Ecolab Inc.
Board Chemistry INC (Form: POS AM, Received: 06/06/2006 16:59:10) Table of Contents

As filed with the Securities and Exchange Commission on June 6, 2006

Registration No. 333-119480

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

POST-EFFECTIVE
AMENDMENT NO.2 TO

FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

NALCO COMPANY

(Exact name of registrant as specified in its charter)

SEE TABLE OF ADDITIONAL REGISTRANTS


Delaware 2890 36-1520480
(State of Incorporation) (Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification No.)

1601 West Diehl Road
Naperville, Illinois 60563
(630) 305-1000

(Address, including zip code, and telephone number, including area code, of registrants' principal executive offices)

Stephen N. Landsman, Esq.
General Counsel
Nalco Company
1601 West Diehl Road
Naperville, Illinois 60563
(630) 305-1000
(Name, address, including zip code, and telephone number, including area code, of agent for service)

With a copy to:
Richard A. Fenyes, Esq.
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017-3954
(212) 455-2000

Approximate date of commencement of proposed offer: As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [X]

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]

CALCULATION OF REGISTRATION FEE


Title of Each Class of Securities to be Registered Amount to be
Registered
Proposed Maximum
Offering Price per Note
Proposed Maximum
Aggregate Offering
Price
Amount of
Registration
Fee
7¾% Senior Notes due 2011 $665,000,000 100% $665,000,000 (3)
7¾% Senior Notes due 2011 €200,000,000 100% €200,000,000 (3)
8 7/8% Senior Subordinated Notes due 2013 $465,000,000 100% $465,000,000 (3)
9% Senior Subordinated Notes due 2013 €200,000,000 100% €200,000,000 (3)
Guarantees of 7¾% Senior Notes due 2011(1) N/A(2) N/A(2) N/A(2) (2)
Guarantees of 8 7/8% Senior Subordinated Notes due 2013 (1) N/A(2) N/A(2) N/A(2) (2)
Guarantees of 9% Senior Subordinated Notes due 2013 (1) N/A(2) N/A(2) N/A(2) (2)
(1) See inside facing page for additional registrant guarantors.
(2) Pursuant to Rule 457(n) under the Securities Act, no separate filing fee is required for the guarantees.
(3)    Pursuant to Rule 457(q) under the Securities Act, no filing fee is required.

This post-effective amendment will become effective in accordance with the provisions of Section 8(c) of the Securities Act.




Table of Contents

TABLE OF ADDITIONAL REGISTRANT GUARANTORS


Exact Name of Registrant
as Specified in its Charter
State or Other
Jurisdiction of
Incorporation or
Organization
I.R.S. Employer
Identification
Number
Address, Including Zip
Code and Telephone
Number, Including Area
Code, of Registrant's
Principal Executive Offices
ADX Corp. Michigan 36-3112436 1601 West Diehl Road
Naperville, IL 60563-1198
(630) 305-1000
Board Chemistry Incorporated Delaware 36-3282850 1602 West Diehl Road
Naperville, IL 60563-1198
(630) 305-1000
Calgon Corporation Delaware 25-1711614 1603 West Diehl Road
Naperville, IL 60563-1198
(630) 305-1000
Nalco American Holding, Inc.
(f/k/a Degremont American Holding, Inc.)
Delaware 54-1887359 1604 West Diehl Road
Naperville, IL 60563-1198
(630) 305-1000
Nalco Company LLC
(f/k/a Ondeo Nalco Company LLC)
Delaware 36-1520480 1613 West Diehl Road
Naperville, IL 60563-1198
(630) 305-1000
Nalco Delaware Company Delaware 36-3765301 1605 West Diehl Road
Naperville, IL 60563-1198
(630) 305-1000
Nalco Energy Services Equatorial Guinea LLC
(f/k/a ONES Equatorial Guinea LLC)
Delaware 76-0444295 1613 West Diehl Road
Naperville, IL 60563-1198
(630) 305-1000
Nalco Energy Services Middle East Holdings, Inc. (f/k/a ONDEO Nalco Energy Services Middle East Holdings, Inc.) Delaware 22-2429311 7701 Highway 90-A
Sugar Land, Texas 77478
(281) 263-7000
Nalco FT, Inc. Delaware 36-3690790 1606 West Diehl Road
Naperville, IL 60563-1198
(630) 305-1000
Nalco Global Holdings LLC
(f/k/a ONDEO Nalco Global Holdings LLC)
Delaware 36-1520480 1613 West Diehl Road
Naperville, IL 60563-1198
(630) 305-1000
Nalco Holdings LLC Delaware 73-1683500 1601 West Diehl Road
Naperville, IL 60563-1198
(630) 305-1000
Nalco Industrial
Outsourcing Company
Delaware 36-4344205 1601 West Diehl Road
Naperville, IL 60563-1198
(630) 305-1000



Table of Contents
Exact Name of Registrant
as Specified in its Charter
State or Other
Jurisdiction of
Incorporation or
Organization
I.R.S. Employer
Identification
Number
Address, Including Zip
Code and Telephone
Number, Including Area
Code, of Registrant's
Principal Executive Offices
Nalco International Holdings LLC
(f/k/a ONDEO Nalco International Holdings LLC)
Delaware 36-6114238 1613 West Diehl Road
Naperville, IL 60563-1198
(630) 305-1000
Nalco Leasing Corporation Delaware 36-3308773 1607 West Diehl Road
Naperville, IL 60563-1198
(630) 305-1000
Nalco PWS, Inc. Delaware 36-4466815 1608 West Diehl Road
Naperville, IL 60563-1198
(630) 305-1000
Nalco Resources Investment Company Texas 36-6113527 1609 West Diehl Road
Naperville, IL 60563-1198
(630) 305-1000
Nalco TWO, Inc. Delaware 36-4023948 1610 West Diehl Road
Naperville, IL 60563-1198
(630) 305-1000
Nalco U.S. Holdings LLC
(f/k/a ONDEO Nalco U.S. Holdings LLC)
Delaware 36-4402250 1613 West Diehl Road
Naperville, IL 60563-1198
(630) 305-1000
Nalco Worldwide Holdings LLC
(f/k/a ONDEO Nalco Worldwide Holdings LLC)
Delaware 36-6114100 1613 West Diehl Road
Naperville, IL 60563-1198
(630) 305-1000
Nalgreen, Inc. Delaware 36-3650277 1611 West Diehl Road
Naperville, IL 60563-1198
(630) 305-1000
Naltech, Inc. Delaware 51-0357514 1612 West Diehl Road
Naperville, IL 60563-1198
(630) 305-1000
ONES West Africa LLC Delaware 57-1187680 1613 West Diehl Road
Naperville, IL 60563-1198
(630) 305-1000
Pure-Chem Products Company, Inc. California 95-3235235 8371 Monroe Ave
Stanton, California 90680
(714) 995-4141
Visco Products Company Texas 36-3205037 1613 West Diehl Road
Naperville, IL 60563-1198
(630) 305-1000



Table of Contents

The information in this prospectus is not complete and may not be changed. We may not sell the securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion, dated June 6, 2006

PROSPECTUS

Nalco Company

$665,000,000 7¾% Senior Notes due 2011
€200,000,000 7¾% Senior Notes due 2011
$465,000,000 8 7/8% Senior Subordinated Notes due 2013
€200,000,000 9% Senior Subordinated Notes due 2013

The 7¾% senior notes due 2011 were issued on September 14, 2004 in exchange for the 7¾% senior notes due 2011 originally issued on November 4, 2003. The 7¾% senior notes due 2011 were issued on September 14, 2004 in exchange for the 7¾% senior notes due 2011 originally issued on November 4, 2003. The 8 7/8% senior subordinated notes due 2013 were issued on September 14, 2004 in exchange for the 8 7/8% senior subordinated notes due 2013 originally issued on November 4, 2003. The 9% senior subordinated notes were issued on September 14, 2004 in exchange for the 9% senior subordinated notes originally issued on November 4, 2003.

The senior notes will mature on November 15, 2011 and the senior subordinated notes will mature on November 15, 2013.

Nalco Company may redeem some or all of the senior notes at any time prior to November 15, 2007 and some or all of the senior subordinated notes at any time prior to November 15, 2008, in each case, at a price equal to 100% of the principal amount of the notes, plus a ‘‘make-whole’’ premium. Thereafter, Nalco Company may redeem some or all of the senior notes and some or all of the senior subordinated notes, in each case, at the redemption prices described in this prospectus. In addition, on or prior to November 15, 2006, Nalco Company may redeem up to 35% of each of the senior notes and the senior subordinated notes with the proceeds from certain equity offerings.

The senior notes are Nalco Company's unsecured obligations and rank equally with all of Nalco Company's existing and future senior obligations and senior to Nalco Company's subordinated indebtedness. The senior subordinated notes are Nalco Company's unsecured senior subordinated obligations and are subordinated to all of its existing and future senior indebtedness including the senior notes. The notes are effectively subordinated to Nalco Company's existing and future secured indebtedness to the extent of the assets securing that indebtedness. The notes are guaranteed by Nalco Holdings LLC and Nalco Company's direct and indirect domestic subsidiaries that guarantee its obligations under the senior credit facilities. These guarantees are unsecured and, with respect to the senior notes, rank equally with all existing and future senior obligations of the guarantors and, with respect to the senior subordinated notes, are subordinated to all existing and future senior obligations of the guarantors. The guarantees are effectively subordinated to existing and future secured indebtedness of the guarantors to the extent of the assets securing that indebtedness.

The euro notes are listed on the Luxembourg Stock Exchange.

See ‘‘Risk Factors’’ beginning on page 16 for a discussion of certain risks that you should consider in connection with an investment in the notes .

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the notes or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense .

This prospectus may be used by Goldman, Sachs & Co., Goldman Sachs International, Spear, Leeds & Kellogg, L.P., The Hull Group, L.L.C. and other affiliates of The Goldman Sachs Group, Inc. in connection with offers and sales of the notes related to market-making transactions in the notes effected from time to time. Such affiliates of The Goldman Sachs Group, Inc. may act as principal or agent in such transactions, including as agent for the counterparty when acting as principal or as agent for both counterparties, and may receive compensation in the form of discounts and commissions, including from both counterparties, when it acts as agents for both. Such sales will be made at prevailing market prices at the time of sale, at prices related thereto or at negotiated prices.

Goldman, Sachs & Co.

The date of this prospectus is              , 2006.




Table of Contents

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with different information. The prospectus may be used only for the purposes for which it has been published and no person has been authorized to give any information not contained herein. If you receive any other information, you should not rely on it. We are not, and the initial purchasers are not, making an offer of these securities in any state where the offer is not permitted.

TABLE OF CONTENTS


  Page
Summary 1
Risk Factors 16
Special Note Regarding Forward-Looking Statements 26
Use of Proceeds 28
Capitalization 28
Selected Historical Financial Data 29
Management's Discussion and Analysis of Financial Condition and Results of Operations 36
Industry Overview 61
Business 64
Management 79
Security Ownership of Certain Beneficial Owners 91
Certain Relationships and Related Party Transactions 94
Description of Other Indebtedness 99
Description of Senior Notes 104
Description of Senior Subordinated Notes 153
Book-Entry; Delivery and Form 205
Material United States Federal Income Tax Consequences 209
Certain ERISA Considerations 215
Plan of Distribution 217
Legal Matters 217
Experts 217
Where You Can Find Additional Information 217
Index to Financial Statements F-1

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Table of Contents

MARKET AND INDUSTRY DATA AND FORECASTS

We derived the market and industry data we present in this prospectus from the following sources:

Market Size.     We based the global market size for water treatment chemicals and services in the industrials and institutional sector on estimates of Kline & Company Inc., Lake View Associates and SRI International. We adjusted these estimates by deducting results for the Paper and Energy Services water treatment chemicals markets based on estimates of Mars & Co. and internal estimates derived from discussion with our sales force and other industry participants. We further adjusted as necessary to reflect that certain of the third party sources included product lines, such as commodity chemicals, which are outside our relevant market.

We based the global market size for process improvement and water treatment to the petroleum and petrochemical market on our internal estimates for downstream chemical markets and estimates of SRI International and Business Communications Company, Inc. for upstream chemical markets. We adjusted the upstream chemical results by adding results for the production chemicals and drag reducers submarkets and deducting results for the commodity chemical submarket.

We based the global market size for paper process specialty chemicals and services on estimates of Kemira (a market participant), internal estimates based on recent consolidating transactions, SRI International and Business Communications Company, Inc. We deducted from this market results for certain submarkets in which we do not operate.

Market Share.     We determined our market share and market position in each of the markets based on the sizes of the markets, our sales in each of the markets, publicly available information of sales by competitors and our internal estimates of competitors' sales based on discussion with our sales force and other industry participants.

Market Growth.     Our analysis for estimating market growth utilized third party references for specific segments of our business. We estimated the growth of the paper chemicals market based on reports generated by the Finnish Forest Industries Federation, which provided growth estimates for the U.S. and European paper industries. We estimated the growth of the energy services chemicals market based on reports from the EIA Department of Energy, which provided growth estimates for world oil supply and crude oil production growth. We estimated industrial and institutional market growth utilizing reports from Global Insight, which provided estimates of U.S. Industrial Production and World Gross Domestic Production growth.

TRADEMARKS AND SERVICEMARKS

AQUAMAX™, Core Shell™, Fiber NEU™, OptiLux™, ValueLine™, Vantage™, PROSPEC SM , ACTRENE ® , BIO-MANAGE ® , Calgon ® , COKELESS ® , ELIMIN-OX ® , EN/ACT ® , ENERCEPT ® , ENERSPERSE ® , Fiber Brite ® , LAZON ® , Metrix ® , Nalco ® , Nalco ACT ® , NALMET ® , NEOSTAR ® , NexGuard ® , ODORtech ® , PORTA-FEED ® , Ultra POSITEK ® , Scale-Guard ® , SCORPION ® II, SheeTracker ® , SmartSoft ® , STA•BR•EX ® , SULFA-CHECK ® , SUR-GUARD ® , THERMOGAIN ® , TRA-CIDE ® , TRASAR ® , 3D TRASAR ® , Tri-ACT ® , ULTIMER ® , UltraTreat ® , ULTRAXOL ® , ULTRION ® and certain other products and services named in this prospectus are our registered trademarks and servicemarks.

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SUMMARY

This summary highlights selected information in this prospectus, but it may not contain all of the information that you should consider before deciding to invest in the notes. You should read this entire prospectus carefully, including the ‘‘Risk Factors’’ section and the financial statements, which are included elsewhere in this prospectus.

All references in this prospectus to ‘‘we,’’ ‘‘our’’ and ‘‘us’’ mean, unless the context indicates otherwise, Nalco Holdings LLC, or Nalco Holdings, including Nalco Holdings' subsidiaries and affiliates, after giving effect to the Transactions described below in this summary. Nalco Holdings LLC's subsidiaries include:

•  Nalco Company (formerly known as Ondeo Nalco Company) and its subsidiaries, which Suez S.A., or Suez, acquired in 1999; and
•  the subsidiaries of Nalco International SAS that we have operated, but that were held separately from Nalco Company prior to the Acquisition described below, including Nalco Belgium NV/SA (formerly known as Ondeo Nalco Belgium NV/SA), Nalco France (formerly known as Ondeo Nalco France), Nalco (Shanghai) Trading Co. Ltd. (formerly known as Ondeo Nalco (Shanghai) Trading Co. Ltd), Nalco Dutch Holdings B.V., Nalco Portuguesa (Quimica Industrial) Ltd. and Wyss Wassertechnik AG and their subsidiaries. We refer to these subsidiaries as the ‘‘Nalco International SAS Subsidiaries’’ in this prospectus.

However, Nalco Holdings LLC's subsidiaries exclude Ondeo Industrial Solutions LLC, a former subsidiary of Nalco Company that was transferred to Suez in connection with the Acquisition described below.

Our Company

We are the leading global provider of integrated water treatment and process improvement services, chemicals and equipment programs for industrial and institutional applications. We are organized into three primary divisions which correspond to the end markets we serve: Industrial and Institutional Services, Energy Services and Paper Services. Our products and services are typically used in water treatment applications to prevent corrosion, contamination and the buildup of harmful deposits, or in production processes to enhance process efficiency and improve our customers' end products.

Through our sales, research and marketing team of more than 7,000 technically trained professionals, we serve more than 70,000 customer locations. We focus on providing our customers with technologically advanced engineered solutions and services. These technologically advanced engineered solutions and services enable our customers to improve their business by increasing production yields, lowering manufacturing costs, extending asset lives and maintaining environmental standards.

The cost of our technologically advanced engineering solutions and services represents a small share of our customers' overall production expense. We believe we offer the broadest product portfolio in our industry, including more than 15,000 products and 8,000 unique formulations.

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Our Divisions


  Industrial and
Institutional Services
Energy Services Paper Services
Market
Positions
#1 Market Position
$6.6 billion global market (1)(2)
#1 Market Position
$3.25 billion global market (1)
#3 Market Position
$7.8 billion global market (1)
Market Share (3) 19% 29% 9%
2005
Net Sales (4)
$1,494 million $897 million $699 million
    
Representative
Markets
•    Food and Beverage
•    Buildings, Hotels, Hospitals
•    Chemicals, Pharmaceuticals
•    Manufacturing, Metals, Utilities,
Mining
•    Exploration
•    Field Development
•    Production
•    Refining
•    Petrochemical Manufacturing
•    Fine Paper
•    Uncoated Free Sheet
•    Coated Free Sheet
•    Newsprint
•    Tissue
•    Containerboard
(1) Approximate market size based on internal estimates and industry publications and surveys. See ‘‘Market and Industry Data and Forecasts’’ and ‘‘Industry Overview.’’
(2) Industrial and Institutional Services market position and size represents the water treatment and services markets (excluding water treatment and services markets served by the Energy Services and Paper Services divisions), which accounted for approximately 79% of our Industrial and Institutional Services division's net sales in 2005.
(3) Market share calculations include appropriate segment sales from India and Japan reported in Other segment.
(4) Divisional net sales exclude approximately $223 million of sales allocated to our Other segment, including our sales in India, Japan, and an Integrated Channels group.

Industrial and Institutional Services

Our Industrial and Institutional Services division provides products and services that are principally utilized in water treatment applications such as raw water treatment, wastewater treatment, cooling programs and boiler treatment programs to control corrosion, the build up of scale and microbial fouling. Customers use our water treatment programs to extend the useful life of their assets, minimize downtime of their facilities, conserve water and energy and decrease their total cost of operation. We serve companies across a broad spectrum of industries, including aerospace, chemical, pharmaceutical, steel, power, food and beverage, medium and light manufacturing, metalworking, marine and institutions such as hospitals, universities and hotels. Six of our ten largest Industrial and Institutional Services customers in 2005 have been with us for more than ten years.

Energy Services

Our Energy Services division provides on-site, technology driven solutions to the global natural gas, petroleum and petrochemical industries. In addition to recovery, production and process enhancements, we deliver a full range of water treatment offerings to refineries and petrochemical plants. Our upstream process applications improve oil and gas recovery and production, extend production equipment life and decrease operating costs through services that include scale, paraffin and corrosion control, oil and water separation and gas hydrate management solutions. Our downstream process applications increase refinery and petrochemical plant efficiency and the useful lives of customer assets, while improving refined and petrochemical product quality and yields. Our ten largest Energy Services customers in 2005 have been with us for more than twenty years.

Paper Services

Our Paper Services division offers a comprehensive portfolio of programs that are used in all principal steps of the paper-making process and across all grades of paper, including printing and writing, board and packaging, tissue and towel, and mechanical papers. Our clients include the 20 largest paper companies in the world. Seven of our ten largest Paper Services clients in 2005 have been with us for more than ten years.

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Competitive Strengths

We have benefited from the following competitive strengths:

Leading Market Positions .    We are the #1 provider of water treatment services to industrial and institutional end markets. We are also a leading provider of integrated water treatment and process improvement services, maintaining the #1 position in the petroleum and petrochemical markets and the #3 position in the pulp and paper market.

Diverse Customers and Industries Served .    We provide products and services to more than 70,000 customer locations across a broad range of industries and institutions. In 2005, no single customer accounted for more than 3% of our net sales. Our business is also diversified geographically. In 2005, 48% of total sales were in North America, 30% in Europe, Africa and the Middle East, 8% in Latin America and 14% in the Pacific region. We believe this diversification minimizes the potential impact of volatility from any one customer, industry or geographic area.

Global Reach .    We have a direct sales and marketing presence in 130 countries across six continents. This enables us to provide a consistently high level of service to local, regional and multinational customers. We believe our global presence offers us a competitive advantage in meeting the global needs of our multinational customers, which are increasingly seeking single-source suppliers and positions us to extend our reach to higher-growth markets. In 2005, we derived approximately $1,818 million, or 55% of our net sales, from our non-U.S. subsidiaries (excluding sales to our U.S. operations).

World Class Sales Team .    Through the expertise of our more than 6,000 engineers and service technicians, we provide our customers with relevant industry knowledge and experience in order to solve technically challenging and dynamic problems. Our team of experts has significant experience, with more than 40% of our approximately 2,000-person North American sales team having more than ten years of service with us. We believe this contributes significantly to the number and strength of relationships with our customers. We also invest heavily in recruiting and continuously training our sales professionals.

Integrated Technology, Sales and Service .    We combine on-site service, innovative technology and engineering excellence to create value for our customers. Our technical sales professionals identify problems and opportunities at the customer's plant and our research teams then work to develop effective solutions to these needs, often working jointly with our customers. Many of our customers specify our formulations into their processes and products. This approach has resulted in a high degree of customer loyalty.

Stable and Significant Cash Flow Generation.     We have produced consistent cash flows and maintained high margins over a sustained period of time. We attribute this to (1) the diversity of our revenues, (2) the service nature of our business, (3) the high value we offer our customers, (4) the strength of our customer relationships, (5) our limited dependency on any single raw material and (6) our low capital expenditures relative to our net sales.

Premier Management Team .    Our senior management team consists of professionals with significant experience within our company and the water treatment and industrial process improvement industry. Our eight senior business leaders and executive officers have an average of 14 years of service with our company and 30 years of industry experience. Our top executive officers and other members of management hold approximately five million shares in our company.

Business Strategy

We have historically experienced sales growth in excess of industrial production growth in our core markets. We are pursuing a strategy designed to generate real sales growth at 5% annually for our base business. In addition, we are developing alternate channels to market intended to further accelerate our growth. Earnings and cash flow growth are targeted to grow at faster rates than our underlying sales growth as we improve productivity and working capital management. The key elements of this strategy are:

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Pursue High-Growth Markets.     We intend to continue to focus on high-growth markets and segments. Geographically, we plan to leverage our global reach by capitalizing on our presence in high-growth emerging markets including Asia, Eastern Europe and Latin America. We have also formed new ventures in West Africa and Eastern Europe, which will permit us to pursue energy services opportunities at new customer production facilities planned in these areas.

Maintain Technological Leadership.     We strive to develop new technologies and products through a focused commitment to technology, research and development. The evolution of our existing products and the development of new technologies have historically allowed us to sustain and enhance the profitability of our business and further penetrate our target markets, including our existing customer base. Our engineers will continue to work closely with our customers in an effort to identify new product opportunities and jointly develop new technologies.

Pursue High-Growth Industry Segments.     While we have shown the ability to exceed market growth rates even in many mature markets through innovative technology and advanced engineering, monitoring and control services, we believe that selecting the right industries on which to focus resources helps us exceed underlying market growth rates.

Build Upon Our Customer Base.     We seek to strengthen our position with our existing customer base as well as pursue new customers by continuing to serve as the leading global provider of fully integrated water treatment services and industrial process solutions. We continually seek to add value for our customers by identifying those services, products and equipment that will enhance their profitability through reduced costs, improved yields and decreased capital spending.

Expand Support of Multinational Customers.     As one of a small number of companies that can provide turnkey water management solutions on a global basis, we seek to leverage our relationships with multinational companies by servicing them globally. We expect to benefit significantly as larger customers further consolidate their supplier base and increase their reliance on full service providers, such as our company.

Continue to Reduce Costs.     We have initiated a comprehensive cost reduction plan that yielded savings in 2004 of $88 million compared to 2003, with a year-end run rate to those savings of $110 million. In 2005, we generated additional savings versus 2004 of $89 million, including the run-rate benefit of 2004 projects. We expect our cost reduction plan to achieve incremental efficiencies through work process redesign and other targeted cost improvements, which address inefficiencies in our administrative and overhead functions, as well as other support and service functions around the world.

Maximize Cash Flow and Reduce Debt.     We believe that there are significant opportunities to increase our cash flow. We believe that while the capital expenditures required to maintain our business are low relative to our sales, we can maintain capital expenditures at about $100 million annually through continued management focus. We intend to use our cash flow to reduce indebtedness. During the twelve months ended December 31, 2005, we used $121.5 million for debt reduction from operating cash flows.

Focus on Supply Chain Management.     We have a dedicated global supply chain team that focuses on managing manufacturing, procurement and logistics activities. We believe that by coordinating these functions, we achieve better inventory management and lower overall company costs for our delivered end products. We believe that we will be able to make additional improvements in our inventory management and lower procurement costs as we develop our abilities to fully utilize these systems.

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The Transactions

On August 31, 2003, Nalco Holdings LLC, which was formed by funds affiliated with The Blackstone Group (‘‘Blackstone’’), Apollo Management, L.P. (‘‘Apollo’’) and GS Capital Partners (‘‘GSCP’’ and together with Blackstone and Apollo, the ‘‘Sponsors’’), entered into a stock purchase agreement pursuant to which it agreed to purchase all of the outstanding shares of capital stock of Ondeo Nalco Company (which is now known as Nalco Company) and the Nalco International SAS Subsidiaries, which had been operated as a single business unit, from subsidiaries of Suez. The aggregate purchase price was $4,102.9 million in cash, after giving effect to direct costs of the Acquisition, closing date working capital and indebtedness purchase price adjustments, a post-closing working capital and indebtedness purchase price adjustment, and certain other post-closing adjustments. The Transactions closed on November 4, 2003. In this prospectus, we refer to this acquisition as the ‘‘Acquisition.’’ As used in this prospectus, the term ‘‘Transactions’’ means, collectively, the Acquisition and the related financings to fund the Acquisition.

We incorporated in the State of Delaware in 1928. Our principal executive offices are located at 1601 West Diehl Road, Naperville, Illinois 60563. Our main telephone number is (630) 305-1000. Our Internet address is www.nalco.com . Information contained on our website or that can be accessed through our website is not incorporated by reference in this prospectus and you should not rely on that information.

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The Notes

The summary below describes the principal terms of the notes and is not intended to be complete. Some of the terms and conditions described below are subject to important limitations and exceptions. For a more detailed description of each issue of notes, see ‘‘Description of Senior Notes’’ and ‘‘Description of Senior Subordinated Notes.’’

Issuer Nalco Company
Notes Offered $665,000,000 aggregate principal amount of 7¾% Senior Notes due 2011.
€200,000,000 aggregate principal amount of 7¾% Senior Notes due 2011.
$465,000,000 aggregate principal amount of 8 7/8% Senior Subordinated Notes due 2013.
€200,000,000 aggregate principal amount of 9 % Senior Subordinated Notes due 2013.
Maturity Date Senior Notes: November 15, 2011.
Senior Subordinated Notes: November 15, 2013.
Interest Payment Dates Interest is payable in cash on May 15 and November 15 of each year.
Guarantees Nalco Holdings and Nalco Company's direct and indirect domestic subsidiaries that guarantee its and its restricted subsidiaries' obligations under the senior credit facilities fully and unconditionally guarantee the notes on an unsecured basis. Additionally, subject to certain exceptions described in this prospectus, each of Nalco Holdings' domestic subsidiaries that guarantee any of its indebtedness or incur certain indebtedness in the future also guarantee the notes.
Ranking The senior notes are Nalco Company's senior unsecured obligations and:
rank equally in right of payment to all of Nalco Company's existing and future senior indebtedness;
rank senior in right of payment to all of Nalco Company's existing and future senior subordinated indebtedness and subordinated indebtedness; and
are effectively subordinated in right of payment to Nalco Company's secured indebtedness (including obligations under the senior credit facilities) to the extent of the value of the assets securing such indebtedness, and all obligations of each of Nalco Company's existing and future subsidiaries that are not guarantors.

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Similarly, the senior note guarantees are senior unsecured obligations of the guarantors and:
rank equally in right of payment to all of the applicable guarantor's existing and future senior indebtedness;
rank senior in right of payment to all of the applicable guarantor's existing and future senior subordinated indebtedness and subordinated indebtedness; and
are effectively subordinated in right of payment to all of the applicable guarantor's existing and future secured indebtedness (including the applicable guarantor's guarantee under the senior credit facilities), to the extent of the value of the assets securing such indebtedness, and are structurally subordinated to all obligations of any subsidiary of a guarantor if that subsidiary is not also a guarantor.
The senior subordinated notes are Nalco Company's senior subordinated unsecured obligations and:
rank junior in right of payment to all of Nalco Company's existing and future senior indebtedness (including the senior notes and obligations under the senior credit facilities);
rank equally in right of payment with all of Nalco Company's existing and future senior subordinated indebtedness;
are effectively subordinated in right of payment to all of Nalco Company's existing and future secured indebtedness (including obligations under the senior credit facilities), to the extent of the value of the assets securing such indebtedness, and are structurally subordinated to all obligations of each of Nalco Company's subsidiaries that are not guarantors; and
rank senior in right of payment to all of Nalco Company's future subordinated indebtedness.
Similarly, the senior subordinated note guarantees are senior subordinated unsecured obligations of the guarantors and:
rank junior in right of payment to all of the applicable guarantor's existing and future senior indebtedness;
rank equally in right of payment with all of the applicable guarantor's future senior subordinated indebtedness;
are effectively subordinated in right of payment to all of the applicable guarantor's existing and future secured indebtedness (including the applicable

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guarantor's guarantee under the senior credit facilities), to the extent of the value of the assets securing such indebtedness, and are structurally subordinated to all obligations of any subsidiary of a guarantor if that subsidiary is not a guarantor; and
rank senior in right of payment to all of the applicable guarantor's existing and future subordinated indebtedness.
As of March 31, 2006, Nalco Holdings and its subsidiaries had approximately $2,896.6 million of indebtedness, of which approximately $1,224.0 million was secured, $3.4 million of which was indebtedness of non-guarantor subsidiaries and structurally senior to the notes, approximately $706.9 million was subordinated to the senior notes and the senior note guarantees and approximately $2,189.7 million was senior to the senior subordinated notes and the senior subordinated note guarantees. The senior credit agreement and the indentures governing the notes contain restrictions on our ability to incur indebtedness based on, among other things, our compliance with financial tests contained in those agreements. As of March 31, 2006, the maximum amount of additional debt Nalco Holdings and its subsidiaries could have incurred in compliance with these covenants was $761.8 million. See ‘‘Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources,’’ ‘‘Description of Other Indebtedness—Senior Credit Facility,’’ ‘‘Description of Senior Notes—Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock’’ and ‘‘Description of Senior Subordinated Notes—Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock.’’
The notes are also structurally subordinated to all indebtedness and other obligations, including trade payables, of Nalco Company's non-guarantor subsidiaries. See ‘‘—Summary Historical Financial Data’’ and ‘‘Capitalization.’’
Optional Redemption Nalco Company may redeem some or all of the senior notes at any time prior to November 15, 2007 and Nalco Company may redeem some or all of the senior subordinated notes at any time prior to November 15, 2008 at a price equal to 100% of the principal amount of the notes plus a ‘‘make-whole’’ premium as set forth under ‘‘Description of Senior Notes—Optional Redemption’’ and ‘‘Description of Senior Subordinated Notes—Optional Redemption,’’ respectively.

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Additionally, Nalco Company may redeem the senior notes, in whole or in part, at any time on and after November 15, 2007 and Nalco Company may redeem the senior subordinated notes, in whole or in part, at any time on and after November 15, 2008 at the redemption prices set forth under ‘‘Description of Senior Notes—Optional Redemption’’ and ‘‘Description of Senior Subordinated Notes—Optional Redemption,’’ respectively.
Nalco Company may redeem up to 35% of each of the senior notes and the senior subordinated notes on or prior to November 15, 2006 from the proceeds of certain equity offerings at 107.75 % of the principal amount of the dollar senior notes, in the case of a redemption of the dollar senior notes, 107.75% of the principal amount of the euro senior notes, in the case of a redemption of the euro senior notes, 108.875% of the principal amount of the dollar senior subordinated notes, in the case of a redemption of the dollar senior subordinated notes, and 109 % of the principal amount of the euro senior subordinated notes, in the case of a redemption of the euro senior subordinated notes, in each case plus accrued and unpaid interest, if any, to the date of redemption. Nalco Company may make that redemption only if, after the redemption, at least 65% of the aggregate principal amount of the applicable series of notes originally issued remains outstanding and the redemption occurs within 90 days of the date of the equity offering. See ‘‘Description of Senior Notes— Optional Redemption’’ and ‘‘Description of Senior Subordinated Notes—Optional Redemption,’’ respectively.
Change of Control Offer Upon the occurrence of a change of control, the noteholders may require Nalco Company to repurchase some or all of your notes at 101% of their principal amount, plus accrued and unpaid interest, if any, to the repurchase date. We may not have sufficient funds to repurchase the notes upon the occurrence of a change in control. See ‘‘Description of Senior Notes—Change of Control’’ and ‘‘Description of Senior Subordinated Notes—Change of Control.’’
Certain Covenants The indentures governing the notes contain covenants limiting, among other things, Nalco Holdings' ability and the ability of its restricted subsidiaries (including, without limitation, Nalco Company) to:
incur additional indebtedness;
pay dividends on or make other distributions or repurchase Nalco Holdings' capital stock;
make certain investments;
enter into certain types of transactions with affiliates;

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limit dividends or other payments by its restricted subsidiaries to Nalco Holdings;
use assets as security in other transactions; and
sell certain assets or merge with or into other companies.
These covenants are subject to important exceptions and qualifications. See ‘‘Description of Senior Notes’’ and ‘‘Description of Senior Subordinated Notes.’’
Listing The euro notes are listed on the Luxembourg Stock Exchange.

Risk Factors

You should carefully consider all the information in this prospectus before deciding whether to invest in the notes. In particular, we urge you to consider carefully the factors set forth under the heading ‘‘Risk Factors.’’

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Summary Historical Financial Data

The financial statements referred to as the Successor financial statements include the consolidated audited financial statements of Nalco Holdings LLC and its subsidiaries and the unaudited consolidated financial statements of Nalco Holdings LLC and its subsidiaries.

The financial statements referred to as the Predecessor financial statements include the combined financial statements of Ondeo Nalco Group which include the consolidated financial statements of Ondeo Nalco Company and the combined financial statements of the Nalco International SAS Subsidiaries.

The following summary historical financial data has been derived from the unaudited consolidated financial statements of Nalco Holdings LLC and its subsidiaries as of and for the three months ended March 31, 2006 and 2005 and the audited consolidated and combined financial statements of Nalco Holdings LLC and its subsidiaries as of December 31, 2005, 2004 and 2003 and for the periods from January 1, 2005 to December 31, 2005, January 1, 2004 to December 31, 2004, November 4, 2003 to December 31, 2003, and January 1, 2003 to November 3, 2003, that (other than in the case of the audited consolidated financial statements as of December 31, 2003 and the unaudited consolidated financial statements as of March 31, 2005) are included elsewhere in this prospectus.

You should read the following data in conjunction with ‘‘Management's Discussion and Analysis of Financial Condition and Results of Operations’’ and the consolidated and combined financial statements included elsewhere in this prospectus.

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  Successor Predecessor
(dollars in millions) Three months
ended
March 31,
Year ended
December 31,
November 4,
2003 through
December 31,
2003
January 1,
2003 through
November 3,
2003
  2006 2005 2005 2004
Statement of Operations Data:  
Net sales $ 849.4
$ 777.6
$ 3,312.4
$ 3,033.3
$ 460.1
$ 2,306.5
Operating costs and expenses:  
 
 
 
Costs of product sold 471.1
412.8
1,830.7
1,578.4
249.9
1,122.9
Selling, administrative, and research expenses 275.4
258.1
1,030.2
1,039.1
174.7
892.4
Impairment of goodwill (1)
244.4
Amortization of intangible assets (1) 17.3
20.6
81.6
96.3
15.4
68.9
In-process research and development
122.3
Business optimization expenses (2) 3.8
0.8
25.6
1.7
0.8
20.3
Operating costs and expenses 767.6
692.3
2,968.1
2,837.8
440.8
2,348.9
Operating earnings (loss) 81.8
85.3
344.3
195.5
19.3
(42.4
)
Other income (expense), net (3) 1.3
(2.2
)
4.0
(43.3
)
(2.8
)
(17.3
)
Interest income 1.7
2.1
8.5
10.1
0.6
7.1
Interest expense (58.5
)
(54.9
)
(228.6
)
(213.2
)
(49.6
)
(32.7
)
Earnings (loss) before income taxes and minority interests 26.3
30.3
128.2
(50.9
)
(32.5
)
(85.3
)
Income tax provision (benefit) 11.0
13.0
54.3
47.5
(8.3
)
68.7
Minority interests (1.7
)
(1.2
)
(5.7
)
(5.8
)
0.1
(4.2
)
Net earnings (loss) $ 13.6
$ 16.1
$ 68.2
$ (104.2
)
$ (24.1
)
$ (158.2
)
Statement of Cash Flows Data:  
 
 
 
 
 
Net cash provided by (used for):  
 
 
 
 
 
Operating activities $ 58.9
$ 16.9
$ 201.8
$ 237.2
$ 88.7
$ 144.4
Investing activities (15.0
)
(17.1
)
(77.7
)
(72.9
)
(4,145.1
)
(12.3
)
Financing activities (32.3
)
1.9
(125.9
)
(231.9
)
4,130.3
(234.2
)
Other Financial Data (unaudited)  
 
 
 
 
 
EBITDA (4) $ 131.1
$ 135.7
$ 557.5
$ 357.0
$ 54.5
$ 106.8
Non-cash charges included in EBITDA (5) 9.5
10.1
19.8
174.4
23.9
268.7
Unusual items included in EBITDA (6) 0.6
0.7
6.4
45.9
6.3
48.5
Capital expenditures, net (7) 14.6
12.3
74.6
91.8
15.6
85.6
Depreciation 32.4
33.2
133.3
114.3
22.5
101.8
Amortization 17.3
20.6
81.6
96.3
15.4
68.9
Ratio of earnings to fixed charges (8) 1.4
x
1.5
x
1.5
x

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  Successor
  As of March 31, As of December 31,
(dollars in millions) 2006 2005 2005 2004 2003
Balance Sheet Data:  
Cash and cash equivalents $ 42.8
$ 34.4
$ 30.8
$ 33.2
$ 100.0
Working capital (9) 501.0
488.7
498.1
424.2
398.7
Property, plant and equipment, net (10) 742.7
815.9
755.3
847.3
865.6
Total assets 5,562.2
5,858.1
5,554.2
5,933.7
6,163.8
Total debt (including lease obligation and current portion of long-term debt) (10) 2,896.6
3,095.6
2,913.3
3,118.3
3,314.7
Total unitholder's equity 1,067.2
1,013.2
1,033.2
1,017.7
1,069.0
(1) The Predecessor adopted Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets , as of January 1, 2002. Under SFAS No. 142, goodwill and intangible assets deemed to have indefinite lives are no longer amortized but are subject to annual impairment tests. In the period from January 1, 2003 through November 3, 2003, the Predecessor took a goodwill impairment charge of $244.4 million based on the price paid in the Acquisition.
(2) The Successor incurred business optimization expenses in connection with its programs to redesign and optimize its business and work processes. The Predecessor incurred significant business optimization expenses as a result of the global integration of the Nalco/Exxon Energy Chemicals, L.P. (Nalco/Exxon) joint venture and the implementation of global cost reduction programs in the sales, marketing, manufacturing and support services operations. The costs incurred include severance, asset write-offs, facility closing costs and other items. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations — Business Optimization Expenses.’’
(3) Other income (expense), net consists of monitoring fees paid by the Successor to affiliates of the Sponsors, management fees paid by the Predecessor to Suez, capital gains/(losses) on the disposals of assets, franchise taxes, equity earnings of unconsolidated subsidiaries, recognized gains and losses on foreign currency transactions and other miscellaneous income (expense). Also included for the year ended December 31, 2004 was a $35.0 million charge for the termination of the Monitoring Fee Agreement with affiliates of the Sponsors.
(4) EBITDA, a measure used by management to measure operating performance, is defined as net earnings plus interest, taxes, depreciation and amortization. EBITDA is reconciled to net earnings (loss) in the following table. Our management believes EBITDA is useful to the investors because it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. EBITDA is not a recognized term under U.S. GAAP and does not purport to be an alternative to net earnings (loss) as an indicator of operating performance or to cash flows from operating activities as a measure of liquidity. Because not all companies use identical calculations, this presentation of EBITDA may not be comparable to other similarly titled measures of other companies. Additionally, EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements. The amounts shown for EBITDA as presented herein differ from the amounts calculated under the definition of EBITDA used in our debt instruments. The definition of EBITDA used in our debt instruments is further adjusted for certain cash and non-cash charges and is used to determine compliance with financial covenants and our ability to engage in certain activities such as incurring additional debt and making certain payments.

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The following is a reconciliation of net earnings (loss) to EBITDA:

  Successor Predecessor
(dollars in millions) Three months
ended March 31,
Year ended
December 31,
November 4,
2003 through
December 31,
2003
January 1,
2003 through
November 3,
2003
2006 2005 2005 2004
Net earnings (loss) $ 13.6
$ 16.1
$ 68.2
$ (104.2
)
$ (24.1
)
$ (158.2
)
Interest expense, net 56.8
52.8
220.1
203.1
49.0
25.6
Income tax provision (benefit) 11.0
13.0
54.3
47.5
(8.3
)
68.7
Depreciation 32.4
33.2
133.3
114.3
22.5
101.8
Amortization of intangible assets 17.3
20.6
81.6
96.3
15.4
68.9
EBITDA $ 131.1
$ 135.7
$ 557.5
$ 357.0
$ 54.5
$ 106.8
(5) EBITDA, as defined above, was reduced by the following non-cash charges, each of which is further discussed below:

  Successor Predecessor
(dollars in millions) Three months
ended March 31,
Year ended
December 31,
November 4,
2003 through
December 31,
2003
January 1,
2003 through
November 3,
2003
2006 2005 2005 2004
Impairment of goodwill $
$
$
$
$
$ 244.4
In-process research and development
122.3
Inventory step-up
14.6
21.2
Asset write-offs 0.9
2.4
2.8
1.1
4.2
Profit sharing and 401(k) expense funded by Suez 5.4
5.6
13.2
27.8
4.0
20.0
Other 3.2
2.1
3.8
8.6
(1.3
)
0.1
  $ 9.5
$ 10.1
$ 19.8
$ 174.4
$ 23.9
$ 268.7
For additional information relating to these line items, see note (6) to ‘‘Selected Historical Financial Data.’’
(6)  In addition to incurring non-cash charges and business optimization expenses, our EBITDA was impacted by the following unusual (income) expenses, each of which is further discussed below:

  Successor Predecessor
(dollars in millions) Three months
ended March 31,
Year ended
December 31,
November 4,
2003 through
December 31,
2003
January 1,
2003 through
November 3,
2003
2006 2005 2005 2004
Pension and OPEB settlement and curtailment $0.3 $
$ 0.5
$ 0.1
$(0.1) $7.9
Loss (gain) on sales, net of expenses 0.1 0.5
4.1
0.2
1.1 12.4
Other unusual items 0.2 0.2
1.8
45.6
5.3 25.7
Suez management fees, net
2.5
  $0.6 $ 0.7
$ 6.4
$ 45.9
$6.3 $48.5

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For additional information relating to these line items, see note (7) to ‘‘Selected Historical Financial Data.’’
(7)  Capital expenditures are net of proceeds from disposal of assets.
(8)  For purposes of calculating the ratio of earnings to fixed charges, earnings represents earnings from continuing operations before income taxes, less income from equity method investments and capitalized interest, plus minority interest expense, income distributions from equity method investments, amortization of capitalized interest and fixed charges. Fixed charges include interest expense (including amortization of debt issuance costs), capitalized interest, and the portion of operating rental expense which management believes is representative of the interest component of rent expense. Earnings were insufficient to cover fixed charges by $87.1 million and $32.9 million in the period from January 1, 2003 through November 3, 2003 and the period from November 4, 2003 through December 31, 2003, respectively, as a result of a $244.4 million goodwill impairment charge and increase in interest expense as a result of the Transactions. Earnings were insufficient to cover fixed charges by $48.1 million in the year ended December 31, 2004, primarily due to the $122.3 million charge for in-process research and development and the $14.6 million charge for inventory step-up.
(9)  Working capital is defined as current assets (excluding cash and cash equivalents) less current liabilities (excluding short-term debt and current portion of long-term debt) and excluding intercompany balances calculated as follows:

  Successor
  As of March 31, As of December 31,
(dollars in millions) 2006 2005 2005 2004 2003
Current assets less current liabilities $ 508.2
$ 497.7
$ 506.3
$ 439.7
$ 446.8
Less cash and cash equivalents (42.8
)
(34.4
)
(30.8
)
(33.2
)
(100.0
)
Plus short-term debt 35.6
25.4
22.6
17.7
51.9
Working capital as defined $ 501.0
$ 488.7
$ 498.1
$ 424.2
$ 398.7
(10)  As a result of the Acquisition, the Successor engaged independent appraisers to assist in determining the fair value of property, plant and equipment in connection with our allocation of purchase price. Preliminary and final valuations from the appraisers are included in the balances at December 31, 2003 and 2004, respectively. In December 2002, Ondeo Nalco Company entered into a sale-leaseback of its Naperville, Illinois headquarters and research facility that was treated as a financing lease for accounting purposes. Concurrent with the Acquisition, on November 4, 2003, the lease was assigned to another Suez subsidiary that subleased the property to the Successor. The Successor accounts for the sublease as an operating lease and has excluded the headquarters and research facility from property, plant and equipment.

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RISK FACTORS

You should carefully consider the risks described below, together with the other information in this prospectus, before deciding whether to invest in the notes. If any of the events described in the risk factors below actually occur, our business, financial condition, operating results and prospects could be materially adversely affected, which in turn could adversely affect our ability to repay the notes. In such case, you may lose all or part of your original investment.

Risks Related To Our Leverage

  Our substantial leverage could harm our business by limiting our available cash and our access to additional capital.

As a result of the Transactions and the note offerings, we are a highly leveraged company. As of March 31, 2006, our total consolidated indebtedness was $2,896.6 million and we had $250.0 million of borrowing capacity available under our revolving credit facility (excluding $27.2 million of outstanding standby letters of credit).

Our high degree of leverage could have important consequences for you, including the following:

•  It may limit our and our subsidiaries' ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions and general corporate or other purposes on favorable terms or at all;
•  A substantial portion of our subsidiaries' cash flows from operations must be dedicated to the payment of principal and interest on their and our indebtedness and thus will not be available for other purposes, including operations, capital expenditures and future business opportunities;
•  The debt service requirements of our subsidiaries' other indebtedness could make it more difficult for us and them to make payments on the notes and their existing indebtedness;
•  It may limit our ability to adjust to changing market conditions and place us at a competitive disadvantage compared to those of our competitors that are less highly-leveraged;
•  It may restrict our ability to make strategic acquisitions or cause us to make non-strategic divestitures; and
•  We may be more vulnerable than a less leveraged company to a downturn in general economic conditions or in our business, or we may be unable to carry out capital spending that is important to our growth.

At March 31, 2006, we had $1,251.8 million of variable rate debt. A 1% increase in the average interest rate would increase future interest expense by approximately $12.5 million per year.

  Our and our subsidiaries' debt agreements contain restrictions that limit our flexibility in operating our business.

Nalco Company's senior credit agreement and the indentures under which the notes were issued and other financing arrangements contain a number of significant covenants that, among other things, restrict our or our subsidiaries' ability to:

•  incur additional indebtedness;
•  pay dividends on or make other distributions or repurchase certain capital stock;
•  make certain investments;
•  enter into certain types of transactions with our affiliates;
•  limit dividends or other payments by restricted subsidiaries;
•  use assets as security in other transactions; and

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•  sell certain assets or merge with or into other companies.

In addition, under the senior credit agreement, Nalco Holdings is required to satisfy and maintain specified financial ratios and tests. Events beyond our control may affect its ability to comply with those provisions and Nalco Holdings may not be able to meet those ratios and tests. The breach of any of these covenants would result in a default under the senior credit agreement and the lenders could elect to declare all amounts borrowed under the senior credit agreement, together with accrued interest, to be due and payable and could proceed against the collateral securing that indebtedness. Borrowings under the senior credit facilities are effectively senior in right of payment to the senior notes and the senior subordinated notes to the extent of the value of the collateral securing the senior credit facilities and are senior in right of payment to the senior subordinated notes. If any of our indebtedness were to be accelerated, our assets may not be sufficient to repay in full that indebtedness and the notes.

  Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

Certain of our borrowings, primarily borrowings under our senior credit facilities, are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net earnings and cash available for servicing our indebtedness, including the notes, would decrease. At March 31, 2006, we had $1,251.8 million of variable rate debt. A 1% increase in the average interest rate would increase future interest expense by approximately $12.5 million per year.

Risks Related to Our Business

  If we are unable to respond to the changing needs of a particular industry and to anticipate, respond to or utilize changing technologies and develop new offerings , it could become more difficult for us to respond to our customers' needs and cause us to be less competitive.

We have historically been able to maintain our market positions and margins through continuous innovation of products and development of new offerings to create value for our customers. Recent innovations and development that we have relied on include our 3D TRASAR system for controlling and monitoring chemical feed and our relationship with US Filter, which permits us to sell equipment solutions as part of a bundled offering to our water treatment customers. We may not be successful in continuing to make similar innovations in the future. Our future operating results will depend to a significant extent on our ability to continue to introduce new products and applications and to develop new offerings that offer distinct value for our customers. Many of our products may be affected by rapid technological change and new product introductions and enhancements. We expect to continue to enhance our existing products and identify, develop and manufacture new products with improved capabilities and make improvements in our productivity in order to maintain our competitive position. We intend to devote sizeable resources to the development of new technologically advanced products and systems and to continue to devote a substantial amount of expenditures to the research and development functions of our business. However, we cannot assure you that:

•  we will be successful in developing new products or systems or bringing them to market in a timely manner;
•  products or technologies developed by others will not render our offerings obsolete or non-competitive;
•  the market will accept our innovations;
•  our competitors will not be able to produce our core non-patented products at a lower cost;
•  we will have sufficient resources to research and develop all promising new technologies and products; or

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•  significant research and development efforts and expenditures for products will ultimately prove successful.

Our ability to anticipate, respond to and utilize changing technologies is crucial because we compete with many companies in each of the markets in which we operate. For example, we compete with hundreds of companies in the water treatment chemicals market, including our largest global competitor, GE Water Technologies. Other companies, including Ecolab, Inc. are expected to enter or increase their presence in our markets. Our ability to compete effectively is based on a number of considerations, such as product and service innovation, product and service quality, distribution capability and price. Moreover, water treatment for industrial customers depends on the particular needs of the industry. For example, the paper industry requires a specific water quality for bleaching paper; certain industrial boilers require demineralized water; the pharmaceuticals industry requires ultra pure water for processing; and, in the case of municipal services, water treatment includes clarification for re-use, sludge dewatering and membrane ultra filtration. We may not have sufficient financial resources to respond to the changing needs of a particular industry and to continue to make investments in our business, which could cause us to become less competitive.

  Our significant non-U.S. operations expose us to global economic and political changes that could impact our profitability.

We have significant operations outside the United States, including joint ventures and other alliances. We conduct business in approximately 130 countries and in 2005, approximately 55% of our net sales originated outside the United States. There are inherent risks in our international operations, including: