Exhibit 13
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Share Repurchase Agreement
This Share Repurchase Agreement (the "Agreement") is made this 16th day of July,
2003 ("Effective Date"), by and between HC Investments, Inc., a Delaware
corporation with offices at 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxxx,
Xxxxxxxx 00000 ("Henkel"), and The Clorox Company, a Delaware corporation with
offices at 0000 Xxxxxxxx, Xxxxxxx, XX 00000 ("Clorox" or the "Company").
Background
Clorox has determined that it is in its stockholders' best interests for Clorox
to utilize a portion of its free cash flow to repurchase shares of its common
stock, $1 par value (the "Stock"). Henkel is a significant stockholder, with
holdings on the Effective Date equal to approximately 29.4% of Clorox's
outstanding Stock (which Clorox represents to be two hundred thirteen million
seven hundred forty-seven thousand six hundred seventy-five (213,747,675) shares
as of the date hereof). Clorox has determined that it does not desire to have
its share repurchases result in Xxxxxx'x overall percentage ownership in Clorox
Stock becoming greater than thirty percent (30%). Accordingly, Henkel and Clorox
hereby agree, in accordance with the terms and conditions set forth below, that
Henkel will participate in Clorox's Stock repurchase program.
Terms and Conditions
1. Definitions
a. "Purchase Date" shall mean December 15, 2003, June 15, 2004, December
15, 2004 and June 15, 2005.
b. "Calculation Period" shall mean, for the December 15, 2003 Purchase
Date, the period from the Effective Date until the eighth business day
prior to the Purchase Date and for each subsequent Purchase Date, the
period from seven business days prior to the previous Purchase Date to
the trading day immediately before the seventh business day prior to
such Purchase Date.
c. "Non-Henkel Purchases" shall mean Clorox's purchases of Stock during
any Calculation Period from persons other than Henkel.
d. "Applicable Non-Henkel Purchases" shall mean those Non-Henkel
Purchases during any Calculation Period that are effected at or above
the then applicable Minimum Price (as defined below).
e. "Value" shall mean the total purchase price (neither increased nor
reduced by commissions or fees paid by Clorox to its brokers and
advisors) of all Applicable Non-Henkel Purchases during the applicable
Calculation Period divided by the total number of shares of Stock
included in Applicable Non-Henkel Purchases during the Calculation
Period.
f. "Henkel Ratio" for any Calculation Period shall mean the quotient
(rounded to the nearest hundredth) resulting from dividing the
percentage of Stock owned by Henkel by the percentage of Stock owned
by persons other than Henkel, in each case, at the start of such
Calculation Period. The "Henkel Ratio" at the Effective Date is 41.64%
(arrived at as follows: 29.4%/70.6%).
g. "Non-Henkel Ratio" for any Calculation Period shall mean the quotient
(rounded to the nearest hundredth) resulting from dividing the
percentage of Stock owned by persons other than Henkel by the
percentage of Stock owned by Henkel, in each case, at the start of
such Calculation Period. The "Non-Henkel Ratio" at the Effective Date
is 2.4 (arrived at as follows: 70.6%/29.4%).
2. Stock Repurchase.
a. Time and amount. Subject to and contingent upon the terms and
conditions stated in Sections 2 and 3 of this Agreement, Clorox will
purchase from Henkel, and Henkel will agree to sell to Clorox on the
Purchase Dates the number of shares of Stock that, when multiplied by
the Value for the applicable Calculation Period, will have a total
value of up to: $50 million on December 15, 2003, $50 million on June
15, 2004, $65 million on December 15, 2004 and $65 million on June 15,
2005. If, during the relevant Calculation Period, Clorox issues any
new Stock (including reissuances of treasury shares), other than
pursuant to an employee or director compensation plan, including, but
not limited to, The Clorox Company 1987 Long-Term Compensation Plan,
The Clorox Company 1996 Stock Incentive Plan, The Clorox Company
Executive Incentive Compensation Plan, The Clorox Company Independent
Directors' Stock-Based Compensation Plan and The Clorox Company 1993
Directors' Stock Option Plan, then, at Xxxxxx'x option, the number of
shares of Stock that Henkel will agree to sell to Clorox shall be
reduced to the number of shares of Stock that, when subtracted from
Xxxxxx'x then current holdings, will result in Henkel owning no less
than the same percentage of Clorox's then aggregate outstanding Stock,
as Henkel owned at the start of such Calculation Period. In each case,
the purchase price per share of Stock purchased from Henkel shall be
equal to the then applicable Value and the payment for such shares
shall be made in immediately available funds on the applicable
Purchase Date. In order that Henkel may verify the Value as at any
Purchase Date, at least five (5) business days prior to such Purchase
Date, Clorox will supply to Henkel, in writing, the volume weighted
average purchase price calculation, and all supporting documentation,
for all Non-Henkel Purchases and Applicable Non -Henkel Purchases for
the applicable Calculation Period. Should Henkel object to any of
these calculations, Henkel may delay the Purchase Date until it is
satisfied with the information provided and the calculations supported
thereby. Upon receipt of the agreed upon Purchase Price, Henkel will
transfer the relevant number of shares of Stock to Clorox.
b. 10b5-1 Plan. During the period when Clorox may purchase Stock on the
open market prior to the end of Clorox's first, second, and fourth
quarters in Clorox's 2004 fiscal year and second quarter in Clorox's
2005 fiscal year (each such pre-quarter-end period being hereafter
referred to as an "Open Window") Clorox shall enter into 10b5-1 plans
obligating Clorox to purchase, prior to the next Purchase Date, a
number of shares of Stock from persons other than Henkel, that would
be no less than the number of shares of Stock that Clorox chooses to
purchase from Henkel on that Purchase Date multiplied by the
Non-Henkel Ratio for each relevant Calculation Period
c. Limitations on amount of purchases.
i. Establishment of minimum and maximum prices. Before Clorox makes
any purchases of Stock in any Calculation Period, Henkel has the
right to set a minimum purchase price ("Minimum Price") and
Clorox has the right to establish a maximum purchase price for
such Calculation Period ("Maximum"). Clorox shall supply Henkel
with written notice of any Maximum at least ten (10) days prior
to the start of each Calculation Period. The Minimum Price for
the first Calculation Period is $42.00 per share, excluding
commissions, and the Maximum for the first Calculation Period is
$55.00 per share, excluding commissions. Clorox will request, in
writing, Xxxxxx'x Minimum Price, at least fifteen (15) days prior
to the beginning of any Calculation Period. If Henkel does not
provide Clorox with a response, in writing, or otherwise notify
Clorox at least five (5) days prior to the beginning of any
Calculation Period, the then current Minimum Price shall remain
in effect during the next Calculation Period. If Clorox does not
timely send such request to Henkel, then Henkel may set the
Minimum Price at any time.
ii. Maximum limitation. Clorox shall have the right not to purchase
shares of Stock during any Calculation Period at more than the
Maximum. If, during any Calculation Period, Non-Henkel Purchases
are limited under the applicable 10b5-1 plan because the market
price exceeds the Maximum at any time during that Calculation
Period, and Clorox's maximum dollar amount of purchases from
Henkel, as set forth in Section 2.a. of this Agreement, on a
Purchase Date would cause the amount of Stock required to be
purchased from Henkel to exceed the applicable Henkel Ratio of
all Non-Henkel Purchases during the applicable Calculation
Period, any obligation of Clorox to purchase Stock from Henkel on
that Purchase Date shall be reduced to a dollar amount equal to
the Henkel Ratio of the number of shares of Stock included in
Non-Henkel Purchases during the Calculation Period multiplied by
the Value for that Calculation Period.
iii. Minimum Limitation. If the number of shares of Stock determined
by dividing Clorox's purchase obligation for the applicable
Purchase Date under section 2.a. above by the Value would exceed
the Henkel Ratio of all Non-Henkel Purchases for that Calculation
Period, Clorox's obligation to purchase Stock from Henkel on that
Purchase Date shall be reduced to a dollar amount equal to the
Henkel Ratio of the number of shares of Stock included in the
Non-Henkel Purchases for that Calculation Period multiplied by
the Value for that Calculation Period.
iv. Regulatory Limitation. If, in the opinion of Clorox's counsel,
(1) Clorox may not enter into a 10b5-1 plan for any Calculation
Period because of the existence of material non-public
information at the time when such plan would otherwise have been
executed during the "Open Window", (2) Clorox may not make
Non-Henkel Purchases during any Calculation Period because it is
involved in a distribution subject to Rule 102 of Regulation M
(17 CFRss.242.102) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") or (3) federal or state law
otherwise prohibits Clorox from making Non-Henkel Purchases
during any Calculation Period, Clorox's obligation to purchase
Stock from Henkel on the applicable Purchase Date shall be
reduced to an amount equal to the Henkel Ratio of the shares of
Stock included in the Non-Henkel Purchases actually made during
the applicable Calculation Period multiplied by the Value for
that Calculation Period. In the event that one of the regulatory
limitation events described in this paragraph prevents Clorox
from making Non-Henkel Purchases during only a portion of a
Calculation Period, Clorox shall make reasonable good faith
efforts during the remainder of the Calculation Period to make
Non-Henkel Purchases sufficient to allow it to fulfill its
purchase obligation under section 2.a. above. Clorox shall
promptly give Notice to Henkel if any circumstance noted in this
Section should, in the opinion of Clorox's counsel, be deemed to
exist.
d. Option to increase purchases. Subject to Section 2(f) below, Clorox
shall have the right to increase the amount of its purchases under
Section 2.a. by up to $15 million on any Purchase Date, provided that,
if such increase occurs on December 15 of 2003 or 2004, the increased
amount shall become Clorox's minimum purchase obligation for the
following Purchase Date. If Clorox wishes to increase its purchase
amount from Henkel on any Purchase Date, it shall increase its
Non-Henkel Purchases during the applicable Calculation Period so that
the number of shares of Stock purchased from Henkel on the Purchase
Date does not exceed the Henkel Ratio of the shares purchased through
Non-Henkel Purchases during the Calculation Period.
e. Option to roll over purchases. If Clorox purchases from Henkel less
than the maximum dollar amount of Stock permitted to be purchased on
any Purchase Date under Section 2.a. above, Clorox may add the
difference between the permitted purchase amount and the actual
purchase amount on that Purchase Date to the maximum purchase amount
applicable to the next Purchase Date. Such increased maximum purchase
amount shall become the maximum purchase amount for that Purchase Date
under Section 2.a.
f. Overall Limitation. Notwithstanding any other provision of this
Agreement, the maximum amount of Stock that Clorox may purchase from
Henkel pursuant to this Agreement shall be limited to Stock with a
purchase price under this Agreement no greater than $255 million in
the aggregate.
x. Xxxxxx Right to Purchase. If Clorox issues any new Stock (including
reissuances of treasury shares), other than pursuant to an employee or
director compensation plan, including, but not limited to, The Clorox
Company 1987 Long-Term Compensation Plan, The Clorox Company 1996
Stock Incentive Plan, The Clorox Company Executive Incentive
Compensation Plan, The Clorox Company Independent Directors'
Stock-Based Compensation Plan and The Clorox Company 1993 Directors'
Stock Option Plan, during the period from the Effective Date through
December 15, 2005 or, if this Agreement is terminated pursuant to
Section 3.b., the date six (6) months after the last purchase from
Henkel made hereunder, whichever is earlier, and Xxxxxx'x ownership
interest in Clorox shall, as a result, be less than 29.4% of the
aggregate outstanding Stock on and as of December 15, 2005 or on and
as of the date six months after the last purchase from Henkel made
hereunder, whichever is applicable, Henkel shall have the right, on
notice to Clorox given no later than January 15, 2006 or thirty (30)
days after the end of the six month period referred to above in this
sentence, whichever is applicable, to re-purchase from Clorox a number
of shares of Stock sold hereunder equal to the lesser of (x) such
number of shares of Stock as will increase Xxxxxx'x ownership interest
in Clorox to 29.4% of the then outstanding Stock (after giving effect
to such issuance) and (y) the number of shares of Stock that Henkel
had sold to Clorox under this Agreement (or, in either case, such
lesser number as Henkel may elect in its notice to Clorox).
Re-purchases shall occur sequentially, beginning with the most recent
sales. The re-purchase price shall be equal to the price at which
Henkel sold the applicable shares to Clorox. Within two (2) weeks of
receipt of notice under this Section 2.g., the parties shall hold a
closing of the repurchase transaction. The parties shall comply with
the Securities Act of 1933 (the "Securities Act") in connection with
any repurchase hereunder, provided that Clorox shall not be required
to register the sale to Henkel of the shares that Henkel repurchases.
3. Term and Termination.
a. Term. The term of this Agreement shall start on the Effective Date and
end on January 31, 2006.
b. Termination.
i. Without cause. Either party may terminate this Agreement without
cause, for any reason or without reason, by giving at least
thirty (30) days prior written notice to the other party.
However, obligations, if any, arising prior to such termination
with respect to the then current Calculation Period in effect at
the time that the notice of termination is provided, shall
survive termination.
ii. Extraordinary Cash Needs. Clorox may terminate this Agreement by
giving notice if the Clorox Board of Directors approves an
acquisition or other capital appropriation or expenditure that
individually or, when aggregated with related acquisitions,
appropriations or expenditures, over a period of twelve (12)
months, requires the total expenditure of more than five hundred
million dollars ($500,000,000) in cash.
iii. Change of Control. Either party may terminate this Agreement by
giving notice at any time that Clorox has entered into an
agreement that will result in a change of control of Clorox or
that a change of control of Clorox has occurred. "Change of
control" for purposes of this Agreement shall mean:
(1) 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
20%, or in the case of Xxxxxx KGaA, or any person controlled
by it ("Xxxxxx Group"), more than the percentage of the
Company's issued Stock agreed to in paragraph 4(a) of the
June 18, 1981 agreement between the Company and Xxxxxx
Group, as amended, of either (i) the then outstanding Stock
of the Company (the "Outstanding Stock") or (ii) the
combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this
subsection (1), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly
from the Company, (ii) any acquisition by the Company,
including any acquisition which by reducing the number of
shares outstanding, is the sole cause for increasing the
percentage of shares beneficially owned by any such Person
or by Xxxxxx Group to more than the applicable percentage
set forth above, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by
the Company or any corporation controlled by the Company or
(iv) any acquisition by any corporation pursuant to a
transaction which complies with clauses (i), (ii) and (iii)
of subsection (3) of this Section 3.b.iii; or
(2) Individuals who, as of the date hereof, constitute the Board
of Directors of Clorox (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination
for election by the Company's shareholders, was approved by
a vote of at least a majority of the directors then
comprising the Incumbent Board, and any individual nominated
as a representative of Xxxxxx Group pursuant to the
agreement between Xxxxxx Group and the Company dated July
16, 1986, shall be considered as though such individual were
a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened
election contest with respect to the election or removal of
directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than
the Board; or
(3) 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, (i) all or substantially all of the individuals
and entities who were the beneficial owners, respectively,
of the Outstanding Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of 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), (ii) no Person (excluding any employee
benefit plan (or related trust) of the Company or such
corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of
the corporation resulting from such Business Combination or
the combined voting power of the then outstanding voting
securities of such corporation except to the extent that
such ownership existed prior to the Business Combination and
(iii) at least a majority of the members of the board of
directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action
of the Board, providing for such Business Combination; or
(4) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
(iv) Notwithstanding the foregoing, no termination of this Agreement
prior to January 31, 2006, under clause i, ii or iii of this Section 3.b,
shall terminate Xxxxxx'x right to purchase Stock under Section 2.g in
respect of any dilution caused by the issuance of shares of Stock by Clorox
on or prior to the date six months after such termination.
4. General
a. Notices. Notices under this Agreement shall be effective when sent by
fax, with a confirmation copy then sent by first class, postage paid
mail, return receipt requested, or by overnight delivery, to the
following fax numbers and addressees:
If to The Clorox Company:
0000 Xxxxxxxx
Xxxxxxx, XX 00000
Attn: General Counsel
Fax: (000) 000-0000
If to HC Investments, Inc.
0000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxx, President
Fax: (000) 000-0000
With a copy to Xxxxxxx X. Xxxx, Secretary, HC Investments, Inc. at:
0000 Xxxxxxxxxxx Xxxx.
Xxxxx Xxxxx, XX 00000
Fax: (000) 000-0000
or to such other address as either party may from time to time specify
in writing to the other by like notice.
b. Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the parties hereto with respect to the purchase and
sale of shares of Stock provided by this Agreement. No aspect of this
Agreement shall be construed to conflict with or supersede any
provision contained in any other agreement between Clorox, and any
other company within the Xxxxxx Group.
c. Governing Law. This Agreement shall be deemed to have been made in the
State of Delaware, and its form, execution, validity, construction and
effect shall be interpreted in accordance with the laws of the State
of Delaware, without recourse to the conflict of laws principles
thereof. Any disputes arising from this Agreement shall be resolved in
the state and/or federal courts located in the State of Delaware. Both
parties consent to the jurisdiction of the State of Delaware.
d. Confidentiality. Each party agrees that, except as required by law
(including Section 13 under the Exchange Act) or the applicable
regulations of a relevant stock exchange, any non-public information
learned or obtained by such party from the other party under this
Agreement shall be kept confidential and will not be disclosed to any
other person. For the avoidance of doubt, each party shall be
permitted to disclose publicly the existence and substance of this
agreement after it has been executed by both parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on
their behalf by their authorized officers whose signatures appear below.
THE CLOROX COMPANY HC INVESTMENTS, INC.
By: /s/ Xxxxx X. Xxxx By: /s/ Xxxxx X. Xxxxx
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Name: Xxxxx X. Xxxx Name: Xxxxx X. Xxxxx
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Title: Chief Financial Officer Title: Chairman and President
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