EXHIBIT 1
EXECUTION DRAFT
OPTION
AND
SECURITY AGREEMENT
This Agreement (the "AGREEMENT") is made and entered into as of the 27TH
day of May, 1997 by and between XXXXXXXX FINANCIAL GROUP, INC. ("XXXXXXXX")
and XXXXXXX XXXXXXXX ("XXXXXXXX").
WHEREAS, Xxxxxxxx is the owner of 317,087 shares of the common capital
stock of IPI, Inc., a Minnesota corporation ("IPI"); and
WHEREAS, Xxxxxxxx presently desires to purchase an option to acquire
79,272 of such shares on the terms hereafter set forth; and
WHEREAS, Xxxxxxxx is willing to xxxxx Xxxxxxxx an option to purchase from
Xxxxxxxx 79,272 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 the 79,272 shares of IPI stock
so acquired to secure payment of the promissory note issued in partial
payment of the purchase price,
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
Xxxxxxxx of the sum of Thirty-Nine Thousand Six Hundred Thirty-Six and no/100
Dollars ($39,636.00) ($.50 per share) (the "OPTION PRICE"), Xxxxxxxx hereby
grants to Xxxxxxxx the right and option (the "OPTION") to purchase 79,272
shares of common capital stock of IPI (the "OPTIONED SHARES") (such number
being subject to adjustment as provided in paragraph 6 hereof) on the terms
and conditions herein set forth.
2. PURCHASE PRICE. The purchase price of the Optioned Shares shall be
Three Hundred Thirty-Two Thousand Nine Hundred Forty-Two and 40/100 Dollars
($332,942.40) (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 Xxxxxxxx shall be applied as a credit
against the purchase price of the Optioned Shares in the manner hereafter
provided.
3. 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 Xxxxxxxx at Westech Business Center, 00000 Xxxxxxxxxx Xxxxx,
Xxxx Xxxxxxx, Xxxxxxxxx 00000 together with payment in the form of:
(a) readily available funds in the amount of $126,835.20 which
together with the amount of Option Price of $39,636 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 Xxxxxxxx duly executed by Xxxxxxxx in the
principal amount of One Hundred Sixty-Six Thousand Four Hundred Seventy-One
and 20/100 Dollars ($166,471.20) 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.
4. 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 Xxxxxxxx to secure payment of the Note
in accordance with its terms. Xxxxxxxx shall cause to be issued and shall
retain in her possession as pledgee an IPI stock certificate (the
"CERTIFICATE") evidencing 79,272 shares of the common capital stock of IPI
registered in the name of Xxxxxxxx and Xxxxxxxx shall execute and deliver
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a stock power in blank to be attached to the Certificate for use in the event
of default under the Note and foreclosure of the security interest in such
shares. In the event of default under the Note, Xxxxxxxx shall have all the
rights in the pledged stock granted to a secured party under the Minnesota
Uniform Commercial Code.
5. 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.
6. 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 had purchased the Optioned Shares at the date hereof.
7. 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 Xxxxxxxx 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 available. Xxxxxxxx agrees that a
legend may be placed on the stock certificates acknowledging the restrictions
on subsequent distribution of the shares.
8. NO REPRESENTATIONS BY XXXXXXXX. Xxxxxxxx represents and acknowledges:
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(a) that it is an experienced and sophisticated investor;
(b) that in purchasing the Option it has not received or relied
upon any representations of any kind by Xxxxxxxx or any individual
associated with Xxxxxxxx; 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 Xxxxxxxx or individuals associated with
Xxxxxxxx.
9. OBLIGATION TO EXERCISE OPTION. On or about May ____, 1997, Xxxxxx
Industries, Inc. ("INDUSTRIES") entered into an agreement with Xxxxxxxx
granting to Xxxxxxxx an option to acquire from Industries 1,608,500 shares of
IPI stock (the "INDUSTRIES OPTION"). Xxxxxxxx agrees that in the event
Xxxxxxxx effectively exercises the Industries Option, Xxxxxxxx will
immediately thereafter exercise the Option granted to it hereunder.
10. REFUND OF OPTION PRICE. In the event that Industries is required
under the provisions of the Industries Option agreement to refund to Xxxxxxxx
the Option Price paid by Xxxxxxxx thereunder, Xxxxxxxx agrees that she will
forthwith refund to Xxxxxxxx the Option Price paid to her by Xxxxxxxx
hereunder 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 payment of the Option
Price to the date of the refund.
11. GOVERNING LAWS. This Agreement shall be governed by the laws of the
State of Minnesota.
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IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
XXXXXXXX FINANCIAL GROUP, INC.
By:
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Its:
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XXXXXXX XXXXXXXX
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