STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") dated February 15, 1999, is
by and between WSI Industries, Inc., a Minnesota corporation (the "Buyer")
and Xxxxxx Xxxxxx (the "Seller").
RECITAL
Seller owns and desires to sell, and Buyer desires to purchase, 100% of
the capital stock of Taurus Numeric Tool, Inc., a Minnesota corporation (the
"Corporation"), upon the terms and subject to the conditions set forth in
this Agreement.
It is agreed:
ARTICLE I
PURCHASE AND SALE OF STOCK
1.1. SALE OF COMMON STOCK. Seller hereby agrees to sell, convey,
transfer, assign and deliver to Buyer on the Closing Date (as defined in
Section 1.7), 10,000 shares (the "Shares") of duly and validly issued, fully
paid and non-assessable, common stock of the Corporation.
1.2. PURCHASE PRICE. Subject to the terms and conditions of this
Agreement and in reliance upon the representations, warranties and covenants
of Seller herein contained and in full consideration of such sale of the
Shares to Buyer, Buyer agrees to pay to Seller a purchase price (the
"Purchase Price") consisting of Six Million and no/100s Dollars ($6,000,000)
subject to adjustment as provided in Sections 1.3 and 1.6 of this Agreement
(the "Closing Payment") and (ii) the Additional Amount as described in
Section 1.5. The Closing Payment shall be paid as detailed in Section 1.4 of
this Agreement.
1.3. CLOSING DATE ADJUSTMENT. Seller shall prepare and deliver to
Buyer, not later than three (3) days before the Closing Date, the December
31, 1998 balance sheet of the Corporation prepared from the books and records
of the Corporation in accordance with generally accepted accounting
principles consistently applied, but with the inventory valued as provided in
Section 1.6 (the "Latest Balance Sheet"). If the sum of the book value of
the Corporation as set forth on the Latest Balance Sheet, less $191,990, is
different from the book value of the Corporation as set forth on the October
31, 1998 Balance Sheet (excluding the book value of life insurance and
vehicles) ($3,928,218) previously delivered to Buyer (the "October Balance
Sheet"), the amount of the Note (as defined in Section 1.4) to be delivered
at Closing shall be reduced or increased, as the case may be, on a dollar for
dollar basis.
1.4. CLOSING PAYMENT. The Closing Payment shall be paid as follows:
(a) $5,000,000 in cash at Closing by wire transfer of funds; and
(b) Subordinated Promissory Note (the "Note") delivered at Closing in
the form attached hereto as Exhibit A in an amount equal to
$1,000,000 as adjusted pursuant to Sections 1.3 and 1.6 of this
Agreement. The Note shall be secured as provided in the form of
Security Agreement attached hereto as Exhibit B.
1.5. ADDITIONAL AMOUNT. Seller shall receive Two Dollars ($2.00) for every
One Dollar ($1.00) of Operating Income (as defined below) above One Million Four
Hundred Seventy-Five Thousand ($1,475,000) generated by the Corporation during
the twelve-month period following the Closing Date, up to a maximum of One
Million Dollars ($1,000,000)(the "Additional Amount"). For purposes of this
Agreement, Operating Income shall be defined as earnings (including earnings
from the sale of inventory described in Section 6.13) before interest, taxes and
acquisition costs, each as determined by the Corporation in accordance with
generally accepted accounting principles. The Additional Amount will be
evidenced by a contingent subordinated promissory note (the "Contingent Note")
in the form of Exhibit C hereto delivered at Closing. The Contingent Note shall
be secured as provided in the form of Security Agreement attached hereto as
Exhibit B. In the event that, prior to the end of the twelve-month period
following the date of this Agreement, Buyer sells, exchanges, or otherwise
disposes of substantially all of the assets of the Corporation or more than 50%
of the outstanding capital stock of the Corporation to a third party, other than
Buyer or any subsidiary of Buyer (a "Change of Control"), then the Additional
Amount shall be determined by multiplying the average monthly Operating Income
for each month following the Closing Date, but prior to the Change of Control,
by twelve (12).
1.6. POST-CLOSING ADJUSTMENT.
(a) Within 45 days after the Closing Date (as defined in Section
1.7), the Buyer shall deliver to the Seller a balance sheet of the
Corporation as of the opening of business on February 15, 1999 (the
"Closing Date Balance Sheet") prepared by the Buyer. The fees and expenses
of the audit shall be paid by Buyer. Such balance sheet shall be prepared
in accordance with generally accepted accounting principles consistently
applied, with the inventory value determined in a manner consistent with
the Latest Balance Sheet and as provided in this Section 1.6. There shall
be accrued on the Closing Date Balance Sheet an expense related to certain
equipment repairs with respect to the B-axis on the Mazak #1 and #2
machines. Such expense shall be determined by quote from Mazak. The
inventory reflected on the Closing Date Balance Sheet shall be determined
by a physical inventory taken as of the start of business on the Closing
Date and observed by the representatives of the Buyer and Seller. The
inventory will be valued at the lower of cost or market and shall consist
of material, hardware and subcontract costs at their historical invoiced
value; plus labor costs applied at a total hourly rate of $34.38 for
work-in-progress and finished goods. The only inventory set forth on the
Closing Date Balance Sheet shall be raw materials, work-in-progress and
finished goods inventory for which there are current orders from customers
or forecasted orders from Rockwell Air
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Transport, or included on Rockwell's annual purchase agreement. All other
inventory shall be excluded and "Obsolete and Slow Moving Inventory."
Obsolete and Slow Moving Inventory shall be subject to the terms of Section
6.13.
(b) If the Seller has any objections to the Closing Date Balance
Sheet, he shall deliver to the Buyer a statement describing such objections
within 15 days after Seller's receipt of the Closing Date Balance Sheet.
If no objections are received within such 15 day period, the Closing Date
Balance Sheet shall be deemed accepted by Seller. Buyer and Seller shall
use reasonable efforts to resolve any objections received during such 15
day period. In the event Buyer and Seller are unable to resolve such
objections within a 15-day period following receipt by Buyer of Seller's
objections, the Buyer and Seller shall, within ten days after such 15-day
period, select a mutually acceptable nationally recognized accounting firm
to resolve any remaining objections. The determination of such accounting
firm shall be made within 30 days of the selection of such accounting firm
and shall be conclusive and binding upon the parties hereto. The fees and
expenses of such accounting firm shall be shared equally by Buyer and
Seller.
(c) If the aggregate book value of the Corporation, as reflected on
the Closing Date Balance Sheet, as finally determined, is greater than the
aggregate book value of the Corporation as reflected on the Latest Balance
Sheet, less $191,990, the Purchase Price shall be adjusted upward by such
amount and a corresponding adjustment to the Note shall be made as of the
Closing. In the event the aggregate book value of the Corporation, as
reflected on the Closing Date Balance Sheet, as finally determined, is less
than the aggregate book value of the Corporation as reflected on the Latest
Balance Sheet, less $191,990, the Purchase Price shall be adjusted
downward by such amount and a corresponding adjustment to the Note shall be
made as of the Closing. The finalization of the Closing Date Balance Sheet
shall not affect any rights or remedies of Buyer under this Agreement. In
the event a downward adjustment is in excess of the principal amount of the
Note, such excess shall be paid by Seller to Buyer within five (5) days of
final determination of such adjustment.
1.7. CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") is taking place simultaneously with the execution of
this Agreement at the offices of Xxxxxxxxx & Xxxxxx PLLP, 4200 IDS Center, 00
Xxxxx 0xx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx at 9:00 a.m. on February 15, 1999. The
date and time of the Closing are herein referred to as the "Closing Date." The
Closing shall be effective as of 12:01 a.m. on February 15, 1999.
1.8. CONDITIONS TO CLOSING.
(a) The obligation of Seller to consummate the transactions
contemplated by this Agreement is subject to the satisfaction of
the following conditions:
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(i) The representations and warranties of the Buyer shall be
true and correct on the Closing Date;
(ii) The Buyer shall have performed and complied with all
covenants and agreements required to be performed and
complied with by it under this Agreement prior to the
Closing;
(iii) No action or proceeding before any court or agency will
be pending or threatened wherein an unfavorable
judgment, decree or order could prevent the carrying
out of this Agreement or any of the transactions
contemplated hereby; and
(iv) All documents required to be delivered at Closing pursuant
to Section 4.1 of this Agreement have been delivered.
(b) The obligation of Buyer to consummate the transactions
contemplated by this Agreement is subject to the satisfaction of
the following conditions:
(i) The representations and warranties of the Seller shall be
true and correct on the Closing Date;
(ii) The Seller shall have performed and complied with all
covenants and agreements required to be performed and
complied with by it under this Agreement prior to the
Closing;
(iii) No action or proceeding before any court or agency will
be pending or threatened wherein an unfavorable
judgment, decree or order could prevent the carrying
out of this Agreement or any of the transactions
contemplated hereby or have an adverse effect on the
Purchased Assets or the Business;
(iv) Buyer, in its sole discretion, is satisfied that no
customer of the Corporation intends to discontinue
business with or significantly reduce its business with
the Corporation following the Closing;
(v) Buyer shall have received all required consents, permits
and licenses;
(vi) Buyer shall have reached acceptable employment
arrangements with key employees of the Corporation; and
(vii) All documents required to be delivered at Closing pursuant
to Section 4.1 of this Agreement have been delivered.
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Either Buyer or Seller may waive any condition to its obligation to
consummate the transactions contemplated by this Agreement and proceed with
Closing.
1.9. TERMINATION. This Agreement may be terminated at any time prior to
the Closing:
(a) by mutual consent of the Buyer and the Seller;
(b) by either the Buyer, on the one hand, or the Seller, on the other
hand, if there has been a misrepresentation or breach of warranty
on the part of the other party in the representations and
warranties set forth in this Agreement, or if the conditions
precedent to the terminating party's obligations to consummate
the transactions contemplated hereby have not been satisfied on
or prior to Closing Date (other than as a result of the willful
acts or omissions of the terminating party); or
(c) by either the Buyer, on the one hand, or the Seller, on the other
hand, if the transactions contemplated hereby have not been
consummated on or before February 28, 1999; provided that neither
the Buyer nor the Seller will be entitled to terminate pursuant
to this Section 1.9(c) if the Buyer's or the Seller's willful
breach of this Agreement, respectively, has prevented the
consummation of the transactions contemplated hereby.
In the event of termination of this Agreement by either the Buyer or the
Seller as provided above, this Agreement will forthwith become void, and
there will be no liability on the part of either the Buyer or the Seller,
except for breaches of this Agreement prior to the time of such termination.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
To induce Buyer to enter into this Agreement, Seller represents and
warrants to Buyer as follows:
2.1. OWNERSHIP OF THE SHARES. Seller is the record and beneficial owner of
all of the Shares free and clear of all liens, encumbrances, purchase rights,
claims, pledges, mortgages, security interests, or other limitations or
restrictions whatsoever. Seller is not subject to, or a party to, any articles
of incorporation or bylaw provisions, shareholder control agreements, buy-sell
agreements, contracts, instruments or other restrictions of any kind or
character which directly or indirectly restrict or otherwise limit in any manner
the voting, sale or other disposition of the Shares.
2.2. AUTHORITY OF SELLER. Seller has full and unrestricted legal right,
power and authority to enter into this Agreement, and to sell, assign, transfer,
and deliver to Buyer valid, lawful and marketable title to the Shares to be
sold, assigned and transferred by Seller pursuant to
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this Agreement. Seller represents that neither the execution and delivery of
this Agreement or any other agreements contemplated hereby nor the
consummation of the transactions contemplated hereby will conflict with or
result in any violation of, or default under, any contract, agreement or
commitment or any law applicable to Seller or the Corporation or any of its
assets or property or its business. No action, consent or approval by, or
filing by Seller or the Corporation with, any federal, state, municipal,
foreign or other court or governmental body or agency, or any other
regulatory body, is required in connection with the execution and delivery by
the Seller of this Agreement or the consummation by Seller of the
transactions contemplated hereby.
2.3. TITLE. Upon delivery to Buyer of certificates duly endorsed or
accompanied by duly executed stock powers representing all the Shares described
in Section 1.1 above, Buyer will acquire lawful, valid and marketable title to
the Shares free and clear of all liens, encumbrances, purchase rights, claims,
pledges, mortgages, security interests, or other limitations or restrictions
whatsoever.
2.4. ORGANIZATION AND QUALIFICATIONS OF THE CORPORATION. The Corporation
is a corporation lawfully existing and in good standing under the laws of
Minnesota with full power and authority to own or lease its properties and to
conduct its business in the manner and in the places where such properties are
owned or leased or such business is conducted by it.
2.5. CAPITALIZATION OF THE CORPORATION. The authorized capital stock of
the Corporation consists of 100,000 shares of common stock, of which 10,000
shares are issued and outstanding, fully paid and non-assessable. There are no
outstanding warrants, options, preemptive rights, or other rights or securities
to purchase or acquire newly issued shares of the Corporation's capital stock.
There are no stock appreciation, phantom or similar rights based on the book
value or any other attribute of any capital stock of the Corporation.
2.6. SUBSIDIARIES. The Corporation does not have any subsidiaries or own
any securities issued by any other business organization or governmental
authority. The Corporation is not a partner or joint venturer in any
partnership or joint venture.
2.7. TITLE TO PROPERTIES; CONDITION OF PROPERTIES. The Corporation owns
and has good and marketable title to all of the assets listed on the Latest
Balance Sheet (defined in Section 2.10) (other than inventory sold since the
date of the Latest Balance Sheet) or acquired since then, free and clear of any
lien or encumbrance of any kind (collectively, "Encumbrances"). All machinery
and equipment owned by the Corporation is in good repair, has been well
maintained and is in good working order, normal wear and tear excepted. All
assets necessary for the continued operation of the Corporation's business as it
is currently being conducted and as it has been conducted since January 1, 1998
are owned by the Corporation or subject to valid leasehold interests.
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2.8. REAL PROPERTY. All real property leased by the Corporation is
described in Schedule 2.8 (the "Leased Real Property") and is owned by Seller.
The Corporation owns no real property.
2.9. ENVIRONMENTAL MATTERS.
(a) Neither the Leased Real Property nor any property previously
owned or operated by the Corporation has been used by the Corporation,
or to the best knowledge of Seller, by any other party, for the
purpose of storing, disposing or treating any hazardous, toxic or
dangerous substance, waste or material ("Hazardous Materials") as
defined under or regulated by any federal, state or local laws
relating to pollution, protection of the environment or worker health
and safety (collectively, the "Environmental Laws"). There has been
no release or threatened release of Hazardous Materials on the Leased
Real Property by the Corporation or Seller or, to the best knowledge
of Seller, by any other party. Neither the Corporation nor the Seller
has received any notice of any asserted present or past failure by the
Corporation or by any other party to comply with any Environmental
Laws or any rule or regulation adopted pursuant to such laws in
connection with the Leased Real Property.
(b) The Corporation has not transported Hazardous Materials, or
arranged for the transportation of Hazardous Materials to any
disposal, treatment or storage site which is the subject of federal,
state or local enforcement actions, or, to the best knowledge of
Seller, other governmental or private investigations, or which may
lead to claims against the Corporation for clean up costs, remedial
work, or for damages.
(c) Except as provided in Schedule 2.9, there are no underground
storage tanks, as defined under federal or applicable state law,
located on the Leased Real Property, and none have been placed on the
Leased Real Property during the Corporation's operation of the Leased
Real Property or the Seller's ownership of the Leased Real Property.
(d) To the best knowledge of Seller, there are no material
expenditures required to bring the Leased Real Property in compliance
with the Environmental Laws.
2.10. FINANCIAL STATEMENTS. Seller has delivered to Buyer the
following financial statements:
(a) Unaudited balance sheets dated December 31, 1997 and 1996,
and related statements of income and retained earnings, and cash flows
for the years then ended, as reviewed by Bertram, Vallez, Xxxxxx &
Talbot, Ltd.; and
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(b) Unaudited October Balance Sheet and Latest Balance Sheet.
All of the financial statements referred to in this Section 2.10 have been
prepared in accordance with generally accepted accounting principles applied on
a basis consistent with the Corporation's past practices, except as provided in
Section 2.14, and present fairly the financial condition of the Corporation at
the dates of said statements and the results of its operations for the periods
covered. All accruals for liabilities and reserves for contingent liabilities
have been established by the Corporation as required to be established and
maintained under generally accepted accounting principles. All liabilities
related to the Corporation's phantom stock plan for all participants therein,
including Xxxxxxx Xxxxxxxx and Xxxx Xxxxxxxxxx, are fully accrued on the Latest
Balance Sheet. Such liabilities include an accrual of $25,530 for Xx. Xxxxxxxx
and $47,869 for Xx. Xxxxxxxxxx.
2.11. PAYMENT OF TAXES. The Corporation has filed all federal, state
and local income, excise or franchise tax returns, real estate and personal
property tax returns, sales and use tax returns and other tax returns and
reports required to be filed by it and has paid all taxes owing by it except
taxes for which adequate provision has been made in the Latest Balance Sheet.
The Corporation has maintained a valid S election since its inception. The
Corporation has received no notice of any impending audit by any taxing
authority. The Corporation has not received notice of any tax deficiency
proposed or assessed against it, and it has not executed any waiver of any
statute of limitations on the assessment or collection of any tax.
2.12. ABSENCE OF UNDISCLOSED LIABILITIES. The Corporation has no
liabilities of any nature, whether accrued, absolute or contingent, other than
and to the extent reflected or reserved against on the Latest Balance Sheet and
liabilities incurred in the ordinary course of business since the date of the
Latest Balance Sheet and liabilities disclosed on Schedule 2.12. To the best
knowledge of Seller, there are no facts which materially affect, or may in the
future (so far as can now be reasonably foreseen) materially affect, the
business, properties, operations or condition of the Corporation which has not
been specifically disclosed in this Agreement.
2.13. ACCOUNTS RECEIVABLE. All of the accounts receivable of the
Corporation reflected on the Closing Date Balance Sheet will be valid and
enforceable claims, fully collectible within 90 days of their respective invoice
dates, and subject to no setoff or counterclaim in the recorded amounts, subject
only to the allowance for doubtful accounts reflected on the Closing Date
Balance Sheet.
2.14. INVENTORIES. The inventory of the Corporation reflected on the
Closing Date Balance Sheet will consist of items of a quantity consistent with
normal inventory levels of the Corporation and of a quality and condition that
is usable and saleable in the ordinary course of business for the purposes for
which intended. Such inventory is carried on the Corporation's books of account
in accordance with generally accepted accounting principles. The inventory
value reflected on the Latest Balance Sheet consists of material, hardware and
subcontract costs at their historical invoiced value; plus labor costs applied
at an hourly rate of $34.38 for work-in-
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progress and finished goods. The hourly rate was determined by dividing (i)
the total of direct and indirect costs of sale less material, subcontract and
applicable general and administrative costs by (ii) the total number of
"machine hours" as accumulated by the Corporation's DCD computer system.
Labor hours applied to inventory consisted of "burden" hours as accumulated
by the Corporation's DCD system for each specific inventory part.
2.15. CONDUCT OF BUSINESS IN THE ORDINARY COURSE. Except as provided
on Schedule 2.15, the Corporation has conducted its business since October 31,
1998 only in the usual and ordinary course consistent with past practice and
since such date, the Corporation has not (i) sold or transferred any of its
assets, except inventory in the ordinary course of business; (ii) changed any
method of accounting or accounting practice; (iii) increased or promised to
increase the compensation payable to any employee, except in accordance with
annual wage reviews consistent with past practices; (iv) made any direct or
indirect payments, dividends, distributions, sales or transfers of assets, other
than normal compensation and the distributions reflected on the Latest Balance
Sheet, to any officer, director, shareholder or employee of the Corporation or
any of their affiliates; (v) changed its outstanding shares of capital stock or
repurchased, redeemed or acquired any outstanding shares of capital stock or
other ownership interest in securities of the Corporation; or (vi) suffered any
damage or casualty to its assets.
2.16. PATENTS, TRADE NAMES, TRADEMARKS AND COPYRIGHTS. The Corporation
owns and has the right to use, free and clear of any claims or rights of others,
all patents, trademarks, service marks, trade names, know-how, trade secrets and
customer and supplier lists which it is using.
2.17. COMMITMENTS. Except as described on Schedules 2.17 or 2.23, the
Corporation is not a party to or subject to any of the following contracts,
commitments, understandings, agreements or licenses, oral or written (the
"Commitments"):
(a) any Commitment creating any obligation of the Corporation of
$5,000 or more (other than sales and purchase commitments in the
ordinary course of business for less than $5,000 each);
(b) any Commitment providing for the purchase of all or
substantially all of the Corporation's requirements of a particular
product from a supplier, or for periodic minimum purchases of a
particular product from a supplier;
(c) any Commitment not terminable on 30-days notice without
penalty to the Corporation, other than sales and purchase commitments
entered into in the ordinary course of business;
(d) any Commitment with any employee, consultant, sales agent or
distributor;
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(e) any Commitment containing covenants limiting the Corporation's
freedom to compete in any line of business or with any person or entity;
(f) any Commitment for the purchase of any fixed asset for a
price in excess of $5,000, whether or not such purchase is in the
ordinary course of business;
(g) any license agreement (as licensor or licensee), except
software licenses used in the ordinary course of business in
compliance with their respective terms;
(h) any Commitment with any present or former officer, director
or shareholder of the Corporation or with any persons or organizations
controlled by or affiliated with any of them; or
(i) any other Commitment not described above which involves
total consideration in excess of $500 per month, other than utilities
purchased in the ordinary course of business, salaries and employee
benefits described on Schedule 2.23.
True, correct and complete copies of the Commitments have been provided to
Buyer prior to the execution of this Agreement. All Commitments are in full
force and effect and have not been amended, extended or otherwise modified.
Neither the Corporation nor, to the best knowledge of Seller, any other party is
in default under any Commitments. None of the Commitments related to funded
debt require prepayment penalties. The Corporation has all necessary software
licenses to conduct its business as currently conducted and the Corporation is
in compliance with such licenses.
2.18. LITIGATION. Except as provided in Schedule 2.18, there are no
legal, administrative, arbitration or other proceedings or governmental
investigations pending or, to the best knowledge of Seller, threatened against
the Corporation and there are no facts known to Seller which may result in such
a proceeding or investigation.
2.19. COMPLIANCE WITH LAWS. The Corporation is in compliance in all
material respects with any laws, regulations or permits which apply to the
conduct of its business or the Leased Real Property.
2.20. PERMITS. The Corporation holds all licenses, permits and
franchises which are required to permit it to conduct its business, and all such
licenses, permits and franchises are listed on Schedule 2.20.
2.21. TRANSACTIONS WITH INTERESTED PERSONS. Except for the Leased Real
Property and two pieces of equipment leased to the Corporation by JRW
Enterprises, Inc., Seller does not own
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directly or indirectly any material interest in, or serve as an officer or
director of, any customer, competitor or supplier of the Corporation, or any
organization which has a material contract or arrangement with the
Corporation.
2.22. SUPPLIERS; CUSTOMERS. There are no existing disputes with any of
the Corporation's suppliers, other than normal disputes in the ordinary course
of business. Seller has no reason to believe that any supplier will discontinue
business with the Corporation following the Closing. No customer has notified
the Corporation, and Seller has no knowledge that a customer intends to
discontinue business with or significantly reduce its business with the
Corporation or materially change the terms or price of its jobs. The
Corporation is not a party to any contract or series of contracts with any one
customer to sell products which, in the aggregate with respect to such customer,
is to be performed at a price which is less than the Corporation's full cost or
to buy products at prices other than the prevailing market prices at the time
the contracts were entered into.
2.23 EMPLOYEE BENEFIT PLANS. Schedule 2.23 sets forth a list of all
health care plan or arrangement; life insurance or other death benefit plans;
deferred compensation or other pension or retirement plan; or other fringe or
employee benefit plan or arrangement; any employment or consulting contract
or executive compensation agreement; whether written or otherwise, formal or
informal, voluntary or required by law, including, without limitation, any
"employee benefit plan" as defined in Section 3(3) ("Employee Plan") (i)
which the Corporation has any time maintained for the benefit of or relating
to present or former employees, directors, leased employees, consultants
and/or their dependents or beneficiaries; or (ii) with respect to which the
Corporation or any ERISA Affiliate has made any payments or contributions.
For purposes of this Section, "ERISA Affiliate" means all trades or
businesses (whether or not incorporated) which are, or any time during the
six years prior to the Closing Date, were members of a group of which the
Corporation is or was a member which are or were under common control within
the meaning of Code Section 414(b) or (c) or which are or were treated,
together with the Corporation, as a single corporation under Code Section
414(m) or (o). Except as specifically set forth in Schedule 2.23:
(a) Each Employee Plan has been consistently administered in
substantial compliance with its terms and provisions and with the Code,
ERISA and all other applicable laws and regulations, including, without
limitation, Code Section 4980B and ERISA Section 601, et. seq. Each
Employee Plan which is an employee pension plan as defined in Section 3(2)
of ERISA meets the applicable requirements for qualification under Section
401(a) and for exemption under Section 501(a) of the Code. All reports
required under ERISA or any other law or regulation to be filed by the
Corporation or any ERISA Affiliate have been duly filed with the relevant
governmental body, and all such reports are true and correct as of the date
given in all material respects, and all Employee Plans have timely complied
in all material respects with the disclosure of information regarding the
Employee Plans required under Title 1 of ERISA.
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(b) All contributions required to be made prior to the Closing Date
to any Employee Plan have been paid or accrued for and neither the
Corporation nor any ERISA Affiliate has any liability for any Employee Plan
that has arisen or accrued prior to the Closing which has not been provided
for through contributions, insurance or by appropriate accrual on the
Closing Date.
(c) Neither the Corporation nor any ERISA Affiliate has engaged in
any nonexempt "prohibited transaction" within the meanings of Sections 503
and 4975 of the Code or Section 406 of ERISA.
(d) Neither the Corporation nor any ERISA Affiliate has ever been (i)
a party or contributor to, or incurred withdrawal liability under Section
4201 of ERISA with respect to, any multiemployer plan (as such term is
defined in Section 3(37) of ERISA), or (ii) a party or contributor to any
plan maintained by more than one employer (as described in Section 413(c)
of the Code).
(e) There are no lawsuits or claims brought by any present or former
employee against the Corporation or any ERISA Affiliate or any of their
respective Employee Plans, other than claims for benefits in the normal
course, which have not been finally resolved, and there are no claims or
assessments pending or threatened against the Corporation or any ERISA
Affiliate or any of their respective Employee Plans.
(f) Except as otherwise expressly provided in any Employee Plan or as
otherwise required by applicable law, no condition exists that would
materially increase the expense to the employer whose employees are covered
under any of the Corporation's or any ERISA Affiliate's Employee Plans nor
does any condition exist which would prevent the amendment or termination
of any such Employee Plan.
(g) Schedule 2.23 sets forth (i) the names of all former employees of
the Corporation whose employment has terminated either voluntarily or
involuntarily during the preceding twelve-month period to which the
Corporation has any continuing obligation or liability; and (ii) the names
of all employees of the Corporation who are on a short or long term
disability, workers' compensation disability, sick leave, personal leave or
is otherwise unable to return to work prior to Closing, the expected
duration of their disability or leave, and any benefits to which such
individuals are entitled as of the Closing.
2.24 EMPLOYEE MATTERS. None of the employees of the Corporation are
represented by any union or subject to any collective bargaining agreement and,
to the best knowledge of Seller, none of such employees are engaged in any
organizational activities. The Corporation is in substantial compliance with all
applicable federal, state, and local laws relating to the employment of labor,
including the provisions thereof relating to wages, hours, occupational health
and safety, health and welfare insurance, collective bargaining, discrimination,
and the
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payment of withholding and social security taxes, and the Corporation is not
liable for any arrears of wages, or any tax or penalties, for failure to
comply with any of the foregoing. The Corporation is not in receipt of any
complaint, demand letter or charge issued by any federal, state or local
agency alleging a violation of any law, regulation or ordinance respecting
employment or employment practices, nor has the Corporation heretofore
incurred any liability under the Workers Adjustment and Retraining
Notification Act or similar state law or regulation. To the best knowledge of
Seller, non of the employees of the Corporation has suffered or is suffering
from any illness or disease caused directly or indirectly by nay employment
related condition or by contract with any Hazardous Materials within the
scope of such employee's employment with the Corporation.
2.25. BANK ACCOUNTS. Schedule 2.25 is a complete list of all bank
accounts of the Corporation, listing all authorized signatories thereto.
2.26. FULL DISCLOSURE. Seller has not omitted to disclose any material
fact necessary to make the representations and warranties of Seller contained
herein not misleading.
2.27. BROKER. Except for Enterprise Investments, Inc., no person, firm
or corporation has or shall have, as a result of any act or omission of either
the Corporation (prior to the Closing) or the Seller, or any representative or
agent of either of them, any right, interest or valid claim against Buyer or the
Corporation, for any commission, fee or other compensation as a finder or broker
in connection with the transactions contemplated by this Agreement.
2.28 YEAR 2000 COMPLIANCE. All computer software, firmware, hardware and
other similar items of automated, computerized, and/or software systems that are
used by the Corporation in the conduct of its business will not malfunction,
will not cease to function, will not generate incorrect data or results when
processing, providing and/or receiving (i) date-related data into and between
the 20th and 21st centuries; and (ii) date-related data in connection with any
valid date in the 20th and 21st centuries in such a manner as would result in a
material adverse effect on the Corporation's operations or financial condition.
No representation is made hereunder by Seller with respect to utility,
transportation and similar services provided to the Corporation on a daily or
ordinary course basis from third parties.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
3.1. ORGANIZATION AND QUALIFICATION OF BUYER. Buyer is a corporation
lawfully existing and in good standing under the laws of Minnesota with full
power and authority to own or lease its properties and to conduct its business
in the manner and in the places where such properties are owned or leased or
such business is conducted by it.
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3.2. APPROVAL. Buyer has all necessary corporate power and is duly
authorized to purchase, acquire and accept the Shares as specified in this
Agreement. Buyer has taken all action required to authorize and approve the
execution and delivery of this Agreement and the consummation by Buyer of the
transactions contemplated hereby.
3.3. PROHIBITIONS OF TRANSACTIONS. There is no pending or threatened
action, suit, proceeding or investigation before any court or governmental body,
or by any government agency, which would restrain or prevent Buyer from carrying
out the transactions contemplated by this Agreement.
3.4. LITIGATION. There is no litigation proceeding or investigation of any
claim pending, or to the best of knowledge of the Buyer, threatened against the
Buyer, its business, or against the transaction contemplated by Buyer under this
Agreement which, if adversely determined, would materially and adversely affect
the execution, delivery or performance of this Agreement on the part of the
Buyer, and there is no basis known to Buyer for any such action.
3.5. BROKER. Except for Franklin Capital Partners, no person, firm or
corporation has, or shall have, as a result of any act or omission of Buyer, any
right, interest or valid claim against the Seller or the Corporation (prior to
the Closing), for any commission, fee or other compensation as a finder or
broker in connection with the transactions contemplated by this Agreement.
3.6. NO CONFLICTS; APPROVALS. Buyer represents that neither the execution
and delivery of this Agreement or any other agreement contemplated hereby by
Buyer nor the consummation of the transactions hereby by Buyer will conflict
with or result in any violation of, or default under, any contract, agreement or
commitment or any law applicable to Buyer or any of its assets or property or
its business. No action, consent or approval by, or filing by Buyer with, any
federal, state, municipal, foreign or other court or governmental body or
agency, or any other regulatory body, is required in connection with the
execution and delivery by Buyer of this Agreement or the consummation by Buyer
of the transactions contemplated hereby, except such filings as may be necessary
under federal securities laws.
ARTICLE IV
DOCUMENTS DELIVERED AT CLOSING
4.1. DELIVERIES AT CLOSING. The following documents shall be executed
and/or delivered at the Closing:
(a) Certificates representing all the issued and outstanding
Shares duly endorsed by Seller or accompanied by duly executed stock
powers transferring such shares to Buyer.
(b) A Lease Agreement between the Corporation and Xxxxxx Xxxxxx.
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(c) An Employment Agreement and a Non-Compete Agreement between the
Corporation and Xxxxxx Xxxxxx.
(d) An Equipment Purchase and Non-Compete Agreement between the
Corporation, JRW Enterprises, Inc. and Xxxxxx X. Xxxxxx.
(e) The Note and the Contingent Note.
(f) Security Agreement between the Corporation and Xxxxxx Xxxxxx.
(g) UCC-1 financing statement of the Corporation.
(h) Resignations of the officers and directors of the
Corporation.
(i) Certificate of Secretary of Buyer regarding resolutions of the
Board of Directors approving the transactions contemplated by this
Agreement.
(j) An executed Subordination Agreement and Landlord's Waiver
with Buyer's senior lender.
(k) Consent of Rockwell to assignment of contract, if required.
(l) Termination and release of all liens and encumbrances on the
assets of the Corporation.
(m) Release of Guaranty of Xxxxxx Xxxxxx issued to Norwest Bank,
National Association.
(n) Release of Guaranty of the Corporation issued to Norwest Bank,
National Association.
ARTICLE V
INDEMNIFICATION AND RELEASE
5.1. INDEMNIFICATION OF BUYER. Seller shall defend, indemnify and hold
harmless Buyer and the Corporation from and against any and all claims, causes
of action, losses, costs, damages, deficiencies or expenses (including
reasonable attorneys' fees) (collectively "Damages") arising from or related to
(a) any and all misrepresentations or breaches of representations, warranties or
covenants of Seller set forth in this Agreement; (b) any tax payable by the
Corporation with respect to any taxable period ending on or prior to the Closing
Date, and any tax deficiencies of the Corporation, including interest and
penalties, arising from any audit by any tax authority with respect to any
period ending on or prior to the Closing Date; (c) whether or not disclosed by
Seller as of the Closing Date, any liability under any Environmental
15
Law arising out of, resulting from or relating to (1) the Leased Real
Property, or the ownership or operation thereof on or prior to the Closing
Date; (2) Hazardous Materials generated, released or disposed of by Seller or
the Corporation on or prior to the Closing Date; (3) conditions which exist
at the Leased Real Property on or prior to the Closing Date or after the
Closing Date which were not caused by the Corporation on or after the Closing
Date; or (4) the existence or maintenance of any underground storage or
holding tank on the Leased Real Property, including any release of Hazardous
Materials associated therewith, on or before the Closing Date (and after the
Closing Date, provided the Corporation continues to utilize the tanks in
substantially the same manner as utilized prior the Closing); (d) except for
liabilities set forth on Schedule 5.1, liabilities of the Corporation arising
out of events occurring or facts existing prior to Closing to the extent
accruals for such liabilities reflected on the Closing Date Balance Sheet are
insufficient to cover such liabilities; or (e) any costs and expenses
associated with defending against any of the foregoing claims, liabilities,
obligations, costs, damages, losses and expenses and seeking indemnification
therefor.
5.2. INDEMNIFICATION OF SELLER. Buyer shall defend, indemnify and hold
harmless Seller from and against any and all claims, causes of action, losses,
costs, damages, deficiencies or expenses (including reasonable attorneys' fees)
(collectively "Damages") arising from or related to (a) any and all
misrepresentations or breaches of representations, warranties or covenants of
Buyer set forth in this Agreement; or (b) any costs and expenses associated with
defending against any of the foregoing claims, liabilities, obligations, costs,
damages, losses and expenses and seeking indemnification therefor. In addition,
the Corporation (after the Closing) shall defend, indemnify and hold harmless
Seller from and against any and all Damages arising from or related to (a) any
tax payable by the Corporation with respect to any taxable period beginning
after the Closing Date, and any tax deficiencies of the Corporation, including
interest and penalties, arising from any audit by any tax authority with respect
to any period beginning after the Closing Date; (b) except to the extent
indemnifiable by Seller as provided in Section 5.1 above, any liability under
any Environmental Law arising out of, resulting from or relating to (1) the
operation by the Corporation of the Leased Real Property after the Closing Date,
or (2) Hazardous Materials generated, released or disposed of by the Corporation
after the Closing Date; (c) liabilities of the Corporation reflected on the
Closing Date Balance Sheet but solely to the extent of any accruals for such
liabilities reflected on the Closing Date Balance Sheet; or (d) any costs and
expenses associated with defending against any of the foregoing claims,
liabilities, obligations, costs, damages, losses and expenses in seeking
indemnification therefor.
5.3. LIMITATIONS.
(a) Notwithstanding the provisions of Section 5.1, Buyer and the
Corporation shall not be entitled to recover Damages for which Buyer or the
Corporation is entitled to indemnification as a result of or arising out of
matters described in Section 5.1(a) until such Damages exceed $50,000, and
if such Damages exceed such amount, Buyer and the Corporation shall be
entitled to recover all such Damages; provided Damages resulting from the
breach of the representations and warranties in Section 2.3 (Title),
Section 2.9
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(Environmental), Section 2.11 (Taxes), Section 2.23 (Employee Benefits),
Section 6.2 (Expenses) or Section 6.14 (Inventory) shall not be subject to
the limitation contained in this Section 5.3(a). Notwithstanding the
provisions of Section 5.1, Seller shall have no liability under Section 5.1
with respect to any costs or expenses of any remediation unless ordered or
demanded by a court, governmental body or agency, or other third party, or
such remediation is required to be undertaken by applicable Environmental
Law or is necessary in order for the Corporation to be in compliance with
applicable Environmental Laws or would be voluntarily undertaken under
customary business practices in the industry.
(b) Notwithstanding the provisions of Section 5.1, the aggregate
Damages for which Buyer or the Corporation is entitled to indemnification
pursuant to Section 5.1(a) shall not exceed an amount equal to the Closing
Payment; provided Damages resulting from the breach of the representations
and warranties in Section 2.3 (Title) shall not be subject to the foregoing
limitation, but shall be limited to an amount equal to the Closing Payment
and all other payments to be made by Buyer or Corporation to Seller under
the other agreements referenced herein.
(c) Any proceeds from insurance paid to or on account of the Buyer as
a direct result of any fact, event or circumstance requiring indemnity
pursuant to Section 5.1 shall constitute a credit which shall be offset
against the total Damage (before the application of Section 5.3(a)).
(d) Any damage calculated for purposes of Section 5.1 shall be
calculated taking into account any offsetting federal, state, local or
foreign tax benefits which may accrue because of such Damage to Buyer.
(e) On September 15, 2000, the parties shall be released from the
agreements of indemnification contained in Sections 5.1 and 5.2 in respect
of any claims which have not been made, in writing, prior to such date;
provided, however, that (i) the Seller shall not be released from the
agreements of indemnification arising under Section 5.1(a) with respect to
breaches of representations and warranties contained in Section 2.3 (Title)
or Section 2.11 (Taxes), or breaches of covenants in this Agreement, all of
which shall continue until the applicable statute of limitations has
expired; (ii) Seller shall not be released from the agreements of
indemnification arising under Sections 5.1(b) or 5.1(d), all of which shall
continue until the applicable statute of limitations has expired, at which
xxxx Xxxxxx shall be released from such agreements of indemnification; and
(iii) the Seller shall not be released from the agreement of
indemnification arising under Section 5.1(a) with respect to breaches of
representations and warranties contained in Section 2.29 (Environmental) or
under Section 5.1(c), each of which shall continue until February 15, 2004,
at which xxxx Xxxxxx shall be released from such agreements of
indemnification. Notwithstanding the foregoing, all agreements of
indemnification under Sections 5.1 and 5.2 shall remain effective in
respect of claims made in writing by giving notice as
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provided in this Agreement prior to such respective dates until such claims
are finally determined and satisfied in full.
5.4. GENERAL RELEASE. On the Closing Date, Seller releases the Corporation
and its directors, officers, agents and employees and discharges them from any
and all obligations and claims which have arisen or might arise out of facts or
actions existing or taken on or prior to the Closing Date, except obligations or
claims which may be made under this Agreement, but including specifically the
Corporation's obligations under any oral or written lease for the Leased Real
Property. In the event that Buyer is entitled to any claim for indemnification
under this Agreement against the Seller, the Seller agrees that he shall not
have the right to seek indemnity or contribution with respect to any such claim
from, or have any similar right with respect to, the Corporation, Buyer or their
affiliates whether by contract, agreement, bylaw, corporate law statute, common
law or otherwise.
ARTICLE VI
MISCELLANEOUS
6.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements set forth in this Agreement or in any
writing delivered to Buyer or Seller in connection with this Agreement will
survive the Closing Date and the consummation of the transactions contemplated
hereby as provided in Section 5.3(e).
6.2. EXPENSES. Buyer and Seller will each pay all of their own legal and
other expenses incurred in the preparation of this Agreement and the performance
of the terms and conditions hereof. Seller represents that all such expenses of
the Corporation shall be paid (and not accrued) prior to the Closing. Seller
and not the Corporation shall pay any fee due Enterprise Investments, Inc.
6.3. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the internal laws (and not the law of conflicts) of the State of
Minnesota.
6.4. ENTIRE AGREEMENT. This Agreement, including the other documents
referred to herein which form a part hereof, contains the entire understanding
of the parties hereto with respect to the subject matter contained herein. This
Agreement supersedes all prior agreements and undertakings between the parties
with respect to such subject matter. No waiver and no modification or amendment
of any provision of this Agreement shall be effective unless specifically made
in writing and duly signed by the party to be bound thereby.
6.5. SEVERABILITY OF INVALID PROVISION. If any one or more covenants or
agreements provided in this Agreement should be contrary to law, then such
covenant or covenants, agreement or agreements shall be null and void and shall
in no way affect the validity of the other provisions of this Agreement.
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6.6. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement.
6.7. SECTION HEADINGS. Section headings contained in this Agreement are
inserted only as a matter of convenience and in no way define, limit, extend or
describe the scope of this Agreement or the intent of any of the provisions
hereof.
6.8. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and shall become effective when one or more counterparts have been
signed by each of the parties.
6.9. WAIVER. Waiver by Seller or Buyer of any breach of or failure to
comply with any provision of this Agreement by the other party shall not be
construed as, or constitute a continuing waiver of, or a waiver of any other
breach of, or failure to comply with, any other provision of this Agreement.
6.10. NON-EXCLUSIVITY. The rights, remedies, powers and privileges
provided in this Agreement are cumulative and not exclusive and shall be in
addition to any and all other rights, remedies, powers and privileges granted by
law, rule, regulation or instrument; provided, however, that such rights,
remedies, powers and privileges are subject to the limitations in Section 5.3,
except to the extent they relate to claims of fraud.
6.11. FINANCIAL STATEMENTS. Seller and Buyer acknowledge that Buyer
may need to report this transaction in a Form 8-K filing with the Securities and
Exchange Commission (the "SEC") and, in connection therewith, Buyer must file
audited financial statements of the Corporation for the past three years.
Seller agrees to the inclusion of such financial statements in the Form 8-K and
further agrees to provide all necessary assistance, including management
letters, as may reasonably be required to complete such audited financial
statements within the time required by the SEC.
6.12. 338(H)(10) ELECTION; FINAL S-CORPORATION RETURN.
(a) Buyer, at its sole discretion, may make an election for federal
and state tax purposes, and Seller hereby agrees to join Buyer in making an
election, under Section 338(h)(10) of the Internal Revenue Code of 1986, as
amended (the "338(h)(10) Election") with respect to the purchase and sale
of the Shares. Buyer shall pay, at such time as the election is made and
joined in by Seller, any taxes for which Seller or the Corporation may
become liable to any taxing authority which are attributable to the
338(h)(10) Election. Buyer and Seller agree to an allocation of the
purchase price with respect to the assets of the Corporation for all tax
purposes in accordance with a schedule to be prepared by Buyer and
delivered to Seller at the time the 338(h)(10) Election is made.
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(b) Seller will prepare the final income tax return for the
Corporation, and the related Forms K-1 through the Closing Date.
6.13. INVENTORY. With respect to inventory owned by the Corporation
which is not included as an asset on the Closing Date Balance Sheet, but which
is sold in the ordinary course of business during the four-year period following
the Closing, the Corporation shall pay Seller an amount equal to 90% of the
amount received from a customer of the Corporation with respect to the purchase
of such inventory within 30 days of Corporation's receipt of payment from its
customer. After such four-year period, the Corporation shall be free to dispose
of such inventory without payment or other obligation to Seller.
6.14. NOTICES. All notices and replies thereto required hereunder shall be
in writing, properly addressed to the other party, signed by the party giving
notice, and may be delivered by hand or sent by facsimile transaction or
certified mail, return receipt requested. Notices shall be effective upon
receipt. Notices sent by mail shall be deemed received on the date of receipt
indicated by the return verification provided by the U.S. Postal Service.
Notices sent by facsimile transaction shall be deemed received the day on which
sent and shall be conclusively presumed to have been received in the event that
the sender's copy of the facsimile transaction contains the "confirmation" of
the other party's facsimile transaction. Notice shall be given, mailed or sent
to the parties at the following addresses, or at such other address as may be
given by proper notice.
If to Buyer: WSI Industries, Inc.
0000 Xxxx Xxxxxxx Xxxxxxxxx
Xxxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx
Fax: 000-000-0000
If to Seller: Xxxxxx Xxxxxx
00000 Xxxxxxxxx 00xx Xxxxxx
Xxx Xxxxx, XX 00000
6.15. OTHER AGREEMENTS. Prior to the Closing Date, the Corporation
will transfer the sponsorship and then shall withdraw, effective as of the
Closing Date, from the pension plan sponsored by the Corporation (the "Profit
Sharing Plan") and except as provided below, the ERISA Affiliates will retain
responsibility for and shall indemnify and hold harmless the Corporation and
Buyer from any and all liabilities arising under the Profit Sharing Plan
occurring prior to or after the Closing Date.
(a) TRANSFER OF ASSETS AND LIABILITIES FROM PROFIT SHARING PLAN. From
and after the Closing Date, employees of the Corporation shall cease to
accrue any further benefits under the Profit Sharing Plan. As soon as
practicable after the Closing Date, the Buyer shall establish (or
designate) (the "Buyer's Plan") to provide benefits to the employees of
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the Corporation and their beneficiaries who, on the Closing Date, are
participants in the Profit Sharing Plan (the "Transferred Plan
Participants") and the sponsor of the Profit Sharing Plan and Buyer shall
agree upon and designate a transfer date ("Transfer Date"). The sponsor of
the Profit Sharing Plan shall cause the trustee of the Profit Sharing Plan
to transfer on the Transfer Date to the trusts forming a part of the
Buyer's Plan cash (or at the election of the Buyer, assets in kind) and
promissory notes representing plan loans to Transferred Plan Participants
in an amount equal to the vested and non-vested account balances of the
Transferred Plan Participants as of the Transfer Date (the "Account
Balances") and, effective as of the receipt of such assets, the Buyer's
Plan shall assume all liabilities and obligations for benefits to the
Transferred Plan Participants and their beneficiaries arising under the
Profit Sharing Plan.
(b) NO THIRD PARTY BENEFITS. Nothing herein expressed or implied is
intended or shall be construed to confer upon or give to any person, firm
or corporation, other than the parties hereto and their respective
permitted successors and assigns, any rights or remedies under or by reason
of this Agreement.
6.16. EMINENT DOMAIN. Buyer and the Corporation agree that any funds
received by the Corporation as a result of an eminent domain action with respect
to real property owned by Seller and not involving the Leased Real Property
shall be received for the benefit of Seller and shall be assigned to him.
6.17. ENVIRONMENTAL MATTERS. Buyer and Seller have received a copy of
a Phase I Environmental Site Assessment prepared by Peer Environmental &
Engineering Resources, Inc. ("Peer") dated February 9, 1999 with respect to the
Leased Real Property (the "Phase I"). Seller agrees that it shall, at Seller's
expense, retain Peer to conduct the Phase II subsurface investigation (the
"Phase II") suggested in the Phase I to address the recognized environmental
conditions referenced in the Phase I, including, without limitation, the
potential for soil and/or groundwater contamination associated with the
underground storage tanks and septic system and the presence of acetone detected
from an on-site water well (the "Environmental Conditions"). The Phase II shall
be completed within 45 days after the Closing. Notwithstanding anything herein
to the contrary, Seller shall, at Seller's expense, undertake such remedial
actions as may be recommended by Peer or otherwise required by Environmental
Laws with respect to any matters addressed in the Phase II, and shall indemnify
and hold Buyer and the Corporation harmless with respect to all Damages arising
out of or related to such Environmental Conditions or other matters addressed in
the Phase II and any remediation of the same, including any required or
recommended ongoing monitoring costs. In addition, Seller, at Seller's expense,
shall immediately register all underground storage tanks located on the Leased
Real Property. Seller's obligations set forth in this Section 6.17 shall
survive the Closing Date indefinitely, shall not be subject to the limitations
in Section 5.3 or 6.1 and shall be in addition to Seller's obligations in
Article V.
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6.18. CASH BALANCE. Notwithstanding anything herein to the contrary,
Seller represents that the Corporation has cash on hand or in banks or
investment accounts in an amount of at least $1,575,000 as of the Closing.
Neither Seller nor any officer or employee of the Corporation has made a
withdrawal, written a check or otherwise directed that such cash be distributed
from the Corporation. Any breach of the representations in this Section 6.18
shall not be subject to the limitations set forth in Article V.
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
on the day and year first above written.
WSI INDUSTRIES, INC.
By: /s/ Xxxxxxx X. Xxxxx
-----------------------------------
Its: President
----------------------------------
/s/ Xxxxxx Xxxxxx, Individually
----------------------------------
Xxxxxx Xxxxxx, Individually
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