EXHIBIT 10.4
STOCK REDEMPTION AND PURCHASE AGREEMENT
This Stock Redemption and Purchase Agreement, dated August 28, 1997, (this
"AGREEMENT"), is entered into between Xxxxxxx X. Xxxxxxx, III ("XXXXXXX"),
Xxxxxxxx Manufacturing Company, Inc., a Texas corporation ("DMC" or the
"COMPANY") and Westar Capital, a limited partnership ("WESTAR").
RECITALS
--------
WHEREAS, DMC and Dogloo, Inc., a California corporation ("DOGLOO") contemplate
entering into that certain merger agreement (the "MERGER AGREEMENT");
WHEREAS, pursuant to the Merger Agreement, and in accordance with the Texas
Business Corporations Act (file "TBCA"), DMC and Dogloo will agree to cause
Dogloo to merge with and into DMC, with DMC as the surviving corporation (the
"MERGER");
WHEREAS, pursuant to the Merger Agreement, each share of Dogloo Common Stock,
no par value (the "DOGLOO COMMON STOCK"), issued and outstanding at the time of
the Merger will be converted into 0.04304004 shares of DMC Common Stock (the
"DMC COMMON STOCK"), each share of Dogloo Series A Preferred Stock, no par value
(the "DOGLOO SERIES A PREFERRED STOCK"), issued and outstanding at the time of
the Merger will be converted into one share of newly designated DMC Series B
Preferred Stock, no par value (the "DMC SERIES B PREFERRED STOCK") and each
share of Dogloo Series B Preferred Stock, no par value (the "DOGLOO SERIES B
PREFERRED STOCK"), issued and outstanding at the time of the Merger will be
converted into one share of newly designated DMC Series C Preferred Stock, no
par value (the "DMC SERIES C PREFERRED STOCK");
WHEREAS, Xxxxxxx currently owns 8,599,667, 6,890,000 and 2,141,280 shares,
respectively, of Dogloo Common Stock, Dogloo Series A Preferred Stock and Dogloo
Series B Preferred Stock (collectively, the "DOGLOO SHARES"), which, pursuant to
the Merger Agreement, will be converted into 370,130, 6,890,000 and 2,141,280
shares, respectively, of DMC Common Stock, DMC Series B Preferred Stock and DMC
Series C Preferred Stock (collectively, the "DMC SHARES"); and
WHEREAS, Xxxxxxx, as an inducement to cause DMC to enter into the Merger
Agreement, desires to grant to DMC or its designee or designees and Westar or
its designee or designees the right to redeem or purchase the DMC Shares that
Xxxxxxx will own immediately following the Effective Time (as defined in Section
1.2 of the Merger Agreement) of the Merger.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and
agreements hereinafter set forth, the parties hereto agree as follows:
ARTICLE I.
OPTION TO REDEEM OR PURCHASE SHARES
1.1 OPTION TO REDEEM OR PURCHASE DMC SHARES. Xxxxxxx hereby grants to (i)
----------------------------------------
DMC or its designee or designees the right to redeem or purchase any or all of
the DMC Series B Preferred Stock or DMC Series C Preferred Stock owned by
Xxxxxxx immediately following the Merger and (ii) Westar or its designee or
designees the right to redeem or purchase any or all of the DMC Common Stock
owned by Xxxxxxx immediately following the Merger; provided, that no shares of
DMC Common Stock may be redeemed or purchased from Xxxxxxx unless prior to or
concurrent with such redemption or purchase all of the shares of DMC Series B
and DMC Series C Preferred Stock then owned by Xxxxxxx have been redeemed or
purchased. The price per share of DMC Common Stock shall be $15.026069 per
share (or $0.6467226 per share of Dogloo Common Stock); the price per share of
DMC Series B Preferred Stock shall be $1.00 plus any unpaid accrued dividends
thereon through the date of the purchase; and the price per share of DMC Series
C Preferred Stock shall be $1.00 plus any unpaid accrued dividends thereon
through the date of the redemption or purchase/(1)/. The options granted hereby
may be exercised in whole or from time to time in part on or before the earlier
of (a) 15 business days after the Closing Date (as defined in the Merger
Agreement) or (b) October 31, 1997, by delivering to Xxxxxxx by facsimile or
first class mail at the address or facsimile number set forth on the signature
page hereto a notice of exercise of the options which notice shall specify a
closing date and the shares being purchased. On the closing date, the party or
parties redeeming or purchasing the DMC Shares agree to pay the purchase price
payable to Xxxxxxx by check or wire transfer and Xxxxxxx agrees to deliver to
such party or parties (i) stock certificates representing the shares
-----------------------------
(1) By way of example only, if all of Xxxxxxx'x DMC Shares were purchased or
redeemed on September 30, 1997, assuming no other purchases or redemptions, the
following amounts, prior to the discount referred to in Section 1.1, shall
be paid to Xxxxxxx for his DMC Shares:
DMC Common Stock
----------------
370,130 shares (or 8,599,667
shares of Dogloo Common Stock) $ 5,561,599
DMC Series B Preferred Stock
----------------------------
6,890,000 $ 6,890,000
Dividends $ 1,483,323
DMC Series C Preferred Stock
----------------------------
2,141,280 $ 2,141,280
Dividends $ 433,536
-----------
$16,509,738
===========
2
purchased, which certificates shall be either duly endorsed in blank or
accompanied by stock powers duly executed in blank, on the date of redemption or
purchase (the purchasing party or parties shall accept an affidavit of lost
stock certificate and indemnity from Xxxxxxx in place of any lost stock
certificate so long as the form and substance of such document is reasonably
acceptable to such purchasing party or parties and Xxxxxxx diligently attempts
to locate such certificates) and (ii) releases, in form and substance
satisfactory to the purchasing party or parties, from all those persons who may
hold any interest, option or right of any kind or nature therein. In addition,
in the event that all of the DMC Shares then owned by Xxxxxxx are being
redeemed or purchased hereunder, on the closing date, DMC and Westar shall cause
the parties (other than Xxxxxxx) to that certain First Amendment to Settlement
Agreement and Mutual Release, in the form attached hereto as Schedule 1, to
execute the same and Xxxxxxx hereby agrees to execute the same concurrently upon
receipt of the purchase price for the DMC Shares being redeemed or purchased.
The aggregate purchase price payable to Xxxxxxx upon the redemption or purchase
of all of his DMC Shares hereunder shall be reduced by an amount equal to
$867,935.
1.2 AMENDMENT TO THE AMENDED AND RESTATED SECURITYHOLDERS' AGREEMENT. In the
-----------------------------------------------------------------
event Westar or its designee or designees do not purchase all of the shares of
the DMC Common Stock held by Xxxxxxx, then Xxxxxxx shall have the right to be a
member of the Board of Directors of DMC or to designate a nominee to be a member
of the Board of Directors of DMC (in place of Xxxxxxx), pursuant to the terms
and conditions of the Amended and Restated Securityholders' Agreement (as
defined in the Merger Agreement). The Amended and Restated Securityholders'
Agreement shall be amended to provide that the stockholders of DMC that are
parties to such Agreement shall vote their shares to elect either Xxxxxxx or his
nominee, who shall be Xxx Xxxxx or another individual that has relevant
experience in the non-food pet products industry and is reasonably acceptable to
a majority of the other members of the Board of Directors of DMC. Xxxxxxx hereby
agrees to execute the Amended and Restated Securityholders' Agreement at the
Effective Time of the Merger.
ARTICLE II.
XXXXXXX REPRESENTATIONS
In connection with the granting of the options provided for herein and the
redemption or purchase of DMC Shares, Xxxxxxx represents and covenants to DMC
and Westar as follows:
2.1 OWNER OF RECORD. Xxxxxxx is the beneficial owner and owner of record of
---------------
the Dogloo Shares and holds the Dogloo Shares free and clear of any liens or
encumbrances and, after the Merger, will be the beneficial owner and owner of
record of the DMC Shares and such DMC Shares will be free and clear of any liens
or encumbrances. Xxxxxxx will not, prior to the expiration of this Agreement,
sell, transfer, assign, pledge, encumber or otherwise transfer any interest in
the Dogloo Shares or the DMC Shares to any person or entity.
2.2 NO CONFLICTS. No other person or entity has any rights to purchase the DMC
-------------
Shares that are the subject of this Agreement, and the redemption or purchase
contemplated hereby will not conflict with or result in a breach of, or
constitute a default (with or without
3
due notice or lapse of time or both) of any note, pledge, bond, mortgage,
indenture or deed of trust, or any license, lease or agreement to which Xxxxxxx
is a party, other than pursuant to that Amended and Restated Securityholders'
Agreement to be dated as of the Closing Date (as defined in the Merger
Agreement).
2.3 NO FURTHER OBLIGATION BY DMC OR WESTAR. Xxxxxxx represents and
---------------------------------------
acknowledges that any consideration received hereunder upon the exercise of the
options satisfies all obligations by or on the part of DMC, Westar or their
designees to Xxxxxxx regarding the shares redeemed or purchased.
ARTICLE III.
COMPANY AND WESTAR REPRESENTATIONS
In connection with the redemption of the DMC Shares, the Company represents
to Xxxxxxx that it is a corporation duly organized, validly existing and in
good standing under the laws of the State of Texas. In addition, the Company
and Westar represent to Xxxxxxx that each has full power and authority to
execute and deliver this Agreement and to perform its obligations under and to
consummate the transactions contemplated by this Agreement, and that all action
of the Company and Westar necessary for such execution, delivery and
performance has been or will be duly and validly taken.
ARTICLE IV.
MISCELLANEOUS
4.1 GOVERNING LAW. This Agreement and all acts and transactions pursuant
--------------
hereto and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the State of Texas,
without regard to conflicts of laws principals.
4.2 ENTIRE AGREEMENT; AMENDMENTS; ENFORCEMENT OF RIGHTS. This Agreement sets
----------------------------------------------------
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the
parties to this Agreement. The failure by any party to enforce any rights under
this Agreement shall not be construed as a waiver of any rights of such party.
This rights of the Company and Westar under this Agreement may be assigned by
the Company or Westar to a designee or designees and shall inure to the benefit
of such parties upon the assignment hereof.
4.3 SEVERABILITY. If one or more provisions of this Agreement are held to be
-------------
unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this
4
Agreement, (ii) the balance of the Agreement shall be interpreted as if such
provision were so excluded and (iii) the balance of the Agreement shall be
enforceable in accordance with its terms.
4.4 HEADINGS. The headings used in this Agreement are used for convenience
---------
only and are not to be considered in construing or interpreting this Agreement.
4.5 COUNTERPARTS. This Agreement may be executed in two or more counterparts,
-------------
each of which shall be deemed an original and all of which together shall
constitute one instrument. This Agreement may be executed by facsimile
signatures.
4.6 CONSENT TO MERGER. Xxxxxxx hereby consents to the Merger and approves the
------------------
Merger Agreement in his capacity as a holder of Common Stock, Series A Preferred
Stock and Series B Preferred Stock of Dogloo and agrees to execute all documents
reasonably required by Dogloo or DMC to evidence the same.
IN WITNESS WHEREOF, the Company, Westar and Xxxxxxx have caused this Agreement
to be duly executed and delivered as of the date first written above.
XXXXXXX X. XXXXXXX, III,
an individual
/s/ XXXXXXX X. XXXXXXX, III
-----------------------------
Address: 00000 Xxxxx Xxxxx
Xxxx Xxxxxxxx, XX 00000
Facsimile:
--------------------------------
THE COMPANY:
------------
XXXXXXXX MANUFACTURING COMPANY,
INC., a Texas corporation
By: /s/ XXXXXX X. XXXXXXXXX
---------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
-------------------------------------
Title: CEO & VP
------------------------------------
WESTAR CAPITAL
By: Westar Capital Associates, a limited
partnership
Its: General Partner
By: /s/ XXXX X. XXXXXXX
--------------------------------------
Xxxx X. Xxxxxxx
Its: General Partner
SCHEDULE 1
AMENDMENT NO. 1 TO SETTLEMENT AGREEMENT AND MANUAL RELEASE
----------------------------------------------------------
THIS AMENDMENT NO. 1 TO SETTLEMENT AGREEMENT AND MUTUAL RELEASE ("Amendment
No. 1") is entered into between Xxxxxxxx Manufacturing Company, Inc. (successor
to Dogloo, Inc.) ("DMC"), Xxxxxxx X. Xxxxxxx III and Xxxxx Xxxxxxx ("Xxxxxxx"),
Westar Capital ("Westar"), Enterprise Partners III, L.P. ("Enterprise III"),
Enterprise Partners III Associates, L.P. ("Enterprise Associates"), and HBI
Financial, Inc. ("HBI").
W I T N E S E T H:
-----------------
WHEREAS, the parties hereto are also parties to that certain Settlement
Agreement and Mutual Release, dated as of May 27, 1997 (the "Original
Agreement"); and
WHEREAS, the parties hereto desire to amend the Original Agreement as provided
herein.
NOW, THEREFORE, for and in consideration of the foregoing premises, which are
incorporated by reference into this Amendment No. 1, and of the mutual promises
set forth below, the parties agree as follows.
1. Section 1 of the Original Agreement is hereby amended as follows:
the date of September 30, 1998 in the first and last sentences of Section 1 of
the Original Agreement shall hereby be amended to the date hereof. In addition,
Section 1 of the Original Agreement is hereby amended by adding the following
provision after the last sentence of such Section:
"Following the date hereof, neither DMC or Dogloo or any of their
successors in interest shall be obligated to pay Xxxxxxx any amounts for
any salary or benefits as a DMC or Dogloo employee or otherwise for any
past, current or future period. In addition, after such date, Xxxxxxx
shall (i) not be eligible to participate in any DMC, Dogloo or any
successor in interest's medical/dental/vision plan or other health plan
and (ii) no longer be eligible to participate in any DMC, Dogloo or any
successor in interest stock option plan, 401(k) plan, LTD or any other
employee benefit plan or accrue any vacation, sick leave or personal
days."
Xxxxxxx shall retain his rights to COBRA benefits as stated in Section 1 of the
Original Agreement.
2. Section 2 of the Original Agreement is hereby deleted in its
entirety.
3. Section 3 of the Original Agreement is hereby amended and restated
to read in full as follows:
"3. Board Membership. Xxxxxxx hereby resigns his membership on the Board
-----------------
of Directors of Dogloo, effective on the date of this Amendment No. 1."
4. Section 6.b. of the Original Agreement shall be amended to delete
the phrases "9.1(c) (Taxes)" and "9.1(d) (Environmental)" from such Section.
5. Section 8.a. of the Original Agreement is hereby amended to delete
the phrases "9.1(c) (Taxes)" and "9.1(d) (Environmental)."
6. The Original Agreement shall remain in full force and effect (as
amended hereby) following the date of this Amendment No. 1.
Executed as of this ________ day of _________, 1997.
--------------------------------------
Xxxxxxx X. Xxxxxxx III
--------------------------------------
Xxxxx Xxxxxxx
DOKOCIL MANUFACTURING
COMPANY, INC.
By:___________________________________
Its:__________________________________
WESTAR CAPITAL
By: Westar Capital Associates, a limited partnership
Its: General Partner
By:___________________________________
Xxxx X. Xxxxxxx
Its: General Partner
ENTERPRISE PARTNERS III, L.P.
By: Enterprise Management Partners III, L.P.
Its: General Partner
By:__________________________________
Xxxxxxx X. Xxxxxx
Its: General Partner
ENTERPRISE PARTNERS III,
ASSOCIATES, L.P.
By: Enterprise Management Partners III, L.P.
Its: General Partner
By:__________________________________
Xxxxxxx X. Xxxxxx
Its: General Partner
HBI FINANCIAL, INC.
By:__________________________________
Xxxxxxx X. Xxxxxxx
Its: Executive Vice President
