EXHIBIT 2
OPTION,
SECURITY AGREEMENT
AND
BUY-SELL AGREEMENT
This Agreement (this "AGREEMENT") is made and entered into as of the 28TH
day of May, 1997 by and between XXXXXX INDUSTRIES, INC., a Minnesota
corporation ("INDUSTRIES") and XXXXXXXX FINANCIAL GROUP, INC. ("XXXXXXXX").
WHEREAS, Industries is the owner of 3,217,000 shares of the common
capital stock of IPI, Inc., a Minnesota corporation ("IPI") which represents
approximately 67.1% of the total outstanding shares of IPI stock; and
WHEREAS, Xxxxxxxx is interested in exploring in depth the advisability of
its making a substantial investment in IPI by purchasing 1,608,500 shares of
IPI stock from Industries and Xxxxxxxx presently desires to purchase an
option to acquire such shares on the terms hereafter set forth; and
WHEREAS, Industries is willing to xxxxx Xxxxxxxx an option to purchase
from Industries 1,608,500 shares of IPI stock on the terms and conditions
hereafter set forth; and
WHEREAS, if Xxxxxxxx becomes the owner of the IPI stock by exercising the
Option granted hereunder, Xxxxxxxx will pledge its IPI stock to secure
payment of the promissory note issued in partial payment of the purchase
price, and the parties also desire to restrict either party from transferring
stock of IPI other than as hereafter provided,
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the parties hereto agree
as follows:
1. GRANT OF OPTION. In consideration of the payment by Xxxxxxxx to
Industries of the sum of Eight Hundred Four Thousand Two Hundred Fifty and
no/100 Dollars ($804,250.00) ($.50 per share) the "OPTION PRICE"), Industries
hereby grants to Xxxxxxxx the right and option (the "OPTION") to purchase
1,608,500 shares of common capital stock of IPI (the "OPTIONED SHARES") (such
number being subject to adjustment as provided in paragraph 7 hereof) on the
terms and conditions herein set forth.
2. PURCHASE PRICE. The purchase price of the Optioned Shares shall be
Six Million Seven Hundred Fifty-five Thousand Seven Hundred and no/100
Dollars ($6,755,700.00) (Four and 20/100 Dollars ($4.20) per share) provided,
however, upon the exercise of the Option as hereinafter provided, the amount
of the Option Price paid by Xxxxxxxx to Industries shall be applied as a
credit against the purchase price of the Optioned Shares in the manner
hereafter provided.
3. COMPLIANCE WITH MINNESOTA STATUTES SECTION 302A.671. Industries and
Xxxxxxxx acknowledge that Xxxxxxxx'x acquisition of the shares of IPI is
within the provisions of the Minnesota Statutes Section 302A.671. Xxxxxxxx
agrees that within ninety (90) days after execution of this Agreement, it
will deliver to IPI an information statement complying with the provisions of
subdivision 2 of Minnesota Statutes Section 302A.671 together with a written
undertaking to pay or reimburse IPI's expenses for conducting a special
meeting of the shareholders as provided in subdivision 3 of Minnesota
Statutes Section 302A.671. At the time of delivery of the information
statement, Xxxxxxxx shall request that a special meeting of the shareholders
of IPI be called and Xxxxxxxx agrees that such meeting may be held at any
time prior to December 1, 1997. Industries agrees that it will use its best
efforts to call a special meeting of the shareholders of IPI pursuant to
subdivision 3 of Minnesota Statutes Section 302A.671 for the purpose of
obtaining shareholder approval that the shares to be acquired by Xxxxxxxx
under the Option shall have the same voting rights
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as other shares of the same class of stock of IPI. In the event that the
shareholders of IPI have not approved voting rights for the shares to be
acquired by Xxxxxxxx under the Option on or before December 1, 1997, the
Option shall terminate and Industries shall thereupon forthwith refund to
Xxxxxxxx the Option Price together with interest thereon at a rate at all
times one percent (1%) per annum in excess of the prime rate (the reference
rate) in effect from time to time at First Bank, N.A. from the date of the
payment of the Option Price to the date of the refund.
4. EXERCISE OF OPTION. The Option shall be exercisable on and after
January 1, 1998 until 2:00 p.m. central standard time on Monday, January 5,
1998 (time being of the essence of this Agreement) by written notice
delivered to the office of Industries at Suite 2500, 000 Xxxxx Xxxxx Xxxxxx,
Xxxxxxxxxxx, Xxxxxxxxx 00000 together with payment in the form of:
(a) readily available funds in the amount of $2,573,600 which
together with the amount of Option Price of $804,250 shall constitute
payment of one-half of the purchase price of the Optioned Shares, and
(b) a negotiable promissory note (the "NOTE") in customary form
satisfactory to counsel for Industries duly executed by Xxxxxxxx in the
principal amount of Three Million Three Hundred Seventy-seven Thousand Eight
Hundred Fifty and no/100 Dollars ($3,377,850.00) due and payable one year
from the date of exercise of the Option and bearing interest payable
quarterly at a rate at all times one percent (1%) per annum in excess of the
prime rate (the reference rate) in effect from time to time at First Bank,
N.A. The maturity of the Note shall be subject to acceleration as provided
in paragraph 10B hereof.
5. DELIVERY AND PLEDGE OF STOCK. Immediately upon exercise of the
Option as above provided, Xxxxxxxx shall become the owner of the Optioned
Shares free and clear of any claims, liens or encumbrances, other than a
security interest by way of pledge to Industries to secure payment of the
Note in accordance with its terms. Industries shall cause to be issued and
shall retain in its possession as pledgee an IPI stock certificate (the
"CERTIFICATE") evidencing 1,608,500 shares of the common capital stock of IPI
registered in the name of Xxxxxxxx and Xxxxxxxx shall execute and deliver a
stock power in blank to be attached to the Certificate for use in the event
of default under the Note
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and foreclosure of the security interest in such shares. In the event of
default under the Note, Industries shall have all the rights in the pledged
stock granted to a secured party under the Minnesota Uniform Commercial Code.
6. NON-TRANSFERABILITY OF OPTION RIGHTS. The Option shall not be
transferable or assignable by operation of law or otherwise and the Option
may be exercised only by Xxxxxxxx. Any attempt at assignment, transfer,
pledge, hypothecation or other disposition of the Option contrary to the
provisions hereof, or the levy of any execution, attachment or similar
process upon the Option, shall be null and void and without effect. In the
event of the death of Xxxxxx Xxxxxxxx before the Option is exercised, the
Option shall terminate and Industries shall thereupon forthwith refund to
Xxxxxxxx the Option Price together with interest thereon at a rate at all
times one percent (1%) per annum in excess of the prime rate (the reference
rate) in effect from time to time at First Bank, N.A. from the date of the
payment of the Option Price to the date of the refund.
7. CHANGES IN CAPITAL STRUCTURE. If the Option is exercised subsequent
to any share dividend, recapitalization, merger, consolidation, exchange of
shares or reorganization as a result of which shares of any class shall be
issued in respect to the presently outstanding stock of IPI or such stock
shall be changed into the same or a different number of shares of the same or
another class or classes of stock, upon exercising the Option, Xxxxxxxx shall
receive the number and class of shares to which it would have been entitled
if it has purchased the Optioned Shares at the date hereof.
8. NO REGISTRATION. Xxxxxxxx acknowledges that the Optioned Shares
have not been and will not be, upon exercise of this Option, registered under
the Securities Act of 1933. Xxxxxxxx represents to Industries that it is
acquiring the shares for investment purposes and it is able to bear the
economic risk of the investment for an indefinite period of time since the
shares so acquired cannot be sold unless they are subsequently registered or
an exemption from such registration is
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available. Xxxxxxxx agrees that a legend may be placed on the stock
certificates acknowledging the restrictions on subsequent distribution of the
shares.
9. NO REPRESENTATIONS BY INDUSTRIES. Xxxxxxxx represents and
acknowledges:
(a) that it is an experienced and sophisticated investor;
(b) that in purchasing the Option it has relied upon publicly
available information regarding the business affairs and financial condition
of IPI and it has not received or relied upon any representations of any
kind by Industries or any individual associated with Industries; and
(c) that in deciding whether to exercise the Option, it will make
such investigation of the relevant facts as it deems appropriate and it will
not rely upon any representations by Industries or individuals associated
with Industries.
10. BUY-SELL AGREEMENT.
A. At any time after valid exercise of the Option and until this
Agreement is terminated as provided in paragraph 11 hereof, either Industries
or Xxxxxxxx shall have the right to initiate the buy-sell procedures and
terms set forth in this section with respect to all of the shares of IPI
stock owned by Xxxxxxxx upon exercise of the Option (1,608,500 shares) and
the like number of shares which will be owned by Industries after exercise of
the Option (1,608,500 shares). To initiate the procedure a party (the
"ELECTING PARTY") shall give a written offer (the "OFFER") to the other party
(the "NON-ELECTING PARTY") to sell its 1,608,500 shares of IPI stock at a
specified price per share (the "SPECIFIED PRICE") payable in cash or
equivalent at closing (the "CLOSING") or to purchase the Non-Electing Party's
1,608,500 shares of IPI stock at the Specified Price per share payable in
cash or equivalent at Closing. Within ninety (90) days after receipt of the
Offer from the Electing Party the Non-Electing Party shall, by written notice
to Electing Party, accept either the Electing Party's Offer to sell or its
Offer to buy, at the option of the Non-Electing Party. If the Non-Electing
Party fails to give such written notice within the time specified, the
Non-Electing Party shall be deemed to have
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accepted the Offer from the Electing Party to buy and the Non-Electing party
shall be bound to sell and the transaction shall proceed at Closing as if the
Non-Electing Party had agreed by written notice to accept the Electing
Party's Offer to buy.
B. The Closing of a transaction initiated pursuant to this section
shall occur on or before the 120th day following the receipt of the Offer.
At Closing, the purchasing party shall pay the purchase price in readily
available funds against delivery of certificates evidencing the purchased
shares duly endorsed for transfer to the purchasing party good and sufficient
to transfer to the purchasing party title to such shares free and clear of
all claims and encumbrances. If the Note is not paid in full at the time of
closing, the unpaid balance shall be due and payable at closing.
C. Prior to execution of the Option, Industries agrees that it will not
sell, transfer, assign or otherwise dispose of the 1,608,500 shares of IPI
stock owned by it. Upon exercise of the Option, Industries and Xxxxxxxx
agree that neither party shall transfer, assign or otherwise dispose of the
1,608,500 shares of IPI owned by each of them except in accordance with the
procedures provided in Section 10 of this Agreement.
D. Industries and Xxxxxxxx agree that the certificates evidencing the
1,608,500 shares of IPI stock owned by each of them shall be endorsed with a
legend stating that transfer of such shares is prohibited except in
accordance with this Agreement.
11. TERMINATION OF THIS AGREEMENT. This Agreement may be terminated at
any time by written agreement duly executed by Industries and Xxxxxxxx.
12. GOVERNING LAWS. This Agreement shall be governed by the laws of the
State of Minnesota.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
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XXXXXX INDUSTRIES, INC.
By:
------------------------------------
Its:
----------------------------
XXXXXXXX FINANCIAL GROUP, INC.
By:
------------------------------------
Its:
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FIRST AMENDMENT TO OPTION, SECURITY AGREEMENT
AND BUY-SELL AGREEMENT
THIS FIRST AMENDMENT TO OPTION, SECURITY AGREEMENT AND BUY-SELL
AGREEMENT, is made and entered into as of the _____ day of May, 1997 by
and between XXXXXX INDUSTRIES, INC. ("INDUSTRIES") and XXXXXXXX FINANCIAL
GROUP, INC. ("XXXXXXXX");
WHEREAS, Industries and Xxxxxxxx entered into an Option, Security
Agreement and Buy-Sell Agreement on the _____ day of May, 1997 (the
"AGREEMENT"); and
WHEREAS, Industries has entered into an Option and Security Agreement
with XXXXXXX XXXXXXXX ("XXXXXXXX") whereunder Xxxxxxxx has granted to
Industries an option to acquire 79,272 shares of the common capital stock of
IPI, INC., a Minnesota corporation ("IPI"); and
WHEREAS, Xxxxxxxx has entered into an Option and Security Agreement with
Xxxxxxxx whereunder Xxxxxxxx has granted to Xxxxxxxx an option to acquire
79,272 shares of the common capital stock of IPI; and
WHEREAS, Industries and Xxxxxxxx desire that paragraph 10 of the
Agreement be amended so as to extend to and cover the shares that either may
acquire from Xxxxxxxx by exercise of the options granted to each as
hereinabove stated,
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the parties hereto have
agreed and do hereby agree as follows:
1. Any shares of IPI stock acquired by Xxxxxxxx and Industries from
Xxxxxxxx, whether pursuant to the options granted by Xxxxxxxx hereinabove
mentioned, or otherwise, shall be subject to and covered by all of the terms
of paragraph 10 of the Agreement in the same manner and with the same effect
as is provided therein with respect to the 1,608,500 shares of IPI stock that
is specifically referred to in the Agreement.
2. Except as amended and supplemented as provided herein, the Option,
Security Agreement and Buy-Sell Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties have executed this First Amendment to
Option, Security Agreement and Buy-Sell Agreement the day and year first
above written.
XXXXXX INDUSTRIES, INC.
By:
------------------------------------
Its:
----------------------------
XXXXXXXX FINANCIAL GROUP, INC.
By:
------------------------------------
Its:
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