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                                                                    EXHIBIT 10.1

                               PURCHASE AGREEMENT

         THIS AGREEMENT is made as of May 11, 2001 by WSI INDUSTRIES, NC., a
Minnesota corporation ("Seller") and DRB #8, LLC, Minnesota limited liability
company ("Buyer").

                                    RECITALS:

         Seller is the fee owner of approximately 25 acres of real property
situated in Orono, Hennepin County, Minnesota, with an address of 2605 West
Wayzata Boulevard, Long Lake, Minnesota, as depicted on Exhibit A attached and
legally described on Exhibit B attached (the "Property").

         A building of approximately 174,000 square feet is located on the
Property, as depicted on Exhibit A (the "Building").

         Buyer desires to purchase the Property and Seller desires to sell the
Property pursuant to the terms of this Agreement.

         NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Seller agrees to sell the Property and Buyer agrees to purchase
the Property, upon the following conditions:

         1. EXCLUDED PROPERTY. The Property specifically excludes (a) the
telephone system (except the wiring for the telephone systems which shall be
included in this sale and shall not be excluded from this sale), (b) any machine
tools and boxes of tooling, and (c) miscellaneous office furniture and supplies,
all of which are currently located in or on the Property (collectively, the
"Excluded Property"). Seller shall remove the Excluded Property from the
Property prior to the Closing.

         2. AS-IS SALE. Seller shall sell the Property to Buyer "AS-IS",
"WHERE-IS", without any express or implied representation or warranty and Buyer
shall purchase the Property from Seller "AS-IS", "WHERE-IS", without any express
or implied representation or warranty from Seller. Buyer (a) has inspected (and
will have further opportunity to inspect) the Property, (b) is acquainted (and
will have further opportunity to become acquainted) with the condition of the
Property, and (c) agrees that in entering into this Agreement, except for the
accuracy of the representation and warranties of Seller specifically set forth
in this Agreement, (i) Buyer has not relied upon any statements or
representations, oral or written, made by Seller or anyone acting on Seller's
behalf, (ii) Buyer is relying entirely upon his own investigation, inspection
and review in making this purchase and (iii) Buyer hereby waives any and all
claims against Seller for misrepresentation or breach of warranty. Specifically
and not by way of limitation, (1) Seller

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shall not be liable for any injury, loss or damage, direct or consequential
arising out of the use or inability to use the Property, including without
limitation lost profits or other commercial loss, (2) Buyer shall not request
nor receive any escrow or "hold back" of amounts payable by or to the Seller for
environmental matters, physical conditions or any other purported defects in the
Property, and (3) neither the terms and conditions of Section 11 of this
Agreement, nor the Access Agreement to be entered into by and between Seller and
Buyer at Closing shall negate the terms and condition of this Section 2, which
terms and conditions shall survive the Closing.

         3. PURCHASE PRICE. The purchase price to be paid by Buyer (the
"Purchase Price") shall be Two Million Four Hundred Thousand Dollars
($2,400,000). The Purchase Price, subject to those adjustments, prorations and
credits described in this Agreement, shall be paid as follows:

            3.1 INITIAL EARNEST MONEY. Twenty-Five Thousand Dollars ($25,000),
        as Initial Ernest Money, to be paid to Seller as of the date upon which
        both Seller and Buyer shall have executed this Agreement (the "Execution
        Date").

            3.2 ADDITIONAL EARNEST MONEY. Twenty-Five Thousand Dollars
        ($25,000), as Additional Earnest Money, to be paid to Seller on or
        before that date which is fifteen (15) days following the Execution
        Date. Buyer's failure to make timely payment of the Additional Earnest
        Money shall be a default of this Agreement by Buyer.

            3.3 PAYMENT AT CLOSING. The balance shall be paid in cash or
        certified funds at Closing.

            3.4 EARNEST MONEY CONDITIONS. All Earnest Money paid by Buyer
        pursuant to this Section 3 shall be (a) nonrefundable to Buyer in the
        event Buyer terminates this Purchase Agreement or fails to purchase the
        Property for any reason whatsoever and (b) applied to the Purchase Price
        at Closing.

         4. CLOSING. The closing of the transaction contemplated by this
Agreement ("Closing") shall take place on or before that date which is thirty
(30) days following the Execution Date (the "Closing Date"). The Closing shall
take place at a location mutually agreeable to Seller and Buyer in Minneapolis,
Minnesota.

         5. REAL ESTATE TAXES AND SPECIAL ASSESSMENTS. At Closing, the Purchase
Price shall be adjusted as follows:

            5.1 CURRENT YEAR'S TAXES. All deferred real estate taxes and all
        real estate taxes which have become a lien on the Property and which are
        due and payable prior to the year in which Closing occurs, shall be paid
        by Seller at or prior to Closing. All real estate taxes which have
        become a lien on the Property and which are due and payable in the year
        in which Closing occurs, shall be prorated to the Closing Date and
        Seller's portion shall be paid by Seller at Closing.

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            5.2 ASSESSMENTS. All charges for improvements or services already
        made to or which benefit the Property, and all levied, deferred, and
        pending assessments (general or special) existing as of the Closing Date
        shall be paid in full by Seller at Closing.

         6. EXAMINATION OF TITLE. Seller shall, at Seller's cost and expense,
promptly furnish to Buyer a commitment for the issuance of an owner's policy of
title insurance, issued by First American Title Insurance Company ("Title"),
certified to a current date, to include proper searches covering special
assessments, bankruptcies, state and federal judgments, and liens (the
"Commitment"). Buyer shall be allowed ten (10) days after receipt of the
Commitment for examination of said title and the making of any objections, said
objections to be made in writing or deemed to be waived. Buyer agrees that the
permitted encumbrances described on Exhibit C (the "Permitted Encumbrances") may
constitute objections to title, provided, however, that Seller shall have no
obligation to cure or remove the same. If any objections are so made, Seller
shall, within five (5) days of receipt of such objections, provide Buyer with
written notice as to whether Seller shall (a) use its reasonable efforts to cure
(or remove) such objections and make title marketable or (b) elect to not cure
(or remove) such objections. Seller's sole monetary obligation pursuant to this
Section 6 is to provide the Commitment at Seller's cost and expense. Buyer shall
be responsible for the payment of any title insurance premium or other charge
for the issuance of a title insurance policy or policies (including without
limitation endorsement fees) as Buyer may desire or require in connection with
the Closing.

            6.1 SELLER ELECTION TO CURE TITLE. If Seller elects to make title
        marketable, Seller shall use reasonable efforts to cure (or remove) any
        objections, which cure shall be completed, if possible, within thirty
        (30) days, during which time the Closing shall be postponed. If Seller
        is unable to cure title within said thirty (30) day period, then and in
        that event, Buyer shall have the options described in Section 6.2 of
        this Agreement.

            6.2 SELLER ELECTION TO NOT CURE TITLE. If Seller elects to not make
        title marketable, or if Seller is unable to make title marketable within
        the thirty (30) day period described in Section 6.1, then and in that
        event, Buyer shall have the option to (a) waive such objection(s) and
        proceed to Closing, in which event such objection(s) shall become
        Permitted Encumbrances for all purposes of this Agreement or (b)
        terminate this Agreement by written notice to Seller.

            6.3 BUYER'S FAILURE TO CLOSE FOLLOWING CURE OF TITLE. If Seller
        makes title marketable and Seller is not otherwise in default or in
        breach of this Agreement and Buyer shall fail to close this transaction
        pursuant to this Agreement, then and in that case, Buyer shall
        immediately be in default of this Agreement, Seller may terminate this
        Purchase Agreement, and all Earnest Money shall be retained by Seller as
        liquidated damages, time being of the essence hereof.

         7. CLOSING COSTS, CONVEYANCES AND CLOSING DOCUMENTS. The parties hereby
agree to provide to one another, at Closing, the Closing Documents described in
this Section 7, as follows:

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            7.1 WARRANTY DEED. Seller shall execute and deliver to Buyer a
        warranty deed, in recordable form with appropriate state deed tax paid
        by Seller, conveying to Buyer fee title to the Property subject only to
        the Permitted Encumbrances.

            7.2 WELL DISCLOSURE CERTIFICATE. Seller shall execute and deliver to
        Buyer a Well Disclosure Certificate as required by Minnesota law (or
        appropriate indication shall be made on the Deed that the same is not
        required).

            7.3 SELLER'S AFFIDAVIT. Seller shall execute and deliver to Buyer an
        affidavit of Seller in the customary Minnesota form.

            7.4 FIRPTA AFFIDAVIT. Seller shall execute and deliver to Buyer an
        affidavit certifying that Seller is not a "foreign person" pursuant to
        the United States Internal Revenue Code of 1986, as amended.

            7.5 ACCESS AGREEMENT. Seller and Buyer shall execute and deliver to
        one another (with an additional copy for recording against the Property)
        an Access Agreement in the form attached as Exhibit D, as more further
        described in Section 11.3 of this Agreement.

            7.6 TITLE DOCUMENTS. All other documents necessary to cure
        objections to title, if any, and the necessary recording fees therefor.

            7.7 OTHER DOCUMENTS. Such other documents and things Buyer or
        Buyer's title insurance carrier may reasonably request to convey the
        Property to Buyer as contemplated by this Agreement.

Costs associated with the closing shall be apportioned between Seller and Buyer
such that (a) Seller shall be responsible for the payment of the state deed tax,
the cost of providing the Commitment and one-half of the closing fee charged by
the title insurance company; and (b) Buyer shall be responsible for all premiums
(and other fees ) required for the issuance of any title insurance policy(ies),
mortgage registration tax, recording fees and one half of the closing fees
charged by the title insurance company, and any other costs and expenses
associated with the transaction, including without limitation the cost of any of
Buyer's due diligence.

         8. CONTINGENCIES. Unless waived by Buyer in writing, Buyer's obligation
to purchase the Property shall be subject to (a) performance of Seller's
obligations hereunder, (b) the continued accuracy of Seller's representations
and warranties set forth in Section 10 of this Agreement and (c) Buyer's
satisfaction, in Buyer's sole discretion, as to the contingencies described in
this Section 8.

            8.1 PHYSICAL CONDITION. On or before that date which is fifteen (15)
        days following the Execution Date (the "Contingency Date"), Buyer shall
        have satisfied itself, in Buyer's sole discretion, with the physical
        condition of the Property.

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            8.2 ENVIRONMENTAL CONDITION. On or before the Contingency Date,
        Buyer shall have satisfied itself with the environmental condition of
        the Property.

                8.2.1 ENVIRONMENTAL REPORT. Buyer hereby acknowledges receipt of
            a copy of that certain Phase I Environmental Site Assessment dated
            July 29, 1999 and prepared by Peer Environmental & Engineering
            Resources, Inc. (the "Environmental Report"). Commencing as of the
            Execution Date, Seller agrees to provide Buyer with access to any
            and all other records in Seller's possession regarding the
            environmental condition of the Property.

                8.2.2 PHASE II TESTING. Seller acknowledges that Buyer may
            desire to further test and/or investigate the environmental
            condition of the Property ("Phase II Testing"). For purposes of this
            Agreement, Phase II Testing shall mean any test, drilling of any
            holes or any other environmental inspection other than a visual
            inspection of the Property. The Phase II Testing shall be performed
            at Buyer's sole cost and expense. Prior to the commencement of any
            Phase II Testing, Buyer shall submit to Seller a written description
            of the desired Phase II Testing and the contractor(s) proposed to
            complete the Phase II Testing (the "Phase II Request"), which Phase
            II Testing and contractor(s) shall be subject to Seller's prior
            written approval, which approval shall not be unreasonably withheld
            or delayed. To the extent Seller fails to affirmatively approve or
            disapprove the Phase II Request within five (5) days of Seller's
            receipt of the Phase II Request, all dates in this Purchase
            Agreement shall be extended by the number of days between the fifth
            (5th) day following Seller's receipt of the Phase II Request and the
            date upon which Seller provides its approval or disapproval of the
            Phase II Request.

                8.2.3 PHASE II REPORTS. Notwithstanding the foregoing, (a)
            Seller shall be provided with a copy of any written results of the
            Phase II Testing at the same time Buyer is provided with such
            results; (b) Buyer shall repair any damage to the Property caused by
            such Phase II Testing, and (c) Buyer hereby specifically agrees that
            because Seller is the owner of the Property, Seller shall control
            the timing and nature of disclosure of any Phase II Testing to the
            Minnesota Pollution Control Agency ("MPCA") and/or other required
            governmental entities. Accordingly, Seller and Buyer agree that
            Seller's approval of the Phase II Request shall include (i) written
            confirmation of the terms of this Section 8.2.3 and (ii) agreement
            by the Phase II contractor desired by Buyer, Braun Intertec, Inc.
            ("Braun") that Braun shall work with Seller's environmental
            contractor, Peer Environmental & Engineering Resources, Inc.
            ("Peer") and that Peer shall be the entity to provide disclosure to
            the MPCA of any new information discovered by the Phase II Testing,
            provided, however, that Peer shall agree in writing with Buyer and
            Braun to assume responsibility for reporting to the MPCA of Braun's
            findings which are required by law to be so reported, if any.

                8.2.4 PHASE II TERMINATION. If Seller fails to grant its consent
            to any Phase II Testing proposed by Buyer within five (5) days after
            Seller receives such request, Buyer

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            may immediately terminate this Purchase Agreement by written notice
            to Seller within ten (10) days following Seller's receipt of such
            request, which termination shall be accompanied by Buyer's quit
            claim deed to the Property and, thereafter, neither party shall be
            liable to the other regarding this the Purchase Agreement, provided,
            however, that Seller shall retain the Earnest Money. Buyer hereby
            indemnifies and agrees to hold Seller harmless from any and all
            liabilities of whatever nature arising out of Buyer's presence on
            the Property prior to the Closing Date, (a) including without
            limitation mechanic's liens, but (b) excluding (i) the liabilities,
            costs and expenses of (or associated with) the remediation of
            conditions which exist on the Property prior to Buyer's inspection
            and testing and (ii) liabilities incurred by the negligent actions
            of Seller and/or Seller's agents and/or employees, which indemnity
            shall survive the Closing or termination of this Purchase Agreement.

            8.3 NO ASSOCIATION DETERMINATION. On or before the Contingency Date,
        Buyer shall have received a No Association Determination letter from the
        MPCA, in form and substance suitable to Buyer.

            8.4 SURVEY. On or before the Contingency Date, Buyer shall have
        received a survey of the Property in a form satisfactory to Buyer (the
        "Survey"). All costs of the Survey shall be at Buyer's sole cost and
        expense.

            8.5 DUE DILIGENCE. Seller and Buyer shall each (a) exercise due
        diligence, (b) act in good faith in attempting to fulfill, and (c)
        reasonably cooperate with the other party's efforts to complete each of
        the contingencies during the Contingency Period.

            8.6 EXERCISE OF CONTINGENCIES. The above contingencies benefit Buyer
        and Buyer reserves the right to waive performance of any or all of the
        contingencies by written notice executed and delivered to Seller. Buyer
        shall provide Seller with written notice of the failure of any condition
        as of the Contingency Date, which termination shall be accompanied by
        Buyer's quit claim deed to the Property and, in such event, this
        Agreement shall be terminated, provided, however, that Seller shall
        retain the Earnest Money. If Buyer does not provide Seller with written
        notice of the failure of any condition as of the Contingency Date, said
        condition shall be deemed waived.

            8.7 SELLER'S COOPERATION. Except as otherwise specifically provided,
        all of the above contingencies shall be undertaken at Buyer's sole cost
        and expense, provided, however, that Seller shall reasonably cooperate
        with Buyer's efforts to complete said contingencies, provided, however,
        that such cooperation shall specifically not include, without
        limitation, the expenditure of funds or the provision of indemnities by
        Seller.

         9. INSPECTION. From and after the date of this Agreement, Buyer and
Buyer's representatives, at Buyer's sole cost and expense, shall have the right
to enter upon the Property for the purposes of viewing the Property and making
such other physical inspection as Buyer deems appropriate, provided, however,
(a) the terms and conditions of Section 8.2 shall control

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as to inspections or testing for environmental conditions, which shall include
without limitation drilling upon the Property, or otherwise testing the soil or
groundwater of the Property, and (b) Buyer shall repair and restore any damage
to the Property caused by or occurring during Buyer's testing and return the
Property to substantially the same condition as existed prior to such entry. In
addition to the indemnity described in Section 8.2.4 regarding environmental
testing, Buyer hereby agrees to hold Seller harmless from any and all
liabilities of whatever nature arising out of Buyer's presence on the Property
prior to the Closing Date, specifically including without limitation the cost of
any repair or restoration of the Property as described in the preceding
sentence, but specifically excluding (i) the liabilities, costs and expenses of
(or associated with) the remediation of conditions which exist on the Property
prior to Buyer's inspection and (ii) liabilities incurred by the negligent
actions of Seller and/or Seller's agents and/or employees. Buyer shall pay all
costs and expenses of any such tests or investigations and Buyer shall, provide
to Seller copies of all written test results and reports of such tests or
investigations.

    10. SELLER'S REPRESENTATIONS AND WARRANTIES. To induce Buyer to (a) enter
into this Agreement, (b) purchase the Property and (c) consummate the
transaction contemplated by this Agreement, Seller hereby warrants and
represents to Buyer, as follows:

        10.1 GOVERNMENTAL MATTERS. Seller has not received written notice of (a)
    any pending or contemplated annexation or condemnation proceedings, or
    purchase in lieu of the same, affecting or which may affect all or any part
    of the Property, (b) any proposed or pending proceeding to change or
    redefine the zoning classification of all or any part of the Property, (c)
    any proposed change(s) in any road patterns or grades which would adversely
    and materially affect access to the roads providing a means of ingress or
    egress to or from the Property (other than potential rerouting of Highway
    12/US Interstate 394, which has been reported in public newspapers) or (d)
    any uncured violation of any legal requirement, restriction, condition,
    covenant or agreement affecting the Property or the use, operation,
    maintenance or management of the Property.

        10.2 TITLE. Seller is and will at Closing be the sole owner of the
    Property and will transfer to Buyer at Closing good and marketable title to
    the Property subject only to the Permitted Encumbrances. Specifically but
    not by way of limitation, (a) there shall be no leases, tenancies,
    agreements or other contracts of any nature or type affecting or serving the
    Property as of the Closing Date and (b) the Property is not subject to any
    other contracts for sale, options, rights of first refusal or similar
    contract rights or restrictions on Seller's right to sell the Property or
    any of it.

        10.3 PROPERTY. The Property consists of approximately 25 acres of real
    property and the Building contains approximately 174,000 square feet of
    space.

The obligations of Buyer to purchase the Property and to perform the other
covenants and obligations to be performed by Buyer shall be subject to the
representations and warranties made by Seller being true and correct on the
Closing Date with the same force and effect as though

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such representations and warranties had been made on and as of such date. Seller
agrees to pay and protect, indemnify and release Buyer from and hold Buyer
harmless against any and all liabilities, damages, losses, costs, expenses
(including reasonable attorneys' fees and expenses), causes of action, suits,
claims, demands or judgements, made or otherwise claimed by any person or entity
arising from the inaccuracy of Seller's representations and warranties set forth
in this Purchase Agreement, which representations, warranties and indemnity
shall survive the Closing.

    11. ENVIRONMENTAL MATTERS. Seller hereby represents to Buyer and Buyer
hereby acknowledges that the Property has been and continues to be the subject
of environmental remediation as more further described in the Environmental
Report and in this Section11.

        11.1 REPRESENTATIONS BY SELLER. Seller represents and warrants to Buyer
    that, to Seller's actual knowledge as of the date of this Agreement without
    investigation of any kind or nature whatsoever, (a) there are no Hazardous
    Substances located on the Property, except (i) as disclosed in the
    Environmental Report and (ii) for the fact that asbestos may be present in
    the Building, and (b) the Property has not been used by Seller in connection
    with the generation, disposal, storage, treatment or transportation of
    Hazardous Substances except as disclosed in the Environmental Report.

        11.2 "HAZARDOUS SUBSTANCE" DEFINITION. For purposes of this Agreement,
    the term "Hazardous Substance" includes, but is not limited to, substances
    defined as "hazardous substances", "toxic substances", or "hazardous waste"
    in the Comprehensive Environmental Response Compensation Liability Act of
    1980, as amended, 42 USC Section 9601, et seq., and substances defined as
    "hazardous waste", "hazardous substances", or "pollutants or contaminants"
    in the Minnesota Environmental Response and Liability Act, Minn. Stat. ss.
    115B.02. The term "Hazardous Substance" shall also include polychlorinated
    biphenyls, petroleum, including crude oil or any fraction thereof, petroleum
    products, heating oil, natural gas, natural gas liquids, liquified natural
    gas or synthetic gas usable for fuel.

        11.3 CLEAN-UP. Buyer acknowledges that the Property is the subject of an
    environmental clean-up ("Clean-Up") monitored by the MPCA, as described in
    the Environmental Report. Seller and Buyer acknowledge that the current
    status of the Clean-Up is the continued placement of and monitoring from
    five (5) wells on the Property and, other than the provision of reports to
    the MPCA, does not currently require other affirmative action by Seller.
    Seller makes no warranties or representations concerning the timing or
    extent of the Clean-Up, provided, however, that Seller shall comply with
    applicable law regarding the Clean-Up and shall use due diligence to provide
    the monitoring reports to the MPCA in a timely manner. Seller shall only be
    required to take such actions regarding the Clean-Up as are required by
    applicable law to obtain written confirmation of closure of the Clean-Up
    ("Closure Letter"). Upon completion of the Clean-Up, Seller shall provide
    Buyer with the Closure Letter, if a Closure Letter is so available.

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            11.3.1 REIMBURSEMENTS. The parties agree that Seller shall be
        entitled to any and all reimbursements from the State of Minnesota and
        the United States Government in connection with the Clean-Up
        ("Environmental Reimbursements") and that Buyer shall not be entitled to
        make any claim to any Environmental Reimbursements, except as
        specifically provided in Section 9 of the Access Agreement.

            11.3.2 FURTHER NEGOTIATIONS. Seller shall have the sole right and
        responsibility to negotiate any matters relating to the Clean-Up with
        the MPCA and/or any other state or federal governmental entities, unless
        such matters affect Buyer's rights to make improvements to the Property,
        in which event Buyer shall have the sole right and responsibility to
        negotiate any matters relating to further remediation and/or relocation
        of existing monitoring wells, provided, however, that Buyer shall
        provide Seller with written notice of any such negotiations within three
        (3) days of the date of any such negotiations. In the event the Clean-Up
        is amended at Buyer's request or as otherwise described in Section 8 of
        the Access Agreement and such amendment results in an increase in any
        Clean-Up expenses over and above the Clean-Up expenses as of the date of
        this Agreement (which increased costs are described in the Access
        Agreement as costs of New Remediation and which include without
        limitation increased monitoring expenses by reason of additional
        monitoring wells and/or increased monitoring requirements and/or any
        expenses other than groundwater well monitoring, e.g., expenses of soil
        excavation, removal and disposal), then and in that event, Buyer shall
        be solely responsible for the cost of such increased expenses and any
        increased responsibilities on the Property in connection with the
        completion of the Clean-Up. Seller and Buyer hereby agree that the terms
        and conditions of this Section 11.3.2 are intended to complement and be
        in addition to the terms and conditions of Section 10 of the Access
        Agreement.

            11.3.3 ACCESS TO PROPERTY. To allow Seller to perform the Clean-Up,
        Buyer hereby agrees that Seller shall retain a right of access to the
        Property for purposes of performing the Clean-Up, as more further
        described in that certain Access Agreement in the form attached as
        Exhibit D (the "Access Agreement"). Accordingly, at Closing, Seller and
        Buyer shall execute the Access Agreement in recordable form.

        11.4 SELLER'S INDEMNIFICATION. Seller agrees to pay and protect,
    indemnify and release Buyer from and hold Buyer harmless against any and all
    liabilities, damages, losses, costs, expenses (including reasonable
    attorneys' fees and expenses), causes of action, suits, claims, demands or
    judgements, made or otherwise claimed by any person or entity arising from
    cost, damage or expense which Buyer incurs as a result of any claims, causes
    of actions, regulatory proceedings or other actions against Buyer or the
    Property arising in connection with or in relation to environmental
    conditions existing as of the Closing Date, including but not limited to the
    matters disclosed in the

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    Environmental Report, specifically including claims by adjacent property
    owners for damages resulting from the contamination of adjacent properties
    due to the migration of any such contamination, except where the same is
    incurred by reason of the (a) breach of Buyer's obligations described in (i)
    the Access Agreement and/or (ii) this Section 11, or (b) the negligent or
    intentional acts or omissions by Buyer or its tenants, invitees,
    contractors, subcontractors, agents or employees ("Seller's Environmental
    Responsibility"). Notwithstanding the foregoing, Seller's Environmental
    Responsibility shall not include the abatement, removal or other action
    taken regarding asbestos which may be present in the Building ("Asbestos
    Actions"), the cost of any such action shall be and remain Buyer's sole
    responsibility.

        11.5 BUYER'S INDEMNIFICATION. Buyer further agrees to pay and protect,
    indemnify and release Seller from and hold Seller harmless against any and
    all liabilities, damages, losses, costs, expenses (including reasonable
    attorneys' fees and expenses), causes of action, suits, claims, demands or
    judgments made or otherwise claimed by any person or entity arising from
    cost, damage or expense which Seller incurs as a result of any damage to the
    Property or any claims, causes of actions, regulatory proceedings or other
    actions against Seller or the Property arising in connection with or in
    relation to any environmental conditions of the Property which first arise
    during Buyer's ownership of the Property and/or during the ownership of the
    Property by a parent, subsidiary or affiliate of Buyer or an entity whose
    ownership is in common with Buyer ("Buyer's Affiliates"), specifically
    including Asbestos Actions but specifically excluding Seller's Environmental
    Responsibility.

        11.6 SURVIVAL. The indemnities, representations, warranties and
    covenants and agreements set forth in this Section 11 shall survive the
    closing of this transaction and Seller's delivery of the Deed to the
    Property to Buyer.

    12. DEFAULT. Either Buyer or Seller shall be in default under this Agreement
if either party fails to observe, perform or comply with any term, condition or
obligation of this Agreement within the time period(s) described in this
Agreement. In the event of default, the parties shall have the rights described
as to such default in this Agreement, provided, however, that nothing herein
shall deprive either party of any rights or remedies available to such party at
law or in equity, including the right of enforcing the specific performance of
this Agreement, provided action to enforce the specific performance of this
Agreement shall be commenced within six (6) months after such right of action
shall arise. Notwithstanding anything to the contrary in this Agreement, neither
party shall have a claim for damages for breach of this Purchase Agreement,
provided, however, that (a) Seller may have a claim for damages by reason of
Buyer's breach of the terms and conditions of Section 8.2.4 and/or Section 9 of
this Agreement and (b) either party may have a claim for damages by reason of
the other party's breach of the other party's indemnity(ies) described in this
Agreement.

    13. TERMINATION OF AGREEMENT. In the event of termination of this Agreement
for any reason described in this Agreement, Buyer specifically agrees to provide
to Seller or Title a

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recordable Quit Claim Deed to the Property executed by Buyer. Further, Buyer
agrees that within ten (10) days of such termination, Buyer shall provide Seller
with a copy of each and every document obtained by Buyer in connection with any
of the contingencies described in Section 8, which relates to the physical
condition of the Property, specifically including without limitation, the
environmental condition of the Property. The parties specifically agree that, in
the event of any termination of this Agreement, Seller shall retain the Earnest
Money.

    14. RISK OF LOSS. Between the date of this Agreement and the Closing Date,
the risk of ownership and loss of the Property shall belong solely to Seller.
If, prior to Closing, all or any portion of the Property is condemned, taken by
eminent domain, damaged by fire or by any other cause of any nature, Seller
shall, to the extent Seller receives knowledge of the same, immediately give
Buyer notice of such condemnation, taking or damage. After receipt of notice of
such condemnation, taking or damage (from Seller or otherwise), Buyer shall have
the option either (a) to require Seller to convey the Property at Closing to
Buyer in its damaged condition, upon and subject to all of the other terms and
conditions of this Agreement without reduction of the Purchase Price, or (b) to
terminate this Agreement by giving notice of such termination to Seller,
whereupon this Agreement shall be terminated, provided, however that the terms
and conditions of Section 13 shall apply, and thereafter neither party shall
have any further obligations or liabilities to the other. The right to terminate
this Agreement shall be exercised within ten (10) days of the date of notice of
the event giving rise to such notice and if not exercised by Buyer within said
time period such right shall be deemed to have been waived.

    15. BROKERS. Each party represents that all negotiations on its behalf
relative to this Agreement and the transaction contemplated by this Agreement
have been carried on directly between the parties, without the intervention of
any party, as broker, finder or otherwise, except for John Ryden of CB Richard
Ellis ("Broker"), whose fee shall be payable by Seller. In the event any party
other than the Broker institutes a legal action in an effort to recover such
fees, the parties jointly shall defend such action. If a judgment is obtained
against the parties jointly, the party responsible for breach of this warranty
shall reimburse the other for the latter's attorneys' fees, court costs and
share of judgment. Each party agrees to indemnify and hold the other party
harmless from and against any loss, cost, charge and expense, including
attorneys' fees, resulting from any claim for such fee or commission.

    16. NOTICES. Any notice to be given by a party to this Agreement shall be
personally delivered or be sent by registered or certified mail, or by a
nationally recognized overnight courier that issues a receipt to the other
parties in this Section (or to such other address as may be designated by notice
to the other parties), and shall be deemed given upon the earlier of personal
delivery, the date postmarked, delivery to such courier or the refusal to accept
such service: 10

         If to Seller:     WSI Industries, Inc.
                           15250 Wayzata Boulevard, Suite 108
                           Wayzata, MN 55391
                           Attention: Michael J. Pudil
                           Fax: 952/476-7561

<PAGE>   12

         If to Buyer:      DRB #8, LLC
                           c/o David R. Busch
                           Fredrikson & Byron, P.A.
                           1100 International Centre
                           900 Second Avenue South
                           Minneapolis, MN 55402
                           Fax: 612/347-7077

    17. SUCCESSORS AND ASSIGNS. The terms, conditions and covenants hereof shall
extend to, be binding upon and inure to the benefit of the successors and
assigns of the parties to this Agreement. Notwithstanding the foregoing, Buyer
may not assign its interest in this Agreement without Seller's prior written
consent, except as specifically provided for in Section 20 of this Agreement.

    18. SURVIVAL OF COVENANTS. All agreements, and all warranties,
representations and indemnities specifically set forth in this Agreement shall
survive the Closing and shall bind the parties subsequent to the Closing as
fully as if new agreements were entered into at Closing, any rule of law to the
contrary notwithstanding.

    19. COUNTERPART; DELIVERY BY FACSIMILE. This Agreement may be executed and
acknowledged in multiple counterparts for the convenience of the parties, which
together shall constitute one agreement and the counterpart signature and
acknowledgment pages may be detached from the various counterparts and attached
to make one copy of this Agreement. Each such copy of this Agreement shall be
deemed an original. It shall not be necessary in making proof of this Agreement
to produce or account for more than one counterpart. Delivery of an executed
counterpart of this Agreement by facsimile shall be deemed delivery of the
original of this Agreement, provided, however, that each party to this Agreement
hereby agrees to deliver an executed original of this Agreement to the other
party within five (5) days of the delivery of the facsimile copy.

    20. 1031 EXCHANGE. At either party's option, the other party agrees to
cooperate with the electing party in a deferred ss. 1031 like-kind exchange of
the property, provided, however, that the other party is not required to take
title to any other property or to incur any further cost or liability.

<PAGE>   13

    IN AGREEMENT, the parties have executed this Purchase Agreement as of the
day and year first above written.

SELLER:                                     BUYER:

WSI INDUSTRIES, INC.                        DRB #8, LLC

By                                         By
  ------------------------------------       -----------------------------------
   Its                                       Its
      -------------------------------           -------------------------------<PAGE>

                                                                   EXHIBIT 10.11
                                                                   -------------

                             EMPLOYMENT AGREEMENT

          EMPLOYMENT AGREEMENT (this "Agreement") dated as of the 12/th/ day of
June, 2000 between Tommy Hilfiger U.S.A., Inc. ("THUSA" or the "Company") and
Joel H. Newman ("Executive").

          WHEREAS, the parties desire to enter into this Agreement to reflect
their mutual agreements with respect to the employment of Executive by the
Company.

          NOW, THEREFORE, in consideration of the mutual covenants, warranties
and undertakings herein contained, the parties hereto agree as follows:

          1.   Term.  The employment of Executive under this Agreement shall
               ----
commence on June 12, 2000 and shall continue through March 31, 2003 (the
"Term"), subject to the terms and provisions of this Agreement.  The Term shall
be automatically renewed from year to year unless either party shall give the
other written notice at least thirty (30) days prior to the end of the then
current term of its intention that the then current term is not to renew.

          2.   Position and Duties.  Executive shall remain in his present
               -------------------
position as President of Finance and Administration, continuing with his current
responsibilities for the Company's Finance, Customer Services, Legal,
Facilities, Investor Relations and Human Resources Divisions as well as other
duties to be mutually agreed upon.  Executive shall continue to report directly
to the Company's Chief Executive Officer.  The Company agrees that on or before
July 1, 2001, Executive shall be appointed Chief Operating Officer of the
Company, and at the time of such appointment, in addition to his current
responsibilities, Executive will assume responsibility for the Company's
Operations Division.  Except for vacation, personal and sick days in accordance
with the Company's policies for comparable senior
<PAGE>

executives, Executive shall devote his full time during the Term to provide
services to the Company, its parents, subsidiaries, affiliates or divisions.

          3.   Compensation.
               ------------

               (a)  Base Salary.  Executive's base salary (the "Base Salary")
                    -----------
shall be at the rate of $650,000 per annum for the period June 12, 2000 through
March 31, 2001. The Base Salary shall be increased to $750,000 per annum as of
April 1, 2001, and to $850,000 per annum as of April 1, 2002. If this Agreement
shall be renewed for the period April 1, 2003 through March 31, 2004, the Base
Salary for such period shall be $950,000. The Base Salary shall be payable in
substantially equal semi-monthly installments.

               (b)  Bonus Compensation.
                    ------------------

                    (i)   Signing Bonus. The Executive shall receive a bonus of
                          -------------
$225,000 upon Executive's execution of this Agreement.

                    (ii)  Annual Cash Incentive Bonus. For the fiscal year
                          ---------------------------
ending March 31, 2001, Executive shall be entitled to a minimum bonus of 50% of
the Base Salary in effect on such date. However, if the Company achieves or
exceeds the Company's Annual Financial Budget as approved by the Board of
Directors for such year, Executive shall be entitled to a minimum bonus of 100%
of the Base Salary in effect on such date. For the fiscal year ending March 31,
2002, Executive shall be entitled to a minimum bonus of $500,000. However, if
the Company achieves or exceeds the Company's Annual Financial Budget as
approved by the Board of Directors for such year, Executive shall be entitled to
a minimum bonus of 100% of the Base Salary in effect on such date. For the
fiscal year ending March 31, 2003, Executive shall be entitled to a minimum
bonus of $567,000. However, if the Company achieves or exceeds the Company's
Annual Financial Budget as approved by the Board of Directors for such year,
Executive shall be entitled to a minimum bonus of 100% of the Base Salary in
effect on such date. If this

                                       2

<PAGE>

Agreement shall be renewed for the period April 1, 2003 through March 31, 2004,
for the fiscal year ending March 31, 2004, Executive shall be entitled to a
minimum bonus of $634,000. However, if the Company achieves or exceeds the
Company's Annual Financial Budget as approved by the Board of Directors for such
year, Executive shall be entitled to a minimum bonus of 100% of the Base Salary
in effect on such date. The Annual Cash Incentive Bonus shall be earned on the
last day of the Company's fiscal year, and payable when the Company pays bonuses
to other Company executives, but no later than June 30 of the following fiscal
year.

               (c)  Benefits.  During his employment under this Agreement, the
                    --------
Company will continue to provide Executive with the benefits Executive has been
receiving prior to execution of this Agreement.

               (d)  Automobile.  During his employment under this Agreement, the
                    ----------
Company will continue to provide Executive at its expense with the same
automobile benefit Executive has been receiving prior to Executive's execution
of this Agreement.

               (e)  Expense Reimbursement.  The Company shall reimburse
                    ---------------------
Executive for the ordinary and necessary business expenses incurred by him in
the performance of his duties in accordance with the Company's policies and
procedures applied in a manner consistent with past practice.

               (f)  Stock Options.  Upon execution of this Agreement, the
                    -------------
Company will grant to the Executive under the THUSA 1992 Stock Incentive Plan
(as the same may be amended or superseded from time to time, the "Plan"), an
option to purchase 100,000 Ordinary Shares of Tommy Hilfiger Corporation. The
number of shares subject to such option grant shall be subject to ratable
adjustment by the Company in the circumstances described in Section 3 of the
Plan. The grant provided for herein will vest in three (3) equal installments on
June 30, 2001, June 30, 2002 and March 31, 2003, respectively, and will be
subject to the terms and conditions set forth below, in the Plan and any
applicable stock option agreement, provided that any such stock option agreement
shall be in the form

                                       3

<PAGE>

then used with respect to employees of the Company generally. Upon execution of
this Agreement, the Company also will accelerate to the date hereof the vesting
of the options under the Plan granted to the Executive on February 25, 2000 that
heretofore were scheduled to vest on April 30, 2003 and April 30, 2004
respectively. In addition, if the Company meets or exceeds its Budget for the
fiscal year ending March 31, 2001, the options granted to the Executive under
the Plan on July 21, 1997 that are scheduled to vest on September 30, 2001 and
September 30, 2002 respectively will vest instead on March 31, 2001. In any
event, if Executive remains in the Company's employ on March 31, 2002, all
options issued to Executive prior to March 31, 2000 which have not vested as of
March 31, 2002 will be accelerated to vest on that date. Executive agrees that
notwithstanding the terms and conditions of this Agreement, the Plan and any
such stock option agreement, if Executive resigns his employment for any reason,
other than for "Good Reason" as that term is defined in Section 5(a) of this
Agreement, or his employment is terminated for "Cause" as that term is defined
in Section 4(b) of this Agreement, Executive shall no longer have the right to
exercise any of the options granted pursuant to this Section 3(f) or thereafter
which Executive has not exercised as of the date of Executive's resignation or
termination. Executive further understands that (1) the preceding sentence shall
apply regardless of whether the options are "vested" under the Plan; and (2) all
such options will terminate immediately as of such date.

               (g)  Taxes.  All payments to be made to and on behalf of
                    -----
Executive under this Agreement will be subject to required withholding of
federal, state and local income and employment taxes, and to related reporting
requirements.

          4.   Termination of Employment.
               -------------------------

               (a)  Death and Disability.
                    --------------------

                    (i)  Death.  Executive's employment under this Agreement
                         -----
shall terminate automatically upon his death.

                                       4

<PAGE>

                    (ii) Disability.  The Company may terminate Executive's
                         -----------
employment under this Agreement if Executive is absent from work due to serious
illness or incapacity for a period of at least 180 days (whether or not
consecutive) in any period of 365 consecutive days.

               (b)  Cause.  The Company may terminate Executive's employment
                    -----
under this Agreement at any time with Cause (as defined below). For purposes of
this Agreement, "Cause" means the occurrence of any of the following events: (i)
a material breach by Executive of his obligations under this Agreement; (ii) the
commission by Executive of a fraud against the Company or its parents,
subsidiaries, affiliates and divisions or his conviction for aiding or abetting,
or the commission of, a felony or of a fraud or a crime involving moral
turpitude or a business crime; or (iii) the possession or use by Executive of
illegal drugs or prohibited substances, the excessive drinking of alcoholic
beverages on a recurring basis which impairs Executive's ability to perform his
duties under this Agreement, or the appearance during hours of employment on a
recurring basis of being under the influence of such drugs, substances or
alcohol.

          5.   Consequences of Termination or Breach.
               -------------------------------------

               (a)  Death: Termination for Cause or Without Good Reason.  If
                    ---------------------------------------------------
Executive's employment under this Agreement is terminated under Section 4(a)(i)
or 4(b), or Executive terminates his employment for any reason other than for
"Good Reason" (as defined below), Executive shall not thereafter be entitled to
receive any compensation or benefits under this Agreement, other than for (i)
Base Salary earned but not yet paid prior to the date of Executive's termination
of employment with the Company for any reason (the "Termination Date"), and (ii)
reimbursement of any expenses pursuant to Section 3(e) incurred prior to the
Termination Date.  For purposes of this Agreement, "Good Reason" means a
material breach by the Company of its obligations under this Agreement, which
shall include, without limitation, the Company's failure to appoint Executive
Chief Operating Officer as required by Section 2 above.

                                       5
<PAGE>

               (b)  Other Terminations.  If Executive's employment under this
                    ------------------
Agreement is terminated by the Company other than under Section 4(a)(i) or 4(b),
or the Company does not renew this Agreement at the end of the Term or any
renewal term, or Executive terminates his employment for Good Reason, the sole
obligations of the Company to Executive shall be to make the payments described
in clauses (i) and (ii) of Section 5(a), and subject to the Executive providing
the Company with the release described below, to continue to pay Executive's
annual Base Salary then in effect, in substantially equal semi-monthly
installments, until the end of the Term or then current renewal term, as
applicable, plus one year, which such payments shall be offset by any
compensation and benefits Executive receives from other employment (including
self-employment) and Company sponsored long term disability during the severance
period.  If Executive's employment terminates on any day other than the last day
of the Company's fiscal year, Executive shall be entitled to a pro rata portion
of the Annual Cash Incentive Bonus (if any) that otherwise would have been
payable to Executive in respect of such partial fiscal year, which such bonus
shall be payable at the time referred to in Section 3(b) above.

The Company's obligations to provide the separation payments referred to in this
Section 5(b) shall be contingent upon (A) the Executive having delivered to the
Company a fully executed release (that is not subject to revocation) of claims
against the Company, its subsidiaries, affiliates (other than Tommy Hilfiger
Corporation), divisions, directors, officers, employees, agents and
representatives satisfactory in form and content to the Company's counsel,
provided however, that nothing herein shall be deemed to require Executive to
execute a release of (1) Tommy Hilfiger Corporation and (2) Executive's rights
to vested benefits Executive may have under the Company's benefits plans,
including without limitation, the Company's 401(k) plan and SERP and (B)
Executive's continued compliance with the terms of Sections 6(a), (b) and (c) of
this Agreement.  A sample of the form of release required by the Company is
attached as Exhibit A. Executive agrees that the form may be reasonably modified
by the Company to reflect developments in the law after the date hereof.
Executive acknowledges that and agrees that in the event the Company terminates
Executive's employment in breach of this Agreement (1) Executive's sole

                                       6
<PAGE>

remedy shall be to receive the payments specified in this Section 5(b), (2) if
Executive does not execute the release described above, Executive shall have no
remedy against the Company, its subsidiaries, affiliates (other than Tommy
Hilfiger Corporation) and divisions or any of their respective officers,
directors, stockholders, employees or agents with respect to such breach and (3)
Executive hereby waives any other rights he may have against the Company, its
subsidiaries, affiliates (other than Tommy Hilfiger Corporation) and divisions
or any of their respective officers, directors, stockholders, employees or
agents for damages arising from such termination, provided however, that
Executive is not hereby waiving any rights he may have against Tommy Hilfiger
Corporation. Executive also agrees to notify the Company's Senior Vice President
of Human Resources promptly upon his obtaining other employment or commencing
self-employment during any severance period described in this Section 5(b) and
to provide the Company with complete information regarding his compensation and
benefits therein.

          6.   Certain Covenants and Representations.
               -------------------------------------

               (a)  Confidentiality.  The Executive acknowledges that in the
                    ---------------
course of his employment by the Company, the Executive will receive and or be in
possession of confidential information of the Company and its parents,
subsidiaries, affiliates and divisions, including, but not limited to,
information relating to their financial affairs, business methods, strategic
plans, marketing plans, product and styling development plans, pricing,
products, vendors, suppliers, manufacturers, computer programs and software.
The Executive agrees that he will not, without the prior written consent of the
Company, during the period of his employment or thereafter, disclose or make use
of any such confidential information, except as may be required by law or in the
course of Executive's employment hereunder.  Executive agrees that all tangible
materials containing confidential information, whether created by Executive or
others which shall come into Executive's custody or possession during
Executive's employment shall be and is the exclusive property of the Company.
Upon termination of Executive's employment for any reason whatsoever, Executive
shall immediately surrender to the Company all confidential information and
property of the Company in Executive's possession.

                                       7
<PAGE>

          (b)  Non-Competition.  Executive agrees that during the term of his
               ---------------
employment with, and for one year after leaving the employ of the Company, the
Executive will not engage in, or carry on, directly or indirectly, either for
himself or as an officer or director of a corporation or as an employee, agent,
associate, or consultant of any person, partnership, business or corporation,
any business in competition with the business carried on by the Company and its
parents, subsidiaries, affiliates and divisions in any market in which the
Company or its parents, subsidiaries, affiliates, or divisions actively conduct
business; provided, however, that if the Company elects to enforce this
provision, and the Executive is not receiving separation pay pursuant to Section
5(b) herein, the Company shall pay to the Executive during the one-year period
(in accordance with the Company's then current payroll practices) at the rate of
one-half (1/2) his annual Base Salary as of the date of his termination. If the
Company, at its sole option, decides not to continue the Executive's one-half
(1/2) Base Salary at any time during the one-year period and the Executive is
not otherwise receiving separation pay pursuant to Section 5(b) herein, this
non-competition provision shall not thereafter be enforceable.

          (c)  No Hiring.  During the two-year period immediately following the
               ---------
Termination Date, Executive shall not employ or retain (or participate in or
arrange for the employment or retention of) any person who was employed or
retained by the Company or any of its parents, subsidiaries, affiliates and
divisions within the six-month period immediately preceding such employment or
retention.

          (d)  Remedy for Breach and Modification.  Executive acknowledges that
               ----------------------------------
the foregoing provisions of this Section 6 are reasonable and necessary for the
protection of the Company and its parents, subsidiaries, affiliates and
divisions, and that they will be materially and irrevocably damaged if these
provisions are not specifically enforced.  Accordingly, Executive agrees that,
in addition to any other relief or remedies available to the Company and its
parents, subsidiaries, affiliates and divisions, they shall be entitled to seek
an appropriate injunctive or other equitable remedy for the purposes of
restraining Executive from any actual or threatened breach of or otherwise
enforcing these provisions and

                                       8
<PAGE>

no bond or security will be required in connection therewith. If any provision
of this Section 6 is deemed invalid or unenforceable, such provision shall be
deemed modified and limited to the extent necessary to make it valid and
enforceable.

          7.   Miscellaneous.
               -------------

               (a)  Authority. The Company and Executive each have full power
                    ---------
and authority to execute and deliver this Agreement and to perform their
respective obligations hereunder. This Agreement constitutes the legal, valid
and binding obligation of the Company and Executive and is enforceable against
the Company and Executive in accordance with its terms.

               (b)  Notices.  Any notice or other communication made or given in
                    -------
connection with this Agreement shall be in writing and shall be deemed to have
been duly given when delivered by hand, by facsimile transmission, by a
nationally recognized overnight delivery service or mailed by certified mail,
return receipt requested, to Executive at his address or to the Company at the
address set forth below or at such other address as Executive or the Company may
specify by notice to the others:

               To the Company:

               Tommy Hilfiger U.S.A., Inc.
               25 West 39th Street
               New York, NY 10018
               Attention: Joel J. Horowitz
               Fax Number: 212-548-1818

               To Executive:

               Joel H. Newman
               179 East 70th Street - Apt. 12B
               New York, NY 10021

               (c)  Entire Agreement; Amendment. This Agreement supersedes all
                    ---------------------------
prior agreements between the parties with respect to its subject matter,
including, without limitation, the

                                       9
<PAGE>

Employment Agreement, dated as of April 1, 1996, between Executive and the
Company, the memorandum regarding compensation overview, dated May 21, 1998, and
the letter from Joel Horowitz to Executive, dated February 8, 2000, and is
intended as a complete and exclusive statement of the terms of the agreement
between the parties with respect thereto and may be amended only by a writing
signed by both parties hereto.

          (d)  Waiver.  The failure of any party to insist upon strict adherence
               ------
to any term or condition of this Agreement on any occasion shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.  Any waiver
must be in writing.

          (e)  Assignment. Except as otherwise provided in this Section 7(e),
               ----------
this Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective heirs, representatives, successors and assigns.
This Agreement shall not be assignable by Executive and shall be assignable by
the Company only to its parents, subsidiaries, affiliates or divisions, provided
that any assignment by the Company shall not, without the written consent of
Executive, relieve the Company of its obligations hereunder.

          (f)  Counterparts.  This Agreement may be executed in two or more
               ------------
counterparts, each of which shall be considered an original, but all of which
together shall constitute the same instrument.

          (g)  Captions.  The captions in this Agreement are for convenience of
               --------
reference only and shall not be given any effect in the interpretation of the
Agreement.

          (h)  Governing Law. This Agreement shall be governed by the law of the
               -------------
State of New York, without regard to its conflict of laws principles.

                                       10
<PAGE>

          (i)  Arbitration.  Any dispute or claim between the parties hereto
               -----------
arising out of, or, in connection with this Agreement, shall, upon written
request of either party, become a matter for arbitration, provided, however,
Executive acknowledges that in the event of any violation of Section 6 hereof,
the Company shall be entitled to obtain from any court in the State of New York,
temporary, preliminary or permanent injunctive relief as well as damages, which
rights shall be in addition to any other rights or remedies to which it may be
entitled.  The arbitration shall be before a neutral arbitrator in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
and take place in New York City.  Each party shall bear its own fees, costs and
disbursements in such proceeding.  The decision or award of the arbitrator shall
be final and binding upon the parties hereto.  The parties shall abide by all
awards recorded in such arbitration proceedings, and all such awards may be
entered and executed upon in any court having jurisdiction over the party
against whom or which enforcement of such award is sought.

          IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

                                         TOMMY HILFIGER U.S.A., INC.

                                         By:     /s/ Joel Horowitz
                                            -----------------------------------
                                             Name:  Joel Horowitz
                                             Title: Chief Executive Officer

                                                 /s/ Joel H. Newman
                                         --------------------------------------
                                                     Joel H. Newman

                                       11
<PAGE>

____________,                      EXHIBIT A

Dear XXXX:

          This letter ("Agreement") sets forth our mutual agreement concerning
your separation from your employment with Tommy Hilfiger U.S.A., Inc., including
its subsidiary and affiliated corporations (other than Tommy Hilfiger
Corporation), and their respective successors, assignees, representatives,
agents, shareholders, officers, directors and employees (the "Company"; provided
that for purposes of the following sentence and paragraphs 4, 5 and 7 hereof,
the "Company" shall be deemed to include Tommy Hilfiger Corporation).  We have
agreed that your employment with the Company ends for all purposes effective
_________, and as of that date, you cease to accrue any benefits that
customarily accrue to the Company's active employees.

     1.   Separation Payments. In consideration for your signing this Agreement,
          -------------------
subject to the conditions set forth below, you will receive _________________
which amount shall be payable in substantially equal semi-monthly installments;
all less applicable deductions and withholdings required by federal, state and
local law.  You agree that the Company's obligation to pay you salary
continuation shall be reduced by the amount of the compensation and benefits you
are entitled to receive from other employment (including self-employment) you
obtain prior to _________.  You agree to notify the Company's Senior Vice
President of Human Resources promptly upon your obtaining any such other
employment or commencing self-employment, and to provide the Company with
complete information regarding your compensation therein.  You acknowledge that
you are not entitled to receive the items provided for in this paragraph and
that these items will be provided to you only if you execute this Agreement and
do not revoke your signature during the seven (7) day period referred to in
paragraph 15 below.  You represent that during the term of your employment with
the Company you did not breach your fiduciary duty to the Company.

     2.   Release. In exchange for providing you with the items described in
          -------
paragraph 1 above, you agree to waive any and all claims against the Company and
release and discharge the Company from liability for any and all claims or
damages that you had, have or may have against the Company as of the date of
your execution of this Agreement, whether known or unknown to you, including but
not limited to any claims arising under any federal, state or local law, rule or
ordinance, tort, employment contract (express or implied), public policy, or any
other obligation including any claims arising under Title VII of the Civil
Rights Act of 1964, the Age Discrimination in Employment Act of 1967, the Older
Workers' Benefit Protection Act, the Civil Rights Act of 1866, the Civil Rights
Act of 1991, the Americans With Disabilities Act, the Family and Medical Leave
Act, the Employee Retirement Income Security Act, the New York State Human
Rights Law, the New York City Human Rights Law and any other labor law, employee
relations, and/or fair employment practice statute, rule or ordinance and all
claims for workers' compensation, wages, monetary or equitable relief, vacation,
other employee fringe benefits, benefit plans or attorney's fees. This Agreement
may not be cited as, and does not constitute any admission by the Company with
respect to any aspect of your employment or termination therefrom. Nothing
herein shall be deemed to release (1) Tommy Hilfiger Corporation; and (2) your
rights to vested benefits you may have under the Company's benefits plans,
including without limitation, the Company's 401(k) plan and SERP.

     3.   Confidentiality and Cooperation. You agree that you will not disclose
          -------------------------------
or cause to be disclosed in any way the terms, contents or execution of this
Agreement or the facts and circumstances underlying this Agreement, except in
the following circumstances; (1) to your immediate family provided the persons
to whom the information is to be disclosed are informed of this paragraph and
agree to be bound by it; (2) to your tax adviser, provided such persons agree to
be bound by this paragraph; (3) to

                                       12
<PAGE>

your legal counsel; and (4) pursuant to an order of a court or governmental
agency of competent jurisdiction, or for the purposes of securing enforcement of
the provisions of this Agreement. You also agree that you will cooperate fully
with the Company in connection with any existing or future litigation against
the Company, whether administrative, civil or criminal in nature, in which and
to the extent the Company reasonably deems your cooperation necessary. You
further agree that, in the event you or anyone acting on your behalf, is served
with any subpoena, order, directive or other legal process involving the
Company, you or your attorney shall immediately notify the Company's Senior Vice
President of Human Resources of such service and of the content of any testimony
or information to be provided pursuant to such subpoena, order, directive or
other legal process and within two (2) business days send to the Company's
Senior Vice President of Human Resources via overnight delivery (at the
Company's expense) a copy of said documents served upon you.

     4.   Company Property. It is understood and agreed that all books,
          ----------------
handbooks, manuals, files, papers, memoranda, letters, facsimile or other
communications which you have in your possession that were written, authorized,
signed, received or transmitted during your employment are and remain the
property of the Company and, as such, are not to be removed from the Company's
offices. In addition, you acknowledge that you have returned to the Company all
confidential information and property of the Company in your possession,
including the automobile which the Company provided to you pursuant to Section
3(e) of the Employment Agreement.

     5.   Future Employment.  You agree that you shall not seek reinstatement to
          -----------------
employment with the Company in the future.  You hereby waive any rights that may
accrue to you and release the Company from any liability that may arise against
the Company because of any denial of employment, re-employment, reinstatement or
any other remunerative relationship and to hold the Company harmless for any
costs or fees it incurs as a result of your breach of this paragraph.

     6.   Enforceability and Severability. It is the intention of the parties
          -------------------------------
that the provisions of this Agreement shall be enforced to the finest extent
permissible under the laws and public policies of each state and jurisdiction in
which such enforcement is sought, but that the unenforceability (or the
modification to conform with such laws or public policies) of any provisions
hereof, shall not render unenforceable or impair the remainder of this
Agreement. Accordingly, if any provision of this Agreement shall be determined
to be invalid or unenforceable, either in whole or in part, this Agreement shall
be deemed amended to delete or modify, as necessary, the offending provisions
and to alter the balance of this Agreement in order to render the same valid and
enforceable to the fullest extent permissible. However, the illegality or
unenforceability of any such provision shall have no effect on, and shall not
impair the enforceability of the release language set forth in paragraph 2,
provided that, if a court of competent jurisdiction in an action or proceeding
to which you are a party determines that the release language set forth in
paragraph 2 is unenforceable in any respect, you shall be required to pay to the
Company the value of all amounts paid and benefits provided to you by the
Company under this Agreement, net of taxes paid and not recoverable.

     7.   Non-Disparagement. You agree not to make, or cause to be made, any
          -----------------
written or oral statements about the Company that may disparage, criticize or in
any way injure the Company.

     8.   Covenant Not to Sue.  You represent that: (a) you have not filed any
          -------------------
lawsuits against the Company in any court whatsoever; (b) you have not filed or
caused to be filed any charges or complaints against the Company with any
municipal, state or federal agency charged with the enforcement of any law; and
(c) pursuant to and as part of your release of the Company herein, to the
fullest extent permitted by law, you shall not sue or file a charge, complaint,
grievance or demand for arbitration in any forum or assist or otherwise
participate in any claim, arbitration, suit, action, investigation or other
proceeding of any kind that relates to any matter that involves the Company that
occurred up to and including the date

                                       13
<PAGE>

of your execution of this Agreement. You agree that you will pay all costs and
expenses including, without limitation, attorney's fees incurred by the Company
in defending against any such suit, charge or complaint initiated by you and you
expressly waive any claim to any form of monetary or other damages, or any other
form of recovery or relief in connection with any such action, or in connection
with any action brought by a third party.

     9.   Breach by You. You acknowledge and agree that if you breach any of
          -------------
your promises in this Agreement, for example, by filing or prosecuting a lawsuit
or charge based on claims that you have released, such conduct would cause great
damage and injury to the Company and that such provisions provide a material
element of the Company's consideration for and inducement to enter into this
Agreement. Accordingly, it is expressly understood and agreed that if there is a
breach by you (1) the Company may cease providing any payments and benefits not
already provided hereunder; and (2) you must immediately repay to the Company
the value of all payments and benefits previously received by you under this
Agreement as liquidated damages, it being agreed that the Company's monetary
damages in the event of such breach would be difficult to calculate and that
this amount represents a fair approximation of such damages. You further agree
that the Company may, in addition to these liquidated damages and in addition to
pursuing any other remedies that it may have in law or in equity, obtain an
injunction against you from any court having jurisdiction over this matter,
restraining any further violations of this Agreement.

     10.  Agreement Not Admissible. The terms of this Agreement, including all
          ------------------------
facts, circumstances, statements and documents relating thereto, shall not be
admissible or submitted as evidence in any litigation in any forum for any
purpose, other than to secure enforcement of the terms and conditions of this
Agreement.

     11.  Binding Effect. This Agreement and all of the provisions hereof shall
          --------------
be binding upon, and inure to the benefit of, you and the Company and your and
the Company's successors (including successors by merger, consolidation or
similar transactions), permitted assigns, executors, administrators, personal
representatives, heirs and distributees.

     12.  Headings.  The paragraph headings contained in this Agreement are for
          --------
convenience of reference only and are not intended to determine, limit or
describe the scope or intent of any provision of this Agreement.

     13.  Entire Agreement and Applicable Law. This Agreement contains the
          -----------------------------------
entire understanding between you and the Company, and supersedes any and all
prior or contemporaneous understandings and agreements, written or oral,
including, but not limited to, the Employment Agreement, provided, however, that
you agree that Section 6 of the Employment Agreement shall survive in its
entirety. This Agreement shall be interpreted for all purposes under the laws of
the State of New York, excluding its choice of laws principles, which are deemed
inapplicable.

     14.  Waiver. The failure of you or the Company to insist upon strict
          ------
adherence to any term of this Agreement on any occasion shall not be considered
a waiver thereof or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.

     15.  Right to Counsel, Effective Date and Amendments. Your signature below
          -----------------------------------------------
indicates that you are entering into this Agreement freely, knowingly and
voluntarily without duress or coercion, with a full understanding of its terms.
You also acknowledge that you have been given a period of 21 days to consider
the terms of this Agreement and that you have a period of seven days, from the
date you sign this Agreement, to revoke your acceptance by so notifying the
Company to my attention in writing by 5:00 p.m. on or before the seventh (7th)
day after this Agreement is executed by you.  This Agreement shall

                                       14
<PAGE>

not become effective or enforceable until the revocation period of seven days
has expired. Further, you acknowledge that you have been advised by the Company
to discuss this Agreement with an attorney of your choice and you have had ample
opportunity to do so. This Agreement may not be changed or altered, except by a
writing signed by the Company and you. To accept this offer you must return this
letter to me, signed and notarized.

Very truly yours,

AGREED AND ACCEPTED:

By:_________________________                  By:___________________________
   Print:            Date                        SIGNATURE:        Date

On this ___ day of ___________, before me personally came _______________, to me
known and known to me to be the individual described in and who executed the
foregoing Agreement, and duly acknowledged to me that he executed the same.

___________________
Notary Public

YOU MUST SIGN AND RETURN THIS AGREEMENT TO THE COMPANY NO LATER THAN 5:00 P.M.
ON THE 21/ST/ DAY FOLLOWING RECEIPT OF THIS DOCUMENT OR IRREVOCABLY LOSE THE
OPPORTUNITY TO RECEIVE THE CONSIDERATION DETAILED HEREIN.  YOU RECEIVED THIS
AGREEMENT ON ___________.

                                       15

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