractors with which it does business. We will maintain strict compliance in transacting business with the United States government. Once a contract is awarded, all contract terms will be met. No deviations or substitutions will be made without the appropriate notice to or approval of the authorized official.

Contract Negotiation and Pricing : Doing business with the United States government usually requires Ecolab to submit complete,

current and accurate pricing and other factual information as part of contract negotiations. Discrepancies can lead to financial penalties and possible criminal charges against the Company and the individuals involved.

During the negotiation process, we will explain the significance of all important facts concerning a contract proposal and be prepared

to certify the accuracy of the information provided. Extra care will be taken in preparing submissions to the government. Any changes affecting pricing data will be reported immediately to Contract Sales.

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Product Specifications and Testing : All materials and processes will conform to the specifications called for in the contract. Any

change from the contract’s requirements must have the approval of an authorized government official.

Hiring of United States Officials : The government has enacted specific rules to eliminate even the appearance of a conflict of interest by officials who leave government employment and go to work for government contractors. Clearance from Human Resources is required prior to employing, or hiring as a consultant, any official currently or recently employed by the government, whether military or civilian.

No Gifts, Meals or Gratuities : Normal business courtesies in the commercial marketplace can be construed as an attempt to

improperly influence someone in the government marketplace in the United States. Therefore, no Ecolab employee shall provide anything of value to a federal government customer, contractor or employee of such customer or contractor:

• For the purpose of influencing the award, renewal or modification of a contract;

• In exchange for some official act; or • To secure or reward favorable treatment in connection with procurement activities.

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Any type of gratuity for employees of federal government customers, including but not limited to meals, refreshments, travel or

lodging expenses, is prohibited. Whenever you and government personnel participate in a joint endeavor, government personnel must pay their fair share.

Rules may also be in effect by state, local and other national governments governing the acceptance of business courtesies such as

meals and refreshments. These rules must be observed.

Employees involved with government contracts must be familiar with the Federal Government Contracts, Policies, and Procedures Manual.

Lobbying Government Officials

All lobbying activities, offering testimony or making similar, major contacts with government personnel in the United States on behalf of Ecolab must be coordinated in advance by the corporate officer in charge of Public Affairs. Outside the United States, all activities that might constitute lobbying or attempts to influence government officials should first be reviewed with subsidiary management and legal counsel.

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Working with Each Other

The intrinsic worth and dignity of each employee must be respected. Conduct which subtracts from that worth and dignity is contrary to Ecolab’s culture.

Equal Employment Opportunity

Employees and applicants for employment will be evaluated on a non-discriminatory basis. Ecolab hires, compensates and promotes associates on the basis of their qualifications and performance. Only those criteria which are relevant to the job will be considered.

Ecolab has in place a proactive set of programs in order to ensure that we meet our objective to provide equal employment

opportunity. Workplace Respect

Respect for each other is basic to Ecolab’s culture. Regardless of where it occurs, behavior that disrupts the productive work environment of our associates threatens the teamwork vital to Ecolab’s success. Each of us must help ensure that our work environment is respectful and free from abusive behavior and harassment. Behavior that violates this policy must be reported and addressed.

As part of this policy, we will maintain a work environment free of sexual harassment. Generally, sexual harassment, regardless of

intent, is direct or indirect, unwelcome, physical or verbal conduct of a sexual nature. Such harassment by any manager, employee, supervisor, customer or supplier of Ecolab will not be tolerated.

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Entertainment/Gifts and Monetary Payments Customers

Sales of Ecolab products and services, whether sold directly or through distributing customers, must always be free from inappropriately seeking, receiving, giving or furnishing gifts, favors or entertainment. Therefore, gifts, favors, entertainment or other forms of personal benefit may only be provided by, or on behalf of, Ecolab to a customer, or may only be accepted from a customer, if all of the following criteria are met:

• The item is consistent with the normal and accepted business ethics of the country in which it is provided;

• It does not violate the laws of the United States or the country in which it is provided, or Ecolab policy;

• If a gift, it has only nominal value; and if a favor or entertainment, it is reasonable in cost, amount, quantity and frequency, and not

excessive; • It cannot, under the surrounding circumstances, be reasonably construed as a bribe, payoff or kickback;

• It involves no element of concealment;

• Public disclosure of it would not embarrass Ecolab or damage Ecolab’s reputation;

• It does not violate standards of conduct of the recipient’s organization; and

• The expense is documented and the business purpose is clearly stated.

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Under no circumstances may a personal benefit take the form of cash or cash equivalents such as securities of Ecolab or any other

corporation, nor may personal loans be advanced. Suppliers

No employee may accept from a supplier, or from a business that wishes to become a supplier, any kind of business courtesy or gratuity such as meals, cocktails, discounts, hospitality, entertainment, recreation, transportation or other personal benefit unless all of the following criteria are met:

• The item is consistent with the normal and accepted business ethics of the country in which it is provided;

• It does not violate the laws of the United States or the country in which it is provided, or Ecolab policy;

• If a gift, it has only nominal value; and if a favor or entertainment, it is reasonable in cost, amount, quantity and frequency, and not

excessive;

• It cannot, under the surrounding circumstances, be reasonably construed as a bribe, payoff or kickback;

• It involves no element of concealment; and

• Public disclosure of it would not embarrass Ecolab or damage Ecolab’s reputation.

Solicitation of any favor or gratuity, regardless of value, or the suggestion that Ecolab will purchase from a supplier if the supplier purchases from Ecolab, is expressly prohibited.

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Under no circumstances may a personal benefit take the form of cash or cash equivalents, nor may personal loans be accepted.

Payments for Goods or Services Outside the United States

Payments by Ecolab for goods and services provided to Ecolab outside the United States must be paid with an Ecolab check or other approved instrument payable to the person or company legally entitled to receive payment. Payments will only be made to a party in the country where the party resides, maintains a place of business, or has delivered the goods or provided the services. An exception may be made where it is clear that payment made in another country will not violate local laws, such as income tax or currency control laws, of all of the countries involved. Consult the Law Department for legal advice concerning these matters.

Payments to Employees Working Outside the United States

We will comply with all applicable tax and currency control laws of the countries where our employees have their principal employment. Any portion of the salary or benefits of an employee who resides outside the United States is to be paid in either the home country or in the country in which the employee is residing. (This includes United States employees who reside outside the United States.) Exceptions must be reviewed by the Human Resources, Tax and Law Departments.

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Accounting/Financial and Corporate Information

Ecolab’s accounting records are relied upon to produce reports to management, shareholders, investors, creditors, governmental entities, and others. All accounting records, and reports produced from these records, must be kept and presented in accordance with applicable laws. They must accurately and fairly reflect, in reasonable detail, Ecolab’s income, cash flow, assets and liabilities and financial condition. “Reasonable detail” means the level of information and degree of assurance that would satisfy a prudent person in the conduct of his or her own affairs.

Accordingly:

• No false or misleading entries will be made in the accounting records. Transactions will be properly classified as to account and

accounting period and will be adequately documented;

• Compliance with generally accepted accounting principles, Ecolab accounting policies and procedures is required;

• Payments and other dispositions of assets will be described accurately, fairly, and in reasonable detail in Ecolab’s accounting records, and will be made only for the purpose described in the relevant entries or documentation;

• No undisclosed or unrecorded fund or asset will be established or maintained;

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• Sales will be properly recorded in the accounting records and in the appropriate accounting period, and only billed by written

invoice. Exceptions must conform to Ecolab’s asset disposition policy. Billing in excess of actual selling price is prohibited and rebates will be made only in accordance with approved Ecolab procedures;

• Accounting estimates, including accruals, will be based on good faith judgment and on any applicable Ecolab policy; and • Complete and accurate information will be given to inquiries from Ecolab’s internal and external auditors and Ecolab’s legal counsel.

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Securities

Ecolab is governed by United States Securities Law statutes administered by the Securities and Exchange Commission (“SEC”) and by the Rules of the New York Stock Exchange (“NYSE”). We will comply with these laws.

If statements made by Ecolab in public statements and communications or in filings with the SEC or NYSE are false or misleading as

to a material matter, the responsible person and Ecolab can be exposed to civil and criminal penalties. A matter or information is “material” if it is important enough to influence an employee or others in the decision to purchase or sell the stock of Ecolab or any other company with whom Ecolab does business.

Accordingly, disclosures to the investing public, including periodic reports, press releases and analyst and stockholder

communications will be accurate and timely. No willful or knowingly false or misleading statement or omission will be made in any disclosure, report or registration statement filed with the SEC or NYSE or any other stock exchange on which Ecolab’s securities is listed. Also see Insider Trading, page 25 .

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Antitrust General

We will fully comply with the antitrust laws of the United States and all other applicable jurisdictions. These laws are intended to preserve our free enterprise system by ensuring that competition is the prime regulator of the economy.

The antitrust laws are complex, wide ranging and subject to changing interpretations. Advice of the Law Department should be

obtained whenever a question arises over a contemplated course of action. Compliance

Antitrust law compliance is of critical importance. Employees must be familiar with Ecolab’s Antitrust Policy and Guide to Compliance with the Antitrust Laws . Violation of these laws can subject Ecolab or individual employees to criminal sanctions, substantial fines and/or imprisonment.

Managers and supervisors are responsible for ensuring that employees under their supervision are aware of and comply with this

policy. Knowing violation of, or authorizing or permitting a subordinate to violate, the antitrust will subject you to discipline, including termination, if appropriate.

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Implementation

Familiarity with the antitrust laws is not only important for Ecolab salespeople. Many other Ecolab associates are frequently in situations where antitrust considerations come into play. For example, some of us may have close friends who work for competitors, customers or suppliers. No one is asked to give up those relationships. However, a mutual understanding should be reached that there will never be any improper discussion of business matters. Finally, it is important to avoid conduct that could appear to constitute a violation of the law. No matter how innocent a particular act may be, legal difficulties can result if it leads others to believe that a violation has occurred.

International Operations

United States antitrust laws and/or the laws of other jurisdictions may govern Ecolab’s conduct or transactions outside the United States. Consult with the Law Department before engaging in any conduct or transaction outside the United States that is covered by this policy.

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Transacting Business Globally

Each of us, as an employee anywhere in the global operations of Ecolab, will comply with:

• Ecolab policies;

• The ethical standards of each country in which business is conducted;

• All legal requirements of each country in which business is conducted; and

• United States laws that apply in other countries. Compliance with United States Anti-boycott Laws

United States anti-boycott laws and regulations prohibit Ecolab and its subsidiaries and controlled affiliates from refusing to do business with a boycotted country or with any person who has dealt with a boycotted person or country, and require Ecolab to report to the United States government certain boycott requests.

Ecolab subsidiaries and controlled affiliates must comply with United States anti-boycott laws in the conduct of Ecolab business.

Neither you nor any agent has the authority to act contrary to this policy or to authorize or condone violations of this policy. No one will provide information, statements, certificates or any other communication that violates United States anti-boycott laws and regulations. Because the boycott laws are very complex, all boycott requests are to be reported immediately to the Law Department.

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Compliance with Export Control Laws

We will comply with all United States Export Control Laws. These laws restrict sales of many types of technologies, materials or products, originating in the United States, that could have significant military or police end uses. For example, these laws restrict sales to certain countries of technologies, materials and products that could be used in the design, development or production of chemical, biological or nuclear weapons or missile systems. Also, there are controls that impose trade sanctions and prohibit sales to certain named individuals and companies.

These control laws apply to indirect as well as direct export sales. Conversations of a technical nature with a citizen of another

country may be considered an export, even when that citizen is in the United States. What international visitors see when they tour United States facilities can be considered an export. If there is any doubt about a pending situation, consult the Law Department.

In addition to complying with United States Export Control Laws, we will comply with applicable export control laws of all countries

where business is conducted. For further information, consult the Law Department. Compliance with Customs Laws and Regulations

We will comply with all customs laws and regulations in all Ecolab business operations. International movement of Ecolab products and materials requires appropriate

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customs documentation, country-of-origin markings and proper valuation declarations.

Political Contributions

No corporate funds or other assets will be paid or furnished, directly or indirectly, to a political party or political candidate or incumbent, unless legally permissible and if approved in writing in advance by the officer in charge of Public Affairs, the General Counsel, and the Controller of Ecolab. No political contribution may be made by you, individually, in the name of Ecolab or any affiliate. Also, you may not be directly or indirectly reimbursed by Ecolab or any affiliate for any political contribution.

Protecting the Environment

We recognize that air, land and water are finite resources and must be used wisely in order to assure their suitability and supply for all users, both present and future. Accordingly, we will adhere to the “Ecolab Environmental Principles.”

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Your Responsibility to Ecolab Dealing Honestly

We will be honest in performing our employment duties. Committing or contributing to acts of dishonesty against Ecolab, such as fraud, theft, embezzlement or misappropriation of corporate assets, will result in appropriate discipline. In addition, a criminal complaint will be filed against the offending employee when warranted by the evidence, circumstances and Ecolab’s interests.

Safeguarding Assets

Each of us is responsible for protecting the assets of Ecolab. Assets include Ecolab’s investment in trade secrets, technology and other proprietary information, as well as physical property. Managers are responsible for maintaining good controls to protect assets from loss or unauthorized use, or disposition not in accordance with Ecolab’s asset disposition policy. Each of us is responsible for assisting in preventing waste and theft and assuring the integrity of the controls.

Protecting Proprietary Information

Confidentiality is required for corporate information regarding Ecolab, its subsidiaries and affiliates. Most of the information to which each of us has access or develops on the job is proprietary. It is Ecolab properly and a valuable business asset. Proprietary information of Ecolab may never be used for personal gain during or after employment with Ecolab.

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Proper precautions must be taken to protect our proprietary information. Unauthorized disclosure could destroy its value to the

Company and give unfair advantage to others. We are all responsible for protecting this information. Disclosure should be limited to those who have a need to know.

Responsibility to keep information confidential continues after separation from employment with Ecolab.

Proprietary information requiring protection includes, without limitation, any information not generally known about Ecolab’s

business, such as customer and supplier lists, financial data, sales reports, materials developed for in-house use, administrative and manufacturing processes, business plans, pricing strategies and lists, formulae, devices and compilations of information which give the Company a competitive advantage.

Any situation in which Ecolab’s proprietary information has or may have been compromised must be reported immediately to the Law Department.

Avoiding Conflict of Interest

A conflict of interest exists where one or both parties in a relationship receive or give unfair advantage or preferential treatment because of the relationship. If not sure if your relationship with another organization or person conflicts with your job performance or Ecolab’s interests, discuss the circumstances with your supervisor. Most potential conflict situations are readily resolved. It is always best to raise your concern.

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Gifts and Entertainment

In order to personally accept a gift, favor or entertainment from a customer, supplier, agent, consultant or other person or organization in connection with Ecolab business, a ll of the following criteria must first be met:

• The item is consistent with the normal and accepted business ethics of the country in which it is provided;

• It does not violate the laws of the United States or the country in which it is provided, or Ecolab policy;

• If a gift, it has only nominal value; and if a favor or entertainment, it is reasonable in cost, amount, quantity and frequency, and not

excessive;

• It cannot, under the surrounding circumstances, be reasonably construed as a bribe, payoff or kickback;

• It involves no element of concealment; and • Public disclosure of it would not embarrass Ecolab or damage Ecolab’s reputation.

Under no circumstances may an employee accept cash or cash equivalents or personal loans. Also see Entertainment/Gifts and

Monetary Payments, page 12. Insider Trading

You may not buy or sell Ecolab stock or other Ecolab securities for your own account or for members of your family while possessing material information about Ecolab

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which has not been publicly released. You may not buy or sell securities of another company while possessing non- public, material information about that company which is related to an intended action by Ecolab of which you are aware. For example, you may not trade in the stock of a company based on the knowledge that Ecolab will shortly acquire the shares or assets of that company.

Furthermore, such non-public, material information must not be passed along to another person (including other employees, relatives

or friends) who has no work- related need to know. A matter or information is “material” if it is important enough to influence an employee or others in the decision to purchase or sell the stock of Ecolab or any other company with whom Ecolab does business. Failure to observe this prohibition can expose you and Ecolab to civil and criminal penalties.

Outside Employment

You may not engage in employment outside Ecolab if such employment competes with Ecolab, provides services or assistance to an Ecolab competitor, or interferes with your assigned duties at Ecolab. Examples of such interference would be the requiring of Ecolab time or facilities to perform the outside employment, or if the outside employment impairs the ability to give full attention to your position with Ecolab during normal working hours.

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Your Responsibility to Ecolab Outside Directorships and Investments

If you serve or seek to serve as a director of, or have a business or financial interest in, a firm having current or prospective dealings with Ecolab, you must disclose that fact to your supervisor so that it may be determined whether the situation presents a conflict of interest. This would include, without limitation, a supplier, customer, landlord, tenant or merger/acquisition candidate, or competitor of Ecolab. The business or financial interests of members of your immediate family living with you will also be considered to be your financial interests.

Any subsequent approval to continue or engage in such outside directorship or investment must be made in writing by your

supervisor. The ownership of not more than one percent (1%) of a publicly-traded company’s securities will be presumed not to be a conflict of interest and need not be disclosed.

Speculation or Competition with Ecolab

You may never take personal advantage of, or make available to others, any business opportunity in which it is known, or could reasonably be known, that Ecolab would be interested in, without advance written approval from your supervisor. The obvious examples are a purchase of real estate or other property, or any interest in a firm, in which Ecolab is known to have an interest in acquiring.

In no event may you deal for your own account in products sold or services performed by Ecolab.

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Purchases from Employees or Family Members

Purchases by Ecolab from employees, family members, or others with close personal relationships can give rise to conflicts of interest. Except for individuals who will be paid through the Ecolab payroll system, Ecolab will not purchase any goods or services from any employee or close relative of an employee without the prior consent of your supervisor. While not intending to prohibit personal relationships, management is responsible for taking appropriate action, including disciplinary action, to protect the Company when a personal relationship is contrary to the Company’s interest.

Government Service

Your service in government positions is encouraged, but in some cases may present a conflict of interest. If election or appointment to such a position is anticipated, you must request the written approval of your supervisor. If you hold a government office, it is expected that you will abstain from any vote or decision which materially involves the interests of Ecolab.

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Complying with the Code

You are responsible for understanding and complying with the Code of Conduct . It is the responsibility of your supervisor to assist you in applying the Code and to be aware of the ethical quality of your business behavior. Managers are also responsible for enforcing the Code within their areas of responsibility.

Written certification concerning Code of Conduct compliance will be periodically required from those employees designated by the

Chairman of the Board or the Chief Executive Officer of Ecolab.

Any actual or contemplated conduct which you reasonably believe may constitute a violation of the Code of Conduct must be promptly reported to your supervisor or the General Counsel of Ecolab.

A VERBAL OR WRITTEN REPORT TO YOUR SUPERVISOR OR TH E GENERAL COUNSEL IS THE PREFERRED

METHOD OF REPORTING VIOLATIONS OR OBTAINING GUIDANC E IN COMPLYING WITH THE CODE OF CONDUCT . IF THIS IS NOT PRACTICAL, SUSPECTED VIOLATIONS C AN BE REPORTED, OR GUIDANCE CAN BE OBTAINED, BY CALLING THE HELPLINE TELEPHONE NUMBER ASSIGNED TO YOUR EMPLOYMENT LOCATION.

Ecolab will investigate possible violations. In doing so, it will respect the rights of all parties concerned. Employees will be expected

to cooperate with any investigation. The identity of persons reporting possible violations will be kept confidential unless the Company is required to reveal it in order to enforce the Code , or by applicable law or judicial process.

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EXHIBIT (99)B

Code of Ethics for Senior Officers and Finance Associates In my role as a Senior Officer or Finance Associate at Ecolab, I have adhered to and advocated to the best of my knowledge and ability the following principles and responsibilities governing professional conduct and ethics: 1. Act with honesty and integrity, avoiding actual or apparent conflicts of interest in personal and professional relationships. A “conflict of

interest” exists when an individual’s private interests interfere or conflict in any way (or even appear to interfere or conflict) with the interests of the Company.

2. Provide information that is full, fair, accurate, complete, objective, relevant, timely and understandable, including in and for reports and

documents that the Company files with, or submits to, the SEC and other public communications made by the Company. 3. Comply with all applicable laws, rules and regulations of federal, state and local governments, and other appropriate private and public

regulatory agencies. 4. Act in good faith, responsibly, with due care, competence and diligence, without misrepresenting material facts or allowing my

independent judgement to be subordinated. 5. Respect the confidentiality of information acquired in the course of business except when authorized or otherwise legally obligated to

disclose the information. I acknowledge that confidential information acquired in the course of business in not to be used for personal advantage.

6. Proactively promote ethical behavior among my associates at the Company and as a responsible partner with industry peers and

associates. 7. Maintain control over and responsibly manage all assets and resources employed or entrusted to me by Ecolab. 8. Adhere to and promote this Code of Ethics. This Code of Ethics is intended to supplement the Ecolab Code of Conduct and company policies regarding ethical practices in the finance area. All procedures for upholding, enforcing, and complying with the Code of Conduct are also applicable to this Code of Ethics. The Ecolab Law Department should be asked to help interpret or apply this Code as required.

End of Filing

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