Document:

exv10w2

 

Exhibit 10.2

NOTE

March 31, 2004

	 	 	 
	$917,095.44

	 	San Diego, California

     FOR VALUE RECEIVED, Acceris Communications Inc., a Florida corporation
formerly known as I-Link Incorporated (the “Maker”) hereby promises effective
as of March 31, 2004, to pay to the order of COUNSEL CORPORATION (US), a
Delaware corporation (the “Payee”) in immediately available funds, on or before
the Maturity Date, the principal sum of Nine-Hundred and Seventeen Thousand and
Ninety-Five and 44/l00ths Dollars ($917,095.44), pursuant to the Loan
Agreement, as that term is defined below, together with interest thereon as
provided herein. All capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to them in the Loan Agreement (as defined
below).

     1. Loan Agreement. The unpaid principal balance of this Note shall bear
interest commencing April 1, 2004, at the rate and in the manner determined in
accordance with the provisions of that certain Amended and Restated Loan
Agreement dated as of January 30, 2004, between the Maker and the Payee (as the
same may be amended, modified, extended or restated, the “Loan Agreement”), the
terms of which are incorporated herein by reference.

     2. Address for Payments. All payments made hereunder shall be paid in
lawful money of the United States of America at Payee’s business address, or at
such other place as the Payee may at any time or from time to time designate
in writing to the Maker.

     3. Severability. If any part of this Note is declared invalid or
unenforceable, such invalidity or unenforceability shall not affect the
remainder of this Note, which shall continue in full force and effect. Any
provision that is invalid or unenforceable in any application shall remain in
full force and effect as to valid applications.

     4. Notices. All notices which are required or permitted hereunder shall
be given by first class mail, to be confirmed by telephone.

     5. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York with the exception of the
conflicts of laws provisions thereof.

     6. Authority. The party executing this Note for and on behalf of Maker
warrants and represents that he has full power and authority to bind Maker for
the uses and purposes as in this Note contained.

     7. Waivers.

          (a) Maker hereby waives and renounces, for itself and all its successors
and assigns, all right to the benefit of any moratorium, reinstatement,
marshalling, forbearance, valuation, stay, extension, redemption, appraisement,
exemption and homestead now provided or which hereafter may be provided by the
Constitution and laws of the United States of America and

 

 

of any state thereof,
as to itself and in and to all of its property, real and personal, against the
enforcement and collection of the Indebtedness evidenced by this Note.

     (b) Presentment for payment, demand, protest and notice of demand, notice
of dishonor and notice of nonpayment and all other notices are hereby waived by
Maker.

     8. Prohibition on Assignment. Maker shall not give, grant, bargain, sell,
transfer, assign, convey or deliver this Note or any of its obligations
hereunder.

     IN WITNESS WHEREOF, the Maker has executed this Note as of the date and
year first above written.

	 	 	 	 	 	 	 	 	 
	 	 	ACCERIS COMMUNICATIONS, INC.
	 
	 	 	 	 	 	 	 	 
	

	 	By:	 	 	 	 	 	 
	 	 	 	 	
 
	

	 	 	 	 	 	Its	 	 
	

	 	 	 	 	 	 	 	
 

2

 

PROMISSORY NOTE

	 	 	 
	$2,050,000.00

	 	March 12, 2004

     FOR VALUE RECEIVED, Acceris Communications Inc., a Florida corporation
formerly known as I-Link Incorporated (the “Maker”) promises to pay to Counsel
Corporation, an Ontario corporation, or its assigns (the “Payee”), in the
lawful money of the United States of America (“Dollars” or “$”) the principal
sum of Two Million Dollars ($2,050,000.00) funded from time to time by Payee to
Maker, together with interest thereon as set forth herein, on or before the
Maturity Date as provided below and in accordance with the provisions of that
certain Loan Agreement dated as of January 26, 2004 between the Maker and Payee
as the same may be amended, modified, extended or restated, the “Loan
Agreement.” Capitalized terms used herein but not defined shall have the
meanings ascribed to them in the Loan Agreement.

     1. Interest. The outstanding principal amount of this Promissory Note
(the “Note”), together with unpaid interest, shall bear interest at the rate of
ten percent (10%) per annum commencing on the date funded as to principal
hereunder, namely, commencing February 17, 2004 in respect of One Million
Dollars ($1,000,000.00) funded on that date, commencing February 27, 2004 in
respect of One Million Dollars ($1,000,000.00) funded on that date, and
commencing on March 12, 2004 in respect of Fifty Thousand ($50,000.00) funded
on that date, which interest shall accrue and be compounded quarterly and shall
result in a corresponding increase in the principal amount of the Indebtedness.

     2. Time and Place of Payment. The Indebtedness shall be due and payable
in full on June 30, 2005 (the “Maturity Date”); provided, however, the Maturity
Date shall be accelerated to the date ten (10) calendar days following closing
under or conclusion of each occurrence of (a) the sale or sales by Maker to a
third party unrelated to Payee of the Buyers United, Inc. Series B Convertible
Preferred Stock and/or the common stock into which such stock is convertible
owned by Maker and held by Payee as security for the performance by Maker
hereunder pursuant to the Stock Pledge Agreement between the Maker and Payee
(as hereinafter defined), or any portion thereof (a “BUI Sale”) or (b) an
equity investment or investments in Maker by a third party unrelated to Payee
through the capital markets, whether pursuant to a registered offering or
unregistered offering or other transaction (an “Equity Investment”); provided,
further, however, that the Maturity Date shall be accelerated with respect only
to the portion of the unpaid Indebtedness equal to the net amount received by
Maker from any such BUI Sale or any such Equity Investment.

     3. The Indebtedness, including that portion of the Indebtedness
represented by this Note, is secured pursuant to that Amended and Restated
Stock Pledge Agreement between the Maker and Payee dated as of January 26,
2004, executed and delivered concurrent herewith as the same has been amended,
modified, extended or restated, the “Stock Pledge Agreement.”

     4. Events of Default. The occurrence of any of the following events or
conditions shall constitute an event of default (each an “Event of Default”):

     (a) Maker shall fail to pay any of the Indebtedness pursuant to terms of
this Note;

     (b) Maker shall fail to comply with any term, obligation, covenant, or
condition contained in any agreement between Maker and Payee (each, an
“Agreement”);

     (c) Any warranty or representation made to Payee by Maker under any
Agreement proves to have been false when made or furnished;

     (d) If Maker voluntarily files a petition under the federal Bankruptcy
Act, as such Act may from time to time be amended, or under any similar or
successor federal statute relating to bankruptcy,

 

 

insolvency, arrangements or
reorganizations, or under any state bankruptcy or insolvency act, or files an
answer in an involuntary proceeding admitting insolvency or inability to pay
debts, or if Maker is adjudged a bankrupt, or if a trustee or receiver is
appointed for Maker’s property, or if Maker makes an assignment for the benefit
of its creditors, or if there is an attachment, receivership, execution or
other judicial seizure, then Payee may, at Payee’s option, declare all of the
Indebtedness to be immediately due and payable without prior notice to Maker,
and Payee may invoke any remedies permitted by this Note. Any attorneys’ fees
and other expenses incurred by Payee in connection with Maker’s bankruptcy or
any of the other events described in this Section 3 shall be additional
Indebtedness of Maker secured by this Note.

     (e) There exists a material breach by Maker under (or a termination by any
party of) a material contract of Maker (for purposes of this Section 4 a
material contract shall mean any contract resulting in revenues of in excess of
$10,000 per annum);

     (f) Maker is in default under any funded indebtedness, including but not
limited to indebtedness evidenced by notes or capital leases, of Maker other
than the amounts loaned pursuant to this Note; or

     (g) If Maker’s business undergoes a material adverse change in Payee’s
reasonable opinion.

     If an Event of Default specified in Section 4(d) hereof occurs and is
continuing, the principal amount of the Indebtedness, together with all accrued
and unpaid interest thereon, shall automatically become and be immediately due
and payable, without any declaration or other act on the part of Payee.

     5. Acceleration. Upon an Event of Default, the Payee may give written
notice to the Maker of the occurrence of such Event of Default and Maker shall
have the shorter of (i) thirty (30) days or (ii) such remedy period as set
forth in the applicable provisions of Section 4 within which to cure such Event
of Default. If the Event of Default is not cured within the applicable cure
period, then, at the option of the Payee, Payee may declare the Maker in
default (a “Default”) and all sums due hereunder shall become immediately due
and payable.

     Any written notification from Payee to Maker hereunder shall be deemed to
be written notification of an Event of Default, or Default, or rescission of
Acceleration (as provided below), respectively, only if such notification,
communication or other election shall (a) be clearly and distinctly identified
as such a Notice of Event of Default, Notice of Default, or Notice of
Rescission of Acceleration, respectively, and (b) be given by certified mail,
return receipt requested or overnight delivery requiring acknowledgement of
receipt, and any communication between the parties not so designated and
delivered shall not be construed or deemed to be effective notice under this
Section 5.

     6. Waivers. The Maker hereby waives presentment, demand for payment,
notice of dishonor and any and all other notices or demands in connection with
the delivery, acceptance, performance, default or enforcement of this Note and
hereby consents to any waivers or modifications that may be granted or
consented to by the Payee of this Note. No waiver by the Payee or any breach
of any covenant of the Maker herein contained or any term or condition hereof
shall be construed as a waiver of any subsequent breach of the same or of any
other covenant, term or condition whatsoever.

     7. Enforcement. In the event that any Payee of this Note shall institute
any action for the enforcement or the collection of this Note, there shall be
immediately due and payable, in addition to the unpaid balance of this Note,
all late charges, and all costs and expenses of such action including
reasonable attorney’s fees. The Maker waives the right to interpose any
setoff, counterclaim or defense of any nature or description whatsoever.

     8. Replacement of Note. Upon receipt by the Maker of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this Note,
and (in case of loss, theft or destruction) of an indemnity

 

 

reasonably
satisfactory to it, and upon reimbursement to the Make of all reasonable
expenses incidental thereto, and upon surrender and cancellation of this Note
if mutilated, the Maker will make and delivery a new Note of like tenor in lieu
of this Note.

     9. Amendments. This Note may not be changed, modified, amended, or
terminated except by a writing duly executed by the Maker and the Payee.

     10. Governing Law. This Note shall be governed by, and construed in
accordance with, the laws of the State of New York.

     11. Assignment. This Note may not be assigned, in whole or in part, by
operation of law or otherwise, by the Maker without the prior written consent
of the Payee in its sole and absolute discretion, and any purported assignment
without the express prior written consent of the Payee shall be void ab initio.
The Payee may assign any or all of its rights and interests hereunder to any
party. Subject to the foregoing, this Note shall be binding upon, and inure to
the benefit of, the successors and assigns of the Payee and the Maker.

[See attached Signature Page]

 

 

Signature Page

to Promissory Note

dated as of March 12, 2004

     IN WITNESS WHEREOF, the Maker has executed this Promissory Note by its
duly authorized officer as of the 12th day of March, 2004.

	 	 	 	 	 
	 	 	ACCERIS COMMUNICATIONS INC.
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	
 
	

	 	Name:	 	 
	

	 	 	 	
 
	

	 	Title:<PAGE>

                                                                    Exhibit 10.1

                               PURCHASE AGREEMENT

         THIS AGREEMENT is made as of March 12, 2004 (the "Effective Date"),
between REMMELE ENGINEERING, INC., a Minnesota corporation ("Seller"), and WSI
INDUSTRIES, INC., a Minnesota corporation, or its assigns ("Buyer").

         In consideration of this Agreement and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Seller and Buyer agree as follows:

         1.       Sale of Property. Seller shall sell to Buyer, and Buyer shall
buy from Seller, the following property (collectively, the "Property"):

         (a)      Real Property. The real property located at 213 Chelsea Road,
                  Monticello, Minnesota, legally described on the attached
                  Exhibit A, together with all buildings and improvements
                  constructed or located thereon, all fixtures and installed
                  equipment therein, and all easements and rights benefiting or
                  appurtenant thereto (collectively the "Real Property"). The
                  Real Property is subject to the Permitted Encumbrances
                  described in Section 6 of this Agreement.

         (b)      Personal Property. Seller's interest in any personal property
                  located at the Real Property used in the operation and
                  maintenance of the Real Property (the "Personal Property").

         (c)      Contracts. Seller's interests in any assignable service and
                  maintenance contracts, equipment leases and other contracts,
                  if any, regarding the Real Property (the "Contracts").

         (d)      Permits. Seller's interests in all assignable permits and
                  licenses benefiting the Property, if any (the "Permits").

         (e)      Warranties. Seller's interests in all assignable warranties
                  and guaranties given to, assigned to or benefiting Seller or
                  the Real Property regarding the acquisition, construction,
                  design, use, operation, management or maintenance of the Real
                  Property, if any (the "Warranties").

         (f)      Plans. Seller's interests in the blueprints, plans and
                  specifications regarding the Real Property, if any, in
                  Seller's possession or immediately available to Seller (the
                  "Plans").

         (g)      Records. All records of Seller regarding the Property which
                  are known by Seller to be in its possession or immediately
                  available to Seller, including all Contracts, Permits,
                  Warranties, Plans, a schedule of the Personal Property, if
                  any, surveys, environmental reports and soil reports, all
                  records regarding management and leasing, real estate taxes
                  and assessments, maintenance, repairs and capital
                  improvements, but excluding, appraisals, insurance policies
                  and insurance records, tax returns and such

<PAGE>

                  other records as are normally viewed as confidential, provided
                  that such other records are not necessary, in Seller's
                  reasonable judgment, to the continued operation and management
                  of the Real Property (the "Records").

         2.       Purchase Price and Manner of Payment. The total purchase price
for the Property (the "Purchase Price") is One Million Nine Hundred Thousand and
no/100 Dollars ($1,900,000.00). Buyer shall pay the Purchase Price to Seller as
follows:

         (a)      $25,000.00 (the "Earnest Money") to be paid within five (5)
                  days of the Effective Date to First American Title Insurance
                  Company ("Title"), the sufficiency of which Seller hereby
                  acknowledges; and

         (b)      $1,875,000.00 by wire transfer to Title for the benefit of
                  Seller by 2:00 p.m. on the Closing Date, defined below (the
                  "Closing Payment").

Title, by executing the attached Joinder, acknowledges that it has received the
Earnest Money on behalf of the Seller and agrees to deposit the Earnest Money in
a segregated, interest bearing account insured by the FDIC and to hold and
disburse the Earnest Money in the manner specified by this Agreement. All
interest earned on the Earnest Money shall be added to and become part of the
Earnest Money.

         3.       Contingencies. The obligations of Buyer under this Agreement
are contingent upon each of the following (the "Contingencies"):

         (a)      Title. Title shall have been found acceptable, or been made
                  acceptable, in accordance with the requirements and terms of
                  Section 6 below.

         (b)      Testing. Buyer shall have determined, on or before the
                  Contingency Date, that it is satisfied with the results of and
                  matters disclosed by soil tests, engineering inspections,
                  hazardous waste and environmental reviews, business
                  feasibility reviews of the Property and such other tests,
                  studies and investigations as Buyer deems necessary in its
                  sole determination (the "Tests"), all Tests to be obtained at
                  Buyer's sole cost and expense. Until the Closing Date, Seller
                  shall allow Buyer, and Buyer's agents, access to the Real
                  Property without charge and at all reasonable times for the
                  purpose of Buyer completing the Tests. Buyer shall deliver to
                  Seller reasonable prior written notice of its planned entry
                  onto the Property and Buyer shall conduct its activities in a
                  manner so as not to unreasonably disturb or interfere with the
                  activities of Seller or any tenant or occupant of the Property
                  nor materially disturb the structural components of the
                  Building. Buyer shall pay all costs and expenses of the Tests
                  and shall indemnify and hold Seller and the Property harmless
                  from all costs and liabilities, including mechanics' liens,
                  relating to the Buyer's activities and those of its agents on
                  or about the Property. Buyer shall further repair and restore
                  any damage to the Property caused by or occurring during
                  Buyer's testing and shall return the Property to substantially
                  the same condition as existed prior to such entry. Buyer shall
                  promptly deliver to Seller true and correct copies of all Test
                  reports upon receipt of same. Buyer's obligations in this
                  Section 3(b) are referred to herein as "Buyer's

                                       2
<PAGE>

                  Due Diligence Obligations" and Buyer's Due Diligence
                  Obligations shall specifically survive the termination or
                  cancellation of this Agreement.

         (c)      Document Review. Within fifteen (15) days after the Effective
                  Date, Seller shall deliver to Buyer true and correct copies of
                  the Records. Buyer shall have determined, on or before the
                  Contingency Date, that it is satisfied with its review and
                  analysis of the Records.

         (d)      Government Approvals. Buyer shall have obtained at its sole
                  cost and expense, on or before the Closing, all final
                  governmental approvals necessary in Buyer's judgment in order
                  to make use of the Property as Buyer intends. Seller shall,
                  without charge to Buyer, cooperate in Buyer's attempts to
                  obtain all such governmental approvals.

         (e)      Board Approval. Buyer shall obtain the approval of this
                  Agreement by its Board of Directors.

         (f)      Financing. Buyer shall have received, on or before the
                  Contingency Date, a commitment for financing its purchase of
                  the Property upon terms and conditions acceptable to Buyer in
                  its sole determination.

         (g)      Seller's Obligations. Each of Seller's representations and
                  warranties are true and each covenant and obligation of Seller
                  hereunder shall be performed.

         The Contingency Date May 11, 2004. If any of the foregoing
contingencies have not been satisfied in Buyer's sole discretion, or waived by
Buyer, on or before the stated date (or by the Closing Date if no date is
specified), then this Agreement may be terminated, at Buyer's option, by written
notice from Buyer to Seller at any time prior to the Contingency Date. Such
notice of termination may be given at any time on or before the stated date for
such contingency (or the Closing Date if no date is specified). Upon such
termination, the Earnest Money shall be immediately returned to Buyer and upon
such return neither party will have any further rights or obligations regarding
this Agreement or the Property. All the contingencies set forth in this
Agreement are specifically stated and agreed to be for the sole and exclusive
benefit of the Buyer and the Buyer shall have the right to unilaterally waive
any contingency by written notice to Seller.

         4.       Closing. The closing of the purchase and sale contemplated by
this Agreement (the Closing) shall occur on the earlier of: (a) ten (10) days
after Buyer delivers written notice to Seller that it has satisfied or waived
all contingencies, or (b) May 15, 2004 (the "Closing Date"). The Closing shall
take place at 10:00 a.m. local time at the office of Buyer's counsel. Seller
shall deliver possession of the Property to Buyer on the Closing Date.

         (a)      Seller's Closing Documents. On the Closing Date, Seller shall
                  execute and/or deliver to Buyer the following (collectively,
                  the "Seller's Closing Documents"):

                  (1)      Warranty Deed. A Warranty Deed conveying Seller's
                           interest in the Real Property to Buyer, free and
                           clear of all encumbrances except the Permitted
                           Encumbrances, which Deed shall contain a
                           certification that the Seller does

                                       3
<PAGE>

                           not know of the location of any wells upon the Real
                           Property or Seller shall deliver a well certificate
                           in compliance with all applicable laws.

                  (2)      Bill of Sale. A Bill of Sale conveying all of
                           Seller's interest in the Personal Property.

                  (3)      Assignment of Contracts, Permits, Warranties. An
                           Assignment of Contracts, Permits, and Warranties.

                  (4)      Seller's Affidavit. An Affidavit of Seller indicating
                           that on the Closing Date there are no outstanding,
                           unsatisfied judgments, tax liens or bankruptcies
                           against or involving Seller or the Property; that
                           there has been no skill, labor or material furnished
                           to the Property at Seller's request for which payment
                           has not been made or for which mechanics' liens could
                           be filed and that there are no other unrecorded
                           interests in the Real Property.

                  (5)      FIRPTA Affidavit. A non-foreign affidavit, properly
                           executed and in recordable form, containing such
                           information as is required by IRC Section 1445(b)(2)
                           and its regulations.

                  (6)      Abstract. The abstract(s) of title regarding the Real
                           Property.

                  (7)      Bring Down Certificate. A Bring Down Certificate
                           stating that the representations and warranties of
                           Seller in Section 8 are true and correct as of the
                           Closing Date.

                  (8)      Records. Originals of the Records, to the extent they
                           exist and are in Seller's possession.

                  (9)      Other Documents. All other documents reasonably
                           determined by Title to be necessary to transfer the
                           fee interest in the Property to Buyer in the manner
                           specified herein.

         (b)      Buyer's Closing Documents. On the Closing Date, Buyer shall
                  execute and/or deliver to Seller the following (collectively,
                  the "Buyer's Closing Documents"):

                  (1)      Closing Payment. The Closing Payment, by wire
                           transfer of U.S. Federal Funds, to be received in
                           Title's trust account, for delivery to Seller, on the
                           Closing Date.

                  (2)      Title Documents. Such Affidavits of Buyer,
                           Certificates of Real Estate Value or other documents
                           as may be reasonably required by Title in order to
                           record the Seller's Closing Documents.

                  (3)      Assumption of Contracts, Permits, Warranties. An
                           Assumption of Contracts, Permits, and Warranties.

                                       4
<PAGE>

         5.       Prorations. Seller and Buyer agree to the following prorations
and allocation of costs regarding this Agreement:

         (a)      Title and Closing Fees. Seller shall pay all costs of the
                  Title Evidence, as defined below. Buyer shall pay all premiums
                  required for the issuance of any owner's or lender's policy
                  issued pursuant to the Title Evidence. Seller and Buyer shall
                  share equally the Title's closing fee or charge.

         (b)      Real Estate Taxes and Special Assessments. General real estate
                  taxes and installments of special assessments payable
                  therewith ("Taxes") due and payable in the year prior to the
                  year in which the Closing Date occurs and all prior years
                  shall be paid by Seller. Taxes due and payable in the year in
                  which the Closing Date occurs shall be prorated between Seller
                  and Buyer as of the Closing Date. Buyer shall pay the Taxes
                  due and payable in the year subsequent to the year in which
                  the Closing Date occurs and thereafter. Buyer shall assume all
                  special assessments levied, pending or ordered against the
                  Property as of, and after, the Closing Date.

         (c)      Recording Costs. Seller will pay the cost of recording all
                  documents necessary to place record title in the condition
                  warranted and represented by Seller in this Agreement. Buyer
                  will pay the cost of recording all other documents and the
                  mortgage registration tax due with respect to any mortgage.

         (d)      Other Costs. All other income, rents, fees, costs, expenses,
                  operating costs of the Property and any other income or
                  expenses shall be prorated between Seller and Buyer as of the
                  Closing Date.

         (e)      Attorneys' Fees. Each of the parties will pay its own
                  attorneys' fees, except that a party defaulting under this
                  Agreement or any closing document will pay the reasonable
                  attorneys' fees and court costs incurred by the non-defaulting
                  party to enforce its rights regarding such default.

         6.       Title Examination. Title Examination will be conducted as
follows:

         (a)      Title Evidence. The following constitutes the Title Evidence:

                  (1)      Title Insurance Commitment. Within fifteen (15) days
                           from the Effective Date, Seller shall deliver to
                           Buyer a commitment (the "Commitment") for a 1992 ALTA
                           Owner's Policy of Title Insurance insuring title to
                           the Real Property in the amount of the Purchase
                           Price, issued by Title. The Commitment will commit
                           Title to insure title to the Buyer's interest in
                           Property subject only to the Permitted Encumbrances
                           and the so-called standard exceptions to coverage.

                  (2)      Survey. Within thirty (30) days from the Effective
                           Date, Seller shall deliver to Buyer a copy of
                           Seller's existing survey of the Property.

                                       5
<PAGE>

                  (3)      UCC Searches. Within fifteen (15) days from the
                           Effective Date, Seller shall deliver to Buyer a
                           report of UCC Searches made of the Uniform Commercial
                           Code records of the Secretary of State of Minnesota,
                           made by said Secretary of State, or by a search firm
                           acceptable to Buyer, showing no UCC filings regarding
                           any of the Personal Property included in this
                           Agreement.

         (b)      Buyer's Objections. Within thirty (30) days after receiving
                  the last of the Title Evidence, Buyer shall make written
                  objections (the "Objections") to the form and/or contents of
                  the Title Evidence. Buyer's failure to make Objections within
                  such time period will constitute waiver of Objections. Any
                  matter shown on such Title Evidence and not objected to by
                  Buyer shall be a Permitted Encumbrance. Seller will have
                  thirty (30) days after receipt of the Objections to cure the
                  Objections, during which period the Closing will be postponed
                  as necessary. Seller shall use commercially reasonable efforts
                  to correct any Objections. Buyer may object to any easements,
                  restrictions or reservations of record which interfere with
                  Buyer's intended use of the Real Property. If the Objections
                  are not cured within such thirty (30) day period, Buyer will
                  have the option to do any of the following:

                  (1)      Terminate this Agreement; or

                  (2)      Waive the Objections and proceed to close.

         7.       Operation Prior to Closing. During the period from the date of
Seller's acceptance of this Agreement to the Closing Date (the "Executory
Period"), Seller shall operate and maintain the Property in the ordinary course
of business in accordance with prudent, reasonable business standards, including
the maintenance of adequate liability insurance and insurance against loss by
fire, windstorm and other hazards, casualties and contingencies, including
vandalism and malicious mischief. However, Seller shall execute no contracts,
leases or other agreements regarding the Property during the Executory Period
that are not terminable on or before the Closing Date, without the prior written
consent of Buyer.

         8.       Representations and Warranties by Seller. Seller represents
and warrants to Buyer as follows:

         (a)      Authority. Seller is a Minnesota corporation; Seller is duly
                  qualified to transact business in the State of Minnesota;
                  Seller has the requisite power and authority to enter into and
                  perform this Agreement and those Seller's Closing Documents
                  signed by it; such documents have been duly authorized by all
                  necessary action on the part of the Seller and have been duly
                  executed and delivered; such execution, delivery and
                  performance by Seller of such documents does not conflict with
                  or result in a violation of Seller's organizational documents
                  or any judgment, order, or decree of any court or arbiter to
                  which Seller is a party; such documents are valid and binding
                  obligations of Seller, and are enforceable in accordance with
                  their terms.

         (b)      Title to Real Property. Seller owns the Property, free and
                  clear of all encumbrances except Permitted Encumbrances.

                                       6
<PAGE>

         (c)      Environmental Laws. Except as disclosed on the Disclosure
                  Schedule attached as Exhibit B and to the best knowledge of
                  Seller without inquiry or investigation, no toxic or hazardous
                  substances or wastes, pollutants or contaminants (including,
                  without limitation, asbestos, urea formaldehyde, the group of
                  organic compounds known as polychlorinated biphenyls,
                  petroleum products including gasoline, fuel oil, crude oil and
                  various constituents of such products, and any hazardous
                  substance as defined in the Comprehensive Environmental
                  Response Compensation and Liability Act of 1980 ("CERCLA"), 42
                  U.S.C. Section 9601-9657, as amended) have been generated,
                  treated, stored, released or disposed of, or otherwise placed,
                  deposited in or located on the Property nor has any activity
                  been undertaken on the Property that would cause or contribute
                  to (i) the Property to become a treatment, storage or disposal
                  facility within the meaning of, or otherwise bring the
                  Property within the ambit of, the Resource Conservation and
                  Recovery Act of 1976 ("RCRA"), 42 U.S.C.Section 6901 et seq.,
                  or any similar state law or local ordinance, (ii) a release or
                  threatened release of toxic or hazardous wastes or substances,
                  pollutants or contaminants, from the Property within the
                  meaning of, or otherwise bring the Property within the ambit
                  of, CERCLA, or any similar state law or local ordinance, or
                  (iii) the discharge of pollutants or effluents into any water
                  source or system, the dredging or filling of any waters or the
                  discharge into the air of any emissions, that would require a
                  permit under the Federal Water Pollution Control Act, 33
                  U.S.C. Section 1251 et seq., or the Clean Air Act, 42 U.S.C.,
                  Section 7401 et seq., or any similar state law or local
                  ordinance. No above ground or underground tanks, are located
                  in or about the Real Property. To the extent storage tanks
                  exist on or under the Real Property such storage tanks have
                  been duly registered with all appropriate regulatory and
                  governmental bodies and otherwise are in compliance with
                  applicable Federal, state and local statutes, regulations,
                  ordinances and other regulatory requirements.

         (d)      Compliance with Laws. Seller has not been cited for any
                  violations of any rule, regulation, code, resolution,
                  ordinance, statute or law involving the use, maintenance, or
                  operation or condition of the Property, or any part thereof or
                  installations therein, and the Property fully and duly
                  complies with all applicable resolutions, statutes, laws,
                  rules, regulations, and codes of all governmental units,
                  authorities, agencies, and environmental protection agencies
                  having authority over the Property.

         (e)      Rights of Others to Property. Seller has not entered into any
                  other contracts for the sale of the Property, nor are there
                  any effective rights of first refusal or options to purchase
                  the Property or any other legal or equitable rights of others
                  that might prevent the consummation of this Agreement or the
                  development and use of the Property as Buyer intends.

         (f)      Contracts. All of the Contracts may be cancelled on not more
                  than thirty (30) days notice without premium or penalty except
                  as disclosed on the Disclosure Schedule attached as Exhibit B.

         (g)      Seller's Defaults. To Seller's knowledge, Seller is not in
                  default concerning any of its other obligations or liabilities
                  regarding the Property.

                                       7
<PAGE>

         (h)      FIRPTA. Seller is not a "foreign person," "foreign
                  partnership," "foreign trust" or "foreign estate" as those
                  terms are defined in Section 1445 of the Internal Revenue
                  Code.

         (i)      Proceedings. There is no litigation, condemnation or
                  proceeding of any kind pending or to Seller's knowledge
                  threatened, against any portion of the Property.

         (j)      Assessments. Seller has received no notice of actual or
                  threatened imposition of any special assessment or any
                  reassessment of the Real Property's current real estate tax
                  valuation and, to the best of Seller's knowledge based upon
                  reasonable inquiry as of the date of this Agreement, there are
                  no certified, levied, pending special assessments in excess of
                  $150.00.

Seller will indemnify Buyer, its successors and assigns, against, and will hold
Buyer, its successors and assigns, harmless from, any expenses or damages
including reasonable attorneys' fees, that Buyer incurs because of the breach of
any of the above representations and warranties, whether such breach is
discovered before or after closing. Each of the representations and warranties
herein shall survive the Closing for a period of three years. Consummation of
this Agreement by Buyer with knowledge of any breach of such representations and
warranties by Seller shall not constitute a waiver or release by Buyer of any
claims due to such breach.

         9.       Representations and Warranties by Buyer. Buyer represents and
warrants to Seller that the execution and performance by Buyer of this Agreement
does not violate or contravene any agreement or court order to which Buyer is
bound and that this Agreement and the Buyer's Closing Documents when executed by
Buyer constitute the binding agreement and obligation of Buyer, enforceable
against Buyer in accordance with their terms.

         10.      Damage. If, prior to the Closing Date, all or any part of the
Property is substantially damaged by fire, casualty, the elements or any other
cause, Seller shall immediately give notice to Buyer of such fact and at Buyer's
option (to be exercised within ten (10) days after Seller's notice), this
Agreement shall terminate, in which event neither party will have any further
obligations under this Agreement (except for Buyer's Due Diligence Obligations)
and the Earnest Money shall be refunded to Buyer. If Buyer fails to elect to
terminate despite such damages, or if the Property is damaged, but not
substantially, Seller shall assign to Buyer all right to receive the proceeds of
all insurance related to such damage and the Purchase Price shall remain the
same. For purposes of this Section, the words "substantially damaged" mean
damage that would cost Twenty-five Thousand and no/100 Dollars ($25,000.00) or
more to repair.

         11.      Condemnation. If, prior to the Closing Date, eminent domain
proceedings are commenced against all or any part of the Property, Seller shall
immediately give notice to Buyer of such fact and at Buyer's option (to be
exercised within thirty (30) days after Seller's notice), this Agreement shall
terminate, in which event neither party will have further obligations under this
Agreement and the Earnest Money shall be refunded to Buyer. If Buyer shall fail
to give such notice, there shall be no reduction in the Purchase Price, and
Seller shall assign to Buyer at the Closing Date all of Seller's right, title
and interest in and to any award made or to be made in the condemnation

                                       8
<PAGE>

proceedings. Prior to the Closing Date, Seller shall not designate counsel,
appear in, or otherwise act with respect to the condemnation proceedings without
Buyer's prior written consent.

         12.      Broker's Commission. Seller has retained CB Richard Ellis as
its broker in this transaction. Buyer has retained Remax Results as its broker
in this transaction. Seller is responsible for any commission payable to CB
Richard Ellis, and the parties agree and acknowledge that CB Richard Ellis will
compensate Remax Results pursuant to the terms of a separate agreement. Seller
and Buyer represent and warrant to each other that they have dealt with no other
brokers, finders or the like in connection with this transaction, and agree to
indemnify each other and to hold each other harmless against all other claims,
damages, costs or expenses of or for any fees or commissions resulting from
their separate actions or agreements regarding the execution or performance of
this Agreement, and will pay all costs of defending any action or lawsuit
brought to recover any such fees or commissions incurred by the other party,
including reasonable attorneys' fees.

         13.      Mutual Indemnification. Seller and Buyer agree to indemnify
each other against, and hold each other, harmless from, all liabilities
(including reasonable attorneys' fees in defending against claims) to the extent
arising out of the ownership, operation or maintenance of the Property for their
respective periods of ownership. Such rights of indemnification will not arise
to the extent that (a) the party seeking indemnification actually receives
insurance proceeds or other cash payments directly attributable to the liability
in question, (net of the cost of collection, including reasonable attorneys'
fees) or (b) to the extent that the claim for indemnification arises out of the
act or neglect of the party seeking indemnification. If and to the extent that
the indemnified party has insurance coverage, or the right to make claim against
any third party for any amount to be indemnified against as set forth above, the
indemnified party will, upon full performance by the indemnifying party of its
indemnification obligations, assign such rights to the indemnifying party or, if
such rights are not assignable, the indemnified party will diligently pursue
such rights by appropriate legal action or proceeding and assign the recovery
and/or right of recovery to the indemnifying party to the extent of the
indemnification payment made by such party

         14.      Assignment. Either party may assign its rights under this
Agreement, and shall provide the other party with written notice.

         15.      Notices. Any notices required or permitted to be given
hereunder shall be in writing and shall be effective (i) when delivered
personally, (ii) when received by overnight courier service or facsimile
communications (provided that a copy of such notice is deposited in the United
States mail within one (1) business day of the facsimile transmission) or (iii)
three (3) days after being deposited in the United States Mail (sent certified
or registered, return receipt requested), in each case addressed as follows (or
to such other address as the parties hereto may designate in the manner set
forth herein):

                                       9
<PAGE>

         If to Seller:              Remmele Engineering, Inc.
                                    10 Old Highway 8 SW
                                    New Brighton, MN 55112
                                    Facsimile: (651) 635-4170
                                    Attn: Charles Jungman

                                    Dorsey & Whitney LLP
                                    50 South Sixth Street
                                    Suite 1500
                                    Minneapolis, MN 55402
                                    Facsimile (612) 340-2644
                                    Attn: Robert J. Olson

         If to Buyer:               WSI Industries, Inc.
                                    18151 Territorial Road
                                    Osseo, MN 55369
                                    Facsimile: _____________
                                    Attn: Mike Pudil

         with a copy to:            Lindquist & Vennum P.L.L.P.
                                    4200 IDS Center
                                    80 South Eighth Street
                                    Minneapolis, MN 55402
                                    Facsimile: (612) 371-3207
                                    Attn: Laura L. Krenz

         16.      Captions. The paragraph headings or captions appearing in this
Agreement are for convenience only, are not a part of this Agreement and are not
to be considered in interpreting this Agreement.

         17.      Entire Agreement; Modification. This written Agreement
constitutes the complete agreement between the parties and supersedes any prior
oral or written agreements between the parties regarding the Property. There are
no verbal agreements that change this Agreement and no waiver of any of its
terms will be effective unless in a writing executed by the parties.

         18.      Binding Effect. This Agreement binds and benefits the parties
and their successors and assigns.

         19.      Controlling Law. This Agreement has been made under the laws
of the State of Minnesota, and such laws will control its interpretation.

         20.      Remedies. If Buyer defaults under this Agreement, Seller shall
have the right to terminate this Agreement pursuant to Minnesota Statutes
Section 559.21, and upon such termination Seller will retain the Earnest Money,
and all interest accrued thereon, as liquidated damages, time being of the
essence of this Agreement. Seller's retention of the Earnest Money is Seller's
sole and exclusive remedy in the event of a Buyer default under this Agreement.
If Seller defaults under this

                                       10
<PAGE>

Agreement, Buyer may, as its sole remedy, either (a) terminate this Agreement by
written notice to Seller, whereupon the Earnest Money shall be returned to
Buyer, and recover as damages from Seller Buyer's actual out-of-pocket costs and
fees, including without limitation, reasonable attorneys' fees, accountants'
fees and other consultants' fees incurred by Buyer in preparing and negotiating
this Agreement, preparing for the closing, obtaining financing commitments,
investigating the status, title and condition of the Property, and other similar
and reasonable costs and expenses, or (b) bring an action for specific
performance provided such action must be commenced within twelve (12) months of
Seller's default. If Seller defaults under this Agreement, Buyer shall have no
right to seek damages from Seller for Buyer's loss of its bargain in failing to
acquire the Property.

         21.      Confidentiality. Seller will, from and after the date of this
Agreement, hold the terms of this Agreement in confidence and not disclose it or
the fact this Agreement has been entered into without Buyer's prior written
consent; provided, however, that Seller may disclose the terms of this Agreement
to those parties reasonably necessary to satisfy Seller's obligations under this
Agreement, but then only to the extent reasonably necessary to satisfy Seller's
obligations under this Agreement.

         Seller and Buyer have executed this Agreement as of the date first
written above.

                                   SELLER:

                                   Remmele Engineering, Inc.

                                   By: /s/ Charles Jungmann
                                       -----------------------------------------

                                      Its:

                                   BUYER:

                                   WSI Industries, Inc.

                                   By: /s/ Michael J. Pudil
                                       -----------------------------------------

                                      Its: President and Chief Executive Officer

                                       11

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