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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.     )

Filed by the Registrant / /
Filed by a Party other than the Registrant / /

Check the appropriate box:
/ /   Preliminary Proxy Statement
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/x/   Definitive Proxy Statement
/ /   Definitive Additional Materials
/ /   Soliciting Material Pursuant to §240.14a-11(c) or §240.14a-12

Ecolab Inc.
(Name of Registrant as Specified In Its Charter)

 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
         
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LOGO

Ecolab Inc.
370 Wabasha Street N.
St. Paul, MN 55102-1390
651-293-2233

March 30, 2001

Dear Fellow Stockholder:

You are cordially invited to join us for our Annual Meeting of Stockholders, to be held at 10:00 a.m. on Friday, May 11, 2001 in the McKnight Theatre at the Ordway Center for the Performing Arts, 345 Washington Street, St. Paul, MN 55102. The Notice of Annual Meeting and the Proxy Statement that follow describe the business to be conducted at the meeting. We urge you to read both carefully.

We hope you plan to attend the meeting. Directions to the meeting site are located on the last page of the Proxy Statement. However, if you will not be able to join us, we encourage you to exercise your right as a stockholder and vote. Please sign, date and promptly return the accompanying proxy card, or make use of either our telephone or Internet voting services. Stockholders not in attendance may listen to a broadcast of the meeting on the Internet. Webcast instructions will be available on-line at www.ecolab.com.

Sincerely,

ALLAN L. SCHUMAN

Allan L. Schuman
Chairman of the Board and
Chief Executive Officer

YOUR VOTE IS IMPORTANT. PLEASE COMPLETE AND RETURN
THE ACCOMPANYING PROXY, OR USE THE TELEPHONE
OR INTERNET VOTING SYSTEMS.

TABLE OF CONTENTS

 
   Page
NOTICE OF MEETING   ii
VOTING PROCEDURES   1
  Voting Shares and Quorum    
  Voting by Plan Participants    
  Telephone and Internet Voting    
  Revoking Your Proxy    
  Vote Tabulation    
  Discretionary Voting    
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS   2
SECURITY OWNERSHIP OF MANAGEMENT   3
BOARD COMMITTEES   4
ELECTION OF DIRECTORS   5
  Nominees for Election to the Board of Directors — Class III (For a term ending 2004)    
  Members of Board of Directors Continuing in Office — Class I (For a term ending 2002)    
  Members of Board of Directors Continuing in Office — Class II (For a term ending 2003)    
EXECUTIVE COMPENSATION   9
  Report of the Compensation Committee on Executive Compensation    
  Summary Compensation Table    
  Option Grants in 2000    
  Aggregated Option Exercises in 2000 and December 31, 2000 Option Values    
  Comparison of Five-Year Cumulative Total Return    
  Pension Plan Table    
CERTAIN TRANSACTIONS   16
STOCKHOLDER AGREEMENT   16
COMPANY TRANSACTIONS   17
ADOPTION OF THE ECOLAB INC. 2001 NON-EMPLOYEE DIRECTOR STOCK OPTION AND DEFERRED COMPENSATION PLAN   17
  Introduction    
  Summary of 2001 Plan    
  Material Federal Income Tax Consequences    
  Options and Share Units Granted and Deferrals Made Under the Plan    
AUDIT COMMITTEE REPORT   24
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS   24
INDEPENDENT ACCOUNTANT'S FEES   24
OTHER MATTERS   25
  Proxy Solicitation    
  Future Stockholder Proposals — Deadline for Inclusion in Proxy    
  Other Stockholder Proposals/Director Nominations — Deadline for Consideration    
EXHIBIT   26
  Audit Committee Charter    

i

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 11, 2001

To the Stockholders of Ecolab Inc.:

The Annual Meeting of Stockholders of Ecolab Inc. will be held on Friday, May 11, 2001 at 10:00 a.m. in the McKnight Theatre at the Ordway Center for the Performing Arts, 345 Washington Street, St. Paul, MN 55102, for the following purposes (which are more fully explained in the Proxy Statement):

The Board of Directors has fixed the close of business on March 20, 2001 as the record date for the determination of stockholders entitled to notice of and to vote at the meeting.

Whether or not you plan to attend the meeting, please complete and return the accompanying proxy in the enclosed envelope. Or, you may vote by telephone or Internet. If you attend the meeting, you may vote your shares in person even though you have previously returned your proxy by mail, telephone or the Internet.

March 30, 2001

ii


ECOLAB INC.
370 Wabasha Street North, St. Paul, Minnesota 55102

PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 11, 2001

This Proxy Statement, which is first being mailed to stockholders on or about March 30, 2001, is furnished in connection with the solicitation of proxies on behalf of the Board of Directors of Ecolab Inc., a Delaware corporation (hereinafter called the "Company"), from holders of Common Stock of the Company to be voted at the Annual Meeting of Stockholders to be held at 10:00 a.m. on Friday, May 11, 2001 and at any adjournment thereof.

VOTING PROCEDURES

Voting Shares and Quorum

Holders of Common Stock of record at the close of business on March 20, 2001 will be entitled to vote at the meeting and any adjournment thereof. As of March 20, 2001 the Company had outstanding and entitled to vote 127,573,019, shares of Common Stock. Each of such shares is entitled to one vote on each matter presented at the meeting. The presence at the meeting, in person or by proxy, of the holders of a majority of the issued and outstanding shares of Common Stock entitled to vote, is required for a quorum for the transaction of business. Shares represented by a proxy with instructions to abstain and any shares represented by a limited proxy (i.e., a broker non-vote) will be counted in determining whether a quorum is present.

Voting by Plan Participants

If the stockholder is a participant in the Company's Dividend Reinvestment Plan or a participant in the Company's Employee Stock Purchase Plan, the proxy represents the number of shares held on account of the participant in those plans as well as shares held of record by the participant. With respect to participants and beneficiaries of the Company's defined contribution 401(k) Savings Plan, the proxy also serves as the voting instruction card to the plan trustee and represents the stockholder's proportional interest in shares of Common Stock beneficially held by the trustee.

Telephone and Internet Voting

Stockholders described in the two immediately preceding paragraphs may vote (or in the case of participants and beneficiaries of the Company's defined contribution 401(k) Savings Plan, instruct the trustee) by telephone or the Internet using the instructions indicated on the proxy card. Stockholders who hold shares through a bank or brokerage firm in "street name" also may have the opportunity to deliver voting instructions by telephone or the Internet. Please refer to your proxy/voting instruction form for further information.

Revoking Your Proxy

Proxies in proper form received by the time of the meeting will be voted as specified. A stockholder giving a proxy may revoke it at any time before it is exercised by submitting a written revocation to the Secretary of the Company, submitting a subsequently dated proxy, voting by telephone or Internet at a later time, or by attending the meeting and voting in person.

Vote Tabulation

Proposal 1:  Election of Directors — The directors shall be elected by a plurality of the votes cast. The four director nominees receiving the highest vote totals will be elected. Shares represented by proxies which contain instructions to "withhold" voting authority on one or more nominees will not affect the election of nominees receiving a plurality of the votes cast. It is intended that proxies solicited by the Board of Directors will (unless otherwise directed) be voted FOR the election of the four nominees named in this Proxy Statement. If, for any reason, any nominee becomes unavailable for election, the proxies solicited by the Board of Directors will be voted FOR such substituted nominee as is selected by the Board of Directors, or the Board of Directors, at its option, may reduce the number of directors to constitute the entire Board.

1

Proposal 2:  Adopt the Ecolab Inc. 2001 Non-Employee Director Stock Option and Deferred Compensation Plan — The affirmative vote of a majority of the total votes cast by holders of shares present in person or represented by proxy at the Annual Meeting and entitled to vote shall constitute adoption of the plan. In accordance with the By-Laws of the Company, shares represented by a limited proxy (i.e., a broker non-vote) or represented by a proxy with instructions to abstain will not be counted as votes cast for purposes of calculating votes for or against adoption. Unless a contrary choice is specified, proxies solicited by the Board of Directors will be voted FOR adoption of the plan.

Proposal 3:  Ratification of Independent Accountants — The affirmative vote of a majority of the total votes cast by holders of shares present in person or represented by proxy at the Annual Meeting and entitled to vote shall constitute ratification of the appointment of PricewaterhouseCoopers LLP. In accordance with the By-Laws of the Company, shares represented by a limited proxy (i.e., a broker non-vote) or represented by a proxy with instructions to abstain will not be counted as votes cast for purposes of calculating votes for or against ratification of the appointment. Unless a contrary choice is specified, proxies solicited by the Board of Directors will be voted FOR ratification of the appointment.

Discretionary Voting

As of the date of this Proxy Statement, the Board of Directors and management know of no other matters to be brought before the meeting in addition to those described herein. Should any other matters properly come before the meeting which call for a vote of the stockholders, the persons named in the accompanying proxy will have discretionary authority to vote all proxies with respect to such matters in accordance with their best judgment.


SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table sets forth information as to entities which have reported to the Securities and Exchange Commission ("SEC") or have advised the Company that they are a "beneficial owner," as defined by the SEC rules and regulations, of more than 5% of the Company's outstanding Common Stock.

Class

   Name and Address
of Beneficial Owner
   Amount and
Nature of
Beneficial
Ownership
   Percent of
Class(1)
  
 
Common   Henkel KGaA
Henkelstrasse 67
Postfach 1100
40191 Düsseldorf 13
Germany		   17,571,512 (2) 13.8 %
Common   HC Investments, Inc.
1105 North Market Street
Suite 1300
Wilmington, DE 19899		   14,666,664 (3) 11.5 %
(1)
The percent of class is based on the number of voting shares outstanding as of March 20, 2001.
(2)
Henkel KGaA is a partnership limited by shares organized under the laws of Germany. The Company understands that the majority of the voting stock of Henkel KGaA is controlled by the members of the Henkel family. Voting shares of the Company beneficially owned by Henkel KGaA are subject to an agreement containing certain restrictions pertaining to, among other things, maximum shareholding, transfer and voting rights. For a description of the agreement, see the information found at page 16 hereof under the heading "Stockholder Agreement."
(3)
HC Investments, Inc., a Delaware corporation, is an indirect, wholly-owned subsidiary of Henkel KGaA. Voting shares of the Company beneficially owned by HC Investments, Inc. are bound by the terms of the agreement between the Company and Henkel KGaA, as described at page 16 hereof.

2


SECURITY OWNERSHIP OF MANAGEMENT

In general, "beneficial ownership" includes those shares of Common Stock which a director or executive officer has the power to vote or transfer, as well as stock options that are exercisable currently or within 60 days. On March 13, 2001, the executive officers and directors of the Company owned, in the aggregate, 4,056,178 shares of Common Stock which is approximately 3.0% of shares outstanding. (As required by Securities and Exchange Commission disclosure rules, "shares outstanding" for this purpose includes options exercisable within 60 days.) The detail of beneficial ownership is set forth in the following table.

Non-employee directors also have interests in stock units under the Company's 1997 Non-Employee Director Deferred Compensation Plan. The stock units are Common Stock equivalents. The stock units are credited to a deferred stock unit account and will be paid in the form of Common Stock when a director leaves the Board. Although the stock units may not be voted or transferred, they are shown in the table below because they represent part of the total economic interest of the directors in Company stock.

 
 Name of Beneficial Owner

   Amount and Nature of
Beneficial Ownership
   Stock Units
   Total
   Percentage
of
Outstanding
Shares
Beneficially
Owned
    
  


   
    
  
  Allan L. Schuman   1,854,973 (1)(2) 0   1,854,973   1.4 %    
  L. White Matthews, III   249,647 (1)(2) 0   249,647   *      
  Richard L. Marcantonio   308,482 (1)(2) 0   308,482   *      
  John P. Spooner   404,267 (1)(2) 0   404,267   *      
  James L. McCarty   445,567 (1)(2) 0   445,567   *      
  Leslie S. Biller   22,000 (2) 5,833   27,833   *      
  Ruth S. Block   44,742 (2) 13,150   57,892   *      
  Jerry A. Grundhofer   10,600 (2) 2,910   13,510   *      
  Stefan Hamelmann   0   0   0   *      
  James J. Howard   41,112 (2) 9,696   50,808   *      
  William L. Jews   8,000 (2) 2,946   10,946   *      
  Joel W. Johnson   21,158 (2) 6,924   28,082   *      
  Ulrich Lehner   0   0   0   *      
  Jerry W. Levin   36,832 (2) 7,969   44,801   *      
  Robert L. Lumpkins   4,400 (2) 2,131   6,531   *      
  Hugo Uyterhoeven   35,194 (2) 7,421   42,615   *      
  Current Directors and Executive Officers as a Group (23 persons)   4,056,178 (3)         3.0 %    
*
Indicates beneficial ownership of less than 1% of the Company's outstanding stock.
(1)
Includes the following shares held by officers in the Ecolab Savings Plan as of the last Plan report: Mr. Schuman, 12,052; Mr. Matthews, 272; Mr. Marcantonio, 721; Mr. Spooner, 1,883; and Mr. McCarty 42,866.
(2)
Includes the following shares which could be purchased under Company-granted stock options within 60 days from March 13, 2001: Mr. Schuman, 1,541,700; Mr. Matthews, 241,375; Mr. Marcantonio, 294,675; Mr. Spooner, 381,087; Mr. McCarty, 385,000; Ms. Block, 30,400; Mr. Biller, 12,000; Mr. Grundhofer, 8,000; Mr. Howard, 27,200; Mr. Jews, 8,000; Mr. Johnson, 20,000; Mr. Levin, 27,200; Mr. Lumpkins, 4,000; and Mr. Uyterhoeven, 28,800.
(3)
Includes 4,686 shares held by or on behalf of family members of directors and executive officers, 73,179 shares held for executive officers in Company-sponsored employee benefit plans as of the last plan reports, 3,365,894 shares to which these persons have the right to acquire beneficial ownership within 60 days of March 13, 2001, by the exercise of Company-granted stock options and 70,480 shares held by executive officers under Company-granted restricted stock awards which are subject to events of forfeiture.

3


BOARD COMMITTEES

The business and affairs of the Company are managed under the overall direction of the Board of Directors. To assist it in carrying out its duties, the Board has delegated certain authority to four standing committees: Audit, Compensation, Finance and Governance.

Audit Committee — The current Committee members are Ms. Block and Messrs. Howard (Chairman), Jews, Johnson, Lumpkins, and Uyterhoeven (Vice Chairman). The Committee met four times during the past year. In addition, the Committee chair, as representative of the Committee, discussed the interim financial information contained in each quarterly earnings announcement with the Company's Chief Financial Officer and Controller and with the Company's independent accountants. The Committee, which is composed entirely of non-employee directors, assists the Board of Directors in fulfilling its responsibilities to monitor (a) the quality and integrity of the Company's consolidated financial statements and management's financial control of operations, (b) the independence and performance of the independent accountants, (c) the role and performance of the internal audit function, and (d) the Company's compliance with legal and regulatory requirements. The Committee meets regularly with the Company's management and internal auditors, and with the Company's independent accountants.

The Board of Directors has adopted a written charter for the Audit Committee and, as required by the rules of the Securities and Exchange Commission, the Audit Committee Charter is included as an Exhibit to this Proxy Statement. A report of the Audit Committee is found under the heading "Audit Committee Report" at page 24 hereof and certain other disclosures pertaining to the Committee are found under the heading "Independent Accountant's Fees" at page 24 hereof.

The Board of Directors has determined that each member of the Audit Committee is "independent," as independence is defined in Sections 303.01(B)(2)(a) and (3) of the Listing Standards of the New York Stock Exchange, the primary exchange on which the Common Stock of the Company is listed.

Compensation Committee — The current Committee members are Messrs. Biller (Chairman), Grundhofer, Johnson (Vice Chairman), Levin and Uyterhoeven. The Committee met four times during the past year. The Committee is composed entirely of non-employee directors. The principal functions of this Committee are to review and approve (a) the Company's overall compensation policy and executive salary plan, (b) the base salary of corporate officers, and (c) the design, establishment, amendment and termination of the Company's employee benefit plans and related trusts. The Committee also administers the Company's stock and cash-based incentive (i.e., bonus) plans for executives, and makes recommendations to the Board with respect to the design and establishment of significant long-term executive compensation and benefit plans. Certain actions of the Committee relative to officers of the Company who also serve as directors may be subject to ratification by the Board. To assist the Committee in the design and review of executive compensation programs, the Board has selected and retained an independent compensation consultant who reports directly to the Committee. A report by the Committee on executive compensation is located on pages 9 and 10 hereof.

Finance Committee — The current Committee members are Ms. Block (Chair) and Messrs. Hamelmann, Howard, Jews (Vice Chairman), Lehner, Lumpkins and Matthews. The Committee met four times during the past year. The principal functions of this Committee are to review and make recommendations to the Board concerning (a) management's financial and tax policies and standards, (b) the Company's financing requirements, including the evaluation of management's proposals concerning funding vehicles to meet such requirements, (c) dividends, (d) the Company's capital expenditure budget, and (e) adequacy of insurance coverage. The Committee also evaluates acquisitions and divestitures of businesses from a financial standpoint. The Committee oversees a management committee which is charged with monitoring the performance of trust assets held in the Company's benefit plans and reviews the company's investor relations program.

Governance Committee — The current Committee members are Messrs. Biller, Grundhofer (Vice Chairman), Hamelmann, Lehner, Levin (Chairman) and Schuman. The Committee met three times during the past year. The Governance Committee (a) reviews and recommends to the Board policies for the composition of the Board, (b) identifies, interviews, evaluates and recommends to the Board prospective director nominees, (c) reviews and makes recommendations to the Board with regard to compensation for Board service, (d) reviews and recommends to the Board changes in the Company's Certificate of Incorporation and By-Laws, (e) reviews and recommends to the Board with respect to Board organization, management succession and corporate governance issues, social responsibility and the Company's environmental practices, (f) leads the Board's Chief Executive Officer evaluation and Board effectiveness review processes, and (g) undertakes projects which do not fall within the jurisdiction of other committees of the Board. Recommendations by stockholders of potential director nominees may be directed to the Governance Committee in care of the Secretary of the Company, at the Company address located at the top of page 1.

4


ELECTION OF DIRECTORS

There were five meetings of the Board of Directors during the year ended December 31, 2000. Each director attended at least 75% of Board and Committee meetings. Overall attendance at Board and Committee meetings was 97%.

Under the Company's Restated Certificate of Incorporation, the number of directors is determined exclusively by the Board. Currently, the Board has fixed the number of directors at 13. Ms. Block will retire at the upcoming Annual Meeting due to the Company's age 70 retirement policy. Accordingly, the Board intends to decrease the number of Directors to 12 immediately following its Annual Meeting.

Pursuant to the agreement between the Company and Henkel KGaA described at page 16 hereof under the heading "Stockholder Agreement," Henkel is entitled to designate a number of persons to be nominated for election to the Company's Board of Directors proportionate to Henkel's shareholding in the Company rounded to the nearest whole number. As of March 20, 2001, Henkel beneficially owned approximately 25.3% of the Company's outstanding Common Stock and was accordingly entitled to designate three directors. Messrs. Stefan Hamelmann, Ulrich Lehner and Hugo Uyterhoeven have been appointed or elected to the Board pursuant to designation by Henkel.

The Board of Directors is divided into three classes. The members of each class are elected to serve a three-year term with the terms of office of each class ending in successive years.

The term of Class III Directors expires with this Annual Meeting of Stockholders. Messrs. Jews, Johnson, Lehner and Uyterhoeven are the nominees for election to the Board as Class III Directors. All have previously served as directors of the Company. Class III Directors being elected at the current Annual Meeting will serve until the 2004 Annual Meeting expected to be held in May 2004, or until their successors have been duly elected and qualified. The directors of Class I and Class II will continue in office. The Board of Directors recommends a vote FOR the election of the four nominees named in this Proxy Statement.

The Board of Directors has no reason to believe that any of the named nominees is not available or will not serve if elected. However, pursuant to the Board of Director's policy, a director who becomes 70 years of age must resign at the next Annual Meeting following such event. Mr. Uyterhoeven will become 70 prior to next year's Annual Meeting, expected to be held in May 2002, and will be required to resign, at which time the Board of Directors, pursuant to the Company's Restated Certificate of Incorporation, may fill the vacancy or may reduce the size of the Board.

The following information with regard to business experience has been furnished by the respective directors or nominees or obtained from the records of the Company.




NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS—CLASS III
(FOR A TERM ENDING 2004)

[PHOTO]                     WILLIAM L. JEWS, age 49.

5

[PHOTO]                     JOEL W. JOHNSON, age 57.

[PHOTO]                     ULRICH LEHNER, age 54.

[PHOTO]                     HUGO UYTERHOEVEN, age 69.


MEMBERS OF BOARD OF DIRECTORS CONTINUING IN OFFICE—CLASS I
(FOR A TERM ENDING 2002)

[PHOTO]                     STEPHAN HAMELMANN, age 37.

6

[PHOTO]                     JAMES J. HOWARD, age 65.

[PHOTO]                     JERRY W. LEVIN, age 56.

[PHOTO]                     ROBERT L. LUMPKINS, age 57.

7


MEMBERS OF BOARD OF DIRECTORS CONTINUING IN OFFICE—CLASS II
(FOR A TERM ENDING 2003)

[PHOTO]                     LESLIE S. BILLER, age 53.

[PHOTO]                     JERRY A. GRUNDHOFER, age 56.

[PHOTO]                     L. WHITE MATTHEWS, III, age 55.

[PHOTO]                     ALLAN L. SCHUMAN, age 66.

8


EXECUTIVE COMPENSATION


REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION

The Compensation Committee of the Board of Directors (the "Committee") is composed solely of directors who are not current or former employees of the Company. The Committee is responsible for the overall executive compensation program and reviews each component annually to maintain alignment with the Company's goals and philosophy. The Company's management and independent compensation consultants provide competitive data and assistance to help the Committee carry out its responsibilities. The Board of Directors holds authority to ratify certain actions of the Committee. The Committee intends to make all reasonable attempts to comply with the requirements to exempt executive compensation from the $1 million deduction limitation under Section 162(m) of the Internal Revenue Code, unless the Committee determines that such compliance in given circumstances would not be in the best interests of the Company and its stockholders.

Philosophy:  The Committee uses compensation to help communicate desired business results to executives and to influence them to make decisions to produce those results. The program must be competitive to attract, retain and motivate executives, and it must reinforce and complement sound management practices. In addition, the executives' interests must be effectively aligned with those of our stockholders and, to this end, the Committee has developed executive stock ownership guidelines to ensure that executives accumulate a significant ownership stake and are vested in maximizing long-term stockholder returns.

The principal components of the executive compensation program consist of base salary, annual incentives under the Management Incentive Plan or Management Performance Incentive Plan, and long-term incentives in the form of annual stock option awards. In 2000, the Company discontinued its practice of making annual grants of restricted stock. The Company's philosophy is to position the aggregate of these components at a level that is commensurate with the Company's size and performance relative to a broad range of general industry manufacturing and service companies. The Committee periodically reviews the reasonableness of total compensation levels and mix using public information from comparator company proxy statements and survey information from credible third-party general industry surveys.

Base Salary: The Committee reviews the base salary of executive officers on an annual basis in light of relevant market data and individual performance to determine whether an increase is appropriate. For the most recent fiscal year, base salary increases for executive officers averaged 5.8%.

In regard to the Chief Executive Officer, the Committee established a base salary of $800,000 for the most recent fiscal year, representing a 6.7% increase over the prior fiscal year. The increase was based on the Committee's assessment of the Chief Executive Officer's excellent performance as reflected by the Company's strong financial results in the most recent and prior fiscal years.

Management Incentive Plan (MIP)/Management Performance Incentive Plan (MPIP): The MIP is a cash-based annual incentive plan that focuses executives' attention on achieving competitive annual business goals. The Committee, with input from management, sets specific performance goals at the beginning of each year and communicates them to the Company's executives. A mix of corporate and business unit goals is used to assure that executives have a reasonable measure of control over the factors affecting their awards. For the most recent fiscal year, these performance goals were based principally on earnings per share and business unit operating income and revenue goals. Target award opportunities for executive officers, other than the Chief Executive Officer, ranged from 35 to 50% of base salary. Final awards can range from 0 to 200% of the target award based on overall Company, business unit and individual performance for the most recent fiscal year.

The MPIP is a stockholder approved plan that is similar to the MIP, except that it is intended to qualify for the performance-based exception to the $1 million deduction limitation under Section 162(m) of the Internal Revenue Code. For the most recent fiscal year, the Chief Executive Officer was the only participant in the MPIP. The Committee established an award payout range of 50% of base salary at threshold performance to 250% of base salary at maximum performance. Based solely on the Company's earnings per share performance for the most recent fiscal year, and the Committee's assessment of the Chief Executive Officer's performance, the Committee approved an award of 187.5% of base salary for the Chief Executive Officer.

The Committee, in general, makes awards based strictly on the level of achievement against pre-established goals. Under the MIP, the Committee may, in its sole discretion, make awards at a level higher or lower than that determined

9

by strict application of achievement against goals based upon such other business criteria as the Committee determines appropriate. Under the MPIP, however, the Committee may make awards only at a level that is at or lower than the level determined by strict application of achievement against goals.

Long-Term Incentives: The Committee uses annual grants of stock options to deliver a competitive compensation package that motivates executives to make decisions that will increase the value of Company stock, thus providing an appropriate focus on the long-term growth of the Company. When executives deliver sustained superior returns to stockholders by outperforming the general industry, they can increase their own compensation accordingly.

Stock options are granted under a shareholder approved plan with exercise prices not less than the fair market value of the Company's shares on the date of grant, providing no value to the executive unless the Company's stock price increases after the grants are made. The options granted during the most recent fiscal year have a 10-year exercise term and become exercisable cumulatively at the rate of 33, 67, and 100% on each anniversary of the date of grant, subject to accelerated vesting upon a defined change-in-control of the Company. The stock option grant guidelines were equitably adjusted in fiscal year 2000 to account for a change in the annual grant date from August to December. The stock option award to the Chief Executive Officer for fiscal year 2000 was made consistent with the provisions discussed above.

In fiscal years 1998, 1999, and 2000, the Committee made special grants of premium-priced stock options to a select group of executives. The purpose of the grants was to incent the achievement of the growth goals established by the new strategic business plan. These options have a term ending in May 2003 and vested 100% in February 2001. The Committee may choose to make additional grants under this program to new hires and newly promoted executives.

Conclusion: The Committee believes that executive compensation policies and programs described in the report serve the interests of stockholders and the Company effectively. The various pay vehicles utilized maintain an appropriate balance between motivating achievement of short-term goals and strategically leading the Company in a direction to provide long-term success. We will continue to monitor the effectiveness of the Company's total compensation program to ensure that it meets the needs of the Company.

Leslie S. Biller   Jerry W. Levin
Jerry A. Grundhofer   Hugo Uyterhoeven
Joel W. Johnson    

10


SUMMARY COMPENSATION TABLE

The following table shows cash and non-cash compensation for each of the last three years ended December 31 for the Company's Chief Executive Officer and for the next four most highly-compensated executive officers who were serving in those capacities at December 31, 2000. No other individuals served in those capacities at any time during the year.

 
    
    
    
    
   Long Term Compensation Awards
    
 
    
   Annual Compensation
    
 
    
    
   Securities Underlying Options(5)
(#)
    
Name and Principal Position
   Year
   Salary(1)
($)
   Bonus(1,2)
($)
   Other Annual Compensation(3)
($)
   Restricted Stock Award(s)(4)
($)
   All Other Compensation(6)
($)


Allan L. Schuman, Chairman of the Board and Chief Executive Officer   2000
1999
1998		   $
$
$		 800,000
750,000
700,000		   $
$
$		 1,500,000
1,200,000
1,100,000
7
7		 $
$
$		 185,857
80,667
26,697		  
$
$		 -0-
520,000
371,484		   330,000
250,000
845,000		   $
$
$		 69,000
58,500
54,000
L. White Matthews, III, Executive Vice President and Chief Financial Officer(8)   2000
1999
1998		   $
$
 375,000
184,856
-0-		   $
$
 309,900
149,300
-0-		   $
$
 14,811
3,891
-0-		  
$
 -0-
320,000
-0-		   55,000
320,500
-0-		   $
$
 20,547
7,292
-0-
Richard L. Marcantonio, Executive Vice President—Industrial and Service Sectors   2000
1999
1998		   $
$
$		 360,000
350,000
330,667		   $
$
$		 250,000
200,200
190,600		   $

 13,491
-0-
-0-		  
$
$		 -0-
128,000
74,297		   85,000
20,500
235,000		   $
$
$		 18,300
16,506
15,638
John P. Spooner, Former Executive Vice President—International Group   2000
1999
1998		   $
$
$		 375,000
375,000
356,108		   $
$
$		 225,000
223,600
100,000		   $
$
$		 10,109
145
1,841		  
$
$		 -0-
123,200
59,438		   75,000
20,350
230,000		   $
$
$		 18,000
17,958
13,683
James L. McCarty, Retired Senior Executive Vice President—Institutional Group   2000
1999
1998		   $
$
$		 380,000
365,000
338,800		   $
$
$		 200,000
205,500
250,000		   $

$		 21,386
-0-
8,800		  
$
$		 -0-
160,000
118,875		   55,000
25,000
245,000		   $
$
$		 17,400
17,115
17,664
(1)
Includes amounts deferred under Section 401(k) of the Internal Revenue Code, pursuant to the Company's Savings Plan, amounts deferred under a non-qualified deferred compensation plan maintained by the Company for a select group of executives and salary reductions per Section 125 of the Internal Revenue Code.
(2)
Represents annual cash awards under the Company's Management Incentive Plan ("MIP") and, if applicable, the Company's Management Performance Incentive Plan ("MPIP"). The MIP and MPIP are discussed at page 9 hereof in the "Report of the Compensation Committee on Executive Compensation."
(3)
Represents payment by the Company of: (i) certain perquisites for Mr. Schuman including, (a) payment of life insurance premiums in 2000 ($39,268) and in 1999 ($28,440), (b) financial planning expenses in 1999 ($34,219), and (c) club membership dues in 2000 ($42,555); and (ii) certain payroll taxes on items reported in this column. In addition, the Company maintains supplemental long-term disability benefits for a select group of executives, which benefits are self-funded. No specific allocation of cost is made to any named executive officer prior to the occurrence of a disability.
(4)
Represents the cumulative dollar value of restricted stock awards during the calendar year based on the closing market price of the Company's Common Stock on the date of grant. The recipients receive dividends declared on, and have voting power over, the restricted shares. The value and number of the aggregate shares of restricted stock held by the named executive officers at December 31, 2000 were as follows: Mr. Schuman, $1,090,484 with 25,250 shares; Mr. Matthews, $345,000 with 8,000 shares; Mr. Marcantonio, $364,934 with 8,450 shares; Mr. Spooner, $228,030 with 5,280 shares and Mr. McCarty, $345,000 with 8,000 shares.

11

(5)
Includes, for 1998 and 1999, certain premium priced stock options which offer no gain to the optionee until the stock price exceeds $49.00.

(6)
Amounts reported for 2000 represent: (i) the maximum matching contribution of $5,100 made by the Company to each of the named executive officers under the Company's defined contribution 401(k) Savings Plan available generally to all employees; and (ii) the matching contributions made or to be made by the Company on base salary and bonus earned in respect of 2000 which the executive elected to defer under a non-qualified mirror 401(k) deferred compensation plan maintained by the Company for a select group of executives, in the following amounts: Mr. Schuman, $63,900; Mr. Matthews, $15,447; Mr. Marcantonio, $13,200; Mr. Spooner, $12,900 and Mr. McCarty, $12,300.

(7)
Includes, in addition to the annual cash award under the Company's incentive plans referenced in footnote 2 above, separate special recognition awards in respect of 1999 and 1998 for Mr. Schuman as follows: $180,000 in 1999 and $50,000 in 1998.

(8)
Mr. Matthews joined Ecolab and became an executive officer during July 1999.


OPTION GRANTS IN 2000

 
   Individual Grants

   Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation
for Option Term(1)



Name
   Number of
Securities
Underlying
Options
Granted(2)
(#)
   Percent of
Total
Options
Granted to
Employees
in 2000
   Exercise or
Base Price
($/Sh)
   Expiration Date
   0%
($)
   5%
($)
   10%
($)


Allan L. Schuman   330,000   12.1 % $ 38.53125   08/18/10   -0-   $ 8,010,647   $ 20,217,347
L. White Matthews, III   55,000   2.0 % $ 38.53125   08/18/10   -0-   $ 1,335,108   $ 3,369,558
Richard L. Marcantonio   55,000
30,000		   2.0
1.0		 %
%		 $
$		 38.53125
41.59500		   08/18/10
12/07/10		   -0-

-0-		   $
$		 1,335,108
786,146		   $
$		 3,369,558
1,984,082
John P. Spooner   55,000
20,000		   2.0
0.7		 %
%		 $
$		 38.53125
41.59500		   08/18/10
12/07/10		   -0-

-0-		   $
$		 1,335,108
524,097		   $
$		 3,369,558
1,322,721
James L. McCarty   55,000   2.0 % $ 38.53125   08/18/10   -0-   $ 1,335,108   $ 3,369,558
(1)
The dollar amounts under these columns are the results of calculations at the 0%, 5% and 10% compounded growth rates set or permitted by the SEC for the purposes of this table over a period equal to the term of the option. These rates and amounts are not intended to forecast possible future price appreciation of the Company's Common Stock. No gain to the optionees is possible without an increase in stock price.

(2)
All options granted in 2000 become exercisable cumulatively at the rate of 33, 67 and 100% on each anniversary of the date of grant and become exercisable earlier upon the holder's retirement under the Company's pension plan or upon a change in control of the Company.

12


AGGREGATED OPTION EXERCISES IN 2000 AND
DECEMBER 31, 2000 OPTION VALUES

 
    
    
   Number of
Securities Underlying
Unexercised Options at
December 31, 2000

   Value of Unexercised
In-the-Money Options at
December 31, 2000(2)
 
    
    
  


 


Name

   Shares Acquired
on Exercise
(#)
   Value
Realized(1)
($)
   Exercisable
(#)
   Unexercisable
(#)
   Exercisable
($)
   Unexercisable
($)


Allan L. Schuman   148,800   $ 4,961,241   976,700   1,327,500   $ 27,307,017   $ 4,117,359
L. White Matthews, III   -0-     -0-   26,375   349,125   $ 107,115   $ 616,903
Richard L. Marcantonio   -0-     -0-   67,175   342,725   $ 1,420,439   $ 988,415
John P. Spooner   -0-     -0-   166,087   317,263   $ 4,804,701   $ 609,205
James L. McCarty   30,500   $ 781,429   73,750   311,250   $ 1,595,025   $ 749,606
(1)
Represents the difference between the fair market value of the Company's Common Stock on the exercise date and the exercise price of the option.

(2)
Represents the difference between the fair market value of the Company's Common Stock as of December 31, 2000 and the exercise price of the option.

13


COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN 1

The graph below compares the cumulative total shareholder return on the Company's Common Stock for the five calendar years ended December 31, 2000, with the cumulative total return on the Standard & Poor's 500 Index and the Standard & Poor's Chemicals (Specialty) Index over the same periods (assuming the investment of $100 in the Company's Common Stock, the Standard & Poor's 500 Index and the Standard & Poor's Chemicals (Specialty) Index on January 1, 1996, and reinvestment of all dividends).

LOGO

(1)
Total return calculations prepared by Standard & Poor's Compustat.


PENSION PLAN TABLE

 Average Annual
 Earnings During
 The Highest
 Five Continuous
 Years of Eligible
 Service
    
    
    
    
    
    
    
    
  Combined Annual Retirement Income from the
Plans with Years of Service
 



  10 Years
   15 Years
   20 Years
   25 years
   30 Years
   35 Years
   40 Years
   45 Years
 
$ 400,000   $ 80,000   $ 120,000   $ 160,000   $ 200,000   $ 240,000   $ 240,000   $ 240,000   $ 240,000
  500,000     100,000     150,000     200,000     250,000     300,000     300,000     300,000     300,000
  600,000     120,000     180,000     240,000     300,000     360,000     360,000     360,000     360,000
  700,000     140,000     210,000     280,000     350,000     420,000     420,000     420,000     420,043
  800,000     160,000     240,000     320,000     400,000     480,000     480,000     480,000     480,793
  900,000     180,000     270,000     360,000     450,000     540,000     540,000     540,000     541,543
  1,000,000     200,000     300,000     400,000     500,000     600,000     600,000     600,000     602,293
  1,100,000     220,000     330,000     440,000     550,000     660,000     660,000     660,000     663,293
  1,200,000     240,000     360,000     480,000     600,000     720,000     720,000     720,000     723,793
  1,300,000     260,000     390,000     520,000     650,000     780,000     780,000     780,000     784,543
  1,400,000     280,000     420,000     560,000     700,000     840,000     840,000     840,000     845,293
  1,500,000     300,000     450,000     600,000     750,000     900,000     900,000     900,000     906,043
  1,600,000     320,000     480,000     640,000     800,000     960,000     960,000     960,000     966,793
  1,700,000     340,000     510,000     680,000     850,000     1,020,000     1,020,000     1,020,000     1,027,543

The preceding table shows the estimated annual benefits payable under the Company's non-contributory qualified defined benefit Pension Plan, the Company's non-contributory non-qualified defined benefit Mirror Pension Plan and the Company's Supplemental Executive Retirement Plan (based upon a 15-year period certain for the supplemental

14

retirement benefit and a straight life annuity for both the qualified and non-qualified pension benefits) following retirement at age 65 for sample covered compensation amounts and lengths of plan participation, without regard to vesting and offsets, if any, for benefits under the Savings Plan or any predecessor plans and Social Security. At the end of 15 years, payment of amounts attributable solely to the Supplemental Executive Retirement Plan cease. The amounts shown in the preceding table which are attributable to the Supplemental Executive Retirement Plan would be reduced by $8,598, which is the amount attributable to 50% of the primary Social Security annual retirement benefit, based upon 2000 maximum levels for retirement in 2000 at age 65, and by annuitized amounts presumed to be paid from the Company's matching contribution made prior to July 1, 1994 under the Company's Savings Plan and a former profit-sharing plan of the Company.

The table does not show the additional "past service benefit" provided under the Supplemental Executive Retirement Plan to eligible executives who are unable to earn the maximum supplemental benefit by retirement at or after age 65 because the executive was hired by the Company after age 35. The past service benefit would add an additional benefit of 1% of the difference between covered compensation at retirement and annualized earnings at the time of joining the Company ("first year earnings") for each year by which the executive's age at date of hire exceeded 35. Messrs. Matthews, Marcantonio and Spooner are currently subject to these provisions and their first year earnings and estimated years of service creditable as past service are as follows: Mr. Matthews, $374,846 with 19.24 years; Mr. Marcantonio, $321,233 with 12.85 years; and Mr. Spooner, $365,000 with 12.93 years.

Applicable approximate covered compensation and credited years of service as of December 31, 2000 for the combined pensions and supplemental executive retirement benefits for the individuals named in the Summary Compensation Table at page 11 hereof are as follows: Mr. Schuman, $1,542,773 with 43.2 years; Mr. Matthews, $524,300 with 1 year; Mr. Marcantonio, $524,722 with 3 years; Mr. Spooner, $501,142 with 6 years and Mr. McCarty, $533,960 with 37.9 years.

Covered compensation is based on the executive officer's average annual earnings during the five continuous years of highest earnings. In general, there is no material variation between compensation used to determine covered compensation and the base salary and bonus compensation of executive officers as reported in the Summary Compensation Table at page 11 hereof.

Severance Contracts

Mr. Matthews has a severance arrangement which runs until July 5, 2001. If Mr. Matthews' employment is terminated by the Company without cause prior to that date, he shall be entitled to one year of severance pay, to include base salary and annual cash award earned under the Company's incentive plans referenced in footnote 2 at page 11.

Director Remuneration

Members of the Board of Directors who are not employees of the Company are paid an annual retainer of $22,000 and a fee of $1,200 for each Board or committee meeting they attend. Committee chairs each receive an additional fee of $4,500 per annum. One-half of the annual retainer amount is paid in the form of stock units (which are described at page 3 hereof). In addition, non-employee directors receive 600 stock units per annum.

Under a deferred compensation plan, non-employee directors may elect to defer some, or all, of the cash portion of their directors' fees until cessation of Board service. Deferred amounts either earn interest at market rates or are invested in the stock unit account at the election of the director. Upon cessation of Board service, deferred amounts (whether in the interest-bearing account or in the stock unit account) are paid in a lump sum or in equal installments to a maximum of ten years as elected by the director.

During 2000, non-employee directors participated in the Company's 1995 Non-Employee Director Stock Option Plan. Under that Plan, each such director elected at an annual meeting of stockholders to a full three-year term receives a non-statutory option to purchase 12,000 shares of Common Stock at the fair market value of the Common Stock on such date. The option becomes exercisable, on a cumulative basis, as to 4,000 shares on each of the next three subsequent annual meetings of stockholders and in general remains exercisable for ten years. In the event a director ceases to serve due to death or disability, all shares subject to the option become immediately exercisable. The 1995 Plan has terminated and no further options will be granted under that Plan.

A new Director compensation plan, as discussed under the heading "Adoption of the Ecolab Inc. 2001 Non-Employee Director Stock Option and Deferred Compensation Plan" at page 17 hereof, is being proposed for approval by the shareholders at the upcoming Annual Meeting. If approved by the shareholders, the requirement that one-half of the retainer be paid in stock units would terminate. Additionally, the level of stock unit compensation would be fixed from time to time by the Board as would the number and size of future stock option grants. The Board has established new compensation levels for 2001 to take effect at the Annual Meeting upon approval of the new Plan. The retainer would be $24,000; Board or Committee meeting attendance fees would be $1,200, annual stock unit compensation would have a value of $25,000 and annual stock options would have an economic value (as determined by the Board) of $55,000.

15


CERTAIN TRANSACTIONS

The Company and Henkel KGaA ("Henkel") each have a 50% economic interest in a joint venture engaged in industrial and institutional cleaning and sanitizing businesses throughout Europe ("Henkel-Ecolab"). Neither partner may transfer its interest in Henkel-Ecolab without the other's consent. Henkel has a tie-breaking vote on certain matters pertaining to the continuation of business during an impasse, which includes appointment of Henkel-Ecolab senior executives and adoption of the annual business plan. Strategic decisions concerning Henkel-Ecolab require the agreement of the Company and Henkel. The Company and Henkel are equally represented on two - four member governing boards for Henkel-Ecolab. Mr. Lehner is a Henkel designee to one of the governing boards. The Company includes the operations of Henkel-Ecolab in its financial statements using the equity method of accounting and combined financial statements of Henkel-Ecolab are included as a part of the Company's Annual Report on Form 10-K.

While Henkel-Ecolab has its own manufacturing, training and research and development facilities, it also has access to the basic technology of both the Company and Henkel for which it pays each company an equal royalty based on net sales. Henkel-Ecolab operates on a stand-alone basis but obtains certain administrative support from Henkel and its affiliates and acquires certain products from the Company and Henkel as well as from third parties. All such royalties and prices for administrative services and products are based on arm's length negotiations. Mr. Lehner is President and Chief Executive Officer of Henkel and Chairman of the Henkel Management Board, and Mr. Hamelmann is a member of the Henkel Shareholders' Committee.

On December 7, 2000, the Company and Henkel entered into an agreement whereby the Company will, subject to closing conditions and regulatory approval, acquire from Henkel the 50% interest in Henkel-Ecolab which it does not own. The closing is scheduled for January 2, 2002. The purchase price is based on Henkel-Ecolab operating income for 2000 and 2001 and will be paid, at Henkel's option, in cash or the Company's Common Stock. If Henkel chooses Common Stock, the cash purchase price will be converted into a number of shares of Common Stock at the value of $41.06 per share, not to exceed approximately 13,200,000 shares or be less than approximately 9,200,000 shares. Based on current estimates, the cash purchase price will be in an approximate range of 520,000,000 to 560,000,000 euro, or $473,000,000 to $510,000,000 at exchange rates in effect on March 14, 2001. The actual cash purchase price expressed in U.S. dollars (as well as the actual number of shares of Common Stock - within the permitted range - in a share transaction) depends upon Henkel-Ecolab's actual operating income prior to closing and the then current exchange ratio between the euro and the U.S. dollar.

As a part of the proposed transaction, the Stockholders' Agreement between Henkel and the Company will be amended as described under the heading "Stockholder Agreement" at page 16 hereof.

In December 2000, the Company acquired from Henkel, a minority interest which Henkel owned in the Company's operating subsidiary in Venezuela. The price was $3,000,000.


STOCKHOLDER AGREEMENT

As of March 20, 2001, Henkel KGaA and its affiliates owned approximately 32.24 million shares of the Company's Common Stock as set forth in the table of Security Ownership of Certain Beneficial Owners located at page 2 hereof.

Henkel's equity ownership in the Company is subject to an agreement ("Stockholder's Agreement") containing certain restrictions pertaining to, among other things, maximum shareholding, transfer and voting rights. Generally, the Stockholder's Agreement terminates on June 26, 2009. During the year second preceding such date, Henkel and the Company will commence negotiations for an extension of the term. If an agreement to extend such term is not reached, Henkel would have the right, and in certain circumstances the obligation, to purchase the Company's interest in Henkel-Ecolab (Henkel-Ecolab is described under the heading "Certain Transactions" at page 16 hereof). The purchase price shall be paid by Henkel in the Company's Common Stock owned by it, with any excess price payable in cash. If the value of Henkel's Common Stock ownership exceeds the purchase price, then the Company may acquire such remaining Common Stock at market value. After any such purchase, the Stockholder's Agreement would remain in effect for an additional two years. In addition, the Stockholder's Agreement provides that if Henkel-Ecolab is terminated or Henkel owns less than 1% of the Company's Common Stock, the Stockholder's Agreement will terminate two years after the later of such events. Pursuant to the Stockholder's Agreement, Henkel is precluded from acquiring more than 30% of the Company's outstanding Common Stock or from acting, alone or in concert with others, to control or influence the Company.

Henkel may sell its shares of the Company's Common Stock under certain conditions specified in the Stockholder's Agreement subject to the Company's right of first refusal. In addition, Henkel has agreed to vote its shares in the case of election of directors of the Company, certain stockholder proposals, Company compensation and certain matters pertaining to the independent publicly traded nature of the Company, in accordance with the recommendations or directions of the Board. In all other cases, except with respect to certain "strategic transactions," Henkel may vote, at its

16

option, either in accordance with the recommendation of the Board or pro rata in the same manner and proportion that votes of the stockholders of the Company (other than Henkel and officers or directors of the Company) have been cast. Any vote with respect to "strategic transactions" (an increase in the authorized shares or an amendment to the Certificate of Incorporation, as well as a disposition, recapitalization, liquidation or consolidation of the Company or other transactions which could reasonably be expected to have a material effect upon Henkel's investment in the Common Stock) may be cast at Henkel's sole discretion. Henkel also is entitled to designate nominees for election to the Company's Board of Directors proportionate to the percentage of its holding of voting securities in the Company (rounded to the nearest whole number). Currently, Henkel has designated for election three of the Company's directors. Those directors are: Stefan Hamelmann, Ulrich Lehner and Hugo Uyterhoeven. Further information concerning Henkel directorships is found at page 5 hereof under the heading "Election of Directors."

Upon the closing of the proposed transaction whereby the Company will acquire 100% ownership of Henkel-Ecolab as described under the heading "Certain Transactions" at page 16 hereof, Henkel and the Company will enter into an amended and restated Stockholder's Agreement. The amended Stockholder's Agreement will, among other things, contain restrictions pertaining to Henkel's shareholding, transfer and voting rights and will contain provisions regulating Henkel's ability to influence the management of the Company or otherwise take control of the Company. Under the amended Stockholder's Agreement, Henkel will be permitted to increase its stockholding in the Company to 35% and will remain entitled to proportionate representation on the Company's Board of Directors.


COMPANY TRANSACTIONS

During 2000, the Company sold products and services in the amount of approximately $625,000 to Henkel or its affiliates, and purchased products and services in the amount of approximately $5,183,000 from Henkel or its affiliates. The sales were made at prices comparable to prices charged to other customers and the Company believes that the amounts paid for products and services purchased were comparable with prices charged by other suppliers for similar products.

As a part of the transaction with Henkel in which Henkel-Ecolab was formed in 1991, and pursuant to purchases subsequent thereto, the Company has acquired Henkel's industrial and institutional cleaning and sanitizing businesses in approximately 25 countries outside of Europe. During 2000, these acquired businesses, (now owned by the Company) paid Henkel or its affiliates approximately $248,000 for administrative services and approximately $4,591,000 for products under supply arrangements. These payments were in addition to the purchases made by the Company referenced in the above paragraph.

In addition, the Company has access to certain technology of Henkel which is relevant to most of the Company's businesses. The Company paid Henkel 2,500,000 deutsche marks (approximately $1,700,000) under this arrangement in 2000. The payment was determined through arm's length negotiation.


ADOPTION OF THE ECOLAB INC. 2001 NON-EMPLOYEE DIRECTOR
STOCK OPTION AND DEFERRED COMPENSATION PLAN

Introduction

On February 23, 2001, the Board of Directors of the Company adopted the 2001 Non-Employee Director Stock Option and Deferred Compensation Plan (the "2001 Plan"), subject to approval by the Company's stockholders.

Under the 2001 Plan, a non-employee director of the Company will receive:


As more fully discussed under the heading "Director Remuneration" at page 15 of this Proxy Statement, the Company has previously granted its non-employee directors stock options under, most recently, the Company's 1995 Director Stock Option Plan (the "1995 Option Plan"). The Company also has previously granted its non-employee directors annual stock unit grants and offered them the opportunity to defer cash director compensation into a cash account or

17

phantom share account under its 1997 Non-Employee Director Deferred Compensation Plan and into a cash account under an earlier Deferred Compensation Plan for Non-Employee Directors (collectively, the "Prior Deferral Plans").

The 2001 Plan, if approved by the Company's stockholders, will be effective on the date of the Annual Meeting ("Effective Date") and would replace the 1995 Option Plan (except for options outstanding under that plan) and the Prior Deferral Plans. Upon the Effective Date, any existing balance in the cash account or share account of a current or former director under the Prior Deferral Plans will be credited to such individual's Cash Account or Share Account, as the case may be, under the 2001 Plan.

Summary of 2001 Plan

The basic features of the 2001 Plan are outlined below. This summary is qualified in its entirety by reference to the actual text of the 2001 Plan, a copy of which may be obtained from the Company at the address found at the top of page 1 of this Proxy Statement.

Purpose of the 2001 Plan.  The purpose of the 2001 Plan is to attract and retain the services of experienced and knowledgeable non-employee directors by providing these directors with greater flexibility in the form and timing of receipt of compensation for their service on the Board. Additionally, the 2001 Plan also allows non-employee directors to obtain a greater proprietary interest in the Company's long-term success and progress through receipt of Periodic and Elective Options, Share Unit Compensation and the ability to defer fees in the form of credits to their Share Accounts, Cash Accounts or Option Cash Accounts. The Board also believes that the 2001 Plan provides the Board more flexibility to establish the level and components of Board compensation to meet changing needs, than is currently the case under the 1995 Option Plan and the Prior Deferral Plans.

Eligible Participants.  All non-employee directors of the Company are eligible to participate in the Plan. If the four nominees for election to the Company's Board of Directors are elected at the Annual Meeting, 10 of the Company's 12 directors will be non-employee directors who will be eligible to participate in the Plan. Non-employee directors remain participants in the 2001 Plan until their outstanding Options have been exercised, canceled or expired and their entire account balances have been distributed. Additionally, three former non-employee directors will become participants in the 2001 Plan as a result of the transfer of their cash and share account balances under the Prior Deferral Plans to Cash Accounts and Share Accounts, as the case may be, under the 2001 Plan. These former directors will also receive distributions from their Cash Accounts and Share Accounts, as provided in the 2001 Plan, but will not be eligible to receive Periodic Options, Share Unit Compensation, deferrals of future compensation or Elective Options under the 2001 Plan.

Administration.  The Board's Governance Committee will administer the 2001 Plan (the "Administrator"). In connection with the administration of the 2001 Plan, the Administrator may make, modify and rescind rules, policies, practices or procedures and make determinations as the Administrator determines to be necessary or advisable. In addition, the Administrator has the discretionary power and authority to limit or modify application of 2001 Plan provisions and Plan rules as the Administrator determines to be advisable to address or accommodate special issues related to tax deferral treatment for compensation paid or deferred under the 2001 Plan with respect to non-U.S. resident participants. The Administrator also has the authority to amend or modify the terms of any outstanding Option granted under the 2001 Plan in any manner. Any amendment or modification, however, must be permitted by the 2001 Plan and may not adversely affect any participant's rights without his or her consent. Each determination, interpretation or other action of the Administrator will be conclusive and binding for all purposes on all persons.

Stock Subject to the 2001 Plan.  Subject to adjustment as described in the next sentence, the maximum number of shares of Common Stock available for issuance or distribution under the 2001 Plan is 500,000 shares, plus any remaining shares previously approved by the stockholders for use in connection with the 1995 Option Plan and the 1997 Non-Employee Director Deferred Compensation Plan. 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 corporate structure or shares of the Company, the 2001 Plan provides that appropriate adjustment will be made to:

Shares subject to outstanding Options or Share Units and the issuance of shares of Common Stock upon the distribution of Share Accounts and the exercise of outstanding Options, net of shares tendered or attested to in payment of the

18

exercise price, reduce the maximum number of shares available for issuance or distribution under the 2001 Plan. If an Option terminates unexercised or the Company pays for the Option in cash instead of Common Stock, such shares of Common Stock subject to the Option become available again for issuance or distribution under the 2001 Plan.

Periodic Options.  Periodically, the Board will grant non-employee directors of the Company Periodic Options to purchase shares of Common Stock. The number of shares of Common Stock subject to these Periodic Options will be determined by the Board. The exercise price of each Periodic Option will be equal to 100% of the Market Price of a share of Common Stock on the date of grant. The Market Price of a share of Common Stock will be the average of the high and low sale prices of a share of Common Stock during the regular trading session on a specified date, as quoted in The Wall Street Journal reports of The New York Stock Exchange - Composite Transactions. On March 12, 2001, the Market Price of a share of Common Stock was $43.14. The other material terms of the Periodic Options are described below under the heading "Material Terms of Options."

Cash, Option Cash and Share Accounts.  For each participant in the 2001 Plan, the Administrator will establish and maintain a Cash Account, an Option Cash Account and a Share Account to evidence amounts credited with respect to the participant pursuant to the 2001 Plan.

Share Unit Compensation and Election to Receive Share Unit Compensation in Elective Options.  Non-employee directors of the Company will receive Share Unit Compensation in an amount that will be determined by the Board from time to time. This Share Unit Compensation will be paid to each non-employee director in the form of credits to his or her Share Account as of the last day of each February, April, June, August, October and December. The number of Share Units credited to each director's Share Account will equal the number that results from dividing the dollar amount of the Share Unit Compensation the director has earned for the period by the Market Price of a share of Common Stock on the date as of which the credit is made.

A director may elect to have up to 100 percent of his or her Share Unit Compensation paid in the form of credits to his or her Option Cash Account, which credits will convert into Elective Options as described below under the heading "Conversion of Option Cash Account into Elective Options." Credits to a director's Option Cash Account will be in dollars equal to the amount of the Share Unit Compensation earned by the director for the period which he or she has allocated to his or her Option Cash Account.

Deferral of Other Compensation.  Non-employee directors of the Company may elect to defer up to 100 percent of all other cash compensation for their services to the Company as directors, including their annual retainer and fees for attending Board or Board Committee meetings and for acting as chair of a Board Committee ("Other Compensation"), into their Cash, Option Cash and Share Accounts. Other Compensation deferred will be credited to a director's Cash, Option Cash and/or Share Accounts, as elected, as of the last day of each February, April, June, August, October and December. Credits to a director's Cash and Option Cash Accounts will be in dollars equal to the amount of Other Compensation the director has earned for the period and allocated to his or her Cash and Option Cash Accounts, respectively. The number of Share Units credited to the director's Share Account will equal the number that results from dividing the dollar amount of the Other Compensation the director has earned for the period and allocated to his or her Share Account by the Market Price of a share of Common Stock on the date as of which the credit is made.

Earnings Credits.  As of the last day of each February, April, June, August, October and December, a participant's Cash and Option Cash Accounts will be credited with interest, calculated on the basis of the balance in the participant's Cash and Option Cash Accounts on the last day of such month and the immediately preceding calendar month, at the prime rate of a reference bank as in effect on the last day of each such month. A participant's Share Account will be credited as of the date on which dividends are paid on shares of Common Stock with dividend equivalents, based on the amount of 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 of Common Stock.

Conversion of Option Cash Account into Elective Options.  A non-employee director who has elected to allocate any part of his or her Share Unit Compensation or Other Compensation to his or her Option Cash Account will be granted twice each year, on the date of the Company's annual meeting of stockholders and on November 1, an Elective Option to purchase the number of whole shares of Common Stock (rounded up to the next whole share) equal to four

19

times the then dollar value of the participant's Option Cash Account divided by the Market Price of a share of Common Stock on that date.

    4 x Dollar Value of Option
Cash Account
Market Price of a Share of
Common Stock		    

The exercise price of each Elective Option will be equal to 100% of the Market Price of a share of Common Stock on the date of grant. The other terms of the Elective Options are set forth under the heading "Material Terms of Options."

Distributions of Accounts Upon Termination of Service or Death.  If a director is deferring Share Unit Compensation or Other Compensation into an Option Cash Account and such director ceases to serve as a member of the Board, his or her Option Cash Account will be credited Share Unit Compensation, Other Compensation and interest payments as of the day the director ceases to be a member of the Board. Unless the balance in the director's Option Cash Account is, following such crediting, de minimis (i.e., the number of shares of Common Stock subject to the Elective Option would be less than 100), the balance will convert into an Elective Option as of the day the director ceases to be a member of the Board.

Distributions of a participant's Cash and Share Accounts will be made or commence after the participant ceases to be a member of the Board. Distributions from a participant's Cash and Share Accounts will be made in the form of a lump sum payment unless the participant elects, in accordance with the 2001 Plan's rules, to receive distributions in the form of annual installment payments for a period of not more than 10 years. If a participant dies, distributions will be made to the participant's designated beneficiary in a lump sum payment whether or not payments have already commenced in the form of installments. Any distribution from a participant's Cash Account will be made in cash only, and any distribution from a participant's Share Account will be made in shares of Common Stock only.

Special Distributions.  The normal distribution times under the 2001 Plan may be changed as described below. As with other distributions, special distributions from a participant's Cash and Option Cash Accounts will be made in cash only, and any distribution from a participant's Share Account will be made in shares of Common Stock, only.

A distribution will be made to a participant from his or her Cash, Option Cash and Share Accounts in the form of a lump sum payment if the participant submits a written distribution request to the Administrator and the Administrator determines that the participant has experienced an unforeseeable 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 amount of the distribution may not exceed the lesser of the amount necessary to satisfy the emergency or the sum of the balances of the participant's Accounts.

A participant may, at any time, elect an immediate lump sum distribution of his or her Cash, Option Cash and Share Accounts in an amount equal to 90 percent of the balance of such Accounts as of the date of the distribution. The remaining balances of such Accounts will then be forfeited.

If a participant who has ceased to be a member of the Board has a Cash Account balance of less than $2,500 or has a Share Account balance of fewer than 100 Share Units, such participant's balance will be distributed to the participant in a lump sum payment. The number of a participant's installment distributions may also be decreased in order to avoid the administrative expense and burden associated with the payment of small benefits.

Material Terms of Options.  All Periodic Options and Elective Options granted under the 2001 Plan will be non- statutory options not entitled to special tax treatment under Section 422 of the Internal Revenue Code of 1986, as amended. Each Option granted under the 2001 Plan will be immediately exercisable and will terminate 10 years after the date of grant. If a non-employee director ceases to serve as a director of the Company for any reason, then his or her Options will remain exercisable for the remaining term of the Options or, if earlier, until five years after the date he or she ceased to serve as a director of the Company.

Payment of the exercise price for an Option may be made either in cash or, with the consent of the Administrator, by tender or attestation as to ownership of shares of Common Stock previously owned by the participant, by delivery of a broker exercise notice (pursuant to which the broker or dealer is irrevocably instructed to sell enough shares or loan the participant enough money to pay the exercise price and to remit such sums to the Company) or by a combination of these methods. Non-employee directors may elect to defer receipt of all or a portion of the shares of Common Stock issuable upon the stock-for-stock exercise of an Option; provided, that the director (1) is a non-employee director both at the time of execution of the election to defer and at the time of the exercise of the Option, (2) makes the election at

20

least six months prior to the director's exercise of the Option, and (3) uses the attestation as to ownership of previously owned shares method of exercise. Shares of Common Stock deferred with respect to an Option will be credited to the director's Share Account as of the date of exercise of the Option. The number of Share Units credited to the director's Share Account will equal the number of shares with respect to which the Option was so exercised, net of the number of shares attested to in payment of the exercise price.

Each Option will provide for the automatic grant of a reload option if, while the participant is a director of the Company, he or she exercises the original Option and satisfies some or all of the exercise price by tender or attestation of ownership of previously acquired shares. The reload option will be an option to purchase the number of the previously acquired shares so tendered or attested to at the Market Price on the date of the exercise of the original Option. Except for the exercise price, and the unavailability of a further reload feature, reload options will have the same terms as the original Option and have a duration equal to the remaining term of the original Option.

No Options granted under the 2001 Plan may be transferred in any manner, except for two situations. An Option may be transferred to a beneficiary or legal representative if a participant dies. The Administrator may permit an Option to be given to any member of a participant's immediate family, a trust in which such family members have more than 50% of the beneficial interests, a foundation in which such family members (or the participant) control the management of assets, and an entity in which such family members (or the participant) own more than 50% of the voting interests. Except for these permitted transfers, only a participant may exercise an Option.

If a Change in Control of the Company occurs, the Board in its sole discretion may determine that some or all participants holding outstanding Options will receive 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 over the exercise price per share of the Options. For purposes of the 2001 Plan, a "Change in Control of the Company" occurs if:

Effect of Actions Constituting Cause.  A participant's right to exercise outstanding Periodic Options granted under the 2001 Plan will terminate if the Board determines that such participant has engaged in dishonesty, fraud, misrepresentation, embezzlement or deliberate injury or attempted injury, in each case related to the Company, or any material breach of any confidentiality or non-compete agreement with the Company. A participant's Elective Options and other benefits attributable to the participant's participation in the 2001 Plan including balances in the participant's accounts will not be forfeited.

Source of Payments; Nature of Interests.  The 2001 Plan is unfunded for tax purposes. All benefits and costs under the 2001 Plan will be paid from the Company 's general assets, and participants have no greater rights to receive benefits than any unsecured general creditor of the Company. The Company may establish a trust with an independent corporate trustee for the purpose of paying such benefits. The benefits payable under the 2001 Plan may not be sold, transferred, assigned, pledged, encumbered or subjected to any charge or legal process, except as described under the heading "Material Terms of Options" above.

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Amendment of the 2001 Plan.  The Board may suspend or terminate all or any part of the 2001 Plan at any time, and may amend the 2001 Plan from time to time to conform the 2001 Plan to any change in applicable laws or regulations or in any other respect the Board may deem advisable.

Termination of the 2001 Plan.  Any benefits to which participants in the 2001 Plan have become entitled prior to the effective date of termination of the 2001 Plan will continue to be paid in accordance with the provisions of the 2001 Plan. No Options may be granted after such termination. Options outstanding upon termination of the 2001 Plan may continue to be exercised according to their terms.

Material Federal Income Tax Consequences

The following description of federal income tax consequences is based on current statutes, regulations and interpretations. State, local and foreign income tax consequences are not described. The description is not intended to address specific tax consequences applicable to an individual participant in the 2001 Plan.

Options.  Neither the participant nor the Company incurs any federal income tax consequences as a result of the grant of a Periodic Option or an Elective Option. Upon exercise of an Option, a participant will recognize ordinary income equal to the difference between the fair market value of the shares purchased, determined on the date of exercise, and the consideration paid for the shares. Special rules will apply if previously acquired shares of Common Stock are permitted to be tendered or attested to in payment of an Option exercise price. Special rules that apply if a participant elects to defer receipt of shares issuable upon the stock-for-stock exercise of Options are described in the paragraph below titled "Deferrals."

At the time of a subsequent sale or disposition of any shares of Common Stock obtained upon exercise of an Option, any gain or loss will be a capital gain or loss. Whether the gain or loss constitutes long or short-term capital gain or loss will depend upon the length of time the participant held the stock prior to its disposition.

If a participant transfers an Option during his or her lifetime, the difference between the fair market value of the shares that can be purchased under the transferred Option and the consideration that would be required to be paid for such shares, determined on the date of the transfer, would constitute a gift subject to federal gift tax law. The transferor participant will recognize ordinary income when the transferee exercises the Option equal to the difference between the fair market value of the shares purchased, determined on the date of exercise, and the consideration paid for the shares. Any gain or loss recognized by the transferee upon a subsequent disposition of the Common Stock obtained upon exercise of a transferred Option will be reportable by the transferee.

In general, the Company will be entitled to a compensation expense deduction in connection with the exercise of an Option for any amounts includable in the taxable income of the participant as ordinary income.

Share Unit Compensation.  The Company believes that a participant's receipt of credits to his or her Share Account as a result of Share Unit Compensation paid pursuant to the 2001 Plan will not be a taxable event for federal income tax purposes. A participant will generally not recognize taxable income until he or she receives distributions of shares of Common Stock, when the then market value of the distributed shares will be taxable as ordinary income. A participant will generally recognize a capital gain or loss upon a subsequent taxable sale or disposition of any Common Stock received under the 2001 Plan. Whether the gain or loss constitutes long or short-term capital gain or loss will depend upon the length of time the participant held the stock prior to its disposition.

In general, the Company will be entitled to a compensation expense deduction for any amounts includable in the taxable income of a participant as ordinary income.

Deferrals.  The Company believes that a participant's election to defer the receipt of Other Compensation or shares of Common Stock upon the stock-for-stock exercise of an Option or to elect to have Share Unit Compensation credited to his or her Option Cash Account pursuant to the 2001 Plan will not be a taxable event for federal income tax purposes. A participant will generally not recognize taxable income until he or she receives distributions of cash or shares of Common Stock or in the case of the Option Cash Account, until the Elective Option into which the Option Cash Account is converted is exercised in a taxable exercise. A participant will generally recognize a capital gain or loss upon a subsequent taxable sale or disposition of any Common Stock received under the 2001 Plan. Whether the gain or loss constitutes long or short-term capital gain or loss will depend upon the length of time the participant held the stock prior to its disposition.

In general, the Company will be entitled to a compensation expense deduction for any amounts includable in the taxable income of a participant as ordinary income.

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Options and Share Units Granted and Deferrals Made Under the Plan

As of the date of this Proxy Statement, no Options have been granted, no Share Unit Compensation has been paid and no deferrals of Other Compensation or receipt of shares of Common Stock upon the stock-for-stock exercise of an Option have been made under the Plan. However, on February 23, 2001, the Board established compensation levels for Board service for the year commencing with the date of the Annual Meeting. Assuming those compensation levels remain in effect for the year following the date of the Annual Meeting and the Company's stockholders approve the 2001 Plan, each of the four Class III non-employee directors being elected on the date of the Annual Meeting, as well as Mr. Hamelmann who has not received an option under the 1995 Option Plan, will be granted, on the Annual Meeting Date, Periodic Options having an economic value, as determined by the Board, equal to $55,000. The exact number of shares subject to the Periodic Option is not determinable at this time as it is based upon the Market Price of the Company's Common Stock on the date of grant. It is anticipated that directors who hold unvested options from previous option grants made under the 1995 Option Plan will not receive Periodic Option grants in 2001.

Each non-employee director will receive Share Unit Compensation over the year commencing with the Annual Meeting having an economic value of $25,000. Each non-employee director may also elect to have (i) up to 100 percent of his or her other cash compensation (e.g., retainer and fees for attending Board meetings and committees and for chairing a Board Committee) for service on the Board credited to his or her Cash Account, Share Account and Option Cash Account for conversion into Elective Options and (ii) up to 100 percent of his or her Share Unit Compensation credited to his or her Option Cash Account for conversion into Elective Options. The number of Elective Options which will be granted is not determinable at this time as it is based on amounts credited to the Option Cash Account, and the market price of the Company's common stock on the date of grant.

All current non-employee directors and certain former non-employee directors will have balances in their cash accounts and/or share accounts under the Prior Deferral Plans, which will become, on the date of the Annual Meeting and assuming the Company's stockholders approve the 2001 Plan, balances under the equivalent Cash Account or Share Account under the 2001 Plan. As of January 1, 2001, the number of share units in the share account and the dollar value of the cash account under the Prior Deferral Plans for each current non-employee director of the Company and the former non-employee directors as a group are as follows:



Name
   Number of
Share Units
   Dollar Value of Cash Account
           
Leslie S. Biller   5,720     0
Ruth S. Block   40,742     0
Jerry A. Grundhofer   2,796     0
Stefan Hamelmann   0 (1)   0
James J. Howard   9,554     0
William L. Jews   2,918     0
Joel W. Johnson   6,810   $ 24,565
Ulrich Lehner   0 (1)   0
Jerry W. Levin   7,856     0
Robert L. Lumpkins   1,990     0
Hugo Uyterhoeven   7,241     0
Former non-employee directors as a group   23,439   $ 43,355
(1)
Messers. Hamelmann and Lehner joined the Board of Directors subsequent to January 1, 2001.

The Board of Directors recommends a vote FOR the adoption of the Company's 2001 Non-Employee Director Stock Option and Deferred Compensation Plan.

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AUDIT COMMITTEE REPORT

The Audit Committee has (i) reviewed and discussed the audited financial statements of the Company with respect to the year ended December 31, 2000 with management, (ii) discussed with PricewaterhouseCoopers LLP (the Company's independent accountants) the matters required to be discussed by Statement on Auditing Standards No. 61, as amended, (Codification of Statements on Auditing Standards, AU Section 380), and (iii) has received the written disclosures and the letter from PricewaterhouseCoopers LLP required by Independence Standards Board Standard No. 1 (Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees), and has discussed with PricewaterhouseCoopers LLP their independence. Based on the review and discussions referred to in the preceding sentence, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company's Annual Report on Form 10-K for the year ended December 31, 2000 for filing with the Securities and Exchange Commission.

Ruth S. Block   Joel W. Johnson
James J. Howard   Robert L. Lumpkins
William L. Jews   Hugo Uyterhoeven


RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS

Upon the recommendation of its Audit Committee, the Board of Directors has appointed PricewaterhouseCoopers LLP as independent accountants to audit the consolidated financial statements of the Company for the year ending December 31, 2001 and to perform other appropriate audit, accounting and consulting services. Representatives of PricewaterhouseCoopers LLP are expected to be present at the Annual Meeting of Stockholders. They will have an opportunity to make a statement if they desire to do so, and are expected to be available to respond to appropriate questions.

Under the laws of the State of Delaware, stockholder ratification of the appointment of independent accountants is not required. However, the Company deems it advisable to submit the appointment of PricewaterhouseCoopers LLP for stockholder consideration and ratification. If the appointment is not ratified, the Board of Directors will reconsider the matter, but will not be required to change its decision to appoint PricewaterhouseCoopers LLP as independent accountants. The Board of Directors recommends a vote FOR the ratification of the appointment of PricewaterhouseCoopers LLP as independent accountants for the Company.

PricewaterhouseCoopers LLP has provided audit and non-audit services to the Company in 2000, the aggregate fees and expenses of which are shown below.

INDEPENDENT ACCOUNTANT'S FEES

Audit Fees

The aggregate fees and expenses of PricewaterhouseCoopers LLP for professional services provided for (i) the audit of the consolidated financial statements for the year ended December 31, 2000 included in the Company's Annual Report on Form 10-K, (ii) the reviews of the interim consolidated financial information included in the Company's 2000 Quarterly Reports on Form 10-Q, and (iii) the audit of the combined financial statements of Henkel-Ecolab for its fiscal year ended November 30, 2000, which are also included in the Company's Annual Report on Form 10-K, were $1,722,000.

Financial Information Systems Design and Implementation Fees

PricewaterhouseCoopers LLP did not render any professional services related to financial information systems design and implementation for the most recent fiscal year.

All Other Fees

The aggregate fees and expenses billed by PricewaterhouseCoopers LLP for all other services provided to the Company for the year ended December 31, 2000, were $3,278,000. These include, but are not limited to, fees and expenses related to certain international subsidiary statutory audits, benefit plan audits, services in connection with business acquisitions and divestitures, Company tax planning and expatriate taxes.

The Audit Committee has considered whether the provision of the services covered by the two immediately preceding paragraphs (i.e., "Financial Information Systems Design and Implementation Fees" and "All Other Fees") is compatible with maintaining the independence of PricewaterhouseCoopers LLP and has determined that such services did not impair their independence.

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OTHER MATTERS

Proxy Solicitation

The Company will bear the cost of the preparation and solicitation of proxies, including the charges and expenses of brokerage firms, banks or other nominees for forwarding proxy material to beneficial owners. In addition to solicitation by mail, proxies may be solicited by telephone, the Internet or personally. The Company has retained Georgeson Shareholder Communications, Wall Street Plaza, New York, NY 10005, to aid in the solicitation of proxies for a fee of $8,000 plus expenses. Proxies may also be solicited by certain directors, officers and employees of the Company without extra compensation.

Future Stockholder Proposals—Deadline for Inclusion in Proxy

Any stockholder proposal to be considered by the Company for inclusion in the Proxy Statement and form of proxy for next year's Annual Meeting of Stockholders, expected to be held in May, 2002, must be received by the Secretary of the Company at the Company's principal executive offices located at the address found at the top of page 1, no later than November 30, 2001.

Other Stockholder Proposals/Director Nominations—Deadline for Consideration

Stockholder proposals not included in a proxy statement for an Annual Meeting as well as proposed stockholder nominations for the election of directors at an annual meeting must each comply with advance notice procedures set forth in the By-Laws of the Company in order to be properly brought before that Annual Meeting of Stockholders. In general, written notice of a stockholder proposal or a director nomination must be delivered to the Secretary of the Company not less than 90 days nor more than 135 days prior to the anniversary date of the preceding Annual Meeting of Stockholders. With regard to next year's Annual Meeting of Stockholders, expected to be held in May 2002, the written notice must be received between December 27, 2001 and February 10, 2002 inclusive.

In addition to timing requirements, the advance notice provisions of the By-laws contain informational content requirements which must also be met. A copy of the By-Law provisions governing these timing procedures and content requirements may be obtained by writing to the Secretary of the Company.

If the presiding officer of the Annual Meeting of Stockholders determines that business, or a nomination, was not brought before the meeting in accordance with the By-Law provisions, such business shall not be transacted or such defective nomination shall not be accepted.

March 30, 2001

25


EXHIBIT


AUDIT COMMITTEE CHARTER

Membership and Organization 

The members of the Audit Committee shall be comprised of not less than three members. The Committee shall meet the independence and financial experience requirements established by the New York Stock Exchange and possess the personal characteristics appropriate to the Committee's role. The members of the Committee shall be appointed by the Board upon the recommendation of the Governance Committee.

Objective 

The Committee shall assist the Board of Directors in fulfilling their responsibilities to monitor (1) the quality and integrity of the Corporation's consolidated financial statements and Management's financial control of operations, (2) the independence and performance of the independent accountants, (3) the role and performance of the internal audit function and (4) the Corporation's compliance with legal and regulatory requirements. In performing its duties, the Committee shall maintain effective working relationships with the Board of Directors, Management, the internal auditors and the independent accountants.

The Committee's authorities and responsibilities as set forth herein are intended to assist it and the Board of Directors in its monitoring and oversight role. It remains the responsibility of Management to prepare complete and accurate financial statements in accordance with GAAP, to maintain financial control of operations and assure compliance with laws and regulations. It remains the responsibility of the independent accountants to plan and conduct the annual audit and express their opinion on the consolidated financial statements in accordance with professional standards.

Authority 

The Committee shall oversee, on behalf of the Board of Directors, the work of the other participants in the financial reporting and financial control process. To facilitate that role:

26

27


ECOLAB INC.

2001 NON-EMPLOYEE DIRECTOR STOCK OPTION AND
DEFERRED COMPENSATION PLAN

    1.  Description.  

    2.  Participation.  

    3.  Participant Cash, Option Cash and Share Accounts.  For each Participant, the Administrator will establish and maintain a Cash Account, a Share Account and an Option Cash Account to evidence amounts credited with respect to the Participant pursuant to Sections 4, 5 and 6. Subject to Section 9.3(c), each Participant will always have a fully vested nonforfeitable interest in his or her Account.

    4.  Carryover Credits from Prior Deferred Compensation Plans.  At the Effective Time, the Cash Account and Share Account of each Participant will be credited with the amount of cash or Share Units, if any, in such Participant's corresponding cash account and share account, as the case may be, under the Prior Deferred Compensation Plans, which will then be reduced to zero.

    5.  Compensation and Deferral Credits.  

2

3

4

    6.  Earnings Credits.  

    7.  Conversion of Option Cash Accounts into Elective Options.  

5

    8.  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 10.

    9.  Distributions.  

6

7

8

9

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

10

    11.  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 16.8, 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

11

evidencing a Periodic Option then held by the Participant will terminate and be forfeited without notice of any kind. Elective Options granted under Section 7 and 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.

    12.  Source of Payments: Nature of Interest.  

    13.  Payment of Withholding Taxes.  

12

    14.  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.

    15.  Amendment and Termination.  

13

    16.  Definitions.  

    The definitions set forth in this Section 16 apply unless the context otherwise indicates.

14

15

16

17

    17.  Administration.  

    18.  Shares Available for Issuance.  

18

    19.  Miscellaneous.  

19

20


P R O X Y

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

ECOLAB INC.

ANNUAL MEETING OF STOCKHOLDERS
MAY 11, 2001

The undersigned hereby appoints Allan L. Schuman and Kenneth A. Iverson, or either of them, with full power of substitution to each as proxies to represent the undersigned at the Annual Meeting of Stockholders of Ecolab Inc., to be held in the McKnight Theatre at the Ordway Center for the Performing Arts, 345 Washington Street, St. Paul, MN on Friday, May 11, 2001 at 10:00 a.m. and at any adjournment(s) thereof, and to vote all shares of stock which the undersigned may be entitled to vote at said meeting as directed below with respect to the proposals as set forth in the Proxy Statement, and in their discretion, upon any other matters that may properly come before the meeting.

Nominees for election to Board of Directors:

1. William L. Jews 2. Joel W. Johnson 3. Ulrich Lehner 4. Hugo Uyterhoeven

You are encouraged to specify your choices by marking the appropriate boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance with the Board of Directors' recommendations. The tabulator cannot vote your shares unless you sign and return this card, or you use the telephone or internet voting services.


SEE REVERSE SIDE

/X/ Please mark your votes as in this example.

Unless you indicate otherwise, this proxy will be voted in accordance with the Board of Directors' recommendations.

___________________________________________________________________________________________

Directors recommend a vote FOR all Nominees and FOR Proposals 2 and 3.

___________________________________________________________________________________________

1.
Election of 4 Directors. (see reverse)

FOR   WITHHELD
/ /   / /

For all except the following nominee(s):____________________________

___________________________________________________________________________________________ __

2.
Adopt the Ecolab Inc. 2001 Non-Employee Director Stock Option and Deferred Compensation Plan.

FOR   AGAINST   ABSTAIN
/ /   / /   / /
3.
Ratify appointment of independent accountants.

FOR   AGAINST   ABSTAIN
/ /   / /   / /

Please sign name(s) exactly as printed hereon. Joint owners should each
sign. In signing as attorney, administrator, executor, guardian or
trustee, please give full title as such.

____________________________________    ________________________

____________________________________    ________________________
SIGNATURE(s)                                                             DATE


ECOLAB ANNUAL MEETING—MAY 11, 2001


VOTE BY INTERNET    (www.eproxyvote.com/ecl)


VOTE BY TELEPHONE    (1-877-779-8683)



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BOARD COMMITTEES
ELECTION OF DIRECTORS
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS—CLASS III (FOR A TERM ENDING 2004)
MEMBERS OF BOARD OF DIRECTORS CONTINUING IN OFFICE—CLASS I (FOR A TERM ENDING 2002)
MEMBERS OF BOARD OF DIRECTORS CONTINUING IN OFFICE—CLASS II (FOR A TERM ENDING 2003)
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
OPTION GRANTS IN 2000
AGGREGATED OPTION EXERCISES IN 2000 AND DECEMBER 31, 2000 OPTION VALUES
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN 1
PENSION PLAN TABLE
CERTAIN TRANSACTIONS
STOCKHOLDER AGREEMENT
COMPANY TRANSACTIONS
ADOPTION OF THE ECOLAB INC. 2001 NON-EMPLOYEE DIRECTOR STOCK OPTION AND DEFERRED COMPENSATION PLAN
AUDIT COMMITTEE REPORT
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
EXHIBIT
AUDIT COMMITTEE CHARTER
ECOLAB INC. 2001 NON-EMPLOYEE DIRECTOR STOCK OPTION AND DEFERRED COMPENSATION PLAN
P R O X Y THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS ECOLAB INC. ANNUAL MEETING OF STOCKHOLDERS MAY 11, 2001
SEE REVERSE SIDE
ECOLAB ANNUAL MEETING—MAY 11, 2001
VOTE BY INTERNET (www.eproxyvote.com/ecl)
VOTE BY TELEPHONE (1-877-779-8683)