Exhibit 10.5
STOCK REDEMPTION AGREEMENT
This Stock Redemption Agreement, dated as of September 15, 1997 (this
"AGREEMENT"), is entered into between Xxxxxxx X. Xxxxxx ("XXXXXX"), Xxxxxxxx
Manufacturing Company, Inc., a Texas corporation ("DMC" or the "COMPANY") and
the other parties hereto.
RECITALS
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WHEREAS, DMC and Dogloo, Inc., a California corporation ("DOGLOO")
contemplate entering into a merger agreement (the "MERGER AGREEMENT");
WHEREAS, pursuant to the Merger Agreement, and in accordance with the Texas
Business Corporations Act (the "TBCA"), DMC and Dogloo will agree to cause
Dogloo to merge with and into DMC, with DMC as the surviving corporation,
pursuant to the TBCA (the "MERGER");
WHEREAS, DMC and Dogloo currently contemplate that the Closing Date (as
defined in the Merger Agreement) of the Merger will be September 19, 1997;
WHEREAS, pursuant to the Merger Agreement, 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");
WHEREAS, Xxxxxx currently owns 3,334,255 shares of Dogloo Series A
Preferred Stock (the "DOGLOO SHARES"), which, pursuant to the Merger Agreement,
will be converted into 3,334,255 shares of DMC Series B Preferred Stock (the
"DMC SHARES"); and
WHEREAS, Xxxxxx, as an inducement to cause DMC to enter into the Merger
Agreement and proceed with the Merger, desires to grant to DMC the right to
redeem and/or purchase the DMC Shares that Xxxxxx 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 SHARES
1.1 PURCHASE AND SALE OF THE DMC STOCK. Subject to (i) the funding and
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closing of the Senior Subordinated Note financing and Senior Credit facility as
contemplated by that certain Offering Memorandum dated September 12, 1997,
including as contemplated by the
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"Use of Proceeds" section contained therein (except that with respect to
footnote 6 thereof, no further offset shall be made to the 3,334,255 shares
currently held by Xxxxxx or the accrued dividends thereon), and (ii) the closing
of the Merger as contemplated by the Merger Agreement, DMC hereby agrees to
purchase all of the DMC Shares to be owned by Xxxxxx immediately following the
Effective Time of the Merger. Such purchase and sale shall be effected, and the
closing of such transaction shall occur, no later than two business days
following the Closing Date of the Merger. The price per share for the DMC
shares shall be $1.00 plus any unpaid accrued dividends thereon through the
Closing Date./1/ On the closing date of the purchase and sale, the Company
agrees to pay the purchase price payable to Xxxxxx by check or wire transfer and
Xxxxxx agrees to deliver to the Company (or other purchaser) stock certificates
representing the DMC Shares purchased which certificates shall be either duly
endorsed in blank or accompanied by stock powers duly executed in blank. In
consideration for DMC's agreements set forth herein, and, subject to Xxxxxx'x
receipt of the aggregate purchase price for his DMC Shares (including all
accrued, but unpaid dividends thereon), Xxxxxx hereby waives his right to all
statutory and other notice requirements related to the redemption of his DMC
Shares or otherwise in connection with the Merger.
ARTICLE II.
SHAREHOLDER REPRESENTATIONS
In connection with the purchase of the DMC Shares, Xxxxxx represents and
covenants to the Company as follows:
2.1 OWNER OF RECORD. Xxxxxx is the beneficial owner and owner of record
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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. Xxxxxx 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.
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/1/ By way of example only, if all of Xxxxxx'x DMC Shares are purchased or
redeemed on September 19, 1997, as contemplated (subject to the conditions set
forth in Section 1.1) assuming no other purchases or redemptions, the following
amounts shall be paid to Xxxxxx for his DMC Shares:
DMC Series B Preferred Stock Dollar Amount
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3,334,255........................... $3,334,255
Aggregate Dividends................. 706,324
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Total.......................... $4,040,579
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2.2 NO CONFLICTS. No other person or entity has any rights to purchase
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the 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 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 Xxxxxx is a party.
2.2 NO FURTHER OBLIGATION BY DMC OR DOGLOO. Xxxxxx represents and
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acknowledges that the consideration received hereunder for the purchase of his
DMC Shares satisfies all obligations by or on the part of the Company or Dogloo
to Xxxxxx regarding such DMC Shares.
ARTICLE III.
COMPANY REPRESENTATIONS
In connection with the redemption or purchase of the DMC Shares, the
Company represents to Xxxxxx 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.
ARTICLE IV.
MISCELLANEOUS
4.1 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.
4.2 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. The
rights of the Company under this Agreement may be assigned by the Company.
4.3 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.
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4.4 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.
4.5 COUNTERPARTS. This Agreement may be executed by facsimile in two or
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more counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
4.6 CONSENT TO MERGER. Subject to Xxxxxx'x receipt of the aggregate
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purchase price for his DMC Shares (including all accrued, but unpaid dividends),
Xxxxxx hereby consents to the Merger and approves the Merger Agreement in his
capacity as a holder of Series A Preferred Stock of Dogloo and agrees to execute
all documents reasonably required by Dogloo or DMC to evidence the same.
4.7 MUTUAL RELEASES.
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a. Release by DMC, et. al. In consideration of Xxxxxx'x
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warranties, covenants and promises contained in this Agreement, subject to the
conditions set forth in Sections 1.1(i) and 1.1(ii) herein, and for other good
and sufficient consideration, receipt of which is hereby acknowledged, DMC,
Dogloo, Westar Capital, Enterprise Partners III, L.P., Enterprise Partners III
Associates, L.P. and HBI Financial (collectively, the "Other Parties"), for
themselves and their general and limited partners, officers, directors, agents
and employees, individually and in their corporate, partnership and other legal
capacities fully and forever release and discharge Xxxxxx, his heirs, executors,
administrators, assigns, successors and spouses (collectively for this Section
4.7(a) "Xxxxxx") from, and covenant not to xxx or otherwise institute or cause
to be instituted any legal or administrative proceedings against Xxxxxx with
respect to any and all liabilities, claims, demands, contracts, debts,
obligations and causes of action of every nature, kind and description in law,
equity, or otherwise, whether or not now known or ascertained, arising out of or
relating to any claim for Damages (which includes the term "Investors Damages")
(as such terms are defined in the Stock Purchase and Exchange Agreement dated as
of September 22, 1995 (the "Stock Agreement")) (other than any claim for Damages
that arises out of or is related to Xxxxxx'x intentional fraud or intentional
wrongdoing or the representations and warranties in Stock Agreement Sections
9.1(f)(Past Issuance of Stock)).
b. Release By Xxxxxx. In consideration of the payments made under
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this Agreement, certain of which Xxxxxx would not be entitled to receive but for
this Agreement, subject to the conditions set forth in Sections 1.1(i) and
1.1(ii) herein, and for other good and sufficient consideration, receipt of
which is hereby acknowledged, Xxxxxx, for himself, his heirs, executors,
administrators, assigns, successors and spouses, fully and forever release and
discharge the Other Parties and the general and limited partners, officers,
directors, agents and employees of the Other Parties, individually and in their
corporate, partnership and other legal capacities (individually, a "releasees"
and collectively, "releasees") from, and covenant not to xxx or otherwise
institute or cause to be instituted any legal or administrative proceedings
against releases with respect to any and all liabilities, claims, demands,
contracts, debts, obligations and causes of action of every nature, kind and
description, in
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law, equity, or otherwise, whether or not now known or ascertained,
(collectively for this Section 4.7(b) "Claims"), arising out of or relating to
the redemption of his DMC Shares or any set-offs taken against his shares of
capital stock of Dogloo under the Stock Agreement.
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IN WITNESS WHEREOF, the Company and the Xxxxxx have caused this Agreement
to be duly executed and delivered as of the date first written above.
XXXXXXX X. XXXXXX,
an individual
/s/ XXXXXXX X. XXXXXX
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Address: 000-000xx Xxx. XX. Xxx 000
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Xxxxxxx, XX 00000
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Facsimile: (000) 000-0000
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THE COMPANY:
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XXXXXXXX MANUFACTURING COMPANY, INC.,
a Texas corporation
By: /s/ XXXXXX X. XXXXXXXXX
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Name: Xxxxxx X. Xxxxxxxxx
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Title: Chief Financial Officer
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DOGLOO, INC.
By: /s/ XXXXXXX X. XXXXXX
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Xxxxxxx X. Xxxxxx
Executive Vice President
WESTAR CAPITAL
By: Westar Capital Associates, a limited
partnership
Its: General Partner
By: /s/ XXXX X. XXXXXXX
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Xxxx X. Xxxxxxx
Its: General Partner
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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
HBI FINANCIAL INC.
By: /s/ XXXXXXX X. XXXXXXX
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Xxxxxxx X. Xxxxxxx
Its: Executive Vice President
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