424B3 1 Registration #33-9934 Rule 424(b)(3) PROSPECTUS -------------------------------------------------------------------------------- Nalco Chemical Company DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN 1,000,000 SHARES OF COMMON STOCK (Par Value $0.1875 Per Share) -------------------------------------------------------------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. -------------------------------------------------------------------------------- Nalco Chemical Company (the "Company") hereby offers to eligible holders of its Common Stock the opportunity to purchase shares of its Common Stock, par value $0.1875 per share, with cash dividends automatically reinvested and with optional cash payments of up to $60,000 per calendar year. No service fees or brokerage commissions will be charged to participants for purchases made under the Nalco Chemical Company Dividend Reinvestment and Stock Purchase Plan (the "Plan") except in connection with automatic monthly investments through withdrawals from a predesignated account. All stockholders of record of Common Stock are eligible to participate in the Plan. Owners of Common Stock whose shares are registered in names other than their own, such as a broker or nominee, must either arrange with the registered owners to have all or a portion of their dividends reinvested or become holders of record by having those shares registered in their own names in order to reinvest dividends under the Plan. Such owners whose shares are registered in other names and who desire to make optional cash payments must become holders of record. The shares purchased under the Plan may be newly-issued shares, shares held by the Company as treasury stock or shares purchased for participants in the open market by First Chicago Trust Company of New York, as agent. The price of authorized but unissued shares of Common Stock and shares of Common Stock held as treasury stock purchased for participants in the Plan will be 100% of the average of the high and low sales prices of the Company's Common Stock as reported on the New York Stock Exchange-Composite Transactions on the relevant Investment Date (as hereinafter defined). If no trading occurs on the New York Stock Exchange on the relevant Investment Date, the purchase price per share will be determined by the Company on the basis of such market quotations as it deems appropriate. In no event will the purchase price of such shares be less than par value. The price of shares of Common Stock purchased for participants in the Plan on the open market will be the weighted average price of such shares purchased for the relevant Investment Date. Further information concerning the Plan is set forth herein under "Nalco Chemical Company Dividend Reinvestment and Stock Purchase Plan". -------------------------------------------------------------------------------- The date of this Prospectus is May 20, 1996. AVAILABLE INFORMATION -------------------------------------------------------------------------------- The Company is subject to the information requirements of the Securities Exchange Act of 1934 (the "Exchange Act") and, in accordance therewith, files reports and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy and information statements and other information may be inspected and copied at the offices of the Commission at 450 Fifth Street, N.W., Washington, D.C.; and at its regional Offices, 1500 West Madison Street, Chicago, Illinois 60661 and World Trade Center, New York, New York, 10048. Copies of such material may be obtained from the Public Reference Section of the Commission in Washington, D.C. 20549 at prescribed rates. In addition, reports, proxy and information statements and other information concerning the Company may be inspected at the offices of the New York and the Chicago Stock Exchanges on which the Common Stock of the Company is listed. INCORPORATION BY REFERENCE -------------------------------------------------------------------------------- The following documents, which have heretofore been filed by the Company with the Commission pursuant to the Exchange Act, are incorporated by reference in this Prospectus and shall be deemed to be a part hereof: (a)Annual Report on Form 10-K for the year ended December 31, 1995. (b) Description of Preferred Share Purchase Rights included in the Registration Statement on Form 8-A filed August 1, 1986, Forms 8 and 8-K filed July 6, 1989 and Form 8-K filed May 15, 1989. All documents filed by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering made by this Prospectus shall be deemed to be incorporated herein by reference and to be a part hereof from the date of filing such documents. The Company hereby undertakes to provide without charge to each person to whom a copy of the Prospectus has been delivered (including any beneficial owner), on the written or oral request of any such person, a copy of any and all of the documents referred to above which have been or may be incorporated in this Prospectus by reference, other than exhibits to such documents unless such exhibits are specifically incorporated by reference in the information that the Registration Statement incorporates. Requests should be directed to the Secretary, Nalco Chemical Company, One Nalco Center, Naperville, Illinois 60563-1198, the Company's principal executive offices. The Company's telephone number is 708/305-1000 and beginning August 3, 1996 the telephone number will be 630/305-1000.. THE COMPANY -------------------------------------------------------------------------------- Nalco Chemical Company was incorporated in 1928 in Delaware and has its principal executive offices at One Nalco Center, Naperville, Illinois 60563-1198. Its telephone number is 708/305-1000 and beginning August 3, 1996 the telephone number will be 630/305-1000. The Company is engaged primarily in the manufacture and sale of highly specialized service chemicals. This includes the production and sale of chemicals, technology and services, 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. NALCO CHEMICAL COMPANY DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN -------------------------------------------------------------------------------- Introduction -------------------------------------------------------------------------------- The Plan consists in its entirety of the questions and answers appearing below. The Plan -------------------------------------------------------------------------------- 1. What is the Plan? The Plan provides that the Company's eligible stockholders can automatically invest their cash dividends from some or all of their shares of the Company's Common Stock in additional shares of Common Stock. Eligible stockholders may also make optional cash payments to purchase additional shares of Common Stock in amounts from $25 up to an aggregate of $60,000 per calendar year. (See Question 14.) 2. What is the purpose of the Plan? The Plan offers a convenient method for eligible stockholders to invest in shares of the Company's Common Stock without payment of any brokerage commission or service charge except in connection with automatic monthly investments through withdrawals from a predesignated account. Funds from reinvested dividends and optional cash payments are intended to be used by the Company for general corporate purposes or to purchase shares in the open market for participants. (See Question 4 and "Use of Proceeds".) Administration -------------------------------------------------------------------------------- 3. Who will administer the Plan for participants? First Chicago Trust Company of New York ("First Chicago"), a wholly-owned subsidiary of First Chicago NBD Corporation, will administer the Plan for participants, keep records for the Plan, perform other duties relating to the Plan and mail statements of account to the participants. Common Stock purchased under the Plan will be registered in the name of First Chicago (or its nominee), as agent for the participants in the Plan, and will be credited to the accounts of the respective participants. As record holder of Common Stock held for the benefit of participants under the Plan, First Chicago will receive dividends on all shares of Common Stock held under the Plan on the dividend record date, will credit such dividends to participants' accounts on the basis of full and fractional shares held in their accounts, and will automatically reinvest such dividends in shares of Common Stock. Certificates for any number of whole shares credited to an account under the Plan will be issued to a participant upon written request. (See Question 20.) Purchases -------------------------------------------------------------------------------- 4. What is the source of Common Stock purchased under the Plan? Shares of Common Stock will be, at the Company's discretion, purchased either directly from the Company, in which event such shares will be either authorized but unissued shares or shares held by the Company as treasury stock, or, on the open market, or by combination of the foregoing. 5. When will shares be purchased under the Plan? Purchases from the Company of authorized but unissued shares of Common Stock and shares held as treasury stock will be made on the relevant Investment Date (as defined in the next paragraph). If the Company elects to cause First Chicago to make purchases on the open market, such purchases will begin on the Investment Date and will be completed no later than 30 days from such date except where completion at a later date is necessary or advisable under any applicable regulatory requirements. Such open market purchases may be made on any securities exchange where such shares are traded or by negotiated transactions and may be subject to such terms with respect to price, delivery and otherwise as First Chicago may agree to. Neither the Company nor any Plan participant will have any authority or power to direct the time or price at which shares may be purchased, or the selection of the broker or dealer through or from whom purchases are to be made. An Investment Date in any month in which a dividend is paid is the Company's dividend payment date and in any other month will be the 10th day of such month. If the Investment Date falls on a date when the New York Stock Exchange is closed, the Investment Date will be the first day immediately succeeding such date on which the Exchange is open. 6. What is the purchase price of the shares? The price of authorized but unissued shares of Common Stock and shares of Common Stock held as treasury stock purchased for participants in the Plan will be 100% of the average of the high and low sales prices of the Company's Common Stock as reported on the New York Stock Exchange-Composite Transactions on the relevant Investment Date. If no trading in Common Stock occurs on the New York Stock Exchange on the relevant Investment Date, the purchase price per share will be determined by the Company on the basis of such market quotations as it deems appropriate. In no event will the purchase price for such shares be less than par value. The price of shares of Common Stock purchased for participants in the Plan on the open market will be the weighted average price of shares purchased for the relevant Investment Date. 7. How many shares will be purchased for the participant? In accordance with the stockholder's selection on the Enrollment Authorization Form, cash dividends invested, including dividends received on shares credited to the participant's account under the Plan, and optional cash payments will be used to purchase Common Stock for the participant's account. Both whole and fractional shares will be purchased, with the latter computed to three decimal places. Shares purchased, including fractional shares, will be credited to the participant's account. The number of shares, including fractional shares, so purchased will depend on the amount of dividends invested, the amount of optional cash payments, if any, and the price per share as determined under Question 6. Advantages -------------------------------------------------------------------------------- 8. What are the advantages of the Plan? Participants in the Plan may (1) reinvest the cash dividends from all shares of Common Stock registered in their names in additional shares of Common Stock, and may also invest additional amounts by making optional cash payments, (2) reinvest the cash dividends from some of the shares of Common Stock registered in their names, and may also make optional cash payments, or (3) continue to receive all cash dividends from shares registered in their names and invest by making optional cash payments. (See Question 12.) Optional cash payments may be made in amounts from $25 up to an aggregate of $60,000 per calendar year. (See Question 14.) In addition to eliminating brokerage commissions, service charges (except in connection with automatic monthly investments through withdrawals from a predesignated account) and other expenses for participants in connection with shares purchased under the Plan, participants achieve full investment of funds, because the Plan permits fractions of shares, as well as whole shares, to be credited to participants' accounts. (See Question 7.) Moreover, participants may avoid safekeeping of certificates evidencing shares credited to their accounts and thus be protected against the risks of loss, theft or destruction of such certificates. Statements of account will be issued after each purchase to provide simplified record keeping. Participation in the Plan -------------------------------------------------------------------------------- 9. Who is eligible to participate in the Plan? All stockholders of record of Common Stock are eligible to participate in the Plan. Owners of Common Stock whose shares are registered in names other than their own, such as a broker or nominee, must either arrange with the registered owners to have all or a portion of their dividends reinvested or become holders of record by having those shares registered in their own names in order to reinvest dividends under the Plan. Such owners whose shares are registered in other names and who desire to make optional cash payments must become holders of record in order to make such optional cash payments. (See Question 14.) The Company has made arrangements with First Chicago to facilitate reinvestment of dividends under the Plan by record holders such as brokers and nominees, on a per-dividend basis, on behalf of beneficial owners. (See Question 13.) 10. How does an eligible stockholder participate? Any eligible stockholder may join the Plan by completing and signing the Enrollment Authorization Form accompanying this Prospectus and returning it to First Chicago. A postage-paid envelope is provided for this purpose. Additional Enrollment Authorization Forms may be obtained at any time by written request to First Chicago Trust Company at P.O. Box 2598, Jersey City, New Jersey 07303-2598 or by calling the toll free number 1-800-446-2617. A broker or nominee may reinvest dividends under the Plan on behalf of beneficial owners by signing and returning to First Chicago either the Enrollment Authorization Form or the Broker and Nominee Authorization Form (the "B&N Form"). (See Question 13.) 11. When may an eligible stockholder join the Plan? An eligible holder of Common Stock may join the Plan at any time. Once in the Plan, such stockholder will remain a participant until such stockholder discontinues participation. If an Enrollment Authorization Form requesting reinvestment of dividends is received by First Chicago on or before the record date established for a particular dividend, reinvestment will commence with that dividend. Dividend record dates for Common Stock (and the related payment dates) are anticipated to be as follows in 1996. Future dividends are contingent upon Board approval. Record Date (Date by Payment Date (Date on which Enrollment Authorization or after which Form must be dividend will received) be reinvested) February 20, 1996 March 8, 1996 May 20, 1996 June 10, 1996 August 20, 1996 September 10, 1996 November 20, 1996 December 10, 1996 It is anticipated that subsequent dividend record dates and payment dates for Common Stock will occur on approximately the same dates each year. If an Enrollment Authorization Form is received from an eligible stockholder after the record date established for a particular dividend, the reinvestment of dividends will begin on the dividend payment date following the next record date if such stockholder is still a holder of record. 12. What does the Enrollment Authorization Form provide? The Enrollment Authorization Form provides for the purchase of additional shares of Common Stock through the following investment options: If "Full Dividend Reinvestment" is elected, the Enrollment Authorization Form directs First Chicago to apply all the cash dividends on all the shares then or subsequently registered in a participant's name, together with any optional cash payments, toward the purchase of additional Common Stock. If "Partial Dividend Reinvestment" is elected, First Chicago will apply all the cash dividends on only the number of shares registered in the Participant's name that are specified on the Enrollment Authorization Form, together with any optional cash payments, toward the purchase of additional Common Stock. If "Optional Cash Payments Only" is elected, the participant will continue to receive cash dividends on shares registered in his or her name in the usual manner, and First Chicago will apply optional cash payments received toward the purchase of additional Common Stock. Selection of the "Full Dividend Reinvestment" or "Partial Dividend Reinvestment" options will not preclude an eligible stockholder from also making optional cash payments. The Enrollment Authorization Form further directs First Chicago to reinvest automatically any subsequent dividends on shares held in the participant's Plan account. Under the Plan, dividends will be reinvested on a cumulative basis on the shares designated on the Enrollment Authorization Form and on all shares held in the Plan account, until a participant specifies otherwise or withdraws from the Plan altogether, or until the Plan is terminated. If the participant has authorized "Full Dividend Reinvestment," cash dividends with respect to shares withdrawn from a participant's account will continue to be reinvested. If, however, cash dividends with respect to only part of the shares registered in a participant's name are being reinvested, First Chicago will continue to reinvest dividends on only the number of shares specified by the Participant on the Enrollment Authorization Form unless a new Enrollment Authorization Form specifying a different number of shares is delivered. If a participant disposes of shares of stock while participating under the partial dividend reinvestment option above such that the new share total is less than the number of shares specified on the Enrollment Authorization Form, all dividends paid on shares of stock registered in the stockholder's name will be reinvested. If a change in method of participation is desired, the participant need simply file a new Enrollment Authorization Form indicating the method of participation to continue thereafter. The Enrollment Authorization Form must be signed by all registered owners of the stock. 13. What does the B&N Form provide? The B&N Form (for brokers and nominees) provides a means whereby a broker or nominee may inform First Chicago each time the Company declares a cash dividend of the names of participating beneficial owners and specify as to each beneficial owner the number of shares of Common Stock with respect to which the dividend is to be reinvested. The B&N Form, therefore, unlike the Enrollment Authorization Form, contemplates new instructions to First Chicago each time a dividend is declared. First Chicago, on the Investment Date, will reinvest the dividend payable with respect to the number of shares specified in the record holder's instructions for each identified beneficial owner in as many whole shares of Common Stock as can be purchased in accordance with the Plan. As soon as practical following the Investment Date, First Chicago will transmit to the record holder information with respect to each beneficial owner for whom the record holder has requested dividend reinvestment showing as to each such beneficial owner: (a) the number of shares specified for reinvestment of the dividend, (b) the total dividend paid with respect to such shares, (c) the number of whole shares purchased, (d) the total cost of the shares purchased, (e) the amount of the total dividend not reinvested, (f) the aggregate fair market value of the shares purchased and (g) the total dividend reportable for federal income tax purposes. Accompanying such information will be a share certificate, registered in the name of the record holder, for the total number of shares purchased for each of such beneficial owners, and a check for the aggregate amount of the dividend not reinvested for such beneficial owners. The B&N Form and appropriate instructions must be received by First Chicago not later than the fifth business day following the record date for such dividend or no dividends will be reinvested based on such B&N Form. Optional Cash Payments -------------------------------------------------------------------------------- 14. What is the procedure for making optional cash payments? Any stockholder of record is eligible to make optional cash payments upon joining the Plan. Cash payments must be a minimum of $25 each and may not exceed an aggregate of $60,000 per calendar year. First Chicago will apply any optional cash payment received from a participant before an Investment Date to the purchase of Common Stock for the account of the participant on such Investment Date if the Common Stock is purchased from the Company and as soon as practical after such Investment Date if such Common Stock is purchased on the open market. Brokers or nominees participating on behalf of beneficial owners cannot utilize the optional cash payment provision of the Plan. Therefore, if shares of Common Stock are held by a broker or nominee and the owner of such shares wishes to participate in the optional cash payment feature of the Plan, such owner must become a stockholder of record by having all or a part of such shares registered in such owner's name. The owner must then enroll such shares in the Plan. (See Questions 10 and 11.) If the "Optional Cash Payments Only" box on the Enrollment Authorization Form has been checked, the Company will pay cash dividends on shares registered in the participant's name to the participant in the usual manner. An initial optional cash payment may be made by a participant upon joining the Plan by enclosing a check or money order with the Enrollment Authorization Form and by returning it to First Chicago. Thereafter, optional cash payments may be made using cash payment forms which will be sent to participants with their statements of account. Checks or money orders should be made payable to "First Chicago - Nalco Chemical". NO INTEREST WILL BE PAID ON OPTIONAL CASH PAYMENTS. Therefore, it is suggested that optional cash payments be sent to First Chicago shortly before an Investment Date. Reasonable mail delay time should be taken into account so that receipt by First Chicago is on a timely basis. Participants may also make optional cash payments by automatic monthly investments of a specified amount (not less than $25 per transaction or more than $60,000 per calendar year) through an Automated Clearing House ("ACH") withdrawal from a predesignated account. A $1.00 transaction fee will be subtracted from the amount drawn from the participant's bank account prior to each investment. To initiate automatic monthly deductions, a participant must complete and sign an Automatic Monthly Deduction Form ("Authorization Form") and return it to First Chicago together with a voided blank check or a savings account deposit slip for the account from which funds are to be drawn. Forms will be processed and will become effective as promptly as practicable. Once automatic monthly deductions are initiated, funds will be drawn from the participant's account three business days preceding each Investment Date. A participant may change or terminate automatic monthly deductions by completing and submitting to First Chicago a new Authorization Form. When a participant transfers shares or otherwise establishes a new account, an Authorization Form must be completed for the new account. If a participant closes or changes a bank account number, a new Authorization Form must be completed. To be effective with respect to a particular Investment Date, however, the new Authorization Form must be received by First Chicago at least six business days preceding the Investment Date. A request to return optional cash payments will be honored if a written request is received by First Chicago at least 48 hours before the Investment Date. The same amount of cash need not be sent each time an optional cash payment is made and there is no obligation to make optional cash payments. Costs -------------------------------------------------------------------------------- 15. What are the costs to a participant in the Plan? A participant will incur no brokerage commissions or service charges for purchases made under the Plan, except a $1.00 transaction fee if automated monthly investments are made. All costs of administration of the Plan and brokerage commissions or service charges incurred in connection with the purchase of shares will be paid by the Company. A service fee and any brokerage commissions or transfer taxes in connection with a sale by First Chicago of all or a part of the shares held for a participant under the Plan will be charged to such participant. (See Question 16.) Withdrawal -------------------------------------------------------------------------------- 16. How does a participant withdraw from the Plan? In order to withdraw from the Plan, a participant must notify First Chicago in writing or by telephone of the desire to withdraw. Written notice should be addressed to First Chicago Trust Company, P.O. Box 2598, Jersey City, New Jersey 07303-2598. In the event of withdrawal, or in the event of termination of the Plan by the Company, a certificate for whole shares credited to the participant's account under the Plan will be issued and a cash payment will be made for any fractional share based on the then current market price of the Company's Common Stock. Such payment will be less any brokerage commission. A participant may withdraw some or all of the participant's shares held in the participant's account under the Plan. If a participant requests, a certificate for all or a portion of the participant's shares held in the participant's account under the Plan will be issued in the participant's name. (See Question 20.) If a participant so requests, First Chicago will sell all or a portion of any shares credited to such participant's account under the Plan, and remit the proceeds, less a service fee, any related brokerage commission and any other costs of sale, to the participant. Participants may direct their requests to the above address or by phoning toll free 1-800-446-2617 17. When may a participant withdraw from the Plan? Participants may withdraw from the Plan at any time. If a request to withdraw is received by First Chicago on or after the record date for a dividend payment, First Chicago, in its sole discretion, may either pay any such dividend in cash or reinvest it in Common Stock on behalf of the withdrawing participant. If such dividend is reinvested, First Chicago may sell the shares purchased and remit the proceeds to the participant, less any brokerage commission, any service fee and any other costs of sale. Any optional cash payments sent to First Chicago prior to the request to withdraw will also be invested unless return of the amount is expressly requested in the request to withdraw and such request is received at least 48 hours before the dividend payment date. After withdrawing from the Plan, a stockholder may re-enroll by sending a new Enrollment Authorization Form to First Chicago. (See Questions 10 and 11.) Account Statements -------------------------------------------------------------------------------- 18. How will the participant be advised of purchases of Common Stock? Each participant in the Plan will receive a statement of account as soon as practicable after each Investment Date. These statements are a participant's continuing record of the cost of shares purchased and should be retained for income tax purposes. Each participant will receive copies of all communications sent to other stockholders including the Company's Annual and Quarterly Reports to Stockholders, Notices of Annual and Special Meetings of Stockholders and Proxy Statements and income tax information for reporting dividends paid. Dividends -------------------------------------------------------------------------------- 19. Will participants be credited with dividends on shares held in their account under the Plan? Yes. The Company pays dividends, as declared, to the stockholders of record of all its shares of Common Stock. As the holder of record for Plan participants, First Chicago, as agent, will receive dividends for all Plan shares held on the record date. It will credit such dividends received to participants' accounts on the basis of full and fractional shares held in their accounts, and will invest such dividends in additional shares of Common Stock. Stock Certificates -------------------------------------------------------------------------------- 20. Will stock certificates be issued for shares of Common Stock purchased? Normally, certificates for shares of Common Stock purchased and held under the Plan will not be issued to participants. The number of shares credited to an account under the Plan will be shown on the participant's statement of account. This service protects against loss, theft or destruction of stock certificates. Certificates for any number of whole shares credited to an account under the Plan will be issued upon the written or telephone request of a participant. Any remaining full shares and fractional shares will continue to be credited to the participant's account. Shares credited to an account of a participant in the Plan and held by First Chicago may not be pledged or otherwise hypothecated. A participant who wishes to pledge such shares must first request that a certificate for such shares be issued. When certificates are issued, they will be registered in the participant's name as shown in the Company's records. Certificates for shares purchased with dividends reinvested pursuant to instructions received on B&N Forms will be delivered to the holder of record. (See Question 13.) Certificates for fractional shares will not be issued under any circumstances. 21. May stock certificates be deposited with shares held under the Plan? A participant may deposit with First Chicago any Common Stock certificates now or hereafter registered in the participant's name for credit under the Plan. There is no charge for this custodial service and, by making the deposit, the participant will be relieved of the responsibility for loss, theft or destruction of the certificate. First Chicago provides insurance coverage on certificates mailed by participants to First Chicago for safekeeping in Plan accounts in certain instances as described below. Certificates sent to First Chicago for deposit should not be endorsed. To be eligible for certificate mailing insurance, certificates must be mailed in brown, pre-addressed return envelopes supplied by First Chicago. Certificates mailed in this manner are insured for up to $25,000 current market value provided they are mailed first class. First Chicago will promptly send the Service User a statement confirming each deposit of certificates. First Chicago must be notified of any claim within thirty (30) calendar days of the date the certificates were mailed. To submit a claim, a stockholder must be a current participant or the stockholder's loss must be incurred in connection with becoming a participant. In the latter case, the claimant must enroll in the Plan at the time the insurance claim is processed. The maximum insurance protection provided is $25,000 and coverage is available only when the certificate(s) are sent to First Chicago in accordance with the guidelines described above. For information about mailing certificates to First Chicago having a current market value in excess of $25,000, contact First Chicago. If a participant does not use the brown pre-addressed envelope provided by First Chicago, certificates should be sent to the address listed below via registered mail, return receipt requested, and insured for possible mail loss for 2% of the market value (minimum of $20.00); this represents the replacement cost to the participant. Insurance covers the replacement of shares of stock, but in no way protects against any loss resulting from fluctuations in the value of such shares from the time the stockholder mails the certificates until such time as replacement can be effected. Whenever certificates are issued to the participant either upon request or upon termination of participation, new, differently numbered certificates will be issued. Dividends will be reinvested on shares represented by the certificates deposited with First Chicago. Sales -------------------------------------------------------------------------------- 22. How does a participant sell shares held under the Plan? A participant may at any time, including upon withdrawal, request the sale of all or any whole shares held in his or her account under the Plan. Any such request may be made by either writing to First Chicago or calling First Chicago at 1-800-446-2617. First Chicago will make every effort to process all sale orders (written and telephone) on the day it receives them, provided that instructions are received before 1:00 p.m. Eastern time on a business day when First Chicago and the relevant securities markets are open. The proceeds from such sale, less a service fee, any brokerage commission, and any other costs of sale, will be remitted to the participant. Each sale request will be processed and a check for the net proceeds will be mailed as promptly as possible after First Chicago receives such sale request. Other Information -------------------------------------------------------------------------------- 23. What happens when participants sell or transfer all of the shares registered in their names on the books of the Company other than shares held under the Plan? When participants sell or transfer all shares of Common Stock registered in their names, First Chicago will continue to invest the dividends on the shares credited to their accounts under the Plan until otherwise notified. 24. What happens if the Company has a rights offering? In the case of a Common Stock rights offering, Plan participants will receive rights based upon whole shares of Common Stock registered in their names as of the record date for any such rights offered, and whole shares credited to their accounts under the Plan as of the record date. 25. Are shares purchased under the Plan entitled to preferred share purchase rights? Each share of Common Stock, including each whole share purchased under the Plan, is entitled to one preferred share purchase right. If at any time certificates representing preferred share purchase rights are distributed to holders of Common Stock, First Chicago will distribute to participants such certificates issued with respect to shares of Common Stock held in the Plan. 26. What happens if the Company issues a stock dividend or declares a stock split? Any stock dividend or split shares of Common Stock distributed by the Company on shares credited to the account of a participant under the Plan will be added to the participant's account. Stock dividends or split shares distributed on shares held directly by the participant and registered in the participant's name will be mailed to such participant in the same manner as to stockholders who are not participating in the Plan. 27. What are the Federal income tax consequences of participation in the Plan? In the case of reinvested dividends, when First Chicago acquires shares for a participant's account directly from the Company, the participant must include in gross income a dividend equal to the fair market value of the shares on the relevant dividend payment date. The participant's basis in those shares will also equal the fair market value of the shares on the relevant dividend payment date. Alternatively, when First Chicago purchases Common Stock for a participant's account on the open market with reinvested dividends, a participant must include in gross income a dividend equal to the actual purchase price to First Chicago of the shares plus that portion of any brokerage commissions paid by the Company which are attributable to the purchase of the participant's shares. The participant's basis in Plan shares held for his or her account will be equal to their purchase price plus allocable brokerage commissions. In the case of shares purchased directly from the Company with optional cash investments, the participant will not realize any income by reason of the purchase, and the participant's basis in the shares so purchased will be their cost. In the case of shares purchased on the open market with optional cash investments, participants will be in receipt of a dividend to the extent of any brokerage commissions paid by the Company. The participant's basis in the shares acquired on the open market with optional investments will be the cost of the shares plus an allocable share of any brokerage commissions paid by the Company. The holding period for Plan shares will begin the day after the date the shares are acquired. A participant will not realize any taxable income when he or she receives certificates for whole shares credited to his or her account under the Plan, either upon a request for such certificates or upon withdrawal from or termination of the Plan. However, a participant who receives, upon withdrawal from or termination of the Plan, a cash payment for the sale of Plan shares or for a fractional share then held in his or her account will realize gain or loss measured by the difference between the amount of the cash received and the participant's basis in such shares or fractional share. Such gain or loss will be capital in character if such shares or fractional shares are a capital asset in the hands of the participant. Dividends distributed pursuant to the Plan may be subject to withholding, in the same circumstances as regular dividends are subject to withholding. In the case of foreign or other stockholders who are subject to income tax withholding, dividends will be reinvested after the deduction of such withholding taxes. For further information as to tax consequences of participation in the Plan, participants should consult with their own tax advisors. 28. How many shares will be sold by the Company under the Plan? Of the shares registered with the Securities and Exchange Commission for the Plan, the Company will sell as many shares as the dividends and optional cash payments of participating stockholders will purchase. The Company anticipates that it will, from time to time, as required, make additional shares available for purchase under the Plan. (See Question 31) 29. How will participants' shares held under the Plan be voted at meetings of stockholders? For each meeting of stockholders, participants will receive proxies which will enable them to vote shares registered in their names and also whole shares credited to their accounts under the Plan. 30. Who interprets and regulates the Plan? The Company reserves the right to interpret and regulate the Plan, as deemed desirable or necessary, in connection with its operation. 31. May the Plan be modified or discontinued? The Company reserves the right to suspend, modify or terminate the Plan at any time. Participants in the Plan will be notified of any suspension, termination or significant modification of the Plan. If the Plan is terminated, shares held in the participant's account will be distributed as described in Question 16. 32. What are the responsibilities of the Company and First Chicago under the Plan? Neither the Company, nor First Chicago, as administrator of the Plan, will be liable for any good faith act or for any good faith omission to act, including, without limitation, any claim or liability arising out of failure to terminate a participant's account upon such participant's death, the prices at which shares are purchased or sold for a participant's account, the times when purchases or sales are made, or fluctuations in the market value of Common Stock. The participants should recognize that neither the Company nor First Chicago can assure them of a profit or protect them against a loss on the shares purchased by them under the Plan. The Company has no obligation to purchase shares issued under the Plan. 33. Who should be contacted with questions about the Plan? All correspondence and inquiries concerning the Plan should be directed to: First Chicago Trust Company P.O. Box 2598 Jersey City, New Jersey 07303-2598 Telephone inquires should be directed to: Stockholder customer service, including sale of shares: 1-800-446-2617 Normal hours: 8:00 am - 10:00 pm, Eastern time, each business day 8:00 am - 3:30 pm, Eastern time, Saturdays Customer Service Representatives are available 9:00 am -6:00 pm, Eastern time, each business day. Internet: Messages forwarded on the Internet will be responded to within one business day. The First Chicago Internet address is "HTTP://WWW.FCTC.COM" TDD: 1-201-222-4955 Telecommunications Device for the hearing impaired. DESCRIPTION OF CAPITAL STOCK Common Stock -------------------------------------------------------------------------------- The record holders of the Common Stock are entitled, ratably, to such dividends thereon as the Company's Board of Directors in its discretion may declare out of funds available therefor; are entitled to receive pro rata all assets of the Company available for distribution to stockholders in the event of liquidation of the Company; are entitled to one vote for each share held; and have no preemptive rights to purchase or subscribe for any stock of the Company now or hereafter authorized or securities convertible into Common stock. All outstanding shares of Common Stock, including the shares offered hereby, are fully paid and non-assessable. There is no charter restriction on the repurchase by the Company of shares of its own stock. Preferred Stock -------------------------------------------------------------------------------- The Company's Restated Certificate of Incorporation permits the Board of Directors of the Company, without further stockholder approval, to authorize the issuance of up to 2,000,000 shares of Preferred Stock, $1.00 par value, and to fix the various rights, preferences, terms and provisions of each series of Preferred Stock so issued. No such Preferred Stock has been issued other than Series B ESOP Convertible Preferred Stock (the "ESOP Stock"), of which 415,800 Shares were issued to the Northern Trust Company as Trustee of the Nalco Chemical Company Employee Stock Ownership Plan (the "ESOP"). These shares are subject to restrictions on transfer set forth in the Certificate of Designations relating to the ESOP Stock and a stock purchase transfer agreement dated May 15, 1989. The shares are convertible into the Company's Common Stock in a 20-1 ratio with the number of votes per share of ESOP stock equal to the shares of Common Stock into which the ESOP Stock can be converted. Except with respect to the preferred share purchase rights described below, there are presently no understandings, agreements, negotiations or discussions which will or might involve the possible issuance of Preferred Stock for any purpose. Preferred Share Purchase Rights -------------------------------------------------------------------------------- On July 24, 1986, the Company's Board of Directors declared a dividend of certain preferred share purchase rights on each outstanding share of Common Stock. The Company will issue similar rights with respect to newly-issued shares of Common Stock as long as the rights are attached to Common Stock. The rights, which are not exercisable until certain events involving a potential takeover occur, are more particularly described in the Company's Registration Statement on Form 8-A, filed with the Commission on August 1, 1986, and Forms 8 and 8-K, filed with the Commission on July 6, 1989, which are incorporated herein by reference. Use of Proceeds -------------------------------------------------------------------------------- The Company does not know the number of shares that will ultimately be purchased from the Company under the Plan nor the prices at which such shares will be sold. The proceeds are intended to be used for general corporate purposes or to purchase shares in the open market for participants. -------------------------------------------------------------------------------- TABLE OF CONTENTS ------------------------------------- Page Available Information........... 2 Incorporation by Reference...... 2 The Company..................... 2 Nalco Chemical Company Dividend Reinvestment and Stock Purchase Plan 3 Description of Capital Stock.... 14 Preferred Share Purchase Rights. 14 Use of Proceeds................. 14 No person has been authorized to give any information or to make any representation not contained in this Prospectus, and if given or made such information or representation must not be relied upon as having been authorized by the Company. The delivery of this Prospectus at any time does not imply that information herein is correct at any time subsequent to its date. Nalco Chemical Company --------------------------------------- DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN PROSPECTUS --------------------------------------- May 20, 1996 --------------------------------------------------------------------------------