EXHIBIT 1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made and entered into as of
this 17th day of March, 1997, by and between Dynamic Homes, Inc., a Minnesota
corporation and Shagawa Resort, Inc., its wholly-owned subsidiary (collect-
ively, "Dynamic"), and Northland Adventures Minnesota, Ltd., a Minnesota cor-
poration (the "Company").
WHEREAS, the Company is engaged in the management of the property commonly
known as Holiday Inn Sun Spree Resort ("Resort") in the City of Ely, Minnesota
(the "Business"); and
WHEREAS, the Company desires to sell substantially all of the assets of
the Business to Dynamic pursuant to the terms, conditions and covenants of this
Agreement, as hereinafter provided; and
WHEREAS, Dynamic desires to purchase substantially all of the assets of
the Business from the Company, as hereinafter provided.
NOW, THEREFORE, in consideration of the premises and of the mutual agree-
ments, representations, warranties, provisions and covenants herein contained,
the parties hereto, each intending to be bound hereby, agree as follows:
1. PURCHASE AND SALE.
1.1 Assets Purchased.
Subject to the terms and conditions of this Agreement and the limitations
of Section 1.2, the Company shall sell to Dynamic, free and clear of all
liens, encumbrances, equities and charges, and Dynamic shall purchase from the
Company, the following assets used by the Company in the operation of the
Business ("Assets"):
(A) Cash on hand not less than $8,382 (excluding cash in the Company
bank accounts);
(B) Accounts receivable not less than $13,892;
(C) All equipment, supplies and inventory purchased for or used in con-
nection with the Business including, but not limited to, the follow-
ing items:
Food Inventory not less than $13,000;
Beverages (Liquor, Pop and Cigarettes) not less than $11,190;
Propane not less than $10,920 (calculated at 87 cents per gallon);
Uniforms not less than $10,000;
Maintenance and Cleaning Supplies not less than $10,000;
Equipment and Tools not less than $43,957.
(D) Prepaid Fees:
St. Louis Count Health Department Fee - $895
City of Ely Liquor License Fee - $963
Liquor Control Fee - $116
(E) All licenses, permits and agreements material to the operation of the
Business, including but not limited to the liquor license and the
Holiday Inn Franchise Agreement to which the Company is a party.
(F) Goodwill; all of the books and records of the Company which pertain
to the Business and to any of the Assets and to suppliers and any
other books, records or accounts which may be reasonably needed by or
reasonably helpful to Dynamic in the operation of the Business, ex-
cept stock records and corporate minute book; provided that the Com-
pany may retain all tax records and shall deliver copies thereof to
Dynamic, as requested by Dynamic in connection with an audit by a
government taxing authority.
Dynamic represents that it has inspected the Assets and has assured itself
that the Assets are in the quantity stated herein and are in good and usable
condition.
1.2 Nonassumption of Liabilities.
Except for accounts payable in the amount of $43,336, as listed on
Schedule 1.2(A), gift certificates in the amount of $14,445, ADU deposits in
the amount of $2,886, payroll obligations to employees of the Resort due on
March 21, 1997, and except for those contract rights and agreements specifi-
cally listed on Schedule 1.2(B), Dynamic will not assume any liability or ob-
ligation of any nature whatsoever, contractual or otherwise, of the Company
by reason of this Agreement, or any of the transactions contemplated hereby,
including but not limited to any other obligations or liability of the Company
to pay taxes (including sales taxes) and any other obligations or liabilities
to employees or agents of the Company or to pension or profit sharing plans or
other entities for their benefit.
1.3 Purchase Price.
The purchase price for the Assets to be sold ("Purchase Price") shall be
$52,543.
Dynamic and the Company agree that each will file its income tax returns
and maintain its income tax records in a manner consistent with the terms of
this Agreement, including the allocation among the Assets of the total consi-
deration paid by Dynamic to the Company, and will not assert or defend a
position in connection with any income tax examination, administrative pro-
ceeding or court proceeding which is inconsistent with the terms thereof.
1.4 Payment of Purchase Price.
At the Closing (as hereinafter defined), the Purchase Price shall be pay-
able by wire transfer of funds or other form of payment acceptable to the
Company.
2. CLOSING PLACE AND ACTIONS AT THE CLOSING.
2.1 Closing Time and Place.
The consummation of the transactions contemplated herein (the "Closing")
shall take place at 2:00 p.m. on March 17, 1997 (the "Closing Date"), at the
offices of Border, Steinbauer & Krueger, Brainerd, Minnesota.
(A) At the Closing, the Company will deliver to Dynamic the following:
(i) a Bill of Sale covering the Assets being purchased hereunder
and assignments of all contract rights and agreements to which
the Company is a party and which are being purchased here-
under, together with such consents to the assignments as might
be necessary;
(ii) all of the books and records of the Company pertaining to the
Assets or to the conduct of the Business, subject to the pro-
visions of Section 1.1(F);
(iii) assignments of all licenses and permits which can assigned and
which are material to the operation of the Business;
(iv) copies of corporate resolutions of the Company, authorizing it
to enter into this Agreement and to consummate the trans-
actions contemplated herein.
(B) At the Closing, Dynamic will deliver to the Company the following:
(i) the Purchase Price, pursuant to Section 1.4 herein; and
(ii) copies of corporate resolutions of Dynamic, authorizing it to
enter into this Agreement and to consummate the transactions
contemplated therein.
(C) At the Closing, Dynamic agrees to execute an assignment and assump-
tion agreement relating to the Assets and contract rights which are
being purchased hereunder.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company makes the following representations and warranties to Dynamic,
each of which is true and correct on the date hereof and shall remain true and
correct up to and including the Closing Date, and the Company agrees that such
representations and warranties shall survive the Closing for the periods pro-
vided in Section 5 of this Agreement:
3.1 Corporate Status.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Minnesota and has full legal and cor-
porate power and has duly taken all required corporate action to enable it to
enter into this Agreement and carry out the transactions required of it
hereunder.
3.2 Validity of Obligations.
This Agreement is valid and legally binding upon the Company, and enforce-
able in accordance with its terms and neither the execution by the Company of
this Agreement, nor the performance by the Company of the various terms and
provisions hereof, will violate the Articles of Incorporation or Bylaws of the
Company or any indenture, license or agreement to which the Company is a party
or by which the Company is bound. Provided, however, that no representation is
being made with respect to the Holiday Inn Franchise Agreement.
3.3 Title to Assets.
Except as reflected in the UCC Search dated March 7, 1997, the Company
owns outright, with good and marketable title thereto, all of the Assets, as
defined in Section 1.1 herein, free and clear of all liens and encumbrances and
the Company has full and complete right and authority to sell, assign and
deliver to Dynamic the Assets without the consent of any third parties or any
governmental authority.
3.4 Litigation, Laws, Adverse Conditions.
Except for the ongoing litigation by and between Dynamic and CAM Project
Management, Inc., there is no litigation or other court or governmental pro-
ceeding pending to the knowledge of the Company, threatened, against or rela-
ting to the Company or any part of the Business or Assets. The Company does
not know or have any reasonable grounds to know of any basis or alleged basis
for any such litigation or proceeding or of any governmental investigation
relative to the Business or Assets. The Company is in material compliance
with all its contracts and, to its knowledge, all federal, state and local
laws (including, but not limited to, wage/hour laws), ordinances, rules, reg-
ulations, governmental permits, judgments and orders applicable to the
Business. No event or condition of any nature which might materially and ad-
versely affect the Business or the Assets has occurred, exists or to the know-
ledge of the Company is anticipated.
3.5 Authority and Consents.
The directors and shareholders of the Company have approved this Agreement
and the transactions contemplated herein and the Company needs no other consent
or action from any other person or entity. This Agreement and the instruments
and documents delivered pursuant hereto have been duly executed and delivered
by the appropriate corporate officers of the Company and have been duly author-
ized by its Board of Directors.
3.6 Notices of Violation.
The Company has received no notice and has no knowledge of any pending no-
tice of violation of any statutes, ordinances, regulations, judicial decrees or
orders, nor the pendency of any lawsuits, administrative or arbitration hear-
ings, or governmental investigations or proceedings affecting the Assets being
purchased hereby.
3.7 Contracts and Agreements.
The Company is party to the contracts and agreements relating to the Busi-
ness and the Assets as set forth on Schedule 3.10, to which a copy of each such
contract is attached. Dynamic does not agree to assume any of such contracts,
except for those contracts and agreements set forth on Schedule 1.2(B).
3.8 Sales and Use Taxes.
The Company has paid all applicable state and municipal sales and use
taxes in connection with the purchase or other acquisition of the Assets and
the operation of the Business.
3.9 Payment of Taxes.
All federal, state and other taxes which related to the Company's conduct
of the Business through the Closing Date have been or will be paid or fully
provided for by the Company, and there is no pending tax claim or dispute on
taxes which might result in a lien against the Assets.
3.10 Full Disclosure.
None of the representations and warranties made by the Company, or made in
any schedule furnished or to be furnished by the Company, contains or will con-
tain any untrue statement of material fact, or omit any material fact, the
omission of which would be misleading.
3.11 Enforcement.
This Agreement is binding upon and enforceable against the Company in ac-
cordance with its terms and is not in violation of any provisions of any judi-
cial, governmental or administrative decree, order, writ, injunction or judg-
ment or in conflict with or will result in the breach of, or constitute a
default under, any mortgage, indenture, contract, agreement, or other instru-
ment to which the Company is a party or by which it might be bound and which
might affect the Business or the Assets being purchased hereby.
3.12 Permits and Licenses.
The Company has all the material permits, licenses, franchises, titles and
any other similar documents material to the operation of the Business (the
"Permits"). The Company represents and warrants that it will cooperate in ob-
taining any third party consent from whom consent must be obtained in order to
effect a transfer to Dynamic of the Permits acquired as a result of the trans-
actions contemplated in this Agreement. The Permits are adequate for the
operation of the Business as presently constituted and are valid and in full
force and effect.
3.13 Knowledge.
Wherever reference is made in this Agreement to the "knowledge" of the
Company, such term means the actual knowledge of the officers, directors or
shareholders of the Company or any knowledge which should have been known by
the officers, directors or shareholders of the Company upon reasonable inquiry
by a reasonable business person.
4. WARRANTIES AND REPRESENTATIONS OF DYNAMIC
4.1 Corporate Status.
Dynamic hereby represents and warrants to the Company that it is a corpo-
ration duly organized, validly existing and in good standing under the laws of
the State of Minnesota and that it has full legal and corporate power and has
duly taken all required corporate action to enable it to enter into this Agree-
ment and carry out the transactions required of it hereunder.
4.2 Validity of Obligations.
This Agreement is valid and legally binding upon Dynamic, and enforceable
in accordance with its terms and neither the execution by Dynamic of this
Agreement, nor the performance by Dynamic of the various terms and provisions
hereof, will violate the Articles of Incorporation or Bylaws of Dynamic or any
indenture or agreement to which it is a party or by which it is bound.
5. INDEMNIFICATION
5.1 The Company's Indemnities.
Subject to the provisions of Section 5 herein, the Company covenants and
agrees that it will indemnify and hold harmless Dynamic and its directors, of-
ficers, agents, parents, subsidiaries, successors and assigns (singularly
"Dynamic Indemnitee" and plural "Dynamic Indemnitees"), from and after the date
of this Agreement, against any and all losses, damages, assessments, adjust-
ments, liabilities, claims, deficiencies, fines, penalties, costs, expenses
(including specifically, but without limitation, reasonable attorneys' fees and
expenses of investigation) (hereinafter referred to as "Dynamic Losses") aris-
ing out of or with respect to either of the following:
(A) Any misrepresentation, breach of warranty or nonfulfillmint of any
agreement or covenant on the part of the Company under this Agreement
or any misrepresentation in or omission from any exhibit, schedule,
list, certificate or other instrument furnished to Dynamic pursuant
to the terms of this Agreement, regardless of whether, in the case of
a breach of a representation or a warranty, Dynamic relied on the
truth of such representation or warranty or had any knowledge of any
breach thereof.
(B) Any claim for payment of fees and/or expenses by a broker or finder
in connection with the origin, negotiation, execution or consummation
of this Agreement based upon any alleged agreement between the claim-
ant and the Company.
(C) Any claim arising out of the Company's operation of the Business
prior to the Closing Date (excluding claims relating to the liabili-
ties being assumed pursuant to Section 1.2 hereof).
5.2 Limitation of the Company's Indemnities.
The obligation of the Company to indemnify the Dynamic Indemnitees as pro-
vided in Section 5.1 herein shall be equal to the amount of all Dynamic Losses,
but such obligation of the Company to indemnify the Dynamic Indemnitees shall
not exceed, in the aggregate, the Purchase Price.
5.3 Dynamic's Indemnities.
Subject to Section 5.4 herein, Dynamic covenants and agrees to indemnify
and hold harmless the Company and its respective directors, officers, agents,
successors and assigns (the "Company's Indemnitees"), from and after the date
of this Agreement, against any and all losses, damages, assessments, adjust-
ments, liabilities, claims, deficiencies, fines, penalties, costs, expenses
(including specifically, but without limitation, reasonable attorneys' fees and
expenses of investigation) (herein collectively referred to as the "Company's
Losses") arising out of or with respect to any of the following:
(A) Any breach of representation or warranty or post-closing covenant by
Dynamic under this Agreement; or
(B) Any claim for payment of fees and/or expenses as a broker or finder
in connection with the origin, negotiation, execution or consummation
of this Agreement based upon any alleged agreement between the claim-
ant and Dynamic; or
(C) Any claim arising out of Dynamic's operation of the Business after
the Closing Date.
5.4 Notice of Indemnity Claim.
(A) In the event that any claim ("Claim") is hereafter asserted against
any party hereto as to which such party may be entitled to indemnifi-
cation hereunder, such party (the "Indemnitee") shall notify the
party required by the terms of this Agreement to indemnify the Indem-
nitee (the "Indemnifying Party") in writing thereof (the "Claims
Notice") within 30 days after (i) receipt of written notice of com-
mencement of any third party litigation against such Indemnitee,
(ii) receipt by such Indemnitee of written notice of any third party
claim pursuant to an invoice, notice of claim or assessment, against
such Indemnitee, or (iii) such Indemnitee becomes aware of the exis-
tence of any other event, in respect of which indemnification may be
sought from the Indemnifying Party. The Claims Notice shall describe
the Claim and the specific facts and circumstances in reasonable de-
tail, and shall indicate the amount, if known, or an estimate, if
possible, of the Dynamic Losses or the Company's Losses, as the case
may be, that have been or may be incurred or suffered by the Dynamic
Indemnitee(s) or the Company's Indemnitee(s), as the case may be.
(B) The Indemnifying Party may elect to defend and/or compromise any
Claim, at its own or his own expense and by its or his own counsel
(who shall be reasonably acceptable to the Indemnitee), provided that
the Indemnifying Party acknowledges that it or he has an obligation
to indemnify the Indemnitee. The Indemnitee may participate, at its
or his own expense, in the defense of any Claim assumed by the Indem-
nifying Party. Without the written approval of the Indemnitee, which
approval shall not be unreasonably withheld, the Indemnifying Party
shall not agree to compromise of a Claim defended by the Indemnifying
Party which would require the Indemnitee to perform or take any
action or to refrain from performing or taking any action, other than
the payment of money.
(C) If, within 30 days of the Indemnifying Party's receipt of a Claim
Notice, the Indemnifying Party shall not have notified the Indemnitee
of its or his election to assume the defense, the Indemnitee shall
have the right to assume control of the defense and/or compromise of
such Claim, and the costs and expenses of such defense, including
reasonable attorneys' fees, shall be added to the Claim. If the
Indemnitee does not elect to assume the defense of any Claim, it or
he may give written notice to the Indemnifying Party of its or his
intent not to do so, in which event the Indemnifying Party shall
assume control of the defense and/or compromise of such Claim, sub-
ject to the right of the Indemnitee to participate, at its or his
expense, in the defense against or compromise of such Claim.
(D) The party assuming the defense of any Claim shall keep the other
party reasonably informed at all times of the progress and develop-
ment of its or his defense of and compromise efforts with respect to
such Claim and shall furnish the other party with copies of all rele-
vant pleadings, correspondence and other papers. In addition, the
parties to this Agreement shall cooperate with each other, and make
available to each other and their representatives all available rele-
vant records or other materials required by them for their use in
defending, compromising or contesting any Claim. The failure to
timely notify the Indemnifying Party of the commencement of such ac-
tions in accordance with this Section 5.4 shall relieve the Indemni-
fying Party from the obligation to indemnify under Section 5 herein,
but only to the extent the Indemnifying Party establishes by compe-
tent evidence that it or he is prejudiced thereby.
5.5 Survival of Representations, Warranties and Agreements.
The representations and warranties of the parties contained in this Agree-
ment and in any certificate, exhibit or schedule delivered pursuant hereto, or
in any other writing delivered pursuant to the provisions of this Agreement
(the "Representations and Warranties") and the liability of the party making
such Representations and Warranties for breaches thereof, shall survive the
consummation of the transactions contemplated hereby for two years from the
Closing Date with respect to any matter giving rise to Dynamic Losses and the
Company's Losses resulting from breaches of the Representations and Warranties;
provided that the Representations and Warranties and the liability of the party
making such Representations and Warranties for breaches thereof shall also sur-
vive until the resolution of any litigation commenced by the Dynamic
Indemnitee(s) or the Company's Indemnitee(s) to recover indemnity therefor.
The parties hereto in executing and delivering and in carrying out the provi-
sions of this Agreement are relying solely on the representations, warranties,
schedules, exhibits, agreements and covenants contained in this Agreement, or
in any writing or document delivered pursuant to the provisions of this Agree-
ment, and not upon any representation, warranty, agreement, promise or informa-
tion, written or oral, made by any persons other than as specifically set forth
herein or therein.
6. MISCELLANEOUS PROVISIONS
6.1 Applicable Law.
This Agreement was entered into, and shall be controlled by, and construed
and enforced in accordance with the laws of the State of Minnesota.
6.2 Termination of All Prior Agreements.
All prior agreements pertaining to management of the Holiday Inn Sun Spree
Resort, including specifically the Management Agreement by and between Shagawa
Resort, Inc. and the Company dated September 7, 1995 and the Stock Purchase and
Sale Agreement and Option to Repurchase Stock between and among Gary Loge, Phil
Swanson, Gary Otterstad, Dynamic Homes, Inc. and the Company, dated September
7, 1995, are hereby canceled and terminated in their entirety by this Agree-
ment. Dynamic agrees that any outstanding amounts owing to Dynamic by the Com-
pany pursuant to the Management Agreement shall be canceled and forgiven in
their entirety as of the Closing Date. Dynamic also agrees to pay the current
real estate taxes due and payable May 15, 1997 (excluding any amounts owing due
to interest, penalties or arrearages which accrued prior to the Closing Date)
and any amounts which may be due as a result of the ongoing insurance audit.
6.3 No Collateral Agreements or Modifications.
This Agreement embodies the entire agreement and understanding between the
parties hereto and supersedes all prior agreements and understandings relating
to the subject matter hereof. No change, modification of or addition to this
Agreement shall be valid unless in writing and signed by the parties hereto.
6.4 Notices.
All notices, requests, demands and other communications hereunder shall be
deemed to have been given if in writing and either delivered personally, sent
by facsimile transmission or by air courier service, or mailed by postage pre-
paid registered or certified U.S. mail, return receipt requested, to the
addresses designated below or such other addresses as may be designated in
writing by notice given hereunder, and shall be effective upon personal deli-
very or facsimile transmission thereof or upon delivery by registered or cer-
tified U.S. mail or one business day following deposit with an air courier
service:
If to the Company: Northland Adventures Minnesota, Ltd.
c/o Gary Loge
HC86 Box 3560
Merrifield, MN 56465
With a copy to: Alan W. VanDellen, Esq.
Leonard, Street and Deinard
150 South Fifth Street, #2300
Minneapolis, MN 55402
If to Dynamic: Dynamic Homes, Inc.
c/o Glenn R. Anderson
525 Roosevelt Avenue
Detroit Lakes, MN 56501
With a copy to: James H. Lockhart, Esq.
Lommen, Nelson, Cole & Stageberg, P.A.
1800 IDS Center
80 South Eighth Street
Minneapolis, MN 55402
6.5 Benefit.
The rights and obligations created hereunder shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns.
6.6 Announcements.
Except as required by law, no party shall make any public announcement or
filing with respect to the transactions provided for herein without the prior
consent of the other party hereto.
6.7 Payment of Fees and Expenses.
Whether or not the transactions herein contemplated shall be consummated,
each party hereto will pay its own fees, expenses and disbursements incurred in
connection herewith and all other costs and expenses incurred in the perform-
ance and compliance with all conditions to be performed hereunder.
6.8 Counterparts.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original.
IN WITNESS THEREOF, the parties hereto have duly executed this Agreement
as of the date first above written.
DYNAMIC HOMES, INC.
By: GLENN R. ANDERSON
Its: President
NORTHLAND ADVENTURES MINNESOTA, LTD.
By: GARY L. LOGE
Its: President
SHAGAWA RESORT, INC.
By: GLENN R. ANDERSON
Its: President