WSI INDUSTRIES, INC. (Form: 8-K, Received: 05/22/2017 09:25:48)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (date of earliest event reported): May 19, 2017

WSI Industries, Inc.

(Exact name of Registrant as Specified in its Charter)

Minnesota

(State Or Other Jurisdiction Of Incorporation)

000-00619

41-0691607

(Commission

File Number)

(I.R.S. Employer

Identification No.)

213 Chelsea Road

Monticello, MN

55362

(Address Of Principal Executive Offices)

(Zip Code)

(763) 295-9202

Registrant’s Telephone Number, Including Area Code

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

[ ]	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ]	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ]	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ]	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Items under Sections 1 through 4 and 6 through 8 are not applicable and therefore omitted.

ITEM 5.02

DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS

On May 19, 2017, WSI Industries, Inc. (the “Company”) appointed Michael J. Pudil as the Company’s President and Chief Executive Officer to succeed Benjamin T. Rashleger. Also on May 19, 2017, Mr. Rashleger resigned as a director. Mr. Pudil will continue to serve on the Board of Directors as its Chairman. The Company issued a press release on May 22, 2017 relating to the transition of the President and Chief Executive Officer position, which press release is furnished hereto as Exhibit 99.1.

Michael J. Pudil, age 68, has served as a director of the Company since 1993 and is the Chairman of the Board of Directors. Mr. Pudil also served as the Company’s Chief Executive Officer from 1993 until December 31, 2011. Prior to joining the Company, Mr. Pudil was Vice President and General Manager of Remmele Engineering, Inc., a privately-held contract machining company located in St. Paul, Minnesota.

On May 19, 2017, the Company and Mr. Pudil entered into an offer letter agreement (the “offer letter”) pursuant to which Mr. Pudil agreed to serve as the Company’s President and Chief Executive Officer effective as of May 19, 2017. The Compensation Committee of the Board of Directors recommended, and the Board of Directors approved, the compensation to Mr. Pudil under the offer letter, which is attached hereto as Exhibit 10.1. The offer letter provides that Mr. Pudil’s compensation as President and Chief Executive Officer will consist of a base salary of $150,000 for the one-year period beginning May 19, 2017 and stock option and restricted stock awards under the Company’s 2005 Stock Plan granted on May 19, 2017. In addition, Mr. Pudil and the Company entered into a severance and change of control letter agreement (the “Letter Agreement”) by which the Company agreed to pay Mr. Pudil’s an amount equal to his base salary for the remainder of the one-year period ending May 19, 2018 if Mr. Pudil’s employment were terminated during that period by the Company without cause, by Mr. Pudil for good reason following a change of control or by reason of Mr. Pudil’s death or disability. Under these same circumstances, the vesting and lapse of restrictions on the stock option and restricted stock awards granted to Mr. Pudil on May 19, 2017 will accelerate. The foregoing summary of the Letter Agreement does not purport to be complete and is subject to and qualified in its entirety by reference to the Letter Agreement, which is attached hereto as Exhibit 10.2 and is incorporated herein by reference.

To implement the provisions of the severance letter agreement with Mr. Rashleger dated October 20, 2011 (the “Severance Agreement”), the Company and Mr. Rashleger entered into a separation letter agreement dated May 19, 2017 (the “Separation Agreement”). By the Separation Agreement, the parties agreed that Mr. Rashleger’s employment with the Company will terminate May 19, 2017, the Company provided the form of general release in favor of the Company that Mr. Rashleger is obligated to deliver as a condition of the benefits of the Severance Agreement, and the parties agreed that Mr. Rashleger would be entitled to the benefits under the Severance Agreement for a termination without cause. The foregoing summary of the Separation Agreement does not purport to be complete and is subject to and qualified in its entirety by reference to the Separation Agreement, which is attached hereto as Exhibit 10.3 and is incorporated herein by reference.

ITEM 9.01

FINANCIAL STATEMENTS AND EXHIBITS.

Exhibit No.		Description

10.1		Offer Letter Agreement dated May 19, 2017 by and between WSI Industries, Inc. and Michael J. Pudil.

10.2		Severance and Change of Control Letter Agreement dated May 19, 2017 by and between WSI Industries, Inc. and Michael J. Pudil.

10.3		Separation Letter Agreement dated May 19, 2017 by and between WSI Industries, Inc. and Benjamin T. Rashleger.

99.1		Press release issued by WSI Industries, Inc. on May 22, 2017.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	WSI INDUSTRIES, INC.

	By:	/s/ Paul D. Sheely
		Paul D. Sheely
		Vice President, Finance & CFO

Date: May 22, 2017

EXHIBIT 10.1

WSI Industries, Inc.

213 Chelsea Road

Monticello, MN 55362

May 19, 2017

Via Email Only to : Mr. Michael J. Pudil

Dear Mike,

On behalf of the Board of Directors, we are pleased to offer you the position of President and Chief Executive Officer. Below are the terms of this full time offer of employment. We would like you to begin serving in this role on May 19, 2017.

Your base salary will be $150,000, paid in accordance with the Company’s current payroll practices, subject to regular withholdings, for the one-year period beginning May 19, 2017. You will not participate in any cash incentive compensation plan for fiscal 2017. Unless otherwise determined by the Compensation Committee in its discretion, your compensation as a director and as Chairman of the Board will not change following your appointment as President and Chief Executive Officer.

As an executive officer of WSI Industries, WSI Industries is willing to enter into an agreement with you relating to severance and change in control benefits (the “Letter Agreement”), a copy of which is attached to this offer letter. Neither this offer letter nor the Letter Agreement is an agreement for a term of employment. Your employment is “at will” and may be terminated by you or WSI Industries at any time with or without cause, subject to the benefits of the Letter Agreement. There are no express or implied agreements to the contrary.

The benefits package will be per the standard employee plan.

You will be granted on your first day of employment two awards under the Company’s 2005 Stock Plan, as amended (the “Plan”). These awards are summarized as follows:

Stock Option Award: A ten year non-qualified stock option (with tandem stock appreciation rights) for 50,000 shares of common stock of WSI Industries. The stock option will vest and become exercisable in two equal installments of 25,000 shares on the grant date and on the 6 month anniversary of the grant date subject to the condition that you have been providing continuous service to WSI Industries as a director, employee or consultant on such vesting date and subject to accelerated vesting as provided in the Letter Agreement. The exercise price of the option will be the fair market value of the Company’s common stock on the date of grant determined in accordance with the Plan. The stock option will be governed by the Plan and a stock option agreement under the Plan that will be provided to you following the grant date.

Restricted Stock Award: An award of 50,000 shares of restricted stock. The restrictions on the restricted stock will lapse in two equal installments of 25,000 shares on the grant date and on the 6 month anniversary of the grant date subject to the condition that you have been providing continuous service to WSI Industries as a director, employee or consultant on such date of lapse and subject to accelerated lapse of restrictions as provided in the Letter Agreement. The restricted stock award will be governed by the Plan and a restricted stock award agreement under the Plan that will be provided to you following the grant date.

An attached Restrictive Covenant Agreement, signed by you, will be required as a condition of employment.

Mike, we look forward to you re-joining WSI Industries and to your future contributions.

Sincerely,

/s/ Jack R. Veach

Jack R. Veach

Chair of the Compensation Committee of the

Board of Directors of WSI Industries, Inc.

Accepted and agreed to:

/s/ Michael J. Pudil
Michael J. Pudil

EXHIBIT 10.2

WSI Industries, Inc.

213 Chelsea Road

Monticello, MN 55362

May 19, 2017

Via Email Only to : Mr. Michael J. Pudil

Dear Mike,

The purpose of this letter agreement (the “Letter Agreement”) is to set forth the agreement between you and WSI Industries, Inc. (“WSI”) in regard to severance and change of control matters. Although your employment is “at will” and may be terminated by you or WSI at any time for any reason, WSI has agreed to provide you with the benefit set for in this Letter Agreement. Terms not otherwise defined in this Letter Agreement shall have the meaning given such terms on Schedule 1, which is incorporated herein by reference.

Specifically, we have agreed as follows:

1.	Severance .

(a)

For the purposes of this Letter Agreement, the following terms shall have the following respective meanings:

(i) “Date of Termination” shall mean the date specified in the Notice of Termination; provided that, (A) in the case of a termination pursuant by WSI for Cause, such date shall not be less 10 days following the date such Notice of Termination is given; (B) in the case of a termination by you for Good Reason following a Change in Control, such date shall not be less than 10 nor more than 30 days following the date such Notice of Termination is given; and (C) in the case of a termination pursuant by WSI for Disability, such date shall not be less 30 days following the date such Notice of Termination is given (provided that you shall not have returned to the full-time performance of the your duties during such 30 day period).

(ii) “Notice of Termination” shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth the facts and circumstances claimed to provide a basis for termination of your employment.

(iii) “Severance Period” shall mean the one year period beginning on the date of this Letter Agreement.

	(b)	If (i) your employment is terminated by WSI without Cause during the Severance Period, (ii) a Change in Control shall occur during the Severance Period and your employment is terminated by you for Good Reason within sixty (60) days after the Change of Control or (iii) your employment is terminated during the Severance Period by reason of your death or Disability, subject to the condition stated in Section 1(d), WSI will pay you a lump sum amount within sixty (60) days of termination of your employment equal to the pro rata portion of your base salary for the remainder of the Severance Period, subject to applicable tax withholding. In addition, upon a termination of employment described in clauses (i), (ii) or (iii), the stock option granted to you on May 19, 2017 shall vest in full on the Date of Termination and all restrictions on the restricted stock award granted to you on May 19, 2017 shall lapse in full on the Date of Termination, to the extent not already vested or lapsed as of such date.

	(c)	If you resign for any reason other than for Good Reason following a Change of Control or if WSI terminates your employment for Cause, you shall be entitled to receive your base salary accrued but unpaid as of the Date of Termination, but shall not be entitled to receive any severance or salary continuation benefit thereafter.

	(d)	In case of termination as provided in Section 1(a), you shall be entitled to receive the amounts due you under Section 1(a) only upon your execution and delivery to WSI of a general release (and following termination of all rescission periods) with respect to any and all claims against WSI and its officers, directors, employees, agents and shareholders, acceptable in form and substance to WSI in all respects, and provided you continue to comply with the terms of the Restricted Covenant Agreement with WSI.

	(e)	For purposes of this Agreement, “termination of employment” shall be interpreted consistent with the term “separation from service” within the meaning of Treas. Reg. §1.409A-1(h), except that your service as a member of the Board of Directors of WSI (and any entity that is part of a controlled group of which WSI is a member) shall be disregarded in determining whether a separation from service has occurred.

Dispute of Termination . If, within 10 days after any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party in good faith that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, or by a final judgement, order or decree of a court of competent jurisdiction in accordance with Section 3 (which is not appealable or the time for appeal therefrom having expired and no appeal having been perfected); provided , that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, WSI shall continue to pay you full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base salary) and continue you as a participant in all compensation, benefit and insurance plans in which you were participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this Section. Amounts paid under this Section are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts under this Agreement. Such payment shall continue while you are either performing services for WSI or are willing and able to provide services during the period of such dispute, and no “separation from service” shall occur during such period.

3.	Funding of Payments . In order to assure the performance by WSI or its successor of its obligations under this Agreement, WSI shall, no later than immediately prior to the closing of the transaction that constitutes an Unapproved Change in Control, deposit in a so-called “rabbi trust” or similar escrow arrangement an amount equal to the maximum payment that will be due you under the terms hereof. Under a written trust instrument, the trustee shall be instructed to pay to you (or your legal representative, as the case may be) the amount to which you shall be entitled under the terms hereof, and the balance, if any, of the trust not so paid or reserved for payment shall be repaid to WSI. If and to the extent there are not amounts in trust sufficient to pay you under this Agreement, WSI shall remain liable for any and all payments due to you. In accordance with the terms of such trust, at all times during the term of this Agreement you shall have no rights, other than as an unsecured general creditor of WSI, to any amounts held in trust and all trust assets shall be general assets of WSI and subject to the claims of creditors of WSI. With respect to an Approved Change in Control, WSI’s obligations in this Section 3 shall not be mandatory but rather shall be permissive.

4.	Arbitration . All disputes or claims arising out of or in any way related to this Letter Agreement, including the making of this Letter Agreement, shall be submitted to and determined by final and binding arbitration under the American Arbitration Association Rules for Resolution of Employment Disputes. Arbitration proceedings may be initiated by either of us upon notice to the other and to the American Arbitration Association, and shall be conducted by one arbitrator in Minneapolis, Minnesota who has experience in employment matters. Unless we agree to have the person to serve as arbitrator within thirty (30) days of delivery of the list of proposed arbitrators by the American Arbitration Association, then, at the request of either of us, the single arbitrator shall be selected at the discretion of the American Arbitration Association. The arbitrator shall provide a reasoned decision and may award any remedy available at law or equity, including reasonable attorneys’ fees to the prevailing party (subject to the paragraph below). WSI shall pay the costs of the arbitrator. The decision of the arbitrator shall be enforceable in any court of competent jurisdiction.

	In the event WSI fails to pay you any amounts owing to you under this Agreement or to provide you any benefits to which you are ultimately determined, by settlement, mediation, arbitration, or by any court or other decision making body with jurisdiction, to be entitled to under this Agreement, WSI shall pay the legal expenses (including reasonable attorneys’ fees, court costs and other out-of-pocket expenses), incurred by you to enforce your rights under this Agreement and collect or obtain such amounts or benefits.

5.	Entire Agreement . This Letter Agreement constitutes our entire agreement and supersedes all prior discussions, understandings and agreements with respect to the severance and change in control benefits which WSI has agreed to provide to you. This Letter Agreement shall be governed and construed by the laws of the State of Minnesota and may be amended only in writing signed by both of us.

6.	Successors . This Letter Agreement shall not be assignable, in whole or in part, by you. This Letter Agreement shall be binding upon and inure to the benefit of WSI and its successors and assigns and upon any person acquiring, by merger, consolidation, purchase of assets or otherwise, all or substantially all of the assets and business of WSI, and the successor shall be substituted for WSI under this Letter Agreement. WSI will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of WSI to expressly assume and agree to perform this Agreement in the same manner and to the same extent that WSI would be required to perform it if no such succession had taken place. Failure of WSI to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle you to compensation from WSI in the same amount and on the same terms as you would be entitled hereunder if you terminated your employment for Good Reason following a Change in Control, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination.

7.	Amendment and Termination . It is the intention of the parties that this Agreement be exempt from Code §409A as separation pay to the greatest extent possible. Accordingly, all provisions herein shall be construed and interpreted consistent with that intent, but that, to the extent any payment constitutes nonqualified deferred compensation, WSI shall amend any such provision pertaining to such payment to comply with Code §409A and the regulations thereunder, in the least restrictive manner necessary without any diminution in the value of the payments to you.

8.	Delay for Specified Employees . Notwithstanding the foregoing, if on the date of your “separation from service” (within the meaning of Treas. Reg. §1.409A-1(h)), you are a “specified employee” within the meaning of Treas. Reg. §1.409-1(i), then payment of any amount under this Agreement that constitutes nonqualified deferred compensation shall be delayed until the earlier of (i) the first day of the seventh month following your separation from service provided that WSI has receive an executed release from you as provided in Section 1(d), (ii) the first date on which such payment would not be non-deductible as a result of Section 162(m) of the Code, or (iii) your death and in the event any such payment is so delayed, the amount of the first payment shall be increased for interest earned on the delayed payment based upon interest for the period of delay, compounded annually, equal to the prime rate (as published in the Wall Street Journal) in effect as of the date the payment should otherwise have been provided. Notwithstanding the foregoing, in the event any such payment is delayed, WSI will deposit, no later than the effective date of the Change in Control, an amount equal to the aggregate of all delayed payments into the so-called “rabbi trust” referred to in Section 3 to be paid in accordance with the terms of this Agreement.

If this Letter Agreement accurately sets forth our agreement and understanding in regard to these matters, will you please sign this Letter Agreement where indicated below and return the executed letter to me for our files. A separate copy is enclosed for your records.

WSI INDUSTRIES, INC.

/s/ Jack R. Veach
Jack R. Veach
Chair of the Compensation Committee of the
Board of Directors of WSI Industries, Inc.

READ AND AGREED:

/s/ Michael J. Pudil
Michael J. Pudil

Dated as of May 19, 2017

SCHEDULE 1

Definition of “Cause”:

(i) your willful and continued failure to perform your essential duties;

(ii) the willful engaging by you in illegal conduct; or

(iii) willful misconduct materially injurious to WSI

which, in the case of clause (i) and (iii), you have not cured, in the sole opinion of the Board of Directors, determined in good faith, within 10 days of receipt of the Notice of Termination.

Your act shall not be deemed “willful” unless done or omitted to be done by you not in good faith and without reasonable belief that the act or omission was in WSI’s best interests.

Definition of “Change in Control”:

A “Change in Control” of WSI shall be deemed to occur when and if any of the following occur:

(i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of WSI representing 50% or more of the combined voting power of WSI’s then outstanding securities;

(ii) there ceases to be a majority of the Board of Directors comprised of: (A) individuals who on the date hereof constituted the Board of WSI, and (B) any new director (other than a director whose initial assumption of office is in connection with an actual or threatened contest, including but not limited to a proxy or consent solicitation, relating to the election of directors of WSI or a settlement of such contest or consent solicitation) who subsequently was elected or nominated for election by a majority of the directors who held such office immediately prior to a Change in Control (the individuals designated in (A) and (B) shall be referred to as the “Incumbent Directors”); or

(iii) WSI disposes of at least 75% of its assets, other than to an entity owned 50% or greater by WSI or any of its subsidiaries.

A Change in Control which arises from a transaction or series of transactions which are not authorized, recommended or approved by formal action taken by a majority of the Incumbent Directors shall be referred to as an “Unapproved Change in Control.” A Change in Control which has been authorized, recommended or approved by a majority of the Incumbent Directors shall be referred to as an “Approved Change in Control.” The formal action to approve (or the failure to approve) a transaction by a majority of disinterested Directors shall constitute the objective determination of an “Approved Change in Control” or “Unapproved Change in Control.”

Definition of “Disability”

If, as a result of incapacity due to physical or mental illness, you shall have been absent from the full-time performance of your duties with WSI for six consecutive months, and within 30 days after written Notice of Termination is given you shall not have returned to the full-time performance of the your duties, WSI may terminate your employment for “Disability.” Any question as to the existence of your Disability upon which you and WSI cannot agree shall be determined by a qualified independent physician selected by you (or, if you are unable to make such selection, it shall be made by any adult member of the your immediate family), and approved by WSI. The determination of such physician made in writing to WSI and to you shall be final and conclusive for all purposes of this Agreement. Further, the term “Disability” shall have the meaning under Treas. Reg. § 1.409A-3(i)(4).

Definition of “Good Reason”:

(i) the assignment to you of any duties inconsistent with your status or position with WSI, or a substantial reduction in the nature or status of your responsibilities from those in effect immediately prior to the Change in Control;

(ii) a reduction by WSI in your annual base salary in effect immediately prior to a Change in Control;

(iii) the relocation of WSI’s principal executive offices to a location more than fifty miles from WSI’s principal office prior to the Change in Control, except for required travel on WSI’s business to an extent substantially consistent with your prior business travel obligations;

(iv) the failure by WSI to continue to provide you with benefits substantially similar to those enjoyed by you under any of WSI’s pension, life insurance, medical, health and accident, disability, deferred compensation, incentive awards, incentive stock options, or savings plans in which you were participating at the time of the Change in Control, the taking of any action by WSI which would directly or indirectly materially reduce any of such benefits or deprive you of any material fringe benefit enjoyed at the time of the Change in Control, or the failure by WSI to provide you with the number of paid vacation days to which you are entitled at the time of the Change in Control, provided, however, that WSI may amend any such plan or programs as long as such amendments do not reduce any benefits to which you would be entitled upon termination;

(v) the failure of WSI to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 6; or

(vi) if an Unapproved Change in Control occurs.

EXHIBIT 10.3

May 19, 2017

Via Hand Delivery to Benjamin T. Rashleger

Dear Benji:

This letter (“Agreement”) describes our agreement regarding the separation of your employment with WSI Industries, Inc. (“WSI Industries” or the “Company”), effective May 19, 2017 and to specify the terms of the general release you are obligated to provide pursuant to Section 1(c) of the severance letter agreement between you and the Company dated October 20, 2011 (the “Severance Letter Agreement”).

Capitalized terms used but not defined in this Agreement have the meanings ascribed to them in the Severance Letter Agreement.

1. Separation of Employment; Resignation as Director . Your employment with the Company will end effective May 19, 2017 without further action by either you or WSI Industries. For the purposes of the Severance Letter Agreement, the separation of your employment effective May 19, 2017 will be considered a termination without Cause. Effective May 19, 2017, you also resign as a director of the Company and from any position you hold with any subsidiary of the Company and have deliver a resignation letter to the Board of Directors to the foregoing effect.

2. Severance and Benefits . The Company will pay to you the severance and provide the other benefits described in Section 1(a) of the Severance Letter Agreement only if you sign and deliver, following the termination of your employment but on or before the 21 ^st day thereafter and you do not rescind or revoke, a release of claims attached to this Agreement as Exhibit A (the “Release”). The payments of the amounts specified in the Severance Letter Agreement will begin within twenty (20) days of the expiration of any right you have to rescind or revoke the properly executed, delivered and accepted Release.

In consideration for the benefits outlined above, you agree to the following:

3. Consideration Period . You may review this Agreement with an attorney of your choosing and are hereby advised to do so. You have 21 calendar days from the date you receive this Agreement to consider whether you wish to sign it. You acknowledge that if you sign this Agreement before the end of the 21 calendar day period, it is your voluntary decision to do so, and you waive the remainder of the 21 calendar day period.

4. Other Agreements . You acknowledge and agree that the Restrictive Covenant Agreement dated as of October 12, 2009 by and between the Company and you (the “Restrictive Covenant Agreement”) remains in full force and effect. You hereby affirm your continuing obligations to the Company under the Restrictive Covenant Agreement, including the confidentiality, non-compete and non-solicit obligations as described therein. You agree that the Employment (Change in Control) Agreement dated October 12, 2009 is hereby terminated and is of no further force or effect as of the date hereof.

5. Non-Disparagement . You agree you will not defame or disparage the reputation, character, image, products or services of the Company, or the reputation or character of the Company’s directors, officers, employees or agents. The Company will direct its officers and directors not to defame or disparage your reputation or character. Nothing in this Section will be construed to limit or restrict you or the Company from taking any action that such party in good faith reasonably believes is necessary to fulfill such party’s fiduciary obligations to the Company or from providing truthful information in connection with any legal proceeding, government investigation or other legal matter.

This Agreement shall not in anyway be construed as an admission by WSI Industries of any liability or unlawful conduct whatsoever.

In the event that any provision of this Agreement is found to be illegal or unenforceable, such provision shall be severed or modified to the extent necessary to make it enforceable, and as so severed or modified, the remainder of this Agreement shall remain in full force and effect. This Agreement shall be governed and construed in accordance with laws of the state of Minnesota, other than its law dealing with conflicts of law.

No amendment or modification of this Agreement will be effective unless made in writing and signed by you and WSI Industries. This Agreement, the Restrictive Covenant Agreement, the Severance Letter Agreement, any written stock option agreements and restricted stock award agreements to which you and the Company are parties, and the employee benefit plans sponsored by the Company in which you are a participant are intended to define the full extent of the legally enforceable undertakings of the parties, and no promises or representations, written or oral, that are not set forth or referenced explicitly in this Agreement, such other agreements or such other plans are intended by either party to be legally binding. You are not eligible for any other payment or benefits except for those expressly described in this Agreement as provided under the Severance Letter Agreement, provided that you sign and do not rescind the Release.

By signing this Agreement, you acknowledge that you have read this Agreement, including the Release. By signing, you also acknowledge and agree that you have entered into this Agreement knowingly and voluntarily and knew that you could consult with any attorney regarding this Agreement.

If you agree to the terms and conditions of this Agreement, please sign and return the signed Agreement to me, keeping a copy for yourself.

	Sincerely,

	WSI Industries, Inc.

	By:	/s/ Jack R. Veach
		Jack R. Veach
		Chair of the Compensation Committee of the
		Board of Directors of WSI Industries, Inc.

I, Benjamin T. Rashleger have read and understand and agree to the terms and conditions set forth above and have signed this Agreement dated May 19, 2017 voluntarily and with full knowledge and understanding of its meaning.

Dated May 19, 2017

	/s/ Benjamin T. Rashleger
	Benjamin T. Rashleger

EXHIBIT A

RELEASE BY BENJAMIN T. RASHLEGER

THIS RELEASE AGREEMENT (the “Release Agreement” or the “Release”) is entered into as of the date indicated below by Benjamin T. Rashleger for the benefit of WSI Industries and the Company (each as defined below).

Definitions . I intend all words used in this Release to have their plain meanings in ordinary English. Specific terms that I use in this Release have the following meanings:

	A.	I , me , and my include both me and anyone who has or obtains any legal rights or claims through me.

	B.	WSI Industries means WSI Industries, Inc., any company related to WSI Industries, Inc. in the present or past (including, without limitation, its predecessors, parents, subsidiaries, affiliates, and divisions), and any successors of WSI Industries, Inc.

	C.	Company means WSI Industries; the present and past officers, directors, committees, shareholders, and employees of WSI Industries; any company providing insurance to WSI Industries in the present or past; the present and past employee benefit plans sponsored or maintained by WSI Industries and the present and past fiduciaries of such plans; the attorneys for WSI Industries; and anyone who acted on behalf of WSI Industries or on instructions from WSI Industries.

	D.	Severance Letter Agreement means the Severance Letter Agreement between WSI Industries and me dated as of October 20, 2011.

	E.	May 2017 Letter Agreement means the Letter Agreement between WSI Industries and me dated as of May 19, 2017.

	F.	My Claims means all of my rights that I now have to any relief of any kind from the Company, including without limitation:

		1.	all claims arising out of or relating to my employment with WSI Industries or the termination of that employment, or otherwise, including, without limitation, all claims arising out of or relating to WSI Industries’ offer letter to me dated October 5, 2009, the Employment (Change in Control) Agreement between me and WSI Industries dated October 12, 2009, or any cash incentive compensation plan for fiscal 2017 or any other period;

		2.	all claims arising out of or relating to the statements, actions, or omissions of the Company;

		3.	all claims I may have for compensation of any kind, including without limitation salary, wages, bonuses, deferred compensation, commissions, penalties, vacation pay, separation pay and/or benefits, incentive compensation, equity compensation of any kind (including stock awards), perquisites, relocation expenses, and expense reimbursements;

		4.	all claims I may have for defamation, improper discharge or retaliation (based on contract, common law, or statute), alleged violation of the Minnesota Human Rights Act, Title VII of the Civil Rights Act of 1964 as amended, the Older Workers Benefit Protection Act and Age Discrimination in Employment Act, the Americans with Disabilities Act, the Family and Medical Leave Act, and any claim for discrimination or harassment under local, state or federal law;

		5.	all claims for alleged wrongful discharge; breach of contract; breach of implied contract; failure to keep any promise; breach of a covenant of good faith and fair dealing; breach of fiduciary duty; estoppel; my activities, if any, as a “whistleblower”; defamation; infliction of emotional distress; fraud; misrepresentation; negligence; constructive discharge; assault; battery; false imprisonment; invasion of privacy; interference with contractual or business relationships; any other wrongful employment practices; and violation of any other principle of common law;

		6.	all claims for back pay, front pay, reinstatement, other equitable relief, compensatory damages, damages for alleged personal injury, liquidated damages, and punitive damages;

		7.	all claims that a past unlawful decision has or has had a continuing effect on my compensation; and

		8.	all claims for attorneys’ fees, costs, and interest.

Notwithstanding the foregoing, My Claims does not include: any claims that the law does not allow to be waived; any claims that may arise after the time I sign this Release; any claims for breach of the Severance Letter Agreement or the May 2017 Letter Agreement; any rights I have under any written stock option or restricted stock award agreement with WSI Industries; my right to benefits under any employee benefit plan sponsored by WSI Industries in which I am currently a participant; or any rights that I may have to indemnification from WSI Industries as a current or former officer, director, or employee of WSI Industries, including without limitation indemnification rights under applicable laws, the Articles of Incorporation or Bylaws of WSI Industries, or any liability insurance policy maintained by WSI Industries.

Nothing contained in this Release Agreement shall be construed to prohibit me from seeking recourse through a government agency providing information to a government agency regarding any employee dispute; exercising any rights that are not allowed to be released by law; or to testify, assist, or participate in an investigation, hearing or proceeding conducted by a governmental agency regarding a charge or claim of alleged discrimination, harassment or retaliation filed with the governmental agency. Notwithstanding, this Release includes a release of my right to file a court action or to seek individual remedies or damages in any action filed by any such government agency and my release of these rights shall apply with full force and effect to any proceedings arising from or relating to such recourse including, but not limited to, the right to monetary damages or other individual legal or equitable relief awarded.

Agreement to Release My Claims . I acknowledge that I will receive consideration from WSI Industries if I sign and do not rescind or revoke this Release as provided below. I acknowledge that that consideration is in addition to anything of value that I would be entitled to receive from WSI Industries if I did not sign this Release or if I rescinded or revoked this Release. In exchange for that consideration, I hereby release, agree not to sue, and forever discharge the Company from all of My Claims to the full extent allowed by law. I will not make any demands or claims against the Company for compensation or damages relating to My Claims. The consideration that I am receiving is a fair consideration for the release of My Claims.

Additional Agreements and Understandings . Even though WSI Industries will provide consideration for me to settle and release My Claims, the Company does not admit that it is responsible or legally obligated to me. In fact, the Company denies that it is responsible or legally obligated to me for My Claims, denies that it engaged in any unlawful or improper conduct toward me, and denies that it treated me unfairly.

Advice to Consult with an Attorney . I am hereby being advised by the Company to consult with an attorney prior to signing this Release. My decision whether to sign this Release is my own voluntary decision made with full knowledge that the Company has advised me to consult with an attorney.

Period to Consider the Release. I have 21 days from the day that I receive this Release, not counting the day upon which I receive it, to consider whether I wish to sign this Release. If I sign this Release before the end of the 21-day period, it will be my voluntary decision to do so and I waive any remaining days in the 21-day period.

My Right to Rescind/Revoke this Release . I have the right to revoke this Release within 7 calendar days of signing this Release to reinstate federal claims under the Age Discrimination in Employment Act. I have the right to rescind this Release within 15 calendar days of signing this Release to reinstate claims arising under the Minnesota Human Rights Act. This Release will not become effective or enforceable unless and until the 7-day or 15-day revocation or rescission period has expired without my revoking or rescinding it.

Procedure for Accepting or Rescinding/Revoking the Release. To accept the terms of this Release, I must deliver the Release, after I have signed and dated it, to WSI Industries by hand or by mail no later than the last day of the 21-day period that I have to consider this Release. To rescind or revoke my acceptance of this Release, I must timely deliver to WSI Industries a written, signed statement that I rescind or revoke my acceptance. All deliveries must be made to WSI Industries at the following address:

Chief Financial Officer

WSI Industries, Inc.

213 Chelsea Avenue

Monticello, MN 55362

If I choose to deliver my acceptance or the rescission/revocation of my acceptance by mail, it must be:

	(1)	postmarked within the period stated above; and
	(2)	properly addressed to WSI Industries at the address stated above; and
	(3)	sent by certified mail return receipt requested.

I UNDERSTAND THAT IF I RESCIND OR REVOKE ANY PART OF THIS RELEASE THE SEVERANCE LETTER AGREEMENT IS VOIDABLE AT THE DISCRETION OF WSI INDUSTRIES.

Interpretation of the Release. This Release should be interpreted as broadly as possible to achieve my intention to resolve all of My Claims against the Company. If this Release is held by a court to be inadequate to release a particular claim encompassed within My Claims, this Release will remain in full force and effect with respect to all the rest of My Claims.

My Representations. I am legally able and entitled to receive the consideration being provided to me in settlement of My Claims. I have not been involved in any personal bankruptcy or other insolvency proceedings at any time since I began my employment with WSI Industries. No child support orders, garnishment orders, or other orders requiring that money owed to me by WSI Industries be paid to any other person are now in effect. No Medicaid payment has been made to me or on my behalf, and no liens, claims, demands, subrogated interests, or actions of any nature exist or have been asserted related to employment with WSI Industries. I have returned all WSI Industries property, including keys, credit cards, security access cards, codes, personal computers, cell phones, memoranda, data, records, notes and other information. I have read this Release carefully. I understand all of its terms. In signing this Release, I have not relied on any statements or explanations made by WSI Industries except as specifically set forth in the Severance Letter Agreement and the May 2017 Letter Agreement. I am voluntarily releasing My Claims against the Company. I intend this Release and the May 2017 Letter Agreement to be legally binding.


	Benjamin T. Rashleger


	Date

Exhibit 99.1

For Immediate Release

WSI Industries Announces Michael J. Pudil Appointed as President and CEO

May 22, 2017 — Minneapolis, MN — WSI Industries, Inc. (Nasdaq: WSCI) today announced that Michael J. Pudil was appointed President and Chief Executive Officer to succeed Benjamin T. Rashleger effective May 19, 2017. Mr. Rashleger also resigned from the Board of Directors effective May 19, 2017. Mr. Pudil formerly served as the Company’s Chief Executive Officer from 1993 until December 31, 2011. Mr. Pudil will continue to serve as the Chairman of the Board of Directors.

WSI Industries, Inc. is a leading contract manufacturer that specializes in the machining of complex, high-precision parts for a wide range of industries, including automotive, avionics and aerospace, energy, recreational powersports vehicles, small engines, marine, bioscience and the defense markets.

# # #

For additional information:

Michael Pudil (President & CEO) or Paul D. Sheely (CFO)

763-295-9202

The statements included herein which are not historical or current facts are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Reform Act of 1995. There are certain important factors which could cause actual results to differ materially from those anticipated by some of the statements made herein, including the Company’s ability to retain current programs and obtain additional manufacturing programs, and other factors detailed in the Company’s filings with the Securities and Exchange Commission.