Exhibit 10.3
EMPLOYMENT AGREEMENT
     THIS AGREEMENT, dated August 25, 2006, is between THE CLOROX COMPANY, a
Delaware corporation (the “Company”), and Donald R. Knauss (the “Executive”).
RECITAL
     The Company and the Executive want to enter into a written agreement
concerning the terms of the Executive’s employment with the Company and the
terms of the termination of that employment.
TERMS OF AGREEMENT
1. Term of Employment.
     (a) Basic Term. The term of this Agreement shall commence on the
Executive’s first day of employment with the Company, which date is to be
determined but which shall not be later than December 1, 2006 (the “Effective
Date”) and end upon the earliest of (such ending date, the “Date of
Termination”) (i) the third anniversary thereof, as and to the extent extended
under Section 1(b) (the “Term Date”), (ii) the date upon which the Executive’s
employment is terminated in accordance with Section 4, and (iii) the first day
of the month following the Executive’s 65th birthday. In the event that the
Executive’s employment with the Company does not begin on or before December 1,
2006, this Agreement shall be null and void.
     (b) Extension of Term. Subject to Section 1(a)(iii) and to Section 4, the
Term Date will be automatically extended for one additional year on the last day
before such Term Date, and for one additional year on each succeeding
anniversary of the Term Date as so extended thereafter, unless and until either
party gives notice to the other party at least one hundred eighty (180) days
before any such extension of the Term Date would become effective hereunder that
the automatic extension shall cease and that this Agreement shall terminate on
the Term Date occurring after such notice. The Company’s right not to extend the
Agreement shall be with or without Cause (defined below), and the Company’s
exercise of its right not to extend the Agreement will not necessarily terminate
the Executive’s employment with the Company.
     (c) Certain Definitions.
          (i) The “Average Annual Bonus” shall mean the average annual incentive
bonus that the Executive received for the three (3) completed fiscal years
immediately preceding the Date of Termination, or the average annual incentive
bonus that the Executive received for the actual number of completed fiscal
years immediately preceding the Date of Termination if less than three (3),
under the Company’s Annual Incentive Plan (“AIP Plan”) and/or the Company’s
Executive Incentive Compensation Plan (“EIC Plan”), provided that the First Year
Bonus Target shall be used in the event that the termination of the Executive’s
employment occurs prior to the date that the Executive receives (or is entitled
to receive, together with other senior executives if earlier) his annual bonus,
if any, for the fiscal year ending June 30, 2007.

 

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          (ii) “Bonus Target” means the annual bonus that the Executive would
have received in a fiscal year under the AIP Plan and/or the EIC Plan, if the
target goals had been achieved.
          (iii) “First Year Bonus Target” means the Executive’s Bonus Target as
of the Effective Date.
2. Position; Duties; Responsibilities.
     (a) Position. The Company agrees to employ the Executive, and the Executive
agrees to be employed by the Company subject to the terms and conditions of this
Agreement. The Executive shall serve as Chairman of the Board of Directors of
the Company (the “Board”) and Chief Executive Officer (“CEO”), reporting to the
Board. As of the Effective Date, the Board shall appoint the Executive as a
member of the Board. Thereafter, during the term of this Agreement, the Board
shall nominate the Executive for reelection as a member of the Board at the
expiration of each then-current Board term. The Executive shall devote his best
efforts and the equivalent of full time employment to the performance of the
services customarily incident to the Executive’s current office and to such
other services as may be reasonably requested by the Board, consistent with his
offices, titles and positions. The Company shall retain full direction and
control of the means and methods by which the Executive performs the above
services and of the place(s) at which such services are to be rendered;
provided, the Executive’s principal place of employment shall be at the
Company’s headquarters in Oakland, California unless he consents to another such
place.
     (b) Other Activities. Excluding any periods of vacation and sick leave to
which the Executive is entitled, the Executive agrees to devote reasonable
attention and time during normal hours to the business and affairs of the
Company, and to the extent necessary to discharge the responsibilities assigned
to the Executive hereunder, to use the Executive’s reasonable best efforts to
perform faithfully and efficiently such responsibilities. It shall not be a
violation of this Agreement for the Executive to (A) serve on corporate, civic
or charitable boards or committees, provided that with respect to any corporate
board, such service has been pre-approved by the Presiding Director of the
Company, (B) deliver lectures or fulfill speaking engagements (other than
lectures and engagements pursuant to the discharge of his duties hereunder) or
teach at educational institutions on a part-time basis not to exceed five hours
per week in the aggregate and (C) manage personal investments, so long as such
activities do not significantly interfere with the performance of the
Executive’s responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive’s
responsibilities to the Company.
3. Salary; Incentive Compensation; Benefits; Expenses.
     (a) Salary. In consideration of the services to be rendered hereunder,
including, without limitation, services to any affiliate of the Company (an
“Affiliated Company”), the Executive shall be paid a base salary at the annual
rate of $950,000 (“Annual Base Salary”),

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payable at the times and pursuant to the procedures regularly established, and
as they may be amended, by the Company during the course of this Agreement. The
Annual Base Salary shall be reviewed periodically for increase (or decrease to
the extent permitted hereunder) in accordance with the Company’s regular
administrative practice for adjusting salaries of the “Executive Officers”
(i.e., the Executive and the other members of the Management Executive
Committee). Thereafter, “Annual Base Salary” shall mean such annual base salary
rate as so increased (or decreased) from time to time. The Company may reduce
the Executive’s Annual Base Salary only if the annual base salaries of all other
Executive Officers of the Company are at the same time being similarly reduced
and if the percentage of reduction of the Executive’s Base Salary does not
exceed that of any other Executive Officer.
     (b) Annual Incentive Plan; Executive Incentive Compensation Plan; Long Term
Compensation Program.
          (i) As of the Effective Date, the Executive shall be entitled to
participate in the AIP Plan, the EIC Plan and Stock-Based Long-Term Compensation
Program (the “LTC Program”), or any successors thereto, in accordance with the
Company’s practice for administering the AIP Plan, the EIC Plan and the LTC
Program with respect to Executive Officers; provided, the Executive shall be
first eligible for annual awards under the LTC Program at such time as awards
are granted to Executive Officers during calendar 2007. For purposes of this
Agreement, “LTC Program” encompasses Stock-Based Awards made to the Executive
under the 2005 Stock Incentive Plan or any subsequent stock-based incentive
compensation plan.
          (ii) The Executive shall be eligible to receive an annual incentive
bonus as determined in accordance with the terms and conditions of the EIC Plan
and/or AIP Plan with a Bonus Target of 115% of the Executive’s Annual Base
Salary for the applicable year and a maximum bonus equal to not less than 200%
of his Bonus Target for the applicable year. Notwithstanding the foregoing, the
Executive’s actual bonus for the fiscal year ending June 30, 2007 shall not be
less than the Bonus Target (the “Guaranteed Bonus”); provided, however, that, if
the Effective Date is after November 1, 2006, the Guaranteed Bonus shall be
prorated based upon the portion of the fiscal year ending June 30, 2007 during
which the Executive was employed by the Company.
          (iii) On the Effective Date, the Executive will be granted the
following equity awards:
               (A) 83,500 restricted stock units subject to the terms and
conditions of the LTC Program and the form of award agreement provided to the
Executive (subject to the terms of this Agreement), with such grant vesting over
four (4) years with one-fourth (1/4) vesting on each of the first, second, third
and fourth anniversaries of the date of grant, and payment of which shall be
delayed until six (6) months following the date of the Executive’s termination
of employment; and
               (B) a ten-year option to purchase 275,000 shares of the Company’s
common stock, subject to the terms and conditions of the LTC Program and the
form of award agreement provided to the Executive (subject to the terms of this
Agreement). The exercise price

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per share of the option will be the fair market value (as defined in the LTC
Program) of the common stock on the date of grant, and the option will vest over
four (4) years, with one-fourth (1/4) of the shares underlying the option
vesting on each of the first, second, third and fourth anniversaries of the date
of grant. Except as otherwise provided in this Agreement, upon termination of
the Executive’s employment, vested options shall remain exercisable for the
lesser of one (1) year or the remainder of the term of the option.
     (c) Sign-On Bonus. The Company shall pay to the Executive no later than ten
(10) days following the Effective Date a lump sum cash sign-on bonus of
$500,000.
     (d) Benefits. As he becomes eligible therefor, the Company shall provide
the Executive, his spouse and eligible dependents with the right to participate
in and to receive benefits from all present and future welfare benefit plans,
practices, policies and programs (including without limitation, medical,
prescription drugs, dental, disability, salary continuance, severance pay,
employee life, group life, accidental death and travel accident insurance plans
and programs), all incentive savings and retirement plans, practices and
programs and all similar benefits, made available generally to Executive
Officers of the Company. The amount and extent of benefits to which the
Executive is entitled shall be governed by each specific benefit plan, as it may
be amended from time to time. The Company may suspend or terminate any benefit
plan described in this Section 3(d). The Executive shall also be entitled to the
death and disability benefits described in Section 4 and the benefits described
in Sections 3(e), 3(f), 3(i) and 3(j).
     (e) Supplemental Executive Retirement Plan. The Executive shall be eligible
to receive supplemental executive retirement plan benefits equal to the greater
of the amount attributable to the Company SERP or the Replacement SERP, as
described below:
          (i) Company SERP. The Executive will be eligible to participate
immediately in the Company’s Supplemental Executive Retirement Plan (the
“Company SERP”) in accordance with the terms and conditions of the Company SERP
as in effect from time to time; provided, however, that the Executive shall be
fully vested and eligible for an Early Retirement Benefit (at Separation of
Employment) (each such term as defined under the Company SERP), upon completion
of seven (7) years of service with the Company, and otherwise as provided in the
Company SERP. The Company expects to review the Company SERP as part of an
overall review of retirement benefits and the Company SERP may change as a
result of such review, in the Company’s discretion.
          (ii) Replacement SERP. The Company shall also establish a supplemental
executive retirement plan for the benefit of the Executive (and his surviving
spouse in the event of the Executive’s death) that duplicates the rights and
benefits the Executive would have been entitled to under The Coca-Cola Company
Employee Retirement Plan and The Coca-Cola Company Supplemental Benefit Plan –
Pension, as in effect on the date hereof, had his employment with The Coca-Cola
Company continued until the Executive’s retirement or other termination of
employment with the Company (the “Replacement SERP”) and which shall be subject
to the following terms for purposes of attributing the amount attributable to
the Replacement SERP:

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               (A) final average compensation for purposes of the Replacement
SERP shall include the actual Annual Base Salary and bonuses paid by the Company
to the Executive and, to the extent needed to obtain five years of consecutive
annual compensation, the Executive’s actual annual base salary and bonuses paid
by The Coca-Cola Company prior to the Executive’s retirement;
               (B) the Executive shall be fully vested at all times in the
Replacement SERP benefit;
               (C) in the event that the Executive’s employment with the Company
terminates prior to the third anniversary of the Effective Date, the Executive
shall be credited with a minimum of three (3) years of benefit accruals under
the Replacement SERP; and
               (D) the Executive’s service with The Coca-Cola Company under such
plans shall be credited as service under the Replacement SERP and any benefits
to which the Executive becomes entitled under the Replacement SERP shall be
offset by benefits received by the Executive under The Coca-Cola Company
Employee Retirement Plan and Supplemental Benefit Plan — Pension.
     (f) Vacation. The Executive will be entitled to five (5) paid weeks of
vacation per year during each year of the term of this Agreement in accordance
with the Company’s vacation policy generally applicable to Executive Officers.
     (g) Relocation and Housing Expenses.
          (i) The Executive shall be entitled to relocation benefits in
accordance with the Company’s relocation policy and such additions thereto as
mutually agreed to by the Executive and the Company, which shall include up to
$50,000 in loss protection on the sale of the Executive’s residence in Atlanta,
Georgia. In addition, the Company shall, if necessary, pay to the Executive tax
gross-up payments so that the net amount retained by the Executive after payment
of all applicable income and employment taxes attributable to amounts paid is
equal to the agreed amount to be reimbursed for such relocation expenses under
this Section 3(g)(i) and Section 3(g)(ii) (other than for any gain on any sale
of the Executive’s Atlanta, Georgia residence), provided, however, that a
gross-up payment shall not be made with respect to any reimbursement to the
extent the related expense is deductible or is otherwise excludable from the
Executive’s taxable income. All amounts payable under this Section 3(g)(i) shall
be subject to the Executive’s presentation of receipts and/or invoices as may be
reasonably required by the Company.
          (ii) The Executive shall be entitled to reimbursement for the cost of
temporary housing in an amount up to $10,000 per month and the cost of commuting
incurred by the Executive and the cost of house hunting travel incurred by the
Executive’s spouse, as part of the Executive’s relocation to the Oakland,
California metropolitan area, for a period of up to one (1) year following the
Effective Date. All amounts payable under this Section 3(g)(ii) shall be subject
to the Executive’s presentation of receipts and/or invoices as may be reasonably
required by the Company.

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     (h) Business and Legal Expenses. The Company shall reimburse the Executive
for reasonable travel and other business expenses incurred by the Executive in
the performance of his duties hereunder in accordance with the Company’s general
policies, as they may be amended from time to time during the course of this
Agreement. In addition, the Company will pay all of the legal fees and other
expenses incurred by the Executive in connection with the negotiation and
drafting of this Agreement (and all related agreements hereunder) in an amount
not to exceed $40,000, subject to the Executive’s presentation of receipts
and/or invoices as may be reasonably required by the Company, and, if necessary,
the Company shall pay to the Executive tax gross-up payments so that the
Executive incurs no net amount after payment of all applicable income and
employment taxes in excess of the amount so paid by the Company for such legal
fees and expenses.
     (i) Automobile. The Executive shall be provided with an automobile or a
monthly automobile allowance of $1,100 per month, plus parking and a cellular
phone.
     (j) Retiree Benefits. Upon completion of seven (7) years of continuous
employment with the Company, the Executive will be deemed retiree eligible under
all welfare benefit, equity and other incentive plans and programs (other than
tax-qualified pension and 401(k) plans) applicable to senior executives of the
Company under the terms and conditions of such plans and programs as in effect
from time to time; provided, however, that such treatment shall not apply to the
extent the Executive is entitled to retiree benefits from The Coca-Cola Company,
on a benefit-by-benefit and coverage-by-coverage basis, that duplicates retiree
benefits available to the Executive by the Company.
     (k) Change in Control. As of the Effective Date, the Company and the
Executive will enter into a Change in Control Agreement having such terms and
conditions as they have negotiated and agreed.
4. Termination of Employment.
     (a) By Death. The Executive’s employment shall terminate automatically upon
his death. The Company shall pay to the Executive’s beneficiaries or estate, as
appropriate, the salary to which he is entitled pursuant to Section 3(a), any
accrued vacation due the Executive, through the end of the month in which death
occurs and any prior completed fiscal year’s earned and unpaid annual incentive
bonus. In addition, all restricted stock units and stock options granted
pursuant to Section 3(b) shall immediately vest upon the Executive’s date of
death, and such stock options will remain exercisable for one (1) year after the
Executive’s date of death, subject to the earlier expiration of the term of such
stock option. The Company shall also pay the Executive’s beneficiaries or
estate, as appropriate, a pro rata portion (through the date of death) of the
Executive’s Bonus Target for the fiscal year of his death. All other equity and
other LTC Program awards shall be governed by the applicable terms of award
under which they were granted. Except as otherwise specifically provided under
this Agreement, after the payments called for in this Section 4(a) are made, the
Company’s obligations hereunder shall terminate. This Section 4(a) shall not
affect entitlement of the Executive’s estate or beneficiaries to death benefits
under any benefit plan of the Company.

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     (b) By Disability. Should the Executive begin to receive benefits under the
Company’s Long Term Disability Plan, the Executive’s employment may terminate at
the Company’s option. If the Company so elects, the Company shall pay the salary
to which the Executive is entitled pursuant to Section 3(a) through the Date of
Termination, and in lieu of any AIP and EIC Plan award under Section 3(b) for
the fiscal year in which termination occurs, the Company shall pay the Executive
a pro rata portion (through the Date of Termination) of the Executive’s Bonus
Target for the fiscal year of the termination. The Company shall also pay the
Executive any accrued vacation through the Date of Termination and any prior
completed fiscal year’s earned and unpaid annual incentive bonus. In addition,
all restricted stock units and stock options granted pursuant to Section 3(b)
shall immediately vest upon the date of such termination of the Executive’s
employment, and such stock options will remain exercisable for one (1) year
after the date of such termination of the Executive’s employment, subject to the
earlier expiration of the term of such stock option. All other equity and other
LTC Program awards shall be governed by the applicable terms of award under
which they were granted. Except as otherwise specifically provided under this
Agreement, thereafter the Company’s obligations hereunder shall terminate.
     (c) By Company For Cause. The Company may terminate the Executive’s
employment for Cause (as defined below) at any time. The Company shall pay the
Executive the salary to which he is entitled pursuant to Section 3(a) through
the Date of Termination, and, except as otherwise specifically provided under
this Agreement, thereafter the Company’s obligations hereunder shall terminate.
The Executive shall not be entitled to any unpaid AIP Plan and EIC Plan award
pursuant to Section 3(b) for the prior fiscal year or the fiscal year in which
termination occurs and outstanding options granted pursuant to Section
3(b)(iii)(B) shall be immediately forfeited. All other equity and other LTC
Program awards shall be governed by the applicable terms of award under which
they were granted. Termination shall be for “Cause” if:
          (i) the Executive willfully neglects significant duties he is required
to perform or willfully violates a material Company policy, and, after being
warned in writing, continues to willfully neglect such duties or continues to
willfully violate such specified Company policy;
          (ii) the Executive commits a material act of dishonesty, fraud,
misrepresentation or other act of moral turpitude;
          (iii) the Executive acts (or omits to act) with gross negligence with
regard to material matters in the performance of the Executive’s duties
hereunder; or
          (iv) the Executive willfully disregards a lawful direction of the
Board.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered “willful” unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive’s action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or based upon the advice of counsel for the Company shall
be conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Company. The cessation of employment
of the Executive shall not be deemed to

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be for Cause unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than a
majority of the Board (excluding the Executive) at a meeting of the Board called
and held for such purpose (after reasonable notice is provided to the Executive
and the Executive is given an opportunity, together with counsel, to be heard
before the Board), finding that, in the good faith opinion of the Board, the
Executive is guilty of the conduct described in subparagraph (i), (ii), (iii) or
(iv) above, and specifying the particulars thereof in detail.
     (d) By the Executive or the Company At Will.
          (i) Termination by the Company. The Company may, at any time,
terminate the Executive’s employment without Cause. If the Company does so, the
severance payment provisions of Section 6 shall apply and the Company shall have
no additional liability. The Executive hereby agrees that the Company may
terminate his employment under this Section 4(d)(i) without regard (A) to any
general or specific policies (whether written or oral) of the Company relating
to the employment or termination of its employees, or (B) to any statements made
to the Executive, whether made orally or contained in any document, pertaining
to the Executive’s relationship with the Company. Nothing in this
Section 4(d)(i) shall prevent the Company from exercising its right under
Section 4(c) to terminate the Executive’s employment for Cause, and such a
termination shall not give rise to damages under Section 6.
          (ii) Termination by the Executive Without Good Reason. Except in the
case of Good Reason (as defined below) as provided in Section 4(d)(iii) or
Retirement as provided in Section 4(d)(iv), the Executive may, upon giving at
least ten (10) business days’ notice to the Company, terminate his employment,
without liability, for any reason. If the Executive terminates his employment
pursuant to this Section 4(d)(ii), the Company shall pay the Executive the
salary and accrued vacation to which the Executive is entitled pursuant to
Section 3(a) through the end of the ten (10) business days notice period. In
addition, the Executive’s vested and outstanding stock options granted pursuant
to Section 3(b)(iii)(B) shall remain exercisable for one (1) year after the date
of such termination of the Executive’s employment, subject to the earlier
expiration of the term of such stock option. All other equity and other LTC
Program awards shall be governed by the applicable terms of award under which
they were granted. Except as otherwise specifically provided under this
Agreement, thereafter the Company’s obligations hereunder shall terminate. The
Executive shall not be entitled to any AIP and EIC Plan award pursuant to
Section 3(b) for the fiscal year in which he terminates his employment under
this Section 4(d)(ii).
          (iii) Termination by the Executive For Good Reason. The Executive may
terminate his employment for Good Reason at any time. If the Executive
terminates his employment for Good Reason, the severance payment provisions of
Section 6 shall apply and the Company shall have no additional liability.
Termination by the Executive shall be for Good Reason if:
               (A) the Executive is assigned any duties inconsistent in any
respect with the Executive’s position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as contemplated
by Section 2(a) of this Agreement, or the Company takes any other action which
results in a diminution in such position, authority, duties

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or responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive;
               (B) the Company fails to comply with any of the provisions of
Section 3 of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Executive;
               (C) the Company requires the Executive to be based at any office
or location more than 40 miles outside the Oakland, California metropolitan
area;
               (D) the Company purports to terminate the Executive’s employment
other than as expressly permitted by this Agreement; or
               (E) the Company fails to obtain from any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company the express
assumption and agreement to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place.
Notwithstanding the above, a failure by the Company’s stockholders to elect the
Executive to the Board shall not constitute Good Reason, but a failure by the
Board to appoint the Executive to the Board as of the Effective Date or to
thereafter nominate the Executive to the Board at any time shall constitute Good
Reason.
          (iv) Termination Due to Executive’s Retirement. The Executive may
terminate his employment upon giving at least three (3) months’ notice to the
Company, provided that he is vested in his accrued benefit pursuant to the
Company SERP upon the Date of Termination. Such a termination constitutes
“Retirement” for purposes of this Agreement. Upon the Executive’s Retirement,
the Company shall pay the Executive the salary and accrued vacation to which he
is entitled pursuant to Section 3(a) and 3(f) through the last day of his
employment. The Executive also shall receive any prior completed fiscal year’s
earned and unpaid annual incentive bonus. In addition, the Executive shall be
entitled to receive a pro rata portion calculated upon the portion of the fiscal
year during which the Executive was employed of the Executive’s AIP and/or EIC
Plan award for the fiscal year of his Retirement. The award will be paid after
the close of the fiscal year at the same time that AIP and EIC Plan award
payments are made to employed executives. The award will be a percentage of the
Executive’s AIP and/or EIC Plan Bonus Target award for that fiscal year based
upon the application of the overall corporate results factor and the division
and/or functional results factor, if applicable, of the AIP and/or EIC Plan
award calculation matrix. The award will not be based on any personal objectives
factor; thus, the individual modifier to be applied to the corporate and
business and/or functional results, if any, will be calculated at 100%.
          (v) Termination of Employment Following Notice of Non-Renewal. In the
event the Executive’s employment is terminated for any reason upon expiration of
the Agreement or thereafter following a notice of non-renewal by either party
pursuant to Section 1(b), the

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Company shall pay the Executive the salary and accrued vacation to which he is
entitled pursuant to Section 3(a) and Section 3(f) through the date of such
termination of the Executive’s employment, and, except as otherwise specifically
provided under this Agreement, thereafter the Company’s obligations hereunder
shall terminate. In the event that the Executive’s employment is terminated by
the Company without Cause or by the Executive for Good Reason (during the term
of this Agreement or thereafter) at any time following the issuance by the
Company to the Executive of a notice of non-renewal pursuant to Section 1(b)
that is effective on the third anniversary of the Effective Date, 5,875
restricted stock units of the unvested portion of the restricted stock units
granted pursuant to 3(b)(iii)(A) and 15,250 unvested stock options of the
unvested portion of the stock options granted pursuant to Section 3(b)(iii)(B)
shall immediately vest. In the event that the Executive’s employment is
terminated by the Company without Cause or by the Executive for Good Reason
(during the term of this Agreement or thereafter) at any time following the
issuance by the Company to the Executive of a notice of non-renewal pursuant to
Section 1(b) that is effective at any time provided thereunder, 61,000 vested
stock options awarded pursuant to Section 3(b)(iii)(B) will remain exercisable
for three (3) years after the Date of Termination, subject to the earlier
expiration of the term of such stock options. The remaining vested portion of
such stock option grant will remain exercisable for one (1) year after the Date
of Termination, subject to earlier expiration of the term of such stock options.
For the purposes of the preceding three sentences, for the avoidance of doubt, a
termination of the Executive’s employment by the Company on the Term Date
pursuant to a Company notice of non-renewal under Section 1(b) shall be a
termination by the Company without Cause. The Executive shall not be entitled to
any AIP and EIC Plan award pursuant to Section 3(b) for the fiscal year in which
his employment terminates pursuant to this Section 4(d)(v).
     (e) Termination Obligations.
          (i) The Executive hereby acknowledges and agrees that all personal
property and equipment furnished to or prepared by the Executive in the course
of or incident to his employment, belong to the Company and shall, if physically
returnable, be promptly returned to the Company upon termination of his
employment. “Personal property” includes, without limitation, all books,
manuals, records, reports, notes, contracts, lists, blueprints, and other
documents, computer media or materials, or copies thereof, and Proprietary
Information (as defined below), but does not include the Executive’s rolodex or
address book. Following termination, the Executive will not retain any written
or other tangible material containing any Proprietary Information.
          (ii) Upon termination of his employment, the Executive shall be deemed
to have resigned from all offices and directorships then held with the Company
or any Affiliated Company, and will execute a letter of resignation if
requested.
          (iii) The Executive’s obligations under Sections 4(e), 5, 7 and 14,
and the Company’s obligations under Sections 3(c), 3(d) (in accordance with the
terms of the applicable plan), 3(e), 3(g), 3(j), 4, 6, 14, 16 and this
Section 4(e)(iii), and the Executive’s entitlement to payment or reimbursement
of his business expenses incurred in accordance with Section 3(h) through the
Date of Termination, shall survive termination of the Executive’s employment and
the expiration of this Agreement.

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5. Post Termination Obligations.
     (a) Proprietary Information Defined. “Proprietary Information” is all
information and any idea in whatever form, tangible or intangible, pertaining in
any manner to the business of the Company or any Affiliated Company, or to its
clients, consultants, or business associates, unless: (i) the information is or
becomes publicly known through lawful means; (ii) the information was rightfully
in the Executive’s possession or part of his general knowledge prior to his
employment by the Company; or (iii) the information is disclosed to the
Executive without confidential or proprietary restriction by a third party who
rightfully possesses the information (without confidential or proprietary
restriction) and did not learn of it, directly or indirectly, from the Company.
     (b) General Restrictions on Use of Proprietary Information. The Executive
agrees to hold all Proprietary Information in strict confidence and trust for
the sole benefit of the Company and not to, directly or indirectly, disclose,
use, copy, publish, summarize, or remove from Company’s premises any Proprietary
Information (or remove from the premises any other property of the Company),
except (i) during his employment to the extent necessary to carry out the
Executive’s responsibilities under this Agreement, and (ii) after termination of
his employment as specifically authorized in writing by the Board or pursuant to
a subpoena; provided, however, that prior to responding to any subpoena, the
Executive shall give notice to the Company and an opportunity for the Company to
object to such subpoena.
     (c) Non-Solicitation and Non-Raiding. To forestall the disclosure or use of
Proprietary Information in breach of Section 5(b), and in consideration of this
Agreement, the Executive agrees that for a period of two (2) years after
termination of his employment, he shall not, for himself or any third party,
directly or indirectly (i) divert or attempt to divert from the Company (or any
Affiliated Company) any business of any kind in which it is engaged, including,
without limitation, the solicitation of its customers as to products which are
directly competitive with products sold by the Company at the time of the
Executive’s termination, or interference with any of its suppliers or customers,
or (ii) solicit for employment any person employed by the Company, or by any
Affiliated Company, during the period of such person’s employment and for a
period of one year after the termination of such person’s employment with the
Company.
     (d) Contacts with the Press. Following termination, the Executive will
continue to abide by the Company’s policy that prohibits discussing any aspect
of Company business with representatives of the press without first obtaining
the permission of the Company’s Public Relations Department.
     (e) Remedies. Nothing in this Section 5 is intended to limit any remedy of
the Company under the California Uniform Trade Secrets Act (California Civil
Code Section 3426), or otherwise available under law.
6. Severance Payments; Requirement of Mitigation; Release.
     (a) Severance Payments. The Company and the Executive acknowledge that it
would be impractical or extremely difficult to fix the Executive’s actual
damages in the case of

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termination at will by the Company pursuant to Section 4(d)(i) or in the case of
a termination by the Executive for Good Reason pursuant to Section 4(d)(iii).
Therefore, in the event of such a termination and notwithstanding any other
provision of this Agreement, in exchange for and in consideration of the
Executive’s execution and non-revocation of a General Release (“Release”) in a
form substantially equivalent to the attached Exhibit, and subject to the
mitigation provisions of Section 6(b), the Executive shall be entitled to
severance payments made up of the following components:
          (i) Salary Component.
          Payment, promptly after termination, of a lump sum amount equal to the
product of (A) three (3) and (B) the Executive’s Annual Base Salary on the Date
of Termination.
          (ii) AIP and EIC Plan Components.
               (A) Payment, promptly after termination, of a lump sum amount
equal to the product of (A) three (3) and (B) 75% of his Average Annual Bonus.
               (B) A pro rata portion calculated upon the portion of the fiscal
year during which the Executive was employed of the Executive’s AIP and/or EIC
Plan award for the fiscal year in which the Executive’s employment terminated.
The prorated award will be paid after the close of the fiscal year at the same
time that AIP and EIC Plan award payments are made to then employed executives.
The award will be a percentage of the Executive’s AIP and/or EIC Plan target
award for such fiscal year based upon the application of the overall corporate
results factor and the division and/or functional results factor, if applicable,
of the AIP and/or EIC Plan award calculation matrix. The award will not be based
on any personal objectives factor; thus, the individual modifier to be applied
to the corporate and business and/or functional results, if any, will be
calculated at 100%.
          (iii) Medical/Dental Plans Component.
               (A) Continuation for a period of three (3) years on the same
basis as an employee of the Company of the right to participate in any Medical
and/or Dental Benefit Plans as and if offered by the Company to its salaried
employees. The Executive shall not participate in any other Company sponsored
welfare benefit plans after the termination of employment.
               (B) In addition, if upon termination of employment the Executive
has completed at least seven (7) years of service with the Company, continuation
of the right to participate in Medical and/or Dental Plans as and if offered to
former employees whose employment terminated at or after age 55 with ten (10) or
more years of service on the same terms and conditions as for such former
employees including premium contributions from the Executive as in effect from
time to time. Such right to participate shall apply from the time such coverage
would otherwise terminate pursuant to Section 6(a)(iii)(A) and shall continue
until the Executive attains age 65; thereafter the Executive may participate in
the Company’s Retiree Health Plan as and if it may exist from time to time in
the future (provided, not more than seven (7) years of service shall be required
for eligibility thereunder), if he would be eligible to participate pursuant to
the terms of that Plan; provided, however, that such coverage shall not be
provided to the extent the Executive is entitled to retiree benefits from The
Coca-Cola Company,

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on a benefit-by-benefit and coverage-by-coverage basis, that duplicates the
retiree benefits available to the Executive by the Company.
          (iv) LTC Program Component.
               (A) If the Executive is vested in his accrued benefit pursuant to
Section 3(e)(i) herein, then for purposes of the LTC Program his termination of
employment will be deemed to be a Termination of Employment Due to Retirement if
the Executive irrevocably elects prior to his termination date to begin
retirement benefits under the Company SERP. If the Executive does not so elect
or is not eligible to so elect, all LTC Program awards which remain at the Date
of Termination will be treated pursuant to subsection (B) below.
               (B) If the Executive does not elect or is not eligible to elect
to commence benefits under the Company SERP pursuant to (iv)(A) above, then for
purposes of all LTC Program awards, he will be deemed to have terminated
employment on the day prior to his termination date. Whether any LTC Program
award is forfeited in such a case will be determined by the terms of the award
and the plan pursuant to which it was awarded.
               (C) Notwithstanding the foregoing, the Executive shall become
immediately vested in unvested restricted stock units granted pursuant to
3(b)(iii)(A) and unvested stock options granted pursuant to Section 3(b)(iii)(B)
as follows:
     (1) for the purpose of this Section 6(a)(iv)(C), (x) such restricted stock
unit grant shall be deemed to be two grants comprised of 60,000 restricted stock
units and 23,500 restricted stock units; (y) each such deemed grant shall have
become vested in one-fourth of each such grant on each anniversary of the
Effective Date through the Date of Termination; and (z) the remaining unvested
portion of the deemed grant of 23,500 restricted stock units shall become
immediately vested on the Date of Termination; and
     (2) for the purpose of this Section 6(a)(iv)(C), (x) such stock option
grant shall be deemed to be two grants comprised of 214,000 stock options and
61,000 stock options; (y) each such deemed grant shall have become vested in
one-fourth of each such grant on each anniversary of the Effective Date through
the Date of Termination; and (z) the remaining unvested portion of the deemed
grant of 61,000 stock options shall become immediately vested on the Date of
Termination and the 61,000 such vested stock options shall remain exercisable
for three (3) years after the Date of Termination, subject to the earlier
expiration of the term of such stock option. The vested portion of the deemed
grant of 214,000 stock options will be exercisable for one (1) year after the
date of such termination of the Executive’s employment, subject to the earlier
expiration of the term of such stock option.
          (v) Automobile Component.
          The Executive shall be entitled to purchase the Company-leased
automobile, if any, being used by the Executive prior to termination at the
“buyout amount” specified by the vehicle’s lessor.

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     The parties acknowledge that the amounts and benefits provided in
(i) through (v) above constitute a reasonable estimate of and compensation for
any damages the Executive may suffer as the result of his termination of
employment under this Agreement.
     If the Executive does not execute, or having executed, effectively revokes
the Release, the Company will not be obligated to provide any benefits or
payments of any kind to the Executive.
     (b) Coordination of Benefits. The Executive’s medical and dental benefit
coverage under Section 6(a)(iii)(A) and/or (B) shall be secondary to medical
and/or dental coverage provided to the Executive by a subsequent employer to the
extent such benefits are available, and or are duplicated by such benefits by a
prior employer to the extent available on a benefit-by-benefit and
coverage-by-coverage basis, and the Executive will make every good faith effort
to participate in any such coverage. For any period during which the Executive
does not make such a good faith effort the Executive’s medical and dental plan
coverage under Section 6(a)(iii)(A) and/or (B) shall be completely suspended. If
medical and dental benefit coverage ceases to be provided by the subsequent or
prior employer, as the case may be, the Executive may have his
Section 6(a)(iii)(A) and/or (B) coverage from the Company become his primary
coverage again. The Executive’s right to medical and dental continuation
coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 shall
commence after the conclusion of coverage under Section 6(a)(iii)(A) and/or (B),
as the case may be.
     (c) Lack of Participation in Qualified Plans. Upon termination of
employment the Executive shall cease to actively participate in any qualified
benefit plan maintained by the Company, such as the Pension Plan and the 401(k)
Plan, and the Executive shall also cease to actively participate in any welfare
benefit plan maintained by the Company, except as otherwise provided in
Section 6(a)(iii) above or under the terms of such plan. No employee or employer
contributions will be made to any qualified benefit plan based on any bonus paid
after the termination of the Executive’s employment.
7. Successors.
     (a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive’s legal
representatives.
     (b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
     (c) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. As used in this
Agreement, “Company” shall mean the Company as herein before defined and any
successor to its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.

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     8. Notices. All notices or other communications required or permitted
hereunder shall be made in writing and shall be deemed to have been duly given
if delivered by hand upon receipt, or if mailed, three (3) business days after
having been mailed, postage prepaid, by certified or registered mail, return
receipt requested, and addressed to the Company at:

     
 
  If to the Company:
 
   
 
  The Clorox Company
 
  1221 Broadway
 
  Oakland, CA 94612
 
  Attn: General Counsel
 
   
 
  If to the Executive:
 
   
 
  To the residence address for the Executive last shown on the
 
  Company’s payroll records.

     Notice of change of address shall be effective only when done in accordance
with this Section.
9. Entire Agreement. Together with the Change in Control Agreement, effective on
the Executive’s first day of employment with the Company, which date is to be
determined but which shall not be later than December 1, 2006, between the
Executive and the Company, the terms of this Agreement (and the restricted stock
award agreement contemplated under Section 3(a)(ii)(A) and the stock option
award agreement contemplated under Section 3(a)(ii)(B)) are intended by the
parties to be the final expression of their agreement with respect to the
employment of the Executive by the Company and may not be contradicted by
evidence of any prior or contemporaneous agreement. The parties further intend
that this Agreement (and such restricted stock award agreement and such stock
option award agreement) and said Change in Control Agreement shall constitute
the complete and exclusive statement of their terms and that no extrinsic
evidence whatsoever may be introduced in any judicial, administrative, or other
legal proceeding involving either Agreement. The Change in Control Agreement and
this Agreement (and such restricted stock award agreement and such stock option
award agreement) supersede any prior agreements, written or oral, between the
Company and the Executive concerning the terms of his employment.
10. Amendments; Waivers. This Agreement may not be modified, amended, or
terminated except by an instrument in writing, signed by the Executive and by a
duly authorized representative of the Company other than the Executive. By an
instrument in writing similarly executed, either party may waive compliance by
the other party with any provision of this Agreement that such other party was
or is obligated to comply with or perform, provided, however, that such waiver
shall not operate as a waiver of, or estoppel with respect to, any other or
subsequent failure. No failure to exercise and no delay in exercising any right,
remedy, or power hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, remedy, or power hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy, or
power provided herein or by law or in equity.

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11. Severability; Enforcement. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
12. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect.
13. Executive Acknowledgment. The Executive acknowledges (a) that he has
consulted with or has had the opportunity to consult with independent counsel of
his own choice concerning this Agreement and has been advised to do so by the
Company, and (b) that he has read and understands the Agreement, is fully aware
of its legal effect, and has entered into it freely based on his own judgment.
14. Arbitration. Any controversy between the Executive, his heirs or estate and
the Company or any employee of the Company, including but not limited to, those
involving the construction or application of any of the terms, provisions or
conditions of this Agreement or otherwise arising out of or related to this
Agreement, shall be settled by arbitration before a single arbitrator in
accordance with the then current commercial arbitration rules of the American
Arbitration Association, and judgment on the award rendered by the arbitrator
may be entered by any court having jurisdiction thereof. The location of the
arbitration shall be San Francisco, California if the Executive’s current or
most recent location of employment with the Company is or was located in Alameda
or Contra Costa County, California. If it is or was elsewhere, the arbitration
shall be held at the city nearest to the Executive’s last location of employment
with the Company that has an office of the American Arbitration Association. The
arbitrator shall, to the extent that the Executive prevails in the arbitration,
award attorney’s fees to the Executive.
15. Representation. The Executive represents and warrants to the Company that he
has the legal right to enter into this Agreement and to perform all of the
obligations on his part to be performed hereunder in accordance with its terms
and that he is not a party to any agreement or understanding, written or oral,
which could prevent him from entering into this Agreement or performing all of
his obligations hereunder.
16. Indemnification. The Company agrees to indemnify the Executive and hold him
harmless to the fullest extent permitted by the Company’s certificate of
incorporation, bylaws and applicable law against and in respect to any and all
actions, suits, proceedings, claims, demands, judgments, costs, expenses,
losses, and damages resulting from the Executive’s good faith performance of his
duties and obligations with the Company. The Company shall insure the Executive
under any contract of directors and officers liability insurance, insuring
members of the Board, during his employment and tenure as a Board member and
thereafter for so long as he may be subject to liability for such acts or
omissions in the performance of his duties and obligations to the Company.
17. Withholdings. The Company may withhold from any amounts payable pursuant to
this Agreement such Federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.

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18. Code Section 409A. To the extent applicable, it is intended that this
Agreement and any payment made hereunder shall comply with the requirements of
Section 409A of the Internal Revenue Code, and any related regulations or other
effective guidance promulgated with respect to such Section by the U.S.
Department of the Treasury or the Internal Revenue Service (“Code Section
409A”). Any provision that would cause the Agreement or any payment hereof to
fail to satisfy Code Section 409A shall have no force or effect until amended to
the minimum extent required to comply with Code Section 409A, which amendment
may be retroactive to the extent permitted by Code Section 409A.
19. No Mitigation. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and, except as
specifically provided in Section 6(b), such amounts shall not be reduced if the
Executive obtains other employment.
20. Inconsistency. In the event of any inconsistency between (a) this Agreement
and (b) any other plan, program, practice or agreement in which the Executive
participates or is a party, this Agreement shall control.

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21. Counterparts. This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one and the same instruments. One or more counterparts of this
Agreement may be delivered by facsimile, with the intention that delivery by
such means shall have the same effect as delivery of an original counterpart
thereof.
     The parties have duly executed this Agreement as of the date that first
appears at the beginning of this Agreement.

              The Company:
THE CLOROX COMPANY
 
            /s/ Robert W. Matschullat
 
  By:   Robert W. Matschullat
 
       
 
  Its:   Interim Chairman and Interim Chief Executive Officer
 
       
 
            The Executive:
 
  /s/ Donald R. Knauss          

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EXHIBIT
GENERAL RELEASE
     This document is an important one. You should review it carefully and, if
you agree to it, sign at the end on the line indicated.
     You have 21 days to sign this Release, during which time you are advised to
consult with an attorney regarding its terms.
     After signing this Release, you have seven days to revoke it. Revocation
should be made in writing and delivered so that it is received by the Corporate
Secretary of The Clorox Company, 1221 Broadway, Oakland, CA 94612 no later than
4:30 p.m. on the seventh day after signing this Release. If you do revoke this
Release within that time frame, you will have no rights under it. This Release
shall not become effective or enforceable until the seven day revocation period
has expired.
     The agreement for payment of consideration in paragraph 2 will not become
effective until the seven day revocation period has passed.
     This GENERAL RELEASE is entered into between The Clorox Company
(hereinafter referred to as “Employer”) and                      (hereinafter
referred to as “Employee”). Employer and Employee agree as follows:
     1. Employee’s regular employment with Employer will terminate as of
                    , 20___. Employee is ineligible for reemployment or
reinstatement with Employer.
     2. Upon Employee’s acceptance of the terms set forth herein, the Employer
agrees to provide the Employee with compensation and benefits set forth in
Section 6 of the Employment Agreement between Employee and the Employer
effective as of                     , 2006 (“Employment Agreement”), a copy of
which is attached as the first Exhibit to this General Release. A complete
description of those benefits is attached as the second Exhibit to this General
Release.
     3(a). In consideration of the Employer providing Employee this
compensation, Employee and Employee’s heirs, assignees and agents agree to
release the Employer, all affiliated companies, agents (solely in their capacity
as agents and not as advisors) and employees and each of their successors and
assigns (hereinafter referred to as “Releasees”) fully and finally from any
claims, liabilities, demands or causes of action which Employee may have or
claim to have against the Releasees at present or in the future, except claims
for vested benefits, if any; provided, this release does not apply to
(x) Employee’s rights under paragraph 2 hereof, (y) Employees rights to
indemnification under Section 16 of the Employment Agreement or otherwise or
(z) Employee’s rights to accrued and vested benefits under all employee benefit
plans of the Employer (in accordance with the terms thereof) in which he
actively participated immediately prior to termination of his employment. The
claims released may include, but are not limited to, any tax obligations as a
result of the payment of consideration referred to in paragraph 2, and claims
arising under federal, state or local laws prohibiting discrimination in
employment, including the Age Discrimination in Employment Act (ADEA) or claims
growing

 

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out of any legal restrictions on the Employer’s right to terminate its
employees. Claims of discrimination, wrongful termination, age discrimination,
and any other claims other than as expressly excepted above are hereby released.
     (b). By signing this document, Employee agrees not to file a lawsuit to
assert such claims. Employee also agrees that if Employee breaches this
provision, Employee will be liable for all costs and attorneys’ fees incurred by
any Releasee resulting from such action.
     4. By signing this document, Employee is also expressly waiving the
provisions of California Civil Code section 1542, which provides as follows:
“A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor.”
     By signing this document, Employee agrees and understands that Employee is
releasing unknown as well as known claims related to Employee’s employment in
exchange for the compensation set forth above.
     5. Employee agrees to maintain in complete confidence the terms of this
Release, except as it may be necessary to comply with a legally compelled
request for information. It is agreed since confidentiality of this Release is
of the essence, damages for violation being impossible to assess with precision,
that $10,000 is a fair estimate of the damage caused by each disclosure and is
agreed to as the measure of damages for each violation.
     6. Employee agrees to indemnify and hold Employer harmless from and against
any tax obligations for which Employee may become liable as a result of this
Release and/or payments made pursuant to the Employment Agreement, other than
tax obligations of the Employer resulting from the nondeductibility of any
payments made pursuant to this Release or the Employment Agreement.
     7. Agreeing to this Release shall not be deemed or construed by either
party as an admission of liability or wrongdoing by either party.
     8. This Release, the Employment Agreement and the plan documents of plans
of The Clorox Company referred to in the Employment Agreement set forth the
entire agreement between Employee and the Employer. This Release and the
Employment Agreement are not subject to modification except in writing executed
by both of the parties. The Clorox Company plans referred to in the Employment
Agreement may be amended in accordance with the provisions of those plans not
inconsistent with the Employment Agreement.

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     Employee acknowledges by signing below that Employee has not relied upon
any representations, written or oral, not set forth in this Release.

     
 
Employee
   

Dated:

                  THE CLOROX COMPANY    
 
           
 
  By:        
 
  Dated:  
 
   

iii