UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
-----------------
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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 number
1221 Broadway - Oakland, California 94612 - 1888
(Address of principal executive offices)
Registrant's telephone number, (510) 271-7000
(including area code)
(Former name, former address and former fiscal year, if changed since
last report)
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
As of December 31, 1999 there were 236,516,258 shares outstanding of the
registrant's common stock (par value - $1.00), the registrant's only
outstanding class of stock.
<PAGE>
THE CLOROX COMPANY
PART I. Financial Information Page No.
--------------------- --------
Item 1. Financial Statements
Condensed Statements of Consolidated Earnings
Three Months and Six Months Ended
December 31, 1999 and 1998 3
Condensed Consolidated Balance Sheets
December 31, 1999 and June 30, 1999 4
Condensed Statements of Consolidated Cash Flows
Six Months Ended December 31, 1999 and 1998 5
Notes to Condensed Consolidated Financial
Statements 6 - 9
Item 2. Management's Discussion and
Analysis of Results of Operations and Financial
Condition 10-12
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The Clorox Company and Subsidiaries
Condensed Statements of Consolidated Earnings
(In millions, except share and per-share amounts)
<S> <C> <C>
Three Months Ended Six Months Ended
--------------------- ---------------------
12/31/99 12/31/98 12/31/99 12/31/98
-------- -------- -------- --------
Net Sales $ 954 $ 947 $ 1,896 $ 1,912
Cost and Expenses
Cost of products sold 478 459 940 917
Selling, delivery and administration 192 201 374 392
Advertising 110 122 226 237
Research and development 15 15 29 30
Merger, integration and restructuring 6 - 8 -
Interest expense 23 25 46 53
Other expense, net 10 7 16 7
-------- -------- -------- --------
Total costs and expenses 834 829 1,639 1,636
-------- -------- -------- --------
Earnings before income taxes 120 118 257 276
Income taxes 44 44 94 102
-------- -------- -------- --------
Net Earnings $ 76 $ 74 $ 163 $ 174
======== ======== ======== ========
Earnings per Common Share
Basic $ 0.32 $ 0.32 $ 0.69 $ 0.74
Diluted 0.32 0.31 0.68 0.73
Weighted Average Shares Outstanding (in thousands)
Basic 236,475 234,588 236,747 234,522
Diluted 239,737 239,598 240,211 239,348
Dividends per Share $ 0.20 $ 0.18 $ 0.40 $ 0.35
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION (Continued)
Item 1. Financial Statements
The Clorox Company and Subsidiaries
Condensed Consolidated Balance Sheets
(In millions)
12/31/99 6/30/99
-------- -------
<S> <C> <C>
ASSETS
- ------
Current Assets
Cash and short-term investments $ 159 $ 132
Receivables, net 575 610
Inventories 359 319
Prepaid expenses and other 23 29
Deferred income taxes 24 26
-------- -------
Total current assets 1,140 1,116
Property, Plant and Equipment - Net 1,061 1,054
Brands, Trademarks, Patents and Other Intangibles - Net 1,489 1,497
Investments in Affiliates 115 104
Other Assets 347 361
-------- -------
Total $ 4,152 $ 4,132
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
Accounts payable $ 214 $ 206
Accrued liabilities 325 350
Accrued merger, integration, and restructuring 12 23
Short-term debt and notes payable 697 734
Income taxes payable 36 48
Current maturities of long-term debt 12 7
-------- -------
Total current liabilities 1,296 1,368
Long-term Debt 695 702
Other Obligations 186 255
Deferred Income Taxes 230 237
Stockholders' Equity
Common stock 250 250
Additional paid-in capital 128 50
Retained earnings 1,923 1,842
Treasury shares, at cost (374) (392)
Accumulated other comprehensive loss (161) (160)
Other (21) (20)
-------- -------
Stockholders' equity 1,745 1,570
-------- -------
Total $ 4,152 $ 4,132
======== =======
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION (Continued)
Item 1. Financial Statements
The Clorox Company and Subsidiaries
Condensed Statements of Consolidated Cash Flows
(In millions)
Six Months Ended
------------------------------------
12/31/99 12/31/98
------------------ -----------------
<S> <C> <C>
Operations:
Net earnings $ 163 $ 174
Adjustments to reconcile to net cash provided by
operating activities:
Depreciation and amortization 98 97
Deferred income taxes 9 4
Other 3 (7)
Changes in (excluding effects of businesses purchased):
Accounts receivable 36 89
Inventories (38) (11)
Prepaid expenses and other 6 6
Accounts payable 8 (68)
Accrued liabilities (23) (99)
Accrued merger, integration, and restructuring (11) (9)
Income taxes payable (12) 32
------------------ -----------------
Net cash provided by operations 239 208
Investing Activities:
Purchases of property, plant and equipment (67) (69)
Proceeds from disposals of property, plant and equipment 3 4
Businesses purchased (31) (111)
Other (27) (46)
------------------ -----------------
Net cash used for investing (122) (222)
Financing Activities:
Credit facilities and short-term debt repayments, net (37) (69)
Long-term debt and other borrowings 14 201
Long-term debt and other repayments (12) (6)
First Brands receivables financing program, net - (15)
Cash dividends (95) (82)
Treasury stock purchased (51) (33)
Settlement of share repurchase and options contracts 82 -
Issuance of common stock for employee stock plans and other 8 41
------------------ -----------------
Net cash provided by (used for) financing (91) 37
------------------ -----------------
Effect on cash of exchange rate changes 1 -
Net increase in cash and short-term investments 27 23
Cash and short-term investments:
Beginning of period 132 102
------------------ -----------------
End of period $ 159 $ 125
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION (Continued)
Item 1. Financial Statements
The Clorox Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(In millions, except share and per-share amounts)
1) The condensed consolidated financial statements for the three and six
months ended December 31, 1999 and 1998 has not been audited but, in the
opinion of management, include all adjustments (consisting of normal
recurring and merger related accruals) necessary for a fair presentation
of the consolidated results of operations, financial position, and cash
flows of The Clorox Company and its subsidiaries (the "Company"). The
Company's results reflect the January 29, 1999 merger with First Brands
Corporation ("First Brands"). The merger was accounted for as a pooling
of interests and all historical financial information has been restated
to include First Brands. The results for the three and six months ended
December 31, 1999 and 1998 should not be considered as necessarily
indicative of the annual results for the respective years.
2) Inventories at December 31, 1999 and at June 30, 1999 consisted of:
12/31/99 6/30/99
------------ ------------
Finished goods and work in process $ 248 $ 220
Raw materials and supplies 111 99
------------ ------------
Total $ 359 $ 319
============ ============
3) International acquisitions since June 30, 1999 totaled $31 and were
funded using a combination of cash and debt. These acquisitions
included an increase in ownership to 100% in Tecnoclor, S.A. in Colombia
(previously 72% owned and fully consolidated) and a rubber glove business
purchased in Australia.
4) Basic earnings per share (EPS) is computed by dividing net earnings by
the weighted average number of common shares outstanding each period.
Diluted EPS is computed by dividing net earnings by the diluted weighted
average number of common shares outstanding during each period. Diluted EPS
reflects the potential dilution that could occur from common shares issuable
through stock options, restricted stock, warrants and other convertible
securities. The weighted average number of shares outstanding (denominator)
used to calculate basic EPS is reconciled to those used in calculating diluted
EPS as follows (in thousands):
Weighted Average Number of Shares Outstanding
---------------------------------------------
Three Months Ended Six Months Ended
------------------ ------------------
12/31/99 12/31/98 12/31/99 12/31/98
-------- -------- -------- --------
Basic 236,475 234,588 236,747 234,522
Stock options 3,225 4,932 3,428 4,744
Other 37 78 36 82
-------- -------- -------- --------
Diluted 239,737 239,598 240,211 239,348
======== ======== ======== ========
PART I - FINANCIAL INFORMATION (Continued)
Item 1. Financial Statements
The Clorox Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(In millions, except share and per-share amounts)
5) Comprehensive income for the Company includes net income and foreign
currency translation adjustments that are excluded from net income but
included as a separate component of total stockholders' equity.
Comprehensive income for the three and six months ended December 31, 1999 and
1998 is as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------- --------------------
12/31/99 12/31/98 12/31/99 12/31/98
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Earnings $ 76 $ 74 $ 163 $ 174
Other comprehensive income (loss):
Foreign currency translation adjustments 4 8 (1) (14)
--------- --------- --------- ---------
Total $ 80 $ 82 $ 162 $ 160
========= ========= ========== =========
</TABLE>
6) On January 29, 1999, the Company completed a merger with First Brands.
Related merger, integration, restructuring and asset impairment charges
through December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Merger and Asset
Integration Restructuring Sub-Total Impairment Total
----------- ------------- --------- ---------- ------
<S> <C> <C> <C> <C> <C>
Provision for merger,
integration, restructuring,
and asset impairment:
For the year ended
June 30, 1999 $36 $53 $89 $91 $180
For the six months ended
December 31, 1999 6 2 8 - 8
----------- ------------- --------- ---------- ------
Total provision for merger,
integration, restructuring and
asset impairment through
December 31, 1999 42 55 97 $91 $188
========== ======
Total paid through
December 31, 1999 (37) (48) (85)
----------- ------------- ---------
Accrued liability as of
December 31, 1999 $5 $7 $12
=========== ============= =========
</TABLE>
Total merger, integration, restructuring and asset impairment costs are
estimated to be approximately $210, including $196 recognized through
December 31, 1999 (includes $8 of obsolete inventory written off to cost
of sales). The Company expects to incur approximately an additional
$14 over the remainder of the fiscal year and such costs will be expensed
as merger, integration and restructuring costs as incurred.
PART I - FINANCIAL INFORMATION (Continued)
Item 1. Financial Statements
The Clorox Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(In millions, except share and per-share amounts)
7) The Company's operating segments are as follows:
Household Products: Includes cleaning, bleach and other home care products,
and water filtration products marketed in the United States and all products
marketed in Canada.
U. S. Specialty Products: Includes charcoal, automotive care, cat litter,
insecticides, dressings, sauces, professional products and food storage
and disposal categories.
International: Includes operations outside the United States and Canada.
Corporate, Interest and Other: Includes certain non-allocated
administrative and sales costs, goodwill amortization, interest income,
interest expense, merger, integration and restructuring, and other income
and expense.
Each segment is individually managed with separate operating results that
are reviewed regularly by the chief operating decision maker. The following
table shows operating segment information.
Net Sales
------------------------------------------
Three Months Ended Six Months Ended
--------------------- -------------------
12/31/99 12/31/98 12/31/99 12/31/98
--------- -------- -------- --------
Household Products $ 388 $ 381 $ 789 $ 796
U.S. Specialty Products 400 403 804 812
International 166 163 303 304
--------- -------- -------- --------
Total Company $ 954 $ 947 $1,896 $ 1,912
========= ======== ======== ========
Earnings Before Income Taxes
------------------------------------------
Three Months Ended Six Months Ended
--------------------- -------------------
12/31/99 12/31/98 12/31/99 12/31/98
--------- -------- -------- --------
Household Products $ 120 $ 122 $ 252 $ 258
U.S. Specialty Products 93 90 190 191
International 26 17 39 26
Corporate, Interest and Other (119) (111) (224) (199)
--------- -------- -------- --------
Total Company $ 120 $ 118 $ 257 $ 276
========= ======== ======== ========
As a result of several executive promotions and management realignments
which occurred after June 30, 1999, operating segment information for years
ending June 30, 1999 and June 30, 1998 has been restated to reflect the
Company's current organizational structure and management responsibilities.
The restated information is as follows:
PART I - FINANCIAL INFORMATION (Continued)
Item 1. Financial Statements
The Clorox Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(In millions, except share and per-share amounts)
<TABLE>
(CAPTION>
U.S. Corporate
Fiscal Household Specialty Interest & Total
Year Products Products International Other Company
-------- ----------- ----------- --------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Net Sales 1999 $1,439 $1,856 $ 708 $ - $4,003
1998 1,376 1,796 726 - 3,898
Earnings before Tax 1999 496 456 54 (576) 430
1998 440 426 96 (406) 556
Identifiable Assets 1999 1,253 1,251 1,020 608 4,132
1998 1,192 1,138 1,025 710 4,065
Capital Spending 1999 55 64 27 30 176
1998 32 99 33 26 190
Depreciation and 1999 42 68 41 51 202
Amortization 1998 43 61 40 38 182
Interest Expense 1999 - - - 97 97
1998 - - - 104 104
</TABLE>
8) In September 1999, in response to declines in the Company's stock price in
the first quarter, the Board of Directors authorized a common stock
repurchase and hedging program intended to reduce or eliminate dilution
when shares are issued in accordance with the Company's various stock
compensation plans. The Company had canceled a prior share repurchase
and hedging program (previously authorized in September 1996 by the
Board of Directors to offset the dilutive effects of
employee stock exercises) when it merged with First Brands. From
inception of the new program through December 31, 1999, a total
of 1,123,000 shares were acquired at a cost of $51.
PART I - FINANCIAL INFORMATION (Continued)
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition
Results of Operations
Diluted earnings per share increased 3% to 32 cents and decreased 7% to 68
cents for the three and six months ended December 31, 1999, respectively.
Net earnings increased 3% to $76 million and decreased 6% to $163 million
for the three and six months ended December 31, 1999, respectively. The
Company's results reflect the January 29, 1999 merger with First Brands
Corporation ("First Brands"). The merger was accounted for as a pooling of
interests and all historical financial information has been restated to
include First Brands.
Net sales for the second quarter of fiscal 2000 increased 1% to $954 million
mostly due to the results achieved from the Company's household products
and international segments partially offset by lower net sales from the
Company's U.S. specialty products segment. The increase in household
product's net sales resulted mostly from the introduction of new products,
such as Clorox Disinfecting Spray, Liquid-Plumr Foaming Pipe Snake, and
Clorox FreshCare fabric refresher, partially offset by lower shipments of
Brita water filtration systems driven by lower demand for pour-through
pitchers, and a decrease in shipments of Clorox liquid bleach and Clorox 2
bleach. International net sales increases reflected higher shipments due
to an increase in market share in the Brazilian bleach market and growth
in Australia and New Zealand partly attributable to the acquisition of a
rubber glove business in Australia; such increases were partially offset
by currency devaluations experienced by some of the Company's Latin
American businesses. The U.S. specialty products segment's net sales
decreased mostly due to the discontinuation of First Brands prior year
promotional activities partially offset by higher shipments of charcoal
products due to an extended season, and higher shipments of Hidden Valley
bottled dressings resulting from strong demand for club-size products.
Net sales for the six month period ended December 31, 1999 decreased 1% to
$1,896 million mostly due to the discontinuation of prior year First
Brands promotional activities, lower shipments of Tilex Fresh Shower due
to higher volumes in the prior year during its launch, an increase in
international promotional spending during the first quarter of fiscal 2000,
and currency devaluations experienced by some of the Company's Latin
American businesses. Partially offsetting these decreases were higher
shipments from new product launches, the full year results of the Handi
Wipes business acquired in the prior year, higher charcoal shipments and
international growth.
Cost of products sold as a percentage of sales increased to 50.1% from
48.5% and increased to 49.6% from 48.0% for the three and six months ended
December 31, 1999, respectively. These increases were mostly due to
higher resin prices, somewhat offset by cost savings initiatives throughout
the Company's domestic and international business units.
Selling, delivery, and administrative expenses decreased 4% to $192 million
and decreased 5% to $374 million for the three and six months ended
December 31, 1999, respectively, mostly from continued benefits from
combining the former First Brands businesses with Clorox. These decreases
reflect a savings from lower commission expense primarily due to the
consolidation of the Company's broker network.
Advertising expense decreased 10% to $110 million and decreased 5% to
$226 million for the three and six months ended December 31, 1999,
respectively, mostly due to savings resulting from changing certain of
First Brands couponing practices. These savings are partially offset
by higher media spending to support former First Brands' businesses and
the introduction of new products.
Merger, integration and restructuring for the six months ended
December 31, 1999 primarily reflect relocation expenses and retention
bonuses paid to former First Brands employees and costs associated
with the closure of First Brands distribution centers. The Company
expects to incur approximately an additional $14 million over the
remainder of the fiscal year and such costs will be expensed as merger,
integration and restructuring costs as incurred.
Interest expense decreased to $23 million from $25 million and decreased
to $46 million from $53 million for the three and six months ended
December 31, 1999, respectively. The decreases are mostly due to the
refinancing of former First Brands debt at lower interest rates made
possible by Clorox's more favorable credit rating.
PART I - FINANCIAL INFORMATION (Continued)
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition
Liquidity and Capital Resources
The Company's financial position and liquidity remain strong due to cash
provided by operations during the quarter. Normal seasonal variations
experienced by the Company's seasonal businesses and higher shipment
volumes recorded in the fourth quarter of fiscal 1999 were the primary
drivers causing reductions in receivables and accrued liabilities and
the increase in inventories.
International acquisitions since June 30, 1999 totaled $31 million and
were funded using a combination of cash and debt. These acquisitions
included an increase in ownership to 100% (from 72%) in Tecnoclor, S.A.
in Colombia and a rubber glove business purchased in Australia.
In September 1999, in response to declines in the Company's stock price
in the first quarter, the Board of Directors authorized a common stock
repurchase and hedging program intended to reduce or eliminate dilution
when shares are issued in accordance with the Company's various stock
compensation plans. The Company had canceled a prior share repurchase
and hedging program (previously authorized in September 1996 by the
Board of Directors to offset the dilutive effects of employee stock
exercises) when it merged with First Brands. During the six month period
ended December 31, 1999, a total of 1,123,000 shares were acquired at
a cost of $51 million.
On September 15, 1999, the Company settled prior share repurchase
agreements and options contracts realizing cash proceeds of
approximately $82 million. On the same day, the Company entered
into two new share repurchase transactions whereby the Company
contracted for future delivery of 2,260,000 shares on September 15, 2002
and 2,260,000 shares on September 15, 2004, each for a strike price of
$43 per share. In November 1999, the Company entered into an agreement
to purchase an additional 1,000,000 shares on December 1, 2003 at a
price of $46.32 per share.
On November 17, 1999, the stockholders approved an amendment of the
Company's Certificate of Incorporation to increase the authorized
capital of the Company to consist of 750,000,000 shares of Common
Stock and 5,000,000 shares of Preferred Stock, each with a par
value of $1.00 per share.
Management believes the Company has access to sufficient capital
through existing lines of credit and, should the need arise, from
other public and private sources.
Year 2000 Compliance
In 1997, the Company established a comprehensive corporate-wide
program to address what is commonly referred to as the "Year 2000"
or "Y2K" problem. This effort encompassed software, hardware,
electronic data interchange, networks, personal computers,
manufacturing and other facilities, embedded chips, century
certification, supplier and customer readiness, contingency planning
and domestic and international operations. Following the Company's
January 29, 1999 merger with First Brands, the Company incorporated
First Brands (since renamed The Glad Products Company) and its
subsidiaries into the Company's comprehensive Y2K compliance program.
As of December 31, 1999, the Company completed all of its Y2K
compliance efforts on all of its critical domestic and international
business systems, through retirement, upgrades or replacements, its
critical plant floor equipment, instrumentation and facilities, and
its third party assessment for all of its operations. The Company
developed written contingency plans for its critical operations and
third party relationships, including key customers, suppliers and
other service providers. The Company did not implement any of its
contingency plans because it did not experience any material Y2K related
issues with the arrival of the new millennium.
Y2K costs were expensed as incurred and funded through operating cash
flows. Through December 31, 1999, the Company has expensed incremental
remediation costs of $20 million and accelerated strategic upgrade
costs of $20 million. The Company spent approximately 6.4% of its 1999
fiscal year information technology budget on Y2K remediation issues. The
Company has not deferred any critical information technology projects
because of its Year 2000 program efforts, which were primarily addressed
through a joint team of the Company's business and information technology
resources.
PART I - FINANCIAL INFORMATION (Continued)
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition
Cautionary Statement
Except for historical information, matters discussed above and in the
financial statements and footnotes, including statements about future
growth, profitability, costs, expectations, plans or objectives, are
forward-looking statements based on management's estimates, assumptions
and projections. These forward-looking statements are subject to risks
and uncertainties, and actual results could differ materially from those
discussed above and in the financial statements and footnotes. Important
factors that could affect performance and cause results to differ
materially from management's expectations are described in "Forward-Looking
Statements and Risk Factors" in the Company's Annual Report on Form 10-K
for the year ending June 30, 1999, and in the Company's subsequent
SEC filings. Those factors include, but are not limited to, marketplace
conditions and events, competitors' actions, the Company's costs, risks
inherent in litigation and international operations, the success of new
products, the integration of acquisitions and mergers, including First Brands,
and environmental, regulatory and intellectual property matters.
.
PART I - FINANCIAL INFORMATION (Continued)
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(3) (iii) Restated Certificate of Incorporation
(10) Material Contracts
(XIX) Agreement between Henkel KGaA and the Company, November 2, 1999
<PAGE>
S I G N A T U R E
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE CLOROX COMPANY
(Registrant)
DATE: February 14, 2000 BY /S/ GREGORY S. FRANK
Gregory S. Frank
Vice-President - Controller
INDEX TO EXHIBITS
Exhibit Number Description of Exhibit
- -------------- -------------------------------------
3(iii) Restated Certificate of Incorporation
10(XIX) Agreement between Henkel KGaA and
the Company, November 2, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION FROM THE FINANCIAL
STATEMENTS OF THE CLOROX COMPANY FOR THE FISCAL QUARTER ENDED DECEMBER 31, 1998,
AS PRESENTED IN THE CLOROX COMPANY'S FORM 10-Q FILED FOR SUCH PERIOD, AND AS
RESTATED HEREIN, AND IS INCORPORATED BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> DEC-31-1998
<CASH> 65
<SECURITIES> 60
<RECEIVABLES> 464
<ALLOWANCES> 4
<INVENTORY> 381
<CURRENT-ASSETS> 1047
<PP&E> 1765
<DEPRECIATION> 741
<TOTAL-ASSETS> 4136
<CURRENT-LIABILITIES> 1146
<BONDS> 938
0
0
<COMMON> 249
<OTHER-SE> 1297
<TOTAL-LIABILITY-AND-EQUITY> 4136
<SALES> 1912
<TOTAL-REVENUES> 1912
<CGS> 917
<TOTAL-COSTS> 1576
<OTHER-EXPENSES> 7
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 53
<INCOME-PRETAX> 276
<INCOME-TAX> 102
<INCOME-CONTINUING> 174
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 174
<EPS-BASIC> 0.74
<EPS-DILUTED> 0.73
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE FINANCIAL
STATEMENTS OF THE CLOROX COMPANY FOR THE FISCAL QUARTER ENDED DECEMBER 31, 1999,
AS PRESENTED IN THE CLOROX COMPANY'S FORM 10-Q FILED FOR SUCH PERIOD, AND IS
INCORPORATED BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 98
<SECURITIES> 61
<RECEIVABLES> 578
<ALLOWANCES> 3
<INVENTORY> 359
<CURRENT-ASSETS> 1140
<PP&E> 1889
<DEPRECIATION> 828
<TOTAL-ASSETS> 4152
<CURRENT-LIABILITIES> 1296
<BONDS> 695
0
0
<COMMON> 250
<OTHER-SE> 1495
<TOTAL-LIABILITY-AND-EQUITY> 4152
<SALES> 1896
<TOTAL-REVENUES> 1896
<CGS> 940
<TOTAL-COSTS> 1569
<OTHER-EXPENSES> 24
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46
<INCOME-PRETAX> 257
<INCOME-TAX> 94
<INCOME-CONTINUING> 163
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 163
<EPS-BASIC> 0.69
<EPS-DILUTED> 0.68
</TABLE>
RESTATED CERTIFICATE OF INCORPORATION
OF
THE CLOROX COMPANY
This corporation was originally incorporated on
September 5, 1986.
ARTICLE ONE
The name of the corporation is THE CLOROX COMPANY
ARTICLE TWO
The address of the registered office of the corporation in the
State of Delaware is 1209 Orange Street in the City of Wilmington,
County of New Castle. The name of the registered agent of the
corporation at such address is The Corporation Trust Company.
ARTICLE THREE
The purpose of the corporation is to engage in any lawful act
or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware.
ARTICLE FOUR
The total number of shares of stock which the corporation
shall have authority to issue is 755,000,000, consisting of
750,000,000 shares of Common Stock having a par value of $1.00
per share and 5,000,000 shares of Preferred Stock having a par
value of $1.00 per share.
The board of directors of the corporation is authorized,
subject to limitations prescribed by law and the provisions of
this Article Four, to provide for the issuance of the shares
of Preferred Stock in series, and by filing a certificate
pursuant to the applicable law of the State of Delaware, to
establish from time to time the number of shares to be included
in each such series, and to fix the designation, powers,
preferences and rights of the shares of each such series and
the qualifications, limitations or restrictions thereof.
The number of authorized shares of Preferred Stock may be
increased or decreased (but not below the number of shares
thereof then outstanding) by the affirmative vote of the holders
of a majority of the Common Stock, without a vote of the holders
of the Preferred Stock, or of any series thereof, unless a vote
of any such holders is required pursuant to the certificate or
certificates establishing the series of Preferred Stock.
ARTICLE FIVE
The business and affairs of the corporation shall be managed
by the board of directors which shall consist of not less than 9
persons. The exact number of directors shall be fixed from time
to time by, or in the manner provided in, the by-laws of the
corporation and may be increased or decreased as therein provided.
Directors of the corporation need not be elected by ballot unless
required by the by-laws. The board of directors is authorized to
adopt, amend or repeal the by-laws.
ARTICLE SIX
Part I
Vote Required For Certain Business Combinations
A. In addition to any affirmative vote required by law or
this Restated Certificate of Incorporation, and except
as otherwise expressly provided in Part II of this Article
Six, the following transactions:
(i) or any Subsidiary any merger or consolidation of
this corporation (as hereinafter defined) into or with
(a) any Interested Stockholder (as
hereinafter defined); or
(b) any other corporation (whether or not
it is an Interested Stockholder) which is, or after such merger
or consolidation would be, an Affiliate (as hereinafter defined)
of an Interested Stockholder; or
(ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a series of
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of this
corporation or any Subsidiary having an aggregate Fair Market
Value (as hereinafter defined) of more than ten percent (10%) of
the Fair Market Value of the consolidated total assets of this
corporation; or
(iii) the issuance or transfer by this corporation
or any Subsidiary (in one transaction or a series of transactions)
of any securities of this corporation or any Subsidiary to any
Interested Stockholder or any Affiliate of any Interested
Stockholder in exchange for cash, securities or
other property having an aggregate Fair Market Value of more
than ten percent (10%) of the Fair Market Value of the
consolidated total assets of this corporation; or
(iv) the adoption of any plan or proposal for the
liquidation of this corporation proposed by or on behalf of an
Interested Stockholder or any Affiliate of any Interested
Stockholder; or
(v) any reclassification of this corporation's
securities (including any reverse stock split), or recapitalization
of this corporation, or any merger or consolidation of this
corporation with any of its Subsidiaries or any other transaction
(whether or not with or into or otherwise involving an Interested
Stockholder) which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares
of any class of equity or convertible securities of this
corporation or any Subsidiary which is directly or indirectly
owned by any Interested Stockholder;
shall require the affirmative vote of the holders of at least
eighty percent (80%) of the voting power of the then outstanding
shares of stock of this corporation entitled to vote regularly
in the election of directors (the "Voting Stock") voting as a
single class (it being understood that for purposes of this
Article Six, each share of the Voting Stock other than Common
Stock shall have the number of votes granted to it pursuant to
Article Four of this Restated Certificate of Incorporation).
Such affirmative vote shall be required notwithstanding the fact
that no vote may be required, or that a lesser percentage may be
specified, by law or in any agreement with any national
securities exchange or otherwise.
B. The term "Business Combination" as used in this
Article Six shall mean any transaction which is referred to
in any one or more of clauses (i) through (v) of paragraph A
of Part I.
Part II
When Higher Vote Is Not Required
The provisions of Part I of this Article Six shall not
be applicable to any particular Business Combination, and
such Business Combination shall require only such affirmative
vote as is required by law and any other provision of this
Restated Certificate of Incorporation, if all of the
conditions specified in either of the following paragraphs
A and B are met:
A. The Business Combination shall have been approved
by a majority of the Disinterested Directors (as hereinafter
defined).
B. All of the following conditions shall have been
met:
(i) The aggregate amount of the cash and the
Fair Market Value as of the date of the consummation of the
Business Combination of consideration other than cash to be
received per share by holders of Common Stock in such Business
Combination shall be at least equal to the higher of the
following:
(a) (if applicable) the highest per share
price paid by the Interested Stockholder for any shares of
Common Stock acquired by it (1) within the two year period
immediately prior to the first public announcement of the
proposal of the Business Combination (the "Announcement
Date") or (2) in the transaction in which it became an
Interested Stockholder, whichever is higher; and
(b) the Fair Market Value per share of
Common Stock on the Announcement Date or on the date on
which the Interested Stockholder became an Interested
Stockholder (such latter date is referred to in this Article
Six as the "Determination Date"), whichever is higher.
(ii) The aggregate amount of the cash and the
Fair Market Value on the date of the consummation of the
Business Combination of consideration other than cash to
be received per share by the holders of shares of any other
class of outstanding Voting Stock shall be at least equal
to the highest of the following (it being intended that the
requirements of this paragraph B (ii) shall be required to
be met with respect to every class of outstanding Voting
Stock, whether or not the Interested Stockholder has
previously acquired any shares of a particular class of
Voting Stock):
(a) (if applicable) the highest per
share price paid by the Interested Stockholder for any
shares of such class of Voting Stock acquired by it (1)
within the two-year period immediately prior to the
Announcement Date or (2) in the transaction in which it
became an Interested Stockholder, whichever is higher;
(b) (if applicable) the highest
preferential amount per share to which the holders of
shares of such class of Voting Stock are entitled in the
event of any voluntary or involuntary liquidation,
dissolution or winding up of this corporation; or
(c) the Fair Market Value per share of
such class of Voting Stock on the Announcement Date or on
the Determination Date, whichever is higher.
(iii) The consideration to be received by
holders of a particular class of outstanding Voting Stock
(including Common Stock) shall be in cash or in the same
form as the Interested Stockholder has previously paid
for shares of such class of Voting Stock. If the Interested
Stockholder has paid for shares of any class of Voting
Stock with varying forms of consideration, the form of
consideration for such class of Voting Stock shall be either
cash or the form used to acquire the largest number of
shares of such class of Voting Stock previously acquired by
it. The price determined in accordance with paragraphs B(i)
and B(ii) shall be subject to appropriate adjustment in the
event of any stock dividend, stock split, combination of
shares or similar event.
(iv) After such Interested Stockholder has
become an Interested Stockholder except as approved by a
majority of the Disinterested Directors, there shall have
been:
(a) no failure to declare and pay at the
regular date therefor any full quarterly dividends (whether
or not cumulative) on the outstanding Preferred Stock, if
any; and
(b) no reduction in the effective annual
rate of dividends paid on the Common Stock.
(v) After such Interested Stockholder has
become an Interested Stockholder, such Interested Stockholder
shall not have received the benefit, directly or indirectly
(except proportionately as a stockholder), of any loans,
advances, guarantees, pledges or other financial assistance
or any tax credits or other tax advantages provided by the
corporation, whether in anticipation of or in connection with
such Business Combination or otherwise.
Part III
Certain Definitions
For the purpose of this Article Six:
A. A "person" shall mean any individual, firm,
corporation or other entity.
B. "Interested Stockholder" shall mean any person
(other than this corporation, any Subsidiary or any compensation
plan of this corporation) who or which:
(i) is the beneficial owner, directly or
indirectly, of more than 5% of the voting power of the
outstanding Voting Stock; or
(ii) is an Affiliate of this corporation and at
any time within the two-year period immediately prior to the
date in question was the beneficial owner, directly or
indirectly, of more than five percent (5%) of the voting
power of the then outstanding Voting Stock; or
(iii) is an assignee of or has otherwise
acquired or succeeded to any shares of Voting Stock which
were at any time within the two-year period immediately
prior to the date in question beneficially owned by any
Interested Stockholder, if such assignment or succession
shall have occurred in the course of a transaction or
series of transactions not involving a public offering
within the meaning of the Securities Act of 1933.
C. A person shall be a "Beneficial Owner" of any
Voting Stock:
(i) which such person or any of its Affiliates
or Associates (as hereinafter defined) beneficially owns,
directly or indirectly; or
(ii) which such person or any of its Affiliates
or Associates has:
(a) the right to acquire (whether such
right is exercisable immediately or only after the passage
of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise, or
(b) the right to vote pursuant to any
agreement, arrangement or understanding; or
(iii) which are beneficially owned, directly
or indirectly, by any other person with which such person
or any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of Voting Stock.
D. For the purpose of determining whether a person
is an Interested Stockholder pursuant to paragraph B of this
Part III, the number of shares of Voting Stock deemed to be
outstanding shall include shares deemed owned through
application of paragraph C of this Part III but shall not
include any other shares of Voting Stock which may be
issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights,
warrants or options, or otherwise.
E. "Affiliate" or "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2
of the General Rules and Regulations under the Securities
Exchange Act of 1934, as in effect on March 1, 1984.
F. "Subsidiary" means any corporation of which a
majority of any class of equity securities is owned,
directly or indirectly, by this corporation; provided,
however, that for the purposes of the definition of
Interested Stockholder set forth in paragraph B of this
Part III, the term "Subsidiary" shall mean only a
corporation of which a majority of each class of equity
securities is owned, directly or indirectly, by this
corporation.
G. "Disinterested Director" means any member of
the board of directors of this corporation (the "Board")
who is unaffiliated with the Interested Stockholder by
whom or on whose behalf, directly or indirectly, the
Business Combination is proposed or was a member of the
Board prior to the time that such Interested Stockholder
became an Interested Stockholder, and any successor of a
Disinterested Director who is unaffiliated with such
Interested Stockholder and is recommended to succeed a
Disinterested Director by a majority of Disinterested
Directors then on the Board.
H. "Fair Market Value" means:
(i) In the case of stock, the highest
closing sale price during the 30-day period immediately
preceding the date in question of a share of such stock
as reported in the principal consolidated transaction
reporting system for securities listed or admitted to
trading on the New York Stock Exchange, or, if such stock
is not listed on such Exchange, on the principal United
States securities exchange, registered under the Securities
Exchange Act of 1934 on which stock is listed, or, if such
stock is not listed on such an exchange, the highest closing
bid quotation with respect to a share of such stock during
the 30-day period immediately preceding the date in question
on the National Association of Securities Dealers, Inc.
Automated Quotation System or any system then in use, and
(ii) in the case of property other than cash or
stock valued under (i) above, the fair market value of such
property on the date in question as determined in good faith
by a majority of the Disinterested Directors.
I. In the event of any Business Combination in which
this corporation is the surviving corporation, the phrase
"consideration other than cash to be received" as used in
clauses (i) and (ii) of paragraph B of Part II of this Article
Six shall include the Fair Market Value of the shares of
Common Stock and/or the shares of any other class of outstanding
Voting Stock retained by the holders of such shares.
Part IV
Powers of The Board of Directors
A majority of the Disinterested Directors of this
corporation shall have the power and duty to determine for
the purposes of this Article Six, on the basis of information
known to them after reasonable inquiry:
A. whether a person is an Interested Stockholder;
B. the number of shares of Voting Stock beneficially
owned by any person;
C. whether a person is an Affiliate or Association
of another; and
D. whether the assets which are the subject of
any Business Combination have, or the consideration to be
received for the issuance or transfer of securities by
this corporation or any Subsidiary in any Business
Combination has, an aggregate Fair Market Value of more
than ten percent (10%) of the Fair Market Value of the
consolidated total assets of this corporation.
Part V
Fiduciary Obligations
Nothing contained in this Article Six shall be
construed to relieve any Interested Stockholder from
any fiduciary obligation imposed by law.
Part VI
Amendment Or Repeal
The provisions set forth in this Article Six may
not be amended or repealed in any respect, unless such
action is approved by the affirmative vote of the holders
of not less than eighty percent (80%) of the then
outstanding Voting Stock, voting as a single class.
ARTICLE SEVEN
Action shall be taken by stockholders of the
corporation only at annual or special meetings of
stockholders and stockholders may not act by written
consent.
ARTICLE EIGHT
Part I
Right To Indemnification
Each person who was or is made a party or is
threatened to be made a party to or is involved in
any action, suit or proceeding, whether civil,
criminal, administrative or investigative ("proceeding"),
by reason of the fact that he or she, or a person of
whom he or she is the legal representative, is or was a
director or officer of this corporation or is or was
serving at the request of the corporation as a director
or officer of another corporation or of a partnership,
joint venture, trust or other enterprise, including
service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an
official capacity as a director or officer or in any
other capacity while serving as a director or officer
shall be indemnified and held harmless by the corporation
to the fullest extent authorized by the General
Corporation Law of the State of Delaware, as the same
exists or may hereafter be amended, (but, in the case of
any such amendment, only to the extent that such amendment
permits the corporation to provide broader indemnification
rights than said law permitted the corporation to provide
prior to such amendment) against all expenses, liability
and loss (including attorneys' fees, judgments, fines,
ERISA excise taxes or penalties and amounts paid or to be
paid in settlement) reasonably incurred or suffered by
such person in connection therewith; provided, however,
that the corporation shall indemnify any such person seeking
indemnity in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part
thereof) was authorized by the board of directors of the
corporation. Such right shall be a contract right and shall
include the right to be paid by the corporation expenses
incurred in defending any such proceeding in advance of its
final disposition; provided, however, that, the payment of
such expenses incurred by a director or officer in his or
her capacity as a director or officer (and not in any other
capacity in which service was or is rendered by such person
while a director or officer, including, without limitation,
service to an employee benefit plan) in advance of the final
disposition of such proceeding, shall be made only upon
delivery to the corporation of an undertaking, by or on behalf
of such director or officer, to repay all amounts so advanced
if it should be determined ultimately that such director or
officer is not entitled to be indemnified under this Article
Eight or otherwise. The corporation may, by action of the
board of directors, provide indemnification to employees and
agents of the corporation with a lesser or the same scope and
effect as the foregoing indemnification of directors and
officers.
Part II
Right of Claimant To Bring Suit
If a claim under Part I of this Article Eight is not
paid in full by the corporation within ninety days after a
written claim has been received by the corporation, the
claimant may at any time thereafter bring suit against the
corporation to recover the unpaid amount of the claim and,
if successful in whole or in part, the claimant shall be
entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such action (other
than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its
final disposition where the required undertaking has been
tendered to the corporation) that the claimant has not
met the standards of conduct which make it permissible
under the General Corporation Law of the State of Delaware
for the corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense
shall be on the corporation. Neither the failure of the
corporation (including its board of directors, independent
legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action
that indemnification of the claimant is proper in the
circumstances because he or she has met the applicable
standard of conduct set forth in said law, nor an actual
determination by the corporation (including its board of
directors, independent legal counsel, or its stockholders)
that the claimant had not met such applicable standard of
conduct, shall be a defense to the action or create a
presumption that the claimant had not met the applicable
standard of conduct.
Part III
Non-Exclusivity Of Rights
The rights conferred on any person by Parts I and
II of this Article Eight shall not be exclusive of any
other right which such person may have or hereafter
acquire under any statute, provision of this Restated
Certificate of Incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
Part IV
Insurance
The corporation may maintain insurance, at its expense,
to protect itself and any such director or officer of the
corporation or of another corporation, partnership, joint
venture, trust or other enterprise against any such expense,
liability or loss, whether or not the corporation would
have the power to indemnify such person against such expense,
liability or loss under the General Corporation Law of the
State of Delaware.
ARTICLE NINE
A director of this corporation shall not be personally
liable to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, except
for liability (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of the State
of Delaware, or (iv) for any transaction from which the
director derived an improper personal benefit.
This Restated Certificate of Incorporation of THE
CLOROX COMPANY was adopted by The Board of Directors of
this corporation in accordance with Section 245 & 242 of
the General Corporation Law of the State of Delaware.
It restates. integrates and further amends the provisions
of this corporation's Certificate of Incorporation.
THE CLOROX COMPANY
Date: November 19, 1999 By: /S/ G. C. SULLIVAN
G.C. Sullivan
Chairman of the Board and
Chief Executive Officer
Attest: /S/ PETER D. BEWLEY
Peter D. Bewley
Secretary
THE UNDERSIGNED, the duly elected, and qualified
Assistant Secretary of THE CLOROX COMPANY, a Delaware
corporation, does hereby certify the foregoing to be the
Restated Certificate of Incorporation of said Corporation.
Date: November 19, 1999 /S/ THOMAS W. HUCKABY
Thomas W. Huckaby
This Agreement, made and entered into as of this 2nd day of
November, 1999
between
THE CLOROX Company, 1221 Broadway, Oakland, California
94612, USA (hereinafter referred to as "CLOROX")
and
HENKEL KGaA, Henkelstrasse 67, D-40191 Duesseldorf,
Federal Republic of Germany (hereinafter referred to
as "HENKEL")
WITNESSETH:
WHEREAS, CLOROX and HENKEL have concluded an agreement
dated January 16, 1992, providing for cooperative
research and development in the field of consumer
products excluding cosmetics; and
WHEREAS, CLOROX and HENKEL have also concluded a
Joint Venture Agreement dated October 1, 1985, and
WHEREAS, CLOROX and HENKEL, in light of the progress
made and the experience so far gathered, wish to renew
and extend their cooperation on a basis mutually beneficial,
and to revise their prior agreements related to ownership
and licensing of their inventions, know how and patents
to enhance such cooperative efforts and MAXIMIZE the
mutual benefits thereof to both parties.
NOW, THEREFORE, the Parties hereto have agreed as follows:
(1)
SUPERSEDES PRIOR AGREEMENTS
This Agreement supersedes and replaces in their entirety
the agreement of January 16, 1992, the provisions of
section 9.2 of the Joint Venture Agreement of October 1,
1985.
(2)
DEFINITIONS
"Affiliate" shall mean an entity or party controlled by a
party hereto, either directly or indirectly.
"Cleaning Product Categories" shall mean all consumer
chlorine laundry bleach, fabric deodorizer products and
household cleaning products, except the "Excepted Cleaning
Product Categories."
"Excepted Cleaning Product Categories" shall mean consumer
dish detergents and in-home dry cleaning products, including
products for cleaning, deodorizing, freshening, softening,
static control or spot removal in a clothes dryer.
"Clorox Territory" shall mean the United States, Canada,
Argentina and Caribbean countries.
"Henkel Territory" shall mean Western Europe, as defined
below.
"Other Territory" shall mean all territories other than
the Clorox Territory and the Henkel Territory.
"Western Europe" shall comprise the following countries:
Austria, Belgium, Denmark, Finland, France, Germany,
Italy, Luxembourg, Malta, Netherlands, Norway, Portugal,
Spain, Sweden, Switzerland, Turkey and the United Kingdom.
"Technology" shall mean, with respect to Cleaning Product
Categories, all rights to any developments, trade secrets,
know how, inventions, patent applications and patents wholly
owned by a party including its Affiliates, or jointly with
Affiliates, but excluding any rights jointly owned by a
party with third parties other than Affiliates.
(3)
LICENSES OF TECHNOLOGY
To facilitate the communication, sharing and cooperative
development efforts of the parties with respect to
Technology in the Cleaning Product Categories, CLOROX and
HENKEL agree that all rights in their respective Technology
with respect to the Cleaning Product Categories shall upon
request of the other party be licensed to the other party
as follows:
(a) CLOROX shall grant to HENKEL an exclusive, royalty
free license under its Technology rights with respect to
the Cleaning Product Categories in the HENKEL Territory.
(b) HENKEL shall grant to CLOROX an exclusive, royalty
free license under its Technology rights with respect to the
Cleaning Product Categories in the CLOROX Territory.
(c) Neither party shall have any rights in the other's
Technology in the Other Territory unless the other party
gives written notice to it at any time within nine (9) months
after first launching a product utilizing such Technology in
any country, at its sole option, that it does not choose to
use a specific Technology, or launch a specific product, in
one or more specific countries of the Other Territory,
(a "Disclaimed Country"), whereupon the party so notified,
including its Affiliates and joint ventures, (the "Notified
Party"), shall have a period of nine (9) months from such
notice of the owning party during which it may launch a
product utilizing the same Technology in the Disclaimed
Countries. (If a party does not give such notice within nine
(9) months after first launch of a product utilizing any
specific Technology in a country, then this subsection (c)
shall be inapplicable with respect to such Technology.) If
the Notified Party launches such a product in a Disclaimed
Country within this period, it will have an exclusive,
royalty free license in such Technology in every Disclaimed
Country where it launched the product within such period.
For each of the Disclaimed Countries in which it does not
launch such a product within this time period it will have
no further rights to a license in such Technology, and the
owning party shall be free to license others under such
Technology. The date of the first launch shall be the last
day of the month in which a product is first generally
available to the consumer. Each party further agrees not to
license its Technology in the Other Territory to any third
party without giving notice to the other party as provided
in Article 3(c).
(d) Such licenses shall include Technology developed
prior to this agreement to the extent not previously
licensed to others. Hereafter, the right to grant licenses
to others in areas outside the granting party's territory
shall be limited by the rights granted herein.
(e) It is understood that if Technology developed for
the Excepted Cleaning Product Categories can be applied to
the fields included in the Cleaning Product Categories, the
license provisions of Article 3(a) through (c) will extend
to such application within the Cleaning Product Categories
unless otherwise restricted by agreements entered into
before the effective date of this agreement.
(f) The licenses and rights provided for herein shall
include the right to sublicense Affiliates, including
subsidiaries and joint ventures.
(g) The parties recognize that conflicts may arise with
respect to the non-exclusive licenses outside the
Territories of the respective parties, and, accordingly,
either party may bring to the attention of the other the
existence of a conflict or potential conflict with respect
to any specific product, whereupon the senior management
of the parties shall confer in good faith to try to resolve
any conflicts or potential conflicts.
(h) In the event that either party acquires a business in
the other party's Territory, the exclusive licenses of
sections (3)(a) and (b) shall not apply to Technology
acquired with such business or to Technology subsequently
developed by such party to the extent that such Technology
has application to such business.
(4)
COOPERATIVE RESEARCH AND DEVELOPMENT
The parties shall cooperate on research and development in
the Cleaning Product Categories as follows:
1) Joint Projects
The parties agree to undertake joint research and
development projects ("Joint Projects") in the Cleaning
Product Categories in areas of mutual interest as may be
agreed upon from time to time by the parties. Each party
shall bear its own costs for work done pursuant to a Joint
Project.
2) Experimental Work
The parties also agree to individually undertake
Experimental Work in the Cleaning Product Categories
which is not of mutual interest and which is unrelated
to any experimental or other work undertaken as a part of
a Joint Project. Such work may be requested from time to
time by either party and shall be carried out at the expense
of the requesting party, subject to mutual agreement, and
consistent with each party's available capacity for undertaking
such work.
3) Disclosure of Individual Developments
The parties also agree to disclose to each other their
own individual inventions and product developments as follows:
(a) Each party shall provide the other with a quarterly
listing (informative title) of all patent applications first
filed anywhere in the world relating to the Cleaning Product
Categories making the patent application itself available
for review by the other party if so requested.
(b) Each party shall supply the other with a description
and sample of each consumer product in the Cleaning Product
Categories for which they conduct market testing within
four weeks after initiation of such market testing test.
(c) Each party shall disclose to the other all
analytical techniques and test methods that they employ or
develop related to consumer products in the Cleaning Product
Categories and deliver copies of technical reports primarily
related thereto on request.
(d) Each party will inform the other of any new chemical
product developments relating to the Cleaning Product
Categories in, to the extent that such information can be of
use in formulating end products in the Cleaning Product
Categories , provided however, that such exchange of
information, per se, shall not confer any rights in such
information.
4) Visiting Scientists
The parties also agree that, from time to time, and upon
their mutual agreement, one or more scientists of a party
will be temporarily assigned to work at the research
facilities and with the scientists of the other party in
connection with said other party's own research. Such
visiting scientists shall at all times remain the
employees of their normal employer, which will continue
to be responsible for all salary and benefits for the
visiting scientists.
(5)
JOINT PROJECTS
1) Establishment
CLOROX and HENKEL shall identify areas of mutual interest
in the Cleaning Product Categories from time to time. They
shall undertake Joint Projects in such areas as the
parties may agree upon from time to time. Each agrees to
use its reasonable best efforts in implementing the Joint
Projects instituted under this Agreement, taking into
account the available research and development capacity
of each party.
Upon the commencement of any Joint Project, each party
will disclose to the other party any prior invention and
patent which it owns, which dominates, or is likely to
dominate, any inventions arising from the Joint Project,
and any licenses which have been granted under such
patent unless such disclosure is not permitted according
to the terms of such license agreements.
At the commencement of Joint Projects under this
Agreement the parties shall promptly prepare a formal
project proposal for approval of management of each
party which, to the extent possible, shall set forth,:
(a) objectives and scope of the projects to be
undertaken, equipment needs, personnel needs, and the
like;
(b) provisions for the administration of the project,
including budget provisions, project organization, the
respective parties' responsibilities, and the like;
(c) prior developments of each of the parties that
relate to the proposed Joint Project; and
(d) inventions which dominate, or are likely to dominate,
inventions arising from the Joint Project.
2) Communication of Joint Project Information
The parties shall keep each other fully informed of
their progress in all Joint Project work performed under
this Agreement. The parties' research and development
management shall meet from time to time (at least once a
year) to review the progress of the work and outline and
agree upon any changes in the program which may be necessary
or desirable in view of the results, and to select
additional areas of cooperation.
In addition, working meetings of scientists participating
directly in a Joint Project will be held as needed.
Scientist employees of each party shall have access to
the laboratories of the other to participate in work
conducted with respect to the Joint Project.
Copies of all written work reports prepared by either
party for its own internal use will be supplied to the
other party within a reasonable time to the extent as
they relate to Joint Projects or Experimental Work
under this Agreement.
3) Termination of Joint Projects
Joint Projects established hereunder may be terminated
by either party at any time by giving the other party
sixty (60) days written notice thereof.
Upon such termination of a Joint Project the
parties shall prepare a written summary of the Joint
Project, including an identification of all developments
made during the Joint Project and the contributions of
each party to the Joint Project, as well as identification
of any prior dominating inventions of either party.
All developments made on a Joint Project up to the time
of termination shall be owned and treated as Joint Project
inventions as provided in Article (7), and all information
obtained from the other party during the course of the
Joint Project shall continue to be treated as provided in
Article (9).
Developments related to a terminated Joint Project made by
a party after termination of the Joint Project shall not be
considered Joint Project developments. However, they should
be treated as other inventions, and disclosed pursuant to
Article (4) Paragraph 3), and shall be licensed to the
other pursuant to Article (3) . If a Joint Project is
reinstituted after such a termination developments made
after reinstitution of the Joint Project shall be Joint
Project developments, but developments made while the Joint
Project was terminated shall not become Joint Project
developments.
4) Joint Projects with Third Parties
Upon agreement of both parties, a third party may be
included in a Joint Project, either at its inception or
at any other time, provided the third party agrees to the
terms of this agreement related to Joint Projects, namely:
Disclosure of and agreement to license prior
dominating inventions,
- - Full disclosure and reports on Joint Project work
and developments, and
- - Prior disclosure and agreement on filing patents on
Joint Project inventions, as well as any territorial
restrictions on rights to Joint Project developments
that the parties deem appropriate.
(6)
EXPERIMENTAL WORK
Each party performing Experimental Work under this Agreement
shall be compensated by the other party for the true and
accurate costs incurred by it.
The cost shall be computed on the basis of the hourly
manpower rates prevailing at the time of the performance of
the work in the party performing the Experimental Work and
shall consist of the following:
1) cost of the personnel performing the work under this
Agreement plus prorated overhead cost of the respective
department;
2) other costs directly incurred in the performance of
the work under this Agreement, e.g.consumption of factory
supplies, energy and the like, depreciation on buildings and
machinery, services of other departments, travel expenses,
transportation costs plus prorated overhead costs for the
administration of the foregoing.
In addition to the compensation of actual cost hereunder
the party performing the project work shall be entitled to
a surplus benefit of ten percent (10%) of the true and
accurate costs incurred by it as consideration for making
laboratory capacity available.
The aforementioned costs and surplus benefits shall be
computed on a quarterly basis by the party performing the
project work under this Agreement and be paid by the other
party no later than thirty (30) days after presentation of
the invoice.
(7)
PATENT RIGHTS
1) Ownership of Inventions
(a) Generally
Inventions and developments, and patents thereon, will be
owned by the party whose employees made such inventions,
except as provided in (b) or (c) below. Inventorship of
employees of the parties shall be determined in accordance
with the applicable laws of the USA and the Federal Republic
of Germany. Where inventorship is unclear, inventorship shall
be reviewed and resolved jointly by research and development
management and patent attorneys in keeping with the
patent laws of the applicable countries..
(b) Joint Inventions
All inventions made and trade secrets and know-how
developed in the course of a Joint Project or otherwise
determined to be joint inventions of employees of both
parties shall be assigned to and owned by one of the
parties herein, regardless of inventorship, such owning
party to be chosen by joint agreement of the parties
pursuant to consideration of the relative investments and
contributions of the parties, and the relevance and
importance of the invention to each party's markets and
other patents. Such Technology shall be subject to the
licensing provisions of Article (3). However, outside
of each parties' Territories such licenses shall be
exclusive except for the owning party and its Affiliates.
Each party shall agree to the other party's licensing or
sublicensing third parties as to such inventions, trade
secrets and know-how if that is necessary or reasonable
to avert mandatory licensing according to the applicable
laws.
c) Experimental work
All patent rights covering inventions made by employees of
either party, whether solely or jointly, in the course of
any Experimental Work requested under this Agreement shall
be the property of the party requesting and paying for such
work. To the extent that they relate to the Cleaning
Product Categories, they shall be subject to the licensing
provisions of section (3). Otherwise, the other party, who
did the experimental work, shall have a non-exclusive
royalty-free license with the right to sublicense.
2) Patent Filing
a) General
(i) Each party shall file such patent applications in
its Territory on its own inventions that it deems warranted,
and shall file corresponding patent applications thereon in
the other party's Territory unless otherwise instructed by
the other party. In other territories, if the owning party
chooses not file an application or maintain a patent, it
will so advise the other party at least ninety (90) days
prior to any deadline set in the subject case for taking
action and it will give the other party a right to do so
upon request.
(ii) Each party shall pay for or reimburse the other
for all maintenance costs related to the other party's
patent applications and patents licensed to it in its
Territory pursuant to Article (3).
(b) Joint Project Inventions
Prior to filing any patent application on a Joint Project
invention, the parties shall discuss the contents of
such applications including claims, initial filing country,
countries of mutual interest, and the party to undertake
initial preparation and filing as promptly as feasible in
order not to jeopardize priority. Rights in such Joint
Project Inventions, and the costs of maintenance of such
patent applications and patents, shall be in accordance
with Article (3) and Article (7) section (1)(b).
However, prior to the first filing of an application on a
Joint Project invention or any other joint invention, a
copy of the application shall be provided to the other
party with an opportunity for review and comment, at least
two weeks before filing. If the reviewing party notifies
the filing party that there is a disagreement as to
inventorship or the use of the reviewing party's
information in the application that cannot be resolved
by the Technical and Legal staffs of the parties, the
application will not be filed until the matter is resolved,
except with the agreement of the Vice President of
Research and Development for each party.
Also, each party shall disclose to the other party any
patent applications on their own individual projects
which utilize or disclose any information derived from
Joint Project disclosures or any information of the other
party obtained in the course of cooperation under this
Agreement, whether or not any related Joint Project has
been terminated, as soon as reasonably possible, but in
any event at least ten (10) days prior to filing to allow
the other party to review and comment on or object to such
a utilization or disclosure.
(c) Experimental Work Inventions
Each party shall notify the other as to all countries in
which it intends to apply for patent rights on inventions
made in the course of the Experimental Work performed
under this Agreement which it owns under the terms hereof
and, if so requested, shall grant to the other the right to
apply in the other's own name and at its own expense for
patents with respect to such inventions in any country where
the first party does not intend to apply; and if either
party intends to abandon any of the aforementioned patent
rights covering such inventions, it shall first advise the
other, who shall then have the right to receive an assignment
of such patent or patent application and to maintain such
patent right or to continue its prosecution at its own expense.
3) Visiting Scientists
(a) Ownership and Licensing of Inventions
Any inventions made by an employee of a party while assigned
to work with scientists of the other party on research or
development work not falling within Article 4, Section 1,
whether or not the sole invention of the employee, or an
invention made jointly with scientists of the other party,
shall be owned by the party to whose research project the
invention relates (typically the host company). However, the
other party shall have a right to a license under such
inventions and any patents granted thereon. as provided in
Article (3).
(b) Any employee assigned to work with scientists of the
other party shall receive compensation (inventors fees and
the like) for inventions made and covered by these provisions
from his employer.
(8)
MARKETING RIGHTS
Henkel and Clorox shall inform each other about all new
consumer products that they develop in the Cleaning Product
Categories and make them available to the other party for
manufacture or marketing in accordance with the provisions of
Article (3) with respect to rights in Technology.
(9)
CONFIDENTIALITY
Each party shall retain in strict confidence and disclose to
no one without the prior written consent to the other party,
any information which it first acquires as a result of any
Joint Project work, or which otherwise is disclosed to it by
the other party under this Agreement, provided, however, that
this obligation:
1) shall not prevent the disclosure under a like condition
of confidence and trust of information to companies at least 50%
of which one of the parties hereto owns or controls;
2) shall not apply to information already lawfully known to
the receiving party prior to the date of this Agreement, or to
information which is or becomes part of the public domain through
no fault of the receiving party; and
3) shall be limited to a period of ten (10) years from the
date of such disclosure.
The foregoing shall not be interpreted to allow either party to
disclose information concerning test marketing of the other
party disclosed to it according to Article (4) Paragraph 3) b).
(10)
INDEMNITY
Marketing any of the products and substances developed under
this Agreement or utilization of any Technology as provided in
this Agreement remains the sole responsibility of the party
deciding so to do. Therefore, the party marketing any product
developed or disclosed pursuant to this Agreement shall indemnify
the other party against any and all loss, liability, damage
and expense of every character whatsoever for loss of, or damage
to, property, or for personal injury, sickness and disease
(including death) sustained by any person, if such loss, damage
or injury is caused by, or is in any way connected with products
developed under this Agreement.
Neither party shall have any liability to the other for patent
infringement, or the like, for utilization of its Technology
by the other party pursuant to this Agreement. However, each
party will use its reasonable best efforts to insure that it
has obtained all inventor's rights in its Technology that it
makes available to the other pursuant to this Agreement.
(11)
TERMINATION
The term of this Agreement shall commence on the date and day
first written above and shall continue for ten (10) years
thereafter, unless sooner terminated as herein provided.
This Agreement may be terminated by either party on twelve
(12) calendar months prior written notice given as of any
date after one (1) year from the commencement date of this
Agreement.
Either party may terminate this Agreement forthwith in any
of the following events:
1) if at any time and for any reason HENKEL should hold
directly or indirectly less than 15 per cent of the then
outstanding shares of CLOROX common stock; or
2) if at any time one or more corporations or individuals
acting in concert or as a syndicate or other group, or any
persons so acting on behalf of any of the foregoing, shall
acquire without HENKEL's consent or hold more than 15 percent
of the then outstanding shares of CLOROX common stock; or
3) if either party is subject to corporate reorganization
and as a result thereof is not the surviving or controlling
corporation.
Also, this agreement shall terminate immediately upon any
termination of the Joint Venture Agreement dated October 1,
1985.
(12)
SURVIVABILITY
Upon the expiration or sooner termination of the term hereof,
all rights and obligations of the parties shall come to an
end except that:
1) the non-disclosure provisions of Article (9) shall
not immediately terminate but shall remain in full force and
effect for the period provided in Article (9) and shall then
terminate;
2) with respect to Technology for which a party has
developed plans for use or actually made use in a commercial
product prior to such expiration or termination the provisions
of Article (3) and (7) relating to licenses under patent, trade
secret and know-how rights shall not terminate but shall
continue in full force and effect, as to patents, until
expiration of the patents and, as to trade secrets and know-how,
perpetually;
(13)
ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof. Any
alteration, amendment or termination of this Agreement shall
be valid only if made in written form.
(14)
SEVERABILITY
In the event that any provision of this Agreement shall be held
illegal, void or in effective, the remaining portions hereof
shall remain in full force and effect. In this case, the parties
hereto shall replace the illegal, void or ineffective provision
by a provision which has the same or similar economic effect.
(15)
NOTICES
All notices given under this Agreement shall be in writing and
as to CLOROX shall be addressed to:
THE CLOROX COMPANY
Attention: General Counsel
1221 Broadway
Oakland, California 94612
U S A
and as to HENKEL shall be addressed to
HENKEL KGaA
Attention: General Counsel
Henkelstrasse 67
D-40191 Duesseldorf Germany
or as modified from time to time by the parties hereto.
(16)
ASSIGNABILITY
This Agreement shall be assignable in whole or in part by
either party to any assignee controlled by the parties hereto.
Otherwise, this Agreement shall be assignable in whole or in part
only with the prior written consent of the other party.
(17)
GOVERNING LAW
This Agreement shall be construed and interpreted in accordance
with and its performance governed by the laws of the State of
New York, USA.
All disputes arising in connection with this Agreement shall
be finally settled by the courts of the State of New York, USA.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first written above.
THE CLOROX COMPANY
/S/ G. CRAIG SULLIVAN
G. Craig Sullivan
Chairman of the Board and
Chief Executive Officer
HENKEL KGaA
/S/ DR. KLAUS MORWIND
Dr. Klaus Morwind
Executive Vice President, Personally Liable
Associate and Member of Management Board
