<PAGE>
FILED PURSUANT TO RULE NO. 424(b)(3)
REGISTRATION NO. 333-50469
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. THIS +
+PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS SHALL NOT CONSTITUTE AN +
+OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY +
+SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR +
+SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE +
+SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 1, 1998
Prospectus Supplement
(To Prospectus dated April 24, 1998)
NALCO CHEMICAL COMPANY
$150,000,000
% NOTES DUE 2008 LOGO
The % Notes due 2008 (the "Notes") mature on May , 2008. Interest on the
Notes is payable semi-annually on May and November , commencing November
, 1998. The Notes will not be redeemable by the Company prior to maturity.
The Notes will not be subject to any sinking fund. See "Description of the
Notes."
The Notes will be represented by one or more global registered securities (the
"Global Securities") registered in the name of the nominee of The Depository
Trust Company, which will act as the Depository. Interests in the Global
Securities will be shown on, and transfers thereof will be effected only
through, records maintained by the Depository and its participants. Except as
described herein, Notes in definitive form will not be issued.
----------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH
IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public(1) Discount(2) Company(1)(3)
- -------------------------------------------------
<S> <C> <C> <C>
Per Note % % %
Total $ $ $
</TABLE>
- --------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from May , 1998.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at
$ .
----------------------------------------
The Notes are offered by several Underwriters, subject to prior sale, when, as
and if delivered to and accepted by the Underwriters, and certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer and reject orders in whole or in part. It is expected that delivery
of the Notes will be made through the book-entry facilities of the Depository
on or about May , 1998.
CHASE SECURITIES INC.
BANCAMERICA ROBERTSON STEPHENS
FIRST CHICAGO CAPITAL MARKETS, INC.
The date of this Prospectus Supplement is May , 1998.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING
OVERALLOTMENT, STABILIZING TRANSACTIONS AND SYNDICATE SHORT COVERING
TRANSACTIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
----------------
THE COMPANY
Nalco Chemical Company is in the business of providing services, chemicals,
technology, equipment, and systems (monitoring and surveillance) used in water
treatment, pollution control, energy conservation, steelmaking, papermaking,
mining and mineral processing, electricity generation, other industrial
processes, and commercial building utility systems. Service chemicals are
developed, formulated, and manufactured to meet specific customer needs. They
are part of value added programs designed to help customers maintain a high
level of operating performance and efficiency in their facilities, improve the
quality of customers' end products, or help customers meet environmental
discharge limits in a cost-effective way. The Company's products are used for
purposes such as: control of scale, corrosion, foam and fouling in cooling
systems, boilers, and other equipment; clarification of water; separation of
liquids and solids; improving combustion; control of dust; lubrication and
corrosion protection in rolling, drawing and forming of metals; improving
production of pulp and qualities of paper; recovery of minerals; and
specialized process applications in a variety of industries. The quality and
on-site availability of technical expertise provided through highly qualified
personnel are very important considerations to customers. The effective use of
the Company's products requires a substantial amount of problem solving,
monitoring, and technical assistance on the part of Company employees.
Service chemicals are usually marketed through the Company's own
organization because of the high degree of technical service required. The
worldwide field sales force is trained in the application and use of Nalco
service chemicals, and is supported by a marketing and research staff of
specialists in the technology and use of various Nalco service chemicals. The
Company's principal method of competition is based on quality service, product
performance and technology through safe, practical applied science.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Notes will be used to
retire outstanding commercial paper bearing an effective interest rate of
approximately 5.51% and maturing within the next thirty days. The commercial
paper to be retired was incurred in connection with acquisitions made by the
Company within the past six months. Pending any such application, the proceeds
may be invested in short-term securities.
S-2
<PAGE>
DESCRIPTION OF THE NOTES
The following description of the particular terms of the Notes offered
hereby supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Securities set forth in
the accompanying Prospectus, to which description reference is hereby made.
The statements herein concerning the Notes and the Indenture do not purport to
be complete. All such statements are qualified in their entirety by reference
to the accompanying Prospectus and the provisions of the Indenture, the form
of which has been filed with the Securities and Exchange Commission.
The Notes offered hereby constitute a single series of Securities to be
issued under an Indenture, dated as of May , 1998, between the Company and
The Chase Manhattan Bank, as Trustee (the "Trustee"). The Trustee will
initially be the securities registrar and paying agent (the "Paying Agent").
The Notes will be issued only in registered form without coupons in
denominations of $1,000 and integral multiples thereof.
The Notes will be represented by one or more Global Securities (as defined
in the accompanying Prospectus) registered in the name of a nominee of DTC.
The ownership interests ("Book-Entry Interests") in such Global Securities
will be shown on, and transfers thereof will be effected only through, records
maintained by DTC or its nominee for such Global Securities and on the records
of DTC participants. Except as described below and in the accompanying
Prospectus, owners of Book-Entry Interests will not be considered the holders
thereof and will not be entitled to receive physical delivery of Notes in
definitive form. If the book-entry system is discontinued, including if DTC is
at any time unwilling or unable to continue as Depository, the Company will
issue individual Notes to owners of Book-Entry Interests in exchange for the
Global Securities. See "Description of Securities--Book-Entry Securities" in
the accompanying Prospectus.
Settlement for the Notes will be made by the Underwriters in immediately
available funds, and all payments of principal, premium, if any, and interest
on the Notes will be made by the Company in immediately available funds.
The Notes will mature on May , 2008 and will be limited to $150 million
aggregate principal amount. Interest on the Notes will be computed on the
basis of a 360-day year of twelve 30-day months and will be payable semi-
annually on each May and November (each, an "Interest Payment Date"),
commencing November , 1998. Interest payable on each Interest Payment Date
will include interest accrued from May , 1998 or from the most recent
Interest Payment Date to which interest has been paid or duly provided for to,
but excluding, such Interest Payment Date. Interest payable on any Interest
Payment Date will be payable to the person in whose name a Note (or any
predecessor Note) is registered at the close of business on the or
, as the case may be, next preceding such Interest Payment Date.
Payments of principal, premium, if any, and interest to owners of Book-Entry
Interests are expected to be made in accordance with the Depository's and its
participants' procedures in effect from time to time. Principal of, premium,
if any, and interest on Notes in definitive form will be payable at the office
or agency of the Company maintained for such purpose in New York, New York,
which initially will be the office of the Paying Agent.
The Notes will not be redeemable by the Company prior to maturity. The Notes
will not be subject to any sinking fund.
The provisions of Section 13.2 and 13.3 of the Indenture relating to
defeasance and covenant defeasance, described in the accompanying Prospectus
under "Description of Securities--Defeasance and Covenant Defeasance," are
applicable to the Notes.
S-3
<PAGE>
The Indenture does not contain covenants or other provisions designed to
afford holders of the Notes protection in the event of a highly leveraged
transaction, change in credit rating or other similar occurrence.
RECENT DEVELOPMENTS
On April 16, 1998, the Company announced its first quarter earnings.
Selected consolidated financial data of the Company, based upon unaudited
financial data for the three months ended March 31, 1998 and 1997, are as
follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
(UNAUDITED)
-------------
1998 1997
------ ------
(MILLIONS OF
DOLLARS
EXCEPT PER
SHARE
AMOUNTS)
<S> <C> <C>
Net Sales................................................... $367.1 $334.6
Earnings before income taxes................................ 59.7 56.4
Net Earnings................................................ 38.0 35.8
Net Earnings per share (diluted)............................ .49 .46
</TABLE>
First quarter net sales rose 10 percent to $367.1 versus year-ago results of
$334.6 million. Measured in local currency, worldwide aggregate sales were up
16 percent. Net earnings increased 6 percent to $38.0 million versus year-
earlier results of $35.8 million.
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Sales........................ 1,291.6 1,246.8 1,214.5 1,303.5 1,433.7
Operating Earnings............... 223.8 136.1* 205.5 216.7 242.7
Earnings from continuing
operations...................... 128.8 73.2* 135.7 145.9 163.4
Net Earnings..................... 85.6 97.1* 153.7 154.5 158.9
Earnings Per Share (from
continuing operations--diluted). 1.57 0.88* 1.71 1.86 2.10
Fixed Charge Coverage Ratio...... 7.6 6.2* 10.2 11.6 12.9
Earnings as a percent to sales**. 10.0% 5.9%* 11.2% 11.2% 11.4%
Earnings as a percent to
shareholders' equity**.......... 24.2% 13.2%* 24.1% 23.5% 24.7%
Total Debt/Total Capital......... 32.7% 32.9% 35.3% 30.3% 35.4%
</TABLE>
- --------
* Includes a pretax charge of $68.2 million ($54.0 million after tax) for
formation and consolidation expenses.
** Based on earnings from continuing operations before extraordinary loss and
effect of accounting changes.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
1997 VS. 1996
Sales were $1,434 million in 1997, an increase of 10 percent over last
year's sales of $1,304 million. Changes in volume, mix and price increased
sales 6 percent over 1996, while acquisitions resulted in a 5 percent gain
over last year. Effective July 1, 1997, the Company adopted the policy of
reporting freight revenues as a component of sales rather than offsetting
freight costs that are included as a component of cost of products sold. This
resulted in recognizing additional revenues of
S-4
<PAGE>
approximately $28 million for the year 1997. Adverse foreign currency
translation effects resulting from the stronger U.S. dollar compared to
virtually all European and Asian currencies reduced 1997 sales by
approximately $39 million or 3 percent. Sales for 1997 and 1996 by major
operating unit were as follows:
<TABLE>
<CAPTION>
1997
VS. 1996
1997 1996 INCREASE
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Water and Waste Treatment................... $ 470.6 $ 412.7(1) 14%
Process Chemicals........................... 379.4 346.4(1) 10
Europe...................................... 317.2 289.3 10
Latin America............................... 113.1 107.3 5
Pacific..................................... 153.4 147.8 4
-------- --------
Total................................... $1,433.7 $1,303.5 10
======== ========
</TABLE>
- --------
(1) To conform to the 1997 presentation, $3.1 million of 1996 sales which were
originally reported in the Process Chemicals Division have been
reclassified to the Water and Waste Treatment Division.
The Water and Waste Treatment Division reported a 14 percent gain in sales
over 1996. Slightly more than three-fourths of the increase was attributable
to sales by acquired companies and the aforementioned change in the reporting
of freight revenues. Modest improvements posted by the other four marketing
groups in the Water and Waste Treatment Division accounted for the balance of
the change. Sales by the Process Chemicals Division rose 10 percent over last
year, with acquisitions and freight revenues representing slightly over one-
third of the increase. Excluding freight, the General Industry and Pulp
Technologies Groups reported double-digit gains while the Paper Group posted a
more modest improvement. The Europe Division reported a 10 percent sales gain
with most operations in the Division posting solid improvements in local
currencies. Acquisitions and freight revenues had an 11 percent positive
effect on Europe Division sales, but this was largely offset by a nearly 9
percent negative impact due to the stronger U.S. dollar compared to European
currencies. The Latin America Division reported a 5 percent sales increase
with double-digit gains posted by operations in Chile, Mexico and Venezuela.
Acquisitions and the change in the reporting of freight revenues were
insignificant for the Latin America Division's sales, as well as for the
Pacific Division. Pacific Division sales were up 4 percent over 1996 despite a
nearly 10 percent negative translation impact resulting from the stronger U.S.
dollar compared to Asian currencies. Double-digit gains in local currencies
were reported by operations in China, Japan, Korea, Indonesia, the
Philippines, Singapore/Malaysia and Thailand.
Costs of products sold was 43.9 percent of sales for 1997, which reflects
the classification of approximately $28 million of freight revenue as a
component of sales rather than as an offset to cost of products sold. On a
comparable basis, cost of products sold would have been 42.8 percent of sales
as compared to 43.6 percent for 1996. This improvement was attributable to the
Company's North American operations, and reflected lower raw material costs
and tighter control of manufacturing expenses.
Selling, administrative and research expenses were up $43 million or 8
percent over 1996, with acquisitions accounting for over two-thirds of this
increase. Higher selling and service expenses in select markets account for
most of the remaining change. The translation effect of changes in foreign
currency exchange rates moderated the increase in expenses by approximately
$15 million.
Interest and other income for 1997 decreased $2 million from 1996.
Unfavorable foreign currency exchange adjustments, primarily related to
operations in the Pacific, accounted for most of the decrease.
S-5
<PAGE>
Interest expense of $15 million in 1997 was up $1 million over 1996, and
reflected increased average borrowing levels to finance acquisitions and the
repurchase of the Company's common stock.
The Company's equity in earnings of its Nalco/Exxon Energy Chemicals, L.P.
(Nalco/Exxon) joint venture was $28 million, a $3 million improvement over the
$25 million reported in 1996. The increase reflects improved margins and
continuing benefits of cost controls.
If the Company's portion of Nalco/Exxon's income tax expense was
reclassified from equity in earnings of partnership to income taxes, the
effective tax rate for 1997 and 1996 would have been 37.5 percent and 37.6
percent, respectively.
Earnings from continuing operations as a percent to sales was 11.4 percent
in 1997 compared to 11.2 percent for the year 1996.
The Company recognized a one-time after-tax charge of $4.5 million during
the fourth quarter of 1997, which was comprised of unamortized capitalized
business process reengineering costs. (See Note 10 to the Company's
consolidated financial statements for the year ended December 31, 1997).
Because the Company conducts its business worldwide, its earnings and cash
flows are subject to fluctuations due to changes in foreign currency exchange
rates. The Company continually monitors its exposure to exchange rate risks,
and reduces its exposure to changing foreign currency exchange rates through
both operational and financial market actions. The Company's products are
manufactured in several locations around the world, and its customers are
served by locally-based sales engineers. This results in a cost base that is
well diversified over a number of international currencies as well as the U.S.
dollar. This diverse base of local currencies serves to partially offset the
earnings effect of potential changes in the translated value of the Company's
local currency denominated revenues. However, the primary operational method
of mitigating the effect of foreign currency devaluations is the aggressive
pursuit of local currency price increases. The Company also attempts to reduce
its exposure to exchange rate fluctuations with regard to transactions through
timely settlement of intercompany balances, the use of foreign currency
borrowings, balance sheet structure and selective hedging.
The Company makes limited use of derivative financial instruments such as
interest rate swaps and foreign exchange contracts. Interest rate swaps are
used to reduce the potential impact of increases in interest rates on floating
rate long-term debt, while foreign exchange contracts are used to minimize
exposure and reduce risk from exchange rate fluctuations. The Company does not
hold or issue financial instruments for trading purposes. (See Note 17 to the
Company's consolidated financial statements for the year ended December 31,
1997).
The Company is involved in environmental clean-up activities in connection
with former waste disposal sites and plant locations and litigation in the
normal course of business. (See Note 19 to the Company's consolidated
financial statements for the year ended December 31, 1997). This involvement
has not had, nor is it expected to have, a material effect on the Company's
earnings or financial position.
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 (SFAS 128), "Earnings per Share," which
establishes standards for computing and presenting earnings per share (EPS)
and simplifies the standards for computing EPS previously found in Accounting
Principles Board Opinion No. 15 (APB 15), "Earnings per Share." As prescribed
by SFAS 128, the Company retroactively adopted this standard in the fourth
quarter 1997, and has restated all prior-period EPS data presented in the
Company's consolidated financial statements for the year ended December 31,
1997. The adoption of SFAS 128 had little or no impact on previously reported
EPS.
S-6
<PAGE>
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 (SFAS 130), "Reporting Comprehensive
Income," which establishes standards for reporting comprehensive income and
its components. Comprehensive income is defined as all changes in
shareholders' equity during a period except those resulting from investments
by shareholders and distributions to shareholders. Comprehensive income
includes net earnings, foreign currency translation adjustments, minimum
pension liability adjustments, and unrealized gains and losses on certain
investments in debt and equity securities. The Company adopted SFAS 130 in
1997, and all prior-period financial statements presented in the Company's
consolidated financial statements for the year ended December 31, 1997 have
been reclassified to reflect application of the provisions of SFAS 130. The
adoption of SFAS 130 had no impact on the Company's consolidated results of
operations, financial condition or cash flows.
1996 VS. 1995
Sales from continuing operations were $1,304 million in 1996, an increase of
7 percent over 1995 sales of $1,215 million. Sales by Diversey Water
Technologies (DWT), a middle market water treatment business which was
acquired by the Company in mid-1996, accounted for slightly less than one-
third of the improvement. Sales for 1996 and 1995 by major operating unit were
as follows:
<TABLE>
<CAPTION>
1996 VS. 1995
1996 1995 INCREASE
-------- -------- -------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Water and Waste Treatment............. $ 409.6 $ 373.1 10%
Process Chemicals..................... 349.5 316.9 10
Europe................................ 289.3 285.8 1
Latin America......................... 107.3 92.6 16
Pacific............................... 147.8 146.1 1
-------- --------
Total............................. $1,303.5 $1,214.5 7
======== ========
</TABLE>
The Water and Waste Treatment Division posted a 10 percent gain in sales
over 1995, with slightly more than half of the increase attributable to sales
by DWT. Sales by the Process Chemicals Division were up 10 percent over 1995,
as the Pulp and Paper Group reported a double-digit gain. Sales by the Europe
Division were up 1 percent over 1995. Higher sales in local currencies by most
operating units in the region, combined with sales by the European operations
of DWT, were largely offset by sales decreases due to the stronger U.S. dollar
compared to 1995 and business now with the Nalco/Exxon joint venture. The
Latin America Division reported a 16 percent sales gain, as solid double-digit
improvements were posted by all but two of the operating units in the region.
Reported sales by the Pacific Division were up only 1 percent over 1995
because some business was transferred as of the beginning of 1996 to the
Nalco/Exxon joint venture. On a comparable basis, Pacific Division sales
increased 12 percent, as solid double-digit improvements were posted by
operations in Indonesia and Korea. Sales by the Company's former affiliate
company in India, which became a majority owned subsidiary in the fourth
quarter of 1995, also contributed to the sales growth in the Pacific Division.
Cost of products sold was 43.6 percent of sales for 1996, compared with 43.7
percent of sales for 1995. This slight improvement was mainly attributable to
higher margins of the newly acquired DWT. Changes in product mix resulted in
slightly lower gross margins for the Company's existing North American
operations, and gross margins of the three International Divisions were also
slightly lower than 1995 on a combined basis.
Selling, administrative and research expenses in 1996 were up $41 million or
8 percent over 1995. Expenses of DWT and other operations acquired since late
1995, as well as increased spending to support growth in Latin America, the
Pacific, and the paper market, accounted for most of the increase.
S-7
<PAGE>
Interest and other income for 1996 was down $5 million from 1995.
Contributing to this decline were translation losses resulting from the
devaluation of the Venezuelan bolivar, lower interest income reflecting a
decrease in invested balances, and a gain on the sale of assets recognized in
1995.
Interest expense of $14 million in 1996 was down $2 million from 1995, which
was mainly attributable to lower interest rates.
The Company's equity in earnings of Nalco/Exxon was $25 million, an $8
million increase over the $17 million reported in 1995. The increase reflected
strong growth in the joint venture's international operations, improved
operating efficiencies, and business transferred to the joint venture as of
the beginning of 1996.
If the Company's share of the Nalco/Exxon joint venture's income tax expense
was reclassified from equity in earnings of partnership to income taxes, the
effective tax rate for 1996 and 1995 would have been 37.6 percent and 37.0
percent, respectively.
Earnings from continuing operations as a percent to sales was 11.2 percent
in 1996, which was unchanged from the rate for 1995.
In late October 1996, the Company completed the sale of its discontinued
superabsorbent chemicals business, realizing a gain of $3 million, net of
income taxes. Earnings from the discontinued operation, exclusive of the $3
million net gain on the sale, were $6 million in 1996 and $18 million in 1995.
(See Note 3 to the Company's consolidated financial statements for the year
ended December 31, 1997).
FINANCIAL CONDITION
Total assets increased $46 million or 3 percent during 1997.
Accounts receivable were up $8 million or 4 percent. Most of this increase
was attributable to the accounts receivable of operations which were acquired
by the Company in 1997. (See Note 11 to the Company's consolidated financial
statements for the year ended December 31, 1997). Higher worldwide sales
levels in the fourth quarter 1997 also contributed to the increase.
Conversely, the stronger U.S. dollar reduced the carrying value of the
accounts receivable of the Company's international operations. If translation
rates were unchanged from year-end 1996, accounts receivable would have been
about 10 percent higher than the $242 million reported at the end of 1997.
Inventories in 1997 were up $4 million or 4 percent over year-ago levels,
with acquisitions accounting for approximately three-fourths of the increase.
Year-end 1997 inventories would have been about 12 percent higher than
reported if foreign currency translation rates were constant from a year ago.
The $47 million increase in goodwill was attributable to acquisitions made
during 1997, partly offset by additional amortization and the translation
effect of the stronger U.S. dollar in relation to various foreign currencies
compared to the end of 1996.
Total liabilities increased $48 million or 7 percent during 1997 mostly
because of a net increase in short-term and long-term debt which was used
primarily to finance acquisitions and repurchases of the Company's common
stock.
Shareholders' equity decreased $2 million during 1997. The translation
impact of the stronger U.S. dollar resulted in a $42 million increase in
foreign currency translation adjustments and a corresponding decrease in
shareholders' equity. Common stock repurchases of 2.0 million shares at a cost
of $76 million were partly offset by treasury stock transactions for stock
option, benefit and other plans totaling $29 million. Net earnings of $159
million exceeded dividends totaling $78 million.
S-8
<PAGE>
The Company's return on average shareholders' equity was 24.7 percent in
1997, slightly higher than the 23.5 percent in 1996 based on earnings from
continuing operations.
CASH FLOWS
One of the Company's most significant financial strengths is its ability to
consistently generate strong cash flow from operations. Net cash provided by
operating activities was $214 million in 1997, which was generated primarily
from net earnings before noncash charges such as depreciation and
amortization.
Significant cash flow requirements in 1997 included capital investments of
$101 million, business purchases of approximately $80 million, dividends of
$78 million, and $76 million for the reacquisition of common stock.
In 1996, cash provided by operations was $229 million compared to the 1995
total of $213 million.
Approximately two-thirds of the 1997 capital investments of $101 million was
attributable to investments in North America, which included $16 million for
field equipment, an initial investment of $10 million for the implementation
of the Company's new global management information systems, $9 million for
PORTA-FEED units and $9 million for transportation equipment. The Company
plans to continue to invest in internal growth in 1998 and it is expected that
capital investments will exceed $100 million.
Other significant investing activities in 1997 included the acquisition of
several businesses that operate in the Company's core markets of water
treatment and process chemicals, as well as an additional 24 percent interest
in the Company's subsidiary company in Taiwan, for a total of approximately
$80 million, net of cash acquired. (See Note 11 to the Company's consolidated
financial statements for the year ended December 31, 1997). Investing
activities related to the Company's Nalco/Exxon joint venture partnership
included an additional $12 million of borrowings from the joint venture.
Investments in North America accounted for over 60% of the 1996 capital
investments of $93 million, which included $18 million for PORTA-FEED units
and $10 million for transportation equipment. Investments in manufacturing
facilities and related support equipment for operations in Argentina and China
totaled $8 million.
Other significant investing activities in 1996 included the acquisitions of
DWT and the water treatment chemicals business of Albright & Wilson U.K.
Limited for approximately $83 million, net of cash acquired. Borrowings from
Nalco/Exxon totaled $23 million during 1996, and the Company received $41
million from the sale of the discontinued super-absorbent chemicals business.
Investing activities in 1995 totaled $156 million, which included $127
million for investments in property, plant and equipment. Over two-thirds of
the capital spending in 1995 was for investments in the United States and
included $26 million for PORTA-FEED units, $17 million for field equipment and
$13 million for transportation equipment. Investing activities in 1995 also
included the purchase of an additional 25 percent interest of Nalco Chemical
India, Ltd., the purchase of the pulp and paper chemical business of Texo
Corporation, and additional cash investments in Nalco/Exxon.
Net financing activities of $32 million in 1997 included dividends paid on
common stock of $67 million or $1.00 per share. Since the Company's founding
in 1928, it has paid 278 consecutive quarterly dividends, and expects to
continue its policy of paying regular cash dividends. The Company continued
its stock repurchase program in 1997 by reacquiring 2.0 million shares of
common stock at a cost of $76 million. In 1996, the Company reacquired 0.7
million shares of common stock at a cost
S-9
<PAGE>
of $26 million, and 1.3 million shares were repurchased for $42 million in
1995. Cash received from treasury stock issued under option, benefit and other
plans totaled $22 million in 1997 and $10 million in both 1996 and 1995.
Management believes that the stock repurchase program represents a sound
economic investment for the Company's shareholders.
Other financing activities in 1997 consisted primarily of a net increase in
short-term and long-term debt of $95 million.
Among the most significant financing activities in 1996 and 1995 were
payments for cash dividends and the repurchase of common stock.
Management expects that internal growth in existing businesses will be
financed principally from internally generated funds. For general purposes and
to support the ESOP loans and the issuance of commercial paper, the Company
has a $350 million Revolving Credit Agreement with eleven banks. The credit
arrangements were unused at December 31, 1997. (See Note 14 to the Company's
consolidated financial statements for the year ended December 31, 1997). With
the agreement of the banks, with two weeks notice, this credit can be
increased to $600 million. In addition, most foreign subsidiaries have
established short-term borrowing facilities in local currency and use them as
the need arises. Net debt (short-term and long-term borrowings less cash and
cash equivalents) totaled $308 million, $245 million and $278 million at
December 31, 1997, 1996 and 1995, respectively.
Management believes that the Company's strong cash flow, together with its
unused debt capacity, provides ample capability for the Company to pursue
investment opportunities ranging from internal growth to acquisitions and
stock repurchase.
YEAR 2000 COMPLIANCE
The potential computer system problems that may arise due to the year 2000
(the "Year 2000 Issue") result from computer programs that were designed to
use two digits rather than four to define years. Programs that use dates in
calculations or sorting may yield unexpected results or fail completely when
encountering the year "00" in 2000.
The Company's Board of Directors authorized the investment of approximately
$50 million for the worldwide implementation of new business and management
information systems. The systems, based on software purchased from SAP
America, Inc., will provide an integrated suite of core business applications
to support all major functions worldwide including human resources, finance,
environmental health and safety, sales and marketing, and manufacturing and
logistics. The new systems are Year 2000 compliant, and will position the
Company well to provide uninterrupted service to all of its customers in the
year 2000 and beyond. It is expected that more than 80 percent of the
estimated cost of implementation will be capitalized. At the time the systems
are placed in service, the capitalized costs will be amortized over the
systems' estimated useful lives. Implementation by geographic region is
planned to occur beginning in 1998 and concluding in 2001.
The Company is conducting a program to detect problems that may result from
the Year 2000 Issue, including problems with any of the Company's current
legacy systems that will not be replaced by the year 2000, as well as
computerized equipment used at customers' sites. The program also addresses
problems that may arise with suppliers, customers, service providers and other
third parties. Management fully expects this program, in conjunction with the
implementation of the new systems discussed above, to sufficiently address and
deal globally with problems in a timely fashion to ensure no disruption in
operations. However, failure by other parties to address their own Year 2000
Issue could have a material impact on the Company's ability to conduct its
business, although no specific risks have been identified at this time. Costs
of conducting this program are being expensed as incurred and are not expected
to have a material impact on the results of operations.
S-10
<PAGE>
FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of Financial Condition and Results
of Operations contains forward-looking statements that are based on current
expectations, estimates and assumptions regarding the worldwide economy,
technological innovation, competitive activity, interest rates, pricing,
currency movements, and the development of certain markets. These statements
are not guarantees of future results or events, and involve certain risks and
uncertainties which are difficult to predict and many of which are beyond the
control of the Company. Actual results and events could differ materially from
those anticipated by the forward-looking statements.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement") among the Company and each of Chase Securities
Inc., BancAmerica Robertson Stephens and First Chicago Capital Markets, Inc.
(collectively, the "Underwriters"), the Company has agreed to sell to each of
the Underwriters and each of the Underwriters severally has agreed to purchase
from the Company the aggregate principal amount of the Notes set forth
opposite its name below. The Underwriting Agreement provides that the
obligations of the Underwriters are subject to certain conditions precedent
and that the Underwriters will be obligated to purchase all of the Notes if
any are purchased.
<TABLE>
<CAPTION>
UNDERWRITERS PRINCIPAL AMOUNT
------------ ----------------
<S> <C>
Chase Securities Inc.................................... $
BancAmerica Robertson Stephens..........................
First Chicago Capital Markets, Inc......................
------------
Total............................................... $150,000,000
============
</TABLE>
The Underwriters have advised the Company that they propose to offer the
Notes to the public at the public offering price set forth on the cover page
of this Prospectus Supplement and to certain dealers at such price less a
concession not in excess of % of the principal amount of the Notes. The
Underwriters may allow, and such dealers may reallow, a discount not in excess
of % of the principal amount of the Notes to certain other dealers. After
the initial public offering, the public offering price, concession and
discount may be changed.
There is no public trading market for the Notes and the Company does not
intend to apply for listing of the Notes on any national securities exchange
or for quotation of the Notes on any automated dealer quotation system. The
Company has been advised by the Underwriters that they presently intend to
make a market in the Notes after the consummation of the offering contemplated
hereby, although they are under no obligation to do so and may discontinue any
market-making activities at any time without any notice. No assurance can be
given as to the liquidity of the trading market for the Notes or that an
active public market for the Notes will develop. If an active public trading
market for the Notes does not develop, the market price and liquidity of the
Notes may be adversely affected. If the Notes are traded, they may trade at a
discount from their initial offering price, depending on prevailing interest
rates, the market for similar securities, the performance of the Company and
certain other factors.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended, or to contribute to payments that the Underwriters may be required to
make in respect thereof.
S-11
<PAGE>
In connection with the offering of the Notes, Chase Securities Inc., on
behalf of the Underwriters, may engage in overallotment, stabilizing
transactions and syndicate covering transactions in accordance with Regulation
M under the Exchange Act. Overallotment involves sales in excess of the
offering size, which creates a short position for the Underwriters.
Stabilizing transactions involve bids to purchase the Notes in the open market
for the purpose of pegging, fixing or maintaining the price of the Notes.
Syndicate covering transactions involve purchases of the Notes in the open
market after the distribution has been completed in order to cover short
positions. Such stabilizing transactions and syndicate covering transactions
may cause the price of the Notes to be higher than it would otherwise be in
the absence of such transactions. Such activities, if commenced, may be
discontinued at any time.
From time to time the Underwriters and certain of their affiliates have
engaged, and may in the future engage, in various general financing and
banking transactions with the Company and its affiliates in the ordinary
course of business. The Chase Manhattan Bank, the Trustee, is an affiliate of
Chase Securities Inc.
LEGAL MATTERS
Certain legal matters relating to the Notes offered hereby will be passed
upon for the Company by Mayer, Brown & Platt, Chicago, Illinois and by William
E. Parry, Esq., Vice President and General Counsel of the Company. Mr. Parry
is the beneficial owner of approximately 2,510 shares of Nalco Common Stock
and holds options to purchase approximately 25,900 shares of Nalco Common
Stock. Certain legal matters relating to the Notes offered hereby will be
passed upon for the Underwriters by Simpson Thacher & Bartlett, New York, New
York.
S-12
<PAGE>
PROSPECTUS
$400,000,000
NALCO CHEMICAL COMPANY
DEBT SECURITIES
Nalco Chemical Company, a Delaware corporation (the "Company"), intends from
time to time to issue its unsecured and unsubordinated debt securities (the
"Securities") from which the Company will receive up to an aggregate amount of
$400,000,000 in proceeds (or its equivalent in foreign currencies or currency
units). The Securities will be offered for sale in amounts, at prices and on
terms to be determined when an agreement to sell is made or at the time of
sale, as the case may be. The Securities may be sold for U.S. dollars, foreign
denominated currency or composite currency units, and principal of and any
interest on the Securities may likewise be payable in U.S. dollars, foreign
denominated currency or composite currency units. For each issue of Securities
in respect of which this Prospectus is being delivered (the "Offered
Securities"), there is an accompanying Prospectus Supplement (the "Prospectus
Supplement") that sets forth the title, designation, aggregate principal
amount, designated currency or currency units, rate (which may be fixed or
variable) or method of calculation of interest and dates for payment thereof,
maturity, priority, premium, if any, authorized denominations, initial price,
any redemption or prepayment rights at the option of the Company or the
holder, any terms for sinking fund payments, any listing on a securities
exchange and the initial public offering price, the form of the Securities
(which may be in registered or permanent global form) and other special terms
of the Offered Securities, together with the terms of the offering of the
Offered Securities and the net proceeds to the Company from the sale thereof.
The Securities will be sold directly, through agents designated from time to
time, through underwriters or dealers, or through a combination of those
methods of sale. If any agents of the Company or any underwriters are involved
in the sale of the Offered Securities in respect of which this Prospectus is
being delivered, the names of such agents or underwriters and any applicable
commissions and discounts are set forth in the Prospectus Supplement.
----------------
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
The date of this Prospectus is April 24, 1998.
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. NEITHER THIS PROSPECTUS NOR ANY
PROSPECTUS SUPPLEMENT CONSTITUTES AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES TO ANY PERSON IN ANY JURISDICTION TO WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the office of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, as well as at the Regional Offices
of the Commission at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511, and Seven World Trade Center, Suite 1300, New
York, New York 10048. Copies of such information can be obtained by mail from
the Public Reference Section of the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
common stock of the Company is listed on the New York Stock Exchange and
reports, proxy statements and other information concerning the Company can
also be inspected at the office of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005. Such information may also be accessed
electronically by means of the Commission's home page on the World Wide Web
located at http://www.sec.gov.
This Prospectus constitutes a part of a registration statement (the
"Registration Statement") filed by the Company with the Commission under the
Securities Act of 1933, as amended (the "Securities Act"). This Prospectus
omits certain of the information contained in the Registration Statement, and
reference is hereby made to the Registration Statement and to the exhibits
thereto for further information with respect to the Company and the
Securities.
DOCUMENTS INCORPORATED BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1997, filed by the Company under the Exchange Act with the Commission, is
incorporated herein by reference.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Securities offered hereby shall be deemed
to be incorporated in this Prospectus by reference and to be a part hereof
from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide, without charge, upon the written or oral request
by any person to whom this Prospectus is delivered, a copy of any or all of
the documents incorporated by reference in this Prospectus, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into such documents). Such requests should be directed to:
Suzzanne J. Gioimo, Secretary, Nalco Chemical Company, One Nalco Center,
Naperville, Illinois 60563-1198 (telephone (630) 305-1000).
2
<PAGE>
THE COMPANY
Nalco Chemical Company is in the business of providing services, chemicals,
technology, equipment, and systems (monitoring and surveillance) used in water
treatment, pollution control, energy conservation, steelmaking, papermaking,
mining and mineral processing, electricity generation, other industrial
processes, and commercial building utility systems. Service chemicals are
developed, formulated, and manufactured to meet specific customer needs. They
are part of value added programs designed to help customers maintain a high
level of operating performance and efficiency in their facilities, improve the
quality of customers' end products, or help customers meet environmental
discharge limits in a cost-effective way. The Company's products are used for
purposes such as: control of scale, corrosion, foam and fouling in cooling
systems, boilers, and other equipment; clarification of water; separation of
liquids and solids; improving combustion; control of dust; lubrication and
corrosion protection in rolling, drawing and forming of metals; improving
production of pulp and qualities of paper; recovery of minerals; and
specialized process applications in a variety of industries. The quality and
on-site availability of technical expertise provided through highly qualified
personnel are very important considerations to customers. The effective use of
the Company's products requires a substantial amount of problem solving,
monitoring, and technical assistance on the part of Company employees.
Service chemicals are usually marketed through the Company's own
organization because of the high degree of technical service required. The
worldwide field sales force is trained in the application and use of Nalco
service chemicals, and is supported by a marketing and research staff of
specialists in the technology and use of various Nalco service chemicals. The
Company's principal method of competition is based on quality service, product
performance and technology through safe, practical applied science.
USE OF PROCEEDS
Except as otherwise set forth in the Prospectus Supplement relating to the
Offered Securities, the net proceeds to be received by the Company from the
sale of the Securities will be used for general corporate purposes, including
repayment of indebtedness, repurchase of common stock, expansion of existing
businesses and investments in related business opportunities as they may
arise. Pending such use, the net proceeds may be temporarily invested in
short-term instruments.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges of the
Company for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
12.9x 11.6x 10.2x 6.2x(1) 7.6x
</TABLE>
- --------
(1) Included in earnings for 1994 was a pretax provision of $68.2 million for
formation and consolidation expenses as disclosed in Note 3 to the
Company's 1994 consolidated financial statements. If this provision had
not been made, the ratio of earnings to fixed charges would have been
8.8x.
For purposes of calculating this ratio, earnings consist of income from
continuing operations before income taxes and extraordinary items, plus
minority interests, less undistributed earnings (and plus losses) of
affiliates, plus interest expense and amortization of debt discount, fees and
expenses, plus one-third of rentals. Fixed charges consist of interest expense
and amortization of debt discount, fees and expenses, interest capitalized as
part of fixed assets and interest included in rental expense.
DESCRIPTION OF SECURITIES
The Securities are to be issued under an Indenture (the "Indenture") between
the Company and The Chase Manhattan Bank, as Trustee (the "Trustee"), a copy
of which is filed as an exhibit to the Registration Statement. The following
summaries of certain provisions of the Indenture do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, all
the provisions of the Indenture, including the definitions therein of certain
terms. Wherever particular Sections or defined terms of the Indenture are
referred to, such Sections or defined terms are incorporated herein by
reference.
3
<PAGE>
The following sets forth certain general terms and provisions of the
Securities offered hereby. The particular terms of the Securities offered by
any Prospectus Supplement (the "Offered Securities") will be described in the
Prospectus Supplement relating to such Offered Securities (the "Applicable
Prospectus Supplement").
GENERAL
The Indenture does not limit the amount of Securities that may be issued
thereunder, and Securities may be issued thereunder from time to time in one
or more series. The Securities will be unsecured and unsubordinated
obligations of the Company and will rank equally and ratably with other
unsecured and unsubordinated obligations of the Company.
Unless otherwise indicated in the Applicable Prospectus Supplement,
principal of, premium, if any, and interest on the Securities will be payable,
and the transfer of Securities will be registrable, at the office or agency to
be maintained by the Company in New York, New York, and at any other office or
agency maintained by the Company for such purpose. The Securities will be
issued only in fully registered form without coupons and, unless otherwise
indicated in the Applicable Prospectus Supplement, in denominations of $1,000
and integral multiples thereof. No service charge will be made for any
registration of transfer or exchange of the Securities, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge imposed in connection therewith.
The Applicable Prospectus Supplement will describe the following terms of
the Offered Securities: (1) the title of the Offered Securities; (2) any limit
on the aggregate principal amount of the Offered Securities; (3) the Person to
whom any interest on the Offered Securities shall be payable, if other than
the person in whose name that Security (or one or more Predecessor Securities)
is registered at the close of business on the Regular Record Date for such
interest; (4) the date or dates on which the principal of the Offered
Securities is payable; (5) the rate or rates (which may be fixed or variable)
at which the Offered Securities will bear interest, if any, or the method by
which such rate or rates will be determined, the date or dates from which any
such interest will accrue, the Interest Payment Dates on which any such
interest will be payable and the Regular Record Date for the interest payable
on any Interest Payment Date; (6) the place or places where the principal of
and any premium and interest on the Offered Securities will be payable; (7)
the period or periods within which, the price or prices at which and the terms
and conditions upon which the Offered Securities may be redeemed, in whole or
in part, at the option of the Company; (8) the obligation, if any, of the
Company to redeem, purchase or repay the Offered Securities pursuant to any
sinking fund or analogous provisions or at the option of a Holder thereof and
the period or periods within which, the price or prices at which and the terms
and conditions upon which the Offered Securities will be redeemed, purchased
or repaid, in whole or in part, pursuant to such obligation; (9) if other than
denominations of $1,000 and any integral multiple thereof, the denominations
in which the Offered Securities will be issuable; (10) the currency,
currencies or currency units in which payment of the principal of and any
premium and interest on any Offered Securities will be payable if other than
the currency of the United States of America; (11) if the amount of payments
of principal of or any premium or interest on any Offered Securities may be
determined with reference to an index or formula, the manner in which such
amounts will be determined; (12) if the principal of or any premium or
interest on any Offered Securities is to be payable, at the election of the
Company or a Holder thereof, in one or more currencies or currency units other
than that or those in which the Offered Securities are stated to be payable,
the currency, currencies or currency units in which payment of the principal
of and any premium and interest on the Offered Securities as to which such
election is made will be payable, and the periods within which and the terms
and conditions upon which such election is to be made; (13) the applicability,
if any, of the provisions described under "Defeasance and Covenant
Defeasance;" (14) whether the Offered Securities will be issuable, in whole or
in part, in the form of one or more Book-Entry Securities as described under
"Book-Entry Securities," and, in such case, the depository appointed by the
Company or its nominee with respect to the Offered Securities and the
circumstances under which the Book-Entry Security may be registered for
transfer or exchange or authenticated and delivered in the name of a Person
other than the Depository or its nominee; (15) if other than the principal
amount thereof, the portion of the principal amount of the Offered Securities
which will be payable upon declaration of acceleration of the Maturity
thereof; and (16) any other terms of the Offered Securities.
4
<PAGE>
The Securities may be issued as Original Issue Discount Securities to be
offered and sold at a substantial discount below their stated principal
amount. Federal income tax consequences and other special considerations
applicable to Original Issue Discount Securities and any Securities treated as
having been issued with original issue discount for federal income tax
purposes will be described in the Applicable Prospectus Supplement. "Original
Issue Discount Securities" means any Security which provides for an amount
less than the principal amount thereof to be due and payable upon the
declaration of acceleration of the Maturity thereof upon the occurrence of an
Event of Default and the continuation thereof.
The Indenture does not contain covenants or other provisions designed to
afford holders of the Securities protection in the event of a highly leveraged
transaction, change in credit rating or other similar occurrence.
BOOK-ENTRY SECURITIES
Unless otherwise provided in the Prospectus Supplement, the Securities will
be represented by one or more certificates (the "Global Securities"). The
Global Security representing Securities will be deposited with, or on behalf
of, The Depository Trust Company ("DTC"), or other successor depository
appointed by the Company (DTC or such other depository being the "Depository")
and registered in the name of the Depository or its nominee. Unless otherwise
provided in the Prospectus Supplement, Securities will not be issued in
definitive form. If the aggregate principal amount of any issue exceeds $200
million, one certificate will be issued with respect to each $200 million of
principal amount and an additional certificate will be issued with respect to
any remaining principal amount of such issue.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934. DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Participants who deposit securities with DTC directly
("Direct Participants") include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. DTC is owned
by a number of its Direct Participants and by the New York Stock Exchange,
Inc., the American Stock Exchange, Inc. and the National Association of
Securities Dealers, Inc. Access to the DTC system is also available to others
such as securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a Direct Participant, either
directly or indirectly ("Indirect Participants"). The rules applicable to DTC
and its Participants are on file with the Commission.
Upon the issuance by the Company of Securities represented by a Global
Security, purchases of Securities under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Securities on
DTC's records. The ownership interest of each actual purchaser of each
Security ("Beneficial Owner") is in turn to be recorded on the Direct and
Indirect Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchase, but Beneficial Owners are expected to
receive written confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of
ownership interests in the Securities are to be accomplished by entries made
on the books of Participants acting on behalf of Beneficial Owners. Beneficial
Owners will not receive certificates representing their ownership interests in
Securities, except in the event that use of the book-entry system for the
Securities is discontinued. The laws of some states require that certain
purchasers of securities take physical delivery of such securities in
definitive form. Such limits and such laws may impair the ability to transfer
beneficial interests in the Global Security.
So long as the Depository for the Global Security, or its nominee, is the
registered owner of the Global Security, the Depository or its nominee, as the
case may be, will be considered the sole owner or holder of the
5
<PAGE>
Securities represented by such Global Security for all purposes under the
Indenture. Except as provided below, owners of beneficial interests in
Securities represented by the Global Security will not be entitled to have
Securities represented by such Global Security registered in their names, will
not receive or be entitled to receive physical delivery of Securities in
definitive form and will not be considered the owners or holders thereof under
the Indenture.
To facilitate subsequent transfers, all Securities deposited by Participants
with DTC are registered in the name of DTC's partnership nominee, Cede & Co.
The deposit of Securities with DTC and their registration in the name of Cede
& Co. effect no change in beneficial ownership. DTC has no knowledge of the
actual Beneficial Owners of the Securities; DTC's records reflect only the
identity of the Direct Participants to whose accounts such Securities are
credited, which may or may not be the Beneficial Owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their
customers. Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to Securities.
Under its usual procedures, DTC mails an Omnibus Proxy to the Company as soon
as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts the
Securities are credited on the record date (identified in a listing attached
to the Omnibus Proxy).
Payments of principal of and premium, if any, and interest on the Securities
represented by the Global Security registered in the name of DTC or its
nominee will be made by the Company through the Trustee under the Indenture or
a paying agent (the "Paying Agent"), which may also be the Trustee under the
Indenture, to DTC or its nominee, as the case may be, as the registered owner
of the Global Security. Neither the Company, the Trustee, nor the Paying Agent
will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests of
the Global Security or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
The Company has been advised that DTC, upon receipt of any payment of
principal, premium, if any, and interest in respect of a Global Security, will
credit Direct Participants' accounts on the payable date in accordance with
their respective holdings shown on DTC's records unless DTC has reason to
believe that it will not receive payment on the payable date. Payments by
Participants to Beneficial Owners will be governed by standing instructions
and customary practices, as is the case with securities held for the accounts
of customers in bearer form or registered in "street name," and will be the
responsibility of such Participant and not of DTC, the Paying Agent or the
Company, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of principal, premium, if any, and interest
to DTC is the responsibility of the Company or the Paying Agent, disbursement
of such payments to Direct Participants shall be the responsibility of DTC,
and disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct and Indirect Participants.
If the Depository with respect to a Global Security is at any time unwilling
or unable to continue as Depository and a successor Depository is not
appointed by the Company within 90 days, the Company will issue certificated
notes in exchange for the Securities represented by such Global Security.
The information in this section concerning the Depository and the
Depository's book-entry system has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
CERTAIN COVENANTS OF THE COMPANY
Restrictions on Secured Funded Debt. The Indenture provides that the Company
will not, nor will it permit any Restricted Subsidiary to, incur, issue,
assume, guarantee or create any Secured Funded Debt, without
6
<PAGE>
effectively providing concurrently with the incurrence, issuance, assumption,
guaranty or creation of any such Secured Funded Debt that the Outstanding
Securities (together with, if the Company shall so determine, any other
Indebtedness of the Company or such Restricted Subsidiary then existing or
thereafter created which is not subordinated to the Outstanding Securities)
will be secured equally and ratably with (or prior to) such Secured Funded
Debt, so long as such Secured Funded Debt will be secured by a Lien, unless,
after giving effect thereto, the sum of the aggregate amount of all
outstanding Secured Funded Debt of the Company and its Restricted Subsidiaries
together with all Attributable Debt in respect of sale and leaseback
transactions relating to a Principal Property (with the exception of
Attributable Debt which is excluded pursuant to clauses (1) to (6) described
under "Limitations on Sales and Leasebacks" below), would not exceed 15% of
Consolidated Net Tangible Assets; provided, however, that this restriction
will not apply to, and there will be excluded from Secured Funded Debt in any
computation under this restriction, Funded Debt secured by: (1) Liens on
property, shares of capital stock or indebtedness of any corporation existing
at the time such corporation becomes a Subsidiary; (2) Liens on property,
shares of capital stock or indebtedness existing at the time of acquisition
thereof or incurred within 180 days of the time of acquisition thereof
(including, without limitation, acquisition through merger or consolidation)
by the Company or any Restricted Subsidiary; (3) Liens on property, shares of
capital stock or indebtedness acquired (or constructed) by the Company or any
Restricted Subsidiary and created prior to, at the time of, or within 270 days
after such acquisition (including, without limitation, acquisition through
merger or consolidation) (or the completion of such construction or
commencement of commercial operation of such property, whichever is later) to
secure or provide for the payment of all or any part of the purchase price (or
the construction price) thereof; (4) Liens in favor of the Company or any
Restricted Subsidiary; (5) Liens in favor of the United States of America, any
State thereof or the District of Columbia, or any agency, department or other
instrumentality thereof, to secure partial, progress, advance or other
payments pursuant to any contract or provisions of any statute; (6) Liens
incurred or assumed in connection with the issuance of revenue bonds the
interest on which is exempt from federal income taxation pursuant to Section
103(b) of the Internal Revenue Code; (7) Liens securing the performance of any
contract or undertaking not directly or indirectly in connection with the
borrowing of money, the obtaining of advances or credit or the securing of
Funded Debt, if made and continuing in the ordinary course of business; (8)
Liens incurred (no matter when created) in connection with the Company's or a
Restricted Subsidiary's engaging in leveraged or single-investor lease
transactions; provided, however, that the instrument creating or evidencing
any borrowings secured by such Lien will provide that such borrowings are
payable solely out of the income and proceeds of the property subject to such
Lien and are not a general obligation of the Company or such Restricted
Subsidiary; (9) Liens under workers' compensation laws, unemployment insurance
laws or similar legislation, or good faith deposits in connection with bids,
tenders, contracts or deposits to secure public or statutory obligations of
the Company or any Restricted Subsidiary, or deposits of cash or obligations
of the United States of America to secure surety and appeal bonds to which the
Company or any Restricted Subsidiary is a party or in lieu of such bonds, or
pledges or deposits for similar purposes in the ordinary course of business,
or Liens imposed by law, such as laborers' or other employees', carriers',
warehousemen's, mechanics', materialmen's and vendors' Liens, and Liens
arising out of judgments or awards against the Company or any Restricted
Subsidiary with respect to which the Company or such Restricted Subsidiary at
the time shall be prosecuting an appeal or proceedings for review and with
respect to which it shall have secured a stay of execution pending such appeal
or proceedings for review, or Liens for taxes not yet subject to penalties for
nonpayment or the amount or validity of which is being in good faith contested
by appropriate proceedings by the Company or any Restricted Subsidiary, as the
case may be, or minor survey exceptions, minor encumbrances, easements or
reservations of, or rights of others for, rights of way, sewers, electric
lines, telegraph and telephone lines and other similar purposes, or zoning or
other restrictions or Liens as to the use of real properties, which Liens,
exceptions, encumbrances, easements, reservations, rights and restrictions do
not, in the opinion of the Company, in the aggregate materially detract from
the value of said properties or materially impair their use in the operation
of the business of the Company and its Restricted Subsidiaries; (10) Liens
incurred to finance all or any portion of the cost of construction, alteration
or repair of any Principal Property and improvements thereto created prior to
or within 270 days after completion of such construction, alteration or
repair; (11) Liens outstanding on the date of the Indenture; or (12) any
extension, renewal, refunding or replacement of the foregoing.
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<PAGE>
"Attributable Debt" means, as to any particular lease under which either the
Company or any Restricted Subsidiary is at the time liable as lessee for a
term of more than 12 months and at any date as of which the amount thereof is
to be determined, the total net obligations of the lessee for rental payments
during the remaining term of the lease (including any period for which such
lease has been extended or may, at the option of the lessor, be extended)
discounted from the respective due dates thereof to such determination date at
a rate per annum equivalent to the greater of (a) the weighted-average Yield
to Maturity (as defined in the Indenture) of the Outstanding Securities, such
average being weighted by the principal amount of the Outstanding Securities
of each series or, in the case of Original Issue Discount Securities (as
defined in the Indenture), such amount to be the principal amount of such
outstanding Original Issue Discount Securities that would be due and payable
as of the date of such determination upon a declaration of acceleration of the
maturity thereof pursuant to the Indenture and (b) the interest rate inherent
in such lease (as determined in good faith by the Company), both to be
compounded semi-annually.
"Consolidated Net Tangible Assets" means, at any date, the total assets
appearing on the most recent consolidated balance sheet of the Company and its
Subsidiaries as at the end of the fiscal quarter of the Company ending not
more than 135 days prior to such date, prepared in accordance with generally
accepted accounting principles, less (a) investments in and advances to
affiliates as shown on the consolidated balance sheet of the Company and its
Subsidiaries, and (b) Intangible Assets.
"Funded Debt" means (i) any indebtedness of the Company or a Restricted
Subsidiary maturing more than 12 months after the time of computation thereof,
(ii) guarantees of Funded Debt or of dividends of others (except guarantees in
connection with the sale or discount of accounts receivable, trade acceptances
and other paper arising in the ordinary course of business), (iii) in the case
of any Restricted Subsidiary, all preferred stock having mandatory redemption
provisions of such Restricted Subsidiary as reflected on such Restricted
Subsidiary's balance sheet prepared in accordance with generally accepted
accounting principles, and (iv) all Capital Lease Obligations (as defined in
the Indenture).
"Indebtedness" means, at any date, without duplication, (i) all obligations
for borrowed money of the Company or a Restricted Subsidiary or any other
indebtedness of the Company or a Restricted Subsidiary, evidenced by bonds,
debentures, notes or other similar instruments, and (ii) Funded Debt.
"Intangible Assets" means, at any date, the value (net of any applicable
reserves), as shown on or reflected in the most recent consolidated balance
sheet of the Company and its Subsidiaries as at the end of the fiscal quarter
of the Company ending not more than 135 days prior to such date, prepared in
accordance with generally accepted accounting principles, of: (i) all trade
names, trademarks, licenses, patents, copyrights, service marks, goodwill and
other like intangibles, but excluding, for purposes of this definition, the
ascribed value relating to the assembled sales force and existing customer
lists for any acquisition by the Company or any of its Subsidiaries after the
date of the Indenture, and (ii) unamortized debt discount and expense, less
unamortized premium.
"Liens" means such pledges, mortgages, security interests and other liens
which secure Secured Funded Debt.
"Principal Property" means any building, structure or other facility,
together with the land upon which it is erected and fixtures comprising a part
thereof, used primarily for manufacturing and located in the United States,
the gross book value (without deduction of any reserve for depreciation) of
which on the date as of which the determination is being made is an amount
which exceeds 2% of the Consolidated Net Tangible Assets, other than any such
building, structure or other facility or any portion thereof or any such
fixture (together with the land upon which it is erected and fixtures
comprising a part thereof) which, in the opinion of the Board of Directors of
the Company (as evidenced by a resolution of the Board of Directors to such
effect which is provided to the Trustee), is not of material importance to the
total business conducted by the Company and its Subsidiaries taken as a whole.
8
<PAGE>
"Restricted Subsidiary" means, at any date, each Subsidiary organized in the
United States with total assets, as reflected in the most recent balance sheet
of the Subsidiary as at the end of the fiscal quarter of such Subsidiary
ending not more than 135 days prior to such date, prepared in accordance with
generally accepted accounting principles, greater than 2% of Consolidated Net
Tangible Assets. Restricted Subsidiaries shall not include: (a) Nalco/Exxon
Energy Chemicals, Inc., (b) Nalco/Exxon Energy Chemicals, L.P., (c) Nalco TWO,
Inc. (d) Treated Water Outsourcing, a Nalco/U.S. Filter Joint Venture, (e)
Nalco Leasing Corporation, and (f) any Subsidiary of any of the foregoing.
"Secured Funded Debt" means Funded Debt which is secured by any pledge of,
or mortgage, security interest or other lien on any (i) Principal Property
(whether owned on the date of the Indenture or thereafter acquired or
created), (ii) shares of stock owned by the Company or a Subsidiary in a
Restricted Subsidiary or (iii) indebtedness of a Restricted Subsidiary.
"Subsidiary" means any corporation of which at least a majority of the
outstanding stock, which under ordinary circumstances (not dependent upon the
happening of a contingency) has voting power to elect a majority of the board
of directors (or similar management body) of such corporation, is owned
directly or indirectly by the Company or by one or more Subsidiaries of the
Company, or by the Company and one or more Subsidiaries.
Limitation on Sales and Leasebacks. The Indenture provides that the Company
will not, nor will it permit any Restricted Subsidiary to, enter into any
arrangement with any Person providing for the leasing by the Company or any
Restricted Subsidiary of any Principal Property of the Company or any
Restricted Subsidiary, which Principal Property has been or is to be sold or
transferred by the Company or such Restricted Subsidiary to such Person (a
"sale and leaseback transaction") unless, after giving effect thereto, the
aggregate amount of all Attributable Debt with respect to all such sale and
leaseback transactions plus all Secured Funded Debt (with the exception of
Funded Debt secured by liens which is excluded pursuant to clauses (1) to (12)
described under "Restrictions on Secured Funded Debt" above) would not exceed
15% of Consolidated Net Tangible Assets. This covenant will not apply to, and
there will be excluded from Attributable Debt in any computation under this
restriction or under "Restrictions on Secured Funded Debt" above, Attributable
Debt with respect to any sale and leaseback transaction if: (1) the Company or
a Restricted Subsidiary is permitted to create Funded Debt secured by a Lien
pursuant to clauses (1) to (12) inclusive described under "Restrictions on
Secured Funded Debt" above on the Principal Property to be leased, in an
amount equal to the Attributable Debt with respect to such sale and leaseback
transaction, without equally and ratably securing the Outstanding Securities;
(2) the Company or a Restricted Subsidiary, within 270 days after the sale or
transfer shall have been made by the Company or a Restricted Subsidiary, shall
apply an amount in cash equal to the greater of (i) the net proceeds of the
sale or transfer of the Principal Property leased pursuant to such arrangement
or (ii) the fair market value of the Principal Property so leased at the time
of entering into such arrangement (as determined by the Chief Executive
Officer, the President, the Chief Financial Officer, the Treasurer or the
Controller of the Company) to the retirement of Secured Funded Debt of the
Company or any Restricted Subsidiary (other than Secured Funded Debt owned by
the Company or any Restricted Subsidiary); (3) the Company or a Restricted
Subsidiary invests the net proceeds, or an amount equal to the anticipated net
proceeds, of the sale or transfer of the Principal Property leased pursuant to
such transaction, within 270 days prior to or subsequent to such sale or
transfer, in other property having a fair market value (as determined by the
Chief Executive Officer, the President, the Chief Financial Officer, the
Treasurer or the Controller of the Company) at least equal to the fair market
value of the Principal Property so leased; (4) the effective date of any such
arrangement is within 270 days of the acquisition of the Principal Property
(including, without limitation, acquisition by merger or consolidation) or the
completion of construction and commencement of operation thereof, whichever is
later; (5) the lease in such sale and leaseback transaction is for a term,
including renewals, of not more than five years; or (6) the sale and leaseback
transaction is entered into between the Company and a Restricted Subsidiary or
between Restricted Subsidiaries.
EVENTS OF DEFAULT
Any one of the following events will constitute an Event of Default under
the Indenture with respect to Securities of any series: (a) failure to pay any
interest on any Security of that series when due, continued for 30
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<PAGE>
days; (b) failure to pay principal of or any premium on any Security of that
series when due; (c) failure to deposit any sinking fund or other payment,
when due, in respect of any Security of that series; (d) failure to perform,
or breach of, any other covenant or warranty of the Company in the Indenture
(other than a covenant included in the Indenture solely for the benefit of a
series of Securities thereunder other than that series) continued for 90 days
after written notice as provided in the Indenture; (e) certain events in
bankruptcy, insolvency or reorganization of the Company; or (f) any other
Event of Default provided with respect to Securities of that series.
If any Event of Default with respect to the Securities of any series at the
time Outstanding occurs and is continuing, either the Trustee or the Holder or
Holders of at least 25% in aggregate principal amount of the Outstanding
Securities of that series may declare the principal amount (or, if the
Securities of that series are Original Issue Discount Securities, such portion
of the principal amount as may be specified in the terms thereof) of all the
Securities of that series to be due and payable immediately. At any time after
a declaration of acceleration with respect to Securities of any series has
been made, but before a judgment or decree based on acceleration has been
obtained, the Holders of a majority in aggregate principal amount of
Outstanding Securities of that series may, under certain circumstances,
rescind and annul such acceleration.
Reference is made to the Applicable Prospectus Supplement relating to any
series of Offered Securities that are Original Issue Discount Securities for
the particular provisions relating to acceleration of the Stated Maturity of a
portion of the principal amount of such series of Original Issue Discount
Securities upon the occurrence of an Event of Default and the continuation
thereof.
The Indenture provides that, subject to the duty of the Trustee during
default to act with the required standard of care, the Trustee will be under
no obligation to exercise any of its rights or powers under the Indenture at
the request or direction of any of the Holders, unless such Holders shall have
offered to the Trustee reasonable indemnity. Subject to such provisions for
the indemnification of the Trustee and to certain other conditions, the
Holders of a majority in aggregate principal amount of the Outstanding
Securities of any series will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, with respect to the
Securities of that series.
No Holder of any series of Securities will have any right to institute any
proceeding with respect to the Indenture or for any remedy thereunder, unless
such Holder shall have previously given to the Trustee written notice of a
continuing Event of Default and unless the Holders of at least 25% in
principal amount of the Outstanding Securities of that series shall have made
written request, and offered reasonable indemnity, to the Trustee to institute
such proceeding as trustee, and the Trustee shall not have received from the
Holders of a majority in aggregate principal amount of the Outstanding
Securities of that series a direction inconsistent with such request and shall
have failed to institute such proceeding within 60 days. However, such
limitations do not apply to a suit instituted by a Holder of a Security for
enforcement of payment of the principal of and premium, if any, or interest on
such Security on or after the respective due dates expressed in such Security.
The Company is required to furnish to the Trustee annually a statement as to
the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the Holder or Holders of not less than the
majority in aggregate principal amount of the Outstanding Securities of each
series issued under the Indenture and affected by the modification or
amendment; provided, however, that no such modification or amendment may,
without the consent of the Holder or Holders of all Securities affected
thereby, (i) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Security; (ii) reduce the
principal amount of, or the premium, if any, or (except as otherwise provided
in the Applicable Prospectus Supplement) interest on, any Security (including
in the case of an Original
10
<PAGE>
Issue Discount Security the amount payable upon acceleration of the maturity
thereof); (iii) change the place or currency of payment of principal of, or
premium, if any, or interest on any Security; (iv) impair the right to
institute suit for the enforcement of any payment on any Security on or at the
Stated Maturity thereof (or in the case of redemption, on or after the
Redemption Date); or (v) reduce the percentage in principal amount of
Outstanding Securities of any series, the consent of whose Holders is required
for modification or amendment of the Indenture or for waiver of compliance
with certain provisions of the Indenture or for waiver of certain defaults.
The Holder or Holders of at least a majority in aggregate principal amount
of the Outstanding Securities of any series may, on behalf of all Holders of
that series, waive compliance by the Company with certain restrictive
provisions of the Indenture. The Holder or Holders of not less than a majority
in aggregate principal amount of the Outstanding Securities of any series may,
on behalf of all Holders of that series, waive any past default under the
Indenture, except a default in the payment of principal, premium or interest
and in respect of a covenant or provision of the Indenture that cannot be
modified or amended without the consent of the Holder of each Outstanding
Security of such series affected thereby.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company may not consolidate with or merge into any other corporation (as
defined) or transfer or lease its assets substantially as an entirety to any
corporation and may not permit any corporation to merge into or consolidate
with the Company or transfer or lease its assets substantially as an entirety
to the Company, unless (i) any successor or purchaser is a corporation
organized under the laws of the United States of America, any State or the
District of Columbia, and any such successor or purchaser expressly assumes
the Company's obligations on the Securities under a supplemental Indenture,
(ii) immediately after giving effect to the transaction no Event of Default,
and no event which, after notice or lapse of time or both, would become an
Event of Default, shall have occurred and be continuing, (iii) if properties
or assets of the Company become subject to a mortgage not permitted by the
Indenture, the Company or such successor corporation, as the case may be,
takes such steps as shall be necessary effectively to secure the Securities
equally and ratably with (or prior to) all indebtedness secured thereby, and
(iv) the Company has delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel stating compliance with these provisions.
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that, if such provision is made applicable to the
Securities of any series pursuant to Section 3.1 of the Indenture, the
Company, at the Company's option, (a) will be discharged from any and all
obligations in respect of the Outstanding Securities of any series (except for
certain obligations to register the transfer of or exchange of Securities of
such series, replace stolen, lost or mutilated Securities of such series,
maintain paying agencies and hold moneys for payment in trust) or (b) need not
comply with certain restrictive covenants of the Indenture, including those
described under "Certain Covenants of the Company," and the occurrence of an
event described in clause (d) under "Events of Default" shall no longer be an
Event of Default, in each case, if the Company deposits, in trust, with the
Trustee money or U.S. Government Obligations, which, through the payment of
interest thereon and principal thereof in accordance with their terms, will
provide money in an amount sufficient to pay all the principal of, premium, if
any, and interest on the Securities of such series on the dates such payments
are due (which may include one or more redemption dates designated by the
Company) in accordance with the terms of the Securities of such series. Such a
trust may be established only if, among other things, (i) such deposit will
not cause the Trustee to have any conflicting interest with respect to other
securities of the Company, (ii) such defeasance will not result in a breach or
violation of, or constitute a default under, the Indenture or any other
agreement or instrument to which the Company is a party or by which it is
bound and (iii) the Company shall have delivered an Opinion of Counsel to the
effect that the Holders will not recognize income, gain or loss for federal
income tax purposes as a result of such deposit or defeasance and will be
subject to federal income tax in the same manner as if such defeasance had not
occurred, which Opinion of Counsel, in the case of clause (a) above, must
refer to and be based upon a published ruling of the Internal Revenue Service,
a private ruling of the Internal Revenue Service addressed to the Company, or
otherwise a
11
<PAGE>
change in applicable federal income tax law occurring after the date of the
Indenture. In the event the Company omits to comply with its remaining
obligations under the Indenture after a defeasance of the Indenture with
respect to the Securities of any series as described under clause (b) above
and the Securities of such series are declared due and payable because of the
occurrence of any Event of Default, the amount of money and U.S. Government
Obligations on deposit with the Trustee may be insufficient to pay amounts due
on the Securities of such series at the time of the acceleration resulting
from such Event of Default. However, the Company will remain liable in respect
of such payments.
CONCERNING THE TRUSTEE
The Chase Manhattan Bank will be the Trustee under the Indenture. The
Trustee and its affiliates perform services for the Company in the ordinary
course of business and the Trustee is a lender bank under the Company's credit
facilities.
PLAN OF DISTRIBUTION
The Company may sell the Securities being offered hereby through agents,
through underwriters and through dealers, and Securities may be sold to other
purchasers directly or through agents or through a combination of any such
methods of sale.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices, or at negotiated prices.
Offers to purchase Securities may be solicited by agents designated by the
Company from time to time. Any such agent who may be deemed to be an
underwriter (as defined in the Securities Act) involved in the offer or sale
of the Securities (as defined in this Prospectus) will be named in the
Applicable Prospectus Supplement. The Applicable Prospectus Supplement will
also set forth any commissions payable by the Company to such agent. Agents
may be entitled under agreements that may be entered into with the Company to
indemnification by the Company against certain liabilities, including
liabilities under the Securities Act, and such agents or their affiliates may
be customers of, extend credit to or engage in transactions with or perform
services for the Company in the ordinary course of business. Unless otherwise
indicated in the Applicable Prospectus Supplement, any such agent will be
acting on a reasonable efforts basis for the period of its appointment.
If any underwriters are utilized in the sale of the Securities, the Company
will enter into an underwriting agreement with such underwriters at the time
of sale to them, and the names of the underwriters and the terms of the
transaction will be set forth in the Applicable Prospectus Supplement that
will be used by the underwriters to make sales of the Securities in respect of
which this Prospectus is delivered to the public. The underwriters may be
entitled under the relevant underwriting agreement to indemnification by the
Company against certain liabilities, including liabilities under the
Securities Act, and such underwriters or their affiliates may be customers of,
extend credit to or engage in transactions with or perform services for the
Company in the ordinary course of business.
If dealers are utilized in the sale of the Securities in respect of which
this Prospectus is delivered, the Company will sell such Securities to such
dealers as principal. The dealers may then resell such Securities to the
public at fixed prices or varying prices to be determined by such dealers at
the time of resale. Dealers may be entitled to indemnification by the Company
against certain liabilities, including liabilities under the Securities Act,
and such dealers or their affiliates may be customers of, extend credit to or
engage in transactions with or perform services for the Company in the
ordinary course of business.
Unless otherwise indicated in the Applicable Prospectus Supplement,
Securities are not proposed to be listed on a securities exchange, and any
underwriters or dealers will not be obligated to make a market in Securities.
The Company cannot predict the activity or liquidity of any trading in the
Securities.
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<PAGE>
LEGAL MATTERS
Unless otherwise indicated in a supplement to this Prospectus, certain legal
matters in connection with the Securities offered hereby will be passed upon
for the Company by Mayer, Brown & Platt, Chicago, Illinois. The legality of
the Securities offered hereby will be passed upon for the underwriters,
dealers and agents, if any, as set forth in the Prospectus Supplement.
EXPERTS
The financial statements incorporated in this Prospectus by reference to the
Annual Report on Form 10-K for the year ended December 31, 1997 have been so
incorporated in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
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<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESEN-
TATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PRO-
SPECTUS SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
TO WHICH IT RELATES OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCE IN WHICH SUCH OFFER OR SOLICITATION IS UN-
LAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, CRE-
ATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COM-
PANY SINCE THE DATE HEREOF OR THEREOF OR THAT THE INFORMATION CONTAINED HEREIN
OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<S> <C>
The Company S-2
Use of Proceeds S-2
Description of the Notes S-3
Recent Developments S-4
Summary Consolidated Financial Information S-4
Management's Discussion and Analysis of Financial Condition and Results
of Operations S-4
Underwriting S-11
Legal Matters S-12
PROSPECTUS
Available Information 2
Documents Incorporated by Reference 2
The Company 3
Use of Proceeds 3
Ratio of Earnings to Fixed Charges 3
Description of Securities 3
Plan of Distribution 12
Legal Matters 13
Experts 13
</TABLE>
Prospectus Supplement
NALCO CHEMICAL COMPANY
$150,000,000
% NOTES DUE 2008
LOGO
CHASE SECURITIES INC.
BANCAMERICA ROBERTSON STEPHENS
FIRST CHICAGO CAPITAL MARKETS, INC.
Dated May , 1998
