<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
THE CLOROX COMPANY
- ------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- ------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:*
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state how
it was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
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<PAGE>
[LOGO]
THE CLOROX COMPANY
---------
NOTICE OF ANNUAL MEETING
AND
PROXY STATEMENT
-------------
ANNUAL MEETING OF
SHAREHOLDERS
NOVEMBER 16, 1994
<PAGE>
[LOGO]
THE CLOROX COMPANY
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 16, 1994
The Annual Meeting of Stockholders of The Clorox Company, a Delaware
corporation (the "Company"), will be held at 9:00 A.M. on Wednesday, November
16, 1994, at the offices of the Company, 1221 Broadway, Oakland, California, for
the following purposes:
1. To elect a board of thirteen directors to hold office until the next
annual election of directors;
2. To ratify the appointment of Deloitte & Touche LLP as independent
auditors for the fiscal year ending June 30, 1995; and
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The board of directors has fixed the close of business on September 19, 1994
as the record date for determining the stockholders entitled to notice of, and
to vote at, the meeting and any adjournment thereof. A list of such stockholders
will be available at the time and place of the meeting and, during the ten days
prior to the meeting, at the office of the Secretary of the Company at 1221
Broadway, Oakland, California.
A copy of the Company's Annual Report for the fiscal year ended June 30,
1994, containing financial statements, is included with this mailing.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THIS MEETING. EVEN IF YOU
PLAN TO ATTEND THE MEETING, WE HOPE THAT YOU WILL PROMPTLY MARK, SIGN, DATE AND
RETURN THE ENCLOSED TWO-SIDED PROXY IN THE ENCLOSED ENVELOPE. THIS WILL NOT
LIMIT YOUR RIGHT TO ATTEND OR VOTE AT THE MEETING.
By Order of the Board of Directors
Edward A. Cutter,
SENIOR VICE PRESIDENT -- GENERAL
COUNSEL
AND SECRETARY
September 28, 1994
<PAGE>
THE CLOROX COMPANY
1221 BROADWAY
OAKLAND, CALIFORNIA 94612
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation of proxies
by the board of directors of The Clorox Company, a Delaware corporation (the
"Company"), for use at the Annual Meeting of Stockholders of the Company, to be
held at 9:00 A.M. on November 16, 1994 at the above offices of the Company (the
"Annual Meeting").
THE PROXY
A stockholder giving the enclosed proxy may revoke it at any time before it is
used by giving written notice of revocation to the Secretary of the Company or
by voting in person at the Annual Meeting.
VOTING AT THE ANNUAL MEETING
The only voting securities of the Company are its shares of common stock $1.00
par value (the "Common Stock"), of which 53,445,159 were outstanding and
entitled to vote at the close of business on September 19, 1994. Only
stockholders of record at the close of business on September 19, 1994 are
entitled to vote at the Annual Meeting. The holders of the Common Stock are
entitled to one vote per share on each matter submitted to a vote of
stockholders.
The holders of a majority of the issued and outstanding Common Stock, present in
person or by proxy, will constitute a quorum for the transaction of business at
the Annual Meeting or any adjournment thereof. Abstentions are counted as shares
that are present and entitled to vote for purposes of determining the presence
of a quorum. Abstentions are not counted as votes cast on the proposed election
of directors, but will have the same legal effect as a vote against the
ratification of the appointment of independent auditors. Broker non-votes are
not counted as votes cast on any matter to which they relate.
This proxy statement and the accompanying proxy are first being sent or given to
stockholders on or about September 28, 1994.
NOMINEES FOR ELECTION AS DIRECTORS
At the Annual Meeting, thirteen persons will be elected as members of the board
of directors, each for a one-year term. The Nominating Committee of the board of
directors has nominated the thirteen persons listed below for election at the
Annual Meeting. All of such nominees were elected at the Company's Annual
Meeting of Stockholders held on November 17, 1993.
The proxies given to the proxyholders will be voted or not voted as directed
thereon and, if no direction is given, will be voted FOR these thirteen
nominees. The board of directors knows of no reason why any of these nominees
should be unable or unwilling to serve. However, if for any reason any nominee
should be unable or unwilling to serve, the proxies will be voted for the
election of such other person to the office of director as the board of
directors may nominate in the place of such nominee.
Certain information with respect to each nominee appears on the following pages,
including age, period or periods served as a director, position (if any) with
the Company, business experience during at least the past five years and
directorships of other publicly-owned corporations.
1
<PAGE>
<TABLE>
<CAPTION>
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NAME, PRINCIPAL OCCUPATION DIRECTOR
AND OTHER INFORMATION SINCE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
WILLIAM F. AUSFAHL Group Vice President and Chief Financial 1984
Officer of the Company.
Mr. Ausfahl is the senior executive officer responsible for
the financial activities of the Company, which include
controllership, treasury, tax and audit, and for investor
relations and public affairs. He joined the Company in
December 1982, and became Group Vice President and Chief
Financial Officer in January 1983. Age: 54
[PHOTO]
- ---------------------------------------------------------------------------------
DANIEL BOGGAN, JR. Vice Chancellor, Business and
Administrative Services, University of California at 1990
Berkeley.
Mr. Boggan has been Vice Chancellor for business and
administrative services at the University of California at
Berkeley since 1986. He recently resigned from that position
effective October 14, 1994, and he will thereafter be the
Group Executive Director for Education Services for the
National Collegiate Athletic Association. Previously, he was
the
City Manager for the City of Berkeley, California, and the [PHOTO]
Chief Administrator for Essex County, New Jersey. Age: 48
- ---------------------------------------------------------------------------------
JOHN W. COLLINS Former President and Chief Operating Officer 1993
of the Company.
Mr. Collins was President and Chief Operating Officer of the
Company from March 1986 through December 1989. He was also a
director of the Company from March 1986 through October 1989.
Beginning January 1990, he was on a paid leave of absence
which extended until his retirement on December 31, 1993. He
was not active in the Compa-
ny's affairs from January 1990 until his reelection to the [PHOTO]
board of directors in January 1993. Age: 63
- ---------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
NAME, PRINCIPAL OCCUPATION DIRECTOR
AND OTHER INFORMATION SINCE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
URSULA FAIRCHILD Professional Photographer. 1976
Mrs. Fairchild is a professional photographer, as well as a
member of the Supervisory Board of Henkel KGaA, Duesseldorf,
Germany (manufacturer of household products and chemicals).
She is a member of the Henkel family which controls Henkel
KGaA and is nominated pursuant to an understanding between
the Company and Henkel KGaA (see
Beneficial Ownership of Voting Securities, page 9 below). [PHOTO]
Age: 63
- ---------------------------------------------------------------------------------
JOCHEN KRAUTTER Member of the Executive Board, Henkel KGaA. 1992
Dr. Krautter is a member of the Executive Board of Henkel
KGaA, Duesseldorf, Germany (manufacturer of household
products and chemicals). He joined Henkel KGaA in 1973 and
held several management positions before assuming
responsibility for that company's metal chemicals business
and information systems. Dr. Krautter is nominated
pursuant to an understanding between the Company and Henkel
KGaA (see Beneficial Ownership of Voting Securities, page 9 [PHOTO]
below). Age: 51
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JUERGEN MANCHOT Vice-Chairman of the Shareholders' Commit- 1989
tee, Henkel KGaA.
Mr. Manchot is the Vice-Chairman of the Shareholders'
Committee of Henkel KGaA, Duesseldorf, Germany (manufacturer
of household products and chemicals). He is a member of the
Henkel family which controls Henkel KGaA and is nominated
pursuant to an understanding between the Company and Henkel
KGaA (see Beneficial Ownership of
Voting Securities, page 9 below). Dr. Manchot is a director
of Loctite Corp. and Transaction Network Services Inc. Age: [PHOTO]
57
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</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
NAME, PRINCIPAL OCCUPATION DIRECTOR
AND OTHER INFORMATION SINCE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
DEAN O. MORTON Retired Executive Vice President and Chief 1991
Operating Officer, Hewlett-Packard Company.
Mr. Morton was the Executive Vice President and the Chief
Operating Officer of Hewlett-Packard Company (manufacturer of
electronics) until his retirement in 1993. Mr. Morton is a
director of ALZA Corporation, Raychem Corporation, Tencor
Instruments, Centigram Communications Corporation and Kaiser
Foundation Health Plan and
Hospitals. He is a trustee of the State Street Group of
Funds, the MetLife-State Street Group of Mutual Funds and [PHOTO]
Director of the Metropolitan Series Funds, Inc. and MetLife
Portfolios, Inc. Age: 62.
- ---------------------------------------------------------------------------------
EDWARD L. SCARFF Former Chairman of the Board and Chief Exec- 1986
utive Officer, Arcata Corporation.
Mr. Scarff has been a private investor for more than five
years. From 1983 through June 1994, he was Chairman of the
Board and Chief Executive Officer of Arcata Corporation
(commercial printer and manufacturer of redwood lumber). Age:
63
[PHOTO]
- ---------------------------------------------------------------------------------
LARY R. SCOTT Chairman and Chief Executive Officer of the 1989
Carolina Freight Corporation.
Mr. Scott is Chairman and Chief Executive Officer of the
Carolina Freight Corporation (highway transportation
company), having been elected to those positions in 1994 and
1993, respectively. Previously, he had been President of
Alexis Consulting, a transportation consulting firm. From
1985 to 1990, Mr. Scott was President and Chief Executive
Officer of Consolidated Freightways, Inc., a worldwide
transportation company. Mr. Scott is a director of The [PHOTO]
Mayflower Transportation Group, Inc. and the Carolina Freight
Corporation. Age: 58
- ---------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
NAME, PRINCIPAL OCCUPATION DIRECTOR
AND OTHER INFORMATION SINCE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
FORREST N. SHUMWAY Retired Vice Chairman of the Board, 1985
Allied-Signal Inc.
Mr. Shumway is the retired Vice Chairman of the Board of
Allied-Signal Inc. (manufacturer of products in the
aerospace, aviation, chemical and energy industries).
Previously, he was Chief Executive Officer (1968-1985) and
Chairman of the Board (1980-1985) of The Signal Companies,
Inc. until its merger into Allied-Signal Inc. Mr. Shumway is
a director of Aluminum Company of America, American President
Companies, Ltd., First Interstate Bancorp and Transamerica [PHOTO]
Corporation. Age: 67
- ---------------------------------------------------------------------------------
G. CRAIG SULLIVAN Chairman of the Board and Chief Executive 1992
Officer of the Company.
Mr. Sullivan has been Chairman of the Board and Chief
Executive Officer of the Company since July 1, 1992.
Previously, he was Vice Chairman and Chief Executive Officer
(May-June, 1992); Group Vice President (1989-1992); Vice
President-Household Products (1984-1989); and Vice
President-Food Service Products Division
(1981-1984). He joined the Company in 1971. Mr. Sullivan is a [PHOTO]
director of American President Companies, Ltd. Age: 54
- ---------------------------------------------------------------------------------
JAMES A. VOHS Retired Chairman of Kaiser Foundation Health 1988
Plan, Inc. and Kaiser Foundation Hospitals.
Mr. Vohs retired as Chairman of the Board of Kaiser
Foundation Health Plan, Inc. and Kaiser Foundation Hospitals
(nationwide health maintenance organization) in March 1992.
Previously he had served as President (1975-1991) and Chief
Executive Officer (1980-1991) of those companies. Currently,
Mr. Vohs serves as Chairman of the Board of
Directors of the Federal Reserve Bank of San Francisco. Age: [PHOTO]
65
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</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
NAME, PRINCIPAL OCCUPATION DIRECTOR
AND OTHER INFORMATION SINCE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
C. A. (AL) WOLFE President, Al Wolfe Associates, Inc. 1991
Mr. Wolfe is the President of Al Wolfe Associates, Inc., a
marketing and advertising consulting firm. He is the retired
President of the U.S. Division of DDB Needham Worldwide, a
major advertising agency. Previously, Mr. Wolfe had been
Executive Vice President of N.W. Ayer and Executive Vice
President and General Manager of Wells, Rich,
Greene advertising agencies. He is a director of Dolphin [PHOTO]
Software, Inc. Age: 62
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</TABLE>
ORGANIZATION OF THE BOARD OF DIRECTORS
The board of directors has established six standing committees: the Executive
Committee, the Finance Committee, the Audit Committee, the Nominating Committee,
the Employee Benefits and Management Compensation Committee, and the Board
Administration and Public Policy Committee. The Finance, Audit, Nominating,
Employee Benefits and Management Compensation, and the Board Administration and
Public Policy Committees consist only of non-management, independent directors,
with the exception of the Board Administration and Public Policy Committee on
which Mr. Sullivan serves as the chairman and secretary.
EXECUTIVE COMMITTEE. The Executive Committee, consisting of directors Collins,
Krautter, Manchot, Morton, Scarff, Shumway, Sullivan and Vohs, is delegated all
of the powers of the board of directors except certain powers reserved by law to
the full board. In addition to being available to meet between regular board
meetings on occasions when board action is required but the convening of a full
board is impracticable, the Executive Committee is authorized to handle special
assignments as requested from time to time by the board. The Executive Committee
held no meetings during fiscal year 1994.
FINANCE COMMITTEE. The Finance Committee consists of directors Boggan, Collins,
Krautter, Manchot, Morton, Scarff and Shumway and, working with the Company's
finance and operating personnel, considers and recommends to the board major
financial policies and actions of the Company. The Finance Committee held two
meetings during fiscal year 1994.
AUDIT COMMITTEE. The Audit Committee, composed of directors Fairchild,
Krautter, Scarff, Scott and Wolfe, is the principal link between the board and
the Company's independent public accountants. The Audit Committee makes
recommendations to the board regarding selection and employment of the Company's
independent auditors and, working with the Company's internal and external
auditors, monitors internal audit and control procedures. The Audit Committee
held three meetings during fiscal year 1994.
NOMINATING COMMITTEE. Directors Boggan, Fairchild, Scarff, Vohs and Wolfe are
members of the Nominating Committee. The Nominating Committee identifies and
recommends to the board of directors prospective candidates to be considered as
nominees for election to the board, including those recommended in writing by
any stockholder. The Nominating Committee held one meeting during fiscal year
1994.
COMPENSATION COMMITTEE. The Employee Benefits and Management Compensation
Committee (the "Compensation Committee") consists of directors Fairchild,
Manchot, Morton, Scott, Shumway and Vohs. The Compensation Committee establishes
and monitors the policies under which compensation is paid or awarded to the
Company's executive officers, determines executive compensation, grants stock
options, restricted stock and other cash or stock awards under the Company's
stock option, management incentive
6
<PAGE>
compensation and restricted stock plans, and reviews pension and other
retirement plans for adequacy and compliance with applicable regulations. The
Compensation Committee held five meetings during fiscal year 1994.
BOARD ADMINISTRATION AND PUBLIC POLICY COMMITTEE. The Board Administration and
Public Policy Committee consists of directors Boggan, Collins, Fairchild,
Krautter, Manchot, Morton, Scarff, Scott, Shumway, Sullivan, Vohs and Wolfe. The
Board Administration and Public Policy Committee establishes the rules and
procedures for board governance, is the principal link between the board and the
public community and has oversight responsibility for environmental matters. The
Board Administration and Public Policy Committee held one meeting during fiscal
year 1994.
The board of directors held seven meetings during fiscal year 1994. All
directors attended more than 75% of the meetings of the board and committees of
which they are members during fiscal year 1994.
Non-management directors received an annual fee at a level of $27,500 for the
1994 fiscal year. In addition, each non-management director received $1,000 for
each meeting of the board attended and $875 for each meeting of a board
committee attended. The chairperson of each committee received an additional
$625 for each committee meeting attended. In addition, each non-management
director is entitled to receive $1,000 per diem for any special assignment
requested of any such director by the board. However, no such special assignment
fees were paid in fiscal year 1994. Management directors receive no extra
compensation for their service as directors. Directors may elect to defer all or
a part of such compensation. Any such deferred amounts are credited with
interest annually, based on the rate of interest paid by Wells Fargo Bank on
July 1 of each year for a $100,000 certificate of deposit with a one-year term.
All deferred fees are payable only in cash. In addition, under the retirement
plan for non-management directors, such directors who have had at least five
years' service may, after termination of service and upon attainment of age 65,
receive annual payments equal to the annual retainer they received during their
last twelve months of service for the number of calendar years and quarters they
served as a non-management director. Directors are covered by the Company's
business travel accident insurance plan for travel to and from meetings of the
board of directors.
Pursuant to the Company's 1993 Directors' Stock Option Plan, each non-management
director received an initial grant of stock options covering 2,000 shares of
Common Stock during fiscal year 1994. Such stock options vest in two equal
installments on each of the first two anniversary dates of the grant date and
have an exercise price of the fair market value on the grant date. Other than
the non-management director fees, the retirement benefits, the business travel
accident insurance coverage, and the stock option grants described above,
directors who are not employees of the Company do not receive any additional
form of direct compensation, nor do they participate in any of the Company's
employee plans.
7
<PAGE>
BENEFICIAL OWNERSHIP OF VOTING SECURITIES
The following table shows, as of July 29, 1994, the holdings of the Common Stock
by (i) the only entity or person known to the Company to be the beneficial owner
of more than 5% of the Common Stock, (ii) each director and each of the five
executive officers named in the Summary Compensation Table on page 13, and (iii)
all directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME OF BENEFICIAL
BENEFICIAL OWNER(1) OWNERSHIP(2) PERCENT OF CLASS(3)
- ------------------------------------------------ --------------- -------------------
<S> <C> <C>
HC Investments, Inc. (4) 15,428,100 28.91%
William F. Ausfahl 83,804 *
Daniel Boggan, Jr. 187 *
John W. Collins 22,906 *
Neil P. DeFeo 18,178 *
Ursula Fairchild 3,000 *
Jochen Krautter 1,000 *
Ramon A. Llenado 11,941 *
Peter N. Louras 33,590 *
Juergen Manchot 1,000 *
Dean O. Morton 2,000 *
Edward L. Scarff 5,000 *
Lary R. Scott 3,250 *
Forrest N. Shumway 5,000 *
G. Craig Sullivan 71,018 *
James O. Vohs 1,000 *
C. A. (Al) Wolfe 2,000 *
All directors and executive officers 530,188 *
as a group (32 persons) (5)
<FN>
- ---------
Notes:
* Does not exceed one percent of the outstanding shares.
(1) Correspondence to all executive officers and directors of the Company may
be mailed to 1221 Broadway, Oakland, California 94612. The address of HC
Investments, Inc. is 1100 North Market Street, Suite 780, Wilmington,
Delaware 19801.
(2) These totals list shares as to which sole voting and dispositive power is
possessed, except (i) Mr. Ausfahl indirectly holds 24,079 shares over which
he shares voting and dispositive power with his spouse; and (ii) 3,461
additional shares of the amount listed as held by all directors and
officers as a group are subject to shared voting and dispositive power with
an executive officer's spouse. These totals include the following number of
shares of Common Stock which such persons have the right to acquire through
stock options exercisable within 60 days of July 29, 1994: Mr. Ausfahl --
52,395; Mr. DeFeo -- 5,000; Mr. Llenado -- 5,122; Mr. Louras -- 21,860; Mr.
Sullivan -- 44,105; and all directors and executive officers as a group (32
persons) -- 342,828.
(3) On July 29, 1994, there were 53,373,251 shares of Common Stock issued and
outstanding.
(4) Indirect wholly-owned United States subsidiary of Henkel KGaA of
Duesseldorf, Germany (manufacturer of household products and chemicals).
(5) Executive officers include the chief executive officer and all the vice
presidents of the Company.
</TABLE>
8
<PAGE>
The Company and Henkel KGaA are parties to a June 1981 letter agreement (as
amended in July 1986 and March 1987), relating to ownership by Henkel KGaA of
Common Stock and representation on the Company's board of directors. The July
1986 amendment assures Henkel KGaA of the right to nominate for election to the
board not less than two representatives so long as Henkel KGaA beneficially owns
at least 5% of the outstanding shares of Common Stock. Under the letter
agreement, as amended, Henkel KGaA's maximum permitted ownership of Common Stock
without consultation with the Company is limited to 30%, and Henkel KGaA has
affirmed that it considers its investment in the Company as long-term and its
role in the Company as that of a significant minority stockholder without an
active role in the management of the Company.
The Company and Henkel KGaA have entered into certain joint manufacturing,
marketing and product development arrangements in the United States and
internationally, either directly or through affiliates or joint venture
collaboration. No such arrangements, either individually or in the aggregate,
were material to the Company or Henkel KGaA during fiscal year 1994.
EMPLOYEE BENEFITS AND MANAGEMENT COMPENSATION
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The membership of the Compensation Committee consists entirely of non-management
directors who have never been employees of the Company (see page 6). The
Compensation Committee establishes and monitors the policies under which
compensation is paid or awarded to the Company's executive officers and
determines executive compensation.
COMPENSATION PHILOSOPHY.
In determining executive compensation, the Compensation Committee operates under
the following principles:
-Total compensation levels should be competitive with those of other
employers to help attract, motivate and retain highly-qualified people
critical to the long-term success of the Company.
-Executive officers' total compensation should be linked to the Company's
performance in achieving its short-term and long-term business and
strategic goals.
-Compensation should create incentives for superior corporate and individual
performance and adverse consequences for below target performance,
including tying part of every executive officer's compensation to the
Company's performance for its stockholders.
-Compensation programs should encourage executive officers to build their
holdings of the Company's stock to align their goals with those of the
stockholders in order to enhance the value of the Company.
COMPENSATION OF EXECUTIVE OFFICERS.
The Company's executive compensation mix consists of base annual salary, annual
short-term incentive awards in the form of stock or cash under the Management
Incentive Compensation Plan (the "MIC Plan"), and long-term incentive awards in
the form of stock options and restricted stock under the Company's 1987
Long-Term Compensation Program. As described below, the mix of compensation
elements is determined by competitive data collected from the comparator peer
group discussed below and internal ranking within the executive officer group.
General targeted competitive levels for all elements of pay are the 50th
percentile of such comparator peer group when adjusted for size. There is
opportunity for the executive officers to earn more than the targeted 50th
percentile if the Company's performance exceeds the measures discussed in this
report.
BASE ANNUAL SALARY. Base annual salaries for executive officers are determined
by the following factors: (1) parity to market, (2) the individual's
performance, (3) promotions resulting in increases in responsibility, and (4)
equity in relationship to other executive positions within the Company. With the
assistance of the Company's compensation consulting firm, surveys are conducted
of benchmark positions in 27 other peer
9
<PAGE>
companies (the "Peer Group Companies"), most of which compete with the Company
in one or more of its primary businesses. Those which are not direct competitors
are in closely-related fields. The Compensation Committee takes into account
both the size and performance of the Company relative to the size and
performance of the companies in the Peer Group Companies and considers the
competitiveness of the entire compensation package of the Company's executive
officers compared to the Peer Group Companies. The Compensation Committee
reviews which peer companies are selected for compensation analysis. For fiscal
year 1994, the Compensation Committee established salary ranges for executive
officer positions with midpoints which approximate the 50th percentile or median
level of the comparable, benchmarked positions. An individual executive
officer's position within a salary range depends upon his or her length of
service in the position and the executive officer's performance, as judged by
his or her immediate superior and the chief executive officer. The performance
of the six executive officers who serve as members of the management executive
committee is judged by the chief executive officer and the Compensation
Committee, or in the chief executive officer's case, by the Compensation
Committee alone. Elements of performance assessed for all executive officers
include achieving financial performance goals tied to their particular
responsibilities in the Company and individual objectives, some of which are not
of a financial nature, all of which are agreed to in advance by the executive
officer and his or her immediate superior, or in the chief executive officer's
case, by him and the Compensation Committee. An executive officer may also
receive a promotional salary increase to reflect increases in his or her job
responsibility.
MANAGEMENT INCENTIVE COMPENSATION PLAN. The MIC Plan is an annual bonus plan in
which the top 167 managers of the Company participate. For fiscal year 1994, the
MIC Plan, as it applied to the executive officers, established a linkage between
the annual bonus awards and both the Company's performance and the individual
performance of each executive officer. The Compensation Committee determined
that awards under the MIC Plan also would include an element of adverse
consequences for poor financial results, including no MIC Plan award funding for
the Company's financial performance component described below unless the Company
achieved an earnings before taxes target previously established by the
Compensation Committee. That earnings before taxes target was exceeded in fiscal
year 1994.
In keeping with the Company's desire to have executive officers build their
holdings of the Company's stock, starting with fiscal year 1994 awards executive
officers were able to elect to receive all or a portion of their MIC Plan award
in the Company's stock rather than cash. Those participants electing stock will
receive a premium equal to 20% of the bonus amount elected to be paid in the
Company's stock based on the fair market value on September 1, 1994 and such MIC
Plan stock award will be subject to transfer restrictions for two years, or the
premium will be forfeited.
For the MIC Plan, the Compensation Committee divided the executive officer group
into two subcategories. The six executive officers who serve as members of the
management executive committee are the five executive officers named in the
Summary Compensation Table on page 13, plus Mr. Edward A. Cutter, Senior Vice
President -- General Counsel and Secretary. For those six executive officers,
75% of the MIC Plan award was determined by achieving corporate financial
performance measures previously established by the Compensation Committee based
on a computation consisting of targeted operating margin level, asset turnover
rate and volume growth. In the computation, the targeted operating margin level
and asset turnover rate were weighted equivalently and counted approximately 75%
in the determination of the financial measures. Volume growth was weighted at
approximately 25%. The targeted corporate financial measures were exceeded as
measured at the end of fiscal year 1994. The remaining 25% of the MIC Plan award
was based on achieving pre-established individual objectives related to budget
performance and other goals that cannot be measured by traditional accounting
tools, including the development and execution of strategic plans, the
development of management and employees and the exercise of leadership within
the industry and in the communities that the Company serves. Individual
objectives and the weight given each individual objective varied for the members
of the management executive committee. The target MIC Plan award for such six
executive officers was 50% of base annual salary at June 30, 1994 (60% for the
chief executive officer) if the corporate financial performance and individual
objectives were achieved. The maximum MIC Plan award was 100% of base annual
salary at June 30, 1994 (120% for the chief executive
10
<PAGE>
officer) if the goals were substantially exceeded, and the minimum MIC Plan
award was 0 if the goals came in substantially lower than the targets. All MIC
Plan awards are determined by the chief executive officer and the Compensation
Committee or, in the chief executive officer's case, by the Compensation
Committee.
The MIC Plan awards to other members of the executive officer group were
determined based on an equally divided weighting of (i) the same corporate
financial performance measures used for the six management executive committee
members, and (ii) achieving individual objectives, including, for operating
division officers, operating division financial performance measures and other
individual objectives, and for staff executive officers, individual objectives,
such as the achievement of selected strategic goals and the successful
development of human resources. Individual objectives and the weight given each
individual objective varied from person to person depending on job
responsibilities. The target MIC Plan award for the other members of the
executive officer group was 40% of base annual salary at June 30, 1994 if goals
were achieved up to a maximum of 80% if the goals were substantially exceeded
and down to a minimum of 0 if the goals came in substantially lower than the
targets.
LONG-TERM COMPENSATION PROGRAM. During fiscal year 1994, awards under the
Company's Long-Term Compensation Program were made under two plans: the Stock
Option Plan and the Restricted Stock Plan. A method of valuing each such plan's
award as of the date of its grant was determined by the Compensation Committee
with the assistance of the Company's compensation consultant, which resulted in
a weighting of 60% for stock options using a modified version of the
Black-Scholes pricing model and 40% for restricted stock based on fair market
value on the date of the award modified to reflect Restricted Stock Plan
features. Shares of such restricted stock were called "performance shares" to
highlight the performance requirements involved for the lapse of restrictions as
described below. The total targeted annual value of the two elements for each
executive officer was in turn a function of the executive officer's base annual
salary, as modified by individual performance, and represented competitive
levels of compensation in the Peer Group Companies. The percentages were as
follows: 120% of base annual salary for the chief executive officer; 80% of base
annual salary for other members of the management executive committee; and 55%
to 80% of base annual salary for all other executive officers.
A major goal of the Compensation Committee is to increase the level of ownership
of the Company's stock by the executive officer group. To that end, the
Compensation Committee took three important steps in fiscal year 1994. The first
step was to provide three-year grants of stock options and restricted stock to
all executive officers, with no additional annual grants to be made until fiscal
year 1997. It is the Compensation Committee's intention not to make further
grants of stock options or restricted stock to executive officers who received
such three-year grants until fiscal year 1997, except in the case of an
executive officer's promotion or a significant increase in the officer's
responsibility. The second step was to change the weighting of the various
incentive plans under the Long-Term Compensation Program. Stock option awards
were increased from 50% to 60% of the long-term award, restricted performance
shares were increased from 25% to 40% of the long-term award, and future grants
of performance units which would have been paid in cash were discontinued.
Performance units granted prior to fiscal year 1994 would not be affected.
Third, in May 1994 executive officer stock ownership guidelines were adopted.
Target ownership levels to be achieved by fiscal year 1999, based on the fair
market value of the Common Stock at that time, are the equivalent of four times
base annual salary for the chief executive officer, three times base annual
salary for the other executive officers who serve as members of the management
executive committee, and two times base annual salary for other executive
officers. No stock options will be counted in determining ownership levels,
which will be based on shares of Common Stock held, including restricted stock
and shares held via the Company's Tax Reduction Investment Plan.
Each stock option awarded to executive officers during fiscal year 1994 has a
ten-year life, and 1/3 of the number of option shares will vest on each of the
first, second and third anniversaries of the option grant. Option shares vesting
on the first anniversary of the grant have an exercise price of $52.94, the fair
market value on the option grant date. Option shares vesting on the second and
third anniversaries of the grant have exercise prices of $58.25 and $63.50,
premiums of 10% and 20%, respectively, over the $52.94 fair market value on the
option grant date.
11
<PAGE>
The timing of the lapse of restrictions on performance shares awarded during
fiscal year 1994 will be determined at the end of fiscal year 1996, 1998 or 2000
and will be based on Company performance. The relative total stockholder return
(stock price appreciation plus dividends paid) of the Company's stock will at
that time be measured against two comparator groups: first, the total
stockholder return of the Standard & Poor's 500 Stock Index and second, the
total stockholder return of an index of the stocks of the Peer Group Companies.
Each comparator group will have an equal 50% weight. If, on average, the
Company's total shareholder return is in the 60th percentile or above relative
to the stockholder returns of the two groups, the restrictions on the
performance shares will lapse on the third anniversary of the grant date. If the
restrictions do not lapse on the third anniversary (1996) and the Company's
total stockholder return is above the 50th percentile in 1998, the shares will
vest in 1998. Failing that, the shares will not vest until 2000.
CHIEF EXECUTIVE OFFICER COMPENSATION.
The Compensation Committee increased Mr. Sullivan's base annual salary on June
1, 1994 from $540,000 to $585,000. The increase was based on the Compensation
Committee's assessment of Mr. Sullivan's performance against objectives it had
set for him a year earlier. The Compensation Committee found significant
progress made in implementing the Company's international strategy and domestic
strategy, including the S.O.S products acquisition, the introduction of 14 new
products in the United States and 14 overseas, above target earnings growth,
developing and maintaining a strong management team, and what the Compensation
Committee viewed as an overall outstanding demonstration of leadership and
contribution to the Company's business during his second year as chief executive
officer. His new chief executive salary is in the second lowest quartile of the
Peer Group Companies, adjusted for relative differences in company size.
Mr. Sullivan's MIC Plan award for fiscal year 1994 was based upon the weighted
corporate financial performance measures (75%) and individual objectives (25%)
established by the Compensation Committee as described above. The targets were
exceeded, and Mr. Sullivan's MIC Plan award formula called for a payment of
$422,956, 72% of his base annual salary at June 30, 1994.
The Long-Term Compensation Program component of Mr. Sullivan's compensation is
described above. Other than making awards at a higher percentage of his base
annual salary, the Compensation Committee did not treat Mr. Sullivan's Long-Term
Compensation Program or MIC Plan awards differently from other members of the
management executive committee.
ON-GOING REVIEW OF COMPENSATION.
The Company's compensation consulting firm has been asked to conduct an ongoing
review of the Company's existing executive compensation programs for the
Compensation Committee to continue to ensure they are compatible with long-term
stockholder objectives, support the future direction of the Company,
differentiate and reward for component Company performance, and attract and
retain high caliber talent. The Compensation Committee reserves the right to
select and/or meet independently with any consultant at its discretion. The
Compensation Committee has access to and reviews independent compensation data
relating to executive compensation at other companies.
The Compensation Committee has not yet developed a policy in order to qualify
any future compensation to the five highest-paid executive officers in excess of
$1 million per year for federal tax deductibility pursuant to Section 162(m) of
the Internal Revenue Code of 1986, as amended. The Compensation Committee
intends to consider the matter further when final regulations on this subject
are issued. At that time, the Compensation Committee will balance the interests
of the Company in maintaining flexible incentive plans against the possible loss
of a tax deduction should taxable compensation for any of the five highest-paid
executive officers exceed $1 million per year in future years.
<TABLE>
<S> <C>
Dean O. Morton, Chair Lary R. Scott
Ursula Fairchild Forrest N. Shumway
Juergen Manchot James A. Vohs
</TABLE>
(Members of the Compensation Committee)
12
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation for each of the last three
fiscal years earned by or paid or awarded to the chief executive officer of the
Company and the four other most highly compensated executive officers of the
Company (the "Named Officers").
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------- ----------------------- -------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
SECURITIES
RESTRICTED UNDERLYING ALL
OTHER ANNUAL STOCK OPTIONS/ LTIP OTHER
SALARY BONUS COMPENSATION AWARD(S) SARS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) ($)(2) ($)(1)(3)(4) (#)(3)(4) ($)(4) ($)(2)(5)
- ----------------------------------- ---- ---------- -------- ------------ ---------- ----------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1994 $ 551,250 $422,956 -- $1,061,343 114,963 $136,197 $ 24,302
1993 $ 457,500 $351,000 -- $ 125,563 18,516 $85,995 $ 17,885
1992 $ 283,333 $119,000 -- $ 40,095 4,452 $63,468 $ 12,843
G. Craig Sullivan..................
Chairman of the Board and Chief
Executive Officer
1994(6) $ 343,494 $175,000 $ 20,321 $ 619,485 60,339 -- $ 19,042
1993(6) -- -- -- -- -- -- --
1992(6) -- -- -- -- -- -- --
Neil P. DeFeo......................
Group Vice President -- U.S.
Operations
1994 $ 292,500 $174,050 -- $ 334,807 34,005 $131,289 $ 24,470
1993 $ 281,250 $154,375 -- $ 56,700 8,643 $81,081 $ 16,899
1992 $ 266,250 $120,000 -- $ 38,394 4,284 $66,564 $ 13,311
William F. Ausfahl.................
Group Vice President and Chief
Financial Officer
1994 $ 252,000 $154,665 -- $ 330,930 34,005 -- $ 24,417
1993(7) $ 240,000 $130,000 -- $ 50,400 7,683 -- $ 14,411
1992(7) $ 178,990 $ 80,000 -- -0- 2,472 -- $ 498
Ramon A. Llenado...................
Group Vice President -- Technical
1994 $ 251,250 $153,400 -- $ 330,457 37,782 $77,301 $ 24,416
1993 $ 219,000 $121,875 -- $ 39,681 6,051 $48,321 $ 18,073
1992 $ 162,000 $ 60,000 -- $ 23,450 2,472 $27,864 $ 10,027
Peter N. Louras....................
Group Vice President
<FN>
- ------------
(1) Pursuant to the MIC Plan, starting with fiscal year 1994 awards, executive
officers were able to elect all or a portion of their annual bonus plan
awards in Common Stock rather than cash. Those participants electing stock
received a premium equal to 20% of the bonus amount elected to be paid in
Common Stock based on the fair market value on September 1, 1994. Such
stock award is subject to transfer restrictions for two years from the date
of grant (September 1, 1996) or the premium will be forfeited. Messrs.
Ausfahl, DeFeo and Llenado elected to receive their respective fiscal year
1994 MIC Plan bonus awards all in Common Stock. Mr. Sullivan elected to
receive all his MIC Plan bonus award in Common Stock, except for $75,000
paid in cash. Mr. Louras elected to receive part of his annual bonus in
cash and the remainder in 1,200 shares of Common Stock (which included the
20% premium). The amount of the bonus elected to be paid in Common Stock is
included in the bonus column (d) in the annual compensation portion of this
table. The 20% premium received with such election, which is subject to
forfeiture restrictions, is included in the restricted stock awards column
(f) in the long-term compensation portion of this table. The number of
shares and value of the MIC annual bonus amount(s) paid in Common Stock
awards were as follows: base award -- 5,871 shares ($306,767) and premium
-- 1,174 shares ($61,353) for Mr. Sullivan; base award -- 3,349 shares
($175,000) and premium -- 670 shares ($35,000) for Mr. DeFeo; base award --
3,331 shares ($174,050) and premium -- 666 shares ($34,810) for Mr.
Ausfahl; base award -- 2,960 shares ($154,665) and premium -- 592 shares
($30,933) for Mr. Llenado; and base award -- 1,000 shares ($52,250) and
premium -- 200 shares ($10,450) for Mr. Louras.
(2) In connection with joining the Company, Mr. DeFeo was reimbursed for his
relocation costs by the Company in accordance with the Company's general
relocation policy for experienced new hires. The amounts the Company paid
Mr. DeFeo in excess of such relocation policy are set forth in the table
above as follows: (i) the amount of $20,321 in the other annual
compensation column (e) represents the excess tax gross-up paid to Mr.
DeFeo in connection with his relocation; and (ii) $18,580 of the amount
listed in the all other compensation column (i) represents other excess
relocation cost reimbursement received by Mr. DeFeo. In connection with his
relocation and pursuant to the Company's relocation policy applicable to
executive officers, the Company purchased Mr. DeFeo's home during fiscal
year 1994 for a purchase price of $1,150,000, which was based on an
independent third party appraisal. Such purchase price is not included in
the amounts set forth in the table above.
(3) Amounts include awards earned for the years indicated, consistent with past
practice. In fiscal year 1994, three-year grants of stock options and
restricted stock were made to all executive officers, with no additional
annual grants to be made until fiscal year 1997, except in the case of an
executive officer's promotion or a significant increase in the executive
officer's responsibility. Except for 4,000 shares of restricted stock
granted to Mr. DeFeo in connection with his joining the Company (which will
vest 25% in each of the first four anniversaries of the grant date), the
vesting of restricted stock awards granted in fiscal year 1994 will be
determined by Company performance. The vesting dates will be October 1,
1996, October 1, 1998 or October 1, 2000, depending on when the relative
total stockholder return requirements set forth in the Compensation
Committee Report on page 12 above are met. The restricted stock awards
granted in fiscal year 1993 will vest 50% in each of the fourth and fifth
years following the grants. The remaining unvested shares of restricted
stock granted in fiscal year 1992 will vest on the third anniversary of the
date of grant (vesting 9/94): Mr. Sullivan -- 330; Mr. Ausfahl -- 316; and
Mr. Louras -- 193. Except for the possibility mentioned above that the
restricted stock granted in fiscal year 1994 may vest on the third
anniversary of the grant date depending on Company performance, Mr. Llenado
does not have any restricted stock that will vest in 3 years or less from
the date of grant. The value of all restricted stock awards set forth in
the table above was determined by multiplying the fair market value of the
Common Stock on the date of
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
grant by the number of shares awarded. As of June 30, 1994, the number and
value of aggregate restricted stock award holdings, based on fair market
value on June 30, 1994, were as follows: 22,090 shares ($1,079,649) for Mr.
Sullivan; 11,178 shares ($546,325) for Mr. DeFeo; 7,279 shares ($355,761)
for Mr. Ausfahl; 6,819 shares ($333,279) for Mr. Llenado; and 7,145 shares
($349,212) for Mr. Louras. Dividends are paid on shares of restricted stock
awarded commencing from the date of grant.
(4) In the event of a "change in control," all periods of restriction on
restricted stock end, all stock options become exercisable and all
performance units become immediately payable. A change in control will be
deemed to occur if any person or entity other than Henkel KGaA becomes the
beneficial owner, directly or indirectly, of securities of the Company then
representing 50% or more of the combined voting power for the election of
the Company's directors. A feature of both the Restricted Stock Plan and
the 1987 and 1977 Stock Option Plans is the stock withholding election,
pursuant to which a recipient may elect to have the Company withhold shares
of Common Stock to pay any withholding tax liability that arises when the
restrictions on the restricted stock are released or when non-qualified
stock options are exercised, respectively. In both cases, the value of
shares which may be withheld is based on the per share price of the Common
Stock on the Composite Transactions Report for the New York Stock Exchange
on the last business day before the withholding is made.
(5) Except for $18,580 related to Mr. DeFeo's relocation in fiscal year 1994,
the amounts shown in the column are pursuant to programs provided to
salaried employees generally and represent Company contributions under the
Company's Tax Reduction Investment Plan and Profit Sharing Trust Plan and
term life insurance premiums paid by the Company for the benefit of each
respective Named Officer.
(6) Mr. DeFeo was first employed in July 1993. In addition to the 1994 fiscal
year grants of restricted stock and stock options made to all the Named
Officers, Mr. DeFeo received initial grants of restricted stock (4,000
shares) and stock options (15,000 shares) in August 1993. As part of his
employment with the Company, Mr. DeFeo received a pre-determined annual
bonus of $175,000 for fiscal year 1994 only, which was the target bonus
goal established for him.
(7) Mr. Llenado was first employed during the 1992 fiscal year. His first
Long-Term Incentive Plan payout will occur for the first three years ending
June 30, 1995.
</TABLE>
OPTIONS AND STOCK APPRECIATION RIGHTS
The following tables show options and stock appreciation rights ("SARs") granted
or exercised during fiscal year 1994 to or by the Named Officers, and the value
of the options and SARs held by the Named Officers at the end of fiscal year
1994.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
FOR OPTION TERM
-----------------------------------
INDIVIDUAL GRANTS
--------------------------------------------------------------------
(A) (B) (C) (D) (E) (F) (G)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR BASE
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED(#)(1) FISCAL YEAR(2) ($/SHARE)(1) DATE 0%(4) 5%(3)(4) 10%(3)(4)
- --------------------- --------------- ----------------- ----------------- ---------- ----- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
G. Craig Sullivan.... 38,321 4.33% $ 52.9375 10/01/2003 -0- $ 1,275,787 $ 3,233,095
38,321 4.33% $ 58.2500 10/01/2003 -0- $ 1,072,207 $ 3,029,514
38,321 4.33% $ 63.5000 10/01/2003 -0- $ 871,021 $ 2,828,329
Neil P. DeFeo........ 15,113 1.71% $ 52.9375 10/01/2003 -0- $ 503,144 $ 1,275,065
15,113 1.71% $ 58.2500 10/01/2003 -0- $ 422,856 $ 1,194,777
15,113 1.71% $ 63.5000 10/01/2003 -0- $ 343,513 $ 1,115,434
15,000 1.69% $ 51.1250 08/20/2003 -0- $ 482,284 $ 1,222,201
William F. Ausfahl... 11,335 1.28% $ 52.9375 10/01/2003 -0- $ 377,366 $ 956,320
11,335 1.28% $ 58.2500 10/01/2003 -0- $ 317,149 $ 896,103
11,335 1.28% $ 63.5000 10/01/2003 -0- $ 257,640 $ 836,594
Ramon A. Llenado..... 11,335 1.28% $ 52.9375 10/01/2003 -0- $ 377,366 $ 956,320
11,335 1.28% $ 58.2500 10/01/2003 -0- $ 317,149 $ 896,103
11,335 1.28% $ 63.5000 10/01/2003 -0- $ 257,640 $ 836,594
Peter N. Louras...... 12,594 1.42% $ 52.9375 10/01/2003 -0- $ 419,281 $ 1,062,540
12,594 1.42% $ 58.2500 10/01/2003 -0- $ 352,375 $ 995,634
12,594 1.42% $ 63.5000 10/01/2003 -0- $ 286,257 $ 929,516
<FN>
- ------------
(1) In fiscal year 1994, three-year grants of stock options were made to all
executive officers, with no additional annual grants to be made until
fiscal year 1997, except in the case of an executive officer's promotion or
a significant increase in the executive officer's responsibility. All
options granted in fiscal year 1994 become exercisable in increments of
one-third annually commencing on the first anniversary date of the option
grant and become fully exercisable on the third anniversary date thereof.
Except for the 15,000 share option granted to Mr. DeFeo, which was made on
August 20, 1993, all option grants in fiscal year 1994 to the Named
Officers
</TABLE>
14
<PAGE>
<TABLE>
<S> <C>
were made on October 1, 1993. For the options granted on October 1, 1993,
the exercise price of the one-third of the option shares which vests on the
first anniversary is the fair market value of the Common Stock on the grant
date, and the option shares vesting on the second and third anniversaries
of the grant date have exercise prices at premiums of 10% and 20%,
respectively, over the fair market value of the Common Stock on the grant
date. The exercise price of the option granted to Mr. DeFeo on August 20,
1993 is the fair market value of the Common Stock on the date of grant. In
the event of a "change of control," all stock options become exercisable. A
change in control will be deemed to occur if any person or entity other
than Henkel KGaA becomes the beneficial owner, directly or indirectly, of
securities of the Company then representing 50% or more of the combined
voting power for the election of the Company's directors.
(2) The total number of options/SARs granted to employees of the Company in
fiscal year 1994 represented 885,768 shares of Common Stock. The potential
realizable value (excluding dividends) of such options at assumed annual
rates of appreciation of 5% and 10% from the dates of their respective
grants to the end of the option terms using the appropriate base prices
above would be $26,423,924 and $71,639,738, respectively.
(3) Based on the fair market value of the outstanding shares of Common Stock on
June 30, 1994 and not including dividends, the potential realizable value
at assumed annual rates of Common Stock appreciation of 5% and 10% for a
ten-year period for all stockholders would be $1,803,077,868 and
$4,569,353,330, respectively. The potential realizable value at assumed
annual rates of appreciation of 5% and 10% rates on the options of the
Named Officers from the date of grant to the end of the ten-year option
terms would be $7,933,033 and $22,264,136, respectively. Thus, the Named
Officers' potential realizable value as a percentage of all stockholders'
gain would be 0.44% in the event of a 5% assumed annual rate of
appreciation, and 0.49% in the event of a 10% assumed annual rate of
appreciation. Further, the potential realizable value of all employee
options as a percentage of all stockholders' gain would be 1.47% in the
event of a 5% assumed annual rate of appreciation and 1.57% in the event of
a 10% assumed annual rate of appreciation over the ten-year option terms.
(4) The 5% and 10% assumed rates of appreciation are shown in response to
requirements of the rules of the Securities and Exchange Commission. There
can be no assurance that the market value of the Common Stock will
appreciate in the assumed manner. The column reflecting no appreciation in
market value is included for illustrative purposes only. The market value
of the Common Stock on October 1, 1993 was $52.9375 per share.
</TABLE>
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR,
AND FY-END OPTIONS/SAR VALUES
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END(#) AT FY-END($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($) UNEXERCISABLE(2) UNEXERCISABLE(1)(2)
- ------------------------------ --------------- ----------- -------------------- -------------------------
<S> <C> <C> <C> <C>
G. Craig Sullivan............. -0- -0- 36,449/128,791 $527,558/($999,692)
Neil P. DeFeo................. -0- -0- -0-/ 60,339 -0-/($457,859)
William F. Ausfahl............ 1,500 $ 49,500 48,086/ 41,195 $896,468/($276,599)
Ramon A. Llenado.............. -0- -0- 2,561/ 39,127 $13,125/($291,838)
Peter N. Louras............... 1,800 $ 71,213 19,019/ 42,640 $327,502/($325,844)
<FN>
- ------------
(1) The value of the unexercised options was determined by multiplying the
number of shares subject to unexercised options on the fiscal year end June
30, 1994 by $48.8750, the fair market value of the Common Stock on such
date, minus the exercise price of each unexercised option.
(2) None of the unexercisable options were granted under the 1977 Stock Option
Plan. The number of shares covered and the value of the unexercisable
options listed in columns (d) and (e) of the table above were all granted
under the 1987 Stock Option Plan.
</TABLE>
15
<PAGE>
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total stockholder return on the Common
Stock for the last five fiscal years with the cumulative total return of the
Standard & Poor's 500 Stock Index and a composite index composed of the Standard
& Poor's Household Products Index and the Standard & Poor's Housewares Index for
a five-year period ending June 30, 1994. The composite index is weighted based
on market capitalization as of the end of each quarter during each of the last
five years.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
The Clorox Company Combined Industry Index S&P 500
<S> <C> <C> <C>
June 1989 100 100 100
June 1990 115.1 116.4 147.4
June 1991 111.5 125 142.3
June 1992 133.7 141.7 181.5
June 1993 159.1 160.9 200.3
June 1994 154.7 163.2 206.2
</TABLE>
PENSION PLAN
The Company's Pension Plan is a qualified non-contributory plan under pertinent
income tax laws and essentially all salaried employees as well as non-union
hourly employees with at least one year of service participate. The Company
contributes annually an amount determined actuarially on the entry age normal
cost method. A participant obtains 100% vesting of his or her interests under
the Pension Plan after 5 years of service. Benefits are based on average salary
and years of service of each participant. No deduction is made for Social
Security benefits. Pension benefits for married retirees will be on a 50% joint
and survivor annuity basis unless the retiree elects otherwise. For an unmarried
retiree the benefit is on a straight life
16
<PAGE>
annuity basis. The table below shows the estimated pensions payable to an
unmarried person on retirement under the Pension Plan at age 65 or later for
representative years of service at various levels of average covered annual
salary.
<TABLE>
<CAPTION>
YEARS OF SERVICE
AVERAGE COVERED ----------------------------------------------------------
ANNUAL SALARY(1)(2) 15 20 25 30 35
- ----------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 125,000.................... $ 28,125 $ 37,500 $ 46,875 $ 56,250 $ 65,625
$ 150,000.................... $ 33,750 $ 45,000 $ 56,250 $ 67,500 $ 78,750
$ 175,000.................... $ 39,375 $ 52,500 $ 65,625 $ 78,750 $ 91,875
$ 200,000.................... $ 45,000 $ 60,000 $ 75,000 $ 90,000 $ 105,000
$ 250,000.................... $ 53,942 $ 72,692 $ 91,442 $ 110,192 $ 115,641
$ 300,000.................... $ 61,442 $ 83,942 $ 106,442 $ 115,641 $ 115,641
$ 350,000.................... $ 68,942 $ 95,192 $ 115,641 $ 115,641 $ 115,641
$ 400,000.................... $ 76,442 $ 106,442 $ 115,641 $ 115,641 $ 115,641
$ 450,000.................... $ 83,942 $ 115,641 $ 115,641 $ 115,641 $ 115,641
$ 500,000.................... $ 91,442 $ 115,641 $ 115,641 $ 115,641 $ 115,641
$ 600,000.................... $ 106,442 $ 115,641 $ 115,641 $ 115,641 $ 115,641
$ 700,000.................... $ 115,641 $ 115,641 $ 115,641 $ 115,641 $ 115,641
$ 800,000.................... $ 115,641 $ 115,641 $ 115,641 $ 115,641 $ 115,641
$ 900,000.................... $ 115,641 $ 115,641 $ 115,641 $ 115,641 $ 115,641
$1,000,000................... $ 115,641 $ 115,641 $ 115,641 $ 115,641 $ 115,641
<FN>
- ---------
(1) The number of years of credited service for each of the Named Officers are:
Mr. Sullivan, 23; Mr. DeFeo, 1; Mr. Ausfahl, 12; Mr. Llenado, 2; and Mr.
Louras, 14.
(2) For the executive officers, the foregoing pensions will likely be
supplemented as described and illustrated below in the section entitled
"Supplemental Executive Retirement Plan."
</TABLE>
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The retirement benefits shown in the table below are based on the Company's
Supplemental Executive Retirement Plan ("SERP"). The SERP is designed to
supplement in certain instances the combined retirement income of executive
officers. The benefits payable under the SERP assure the achievement of a fixed
objective for the combined benefit amounts payable under the Company's qualified
plans (Profit Sharing, Pension and the Company's matching contributions to the
Tax Reduction Investment Plan) and primary Social Security. The fixed objective
is shown in the table below and is 55% of the average annual compensation for
the three consecutive years of highest compensation. Compensation consists of
base annual salary and the MIC Plan bonus. For the Named Officers, those amounts
are shown in the salary and bonus columns ((a) and (b)) of the Summary
Compensation Table on page 13. The actual amount paid from the SERP is the
difference, if any, between the fixed objective and the benefits received from
primary Social Security and the Company's qualified plans. The benefits shown in
the table below are calculated for an
17
<PAGE>
unmarried person and are based on retirement at age 65 with at least 15 years of
service with the Company. They would be proportionately reduced for early
retirement or for shorter periods of service to a minimum of 10 years.
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------------
COMPENSATION(1) 15 20 25 30 35
- ----------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 125,000.................... $ 68,750 $ 68,750 $ 68,750 $ 68,750 $ 68,750
$ 150,000.................... $ 82,500 $ 82,500 $ 82,500 $ 82,500 $ 82,500
$ 175,000.................... $ 96,250 $ 96,250 $ 96,250 $ 96,250 $ 96,250
$ 200,000.................... $ 110,000 $ 110,000 $ 110,000 $ 110,000 $ 110,000
$ 250,000.................... $ 137,500 $ 137,500 $ 137,500 $ 137,500 $ 137,500
$ 300,000.................... $ 165,000 $ 165,000 $ 165,000 $ 165,000 $ 165,000
$ 350,000.................... $ 192,500 $ 192,500 $ 192,500 $ 192,500 $ 192,500
$ 400,000.................... $ 220,000 $ 220,000 $ 220,000 $ 220,000 $ 220,000
$ 450,000.................... $ 247,500 $ 247,500 $ 247,500 $ 247,500 $ 247,500
$ 500,000.................... $ 275,000 $ 275,000 $ 275,000 $ 275,000 $ 275,000
$ 600,000.................... $ 330,000 $ 330,000 $ 330,000 $ 330,000 $ 330,000
$ 700,000.................... $ 385,000 $ 385,000 $ 385,000 $ 385,000 $ 385,000
$ 800,000.................... $ 440,000 $ 440,000 $ 440,000 $ 440,000 $ 440,000
$ 900,000.................... $ 495,000 $ 495,000 $ 495,000 $ 495,000 $ 495,000
$1,000,000................... $ 550,000 $ 550,000 $ 550,000 $ 550,000 $ 550,000
<FN>
- ---------
(1) The number of years of credited service for each of the Named Officers are
as follows: Mr. Sullivan, 23; Mr. DeFeo, 1; Mr. Ausfahl, 12; Mr. Llenado,
2; and Mr. Louras, 14.
</TABLE>
EMPLOYMENT CONTRACTS
The Company has entered into employment contracts with each of its executive
officers. The terms of the contracts vary from a maximum of 5 years for the
chief executive officer to a minimum of 1 year for an executive officer who has
held office for less than 2 years. The contracts provide for severance benefits
in the event of involuntary termination of employment other than for a cause
defined in the contracts. In addition, within a specified period of time
following a change of control, an executive officer may terminate his or her
employment in the event of a reduction or elimination in rank, responsibilities,
compensation or benefits, and receive severance benefits. Severance benefits are
based upon cash compensation and benefits received prior to termination of
employment, and would be paid for a period of time equal to the term of the
employment contract, subject to reduction by the amount of a terminated
officer's earned income during the period. Assuming a termination on July 1,
1994, the Named Officers named in the Summary Compensation Table on page 13
above would have received the following annual payments for the periods
indicated, subject to reduction by the amount of any earned income from another
source: Mr. Sullivan -- $848,250 per year for 5 years; Mr. DeFeo -- $481,250 per
year for 3 years; Mr. Ausfahl -- $405,625 per year for 3 years; Mr. Llenado --
$346,500 per year for 3 years; and Mr. Louras -- $357,500 per year for 3 years.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 and Securities and Exchange
Commission regulations require the Company's directors, certain officers and
greater than ten percent stockholders to file reports of ownership on Form 3 and
changes in ownership on Forms 4 or 5 with the Securities and Exchange
Commission. The Company undertakes to file such forms on behalf of the reporting
person pursuant to a power of attorney given to certain attorneys-in-fact. Such
reporting officers, directors and ten percent stockholders are also required by
Securities and Exchange Commission rules to furnish the Company with copies of
all Section 16(a) reports they file.
18
<PAGE>
Based solely on its review of copies of such reports received or written
representations from such executive officers, directors and ten percent
stockholders, the Company believes that all Section 16(a) filing requirements
applicable to its directors, executive officers and ten percent stockholders
were complied with during fiscal year 1994.
RATIFICATION OF INDEPENDENT AUDITORS
The Audit Committee of the board of directors has recommended, and the board of
directors has selected, Deloitte & Touche LLP as independent auditors for the
fiscal year ending June 30, 1995. This firm has been so engaged since 1957.
During fiscal year 1994, Deloitte & Touche LLP examined the Company's
consolidated financial statements, made limited reviews of the interim financial
reports, reviewed filings with the Securities and Exchange Commission and
provided general advice regarding related accounting matters.
Ratification of the selection of Deloitte & Touche LLP by stockholders is not
required by law. However, as a matter of policy, such selection is being
submitted to the stockholders for ratification at the Annual Meeting (and it is
the present intention of the board of directors to continue this policy). The
board of directors recommends the adoption of the following resolution which
will be presented to the Annual Meeting:
RESOLVED, that the stockholders of The Clorox Company hereby ratify the
selection of Deloitte & Touche LLP as independent auditors for the fiscal
year ending June 30, 1995.
The persons designated in the enclosed proxy will vote your shares FOR
ratification unless instructions to the contrary are indicated in the enclosed
proxy. If the stockholders fail to ratify the selection of this firm, the board
of directors will reconsider the matter.
Representatives of Deloitte & Touche LLP are expected to be present at the
Annual Meeting, to respond to appropriate questions and to make a statement
should they desire to do so.
OTHER BUSINESS
The board of directors is not aware of any other matters to come before the
Annual Meeting. If any matter not mentioned herein is properly brought before
the Annual Meeting, the persons named in the enclosed proxy will have
discretionary authority to vote all proxies with respect thereto in accordance
with their judgment.
SOLICITATION OF PROXIES
The Company has not retained an outside firm in connection with the solicitation
of the enclosed proxy. However, executive officers, directors and regular
employees of the Company, who will receive no extra compensation for their
services, may solicit proxies by telephone, telegraph or personal call.
STOCKHOLDER PROPOSALS FOR 1995 ANNUAL MEETING
Stockholders who may wish to present proposals for inclusion in the Company's
proxy material and for consideration at the 1995 annual meeting must submit such
proposals in writing to the Secretary at the address shown on the top of the
notice accompanying this proxy statement not later than May 31, 1995.
By Order of the Board of Directors
Edward A. Cutter,
SENIOR VICE PRESIDENT -- GENERAL
COUNSEL
AND SECRETARY
September 28, 1994
19
<PAGE>
L
Printed on Recycled Paper
<PAGE>
/X/ PLEASE MARK CHOICES IN BLUE OR BLACK INK AS IN THIS SAMPLE. 0129
The Board of Directors unanimously recommends a vote FOR the election of the
nominees for director and FOR proposal 2.
1. Election of Directors. FOR / / WITHHELD / /
(see list below)
FOR, EXCEPT VOTE WITHHELD FROM THE FOLLOWING NOMINEE(S):
- ------------------------
2. Proposal to ratify the selection of FOR / / AGAINST / / ABSTAIN / /
Deloitte & Touche LLP as independent
auditors for The Clorox Company for
the fiscal year ending June 30, 1995.
Check this box only if you have comments / /
or change of address and use the back of form.
Check this box only if you wish to attend / /
and vote at the meeting.
SIGNATURE(S) DATE
--------------------------- ----------------------------------
Note: Your signature should conform with your name as printed above. If signing
as attorney, executor, administrator, trustee or guardian, please give
your full title as such. If stock is owned by a partnership or
corporation, please indicate your capacity in signing the proxy. If stock
is held in joint ownership, all co-owners must sign. Please sign, date
and return promptly.
- --------------------------------------------------------------------------------
PLEASE TEAR OFF AT PERFORATION AND RETURN SIGNED PORTION AS SOON AS POSSIBLE.
THE CLOROX COMPANY
ANNUAL MEETING NOVEMBER 16, 1994
[CLOROX Logo]
Nominees for Director:
William F. Ausfahl, Daniel Boggan, Jr., John W. Collins,
Ursula Fairchild, Jochen Krautter, Juergen Manchot, Dean O.
Morton, Edward L. Scarff, Lary R. Scott, Forrest N. Shumway,
G. Craig Sullivan, James A. Vohs, C.A. (Al) Wolfe
----------------------------------------------
**********IMPORTANT**********
----------------------------------------------
DETACH AT PERFORATION AND RETAIN THIS PORTION.
THE PROXY VOTING INSTRUCTIONS SHOULD BE
RETURNED AS SOON AS POSSIBLE
----------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE CLOROX
COMPANY
The undersigned, whose signature appears on the reverse, hereby appoints G. C.
SULLIVAN, W. F. AUSFAHL and E. A. CUTTER, and each of them, with full power of
substitution and revocation, the proxy or proxies of the undersigned to vote the
shares of common stock which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Stockholders to be held on November
16, 1994, and at any and all adjournments thereof and on all matters that may
properly come before the meeting.
Your shares will be voted as directed herein. If signed and no direction is
given for any item, it will be voted in favor of Items 1 and 2.
If you have any comments or change of address, MARK THE APPROPRIATE BOX ON THE
REVERSE side and use the following space:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INSTRUCTIONS:
1. Use the reverse side to specify your voting instructions for each proposal.
2. Sign and date form.
3. Tear off at perforation and RETURN THIS PORTION OF THE FORM ONLY.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. BY
RETURNING YOUR VOTING INSTRUCTIONS PROMPTLY, YOU CAN AVOID THE INCONVENIENCE
OF RECEIVING FOLLOW-UP MAILINGS PLUS HELP AVOID THE EXPENSES ASSOCIATED WITH
SUCH ADDITIONAL MAILINGS.
- --------------------------------------------------------------------------------
[CLOROX Logo]
