EXHIBIT 10.3
STOCK REDEMPTION AGREEMENT
This Stock Redemption Agreement, dated as of September ___, 1997 (this
"AGREEMENT"), is entered into by and among Enterprise Partners III, L.P., a
Delaware limited partnership ("EPIII"), Enterprise Partners III Associates,
L.P., a Delaware limited partnership ("EPIIIA"), Enterprise Partners IV, L.P., a
Delaware limited partnership ("EPIV"), Enterprise Partners IV Associates, L.P.,
a Delaware limited partnership ("EPIVA," and together with EPIII, EPIIIA and
EPIV, the "EP ENTITIES"), and Enterprise Management Partners Corporation, a
California corporation ("EMPC," and together with the EP Entities, the
"STOCKHOLDERS"), and Xxxxxxxx Manufacturing Company, Inc., a Texas corporation
("DMC" or the "COMPANY").
RECITALS
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WHEREAS, DMC and Dogloo, Inc., a California corporation ("DOGLOO"),
contemplate entering into that certain merger agreement (the "MERGER AGREEMENT),
to be dated as of the ______ day of September 1997;
WHEREAS, pursuant to the Merger Agreement, and in accordance with the Texas
Business Corporation Act (the "TBCA"), DMC and Dogloo will cause Dogloo to merge
with and into DMC, with DMC as the surviving corporation, pursuant to Section
5.04 of the TBCA (the "MERGER");
WHEREAS, EPIII currently owns 193,344 shares of DMC Common Stock and 51,558
shares of DMC Series A Preferred Stock; EPIIIA currently owns 16,811 shares of
DMC Common Stock and 4,483 shares of DMC Series A Preferred Stock; EPIV
currently owns 179,688 shares of DMC Common Stock and 47,917 shares of DMC
Series A Preferred Stock; EPIVA currently owns 9,464 shares of DMC Common Stock
and 2,524 shares of DMC Series A Preferred Stock; EMPC currently owns 598,959
shares of DMC Common Stock and 1,424,192 shares of DMC Series A Preferred Stock
(collectively, the "DMC SHARES");
WHEREAS, EPIII and EPIIIA currently own 1,846,440 and 160,560 shares (the
"DOGLOO SERIES B SHARES"), respectively, of Dogloo Series B Preferred Stock, no
par value ("DOGLOO SERIES B PREFERRED STOCK"), and each such share will, as part
of the Merger, be converted into one share of DMC Series C Preferred Stock, no
par value ("DMC SERIES C PREFERRED STOCK");
WHEREAS, EMPC and the Company mutually desire that EMP grant to DMC the
right to purchase the shares of DMC Common Stock and DMC Series A Preferred
Stock held by EMPC;
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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 SHARES
1.1 OPTION TO REDEEM DMC STOCK HELD BY EMPC. EMPC hereby grants to DMC
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the right to purchase for a total price of $14.4 million (plus accrued but
unpaid dividends on such shares of DMC Series A Preferred Stock as of the
Closing Date), 598,959 shares of DMC Common Stock and 359,376 shares of DMC
Series A Preferred Stock owned by EMPC. The Company agrees to pay the sum of
$14.4 million (plus accrued but unpaid dividends on such shares of DMC Series A
Preferred Stock as of the Closing Date) to EMPC by check or wire transfer on the
date of redemption. The option granted hereby may be exercised in whole or from
time to time in part on or before October 31, 1997 by delivering, personally, by
U.S. certified or registered mail, postage prepaid, return receipt requested or
by facsimile transmission, to EMPC at 0000 Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx
Xxxxx, Xxxxxxxxxx 00000 a notice of exercise of the option which notice shall
specify a closing date and the shares being purchased. On the closing date,
EMPC agrees to (i) deliver to the Company stock certificates representing
598,959 shares of DMC Common Stock and 359,376 shares of Series A Preferred
Stock, which certificates shall be either duly endorsed in blank or accompanied
by stock powers duly executed in the blank, on the date of redemption or (ii) in
the event the certificates are lost, the provisions of Section 2.1 shall apply.
1.2 OPTION TO REDEEM DMC SHARES HELD BY EPIII, EPIIIA, EPIV AND EPIVA.
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The EP Entities hereby grant to the Company the right to purchase for a total
price of $3.6 million (no dividends will be paid to the EP Entities on their
respective shares of DMC Series A Preferred Stock being redeemed), (i) 64,448
shares of Common Stock and 51,558 shares of Series A Preferred Stock held by
EPIII, (ii) 5,604 shares of Common Stock and 4,483 shares of Series A Preferred
Stock held by EPIIIA, (iii) 63,050 shares of Common Stock and 47,917 shares of
Series A Preferred Stock held by EPIV, and (iv) 2,524 shares of Series A
Preferred Stock held by EPIVA. The Company agrees to pay the sums of $1,743,120
to EPIII, $151,560 to EPIIIA, $1,667,400 to EPIV and $37,920 to EPIVA, all of
which will be paid by check or wire transfer on the date of redemption. The
option granted hereby may be exercised in whole or from time to time in part on
or before October 31, 1997 by delivering, personally, by U.S. certified or
registered mail, postage prepaid, return receipt requested or by facsimile
transmission, to the EP Entities at 0000 Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx
Xxxxx, Xxxxxxxxxx 00000 a notice of exercise of the option which notice shall
specify a closing date and the shares being purchased. On the closing date, the
EP Entities agree, severally but not jointly, to (i) deliver stock certificates
to
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the Company representing the number of shares of DMC Common Stock and DMC Series
A Preferred Stock enumerated in this Section 1.2 and held by each of EPIII,
EPIIIA, EPIV, and EPIVA, respectively, which certificates shall be either duly
endorsed in blank or accompanied by stock powers duly executed in the blank or
(ii) in the event the certificates are lost, the provisions of Section 2.1 shall
apply. As an inducement to cause DMC to effect the redemptions contemplated by
this Section 1.2 hereof, the EP Entities agree, in the event the option
contained in this Section 1.2 is exercised, to waive their respective rights to
accrued but unpaid dividends on such shares of DMC Series A Preferred Stock that
are redeemed pursuant to this Section 1.2.
EPIII and EPIIIA hereby grant to the Company the right to purchase 495,358
shares and 43,075 shares of DMC Series C Preferred Stock owned by EPIII and
EPIIIA, respectively, immediately following the Merger for a price per share of
$1.00 plus any unpaid accrued dividends thereon. The Company agrees to pay the
redemption price by check or wire transfer on the date of redemption. The
option granted hereby may be exercised in whole or from time to time in part on
or before October 31, 1997 by delivering, personally, by U.S. certified or
registered mail, postage prepaid, return receipt requested or by facsimile
transmission, to EPIII and EPIIIA at 0000 Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx
Xxxxx, Xxxxxxxxxx 00000 a notice of exercise of the option, which notice shall
specify a closing date and the shares being purchased. On the closing date,
EPIII and EPIIIA agree to (i) deliver to the Company stock certificates
representing the shares of DMC Series C Preferred Stock being 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 (ii) in the event
the certificates are lost, the provisions of Section 2.1 shall apply.
ARTICLE II.
STOCKHOLDER REPRESENTATIONS
In connection with the granting of the options provided for herein and in
connection with the redemption of shares of DMC Common Stock, DMC Series A
Preferred Stock and DMC Series C Preferred Stock, each Stockholder represents to
Company as follows:
2.1 OWNER OF RECORD. The Stockholder is the beneficial and owner of
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record of the DMC Shares and the Dogloo Series B Shares and holds the DMC Shares
and the Dogloo Series B Shares free and clear of any liens or encumbrances and,
after the Merger, will be the beneficial and owner of record of the DMC Shares
and shares of DMC Series C Preferred Stock. Each Stockholder has made or caused
to be made a search for the certificate representing their shares of Series A
Preferred Stock and has been unable to locate the certificate. Each Stockholder
represents that (i) as
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of the date hereof, neither the lost certificate nor the rights of Stockholder
to the lost certificate have, in whole or in part, been cashed, negotiated,
sold, assigned, transferred, hypothecated, pledged, deposited under any
agreement or otherwise disposed of or encumbered and (ii) and, to such
Stockholder's knowledge, no claim of right, title or interest adverse to
Stockholder in or to the lost certificate has been made or advanced by any
person. Each Stockholder agrees to surrender the lost certificate if comes into
their possession and hereby agrees to indemnify and save harmless the Company
for any an all claims, actions and suits and from any liabilities, losses,
damages, costs and charges of any kind from the making of any payment, credit,
conversion, exchange, distribution or delivery in respect of their lost
certificate.
2.2 NO CONFLICTS. To the best of each Stockholder's knowledge, no other
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person or entity has any rights to purchase the Shares being redeemed by the
Company pursuant to this Agreement, and the redemption contemplated hereby will
not conflict with or result in a breach of, or constitute a default (with or
without 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 Stockholder is a party.
ARTICLE III.
COMPANY REPRESENTATIONS
In connection with the redemption of the shares of DMC Common Stock, DMC
Series A Preferred Stock and DMC Series C Preferred Stock, the Company
represents to the Stockholders that it is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas, that it has
full corporate 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 corporate action of the Company necessary for such
execution, delivery and performance has been or will be duly and validly taken
and remains or will remain in full force and effect.
ARTICLE IV.
MISCELLANEOUS
5.1 GOVERNING LAW. This Agreement and all acts and transactions pursuant
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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 principles.
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5.2 ENTIRE AGREEMENT; AMENDMENTS; ENFORCEMENT OF RIGHTS. This Agreement
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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 either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
5.3 SEVERABILITY. If one or more provisions of this Agreement are held to
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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 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.
5.3 HEADINGS. The headings used in this Agreement are used for
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convenience only and are not to be considered in construing or interpreting this
Agreement.
5.4 COUNTERPARTS. This Agreement may be executed in two or more
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counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
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IN WITNESS WHEREOF, the Company and the Stockholders have caused this
Agreement to be duly executed and delivered as of the date first written above.
THE STOCKHOLDERS:
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ENTERPRISE PARTNERS III, L.P.
By: Enterprise Management Partners III, L.P.
Its: General Partner
By: /s/ XXXXXXX X. XXXXXX
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Xxxxxxx X. Xxxxxx
Its: General Partner
ENTERPRISE PARTNERS III ASSOCIATES, L.P.
By: Enterprise Management Partners III, L.P.
Its: General Partner
By: /s/ XXXXXXX X. XXXXXX
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Xxxxxxx X. Xxxxxx
Its: General Partner
ENTERPRISE PARTNERS IV, L.P.
By: Enterprise Management Partners IV, L.P.
Its: General Partner
By: /s/ XXXXXXX X. XXXXXX
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Xxxxxxx X. Xxxxxx
Its: General Partner
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ENTERPRISE PARTNERS IV ASSOCIATES, L.P.
By: Enterprise Management Partners IV, L.P.
Its: General Partner
By:
/s/ XXXXXXX X. XXXXXX
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Xxxxxxx X. Xxxxxx
Its: General Partner
ENTERPRISE MANAGEMENT PARTNERS CORPORATION
By:
/s/ XXXXXXX X. XXXXXX
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Xxxxxxx X. Xxxxxx
Its: President
THE COMPANY:
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XXXXXXXX MANUFACTURING COMPANY, INC.,
a Texas corporation
By:
/s/ XXXXX X. XXXXXXX
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Name: Xxxxx X. Xxxxxxx
Title: President
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