SEVERANCE AGREEMENT

AGREEMENT effective as of July 1, 2005 between Nalco Company (the “Company”) and
Gregory N. Nelson (“Executive”).

WHEREAS, Executive is currently a valued employee of the Company;

WHEREAS, Executive has been offered the opportunity to enter into certain equity
and option agreements relating to the Company; and

WHEREAS, the Company desires to promote the continued good performance of
Executive by offering this Severance Agreement; and

WHEREAS, the parties desire to enter into this Agreement;

NOW, THEREFORE, in consideration of the premises and mutual covenants herein and
for other good and valuable consideration, the parties agree as follows:

1. Definitions. For purposes of this Agreement, the following terms shall have
the meanings indicated.

“BASE SALARY” means Executive’s annual base salary immediately prior to the
Severance;

“CAUSE” means (i) Executive’s conviction of, plea of nolo contendere or guilty
to, or written admission of, the commission of a felony, (ii) any act by
Executive involving moral turpitude, fraud or misrepresentation with respect to
his duties for the Company, or (iii) gross negligence, willful misconduct, or an
unjustified refusal on the part of Executive to perform his duties as an
employee, officer or member of the Company.

“CHANGE OF CONTROL” is an occurrence on which either (i) the Company ceases, for
any reason, to be a member of the same controlled group as Parent within the
meaning of Section 414(b) and (c) of the Code, except that a 50% ownership test
shall be applied in lieu of the 80% ownership test specified in each of the
foregoing Sections of the Code (the “PARENT CONTROLLED GROUP”), or (ii) all or
at least 80% of the assets of the Company and its majority owned (by voting
control) entities are sold to an entity outside the Parent Controlled Group.

“CODE” means the Internal Revenue Code of 1986, as amended.

“COMPANY” means Nalco Company and any successor (whether direct or indirect) to
all or substantially all of the stock, assets or business of Nalco Company.

“EQUITY AGREEMENTS” means those Agreements executed simultaneously with this
Agreement pursuant to which Executive is purchasing certain Units and

 

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restricted Units in Nalco LLC.

“GAINS” means any gains which Executive receives on any Units which are the
subject of the Equity Agreement, as a result of a Company purchase of such Units
at the time Executive’s employment with the Company terminates.

“GOOD REASON” means the occurrence of any of the following events without
Executive’s written consent, (i) a reduction by the Company in Executive’s
annual base salary, or (ii) a material reduction by the Company in Executive’s
duties and responsibilities, or the assignment to Executive of duties that are
inconsistent, in a material respect, with the scope of duties and
responsibilities associated with Executive immediately prior to the Change of
Control.

“TARGET BONUS” means, with respect to any fiscal year of the Company, the target
annual bonus, assuming achievement of 100% of target, under the applicable
Company annual incentive plan, (currently known as the Management Incentive
Plan) for Executive for such year, but shall exclude any bonus payable under the
Long Term Cash Incentive Plan or its equivalent.

“PARENT” means Nalco Holdings LLC.

2. Term of Agreement. This Agreement shall be in effect from the date hereof
until December 31, 2008 (the “Term”); provided, however, that if a Change in
Control shall occur prior to December 31, 2008, the Term shall then continue
until the second anniversary of such Change of Control or December 31, 2008,
whichever is longer. Notwithstanding the foregoing, Executive’s employment at
all times shall be deemed to be an employment at-will and Executive’s employment
may be terminated at will by Executive or the Company.

3. Severance.

(a) Termination Without Cause by the Company; by Executive for Good Reason. If
Executive’s employment with the Company is terminated during the Term by the
Company without Cause or by Executive for Good Reason, in lieu of any other
severance benefits to which Executive would be entitled under either any other
plan or program of the Company or an existing employment or severance agreement
with the Company, Executive shall be entitled to the following benefits.

(i) The Company shall pay Executive, within thirty days of the date of such
termination of employment (the “DATE OF TERMINATION”) in a lump sum payment A)
accrued unpaid Base Salary through the Date of Termination, B) any prior year
bonus earned but not paid, C) severance equal to one and one-half (1.5) times
Base Salary and Target Bonus. The Company shall also pay a pro-rata portion of
any Management Incentive Bonus for the year of termination based on the portion
of the year elapsed through the date of termination, any such Management
Incentive Bonus being paid in accordance with the Company’s normal cycle for
such payment. This lump sum shall be reduced by the amount of any Gains (but in
no event less than zero), even if such Gains are to be paid by the Company after
the date the payment is required hereunder.

(ii) Except as otherwise indicated herein, Executive

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shall receive any other benefits they are otherwise eligible for under other
plans or programs of the Company in accordance with their terms. Executive shall
have the right to continue medical or dental benefits for a period equal to the
severance pay period at the active employee rate. For clarity, the severance pay
period shall equal the number of year(s) used to calculate the payment under
Section 3(a)(i)(D).

(iii) Other than the benefits set forth in this Section 3(a), the Company and
its affiliates will have no further obligations hereunder with respect to
Executive following the Date of Termination.

(iv) Executive shall not be required to mitigate damages or the amount of any
payment provided for under this Agreement by seeking other employment or
otherwise, nor will any payments hereunder be subject to offset in respect of
any claims which the Company may have against Executive, nor, shall the amount
of any payment or benefit provided for in this Section 3 be reduced by any
compensation earned as a result of Executive’s employment with another employer.

(b) Any Other Termination. If Executive’s employment is terminated during the
Term of this Agreement for any reason other than as set forth in Section 3(a),
neither Executive nor his estate shall be entitled to any severance payments or
insurance benefits under this Agreement.

(c) Covenants and Release. As a condition precedent to payment under this
Agreement or payment of severance or grant of any other benefit hereunder,
Executive must comply with, and continue to comply with, the Covenants and Terms
attached hereto as Exhibit A, and sign and deliver a release to the Company
within one week after the termination of Executive’s employment in a form
substantially in the form of General Release, attached hereto as Exhibit B.

4. Termination of Other Benefits and Agreements

(a) The parties mutually terminate, and Executive hereby waives and releases any
and all claims he or she has, either existing or to be earned in the future
relating to, any existing agreement Executive has with the Company or any of its
affiliates, relating to severance, change-in-control, supplemental retirement
benefits, letter of credit or pension benefits other than those available
through the standard Nalco pension plans and the benefits granted to Executive
under the Stock Option Agreement executed by Executive and the Conmpany
contemporaneously with this Agreement.

5. Miscellaneous.

(a) Governing Law. This Agreement shall be governed by and

 

 

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construed in accordance with the laws of Illinois without reference to the
principles of conflict of laws.

(b) Entire Agreement/Amendments. This Agreement contains the entire
understanding of the parties with respect to the severance payable to Executive
in the event of a termination of employment. There are no restrictions,
agreements, promises, warranties, covenants or undertakings between the parties
with respect to the subject matter herein other than those expressly set forth
herein. This Agreement may not be altered, modified, or amended except by
written instrument signed by the parties hereto.

(c) No Waiver. The failure of a party to insist upon strict adherence to any
term of this Agreement on any occasion shall not be considered a waiver of such
party’s rights or deprive such party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.

(d) Severability. If any one or more of the provisions of this Agreement shall
be or become invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not be affected thereby.

(e) Assignment. This Agreement shall not be assignable by Executive and shall be
assignable by the Company only with the consent of Executive; provided, however,
that the Company shall require any successor to substantially all of the stock,
assets or business of the Company to assume this Agreement.

(f) Successors; Binding Agreement. This Agreement shall inure to the benefit of
and be binding upon the personal or legal representatives, executors,
administrators, successors, including successors to all or substantially all of
the stock, business and/or assets of the Company, heirs, distributees, devisees
and legatees of the parties.

(g) Notice. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the execution page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the Board
of Directors of the Company with a copy to the Secretary of the Company, or to
such other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.

(h) Withholding Taxes. The Company may withhold from any amounts payable under
this Agreement such U.S. federal, state and local taxes as may be required to be
withheld pursuant to any applicable law or regulation.

(i) Counterparts. This Agreement may be signed in counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument.

 

 

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(k) Resignations. Executive agrees to immediately resign any positions held by
him with the Company and its affiliates upon the termination of Executive’s
employment.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.

 

 

 

NALCO COMPANY

 

By: 

/s/ Stephen N. Landsman

 

 

 

Name: Stephen N. Landsman
Title: Vice President

 

 

 

 

Dated: July 1, 2005

 

Executive

     

 

By: 

/s/Gregory N. Nelson

 

 

 

 

 

 

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