UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1996
OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transmission period from to
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Commission file number 1-07151
THE CLOROX COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 31-0595760
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1221 Broadway, Oakland, CA 94612-1888
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, (510) 271-7000
including area code
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- ------------------------ ------------------------
Common Stock, $1 par value New York Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE.
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.[ ]
Aggregate market value of voting stock held by non-affiliates
of the registrant at July 31, 1996: $4,682,914,521.
Number of shares of common stock outstanding at July 31, 1996: 51,531,384.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Stockholders
for the Year Ended June 30, 1996 are incorporated by reference
into Parts I, II and IV of this Report. Portions of the
registrant's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held on November 20, 1996,
which will be filed with the United States Securities and
Exchange Commission within 120 days after the end of the
registrant's fiscal year ended June 30, 1996, are incorporated
by reference into Part III of this Report.
<PAGE>
PART I
ITEM l. BUSINESS
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(a) GENERAL DEVELOPMENT OF BUSINESS.
The Company (the term "Company" as used herein includes the
registrant identified on the facing sheet, The Clorox Company,
and its subsidiaries, unless the context indicates otherwise)
was originally founded in Oakland, California in 1913 as the
Electro-Alkaline Company. It was reincorporated as Clorox
Chemical Corporation in 1922, as Clorox Chemical Co. in 1928,
and as The Clorox Company (an Ohio corporation) in 1957,
when the business was acquired by The Procter & Gamble Company.
The Company was fully divested by The Procter & Gamble Company
in 1969 and, as an independent company, was reincorporated in
1973 in California as The Clorox Company. In 1986, the
Company was reincorporated in Delaware.
The Clorox Company Annual Report for the Year Ended June 30,
1996 ("Annual Report") to its stockholders is included in this
Form 10-K. Portions of the Annual Report are incorporated
herein by specific reference.
During fiscal year 1996, the Company continued to focus on
expanding its domestic business, through internal development
of new products and line extensions of existing products.
The Company introduced 14 new products in the U.S. during
fiscal year 1996. It also continued its strategy of considering
strategic acquisitions and, in that regard, acquired the
"Black Flag" brand of aerosol insecticides and the "Lestoil"
brand of home cleaning products during fiscal year 1996.
Additionally, the Company acquired from Rhone-Poulenc exclusive
rights to a new active ingredient, Fipronil, for use in the U.S.
and many international consumer insecticide markets.
An application for the registration of Fipronil with the U.S.
Environmental Protection Agency has been filed.
Internationally, the Company continued the implementation of
its strategy of expanding its laundry, household cleaning and
insecticide businesses to markets where these categories are
not yet fully developed, but where high potential exists.
The Company made three international acquisitions in fiscal
year 1996 and increased its ownership in one additional business.
In addition, the Company introduced 20 new products or line
extensions in previously established international operations.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.
The Company's operations are predominantly in one segment --
non-durable household consumer products. Such operations include
the production and marketing of non-durable consumer products
sold primarily through grocery and other retail stores.
Financial information for the last three fiscal years attributable
to the Company's operations is set forth in the Consolidated
Financial Statements, pages 24 through 35 of the Annual Report,
incorporated herein by this reference.
(c) NARRATIVE DESCRIPTION OF BUSINESS.
PRINCIPAL PRODUCTS. Products currently marketed in the United
States and certain foreign countries are listed on the inside back
cover (page 41) of the Annual Report, incorporated herein by this
reference.
PRINCIPAL MARKETS - METHODS OF DISTRIBUTION. Most non-durable
household consumer products are nationally advertised and sold
within the United States to grocery stores through a network of
brokers, and to mass merchandisers, warehouse clubs, military and
other retail stores primarily through a direct sales force. The
Company also sells, within the United States, institutional
versions of specialty food and non-food products. Outside the
United States, the Company sells consumer products through
subsidiaries, licensees, distributors and joint venture
arrangements with local partners.
SOURCES AND AVAILABILITY OF RAW MATERIALS. The Company has
obtained ample supplies of all required raw materials and
packaging supplies, which, with a few exceptions, were available
from a wide variety of sources during fiscal year 1996.
Contingency plans have been developed for single sourced
supplier materials. No supply problems are presently anticipated.
PATENTS AND TRADEMARKS. Although some products are covered by
patents, the Company does not believe that patents, patent
licenses or similar arrangements are material to its business.
Most of the Company's brand name consumer products are protected
by registered trademarks. Its brand names and trademarks are
extremely important to its business and the Company pursues a
course of vigorous action against apparent infringements.
SEASONALITY. The only portions of the operations of the Company which
have any significant degree of seasonality are the marketing of
charcoal briquets and insecticides. Most sales of these product lines
occur in the third and fourth fiscal quarters. Working capital to
carry inventories built up in the off-season and to extend terms to
customers is generally provided by internally generated funds plus
commercial paper lines of credit.
CUSTOMERS AND ORDER BACKLOG. During fiscal years 1994, 1995
and 1996, revenue from the Company's sales of its products to
Wal-Mart Stores, Inc. and its affiliated companies was 12%, 13%
and 14%, respectively, of the Company's gross consolidated revenues.
Except for this relationship, the Company is not dependent upon
any other single customer or a few customers. Order backlog is
not a significant factor in the Company's business.
RENEGOTIATION. None of the Company's operations is subject to
renegotiation or termination at the election of the Federal
government.
COMPETITION. The markets for consumer products are highly
competitive and most of the Company's products compete with
other nationally advertised brands within each category, and
with "private label" brands and "generic" non-branded products
of grocery chains and wholesale cooperatives. Competition is
encountered from similar and alternative products, many of
which are produced and marketed by major national concerns
having financial resources greater than those of the Company.
Depending on the competitor, the Company's products compete
with competitive products on price, quality or other benefits
to consumers.
A newly introduced consumer product (whether improved or newly
developed) usually encounters intense competition requiring
substantial expenditures for advertising and sales promotion.
If a product gains consumer acceptance, it normally requires
continuing advertising and promotional support to maintain
relative market position.
RESEARCH AND DEVELOPMENT. The Company's operations incurred
expenses of approximately $45,821,000 in fiscal year 1996,
$44,819,000 in fiscal year 1995, and $44,558,000 in fiscal year
1994 on research activities relating to the development of new
products or the maintenance and improvement of existing products.
None of such research activity was customer sponsored.
ENVIRONMENTAL MATTERS. The Company does not anticipate
making material capital expenditures in the future for
environmental control facilities or to comply with environmental
laws and regulations. However, in general, the Company does
anticipate spending increasing amounts annually for facility
upgrades and for environmental programs. The amount of capital
expenditures for environmental compliance was not material
in fiscal year 1996 and is not expected to be material in
the next fiscal year.
In addition, the Company is involved in certain other
environmental matters, as follows:
(i) The Company sold its architectural coatings business in
fiscal year 1990. In connection with the disposition of those
manufacturing facilities, the Company retained responsibility
for certain environmental obligations. The financial reserve
established at the time of the sale is expected to be adequate
to cover the financial responsibilities for environmental matters
which may arise in the future.
(ii) The Company has been named as a potentially responsible
party ("PRP") by the Environmental Protection Agency pursuant to
the Spill Compensation and Control Act, the Sanitary Landfill
Closure and Contingency Fund Act, and a section of the Solid
Waste Management Act, for a site in New Jersey. Based on the
Company's experience and because the Company's level of involvement
is extremely limited, the Company does not expect that this matter
will represent a material cost to the Company in the future. The
Company settled a similar matter for another site in New Jersey
during fiscal year 1995 and does not expect such settlement to
represent a material cost in the future.
(iii) The Company operates a water treatment operation at its
former Oakland, California manufacturing location and may undertake
additional remediation in the future to recondition such property
for sale. A financial reserve established in an earlier year is
considered by management to be adequate to cover the future costs
or liability in connection with this manufacturing location.
(iv) The Company has announced that it contemplates the sale of
its Frederick, Maryland manufacturing facility. Customary
environmental investigations are being conducted in conjunction
with the contemplated sales of these sites. The Company does not
expect that material environmental liabilities will be identified,
and accordingly has not recorded any loss contingencies.
(v) A former subsidiary of the Company has been named as a PRP
by the Environmental Protection Agency for a site in Tulalip,
Washington in connection with the Company's former architectural
coatings business. Pursuant to the terms of the agreement by which
the Company sold such architectural coatings business, the Company
has been responding to this matter. Based on the Company's experience
and because the Company's level of involvement is extremely limited,
the Company does not expect that this matter will represent a
material cost to the Company in the future.
(vi) An explosion attributed to methane caused property damage and
personal injury in a residential area near a site formerly operated by
a subsidiary of the Company in Eaton Estates, Michigan. The
Environmental Protection Agency is investigating and has served the
Company with a Request for Information under CERCLA Sec. 104(e). The
result of the investigation is to be determined and the Company's
potential liability is unknown at this time.
(vii) The Company has been served with a Notice of Violation at
the site operated by its subsidiary at Bedford Park, near Chicago,
Illinois. Based on the Company's experience, the Company does not
expect that this matter will represent a material cost to the Company
in the future.
Although the potential cost to the Company related to the above
ongoing environmental matters is uncertain due to such factors
as: the unknown magnitude of possible pollution and clean-up
costs; the complexity and evolving nature of governmental laws
and regulations and their interpretations; and the timing, varying
costs and effectiveness of alternative clean-up technologies;
based on its experience and without offsetting for expected
insurance recoveries or discounting for present value, the Company
does not expect that such costs individually and in the
aggregate will represent a material cost to the Company or
affect its competitive position.
NUMBER OF PERSONS EMPLOYED. At the end of fiscal year 1996,
approximately 5,300 persons were employed by the Company's
continuing operations.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
AND EXPORT SALES.
Net sales, pretax earnings and identifiable assets related to
foreign operations and export sales are 13%, 4% and 28%,
respectively for fiscal year 1996. See Note 17 of Notes to
Consolidated Financial Statements, page 35 of the Annual Report,
incorporated herein by this reference.
ITEM 2. PROPERTIES
PRODUCTION FACILITIES. The Company operates production and major
warehouse facilities for its operations in 18 locations throughout
the United States, and in 24 locations internationally. The
vast majority of the space is owned. Some space, mainly for
warehousing, is leased. The Company acquired a production
facility in Argentina in August 1995. No facilities were either
closed or sold during fiscal year 1996. The Company considers its
manufacturing and warehousing facilities to be adequate to support
its business.
OFFICES AND TECHNICAL CENTER. The Company's general office
building is owned and is located in Oakland, California. The
Company's Technical Center and Data Center are owned and are
located in Pleasanton, California. Leased sales and other
office facilities are located at a number of manufacturing
and other locations.
ENCUMBRANCES. None of the Company's owned facilities are
encumbered to secure debt owed by the Company, except that the
manufacturing facilities in Wheeling, Illinois and Belle,
Missouri secure industrial revenue bond indebtedness incurred
in relation to the construction or upgrade thereof.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
<TABLE>
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EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages and current positions of the executive officers
of the Company are set forth below:
Name (Age) and Year Elected to
Current Position Title and Current Position(s)
- ----------------------------------------------- ------------------------------------------------
<S> <C> <C> <C>
G. C. Sullivan (56) 1992 Chairman of the Board, Chief Executive Officer
and President
W. F. Ausfahl (56) 1983 Group Vice President and Chief Financial Officer
E. A. Cutter (57) 1992 Senior Vice President-General Counsel and Secretary
G. E. Johnston (49) 1996 Group Vice President
R. A. Llenado (49) 1992 Group Vice President-Technical
P. N. Louras, Jr. (46) 1992 Group Vice President
D. C. Murray (60) 1996 Group Vice President
C. T. Alcantara (46) 1996 Vice President-Latin America
A. W. Biebl (46) 1992 Vice President-Manufacturing, Engineering and
Distribution
R. H. Bolte (56) 1995 Vice President-Corporate Marketing Services
J. M. Brady (42) 1993 Vice President-Human Resources
J. O. Cole (55) 1992 Vice President-Corporate Affairs
R. T. Conti (41) 1996 Vice President-Kingsford Products
C. M. Couric (49) 1995 Vice President and General Manager- Brita Products
L. Griffey (60) 1993 Vice President-International Manufacturing
R. C. Klaus (51) 1996 Vice President-Corporate Administration
L. S. Peiros (41) 1995 Vice President and General Manager-Food Products
Division
K. M. Rose (47) 1993 Vice President-Treasurer
H. J. Salvo, Jr. (48) 1991 Vice President-Controller
B. A. Sudbury (49) 1992 Vice President-Research and Development
F. A. Tataseo (42) l994 Vice President-Sales
C. E. Williams (47) 1993 Vice President-Information Services
</TABLE>
There is no family relationship between any of the above
named persons, or between any of such persons and any of the
directors of the Company or any persons nominated for election
as a director of the Company. See Item 10 of Part III of
this Form 10-K.
The current term of office of each officer is from the date of
the officer's election to the date of the first Board of
Directors' meeting following the next Annual Meeting of
Stockholders or until the officer's successor is elected,
subject to the power of the Board of Directors to remove
any officer at any time.
W. F. Ausfahl, R. A. Llenado and H .J. Salvo have been
employed by the Company for at least the past five years in
the same respective positions as listed above. The other
executive officers have held the respective positions
described below for at least the past five years:
G. C. Sullivan joined the Company in 1971 in the sales
department of Household Products. Prior to his election as
Chairman of the Board, Chief Executive Officer and President
in 1992, he was Group Vice President from 1989 through 1992
and Vice President-Household Products from 1984 through 1989.
E. A. Cutter joined the Company in June 1983 as Vice
President-General Counsel and Secretary. He held this
position through June 1, 1992, when he was elected Senior
Vice President-General Counsel and Secretary, with additional
responsibility for the Company's government affairs and
community affairs functions.
G. E. Johnston joined the Company in July 1981 as Regional
Sales Manager-Special Markets. Prior to his election as
Group Vice President effective July 1, 1996, he was Vice
President-Kingsford Products from November 17, 1993 through
June 1996, Vice President-Corporate Development from June
1992 through November 16, 1993, Director of Corporate
Development from 1991 through May 1992, and Director of
Business Development from September 1989 through 1991.
P. N. Louras, Jr. joined the Company in April 1980 as Manager,
Analysis and Control, Kingsford Products. Prior to his
election as Group Vice President effective June 1, 1992, he was
Vice President-International from August 1990 through May 1992,
Vice President-Controller from July 1988 through August 1990
and Controller, Household Products from 1987 through July 1988.
D. C. Murray joined the Company in February 1978 as Region
Manager - Latin America and Asia. Prior to his election as
Group Vice President effective July 1, 1996, he was Vice
President - Household Products Division from November 1994
through June 30, 1996, Vice President - Household Products from
April 1989 through November 1994, Vice President - International
from November 1984 through April 1989, and Vice President -
Latin America and Asia from April 1982 through November 1984.
C. T. Alcantara joined the Company in 1992 as Area General
Manager - Latin America. Prior to his election as Vice
President - Latin America effective July 1, 1996, he left
the Company briefly from December 8, 1995 through March 31,
1996, when he returned as Area General Manager - Latin America.
A. W. Biebl joined the Company in 1981 as Manufacturing Manager,
Food Service. Prior to his election as Vice President-
Manufacturing, Engineering and Distribution effective June 1,
1992, he was Vice President-Kingsford Products from 1989
through May 1992 and Vice President-Food Service Products from
1985 through 1989.
R. H. Bolte joined the Company in April 1982. Prior to his
election as Vice President-Corporate Marketing Services in July
1995, he was Director of Advertising and Promotion from June
1993 through June 1995 and Director of Media Services from May
1982 through May 1993.
J. M. Brady joined the Company in 1976 as a brand assistant in
Marketing, Household Products. From November 1991 until her
election as Vice President-Human Resources in September 1993,
she was Vice President-Corporate Marketing Services. She was
director of Corporate Marketing Services from August 1991
through November 1991, Director of Marketing, Kingsford Products
from 1989 through August 1991 and held various marketing
positions for Household Products and Kingsford Products from 1987
through 1989.
J. O. Cole joined the Company in 1973 as an attorney in its Legal
Services Department. He has served in numerous capacities in
that Department and was named Associate General Counsel in 1992.
In November 1992, he was elected to the position of Vice
President-Corporate Affairs.
R. T. Conti joined the Company in 1982 as Associate Region Sales
Manager, Household Products. Prior to his election as Vice
President-Kingsford Products effective July 1, 1996, he was
Vice President-International from June 1992 through June 1996,
Area General Manager-International for Europe, Middle East and
Africa from 1990 through May 1992 and Manager of Sales Planning
for Household Products from 1987 through 1990.
C. M. Couric joined the Company in 1973 as a brand assistant in
the Household Products marketing organization. Prior to his
election in July 1995 as Vice President-Brita Products, he had
served as Director, Brita Operations from 1988 through June 1995
and as a Manager of Business Development from 1984 through 1988.
R. C. Klaus joined the Company in 1977 as Regional Sales
Manager (Baltimore) for the Company's Household Products
Business. Prior to his election as Vice President -
Corporate Administration in November 1995, he was Vice
President - Clorox Professional Products from March 1994
through October 1995, and Vice President - Food Service
Products from May 1990 through March 1994.
L. S. Peiros joined the Company in 1982 and was elected Vice
President-Food Products Division effective July 1995. From
September 1993 until his election to his current position he
was Vice President-Corporate Marketing Services. From June
1992 through August 1993 he was Director of Marketing-
Household Products and from August 1991 through June 1992
he was Director of Marketing-Kingsford Products. Prior to
that he had served in various marketing positions in both
Household Products and Kingsford Products.
K. M. Rose joined the Company in 1978 as a financial analyst.
Prior to her election as Vice President-Treasurer effective
July 15, 1992, she was Controller, Household Products from
July 1988 through July 1992. Beginning October 1, 1994, she
also assumed responsibility for the Company's investor
relations and risk management functions.
B. A. Sudbury joined the Company in 1978 as Project Leader in
Research and Development. Prior to his election as Vice
President-Research and Development effective June 1, 1992,
he was Director of Research and Development, Household
Products from 1985 through May 1992.
F. A. Tataseo joined the Company in October 1994 as Vice
President-Sales. Previously, he was employed by The
Pillsbury Company (Division of Grand Metropolitan Inc.) as
Vice President, Sales (March - September 1994), and as Vice
President, Direct Sales Force (June 1993 - February 1994);
and by The Procter & Gamble Company as Sales Merchandising
Division Manager, Soap Sector (May 1992 - May 1993); as
Division Sales Manager, Laundry Products Category (November
1990 - April 1993); and as Division Sales Manager, Fabric
Care Category (July 1988 - October 1990).
C. E. Williams joined the Company in May 1993 as Vice
President-Information Services. From 1987 until he joined
the Company, Mr. Williams was Director of Information
Services of the Fritz Companies, Inc.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(a) MARKET INFORMATION.
The principal markets for Clorox Common Stock are the New York
and Pacific Stock Exchanges. The high and low sales prices
quoted for New York Stock Exchange-Composite Transactions
Report for each quarterly period during the past two fiscal
years appears under "Quarterly Data," page 38 of the Annual
Report, incorporated herein by this reference, and on
July 31, 1996, the closing price for the Company's stock was
$90.875 per share.
(b) HOLDERS.
The approximate number of record holders of Clorox Common Stock
as of July 31, 1996 was 13,009 based on information provided by
the Company's transfer agent.
(c) DIVIDENDS.
The amount of quarterly dividends paid with respect to Clorox
Common Stock during the past two fiscal years appears under
"Quarterly Data," page 38 of the Annual Report, incorporated herein
by this reference.
ITEM 6. SELECTED FINANCIAL DATA
This information appears under "Financial Summary," pages 36 and
37 of the Annual Report, incorporated herein by this reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
This information appears under "Management's Discussion and
Analysis," pages 22 and 23 of the Annual Report, incorporated
herein by this reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
These statements and data appear on pages 24 through 35 and 38
of the Annual Report, incorporated herein by this reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM l0. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding each nominee for election as a director,
including those who are executive officers of the Company,
appears under "Nominees for Election as Directors" of the
definitive Proxy Statement of the Company, which will be
filed with the United States Securities and Exchange Commission
within 120 days after the end of the registrant's fiscal year
ended June 30, 1996 ("Proxy Statement"), incorporated herein
by this reference.
Pursuant to Instruction 3 to Item 401(b) of Regulation S-K,
information regarding the executive officers of the
registrant is reported in Part I of this Report.
The information required by Item 405 of Regulation S-K appears
under "Section 16(a) Beneficial Ownership Reporting Compliance"
of the Proxy Statement, incorporated herein by this reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 402 of Regulation S-K appears
under "Organization of the Board of Directors," "Employee
Benefits and Management Compensation Committee Report on
Compensation," "Summary Compensation Table," "Options and
Stock Appreciation Rights," "Long-Term Incentive Plans,"
"Comparative Stock Performance," and "Pension Benefits" of
the Proxy Statement, all incorporated herein by this reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.
Information concerning the only entity or person known to
the Company to be the beneficial owner of more than 5% of
its Common Stock appears under "Beneficial Ownership of
Voting Securities" of the Proxy Statement, incorporated
herein by this reference.
(b) SECURITY OWNERSHIP OF MANAGEMENT.
Information concerning the beneficial ownership of the
Company's Common Stock by each nominee for election as
a director appears under "Nominees for Election as
Directors" of the Proxy Statement and by all directors
and executive officers as a group appears under
"Beneficial Ownership of Voting Securities" of the
Proxy Statement, both incorporated herein by this
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning transactions with directors,
nominees for election as directors, management and the
beneficial owner of more than 5% of the Company's
Common Stock appears under "Beneficial Ownership of
Voting Securities" of the Proxy Statement, incorporated
herein by this reference.
PART IV
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
<S> <C> <C><C> <C>
(a)(1) Financial Statements: Page
Financial Statements and Independent Auditors' Report Copy
included in the Annual Report, incorporated herein by this Included
reference:
Statements of Consolidated Earnings for the years
ended June 30, 1996, l995 and l994
Consolidated Balance Sheets, June 30, 1996 and l995
Statements of Consolidated Stockholders' Equity for
the years ended June 30, 1996, l995 and l994
Statements of Consolidated Cash Flows for the years
ended June 30, 1996, l995 and l994
Notes to Consolidated Financial Statements
Independent Auditors' Report
Quarterly Data
(2) Financial Statement Schedules have been omitted because of the absence of conditions under which
they are required, or because the information is shown elsewhere in this Form 10-K.
(3) Executive Compensation Plans and Arrangements:
Stock Option Plan (1977), amended 10/16/80, 7/21/82, 6/21/83,
10/19/83 and 11/17/93 (Exhibit 10(i) to Annual Report on Form 10-K
for the year ended June 30, 1994)
Long-Term Compensation Program dated October 21, 1987,
amended 11/17/93 (Exhibit 10(ii) to Annual Report on Form 10-K
for the year ended June 30, 1994)
Officer Employment Agreement (form) (filed as Exhibit 10(xi) to this Annual Report
on Form 10-K for the year ended June 30, 1996)
Officer Change of Control Employment Agreement (form) (filed as Exhibit 10(xii) to this
Annual Report on Form 10-K for the year ended June 30, 1996)
Supplemental Executive Retirement Plan dated July 17, 1991 (Exhibit 10(x)
to Annual Report on Form 10-K for the year ended June 30, 1993)
Non-Qualified Deferred Compensation Plan (filed as Exhibit 10(xiii) to this Annual
Report on Form 10-K for the year ended June 30, 1996)
The Clorox Company 1995 Performance Unit Plan filed as Exhibit 10(xiv) to this
Annual Report on Form 10-K for the year ended June 30, 1996)
The Clorox Company 1996 Stock Incentive Plan (filed as Exhibit 10(xv) to this Annual
Report on Form 10-K for the year ended June 30, 1996)
The Clorox Company 1996 Executive Incentive Compensation Plan (filed as Exhibit
10(xvi) to this Annual Report on Form 10-K for the year ended June 30, 1996);
(b) Current Reports on Form 8-K during the fourth quarter of fiscal year 1996:
None.
(c) Exhibits:
Index to Exhibits follows.
(d) (Not applicable)
Index to Exhibits
-----------------
(2) (Not applicable)
(3) (i) Certificate of Incorporation dated October 22, 1986 (filed as Exhibit (3)(i) to Annual Report on Form 10-K
for the year ended June 30, 1987, incorporated herein by this reference)
(ii) Bylaws dated November 18, 1992 (restated) (filed as Exhibit 3(ii) to Quarterly Report on Form 10-Q for the
quarter ended December 31, 1992, incorporated herein by this reference)
(4) (i) Form of Indenture between the Company and Wachovia Bank & Trust Company, N.A. as Trustee, regarding
$200,000,000 in 8.8% Notes due 2001 (filed as Exhibit 4 to Registration Statement on Form S-3 No. 33-4083
dated May 24, 1991, incorporated herein by this reference)
(ii) Prospectus Supplement (to Prospectus dated July 9, 1991) giving terms of the Indenture referenced in
Exhibit 4 (i) above (filed on July 18, 1991, supplementing the Registration Statement on Form S-3 No. 33-4083
dated May 24, 1991, and incorporated herein by this reference)
(9) (Not applicable)
(10) Material contracts:
(i) Stock Option Plan (1977) (Amended l0/l6/80, 7/2l/82, 6/2l/83, l0/l9/83, 9/18/85, 11/20/85, 7/15/87 and
11/17/93) (filed as Exhibit 10(i) to Annual Report on Form 10-K for the year ended June 30, 1994,
incorporated herein by this reference)
(ii) Long-Term Compensation Program dated October 21, 1987 (filed as Exhibit 10(ii) to Annual Report on
Form 10-K for the year ended June 30, 1994, incorporated herein by this reference)
(iii) Agreement between Henkel KGaA and the Company dated June l8, l981 (filed as Exhibit (l0)(v) to Form 8
dated August 11, l983, incorporated herein by this reference)
(iv) Agreement between Henkel GmbH (now Henkel KGaA) and the Company dated July 3l, l974 (filed as
Exhibit (l0)(vi) to Form 8 dated August 11, l983, incorporated herein by this reference)
(v) Agreement between Henkel KGaA and the Company dated November l6, 1981 (filed as Exhibit (l0)(vii) to
Form 8 dated August 11, l983, incorporated herein by this reference)
(vi) Agreement between Henkel KGaA and the Company dated July 16, 1986 (filed as Exhibit B to Current Report
on Form 8-K for March 19, 1987, incorporated herein by this reference)
(vii) Agreement between Henkel KGaA and the Company dated March 18, 1987 (filed as Exhibit A to Current Report
on Form 8-K for March 19, 1987, incorporated herein by this reference)
(viii) Agreement between Henkel KGaA and the Company dated January 16, 1992 (filed as Exhibit 10(xi) to Annual Report
on Form 10-K for the year ended June 30, 1992, incorporated herein by this reference)
(ix) Supplemental Executive Retirement Plan dated July 17, 1991 (filed as Exhibit 10(x) to Annual Report on Form
10-K for the year ended June 30, 1993, incorporated herein by this reference)
(x) 1993 Directors' Stock Option Plan dated November 17, 1993 (filed as Exhibit 10(xi) to Annual Report on
Form 10-K for the year ended June 30, 1994, incorporated herein by this reference)
(xi) Officer Employment Agreement (form) (filed as Exhibit 10(xi) to this Annual Report on Form 10-K for the
year ended June 30, 1996)
(xii) Officer Change of Control Employment Agreement (form) (filed as Exhibit 10(xii) to this Annual Report on
Form 10-K for the year ended June 30, 1996)
(xiii) Non-Qualified Deferred Compensation Plan (filed as Exhibit 10(xiii) to this Annual Report on Form 10-K for
the year ended June 30, 1996)
(xiv) The Clorox Company 1995 Performance Unit Plan (filed as Exhibit 10(xiv) to this
Annual Report on Form 10-K for the year ended June 30, 1996)
(xv) The Clorox Company 1996 Stock Incentive Plan (filed as Exhibit 10(xv) to this Annual
Report on Form 10-K for the year ended June 30, 1996)
(xvi) The Clorox Company 1996 Executive Incentive Compensation Plan (filed as
Exhibit 10(xvi) to this Annual Report on Form 10-K for the year ended June 30, 1996)
(11) (Not applicable)
(12) (Not applicable)
(13) 1996 Annual Report to Stockholders, following Exhibit 10(xvi) of this Form 10-K
(16) (Not applicable)
(l8) (Not applicable)
(21) Subsidiaries of the registrant, following Exhibit 13 of this Form 10-K
(22) (Not applicable)
(23) Independent Auditors' Consent, following Exhibit 21 of this Form 10-K
(24) Power of Attorney (see page 15 )
(27) Financial Data Schedule, following Exhibit 23 of this Form 10-K
</TABLE>
SIGNATURES
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints
Edward A. Cutter and Henry J. Salvo, Jr., jointly and
severally, attorneys-in-fact and agents, with full power
of substitution, for him in any and all capacities to
sign any and all amendments to this Form 10-K, and to
file the same and all exhibits thereto, and other
documents in connection therewith, with the Securities
and Exchange Commission, hereby ratifying and confirming all
that each of said attorneys-in-fact and agents, and his or
their substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of Section l3 or l5(d) of the
Securities Exchange Act of l934, the registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE CLOROX COMPANY
Date: September 18, 1996 By: /s/G. C. Sullivan
--------------------
G. C. Sullivan,
Chairman of the Board
and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of
l934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ----------------------- ---------------------------------- --------------------------
<S> <C> <C>
/s/G.C. Sullivan Chairman of the Board & Director September 18, 1996
- -----------------------
G. C. Sullivan (Chief Executive Officer)
/s/W. F. Ausfahl Group Vice President & Director September 18, 1996
- -----------------------
W. F. Ausfahl (Principal Financial Officer)
/s/D. Boggan, Jr. Director September 18, 1996
- -----------------------
D. Boggan, Jr.
/s/J. W. Collins Director September 18, 1996
- -----------------------
J. W. Collins
(signatures continue)
Director September 18, 1996
- -----------------------
U. Fairchild
Director September 18, 1996
- -----------------------
J. Manchot
/s/D. O. Morton Director September 18, 1996
- -----------------------
D. O. Morton
/s/K. Morwind Director September 18, 1996
- -----------------------
K. Morwind
/s/E. L. Scarff Director September 18, 1996
- -----------------------
E. L. Scarff
/s/L. R. Scott Director September 18, 1996
- -----------------------
L. R. Scott
/s/F. N. Shumway Director September 18, 1996
- -----------------------
F. N. Shumway
/s/J. A. Vohs Director September 18, 1996
- -----------------------
J. A. Vohs
/s/C. A. Wolfe Director September 18, 1996
- -----------------------
C. A. Wolfe
/s/H. J. Salvo, Jr. Vice President-Controller September 18, 1996
- ----------------------- (Principal Accounting Officer)
H. J. Salvo, Jr.
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
Results of Operations
Continuing operations again achieved record unit volume in 1996, after
record years in 1995 and 1994. The gain in 1996 volume was principally due
to: acquisition activity in Latin America; record volumes for Pine-Sol,
Clorox toilet bowl cleaner, Clorox liquid bleach, Clorox Clean-Up cleaners,
Tilex products, Kingsford charcoal briquets, and the Brita water filtration
business in the United States; and the effects of the 1995 Brita Canada and
the Black Flag insecticide acquisitions. These were partially offset by
lower volumes in our food business. The gain in 1995 volume was principally
due to a full year's ownership of the S.O.S business, which was acquired in
mid 1994, growth in the Brita water filtration business in the United
States, and record volumes for Combat insecticides, Clorox liquid bleach,
Clorox Clean-Up dilutable cleaner, Tilex soap scum remover, Clorox toilet
bowl cleaner, Professional Strength Formula 409 cleaner, Pine-Sol cleaner,
and the Kingsford line of charcoal briquets.
Net sales increased 12% in 1996 following increases of 8% in 1995 and 12%
in 1994. This year's growth was driven primarily by the volume increases
and the acquisitions mentioned above.
Cost of products sold was 45% of net sales in 1996, 1995, and 1994.
Research and development (R&D) expense was up slightly over 1995. New
product activity continued at a high level for the third consecutive year
and reflects efficiencies achieved in the R&D function to bring new products
to market faster and at lower overall costs. R&D activities are anticipated
to continue at current levels as a percent of sales. We expect to continue
to shorten development times and further improve cost efficiencies while
maintaining a high level of new product activity in 1997.
Selling, delivery, and administration expenses increased 12% over 1995 and
remained constant as a percentage of net sales. The increase is principally
attributable to the strategic growth of our international business where
we have increased our overhead infrastructure through acquisitions or
through expanding our marketing activities in Latin America, the Caribbean,
Canada, the Pacific Rim, and Central Europe. In addition, we incurred
transition costs related to the implementation of our manufacturing
strategy, and our new Customer Interface project that we believe will
improve customer service. We continue to focus on improving our cost
structure and anticipate continued spending during 1997 on our
International infrastructure and the Customer Interface initiative.
Advertising expense increased 5% over 1995 and includes a shift in emphasis
away from consumer sales promotions, i.e., couponing, to media advertising,
which increased at a rate faster than sales. This follows a trend started
in 1995 when marketing expense increased 3% over 1994.
Interest expense, the majority of which relates to long-term financing,
increased by $13,168,000 in 1996 and $6,696,000 in 1995 due to additional
borrowings to finance acquisitions and our share-repurchase program.
Effective tax rates were 40.0%, 40.6%, and 41.3% in 1996, 1995, and 1994,
respectively. The decrease in 1995 was principally due to the effecting
1994 of the retroactive 1% increase in the federal statutory tax rate that
was reflected in 1994 earnings.
Earnings per share from continuing operations increased $.50 in 1996 over
1995, a 13% improvement, and $.43 in 1995, also a 13% improvement over
1994, both of which were driven by the volume growth described above and
shares repurchased in 1996, 1995, and 1994 under the share-repurchase
program. Net earnings per share decreased in 1995 from 1994 due to the
inclusion in 1994 of $.59 earnings per share from discontinued
operations.
Foreign Operations
Foreign net sales were $302,575,000 and represented 14% of total company
sales in 1996. This was up significantly from 1995 and 1994 when foreign
sales represented only 9% and 7%, respectively, of total Company sales.
This growth comes primarily from volume associated with acquisitions made
in the last three years, principally in Latin America. Foreign pre-tax
earnings in 1996 were $14,525,000 and have grown from $5,989,000 in 1994.
Earnings levels in these years reflect investment spending on our
international infrastructure and the cost of integrating these operations
into our mode of business. Our stated strategy has been to grow our
International business to 20% of total Company net sales by the turn of the
century. Commensurate with the growth in sales, identifiable assets have
grown to $613,375,000 in 1996 from $191,468,000 in 1994 primarily due to
acquisitions of existing businesses abroad.
Financial Position and Liquidity
Cash provided by continuing operations was a record $406,665,000 in 1996
and resulted from record earnings and our continued focus on efficient
utilization of resources driven by the Clorox Value Measure (CVM) economic
value measurement system implemented in 1993. CVM increased 20% in 1996
over 1995. The 1995 increase in CVM was 26%, which followed the two
previous years' increases of 18%. Inventory levels are up over last year
due to acquisitions in 1996 and 1995. Both short-term and long-term debt
increased over the prior year principally to fund a portion of 1996
investing activities and the stock repurchase program.
At June 30, 1996, we had available a $350,000,000 credit agreement with a
syndication of banks that expires on May 31, 2000.
During 1996, we invested $165,231,000 in new businesses. Foreign
acquisitions included the Poett San Juan home products business in
Argentina, the largest business acquired, and the Electroquimicas Unidos
S.A.C.I. bleach business in Chile. Domestically, acquisitions included the
Black Flag line of insecticides and the Lestoil brand of home cleaning
products.
During 1995, $97,651,000 was invested in new businesses, all of which were
outside the United States. The largest single investment was Brita
International Holdings, Inc., of Canada. On January 1, 1994, the S.O.S
products business was acquired for $116,488,000. Also during 1994,
additional foreign investments of $25,949,000 were made.
Dividends paid in 1996 were $110,447,000 or $2.12 per share. In July 1996,
we announced a 9.4% increase in the quarterly dividend rate to $.58 from
$.53 per share for a new annual rate of $2.32.
In 1996, 1995, and 1994, cash flow from operations has exceeded cash needs
for capital expenditures, dividends, and scheduled debt service. We believe
that cash flows from operations, supplemented if necessary by financing
expected to be available from external sources, will provide sufficient
liquidity for the foreseeable future. However, depending upon conditions
in the financial markets and other factors, the Company may from time to
time consider the issuance of debt or other securities, the proceeds of
which would be used to finance acquisitions, to refinance debt, or for
other general corporate purposes. Proceeds from the sale of discontinued
operations generated cash of $159,293,000 in 1994.
We recently completed a stock repurchase program authorized in July 1995 by
our Board of Directors. During 1996, 1,266,906 shares were repurchased at a
cost of $98,112,000. During 1995, we completed a stock repurchase program
initiated in 1989 in which 5,000,000 shares were repurchased. Reacquired
shares are held as treasury shares and are available for reissuance for
corporate uses.
In order to manage the impact of interest rate movements on interest
expense and interest income, we have approved the use of interest rate
derivative instruments, such as interest rate swaps. These instruments have
the effect of converting fixed rate interest to floating, or floating to
fixed. Conditions under which derivatives can be used are set forth in a
Company Policy Statement. They include a restriction on the amount of
such activity to a designated portion of existing debt, a limit on the
term of any derivative transaction, and a specific prohibition of the use
of any leveraged instrument. Other derivative instruments used to hedge
assets and anticipated transactions include foreign currency contracts.
We are committed to an ongoing program of comprehensive, long-term
environmental assessment of our facilities. This program is implemented by
the Company's Department of Health, Safety and Environment, with guidance
from legal counsel. During each facility assessment, compliance with
applicable environmental laws and regulations is evaluated and the facility
is reviewed in an effort to identify possible future environmental
liabilities. Although not material, at June 30, 1996 and 1995, expected
costs have been accrued for the probable future costs of environmental
liabilities without offset for expected insurance recoveries or discounting
for present value.
INDEPENDENT AUDITOR'S REPORT
The Stockholders and Board of Directors of The Clorox Company:
We have audited the accompanying consolidated balance sheets of The Clorox
Company and its subsidiaries (the companies) as of June 30, 1996 and 1995,
and the related statements of consolidated earnings, consolidated
stockholders' equity and consolidated cash flows for the years ended June
30, 1996, 1995, and 1994. These financial statements are the responsibility
of the companies' management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the companies at June 30,
1996 and 1995, and the results of their operations and their cash flows for
the years ended June 30, 1996, 1995, and 1994 in conformity with generally
accepted accounting principles.
/S/ DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Oakland, California August 8, 1996
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Years ended June 30 (in thousands, except per-share amounts) 1996 1995 1994
<S> <C> <C> <C>
Net Sales $2,217,843 $1,984,170 $1,836,949
- --------------------------------------------------------------------------------------------------------
Costs and Expenses
Cost of products sold 1,007,200 892,172 820,434
Selling, delivery and administration 464,767 416,392 359,360
Advertising 285,015 271,730 286,666
Research and development 45,821 44,819 44,558
Interest expense 38,288 25,120 18,424
Other (income) expense, net 6,365 (3,957) 874
- --------------------------------------------------------------------------------------------------------
Total costs and expenses 1,847,456 1,646,276 1,530,316
- --------------------------------------------------------------------------------------------------------
Earnings Before Income Taxes 370,387 337,894 306,633
Income Taxes 148,295 137,062 126,640
- --------------------------------------------------------------------------------------------------------
Earnings from Continuing Operations 222,092 200,832 179,993
Earnings from Discontinued Operations - - 32,064
- --------------------------------------------------------------------------------------------------------
Net Earnings $ 222,092 $ 200,832 $ 212,057
========================================================================================================
Earnings per Common Share
Continuing operations $ 4.28 $ 3.78 $ 3.35
Discontinued operations - - 0.59
- --------------------------------------------------------------------------------------------------------
Net Earnings $ 4.28 $ 3.78 $ 3.94
========================================================================================================
Weighted Average Shares Outstanding 51,935 53,147 53,800
========================================================================================================
See notes to consolidated financial statements.
</TABLE>
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Years ended June 30 (in thousands, except shares and per-share amounts) 1996 1995
<S> <C> <C>
Assets
Current Assets
Cash and short-term investments $ 90,828 $ 137,330
Accounts receivable, less allowance 315,106 311,868
Inventories 138,848 121,095
Prepaid expenses 18,076 18,543
Deferred income taxes 10,987 11,495
- ---------------------------------------------------------------------------------------------------------------------
Total current assets 573,845 600,331
- ---------------------------------------------------------------------------------------------------------------------
Property, Plant and Equipment - Net 551,437 524,972
- ---------------------------------------------------------------------------------------------------------------------
Brands, Trademarks, Patents and Other Intangibles - Net 704,669 592,792
- ---------------------------------------------------------------------------------------------------------------------
Investments in Affiliates 99,033 96,385
- ---------------------------------------------------------------------------------------------------------------------
Other Assets 249,910 92,192
- ---------------------------------------------------------------------------------------------------------------------
Total $2,178,894 $1,906,672
=====================================================================================================================
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 155,366 $ 122,763
Accrued liabilities 266,192 234,595
Short-term debt 192,683 115,303
Income taxes payable 9,354 6,283
Current maturities of long-term debt 291 379
- ---------------------------------------------------------------------------------------------------------------------
Total current liabilities 623,886 479,323
- ---------------------------------------------------------------------------------------------------------------------
Long-term Debt 356,267 253,079
- ---------------------------------------------------------------------------------------------------------------------
Other Obligations 117,505 85,129
- ---------------------------------------------------------------------------------------------------------------------
Deferred Income Taxes 148,408 145,228
- ---------------------------------------------------------------------------------------------------------------------
Stockholders' Equity
Common stock - authorized, 175,000,000 shares, $1 par value 55,422 55,422
Additional paid-in capital 111,782 108,347
Retained earnings 1,078,789 971,380
Treasury shares, at cost (268,652) (168,217)
Cumulative translation adjustments and other (44,513) (23,019)
=====================================================================================================================
Stockholders' equity 932,828 943,913
- ---------------------------------------------------------------------------------------------------------------------
Total $2,178,894 $1,906,672
=====================================================================================================================
See notes to consolidated financial statements.
</TABLE>
<PAGE>
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
cumulative
(in thousands, except shares common stock additional treasury shares translation
and per-share amounts) -------------------- paid-in retained ------------------ adjustments
shares amount capital earnings shares amount and other
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1993 55,422,297 $55,422 $105,483 $ 762,162 (572,155) $ (23,357) $(20,416)
Net earnings 212,057
Dividends ($1.80 per share) (97,095)
Employee stock plans and other 1,071 (292) 405,414 16,121
Treasury stock acquired (1,883,300) (99,910)
Translation adjustments (1,829)
- --------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1994 55,422,297 55,422 106,554 876,832 (2,050,041) (107,146) (22,245)
Net earnings 200,832
Dividends ($1.92 per share) (102,272)
Employee stock plans and other 1,793 (4,012) 355,211 17,199 (1,187)
Treasury stock acquired (1,325,485) (78,270)
Translation adjustments 413
- --------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1995 55,422,297 55,422 108,347 971,380 (3,020,315) (168,217) (23,019)
Net earnings 222,092
Dividends ($2.12 per share) (110,447)
Employee stock plans and other 3,435 (4,236) 362,750 14,936 (9,949)
Treasury stock acquired (1,266,906) (98,112)
Put option obligations (240,000) (17,259)
Translation adjustments (11,545)
- --------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1996 55,422,297 $55,422 $111,782 $1,078,789 (4,164,471) $(268,652) $(44,513)
See notes to consolidated financial statements.
</TABLE>
<PAGE>
STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
Years ended June 30 (in thousands) 1996 1995 1994
<S> <C> <C> <C>
Operations
Earnings from continuing operations $ 222,092 $ 200,832 $ 179,993
Adjustments to reconcile to net cash provided by
continuing operations:
Depreciation and amortization 116,534 103,866 94,120
Deferred income taxes 2,020 15,386 15,985
Other 16,057 7,498 25,985
Effects of changes in:
Accounts receivable 27,447 (58,314) (18,299)
Inventories (5,132) (11,723) 5,691
Prepaid expenses 7,653 (1,892) 2,355
Accounts payable 17,890 21,771 13,485
Accrued liabilities 2,561 15,630 (8,134)
Income taxes payable (457) (2,205) (12,741)
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided by continuing operations 406,665 290,849 298,440
Net cash (used for) discontinued operations - - (31,658)
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided by operations 406,665 290,849 266,782
- ------------------------------------------------------------------------------------------------------------------------
Investing Activities
Property, plant and equipment (84,804) (62,911) (56,627)
Net proceeds from sales of businesses - - 159,293
Businesses purchased (165,231) (97,651) (142,437)
Disposal of property, plant and equipment 2,671 8,707 11,264
Other (47,312) (23,299) (22,046)
- ------------------------------------------------------------------------------------------------------------------------
Net cash used for investment (294,676) (175,154) (50,553)
- ------------------------------------------------------------------------------------------------------------------------
Financing Activities
Long-term borrowings 110,000 47,298 13,000
Long-term debt repayments (14,732) (2,806) (741)
Forward purchase financing agreements (110,045) (31,138) -
Short-term borrowings, net 50,763 62,115 3,430
Cash dividends (110,447) (102,272) (97,095)
Treasury stock acquired (98,112) (78,270) (99,910)
Employee stock plans and other 14,082 10,786 9,845
- ------------------------------------------------------------------------------------------------------------------------
Net cash used for financing (158,491) (94,287) (171,471)
- ------------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and short-term investments (46,502) 21,408 44,758
Cash and short-term investments:
Beginning of year 137,330 115,922 71,164
- ------------------------------------------------------------------------------------------------------------------------
End of year $ 90,828 $ 137,330 $ 115,922
========================================================================================================================
Cash Paid For
Interest (net of amounts capitalized) $ 36,576 $ 25,479 $ 18,267
Income taxes 116,799 106,821 128,210
Noncash Transactions
Liabilities arising from businesses purchased $ 75,690 $ 25,047 $ 7,200
========================================================================================================================
See notes to consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Significant Accounting Policies
Nature of Operations and Principles of Consolidation
The Company is principally engaged in the production and marketing
of nondurable consumer products to grocery stores, mass merchandisers
and other retail outlets. The consolidated financial statements
include the statements of the Company and its majority-owned and
controlled subsidiaries. All significant intercompany transactions
and accounts are eliminated in consolidation.
Accounting Estimates
The preparation of consolidated financial statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect reported amounts
and related disclosures. Actual results could differ from estimates and
assumptions made.
Short-term Investments
Short-term investments consist of money market and
other high-quality instruments with an initial maturity of three months or
less and are stated at cost, which approximates market value.
Inventories
Inventories are stated at the lower of cost or market. Cost
of the majority of inventories is determined on the last-in, first-out
(LIFO) method. Cost of the remainder of the inventories is determined
generally on the first-in, first-out (FIFO) method.
Property, Plant and Equipment
Property, plant and equipment are stated at
cost. Depreciation is calculated by the straight-line method over the
estimated useful lives of the depreciable assets.
Brands, Trademarks, Patents and Other Intangibles
Brands, trademarks, patents and other intangible assets arising from
transactions after October 30, 1970 are amortized over their estimated
useful lives up to a maximum of 40 years. Carrying values are reviewed
periodically and a determination of impairment is made based on
estimates of future cash flows, undiscounted and without interest
charges.
Investments in Affiliates
The Company holds minority investments in
foreign entities which are accounted for under the equity method. The most
significant investment is a 20 percent equity ownership in Henkel Iberica,
S.A. of Spain.
Forward Purchase Financing Agreements I
n connection with the financing of
acquisitions in Argentina in 1996 and the Brita water filtration systems
business in Canada in 1995, the Company entered into forward purchase
agreements with third parties whereby the Company has purchased preferred
stock of certain of its foreign subsidiaries for future delivery from
third parties who have the right to acquire the preferred stock according
to the terms of certain subscription agreements. The differences between
the purchase prices and the third party subscription prices are being
accreted on a straight-line basis over the terms of the agreements.
Income Taxes The Company uses the liability method to account for income
taxes, in accordance with Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes."
Foreign Currency Translation
The local currency is primarily the
functional currency for the Company's foreign operations. Assets
and liabilities are translated using the exchange rates in effect at the
balance sheet date. Income and expenses are translated at the average
exchange rates during the year. Translation gains and losses, and the
effects of exchange rate changes on transactions designated as hedges of
net foreign investments, are reported in stockholders' equity. Transaction
gains and losses and foreign currency gains and losses where the U.S.
dollar is the functional currency are included in net earnings.
Earnings per Common Share
Earnings per common share are computed by
dividing net earnings by the weighted average number of common shares
outstanding during each year. The potential dilution from the exercise of
stock options is not material.
Major Customer
Sales to the Company's largest customer, Wal-Mart Stores,
Inc. and its affiliates, were 14%, 13%, and 12% of consolidated net sales in
1996, 1995, and 1994, respectively.
Derivative Financial Instruments
The use of financial instruments is
limited to purposes other than trading and includes management of interest
rate movements (interest rate swaps), and foreign currency exposure
(forward contracts) related to supply contracts, accounts receivable and
net investments in foreign subsidiaries. Both categories of financial
instruments are treated as off-balance sheet financial instruments. Gains or
losses on hedges of existing assets are included in the carrying amounts
and are recognized in earnings when those assets are liquidated. Gains or
losses arising from hedges of firm commitments and anticipated
transactions are deferred and recognized in earnings or as an adjustment
of carrying amounts when the hedged transaction occurs. Interest rate swap
agreements are accounted for using the settlement basis of accounting. As
such, no gains or losses are recorded for movements in the swaps' values
during the term of the agreements.
Note 2 Discontinued Operations
The Company sold its bottled water and frozen foods businesses during 1994
for $159,293,000. The sale of these businesses resulted in a net gain of
$31,430,000. Results of discontinued operations are classified separately in
the Statements of Consolidated Earnings and include (in thousands):
1994
Net sales $18,700
- -------------------------------------==========
Earnings from operations
before income taxes $ 1,043
Income taxes (409)
- -----------------------------------------------
Net earnings from
discontinued operations 634
- -----------------------------------------------
Gain on sale of businesses 42,177
Income taxes (10,747)
- -----------------------------------------------
Net gain on sale of businesses 31,430
- -----------------------------------------------
Earnings from discontinued
operations $32,064
- -------------------------------------==========
Note 3 Acquisitions
Acquisitions in 1996 totaled $165,231,000 and included Black Flag
insecticides, Lestoil cleaner, the Poett San Juan home cleaning products
business in Argentina, and the Electroquimicas Unidas S.A.C.I. bleach
business in Chile. They were each accounted for as purchases and were
funded with cash from operations and debt. Approximately $143,019,000 of
the total acquisition costs have been allocated to brands, trademarks and
other intangibles to be amortized over estimated lives of up to 40 years.
Purchases in 1996 included, at fair value, assets of $97,902,000, and the
assumption of liabilities of $75,690,000.
Acquisitions in 1995 totaled $97,651,000 and were funded from cash from
operations and debt. They included Brita International Holdings, Inc., a
Canadian-based manufacturer and marketer of Brita water filtration systems,
and eight foreign investments, all of which were accounted for as
purchases. Approximately $96,337,000 of the acquisition cost was allocated
to brands, trademarks and other intangibles to be amortized over estimated
lives up to 40 years. Those purchased in 1995 included, at fair value,
assets of $26,361,000 and the assumption of liabilities of $25,047,000.
On January 31, 1994, the Company acquired the S.O.S products business of
Miles, Inc., which was accounted for as a purchase. The acquisition cost of
$116,488,000 included the S.O.S brand of soap pads and other cleaning
products in the United States and Canada, manufacturing facilities, and
certain items of working capital. Approximately $98,850,000 of the purchase
price has been allocated to brands, trademarks and other intangibles to be
amortized over an estimated life of 40 years. The purchase included, at
fair value, current assets of $9,200,000; property, plant and equipment of
$15,600,000; the assumption of current liabilities of $5,300,000, and a
post retirement healthcare liability of $1,900,000. In addition,
acquisitions included various foreign investments of $25,949,000. These
acquisitions were funded from cash from operations and short-term
borrowings.
Operating results of acquired businesses are included in consolidated net
earnings from the date of acquisition.
Note 4 Inventories
The major classes are (in thousands):
1996 1995
- -----------------------------------------------------------------------
Finished goods and work in process $ 82,261 $ 71,102
Raw materials and supplies 56,587 49,993
- -----------------------------------------------------------------------
Total $138,848 $121,095
=======================================================================
Had the cost of inventories been determined using the FIFO method,
inventories would have been higher by approximately $13,320,000 at June 30,
1996 and $14,218,000 at June 30, 1995. The LIFO method was used to value
61% of the inventory at June 30, 1996 and 74% at June 30, 1995.
Note 5 Property, Plant and Equipment
The major classes are (in thousands):
1996 1995
- --------------------------------------------------------------------
Land and improvements $ 63,474 $ 60,083
Buildings 274,895 263,509
Machinery and equipment 577,015 534,660
Construction in progress 45,897 31,622
- -----------------------------------------------------------------------
Total 961,281 889,874
Less accumulated depreciation 409,844 364,902
- -----------------------------------------------------------------------
Net $551,437 $524,972
- ----------------------------------------------=========================
Depreciation expense was $72,619,000 in 1996, $66,886,000 in 1995 and
$61,660,000 in 1994.
Note 6 Brands, Trademarks, Patents and Other Intangibles - Net
The major classes are (in thousands):
1996 1995
- ------------------------------------------------------------------------
Brands and trademarks $722,149 $583,902
Patents and other intangibles 133,096 129,076
Accumulated amortization (150,576) (120,186)
- -----------------------------------------------------------------------
Net $704,669 $592,792
- ----------------------------------------------=========================
Brands and trademarks include $41,708,000 of continuing value arising from
transactions prior to October 31, 1970.
Note 7 Other Assets
The major components are (in thousands):
1996 1995
- ------------------------------------------------------------------------
Forward purchase financing agreements $146,524 $31,138
Other 103,386 61,054
- ------------------------------------------------------------------------
Total $249,910 $92,192
- ----------------------------------------------=========================
The cost to acquire preferred stock of certain foreign subsidiaries
according to terms of forward purchase financing agreements was $141,183,000
and $31,138,000 at June 30, 1996 and 1995, respectively. The difference
between cost and third party subscription price of the preferred stock is
being accreted on a straight-line basis over five years. The amount of
accretion included in other income was $5,341,000 in 1996.
Note 8 Accrued Liabilities
Advertising costs included in accrued liabilities at June 30, 1996 and 1995
were $121,877,000 and $126,268,000, respectively.
Note 9 Short-term Debt
The major components are (in thousands):
1996 1995
- ---------------------------------------------------------------
Commercial paper $167,241 $105,031
Bank loans 25,442 10,272
- ---------------------------------------------------------------
Net $192,683 $115,303
- ----------------------------------------=======================
Note 10 Long-term Debt
The principal components are (in thousands):
1996 1995
- -----------------------------------------------------------------
8.8% Non-callable notes
due August 2001,
including net unamortized
premium of $173 and
$208, respectively $200,173 $200,208
Bank loans due March 2001,
including accrued unpaid
interest of $2,325, at fixed
rates ranging from 6.7% to 7.7% 112,325 -
Other debt 44,060 53,250
- -----------------------------------------------------------------
356,558 253,458
Less: current maturities 291 379
- -----------------------------------------------------------------
Long-term debt $356,267 $253,079
- -----------------------------------------------==================
The Company has a $350,000,000 credit agreement with a syndication of banks
which expires on May 31, 2000. The credit agreement requires maintenance of
a minimum net worth of $704,000,000. At June 30, 1996, the credit agreement
is available for general corporate purposes and for the support of
additional commercial paper issuance.
Note 11 Financial Instruments and Fair Values
In order to manage the impact of interest rate movements, the Company has
entered into six interest rate swap agreements. The transactions
effectively convert a portion of the Company's interest rate exposure on
its 8.8% fixed rate non-callable notes to a floating rate. The effect of the
swap agreements on the 8.8% fixed rate notes reduced interest expense by
$522,000 and $573,000 in 1996 and 1995, respectively, and resulted in
effective borrowing rates of 8.5% in both years. Under the terms of these
agreements, the Company agrees with other parties to exchange, at specified
intervals, the difference between fixed-rate and floating-rate interest
amounts as calculated by reference to agreed upon notional principal
amounts. LIBOR is used as the variable rate index for calculation.
In 1996, the Company entered into a Canadian dollar interest rate swap that
converted a portion of the exposure of floating interest rate Canadian debt
to a fixed rate of 6.3%. This swap agreement resulted in an effective
borrowing rate of 6.9%.
Exposure to counterparty credit risk has been decreased by entering into
these agreements only with major financial institutions that are expected to
fully perform under the terms of the swap agreements.
Notional amounts outstanding and weighted average rates at June 30 are
(in thousands):
1996 1995
- -----------------------------------------------------------------
Received fixed/pay
floating - notional amounts $100,000 $100,000
Weighted average receive rate 6.3% 6.6%
Weighted average pay rate 5.9% 6.6%
Pay fixed/received
floating - notional amounts $ 75,665 $ 50,000
Weighted average pay rate 7.4% 6.3%
Weighted average receive rate 6.4% 6.6%
Original terms to maturity of these agreements ranged from 71/2 to 73/4
years where fixed rates are received and at June 30, 1996 the remaining
term for these agreements was approximately 5 years. Original terms to
maturity where fixed rates are paid were 13/4 to 2 years and at June 30,
1996 the remaining term for these agreements was approximately 11/2 years.
Foreign currency forward contracts may be used periodically to manage
foreign exchange risks associated with export sales and purchases from
foreign suppliers denominated in foreign currency, net investments in
foreign subsidiaries, and other third party or intercompany foreign
currency obligations. These contracts are entered into with major financial
institutions thereby decreasing the risk of loss. Foreign currency forward
contracts with notional amounts totaling $100,942,000 and $17,937,000 were
outstanding at June 30, 1996 and 1995, respectively. The 1996 amount
includes $90,000,000 of Argentine peso contracts. The balance of the 1996
amount and the 1995 amount is Canadian dollar denominated contracts. The
majority of contracts outstanding at June 30, 1996 will expire prior to
December 31, 1996.
Fair Values The Company has used market information for similar
instruments and applied judgement to estimate fair values of financial
instruments. The carrying values of cash and short-term investments,
accounts receivable and payable, and short-term debt approximate fair
values due to their short-term nature. The values of other financial
instruments at June 30 are (in thousands):
1996 1995
- ----------------------------------------------------------------------
book fair book fair
- ----------------------------------------------------------------------
Forward purchase
financing
agreements $ 146,524 $ 146,524 $ 31,138 $ 31,138
Long-term
debt (356,267) (373,267) (253,079) (275,579)
Foreign exchange
contracts - (211) - 426
Interest rate swaps - (4,095) - (3,539)
=======================================================================
Note 12 Stockholders' Equity
In addition to common stock, the Company is authorized to issue 5,000,000
shares of preferred stock with a par value of $1 per share, none of which
is outstanding. The Company has a stock option plan under which options to
purchase shares of common stock may be granted to key employees. The plan
provides that the option price shall not be less than the fair market value
of the shares on the date of grant and that no portion of the option may be
exercised beyond ten years from that date. Options which are outstanding at
June 30, 1996 become exercisable cumulatively over one, two or three years
from the grant date. At June 30, 1996 no shares were available for the
granting of additional options or other stock compensation awards.
The Company sold 240,000 put options and purchased 240,000 call options
during the second quarter of fiscal year 1996 with various strike prices
(average of $71.91 per share) that expire on various dates through
September 30, 2005. Upon exercise, each put option requires the Company to
purchase, and each call option allows the Company to buy one share of its
common stock at the strike price. The aggregate exercise price of the put
options, $17,259,000, has been classified as other long-term obligations
with a corresponding increase in treasury stock at June 30, 1996.
A summary of changes in common stock options during 1996 and 1995 is:
number
of shares price per share
- ------------------------------------------------------------------------
Outstanding at
June 30, 1994 2,358,120 $13.81 - $63.50
Granted 386,897 48.88 - 57.20
Exercised (330,140) 13.81 - 54.63
Cancelled (35,114) 40.50 - 52.94
- ------------------------------------------------------------------------
Outstanding at
June 30, 1995 2,379,763 20.00 - 63.50
Granted 1,479,019 64.69 - 97.13
Exercised (417,135) 20.00 - 54.63
Cancelled (58,431) 43.75 - 71.75
- ------------------------------------------------------------------------
Outstanding (held
by 207 optionees)
at June 30, 1996 3,383,216 $24.34 - $97.13
========================================================================
Options exercisable at:
June 30, 1996 1,424,228
June 30, 1995 1,328,838
========================================================================
Note 13 Leases
The Company leases transportation equipment and a limited number of its
manufacturing, warehousing and office facilities. Most leases are classified
as operating leases and will expire over the next five years. Future total
minimum lease payments are $6,759,000, and do not exceed $3,765,000 in any
one year. Rental expense for continuing operations was $9,899,000 in 1996,
$11,424,000 in 1995 and $11,875,000 in 1994.
Space not occupied by the Company in its headquarters building is let to
other tenants under operating leases expiring through 2006. Future total
minimum rentals to be received are $4,637,000 and do not exceed $1,102,000
in any one year.
Note 14 Other Expense (Income), Net
The major components are (in thousands):
1996 1995 1994
- ------------------------------------------------------------------------
Amortization of
intangibles $30,439 $26,582 $23,896
Equity in earnings
of affiliates (9,793) (4,441) (5,926)
Interest income (8,132) (7,796) (5,292)
Royalty income (7,622) (7,110) (8,850)
Other, net 1,473 (11,192) (2,954)
- ------------------------------------------------------------------------
Total $ 6,365 $ (3,957) $ 874
========================================================================
Note 15 Income Taxes
Income tax expenses are (in thousands):
1996 1995 1994
- ------------------------------------------------------------------------
Current
Federal $109,964 $ 96,44 $ 86,686
State 22,532 19,778 17,562
Foreign 13,779 5,454 3,569
- ------------------------------------------------------------------------
Total current 146,275 121,676 107,817
- ------------------------------------------------------------------------
Deferred
Federal 778 12,232 16,416
State 709 688 1,173
Foreign 533 2,466 1,234
- ------------------------------------------------------------------------
Total deferred 2,020 15,386 18,823
- ------------------------------------------------------------------------
Total expense $148,295 $137,062 $126,640
========================================================================
Effective income tax rate 40.0% 40.6% 41.3%
The reconciliation between the Company's effective income tax rate and the
statutory federal income tax rate is as follows:
1996 1995 1994
- ----------------------------------------------------------------------
Federal statutory rate 35.0% 35.0% 35.0%
State income taxes, net of federal tax
benefit 4.0 3.9 3.9
Taxes on foreign earnings 1.8 1.5 1.1
Retroactive effect of federal rate increase - - 1.0
Other (.8) .2 .3
- -----------------------------------------------------------------------
Effective income tax rate 40.0% 40.6% 41.3%
=======================================================================
The net deferred income tax liabilities (assets), both current and
non-current at June 30, result from the tax effects of the following
temporary differences (in thousands):
1996 1995
- -------------------------------------------------------------
Amortization/depreciation $ 64,605 $ 61,354
Safe harbor lease agreements 26,431 29,401
Unremitted foreign earnings 45,096 45,473
Post employment benefits (19,143) (17,712)
Other 20,432 15,217
- -------------------------------------------------------------
Net $137,421 $133,733
=============================================================
Note 16 Employee Benefit Plans
Retirement Income Plans The Company has defined benefit pension plans for
substantially all its domestic employees. Benefits are based on either
employee years of service and compensation or stated dollar amount per year
of service. The Company is the sole contributor to the plans, in amounts
deemed necessary to provide benefits and to the extent deductible for
federal income tax purposes. Assets of the plans consist primarily of
stocks and bonds. The components of pension expense are (in thousands):
1996 1995 1994
- -----------------------------------------------------------------------------
Service cost -
benefits earned
in current year $ 6,238 $ 6,944 $ 5,970
Interest on projected benefit obligation 9,343 8,913 7,753
Return on plan assets:
Actual gain (25,026) (19,347) (2,762)
Deferral of the
actual gain
in excess of
(less than) the
assumed rate
of 8.75% in
1996 and 8% in
1995 and 1994 12,831 9,702 (6,029)
Other gains,
including
amortization
over 15 years of
the net pension
transition asset
at July 1, 1985 (1,075) (701) (790)
- -----------------------------------------------------------------------------
Total pension expense $ 2,311 $ 5,511 $ 4,142
=============================================================================
The plans' funded status at June 30 are as follows (in thousands):
1996 1995
- ---------------------------------------------------------------------
Actuarial present value of
the accumulated benefit
obligation, including
vested benefits of $106,508
in 1996 and $95,410
in 1995 $110,435 $101,580
Plans' assets at market value 164,080 141,385
Projected benefit obligation,
determined using a
discount rate of 8% and
including the effect of an
assumed annual increase
in future compensation
levels of 4.5% in 1996 and 1995 129,721 124,119
- ----------------------------------------------------------------------
Excess of plans' assets over
pension obligation 34,359 17,266
Less deferrals:
Remaining unamortized
balance of net pension
transition asset at
July 1, 1985 (7,044) (8,691)
Prior service cost (2,049) 4,734
Other net (gains) losses (5,157) 6,072
- -----------------------------------------------------------------------
Accrued pension asset included in other assets $ 20,109 19,381
=======================================================================
The Company has defined contribution plans for most of its domestic
employees not covered by collective bargaining agreements, to which it has
contributed through June 30, 1995 based on its earnings or participants'
contributions. Effective July 1, 1995, the Company's contribution is based
on the Clorox Value Measure economic value measurement system, defined as
net operating earnings after tax less a capital charge for net assets
employed. The Company also participates in multi-employer pension plans for
certain of its hourly-paid production employees and contributes to those
plans based on collective bargaining agreements. The aggregate cost of the
defined contribution and multi-employer pension plans was $17,006,000 in
1996, $12,427,000 in 1995 and $12,753,000 in 1994.
Retirement Health Care The Company provides certain health care benefits
for employees who meet age, participation and length of service
requirements at retirement. The plans pay stated percentages of covered
expenses after annual deductibles have been met. Benefits paid take into
consideration payments by Medicare. The plans are not prefunded and the
Company has the right to modify or terminate certain of these plans.
Postretirement health care expense consists of the following (in thousands):
1996 1995 1994
- -----------------------------------------------------------------------------
Service cost -
benefits earned
in the current year $2,738 $2,643 $2,823
Interest on
projected benefit obligation 3,365 3,041 2,881
- -----------------------------------------------------------------------------
Total postretirement health care expense $6,103 $5,684 $5,704
=============================================================================
Benefits paid were $1,306,000, $1,191,000 and $1,058,000 in fiscal years
1996, 1995, and 1994, respectively.
The accumulated postretirement benefit obligation (APBO) includes the
following at June 30 (in thousands):
1996 1995
- -----------------------------------------------------------
Retirees $11,892 $12,086
Active employees 35,770 31,109
Deferral of net gains 5,755 5,425
- -----------------------------------------------------------
Total unfunded accrued
benefit obligation included
in other obligations $53,417 $48,620
===========================================================
The assumed health care cost trend rate used in measuring the APBO was
10.5% for 1996, gradually declining to 5.5% over the next 8 years.
Change sin these rates can have a significant effect on amounts reported. A
one percentage point increase in the trend rates would increase the June
30, 1996 accumulated postretirement benefit obligation by $8,674,000 and
increase 1996 expense by $1,351,000. The discount rate used to determine
the APBO was 8%.
Note 17 Industry Segment Information
The Company's operations are predominately in the nondurable consumer
products industry and include the manufacture and marketing of products
through grocery and other retail stores. Operations include those in the
United States and foreign countries. Foreign operations are principally in
Latin American countries, which include Argentina, Brazil, Mexico and
Chile. Earnings before income taxes for Domestic and Foreign operations
represent operating profits, while corporate pretax earnings and identifiable
assets include interest income and expense and other non-allocable items of
earnings, all cash, marketable securities, forward purchase financing
agreements, and the Corporate headquarters facility. Financial information
by geographic area for 1996, 1995, and 1994 is summarized at the right (in
thousands):
1996 1995 1994
- --------------------------------------------------------------------------
Net sales
Domestic $1,915,268 $1,802,993 $1,713,152
Foreign 302,575 181,177 123,797
- --------------------------------------------------------------------------
Net $2,217,843 $1,984,170 $1,836,949
==========================================================================
Earnings
(losses) before income taxes
Domestic $ 442,694 $ 412,627 $ 375,698
Foreign 14,525 5,709 5,989
Corporate (86,832) (80,442) (75,054)
- --------------------------------------------------------------------------
Total $ 370,387 $ 337,894 $ 306,633
==========================================================================
Identifiable assets
Domestic $1,131,760 $1,183,058 $1,206,937
Foreign 613,375 370,515 191,468
Corporate 433,759 353,099 299,164
- --------------------------------------------------------------------------
Total $2,178,894 $1,906,672 $1,697,569
==========================================================================
Note 18 Contingent Liabilities
The Company is subject to various lawsuits and claims arising out of its
businesses which relate to contracts, environmental issues, product
liability, patent and trademark matters, taxes and other issues. In the
opinion of management, after consultation with counsel, the disposition of
these matters will not have a material adverse effect, individually or in
the aggregate, on the Company's financial position, results of operations,
or liquidity.
RESPONSIBILITY FOR CONSOLIDATED FINANCIAL STATEMENTS
The management of the Company is responsible for the integrity and
objectivity of the financial statements included in this Annual Report. In
fulfilling this responsibility, management maintains an effective system of
internal accounting controls and supports a comprehensive internal audit
program.
The Board of Directors has an Audit Committee consisting of independent
directors. The Audit Committee meets regularly with management, internal
auditors and Deloitte & Touche LLP, independent auditors. Deloitte & Touche
LLP and the internal auditors have full authority to meet with the Audit
Committee, either with or without management representatives present.
Deloitte & Touche LLP have completed their audit of the accompanying
consolidated financial statements. Their report appears on page 24.
FINANCIAL SUMMARY
<TABLE>
<CAPTION>
Years ended June 30
(in thousands,
except per-share data) 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operations
Net sales $2,217,843 $1,984,170 $1,836,949 $1,634,171 $1,547,057 $1,468,370 $1,309,019 $1,199,293 $1,033,747 $934,985
- ------------------------------------------------------------------------------------------------------------------------------------
Percent change 11.8 8.0 12.4 5.6 5.4 12.2 9.1 16.0 10.6 4.6
- ------------------------------------------------------------------------------------------------------------------------------------
Cost of products
sold 1,007,200 892,172 820,434 724,753 678,504 672,405 601,322 548,434 450,5277 422,149
Operating
expenses 795,603 732,941 690,584 613,061 612,074 677,468(d) 498,084 458,085 396,910 356,065
Other 44,653 21,163 19,298 21,172 17,382 21,315 (30,755) (28,189) (10,897) (17,588)
- ------------------------------------------------------------------------------------------------------------------------------------
Total costs and
expenses 1,847,456 1,646,276 1,530,316 1,358,986 1,307,960 1,371,188 1,068,651 978,330 836,540 760,626
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings before
income taxes 370,387 337,894 306,633 275,185 239,097 97,182 240,368 220,963 197,207 174,359
Income taxes 148,295 137,062 126,640 107,267 97,903 37,361 87,456 79,718 73,460 75,394
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings from
continuing
operations 222,092 200,832 179,993 167,918 141,194 59,821 152,912 141,245 123,747 98,965
Earnings (losses)
from discontinued
operations - - 32,064(a) (867) (23,429)(b) (7,075) 714 (17,101)(e) 8,823 5,934
Cumulative effect of
accounting
change - - - - (19,061)(c) - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 222,092 $ 200,832 $ 212,057 $ 167,051 $ 98,704 $ 52,746 $ 153,626 $ 124,144 $ 132,570 $104,899
===================================================================================================================================
Percent change,
continuing
operations 10.6 11.6 7.2 18.9 136.0 (60.9) 8.3 14.1 25.0 14.3
Common Stock
Weighted average
shares
outstanding(f) 51,935 53,147 53,800 54,698 54,366 54,063 54,873 55,333 55,127 54,652
Earnings (losses)
per common share:
Earnings from
continuing
operations $ 4.28 $ 3.78 $ 3.35 $ 3.07 $ 2.60 $ 1.11(d)$ 2.79 $ 2.55 $ 2.26 $ 1.82
Earnings (losses)
from
discontinued
operations - - 0.59(a) (0.02) (0.43)(b) (0.13) 0.01 (0.31)(e) 0.16 0.11
Cumulative effect
of accounting
change - - - - (0.35)(c) - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 4.28 $ 3.78 $ 3.94 $ 3.05 $ 1.82 $ 0.98 $ 2.80 $ 2.24 $ 2.42 $ 1.93
====================================================================================================================================
Dividends $ 2.12 $ 1.92 $ 1.80 $ 1.71 $ 1.59 $ 1.47 $ 1.29 $ 1.09 $ 0.92 $ 0.79
Stockholders'
equity at end
of year 18.20 18.01 17.04 16.03 14.92 14.47 15.00 14.19 13.19 11.51
Other Data
Continuing operations
Working capital
(deficiency) $ (50,041)$ 121,008 $ 128,443 $ 160,208 $ (25,322) $ 115,626 $ 151,602 $ 265,569 $ 145,780 $225,596
Property, plant
and equipment -
net 551,437 524,972 532,600 538,101 508,629 441,794 441,681 348,526 312,068 207,712
Property
additions 84,804 62,911 56,627 72,141 114,353 89,009 134,099 66,551 135,702 48,630
Long-term debt 356,267 253,079 216,088 204,000 203,627 405,341 5,807 5,192 20,739 24,513
Percent return on
net sales 10.0 10.1 9.8 10.3 9.1 4.1 11.7 11.8 12.0 10.6
Current ratio .9 1.3 1.3 1.4 0.9 1.3 1.7 1.9 1.5 2.3
Total assets 2,178,894 1,906,672 1,697,569 1,649,230 1,589,993 1,656,872 1,124,147 1,189,894 1,121,232 911,097
Stockholders'
equity 932,828 943,913 909,417 879,294 813,741 784,276 810,514 786,176 712,854 616,447
Percent return on
average
stockholders'
equity 23.8 21.7 24.2 19.8 12.3 6.4 19.1 16.4 19.9 18.0
====================================================================================================================================
</TABLE>
(a) Includes net gain on the sale of discontinued business of $31,430 or
$.58 per share.
(b) Includes special charges for the revaluation of certain intangible assets.
(c) Nonrecurring charge to recognize the accumulated postretirement health
benefit obligation at July 1, 1991, resulting from the adoption of
SFAS No. 106. Operating results preceding 1992 were not restated for the
adoption of this new standard.
(d) Includes a charge for restructuring of $125,250 or $1.45 per share.
(e) Includes net loss on the disposal of Olympic HomeCare Products of
$20,000, or $.36 per share.
(f) Weighted average shares outstanding and earnings per share from 1987
through 1989 assume full dilution from a note converted during 1989.
<PAGE>
QUARTERLY DATA
<TABLE>
<CAPTION>
(in thousands, except per-share amounts) 1st quarter 2nd quarter 3rd quarter 4th quarter year
======================================================================================================================
<S> <C> <C> <C> <C> <C>
Year Ended June 30, 1996
Net Sales $518,486 $466,789 $560,091 $672,477 $2,217,843
Cost of Products Sold 231,333 213,171 255,570 307,126 1,007,200
Net Earnings 58,779 37,911 59,599 65,803 222,092
Per Common Share
Net Earnings $ 1.12 $ 0.73 $ 1.15 $ 1.28 $ 4.28
Dividends 0.53 0.53 0.53 0.53 2.12
Market Price (NYSE)
High 73 3/8 79 1/4 89 3/8 89 1/8 89 3/8
Low 60 7/8 69 1/4 70 1/4 78 3/8 60 7/8
Year end 88 5/8
Price/earnings ratio, year end 21
Year Ended June 30, 1995
Net Sales $476,367 $414,454 $499,060 $594,289 $1,984,170
Cost of Products Sold 210,134 183,963 225,997 272,078 892,172
Net Earnings 53,181 34,095 54,034 59,522 200,832
Per Common Share
Net Earnings $ 1.00 $ 0.64 $ 1.02 $ 1.13 $ 3.78
Dividends 0.48 0.48 0.48 0.48 1.92
Market Price (NYSE)
High 52 3/4 59 1/2 62 3/8 65 3/4 65 3/4
Low 47 3/4 51 1/4 55 1/4 56 47 3/4
Year end 65 1/4
Price/earnings ratio, year end 17
========================================================================================================================
</TABLE>
THE COMPANY'S PRINCIPAL RETAIL BRANDS, PRODUCTS AND MARKETS
United States
Laundry Additives:
Clorox Regular, fresh scent, lemon fresh and floral
fresh liquid bleach
Clorox 2 Regular and lemon fresh dry and liquid
color-safe bleaches
Stain Out Soil and stain remover, liquid and spray
- -------------------------------------------------------------------------
Home Cleaning:
Clorox Toilet
Bowl Toilet bowl cleanser and automatic
toilet bowl cleaner
Clorox Clean-Up Dilutable household cleaner, spray
cleaner and gel
Formula 409 All-purpose spray cleaner, regular, professional strength,
and fresh scent glass & surface cleaner
Lestoil Heavy duty cleaner
Liquid-Plumr Drain opener, regular and professional strength; buildup
remover; and septic system treatment
Pine-Sol Dilutable cleaner, regular and lemon scent; professional
strength; spray cleaner
Soft Scrub Mild abrasive liquid cleanser: regular, lemon,
with bleach, and gel
S.O.S Steel wool soap pads: regular, lemon scent and juniors;
scrubber sponges
Tackle Household cleaner disinfectant
Tilex Instant mildew remover, soap scum remover
Tuffy Mesh scrubber
- -------------------------------------------------------------------------
Charcoal:
BBQ Bag Single-use, lightable bag of charcoal briquets
Kingsford Charcoal briquets, charcoal briquets with
mesquite and charcoal lighter
Match Light Instant lighting charcoal briquets
- -------------------------------------------------------------------------
Insecticides:
Black Flag Insecticides: ant and roach, flying insect and
other aerosols; Roach Motel; room fogger
Combat Insecticides: ant and roach bait stations;
SuperBait roach bait stations; ant granules and stakes;
roach gel; ant and roach aerosols and foggers
Holiday Insecticide: room fogger
- -------------------------------------------------------------------------
Cat Litter:
Control Cat litter
Fresh Step Cat litter
Fresh Step Scoop Scoopable cat litter
- -------------------------------------------------------------------------
Dressings & Sauces:
Hidden Valley Bottled salad dressing, dry salad dressing
and party dip mixes; bottled fat-free salad dressing;
ready-to-eat dips
Hidden Valley
Salad Crispins Seasoned mini-croutons
K.C. Masterpiece Barbecue sauce
Kitchen Bouquet Browning and seasoning sauce and gravy aid
- -------------------------------------------------------------------------
Brita Water filtration systems
=========================================================================
Professional Products
Clorox Germicidal bleach
Clorox Toilet bowl cleanser
Clorox Quat sanitizer and disinfectant
Clorox Clean-Up Dilutable cleaner
Combat Insecticides
Formula 409 All-purpose cleaner, glass & surface cleaner, and heavy
duty degreaser
Hidden Valley Salad dressings
K.C. Masterpiece Barbecue sauce
Kitchen Bouquet Browning and seasoning sauce and gravy aid
Liquid-Plumr Drain opener
Maxforce Professional insecticides: ant and roach baits;
roach gel; ant granules
Pine-Sol Dilutable cleaner
S.O.S Pot & pan detergent, steel wool soap pads
Tilex Instant mildew remover, soap scum remover
=========================================================================
International Markets, excluding export
Argentina
Brazil
Canada
Chile
Colombia
Costa Rica
Czech Republic
Dominican Republic
Egypt
Hong Kong
Hungary
Japan
Malaysia
Mexico
Panama
People's Republic of China
Peru
Poland
Puerto Rico
Republic of Korea
Romania
Saudi Arabia/Gulf States
Singapore
Slovak Republic
Spain
Taiwan
Thailand
Uruguay
Venezuela
Yemen Arab Republic
<TABLE>
<CAPTION>
EXHIBIT 21
(to Form 10-K)
THE CLOROX COMPANY
SUBSIDIARIES OF THE REGISTRANT
(100% owned unless otherwise indicated)
Subsidiaries Jurisdiction of Incorporation
- --------------- -----------------------------
<S> <C>
1109346 Ontario Ltd. Canada
American Sanitary Company S.A. Costa Rica
American Sanitary Cayman Islands
Company (Overseas) Inc. (51%)
Amesco Ltd. (49%) Cayman Islands
Brita America Inc. Nevada
Brita (Canada) Inc. Canada
Brita Ltd. (50%) Canada
The Brita Products Company Delaware
Brita (South America) Inc. (50%) Canada
Camello Cayman Co. Cayman Islands
Ciaba Acquisition S.A. Argentina
Ciaba Holdings S.A. Argentina
Clorox Argentina S.A. (90%) Argentina
Clorox (Barbados) Inc. Barbados
Clorox do Brasil Ltda. Brasil
The Clorox Company of Canada, Ltd. Canada
Clorox (Cayman Islands) Ltd. Cayman Islands
Clorox Chile S.A. Chile
The Clorox China Company Delaware
Clorox Export Company, Inc. Barbados
Clorox (Far East) Ltd. Hong Kong
The Clorox (Guangzhou) Company Ltd. (95%) People's Republic of China
The Clorox International Company Delaware
Clorox Korea Ltd. Korea
Clorox (Malaysia) Industries Sdn. Bhd. Malaysia
Clorox (Malaysia) Sdn. Bhd. Malaysia
Clorox de Mexico, S.A. de C.V. Mexico
Clorox del Pacifico S.A. (80%) Peru
Clorox de Panama S.A. Panama
Clorox del Peru S.A. Peru
Clorox Products Manufacturing Company Delaware
The Clorox Professional Products Company Delaware
The Clorox Company of Puerto Rico Delaware
The Clorox Sales Company Delaware
Clorox Services Company Delaware
The Clorox South Asia Company Delaware
Clorox Uruguay S.A. Uruguay
CLX Realty Co. Delaware
Corporacion Clorox de Venezuela, S.A. Venezuela
EcuaClorox S.A. Ecuador
Electroquimicas Unidas S.A.C.I. Chile
Henkel Iberica, S.A. (20%) Spain
The Household Cleaning Products Egypt
Company of Egypt, Ltd. (49%)
The HV Food Products Company Delaware
HV Manufacturing Company Delaware
Kaflex S.A. Argentina
Kingsford Charcoal of Canada, Ltd. Canada
The Kingsford Products Company Delaware
Marpla Forestal S.A. Argentina
The Mexco Company Delaware
Mohammed Ali Abudawood and Saudi Arabia
Company for Industry (30%)
National Cleaning Products Saudi Arabia
Company Limited (30%)
Papelara Mar del Plata, S.A..I. y C. Argentina
PMP Acquisition S.A. Argentina
Poett San Juan S.A. Argentina
Productos Del Hogar, C. por A. (49%) Dominican Republic
Rocha Color S.A. Uruguay
Tecnoclor, S.A. (60%) Colombia
United Cleaning Products Mfg. Co. Ltd. (33%) Yemen Arab Republic
Yuhan-Clorox Co., Ltd. (50%) Korea
</TABLE>
DELOITTE & TOUCHE LLP
(LOGO)
50 Fremont St.
San Francisco, CA 94105-2230
Telephone (415) 247-4000
Facsimile (415) 247-4329
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in The Clorox Company
Registration Statements No. 33-4083 on Form S-3, and Nos. 33-41131,
33-41277, 2-88106 (Post-Effective Amendment No. 2), 33-24582,
33-56565 and 33-56563 on Form S-8 of our report dated
August 8, 1996 incorporated by reference in this Annual Report
on Form 10-K of The Clorox Company for the year ended June 30, 1996.
/s/ Deloitte & Touche LLP
September 26, 1996
Deloitte Touche Tohmatsu International
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE FINANCIAL
STATEMENTS OF THE CLOROX COMPANY FOR THE FISCAL YEAR ENDED JUNE 30, 1996, AS
PRESENTED IN THE CLOROX COMPANY'S FORM 10-K FOR SUCH PERIOD, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 48897
<SECURITIES> 41931
<RECEIVABLES> 316627
<ALLOWANCES> 1521
<INVENTORY> 138848
<CURRENT-ASSETS> 573845
<PP&E> 961281
<DEPRECIATION> 409844
<TOTAL-ASSETS> 2178894
<CURRENT-LIABILITIES> 623886
<BONDS> 356267
0
0
<COMMON> 55422
<OTHER-SE> 877406
<TOTAL-LIABILITY-AND-EQUITY> 2178894
<SALES> 2217843
<TOTAL-REVENUES> 2217843
<CGS> 1007200
<TOTAL-COSTS> 1802803
<OTHER-EXPENSES> 6365
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38288
<INCOME-PRETAX> 370387
<INCOME-TAX> 148295
<INCOME-CONTINUING> 222092
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 222092
<EPS-PRIMARY> 4.28
<EPS-DILUTED> 0
</TABLE>
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED AGREEMENT, effective ,
is between THE CLOROX COMPANY, a Delaware corporation
(the "Company"), and (the "Executive") and
replaces a prior agreement with the same effective date.
RECITAL
The Company and the Executive want to enter a
written agreement concerning the terms of the Executive's
employment with the Company and the terms of the termination
of that employment.
TERMS OF AGREEMENT
1. Term of Employment.
(a) Basic Term. The term of this Agreement shall commence
on the effective date of this Agreement and end upon the earliest
of (i) the anniversary thereof (the "Term Date"), as, and
to the extent, extended under Section 1 (b), (ii) the date upon
which the Executive's employment is terminated in accordance with
Section 4, and (iii) the first day of the month following the
Executive's 65th birthday.
(b) Extension of Term. Subject to Section 1(a)(iii) and
to Section 4, the Term Date will be automatically extended from
the inception of this Agreement until the Company gives the Executive
written notice that automatic extension has ceased and that this
Agreement is to be terminated on the Term Date as extended to that
point. The Company's right not to extend the Agreement shall be
with or without cause, and the Company's exercise of its right not
to extend the Agreement will not necessarily terminate the Executive's
employment with the Company.
2. Position, Duties, Responsibilities.
(a) Position. The Company agrees to continue the Executive
in its employ, and the Executive agrees to continue employment with
the Company subject to the terms and conditions of this Agreement.
The Executive shall devote his best efforts and the equivalent of full
time employment to the performance of the services customarily
incident to the Executive's current office and to such other
services as may be reasonably requested by the Board. The
Company shall retain full direction and control of the means
and methods by which the Executive performs the above services
and of the place(s) at which such services are to be rendered.
(b) Other Activities. Excluding any periods of vacation
and sick leave to which the Executive is entitled, the Executive
agrees to devote reasonable attention and time during normal hours
to the business and affairs of the Company, and to the extent
necessary to discharge the responsibilities assigned to the
Executive hereunder, to use the Executive's reasonable best
efforts to perform faithfully and efficiently such responsibilities.
It shall not be a violation of this Agreement for the Executive
to (A) serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions on a
part-time basis not to exceed five hours per week in
the aggregate and (C) manage personal investments, so
long as such activities do not significantly interfere
with the performance of the Executive's responsibilities
as an employee of the Company in accordance with this
Agreement. It is expressly understood and agreed that
to the extent that any such activities have been
conducted by the Executive prior to the Effective Date,
the continued conduct of such activities (or the conduct
of activities similar in nature and scope thereto)
subsequent to the Effective Date shall not thereafter
be deemed to interfere with the performance of the
Executive's responsibilities to the Company.
3. Salary; Incentive Compensation; Benefits; Expenses.
a) Salary. In consideration of the services to
be rendered hereunder, including, without limitation,
services to any Affiliated Company, the Executive shall
be paid an annual base salary ("Annual Base Salary")
beginning at the level being paid on the effective date,
payable at the times and pursuant to the procedures
regularly established, and as they may be amended, by
the Company during the course of this Agreement. The
Annual Base Salary shall be reviewed periodically in
accordance with the Company's regular administrative
practice for adjusting salaries of Executive Officers
(the Chairman of the Board, the President and all Vice
Presidents). The Company may reduce the Executive's
salary only if the salaries of other Executive Officers
of the Company are at the same time being similarly
adjusted and if the percentage reduction in the Executive's
salary does not exceed that of the other Executive Officers.
(b) Management Incentive Compensation Plan;
Long Term Compensation Program. The Executive shall be
entitled to participate in the Company's Management
Incentive Compensation Plan (the "MIC Plan") and 1987
Long Term Compensation Program and any later Long Term
Compensation Program which is primarily based on Company
stock (the "LTC Programs") in accordance with the Company's
practice for administering the MIC Plan and the LTC Program
with respect to Executive Officers, unless the Company
suspends or terminates the MIC Plan or the LTC Program,
or both.
(c) Benefits. As he becomes eligible therefor,
the Company shall provide the Executive with the right to
participate in and to receive benefits from all present
and future welfare benefit plans, practices, policies
and programs (including without limitation, medical,
prescription drugs, dental, disability, salary continuance,
employee life, group life, accidental death and travel
accident insurance plans and programs), all incentive
savings and retirement plans, practices and programs,
including without limitation the Supplemental Executive
Retirement Plan (the "SERP"), and all similar benefits,
made available generally to Executive Officers of the
Company. The Executive shall be entitled to annual vacation
as determined in accordance with Company policy which shall
be taken with the prior approval of the Company. The amount
and extent of benefits to which Executive is entitled shall be
governed by each specific benefit plan, as it may be amended
from time to time. The Executive shall also be entitled to
the death and disability benefits described in Section 4.
The Company may suspend or terminate any benefit plan
described in this Section 3(c).
(d) Expenses. The Company shall reimburse the
Executive for reasonable travel and other business expenses
incurred by the Executive in the performance of his duties
hereunder in accordance with the Company's general policies,
as they may be amended from time to time during the course
of this Agreement.
4. Termination of Employment.
(a) By Death. The Executive's employment shall
terminate automatically upon his death. The Company shall
pay to the Executive's beneficiaries or estate, as
appropriate, the salary to which he is entitled pursuant
to Section 3 (a) through the end of the month in which
death occurs. The Company shall also pay the Executive's
beneficiaries or estate, as appropriate, a pro rata portion
(through the date of death) of the Executive's target MIC
Plan award for the fiscal year of his death. After the
payments called for in this Section 4(a) are made, the
Company's obligations hereunder shall terminate. This
Section shall not affect entitlement of the Executive's
estate or beneficiaries to death benefits under any benefit
plan of the Company.
(b) By Disability. Should the Executive begin to
receive benefits under the Company's Long Term Disability
Plan, the Executive's employment may terminate at the Company's
option. If the Company so elects, the Company shall pay the
salary to which the Executive is entitled pursuant to
Section 3(a) through the date of termination, and in lieu
of any MIC Plan award under Section 3(b) for the fiscal
year in which termination occurs, the Company shall pay
the Executive a pro rata portion (through the termination date)
of the Executive's target MIC Plan award for the fiscal
year of the termination. Thereafter the Company's obligations
hereunder shall terminate.
(c) By Company For Cause. The Company may terminate
the Executive's employment for Cause (as defined below) at
any time without notice and without liability. The Company
shall pay the Executive the salary to which he is entitled
pursuant to Section 3(a) through the end of the day upon
which termination occurs, and thereafter the Company's
obligations hereunder shall terminate. The Executive shall
not be entitled to any MIC Plan award pursuant to Section 3(b)
for the fiscal year in which termination occurs. Termination
shall be for Cause if:
(i) the Executive willfully neglects significant
duties he is required to perform or willfully violates material
Company policy, and, after being warned in writing, continues
to neglect such duties or continues to violate the specified
Company policy;
(ii) the Executive commits a material act of
dishonesty, fraud, misrepresentation or other act of moral
turpitude;
(iii) the Executive exhibits gross negligence in
the course of employment; or
(iv) the Executive fails to obey a lawful
direction of the Board of Directors.
(d) By the Executive or the Company At Will.
(i) Termination by the Company. The Company may,
at any time, terminate the Executive's employment without
Cause. If the Company does so, the severance payment provisions
of Section 6 shall apply and the Company shall have no
additional liability. The Executive hereby agrees that the
Company may dismiss him under this Section 4(d)(i) without
regard (A) to any general or specific policies (whether written
or oral) of the Company relating to the employment or
termination of its employees, or (B) to any statements made to
the Executive, whether made orally or contained in any document,
pertaining to the Executive's relationship with the Company.
exercising its right under Section 4(c) to terminate the
Executive's employment for Cause, and such a termination (
regardless of when made) shall not give rise to damages under
Section 6.
(ii) Termination by the Executive. The Executive
may, upon giving 10 business days' written notice to the
Company, terminate his employment, without liability, for
any reason. If the Executive terminates his employment
pursuant to this Section 4(d)(ii), the Company shall pay the
Executive the salary to which he is entitled pursuant to
Section 3(a) through the end of the 10 business days notice
period, and thereafter the Company's obligations hereunder
shall terminate. The Executive shall not be entitled to any
MIC Plan award pursuant to Section 3(b) for the fiscal year
in which he terminates.
(e) Termination Obligations.
(i) The Executive hereby acknowledges and agrees
that all personal property and equipment furnished to or
prepared by the Executive in the course of or incident to his
employment, belong to the Company and shall, if physically
returnable, be promptly returned to the Company upon termination
of his employment. "Personal property" includes, without
limitation, all books, manuals, records, reports, notes, contracts,
lists, blueprints, and other documents, or materials, or
copies thereof, and Proprietary Information (as defined below).
Following termination, the Executive will not retain any written
or other tangible material containing any Proprietary Information.
(ii) Upon termination of his employment, the Executive
shall be deemed to have resigned from all offices and
directorships then held with the Company or any Affiliated
Company, and will execute a letter of resignation if requested.
(iii) The Executive's obligations under Sections 4(e),
5, 7 and 14 shall survive termination of his employment and the
expiration of this Agreement.
5. Post Termination Obligations.
(a) Proprietary Information Defined. "Proprietary
Information" is all information and any idea in whatever
form, tangible or intangible, pertaining in any manner to
the business of the Company or any Affiliated Company, or
to its clients, consultants, or business associates, unless:
(i) the information is or becomes publicly known through
lawful means; (ii) the information was rightfully in the
Executive's possession or part of his general knowledge
prior to his employment by the Company; or (iii) the information
is disclosed to the Executive without confidential or
proprietary restriction by a third party who rightfully
possesses the information (without confidential or
proprietary restriction) and did not learn of it, directly
or indirectly, from the Company.
(b) General Restrictions on Use of Proprietary
Information. The Executive agrees to hold all Proprietary
Information in strict confidence and trust for the sole
benefit of the Company and not to, directly or indirectly,
disclose, use, copy, publish, summarize, or remove from
Company's premises any Proprietary Information (or remove
from the premises any other property of the Company),
except (i) during his employment to the extent necessary to
carry out the Executive's responsibilities under this
Agreement, and (ii) after termination of his employment as
specifically authorized in writing by the Board.
(c) Non-Solicitation and Non-Raiding. To
forestall the disclosure or use of Proprietary Information
in breach of Section 5(b), and in consideration of this
Agreement, Executive agrees that for a period of two years
after termination of his employment, he shall not, for
himself or any third party, directly or indirectly (i) divert
or attempt to divert from the Company (or any Affiliated
Company) any business of any kind in which it is engaged,
including, without limitation, the solicitation of its
customers as to products which are directly competitive
with products sold by the Company at the time of the
Executive's termination, or interference with any of its
suppliers or customers, or (ii) solicit for employment
any person employed by the Company, or by any Affiliated
Company, during the period of such person's employment
and for a period of one year after the termination of such
person's employment with the Company.
(d) Contacts with the Press. Following
termination, the Executive will continue to abide by the
Company's policy that prohibits discussing any aspect
of Company business with representatives of the press
without first obtaining the permission of the Company's
Public Relations Department.
(e) Remedies. Nothing in this Section 5 is
intended to limit any remedy of the Company under the
California Uniform Trade Secrets Act (California Civil
Code Section 3426), or otherwise available under law.
6. Severance Payments; Requirement of Mitigation; Release.
(a) Severance Payments. The Company and the
Executive acknowledge that it would be impractical or
extremely difficult to fix the Executive's actual
damages in the case of termination at will by the Company
pursuant to Section 4(d)(i). Therefore, in the event of
such a termination and notwithstanding any other provision
of this Agreement, in exchange for and in consideration of
Executive's execution and nonrevocation of a General Release
("Release") in a form substantially equivalent to the
attached Exhibit, and subject to the mitigation provisions
of Section 6(b), the Executive shall be entitled to severance
payments made up of the following components:
(i) Salary Component.
Continuation of salary, at a monthly rate
equal to the highest monthly base salary rate in effect
during the twelve month period preceding the termination
of employment for a period equal to what would be the
remaining term of this Agreement as determined in Sections
1(a)(i) or (iii) had the termination not occurred, or
until the Executive's death if that occurs first (the
"Severance Payment Period"). Such payments will be made
on the Company's regular semimonthly payroll dates.
(ii) MIC Plan Components.
(A) Promptly after termination, the
Executive will be paid a lump sum amount equal to 75% of
his target MIC Award for the fiscal year preceding the fiscal
year in which the termination occurs, prorated to the date
of termination.
(B) In addition, for the Severance
Payment Period, together with and in addition to each
payment described in (i) above, the Company shall pay the
Executive semimonthly an amount equal to one twenty-fourth
of 75% of the Executive's target MIC Award for the fiscal
year preceding the fiscal year in which the termination
occurs, for each year of the Severance Payment Period.
(iii) Medical/Dental Plans Component.
(A) Continuation for the Severance Payment
Period on the same basis as an employee of the Company of
the right to participate in any Medical and/or Dental
Benefit Plans as and if offered by the Company to its
salaried employees. The Executive shall not participate
in any other Company sponsored welfare benefit plans after
the termination of employment.
(B) In addition, if at the end of the
Severance Payment Period the Executive will be age 55 or older
and at least 10 years will have passed since the beginning
of the Executive's last period of employment with the
Company, continuation of the right to participate in Medical
and/or Dental Plans as and if offered to former employees
whose employment terminated at or after age 55 with ten or
more years of service on the same terms and conditions as
for such former employees including premium contributions
from the Executive as in effect from time to time. Such
right to participate shall apply from the time such
coverage would otherwise terminate pursuant to (iii)(a)
and shall continue until the Executive attains age 65;
thereafter the Executive may participate in the Company's
Retiree Health Plan as and if it may exist from time to
time in the future, if he would be eligible to participate
pursuant to the terms of that Plan.
(iv) Supplemental Executive Retirement
Plans Component.
Benefit credits and service accruals
under the SERP will continue during the Severance Payment
Period, if, at the end of that period and taking into account
such service accruals the Executive will be age 55 or older
and will be credited with ten or more years of service under
the SERP. During this period, benefit credits shall be
based on the compensation required to be paid under (i) and
(ii)(A) and (B), above, without regard to any adjustment
made pursuant to paragraph 6(b) below.
(v) Long Term Compensation Programs Component.
(A) If the Executive qualifies for
continuation of benefit credits and service accruals under
the SERP pursuant to (iv) above, then for purposes of the
LTC Programs his termination of employment will be deemed
to be a Termination of Employment Due to Retirement occurring
at the end of the Severance Payment Period if the Executive
irrevocably elects prior to the beginning of the Severance
Payment Period to begin retirement benefits under the Company's
Pension Plan and the SERP at the conclusion of the Severance
Payment Period. If he does not so elect, all Restricted
Stock and unvested Stock Options and other LTC Program awards
which remain at the date of termination will be forfeited
unless their terms specifically provide to the contrary in
the event of a termination by the Company other than for
Cause. Even in the event such an election is made, any
incentive stock options which are not exercised within 90
days of the beginning of the Severance Payment Period will
convert to non-qualified stock options thereafter.
(B) If the Executive does not qualify for
continuation of benefit credits and service accruals under
the SERP pursuant to (iv) above, or does not make the
election described in Section 6(a)(v)(A), then for purposes
of all Plans in the LTC Program, he will be deemed to have
terminated employment on the day prior to the beginning of
the Severance Payment Period. Shares of Restricted Stock,
any unvested stock options and any Performance Units shall be
forfeited.
(vi) Automobile Component.
The Executive shall be entitled to
purchase the Company-leased automobile, if any, being used
by the Executive prior to termination at the "buyout amount"
specified by the vehicle's lessor.
The parties acknowledge that the amounts and benefits provided
in (i) through (vi) above constitute a reasonable estimate of
and compensation for any damages the Executive may suffer as t
he result of his termination of employment under this Agreement.
If the Executive does not execute, or having executed, effectively
revokes the Release, the Company will not be obligated to
provide any benefits or payments of any kind to the Executive.
(b) Mitigation Damages. During the Severance Payment
Period, the Executive shall make reasonable efforts to secure
other employment or self-employment opportunities (the
suitability and acceptability of which shall be in the
Executive's sole judgment), and at the Company's request
(which shall not be made more frequently than semi-annually)
the Executive shall report his efforts to the Company.
The Executive shall promptly and regularly report to
the Company all earned income, and all medical and dental
coverage of the type described in (a)(iii) above provided
or made available to the Executive by a subsequent employer.
(i) The Executive's severance payments under
(a)(i) and (a)(ii)(B) above, shall be reduced by his Earned
Income during the Severance Payment Period. "Earned Income"
refers to wages, salary, fees or other immediately taxable
compensation for personal services rendered as an employee
or contractor and to the net before tax earnings from
self-employment. The reduction provided for in this
subsection (i) shall apply only to severance payments due
from the Company from and after the Executive's receipt of
such Earned Income. At the Company's request, the
Executive will provide the Company with copies of appropriate
pages of his federal and state income tax returns to verify
Earned Income amounts, from which pages irrelevant
material may be redacted.
(ii) The Executive's medical and dental
benefit coverage under 6(a)(iii)(A) and/or (B) shall be
secondary to medical and/or dental coverage provided to
the Executive by a subsequent employer and the Executive
will make every good faith effort to participate in any
such coverage. For any period during which the Executive
does not make such a good faith effort the Executive's
medical and dental plan coverage under 6(a)(iii)(A) and/or
(B) shall be completely suspended. If medical and dental
benefit coverage ceases to be provided by the subsequent
employer, Executive may have his 6(a)(iii)(A) and/or (B)
coverage from the Company become his primary coverage again.
(c) Lack of Participation in Qualified Plans.
Upon termination of employment the Executive shall cease
to participate in any qualified benefit plan maintained by
the Company such as the Pension Plan, the Value Sharing
Plan including the Tax Reduction Investment Plan, and the
Executive shall also cease to participate in any welfare
benefit plan maintained by the Company, except as otherwise
provided in (a)(iii) above or under the terms of such plan.
No employee or employer contributions will be made to any
qualified benefit plan based on any bonus paid after after
the termination of the Executive's employment.
7. Successors.
(a) This Agreement is personal to the Executive
and without the prior written consent of the Company
shall not be assignable by the Executive otherwise than
by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable
by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of
and be binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that
the Company would be required to perform it if no such
succession had taken place. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and
any successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of
law, or otherwise.
8. Notices. All notices or other communications required o
r permitted hereunder shall be made in writing and shall be
deemed to have been duly given if delivered by hand or
mailed, postage prepaid, by certified or registered mail,
return receipt requested, and addressed to the Company at:
The Clorox Company
1221 Broadway
Oakland, CA 94612
Attn: General Counsel
or to the Executive at the address written below the
Executive's signature on the last page of this document.
Notice of change of address shall be effective only
when done in accordance with this Section.
9. Entire Agreement. Together with the Change of
Control Agreement effective between the
Executive and the Company, the terms of this Agreement are
intended by the parties to be the final expression of their
agreement with respect to the employment of Executive by
the Company and may not be contradicted by evidence of
any prior or contemporaneous agreement. The parties
further intend that this Agreement and said Change of
Control Agreement shall constitute the complete and
exclusive statement of their terms and that no extrinsic
evidence whatsoever may be introduced in any judicial,
administrative, or other legal proceeding involving either
Agreement. The Change of Control Agreement and this
Agreement supersede any prior Agreements, written or oral,
between the Company and the Executive concerning the terms
of his employment.
10. Amendments; Waivers. This Agreement may not be
modified, amended, or terminated except by an instrument
in writing, signed by the Executive and by a duly
authorized representative of the Company other than
Executive. By an instrument in writing similarly executed,
either party may waive compliance by the other party with
any provision of this Agreement that such other party was
or is obligated to comply with or perform, provided,
however, that such waiver shall not operate as a waiver
of, or estoppel with respect to, any other or subsequent
failure. No failure to exercise and no delay in exercising
any right, remedy, or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise
of any right, remedy, or power hereunder preclude any
other or further exercise thereof or the exercise of any
other right, remedy, or power provided herein or by law or
in equity.
11. Severability; Enforcement. The invalidity or
unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other
provision of this Agreement.
12. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State
of California, without reference to principles of conflict
of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect.
This Agreement may not be amended or modified otherwise
than by a written agreement executed by the parties hereto
or their respective successors and legal representatives.
13. Executive Acknowledgment. Executive acknowledges
(a) that he has consulted with or has had the opportunity
to consult with independent counsel of his own choice
concerning this Agreement and has been advised to do
so by the Company, and (b) that he has read and
understands the Agreement, is fully aware of its legal
effect, and has entered into it freely based on his own
judgment.
14. Arbitration. Any controversy between the Executive,
his heirs or estate and the Company or any employee of the
Company, including but not limited to, those involving the
construction or application of any of the terms, provisions
or conditions of this Agreement or otherwise arising out
of or related to this Agreement, shall be settled by
arbitration before a single arbitrator in accordance with
the then current commercial arbitration rules of the
American Arbitration Association, and judgment on the award
rendered by the arbitrator may be entered by any court
having jurisdiction thereof. The location of the arbitration
shall be San Francisco, California if the Executive's current
or most recent location of employment with the Company is
or was located at the Company's Technical Center or General
Offices. If it is or was elsewhere, the arbitration shall
be held at the city nearest to the Executive's last location
of employment with the Company which has an office of the
American Arbitration Association. The arbitrator may in the
arbitrator's discretion award attorney's fees to the Executive.
15. Withholdings. The Company may withhold from any
amounts payable under this Agreement such Federal, state,
local or foreign taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
The parties have duly executed this Agreement as
of the effective date which appears at the beginning of
this Agreement.
THE CLOROX COMPANY
The Company
By:
-------------------- ---------------------
E. A. Cutter (Executive)
Its Senior Vice President
---------------------
(Address)
CHANGE OF CONTROL
EMPLOYMENT AGREEMENT
THIS AGREEMENT effective , is between THE
CLOROX COMPANY, a Delaware corporation (the "Company") and
(the "Executive").
The Board of Directors of the Company (the "Board"),
has determined that it is in the best interests of the Company
and its shareholders to assure that the Company will have the
continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as
defined below) of the Company. The Board believes it is imperative
to diminish the inevitable distraction of the Executive by virtue
of the personal uncertainties and risks created by a pending or
threatened Change of Control and to encourage the Executive's
full attention and dedication to the Company currently and in
the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits
arrangements upon a Change of Control which ensure that the
compensation and benefits expectations of the Executive will
be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these
objectives, the Board has caused the Company to enter into
this Agreement.
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
1. Certain Definitions.
(a) The "Effective Date" shall mean the first
date during the Change of Control Period (as defined in
Section 1(b)) on which a Change of Control (as defined in
Section 2) occurs. Anything in this Agreement to the
contrary notwithstanding, if a Change of Control occurs
and if the Executive's employment with the Company is
terminated prior to the date on which the Change of Control
occurs, and if it is reasonably demonstrated by the Executive
that such termination of employment (i) was at the request of
a third party who has taken steps reasonably calculated to
effect a Change of Control or (ii) otherwise arose in
connection with or anticipation of a Change of Control,
then for all purposes of this Agreement the "Effective
Date" shall mean the date immediately prior to the date
of such termination of employment.
(b) The "Change of Control Period" shall mean
the period commencing on the date hereof and ending on
the anniversary of the date hereof; provided, however,
that commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and
each annual anniversary thereof shall be hereinafter
referred to as the "Renewal Date"), unless previously
terminated, the Change of Control Period shall be
automatically extended so as to terminate years from
such Renewal Date, unless at least 60 days prior to the Renewal
Date the Company shall give notice to the Executive that the
Change of Control Period shall not be so extended.
(c) "Henkel" shall mean Henkel, KGaA or any
entity controlled by Henkel KGaA.
(d) The "Separation Period" shall mean the period
from the Date of Termination through the earlier of the first
day of the month following the Executive's 65th birthday or
the second anniversary thereof,
(e) The "Target Annual Bonus" shall mean the Annual
Bonus that the Executive would have received for the year in
which the Date of Termination occurs, if the target goals had
been achieved.
2. Change of Control. For the purpose of this Agreement,
a "Change of Control" shall mean:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (a "Person") of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 20%, or in
the case of Henkel KGaA, or any person controlled by it
("Henkel"), more than the percentage of the Company's issued
common stock agreed to in paragraph 4(a) of the June 18, 1981
agreement between the Company and Henkel, as amended, of either
(i) the then outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors
(the "Outstanding Company Voting Securities"); provided,
however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of
Control: (i) any acquisition directly from the Company,
(ii) any acquisition by the Company, including any acquisition
which by reducing the number of shares outstanding, is the
sole cause for increasing the percentage of shares
beneficially owned by any such Person or by Henkel to more than
the applicable percentage set forth above, (iii) any acquisition
by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the
Company or (iv) any acquisition by any corporation pursuant to
a transaction which complies with clauses (i), (ii) and (iii)
of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute
the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to the
date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board,
and if Henkel is not the acquiring person, any individual
nominated as a representative of Henkel pursuant to the
agreement between Henkel and the Company dated July 16,
1986, shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose,
any such individual whose initial assumption of office occurs
as a result of an actual or threatened election contest with
respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board; or
(c) Consummation by the Company of a reorganization,
merger or consolidation or sale or other disposition of all o
r substantially all of the assets of the Company or the
acquisition of assets of another corporation (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals
and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly,
more than 50% of, respectively, the then outstanding shares
of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally
in the election of directors, as the case may be, of the
corporation resulting from such Business Combination
(including, without limitation, a corporation which as a
result of such transaction owns the Company or all or
substantially all of the Company's assets either
directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (ii)
no Person (excluding any employee benefit plan (or
related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the
then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of
such corporation except to the extent that such ownership
existed prior to the Business Combination and (iii) at
least a majority of the members of the board of directors
of the corporation resulting from such Business Combination
were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of
the Board, providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
3. Employment Period.
(a) This Agreement shall become effective on the
Effective Date. Before the Effective Date, the terms and
conditions of the Executive's employment shall be as set
forth in the employment agreement between the Executive
and the Company dated , 1996, (the "Current
Agreement") during the term thereof. From and after the
Effective Date, this Agreement shall supersede the
Current Agreement and any other agreement between the
parties with respect to the subject matter hereof.
(b) The Company agrees to continue the Executive
in its employ, and the Executive hereby agrees to remain
in the employ of the Company subject to the terms and
conditions of this Agreement, for the period commencing
on the Effective Date and ending on the earlier of the
first day of the month following the Executive's 65th
birthday or the anniversary of such date (the
"Employment Period").
4. Terms of Employment.
(a) Position and Duties. (i) During the
Employment Period, (A) the Executive's position (including
status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least
commensurate in all material respects with the most
significant of those held, exercised and assigned to the
Executive at any time during the 120-day period immediately
preceding the Effective Date and (B) the Executive's
services shall be performed at the location where the
Executive was employed immediately preceding the Effective
Date or any office or location not more than 50 miles from
such location.
(ii) During the Employment Period, and
excluding any periods of vacation and sick leave to which
the Executive is entitled, the Executive agrees to devote
reasonable attention and time during normal business hours
to the business and affairs of the Company and, to the
extent necessary to discharge the responsibilities assigned
to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and
efficiently such responsibilities. During the Employment
Period it shall not be a violation of this Agreement for
the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill
speaking engagements or teach at educational institutions on
a part-time basis not to exceed five hours per week in the
aggregate and (C) manage personal investments, so long as
such activities do not significantly interfere with the
performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement.
It is expressly understood and agreed that to the extent
that any such activities have been conducted by the
Executive prior to the Effective Date, the continued conduct
of such activities (or the conduct of activities similar in
nature and scope thereto) subsequent to the Effective Date
shall not thereafter be deemed to interfere with the
performance of the Executive's responsibilities to the Company.
(b) Compensation.
(i) Base Salary. During the Employment Period,
the Executive shall receive an annual base salary ("Annual
Base Salary"), which shall be paid at a monthly rate, at least
equal to twelve times the highest monthly base salary paid or
payable, including any base salary which has been earned but
deferred, to the Executive by the Company and its affiliated
companies in respect of the twelve-month period immediately
preceding the month in which the Effective Date occurs.
During the Employment Period, the Annual Base Salary shall be
reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date
and thereafter at least annually. Any increase in Annual Base
Salary shall not serve to limit or reduce any other obligation
to the Executive under this Agreement. Annual Base Salary shall
not be reduced after any such increase and the term Annual
Base Salary as utilized in this Agreement shall refer to Annual
Base Salary as so increased. As used in this Agreement, the term
"affiliated companies" shall include any company controlled by,
controlling or under common control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary,
the Executive shall have the opportunity to earn, for each fiscal
year ending during the Employment Period, an annual bonus (the
"Annual Bonus") in cash at least equal to the highest amount
the Executive had the opportunity to earn under the Management
Incentive Compensation ("MIC") Plan for any of the last three
full fiscal years prior to the Effective Date (annualized in
the event that the Executive was not employed by the Company
for the whole of such fiscal year). Each such Annual Bonus
shall be paid no later than the end of the third month of the
fiscal year next following the fiscal year for which the Annual
Bonus is awarded, unless the Executive shall elect to defer the
receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans.
During the Employment Period, the Executive shall be entitled
to participate in all incentive, savings and retirement plans,
practices, policies and programs applicable generally to other
peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured
with respect to both regular and special incentive opportunities,
to the extent, if any, that such distinction is applicable),
savings opportunities and retirement benefit opportunities, in
each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and its affiliated
companies for the Executive under such plans, practices,
policies and programs as in effect at any time during the 120-day
period immediately preceding the Effective Date or if more
favorable to the Executive, those provided generally at any time
after the Effective Date to other peer executives of the Company
and its affiliated companies.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as
the case may be, shall be eligible for participation in and
shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and
its affiliated companies (including, without limitation,
medical, prescription drugs, dental, disability, salary
continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent
applicable generally to other peer executives of the Company
and its affiliated companies, but in no event shall such
plans, practices, policies and programs provide the Executive
with benefits which are less favorable, in the aggregate,
than the most favorable of such plans, practices, policies and
programs in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or,
if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives
of the Company and its affiliated companies.
(v) Expenses. During the Employment Period,
the Executive shall be entitled to receive prompt reimbursement
for all reasonable expenses incurred by the Executive in
accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect
for the Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Company and its
affiliated companies.
(vi) Fringe Benefits. During the Employment
Period, the Executive shall be entitled to fringe benefits,
including, without limitation, tax and financial planning
services, payment of club dues, and, if applicable, use of an
utomobile and payment of related expenses, in accordance with
the most favorable plans, practices, programs and policies of
the Company and its affiliated companies in effect for the
Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive,
as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the
Employment Period, the Executive shall be entitled to an
office or offices of a size and with furnishings and other
appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of
the foregoing provided to the Executive by the Company and
its affiliated companies at any time during the 120-day
period immediately preceding the Effective Date or, if
more favorable to the Executive, as provided generally at
any time thereafter with respect to other peer executives
of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period,
the Executive shall be entitled to paid vacation in accordance
with the most favorable plans, policies, programs and practices
of the Company and its affiliated companies as in effect for
the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its
ffiliated companies.
5. Termination of Employment.
(a) Death or Disability. The Executive's employment
shall terminate automatically upon the Executive's death
during the Employment Period. If the Company determines in
good faith that the Disability of the Executive has occurred
during the Employment Period (pursuant to the definition of
Disability set forth below), it may give to the Executive
written notice in accordance with Section 12(b) of this
Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the
Company shall terminate effective on the 30th day after receipt
of such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such receipt,
the Executive shall not have returned to full-time performance
of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from
the Executive's duties with the Company on a full-time basis
for 180 consecutive business days as a result of incapacity
due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the Executive's
legal representative.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes
of this Agreement, "Cause" shall mean:
(i) the willful and continued failure of the
Executive to perform substantially the Executive's duties
with the Company or one of its affiliates (other than any
such failure resulting from incapacity due to physical or
mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board, the
Chief Executive Officer or a senior officer of the Company
which specifically identifies the manner in which the Board,
Chief Executive Officer or senior officer believes that the
Executive has not substantially performed the Executive's
duties, or
(ii) the willful engaging by the Executive in
illegal conduct or gross misconduct which is materially
and demonstrably injurious to the Company.
For purposes of this provision, no act or failure to act,
on the part of the Executive, shall be considered "willful"
unless it is done, or omitted to be done, by the Executive
in bad faith or without reasonable belief that the Executive's
action or omission was in the best interests of the Company.
Any act, or failure to act, based upon authority given
pursuant to a resolution duly adopted by the Board or upon
the instructions of the Chief Executive Officer or a senior
officer of the Company or based upon the advice of counsel
for the Company shall be conclusively presumed to be done,
or omitted to be done, by the Executive in good faith and
in the best interests of the Company. The cessation of
employment of the Executive shall not be deemed to be for
Cause unless and until there shall have been delivered to
the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice
is provided to the Executive and the Executive is given an
opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the
Board, the Executive is guilty of the conduct described in
subparagraph (i) or (ii) above, and specifying the
particulars thereof in detail.
(c) Good Reason. The Executive's employment may
be terminated by the Executive for Good Reason. For
purposes of this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any
duties inconsistent in any respect with the Executive's
position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as
contemplated by Section 4(a) of this Agreement, or any
other action by the Company which results in a diminution
in such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(ii) any failure by the Company to comply with
any of the provisions of Section 4(b) of this Agreement,
other than an isolated, insubstantial and inadvertent failure
not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by
the Executive;
(iii) the Company's requiring the Executive to
be based at any office or location other than as provided in
Section 4(a)(i)(B) hereof or the Company's requiring the
Executive to travel on Company business to a substantially
greater extent than required immediately prior to the
Effective Date;
(iv) any purported termination by the Company
of the Executive's employment otherwise than as expressly
permitted by this Agreement;
(v) any failure by the Company to comply with
and satisfy Section 11(c) of this Agreement; or
(vi) a termination by the Executive for any
reason during the 30-day period immediately following the
first anniversary of the Effective Date.
For purposes of this Section 5(c), any good faith determination
of "Good Reason" made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination by the
Company for Cause, or by the Executive for Good Reason,
shall be communicated by Notice of Termination to the other
party hereto given in accordance with Section 12(b) of this
Agreement. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon,
(ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis
for termination of the Executive's employment under the
provision so indicated and (iii) if the Date of Termination
(as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be
not more than thirty days after the giving of such notice).
The failure by the Executive or the Company to set forth in
the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively,
hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination"
means (i) if the Executive's employment is terminated by the
Company for Cause, or by the Executive for Good Reason, the
date of receipt of the Notice of Termination or any later
date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause
or Disability, the date on which the Company notifies the
Executive of such termination and (iii) if the Executive's
employment is terminated by reason of death or Disability, t
he date of death of the Executive or the Disability Effective
Date, as the case may be.
6. Obligations of the Company upon Termination.
(a) By the Executive for Good Reason; or by the
Company Other Than for Cause, Death or Disability. If,
during the Employment Period, the Company shall terminate
the Executive's employment other than for Cause or Disability
or the Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a
lump sum in cash within 30 days after the Date of Termination
the aggregate of the following amounts:
A. the sum of (1) the Executive's Annual Base
Salary through the Date of Termination to the extent not
theretofore paid, (2) the product of (x) the Target Annual
Bonus and (y) a fraction, the numerator of which is the number
of days in the current fiscal year through the Date of
Termination, and the denominator of which is 365 and (3) any
compensation previously deferred by the Executive (together
with any accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore paid
and in full satisfaction of the rights of the Executive thereto
(the sum of the amounts described in clauses (1), (2), and
(3) shall be hereinafter referred to as the "Accrued Obligations");
and
B. the amount equal to the product of (1) and
(2) the sum of (x) the Executive's Annual Base Salary and (y) the
Target Annual Bonus; and
C. an amount equal to the difference between
(a) the actuarial equivalent of the aggregate benefits under
the Company's qualified pension and profit-sharing plans (the
"Retirement Plans") and any excess or supplemental pension and
profit-sharing plans in which the Executive participates
(collectively, the "Nonqualified Plans") which the Executive
would have been entitled to receive if the Executive's employment
had continued for the Separation Period, assuming (to the
extent relevant) that the Executive's compensation during the
Separation Period would have been equal to the Executive's
compensation as in effect immediately before the termination or,
if higher, on the Effective Date, and that employer contributions
to the Executive's accounts in the Retirement Plans and the
Nonqualified Plans during the Separation Period would have
been equal to the average of such contributions for the
three years immediately preceding the Date of Termination
or, if higher, the three years immediately preceding the
Effective Date, and (b) the actuarial equivalent of the
Executive's actual aggregate benefits (paid or payable),
if any, under the Retirement Plans and the Nonqualified
Plans as of the Date of Termination (the actuarial assumptions
used for purposes of determining actuarial equivalence shall
be no less favorable to the Executive than the most favorable
of those in effect under the Retirement Plan and the
Nonqualified Plans on the Date of Termination and the date
of the Change of Control);
(ii) for the Separation Period, the Company
shall continue benefits to the Executive and/or the Executive's
family at least equal to those which would have been provided
to them in accordance with the plans, programs, practices
and policies described in Section 4(b)(iv) of this
Agreement if the Executive's employment had not been
terminated or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated
companies and their families (in each case with such contributions
by the Executive as would have been required had the
Executive's employment not been terminated); provided,
however, that if the Executive becomes reemployed with another
employer and is eligible to receive medical or other welfare
benefits under another employer-provided plan, the medical and
other welfare benefits described herein shall be secondary to
those provided under such other plan during such applicable
period of eligibility, and for purposes of determining eligibility
(but not the time of commencement of benefits) of the Executive
for retiree benefits pursuant to such plans, practices, programs
and policies, the Executive shall be considered to have remained
employed during the Separation Period and to have retired on the
last day of such period;
(iii) if the Executive was entitled to receive financial
planning and/or tax return preparation benefits immediately
before the Date of Termination, the Company shall continue
to provide the Executive with such financial planning and/or
tax return preparation benefits with respect to the calendar
year in which the Date of Termination occurs (including
without limitation the preparation of income tax returns for
that year), on the same terms and conditions as were in
effect immediately before the Date of Termination (disregarding
for all purposes of this clause (iii) any reduction or
elimination of such benefits that was the basis of a termination
of employment by the Executive for Good Reason); and
(iv) the Executive shall be entitled to purchase the
Company-leased automobile, if any, being used by the Executive
prior to termination at the "buyout amount" specified by the
vehicle's lessor.
(v) to the extent not theretofore paid or provided,
the Company shall timely pay or provide to the Executive any
other amounts or benefits required to be paid or provided or
which the Executive is eligible to receive under any plan,
program, policy or practice or contract or agreement of the
Company and its affiliated companies (such other amounts and
benefits shall be hereinafter referred to as the "Other
Benefits"). To the extent any benefits described in Section
6(a)(ii) and (iii) cannot be provided pursuant to the appropriate
plan or program maintained for employees, the Company shall
provide such benefits outside such plan or program at no additional
cost (including without limitation tax cost) to the Executive.
(b) Death. If the Executive's employment is
terminated by reason of the Executive's death during the
Employment Period, this Agreement shall terminate without
further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive's
estate or beneficiary, as applicable, in a lump sum in cash
within 30 days of the Date of Termination.
(c) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during
the Employment Period, this Agreement shall terminate without
further obligations to the Executive, other than for payment
of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date
of Termination.
(d) Cause; Other than for Good Reason. If the
Executive's employment shall be terminated for Cause during
the Employment Period, this Agreement shall terminate without
further obligations to the Executive other than the obligation
to pay to the Executive (x) the Annual Base Salary through the
Date of Termination, (y) the amount of any compensation
previously deferred by the Executive, and (z) Other Benefits,
in each case to the extent theretofore unpaid. If the
Executive voluntarily terminates employment during the Employment
Period, excluding a termination for Good Reason, this Agreement
shall terminate without further obligations to the Executive,
other than for Accrued Obligations and the timely payment or
provision of Other Benefits. In such case, all Accrued
Obligations shall be paid to the Executive in a lump sum in
cash within 30 days of the Date of Termination.
7. Non-exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Executive's continuing or
future participation in any plan, program, policy or practice
provided by the Company or any of its affiliated companies
and for which the Executive may qualify, nor, subject to
Section 3(a), shall anything herein limit or otherwise affect
such rights as the Executive may have under any contract or
agreement with the Company or any of its affiliated companies.
Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any plan, policy, practice
or program of or any contract or agreement with the Company or
any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan,
policy, practice or program or contract or agreement except
as explicitly modified by this Agreement.
8. Full Settlement. The Company's obligation to
make the payments provided for in this Agreement and otherwise
to perform its obligations hereunder shall not be affected by
any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Company may have against the Executive
or others. In no event shall the Executive be obligated to
seek other employment or take any other action by way of mitigation
of the amounts payable to the Executive under any of the
provisions of this Agreement and except as specifically provided
in Section 6(a)(ii), such amounts shall not be reduced whether or
not the Executive obtains other employment.
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that
any payment or distribution by the Company to or for the
benefit of the Executive (whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional
payments required under this Section 9) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), or any
interest or penalties are incurred by the Executive with respect
to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred
to as the "Excise Tax"), then the Executive shall be entitled
to receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to
such taxes), including, without limitation, any income taxes
(and any interest and penalties imposed with respect thereto)
and Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9,
including whether and when a Gross-Up Payment is required and
the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by
Deloitte & Touche LLP or such other certified public accounting
firm as may be designated by the Executive (the "Accounting Firm"),
which shall provide detailed supporting calculations both to the
Company and the Executive within 15 business days of the receipt
of notice from the Executive that there has been a Payment, or
such earlier time as is requested by the Company. In the event
that the Accounting Firm is serving as accountant or auditor for
the individual, entity or group effecting the Change of Control,
the Executive shall appoint another nationally recognized accounting
firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm
hereunder). All fees and expenses of the Accounting Firm shall be
borne solely by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 9, shall be paid by the Company to the
Executive within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder,
it is possible that Gross-Up Payments which will not have been
made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder.
In the event that the Company exhausts its remedies pursuant to
Section 9(c) and the Executive thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for
the benefit of the Executive.
(c) The Executive shall notify the Company in writing
of any claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no
later than ten business days after the Executive is informed in
writing of such claim and shall apprise the Company of the
nature of such claim and the date on which such claim is requested
to be paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which it
gives such notice to the Company (or such shorter period ending
on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior
to the expiration of such period that it desires to contest such
claim, the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably
selected by the Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly
all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax basis,
for any Excise Tax or income tax (including interest and penalties
with respect thereto) imposed as a result of such representation
and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 9(c), the Company shall
control all proceedings taken in connection with such contest
and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim and may, at
its sole option, either direct the Executive to pay the tax
claimed and sue for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts,
as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and sue for a
refund, the Company shall advance the amount of such payment to
the Executive, on an interest-free basis and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with
respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year
of the Executive with respect to which such contested amount
is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be
limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled
to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 9(c), the
Executive becomes entitled to receive any refund with respect
to such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 9(c)) promptly pay
to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 9(c), a determination
is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of
refund prior to the expiration of 30 days after such determination,
then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be
paid.
10. Post Termination Obligations.
(a) Proprietary Information Defined. "Proprietary
Information" is all information and any idea in whatever form,
tangible or intangible, pertaining in any manner to the business
of the Company or any Affiliated Company, or to its clients,
consultants, or business associates, unless: (i) the information
is or becomes publicly known through lawful means; (ii) the
information was rightfully in the Executive's possession or
part of his general knowledge prior to his employment by the
Company; or (iii) the information is disclosed to the Executive
without confidential or proprietary restriction by a third party
who rightfully possesses the information (without confidential
or proprietary restriction) and did not learn of it, directly
or indirectly, from the Company.
(b) General Restrictions on Use of Proprietary
Information. The Executive agrees to hold all Proprietary
Information in strict confidence and trust for the sole benefit
of the Company and not to, directly or indirectly, disclose,
use, copy, publish, summarize, or remove from Company's
premises any Proprietary Information (or remove from the premises
any other property of the Company), except (i) during his
employment to the extent necessary to carry out the Executive's
responsibilities under this Agreement, and (ii) after termination
of his employment as specifically authorized in writing by the
Board.
(c) Non-Solicitation and Non-Raiding. To forestall
the disclosure or use of Proprietary Information in breach of
Section 10(b), and in consideration of this Agreement, Executive
agrees that for a period of two years after termination of his
employment, he shall not, for himself or any third party, directly
or indirectly (i) divert or attempt to divert from the Company (
or any Affiliated Company) any business of any kind in which it
is engaged, including, without limitation, the solicitation of
its customers as to products which are directly competitive with
products sold by the Company at the time of the Executive's
termination, or interference with any of its suppliers or customers,
or (ii) solicit for employment any person employed by the Company,
or by any Affiliated Company, during the period of such person's
employment and for a period of one year after the termination of
such person's employment with the Company.
(d) Contacts with the Press. Following termination,
the Executive will continue to abide by the Company's policy
that prohibits discussing any aspect of Company business with
representatives of the press without first obtaining the
permission of the Company's Public Relations Department.
(e) Remedies. Nothing in this Section 10 is intended
to limit any remedy of the Company under the California Uniform
Trade Secrets Act (California Civil Code Section 3426), or
otherwise available under law.
(f) In no event shall an asserted violation of the
provisions of this Section 10 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive
pursuant to this Agreement.
11. Successors.
(a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be
assignable by the Executive otherwise than by will or the laws
of descent and distribution. This Agreement shall inure to
the benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of
and be binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of the
Company to assume expressly and agree to perform this Agreement
in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place.
As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets
as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
12. Miscellaneous.
(a) This Agreement shall be governed by and construed
in accordance with the laws of the State of California, without
reference to principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and shall have no
force or effect. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties
hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder
shall be in writing and shall be given by hand delivery to the
other party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive:
To the address written below the Executive's signature
on the last page of this Agreement.
If to the Company:
The Clorox Company
1221 Broadway
Oakland, California 94612
Attention: General Counsel
or to such other address as either party shall have furnished
to the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(d) The Company may withhold from any amounts
payable under this Agreement such Federal, state, local or
foreign taxes as shall be required to be withheld pursuant
to any applicable law or regulation.
(e) This Agreement may not be modified, amended, or
terminated except by an instrument in writing, signed by the
Executive and by a duly authorized representative of the Company
other than Executive. By an instrument in writing similarly
executed, either party may waive compliance by the other party
with any provision of this Agreement that such other party was
or is obligated to comply with or perform, provided, however,
that such waiver shall not operate as a waiver of, or estoppel
with respect to, any other or subsequent failure. No failure
to exercise and no delay in exercising any right, remedy, or
power hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, remedy, or power
hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, or power provided herein
or by law or in equity.
(f) Together with the Employment Agreement dated ,
1996 between the Executive and the Company, the terms of this
Agreement are intended by the parties to be the final expression
of their agreement with respect to the employment of Executive
by the Company and may not be contradicted by evidence of any
prior or contemporaneous agreement. The parties further intend
that this Agreement and said Employment Agreement shall
constitute the complete and exclusive statement of their terms
and that no extrinsic evidence whatsoever may be introduced in
any judicial, administrative, or other legal proceeding involving
either Agreement. The Employment Agreement and this Agreement
supersede any prior Agreements, written or oral, between the
Company and the Executive concerning the terms of his employment.
13. Executive Acknowledgment. Executive acknowledges
(a) that he has consulted with or has had the opportunity to
consult with independent counsel of his own choice concerning
this Agreement and has been advised to do so by the Company,
and (b) that he has read and understands the Agreement, is fully
aware of its legal effect, and has entered into it freely based
on his own judgment.
14. Arbitration. Any controversy between the Executive
or the Executive's heirs or estate and the Company or any employee
of the Company, including but not limited to, those involving the
construction or application of any of the terms, provisions or
conditions of this Agreement or otherwise arising out of or related
to this Agreement, shall be settled by arbitration before a single
arbitrator in accordance with the then current commercial
arbitration rules of the American Arbitration Association, and
judgment on the award rendered by the arbitrator may be entered by
any court having jurisdiction thereof. The location of the
arbitration shall be San Francisco, California if the Executive's
current or most recent location of employment with the Company is
or was located at the Company's Technical Center or General Offices.
If it is or was elsewhere, the arbitration shall be held at the
city nearest to the Executive's last location of employment with
the Company which has an office of the American Arbitration
Association. The arbitrator may in the arbitrator's discretion
award attorney's fees to the Executive.
The parties have duly executed this Agreement as of the
effective date which appears at the beginning of this Agreement.
THE CLOROX COMPANY
The Company
By: ------------------ -------------------
E. A. Cutter (Executive)
Its Senior Vice President
-------------------
(Address)
THE CLOROX COMPANY
NONQUALIFIED DEFERRED COMPENSATION PLAN
(January 1, 1996)
Amended and Restated through April 8, 1996
ARTICLE I.
PURPOSE
This Plan is designed to restore to selected employees of The
Clorox Company and its affiliates certain benefits that cannot be
provided under The Clorox Company's tax-qualified retirement
plans. In addition, this Plan permits selected employees to
defer bonuses and regular pay.
This Plan is intended to be a plan that is unfunded and
that is maintained by The Clorox Company primarily for the
purpose of providing deferred compensation for a select group
of management or highly compensated employees within the
meaning of the Employee Retirement Income Security Act.
ARTICLE II.
DEFINITIONS
In this Plan, the following terms have the meanings
indicated below.
2.01 "Account" means a bookkeeping entry used to
record deferrals and contributions made on a Participant's
behalf under Article III of the Plan and gains and losses
credited to these deferrals and contributions under
Article IV of the Plan.
2.02 "Affiliate" means an entity other than the
Company whose employees participate in the Profit Sharing
Plan and/or the Pension Plan.
2.03 "Beneficiary" means the beneficiary or
beneficiaries designated by a Participant, in writing, to
receive amounts (if any) payable from that Participant's
Account after the Participant's death. If a Participant
fails to properly designate a beneficiary or if a beneficiary
predeceases the Participant, the portion of the Participant's
Account that was to be paid to the improperly designated
beneficiary or to the beneficiary that predeceased the
Participant will be paid to the Participant's estate.
2.04 "Bonus" means one or more cash bonuses
designated from time to time by the Committee as eligible
for deferral under this Plan. As of January 1, 1996, the
term Bonus includes the following bonuses payable (but
for any deferral election) after July 1, 1996:
Cash-or-Deferred Profit Sharing Bonus, and/or an award
under The Clorox Management Incentive Compensation Plan
and/or a Sales Added Compensation Bonus and/or a Mid Level
Incentive Bonus.
2.05 "Committee" means the Company's Employee
Benefits Committee or another group appointed by the
Employee Benefits and Management Compensation Committee
of the Company's Board of Directors. The Committee has
full discretionary authority to administer and interpret the
Plan, to determine eligibility for Plan benefits, to select
employees for Plan participation, and to correct errors.
The Committee may delegate its duties and responsibilities
and, unless the Committee expressly provides to the contrary,
any such delegation will carry with it the Committee's full
discretionary authority to accomplish the delegation.
Decisions of the Committee and its delegate will be final
and binding on all persons.
2.06 "Company" means The Clorox Company.
2.07 "Eligible Employee" means an employee of the
Company or of an Affiliate who has been selected by the
Committee for Plan participation and who, except as provided
in Section 3.01(c), has confirmed his or her participation
in writing with the Committee before the calendar year in
which deferrals and/or restoration contributions under this
Plan are made on that employee's behalf.
o An individual will cease to be an Eligible Employee
on the earliest of (i) the date the individual ceases to be
employed by the Company and all Affiliates, (ii) the date the
Plan is terminated, or (iii) the date the individual is
notified by the Committee that he or she is no longer an
Eligible Employee.
o For purposes of the restoration contributions
described in Section 3.02 of this Plan, an employee who
terminates employment with the Company and all Affiliates
before July 1, 1996 will not be an Eligible Employee,
unless and until he or she is rehired by the Company or
an Affiliate and designated by the Committee as an Eligible
Employee.
o For purposes of the deferrals described in Section
3.01 of this Plan, an employee who terminates employment
with the Company and all Affiliates before January 1, 1996
will not be an Eligible Employee, unless and until he or
she is rehired by the Company or an Affiliate and redesignated
by the Committee as an Eligible Employee.
2.08 "$150,000 Limit" means the $150,000 (indexed)
limit of Internal Revenue Code Section 401(a)(17), which limits
the compensation that can be taken into account when determining
benefits under a tax-qualified retirement plan.
2.09 "Participant" means a current or former Eligible
Employee who retains an Account.
2.10 "Pension Plan" means The Clorox Company Pension
Plan, as amended from time to time. "Pension Plan Year" means
the plan year defined in the Pension Plan and "Cash Balance
Contribution" means a cash balance contribution as defined in
the Pension Plan.
2.11 "Plan" means The Clorox Company Nonqualified Deferred
Compensation Plan, as amended from time to time.
2.12 "Profit Sharing Plan" means The Clorox Company
Profit Sharing Plan, as amended from time to time. "Profit
Sharing Plan Year" means the plan year defined in the Profit
Sharing Plan and "Profit Sharing Contribution" means a profit
sharing contribution (including forfeitures) as described in
the Profit Sharing Plan.
2.13 "Regular Pay" means the pre-tax amount of an
Eligible Employee's base salary. Regular Pay is determined
on a "paycheck by paycheck" basis and does not include amounts
paid before January 1, 1997.
2.14 "Termination of Employment" means termination of
employment with the Company and all Affiliates, other than by
reason of death.
ARTICLE III.
DEFERRALS AND CONTRIBUTIONS
3.01 Deferrals. An Eligible Employee may defer up to 50%
of his or her Regular Pay and up to 100% of each Bonus for which
he or she is eligible by submitting a written election to the
Committee that satisfies such requirements, including such
minimum deferral amounts, as the Committee may determine.
Participants will be 100% vested in these deferrals.
(a) Elections. For each calendar year, an Eligible
Employee may make three separate deferral elections: an election
to defer Regular Pay, an election to defer his or her Cash-or-Deferred
Profit Sharing Bonus (if any), and an election to defer all
other types of Bonus (if any). Each such election must be made
before the calendar year in which the Regular Pay and/or Bonus
is scheduled to be paid and, with respect to a Bonus, no less
than 6 months before scheduled payment of the Bonus. Elections
will remain in effect for one calendar year.
(b) Late Election. If an Eligible Employee does not
make a timely election for an upcoming calendar year, no deferral
will be made on behalf of that Eligible Employee with regard to
that election for that upcoming calendar year.
(c) Initial Election. Notwithstanding the timing
provisions in paragraphs (a) and (b) above, within 30 days after
the date that an Eligible Employee is first notified that he or
she is eligible to participate in the Plan or within 30 days after
the initial effective date of the Plan, an Eligible Employee may
elect to defer (i) Regular Pay for services to be performed
subsequent to the election and (ii) any Bonus that is scheduled
to be paid at least 6 months after the date of the election.
These elections will remain in effect until the end of the
calendar year for which they were made.
3.02 Restoration Contributions. Subject to paragraphs (d),
(e), and (f) below, Eligible Employees' Accounts will be credited
with restoration contributions as described below.
(a) Profit Sharing. The amount of an Eligible
Employee's profit sharing restoration contribution for a Profit
Sharing Plan Year beginning on or after July 1, 1995 will be
equal to the amount by which that Eligible Employee's Profit
Sharing Contribution (including any Cash-or-Deferred Profit Sharing)
for that Profit Sharing Plan Year was reduced due to (i) the
$150,000 Limit and (ii) amounts (excluding any Cash-or-Deferred
Profit Sharing) voluntarily deferred under this Plan.
(b) Pension. The amount of an Eligible Employee's
pension restoration contribution for a Pension Plan Year
beginning on or after July 1, 1995 will be equal to the amount
by which the Eligible Employee's Cash Balance Contribution for
that Pension Plan Year was reduced due to (i) the $150,000
Limit and (ii) amounts voluntarily deferred under this Plan.
(c) Special Restoration Contributions. Accounts of
individuals who are Eligible Employees on July 1, 1996 will be
credited with the following special restoration contributions:
(i) 1994-95 Profit Sharing Plan Contribution.
A special contribution equal to the amount by which the
Eligible Employee's Profit Sharing Contribution for the Profit
Sharing Plan Year beginning July 1, 1994 was actually reduced
due to the $150,000 Limit.
(ii) 1994-95 Pension Plan Accrual. A special
contribution, which is the lump sum equivalent of the amount by
which the Eligible Employee's Pension Plan accrual for the
Pension Plan year beginning July 1, 1994 was actually reduced
due to the $150,000 Limit. This lump sum equivalent amount will
be the lump sum present value, as of June 30, 1996, of the
pension accrual described in the preceding sentence (expressed
as a single life annuity commencing as of the later of: the
Eligible Employee's age, as of June 30, 1996 or age 65), where
the present value is determined using: the annual rate of
interest on 30-year Treasury securities for January, 1996, the
applicable mortality table that is specified for use in January
1996 in accordance with Section 417(e)(3)(A)(ii)(I) of the
Internal Revenue Code, and the Eligible Employee's age as of
June 30, 1996, rounded to years and completed months.
(d) Crediting. Restoration contributions will be
credited to Eligible Employees' Accounts as of the date that
the Profit Sharing Contributions or the Cash Balance
Contributions to which the restoration contributions relate
are credited to the Profit Sharing Plan or the Pension Plan,
as the case may be. Notwithstanding the foregoing, the special
restoration contributions described in the preceding paragraph
(c) will be credited as of July 1, 1996.
(e) Vesting. Participants will vest in their
restoration contributions at the same percentage rate that they
vest in the Profit Sharing Contributions or the Pension Plan
allocations to which the restoration contributions relate.
Amounts not vested upon the earlier of Termination of Employment
or death will be forfeited.
(f) Restrictions.
(i) Participation. If an Eligible Employee is
not credited with an actual Pension Plan accrual for a given
Pension Plan Year, that Eligible Employee will not receive a
pension restoration contribution under this Plan for that year.
Similarly, if an Eligible Employee does not receive an actual
Profit Sharing Contribution for a given Profit Sharing Plan Year,
that Eligible Employee will not receive a profit sharing
restoration contribution under this Plan for that year.
(ii) Eligible Employee. In order to receive a
restoration contribution under this Plan with respect to a given
Profit Sharing Year or Pension Plan Year, an individual must have
been an Eligible Employee during that year; provided, however,
that this requirement will be satisfied with respect to the
special restoration contributions described in (c) above if
an individual is an Eligible Employee on July 1, 1996.
ARTICLE IV.
EARNINGS
4.01 Elections. The Committee may permit Participants
to request that earnings on their Accounts be credited as
though the Accounts were invested in one or more investments
approved by the Committee.
4.02 Interest. To the extent that earnings are not
credited as described above, the Committee will credit interest
to each Account. Interest will be credited quarterly in
accordance with procedures approved by the Committee. The
interest rate used will be the annual rate of interest on
30-year Treasury securities, as determined in accordance with
Section 417(e)(3)(A)(ii)(II) of the Internal Revenue Code,
for the second month preceding the Company's fiscal year for
which the interest is credited. The first quarter for which
interest will be credited is the calendar quarter beginning
July 1, 1996.
ARTICLE V.
DISTRIBUTIONS
5.01 Distribution Elections. Eligible Employees will
elect the form in which Plan benefits will be paid to them
upon Termination of Employment by following the procedures
described below and by satisfying such additional requirements
as the Committee may determine.
(a) Restoration Contributions. When an Eligible
Employee confirms his or her Plan participation, as provided
in Section 2.07 of the Plan, the Eligible Employee will
irrevocably elect, in writing, one of the distribution forms
described in Section 5.02, below, as the form in which the
Eligible Employee's vested restoration contributions (if any)
described in Section 3.02 (and associated earnings) will be
paid upon the Eligible Employee's Termination of Employment.
(b) Deferrals. Each time an Eligible Employee
authorizes deferrals for a calendar year under Section 3.01(a)
or Section 3.01(c) of the Plan, the Eligible Employee will
irrevocably elect one of the distribution forms described in
Section 5.02, below, as the form in which all amounts to be
deferred for that calendar year (and associated earnings) will
be paid upon the Eligible Employee's Termination of Employment.
The election must be submitted to the Committee, in writing,
before the calendar year in which the deferrals governed by
the election are scheduled to be paid (or, if applicable,
when elections are made under Section 3.01(c)) and no less than
6 months before scheduled payment of any Bonus governed by
the election. If a distribution election for a calendar year
is not valid because it is not made in a timely manner, the
Eligible Employee's most recent effective distribution election
under this Section 5.01(b) or, if there is no such election,
the Eligible Employee's distribution election under Section
5.01(a), will govern deferrals (if any) for that calendar year.
5.02 Termination of Employment. The vested portion of a
Participant's Account will be distributed to the Participant
following the Participant's Termination of Employment in one
or more of the following forms elected pursuant to Section
5.01, above.
(a) Lump Sum. Payment in one lump sum as soon as
administratively practicable (as determined by the Committee)
after the Participant's Termination of Employment, but in no
event later than 60 days after the Participant's Termination
of Employment or, if the Participant so elected, as soon as
administratively practicable (as determined by the Committee)
after the end of the calendar year of the Participant's
Termination of Employment, but in no event later than 60 days
after the end of the calendar year of the Participant's
Termination of Employment.
(b) Installments. Annual installment payments, not
in excess of 10, to begin as soon as administratively
practicable (as determined by the Committee) after the
Participant's Termination of Employment, but in no event later
than 60 days after the Participant's Termination of Employment
or, if the Participant so elected, as soon as administratively
practicable (as determined by the Committee) after the end of
the calendar year of the Participant's Termination of Employment,
but in no event later than 60 days after the end of the calendar
year of the Participant's Termination of Employment. The amount
of each installment will be equal to the Participant's entire
remaining Account balance as of the beginning of the
calendar quarter of payment divided by the number of
remaining installments to be paid.
(c) Rehire. If a Participant's entire Account has
not been distributed and/or the Participant was not 100%
vested in his or her Account upon Termination of Employment and
the Participant again becomes an Eligible Employee, distributions
to the Participant under paragraph (a) and/or (b) above will
cease, amounts forfeited (if any) from the Participant's Account
will be restored, and the Participant's distribution election
under Section 5.01(a) will remain in effect. If a former
Participant's entire Account has been distributed and the
former Participant was 100% vested in his or her Account
upon Termination of Employment, the former Participant will
make a new distribution election under Section 5.01(a) if he
or she again becomes an Eligible Employee.
5.03 Death. If a Participant dies with a vested amount
in his or her Account, whether or not the Participant was
receiving payouts from that Account at the time of his or her
death, the Participant's Beneficiary will receive the entire
vested amount in the Participant's Account as soon as
administratively practicable (as determined by the Committee)
but in no event later than 60 days after the Committee learns
of the Participant's death.
5.04 Withholding. The Company will deduct from Plan
payouts, or from other compensation payable to a Participant or
Beneficiary, amounts required by law to be withheld for taxes
with respect to benefits under this Plan.
ARTICLE VI.
MISCELLANEOUS
6.01 Limitation of Rights. Participation in this Plan
does not give any individual the right to be retained in the
service of the Company or of any related entity.
6.02 Satisfaction of Claims. Payments to a Participant,
the Participant's legal representative, or Beneficiary in
accordance with the terms of this Plan will, to the extent
thereof, be in full satisfaction of all claims that person may
have hereunder against the Committee, the Company, and all
Affiliates, any of which may require, as a condition to payment,
that the recipient execute a receipt and release in a form
determined by the Committee, the Company, or an Affiliate.
6.03 Indemnification. The Company and the Affiliates
will indemnify the Committee, the Company's Board of Directors,
and employees of the Company and the Affiliates to whom
responsibilities have been delegated under the Plan for all
liabilities and expenses arising from an act or omission in
the management of the Plan if the person to be indemnified
did not act dishonestly or otherwise in willful violation of
the law under which the liability or expense arises.
6.04 Assignment. To the fullest extent permitted by
law, rights to benefits under the Plan are not subject in any
manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment, or garnishment by creditors
of a Participant or a Beneficiary.
6.05 Lost Recipients. If the Committee cannot locate a
person entitled to payment of a Plan benefit after a
reasonable search, the Committee may at any time thereafter
treat that person's Account as forfeited and amounts credited
to that Account will revert to the Company. If the lost
person subsequently presents the Committee with a valid claim
for the forfeited benefit amount, the Company will pay that
person the amount forfeited.
6.06 Amendment and Termination. The Company's Board of
Directors may, at any time, amend the Plan in writing or
terminate the Plan. In addition, the Committee may amend the
Plan (other than this Section 6.06) in writing, provided that
the amendment will not cause any substantial increase in cost
to the Company or to any Affiliate. No amendment may, without
the consent of an affected Participant (or, if the Participant
is deceased, the Participant's Beneficiary), adversely affect
the Participant's or the Beneficiary's rights and obligations
under the Plan with respect to amounts already credited to a
Participant's Account. Notwithstanding the foregoing, if the
Plan is terminated, the Company's Board of Directors may
determine that all Accounts will be paid out.
6.07 Applicable Law. To the extent not governed by Federal
law, the Plan is governed by the laws of the State of California
without choice of law rules. If any provision of the Plan is
held to be invalid or unenforceable, the remaining provisions
of the Plan will continue to be fully effective.
6.08 No Funding. The Plan constitutes a mere promise by
the Company and the Affiliates to make payments in the future
in accordance with the terms of the Plan. Participants and
Beneficiaries have the status of general unsecured creditors
of the Company and the Affiliates. Plan benefits will be paid
from the general assets of the Company and the Affiliates and
nothing in the Plan will be construed to give any Participant
or any other person rights to any specific assets of the Company
or the Affiliates. In all events, it is the intention of the
Company, all Affiliates and all Participants that the Plan be
treated as unfunded for tax purposes and for purposes of Title I
of the Employee Retirement Income Security Act.
IN WITNESS WHEREOF, The Clorox Company has caused this Plan
to be executed by its duly authorized representative on the
date indicated below.
/s/ Edward A. Cutter April 8, 1996
- ----------------------- ----------------------
DATE
BPHSF6\BPP\0200738.09
THE CLOROX COMPANY 1995 PERFORMANCE UNIT PLAN
The Clorox Company 1995 Performance Unit Plan (the "Plan")
is adopted pursuant to the Performance Unit Plan component
of The Clorox Company 1987 Long Term Compensation Program
(the "Program") effective December 15, 1995. In addition
to the terms and conditions set forth below, the Plan is
subject to the provisions of the Program, which are
incorporated herein by this reference.
ARTICLE I
DEFINITIONS
1.1 Definitions.
Except as defined in this Article I, terms used in
this Plan have the definitions of the terms as set forth
in Article II of the Program:
a) Deferred Stock Units - Performance Units for
which Performance Shares have been exchanged pursuant
to the terms of this Plan.
b) Incentive Units - additional Performance Units
equal to ten percent of Deferred Stock Units which a
Participant receives upon making an Election to Exchange
pursuant to Section 2.1.
c) Participant - an officer of the Company who has
been awarded Performance Shares and elects to exchange
them for Deferred Stock Units pursuant to the terms of
this Plan.
d) Performance Shares - means shares of the
Company's restricted stock which have been awarded
under the Program's Restricted Stock Plan with a
vesting date of October 1, 2000, but with the opportunity
for accelerated vesting on either October 1, 1996 or
October 1, 1998 provided certain specified total shareholder
return goals are achieved by June 30, 1996 or June 30,
1998, respectively.
e) Stock Withholding Arrangement - means a procedure
whereby a Participant satisfies a tax withholding
requirement by directing the Company to apply shares of
stock to which the Participant is entitled as a result of
the redemption of Deferred Stock Units to satisfy such
requirements.
1.2 Value of Performance Unit.
Each Performance Unit shall have a value equal to one
share of Stock (subject to adjustment as provided in
Section 3.2), plus the right to receive amounts equal to
dividends paid by the Company on a share of Stock
(as adjusted).
1.3 Performance Period.
The Performance Period shall be the period from January 1,
1996, to October 1, 2000, provided that (i) if the Performance
Goal is first achieved by June 30, 1996, the Performance Period
shall end on December 31, 1997, and (ii) if the Performance Goal
is first achieved after June 30, 1996, but on or before June 30,
1998, the Performance Period shall end on October 1, 1998.
1.4 Performance Goal.
The Performance Goal shall be the shareholder return goals
specified with respect to the award of Performance Shares.
ARTICLE II
TERMS OF PERFORMANCE UNITS
2.1 Participant Elections.
a) Election to Surrender Performance Shares and Grant of
Performance Units. Officers of the Company who have been
awarded Performance Shares may, on or before December 31, 1995,
make an irrevocable written election to surrender some or all
of their Performance Shares, effective December 31, 1995.
Officers who elect to surrender Performance Shares will be
granted one Deferred Stock Unit for each Performance Share
surrendered and one Incentive Unit for each ten Performance
Shares surrendered.
b) Election Regarding Redemption Upon Retirement in
Installments. At the time the election under Section 2.1(a)
is made, a Participant must further make an irrevocable written
election to have his/her vested Performance Units redeemed in a
lump sum or in not less than three nor more than five equal
annual installments, without interest, following his/her
Retirement. Except in the case of Retirement, vested Performance
Units will be redeemed in a lump sum.
c) Election Regarding Payment of Dividend Equivalents.
At the time the election under Section 2.1(a) is made, a
Participant may make an irrevocable written election to have
dividend equivalent amounts payable pursuant to Section 2.5 of
the Plan deferred and invested in additional Performance Units
based upon the number of whole and fractional Units which the
dollar dividend amount would purchase using the average between
the high and low price value of the Stock on the New York Stock
Exchange on each dividend payment date.
2.2 Vesting of Performance Units.
a) Except as provided in this Section 2.2, or in Article 12
of the Program (relating to Change of Control), Performance Units
granted pursuant to Section 2.1(a) will vest on the last day of
the Performance Period.
b) Performance Units purchased pursuant to a Participant
election under Section 2.1(c) shall be fully vested at the time
of purchase.
c) In the case of death, Disability or Retirement prior
to the last day of the Performance Period, Performance Units
which are Deferred Stock Units shall be fully vested, but payment
of such Performance Units shall not commence prior to the last
day of the Performance Period.
d) If the Performance Goal is met on or before June 30, 1996,
then after October 1, 1996, in the case of a Participant's
involuntary termination by the Company other than a Termination
for Cause, Performance Units which are Deferred Stock Units shall
be fully vested, but payment of such Performance Units shall not
commence prior to the last day of the Performance Period.
e) Except in the event of a Change of Control, Performance
Units which are Incentive Units will not vest prior to December 31,
1997.
f) Performance Units which are not vested pursuant to this
Section 2.2 on a Participant's termination of employment, whether
by death, Disability, Retirement, voluntary or involuntary
termination of employment, with or without Cause, shall be
forfeited. In the event of a Participant's involuntary termination
by the Company other than a Termination for Cause, the Committee
in its sole discretion may waive the automatic forfeiture
provisions.
2.3 Redemption of Performance Units.
a) Company's Right to Defer Redemption. A Participant's Performance
Units will be redeemed at the time and in the manner set forth
below; provided, however, that no redemption under Section 2.3(c)
shall be permitted prior to the ninetieth day of the Company's
fiscal year following the Participant's termination of employment
to the extent that the Company determines that an earlier redemption
would result in the payment of compensation which would not be
deductible by the Company under Section 162(m) of the Internal
Revenue Code of 1986, as amended. If a Participant's election to
redeem Performance Units is deferred by reason of this Section 2.3(a),
any reduction in the value of the Stock from the day the Performance
Units would otherwise have been redeemed to the day the Performance
Units are actually redeemed will be made up to the Participant in
the form of additional shares of the Stock based on the average
between the high and low price of the Stock on the New York Stock
Exchange on the day of the actual redemption, or, if the Stock is
not traded on that day, on the next trading day.
b) Redemption Upon a Change of Control. Immediately following
a Change of Control, all Performance Units will be redeemed in cash.
The cash amount per Performance Unit will equal the average between
the high and low price of the Stock on the New York Stock Exchange
on the date the Change of Control occurs or, if the Stock is not
traded on that day, on the trading day immediately preceding the
Change of Control.
c) Redemption Upon Termination of Employment. On the first
business day following a Participant's termination of employment
or as soon as practicable thereafter, the Participant's vested
Performance Units or, in the case of an installment redemption
election the appropriate proportion of the Participant's vested
Performance Units, will be redeemed unless the Company exercises
its deferral rights pursuant to Section 2.3(a).
If a Participant has elected redemption in installments, his/her
Performance Units will be redeemed in the number of installments
elected by the Participant pursuant to Section 2.1(b) beginning
on the first business day following his/her Retirement and
annually thereafter, unless the Company exercises its deferral
right with regard to any such installments pursuant to Section
2.3(a).
In no event will Performance Units be redeemed prior to
the last day of the Performance Period.
2.4 Performance Units Will be Redeemed Only in Stock Except
Following a Change of Control.
Except in the case of redemptions made as a result of a Change
of Control, Performance Units will be redeemed one for one for
shares of Stock. If the Participant owns a fractional number
of Units, the number of Units will be rounded up or down to
the next whole Unit for purposes of calculating the number of
shares of Stock to be exchanged in the redemption. If
Performance Units are settled in Stock, a Stock Withholding
Arrangement may be used to meet the Participant's withholding
tax obligation. If a redemption is as a result of a Change of
Control, Performance Units will be settled in cash.
2.5 Dividends on Performance Units.
The Company shall pay in cash to each Participant on
the dividend payment date an amount equal to the number of the
Participant's Performance Units multiplied by the per share
dividend rate for each declaration of a dividend (other than
a Stock dividend) on the Stock from January 1, 1996, until the
date on which the Performance Units are redeemed. In the case
of dividend distributions on Stock which are paid in the form
of property (other than Stock), the Committee shall determine
the cash equivalent amount to be paid pursuant to this
Section 2.5.
ARTICLE III
MISCELLANEOUS PROVISIONS
3.1 Accelerated Redemption of Performance Units in Case of
an Unforeseeable Emergency.
The Committee may, upon written application to it, agree to an
accelerated redemption of some or all of a Participant's vested
Performance Units upon the showing of severe financial hardship
to the Participant resulting from (a) a sudden and unexpected
illness or accident of the Participant or a dependent of the
Participant; (b) loss of the Participant's property due to
casualty; or (c) other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control
of the Participant. Acceleration will not be granted if the
hardship may be relieved through (i) reimbursement or compensation
by insurance or otherwise; or (ii) by liquidation of the
Participant's assets, to the extent such liquidation will not
itself cause severe financial hardship.
3.2 Adjustment of Performance Units.
In the event of any change in the outstanding shares of the
Stock, by reason of a stock dividend or split, recapitalization,
merger, consolidation, combination, exchange of shares, or other
similar corporate change, the number of Performance Units shall
be adjusted appropriately by the Committee, whose determination
shall be conclusive.
3.3 No Funding.
The Plan constitutes a mere promise by the Company to
make redemptions or payments in the future in accordance with
the terms of the Plan. Participants and beneficiaries have
the status of general unsecured creditors of the Company.
Any cash payments will be paid from the general assets of the
Company and nothing in the Plan will be construed to give any
Participant or any other person rights to any specific assets
of the Company. In all events, it is the intention of the
Company and all Participants that the Plan be treated as
unfunded for tax purposes and for purposes of Title I of the
Employee Retirement Income Security Act.
IN WITNESS WHEREOF, The Clorox Company has caused this Plan
to be executed by its duly authorized representative on the
date indicated below.
/s/ Edward A. Cutter
- --------------------------------------
December 15, 1995
- --------------------------------------
Date
THE CLOROX COMPANY
1996 STOCK INCENTIVE PLAN
1. Purposes of the Plan. The purposes of this Stock
Incentive Plan are to attract and retain the best available
personnel for positions of substantial responsibility, to
provide additional incentive to Employees of the Company
and its Subsidiaries and to promote the success of the
Company's business. Definitions of capitalized terms
used in the Plan are contained in the attached Glossary
which is an integral part of the Plan.
2. Stock Subject to the Plan.
(a) Subject to the provisions of Section 9,
below, the maximum aggregate number of Shares which may
be issued pursuant to Awards shall be 3.5 million Shares.
Notwithstanding the foregoing, (i) no more than ten percent
(10%) of the total number of Shares available for grant
under the Plan in any fiscal year of the Company may be
issued as restricted stock and (ii) any Shares issued pursuant
to awards under the Company's Executive Incentive Compensation
Plan granted after the date of the Board's adoption of the
Plan shall reduce on a Share for Share basis the number of
Shares otherwise available under the Plan. The Shares to be
issued pursuant to Awards may be authorized, but unissued, or
reacquired Common Stock.
(b) If an Award expires or becomes unexercisable without
having been exercised in full, or is surrendered pursuant to
an Award exchange program, or if any unissued Shares are
retained by the Company upon exercise of an Award in order to
satisfy the exercise price for such Award or any withholding
taxes due with respect to such Award, such unissued or retained
Shares shall become available for future grant or sale under
the Plan (unless the Plan has terminated). Shares that actually
have been issued under the Plan pursuant to an Award shall not
be returned to the Plan and shall not become available for
future distribution under the Plan, except that if unvested
Shares are forfeited, or repurchased by the Company at their
original purchase price, such Shares shall become available
for future grant under the Plan.
3. Administration of the Plan.
(a) Plan Administrator.
(i) Administration with Respect to Employees who are
Directors and Officers. With respect to grants of Awards to
Employees who are also Officers or Directors of the Company,
the Plan shall be administered by (A) the Board or (B) a
Committee designated by the Board, which Committee shall be
constituted in such a manner as to satisfy Applicable Laws and to
permit such grants and related transactions under the Plan to be
exempt from Section 16(b) of the Exchange Act in accordance with
Rule 16b-3. Once appointed, such Committee shall continue to
serve in its designated capacity until otherwise directed by the
Board.
(ii) Administration With Respect to Other Employees. With
respect to grants of Awards to Employees who are neither
Directors nor Officers of the Company, the Plan shall be administered
by (A) the Board or (B) a Committee designated by the Board,
which Committee shall be constituted in such a manner as to
satisfy the Applicable Laws.
(iii) Administration With Respect to Covered Employees.
Notwithstanding the foregoing, grants of Awards to any Covered
Employee intended to qualify as Performance-Based Compensation
shall be made only by a Committee (or subcommittee of a Committee)
which is composed solely of two or more Directors eligible under
the Code to serve on a committee making Awards qualifying as
Performance-Based Compensation. In the case of such Awards g
ranted to Covered Employees, references to the "Administrator"
or to a "Committee" shall be deemed to be references to such
Committee or subcommittee.
(b) Powers of the Administrator. Subject to
Applicable Laws, the provisions of the Plan (including any other
powers given to the Administrator hereunder) and except as
otherwise provided by the Board, the Administrator shall have the
authority, in its discretion:
(i) to select the Employees to whom Awards may from time to
time be granted hereunder;
(ii) to determine whether and to what extent Awards are
granted hereunder;
(iii) to determine the number of Shares to be covered by
each Award granted hereunder;
(iv) to approve forms of Award Agreement for use under the
Plan;
(v) to determine the terms and conditions of any Award
granted hereunder;
(vi) to amend the terms of any outstanding Award granted
under the Plan, provided that any amendment that would adversely
affect the Grantee's rights under an outstanding Award shall
not be made without the Grantee's written consent;
(vii) to construe and interpret the terms of the Plan and
Awards granted pursuant to the Plan; and
(viii) to take such other action, not inconsistent with
the terms of the Plan, as the Administrator deems appropriate.
(c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall
be final and binding on the Grantees and any other holders of
Awards intended by the Administrator to be affected thereby.
4. Eligibility. Awards other than Incentive Stock Options
may be granted to Employees. Incentive Stock Options may be
granted only to Employees. An Employee who has been granted an
Award may, if otherwise eligible, be granted additional Awards.
Awards may be granted to such Employees of the Company and its
subsidiaries who are residing in foreign jurisdictions as the
Administrator in its sole discretion may determine from time to
time. The Administrator may establish additional terms,
conditions, rules or procedures to accommodate the rules or laws
of applicable foreign jurisdictions and to afford Grantees
favorable treatment under such laws; provided, however, that
no Award shall be granted under any such additional terms,
conditions, rules or procedures with terms or conditions which
are inconsistent with the provisions of the Plan.
5. Terms and Conditions of Awards.
(a) Type of Awards. The Administrator is authorized
under the Plan to award any type of arrangement to an
Employee that is not inconsistent with the provisions of the Plan
and that by its terms involves or might involve the issuance
of (i) Shares, (ii) an Option, a SAR or similar right with an
exercise or conversion privilege at a fixed or variable
price related to the Common Stock and/or the passage of time,
the occurrence of one or more events, or the satisfaction of
performance criteria or other conditions, or (iii) any other
security with the value derived from the value of the Common
Stock. Such awards include, without limitation, Options, SARs,
sales or bonuses of Restricted Stock, Dividend Equivalent
Rights, Performance Units or Performance Shares, and an Award
may consist of one such security or benefit, or two or more of
them in any combination or alternative.
(b) Designation of Award. Each Award shall be
designated in the Award Agreement. In the case of an Option, the
Option shall be designated as either an Incentive Stock Option
or a Non-Qualified Stock Option. However, notwithstanding such
designation, to the extent that the aggregate Fair Market Value
of Shares subject to Options designated as Incentive Stock
Options which become exercisable for the first time by a Grantee
during any calendar year (under all plans of the Company or any
Parent or Subsidiary) exceeds $100,000, such excess Options,
to the extent of the Shares covered thereby in excess of the
foregoing limitation, shall be treated as Non-Qualified Stock
Options. For this purpose, Incentive Stock Options shall be
taken into account in the order in which they were granted,
and the Fair Market Value of the Shares shall be determined
as of the date the Option with respect to such Shares is
granted.
(c) Conditions of Award. Subject to the terms
of the Plan, the Administrator shall determine the provisions,
terms, and conditions of each Award including, but not limited
to, the Award vesting schedule, repurchase provisions, rights
of first refusal, forfeiture provisions, form of payment
(cash, Shares, or other consideration) upon settlement of the
Award, and payment contingencies. In the case of an Award
(other than an Option or SAR) intended to qualify as
Performance-Based Compensation, the grant, exercise and/or
settlement of such Award shall be contingent upon achievement
of preestablished performance goals, which shall consist of
one or more of the following performance criteria: total
shareholder return, stock price, Clorox Value Measure, cash
value added, economic value added, operating margin, asset
turnover, sales growth, asset growth, return on investment,
earnings per share, return on equity, return on assets,
return on capital, operating cash flow, cost of capital,
net income, customer satisfaction, employee satisfaction,
and personal management objectives. Performance goals shall
be objective and shall otherwise meet the requirements of
Code Section 162(m) and the regulations thereunder.
Performance goals may differ for Awards granted to any one
Employee or to different Employees. Achievement of
performance goals in respect of Awards intended to qualify
as Performance-Based Compensation shall be measured over a
performance period specified in the Award of up to ten
years, and the goals shall be established not later than
90 days after the beginning of the performance period
applicable to the Award, or at such other date as may be
required or permitted for Performance-Based Compensation.
The Award may provide that partial achievement of the
performance goal will result in a payment or vesting
corresponding to the degree of achievement as specified in
the Award. The Administrator may, in its discretion,
reduce the amount of a settlement otherwise to be made in
connection with an Award intended to qualify as
Performance-Based Compensation, but may not exercise
discretion to increase the award.
(d) Deferral of Award Payment. The Administrator
may establish one or more programs under the Plan to permit
selected Grantees the opportunity to elect to defer receipt
of consideration upon exercise of an Award, satisfaction
of performance criteria, or other event that absent the
election would entitle the Grantee to payment or receipt
of Shares or other consideration under an Award. The
Administrator may establish the election procedures, the
timing of such elections, the mechanisms for payments of,
and accrual of interest or other earnings, if any, on amounts
or Shares so deferred, and such other terms, conditions,
rules and procedures that the Administrator deems advisable
for the administration of any such deferral program.
(e) Award Exchange Programs. The Administrator
may establish one or more programs under the Plan to permit
selected Grantees to exchange an Award under the Plan for one
or more other types of Awards under the Plan on such terms and
conditions as established by the Administrator from time to
time.
(f) Term of Award. The term of each Award shall
be the term stated in the Award Agreement, provided, however,
that the term of an Incentive Stock Option shall be no more
than ten (10) years from the date of grant thereof. However,
in the case of an Incentive Stock Option granted to a Grantee
who, at the time the Option is granted, owns stock representing
more than ten percent (10%) of the voting power of all classes
of stock of the Company or any Parent or Subsidiary, the term
of the Incentive Stock Option shall be five (5) years from the
date of grant thereof or such shorter term as may be provided
in the Award Agreement.
(g) Individual Option, SAR Limit. The maximum
aggregate number of Shares with respect to which Options and
SAR may be granted to any Employee in any fiscal year of the
Company shall be five hundred thousand (500,000) Shares. The
foregoing limitation shall be adjusted proportionately in
connection with any change in the Company's capitalization
pursuant to Section 9, below. This Section 5(g) is intended to
comply with the requirements for the award of Performance-Based
Compensation applicable to stock options and stock appreciation
rights and shall be construed in accordance with the
requirements of Section 162(m) of the Code and the regulations
thereunder.
(h) Individual Performance-Based Compensation
Limit for Awards Other than Options and SARs. The maximum value
of any Award (other than an Option or SAR) granted to any
Employee in any fiscal year of the Company and intended to
qualify as Performance-Based Compensation shall be two million
dollars ($2,000,000), calculated based upon the value of the
Award assuming the performance goal was met on the date of the
grant of the Award. This Section 5(h) is intended to comply
with the requirements for the award of Performance-Based
Compensation applicable to awards other than stock options and
stock appreciation rights and shall be construed in accordance
with the requirements of Section 162(m) of the Code and the
regulations thereunder.
(i) Transferability of Awards. Incentive Stock
Options may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or
by the laws of descent or distribution and may be exercised,
during the lifetime of the Grantee, only by the Grantee. Other
Awards shall be transferable to the extent provided in the
Award Agreement.
(j) Time of Granting Awards. The date of grant of
an Award shall for all purposes be the date on which the
Administrator makes the determination to grant such Award, or
such other date as is determined by the Administrator. Notice
of the grant determination shall be given to each Employee to
whom an Award is so granted within a reasonable time after
the date of such grant.
6. Award Exercise or Purchase Price, Consideration, and
Taxes.
(a) Exercise or Purchase Price. The exercise or purchase
price, if any, for an Award shall be as follows:
(i) In the case of an Incentive Stock Option:
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option owns stock representing more than
ten percent (10%) of the voting power of all classes of stock
of the Company or any Parent or Subsidiary, the per Share
exercise price shall be not less than one hundred ten percent (
110%) of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee
described in the preceding clause, the per Share exercise
price shall be not less than one hundred percent (100%) of
the Fair Market Value per Share on the date of grant.
(ii) In the case of a Non-Qualified Stock Option, the per
Share exercise price shall be not less than one hundred
percent (100%) of the Fair Market Value per Share on the date
of grant unless otherwise determined by the Administrator.
(iii) In the case of any other Award, including Restricted
Stock, such price, if any, as determined by the Administrator.
(b) Consideration. Subject to Applicable Laws,
the consideration to be paid for the Shares to be issued upon
exercise or purchase of an Award including the method of payment,
shall be determined by the Administrator (and, in the case of an
Incentive Stock Option, shall be determined at the time of
grant). In addition to any other types of consideration the
Administrator may determine, the Administrator is authorized
to accept as consideration for Shares under the Plan the
following:
(i) cash;
(ii) check;
(iii) delivery of Grantee's promissory note with such
recourse, interest, security, and redemption provisions as
the Administrator in its discretion determines as appropriate;
(iv) surrender of Shares (including withholding of Shares
otherwise deliverable upon exercise of the Award) which have
a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Award
shall be exercised (but only to the extent that such exercise
of the Award would not result in an accounting compensation
charge with respect to the Shares used to pay the exercise
price unless otherwise determined by the Administrator);
(v) delivery of a properly executed exercise notice together
with such other documentation as the Administrator and the
broker, if applicable, shall require to effect an exercise of
the Award and delivery to the Company of the sale or loan
proceeds required to pay the exercise price and/or related
withholding taxes; or
(vi) any combination of the foregoing methods of payment.
(c) Taxes. No Shares shall be delivered under
the Plan to any Grantee or other person until such Grantee or
other person has made arrangements acceptable to the Administrator
for the satisfaction of federal, state, and local income and
employment tax withholding obligations, including, without
limitation, obligations incident to the receipt of Shares or
the disqualifying disposition of Shares received on exercise
of an Incentive Stock Option. Upon exercise of an Award, the
Company shall withhold from Grantee an amount sufficient to
satisfy such tax obligations.
7. Exercise of Award.
(a) Procedure for Exercise; Rights as a Stockholder.
(i) Any Award granted hereunder shall be exercisable at
such times and under such conditions as determined by the
Administrator under the terms of the Plan and specified in
the Award Agreement.
(ii) An Award shall be deemed to be exercised when written
notice of such exercise has been given to the Company in
accordance with the terms of the Award by the person entitled
to exercise the Award and full payment for the Shares with
respect to which the Award is exercised has been received by
the Company. Until the issuance (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends
or any other rights as a stockholder shall exist with respect
to Shares subject to an Award, notwithstanding the exercise
of an Option or other Award. The Company shall issue (or
cause to be issued) such stock certificate promptly upon
exercise of the Award. No adjustment will be made for a
dividend or other right for which the record date is prior
to the date the stock certificate is issued, except as
provided in the Award Agreement or Section 9, below.
(b) Exercise of Award Following Termination of Employment
Relationship.
(i) An Award may not be exercised after the termination
date of such Award set forth in the Award Agreement and may
be exercised following the termination of a Grantee's
Continuous Status as an Employee only to the extent provided
in the Award Agreement.
(ii) Where the Award Agreement permits a Grantee to
exercise an Award following the termination of the Grantee's
Continuous Status as an Employee for a specified period, the
Award shall terminate to the extent not exercised on the last
day of the specified period or the last day of the original
term of the Award whichever occurs first.
(iii) Any Award designated as an Incentive Stock
Option to the extent not exercised within the time permitted
by law for the exercise of Incentive Stock Options following
the termination of a Grantee's Continuous Status as an
Employee shall convert automatically to a Non-Qualified Stock
Option and thereafter shall be exercisable as such to the
extent exercisable by its terms for the period specified in
the Award Agreement.
8. Conditions Upon Issuance of Shares.
(a) Shares shall not be issued pursuant to the
exercise of an Award unless the exercise of such Award and
the issuance and delivery of such Shares pursuant thereto
shall comply with all Applicable Laws, and shall be further
subject to the approval of counsel for the Company with
respect to such compliance.
(b) As a condition to the exercise of an Award,
the Company may require the person exercising such Award
to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment
and without any present intention to sell or distribute
such Shares if, in the opinion of counsel for the Company,
such a representation is required by any Applicable Laws.
9. Adjustments Upon Changes in Capitalization. Subject
to any required action by the stockholders of the Company,
the number of Shares covered by each outstanding Award, and
the number of Shares which have been authorized for issuance
under the Plan but as to which no Awards have yet been
granted or which have been returned to the Plan, as well
as the price per share of Common Stock covered by each
such outstanding Award, shall be proportionately adjusted
for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification
of the Common Stock, or any other similar event resulting in
an increase or decrease in the number of issued shares of
Common Stock. Such adjustment shall be made by the Administrator,
and its determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason hereof shall be
made with respect to, the number or price of Shares subject
to an Award.
10. Corporate Transactions/Changes of Control/Subsidiary
Dispositions.
(a) In the event of a Corporate Transaction, each Award
which is at the time outstanding under the Plan automatically
shall become fully vested and exercisable and be released
from any restrictions on transfer and repurchase or forfeiture
rights, immediately prior to the specified effective date of
such Corporate Transaction, for all of the Shares at the time
represented by such Award. Effective upon the consummation
of the Corporate Transaction, all outstanding Awards under
the Plan shall terminate unless assumed by the successor
company or its Parent.
(b) In the event of a Change of Control (other than a
Change of Control which also is a Corporate Transaction),
each Award which is at the time outstanding under the Plan
automatically shall become fully vested and exercisable and
be released from any restrictions on transfer and repurchase
or forfeiture rights, immediately prior to the specified
effective date of such Change of Control, for all of the
Shares at the time represented by such Award. Each such
Award shall remain so exercisable until the expiration or
sooner termination of the applicable Award term.
(c) The Administrator shall have the authority,
exercisable either in advance of any actual or anticipated
Subsidiary Disposition or at the time of an actual
Subsidiary Disposition and either at the time of the grant
of an Award or at any time while an Award remains outstanding,
to provide for the automatic full vesting and exercisability
of one or more outstanding unvested Awards under the Plan and
the termination of restrictions on transfer and repurchase or
forfeiture rights on such Awards, in connection with a
Subsidiary Disposition, but only with respect to those Grantees
who are at the time engaged primarily in Continuous Service as
an Employee with the subsidiary corporation involved in such
Subsidiary Disposition. The Administrator also shall have the
authority to condition any such Award vesting and exercisability
or release from such limitations upon the subsequent termination
of the affected Grantee's Continuous Service as an Employee with
that subsidiary corporation within a specified period following
the effective date of the Subsidiary Disposition. The
Administrator may provide that any Awards so vested or released
from such limitations in connection with a Subsidiary Disposition,
shall remain fully exercisable until the expiration or sooner
termination of the Award.
(d) The portion of any Incentive Stock Option accelerated
under this Section 10 in connection with a Corporate Transaction,
Change of Control or Subsidiary Disposition shall remain
exercisable as an Incentive Stock Option under the Code only to
the extent the $100,000 dollar limitation of Section 422(d)
of the Code is not exceeded. To the extent such dollar
limitation is exceeded, the accelerated excess portion of
such Option shall be exercisable as a Non-Qualified Stock
Option.
(e) In the event of termination of a Grantee's Continuous
Status as an Employee as a result of his or her Retirement,
unless otherwise provided in the Award Agreement, each
outstanding Award held by such Grantee shall become fully
vested and exercisable and be released from any restrictions
on transfer and repurchase or forfeiture rights for all of
the Shares at the time represented by such Award.
11. Term of Plan. The Plan shall become effective upon
the earlier to occur of its adoption by the Board or its
approval by the stockholders of the Company. It shall continue
in effect for a term of ten (10) years unless sooner terminated.
12. Amendment, Suspension or Termination of the Plan.
(a) The Board may at any time amend, suspend or terminate
the Plan. To the extent necessary and desirable to comply with
Applicable Laws, the Company shall obtain stockholder approval
of any Plan amendment in such a manner and to such a degree as
required.
(b) No Award may be granted during any suspension or after
termination of the Plan.
(c) Any amendment, suspension or termination of the Plan
shall not affect Awards already granted, and such Awards shall
remain in full force and effect as if the Plan had not been
amended, suspended or terminated, unless mutually agreed
otherwise between the Grantee and the Administrator, which
agreement must be in writing and signed by the Grantee and the
Company.
13. Amendment to Prior Plans. No Awards shall be
granted under the Company's 1977 Stock Option and Restricted
Stock Plans and 1987 Long Term Compensation Program on or after
stockholder approval of the Plan.
14. Reservation of Shares.
(a) The Company, during the term of the Plan, will at all
times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
(b) The inability of the Company to obtain authority from
any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the
Company of any liability in respect of the failure to issue
or sell such Shares as to which such requisite authority shall
not have been obtained.
15. No Effect on Terms of Employment. The Plan shall
not confer upon any Grantee any right with respect to
continuation of employment or consulting relationship with
the Company, nor shall it interfere in any way with his or
her right or the Company's right to terminate his or her
employment or consulting relationship at any time, with or
without cause.
16. Stockholder Approval. Continuance of the Plan with
respect to the grant of Incentive Stock Options and grants
to Covered Employees shall be subject to approval by the
stockholders of the Company within twelve (12) months before
or after the date the Plan is adopted, and such stockholder
approval shall be a condition to the right of a Covered
Employee to receive Performance-Based Compensation hereunder.
Such stockholder approval shall be obtained in the degree
and manner required under Applicable Laws.
GLOSSARY OF DEFINED TERMS
Definitions. As used in the Plan, the following definitions
shall apply:
{ {"Administrator" means the Board or any of the
Committees appointed to administer the Plan.
{ {"Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 promulgated
under the Exchange Act.
{ {"Applicable Laws" means the legal requirements
relating to the administration of stock incentive plans,
if any, under applicable provisions of federal securities
laws, state corporate and securities laws, the Code, and
the rules of any applicable stock exchange or national
market system.
{ {"Award" means the grant of an Option, SAR, Dividend
Equivalent Right, Restricted Stock, Performance Unit,
Performance Share, or other right or benefit under the Plan.
{ "Award Agreement" means the written agreement evidencing
the grant of an Award executed by the Company and the Grantee,
including any amendments thereto.
{ {"Board" means the Board of Directors of the Company.
{ {"Business Combination" means a reorganization, merger
or consolidation or sale or other disposition of all or
substantially all of the assets of the Company or the acquisition
of assets of another corporation or entity, in each case,
unless, immediately following such Business Combination,
(i) all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the outstanding
Common Stock and outstanding Voting Securities immediately
prior to such Business Combination beneficially own,
directly or indirectly, more than fifty percent (50%) of,
respectively, the then outstanding shares of common stock
and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election
of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation,
a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets
either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
outstanding Common Stock and outstanding Voting Securities,
as the case may be, (ii) no Person (excluding any employee
benefit plan (or related trust) of the Company or such
corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, twenty percent
(20%) or more (or, in the case of Henkel, more than the
percentage limit of the Company's issued common stock agreed
to in paragraph 4(a) of the June 18, 1981 agreement between
the Company and Henkel, as amended), of the then outstanding
shares of common stock of the corporation resulting from
such Business Combination or the combined voting power of
the then outstanding voting securities of such corporation
except to the extent that such ownership existed prior to
the Business Combination and (iii) at least a majority of
the members of the board of directors of the corporation
resulting from such Business Combination were members of
the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board, providing
for such Business Combination.
{ {"Change of Control" means a change in ownership or
control of the Company effected through either of the
following transactions:
(i) The acquisition by any Person of beneficial ownership
(within the meaning of Rule 13(d)(3) promulgated under the
Exchange Act) of twenty percent (20%) or more (or, in the
case of Henkel, more than the percentage limit of the
Company's issued common stock agreed to in paragraph 4(a) of
the June 18, 1981 agreement between the Company and Henkel,
as amended) of either (A) the then outstanding shares of
Common Stock or (B) the combined voting power of the then
outstanding Voting Securities; provided, however, that for
purposes of this paragraph, the following acquisitions
shall not constitute a Change of Control: (W) any acquisition
directly from the Company, (X) any acquisition by the
Company, including any acquisition which, by reducing the
number of shares outstanding, is the sole cause for
increasing the percentage of shares beneficially owned by
any such Person or by Henkel to more than the applicable
percentage set forth above, (Y) any acquisition by any
employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled
by the Company or (Z) any acquisition pursuant to a
Business Combination which complies with clauses (i), (ii)
and (iii) of the definition of "Business Combination"
above; or (ii)Directors constituting the Incumbent Board
cease for any reason to constitute at least a majority of
the Directors.
"Clorox Value Measure" means an economic value added model
the calculation of which links profit to investment by
including a capital charge for assets employed in the
business.
{ {"Code" means the Internal Revenue Code of 1986, as
amended.
{ {"Committee" means any committee appointed by the
Board to administer the Plan.
{ "Common Stock" means the common stock of the Company,
as adjusted in accordance with the provisions of Section 9,
below.
{ {"Company" means The Clorox Company.
{ {{"Continuous Status as an Employee" means that the
employment relationship with the Company, any Parent, or
Subsidiary, is not interrupted or terminated. Continuous
Status as an Employee shall not be considered interrupted
in the case of (i) any leave of absence approved by the
Company or (ii) transfers between locations of the Company
or between the Company, its Parent, any Subsidiary, or any
successor. A leave of absence approved by the Company
shall include sick leave, military leave, or any other
personal leave approved by an authorized representative of
the Company. For purposes of Incentive Stock Options, no
such leave may exceed ninety (90) days, unless reemployment
upon expiration of such leave is guaranteed by statute or
contract.
{
{ {"Corporate Transaction" means any of the following
stockholder-approved transactions to which the Company is a
party:
(i) a Business Combination, or
(ii) a complete liquidation or dissolution of the
Company.
{ {"Covered Employee" means an Employee who is a
"covered employee" under Section 162(m)(3) of the Code at
the time of an Award under the Plan.
{ {"Director" means a member of the Board.
{ {"Disability" means disability as defined in
subsection 4.1(a) of The Clorox Company Disability Plan
for twelve (12) consecutive months.
{ "Dividend Equivalent Right" means a right entitling the
Grantee to compensation measured by dividends paid with respect
to Common Stock.
{ {"Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or
Subsidiary of the Company. The payment of a director's fee
by the Company shall not be sufficient to constitute "employment"
by the Company.
{ {"Exchange Act" means the Securities Exchange Act of 1934,
as amended.
{ {"Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) Where there exists a public market for the Common Stock,
the Fair Market Value shall be (A) the closing sales price for
a Share for the last market trading day prior to the time of
the determination (or, if no sales were reported on that date,
on the last trading date on which sales were reported) on
the New York Stock Exchange, the NASDAQ National Market or the
principal securities exchange on which the Common Stock is
listed for trading, whichever is applicable or (B) if the Common
Stock is not traded on any such exchange or national market
system, the average of the closing bid and asked prices of a
Share on the NASDAQ Small Cap Market, in each case, as reported
in The Wall Street Journal or such other source as the
Administrator deems reliable; or
(ii) In the absence of an established market of the type
described above, for the Common Stock, the Fair Market Value
thereof shall be determined by the Administrator in good faith,
and such determination shall be conclusive and binding on all
persons.
{ {"Grantee" means an Employee who receives an Award under
the Plan.
"Henkel" means Henkel KGaA and any person controlled by
Henkel KGaA.
{ {"Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of
Section 422 of the Code.
{ {"Incumbent Board" means Directors who (i) are Directors
as of the date of Board adoption of the Plan, (ii) were elected
or nominated for election as Directors by at least a majority
of the Directors described in clause (i) who were still in
office at the time such election or nomination was approved
by the Board, or (iii) have been nominated as a representative
of Henkel KGaA pursuant to the agreement between Henkel KGaA
and the Company dated July 16, 1986; provided that a person
shall not be deemed an Incumbent Board member if his or her
initial assumption of office as a Director was the result of
an actual or threatened election contest with respect to the
election or removal of Directors, or other actual or threatened
solicitation of proxies or stockholder consents, by or on
behalf of a Person other than the Board.
{ {"Non-Qualified Stock Option" means an Option not intended
to qualify as an Incentive Stock Option.
{ {"Officer" means a person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act
and the rules and regulations promulgated thereunder.
{ {"Option" means a stock option granted pursuant to the
Plan.
{ {"Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
{ "Performance - Based Compensation" means compensation
qualifying as "performance-based compensation" under Section
162(m) of the Code.
{ {"Performance Shares" means Shares or an Award denominated
in Shares which may be earned in whole or in part upon attainment
of performance criteria established by the Administrator and
which may be settled for cash, securities, or a combination of
cash and securities as determined by the Administrator.
{ {"Performance Units" means awards which may be earned in
whole or in part upon attainment of performance criteria
established by the Administrator and which may be settled for
cash, securities or a combination of cash and securities as
determined by the Administrator.
{ {"Person" means any individual, entity or group within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act.
{ {"Plan" means this 1996 Stock Incentive Plan.
{ {"Restricted Stock" means an award of Shares under the
Plan to the Grantee for such consideration, if any, and subject
to such restrictions on transfer, rights of first refusal,
repurchase provisions, forfeiture provisions, and other terms
and conditions as established by the Administrator.
{ {"Retirement" means termination of Continuous Status as
an Employee after attaining age fifty-five (55) with ten (10)
or more years of "vesting service" as defined in The Clorox
Company Pension Plan.
{ {"Rule 16b-3" means Rule 16b-3 promulgated under the
Exchange Act or any successor thereto.
{ "SAR" means a stock appreciation right entitling the
Grantee to Shares or cash compensation measured by appreciation
in the value of Common Stock.
{ {"Share" means a share of the Common Stock.
{ {"Subsidiary" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.
{ {"Subsidiary Disposition" means the disposition by the
Company of its equity holdings in any subsidiary corporation
effected by a merger or consolidation involving that subsidiary
corporation, the sale of all or substantially all of the assets
of that subsidiary corporation or the Company's sale or
distribution of substantially all of the outstanding capital
stock of such subsidiary corporation.
{ {"Voting Securities" means voting securities of the
Company entitled to vote generally in the election of Directors.
THE CLOROX COMPANY
EXECUTIVE INCENTIVE COMPENSATION PLAN
1. Purpose
The purpose of The Clorox Company Executive Incentive Compensation
Plan (the "Plan") is to provide an incentive for corporate
officers and to recognize and reward those officers.
2. Definitions
The following terms will have the following meaning for purposes
of the Plan:
"Award" means a bonus paid in cash, Stock and/or restricted
Stock.
"Board" means the Board of Directors of the Company.
"Clorox Value Measure" means an economic value-added model the
calculation of which links profit to investment by including a
capital charge for assets employed in the business.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Employee Benefits and Management Compensation
Committee of the Board, or such other Committee designated by
the Board to administer the Plan provided that the Committee
shall consist of two or more persons, each of whom is an
"outside director" within the meaning of Section 162(m) of the
Code.
"Company" means The Clorox Company.
"Participant" means a corporate officer of the Company or a
Subsidiary selected by the Committee to participate in the Plan.
"Performance Criteria" means the following measures of performance:
total shareholder return, Stock price, Clorox Value Measure,
cash value added, economic value added, operating margin, asset
turnover, sales growth, asset growth, return on investment,
earnings per share, return on equity, return on assets, return on
capital, operating cash flow, cost of capital, net income,
customer satisfaction, and employee satisfaction.
A Performance Criterion may be applied by the Committee as a
measure of the performance of any, all, or any combination of the
following: the Company, a Subsidiary, a division, group or other
unit of the Company or a Subsidiary, or a particular product
category or categories of the Company or a Subsidiary.
"Performance Goal(s)" means the goal or goals established for a
Participant by the Committee in accordance with Section 4(a).
"Stock" means common stock of the Company.
"Subsidiary" means any corporation in which the Company, directly
or indirectly, controls 50 percent or more of the total combined
voting power of all classes of stock.
"Target Award" means the amount of the target award established
for each Participant by the Committee in accordance with Section 4(a).
3. Term
The Plan shall be effective as of July 1, 1996, subject to
stockholders approval, and shall continue until June 30, 2001 unless
reapproved by the Company's stockholders or unless amended or
terminated pursuant to Section 9 hereof.
4. Awards
Within 90 days after the beginning of each fiscal year of the
Company (a "year"), the Committee will select Participants for
the year and establish in writing (i) an objective Performance
Goal or Goals for each Participant for that year based on one or
more of the Performance Criteria, (ii) the specific Award
amounts that will be paid to each Participant if his or her
Performance Goal or Goals are achieved (the "Target Award")
and (iii) the method by which such amounts will be calculated.
The Committee may specify as to each Target Award the form of
payment of the Award (cash, Stock, restricted Stock, and/or
other property), provided that if restricted Stock is offered
as an incentive to Participants to take some or all of their
Award in Stock the amount of the restricted Stock shall be
specified and the Target Award, including such restricted Stock,
shall not exceed the maximum Award permitted under Section 4(b).
The Target Award may provide for payment of all or part of the
Target Award in the case of retirement, death, disability or
change of ownership of control of the Company or a Subsidiary
during the year.
The maximum Award that may be paid to any Participant under the
Plan for any year will be $2 million.
The Committee may reduce or eliminate, but may not increase, any
Award calculated under the methodology established in accordance
with paragraph (a) in order to reflect additional considerations
relating to performance.
As soon as practicable following each year while the Plan is in
effect, the Committee shall determine and certify, for each
Participant, the extent to which the Performance Goal or Goals have
been met and the amount of the Award, if any, to be made. Awards
will be paid to the Participants following such certification by
the Committee and no later than ninety (90) days following the
close of the year with respect to which the Awards are made.
The Company shall withhold from the payment of any Award hereunder
any amount required to be withheld for taxes.
5. Termination of Employment
Except as may be specifically provided in an Award pursuant to
Section 4(a), a Participant shall have no right to an Award under
the Plan for any year in which the Participant is not actively
employed by the Company or its Subsidiaries on June 30 of such year.
In establishing Target Awards, the Committee may also provide that
in the event a Participant is not employed by the Company or its
Subsidiaries on the date on which the Award is paid, the Participant
may forfeit his or her right to the Award paid under the Plan.
6. Administration
The Plan will be administered by the Committee. The Committee will
have the authority to interpret the Plan, to prescribe rules
relating to the Plan and to make all determinations necessary or
advisable in administering the Plan. Decisions of the Committee
with respect to the Plan will be final and conclusive.
7. Unfunded Plan
Awards under the Plan will be paid from the general assets of the
Company, and the rights of Participants under the Plan will be only
those of general unsecured creditors of the Company.
8. Code Section 162(m)
It is the intent of the Company that all Awards under the Plan
qualify as performance-based compensation for purposes of Code
Section 162(m)(4)(C) so that the Company's tax deduction for
such Awards is not disallowed in whole or in part under Code
Section 162(m). The Plan is to be applied and interpreted
accordingly.
9. Amendment or Termination of the Plan
The Committee may from time to time suspend, revise, amend or
terminate the Plan; PROVIDED, that any such amendment or
revision which requires approval of the Company's shareholders
in order to maintain the qualification of Awards as
performance-based compensation pursuant to Code
Section 162(m) (4) (C) shall not be made without such approval.
10. Applicable Law
The Plan will be governed by the laws of California.
11. No Rights to Employment
Nothing contained in the Plan shall give any person the right
to be retained in the employment of the Company or any of its
Subsidiaries. The Company reserves the right to terminate any
Participant at any time for any reason notwithstanding the
existence of the Plan.
12. No Assignment
Except as otherwise required by applicable law, any interest,
benefit, payment, claim or right of any Participant under the
Plan shall not be sold, transferred, assigned, pledged,
encumbered or hypothecated by any Participant and shall not be
subject in any manner to any claims of any creditor of any
Participant or beneficiary, and any attempt to take any such
action shall be null and void. During the lifetime of any
Participant, payment of an Award shall only be made to such
Participant. Notwithstanding the foregoing, the Committee
may establish such procedures as it deems necessary for a
Participant to designate a beneficiary to whom any amounts
would be payable in the event of any Participant's death.
13. Stockholder Approval
This Plan shall be subject to approval by a vote of the
stockholders of the Company at the 1996 Annual Meeting, and
such stockholder approval shall be a condition to the right
of any Participant to receive any benefits hereunder.
