UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [Fee Required] For the fiscal year ended MAY 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [No Fee Required] For the transition period from ___ to ____
COMMISSION FILE NUMBER 0-11408
BIOSENSOR CORPORATION
Minnesota 41-1427114
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
13755 First Avenue North,
Plymouth, MN 55441
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (612) 449-9100
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock $.05 par value
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes _X_ No ___
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. _X_
The issuer's revenues for its most recent fiscal year were $2,505,000
The aggregate market value of the voting stock held by non-affiliates as of
August 14, 1997 (based upon the mean between the closing bid and asked price as
reported in the local over-the-counter market) was approximately $684,000.
The number of shares outstanding of the registrant's common stock, $.05 par
value, as of August 14, 1997 is 2,823,055.
DOCUMENTS INCORPORATED BY REFERENCE: None
<PAGE>
PART I
ITEM 1. BUSINESS
General
Biosensor Corporation (the "Company" or "Biosensor") designs, manufactures and
markets diagnostic equipment for physicians' offices, clinics and hospitals. The
Biosensor ambulatory ECG ("Holter") monitoring system consists of a patient-worn
microcomputer based unit, called the patient recorder, which monitors and
records cardiac events. Patient recorder data is transferred in a three to five
minute procedure to the central station, located at the physician's office or
healthcare facility. The central station's computer presents cardiac performance
data on a CRT or prints a hard copy for analysis by the physician. The central
computer is capable of running many IBM and other computer programs for office
management. The Biosensor spirometry system uses software developed by the
Company in conjunction with OEM hardware. The Company sells three other OEM PC
compatible products, an ambulatory blood pressure system, an ECG system, and an
ECG stress system and manufactures telemetry equipment and cardiac monitors for
medical equipment manufacturers. The Company's products are distributed in the
United States primarily through independent manufactures' representatives.
Internationally, the products are marketed primarily through independent
distributors.
Products
A. Holter Systems
In the event a 30 second ECG (aka EKG) is unable to tell the physician
information needed about a potential cardiac condition, the physician may order
a 24 hour patient worn ECG, called a Holter, ambulatory ECG, or long term ECG.
The 24 hour Holter is used primarily to evaluate potential cardiac patient
symptoms, to look for episodes where the blood supply to the heart may be
compromised (ischemia), to evaluate cardiac risk in patients with suspected or
overt cardiac disease, and to determine whether cardiac drugs and therapies used
to reduce heart rhythm problems are performing properly. Approximately 2.5
million such procedures are ordered annually in the United States. The Company
estimates approximately an equal number are ordered annually in international
markets. In the United States, the physician will typically charge $150 per
test. International reimbursement can be next to nothing up to approximately $80
per test. A physician or health care facility can financially justify a small
Holter system. The Company believes its Holter systems have significant benefits
over competitive offerings, including real time analysis technology using FLASH
memory components, an easy to use IBM PC compatible program, an attractive
recorder size, documented accuracy, and an affordable price.
The Company's four versions of full disclosure monitoring systems are comprised
of a patient recorder using the Argus ECG analysis algorithm and a central
computer system and three software variations for report viewing and printing.
The full disclosure feature allows for storage and review of all 24 hours of the
ECG. The Company's method of full disclosure ECG storage uses real time digital
means, rather than the more traditional tape storage means.
Optional superimposition allows the operator to view the ECG data via screen
display of one beat over its predecessor at high speeds, allowing 24 hours of
data to be reviewed in 30 minutes or less.
<PAGE>
B. Spirometry System
The Company's spirometry system is used by physicians to measure lung capacity
and function. It uses IBM, compatible software developed by the Company to
function in conjunction with hardware supplied by an outside vendor. The package
allows physicians to expand patient care by performing comprehensive pulmonary
function tests from their office or clinic. The spirometry system includes a
unique feature set comprised of a patented, completely disposable sensor, which
eliminates cleaning, chemical contamination, labor and the risk of spreading
disease; a sailboat race "game" providing patient stimulation and involvement in
testing; patient trending which allows physicians to see the patient progress
over time; and built in help manuals to make operation easy.
C. Telemetry
Biosensor sells a telemetry transmitter and receiver to other medical equipment
vendors, used for monitoring the ECG of patients in cardiac rehabilitation.
Telemetry is the process of radio transmitting, receiving and displaying
physiologic signals including ECG from one or more remote patients to a nurses'
station.
D. OEM Distribution
The Company sells other diagnostic equipment to physicians, clinics and
hospitals. Such equipment includes stress testing equipment, ECG, and ambulatory
blood pressure equipment. This equipment is acquired from others and re-sold.
Research and Development
Since its formation, the Company's research and development activities have been
focused on developing computerized cardiac monitoring system capable of
providing patient-worn heart monitoring, analysis, and reporting. These products
are currently on the market. The Company's research and development efforts are
focused upon enhancing and improving existing systems and developing compatible
diagnostic products such as the spirometry software and the ambulatory blood
pressure software. The Company currently employs four people in R&D, and engages
outside consultants for specific projects. The Company expended $289,000,
$169,000 and $241,000 for research, development, and engineering activities in
fiscal 1997, 1996, and 1995, respectively, which consisted principally of the
salaries of its employees and consultants.
Manufacturing and Sources of Supply
The components which are included in the Company's monitoring systems are
presently purchased from outside vendors, tested and incorporated into the
system by Company personnel. Components are available from multiple sources. If
the Company were unable to obtain certain components from one or more of its
suppliers, the Company would be forced to seek comparable components from other
suppliers. The Company believes it would be able to acquire hardware components
from alternate OEM suppliers should it become necessary.
<PAGE>
Marketing and Distribution
Healthcare reform in the United States, Germany, and in some Asian markets has
influenced the buying patterns of end-users. With this evolution, products used
in this environment need to be lower in price and more cost effective to operate
while remaining feature rich. The Company believes this trend will continue, and
that its products are well suited to the new environment.
Currently, the Company markets its products through manufacturers sales
representatives in the United States and distributors overseas. Biosensor
believes that its sales representatives will be effective in reaching the
physicians office, clinics, and small to mid-sized hospitals; have specific
knowledge of and contacts in particular markets; and enhance the quality and
scope of the Company's sales and marketing efforts. Pursuant to agreements with
sales representatives and distributors, the sales force is prohibited from
engaging in the promotion or sale of products that compete with the Company's
products.
The Company has one employee sales manager and approximately 17 independent
sales organizations covering the United States. In addition, it has one employee
sales manager supporting distribution activities in approximately 35
international markets. The Company employs four full-time sales and marketing
personnel at its headquarters. These employees work directly and in conjunction
with sales representatives and distributors in marketing and selling to doctors,
clinics, and hospitals. The Company's marketing staff prepares advertising copy,
full color sales brochures, sales bulletins, and reimbursement documentation.
Financial Information about Major Customers and Export Sales
See Note 5 to the Financial Statements for information concerning major
customers and export sales.
Competition
Holter Systems
Ambulatory monitoring competition is divided into two segments of approximately
equal size based upon target customers and price considerations:
1) Larger hospitals, clinic, and service companies. These groups
predominantly purchase 24 hour tape scanning and analysis equipment dependent
upon technician operation. Equipment for such users is priced in the $30,000 to
$80,000 range, where volume justifies a significant capital outlay. Del Mar
Avionics Inc., Marquette Electronics, Inc., Zymed, Inc., and Spacelabs, Inc. are
the principal domestic suppliers to this market segment. Historically, these
companies have represented more than half of industry sales revenues. End-users
in this market have demonstrated a willingness to consider more cost-effective
systems.
2) Physician office and small hospital systems. Physicians and small
hospitals have a tendency to purchase more limited Holter systems in a price
range of $6,000 to $25,000. Q-Med, Advanced Medical Products, Inc., Burdick, and
Custo are among the companies that compete with Biosensor selling Holter systems
in offices and small hospitals. Principally price, marketing coverage,
ease-of-use and product features are the key attributes of the sales process. In
the United States, diminishing demand for equipment in the face of a transition
into managed care has occurred in the physician office market. This change may
be temporary or permanent. The physician office diagnostic equipment market is
also characterized by intense
<PAGE>
competition. The competing organizations, most of which are well established,
have established reputations for success in the development, sale, and service
of products.
Spirometry
There are a number of companies producing spirometry systems for the office and
clinic market including Burdick, Advanced Medical Products, SpiroMetrics, QRS,
and others. Many of these companies make devices which perform only one
function, while others make use of a multi-purpose personal computer.
Biosensor's products make use of the personal computer. The Company's spirometry
systems sell for between $2,000 and $4,000.
Telemetry
Telemetry and cardiac monitoring products sold to medical equipment
manufacturers (OEM) are used in cardiac rehabilitation product offerings. The
market is shifting to digital technology generally developed by the equipment
manufacturers. The Company believes there are unique niches for the analog
technology which will take a long time to be replaced by digital approaches. A
matched pair including a telemetry transmitter and receiver sell for $1,300 per
pair.
Government Regulation
The diagnostic products sold by the Company are "devices" as defined in the
Federal Food, Drug and Cosmetic Act (the "Act"), and are subject to the FDA
regulatory authority over the manufacturing, performance standards, patient
registries, labeling and advertising thereof. Under the Act, the FDA must
determine the extent of control necessary to assure the safety and effectiveness
of devices and must define those control levels by the promulgation of
regulations and standards. Under Section 510(k) of the Act, a medical device can
be marketed if the FDA determines that the device is substantially equivalent to
similar devices marketed prior to May 28, 1976. Action by the FDA does not,
however, constitute approval by the FDA of the Company's products or pass upon
their safety and effectiveness.
While the Company believes that regulatory clearance for certain diagnostic
devices which are substantially equivalent to a device currently in commercial
distribution, including products which the Company may in the future develop and
market, may be obtained in less time and at a lower cost than certain other
medical devices, there can be no assurance that regulatory agencies may not
require lengthy clinical testing or other procedures that will involve time and
substantial cost. There can be no assurance that, even after such time and
expenditures, regulatory clearance will be obtained. A marketed product is
subject to continual review, and later discovery of previously unknown problems
may result in restrictions on a product's marketing or withdrawal of the product
from the market.
Trade Secrets
Biosensor exclusively licenses its Argus ECG analysis algorithms used in the
Holter monitor from CNS, Inc. for all medical applications except sleep
applications. With the exception of the Argus algorithms, the Company's software
programs and systems are not protected by patents or registered copyrights, but
instead the Company relies upon the law of trade secrets and the confidentiality
provisions of its employment
<PAGE>
agreements. The Argus algorithms are subject to copyright protection claimed by
Washington University. There are no patents or registered copyrights owned by
Biosensor on its spirometry or ambulatory blood pressure software, but the
products are covered by general US and foreign copyright laws. The OEM hardware
vendor has a patent which protects the disposable sensor, though the
relationship with Biosensor is non-exclusive. The Company believes that
protection of its systems by patents or registered copyrights is less important
than the knowledge, experience and creativity of the Company's product
development and marketing staff in an industry characterized by rapid
technological change. There can be no assurance that competitors could not
successfully duplicate the Company's proprietary software or the Argus
algorithms.
Healthcare Reform
As a result of concerns about changes to the United States system of healthcare
payments, a reduction in purchase levels by physicians has occurred. These
shifts are occurring in varying degrees in other parts of the world as well. The
Company believes that its competitors are also being affected by these factors.
Employees
As of May 31, 1997, the Company had 18 employees 17 of whom were full-time. No
employees are represented by labor organizations and there are no collective
bargaining agreements. Employee relations are believed to be good.
ITEM 2. PROPERTIES
The Company's offices are located at 13755 First Avenue North, Plymouth,
Minnesota 55441. The facility consists of approximately 7,500 square feet of
office, manufacturing and warehouse space and is held under an operating lease
expiring in September, 1997.
The Company has entered into an operating lease with an officer/stockholder for
office, manufacturing and warehouse space of approximately 11,000 square feet
located in Maple Grove, Minnesota. The lease commences in September 1997 and
runs through December 2003. Annual rent for the new facility is approximately
$100,000 plus a share of operating expenses and taxes.
ITEM 3. LEGAL PROCEEDINGS
On January 25, 1995, Cardiosoft, Inc. filed a complaint in the State of
Missouri, District Court, claiming breach of contract with respect to a software
licensing agreement with the Company, entered into in 1988 which was amended in
1991. The Agreement provided for minimum annual royalty payments and royalty
amounts payable for computer systems sold by the Company utilizing certain
Cardiosoft software. The Agreement was modified in 1991 to provide that the
Company's obligation to make royalty payments would be completed once Biosensor
had paid a defined amount. After paying the defined amount, Biosensor stopped
making license payments per the amended Agreement. Cardiosoft advised the
Company of its view that Biosensor continued to be obligated to make royalty
payments.
The matter went to trial in September 1996 and on September 19, 1996, a jury
verdict in the amount of $325,000 plus court costs of approximately $27,000 were
awarded to Cardiosoft. The Company is appealing the verdict at the United States
Court of Appeals, Eight Circuit, where the appeal is expected to be heard in
<PAGE>
the third quarter of fiscal 1998. The Company does not have the resources to pay
the jury award, and is attempting to negotiate a settlement with Cardiosoft.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's common stock is traded on the Minneapolis Local Over-The Counter
market. The high and low bid prices for the common stock by fiscal quarter as
reported by local market makers are presented below. The bid quotations
represent prices between broker-dealers and do not include retail mark-ups,
mark-downs, or commissions and do not necessarily represent actual transactions.
1997 1996
QUARTER HIGH LOW HIGH LOW
- ------- ---- --- ---- ---
First Quarter $0.813 $0.563 $0.156 $0.141
Second Quarter $0.688 $0.281 $0.159 $0.125
Third Quarter $0.281 $0.281 $0.281 $0.125
Fourth Quarter $0.374 $0.281 $0.594 $0.219
At August 15, 1997, the Company had approximately 400 shareholders on record.
The Company has not paid any cash dividends on its common stock. The Company
intends to retain any earnings it may generate to finance the development of its
business and, accordingly, does not anticipate payment of any dividends in the
foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Biosensor Corporation's net sales totaled $2,505,000 in fiscal 1997, compared
with $2,424,000 in fiscal 1996. Sales increased 3% from 1996 to 1997 and were
unchanged from 1995 to 1996. Sales in 1997 increased $143,000 in the US market,
and were offset by a decrease of $74,000 in international markets. The increase
in the US market is a result of increased marketing activity supporting
independent sales representatives and increased extended warranty contract
sales. The decrease in international sales is as a result of continued
competitive pressures and a diminished marketplace in certain countries as a
result of healthcare reform. In 1996 sales increased $313,000 in international
markets and were offset by a corresponding decrease in the OEM and telemetry
markets as the Company emphasized its core product offerings.
Cost of products sold as a percentage of net sales was 49% in fiscal 1997, 41%
in 1996 and 43% in 1995. The increase in 1997 is due to increasing competitive
pricing pressures especially in the international market and certain inventory
write-offs associated with the discontinuation of certain OEM product lines of
$69,000. Sales related to these product lines were $5,000, $34,000 and $65,000
for the years ended May 31, 1997, 1996 and 1995 respectively. The decrease in
1996 was due to stronger emphasis in the US on improving the profitability of
sales.
Research, development and engineering expenses for fiscal year 1997 increased
$120,000 compared to fiscal 1996 and decreased $72,000 in fiscal 1996 compared
to 1995. During 1997, the Company increased the number of research and
development personnel, primarily to return its research and development effort
<PAGE>
approximately to historical levels that had existed prior to the decreases in
fiscal year 1996 in an effort to move new product development forward. The
decrease in 1996 is due to decreases in personnel expenditures, where personnel
reductions as a result of attrition had not been immediately replaced following
weak financial performance in fiscal year 1995.
Sales and marketing expenses remained unchanged from 1996 to 1997 and decreased
$233,000 in 1996 compared to 1995. The decrease resulted from lower sales
expenditures as a result of the conversion from a direct to an independent sales
representative organization during 1996. These decreases were partially offset
by increased personnel costs in the international sales area.
General and administrative expenses were $476,000 in 1997 compared to $438,000
in 1996 and $440,000 in 1995. During 1997 the Company decreased administrative
personnel as a result of the decrease in OEM and telemetry products. This
decrease was offset by an increase in legal expenses of $38,000 resulting from
litigation, described below. In addition, the Company experienced an increase in
bad debts of $99,000 primarily from one distributor in its international market.
The Company is pursing collection of this amount, but has reserved the balance
at May 31, 1997. General and administrative expenditures did not substantially
change in 1996 compared to 1995.
Other expense increased $355,000 in 1997. This increase is primarily due to the
legal judgment described in Item 3 above and described as follows:
On January 25, 1995, Cardiosoft, Inc. filed a complaint in the State of
Missouri, District Court, claiming breach of contract with respect to a software
licensing agreement with the Company, entered into in 1988 which was amended in
1991. The Agreement provided for minimum annual royalty payments and royalty
amounts payable for computer systems sold by the Company utilizing certain
Cardiosoft software. The Agreement was modified in 1991 to provide that the
Company's obligation to make royalty payments would be completed once Biosensor
had paid a defined amount. After paying the defined amount, Biosensor stopped
making license payments per the amended Agreement. Cardiosoft advised the
Company of its view that Biosensor continued to be obligated to make royalty
payments.
The matter went to trial in September 1996 and on September 19, 1996, a jury
verdict in the amount of $325,000 plus court costs of approximately $27,000 were
awarded to Cardiosoft. The Company is appealing the verdict at the United States
Court of Appeals, Eight Circuit, where the appeal is expected to be heard in the
third quarter of fiscal 1998. The Company does not have the resources to pay the
jury award, and is attempting to negotiate a settlement with Cardiosoft. The
amount of the jury verdict was accrued during 1997.
Liquidity and Capital Resources
During 1997 the Company used cash of $142,000 to fund operating activities. The
net loss of $500,000, and decrease in accounts payable of $116,000 were offset
by a decrease in accounts receivable of $106,000, an increase in the reserve for
doubtful accounts of $99,000 and an increase in accrued expenses of $279,000.
The decrease in accounts receivable is due to lower fourth quarter sales than
prior years. At May 31, 1997, the amount of the Jury verdict and court costs of
$352,000 remained unpaid pending final resolution of litigation now under
appeal, resulting in the increase in accrued expenses.
At May 31, 1997 the Company had working capital of $269,000. The Company also
has a line of credit in the amount of $50,000 due November 30,1997, with
interest at 1 percent over prime (8.5% at May 31, 1997). There was no balance on
the line at May 31, 1997. Advances are limited to a percentage of domestic
receivables, are secured by substantially all the assets of the Company, and are
guaranteed by the Company's
<PAGE>
President. In addition, the advances will be made only if the Company is in
compliance with certain financial and other covenants at the time the advance is
requested. These covenants include certain current ratio and tangible net worth
requirements. The Company is currently in violation of certain of these
covenants. The bank has acknowledged these violations but has taken no further
actions.
Legal proceedings described above may require the Company to pay a judgment
amount specified by the Court or negotiate a settlement with the plaintiff. If
the Company is required to pay the entire judgment amount of $352,000, working
capital and cash flows from operations may not be sufficient to pay the judgment
amounts and continue to fund operations. In this event, the Company may be
unable to continue operations and the Company may be required to seek legal
protection under bankruptcy laws while the dispute is resolved.
Forward Looking Statements
This report contains forward looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Actual results could differ materially from those projected in the
forward looking statements as a result of known and unknown risks,
uncertainties, and other factors described in this report, including but not
limited to the ultimate amounts and timing of payments in connection with the
legal proceedings with Cardiosoft, Inc.
ITEM 7. FINANCIAL STATEMENTS
The Financial Statements are filed as part of this Annual Report on form 10-KSB
on pages fourteen through twenty five.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
The names and ages of the Company's directors and executive officers, and their
principal occupations are set forth below.
Director
Name and Age Principal Occupation Since
- ------------ -------------------- -----
B. Steven Springrose President, CEO and CFO 1982
(48)
Stephen L. Zuckerman President of M-T 1986
(54) Venture Capital, Inc.,
Minneapolis, MN
and a practicing internal medicine
physician
Other Information Regarding the Board
Business Experience
Mr. Springrose has been President of the Company since its inception in 1982.
Mr. Springrose had spent several years in the design, development, manufacture
and marketing of medical products before joining the Company. He developed new
product concepts as a biomedical engineer at Medtronic, Inc. (1973-1974), and
subsequently held operations, management and product development engineering
positions at Minntech Corporation (1974-1976). Mr. Springrose worked at Cardiac
Pacemakers, Inc. from 1976 through 1982 in various marketing capacities prior to
founding the Company.
Dr. Zuckerman is a practicing physician and President of M-T Venture Capital
Fund, Inc. He is a co-general partner of Aries Investors Fund Limited
Partnership.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the indicated compensation paid and/or accrued to
the Company's Chief Executive Officer for the years indicated. No other
executive officer of the Company received salary and bonus in excess of $100,000
during the fiscal year ended May 31, 1997.
<PAGE>
<TABLE>
<CAPTION>
Long Term Compensation
-------------------------------
Annual Compensation Awards Payouts
------------------------------- --------------------- -------
Other
Annual Restricted All Other
Name and Compen- Stock LTIP Compen-
Principal Salary Bonus sation Award(s) Options Payouts sation
Position Year ($) ($) ($) ($) SARs(#) ($) ($)
- --------- ---- ------ ----- ------ -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
B. Steven
Springrose 1997 $100,000 - - - - - -
CEO and 1996 $ 99,000 $27,000 - - - - -
CFO 1995 $ 90,000 $ 8,000 - - - - -
</TABLE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Following table presents information provided to the Company as to the
beneficial ownership of the Company's common stock as of August 22, 1997 by (i)
persons holding 5% or more of such stock; and (ii) all officers and directors as
a group:
Common Stock Percent of
Beneficial Owner Beneficially Owned Outstanding Shares
- ---------------- ------------------ ------------------
B. Steven Springrose 896,000(1) 31.7%
Minneapolis, MN
Officers and Directors as a Group 1,006,576(2) 35.7%
(2 persons)
(1) Includes 35,000 shares owned jointly with Mr. Springrose's spouse and
6,000 shares held for the benefit of Mr. Springrose's children, as to
which shares he disclaims beneficial interest.
(2) Includes 70,576 shares held by a partnership in which Dr. Zuckerman is
a general partner and currently holds a .5% interest, and 10,000 shares
which may be acquired within 60 days of the date hereof pursuant to the
exercise of stock options.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has committed to an operating lease for a new office facility with
Springrose Partners. L.L.P. a limited partnership in which B. Steven Springrose,
the registrant's CEO and CFO and his spouse are the owners. The lease begins in
September 1997 and runs through December 2003. Approximate future noncancelable
minimum lease payments of $100,000 are required under the lease. In addition,
the lease provides that the registrant pay a pro rata share of building
operating expenses and required a deposit of $18,000. The registrant has also
guaranteed the underlying debt on the property. The debt consists of a
$1,100,000 five year term loan.
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Page No. or
Exhibit Incorporation by
No. Description Reference to
- ------ ------------------------------------------------------ ----------------
3.1 Restated Articles of Incorporation *
3.2 Amended Bylaws *
10.1 Agreement between the Company and Washington University *
(this agreement expired March 1993)
10.4 Stock purchase agreement between the Company and *
Norwest Growth Fund, Inc.
10.5 Biosensor Corporation Incentive Stock Option Plan *
10.9 License agreement with CNS, Inc. **
10.10 Line of Credit agreement with First Bank National ***
Association dated May 6, 1994
10.11 Agreement with Marcom Inc. ***
10.12 Line of Credit Agreement with First Bank National ***
Association dated May 25, 1995 as amended August 2, 1995.
10.13 Line of Credit Agreement with Norwest Bank, National
Association dated April 7, 1997
10.14 Lease agreement with Springrose Partners LLP dated April 7,1997
* Incorporated by reference to the corresponding exhibit in the Company's
Form S-18 Registration Statement (No. 2-86322C).
** Incorporated by reference to the corresponding exhibit in the Company's
Form 10K filed on August 29, 1989.
*** Incorporated by reference to the corresponding exhibit in the Company's
Form 10K-SB filed on August 26, 1994
**** Incorporated by reference to the corresponding exhibit in the Company's
Form 10K-SB filed on August 26, 1996
Form 8-K
There were no filings on form 8-K in the fourth quarter of 1997.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and
Board of Directors
Biosensor Corporation
Minneapolis, Minnesota
We have audited the accompanying balance sheets of Biosensor Corporation as of
May 31, 1997 and 1996, and the related statements of income, stockholders'
equity, and cash flows for each of the three years in the period ended May 31,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Biosensor Corporation as of May
31, 1997 and 1996, and the results of its operations and its cash flows for each
of the three years in the period ended May 31, 1997, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 8 to the
financial statements, during 1997 the Company lost a lawsuit, resulting in a
judgment against the Company of approximately $352,000. The Company has appealed
the judgment and is also attempting to negotiate a settlement. The Company may
not have adequate working capital to pay the judgment, which raises substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 8. The financial
statements include an accrual for the lawsuit, but do not include any other
adjustments that might result from the outcome of this uncertainty.
Minneapolis, Minnesota
July 7, 1997
<PAGE>
BIOSENSOR CORPORATION
BALANCE SHEETS
MAY 31, 1997 AND 1996
<TABLE>
<CAPTION>
ASSETS (NOTE 2) 1997 1996
---------- ----------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 4,739 $ 163,422
Accounts receivable, less allowance for doubtful accounts
of $111,000 in 1997 and $12,000 in 1996 (Note 5) 400,262 605,536
Inventories:
Raw materials and component parts 118,664 183,957
Work-in-process 50,015 55,747
Finished goods 138,586 68,672
Prepaid expenses and other 54,822 17,163
---------- ----------
TOTAL CURRENT ASSETS 767,088 1,094,497
---------- ----------
Deposits (Note 6) 18,000 11,204
---------- ----------
Property and Equipment, at cost
Manufacturing and engineering equipment 219,164 205,727
Office furniture and equipment 149,149 146,397
---------- ----------
368,313 352,124
Less accumulated depreciation 308,853 277,713
---------- ----------
59,460 74,411
---------- ----------
$ 844,548 $1,180,112
========== ==========
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
----------- -----------
<S> <C> <C>
Current Liabilities
Trade accounts payable $ 50,246 $ 166,058
Accrued expenses:
Lawsuit (Note 8) 352,000 --
Commissions 15,492 55,280
Compensation 48,872 55,481
Warranty 30,618 30,657
Other 1,221 27,348
----------- -----------
TOTAL CURRENT LIABILITIES 498,449 334,824
----------- -----------
Commitments and Contingencies (Notes 6 and 8)
Stockholders' Equity (Notes 2 and 4)
Common stock, $0.05 par value; authorized 5,000,000
shares; issued and outstanding 2,823,055 shares
in 1997 and 2,808,055 shares in 1996 141,153 140,403
Additional paid-in capital 2,940,447 2,940,447
Accumulated deficit (2,735,501) (2,235,562)
----------- -----------
346,099 845,288
----------- -----------
$ 844,548 $ 1,180,112
=========== ===========
</TABLE>
<PAGE>
BIOSENSOR CORPORATION
STATEMENTS OF INCOME
YEARS ENDED MAY 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales (Note 5) $ 2,504,907 $ 2,424,478 $ 2,429,662
----------- ----------- -----------
Costs and expenses:
Cost of products sold 1,235,205 998,153 1,042,517
Research, development, and engineering 289,286 168,859 241,272
Sales and marketing 650,467 647,062 879,612
General and administrative 476,133 437,849 440,938
----------- ----------- -----------
2,651,091 2,251,923 2,604,339
----------- ----------- -----------
OPERATING INCOME (LOSS) (146,184) 172,555 (174,677)
Nonoperating income (expense):
Interest expense (2,587) (1,504) (2,396)
Other expense, primarily lawsuit in 1997 (Note 8) (353,761) (1,441) (5,953)
Interest income 2,593 1,896 5,680
----------- ----------- -----------
NET INCOME (LOSS) $ (499,939) $ 171,506 $ (177,346)
=========== =========== ===========
Earnings (loss) per common and common
equivalent share $ (0.18) $ 0.06 $ (0.06)
Weighted average number of common and
common equivalent shares outstanding 2,820,877 2,803,678 2,798,089
See Notes to Financial Statements.
</TABLE>
<PAGE>
BIOSENSOR CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED MAY 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
Additional
Common Paid-In Accumulated
Stock Capital Deficit Total
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, May 31, 1994 $ 138,528 $ 2,939,947 $(2,229,722) $ 848,753
Issuance of 30,000 shares upon exercise of
stock option 1,500 -- -- 1,500
Net loss -- -- (177,346) (177,346)
----------- ----------- ----------- -----------
Balance, May 31, 1995 140,028 2,939,947 (2,407,068) 672,907
Issuance of 7,500 shares upon exercise of
stock option 375 500 -- 875
Net income -- -- 171,506 171,506
----------- ----------- ----------- -----------
Balance, May 31, 1996 140,403 2,940,447 (2,235,562) 845,288
Issuance of 15,000 shares upon exercise of
stock option 750 -- -- 750
Net loss -- -- (499,939) (499,939)
----------- ----------- ----------- -----------
Balance, May 31, 1997 $ 141,153 $ 2,940,447 $(2,735,501) $ 346,099
=========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
<PAGE>
BIOSENSOR CORPORATION
STATEMENTS OF CASH FLOWS
YEARS ENDED MAY 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net income (loss) $(499,939) $ 171,506 $(177,346)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation 32,347 29,829 25,117
Loss on sale of property and equipment -- 730 --
Bad debt expense 99,000 -- --
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable 106,274 (210,227) 258,753
Inventories 1,111 124,110 (35,714)
Prepaid expenses and other (37,659) 4,869 3,929
Deposits (6,796) (1,561) (977)
Increase (decrease) in:
Accounts payable (115,812) 69,938 (83,757)
Customer deposits -- (9,250) (30,749)
Accrued expenses 279,437 57,489 (36,323)
--------- --------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (142,037) 237,433 (77,067)
--------- --------- ---------
Cash Flows From Investing Activities
Payment for purchase of product line -- (20,000) (50,000)
Purchase of property and equipment (18,471) (40,636) (15,491)
Proceeds from the sale of property and equipment 1,075 1,000 600
--------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES (17,396) (59,636) (64,891)
--------- --------- ---------
Cash Flows From Financing Activities
Borrowings (payments) on note payable to bank -- (20,000) 20,000
Net proceeds from issuance of common stock 750 875 1,500
--------- --------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 750 (19,125) 21,500
--------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (158,683) 158,672 (120,458)
Cash and Cash Equivalents
Beginning of year 163,422 4,750 125,208
--------- --------- ---------
End of year $ 4,739 $ 163,422 $ 4,750
========= ========= =========
Supplemental Disclosures of Cash Flow Information
Cash paid for interest $ 2,587 $ 1,208 $ 2,396
========= ========= =========
</TABLE>
See Notes to Financial Statements.
<PAGE>
BIOSENSOR CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS: Biosensor Corporation (the Company) is engaged in the
development, manufacture, and marketing of diagnostic equipment for physicians'
offices, clinics, and hospitals throughout the U.S., Europe, and Asia. The
24-hour ambulatory cardiac monitoring, EKG telemetry, pulmonary function, EKG,
and ambulatory blood pressure systems operate independently or in unison on an
IBM-compatible office computer. The Company also manufactures cardiac monitors
for OEM distributors.
A summary of the Company's significant accounting policies follows:
ESTIMATES: The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS: For purposes of reporting the statement of cash
flows, the Company considers any highly liquid debt instruments purchased with
an original maturity date of three months or less to be cash equivalents.
The Company maintains its cash in bank deposit accounts which, at times, may
exceed federally insured limits. The Company has not experienced any losses in
such accounts.
INVENTORIES: Inventories are carried at the lower of cost or market determined
under the first-in, first-out (FIFO) method.
DEPRECIATION: Depreciation of property and equipment is computed using
straight-line and accelerated methods over the following useful lives:
Years
- ---------------------------------------------------------------
Manufacturing and engineering equipment 3-5
Office furniture and equipment 5-7
INCOME RECOGNITION: Revenues and expenses are recorded using the accrual basis
of accounting for both financial reporting and income tax purposes. However,
revenues are not accrued if collection thereof is not reasonably assured or the
customer has an unconditional right of return.
INCOME TAXES: Deferred taxes are provided on a liability method, whereby
deferred tax assets are recognized for deductible temporary differences and
operating loss and tax credit carryforwards. Deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
bases. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.
<PAGE>
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCRUED WARRANTY: The products manufactured by the Company are sold with a
one-year warranty. The Company accrues warranty costs based upon historical
experiences and current conditions. The Company also offers an extended warranty
to its customers, under which revenues are initially deferred and recognized to
match the expected related costs incurred over the extended warranty period.
Expense for work performed under the extended warranties are recognized as
incurred. As of May 31, 1997 and 1996, the amount of accrued warranty costs were
$4,668 and $5,766, respectively, and deferred warranty revenue was $25,950 and
$24,891, respectively.
EARNINGS (LOSS) PER COMMON SHARE: Earnings (loss) per common share is computed
by dividing net income (loss) by the weighted average number of common shares
and common share equivalents outstanding during each period. Common share
equivalents include stock options. In 1997 and 1995, the common equivalent
shares were not included in the computation as their effect would have been
anti-dilutive.
Earnings per share assuming full dilution were the same as primary earnings per
share, as the difference between the two computations was not material.
ISSUED BUT NOT YET ADOPTED STANDARD: The FASB has issued Statement No. 128,
EARNINGS PER SHARE, which supersedes APB Opinion No. 15. Statement No. 128
requires the presentation of earnings per share by all entities that have common
stock or potential common stock, such as options, warrants, and convertible
securities, outstanding that trade in a public market. Those entities that have
only common stock outstanding are required to present basic earnings per-share
amounts. All other entities are required to present basic and diluted per-share
amounts. Diluted per-share amounts assume the conversion, exercise, or issuance
of all potential common stock instruments unless the effect is to reduce a loss
or increase the income per common share from continuing operations. All entities
required to present earnings per-share amounts must initially apply Statement
No. 128 for annual and interim periods ending after December 15, 1997. Earlier
application is not permitted.
The adoption of Statement No. 128 would have had no material effect on reported
earnings (loss) per share for the years ended May 31, 1997, 1996 and 1995.
NOTE 2.NOTE PAYABLE TO BANK
The Company has a $50,000 line of credit available due November 30, 1997, with
interest at prime (8.50 percent at May 31, 1997) plus 1 percent. Advances are
limited to a percentage of domestic receivables and are secured by substantially
all the assets of the Company and are guaranteed by the Company's president. In
addition, advances will be made only if the Company is in compliance with
certain financial and other covenants at the time the advance is requested.
These covenants include certain current ratio and tangible net worth
requirements. The Company was in violation of certain covenants at May 31, 1997.
Subsequent to year end, the bank has acknowledged the violations and has taken
no further action. As of May 31, 1997, there was no outstanding balance on the
line of credit.
<PAGE>
NOTE 3.INCOME TAXES
A reconciliation of federal statutory income taxes to the Company's effective
tax provision is as follows:
<TABLE>
<CAPTION>
May 31
-----------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Computed "expected" federal tax expense
(benefit) at statutory rates $(175,000) $ 60,000 $ (62,000)
State income taxes, net of federal benefit -- 9,000 2,500
Federal surtax exemption -- (6,300) 3,000
Utilization of net operating loss carryforwards -- (69,000) --
Tax benefit not utilized 175,000 6,300 56,500
--------- --------- ---------
$ -- $ -- $ --
========= ========= =========
</TABLE>
Net deferred taxes included the following at May 31, 1997 and 1996:
1997 1996
--------- ---------
Deferred tax assets $ 975,000 $ 809,400
Valuation allowance for deferred tax assets (975,000) (809,400)
--------- ---------
Net $ -- $ --
========= =========
Deferred tax assets are comprised of the following at May 31, 1997 and 1996:
1997 1996
--------- ---------
Loss carryforwards $ 689,000 $ 685,700
Accrued lawsuit expense 120,000 --
Tax credit carryforwards 85,000 85,000
Accrued compensation 16,000 18,300
Warranty accrual 10,000 10,400
Allowance for doubtful accounts 38,000 4,100
Other, net 17,000 5,900
--------- ---------
Subtotal 975,000 809,400
Valuation allowance for deferred tax assets (975,000) (809,400)
--------- ---------
$ -- $ --
========= =========
<PAGE>
NOTE 3. INCOME TAXES (CONTINUED)
At May 31, 1997, the Company has approximately $2,024,000 of net operating loss
carryforwards available to offset future taxable income and approximately
$85,000 of tax credit carryforwards to offset future federal income tax
liabilities. Theses carryforwards expire as follows:
Net
Operating Tax
Loss Credit
----------- -----------
Years ending May 31:
1998 $ -- $ 26,000
1999 48,000
2000 845,000 11,000
2001 516,000 --
2002 236,000 --
2003 113,000 --
2004 128,000 --
2010 186,000 --
----------- -----------
$ 2,024,000 $ 85,000
=========== ===========
NOTE 4. STOCK OPTIONS
The Company has a stock option plan that permits the granting of incentive stock
options meeting the requirements of Section 422 of the Internal Revenue Code of
1986, as amended, and nonqualified options which do not meet the requirements of
Section 422. The plan has 250,000 shares available for grant.
The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123 ACCOUNTING FOR STOCK-BASED COMPENSATION.
Accordingly, no compensation cost has been recognized for the stock option plan.
Had compensation cost for the Company's stock option plan been determined based
on the fair value at the grant date for awards in 1997, 1996, and 1995
consistent with the provisions of Statement of Financial Accounting Standards
No. 123, there would have been no material effect on the Company's reported net
earnings (loss) and net earnings (loss) per share.
<PAGE>
NOTE 4. STOCK OPTIONS (CONTINUED)
Additional information relating to all outstanding options as of May 31, 1997,
1996, and 1995, is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------- --------------------- ---------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------- --------- ------- --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
beginning of year 105,000 $ 0.10 100,000 $ 0.20 70,000 $ 0.11
Options granted 90,000 0.11 60,000 0.23
Options exercised (15,000) 0.05 (7,500) 0.10 (30,000) 0.05
Options surrendered (5,000) 0.05 (77,500) 0.23 -- --
------- --------- ------- --------- ------ ---------
Options outstanding,
end of year 85,000 $ 0.12 105,000 $ 0.10 100,000 $ 0.20
======= ========= ======= ========= ====== =========
Weighted average fair value
of options granted during
the year -- $ 0.05
</TABLE>
The following table summarizes information about stock options outstanding at
May 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------- ---------------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Outstanding at Contractual Exercise Exercisable at Exercise
Range of Exercise Prices May 31, 1997 Life (Years) Price May 31, 1997 Price
- ------------------------ ------------ ------------ ----- ------------ -----
<S> <C> <C> <C> <C> <C>
$0.01 - $0.125 85,000 2.96 $ 0.12 51,250 $ 0.11
</TABLE>
NOTE 5. MAJOR CUSTOMERS AND EXPORT SALES
The Company's customers which account for 10 percent or more of sales in any of
the three years ended May 31, 1997, were:
Trade Receivable
Sales Percentage Balance
-------------------------- ---------------
Customer 1997 1996 1995 1997 1996
- -------------------- ---- ---- ---- ---- ----
A (Foreign customer) * 14.8 11.5 $ * $104,851
* Sales to this customer were less than 10 percent in these years.
The Company's export sales are principally to Europe and Asia and totaled
approximately 41, 46, and 40 percent of net sales for the years ended May 31,
1997, 1996, and 1995, respectively.
<PAGE>
NOTE 6. LEASES
The Company leases its office facility under an operating lease expiring in
September 1997. The Company has committed to an operating lease with an
officer/stockholder for a new office facility beginning September 1997 through
December 2003. The leases provide that the Company pay a pro rata share of
building operating expenses and the new lease required a deposit of $18,000. The
Company has also guaranteed the underlying debt on the property. The debt
consists of a $1,100,000 five-year term loan. Total approximate rent expense for
the years ended May 31, 1997, 1996, and 1995, was $73,000, $73,000, and $75,000,
respectively.
The new lease requires approximate future noncancelable minimum lease payments
of $100,000 annually through December 2003.
NOTE 7. EMPLOYEE BENEFIT PLAN
The Company has a 401(k) profit sharing plan covering all employees who meet the
age and service requirements of the plan. Employees may make elective
contributions and the Company, at the discretion of the Board of Directors, has
the option of making a matching contribution each year, up to 25 percent of the
employee's contribution. The Company made matching contributions of
approximately $2,400 and $4,800 for the years ended May 31, 1997 and 1996,
respectively. There was no matching contribution for the year ended May 31,
1995.
NOTE 8. LAWSUIT
In September 1996, a jury verdict in the amount of $352,000 was awarded to a
former vendor for its claims that the Company owed additional amounts under a
1988 software license agreement. The amount of the jury verdict was accrued
during 1997. The continuation of the Company as a going concern is dependent
upon a successful appeal or negotiating the settlement of this judgment at terms
affordable to the Company. Towards this end, the Company has filed an appeal and
is working with counsel to evaluate its further legal options, including
settlement negotiations with the former vendor.
<PAGE>
SIGNATURES
In accordance with Sections 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
BIOSENSOR CORPORATION
/s/ B. Steven Springrose
B. Steven Springrose
President, Chief Executive Officer
and Chief Financial Officer
Date: August 25, 1997
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
date indicated.
/s/ B. Steven Springrose President, Chief Executive August 25, 1997
B. Steven Springrose Officer, Chief Financial
Officer, and Director
(Principal Executive Officer)
/s/ Stephen L. Zuckerman MD Director August 25, 1997
Stephen L. Zuckerman, MD
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
BROOKLYN PARK OFFICE
8041 BROOKLYN BOULEVARD
BROOKLYN PARK, MINNESOTA 55445
CREDIT AGREEMENT
WITH
BIOSENSOR CORPORATION
13755 FIRST AVENUE NORTH
PLYMOUTH, MINNESOTA 55441
EFFECTIVE DATE OF APRIL 7, 1997
Loan Documents:
[ ] Section 1 - Credit Agreement (to be executed by Borrower and Bank)
Exhibit A-1 - Borrowing Base Definition
Exhibit A-2 - Borrowing Base Certificate
Exhibit B - Conditions Precedent and Security
Exhibit C - Representations and Warranties
[ ] Section 2 - $150,000.00 Revolving Note (original to be executed by the
Borrower)
[ ] Section 3 - Security Agreement (original to be executed by the
Borrower)
[ ] Section 4 - UCC-1 Financing Statement (original to be executed by the
Borrower)
[ ] Section 5 - Personal Guaranty of B. Steven Springrose (to be executed
by B. Steven Springrose)
[ ] Section 6 - Arbitration Agreement (original to be executed by the
Borrower)
Other Required Documents (Not Enclosed):
[ ] Corporate Certificate of Authority
[ ] Articles of Incorporation and By-Laws
<PAGE>
[LOGO]
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION CREDIT AGREEMENT
THIS CREDIT AGREEMENT (the "Agreement") dated as of April 7, 1997 (the
"Effective Date") is between Norwest Bank Minnesota, National Association (the
"Bank") and Biosensor Corporation (the "Borrower").
BACKGROUND
The Borrower has asked the Bank to provide a One Hundred Fifty Thousand and
00/100 Dollars ($150,000.00) line of credit to be used for financing accounts
receivable and inventory.
The Bank is agreeable to meeting the Borrower's request provided that the
Borrower agrees to the terms and conditions of this Agreement.
For purposes of this Agreement, all promissory notes that evidence indebtedness
of the Borrower to the Bank and which are documented under this Agreement and
defined below shall collectively be referred to as the "Notes."
The Revolving Note, this Agreement, and all "Security Documents" described in
Exhibit B shall be referred to collectively as the "Documents."
In consideration of the above premises, the Bank and the Borrower agree as
follows:
1. LINE OF CREDIT
1.1 LINE OF CREDIT AMOUNT. During the Line Availability Period defined
below, the Bank agrees to provide a conditional revolving line of
credit (the "Line") to the Borrower. Outstanding amounts under the Line
shall not, at any one time, exceed the lesser of the Borrowing Base or
One Hundred Fifty Thousand and 00/100 Dollars ($150,000.00). The
Borrowing Base is defined in Exhibit A-1 to this Agreement. THIS IS A
CONDITIONAL REVOLVING LINE OF CREDIT AND EACH ADVANCE UNDER THE LINE,
IF MADE, SHALL BE AT THE SOLE DISCRETION OF THE BANK.
1.2 LINE AVAILABILITY PERIOD. The "Line Availability Period" shall mean the
period of time from the Effective Date or the date on which all
conditions precedent described in this Agreement have been met,
whichever is later, to the Line Expiration Date of November 30, 1997.
1.3 THE REVOLVING NOTE. The Borrower's obligation to repay advances under
the Line shall be evidenced by a single promissory note (the "Revolving
Note") dated as of the Effective Date, and in form and content
acceptable to the Bank. Reference is made to the Revolving Note for
interest rate and repayment terms.
1.4 MANDATORY PREPAYMENT. If at any time the principal outstanding under
the Revolving Note exceeds the lesser of the Borrowing Base or One
Hundred Fifty Thousand and 00/100 Dollars ($150,000.00), the Borrower
must immediately prepay the Revolving Note in an amount sufficient to
eliminate the excess.
<PAGE>
2. FEES AND EXPENSES
2.1 DOCUMENTATION EXPENSE. The Borrower agrees to reimburse the Bank for
its reasonable expenses relating to the preparation of the Documents
and any possible future amendments to the Documents, which
reimbursement may include, but shall not be limited to, reimbursement
of reasonable attorneys' fees, including the allocated costs, which
shall not be in excess of $375.00, of the Bank's in-house counsel
relating to the preparation of the Documents.
Despite such reimbursement the Borrower acknowledges that the Bank's
counsel is engaged solely to represent the Bank and does not represent
the Borrower.
2.2 COLLECTION EXPENSE. In the event the Borrower fails to pay the Bank any
amounts due under this Agreement or under the Documents, the Borrower
shall pay all costs of collection, including reasonable attorneys' fees
and legal expenses incurred by the Bank.
2.3 MISCELLANEOUS EXPENSE. The Borrower agrees to reimburse the Bank for
its expenses incurred in perfecting any security interest in property
granted by the Borrower to the Bank.
3. ADVANCES AND PAYMENTS
3.1 REQUESTS FOR ADVANCES. Any line advance requested under the terms of
this Agreement shall be requested by telephone or in a writing
delivered to the Bank (or transmitted via facsimile) by any person
reasonably believed by the Bank to be authorized by the Borrower to do
so. The Bank will not consider any such request following an event
which is, or with notice or the lapse of time would be, an event of
default under this Agreement. Proceeds shall be deposited into the
Borrower's account at the Bank or disbursed in such other manner as the
parties may agree.
3.2 PAYMENTS. All principal, interest and fees due under the Documents
shall be paid in immediately available funds as contracted in this
Agreement and no later than the payment due date set forth in the
statement mailed to the Borrower by the Bank. Should a payment come due
on a day other than a day on which the Bank is open for substantially
all of its business (a "Banking Day"), then the payment shall be made
no later than the next Banking Day and interest shall continue to
accrue during the extended period.
4. SECURITY
During the time period that credit is available under this Agreement,
and afterward until all amounts due under the Documents are paid in
full, unless the Bank shall otherwise agree in writing, all amounts due
under this Agreement and the Documents shall be secured at all times as
provided in Exhibit B. The Borrower also hereby grants the Bank a
security interest (independent of the Bank's right of set-off) in its
deposit accounts at the Bank and in any other debt obligations of the
Bank to the Borrower.
<PAGE>
5. CONDITIONS PRECEDENT
The Borrower must deliver to the Bank the documents described in
Exhibit B, properly executed and in form and content acceptable to the
Bank, prior to the Bank's initial advance or disbursement under this
Agreement.
6. REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement, the Borrower, to the
best of its knowledge and upon due inquiry, makes the representations
and warranties contained in Exhibit C.
7. COVENANTS
7.1 FINANCIAL INFORMATION AND REPORTING
Except as otherwise stated in this Agreement, all financial information
provided to the Bank shall be compiled using generally accepted
accounting principles consistently applied.
During the time period that credit is available under this Agreement,
and afterward until all amounts due under the Documents are paid in
full, unless the Bank shall otherwise agree in writing, the Borrower
agrees to:
(a) Annual Financial Statements. Provide the Bank within 120 days of the
Borrower's fiscal year end, the Borrower's annual financial statements.
The statements must be audited with an unqualified opinion by a
certified public accountant acceptable to the Bank, and must be
accompanied by a certificate of such accountants stating whether, in
conducting their audit, they have become aware of any event of default
under this Agreement, or of any event which might become such an event
of default after the lapse of time or the giving of notice and the
lapse of time, which has occurred and is continuing and specifying the
nature and time period of its existence.
(b) Interim Financial Statements. Provide the Bank within 45 days of each
month end, the Borrower's interim financial statements for the interim
period then ending. The statements must be current through the end of
that period and must be certified as correct by an officer of the
Borrower in form acceptable to the Bank.
(c) Borrowing Base Certificate. Provide the Bank within 45 days of each
month end, a Borrowing Base Certificate in the form of Exhibit A-2,
current through the end of that period and certified as correct by an
officer of the Borrower acceptable to the Bank.
(d) Accounts Receivable Aging. Provide the Bank within 45 days of each
month end, an accounts receivable aging report in form acceptable to
the Bank, current through the end of that period and certified as
correct by an officer of the Borrower acceptable to the Bank.
(e) Guarantor Financial Statements. Provide the Bank within 120 days of the
Borrower's fiscal year end with the annual financial statement of the
Guarantor.
<PAGE>
(f) Notices of Default. Provide the Bank prompt written notice of: 1) any
event which has or might after the passage of time or the giving of
notice, or both, constitute an event of default under any of the
Documents; or 2) any future event that would cause the representations
and warranties contained in this Agreement to be untrue when applied to
the Borrower's circumstances as of the date of such event.
(g) Additional Information. Provide the Bank with such other information as
it may reasonably request, and permit the Bank to visit and inspect its
properties and examine its books and records.
7.2 FINANCIAL COVENANTS
During the time period that credit is available under this Agreement,
and afterward until all amounts due under the Documents are paid in
full, unless the Bank shall otherwise agree in writing, the Borrower
agrees to comply with the financial covenants described below, which
shall be calculated using generally accepted accounting principles
consistently applied, except as they may be otherwise modified by the
following capitalized definitions:
(a) NET PROFIT. Achieve a minimum after-tax net profit of $40,000.00
(excluding legal settlement expense) as of fiscal year end May 31,
1997.
(b) TANGIBLE NET WORTH. Maintain a minimum Tangible Net Worth of at least
$560,000 as of the end of fiscal year May 31, 1997.
"Tangible Net Worth" means total assets less total liabilities and less
the following types of assets: (1) leasehold improvements; (2)
receivables and other investments in or amounts due from any
shareholder, director, officer, employee or other person or entity
related to or affiliated with the Borrower; (3) goodwill, patents,
copyrights, mailing lists, trade names, trademarks, servicing rights,
organizational and franchise costs, bond underwriting costs and other
like assets properly classified as intangible.
(c) Total Liabilities to Tangible Net Worth Ratio. Maintain a ratio of
total liabilities to Tangible Net Worth of less than 1.5 to 1.0 as of
fiscal year end May 31, 1997.
7.3 OTHER COVENANTS
During the time period that credit is available under this Agreement,
and afterward until all amounts due under the Documents are paid in
full, unless the Bank shall otherwise agree in writing, the Borrower
agrees to:
(a) Additional Borrowings. Refrain from incurring any indebtedness except:
(1) trade credit incurred in the ordinary course of business;
(2) indebtedness expressly subordinated to the Bank in a writing
acceptable to the Bank;
(3) indebtedness in existence on the date of this Agreement and
disclosed in advance to the Bank in writing;
(4) indebtedness for business purposes which does not exceed a total
principal amount of $25,000.00.
<PAGE>
(b) Other Liens. Refrain from allowing any security interest or lien on
property it owns now or in the future, except:
(1) liens in favor of the Bank;
(2) liens outstanding on the date of this Agreement and disclosed in
advance to the Bank in writing;
(3) liens for taxes not delinquent or which the Borrower is contesting
in good faith;
(4) liens which secure obligations in a total principal amount not
exceeding $25,000.00.
(c) Insurance. Cause its properties to be adequately insured by a reputable
insurance company against loss or damage and to carry such other
insurance as is required of or usually carried by persons engaged in
the same or similar business. Such insurance must, with respect to the
Bank's collateral security, include a lender's loss payable endorsement
in favor of the Bank in form acceptable to the Bank.
(d) Change in Management. Refrain from permitting or suffering any material
change in its management personnel or management structure.
(e) Collateral Audits. Permit the Bank to conduct audits of all collateral
pledged to the Bank by the Borrower at such intervals as the Bank may
reasonably require, but not in excess of one time each calendar year.
In the event the Borrower is in default, collateral audits may be
performed more frequently than once per calendar year. The audits may
be performed by employees of the Bank or independent contractors
retained by the Bank.
(f) Nature of Business. Refrain from engaging in any line of business
materially different from that presently engaged in by the Borrower.
(g) Form of Organization and Mergers. Refrain from changing its legal form
of organization, or consolidating, merging, pooling, syndicating or
otherwise combining with any other entity.
(h) Maintenance of Properties. Make all repairs, renewals or replacements
necessary to keep its plant, properties and equipment in good working
condition.
(i) Books and Records. Maintain adequate books and records, refrain from
making any material changes in its accounting procedures for tax or
other purposes, and permit the Bank to inspect same upon reasonable
notice.
(j) Compliance with Laws. Comply in all material respects with all laws
applicable to its form of organization, business, and the ownership of
its property.
(k) Preservation of Rights. Maintain and preserve all permits, licenses,
rights, privileges, charters and franchises that it now owns.
<PAGE>
These covenants were negotiated by the Bank and Borrower based on
information provided to the Bank by the Borrower. A breach of a
covenant is an indication that the risk of the transaction has
increased. As consideration for any waiver or modification of these
covenants, the Bank may require: additional collateral, guaranties or
other credit support; higher fees or interest rates; and possible
modifications to the Documents and the monitoring of the Agreement. The
waiver or modification of any covenant that has been violated by the
Borrower shall be made at the sole discretion of the Bank. These
options do not limit the Bank's right to exercise its rights under
Section 8 of this Agreement.
8. EVENTS OF DEFAULT AND REMEDIES
8.1 DEFAULT
The Line is a conditional line of credit, which means that the Bank is
not obligated to make advances under the Line even if the Borrower is
in compliance with the terms of this Agreement, and the Revolving Note
evidencing borrowings under the Line shall be payable by the Borrower
upon the earlier of DEMAND or November 30, 1997. Despite this
reservation of rights, upon the occurrence of any one or more of the
following events of default, or at any time afterward unless the
default has been cured, the Bank may declare each revolving facility
documented in this Agreement to be terminated and in its discretion
accelerate and declare the unpaid principal, accrued interest and all
other amounts payable under the and the Documents to be immediately due
and payable:
(a) Failure by the Borrower to make any payment of principal or interest
due under the Revolving Note which continues for 10 days after its due
date.
(b) Default by the Borrower in the observance or performance of any
covenant or agreement contained in this Agreement, and continuance for
more than 15 days.
(c) Default by the Borrower in the observance or performance of any
covenant or agreement contained in any of the Documents (excepting this
Agreement), after giving effect to any applicable grace period.
(d) Default by the Borrower with respect to any indebtedness or obligation
owed to the Bank, which is unrelated to any loan or facility subject to
the terms of this Agreement, or to any other creditor, which would
allow the maturity of any such indebtedness or obligation to be
accelerated.
(e) Default by Springrose L.L.P. or the Guarantor in the payment of that
certain term loan in the original principal amount of $1,100,000.00 by
the Bank to Springrose L.L.P. or in the observance or performance of
any term, covenant or agreement of such party in any agreement relating
to said term loan.
(f) Any representation or warranty made by the Borrower to the Bank is
untrue in any material respect.
(g) With the exception of the pending litigation with Cardiosoft (the
"Cardiosoft Litigation") as previously disclosed to the Bank, any
litigation or governmental proceeding against the Borrower seeking an
amount in excess of $25,000.00 which is not insured or subject to
indemnity by a solvent third party either 1 ) results in a judgment
equal to or in excess of that amount against the Borrower or 2) remains
unresolved on the 270th day following the date of service on the
Borrower.
<PAGE>
(h) A garnishment, levy or writ of attachment, or any local, state, or
federal notice of tax lien or levy is made or issues against the
Borrower, or any post judgment process or procedure is commenced or any
supplementary remedy for the enforcement of a judgment is employed
against the Borrower or the Borrower's property.
(i) The Guarantor dies or attempts to revoke his Guaranty, or becomes
insolvent or is the subject of a voluntary or involuntary petition
under the United States Bankruptcy Code.
(j) A material adverse change occurs in the Borrower's financial condition
or ability to repay its obligations to the Bank.
8.2 IMMEDIATE DEFAULT
If, with or without the Borrower's consent, a custodian, trustee or
receiver is appointed for any of the Borrower's properties, or if a
petition is filed by or against the Borrower under the United States
Bankruptcy Code, or the Borrower is dissolved, liquidated, or winds up
its business, then the unpaid principal, accrued interest, and all
other amounts payable under the Revolving Note and the Documents shall
become immediately due and payable without notice or demand.
9. MISCELLANEOUS.
(a) No Waiver; Cumulative Remedies. No failure or delay by the Bank in
exercising any rights under this Agreement shall be deemed a waiver of
those rights. The remedies provided for in the Agreement are cumulative
and not exclusive of any remedies provided by law.
(b) Amendments or Modifications. Any amendment or modification of this
Agreement must be in writing and signed by the Bank and Borrower. Any
waiver of any provision in this Agreement must be in writing and signed
by the Bank.
(c) Binding Effect: Assignment. This Agreement and the Documents are
binding on the successors and assigns of the Borrower and Bank. The
Borrower may not assign its rights under this Agreement and the
Documents without the Bank's prior written consent. The Bank may sell
participations in or assign this Agreement and the Documents and
exchange financial information about the Borrower with actual or
potential participants or assignees.
(d) Minnesota Law. This Agreement and the Documents shall be governed by
the substantive laws of the State of Minnesota.
(e) Severability of Provisions. If any part of this Agreement or the
Documents are unenforceable, the rest of this Agreement or the
Documents may still be enforced.
(f) Integration. This Agreement and the Documents describes the entire
understanding and agreement of the parties and supersedes all prior
agreements between the Bank and the Borrower relating to each credit
facility subject to this Agreement, whether verbal or in writing.
<PAGE>
Address for notices to Bank: Address for notices to Borrower:
Norwest Bank Minnesota,
National Association Biosensor Corporation
8041 Brooklyn Boulevard 13755 First Avenue North
Brooklyn Park, Minnesota 55445 Plymouth, Minnesota 55441
Attention: Mona M. Krueger Attention: B. Steven Springrose
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION BIOSENSOR CORPORATION
BY: /s/ Mona M. Krueger BY: /s/ B. Steven Springrose
MONA M. KRUEGER, VICE PRESIDENT B. STEVEN SPRINGROSE, PRESIDENT
<PAGE>
EXHIBIT A-1
BORROWING BASE DEFINITION
Borrowing Base means the sum of 70% of Eligible Accounts Receivable (as defined
below).
Eligible Accounts Receivable means all accounts receivable of the Borrower
except those which are:
1) Greater than 90 days past the invoice date.
2) Due from an account debtor, 10% or more of whose accounts owed
to the Borrower are more than 90 days past the invoice date.
3) Subject to offset or dispute.
4) Due from an account debtor who is subject to any bankruptcy
proceeding.
5) Owed by a shareholder, subsidiary, affiliate, officer or
employee of the Borrower.
6) Not subject to a perfected first lien security interest in
favor of the Bank.
7) Due from an account debtor located outside the United States
and not supported by a standby letter of credit acceptable to
the Bank.
8) Due from a unit of government, whether foreign or domestic.
9) Otherwise deemed ineligible by the Bank in its reasonable
discretion.
<PAGE>
EXHIBIT A-2
BIOSENSOR CORPORATION
BORROWING BASE CERTIFICATE
TO: Norwest Bank Minnesota,
National Association
8041 Brooklyn Boulevard
Brooklyn Park, Minnesota 55445
(the "Bank")
Biosensor Corporation (the "Borrower") certifies that the following
computation of the Borrowing Base was performed as of in accordance with the
Borrowing Base definitions set forth in Exhibit A-1 to the Credit Agreement
entered into between the Bank and the Borrower dated
Total A/R $ _____________
Less: 1) Greater than 90 days $ _____________
2) Other ineligibles $ _____________
Eligible A/R $ _____________
70% of Eligible Accts. Receivable $
==============
Total Borrowing Base $
(Lesser of $150,000 or 70% of Eligible Accts Receivable) ==============
Total Line Outstandings ($ )
==============
Excess (Deficit) $
==============
BIOSENSOR CORPORATION
BY: _________________________
ITS: ________________________
<PAGE>
EXHIBIT B
CONDITIONS PRECEDENT AND SECURITY
PLEASE NOTE: This Exhibit describes each Note, Security Document,
Authorizations, Organizational Documents, and all miscellaneous documents,
reports, certificates and other information required as a condition to each
advance or disbursement under the Agreement, whether or not they have previously
been delivered to the Bank. PLEASE REFER TO THE CLOSING CHECKLIST FOR A COMPLETE
DESCRIPTION OF WHICH OF THE FOLLOWING DOCUMENTS REMAIN TO BE DELIVERED TO THE
BANK.
NOTE
The Revolving Note
SECURITY DOCUMENTS
Each Security Document described below must continue in full force and effect at
all times in accordance with its terms during the time period that credit is
available under this Agreement, and afterward until all amounts due under the
Documents are paid in full. THE FAILURE OF ANY SECURITY DOCUMENT TO MEET THESE
REQUIREMENTS MAY RESULT IN AN EVENT OF DEFAULT UNDER THE AGREEMENT AND THE
ACCELERATION OF ALL OF THE BORROWER'S OBLIGATIONS TO THE BANK EVIDENCED BY THE
DOCUMENTS.
Personal Guaranty of B. Steven Springrose. The unconditional personal Guaranty
of B. Steven Springrose. Pursuant to the Guaranty, the Guarantor guarantees a
maximum of $150,000.00 principal indebtedness, plus interest and enforcement
expenses.
Security Agreement of Biosensor Corporation. A Security Agreement signed by the
Borrower, granting the Bank a first lien security interest in the Borrower's
accounts, inventory, equipment and general intangibles, described in that
Agreement, together with one or more UCC-1 Financing Statements sufficient to
perfect the security interest granted to the Bank in each jurisdiction where
such property is located.
AUTHORIZATION
Certificate of Authority of Borrower. A Certificate of Authority executed by
such person or persons authorized by the Borrower's organizational documents
and/or agreements to do so, certifying the incumbency and signatures of the
officers or other persons authorized to execute the Documents, and authorizing
the execution of the Documents and performance in accordance with their terms.
ORGANIZATION
Articles of Incorporation and By-Laws. A recently certified copy of the
Borrower's Articles of Incorporation and By-laws, and any amendments, if
applicable.
Certificate of Good Standing. A recently certified copy of the Borrower's
Certificate of Good Standing.
<PAGE>
OTHER
Arbitration Agreement. The Bank's standard form of Arbitration Agreement signed
by the Bank and Borrower, subjecting potential controversies between them to
binding arbitration, including but not limited to those relating to the
Documents and this Agreement.
Evidence of Insurance. Evidence that the Borrower has obtained all insurance
coverage required by this Agreement, and that the Bank has been named as the
beneficiary of such policy or policies of insurance.
<PAGE>
EXHIBIT C
REPRESENTATIONS AND WARRANTIES
Organizational Status. The Borrower is a corporation duly formed and in good
standing under the laws of the State of Minnesota.
Authorization. This Agreement, and the execution and delivery of the Documents,
is within the Borrower's powers, has been duly authorized and does not conflict
with any of the Borrower's organizational documents or any other agreement by
which the Borrower is bound, and has been signed by all persons authorized and
required to do so under its organizational documents.
Financial Reports. The Borrower has provided the Bank with its annual audited
financial statement dated May 31, 1996 and its unaudited interim financial
statement dated 2/28/97, and these statements fairly represent the financial
condition of the Borrower as of their respective dates and were prepared in
accordance with generally accepted accounting principals consistently applied.
Litigation. There is no litigation or governmental proceeding pending or
threatened against the Borrower which could have a material adverse effect on
the Borrower's financial condition or business, with the exception of the
pending Cardiosoft litigation.
Taxes. The Borrower has paid when due all federal, state and local taxes.
No Default. There is no event which is, or with notice or the lapse of time
would be, an event of default under this Agreement.
ERISA. The Borrower is in compliance in all material respects with the Employee
Retirement Income Security Act of 1974 and has received no notice to the
contrary from the Pension Benefit Guaranty Corporation or any related
governmental entity.
Environmental Matters. 1) The Borrower is in compliance in all material respects
with all health and environmental laws applicable to the Borrower and its
operations and knows of no conditions or circumstances that could interfere with
such compliance in the future; 2) the Borrower has obtained all environmental
permits and approvals required by law for the operation of its business; and 3)
the Borrower has not identified any "recognized environmental conditions", as
that term is defined by the American Society for Testing and Materials in its
standards for environmental due diligence, which could subject the Borrower to
enforcement action if brought to the attention of appropriate governmental
authorities.
<PAGE>
[LOGO]
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION REVOLVING NOTE
$150,000.00 April 7, 1997
FOR VALUE RECEIVED, Biosensor Corporation (the "Borrower") promises to pay to
the order of Norwest Bank Minnesota, National Association (the "Bank"), at its
principal office or such other address as the Bank or holder may designate from
time to time, the principal sum of ONE HUNDRED FIFTY THOUSAND and 00/100 Dollars
($150,000.00), or the amount shown on the Bank's records to be outstanding, plus
interest (calculated on the basis of actual days elapsed in a 360-day year)
accruing each day on the unpaid principal balance at the annual interest rate
defined below. Absent manifest error, the Bank's records shall be conclusive
evidence of the principal and accrued interest owing hereunder.
INTEREST RATE. The principal balance outstanding under this Revolving Note shall
bear interest at an annual rate equal to the Base Rate plus 1.00%, floating.
Base Rate means the rate of interest established by the Bank from time to time
as its "base" or "prime" rate of interest at its principal office in
Minneapolis, Minnesota.
INTEREST AFTER MATURITY. The unpaid principal balance and interest due under
this Revolving Note after maturity (whether this Revolving Note matures by
demand, acceleration or lapse of time) shall bear interest until paid at the
Base Rate plus 1.00%, floating.
REPAYMENT TERMS
INTEREST. Interest shall be payable on the last day of each month, beginning May
1, 1997.
PRINCIPAL. Principal, and any unpaid interest, shall be due on the earlier of
DEMAND or November 30, 1997.
ADDITIONAL TERMS AND CONDITIONS. This Revolving Note is issued pursuant to a
Credit Agreement of even date between the Bank and the Borrower (the
"Agreement"). The Agreement, and any amendments or substitutions, contains
additional terms and conditions, including default and acceleration provisions,
which are incorporated into this Revolving Note by reference. Capitalized terms
not expressly defined herein shall have the meanings given them in the
Agreement. The Borrower agrees to pay all costs of collection, including
reasonable attorneys' fees and legal expenses incurred by the Bank if this
Revolving Note is not paid as provided above. This Revolving Note shall be
governed by the substantive laws of the State of Minnesota.
WAIVER OF PRESENTMENT AND NOTICE OF DISHONOR. Borrower and any other person who
signs, guarantees or endorses this Revolving Note, to the extent allowed by law,
hereby waives presentment, demand for payment, notice of dishonor, protest, and
any notice relating to the acceleration of the maturity of this Revolving Note.
BIOSENSOR CORPORATION
BY: /s/ B. Steven Springrose
B. STEVEN SPRINGROSE, PRESIDENT
<PAGE>
[LOGO]
NORWEST BANK MINNESOTA
NATIONAL ASSOCIATION SECURITY AGREEMENT
Norwest Bank Minnesota, Biosensor Corporation
National Association 13755 First Avenue North
8041 Brooklyn Boulevard Plymouth, Minnesota 55441
Brooklyn Park, Minnesota 55445
(the "Bank") (the "Borrower")
April 7 ,1997
1. SECURITY INTEREST AND COLLATERAL. To secure payment of the Obligations (as
defined below), the Borrower hereby enters into this Security Agreement (the
"Agreement") and grants to the Bank a security interest (the "Security
Interest") in the Collateral (defined below).
"Obligations" means the debt, liability, or obligation of the Borrower to the
Bank evidenced by the credit agreement of the same date and each promissory note
or other instrument evidencing each loan or debt incurred thereunder by the
Borrower, and any extensions, renewals, amendments, or replacements of any such
loan, debt, or obligation.
"Collateral" means the following property, excluding consumer goods, in which
the Borrower now has or hereafter acquires an interest:
(a) "Inventory". All inventory held for sale or lease or supply under a service
contract, or which constitutes work in process or materials used or consumed in
the Borrower's business.
(b) "Equipment". All equipment including but not limited to all machinery,
vehicles, furniture, appliances, fixtures, manufacturing and processing
equipment, shop equipment, office and recordkeeping equipment, computer hardware
and software, and parts and tools.
(c) "General Intangibles". All general intangibles including but not limited to
applications for patents, patents, copyrights, trademarks, trade secrets,
goodwill, trade names, customer lists, permits, franchises, contracts, and the
right to use the Borrower's name, together with all other intangible property
rights such as the right to redeem or accept payment under an annuity contract
or a non-negotiable certificate of deposit issued by a bank.
(d) "Accounts and other Rights to Payment". All rights of the Borrower to the
payment of money, whether arising out of a sale, lease, or other disposition of
goods or other property by the Borrower, out of a rendering of services by or
loan from the Borrower, out of the overpayment of taxes or other liabilities of
the Borrower, or otherwise arising under any contract or agreement, whether
earned by performance or not, together with all other rights and interests
(including all liens and security interests) which the Borrower may at any time
have by law or agreement against the person or property of any account debtor or
obligor, including but not limited to all present and future debt instruments,
chattel papers, accounts, contract rights, loans and other obligation
receivable, unearned insurance premiums, rebates, and negotiable documents.
The Collateral shall also include, as applicable, all (i) products of the
Collateral; (ii) substitutions and replacements for the Collateral; (iii)
proceeds from the sale or disposition of the Collateral, including insurance
proceeds and any rights of subrogation resulting from the damage or destruction
of the Collateral; and (iv) for Collateral that is tangible, all additions,
increases, improvements, accessories, attachments, parts, equipment and repairs
now or in the future attached to or used in connection with such
<PAGE>
Collateral, and any warehouse receipts, bills of lading or other documents of
title now or in the future evidencing the Borrower's ownership of the
Collateral.
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. Borrower represents, warrants and
agrees that:
(a) Borrower is a corporation whose chief executive office is located at
Plymouth, Minnesota, and that this Agreement has been authorized by all
necessary corporate action.
(b) The Collateral will be primarily used for business purposes.
(c) Borrower has and will have title to each item of Collateral free and clear
of all security interests and other encumbrances, except:
(i) the Security Interest;
(ii) liens for taxes not delinquent or which the Borrower is contesting
in good faith;
(iii) liens securing purchase money indebtedness to the extent
consented to in writing in advance by the Bank.
The Borrower will defend the Collateral against the claims of all persons except
the Bank. Borrower will not dispose of any interest in the Collateral without
the prior written consent of the Bank, except that, until the occurrence of an
Event of Default and the revocation by the Bank of Borrower's right to do so,
Borrower may sell Inventory in the ordinary course of business.
(d) Borrower will execute and deliver to the Bank financing statements and any
other documents that the Bank may require to perfect its Security Interest in
the Collateral, and will not permit any tangible Collateral to be located in any
state and/or county in which a financing statement perfecting such Collateral is
required to be but has not been filed. Borrower agrees that the Bank may
alternatively execute financing statements to perfect the Security Interest in
the Collateral where permitted by law.
(e) Each Account and each document is (or will be when arising or issued) the
valid and legally enforceable obligation, subject to no defense, set-off or
counterclaim (other than those arising in the ordinary course of business) of
the obligor shown by the Borrower's records to be obligated to pay such Account.
Borrower will not agree to the material modification or cancellation of any such
right to payment without the Bank's prior written consent, and will not
subordinate any such Account or right to payment to any other claim.
(f) Borrower will at all times:
(i) keep all tangible Collateral in good working order and condition,
normal depreciation excepted;
(ii) promptly pay all taxes and other governmental charges levied or
assessed upon Collateral;
(iii) permit the Bank to examine or inspect any Collateral, wherever
located, and to examine, inspect and copy Borrower's books and records
pertaining to the Collateral and Borrower's business, and to request
verifications from account obligors of amounts owed to Borrower;
(iv) keep accurate and complete records regarding the Collateral and
Borrower's business and financial condition and provide the Bank such periodic
reports of condition as the Bank may reasonably request;
(v) promptly notify the Bank of any loss of or material damage to any
Collateral or of any adverse change known to Borrower regarding the prospect of
payment on any Account;
<PAGE>
(vi) upon Bank's request, promptly deliver to the Bank any instrument,
document or chattel paper constituting Collateral, duly endorsed or assigned by
Borrower;
(vii) keep all tangible Collateral insured against loss and damage,
including risks of fire (including extended coverage), theft, collision (in case
of Collateral consisting of motor vehicles) and such other risks in such amounts
as the Bank may reasonably request, with any loss payable to the Bank to the
extent of its interest and with the commitment of the insurer to notify the Bank
before cancellation;
(viii) pay when due or reimburse the Bank on demand for all costs of
collection of the Obligations and all other out-of-pocket expenses (including in
each case all reasonable attorney's fees) incurred by the Bank in connection
with this Agreement and the Obligations, including expenses incurred in any
litigation or bankruptcy proceedings;
(ix) prevent the Collateral from being used or kept in violation of all
applicable law;
(x) obtain a waiver or consent from the owner and any mortgagee of any
real property where the Collateral may be located that provides that the
Security Interest will at all times be senior to any such interest or lien.
(g) If Borrower breaches any covenant or warranty in this Agreement, and the
breach or failure continues for a period of ten calendar days after the Bank
gives written notice (or, in the case of the agreement contained in clause (vii)
of Section 2(f), immediately upon the occurrence of such failure, without notice
or lapse of time), the Bank may in its discretion perform or observe such
agreements in the Borrower's or the Bank's name, and may take any other actions
which the Bank deems necessary to cure or correct such failure. Borrower shall
reimburse the Bank on demand for all costs and expenses (including reasonable
attorneys' fees) incurred by the Bank in performing or observing such
agreements. If the Borrower fails to reimburse the Bank upon demand, the Bank
may cause such amounts to be advanced or added to any of the Obligations secured
hereunder, which will bear interest at the highest rate provided under the note
designated for this purpose by the Bank at the time of the advance.
(h) Borrower irrevocably appoints the Bank or its delegate as attorney-in-fact
of Borrower with the right (but not the duty) to execute, deliver, endorse or
file, in the name and on behalf of Borrower, any instruments, documents,
financing statements, applications for insurance or other agreements required of
Borrower under Section 2 at any time following an Event of Default. Following an
Event of Default, the Bank may in its discretion enforce any rights of the
Borrower under any contract of insurance, and in the Borrower's or the Bank's
name, execute and deliver proofs of claim, receive payment of proceeds, endorse
checks and other instruments representing payment of such proceeds, and adjust,
litigate, compromise or release any claim against the issuer of any such policy.
3. EVENTS OF DEFAULT. Each of the following occurrences shall constitute an
event of default under this Agreement (each an "Event of Default"):
(a) Borrower defaults under the terms of any of the Obligations or any credit
agreement relating thereto; or
(b) Borrower materially fails to observe or perform any covenant contained in
this Agreement; or
(c) any representation or warranty made by the Borrower and set forth in this
Agreement is materially false or misleading.
4. REMEDIES UPON EVENT OF DEFAULT. Upon the occurrence of an Event of Default
and at any time thereafter, the Bank may exercise any one or more of the
following rights and remedies:
<PAGE>
(a) declare all unmatured Obligations to be immediately due and payable, without
presentment or other notice or demand;
(b) exercise all rights available upon default to a secured party under the
Uniform Commercial Code. The Bank may require Borrower to make the Collateral
available to the Bank at a place to be designated by the Bank which is
reasonably convenient to both parties, and if notice to Borrower of any intended
disposition of Collateral or any other intended action is required by law in a
particular instance, such notice shall be deemed commercially reasonable if
given in the manner specified in this Agreement at least 10 calendar days prior
to the date of any public sale or disposition or the date after which any
private sale may occur;
(c) exercise any or all other rights available to the Bank by law or agreement
against the Collateral, the Borrower or any other person or property.
The Bank shall not be obligated to preserve any rights Borrower may have against
prior parties, to liquidate or realize on the Collateral at all or in any
particular manner or order, or apply any cash proceeds of Collateral in any
particular order.
5. OTHER PERSONAL PROPERTY. Unless at the time the Bank takes possession of any
tangible Collateral, or at any time within seven days thereafter, the Borrower
gives the Bank written notice of the existence of property belonging to the
Borrower that does not constitute Collateral, but which is located or found upon
or within such Collateral, together with a description of such property, the
Bank shall not be responsible or liable to the Borrower with respect to such
property unless it has actual knowledge of its existence and location upon or in
such Collateral.
6. LOCK BOX, COLLATERAL ACCOUNT. Upon the Bank's request following an Event of
Default, the Borrower will direct each obligor on an account to make payments to
a special lock box under the control of the Bank. Borrower authorizes and
directs the Bank to deposit into a special collateral account to be established
and maintained with the Bank all checks, drafts and cash payments, received in
said lock box. All deposits to this collateral account shall constitute
Collateral and shall not constitute payment of any Obligation. At its option,
the Bank may, at any time, apply collected funds on deposit in the collateral
account to the payment of the Obligations in such order of application as the
Bank may determine, or permit the Borrower to withdraw all or part of the
balance of the collateral account. If a collateral account is established,
Borrower agrees that it will promptly deliver to the Bank for deposit into the
collateral account all payments on Accounts. All such payments shall be
delivered to the Bank in the form received (except for Borrower's endorsement
where necessary). Until deposited, all payments on Accounts received by Borrower
shall be held in trust by the Borrower as the property of the Bank, and shall
not be commingled with any funds or property of the Borrower.
7. COLLECTION RIGHTS OF THE BANK. In addition to its rights under Sections 4 and
6, the Bank may, at any time following an Event of Default, notify any account
obligor or any other person obligated to pay any amount due with respect to an
Account to make payment directly to the Bank. Upon the Bank's request, Borrower
will notify such account obligors and other obligors in writing and will state
on all invoices to such account obligors or other obligors that the amount due
is payable directly to the Bank. At any time after the Bank or Borrower gives
such notice to an account obligor or other obligor, the Bank may, in its
discretion, and in its own name or in Borrower's name, demand, sue for, collect
or receive any money or property at any time payable or receivable on account
of, or securing, any such chattel paper, account, or other right to payment, or
grant any extension to, make any compromise or settlement with or otherwise
agree to waive or change the obligations (including collateral obligations) of
any such account obligor or other obligor.
8. AMENDMENTS. This Agreement can be waived, amended or terminated and the
Security Interest released, only in an express writing signed by the Bank. A
waiver signed by the Bank shall be effective only in the specific instance and
for the specific purpose given.
<PAGE>
9. NO WAIVER; CUMULATIVE REMEDIES. Delay or failure to act shall not preclude
the exercise or enforcement of any of the Bank's rights or remedies. All rights
of the Bank shall be cumulative and may be exercised singularly or concurrently,
at the Bank's option, and the exercise of any one such right or remedy shall
neither be a condition to nor bar the exercise or enforcement of any other.
10. NOTICES. All notices to be given to Borrower shall be deemed sufficiently
given if delivered or mailed to the Borrower at the above address or at the most
recent address shown on the Bank's records.
11. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and inure
to the benefit of Borrower and the Bank and their respective heirs,
representatives, successors and assigns and shall take effect when signed by
Borrower and delivered to the Bank. A photographic or other reproduction of this
Agreement or of any financing statement signed by the Borrower shall have the
same force and effect as the original.
12. APPLICABLE LAW; SEVERABILITY. Except to the extent otherwise required by
law, this Agreement shall be governed by the laws of the state in which the
Bank's main office is located. If any provision or application of this Agreement
is unenforceable in any respect, such unenforceability shall not affect other
provisions of this Agreement.
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained in this Agreement shall survive the execution, delivery and
performance of this Agreement and the creation and payment of the Obligations.
14. INTEGRATION. This Agreement represents the entire understanding of the Bank
and Borrower with respect to the Collateral and supersedes all prior oral or
written agreements between the parties relating to the Collateral.
IN WITNESS WHEREOF, this Agreement was executed the day and year first
above written.
BIOSENSOR CORPORATION
By: /s/ B. Steven Springrose
B. Steven Springrose, President
<PAGE>
[LOGO/SEAL] For
Filing
Officer
STATE OF MINNESOTA
UCC-1 FINANCING STATEMENT
This statement is presented for filing pursuant to MINNESOTA UNIFORM COMMERCIAL
CODE MINNESOTA STATUTES CHAPTER 336 9-402 (TYPE IN BLACK INK)
1. Individual Debtor-Last Name First Name Middle I.
Social Security # Mailing Address
City State Zip Code
2. Individual Debtor-Last Name First Name Middle I.
Social Security # Mailing Address
City State Zip Code
3. Business Debtor-Last Name
BIOSENSOR CORPORATION
Fed ID # Mailing Address
41 - 1427114 13755 FIRST AVENUE NORTH
City State Zip Code
PLYMOUTH MN 55441
4. Secured Party - Last Name 5. Assignee of Secured Party
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Mailing Address Mailing Address
8041 BROOKLYN BOULEVARD
City State Zip Code City State Zip Code
BROOKLYN PARK MN 55445
6. This financing statement covers the following types or items of property. (If
crops are covered describe the real estate and list the name of record owner.)
ALL PROPERTY DESCRIBED ON THE ATTACHED EXHIBIT A.
RETURN ACKNOWLEDGMENT COPY TO:
(name and address) BIOSENSOR CORPORATION
By /s/ B. Steven Springrose Its:
--------------------------------------------
[NORWEST BANK MINNESOTA, NATIONAL Debtor's Signature
ASSOCIATION
8041 Brooklyn Boulevard (Required in Most Cases - see instructions)
Brooklyn Park, Minnesota 55445 ] NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
By: /s/ Mona M. Krueger Its:
--------------------------------------------
Secured Party's Signature
PLEASE DO NOT TYPE OUTSIDE
THE BRACKETED AREA.
<PAGE>
EXHIBIT A
[LOGO] NORWEST BANKS
SECURED PARTY ADDRESS OFFICE
Norwest Bank Minnesota, 8041 Brooklyn Blvd. Brooklyn Blvd. Office
National Association Brooklyn Park, MN 55445
DEBTOR: BIOSENSOR CORPORATION
UCC - 1 FINANCING STATEMENT DESCRIPTION:
This Financing Statement covers the following types of items of property:
[X] (a) All inventory of Debtor, whether now owned or hereafter
acquired and wherever located.
[X] (b) All equipment of Debtor, whether now owned or hereafter
acquired, including but not limited to all present and future
machinery, vehicles, furniture, fixtures, manufacturing
equipment, farm machinery and equipment, shop equipment,
office and recordkeeping equipment, parts and tools, and the
goods described in any equipment schedule or list furnished to
Secured Party by Debtor (but no such schedule or list need be
furnished in order for the security interest to be valid as to
all of Debtor's equipment).
[ ] (c) All farm products of Debtor, whether now owned or hereafter
acquired, including but not limited to (i) all poultry and
livestock and their young, products thereof and produce
thereof, (ii) all crops, whether annual or perennial, and the
products thereof, (iii) all feed, seed, fertilizer, medicines
and other supplies used or produced by Debtor in farming
operations, (iv) any crop insurance payments and any
government farm support payments, including any diversion or
deficiency payments. The real estate concerned with the above
described crops growing or to be grown is: __________________
and the name of the record owner is: ________________________
[X] (d) Each and every right of Debtor to the payment of money,
whether such right to payment now exists or hereafter arises,
whether such right to payment arises out of a sale, lease or
other disposition of goods or other property by Debtor, out of
a rendering of services by Debtor, out of a loan by Debtor,
out of the overpayment of taxes or other liabilities of
Debtor, or otherwise arises under any contract or agreement,
whether such right to payment is or is not already earned by
performance, and howsoever such right to payment may be
evidenced, together with all other rights and interests
(including all liens and security interests) which Debtor may
at any time have by law or agreement against any account
debtor or other obligor obligated to make such payment or
against any of the property of such account debtor or other
obligor; all including but not limited to all present and
future debt instruments, chattel papers, loans and obligations
receivable and tax refunds.
[X] (e) all general intangibles of Debtor, whether now owned or
hereafter acquired, including, but not limited to,
applications for patents, patents, copyrights, trademarks,
trade secrets, good will, trade name, customers lists, permits
and franchises, and the right to use Debtor's name.
[X] (f) All contract rights of the Debtor, whether now owned or
hereafter acquired.
Regardless of which boxes are checked above, this Financing
Statement also covers:
All substitutions and replacements for and products of any of
the foregoing property not constituting consumer goods and
proceeds of any and all of the foregoing property and, in the
case of all tangible collateral, together with all accessions
and, except in the case of consumer goods, together with (i)
all accessories, attachments, parts, equipment and repairs now
or hereafter attached or affixed to or used in connection with
any such goods, and (ii) all warehouse receipts, bills of
lading and other documents of title now or hereafter covering
such goods.
<PAGE>
[LOGO]
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION PERSONAL GUARANTY
Norwest Bank Minnesota, Biosensor Corporation
National Association 13755 First Avenue North
8041 Brooklyn Boulevard Plymouth, Minnesota 55441
Brooklyn Park, Minnesota 55445 (the "Borrower")
(the "Bank")
April 7, 1997
FOR VALUABLE CONSIDERATION, and to induce the Bank in its sole
discretion to make loans or extend other accommodations to or for the account of
the Borrower, the undersigned gives this Personal Guaranty (the "Guaranty") and
absolutely and unconditionally guarantees to the Bank the full and prompt
payment of each and every debt, liability or obligation which the Borrower may
now or at any time in the future owe to the Bank (the "Indebtedness"). This
Guaranty is an absolute, unconditional and continuing guaranty of payment of the
Indebtedness and shall continue to be binding upon the undersigned, whether or
not all Indebtedness is paid in full, until this Guaranty is revoked
prospectively in writing as to future transactions. Such revocation shall not be
effective until actually received in writing by the Bank and then shall not be
effective as to Indebtedness existing or committed to at the time of revocation,
and shall not be effective as to renewals, extensions, or refinancings of
existing Indebtedness, whether such Indebtedness is renewed before or after
receipt of such notice of revocation. The death or incompetence of the
undersigned shall not revoke this Guaranty until written notice of such death or
incompetence is actually received by the Bank, and then only prospectively as to
future transactions as set forth above.
The liability of the undersigned under this Guaranty shall include
accrued interest and all attorneys' fees, collection costs and enforcement
expenses incurred by the Bank in collecting on and enforcing its rights under
the Indebtedness, and all such costs and expenses incurred by the Bank in
connection with the protection, defense, or enforcement of this Guaranty in any
litigation or bankruptcy proceedings. The Bank may apply any sums received by or
available to the Bank on account of the Indebtedness from Borrower or any other
person (except the undersigned), or from the Borrower's or other such persons'
properties or any collateral security or other source of payment, and such
application of proceeds or receipts shall not reduce or impair the liability of
the undersigned under this Guaranty.
Notwithstanding the preceding paragraph, the liability of the
undersigned under this Guaranty shall be limited to a principal amount of
$150,000.00, plus accrued interest and all attorneys' fees, collection costs and
enforcement expenses incurred by the Bank in collecting on and enforcing its
rights under the Indebtedness and incurred in connection with the protection,
defense or enforcement of this Guaranty in any litigation or bankruptcy
proceedings. The Indebtedness may be created and continued in any amount,
whether or not in excess of such principal amount, without reducing or impairing
the liability of the undersigned under this Guaranty. Any payment made by the
undersigned under this Guaranty shall be effective to reduce or discharge the
undersigned's liability only if accompanied by a written transmittal document,
received by the Bank and advising it that such payment is made under this
Guaranty for such purpose.
The undersigned further acknowledges and agrees with Bank that:
<PAGE>
1. No act or event need occur to establish the liability of the undersigned
under this Guaranty, and no act or event, except full payment and discharge of
all Indebtedness, shall exonerate and discharge the liability of the undersigned
under this Guaranty.
2. If the undersigned dies or becomes insolvent (however defined) then the Bank
may declare immediately due and payable the obligations of the undersigned under
this Guaranty, and the undersigned shall immediately pay to the Bank the full
amount of all Indebtedness, whether due and payable or unmatured. If the
undersigned voluntarily commences or there is commenced involuntarily against
the undersigned a case under the United States Bankruptcy Code, the obligations
of the undersigned under this Guaranty shall immediately be due and payable
without the necessity of demand or notice.
3. The undersigned will not exercise or enforce any right of contribution,
reimbursement, recourse or subrogation available to the undersigned against the
Borrower or any person liable for payment of the Indebtedness, or as to any
collateral securing the Indebtedness, unless and until all of the Indebtedness
shall have first been fully paid and discharged.
4. The Bank may in its discretion enter into transactions resulting in the
creation or continuance of Indebtedness, without notice to or the consent or
approval of the undersigned, regardless of whether or not any existing
relationship between the Borrower and the undersigned has been revoked and
regardless of whether this Guaranty has been revoked.
5. The liability of the undersigned shall not be reduced or impaired by any of
the following acts or events (which the Bank is expressly authorized to do, omit
or suffer from time to time, both before and after revocation of this Guaranty,
without notice to or the consent or approval of the undersigned): (i) any
acceptance of collateral security, guarantors, accommodation parties or sureties
for any or all of the Indebtedness; (ii) any one or more extensions or renewals
of Indebtedness (whether or not for a period longer than the original period) or
any modification of the interest rate, maturity or other contractual terms
applicable to all or part of the Indebtedness; (iii) any waiver or indulgence
granted to Borrower, any delay or lack of diligence in the enforcement of the
Indebtedness, or any failure to institute proceedings, file a claim, give any
required notices or otherwise protect any of the Indebtedness; (iv) any full or
partial release of, settlement with, or agreement not to sue, Borrower or any
other guarantor or other person liable with respect to any of the Indebtedness;
(v) any discharge of any evidence of Indebtedness or the acceptance of any
instrument renewing or refinancing the Indebtedness; (vi) any failure to obtain
collateral security (including rights of setoff) for the Indebtedness, or to
assure its proper or sufficient creation, perfection, or priority, or to
protect, insure, or enforce any collateral security; or any modification,
substitution, discharge, impairment, or loss of such collateral security; (vii)
any foreclosure or enforcement of any collateral security by the Bank or any
other creditor of the Borrower with a security interest in the collateral
security; (viii) any assignment or transfer of any Indebtedness or documentation
evidencing the Indebtedness; (ix) any order of application of any payments or
credits upon the Indebtedness from the Borrower, the undersigned, or any other
person; and (x) any election by the Bank under ss. 1 1 1 1 (b)(2) of the United
States Bankruptcy Code
6. The undersigned waives any and all defenses, claims and discharges of
Borrower, or any other obligor, pertaining to the Indebtedness, except the
defense of discharge by payment in full. Without limiting the generality of the
preceding sentence, the undersigned will not assert, plead or enforce against
the Bank any defense of waiver, release, discharge in bankruptcy, statute of
limitations, res judicata, statute of frauds, anti-deficiency statute,
misrepresentation or fraud, incapacity, minority, usury, illegality or
unenforceability which may be available to Borrower or any other party liable
for payment of any of the Indebtedness, or any setoff available against the Bank
to Borrower or any such other person, whether or not on account of a related
transaction. The undersigned shall be liable for any deficiency remaining after
foreclosure of any mortgage, deed of trust or security interest securing the
Indebtedness, whether or not the liability of the Borrower or any other obligor
for such deficiency is discharged pursuant to statute or judicial decision.
<PAGE>
7. The Bank may in its sole discretion demand that the undersigned discharge its
obligations under this Guaranty at any time, whether at the time of the
scheduled or accelerated maturity of the Indebtedness or at any earlier or later
time, and regardless of whether there has been a default with respect to the
Indebtedness. The Bank shall not be required to first resort for payment of the
Indebtedness to the Borrower or to any other person or their properties, or to
first enforce, realize upon, or exhaust any collateral security given to secure
the Indebtedness before enforcing this Guaranty. The undersigned waives
presentment, demand for payment, notice of dishonor or nonpayment, and protest
of any instrument evidencing part or all of the Indebtedness.
8. If any payment applied by the Bank to the Indebtedness is later set aside,
recovered, rescinded or required to be returned for any reason (including,
without limitation, the bankruptcy, insolvency or reorganization of the Borrower
or any other obligor), the Indebtedness to which such payment was applied shall
for the purposes of this Guaranty be deemed to have continued in existence,
notwithstanding such application, and this Guaranty shall be enforceable as to
such Indebtedness as fully as if such application had never been made.
9. The liability of the undersigned under this Guaranty is in addition to and
cumulative with all other liabilities of the undersigned to the Bank as a
guarantor or otherwise, without limitation as to amount, unless the instrument
or agreement evidencing or creating such other liability specifically provides
to the contrary.
10. This Guaranty shall be enforceable regardless of the failure of other
persons to sign other guaranties of the Indebtedness. This Guaranty shall be
effective upon delivery to the Bank, without further act, condition or
acceptance by the Bank, shall be binding upon the undersigned and the heirs,
representatives, successors and assigns of the undersigned for the benefit of
the Bank and its participants, successors and assigns. Any invalidity or
unenforceability of any provision or application shall not affect other lawful
provisions and applications of this Guaranty, which is severable. This Guaranty
may not be waived, modified, amended, terminated, released or otherwise changed
except by a writing signed by both the undersigned and the Bank. This Guaranty
is issued in and shall be governed by the laws of the State of Minnesota.
WAIVER OF RIGHT TO TRIAL BY JURY
The undersigned hereby waives the right to a trial by jury in any action
relating to this Guaranty
IN WITNESS WHEREOF, this Guaranty has been duly executed on the above
date by the undersigned.
/s/ B. STEVEN SPRINGROSE
B. STEVEN SPRINGROSE
Address:
12505 58th Av N
Plymouth MN 55442
<PAGE>
[LOGO]
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION ARBITRATION AGREEMENT
Norwest Bank Minnesota, Biosensor Corporation
National Association 13755 First Avenue North
8041 Brooklyn Boulevard Plymouth, Minnesota 55441
Brooklyn Park, Minnesota 55445 (the "Borrower")
(the "Bank")
April 7, 1997
1. AGREEMENT TO ARBITRATE. The Bank and Borrower agree to submit to binding
arbitration all claims, disputes and controversies (whether in tort, contract,
or otherwise, except "core proceedings" under the U.S. Bankruptcy Code) arising
between themselves and their respective employees, officers, directors,
attorneys and other agents, which relate in any way without limitation to
existing and future loans and extensions of credit or requests for additional
credit, including by way of example but not by way of limitation the
negotiation, collateralization, administration, repayment, modification,
default, termination and enforcement of such loans or extensions of credit.
2. RULES GOVERNING ARBITRATION. Arbitration under this Agreement will be
governed by the Federal Arbitration Act and proceed in Minneapolis, Minnesota in
accordance with the American Arbitration Association's commercial arbitration
rules ("AAA Rules").
3. SELECTION OF ARBITRATOR. Arbitration will be conducted before a single
neutral arbitrator selected in accordance with AAA Rules and who shall be an
attorney who has practiced commercial law for at least ten years.
4. STATUTES OF LIMITATION AND PROCEDURAL ISSUES. The arbitrator will determine
whether an issue is arbitratable and will give effect to applicable statutes of
limitation. Judgment upon the arbitrator's award may be entered in any court
having jurisdiction. The arbitrator has the discretion to decide, upon documents
only or with a hearing, any motion to dismiss for failure to state a claim or
any motion for summary judgment.
5. DISCOVERY. Discovery will be governed by the Minnesota Rules of Civil
Procedure. Discovery must be completed at least 20 days before the hearing date
and within 180 days of the commencement of arbitration. Each request for an
extension and all other discovery disputes will be determined by the arbitrator
upon a showing that the request is essential for the party's presentation and
that no alternative means for obtaining information are available during the
initial discovery period.
6. EXCEPTIONS TO ARBITRATION. This Agreement does not limit the right of either
party to a) foreclose against real or personal property collateral; b) exercise
self-help remedies such as setoff or repossession; c) obtain provisional
remedies such as replevin, injunctive relief, attachment or the appointment of a
receiver during the pendency or before or after any arbitration proceeding; or
d) obtain a cognitive judgment, if available. These exceptions do not constitute
a waiver of the right or obligation of either party to submit any dispute to
arbitration, including those arising from the exercise of these remedies.
7. ARBITRATION COSTS AND FEES. The arbitrator will award costs and expenses in
accordance with the provisions of the documents evidencing each loan or
extension of credit.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION BIOSENSOR CORPORATION
By: /s/ Mona M. Krueger By: /s/ B. Steven Springrose
Mona M. Krueger, Vice President B. Steven Springrose, President
LEASE
This lease is entered into on April 7, 1997, by and between Springrose
Partners, L.L.P., a Minnesota limited liability partnership ("Landlord"), and
Biosensor Corporation, a Minnesota corporation ("Tenant").
1. DEFINITIONS:
"Property" - The real property located at 7001 East Fish Lake Road in
the City of Maple Grove, County of Hennepin and State of Minnesota legally
described on Exhibit "A" attached hereto and made a part hereof, including all
buildings and site improvements now or hereafter located thereon.
"Building" - The office building containing approximately 17,000 square
feet to be constructed on the Property by Landlord according to the Plans
defined below.
"Leased Property" - The part of the Building consisting of
approximately 9,000 square feet, as measured from the outside walls of the
Leased Property to the center of the partition wall, as shown on the floor plan
attached hereto as Exhibit "B" and made a part hereof. The Leased Property
includes a non-exclusive easement for access to common areas, as hereinafter
defined, and all licenses and easements appurtenant to the Leased Property.
"Commencement Date" - The earlier of January 1, 1998, or the date that
Tenant begins conducting business in any part of the Leased Property.
"Common Areas" - The entire areas as designated on Exhibit "B" to be
used for non-exclusive use by Tenant and other Tenants in the Building,
including, but not limited to, corridors, lavatories, driveways, truck docks,
parking lots and landscaped areas. Subject to reasonable rules and regulations
to the promulgated by Landlord, the common areas are available to Tenant and its
employees, agents, customers, and invitees for reasonable use in common with
other Tenants, their employees, agents, customers and invitees.
"Plans" - The Plans and Specifications dated April 1, 1997, prepared by
Houwman Architects, as modified from time to time. Any modifications affecting
the Leased Property must be approved by Tenant in writing.
"Rent" - The Base Rent and Additional Rent as defined herein.
2. TERM: For and in consideration of the rents, additional rents,
terms, provisions and covenants herein contained, Landlord hereby lets, leases
and demises to Tenant the Leased Property for the term beginning on the
Commencement Date and ending on December 31, 2003 ("the Expiration Date"),
unless sooner terminated or extended as hereinafter provided. Provided Tenant is
not then in default, Tenant shall have three successive options to renew this
Lease for successive terms of five years ("Renewal Term") at an increased rental
as hereafter provided, and under the same terms, conditions, and provisions as
herein provided for during the Initial Term. Each renewal option, to be
effective, must be exercised by Tenant by written notice mailed to Landlord not
less than six months prior to the expiration of the Initial Term or successive
Renewal Term. If Tenant fails to exercise a renewal option,
<PAGE>
then this Lease and any remaining renewal options shall terminate at the end of
the then current term. Any such notice of exercise shall be mailed pursuant to
the notice provisions herein.
3. RENT:
a. Base Rent: Landlord reserves and Tenant shall pay Landlord
Base Rent in equal monthly installments of $8,317.00,
beginning on the Commencement Date and continuing on the first
day of each and every month thereafter for the next succeeding
months during the balance of the term. If the Commencement
Date falls on a date other than the first of a month, the
rental for that month shall be prorated and adjusted
accordingly. The Base Rent during each Renewal Term shall be
determined according to the Consumer Price Index for the
Minneapolis/St. Paul metropolitan area published by the
Minneapolis Star Tribune in its Monday Business Section (the
"CPI"). If the Minneapolis Star Tribune ceases to publish such
information, then the Consumer Price Index for the
Minneapolis/St. Paul metropolitan area published by the Bureau
of Labor Statistics of the U.S. Department of Labor shall be
used as the CPI. The CPI as reported on the Monday preceding
the Commencement Date in the Minneapolis Star Tribune Business
Section shall be used as the base and the Base Rent shall be
adjusted in direct proportion to the change in the CPI,
rounded to the nearest 1/10 of a percent. If the adjusted Base
Rent according to the CPI would be less than the beginning
Base Rent, then the adjusted BaseRent shall be the amount of
the beginning Base Rent.
b. Additional Rent: Tenant shall pay to Landlord throughout the
term of this Lease and any Renewal Term as "Additional Rent"
an amount equal to the following:
i. A sum equal to 62.5% of the Real Estate Taxes. The
term "Real Estate Taxes" shall mean all real estate
taxes, and all installments of assessments and any
taxes in lieu thereof levied upon or assessed against
the Property of which the Leased Property is a part.
ii. If the taxing authorities include in the
determination of the Real Estate Taxes the value of
any improvements made by Tenant, or of machinery,
equipment, fixtures, inventory or other personal
property or assets of Tenant, then Tenant shall pay
all the Real Estate Taxes attributable to such items
in addition to its percentage share of the Real
Estate Taxes. A photostatic copy of the tax statement
submitted by Landlord to Tenant shall be sufficient
evidence of the amount of the Real Estate Taxes and
of the items taxed.
iii. A sum equal to 62.5% of the annual aggregate
operating expenses incurred by Landlord in the
operation, maintenance and repair of the Property.
The term "Operating Expenses" shall include but not
be limited to maintenance, repair, replacement and
care of all heating, lighting, plumbing, sprinkling
and air conditioning fixtures, equipment and
<PAGE>
systems, roofs, floors, parking and landscaped areas,
common areas, and signs; snow removal; nonstructural
repair and maintenance of the exterior of the
Building; insurance premiums; management fee; wages
and fringe benefits of personnel employed for such
work, costs of equipment purchased and used for such
purposes; and the cost of any capital improvements
made to the Building by Landlord after the Base Year
which result in a reduction of Operating Expenses or
made to the Building by Landlord after the date of
this Lease that are required under any governmental
law or regulation that was not applicable to the
Building at the time it was constructed (amortized
over such reasonable period as Landlord shall
determine together with interest at the rate of 12%
per annum on the unamortized balance).
iv. The cost of any services provided to Tenant by
Landlord pursuant to paragraph 5, below. The
following are expressly excluded from the term
"Operating Expenses":
(1) Any charge for depreciation of the Building
or Premises or any equipment located
thereon, and any interest or other financing
charge.
(2) All costs relating to activities for the
solicitation and execution of leases of
space in the Building.
(3) All costs for which Tenant or any other
tenant of the Building is being charged
other than pursuant to the operating
expenses clause set forth in this Lease or
comparable operating expenses clauses.
(4) The cost of any repair made by Landlord
because of the total or partial destruction
of the Premises or the condemnation of a
portion of the Premises.
(5) The cost of any items for which Landlord is
reimbursed by insurance or otherwise
compensated by parties other than by tenants
of the Building pursuant to an operating
expenses clause.
(6) Any operating expense representing an amount
paid to a related corporation, entity or
person which is in excess of the amount
which would be paid in the absence of such
relationship.
(7) The cost of alterations of space in the
Building leased to other tenants.
v. The payment of the above Additional Rent shall be in
addition to the Base Rent. All sums due hereunder
shall be due and payable within thirty (30) days of
delivery of written certification by Landlord setting
forth the
<PAGE>
computation of the amount due from Tenant. If the
lease term shall begin or expire at any time during
the calendar year, Tenant shall be responsible for
its pro-rata share of Additional Rent during the
Lease and/or occupancy time. Prior to commencement of
this Lease, and prior to the commencement of each
calendar year thereafter commencing during the term
of this Lease or any renewal or extension thereof,
Landlord may estimate the Additional Rent for each
calendar year. The estimates shall be in writing and
will be delivered or mailed to Tenant at the
Property. If the estimate is delivered to Tenant
before the first day of January of a calendar year,
the Additional Rent so estimated shall be payable in
equal monthly installments, in advance, on the first
day of each month during the calendar year. If the
estimate is delivered to Tenant after the first day
of January of a calendar year, the Additional Rent so
estimated shall be payable in equal monthly
installments, in advance, on the first day of each
month over the balance of such calendar year, with
the number of installments being equal to the number
of full calendar months remaining in the calendar
year. After the end of each calendar year during the
term of this Lease or any renewal or extension
thereof, Landlord shall determine the actual amount
of Tenant's Additional Rent payable in such calendar
year and deliver a written certification of the
amounts to Tenant. If Tenant has underpaid its
Additional Rent for such calendar year, Tenant shall
pay the balance of the Additional Rent within ten
(10) days after the receipt of such statement. If
Tenant has overpaid its Additional Rent for such
calendar year, Landlord shall either (i) refund the
excess, or (ii) credit the excess against the most
current monthly installment or installments due
Landlord for its estimate of Tenant's Additional Rent
for the next following calendar year. A prorata
adjustment of the Additional Rent shall be made for a
fractional calendar year occurring during the term of
this Lease or any renewal or extension thereof based
upon the number of days of the term of the Lease
during said calendar year as compared to three
hundred sixty-five (365) days and all additional sums
payable by Tenant or credits due Tenant as a result
of the provisions of this Article III shall be
adjusted accordingly.
4. COVENANT TO PAY RENT: The covenants of Tenant to pay the Base Rent
and the Additional Rent are each independent of any other covenant, condition,
provision or agreement contained in this Lease. All rents are payable to
Landlord at 12505 58th Avenue North, Plymouth, Minnesota 55442.
5. UTILITIES: Landlord shall provide mains and conduits to the Property
for water, gas, electricity and sanitary sewage. Tenant shall pay, when due, all
charges for sewer usage or rental, garbage disposal, refuse removal, water,
electricity, gas, fuel oil, L. P. gas, telephone and/or other utility services
or energy source furnished to the Leased Property during the term of this Lease,
or any renewal of extension thereof. If Landlord elects to furnish any of the
foregoing services, the rate charged by Landlord for the service shall not
exceed the rate Tenant would be required to pay to a
<PAGE>
utility company or service company furnishing any service. The charges for any
service provided by Landlord shall be included in the Additional Rent in
accordance with paragraph 3, above.
6. CARE AND REPAIR OF LEASED PROPERTY:
a. Tenant shall, at all times throughout the term of this Lease,
including renewals and extensions, and at its sole expense,
keep and maintain the Leased Property in a clean, safe,
sanitary and first class condition and in compliance with all
applicable laws, codes, ordinances, rules and regulations.
Tenant's obligations hereunder shall include but not be
limited to the maintenance, repair and replacement, if
necessary, of all lighting and plumbing fixtures and
equipment, fixtures, motors and machinery, all interior walls,
partitions, doors and windows, including the regular painting
thereof, all exterior entrances, windows, doors and docks and
the replacement of all broken glass. When used in this
provision, the term "repairs" shall include replacements or
renewals when necessary, and all such repairs made by the
Tenant shall be equal in quality and class to the original
work. The Tenant shall keep and maintain all portions of the
Leased Property and the sidewalk and areas adjoining the same
in a clean and orderly condition, free of accumulation of
dirt, rubbish, snow and ice.
b. If Tenant fails, refuses or neglects to maintain or repair the
Leased Property as required in this Lease after notice shall
have been given Tenant as provided in this Lease, Landlord may
make such repairs without liability to Tenant for any loss or
damage that may accrue to Tenant's merchandise, fixtures or
other property or to Tenant's business by reason thereof, and
upon completion thereof, Tenant shall pay to Landlord all
costs plus 15% for overhead incurred by Landlord in making
such repairs by Landlord upon presentation to Tenant of bill
therefor.
c. Landlord shall repair, at its expense, the structural portions
of the Building, provided however where structural repairs are
required to be made by reason of the acts of Tenant, the costs
thereof shall be borne by Tenant and payable by Tenant to
Landlord upon demand.
d. The Landlord shall be responsible for performing all outside
maintenance of the Property, including grounds and parking
areas. All such maintenance shall be performed as reasonably
necessary to the comfortable use and occupancy of the Leased
Property provided that the Landlord shall not be liable for
damages for failure to do so caused by matters beyond its
control.
e. Except for items to be maintained by Tenant as expressly
provided in Paragraph 6A, above, Landlord shall maintain the
Premises in a good, clean, and safe condition and make
repairs, restorations and replacements to the Premises as and
when needed to preserve them in good working order and
condition, reasonable wear and tear excepted. All such
repairs, restorations and replacements shall be in a quality
and class equal to the original work and installations.
<PAGE>
f. Any work performed by Landlord pursuant to the Lease shall, to
the extent reasonably possible, be done in a manner so as to
minimize the inconvenience to and disruption of Tenant's use
of the Demised Premises.
7. SIGNS: No sign, lettering, picture, notice or advertisement (Signs)
may be installed on or in any part of the Property and visible from the exterior
of the Building, or visible from the exterior of the Leased Property, except
Signs installed in conformance with the Sign Criteria in Exhibit "E" attached
hereto at Tenant's sole cost and expense. Signs shall be maintained by Tenant at
Tenant's expense. If a Sign does not conform to the Sign Criteria, or if Tenant
fails to maintain the Sign or fails to remove it at the termination of this
Lease, Landlord may perform maintenance or remove the Sign without any liability
and may charge the expense incurred by such maintenance or removal to Tenant.
8. ALTERATIONS, INSTALLATION, FIXTURES: Except as hereinafter provided,
Tenant shall not make any alteration, additions, or improvements in or to the
Leased Property or add, disturb or in any way change any plumbing or wiring
therein without the prior written consent of the Landlord. If alterations are
required by any governmental agency by reason of the use and occupancy of the
Leased Property by Tenant, Tenant shall make such alterations at its own cost
and expense after first obtaining Landlord's approval of plans and
specifications therefor and furnishing such indemnification as Landlord may
reasonably require against liens, costs, damages and expenses arising out of
such alterations. Alterations or additions by Tenant must be built in compliance
with all laws, ordinances and governmental regulations affecting the Property
and Tenant shall warrant to Landlord that all such alterations, additions, or
improvements shall be in strict compliance with all relevant laws, ordinances,
governmental regulations, and insurance requirements. Construction of such
alterations or additions shall commence only after Tenant obtains and exhibits
to Landlord the required approvals, licenses, permits and indemnification. All
alterations, installations, physical additions or improvements to the Leased
Property made by Tenant shall at once become the property of Landlord and shall
be surrendered to Landlord upon the termination of this Lease; provided,
however, this clause shall not apply to movable equipment or furniture owned by
Tenant which may be removed by Tenant at the end of the term of this Lease if
Tenant is not then in default.
9. POSSESSION: Except as hereinafter provided, Landlord shall deliver
possession of the Leased Property to Tenant in the condition required by this
Lease on or before the Commencement Date. The rent herein reserved shall
commence on the Commencement Date. Landlord shall have no responsibility or
liability for loss or damage to fixtures, facilities or equipment installed or
left on the Leased Property.
10. SECURITY AND DAMAGE DEPOSIT: Tenant contemporaneously with the
execution of this Lease, has deposited with Landlord the sum of $18,000.00 (the
"Deposit"), receipt of which is acknowledged hereby by Landlord, to be held by
Landlord, without liability for interest, as a security and damage deposit for
the faithful performance by Tenant during the term hereof or any extension
hereof. Prior to the time when Tenant shall be entitled to the return of the
Deposit, Landlord may commingle the Deposit with Landlord's own funds and to use
the Deposit for such purposes as Landlord may determine. If Tenant fails to keep
and perform the terms, covenants and conditions of this Lease, then Landlord,
either with or without terminating this Lease, may (but shall not be required
to) apply such portion of the Deposit as may be necessary to compensate or repay
Landlord for all losses or damages sustained or to be sustained by Landlord due
to such breach on the part of Tenant, including,
<PAGE>
but not limited to overdue and unpaid rent, any other sum payable by Tenant to
Landlord pursuant to the provisions of this Lease, damages or deficiencies in
the reletting of Leased Property, and reasonable attorneys' fees incurred by
Landlord. Should the entire Deposit or any portion thereof, be appropriated and
applied by Landlord, in accordance with the provisions of this paragraph, Tenant
upon written demand by Landlord, shall remit forthwith to Landlord a sufficient
amount of cash to restore the Deposit to the original sum deposited, and
Tenant's failure to do so within five (5) days after receipt of such demand
shall constitute a breach of this Lease. The Deposit shall be returned to
Tenant, less any depletion thereof as the result of the provisions of this
paragraph, at the end of the term of this Lease or any renewal thereof, or upon
the earlier termination of this Lease. Tenant shall have no right to anticipate
return of the Deposit by withholding any amount required to be paid pursuant to
the provision of this Lease or otherwise.
If Landlord shall sell the Property, or shall otherwise convey or
dispose of its interest in this Lease, Landlord may assign the Deposit or any
balance thereof to Landlord' assignee, whereupon Landlord shall be released from
all liability for the return or repayment of the Deposit and Tenant shall look
solely to the said assignee for the return an repayment of the Deposit. The
Deposit shall not be assigned or encumbered by Tenant without the written
consent of Landlord, and any assignment or encumbrance without such consent
shall not bind Landlord. In the event of any rightful and permitted assignment
of this Lease by Tenant, the Deposit shall be deemed to be held by Landlord as a
deposit made by the assignee, and Landlord shall have no further liability with
respect to the return of the Deposit to Tenant.
11. USE: The Leased Property shall be used and occupied by Tenant
solely for the purposes of product development, assembly, sales and distribution
(the "Permitted Use") in compliance with all applicable laws, ordinances and
governmental regulations affecting the Building and Property. The Leased
Property shall not be used in such manner that, in accordance with any
requirement of law or of any public authority, Landlord shall be obliged on
account of the purpose or manner of said use to make any addition or alteration
to or in the Building. The Leased Property shall not be used in any manner which
will increase the rates required to be paid for public liability or for fire and
extended coverage insurance covering the Property. Tenant shall occupy the
Leased Property and conduct its business and control its agents, employees,
invitees and visitors in such a way as is lawful, and reputable and will not
permit or create any nuisance, noise, odor, or otherwise interfere with, annoy
or disturb any other tenant in the Building in its normal business operations or
Landlord in its management of the Building. Tenant's use of the Leased Property
shall conform to all the Landlord's rules and regulations relating to the use of
the Property. Outside storage on the Property of any type of equipment, property
or materials owned or used on the Property by Tenant or its customers and
suppliers shall not be permitted.
12. HAZARDOUS SUBSTANCES: As used in this Paragraph 12 the term
"Hazardous Substances" shall mean and refer to asbestos, urea formaldehyde,
polychlorinated biphenyls, nuclear fuel or materials, radioactive materials,
explosives, known carcinogens, petroleum products and by-products, and any
pollutant, contaminant, chemical, material or substance defined as hazardous or
as a pollutant or a contaminant in, or the release or disposal of which is
regulated by any Environmental Law.
<PAGE>
As used in this Paragraph 12 the term "Environmental Law" shall mean
and refer to the Comprehensive Environmental Response and Liability Act of 1980
("CERCLA"), 42 U.S.C. ss. 9601 et seq.; the Federal Resource Conservation and
Recovery Act of 1976 ("RCRA"), 42 U.S.C. ss. 6901 et seq.; the Clean Water Act,
33 U.S.C. ss. 1321 et seq.; the Clean Air Act, 42 U.S.C. ss. 7401 et seq., the
Minnesota Environmental Response and Liability Act ("MERLA"), Minn. Stat. Ch.
115B; the Minnesota Petroleum Tank Release Cleanup Act, Minn. Stat. Ch. 115C;
and any other federal, state, county, municipal, local or other statute, law,
ordinance or regulation which relates to or deals with human health or the
environment, including, without limitation, all regulations promulgated by a
regulatory body pursuant to any such statute, law or ordinance.
Tenant covenants, represents and warrants to Landlord, its successors
and assigns, that it will not use or permit the Property to be used, whether
directly or through contractors, agents or subtenants, for the generating,
transporting, treating, storage, manufacture, emission of, or disposal of any
Hazardous Substances except as reasonably necessary or useful to the Permitted
Use of the Leased Property. If, as a reasonably necessary incident of its
Permitted Use of the Leased Property, Tenant does place or use Hazardous
Substances in or on the Property, Tenant will exercise due care with respect to
such Hazardous Substances, will comply with all applicable laws and regulations
relating to the generation, use, storage, treatment and disposal of such
Hazardous Substances, including reporting and employee disclosure requirements,
and will provide to Landlord any applicable material safety data sheets
regarding said Hazardous Substances as well as a written description of the
amount of such Hazardous Substances to be brought upon or into the Property and
the common and recognized chemical name of such Hazardous Substances. Landlord
or Landlord's representative shall have the right, but not the obligation, to
enter the Leased Property for the purposes of inspecting the storage, use and
disposal of Hazardous Substances to ensure compliance with all Environmental
Laws. Should it be determined, in Landlord's sole opinion, that said Hazardous
Substances are being improperly stored, used, or disposed of, then Tenant shall
immediately take such corrective action as required by Landlord. Should Tenant
fail to take such corrective action within twenty-four (24) hours, Landlord
shall have the right to perform such work and Tenant shall promptly reimburse
Landlord for any and all costs associated with said work. If at any time during
or after the term of the Lease, the Property is found to be so contaminated or
subject to said conditions, Tenant shall diligently institute proper and
thorough cleanup procedures at Tenant's sole cost, and Tenant agrees to
indemnify and hold Landlord harmless from all claims, demands, actions,
liabilities, costs, expenses, damages, fines, reimbursement, restitution,
response costs, cleanup costs, and obligations (including investigative
responses and attorney's fees) of any nature arising from or as a result of the
use of the premises by Tenant. The foregoing indemnification and the
responsibilities of Tenant shall survive the termination or expiration of this
Lease.
Tenant shall indemnify, defend and hold Landlord harmless from and
against any loss, damage, expense or cost, including all attorneys' fees
incurred in connection with the defense of any court action or administrative
proceeding against the Landlord, arising out of Tenant's breach of any of the
warranties and covenants set forth in this Paragraph 12. These covenants,
representations and warranties shall survive the expiration or termination of
the Lease for the benefit of Landlord and any successors and assigns of
Landlord, including any subsequent owner of the Property.
Landlord covenants, represents and warrants to Tenant, its successors
and assigns:
<PAGE>
a. To the best of Landlord's knowledge, there are no Hazardous
Substances located in, on or under or about the Leased
Property other than those disclosed to it by Tenant, owned and
used by Tenant in connection with its Permitted Use of the
Leased Property.
b. To the best of Landlord's knowledge, no Hazardous Substances
have ever been spilled, leaked, pumped, poured, emitted,
emptied, discharged, injected, dumped or permitted to escape
or leach into the environment on the Property.
c. There are no above-ground or underground storage tanks located
on the Property.
d. To the best of Landlord's knowledge, no governmental entity
has ever taken any investigative or enforcement action with
respect to the Property for violation of any Environmental
Law.
Landlord shall indemnify, defend and hold Tenant harmless from and
against any all loss, damage, expense or cost, including all attorneys' fees
incurred in connection with the defense of any court action or administrative
proceeding against the Tenant, arising out of Landlord's breach of any of the
warranties and covenants set forth in this Paragraph 12. These covenants,
representations and warranties shall survive the expiration or termination of
this Lease for the benefit of Tenant and any successors and assigns of Tenant.
13. ACCESS TO LEASED PROPERTY: The Tenant agrees to permit Landlord and
the authorized representatives of the Landlord to enter the Leased Property at
all times during usual business hours for the purpose of inspecting and making
any necessary repairs to the Leased Property and performing any work therein
that may be necessary to comply with any laws, ordinances, rules, regulations or
requirements of any public authority or that the Landlord may deem necessary to
prevent waste or deterioration in connection with the Leased Property. Nothing
herein shall imply any duty upon the part of the Landlord to do any such work
which, under any provision of this Lease, the Tenant may be required to perform,
and the performance thereof by the Landlord shall not constitute a waiver of the
Tenant's default in failure to perform the same. The Landlord may, during the
progress of any work in the Leased Property, keep and store upon the Leased
Property all necessary materials, tools and equipment. The Landlord shall not be
liable for inconvenience, annoyance, disturbance, loss of business, or other
damage of the Tenant by reason of making repairs or the performance of any work
in the Leased Property, or on account of bringing materials, supplies and
equipment into or through the Leased Property during the course thereof and the
obligations of the Tenant under this Lease shall not thereby be affected in any
manner whatsoever.
Landlord reserves the right to enter upon the Leased Property at any
time in the event of an emergency and at reasonable hours to exhibit the Leased
Property to prospective purchasers or others; and to exhibit the Leased Property
to prospective tenants and to display "For Rent" or similar signs on windows or
doors in the Leased Property during the last 180 days of the term of this Lease,
all without hindrance or molestation by Tenant.
<PAGE>
14. EMINENT DOMAIN: In the event of any eminent domain or condemnation
proceeding or private sale in lieu thereof of the Property occurs during the
Term hereof, the following provisions shall apply:
a. If the whole of the Property shall be acquired or condemned by
eminent domain, then the term of this Lease shall cease and
terminate as of the date possession of the Property is taken
by the condemning authority in such proceeding (the "Taking
Date") and all rentals shall be paid up to that date.
b. If any part constituting less than the whole of the Property
shall be acquired or condemned as aforesaid, if in the
reasonable opinion of Landlord, such partial taking or
condemnation shall materially affect the Leased Property so as
to render the Leased Property unsuitable for the business of
the Tenant, then the term of this Lease shall cease and
terminate as of the Taking Date and rent shall be paid to the
date of such termination.
If, in the reasonable opinion of the Landlord, a partial taking or
condemnation of the Property does not materially affect the Leased Property so
as to render the Leased Property unsuitable for the business of the Tenant, this
Lease shall continue in full force and effect but with a proportionate abatement
of the Base Rent and Additional Rent from and after the Taking Date based on the
portion, if any, of the Leased Property taken. Landlord reserves the right, at
its option, to restore the Building and the Leased Property to substantially the
same condition as they were prior to such condemnation. In such event, Landlord
shall give written notice to Tenant, within 30 days following the Taking Date,
of Landlord's intention to restore. Upon Landlord's notice of election to
restore, Landlord shall commence restoration and shall restore the Building and
the Leased Property with reasonable promptness, subject to delays beyond
Landlord's control and delays in the making of condemnation or sale proceeds
adjustments by Landlord; and Tenant shall have no right to terminate this Lease
except as herein provided. Upon completion of such restoration, the rent shall
be adjusted based upon the portion, if any, of the Leased Property restored.
c. Tenant shall not be entitled to any part of the award paid for
such condemnation and Landlord is to receive the full amount
of such award, the Tenant hereby expressly waiving any right
to claim to any part thereof.
d. Although all damages in the event of any condemnation shall
belong to the Landlord whether such damages are awarded as
compensation for diminution in value of the leasehold or to
the fee of the Leased Property, Tenant shall have the right to
claim and recover from the condemning authority, but not from
Landlord, such compensation as may be separately awarded or
recoverable by Tenant in Tenant's own right on account of any
and all damage to Tenant's business by reason of the
condemnation and for or on account of any cost or loss to
which Tenant might be put in removing Tenant's merchandise,
furniture, fixtures, leasehold improvements and equipment.
15. DAMAGE OR DESTRUCTION: If any damage or destruction to the Property
by fire or other cause occurs during the term hereof, the following provisions
shall apply:
<PAGE>
a. If the Building is damaged by fire or any other cause to such
extent that the cost of restoration, as reasonably estimated
by Landlord, will equal or exceed thirty percent (30%) of the
replacement value of the Building (exclusive of foundations)
just prior to the occurrence of the damage, then Landlord may,
no later than the sixtieth (60th) day following the damage,
give Tenant written notice of Landlord's election to terminate
this Lease.
b. If the cost of restoration as estimated by Landlord will equal
or exceed fifty percent (50%) of said replacement value of the
Building and if, in the reasonable opinion of Tenant, the
Leased Property is not suitable as a result of said damage for
the purposes for which they are Leased hereunder, then Tenant
may, no later than the sixtieth (60th) day following the
damage, give Landlord a written notice of election to
terminate this Lease.
c. If the cost of restoration as estimated by Landlord shall
amount to less than thirty percent (30%) of said replacement
value of the Building, or if, despite the cost, Landlord does
not elect to terminate this Lease, Landlord shall restore the
Building and the Leased Property with reasonable promptness,
subject to delays beyond Landlord's control and delays in the
making of insurance adjustments by Landlord; and Tenant shall
have no right to terminate this Lease except as herein
provided. Landlord shall not be responsible for restoring or
repairing leasehold improvements of the Tenant.
d. If either Landlord or Tenant elects to terminate the Lease,
then this Lease shall be deemed to terminate on the date of
the receipt of the notice of election and all rentals shall be
paid through that date. Tenant shall have no claim against
Landlord for the value of any unexpired term of this Lease.
e. If damage to the Building materially affects the Leased
Property so as to render it unsuitable in whole or in part for
the Permitted Uses, then, unless such damage was wholly or
partially caused by Tenant, its employees, contractors or
licensees, a portion of the rent based upon the amount of the
extent to which the Leased Property are rendered unsuitable
shall be abated until repaired or restored. If the damage was
wholly or partially caused by Tenant, its employees,
contractors or licensees, and if Landlord shall elect to
rebuild, the rent shall not abate and the Tenant shall remain
liable for the same.
16. CASUALTY INSURANCE:
a. Landlord shall at all times during the term of this Lease
maintain a policy or policies of insurance issued by an
insurance company licensed to do business in the State of
Minnesota insuring the Building against loss or damage by
fire, explosion or other insurable hazards and contingencies
for the full replacement value, provided that Landlord shall
not be obligated to insure any furniture, equipment,
machinery, goods or supplies which Tenant may bring upon the
<PAGE>
Leased Property or any additional improvements which Tenant
may construct or install on the Leased Property.
b. Tenant shall not carry any stock of goods or do anything in or
about the Leased Property which will in any way impair or
invalidate the obligation of the insurer under any policy of
insurance required by this Lease.
c. Landlord hereby waives and releases all claims, liabilities
and causes of action against Tenant and its agents, servants
and employees for loss or damage to, or destruction of, the
Property or any portion thereof, including the buildings and
other improvements situated thereon, resulting from fire,
explosion or the other perils included in standard extended
coverage insurance, whether caused by the negligence of any of
said persons or otherwise. Likewise, Tenant hereby waives and
releases all claims, liabilities and causes of action against
Landlord and its agents, servants and employees for loss or
damage to, or destruction of, any of the improvements,
fixtures, equipment, supplies, merchandise and other property,
whether that of Tenant or of others in, upon or about the
Property resulting from fire, explosion or the other perils
included in standard extended coverage insurance, whether
caused by the negligence of any of said persons or otherwise.
The waiver shall remain in force whether or not the Tenant's
insurer shall consent thereto.
d. If the use of the Leased Property by Tenant increases the
premium rate for insurance carried by Landlord on the
improvements of which the Leased Property is a part, Tenant
shall pay Landlord, upon demand, the amount of such premium
increase. If Tenant installs any electrical equipment that
overloads the power lines to the Building or its wiring,
Tenant shall, at its own expense, make whatever changes are
necessary to comply with the requirements of the insurance
underwriter, insurance rating bureau and governmental
authorities having jurisdiction.
17. LIABILITY INSURANCE: Landlord shall not be liable to Tenant or
those claiming through or under Tenant, for injury, death or property damage
occurring in, on or about the Property and appurtenances thereto, and Tenant
shall indemnify Landlord and hold Landlord harmless from any claim or damage
arising out of any injury, death, or property damage occurring in, on or about
the Property to Tenant or any employee, customer, or invitee of Tenant. Without
limiting the foregoing, Tenant shall procure and maintain a policy or policies
of insurance at its own cost an expense, insuring Landlord and Tenant from all
claims, demands, or actions for injury or death, made by or on behalf of any
person or persons, firm, or corporation arising from, related to, or connected
with, the conduct and operation of the Leased Property. Said insurance shall be
a minimum of $1,000,000 Combined Single Limit for Bodily Injury and/or Property
Damage Each Occurrence and shall not be subject to cancellation except after at
least thirty (30) days prior written notice to Landlord and the policy or
policies or duly executed certificate or certificates for the same, showing the
Landlord as an Additional Insured with respect to the Leased Property, together
with satisfactory evidence of the payment of premium thereon, shall be deposited
with Landlord at the commencement of the term and renewals thereof not less than
thirty (30) days prior to the expiration of the term of such coverage.
<PAGE>
18. DEFAULT OF TENANT:
a. If Tenant fails to pay any rental due hereunder within five
(5) days after the same shall be due, or fails to perform any
other term, condition or covenant of this Lease for more than
ten (10) days after written notice of such failure shall have
been given to Tenant, or if Tenant or an agent of Tenant shall
falsify any report required to be furnished to Landlord
pursuant to the terms of this Lease, or if Tenant or any
guarantor of this Lease shall become bankrupt or insolvent, or
file any debtor proceedings or any person shall file against
Tenant or any guarantor of this Lease in any court pursuant to
any statute either of the United States or of any state a
petition in bankruptcy or insolvency or for reorganization or
for the appointment of a receiver or trustee of all or a
portion of Tenant's or any such guarantor's property, or if
Tenant or any such guarantor makes an assignment for the
benefit of creditors, or petitions for or enters into an
arrangement, or if Tenant shall abandon the Leased Property or
suffer this Lease to be taken under any writ of execution,
then in any such event Tenant shall be in default hereunder,
and Landlord, in addition to other rights of remedies it may
have, shall have the immediate right of re-entry and may
remove all persons and property from the Leased Property and
such property may be removed and stored in a public warehouse
or elsewhere at the cost of, and for the account of Tenant,
all without service of notice or resort to legal process and
without being guilty of trespass, or becoming liable for any
loss or damage which may be occasioned thereby.
b. Should Landlord elect to re-enter the Leased Property as
herein provided, or should it take possession of the Leased
Property pursuant to legal proceedings or pursuant to any
notice provided for by law, it may either terminate this Lease
or it may from time to time, without terminating this Lease,
make such alterations and repairs as may be necessary in order
to relet the Leased Property, and relet the Leased Property or
any part thereof for such term or terms (which may be for a
term extending beyond the term of this Lease) and at such
rental or rentals and upon such other terms and conditions as
Landlord in its sole discretion may deem advisable. Upon each
such reletting all rental received by the Landlord from such
reletting shall be applied first to the payment of any
indebtedness other than rent due hereunder from Tenant to
Landlord; second, to the payment of any costs and expenses of
such reletting, including brokerage fees and attorney's fees
and of costs of such alterations and repairs; third, to the
payment of residue and unpaid hereunder, and the rent due, if
any, shall be held by Landlord and applied in payment of
future rent as the same may become due and payable hereunder.
If such rentals received from such reletting during any month
be less than that to be paid during that month by Tenant
hereunder, Tenant, upon demand, shall pay any such deficiency
to Landlord. No such re-entry or taking possession of the
Leased Property by Landlord shall be construed as an election
on its part to terminate this Lease unless a written notice of
such intention be given to Tenant or unless the termination
thereof be decreed by a court of competent jurisdiction.
Notwithstanding any such reletting without termination,
Landlord may at any time
<PAGE>
after such re-entry and reletting elect to terminate this
Lease for such previous breach. Should Landlord at any time
terminate this Lease for any such breach, in addition to any
other remedies it may have, it may recover from Tenant all
damages it may incur by reason of such breach, including the
cost of recovering the Leased Property, reasonable attorney's
fees, and including the worth at the time of such termination
of the excess, if any, of the amount of rent and charges
equivalent to rent reserved in this Lease for the remainder of
the stated term over the then reasonable rental value of the
Leased Property for the remainder of the stated term, all of
which amounts shall be immediately due and payable from Tenant
to Landlord.
c. Landlord may, at its option, instead of exercising any other
rights or remedies available to it in this Lease or otherwise
by law, statute or equity, spend such money as is reasonably
necessary to cure any default of Tenant herein and the amount
so spent, and costs incurred, including attorney's fees in
curing such default, shall be paid by Tenant, as Additional
Rent, upon demand.
d. If suit shall be brought for recovery of possession of the
Leased Property, for the recovery of Rent or any other amount
due under the provisions of this Lease, or because of the
breach of any other covenant herein contained on the part of
Tenant to be kept or performed, and a breach shall be
established, Tenant shall pay to Landlord all expenses
incurred therefor, including reasonable attorney's fees,
together with interest on all such expenses at the rate of 12%
percent per annum from the date of such breach of the
covenants of this Lease.
e. Tenant hereby expressly waives any and all rights of
redemption granted by or under any present or future laws in
the event of Tenant being evicted or dispossessed for any
cause, or in the event of Landlord obtaining possession of the
Leased Property, by reason of the violation by Tenant of any
of the covenants or conditions of this Lease, or otherwise.
Tenant also waives any demand for possession of the Leased
Property, and any demand for payment of rent and any notice of
intent to re-enter the Leased Property, or of intent to
terminate this Lease, other than the notices above provided in
this Article, and waives any and every other notice or demand
prescribed by any applicable statutes or laws.
f. No remedy herein or elsewhere in this Lease or otherwise by
law, statute or equity, conferred upon or reserved to Landlord
or Tenant shall be exclusive of any other remedy, but shall be
cumulative, and may be exercised from time to time and as
often as the occasion may arise.
19. COVENANTS TO HOLD HARMLESS: Unless the liability for damage or loss
is caused by the negligence of Landlord, its agents or employees, Tenant shall
hold harmless Landlord from any liability for damages to any person or property
in or upon the Property, including the person and property of Tenant and its
employees and all persons in the Building at its or their invitation or
sufferance, and from all damages resulting from Tenant's failure to perform the
covenants of this Lease. All property kept, maintained or stored on the Property
shall be so kept, maintained or stored at the sole
<PAGE>
risk of Tenant. Tenant agrees to pay all sums of money in respect of any labor,
service, materials, supplies or equipment furnished or alleged to have been
furnished to Tenant on or about the Property, and not furnished on order of
Landlord, which may be secured by any Mechanic's, Materialmen's or other lien to
be discharged at the time performance of any obligation secured thereby matures,
provided that Tenant may contest such lien, but if such lien is reduced to final
judgment and if such judgment or process thereon is not stayed, or if stayed and
said stay expires, then and in each such event, Tenant shall forthwith pay and
discharge said judgment. Landlord shall have the right to post and maintain on
the Property, notices of non-responsibility under the laws of the State of
Minnesota.
20. NON-LIABILITY: Subject to the terms and conditions of paragraph 16
hereof, Landlord shall not be liable for any damage to property of Tenant or of
others located on the Property, nor for the loss of or damage to any property of
Tenant or of others by theft or otherwise. Landlord shall not be liable for any
injury or damage to persons or property resulting from time, explosion, falling
plaster, steam, gas, electricity, water, rain or snow or leaks from any part of
the Property or from the pipes, appliances, or plumbing works or from the roof,
street or subsurface or from any other place or by dampness or by any other
cause of whatsoever nature. Landlord shall not be liable for any such damage
caused by other Tenants or persons in the Property, occupants of adjacent
property, of the buildings, or the public or caused by operations in
construction of any private, public or quasi-public work. Landlord shall not be
liable for any latent defect in the Leased Property. All property of Tenant kept
or stored on the Leased Property shall be so kept or stored at the risk of
Tenant only and Tenant shall hold Landlord harmless from any claims arising our
of damage to the same, including subrogation claims by Tenant's insurance
carrier.
21. SUBORDINATION & ESTOPPELS: This Lease shall be subordinate to any
mortgages that may now exist or that may hereafter be placed upon the Property
and to any and all advances made thereunder, and to the interest upon the
indebtedness evidenced by such mortgages, and to all renewals, replacements and
extensions thereof. If Landlord executes after the date of this Lease any such
mortgage, renewal, replacement or extension, Tenant agrees, upon receipt of a
request from Landlord therefor, execute and deliver to Landlord or to any
proposed holder of a mortgage or trust deed or to any proposed purchaser of the
Property, an Estoppel Certificate and a Subordination and Attornment Agreement
in the forms attached hereto as Exhibit "D".
22. ASSIGNMENT OR SUBLETTING BY Tenant: Tenant agrees to use and occupy
the Leased Property throughout the entire term hereof for the Permitted Uses and
for no other purposes, in the manner and to substantially the extent now
intended, and not to transfer or assign this Lease or sublet said Leased
Property, or any part thereof, whether by voluntary act, operation of law,
merger or otherwise, without obtaining the prior consent of Landlord in each
instance. If Tenant is a partnership, or a non-publicly traded corporation,
transfers of a total of 25% or more of the ownership interest of Tenant shall be
deemed an assignment of this Lease. Tenant shall seek such consent of Landlord
by a written request therefor, setting forth such information as Landlord may
deem necessary. Landlord agrees not to withhold consent unreasonably. Consent by
Landlord to any assignment of this Lease or to any subletting of the Leased
Property shall not be a waiver of Landlord's right under this Article as to any
further assignment or subletting. No such assignment or subleasing shall relieve
the Tenant from any of Tenant's obligations in this Lease contained, nor shall
any assignment or sublease or other transfer of this Lease be effective unless
the assignee, subtenant or transferee shall at the time of such assignment,
sublease or transfer, assume in writing for the benefit of Landlord, its
successors
<PAGE>
or assigns, all of the terms, covenants and conditions of this Lease thereafter
to be performed by Tenant and shall agree in writing to be bound thereby. Should
Tenant sublease in accordance with the terms of this Lease, all rental received
by Tenant in excess of the per square foot rental rate which is being paid by
Tenant shall be forwarded to and belong to Landlord, which increase shall be in
addition to the Base Rent and Additional Rent due Landlord under this Lease.
23. ATTORNMENT: If Landlord sells or assigns its interest in the
Property, or the Building in which the Leased Property is located, or this
Lease, or if the Property comes into custody or possession of a mortgagee or any
other party whether because of a mortgage foreclosure, or otherwise, Tenant
shall attorn to such assignee or other party and recognize such party as
Landlord hereunder; provided, however, Tenant's peaceable possession will not be
disturbed so long as Tenant faithfully performs its obligations under this
Lease. Tenant shall execute, on demand, any attornment agreement required by any
such party to be executed containing such provisions and such other provisions
as such party may require.
24. NOVATION IN THE EVENT OF SALE: If Landlord sells the Leased
Property, Landlord shall be and hereby is relieved of all of the covenants and
obligations created hereby accruing from and after the date of sale, and such
sale shall result automatically in the purchaser assuming and agreeing to carry
out all of the covenants and obligations of Landlord herein accruing from and
after the date of sale. Landlord shall cause to be included in the agreement of
sale and purchase a covenant whereby the purchaser of the Leased Property
assumes and agrees to carry out all of the covenants and obligations of the
Landlord arising from and after the date of closing of the sale.
The Tenant agrees at any time and from time to time upon not less than
ten (10) days prior written request by the Landlord to execute, acknowledge and
deliver to the Landlord an Estoppel Certificate in the form attached hereto as
Exhibit "D", it being intended that the Estoppel Certificate may be relied upon
by an prospective purchaser of the Property.
25. SUCCESSORS AND ASSIGNS: The terms, covenants and conditions hereof
shall be binding upon and inure to the heirs, representatives, successors and
assigns of the parties hereto.
26. UNIFORM COMMERCIAL CODE: The Tenant grants to the Landlord a lien
upon all personal property of the Tenant in the Leased Property during said term
to secure payment of the rent payable hereunder, and agrees that no such
property shall be removed from the Leased Property without the consent of the
Landlord while any installments of rent are past due, and during any other
default in the conditions hereof.
To the extent this Lease grants Landlord, or recognizes in Landlord any
lien or rights greater than provided by the laws of the State of Minnesota
pertaining to "Landlord's Liens," this Lease is intended and does constitute a
security agreement within the meaning of the Uniform Commercial Code of the
State of Minnesota, and Landlord, in addition to the rights prescribed herein
shall have the rights, titles, liens and interests in and to Tenant's property
nor or hereafter located in or upon the Leased Property which are granted a
"secured party" as the term is defined under such Uniform Commercial Code to
secure the payment to Landlord of amounts and monies due under this lease.
Tenant will execute, on request of Landlord, and will deliver to Landlord a
financing statement for the purpose of
<PAGE>
perfecting Landlord' security interest under this Lease or the Landlord may file
this Lease as a security agreement.
27. QUIET ENJOYMENT: Landlord warrants that it has full right to
execute and to perform this Lease and to grant the estate leased, and that
Tenant, upon payment of the rents and other amounts due and the performance of
all the terms, conditions, covenants and agreements on Tenant's part to be
observed and performed under this Lease, may peaceably and quietly enjoy the
Leased Property for the Permitted Uses subject to the terms and conditions of
this Lease.
28. RECORDING: Tenant shall not record this Lease without the written
consent of Landlord. However, upon the request of either party hereto, the other
party shall join in the execution of the Memorandum Lease for the purposes of
recording. Said Memorandum Lease shall describe the parties, the Leased Property
and the term of the Lease and shall incorporate this Lease by reference. This
paragraph 28 shall not be construed to limit Landlord's right to file this Lease
under paragraph 26 of this Lease.
29. OVERDUE PAYMENTS: All payments due under this Lease from Tenant to
Landlord shall be due on demand unless a payment time is otherwise specified in
this Lease, and if not paid when due, shall bear interest at the rate of 12% per
annum until paid.
30. SURRENDER: On the Expiration Date or upon the termination hereof
upon a day other than the Expiration Date, Tenant shall peaceably surrender the
Leased Property broom-clean in the same good order, condition and repair it was
in at the commencement of this Lease, reasonable wear and tear only excepted. On
or before the Expiration Date or upon termination of this Lease on a day other
than the Expiration Date, Tenant shall, at its expense, remove all trade
fixtures, personal property and equipment and signs from the Leased Property and
any property not removed shall be deemed to have been abandoned. Any damage
caused in the removal of such items shall be repaired by Tenant and at its
expense. All alterations, additions, improvements and fixtures (other than trade
fixtures) which shall have been made or installed by Landlord or Tenant upon the
Leased Property and all floor covering so installed shall, at the option of
Landlord, either be removed by Tenant at its expense, or remain upon and be
surrendered with the Leased Property as a part thereof, without disturbance,
molestation or injury, and without charge, at the expiration or termination of
this Lease. If the Leased Property is not surrendered on the Expiration Date or
the date of termination, Tenant shall indemnify Landlord against loss or
liability claims, without limitation, made by any succeeding Tenant founded on
such delay. Tenant shall promptly surrender all keys for the Leased Property to
Landlord at the place then fixed for payment of rent and shall inform Landlord
of combinations of any locks and safes on the Leased Property.
Landlord may, at its option, instead of exercising any other rights or
remedies available to it in this Lease or otherwise by law, statute or equity,
spend such money as is reasonably necessary to cure any default of Tenant herein
and the amount so spent, and costs incurred, including attorney's fees in curing
such default, shall be paid by Tenant.
31. HOLDING OVER: If Tenant remains in possession of the Leased
Property after the Expiration Date of this Lease and without the execution of a
new Lease, at the sole option of Landlord, it shall be deemed to be occupying
the Leased Property as a Tenant from month to month, subject to
<PAGE>
all the conditions, provisions and obligations of this Lease insofar as the same
can be applicable to a month-to-month tenancy, provided however that the rent
required to be paid by Tenant during any holdover period shall be two (2) times
the sum of the Base Rent and additional rent per month.
32. ABANDONMENT: If Tenant shall remove its fixtures, equipment or
machinery or shall vacate the Leased Property or any part thereof prior to the
Expiration Date of this Lease, or shall discontinue or suspend the operation of
its business conducted on the Leased Property for a period of more than thirty
(30) consecutive days (except during any time when the Leased Property may be
rendered untenantable by reason of fire or other casualty), then Tenant shall be
deemed to have abandoned the Leased Property and Tenant shall be in default
under the terms of this Lease.
33. CONSENTS BY Landlord: Whenever provision is made under this Lease
for Tenant securing the consent or approval by Landlord, such consent or
approval shall only be in writing.
34. NOTICES: Any notice required or permitted under this Lease shall be
deemed sufficiently given or secured if sent by registered or certified return
receipt mail to Tenant at 7001 East Fish Lake Road, Maple Grove, Minnesota
55311, and to Landlord at the address then fixed for the payment of rent as
provided in Article 4 of this Lease, and either party may by like written notice
at any time designate a different address to which notices shall subsequently be
sent or rent to be paid.
35. RULES AND REGULATIONS: Tenant shall observe and comply with the
rule and regulations hereinafter set forth in Exhibit "C," and with such further
reasonable rules and regulations as Landlord may prescribe, on written notice to
Tenant for the safety, care and cleanliness of the Building.
36. INTENT OF PARTIES: Except as otherwise provided herein, the Tenant
covenants and agrees that if it shall any time fail to pay any such cost or
expense, or fail to take out, pay for, maintain or deliver any of the insurance
policies above required, or fail to make any other payment or perform any other
act on its part to be made or performed as in this Lease provided, then the
Landlord may, but shall not be obligated so to do, and without notice to or
demand upon the Tenant and without waiving or releasing the Tenant from any
obligations of the Tenant in this Lease contained, pay any such cost or expense,
effect any such insurance coverage and pay premiums therefor, and may make any
other payment or perform any other act on the part of the Tenant to be made and
performed as in this Lease provided, in such manner and to such extent as the
Landlord may deem desirable, and in exercising any such right, to also pay all
necessary and incidental costs and expenses, employ counsel and incur and pay
reasonable attorneys' fees. All sums to paid by Landlord and all necessary and
incidental costs and expenses in connection with the performance of any such act
by the Landlord, together with interest thereon at the rate of 12% per annum
from the date of making of such expenditure by Landlord, shall be deemed
additional rent hereunder, and shall be immediately due and payable to Landlord.
Tenant covenants to pay and such sum or sums with interest as aforesaid and the
Landlord shall have the same rights and remedies in the event of the non-payment
thereof by Tenant as in the case of default by Tenant in the payment of the Base
Rent payable under this Lease.
37. GENERAL: The Lease does not create the relationship of principal
and agent or of partnership or of joint venture or of any association between
Landlord and Tenant, the sole relationship between the parties hereto being that
of Landlord and Tenant.
<PAGE>
No waiver of any default of Tenant hereunder shall be implied from any
omission by Landlord to take any action on account of such default if such
default persists or is repeated, and no express waiver shall affect any default
other than the default specified in the express waiver and that only for the
time and to the extent therein stated. One or more waivers by Landlord shall not
be construed as a waiver of a subsequent breach of the same covenant, term or
condition. The consent to or approval by Landlord of any act by Tenant requiring
Landlord's consent or approval shall not waive or render unnecessary Landlord's
consent to or approval of any subsequent similar act by Tenant. Each term and
each provision of this Lease performable by Tenant shall be construed to be both
a covenant and a condition. No action required or permitted to be taken by or on
behalf of Landlord under the terms or provisions of this Lease shall be deemed
to constitute an eviction or disturbance of Tenant's possession of the Leased
Property. All preliminary negotiations are merged into and incorporated in this
Lease. The laws of the State of Minnesota shall govern the validity, performance
and enforcement of this Lease.
This Lease and the Exhibits, if any, attached hereto and forming a part
hereof, constitute the entire agreement between Landlord and Tenant affecting
the Leased Property and there are no other agreements, either oral or written,
between them other than are herein set forth. No subsequent alterations,
amendment, change or addition to this Lease shall be binding upon Landlord or
Tenant unless reduced to writing and executed in the same form and manner in
which this Lease is executed.
If any agreement, covenant or condition of this Lease or the
application thereof to any person or circumstance shall, to any extend, be
invalid or unenforceable, the remainder of this Lease, or the application of
such agreement, covenant or condition to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby and each agreement, covenant or condition of this Lease shall be valid
and be enforced to the fullest extent permitted by law.
38. CAPTIONS: The captions are inserted only as a matter of convenience
and for reference, and in no way define, limit or describe the scope of this
Lease nor the intent or any provision thereof.
39. RENT A SEPARATE COVENANT: Tenant shall not for any reason withhold
or reduce Tenant's required payments of Base Rent, Additional Rent and other
charges provided in this Lease, it being agreed that the obligations of Landlord
hereunder are independent of Tenant's obligations. In this regard it is
specifically understood and agreed that in event Landlord commences any
proceedings against Tenant for non-payment of rentals or any other sum due and
payable by Tenant hereunder, Tenant will not interpose any counterclaim or other
claim against Landlord of whatever nature or description in any such
proceedings; and in the event that Tenant interposes any such counterclaim or
other claim against Landlord in such proceedings, Landlord and Tenant stipulate
and agree that, in addition to any other lawful remedy of Landlord, upon motion
of Landlord, such counterclaim or other claim asserted by Tenant shall be
severed out of the proceedings instituted by Landlord and the proceedings
instituted by Landlord may proceed to final judgment separately and apart from
and without consolidation with or reference to the status of such counterclaim
or any other claim asserted by Tenant.
40. JOINT AND SEVERAL LIABILITY: If two or more individuals,
corporations, partnerships, or other business associations (or any combination
of two or more thereof) shall sign this Lease as Tenant, the liability of each
such individual, corporation, partnership or other business association to pay
rent and perform all other obligations hereunder shall be deemed to be joint and
<PAGE>
several. In like manner, if the Tenant named in this Lease shall be a
partnership or other business association, the members of which are, by virtue
of statute or general law, subject to personal liability, the liability of each
such member shall be joint and several.
41. CORPORATE TENANCY: If Tenant is a corporation, the undersigned
officer of Tenant hereby warrants and certifies to Landlord that Tenant is a
corporation in good standing and is authorized to do business in the State of
Minnesota. The undersigned officer of Tenant hereby further warrants and
certifies to Landlord that he or she, as such officer, is authorized and
empowered to bind the corporation to the terms of this Lease by his or her
signature thereto.
42. BROKERAGE COMMISSION: Tenant warrants that there are no claims for
brokers' commissions or finder's fees in connection with its execution of this
Lease and agrees to indemnify and save Landlord harmless from any liability that
may arise from such claim, including reasonable attorney's fees.
43. EXHIBITS: Reference is made to Exhibits A through E, inclusive,
which Exhibits are attached hereto and made a part hereof.
Exhibit Description
------- -----------
Exhibit A Legal Description
Exhibit B Leased Property
Exhibit C Building Rules and Regulations
Exhibit D Estoppel Certificate Form and Subordination Form
Exhibit E Sign Criteria
IN WITNESS WHEREOF, the Landlord and the Tenant have caused these
presents to be executed in form and manner sufficient to bind them at law, as of
the day and year first above written.
Landlord:
SPRINGROSE PARTNERS, L.L.P.
By /s/ B. Steven Springrose
B. Steven Springrose
Its Managing Partner
Tenant:
BIOSENSOR CORPORATION
By /s/ B. Steven Springrose
B. Steven Springrose
Its President
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
That part of Government Lot 3, Section 27, Township 119, Range 22 lying North of
Outlots A and L, Wedgwood Commerce Centre; and lying South of Block 1, Windcrest
2nd Addition; and lying West of the West lines of East Fish Lake Road and
Wedgwood Road as described in Document No. 5402375; in Hennepin County,
Minnesota.
<PAGE>
EXHIBIT B
LEASED PROPERTY
[GRAPHIC - 2 PAGES OF STRUCTURAL PLANS FOR BIOSENSOR BUILDING(COPIES)]
<PAGE>
EXHIBIT C
BUILDING RULES AND REGULATIONS
1. Any sign or lettering installed on or in any part of the Property
and visible from the exterior of the Property shall be installed at Tenant's
sole cost and expense and in compliance with the standard sign criteria of the
Building. Anything herein to the contrary not withstanding, approval as to signs
shall be subject to Landlord's approval, which may be withheld in Landlord's
sole discretion. In the event of a violation of the foregoing by Tenant,
Landlord may remove the same without any liability and may charge the expense
incurred by such removal to Tenant.
2. No awning or other projection shall be attached to the outside walls
of the Building.
3. Tenant, its employees, customers, invitees and guests shall not
obstruct sidewalks, entrances, passages in and about the Building which are used
in common with other tenants and their employees, customers, guests and
invitees, and which are not a part of the Property of Tenant. Tenant shall not
place objects against glass partitions or doors or windows which would be
unsightly from the exterior of the Building and will promptly remove any such
objects upon notice from Landlord.
4. Tenant shall not make excessive noises, cause disturbances or
vibrations or use or operate any electrical or mechanical devices that emit
excessive sound or other waves or disturbances or create obnoxious odors, any of
which may be offensive to the other tenants and operation of any device
equipment, radio, television broadcasting or reception from or within the
Building, aerials or similar devices inside or outside of the Property or on the
Building without first obtaining approval of Landlord.
5. Tenant shall not waste electricity, water or air conditioning
furnished by Landlord, if any, and shall cooperate fully with Landlord to ensure
the most effective operation of the Building's systems.
6. Tenant assumes full responsibility for protecting its space from
theft, robbery and pilferage, which includes keeping doors locked and other
means of entry to the Property closed and secured after normal business hours.
7. In no event, shall Tenant bring into the Building flammables, such
as gasoline, kerosene, naphtha and benzine, or explosives or any other article
of intrinsically dangerous nature. If, by reason of the failure of Tenant to
comply with the provisions of this subparagraph, any insurance premium for all
or any part of the Building shall at any time be increased, Tenant shall make
immediate payment of the whole of the increased insurance premium, without
waiver of any of Landlord's other rights at law or in equity for Tenant's breach
of this lease.
<PAGE>
8. Tenant shall comply with all applicable federal, state and municipal
laws, ordinances and regulations, and building rules and shall not directly or
indirectly make any use of the Property which may be prohibited by any of the
foregoing or which may be dangerous to persons or property or may increase the
cost of insurance or require additional insurance coverage.
9. Landlord shall have the right to prohibit any advertising by Tenant
which, in Landlord's reasonable opinion, tends to impair the reputation of the
Building or its desirability as a building for office/warehouse use, and upon
written notice from Landlord, Tenant shall refrain from or discontinue such
advertising.
10. The Property shall not be used for cooking (as opposed to heating
of food), lodging, sleeping or for any immoral or illegal purpose.
11. Tenant and Tenant's employees, agents, visitors and licensees shall
observe faithfully and comply strictly with the foregoing rules and regulations
and such other and further appropriate rules and regulations as Landlord or
Landlord's agent may from time to time adopt. Reasonable notice of any
additional rules and regulations shall be given in such manner as Landlord may
reasonably elect.
12. Unless expressly permitted by the Landlord, no additional locks or
similar devices shall be attached to any door or window and no keys, other than
those provided by the Landlord, shall be made for any door. Additional keys will
be furnished for a nominal charge. Upon termination of this Lease or of the
Tenant's possession, the Tenant shall surrender all keys of the Property and
shall explain to the Landlord all combination locks on safes, cabinets and
vaults.
13. Any carpeting cemented down shall be installed with a releasable
adhesive. In the event of a violation of the foregoing by Tenant, Landlord may
charge the expense incurred by such removal to Tenant.
14. The restrooms, drinking fountains and other plumbing fixtures shall
not be used for any purpose other than those for which they are constructed, and
no sweepings, rubbish, rags, coffee grounds or other substances shall be thrown
therein. All damages resulting from any misuse of the fixtures shall be borne by
the Tenant who, or whose employees, agents, visitors or Licensees have caused
the same. No person shall waste water by interfering or tampering with the
faucets or otherwise.
15. No electric or other wires for any purpose shall be brought into
the leased Property without Landlord's written permission specifying the manner
in which same may be done. Tenant shall not overload any utilities serving the
Property.
16. No dog or other animal shall be allowed in the Building except as
required by laws and regulations relating to persons with disabilities.
17. All loading, unloading, receiving or delivery of goods, supplies or
disposal of garbage or refuse shall be made only through entryways provided for
such purposes. Tenant shall be responsible for any damage in the Building or the
property of its employees or others
<PAGE>
and injuries sustained by any person resulting from the use or moving of such
articles in or out of the Property, and shall make all repairs and improvements
required by Landlord or governmental authorities in connection with the use or
moving of such articles.
18. All safes, equipment or other heavy articles shall be carried in or
out of the Property only in such manner as shall be prescribed in writing by
Landlord, and Landlord shall in all cases have the right to specify the proper
position of any such safe, equipment or other heavy article, which shall only be
used by Tenant in a manner which will not interfere with or cause damage to the
Property or Building in which they are located, or to the other tenants or
occupants of said Building. Tenant shall be responsible for any damage to the
building or the property of its employees or others and injuries sustained by
any person resulting from the use or moving of such articles in or out of the
Property, and shall make all repairs and improvements required by Landlord or
governmental authorities in connection with the use or moving of such articles.
19. Canvassing, soliciting, and peddling in or about the Building is
prohibited and each Tenant shall cooperate to prevent the same.
20. Wherein in these Building Rules and Regulations the word "Tenant"
occurs, it is understood and agreed that it shall mean Tenant's associates,
employees, agents, clerks, invitees, and visitors. Wherever the word "Landlord"
occurs, it is understood and agreed that it shall mean Landlord's assigns,
agents, clerks, and visitors.
21. Tenant, its employees, customers, invitees and guests shall, when
using the parking facilities in and around the Building, observe and obey all
signs regarding fire lanes and no parking zones, and when parking, always park
between the designated lines. Landlord reserves the right to tow away, at the
expense of the owner, any vehicle which is improperly parked or parked in a no
parking zone. All vehicles shall be parked at the sole risk of the owner, and
Landlord assumes no responsibility for any damage to or loss of vehicles. No
vehicles shall be parked overnight.
22. In case of invasion, mob, riot, public excitement, or other
commotion, Landlord reserves the right to prevent access to the Building during
the continuance of same by closing the doors or otherwise, for the safety of the
tenant or the protection of the Building and the property therein. Landlord
shall in no case be liable for damages for any error or other action taken with
regard to the admission to or exclusion for the Building of any person.
23. Tenant shall be responsible for all repair, maintenance and
replacement of mechanical systems and devices directly associated with Tenant's
Leased Property, including, but not limited to, heating and air conditioning
equipment, water heaters, exhaust fans, plumbing and electrical. Landlord must
be advised of any such repair, etc. and must approve of any such repairs.
24. Alterations to the Leased Property by the Tenant of any nature
shall require the written approval of the Landlord. Such approval shall be at
the sole discretion of the Landlord. In
<PAGE>
the event of a violation of the foregoing by Tenant, Landlord may remove the
same without any liability and may charge the expense incurred by such removal
to Tenant.
25. Landlord reserves the right at any time and from time to time to
rescind, alter or waive, in whole or in part, any of these Rules and Regulations
when it is deemed necessary, desirable, or proper, in Landlord's judgment, for
its best interest or for the best interest of the tenants of the Building.
<PAGE>
EXHIBIT D
ESTOPPEL CERTIFICATE FORM AND SUBORDINATION FORM
ESTOPPEL CERTIFICATE
TO: [Bank]
RE: Real Estate Loan Made by [Bank] to
Ladies and Gentlemen:
The undersigned (the "Tenant"), being a tenant under the lease referred
to in Paragraph 1 below, understands that [Bank] (the "Lender"), is extending a
real estate loan to __________________________________________________________
(the "Landlord"), in connection with real estate legally described on Exhibit A
attached hereto, and, as a condition precedent to making such loan, the Lender
is requiring and will be relying upon this letter. The Tenant therefore hereby
certifies to the Lender as to the following:
1. The Tenant is a tenant under a lease with the Landlord dated , 1997,
demising the premises described therein (the "Leased Premises"), a complete and
accurate copy of which has been attached hereto by the Tenant as Exhibit B (such
lease being hereinafter referred to as the "Lease"). The term of the Lease
commenced or commences on , 1997, and, exclusive of unexercised renewal options
(as identified below) contained in the Lease, will expire on . The Tenant has
options to renew the term of the Lease for years each. Except as contained in
Exhibit B, there have been no amendments, modifications or revisions to the
Lease or renewal options exercised or available to be exercised, and there are
no agreements of any kind between the Landlord and the Tenant regarding the
Leased Property other than the Lease.
2. The Lease has been properly executed by the Tenant and is in full
force and effect.
3. No rent has been paid by the Tenant more than thirty (30) days in
advance of its due date.
4. The Lease has not been assigned by operation of law or otherwise by
the Tenant, and no sublease, concession, agreement, or license covering the
Leased Property, or any portion thereof, has been entered into by the Tenant.
5. The Landlord is not in default under the Lease and no event has
occurred which, with the giving of notice or passage of time, or both, could
result in a default.
<PAGE>
6. The Tenant has no claim against the Landlord for any deposits of any
kind except as follows:
Type of Deposit Amount
--------------- ------
7. The Tenant has not received any notice of any present violation of
any federal, state, county or municipal laws, regulations, ordinances, orders or
directives relating to the use or condition of the Leased Property.
8. The Tenant has no existing defenses, offsets, liens, claims or
credits against the rentals or otherwise which presently exist or have accrued
under the Lease or against the enforcement of the Lease by the Landlord.
9. The Tenant agrees that, from and after the date of this certificate,
the Tenant will not pay any rent under the Lease more than thirty (30) days in
advance of its due date, will not surrender or consent to the modification of
any of the terms of the Lease nor to the termination thereof by the Landlord,
and will not seek to terminate the Lease by reason of any act or omission of the
Landlord, until the Tenant shall have first given written notice of such act or
omission to the Lender at the Lender's office located at the address set forth
above, and until thirty (30) days have elapsed following the giving of such
notice, during which period the Lender shall have the right, but shall not be
obligated, to remedy such act or omission.
10. The Tenant acknowledges that the Lender and its successors and
assigns will rely on this Estoppel Certificate and agrees that the Lender and
its successors and assigns shall have the right to rely on this Estoppel
Certificate.
Dated as of this __________ day of _________________, 1997.
________________________________________
By: ____________________________________
Its: _______________________________
<PAGE>
SUBORDINATION AND ATTORNMENT AGREEMENT
THIS AGREEMENT, made as of the ___________ day of ___________________,
1997, by _______________________, a _______________________ corporation (the
"Tenant"), in favor of ____________________________________________ (the
"Lender").
WITNESSETH:
WHEREAS, the Tenant and _____________________________ (the "Borrower"),
have entered into that certain lease (the "Lease") pursuant to which all or a
portion of the real property legally described as set forth on Exhibit A
attached hereto and the building located thereon (the "Leased Property") have
been or will be leased by the Borrower to the Tenant; and
WHEREAS, the Borrower has executed and delivered to the Lender that
certain Mortgage, Security Agreement, Fixture Financing Statement and Assignment
of Leases and Rents (the "Mortgage"), pursuant to which the Borrower has granted
a mortgage to the Lender in and to the Leased Property to secure repayment of
certain indebtedness of the Borrower to the Lender; and
WHEREAS, the Lender has made or will make a loan to the Borrower in
reliance upon the subordination and attornment agreement of the Tenant set forth
herein.
NOW, THEREFORE, in consideration of the foregoing premises, and farther
in consideration of the above-mentioned loan, the receipt and sufficiency of
which are hereby acknowledged, the Tenant hereby agrees as follows:
1. The Tenant hereby subordinates in all respects all of the Tenant's
right, title and interest in and to the Leased Property under the Lease or
otherwise (including, without limitation, any successor lease or subsequent
lease or any other present or future agreement for occupancy of all or any
portion of the real property described on Exhibit A) to the right, title and
interest of the Lender in and to the Leased Property by virtue of the Mortgage,
and without limiting the generality of the foregoing, the Tenant hereby
acknowledges and agrees that any and all such right, title and interest,
including, without limitation, any option to purchase the Leased Property
granted to the Tenant pursuant to the Lease, are and shall be subject and
subordinate to the Mortgage as fully as if the Mortgage were recorded prior to
the recording of the Lease and the taking of possession of the Leased Property
by the Tenant.
2. The Tenant hereby agrees that, if the Lender or any purchaser of the
Leased Property or any part thereof at a foreclosure sale succeeds to the
interest of the Borrower under the Lease, whether by reason of foreclosure of
the Mortgage or a deed in lieu of foreclosure, by reason of enforcement of the
Lender's rights under the assignment of leases and rents portion of the
Mortgage, or by any other manner, the Tenant shall be bound to such party under
all of the terms, covenants and conditions of the Lease for the balance of the
term thereof remaining and any extensions or renewals thereof that may be
effected in accordance with the Lease, with the same force and effect as if such
party were originally the landlord under the Lease, and the
<PAGE>
Tenant does hereby attorn to each of such parties as its landlord, such
attornment to be automatically effective immediately upon such party succeeding
to the interest of the landlord under the Lease without the execution of any
further instruments on the part of any of the parties hereto; provided, however,
that the Tenant shall be under no obligation to pay rent to any such party until
the Tenant receives written notice that such party has succeeded to the interest
of the landlord under the Lease; and the respective rights and obligations of
the Tenant and such party upon such attornment, to the extent of the then
remaining balance of the term of the Lease and any such extensions and renewals
thereof, shall be and are the same as now set forth in the Lease, subject to any
modification of the Lease made with the prior written consent of the Lender it
being the intention of the parties hereto for such purpose to incorporate the
Lease in this Agreement by reference with the same force and effect as if set
forth at length herein.
3. The Tenant: (a) is not presently engaged in nor does it presently
permit; (b) has not at any time in the past engaged in nor permitted; (c) has no
knowledge that any third person or entity has engaged in or permitted; and (d)
will not in the future engage in or permit, any operations or activities upon,
or any use or occupancy of the Leased Property, or any portion thereof, for the
purpose of or in any way involving, the handling, manufacturing, treatment,
storage, use, transportation, spillage, leakage, dumping, discharge or disposal
(whether legal or illegal, accidental or intentional) of any hazardous
substance, materials or wastes, or any wastes regulated under any local, state
or federal law.
4. The Tenant hereby acknowledges that the Lender has made or will make
a loan to the Borrower in reliance upon the agreements, acknowledgments and
subordination of the Tenant set forth herein.
5. The Tenant hereby agrees that, until the indebtedness of the
Borrower to the Lender is paid in full, the Tenant shall not collect or seek to
collect from the Borrower by subrogation, offset or otherwise, any claim the
Tenant has against the Borrower.
6. The Tenant hereby agrees that this Agreement and each and every
covenant, agreement and other provision hereof shall be binding upon the Tenant
and its successors and assigns, including, without limitation, each and every
holder of the Lease or any other person having an interest therein, and shall
inure to the benefit of the Lender, its successors and assigns, and any other
holder of the Mortgage.
7. The Tenant hereby agrees that this Agreement is made and executed
under, and in all respects is to be governed and construed by, the laws of the
State of Minnesota.
IN WITNESS WHEREOF, the Tenant has caused this Agreement to be duly
executed and delivered as of the day and year first above written.
<PAGE>
Tenant:
___________________________________________
By: _______________________________________
Its: __________________________________
STATE OF MINNESOTA }
} ss.
COUNTY OF ____________ }
The foregoing instrument was acknowledged before me this ________ day
of ______________, 1997 by __________________________________________ the
_______________________________________ of _________________________________, a
______________________________ corporation, for and on behalf of said
corporation.
____________________________________
Notary Public
This instrument drafted by:
BEST & FLANAGAN (RAP)
Professional Limited Liability Partnership
4000 First Bank Place
601 Second Avenue South
Minneapolis, MN 55402-4331
<PAGE>
[GRAPHIC - 4 PAGES OF STRUCTURAL PLANS FOR BIOSENSOR BUILDING(COPIES)]
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0
0
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