Exhibit 10-3
THE CLOROX COMPANY
INDEPENDENT DIRECTORS’
DEFERRED COMPENSATION PLAN
1. Establishment, Objectives, Duration.
     The Clorox Company (hereinafter referred to as the “Company”) hereby
establishes a nonqualified deferred compensation plan for Independent Directors
of the Company to be known as the “The Clorox Company Independent Directors’
Deferred Compensation Plan” (hereinafter referred to as the “Plan”).
     The purpose of the Plan is to enhance the Company’s ability to attract and
retain Independent Directors whose training, experience and ability will promote
the interests of the Company and to directly align the interests of such
Independent Directors with the interests of the Company’s stockholders. The Plan
is designed to permit Independent Directors to defer the receipt of all or a
portion of the compensation otherwise payable to them for services to the
Company as members of the Board.
     The Plan is effective as of November 16, 2005. The Plan will remain in
effect until such time as it shall be terminated by the Board, pursuant to
Section 11 herein.
2. Definitions.
     The following terms, when capitalized, shall have the meanings set forth
below:
     (a) “Account” means a bookkeeping account established and maintained for a
Participant pursuant to Section 5(a).
     (b) “Beneficiary” means the person, persons or entity designated by the
Participant pursuant to Section 10 to receive any benefits payable under the
Plan.
     (c) “Board” means the Board of Directors of the Company.
     (d) “Change in Control” means
     (i) The acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Exchange Act ) (a “Person”) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 30% of either (a) the then outstanding shares of common stock of the Company
(the “Outstanding Company Common Stock”) or (b) 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 subparagraph (i), the following
acquisitions shall not constitute a Change in Control: (a) any acquisition
directly from the Company, (b) 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

 

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to more than the applicable percentage set forth above, (c) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (d) any acquisition by
any corporation pursuant to a transaction which complies with clauses (a),
(b) and (c) of subparagraph (iii) of this definition; or
     (ii) Individuals who, as of the date hereof, constitute the Board (the
“Incumbent Board”) cease for any reason within any period of 24 months 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 stockholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board, 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
     (iii) Consummation by the Company of 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 (a
“Business Combination”), in each case, unless, following such Business
Combination, (a) 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) is represented by Outstanding Company Common
Stock and Outstanding Company Voting Securities, respectively, that were
outstanding immediately prior to such Business Combination (or, if applicable,
is represented by shares into which such Outstanding Company Common Stock and
Outstanding Company Voting Securities were converted pursuant to such Business
Combination) and such ownership of common stock and voting power among the
holders thereof is 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, (b) 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 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 (c) 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

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     (iv) Approval by the stockholders of the Company of a complete liquidation
or dissolution of the Company.
     (e) “Code” means the Internal Revenue Code of 1986, as amended.
     (f) “Company” means The Clorox Company and any successor thereto as
provided in Section 12(d).
     (g) “Deferred Stock Unit” means a hypothetical Share as described in
Section 5(b).
     (h) “Deferred Stock Unit Award” means any annual award of Deferred Stock
Units that may be granted to a Participant for services to the Company as an
Independent Director under The Clorox Company 2005 Stock Incentive Plan (or any
successor stock incentive plan approved by the stockholders of the Company).
     (i) “Director’s Fees” means the annual cash retainer for Board and
committee service, special assignment fees, meeting fees, Committee Chair or
Presiding Director fees, and other amounts payable to a Participant for services
to the Company as an Independent Director. Director’s Fees do not include awards
granted to a Participant under The Clorox Company 2005 Stock Incentive Plan (or
any successor stock incentive plan approved by the stockholders of the Company).
     (j) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
     (k) “Fair Market Value” means, as of any date, the value of a Share
determined as follows:
     (i) Where there exists a public market for the Share, 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 Share is listed for trading, whichever is applicable, or (b) if the
Share 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
Board deems reliable; or
     (ii) In the absence of an established market of the type described above
for the Share, the Fair Market Value thereof shall be determined by the Board in
good faith, and such determination shall be conclusive and binding on all
persons.
     (l) “Independent Director” means any individual who is a member of the
Board of Directors of the Company who is not an employee of the Company or any
of its subsidiaries.
     (m) “Participant” means any Independent Director who elects to participate
by filing a Participation Agreement as provided in Section 4.

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     (n) “Participation Agreement” means an agreement in such form as the Board
may prescribe filed by a Participant in accordance with Section 4.
     (o) “Payment Anniversary Date” means an anniversary of the Payment
Commencement Date.
     (p) “Payment Commencement Date” means the first business day of the Plan
Year immediately following the Plan Year in which the Participant terminates
service as a member of the Board.
     (q) “Plan” means The Clorox Company Independent Directors’ Deferred
Compensation Plan, as amended from time to time.
     (r) “Plan Year” means the calendar year.
     (s) “Share” means a share of common stock of the Company, par value $1.00
per share.
3. Administration of the Plan.
     (a) In General. The Plan shall be administered by the Board. The Board
shall act by vote or written consent of a majority of its members.
     (b) Authority of the Board. Subject to applicable laws and the provisions
of the Plan, the Board shall have full and final authority in its discretion to
establish rules and take all actions, including, without limitation,
interpreting the terms of the Plan and any related rules or regulations or other
documents enacted hereunder and deciding all questions of fact arising in their
application, determined by the Board to be necessary in the administration of
the Plan.
     (c) Effect of Board’s Decision. All decisions, determinations and
interpretations of the Board shall be final, binding and conclusive on all
persons, including the Company, its stockholders, the Participants and their
estates and Beneficiaries.
     (d) Delegation. The Board may delegate to any Board committee or officers
of the Company any and all authority with which it is vested under the Plan, and
the Board may allocate its responsibilities under the Plan among its members.
4. Participation and Crediting of Accounts.
     (a) Participation. Participation in the Plan shall be limited to
Independent Directors who elect to participate in the Plan by filing a
Participation Agreement with the Board. A Participation Agreement must be filed
prior to the beginning of the Plan Year for which it is effective; provided,
however, that in the first year in which an individual becomes eligible to
participate in the Plan, the newly eligible Participant may make an election to
defer compensation for services to be performed subsequent to such election
within 30 days after date the individual first becomes eligible to participate.

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     (b) Contents of Participation Agreement.
     (i) Each Participant Agreement shall set forth whether the Participant
elects to receive Director’s Fees in cash, Shares, deferred cash or Deferred
Stock Units. A Participant who does not file a timely Participation Agreement
for a Plan Year shall receive his or her Director’s Fees in cash.
     (ii) A Participant who elects to receive his or her Director’s Fees in
Shares, deferred cash, and/or Deferred Stock Units shall specify the percentage
of such Director’s Fees (in multiples of 10%) to be paid in Shares, deferred
cash or Deferred Stock Units.
     (iii) Each Participation Agreement shall set forth whether amounts deferred
pursuant to subparagraphs (i) and (ii) above will be paid as a lump sum payment
or in five annual installments, as set forth in Section 6(c) herein.
     (iv) Each Participation Agreement shall also set forth whether Deferred
Stock Unit Awards will be paid as a lump sum payment or in five annual
installments, as set forth in Section 6(c) herein.
     (c) Payment of Shares and Crediting of Accounts.
     (i) A Participant who elects to receive all or a portion of his or her
Director’s Fees as Shares shall be distributed Shares as of the last day of each
calendar quarter equal to his or her accrued Director’s Fees for the quarter,
multiplied by the percentage of such Director’s Fees previously selected by the
Participant to be applied to the purchase of Shares, and divided by the Fair
Market Value of a Share as of the last trading day in such calendar quarter.
Cash shall be distributed in lieu of fractional Shares.
     (ii) A Participant who elects to receive all or a portion of his or her
Director’s Fees as deferred cash shall have credited to his or her Account as of
the last day of each calendar quarter an amount determined by multiplying his or
her accrued Director’s Fees for the quarter by the percentage of such Director’s
Fees previously selected by the Participant to be received as deferred cash.
     (iii) A Participant who elects to receive all or a portion of his or her
Director’s Fees as Deferred Stock Units shall have credited to his or Account as
of the last day of each calendar quarter the number of Deferred Stock Units
(including fractional Deferred Stock Units) determined by multiplying his or her
accrued Director’s Fees for the quarter by the percentage of such Director’s
Fees previously selected by the Participant to be applied to the purchase of
Deferred Stock Units, and dividing the product thereof by the Fair Market Value
of a Share as of the last trading day in such calendar quarter.
     (d) Modification or Revocation of Election by Participant. Elections made
pursuant to paragraphs (b)(i) and (ii) of this Section 4 shall remain in effect
for the next Plan Year and for subsequent Plan Years unless and until a new
Participation Agreement is provided. Any elections made under a new
Participation Agreement will apply only to Director’s Fees earned in the Plan
Year beginning after the date of the new Participation Agreement.

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5. Maintenance and Investment of Accounts.
     (a) Accounts. A separate Account shall be maintained for each Participant.
In addition, various subaccounts may be maintained for a Participant as
necessary to reflect separate Participation Agreements, cash deferrals, and
Deferred Stock Units. A Participant’s Account shall be utilized solely as a
device for measurement and determination of the amounts to be paid to the
Participant pursuant to the Plan, and shall not constitute or be treated as a
trust fund of any kind. The balance of a Participant’s Account shall be adjusted
to reflect changes in the value of the deemed investments thereof, adjustments,
credits and debits pursuant to paragraphs (b) and (c) below, any Deferred Stock
Unit Awards, and distributions pursuant to Section 6.
     (b) Deferred Stock Units.
     (i) Deemed Investment in Shares. The Account of a Participant who elects to
receive Deferred Stock Units, as well as the Account of a Participant who
receives Deferred Stock Unit Awards, shall be treated as if it were invested in
Deferred Stock Units equivalent in value to the Fair Market Value of Shares in
accordance with the following rules:

  (a)   Deemed Reinvestment of Dividend Equivalents. The number of Deferred
Stock Units credited to a Participant’s Account shall be increased on each date
on which a dividend is paid on Shares. The number of additional Deferred Stock
Units credited to a Participant’s Account as a result of such increase shall be
determined by (1) multiplying the total number of Deferred Stock Units
(excluding fractional Deferred Stock Units) credited to the Participant’s
Account immediately before such increase by the amount of the dividend paid per
Share on the dividend payment date, and (2) dividing the product so determined
by the Fair Market Value of a Share on the dividend payment date.     (b)  
Adjustments upon Change in Capitalization. In the event of any merger,
reorganization consolidation, recapitalization, liquidation, stock dividend,
split-up, spin-off, stock split, reverse stock split, share combination, share
exchange, extraordinary dividend, or any change in the corporate structure
affecting the Shares, the number of Deferred Stock Units credited to a
Participant’s Account and/or the kind or class of shares deliverable under the
Plan shall be adjusted in such manner as may be determined to be appropriate and
equitable by the Board, in its sole discretion, to prevent dilution or
enlargement of benefits or potential benefits intended to be made available
under the Plan. The determination of the Board as to such adjustments, if any,
to be made shall be conclusive and binding on all Participants and
Beneficiaries.

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     (ii) Hypothetical Nature of Investments. The Deferred Stock Units
established hereunder shall be used solely to determine the amounts to be paid
hereunder, shall not be or represent an equity security of the Company, shall
not be convertible into or otherwise entitle a Participant to acquire an equity
security of the Company and shall not carry any voting rights.
     (c) Cash Deferrals. Cash deferrals shall be credited with interest at an
annual rate for each Plan Year equal to the Prime Lending Rate of Wells Fargo
Bank as in effect on January 1 of such year. Interest shall be accrued to the
date of the actual payment and shall be compounded on a calendar quarter basis.
6. Payments.
     (a) Time of Payment. Payments to a Participant with respect to the
Participant’s Account, including any Deferred Stock Unit Awards credited to a
Participant’s Account, shall begin as of the Participant’s Payment Commencement
Date; provided, however, that if a Participant dies before the Participant’s
Payment Commencement Date, payment of the entire value of the Participant’s
Account shall be made to the Participant’s Beneficiary in accordance with the
provisions of paragraph (c) below after the Board receives all documents and
other information that it requests in connection with the payment.
     (b) Medium of Payment. Except to the extent the Board determines otherwise,
the portion of the Participant’s Account denominated in Deferred Stock Units
shall be paid in Shares. One Share shall be paid for each whole Deferred Stock
Unit contained therein, and any fractional Deferred Stock Units shall be paid in
cash. The portion of the Participant’s Account denominated in cash shall be paid
in cash.
     (c) Form of Payment.
     (i) Lump Sum. A Participant shall receive his or her Account under the Plan
in the form of a lump sum payment unless the Participant has elected to receive
any portion thereof in five annual installments in accordance with subparagraph
(ii). The lump sum shall be payable to the Participant in cash and/or Shares on
the Payment Commencement Date. If the Participant dies before his or her Payment
Commencement Date, a lump sum payment shall be made to the Participant’s
Beneficiary on the Payment Commencement Date.
     (ii) Five Annual Installments. A Participant may elect to receive all or a
portion of his or her Account under the Plan in five annual installments. Such
election must be made in the Participant’s Participation Agreement pursuant to
Section 4. Annual installments shall be payable to the Participant in cash/and
or Shares beginning as of the Payment Commencement Date and continuing each
Payment Anniversary Date thereafter until all installments have been paid. The
first annual installment shall equal one-fifth (1/5th) of the value of the
Participant’s Account(s), determined as of the Payment Commencement Date. Each
successive annual installment shall equal the value of the Participant’s
Account(s), determined as of the Payment Anniversary Date, multiplied by a
fraction, the numerator of which is one, and the denominator of which is the
excess of

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five over the number of installment payments previously made (i.e., 1/4th in
year 2, 1/3rd in year 3, etc.). If the Participant dies before the Participant’s
Payment Commencement Date having elected to receive benefits in five annual
installments, or after the Participant’s Payment Commencement Date but before
all five installments have been paid, the remaining installments shall be paid
to the Participant’s Beneficiary in accordance with the schedule in this
subparagraph (ii).
7. Shares Subject to the Plan.
     Unless otherwise determined by the Board, payments under the Plan that are
made in the form of Shares, in whole or in part, shall be made from the
aggregate number of Shares authorized to be issued under and otherwise in
accordance with the terms of The Clorox Company 2005 Stock Incentive Plan (or
any successor stock incentive plan approved by the stockholders of the Company).
No Shares are reserved for issuance under the Plan.
8. Change in Control.
     Except as otherwise provided by the Board, upon the occurrence of a Change
in Control or as soon as reasonably practicable thereafter, the value of all
amounts deferred by a Participant which have not yet been credited to the
Participant’s Account and the value of such Participant’s Account shall be paid
to the Participant, in each case as a lump sum cash payment. For purposes of
payments under this Section 8, the value of a Deferred Stock Unit shall be
computed as the greater of (a) the Fair Market Value of a Share on or nearest
the date on which the Change in Control is deemed to occur, or (b) the highest
per share price for Shares actually paid in connection with the Change in
Control.
9. Taxes.
     The Company shall have the power and right to deduct or withhold from all
credits and payments under the Plan any applicable taxes that the Board
reasonably determines to be required by law to be withheld from such credits and
payments.
10. Beneficiary Designation.
     (a) Beneficiary Designation. Each Participant shall have the right, at any
time, to designate any person, persons or entity as his Beneficiary or
Beneficiaries. A Beneficiary designation shall be made, and may be amended, by
the Participant by filing a written designation with the Board, on such form and
in accordance with such procedures as the Board shall establish from time to
time.
     (b) No Beneficiary Designation. If a Participant fails to designate a
Beneficiary as provided above, or if all designated Beneficiaries predecease the
Participant, then the Participant’s Beneficiary shall be deemed to be the
Participant’s estate.
11. Amendment or Termination of the Plan.
     The Board may at any time and from time to time, amend, suspend or
terminate the Plan in whole or in part; provided, however, that no such
amendment, suspension or termination shall

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adversely affect the rights of any Participant or Beneficiary under the Plan
unless consented to in writing by such Participant or, in the event the
Participant is deceased, the Beneficiary.
12. Miscellaneous.
     (a) Gender, Number and References. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine, the
plural shall include the singular and the singular shall include the plural. Any
reference in the Plan to a Section of the Plan or to an act or code or to any
section thereof or rule or regulation thereunder shall be deemed to refer to
such Section of the Plan, act, code, section, rule or regulation, as may be
amended from time to time, or to any successor Section of the Plan, act, code,
section, rule or regulation.
     (b) No Assignment. Except as specifically set forth in the Plan with
respect to the designation of Beneficiaries and 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.
     (c) Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
     (d) Successors. All obligations of the Company under the Plan shall be
binding on any successor to the Company, whether the existence of such
successors is the result of a direct or indirect purchase, merger,
consolidation, or other event, or a sale or disposition of all or substantially
all of the business and/or assets of the Company and references to the “Company”
herein any in any Participation Agreements shall be deemed to refer to such
successors.
     (e) Requirements of Law. The payment of cash or Shares under the Plan shall
be subject to all applicable laws and to such approvals by any governmental
agencies or national securities exchanges as may be required.
     (f) Unfunded Plan. The Plan is intended to be an unfunded plan benefiting
persons who are not employees of the Company or any of its subsidiaries. All
payments pursuant to the Plan will be made from the general assets of the
Company, and the rights of Participants and Beneficiaries under the Plan will be
only those of general unsecured creditors of the Company.
     (g) Governing Law. To the extent not preempted by federal law, the Plan
shall be construed in accordance with and governed by the laws of the State of
California, excluding any conflicts or choice of law rule or principle that
might otherwise refer construction or interpretation of this Plan to the
substantive law of another jurisdiction.
     (h) Non-Exclusive Plan. The adoption of the Plan by the Board shall not be
construed as creating any limitations on the power of the Board or a committee
thereof to adopt such other incentive arrangements as it may deem desirable.

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     (i) Code Section 409A Compliance. To the extent applicable, it is intended
that this Plan and all deferrals and payments made hereunder comply with the
requirements of Section 409A of the Code and any related regulations or other
guidance promulgated with respect to such Section by the U.S. Department of the
Treasury or the Internal Revenue Service (“Section 409A”). Any provision that
would cause the Plan or any deferral or payment made hereunder to fail to
satisfy Section 409A shall have no force or effect until amended to comply with
Section 409A, which amendment may be retroactive to the extent permitted by
Section 409A.

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