Exhibit 2.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") dated as of February 22,
2002 is entered into by and among Xxxxxx Tool & Machining, Inc., a Minnesota
corporation ("Seller"), WSI Industries, Inc., a Minnesota corporation ("WSI"),
Xxxxxxx Xxxxxx ("X. Xxxxxx") and W Xxxxxx Consulting Company, a Minnesota
corporation ("Buyer").
WHEREAS, Seller is engaged in the business of custom precision contract
machining (the "Business");
WHEREAS, Seller desires to sell, and Buyer desires to purchase,
substantially all of Seller's assets used in the Business, and Buyer desires to
assume certain liabilities of Seller, all upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the agreements herein, the parties
agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 Purchased Assets. Seller hereby sells, assigns, transfers, conveys
and delivers to Buyer, and Buyer hereby purchases from Seller, for the purchase
price hereinafter specified, the following assets, properties, rights and
interests of Seller, except the Excluded Assets, (the "Purchased Assets"):
(a) all accounts receivable held by Seller on the Closing Date
(the "Accounts Receivable");
(b) all machinery and equipment, attachments and parts
therefor, leasehold improvements, tools, dies, jigs, fixtures,
patterns, engineering equipment, office furniture, supplies and
tangible personal property of every kind and nature owned by Seller on
the Closing Date (the "Fixed Assets") and located at Seller's leased
facility at 0000 Xxxxxxxxxx Xxxxx Xxxxxxxxx, Xxxxxxxxx, Xxxxxxxxx on
the Closing Date (the "Main Facility");
(c) the equipment held on consignment by the entities and at
the locations listed on Schedule 1.1(c) (the "Consigned Equipment");
(d) all inventories of raw materials, work-in-process and
finished goods owned by Seller on the Closing Date and held for sale to
customers or for use in the operation of the Business (the
"Inventory");
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(e) the personal property owned by Seller and stored in
Seller's leased facilities at Rochester City Delivery, 0000 00xx Xxxxxx
Xxxxxxxxx and Xxxxx Transfer, 0000 00xx Xxxxxx Xxxxxxxxx, Xxxxxxxxx,
Xxxxxxxxx (the "Storage Facilities");
(f) all rights of Seller under open purchase orders for
supplies and raw materials and customer sale orders, including without
limitation, and the contracts listed on Schedule 1.1(f) (collectively,
the "Assumed Contracts");
(g) the 1994 F250 Ford pickup (the "Vehicle");
(h) all of Seller's business records and files relating to the
Business, including without limitation, customer lists and records,
sales information, supplier records, cost and pricing information,
employment and personnel records of employees to be hired by Buyer (the
"Business Records");
(i) all computer software, source codes, computer files,
programs, patents, trademarks, copyrights, applications, trade names,
logos, licenses, technical data, product specifications, blueprints,
know-how, trade secrets and other proprietary rights and intellectual
property owned by Seller, or to which Seller otherwise has rights,
including without limitation, the name "Xxxxxx Tool & Machining";
(j) all licenses, permits and approvals associated with, used
or employed in the Business or with respect to the Purchased Assets;
(k) the prepaid expenses listed on Schedule 1.1(k) (the
"Prepaid Expenses"); and
(l) The telephone number 000-000-0000 and fax number
000-000-0000, to the extent transferable.
1.2 Excluded Assets. Notwithstanding the provisions of Section 1.1, the
following assets, properties, rights and interests of Seller are not included in
the Purchased Assets and will be retained by Seller (the "Excluded Assets"):
(a) cash or cash equivalents on hand or in banks;
(b) all corporate minute books and stock records;
(c) Seller's rights under this Agreement and any agreements
executed in connection therewith;
(d) the income tax records and other original income tax
records of Seller and all claims for tax refunds;
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(e) all insurance policies (including the proceeds thereof)
owned by Seller;
(f) prepaid expenses related to auto insurance, workers'
compensation insurance and product liability insurance; and
(g) the Toyoda FA 630, serial number NM8089, including chip
conveyer, a set of tool holders with pull studs suitable for general
job shop work (end mill holders, collet chucks, face mill holder,
etc.), steel decking, spare parts, manuals, all pallets whether
originally provided with the machine or subsequently acquired as
additional, all coolant pumps including any high pressure or
specialized pumps, any touch probes or touch probe accessories
originally included with machine or subsequently acquired.
ARTICLE II
ASSUMPTION OF LIABILITIES; GENERAL RELEASE AND CONSENTS
2.1 Liabilities. Buyer hereby assumes and agrees to pay, discharge
and/or perform the following liabilities and obligations of Seller, whether
absolute, contingent or otherwise, known or unknown, (the "Assumed
Liabilities"):
(a) Liabilities and obligations under the Assumed Contracts;
(b) Liabilities and obligations under that certain Promissory
Note dated August 6, 1999 in the original principal amount of $886,618
issued by WSI to X. Xxxxxx, as amended and replaced by that certain
Promissory Note dated October 27, 2000 in the original principal amount
of $1,594,093, and assigned to Seller pursuant to Assignment dated
February 22, 2002 (the "Note"), with interest accrued to the Closing
Date to be paid by Seller;
(c) Liabilities and obligations under that certain Non-Compete
Agreement dated August 6, 1999 between Seller and X. Xxxxxx;
(d) Liabilities and obligations under that certain Employment
Agreement dated August 6, 1999 between Seller and X. Xxxxxx;
(e) Liabilities and obligations under that certain Lease dated
August 6, 1999 between X. Xxxxxx, X. X. Xxxxxx and Seller, with rent to
be prorated to the Closing Date;
(f) Liabilities and obligations under Lease Numbers 9, 10, 11,
13, 14, 15 and 16 of the Master Lease Agreement dated March 11, 1996
between WSI and U.S. Bancorp Leasing and Financial - Machine Tool
Finance Group (the "U.S. Bancorp Master Lease") and assigned to Seller
pursuant to Assignment dated February 22, 2002 and Lease Numbers 8 and
8A of the Master Leases between WSI and Yamazen Inc. each dated
September 29, 1995 and assigned to Seller pursuant to Assignment dated
February 22, 2002 (collectively, the "Equipment Leases");
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(g) Liabilities and obligations incurred after the Closing
Date which are related to the consignment of the Consigned Equipment,
including, without limitation, any storage fees or commissions;
(h) Liabilities and obligations incurred after the Closing
Date which are related to the Storage Facilities, including, without
limitation, the monthly lease payments; and
(i) Liabilities and obligations undertaken by Buyer as
provided in Sections 8.6, 8.7 and 8.8 of this Agreement.
2.2 Excluded Liabilities. Except for the Assumed Liabilities, Buyer
assumes no other liability or obligation of Seller. Without limiting the
foregoing, Seller agrees that it is responsible for all costs incurred prior to
Closing with respect to those items described in Section 2.1(g) and 2.1(h)
above.
2.3 Release. X. Xxxxxx and Xxxx Xx Xxxxxx ("X. X. Xxxxxx"),
individually and for and on behalf of Xxxxxx Consulting of Rochester, Minnesota
("Xxxxxx Consulting"), and each of their respective affiliates, successors and
assigns, hereby release and forever discharge Seller and WSI and their
respective officers, shareholders, directors, employees, agents, affiliates,
successors, assigns, heirs and personal representatives (the "Releasees"), from
any and all manner of action and actions, cause and causes of action, suits,
debts, dues, sums of money, covenants, contracts, controversies, agreements,
promises, damages, judgments, claims and demands, whatsoever, in law or in
equity, which X. Xxxxxx, X. X. Xxxxxx or Xxxxxx Consulting ever had, now has or
which any of them hereafter can, shall or may have, against the Releasees for,
upon or by reason of any matter, cause or thing, whatsoever, including, without
limitation, any matter arising under or related to the Assumed Liabilities,
except for any obligation, covenant, representation or warranty of Seller or WSI
contained in this Agreement. Notwithstanding the foregoing, nothing herein shall
be deemed to limit X. Xxxxxx'x claims against U.S. Bank related to the
designation of his 401(k) account balance to certain funds.
2.4 Consents. To the extent any of the Assumed Contracts for which
assignment to the Buyer is provided for in this Agreement is not obtained or is
not assignable without the consent of another party, this Agreement shall not
constitute an assignment or an attempted assignment thereof if such assignment
or attempted assignment would constitute a breach thereof. The Seller and Buyer
shall continue to use their respective commercially reasonable efforts to obtain
the consent of such party to the assignment of any such Assumed Contract to the
Buyer in all cases in which such consent is or may be required for such
assignment. Any payment required with respect to any such consent shall be made
by Buyer. If such consent shall not be obtained, the Seller shall cooperate with
the Buyer in any reasonable arrangement designed to provide for the Buyer the
benefits under any such Assumed Contract provided Buyer shall assume any
liability or obligation under the Assumed Contract related to any required
consents that are not obtained prior to the Closing.
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ARTICLE III
PURCHASE PRICE
3.1 Purchase Price for Purchased Assets. In consideration for the
Purchased Assets, Buyer hereby assumes the Assumed Liabilities and pays Seller a
purchase price of $2,075,000, plus the value of Accounts Receivable, Inventory
and Prepaid Expenses to be estimated prior to and paid at the Closing (the
"Estimated Current Asset Amount").
3.2 Post-Closing Adjustment.
(a) Within ten (10) days following the Closing, Seller shall
prepare and deliver to Buyer a statement setting forth the book value
as set forth on Seller's books and records as of the Closing Date of
the Accounts Receivable, Inventory and Prepaid Expenses determined in
accordance with generally accepted accounting principles applied on a
consistent basis (the "Statement of Current Assets"). The Inventory
shall be valued at the lower of cost or market.
(b) Buyer shall have twenty (20) days after the delivery of
the Statement of Current Assets to review the same. If within said
(twenty) 20-day period, the Buyer notifies the Seller in writing that
it disputes any item(s) on the Statement of Current Assets,
specifically identifying the item(s) and amount(s) in dispute and the
basis for such dispute, the Buyer and Seller shall use their reasonable
efforts to reach agreement within the ten (10) day period following the
delivery of the Buyer's notice of dispute, or such longer period as may
be agreed upon by the Buyer and Seller, with respect to such disputed
item(s).
(c) If Buyer and Seller fail to reach a mutually agreeable
determination with respect to the Statement of Current Assets within
the foregoing ten day period, or such longer period as may have been
agreed upon, the disputed item(s) shall be submitted to an independent
certified public accounting firm mutually agreed to by the parties, in
each case utilizing an accounting firm and partners that have not
represented and have no relationship with any party (the "Independent
Accountant") for resolution. The Independent Accountant's determination
shall be final and binding on Seller and Buyer, and judgment on such
determination may be entered in any court having jurisdiction. The
costs and expenses of the Independent Accountant will be paid by the
party against whom the disputed item(s) are resolved, or shall be
prorated between Buyer and Seller by the Independent Accountant to the
extent disputed item(s) are resolved in favor of each party based on
their relative degree of success. The parties shall request that such
determination by the Independent Accountant be resolved as promptly as
possible. The resolution of any disputed item(s) shall be combined with
the undisputed items from the Statement of Current Assets to
re-calculate and finalize the Statement of Current Assets.
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(d) The Purchase Price for the Purchased Assets shall be
subject to a dollar-for-dollar increase or reduction to the extent that
the value of the Accounts Receivable, Inventory and Prepaid Expenses as
set forth on the final Statement of Current Assets is less than or
greater than the Estimated Current Asset Amount. In the event of a
reduction in the Purchase Price, Seller shall pay the difference to
Buyer in immediately available funds. In the event of an increase in
the Purchase Price, Buyer and X. Xxxxxx jointly and severally agree to
pay the difference to Seller in immediately available funds.
3.3 Allocation of Purchase Price. The consideration to be paid by the
Buyer to the Seller in exchange for the Purchased Assets has been allocated as
set forth in Schedule 3.3 pursuant to arm's length negotiation, and such
allocation properly reflects the respective fair market values of the Purchased
Assets. The allocation of the consideration to the Purchased Assets set forth in
Schedule 3.3 will be binding on Buyer and Seller for federal income tax purposes
and will be consistently so reflected by each party in its federal income tax
returns.
ARTICLE IV
CLOSING; DELIVERY OF DOCUMENTS
4.1 Closing. The consummation of the transactions herein contemplated
(the "Closing") is occurring simultaneously with the execution of this Agreement
on February 22, 2002 (the "Closing Date") at 10:00 a.m., at the offices of
Xxxxxxxxx & Xxxxxx, 0000 XXX Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000. The Closing
is effective at 11:59 p.m. on the Closing Date.
4.2 Buyer's Deliveries. At the Closing, Buyer shall execute and/or
deliver to Seller the following:
(a) the payment provided in Section 3.1;
(b) Articles of Incorporation and a Good Standing Certificate
of Buyer certified by the Secretary of the State of Minnesota;
(c) Secretary's Certificate signed by the Secretary of Buyer
and dated as of the Closing Date certifying (i) that resolutions have
been duly adopted by its Board of Directors authorizing the execution
of this Agreement and the documents and transactions related hereto and
(ii) as to the names and incumbency of its officers who are empowered
to execute the foregoing documents for and on behalf of Buyer and the
authenticity of specimen signatures provided thereby; and
(d) an Opinion of Buyer's counsel in the form of Exhibit A.
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4.3 Seller's Deliveries. At the Closing, Seller shall execute and/or
deliver to Buyer the following:
(a) certificates of title or origin (or like documents) with
respect to the Vehicle included in the Purchased Assets with any
necessary accompanying assignments, in order for title to the Vehicle
to be transferred to Buyer;
(b) Secretary's Certificates for each of Seller and WSI signed
by the Secretary of each of Seller and WSI and dated as of the Closing
Date certifying (i) that resolutions have been duly adopted by their
respective Boards of Directors and/or shareholders as appropriate
authorizing the execution of this Agreement and the documents and
transactions related hereto and (ii) as to the names and incumbency of
their respective officers who are empowered to execute the foregoing
documents for and on behalf of Seller and WSI and the authenticity of
specimen signatures provided thereby;
(c) UCC Termination Statements releasing the liens set forth
on Schedule 5.6 or payoff letters relating to the same; and
(d) an Opinion of Seller's counsel in the form of Exhibit B.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER AND WSI
Seller and WSI hereby represent and warrant to Buyer as follows:
5.1 Organization. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Minnesota and has
the requisite power to own its properties and to carry on the Business as now
being conducted.
5.2 Authorization. Seller has full power and authority to enter into
and perform this Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all requisite corporate action of the Seller and WSI, including shareholder
approval where required. This Agreement has been executed and delivered by a
duly authorized officer of Seller and is a valid and binding agreement of the
Seller, enforceable against the Seller in accordance with its terms.
5.3 No Violation. Neither the execution and delivery of this Agreement,
nor the consummation by the Seller of the transactions herein contemplated, will
conflict with or result in a breach of any of the terms, conditions or
provisions of the Articles of Incorporation or Bylaws of Seller, or any order,
writ, injunction, judgment or decree of any court or any governmental authority
or of any arbitration award applicable to the Seller.
5.4 Litigation. There are no claims, actions, suits, inquiries,
investigations, or proceedings pending, or to the knowledge of Seller,
threatened which question or challenge the validity of this Agreement or seek to
restrain or enjoin any action taken or to be taken by Seller pursuant to this
Agreement or in connection with the transactions contemplated hereby.
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5.5 Accounts Receivable. All of the Accounts Receivable reflected on
the final Statement of Current Assets will be valid and enforceable claims,
fully collectible within 90 days of the respective invoice date, and subject to
no setoff or counterclaim in the recorded amounts. In the event such Accounts
Receivable are not fully collected within such 90-day period, Seller shall pay
Buyer an amount equal to such uncollected amount and the uncollected receivable
shall be assigned to Seller. Except for such uncollected receivables as are
assigned to Seller as provided above, Accounts Receivable received by Seller
shall be turned over to Buyer within five (5) days of receipt of the same.
5.6 Title. Except as set forth on Schedule 5.6, Seller owns the
Purchased Assets free and clear of all liens and encumbrances.
5.7 Taxes. There are no State or Federal tax liens of any kind
affecting the assets to be sold hereunder, and there are no unpaid Federal or
State income taxes due from Seller for any period from August 6, 1999 to the
Closing Date. Seller has no due and unpaid business, occupational, social
security, unemployment, withholding or similar taxes of any kind related to the
Business for any period from August 6, 1999 to the Closing Date.
5.8 Contracts. Except for the Assumed Contracts, Schedule 5.8 is a
complete list of all material contracts, agreements, franchise agreements,
employment agreements, leases, licenses, plans, arrangements, commitments and
other documents to which Seller is a party on the Closing Date or by which
Seller is in any way affected or bound on the Closing Date and which, in any
such case, will impose an obligation on Buyer after the Closing which is not an
Assumed Liability.
5.9 Defaults. Assuming all necessary consents are obtained under the
Assumed Contracts, Seller is not, in any material respect, in default under or
in breach of any terms or conditions of any Assumed Contract.
5.10 Compliance. To Seller's knowledge, Seller is in such compliance
with all laws, rules and regulations relating to the Business and property to be
sold pursuant to this Agreement, provided no representation is given with
respect to any compliance related to matters existing or occurring on or prior
to August 6, 1999.
5.11 Financial Statements. Seller has delivered to Buyer the following
financial statements (the "Financial Statements"): Profit and Loss Statements
and Balance Sheets of Seller for the months of August, 2001 through January,
2002. The Financial Statements have been prepared in accordance with generally
accepted accounting principles, except for the absence of footnotes and for
normal year end adjustments, and accurately describes, in all material respects,
the financial position and results of operations of Seller as of and for the
periods set forth therein.
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5.12 Equipment Transfer. To Seller's knowledge, since February 1, 2002,
there has been no transfer out of Seller's main facility of any material Fixed
Asset necessary to operate the Business as currently conducted.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER AND X. XXXXXX
Buyer and X. Xxxxxx hereby represent and warrant to Seller as follows:
6.1 Corporate Existence. Buyer is a corporation, validly existing and
in good standing under the laws of the State of Minnesota and has the requisite
power to own its properties and to carry on its business as now being conducted.
6.2 Authorization. Buyer has all necessary power and authority to enter
into and perform this Agreement. The execution and delivery of this Agreement by
Buyer and the consummation of the transactions contemplated hereby have been
duly authorized by all requisite corporate action of Buyer. This Agreement has
been executed and delivered by a duly authorized officer of Buyer and is a valid
and binding agreement of Buyer and X. Xxxxxx, enforceable against Buyer and X.
Xxxxxx in accordance with its terms. X. Xxxxxx has full authority to execute the
releases set forth in Section 2.3 for and on behalf of Xxxxxx Consulting and
such releases are valid and binding agreements of Xxxxxx Consulting.
6.3 No Violation. Neither the execution and delivery of this Agreement
by Buyer or X. Xxxxxx, nor the consummation by Buyer or X. Xxxxxx of the
transactions herein or therein contemplated, will conflict with or result in a
breach of any of the terms, conditions, or provisions of Buyer's governing
documents or of any order, writ, injunction, judgment or decree of any court or
governmental authority applicable to Buyer or X. Xxxxxx.
6.4 Litigation. There are no claims, actions, suits, inquiries,
investigations, or proceedings pending, or to the knowledge of Buyer, threatened
which question or challenge the validity of this Agreement or seek to restrain
or enjoin any action taken or to be taken by Buyer pursuant to this Agreement or
in connection with the transactions contemplated hereby.
6.5 No Assignment. Neither X. Xxxxxx, X. X. Xxxxxx nor Xxxxxx
Consulting has assigned, transferred, pledged, encumbered or otherwise
hypothecated any of the claims which are being released pursuant to Section 2.3
of this Agreement.
ARTICLE VII
SURVIVAL AND INDEMNIFICATION
7.1 Survival. The representations, warranties, covenants and
indemnification provisions contained in this Agreement, and in any certificate
delivered pursuant hereto at the Closing shall survive the Closing.
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7.2 Buyer's and X. Xxxxxx'x Indemnification Covenants. Buyer and X.
Xxxxxx, jointly and severally, shall indemnify and hold harmless Seller, WSI and
their respective shareholders, directors, officers and employees from and
against all liability, demands, claims, actions or causes of action,
assessments, losses, fines, penalties, costs, damages and expenses, including
reasonable attorneys' fees, and all expenses incurred in investigating,
preparing and defending any litigation commenced or threatened, or any claim
whatsoever, and any amounts paid in settlement of any claim or litigation
sustained or incurred by Seller, WSI or their respective shareholders,
directors, officers and employees as a result of or arising out of or by virtue
of: (i) any inaccuracy in a representation or warranty made by Buyer to Seller
in this Agreement; (ii) the failure of Buyer to comply with, or the breach by
Buyer of, any of the covenants in this Agreement to be performed by Buyer; (iii)
Buyer's failure to honor, discharge, pay or fulfill when due any of the Assumed
Liabilities; (iv) any breach or alleged breach of any Assumed Contract arising
from any failure or alleged failure to obtain any consent to the assignment
thereof from Seller to Buyer or from WSI to Seller as provided herein; and (v)
any breach by Buyer of the U.S. Bancorp Master Lease with respect to any lease
thereunder which is included in the Assumed Liabilities.
7.3 Seller's and WSI's Indemnification Covenants. Seller and WSI shall
indemnify and hold harmless Buyer and its members, governors, officers and
employees from and against all liability, demands, claims, actions or causes of
action, assessments, losses, fines, penalties, costs, damages and expenses,
including reasonable attorneys' fees, and all expenses incurred in
investigating, preparing and defending any litigation commenced or threatened,
or any claim whatsoever, and any amounts paid in settlement of any claim or
litigation sustained or incurred by the Buyer as a result of or arising out of
or by virtue of: (i) any inaccuracy in a representation or warranty made by
Seller to Buyer in this Agreement; (ii) the failure of Seller to comply with, or
the breach by Seller of, any of the covenants in this Agreement to be performed
by Seller; (iii) except for the Assumed Liabilities, Seller's failure to honor,
discharge, pay or fulfill when due any liability or obligation of Seller related
to the period beginning after August 6, 1999 and ending immediately prior to
Closing; and (iv) except for matters described in Section 7.2(iv), any breach by
WSI or Seller of the U.S. Bancorp Master Lease with respect to any lease
thereunder which is not included in the Assumed Liabilities.
7.4 Indemnification Procedure for Third-Party Claims. In the event a
party seeking indemnification (an "Indemnitee") receives written notice of the
commencement of any action or proceeding, the assertion of any claim by a third
party or the imposition of any penalty or assessment for which indemnity may be
sought pursuant to this Article VII (a "Third Party Claim"), and such Indemnitee
intends to seek indemnity pursuant to this Article VII, the Indemnitee shall
promptly provide the indemnifying party (the "Indemnitor") with notice of such
action, proceeding, claim, penalty or assessment. The Indemnitor shall have the
right, by giving notice to the Indemnitee within twenty (20) days after receipt
of notice from the Indemnitee of a Third Party Claim, at its expense, to defend
against, negotiate, settle or otherwise deal with any claim with respect to
which it is the Indemnitor and to have the Indemnitee represented by counsel
reasonably satisfactory to the Indemnitee, selected by the Indemnitor; provided
that the Indemnitee may participate in any proceeding
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with counsel of its choice at its expense. The Indemnitor may not enter into a
settlement of any Third Party Claim without the consent of the Indemnitee unless
such settlement requires no more than a monetary payment for which the
Indemnitee has been fully paid. In the event the Indemnitee is controlling the
defense of any Third Party Claim, the Indemnitor may participate in such defense
and settlement through counsel chosen by it and Indemnitee shall not settle any
Third Party Claim without the consent of the Indemnitor, which consent shall not
be unreasonably withheld. The parties will cooperate fully with each other in
connection with the defense, negotiation or settlement of any Third Party Claim.
ARTICLE VIII
COVENANTS
8.1 Covenant Not to Compete.
(a) Each of Seller and WSI agree that it will not, for a
period of two (2) years following the Closing Date, directly or
indirectly, whether on its own account or as a shareholder, partner,
joint venturer, and/or agent, of any person, firm, corporation or other
entity or otherwise, own, manage, operate, join, control or participate
in the ownership, management, operation or control of, or promote or
assist, financially or otherwise, any person, firm, association,
corporation or other entity engaged in custom precision contract
machining business with those customers listed on Schedule 8.1(a)
solely at the locations set forth therein. Notwithstanding the
foregoing, the obligations under this Section 8.1(a) shall not restrict
the ability of any non-affiliated third party purchasing the stock of
WSI (whether by tender offer or merger), or restrict the ability of any
business purchased by WSI or its affiliates (whether by mergers, asset
or stock purchase), from engaging in custom precision contract
machining with any of those customers listed on Schedule 8.1(a), at the
locations set forth therein, if such purchaser or target was engaged in
such business with any such customers prior to such transaction. Seller
and WSI represent that there are no such transactions currently
pending.
(b) Buyer and X. Xxxxxx agree that they will not, for a period
of two (2) years following the Closing Date, directly or indirectly,
whether on their own account or as a shareholder, partner, joint
venturer, and/or agent, of any person, firm, corporation or other
entity or otherwise, own, manage, operate, join, control or participate
in the ownership, management, operation or control of, or promote or
assist, financially or otherwise, any person, firm, association,
corporation or other entity engaged in any custom precision contract
machining business with those customers listed on Schedule 8.1(b)
solely at the locations set forth therein. Notwithstanding the
foregoing, the obligations under this Section 8.1(b) shall not restrict
the ability of any non-affiliated third party purchasing the stock of
Buyer or restrict the ability of any business purchased by Buyer
(whether by merger, asset or stock purchase) from engaging in custom
precision contract machining with any of those customers listed on
Schedule 8.1(b), at the locations set forth herein, if such purchaser
was engaged in such business with any such customers prior to such
purchase. Buyer and X. Xxxxxx represent that there are no such
transactions currently pending.
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8.2 Covenant Against Solicitation; Confidentiality. Seller and WSI
agree that they shall not, for a period of one (1) year following the Closing
Date, directly solicit for hire any employee of Seller's Business listed on
Schedule 8.2. The provisions of this Section 8.2 shall not restrict the
solicitation of employees who do not accept Buyer's offer of employment or who
are hired but subsequently terminate employment with Buyer, nor shall it
restrict solicitation by general advertisement, or restrict solicitation of any
individual not listed on Schedule 8.2. For a period of two (2) years from the
Closing Date, Seller and WSI agree to keep confidential all non-public
information exclusively related to the Business (as opposed to WSI's and its
affiliate's other operations) as conducted by Seller prior to the Closing Date,
provided this provision shall not apply to information which becomes public
through no breach by Seller or WSI of this provision or is independently
developed by Seller, WSI or any of its affiliates.
8.3 Inspection of Books and Records.
(a) For a period of five (5) years from and after the Closing,
Seller and WSI shall make or cause to be made available to Buyer for
examination and copying all records and documents of every character
not included in the Purchased Assets but relating to the Business, and
shall permit Buyer and its representatives, attorneys, accountants and
agents to have access to the same at all reasonable times, if Buyer
determines in its reasonable judgment that such examination is
necessary in connection with any governmental or quasi-governmental
inquiry or in connection with any claim made against Buyer or the
Purchased Assets.
(b) For a period of five (5) years from and after the Closing,
Buyer agrees to maintain and provide the Seller and WSI and their
representatives reasonable access to the Business Records for purposes
of preparation of any tax returns by the Seller or WSI after the
Closing, responding to any audit by the Internal Revenue Service or any
other authority and responding to any claims made against Seller or WSI
to the extent such documents are relevant.
8.4 Access and Assistance. Buyer agrees to provide Seller access to the
Main Facility for purposes of removing any Excluded Assets, which shall occur
within sixty (60) days after the Closing Date. In addition, Buyer shall, at no
cost to Seller, provide assistance of appropriate employees as necessary to
disconnect and remove the Excluded Assets from the Main Facility. In addition,
for a period of sixty (60) days from the Closing Date, Buyer shall provide, at
no cost to Seller, office space for one employee of Seller, and such employee
shall be afforded access by Buyer to the Business Records related to pre-closing
operations of Seller and access to the computer system for completion of
accounting matters and payment of payables related to pre-closing operations of
Seller. For a period of up to 60 days from the Closing Date, WSI will continue
to provide Buyer with e-mail and internet service in substantially the same
manner as provided to Seller prior to the Closing. Buyer shall reimburse WSI for
all costs incurred by WSI for such service, including the monthly telephone line
charge. WSI shall have no responsibility with respect to the performance of the
e-mail and internet service due to circumstances not in WSI's control.
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8.5 Employees. Seller shall terminate, on or before the effective time
of the Closing, the employment of the individuals listed on Schedule 8.2.
8.6 Transfer of Assets and Liabilities from the WSI Industries, Inc.
Retirement Savings Plan and Trust. As soon as practicable after the Closing
Date, the Buyer shall designate a plan (the "Buyer's 401(k) Plan") and the
Seller and Buyer shall agree upon and designate a transfer date ("Transfer
Date"), which shall be no later than forty-five (45) days after the Closing
Date. Buyer represents and covenants that Buyer's 401(k) Plan shall comply with
all requirements of the Code and ERISA and shall be tax qualified as of the
Transfer Date. Seller shall cause the WSI Industries, Inc. Retirement Savings
Plan to transfer on the Transfer Date and Buyer shall cause the Buyer's 401(k)
Plan to accept cash and promissory notes representing plan loans in an amount
equal to the vested and non-vested account balances of as of the Transfer Date
of any of Seller's employees who accept employment with Buyer and their
beneficiaries (the "Account Balances"). Such transfer shall comply with the
requirements of Section 414(l) of the Code and ERISA.
8.7 Establishment of Group Health Plan and Flex Plan by Buyer. Buyer
shall, as soon as possible but no later than April 1, 2002, establish and
maintain a group medical plan (as defined in Section 4980B of the Code) and
shall provide coverage (at Buyer's expense solely or jointly with employees)
under Buyer's group medical plan to all employees hired from Seller (whether or
not employed on the date such coverage becomes effective). Buyer's group medical
plan shall establish coverages (including deductibles) substantially similar to
Seller's plans and shall, to the extent required by law, waive any pre-existing
conditions. Between the Closing Date and the effective date of Buyer's group
medical plan (not later than April 1, 2002), Seller shall provide coverage
pursuant to Section 4980B of the Code, Part 6 of Title 1 of ERISA (COBRA) and
any applicable state law with respect to any of Seller's employees who are hired
by Buyer and their qualified beneficiaries ("COBRA Continuees") under Seller's
group medical and dental plans, and Buyer agrees to pay to Seller immediately
upon demand all out-of-pocket expenses and costs (including costs of claims,
administration costs, etc.) incurred by WSI or Seller to provide such coverage,
net of any amount actually received by Seller from any such COBRA Continuee, up
to a maximum of $10,500. Seller shall provide an accounting of such costs and
expenses. From and after April 1, 2002 or the effective date of Buyer's group
medical plan (the "Transition Date"), if any COBRA Continuees, other than any
COBRA Continuee whose employment with Buyer is terminated by Buyer or by such
individual, voluntarily or involuntarily, or a COBRA Continuee who elects COBRA
continuation by reason of the failure of Buyer's group medical plan to waive a
pre-existing condition, which condition affects such individual, are not covered
under Buyer's group medical plan, Buyer shall pay to Seller immediately upon
demand any liability incurred by Seller or Seller's group medical plan
(including, but not limited to, the actual cost of claims, the cost of
administration of such claims, and the cost of stop loss insurance related to
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such COBRA Continuees, but less any amounts actually received by Seller from
such COBRA Continuees) with respect to each such COBRA Continuee after the
Transition Date. Seller and Seller's group medical and dental plans shall be and
remain liable for coverage pursuant to Section 4980B of the Code, Part 6 of
Title 1 of ERISA (COBRA) and any applicable state law with respect to any of
Seller's terminated employees who are not hired by Buyer, and their qualified
beneficiaries.
Buyer shall also establish a flexible benefit plan under Section 125 of
the Code, and Buyer shall assume as of the Closing Date the assets and
liabilities of any of Seller's employees who are hired by Buyer and their
dependants under Seller's flexible benefit plan as set forth on the books and
records of the Seller as of the Closing Date.
8.8 Warranty. Buyer agrees to perform all warranty work required by
contract for repairs, returns or other claims made by customers with respect to
products machined and sold by Seller prior to Closing. All such warranty work
shall be completed in substantially the same manner as provided by Seller prior
to Closing, including, without limitation, complying with customer requests for
site visits for repairs. Buyer agrees to bear all of the costs and expenses
related to such warranty work related to claims made within thirty (30) days
after the Closing Date up to a maximum of $10,000, excluding costs and expenses
of any required site visits which shall be borne by Buyer without limitation.
For warranty work exceeding $10,000 during such period, Buyer shall, upon
Seller's written request and upon written notice by Buyer to Seller detailing
the claim and the estimated cost, perform such work and Seller shall reimburse
Buyer for the material cost thereof and for the cost of labor at $60 per hour
associated with such work within thirty (30) days after invoice and
documentation of costs. For claims made after such thirty (30) day period, such
warranty work shall be performed by Buyer at its sole cost and expense.
8.9 Equipment Leases. Buyer agrees to buy out in full the Equipment
Leases on or before February 28, 2002.
ARTICLE IX
MISCELLANEOUS
9.1 Further Assurances. The parties shall execute such further
documents, and perform such further acts, as may be necessary to transfer and
convey the Purchased Assets to Buyer, on the terms herein contained, and to
otherwise comply with the terms of this Agreement and consummate the
transactions herein provided.
9.2 Expenses and Transfer Taxes. All fees and expenses incurred by
Seller in connection with this Agreement shall be borne by Seller, and all fees
and expenses incurred by Buyer in connection with this Agreement shall be borne
by Buyer. Buyer shall pay all transfer taxes, recording fees, deed taxes, sales
tax and vehicle transfer taxes.
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9.3 Notices. All notices required or permitted to be given hereunder
shall be in writing and shall be deemed given when delivered in person, or three
business days after being deposited in the United States mail, postage prepaid,
registered or certified mail, addressed as hereinafter set forth or on the next
business day after being deposited with a nationally recognized overnight
courier service addressed as hereinafter set forth or upon dispatch if sent by
facsimile with telephonic confirmation of receipt from the intended recipient to
the telecopy number hereinafter set forth:
If to Buyer or Xxxxxx addressed to: W Xxxxxx Consulting Company
c/o Xxxxxxx X. Xxxxxx
000 Xxxxx Xxxxxx Xxxx Xxxxxxxxx
Xxxxxxxxx, XX 00000
With a copy to: Xxxxxx X. Xxxxxx
Xxxxxx & Xxxxxx, P.A.
000 Xxxxx Xxxxxxxx, Suite 000
Xxxxxxxxx Xxxx Xxxxxxxx
Xxxxxxxxx, XX 00000
If to Seller or WSI addressed to: Xxxxxx Tool & Machining, Inc.
c/o WSI Industries, Inc.
00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
With a copy to: Xxxxxxx X. Xxxxxx, Esq.
Xxxxxxxxx & Xxxxxx P.L.L.P.
0000 XXX Xxxxxx
00 Xxxxx 0xx Xxxxxx
Xxxxxxxxxxx, XX 00000
and/or to such other respective addresses as may be designated by notice given
in accordance with the provisions of this Section 9.3 except that any notice of
change of address shall not be deemed given until actually received by the party
to whom directed.
9.4 Third Parties. Nothing in this Agreement, whether expressed or
implied, is intended to confer any rights or remedies under or by reason of this
Agreement on any other person other than the parties and their respective
successors and assigns, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third person to either party
hereto, nor shall any provision give any third party any right of subrogation or
actions over or against either party hereto. This Agreement is not intended to
and does not create any third party beneficiary rights whatsoever.
9.5 Entire Agreement. This Agreement and the Schedules and Exhibits
hereto constitute the entire agreement between the parties and shall be binding
upon and inure to the benefit of the parties hereto and their respective legal
representatives, successors and assigns. EXCEPT AS SET FORTH HEREIN, SELLER
MAKES NO REPRESENTATIONS OR WARRANTIES REGARDING THE PURCHASED ASSETS OR THE
BUSINESS INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE AND HEREBY TRANSFERS SUCH ASSETS "AS IS, WHERE
IS."
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9.6 No Waiver. The failure in any one or more instances of a party to
insist upon performance of any of the terms, covenants or conditions of this
Agreement, to exercise any right or privilege in this Agreement conferred, or
the waiver by said party of any breach of any of the terms, covenants or
conditions of this Agreement, shall not be construed as a subsequent waiver of
any such terms, covenants, conditions, rights or privileges, but the same shall
continue and remain in full force and effect as if no such forbearance or waiver
had occurred. No waiver shall be effective unless it is in writing and signed by
an authorized representative of the waiving party.
9.7 Modification. This Agreement may only be amended or modified in
writing signed by the parties hereto.
9.8 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original, and all such
counterparts shall constitute but one instrument.
9.9 Severability. The invalidity of any provision of this Agreement or
portion of a provision shall not affect the validity of any other provision of
this Agreement or the remaining portion of the applicable provision.
9.10 Headings. The descriptive headings of the Articles and Sections of
this Agreement are inserted for convenience only and do not constitute a part of
this Agreement.
9.11 Applicable Law. All questions concerning the validity, operation,
enforceability, interpretation, construction, and effect of this Agreement shall
be governed by, and determined in accordance with the internal laws of the State
of Minnesota without regard to the conflicts of law provisions.
9.12 Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. This Agreement is not assignable by any party without the written
consent of the other parties.
*********
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IN WITNESS WHEREOF, the parties have executed this Asset Purchase
Agreement as of the day and year first above written.
XXXXXX TOOL & MACHINING, INC.
By /s/ Xxxxxxx Xxxxx
------------------------------------
Its President
WSI INDUSTRIES, INC.
By /s/ Xxxxxxx Xxxxx
------------------------------------
Its President
W XXXXXX CONSULTING COMPANY
By /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Its President
/s/ Xxxxxxx Xxxxxx
------------------------------------
Xxxxxxx Xxxxxx
ACCEPTED AND AGREED TO
AS TO SECTIONS 2.3 and 6.5
XXXXXX CONSULTING OF ROCHESTER, MINNESOTA
By /s/ Xxxxxxx Xxxxxx
-----------------------------------------
Its President
/s/ Xxxx Xx Xxxxxx
------------------------------------------
Xxxx Xx Xxxxxx
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