SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999, or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________to___________
__________________
Commission file number 0-17272
__________________
TECHNE CORPORATION
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1427402
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
614 MCKINLEY PLACE N.E. (612) 379-8854
MINNEAPOLIS, MN 55413 (Registrant's telephone number,
(Address of principal including area code)
executive offices) (Zip Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 ( )
At May 3, 1999, 20,201,423 shares of the Company's Common Stock (par value
$.01) were outstanding.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
TECHNE CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
3/31/99 6/30/98
------------ -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 11,258,651 $27,372,345
Short-term investments 14,495,879 15,321,935
Accounts receivable (net) 13,643,737 10,001,937
Inventories 7,189,577 3,810,600
Deferred income taxes 1,787,000 1,583,000
Other current assets 619,822 431,187
------------ -----------
Total current assets 48,994,666 58,521,004
Deferred income taxes 2,767,000 1,798,000
Fixed assets (net) 13,469,818 11,687,300
Intangible assets (net) 47,959,411 293,854
Real estate deposit (Note D) 6,249,018 -
Other assets 1,010,800 618,723
------------ -----------
TOTAL ASSETS $120,450,713 $72,918,881
============ ===========
LIABILITIES & EQUITY
Trade accounts payable $ 2,642,008 $ 2,203,130
Salary and related accruals 2,124,459 2,005,428
Other payables 5,695,961 1,039,334
Income taxes payable 1,907,060 2,185,122
------------ -----------
Total current liabilities 12,369,488 7,433,014
Deferred rent 1,886,400 1,655,100
Royalty payable 12,459,000 -
Common stock, par value $.01 per
share; authorized 50,000,000;
issued and outstanding
20,196,055 and 19,049,983,
respectively 201,961 190,500
Additional paid-in capital 34,357,540 13,714,445
Retained earnings 58,928,276 49,446,319
Accumulated foreign currency
Translation adjustments 248,048 479,503
------------ -----------
Total stockholders' equity 93,735,825 63,830,767
------------ -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $120,450,713 $72,918,881
============ ===========
</TABLE>
See notes to unaudited Consolidated Financial Statements.
TECHNE CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
------------------------ ------------------------
3/31/99 3/31/98 3/31/99 3/31/98
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales $23,789,055 $17,698,472 $66,588,506 $48,708,472
Cost of sales 7,169,105 5,490,966 20,012,235 14,922,728
----------- ----------- ----------- -----------
Gross margin 16,619,950 12,207,506 46,576,271 33,785,744
Operating expenses
(income):
Selling, general and
administrative 4,268,228 3,748,958 13,167,506 11,602,557
Research and development 3,004,721 2,725,251 8,698,832 7,706,757
Amortization expense 2,394,662 9,662 7,183,986 61,796
Interest income (227,664) (314,023) (670,747) (844,390)
----------- ----------- ----------- -----------
9,439,947 6,169,848 28,379,577 18,526,720
----------- ----------- ----------- -----------
Earnings before
income taxes 7,180,003 6,037,658 18,196,694 15,259,024
Income taxes 2,643,000 2,015,000 6,548,000 4,846,000
----------- ----------- ----------- -----------
NET EARNINGS $ 4,537,003 $ 4,022,658 $11,648,694 $10,413,024
=========== =========== =========== ===========
BASIC EARNINGS PER SHARE $ 0.23 $ 0.21 $ 0.58 $ 0.55
DILUTED EARNINGS PER SHARE $ 0.22 $ 0.20 $ 0.56 $ 0.53
</TABLE>
See notes to unaudited Consolidated Financial Statements.
TECHNE CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
3/31/99 3/31/98
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $11,648,694 $10,413,024
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 8,830,039 1,699,813
Deferred income taxes (1,200,000) (181,000)
Deferred rent 231,300 534,600
Tax benefit from exercise of options 413,000 127,000
Other 402,271 205,900
Change in current assets and current
liabilities, net of acquisition:
(Increase) decrease in:
Accounts receivable (3,780,606) (1,152,283)
Inventories 2,295,976 192,467
Other current assets (43,544) (7,503)
Increase (decrease) in:
Trade account/other payables (1,373,875) 1,131,345
Salary and related accruals 123,255 225,532
Income taxes payable (244,582) 392,725
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 17,301,928 13,581,620
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition (Note B) (24,989,543) -
Purchase of short-term investments (11,637,214) (20,145,831)
Proceeds from sale of short-term investments 12,463,270 11,968,197
Additions to fixed assets (3,121,109) (2,443,887)
Real estate deposit (Note D) (4,088,188) -
Proceeds from sale of fixed assets - 246,503
Increase in other long term assetS (900,000) (150,000)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (32,272,784) (10,525,018)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 989,672 653,488
Repurchase of common stock (2,075,683) (280,000)
----------- -----------
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES (1,086,011) 373,488
EFFECT OF EXCHANGE RATE CHANGES ON CASH (56,827) 111,134
----------- -----------
NET CHANGE IN CASH AND EQUIVALENTS (16,113,694) 3,541,224
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 27,372,345 8,598,367
----------- -----------
CASH AND EQUIVALENTS AT END OF PERIOD $11,258,651 $12,139,591
=========== ===========
</TABLE>
See notes to unaudited Consolidated Financial Statements.
TECHNE CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. BASIS OF PRESENTATION:
The unaudited Consolidated Financial Statements have been prepared in accordance
with generally accepted accounting principles and with instructions to Form 10-Q
and Article 10 of Regulation S-X. The accompanying unaudited Consolidated
Financial Statements reflect all adjustments which are, in the opinion of
management, necessary to a fair presentation of the results for the interim
periods presented. All such adjustments are of a normal recurring nature.
A summary of significant accounting policies followed by the Company is detailed
in the Annual Report to Shareholders for Fiscal 1998. The Company follows these
policies in preparation of the interim Financial Statements. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. It is suggested that the Consolidated Financial
Statements be read in conjunction with the Company's Consolidated Financial
Statements and Notes thereto for the fiscal year ended June 30, 1998 included in
the Company's Annual Report to Shareholders for Fiscal 1998.
Certain Consolidated Balance Sheet captions appearing in this interim report are
as follows:
<TABLE>
<CAPTION>
3/31/99 6/30/98
----------- -----------
<S> <C> <C>
ACCOUNTS RECEIVABLE
Accounts receivable $13,909,737 $10,270,937
Less reserve for bad debts 266,000 269,000
----------- -----------
NET ACCOUNTS RECEIVABLE $13,643,737 $10,001,937
=========== ===========
INVENTORIES
Raw materials $ 2,070,248 $ 2,125,365
Supplies 141,033 145,539
Finished goods 4,978,296 1,539,696
----------- -----------
TOTAL INVENTORIES $ 7,189,577 $ 3,810,600
=========== ===========
FIXED ASSETS
Laboratory equipment $11,108,313 $ 9,944,951
Office equipment 3,107,723 2,923,110
Leasehold improvements 11,938,979 10,243,142
----------- -----------
26,155,015 23,111,203
Less accumulated depreciation
and amortization 12,685,197 11,423,903
----------- -----------
NET FIXED ASSETS $13,469,818 $11,687,300
=========== ===========
INTANGIBLE ASSETS
Customer list $18,010,000 $ 1,010,000
Technology licensing agreements 500,000 500,000
Goodwill 39,075,090 1,225,547
----------- -----------
57,585,090 2,735,547
Less accumulated amortization 9,625,679 2,441,693
----------- -----------
NET INTANGIBLE ASSETS $47,959,411 $ 293,854
=========== ===========
</TABLE>
Effective July 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income," which requires disclosures
of comprehensive income and its components in the Company's financial
statements. The Company's total comprehensive income for the quarters ended
March 31, 1999 and 1998 were $4,333,849 and $4,104,732, respectively. The
Company's total comprehensive income for the nine months ended March 31, 1999
and 1998 were $11,417,239 and $10,484,592, respectively. The Company's
comprehensive income consists of net income, unrealized holding gains and losses
on securities and foreign currency translation adjustments.
On June 30, 1999, the Company will adopt Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information," which requires the disclosure of financial and descriptive
information about the reportable operating segments of the Company.
B. ACQUISITION:
On July 1, 1998, the Company, through its Research and Diagnostics Systems, Inc.
subsidiary, acquired the research products business of Genzyme Corporation.
Assets acquired were as follows:
Inventories $ 5,660,000
Equipment 320,000
Customer list 17,000,000
-----------
$22,980,000
===========
The purchase price paid and payable for the acquisition is as follows: $24.76
million cash, 987,206 shares of Techne common stock valued at $17 million and
$18.84 million of royalties (present value of an estimated $23.7 million payable
over five years) on the Company's biotechnology sales. The excess of the
consideration (including acquisition costs) over the fair market value of the
assets acquired has been recorded as goodwill and is being amortized on a
straight-line basis over six years. The customer list is being amortized on a
declining basis over an estimated economic life of five years.
Pro forma financial information for the quarter and nine months ended March 31,
1998, presented as if the acquisition had occurred on July 1, 1997, are as
follows (in 000's except earnings per share data):
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
------------- -----------------
3/31/98 3/31/98
------- -------
<S> <C> <C>
Sales $21,526 $59,608
Net earnings 1,572 3,357
Basic earnings per share .08 .17
Diluted earnings per share .08 .16
</TABLE>
C. EARNINGS PER SHARE:
Shares used in the earnings per share computations are as follows:
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
---------------------- ----------------------
3/31/99 3/31/98 3/31/99 3/31/98
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Weighted average common shares
outstanding-basic 20,124,535 19,005,562 20,096,055 18,923,525
Dilutive effect of stock
options and warrants 667,536 637,260 530,168 668,917
---------- ---------- ---------- ----------
Average common shares
outstanding--diluted 20,792,071 19,642,822 20,626,223 19,592,442
========== ========== ========== ==========
</TABLE>
D. REAL ESTATE ACQUISITION:
On January 22, 1999, the Company entered into agreements to acquire real estate
which its wholly-owned subsidiary, R&D Systems, currently occupies in
Minneapolis, Minnesota. The purchase price of the properties is approximately
$28 million. Cash of $4 million and 100,000 shares of Common Stock valued at
$2.16 million were placed in escrow during the third quarter of fiscal 1999 in
anticipation of the expected closing in July, 1999. The remainder of the
purchase price is expected to be obtained through mortgage financing.
In addition to agreements to purchase the currently occupied properties, the
Company has acquired options on property adjacent to its R&D Systems' facility
to provide future expansion space for the Company.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations Quarter and Nine Months Ended March 31, 1999
vs. Quarter and Nine Months Ended March 31, 1998
Techne Corporation (Techne) has two operating subsidiaries: Research and
Diagnostic Systems, Inc. (R&D Systems) located in Minneapolis, Minnesota and R&D
Systems Europe Ltd. (R&D Europe) located in Abingdon, England. R&D Systems has
two divisions: Biotechnology and Hematology. The Biotechnology Division
manufactures purified cytokines (proteins), antibodies and assay kits, which are
sold primarily to biomedical researchers and clinical research laboratories.
The Hematology Division develops and manufactures whole blood hematology
controls and calibrators which are sold to hospital and clinical laboratories to
check the performance of their hematology instruments to assure the accuracy of
hematology test results. R&D Europe sells R&D Systems' biotechnology products
in Europe, both directly and through a sales subsidiary in Germany. The Company
has a foreign sales corporation, Techne Export Inc.
From November 1997 through March 1999, Techne purchased a total of $4 million of
preferred stock of ChemoCentryx, Inc. (CCX), representing approximately 44% of
issued and outstanding voting shares. In addition, Techne is obligated to
purchase up to an additional $1 million of preferred stock in fiscal 2000 upon
CCX's achievement of certain milestones. After purchase of the additional
preferred shares, Techne will own approximately 49% of the issued and
outstanding voting shares (assuming no investment by other parties). Techne has
consolidated CCX into its financial statements due to the limited amount of cash
consideration provided by the holders of the common shares of CCX. CCX is a new
technology and drug development company working in the area of chemokines.
Chemokines are cytokines which regulate the trafficking patterns of leukocytes,
the effector cells of the human immune system. In conjunction with the equity
investment and joint research efforts, Techne obtains exclusive worldwide
research and diagnostic marketing rights to chemokine proteins, antibodies and
receptors discovered or developed by CCX or R&D Systems.
Net Sales
Net sales for the quarter ended March 31, 1999 were $23,789,055, an increase of
$6,090,583 (34%) from the quarter ended March 31, 1998. Sales for the nine
months ended March 31, 1999 increased $17,880,034 (37%) from $48,708,472 to
$66,588,506. R&D Systems sales increased $4,788,711 (37%) and $13,521,150 (38%)
for the quarter and nine months ended March 31, 1999, respectively. R&D Europe
sales increased $1,301,872 (27%) and $4,358,884 (33%) for the quarter and nine
months ended March 31, 1999, respectively.
The increase in sales for the quarter and nine months was due, in part, to the
acquisition of Genzyme Corporation's research products business on July 1, 1998.
In addition, the increase in consolidated sales for the quarter and nine months
was due to increased sales of R&D Systems' cytokines, antibodies and
immunoassay kits to both R&D Systems customers and to former Genzyme customers
as they are converted from Genzyme products to R&D Systems products.
Gross Margins
Gross margins, as a percentage of sales, increased slightly from the prior year.
Margins for the third quarter of fiscal 1999 were 69.9% compared to 69.0% for
the same quarter in fiscal 1998. Margins for the nine months ended March 31,
1999 were 70.0% compared to 69.4% for the same period in fiscal 1998.
R&D Europe gross margins increased from 41.3% to 47.8% for the quarter and from
46.1% to 46.8% for the nine months ended March 31, 1999. Hematology Division
gross margins increased from 44.4% to 45.7% for the quarter and from 45.1% to
46.3% for the nine months ended March 31, 1999 as a result of changes in product
mix and increased volumes. Biotechnology Division gross margins decreased from
72.5% to 70.2% for the quarter and from 72.2% to 70.7% for the nine months ended
March 31, 1999. The decrease in Biotechnology Division gross margins for the
quarter and nine months was a result of lower gross profit levels on the
inventory acquired from Genzyme and the write-off of obsolete Genzyme packaging
and kit components due to a more rapid conversion of customers to R&D Systems
labeled product than anticipated.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $519,270 (14%) from the
third quarter of fiscal 1998 to the third quarter of fiscal 1999. These
expenses also increased $1,564,949 (13%) for the first nine months of fiscal
1999. The majority of the increase for the quarter and nine months was due to
additional sales personnel added in the U.S. and Europe as a result of the
Genzyme acquisition and additional advertising and promotion activities.
Research and Development Expenses
Research and development expenses increased $279,470 (10%) and $992,075 (13%)
for the quarter and nine months ended March 31, 1999. The increase related to
products currently under development, many of which have been or will be
released in fiscal 1999 and fiscal 2000. Products currently under development
include both biotechnology and hematology products.
Amortization Expense
Amortization expense increased for the quarter and nine months ended March 31,
1999 as a result of the customer list and goodwill associated with the Genzyme
acquisition.
Net Earnings
Earnings before income taxes increased $1,142,345 from $6,037,658 in the third
quarter of fiscal 1998 to $7,180,003 in the third quarter of fiscal 1999.
Earnings before taxes for the nine months increased $2,937,670 from $15,259,024
to $18,196,694. The increase in earnings before income taxes was due mainly to
an increase in Biotechnology Division earnings of $707,987 and $2,430,073,
an increase in R&D Europe earnings of $451,449 and $818,129, and an increase
in Hematology Division earnings of $188,618 and $393,668 for the quarter and
nine months ended March 31, 1999. These increases were offset by increased
net losses of CCX of $139,548 and $751,886 for the quarter and nine months
ended March 31, 1999.
Income taxes for the quarter and nine months ended March 31, 1999 were provided
at a rate of approximately 37% and 36% of consolidated pretax earnings compared
to 33% and 32% for the prior year. The increase in the tax rate is mainly due
to the net loss by CCX in the third quarter and first nine months of fiscal 1999
for which no tax benefit has been provided. U.S. federal taxes have been
reduced by the credit for research and development expenditures and the benefit
of the foreign sales corporation. Foreign income taxes have been provided at
rates which approximate the tax rates in the United Kingdom and Germany.
Liquidity and Capital Resources
At March 31, 1999, cash and cash equivalents and short-term investments were
$25,754,530 compared to $42,694,280 at June 30, 1998. The decrease from June
30, 1998 was due to the cash outlay for the Genzyme acquisition. The Company
believes it can meet its future cash, working capital and capital addition
requirements (excluding real estate to be acquired in July, 1999) through
currently available funds, cash generated from operations and maturities of
short-term investments. The Company has an unsecured line of credit of
$750,000. The interest rate on the line of credit is at prime. There were no
borrowings on the line in the prior or current fiscal years.
Cash Flows From Operating Activities
The Company generated cash of $17,301,928 from operating activities in the first
nine months of fiscal 1999 compared to $13,581,620 for the first nine months of
fiscal 1998. The increase was mainly the result of increased net earnings
adjusted for noncash expenses partially offset by decreased trade accounts and
other payables.
Cash Flows From Investing Activities
On July 1, 1998 the Company acquired the research products business of Genzyme
Corporation for $24.76 million cash, $17 million common stock and royalties on
the Company's biotechnology sales for five years. Cash and cash equivalents at
June 30, 1998 and maturities of short-term investments were used to finance the
cash portion of the acquisition.
During the nine months ended March 31, 1999 short-term investments decreased by
$826,056. During the nine months ended March 31, 1998, the Company increased
short-term investments by $8,177,634. The Company's investment policy is to
place excess cash in short-term tax-exempt bonds. The objective of this policy
is to obtain the highest possible return with the lowest risk, while keeping
the funds accessible.
Capital additions were $3,121,109 for the first nine months of fiscal 1999,
compared to $2,443,887 for the first nine months of fiscal 1998. Included in
the fiscal 1999 and 1998 additions were $1,703,000 and $1,180,110 for leasehold
improvements related to remodeling of facilities by R&D Systems. The remaining
additions in fiscal 1999 and 1998 were for laboratory and computer equipment.
Total expenditures for capital additions and leasehold improvements planned for
the remainder of fiscal 1999 are expected to cost approximately $3.0 million and
are expected to be financed through currently available funds and cash
generated from operating activities.
During the third quarter of fiscal 1999, the Company placed $4 million in escrow
as a deposit on real estate it plans to acquire in July 1999.
Cash Flows From Financing Activities
Cash of $989,672 and $653,488 was received during the nine months ended March
31, 1999 and 1998, respectively, for the exercise of options for 181,870 and
73,791 shares of common stock. During the first nine months of fiscal 1999 and
1998, options for 20,000 and 55,835 shares of common stock were exercised by the
surrender of 4,404 and 20,624 shares of the Company's common stock with fair
market values of $92,424 and $360,194, respectively.
During the first nine months of fiscal 1999 and 1998, the Company purchased and
retired 138,600 and 20,000 shares, respectively, of Company common stock at
market values of $2,075,683 and $280,000. The Board of Directors has authorized
the Company, subject to market conditions and share price, to purchase and
retire up to $10 million of its common stock. Through May 3, 1999, 575,600
shares have been purchased at a market value of $6,887,847.
The Company has never paid cash dividends and has no plans to do so in fiscal
1999.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At March 31, 1999, the Company had an investment portfolio of fixed income
securities, excluding those classified as cash and cash equivalents, of
$14,495,879. These securities, like all fixed income instruments, are subject
to interest rate risk and will decline in value if market interest rates
increase. However, the Company has the ability to hold its fixed income
investments until maturity and therefore the Company does not expect to
recognize an adverse impact in income or cash flows.
The Company operates internationally, and thus is subject to potentially adverse
movements in foreign currency rate changes. The Company does not enter into
foreign exchange forward contracts to reduce its exposure to foreign
currency rate changes on intercompany foreign currency denominated balance
sheet positions. Historically, the effect of movements in the exchange rates
has been immaterial to the consolidated operating results of the Company.
Y2K AND EURO CURRENCY ISSUES
The Company must take steps to ensure that it is not adversely affected by Y2K
software failures which may arise in software applications where two-year digits
are used to define the applicable year. The Company is conducting a review of
all of its computer systems (information technology as well as embedded systems)
to identify those areas that could be affected by Y2K noncompliance. The Company
plans to complete the process of upgrading those systems which may not be Y2K
compliant by mid 1999 and does not believe the cost of any such upgrades will be
material. The Company is in the process of developing contingency plans should
systems fail. The Company has also communicated with many of its suppliers and
service providers regarding compliance with Y2K requirements. As a result of
such inquiries, no significant deficiencies have been identified. The Company
will continue to monitor these third parties for Y2K compliance.
There can be no assurance, however, that there will not be a delay in, or
increased costs associated with, upgrading the Company's computer systems, which
could have a material adverse effect on the operations and financial position of
the Company. In addition, there can be no assurances that the Company's
customers and suppliers will not be adversely affected by their own Y2K issues,
which may indirectly adversely affect the Company.
The Company has implemented new accounting and operational software at its
European subsidiary, which accommodated the conversion on January 1, 1999 to a
common currency, the "Euro," by members of the European Union. The software is
also Y2K compliant.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
No change
ITEM 2 - CHANGES IN SECURITIES
Effective February 26, 1999, the Company issued to Hillcrest Development, a
Minnesota Limited Partnership, 100,000 shares of Common Stock in connection
with the acquisition of real estate. The number of shares issued was based on
$21.6083 per share, being the average market value of the Company's Common
Stock during the 15 trading days prior to February 26, 1999. The issuance
of such securities was deemed to be exempt from registration under the
Securities Act of 1933 by virtue of Section 4(2) thereof. Hillcrest
represented its intention to acquire the stock for investment purposes only
and not with a view to the distribution thereof; in addition, a restrictive
securities legend has been placed on the stock certificate representing the
shares.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SHAREHOLDERS
None
ITEM 5 - OTHER INFORMATION
Forward Looking Information and Cautionary Statements: Statements in this
filing, and elsewhere, which look forward in time involve risks and
uncertainties which may affect the actual results of operations. The
following important factors, among others, have affected and, in the future,
could affect the Company's actual results: the level of success in converting
customers and distributors of Genzyme Corporation's research product business
to the Company and selling the Company's broader range of products to the
former Genzyme customers and distributors, the introduction and acceptance of
new biotechnology and hematology products, the levels and particular
directions of research into cytokines by the Company's customers, the impact
of the growing number of producers of cytokine research products and related
price competition, the retention of hematology OEM and proficiency survey
business, the Company's expansion of marketing efforts in Europe, and the
costs and results of research and product development efforts of the Company
and of companies in which the Company has invested or with which it has formed
strategic relationships.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
See exhibit index immediately following signature page.
B. REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended March 31,
1999.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TECHNE CORPORATION
(Company)
Date: May 14, 1999 /s/ Thomas E. Oland
-------------------------------
Thomas E. Oland
President, Chief Executive and
Financial Officer
EXHIBIT INDEX
TO
FORM 10-Q
TECHNE CORPORATION
Exhibit # Description
- ---------- ------------------
10.1 Extension, dated March 31, 1999, to Employment
Agreement with Thomas C. Detwiler, Ph.D.
10.2 Extension, dated March 31, 1999, to Employment
Agreement with Monica Tsang, Ph.D.
10.3 Extension, dated March 31, 1999, to Employment
Agreement with Marcel Veronneau.
10.4 Second Amendment, dated February 2, 1999, to Purchase
Agreement dated January 22, 1999 between R&D Systems, Inc.
and Hillcrest Development relating to the purchase of
property at 614 and 640 McKinley Place NE and 2201 Kennedy
Street in Minneapolis, Minnesota
10.5 Third Amendment, dated April 3, 1999, to Purchase
Agreement dated January 22, 1999 between R&D Systems, Inc.
and Hilllcrest Development.
10.6 Phase I Option Agreement, dated February 10, 1999, between
R&D Systems, Inc. and Hillcrest Development and form of
Purchase Agreement relating to the purchase of property at
2101 Kennedy Street in Minneapolis, Minnesota.
10.7 First Amendment, dated April 10, 1999, to Phase I Option
Agreement dated February 10, 1999.
10.8 Phase II Option Agreement, dated February 10, 1999,
between R&D Systems, Inc. and Hillcrest Development and
form of Purchase Agreement relating to the purchase of
property at 2001 Kennedy Street in Minneapolis, Minnesota.
27 Financial Data Schedule
EXTENSION OF EMPLOYMENT AGREEMENT
DATE: March 31, 1999
PARTIES: Techne Corporation, a
Minnesota corporation
614 McKinley Place N.E.
Minneapolis, Minnesota 55413
Thomas C. Detwiler, Ph.D.
1601 Northrap Lane
Minneapolis, Minnesota 55403
AGREEMENTS:
The parties hereby agree that the termination date of the Employment
Agreement between them dated December 28, 1995 and originally for the period
July 1, 1995 through June 30, 1998 is extended to June 30, 2001. All other
provision of such Employment Agreement shall remain in full force and effect.
TECHNE CORPORATION
By /s/ Thomas E. Oland
-------------------------------
Thomas E. Oland, President
"Company"
/s/ Thomas C. Detwiler
-------------------------------
Thomas C. Detwiler, Ph.D.
"Employee"
EXTENSION OF EMPLOYMENT AGREEMENT
DATE: March 31, 1999
PARTIES: Techne Corporation, a
Minnesota corporation
614 McKinley Place N.E.
Minneapolis, Minnesota 55413
Monica Tsang, Ph.D.
AGREEMENTS:
The parties hereby agree that the termination date of the Employment Agreement
between them, originally for the period July 1, 1995 through June 30, 1998, is
extended to June 30, 2001. All other provision of such Employment Agreement
shall remain in full force and effect.
TECHNE CORPORATION
By /s/ Thomas E. Oland
-------------------------------
Thomas E. Oland, President
"Company"
/s/ Monica Tsang
------------------------------
Monica Tsang, Ph.D.
"Employee"
EXTENSION OF EMPLOYMENT AGREEMENT
DATE: March 31, 1999
PARTIES: Techne Corporation, a
Minnesota corporation
614 McKinley Place N.E.
Minneapolis, Minnesota 55413
Marcel Verronneau
AGREEMENTS:
The parties hereby agree that the termination date of the Employment Agreement
between them dated March 8, 1996 originally for the period July 1, 1995 through
June 30, 1998 is extended to June 30, 2001. All other provision of such
Employment Agreement shall remain in full force and effect.
TECHNE CORPORATION
By /s/ Thomas E. Oland
-------------------------------
Thomas E. Oland, President
"Company"
/s/ Marcel Veronneau
------------------------------
Marcel Verronneau
"Employee"
SECOND AMENDMENT TO PURCHASE AGREEMENT
THIS SECOND AMENDMENT to Purchase Agreement is dated this 2nd day of
February, 1999, by and between Hillcrest Development ("Seller") and R & D
Systems, Inc. ("Buyer").
RECITALS
1. Seller and Buyer entered into a purchase agreement dated January 22,
1999, for the sale and purchase of real property legally described as Lots 8, 9,
16, and 17, Auditor's Subdivision Number 268, Hennepin County, Minnesota which
Purchase Agreement was amended by that certain First Amendment to Purchase
Agreement dated February 5, 1999 (collectively, the "Purchase Agreement").
2. The parties wish to amend the Purchase Agreement on the terms and
conditions hereafter set forth.
NOW, THEREFORE, in consideration of the foregoing, the parties agree as
follows:
1. Section XXIII is hereby deleted in its entirety and replaced with the
following provision:
CONDITIONS PRECEDENT FOR BOTH SELLER AND BUYER
Notwithstanding any other provision hereof to the contrary, this
Purchase Agreement, including, but not limited to, Section VIII hereof,
shall be null and void and neither party shall hereafter be liable to
the other unless (a) prior to February 11, 1999, both Seller and Buyer
have executed the 2101 Kennedy Option and the Phase II Option; (b) prior
to January 29, 1999, Buyer has delivered to Title the tenant estoppel
letter required by Section VIII and Buyer's Board of Directors approves
the execution of this Purchase Agreement and Buyer delivers a written
copy of such resolution to Seller; and (c) prior to February 26, 1999 at
12:01 P.M. C.S.T. Buyer and Seller have agreed to the form and
substance of the License Agreement, the Parking Easement and the
Management Agreement as defined in Sections XVIII and XXV.
2. Except as provided for above, all the terms and conditions of the
Purchase Agreement shall remain in full force and effect.
Buyer: R & D Systems, Inc.
By: /s/ Thomas E. Oland
Its: President
Seller: Hillcrest Development
By: /s/ Scott Tankenoff
Its: General Partner
THIRD AMENDMENT TO PURCHASE AGREEMENT
THIS THIRD AMENDMENT TO PURCHASE AGREEMENT is dated this 3rd day of April,
1999, by and between Hillcrest Development ("Seller") and R & D Systems, Inc.
("Buyer").
RECITALS
1. Seller and Buyer entered into a purchase agreement dated January 22,
1999, for the sale and purchase of real property legally described as Lots 8, 9,
16, and 17, Auditor's Subdivision Number 268, Hennepin County, Minnesota which
Purchase Agreement was amended by that certain First Amendment to Purchase
Agreement dated February 5, 1999 and Second Amendment to Purchase Agreement
dated February 16, 1999 (collectively, the "Purchase Agreement").
2. The parties wish to amend the Purchase Agreement on the terms and
conditions hereafter set forth.
NOW, THEREFORE, in consideration of the foregoing, the parties agree as
follows:
1. Paragraph (o) of Section IX is hereby deleted and replaced with the
following paragraph:
(o) To the best of Seller's knowledge, (i) the Property is
zoned for the Current Uses, (ii) the Property contains two (2) wells,
and (iii) the Property does not contain any septic systems.
2. Pursuant to Section XXII of the Purchase Agreement, Seller and Buyer
agree to the form of the License Agreement, Parking Easement and Management
Agreement attached hereto as Exhibits A, B and C.
3. Except as provided for above, all the terms and conditions of the
Purchase Agreement shall remain in full force and effect.
BUYER: R & D Systems, Inc.
By: /s/ Thomas E. Oland
Its: President
SELLER: Hillcrest Development
By: /s/ Scott Tankenoff
Its: General Partner
PHASE I OPTION AGREEMENT
(2101 Kennedy Option)
THIS AGREEMENT, made and entered into this 10th day of February, 1999, by
and between Hillcrest Development, a Minnesota limited partnership, hereinafter
called "Owner," and R&D Systems, Inc., a Minnesota corporation, or its only
permitted assignee, Techne Corporation, hereinafter called "Buyer";
WITNESSETH:
WHEREAS, Owner is the fee simple owner of certain real properties improved
with buildings commonly known as 2101 Kennedy and 659 Cleveland and is the fee
simple owner of real property used for surface parking lots commonly known as
the "Triangular Portion" and the northerly portion of the MT-BN lot (consisting
of land which can contain up to 474 parking stalls), all of which are located in
the City of Minneapolis, County of Hennepin, State of Minnesota, and legally
described in Exhibit A hereto attached ("Parcels"); and
WHEREAS, Buyer and Owner have prior to the execution of this Option
Agreement entered into a Purchase Agreement for the purchase and sale of real
property which includes properties commonly known as 614 McKinley, 640 McKinley
and 2201 Kennedy ("Purchase Agreement") and have simultaneously with the
execution of this Option Agreement entered into an additional option agreement
with respect to 2001 Kennedy and certain real property to be used for parking
purposes ("Phase II Option"); and
WHEREAS, Buyer desires to obtain an option to purchase the Parcels, all
personal property items owned by Owner and exclusively used by Owner in the
maintenance and operation of the Parcels and chosen to be purchased by Buyer
("Personal Property"), all guarantees and warranties in effect regarding
improvements to the Parcels ("Warranties") and all contracts and permits
affecting the Parcels selected by Buyer ("Contracts") (hereafter the Parcels,
Personal Property, Warranties, and Contracts are collectively referred to as the
"Property"); and
WHEREAS, Owner is willing to grant such an option on the terms and
provisions hereinafter contained.
NOW, THEREFORE, in consideration of One Dollar ($1.00) and other good and
valuable consideration herewith paid by Buyer to Owner, the receipt and
sufficiency of which is hereby acknowledged by Owner, and in further
consideration of the mutual covenants and agreements herein contained, it is
agreed by and between the parties hereto as follows:
1. Option. Owner hereby grants to Buyer, for the period beginning on the
date hereof and ending at 11:59 o'clock p.m., on November 15, 2001 (the "Option
Termination Date"), the exclusive right and option to purchase the Property upon
the terms and conditions herein contained.
2. Exercise of Option. The option herein granted shall be deemed fully
exercised as to the Property if (i) on or before the date of closing under the
Purchase Agreement as may be extended by amendment to the Purchase Agreement,
the Buyer pays to Title, as defined in the Purchase Agreement attached hereto as
Exhibit B ("Exhibit B Purchase Agreement"), as Escrow Agent for both parties,
the cash portion of the Option Fee, as hereafter defined, and delivers to Owner
the non-cash portion of the Option Fee, namely, the Warrants, as hereafter
defined; and (ii) the Buyer gives to the Owner, before the Option Termination
Date, a written notice of election to purchase the Property. Service of such
notice shall be sufficient if served personally or if timely deposited in the
United States mail addressed to Owner as hereinafter provided and received by
Owner on or prior to the Option Termination Date. Failure to timely provide
such notice or timely pay the Option Fee to Owner and Title, shall automatically
terminate the option herein granted to Buyer and Title shall remit the cash
portion of the Option Fee in its possession to Owner and any accrued interest
thereon to Buyer. Upon receipt by Title of the Option Fee and the receipt by
Owner of the notice and the Warrants, the parties shall execute the Exhibit B
Purchase Agreement. The Option Fee shall consist of nonrefundable cash in the
amount of $2,000,000.00 and nonrefundable warrants with a cashless exercise
provision ("Warrants") to purchase 60,000 shares of Techne Corporation, during a
six (6) year period commencing on the first anniversary of its delivery,
accompanied by registration rights specified in attached Exhibit E.
Notwithstanding the foregoing or any other provision of this Option Agreement to
the contrary, the option granted hereunder shall not be exercisable and shall be
deemed null and void (i) in the event Buyer or Techne Corporation has not yet
acquired from Owner the real property covered by the Purchase Agreement on or
before the scheduled date of closing, as may be extended by an amendment to the
Purchase Agreement; or (ii) provided Owner has acquired fee title to the
property covered by the Phase II Option, in the event Buyer or Techne
Corporation fails to pay Owner the Option Fee as stated in and required by the
Phase II Option prior to the actual exercise of the option herein granted to
Buyer; or (iii) in the event the entire Property is condemned prior to Buyer's
exercise of the Option. Upon execution of the Exhibit B Purchase Agreement by
both parties, the Option Fee shall be deemed the "Deposit" as defined in the
Exhibit B Purchase Agreement.
3. Purchase Price. The purchase price for the Property shall be Seven
Million Nine Hundred Fifty-One Thousand and 00/100ths Dollars ($7,951,000.00)
payable in cash to Owner at the closing plus the Warrants. Buyer shall receive
at closing as a credit against the purchase price for the cash portion of the
Option Fee previously paid. The purchase price shall be allocated between the
following portions of the Property upon execution of the Exhibit B Purchase
Agreement:
$______________ to 2101 Kennedy, $________________ to 659 Cleveland,
$_____________ to Triangular Portion and $_____________ to MT-BN parking lot.
4. Representations and Warranties by Owner. Owner represents and warrants
to Buyer:
(a) If Buyer duly exercises the option herein granted, Owner shall,
subject to performance by Buyer of the covenants and agreements to be
performed by it under the Exhibit B Purchase Agreement, execute and
deliver to Buyer, at closing, as defined in the Exhibit B Purchase
Agreement, a warranty deed ("Deed") conveying good and marketable title
to the Property subject only to the exceptions ("Permitted
Encumbrances") noted on Exhibit C hereto attached. Owner will not
place of record or cause to be incurred within thirty (30) days of the
date of closing of the property pursuant to the Purchase Agreement any
liens or encumbrances against the Property other than the Permitted
Encumbrances.
(b) To the extent commercially reasonable after any condemnation and/or
casualty to the Property, Owner will continue to operate, maintain
and repair the Property as it is being currently operated, maintained
and repaired.
(c) Owner will maintain fire and extended coverage insurance for at least
$8,000,000.00 on the 2101 Kennedy Building and $350,000.00 on the 659
Cleveland Building to the extent it can be economically purchased.
It is assumed that any aggregate increases of less than one hundred
percent (100%) of the current cost shall be economical.
(d) Owner will not hereafter knowingly lease the Property to tenants who
engage in the business of generation and/or storage of hazardous
materials and will insert in all new leases hereafter entered into a
prohibition of such business of generation and/or storage of
hazardous materials but the foregoing shall not be breached if any
tenant, without Owner's consent or knowledge engages in such
activities. Owner will take appropriate action to terminate the
rights of any tenant who violates such prohibition.
(e) Owner will have marketable and insurable record title to the Property
as of closing, subject only to the Permitted Encumbrances.
(f) To the best of Owner's knowledge, the information supplied to Buyer
with respect to the Property including copies of leases, materials
described in Exhibit C to the Purchase Agreement but excluding the
materials described in Exhibit D to the Purchase Agreement is complete
and correct.
(g) At closing, Owner shall assign to the extent they are assignable, all
of Owner's interest in the "Other Agreements" and "Leases" as defined
in the Exhibit B Purchase Agreement.
(h) Owner has not received any notice nor are they aware of any pending or
threatened action to take by eminent domain or by deed in lieu thereof
all or any portion of the Property.
(i) Owner shall be solely responsible for and shall pay on the date of
closing any deferred tax or assessment, including, but not limited to,
those referred to in Minnesota Statutes Section 273.11 (the so-called
"Green Acres recapture"), catch-up or adjustment in future taxes due as
a result of the Property having been classified under any designation
authorized by law to obtain a special low ad valorem tax rate or
receive either an abatement or deferment of ad valorem taxes.
(j) Owner is not a "foreign person" as contemplated by Section 1445 of the
Internal Revenue Code, and that at the closing Owner will deliver to
Buyer a certificate so stating, in a form complying with the Federal tax
law.
(k) This Option Agreement has been duly and validly authorized, executed and
delivered by Owner and the obligations of Owner hereunder and thereunder
are valid and legally binding, and this Option Agreement is enforceable
against Owner in accordance with its terms.
(l) Except as shown by the materials described in Exhibit C and Exhibit D
of the Purchase Agreement, except for acts of Buyer, as a possible
tenant of the Property and the use by Buyer of hazardous materials,
except for asbestos used as a building material for the Property and
except for an underground fuel oil tank located north of 2101 Kennedy
and an underground waste oil tank at 659 Cleveland, to the best of
Owner's knowledge, Owner has not generated, manufactured, buried,
spilled, leaked, discharged, emitted, stored, disposed of, used or
released any Hazardous Substance (as hereafter defined) about the
Property, except as may have occurred as a result of operating the
Property and in any such event such activities were at all times in
compliance with Environmental Laws as hereafter defined and has not
knowingly permitted any other party to do any of the same. Except for
and to the extent of the matters specifically described in Exhibit C
and Exhibit D of the Purchase Agreement, except for acts of Buyer, as
a possible tenant of the Property and the use by Buyer of hazardous
materials, except for asbestos used as a building material for the
Property and except for an underground fuel oil tank located north of
2101 Kennedy and an underground waste oil tank at 659 Cleveland, Owner
has received no notice of and has no actual knowledge, without
inquiry (a) that any Hazardous Substance are or have ever been
generated, manufactured, buried, spilled, leaked, discharged,
emitted, stored, disposed of, used or released about the Property,
except as hereinbefore provided, or (b) of any, requests, notices,
investigations, demands, administrative proceedings, hearings,
litigation or other action proposed, threatened or pending relating
to any of the Property and alleging non-compliance with or liability
under any Environmental Law, or (c) that any above-ground or
underground storage tanks or other containment facilities of any kind
containing any Hazardous Substance are or have ever been located
about the Property, or (d) that Owner's operations on the Property
have been in compliance with all federal, state and local
environmental laws, ordinances, rules and regulations, relating to
the handling, storage and disposal of the Hazardous Material. For
purposes hereof, Hazardous Substance means asbestos, urea
formaldehyde, polychlorinated biphenyls, nuclear fuel or materials,
radioactive materials, explosives, known carcinogens, petroleum
products and by-products (including crude oil or any fraction
thereof), and any pollutant, contaminant, chemical, material or
substance defined as hazardous or as a pollutant or a contaminant in,
or the use, manufacture, generation, storage, treatment,
transportation, release or disposal of which is regulated by, any
Environmental Law. For purposes hereof, Environmental Law means any
federal, state, county, municipal, local or other statute, ordinance
or regulation which relates to or deals with the protection of the
environmental and/or human health and safety, including all
regulations promulgated by a regulatory body pursuant to any such
statute, ordinance, or regulation, including, the Comprehensive
Environmental Response and Liability Act of 1980 ("CERCLA"), as
amended, 42 U.S.C. Sectopm 9601 et. seq., the Resource Conservation
and Recovery Act ("RCRA"), as amended, 42 U.S.C. Section 6901 et. seq.,
the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section
1251 et. seq., the Clean Air Act, as amended, 42 U.S.C. Section 7401 et.
seq., and Minnesota Statutes Section 115B.01 et seq.
(m) To the best of Owner's knowledge, no unrecorded condition, restriction,
obligation or agreement not previously disclosed to Buyer exists which
affect the Property or Buyer's ability to use the Property for the
Current Uses.
(n) To the best of Owner's knowledge, no portion of the Property is located
within an area designated as a "flood plain" or "flood prone area" under
any statute, regulation, or ordinance.
(o) To the best of Owner's knowledge, the Property is free from any use or
occupancy restrictions, except those imposed by zoning laws and
regulations, and no part is dedicated or has been used as a cemetery or
burial ground.
(p) To the best of Owner's knowledge, no fact or condition exists which
would result in the termination of the current access to the Property
from any presently existing streets (except the parties' proposed
vacation of Cleveland Street (north of Kennedy Street and south of
Summer Street)) and roads adjoining or situated on the Property or to
any existing sewer or other utility facilities servicing, adjoining or
situated on the Property. To the best of Owner's knowledge, all
utilities needed for Current Uses are available to the Property.
(q) There is no litigation at law or in equity, and no action, litigation,
investigation or proceedings of any kind, including, but not limited to,
administrative or regulatory authority, pending or threatened against
the Property, or the Owner, or affecting the ability of Owner to
consummate the transaction contemplated herein and Owner knows of no
facts which could give rise to any such action, litigation,
investigation or proceeding with respect to the Property or the Owner.
(r) To the best of Owner's knowledge, there are no outstanding citations or
notices of violations of any statutes, ordinances or regulations of any
kind, with respect to the Property and to the best of Owner's knowledge,
there are no structural defects in the Buildings including the roof, but
the foregoing shall not be construed as a warranty for the roof of the
Buildings.
(s) To the best of Owner's knowledge, (i) the Property is zoned for the
Current Uses, (ii) the Property contains no wells, and (iii) the
Property does not contain any septic systems.
(t) To the best of Owner's knowledge, except for a right that may be granted
by Owner to RREEF Venture Capital Fund L.P., or any of its affiliates
(hereinafter "RREEF"), to purchase the Property which right shall be
contingent on the termination of this Option Agreement, no other party
has any right, title or interest in and to the Property, including the
right to purchase the Property, except as set forth as a Permitted
Encumbrance and except for the rights of tenants, as tenants only.
Owner represents and warrants that in the event it enters into a
purchase agreement with RREEF for the sale of the Property contingent
upon the termination of this Option Agreement, such purchase agreement
will be entered into only if RREEF executes a quitclaim deed in favor of
Owner as to the Property to be placed in escrow with Title and to be
delivered upon Buyer's closing its purchase of the Property under the
Purchase Agreement.
(u) Owner shall cure any violations of law or municipal ordinance, orders
or requirements for which Owner had received a notice of violation
prior to the closing which would affect the Buyer's use of the
Property and which would be binding upon the Property or Buyer after
the closing, it being understood that the Property is to be renovated
upon its purchase and no such violation need be cured if as a result
of the renovation the violation becomes moot.
(v) Owner, when it purchased the Property, was provided original Tenant
Estoppel Certificates for the five tenants ("Five Tenants") in Suites
212 (Dwyer Sales), 309 (Sarah Ruplin), 312 (Schaffer Fine Art
Services, Inc.), 319 (David Walter) and Suites 204 & 15 (Jeff Rabkin)
indicating no renewal options existed despite lease language that may
indicate otherwise. Owner has provided Buyer with copies of such
Tenant Estoppel Certificates. Owner will not hereafter enter into
any new leases or enter into any new renewals of any leases, which do
not contain provisions allowing the landlord the right to terminate
such lease upon three months notice in the event of a sale of the
Property. Except for the Five Tenants and subject to the
availability by the remaining tenants of bankruptcy laws or other
laws that may delay the enforcement of landlord's remedies, Owner
will use its best efforts to terminate existing leases prior to
July 1, 2002 if with notice of Buyer's exercise of the option herein
granted, Buyer agrees in writing to close on July 1, 2002 and not
before.
None of the foregoing warranties shall be construed as a warranty as
to the sufficiency of parking, it being understood that parking
requirements are dependent on the usage of the Property by the Buyer.
Except for the foregoing warranties, Buyer acknowledges that it is
purchasing the Property in its "as is" condition relying solely on
its inspection and knowledge of the Property.
Owner covenants that prior to the termination of this Option
Agreement, it will not knowingly take any affirmative action that
would purposely cause any of the representations and warranties
contained herein to be materially breached. The sole and exclusive
remedy for Buyer under any theory of law for a breach by Owner of
this covenant shall be the return of the cash portion of the Option
Fee, if Buyer chooses not to exercise the option. If Buyer exercises
the Option with knowledge of such breach by Owner, Buyer shall be
deemed to have waived such breach.
5. Right to Enter; Soil Tests; Surveys. Prior to Buyer's exercise of the
options herein granted to Buyer and subject to the rights of tenants, Buyer and
its agents shall have the right to enter upon the Property for purposes of
making soil tests, surveys, and engineering and architectural studies and tests.
Buyer hereby agrees to indemnify and hold harmless Owner from all liabilities,
expenses and attorneys' fees incurred by Owner and arising out of such entry, or
the taking of such tests, surveys, analysis, studies and tests upon the
Property. This indemnification and hold harmless agreement shall survive
termination or expiration of this Agreement and of the option granted under this
Agreement, exercise of the option, and/or consummation of the transaction herein
contemplated. All results of surveys, topographies and tests will be forwarded
to Owner and Buyer hereby consents to Owner utilizing the same, and if Buyer
fails to exercise its option, all the originals of such materials will be deemed
the property of Owner and Buyer agrees to promptly furnish such originals at
Owner's request.
6. No Commissions. Each party represents and warrants to the other that
they have not incurred any real estate brokerage fees, finder's fees, or any
other fees or commissions of any kind or nature due or owing to any third party
as a result of the execution of this Option Agreement or as a result of the sale
of any of the Property. Owner and Buyer each hereby indemnify the other against
and shall hold the other harmless from any and all claims, damages, costs or
expenses of or for such fees or commissions that have been incurred by their
actions.
7. Notices. Any notice or election herein required or permitted to be
given or served by either party hereto upon the other shall be deemed given or
served in accordance with the provisions of this Agreement, if served
personally or if mailed by United States registered or certified mail,
postage prepaid, properly addressed as follows:
If to Owner: Hillcrest Development
2424 Kennedy Street NE
Minneapolis, MN 55413
Attention: Scott M. Tankenoff
with a copy to: Maun & Simon, PLC
2000 Midwest Plaza Building West
801 Nicollet Mall
Minneapolis, MN 55402
Attention: Charles Bans, Esq.
If to Buyer: R & D Systems, Inc.
614 McKinley Place
Minneapolis, MN 55413
Attention: Tom Oland, CEO
with a copy to: Fredrikson & Byron, P.A.
900 Second Avenue South, Suite 1100
Minneapolis, MN 55402
Attention: Chuck Diessner
Each mailed notice of communication shall be deemed to have been given when
served upon, the party to which addressed or if mailed on the date the same
is actually received by the addressee. The addresses to which notices are to
be mailed to either party hereto may be changed by such party by giving
written notice thereof to the other party in the manner above provided.
8. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto, and their respective successors and
assigns. It is expressly agreed that this Agreement shall be assignable by
Buyer; provided, however, that no such assignment shall be valid unless written
notice thereof has been first provided to Owner.
9. Recording. The parties agree to simultaneously execute a recordable
memorandum of Option Agreement ("Memorandum") in the form of Exhibit D hereto
attached for purposes of memorializing of record this Agreement. Buyer shall
deposit upon execution of this Agreement in escrow with Title a quitclaim deed
to the Property in favor of Owner in the event Buyer fails to consummate its
purchase from Owner of the Property but Title shall not release the quitclaim
deed from escrow and/or record the deed until after Title has provided Buyer
with at least five (5) days prior written notice.
10. Condemnation. If any portion of the Property but not the entire
Property is condemned prior to the exercise of the option herein granted, any
proceeds received by Owner shall first be applied by Owner to restore the
Property to the extent commercially reasonable, and the balance, if any, applied
against the Purchase Price if the option is exercised and Buyer consummates its
purchase of the Property pursuant to the Exhibit B Purchase Agreement. If the
entire Property is condemned prior to the exercise of the option, this option
shall be null and void and fifty percent (50%) of the cash portion of the Option
Fee previously paid by Buyer to Owner shall be refunded to Buyer.
11. Casualty. If any "major" damage to the 2101 Kennedy Building occurs
prior to the exercise of the option granted herein, Buyer shall elect within
thirty (30) days of notice from Owner as to the amount of insurance proceeds to
be received by Owner whether Buyer (i) wishes to terminate its rights under this
Option Agreement, or (ii) wishes to then exercise its option and close pursuant
to the Exhibit B Purchase Agreement (without regard to the provisions therein as
to casualty and damage) with a credit against the Purchase Price equal to the
actual insurance proceeds received by Owner but in no event shall such credit
exceed the excess of the Purchase Price over one-half of the cash portion of the
Option Fee. If any "minor" damage to the 2101 Kennedy Building occurs prior to
the exercise of the option granted herein, Owner must use the available
insurance proceeds to restore such building unless within thirty (30) days of
notice from Owner as to the amount of insurance proceeds to be received by
Owner, Buyer elects to exercise its option and close pursuant to the Exhibit B
Purchase Agreement (without regard to the provisions therein as to casualty and
damage) with Buyer receiving a credit against the Purchase Price equal to the
actual insurance proceeds received by Owner but in no event shall such credit
exceed the excess of the Purchase Price over one-half of the cash portion of the
Option Fee.
If any damage occurs to the 659 Cleveland Building prior to Buyer's
exercise of its option herein granted, Owner can solely elect whether to restore
such building or in the event Buyer exercises its option to give a credit to
Buyer against the Purchase Price of any applicable insurance proceeds received
by Owner but in no event shall such credit exceed the excess of the Purchase
Price over one-half of the cash portion of the Option Fee.
For purposes of this paragraph 11, a "major" damage is defined as damage
more than 25% of the value of the 2101 Kennedy Building and a "minor" damage is
defined as damage to such building in an amount less than or equal to twenty-
five percent (25%) of the value of such building.
12. Proposed Vacation of Cleveland Street. It is contemplated by the
parties that part of Cleveland Street lying north of Kennedy Street and south of
Summer Street will be vacated by Owner and the parties agree that upon such
vacation, the easterly one-half of the vacated street shall accrue to the
Property with the westerly one-half accruing to the property common known as
2001 Kennedy and the parties will execute and deliver such deeds as are
necessary to accomplish the same.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
OWNER: BUYER:
Hillcrest Development R & D Systems, Inc.
By: /s/ Scott Tankenoff By: /s/ Thomas E. Oland
Its: General Partner Its: President
ACKNOWLEDGMENT BY TITLE
The undersigned acknowledges receipt of a copy of the foregoing and agrees
to act as Escrow Agent for the parties and to invest the cash portion of the
Option Fee in an interest-bearing federally insured bank account.
First American Title Insurance Company
By: /s/ Rodney D. Ives
Its: Assistant Vice President
EXHIBIT B
PURCHASE AGREEMENT
(2101 Kennedy Option)
THIS AGREEMENT is entered into this _____ day of __________, ______, by
and between Hillcrest Development, a Minnesota limited partnership (hereafter
referred to as the "Seller"), and R & D Systems, Inc., a Minnesota corporation,
(the "Buyer"), upon the basis of the following facts, understandings and
intentions of Seller and Buyer.
RECITALS:
1. Seller is the fee simple owner of real properties ("Land") improved
with buildings ("Buildings") commonly known as 2101 Kennedy and 659 Cleveland
and is the fee simple owner of real property used for surface parking lots
("Parking Land") commonly known as the "Triangular Portion" and the MT-BN Lot,
all of which are located in the City of Minneapolis, County of Hennepin, State
of Minnesota, and legally described in Exhibit A hereto attached.
2. Buyer has pursuant to an Option Agreement ("Option Agreement") duly
exercised an option granted by Seller to purchase the Land, the Buildings, the
Parking Land, and all licenses, permits, equipment, fixtures and furnishings and
all other personal property, tangible or intangible, owned by Seller and
currently located on the Land and solely used in the operation and maintenance
of the foregoing (hereafter said licenses, permits, equipment, fixtures and
furnishings and other included personal property shall be referred to in the
aggregate as "Personal Property," and hereafter the Land, the Building, the
Parking Land, and Personal Property is sometimes referred to in the aggregate as
the "Property") in accordance with the terms and conditions hereinafter set
forth.
3. Seller is willing to grant and extend to Buyer such purchase right as
the terms hereafter set forth.
NOW, THEREFORE, in consideration of the agreements hereinafter provided and
other good and valuable consideration, Seller agrees to sell and Buyer agrees to
purchase from Seller the Property, together with and including all
hereditaments, appurtenances, easements and rights of way thereunto belonging or
in any way appertaining and also the right, title and interest (if any) of
Seller in and to the bounding and abutting streets, alleys and highways, subject
to and upon the following terms and conditions:
SECTION I
PURCHASE PRICE
It is hereby agreed that the Purchase Price of the Property shall be Seven
Million Nine Hundred Fifty-One Thousand and 00/100 Dollars ($7,951,000.00) plus
nonrefundable warrants ("Warrants") with a cashless exercise provision to
purchase 60,000 shares of Techne Corporation, during a six (6) year period
commencing on the first anniversary of its delivery accompanied by registration
rights of the stock purchased pursuant to the Warrants specified in Exhibit D
hereto attached (the "Purchase Price"), which shall be paid by Buyer to Seller
as follows:
(i) $2,000,000.00 has already been paid into escrow as provided for in
Section II below.
(ii) The Warrants have already been delivered to Seller.
(iii) The remainder of the Purchase Price, namely, $5,951,000.00 will be
payable at closing in immediately available funds.
The Purchase Price shall be allocated as follows:
$_________________ to 2101 Kennedy;
$_________________ to 659 Cleveland;
$_________________ to Triangular Portion; and
$_________________ to MT-BN Lot.
SECTION II
EARNEST MONEY DEPOSIT
Buyer has already deposited in escrow with First American Title Insurance
Company (the "Escrow Agent" and sometimes hereafter "Title") the sum of
$2,000,000.00, (this sum plus all accrued interest thereon shall be referred to
as the "Deposit") which shall be retained by the Escrow Agent for the benefit of
Seller and Buyer in accordance with the provisions of this Purchase Agreement.
The parties hereby agree to execute such documentation, if any, reasonably
required by the Escrow Agent in connection with the disbursement of the Deposit
and establishment of said earnest money escrow referenced above.
SECTION III
INVESTMENT AND DISBURSEMENT OF DEPOSIT
The Escrow Agent is hereby directed to invest the Deposit represented by
cash in a segregated U.S. Treasury-backed money market account with U.S. Bancorp
in Minneapolis, Minnesota.
The Deposit shall be disbursed by the Escrow Agent as follows:
(a) Except as provided for in (b) or (c) below, the Deposit shall
be deemed nonrefundable and shall be delivered to Seller either upon the
termination of this Purchase Agreement or upon the closing of the sale
of the Property as partial payment of the Purchase Price.
(b) Fifty percent (50%) of the Deposit shall be delivered to Buyer
in the event: (i) Buyer terminates this Purchase Agreement pursuant to
Sections IV, V, VI or XII (in the event Buyer terminates this Purchase
Agreement because Seller is in material breach of its representations
and warranties other than pursuant to the last paragraph of Section IX)
hereof; (ii) Buyer terminates this Purchase Agreement pursuant to
Section XVI hereof; (iii) Buyer terminates this Purchase Agreement
pursuant to Section XVII hereof.
(c) One hundred percent (100%) of the Deposit shall be delivered
to Buyer in the event Buyer chooses to terminate this Purchase Agreement
pursuant to the last paragraph of Section IX, the last paragraph of
Section XII, or as a result of Seller refusing to perform any of its
obligations set forth herein pursuant to Section XII other than a breach
of its representations and warranties.
(d) Interest in the Deposit shall inure to the benefit of Buyer,
in all events.
SECTION IV
BUYER'S CONDITIONS PRECEDENT
Seller agrees that this Purchase Agreement shall be conditioned upon Buyer
satisfying itself, in its sole and absolute judgment, that the following
conditions precedent with respect to the Property are met:
(a) Buyer's inspection and approval of the Land, the Building, the
Parking Land, Personal Property, the Other Agreements (as hereinafter
defined) and all other information required herein to be provided to
Buyer by Seller, all during regular weekday business hours. Seller
agrees to allow Buyer and its agents the right of any ingress or egress
over and through the Property for the purpose of inspecting the same and
making other observations as Buyer deems reasonably necessary. Buyer
agrees to indemnify and hold Seller harmless from all injury, death or
property damage or claims of any kind whatsoever including mechanic's
liens arising out of or in any way incidental to Buyer's presence on the
Property for the purposes aforesaid. This indemnity shall survive the
termination of this Purchase Agreement, regardless of which party elects
to terminate this Purchase Agreement. To the extent Seller has not
already done so, Seller agrees to provide to Buyer copies of or allow
Buyer access to the following items within ten (10) days from the
execution of this Purchase Agreement:
(i) copies of Plans and Specifications, blueprints,
operating manuals, surveys and licenses, if any, in Seller's
possession, used to operate the Buildings and the remainder of the
Property;
(ii) complete copies of all contracts ("Other Agreements")
and leases ("Leases") currently affecting the Property;
(iii) copies of all permits or authorizations, if any, in
Seller's possession, required to be issued by any governmental
body having jurisdiction in connection with any state of facts or
activity presently existing or being carried on with respect to
the Property;
(iv) copies of all warranties and guaranties, if any, which
are still effective and which pertain to the Property or any
portion thereof ("Warranties");
(v) inventory of the Personal Property owned by the Seller
and located on the Land and used in connection with the operation
of the Property;
(b) Buyer may use the Property for its existing uses and its uses
of the property located at 2201 Kennedy, 614 McKinley and 640 McKinley,
as of February, 1999 ("Current Uses") without being in violation of any
zoning classification, land use classification, environmental
requirement, or any other use classification or building classification
or requirement established by any entity or authority having legal
jurisdiction or authority thereover.
(c) All utilities, including but not limited to electricity, gas,
water (fire and domestic) storm and sanitary sewer, are available on
site, through valid and adequate public or private easements for Current
Uses; provided that in the case of private easements, they are
appurtenant to the Property, or on the Property's side of abutting
streets of size and capacity sufficient to serve the Current Uses.
(d) Buyer approving, as provided in Section V(A) hereof, any
environmental audits for the Property.
(e) Within thirty (30) days of the date of this Purchase
Agreement, Seller shall provide Buyer with original estoppel
certificates from all tenants of the Property in form reasonably
acceptable to Buyer to the extent Seller is able to obtain the same by
exercising its best effort.
This Purchase Agreement shall be deemed terminated and neither party liable
to the other herein unless Buyer affirmatively accepts or waives in writing to
Seller the foregoing conditions by January 15, 2002. Upon any such termination
of this Purchase Agreement by Buyer failing to waive or accept all of the
foregoing conditions or as provided in the last sentence of this Section, all
parties hereto shall be released from all duties and obligations to each other
contained herein (except for Buyer's Indemnity under Sections IV(a) and V(A)
hereof) and upon such termination Buyer shall be entitled to a partial or full
refund of the Deposit as described in Sections III(b) or III(c) hereof.
Notwithstanding the foregoing, Buyer may elect to terminate this Purchase
Agreement between January 15, 2002 and the date of closing in the event (i)
environmental testing done between such dates pursuant to Section V hereof
reveal a contamination previously unknown on January 15, 2002, or (ii) a change
in any item referred to in (b) above occurs between January 15, 2002 and the
date of closing so as to prohibit the use of the Property for Current Uses.
SECTION V
ENVIRONMENTAL AUDITS AND SURVEY
A. Environmental Audits. Seller has provided to Buyer prior to January 6,
1999 environmental reports ("Environmental Reports") for the Property at no cost
or expense to Buyer which are described in Exhibit C hereto attached and that
except for the "Exhibit D" information described in paragraph 4(l) of the Option
Agreement, to the best of Seller's knowledge, such materials constitute all of
the environmental reports in Seller's possession or control. Buyer shall have
the right to do additional environmental audits and/or soil tests subject to the
reasonable prior written approval of Seller regardless of the cost as long as
Buyer pays for all of such costs; provided, however, no such additional testing
shall be done beyond January 15, 2002 unless the testing is based on new
information not previously known to Buyer. If such additional tests reveal the
presence of any material amounts of hazardous materials not disclosed in the
Environmental Reports, and not otherwise "known" to Buyer as of July 1, 1999,
Buyer may terminate this Purchase Agreement by giving Seller notice of the same
prior to (i) January 15, 2002 for the discovery of such materials prior thereto
or (ii) the closing date for the discovery of such materials after January 15,
2002 and prior to the closing date and upon such termination Buyer shall be
entitled to a partial or full refund of the Deposit as described in Sections
III(b) or III(c) hereof. Buyer shall be deemed to have "known" of any hazardous
materials if Buyer had in its possession copies of materials describing such
hazardous materials as of July 1, 1999. Buyer agrees to indemnify and hold
Seller harmless from all mechanic's liens liability and other costs and
expenses arising from Buyer's doing such additional environmental audits and/or
soil tests. The foregoing indemnity shall survive the termination of this
Purchase Agreement.
B. Survey. Seller has provided Buyer with a survey ("Survey") of the
Property.
C. Copies of Documents. To the extent not already done, Seller shall
promptly deliver to Buyer or make available to Buyer copies of all soil tests,
environmental audits, surveys and other documents relating to the physical
properties of the Property which are within Seller's control and Buyer agrees to
promptly deliver to Seller copies of all of such items which are within Buyer's
control.
SECTION VI
TITLE EVIDENCE
A. Seller will, at Seller's expense, provide Buyer within fourteen (14)
days after the date hereof with a commitment(s) (the "Commitment") for an
Owner's Policy of Title Insurance for the Property issued by Title along
with updated Surveys certified to Title, Buyer, Techne Corporation and Buyer's
lender. Buyer shall pay at closing the premium for the actual title insurance
policy, if any, to be purchased by Buyer. The Commitment shall include waiver
of standard exceptions, a zoning and comprehensive endorsements and a contiguity
endorsement as to the Land and each separate parcel comprising the Parking Land
and shall include legible copies of all documents, maps, or plats set forth
therein as affecting the Property and shall be issued through Title in its
capacity as a title insurance company by its local office or by its local
agent (the "Title Company") situated in the county where the Property is
located. The Commitment shall be issued in the name of Buyer, Techne
Corporation and Buyer's lender.
B. Within thirty (30) days after receiving the Commitment and the updated
Surveys, Buyer shall deliver to Seller a written statement containing any
objection Buyer has to the state of title, including Survey objections but
excluding objections to Permitted Encumbrances and excluding matters described
by surveys provided to Buyer prior to February 26, 1999. If such statement of
objection is not delivered by such date, title shall be deemed approved by Buyer
except for Schedule B, Section 1 requirements of the commitment ("Requirements")
which Seller agrees to satisfy at closing. If any objection other than the
Requirements is not cured or removed by the closing date, Buyer, at its option,
may, prior to the closing date, either (i) accept title as it is, subject to
Seller's obligations to satisfy the Requirements; or (ii) terminate this
Purchase Agreement. Seller shall have no obligations to cure any Permitted
Encumbrances. Upon any such termination all parties shall be released from all
duties or obligations contained herein (except for Buyer's Indemnity under
Sections IV(a) and V(A) hereof) and Buyer shall be entitled to a partial or full
refund of the Deposit as described in Sections III(b) or III(c) hereof.
SECTION VII
1031 EXCHANGE
At either party's request, the other party agrees to cooperate with the
requesting party in a deferred or simultaneous Section 1031 like kind
exchange(s) of all or any portion of the Property for which the Purchase
Price has been separately allocated herein as long as the other party is not
required to take title to any other property or to incur any further cost,
expense, liability or delay. The Deposit of $2,000,000.00 in the event of
any such exchange shall be allocated to 2101 Kennedy.
SECTION VIII
VACATION OF CLEVELAND STREET
If at the date of execution of this Purchase Agreement that part of
Cleveland Street lying north of Kennedy Street and south of Summer Street has
been or is in the process of being vacated, it is agreed between the parties
that the easterly one-half of the vacated street shall accrue to the Land with
the westerly one-half accruing to the property commonly known as 2001 Kennedy
and the parties will execute and deliver such deeds as are necessary to
accomplish the same. Seller shall pay the expenses of such vacation except
that neither the Seller nor the Buyer shall have any obligation to pay any
sums attributable to the value of the vacated street which the City may
attempt to impose.
SECTION IX
WARRANTIES
Seller warrants and represents to Buyer that the following statements are
as of February 26, 1999, the date hereof, at closing and after closing to the
extent hereinafter provided, will be true and accurate, except for such material
changes (other than changes resulting from the affirmative and purposeful acts
of Seller contemplated by the last paragraph of this Section IX), that Seller
has notified Buyer in writing at the time of Seller's execution of this Purchase
Agreement:
(a) Seller will have marketable and insurable record title to the
Property as of closing, subject only to the Permitted Encumbrances
listed on Exhibit B attached hereto and made a part hereof.
(b) To the best of Seller's knowledge, the information supplied to
Buyer pursuant to Section IV(a) hereof is complete and correct except
for the materials described in the Option Agreement as "Exhibit D to the
Purchase Agreement" and has been duly supplemented including, but not
limited to, any new Other Agreements.
(c) At closing, Seller shall (i) convey to Buyer by Warranty Deed
the Property and convey by Warranty Bill of Sale the Personal Property
to Buyer free of all encumbrances on the Property or any portion thereof
except for the Permitted Encumbrances and other matters approved by
Buyer pursuant to Section VI or as otherwise provided herein; and (ii)
shall assign to the extent they are assignable, all of Seller's interest
in the "Other Agreements" and the Leases, if any.
(d) Seller has not received any notice nor are they aware of any
pending or threatened action to take by eminent domain or by deed in
lieu thereof all or any portion of the Property.
(e) Seller shall be solely responsible for and shall pay on the
date of closing any deferred tax or assessment, including, but not
limited to, those referred to in Minnesota Statutes Section 273.11 (the
so-called "Green Acres recapture"), catch-up or adjustment in future
taxes due as a result of the Property having been classified under any
designation authorized by law to obtain a special low ad valorem tax
rate or receive either an abatement or deferment of ad valorem taxes.
(f) Seller is not a "foreign person" as contemplated by Section
1445 of the Internal Revenue Code, and that at the closing Seller will
deliver to Buyer a certificate so stating, in a form complying with the
Federal tax law.
(g) This Purchase Agreement and the documents, instruments and
agreements to be executed by Seller pursuant to this Purchase Agreement
have been, or will be on or before the date of closing, duly and validly
authorized, executed and delivered by Seller and the obligations of
Seller hereunder and thereunder are or will be valid and legally
binding, and this Purchase Agreement and the documents, instruments and
agreements to be executed and delivered by Seller pursuant to this
Purchase Agreement are or will be upon such execution and delivery
enforceable against Seller in accordance with their respective terms.
(h) Except as shown by the materials described in Exhibit C and
Exhibit D to the Purchase Agreement (as defined in the Option
Agreement), except for acts of Buyer, as a possible tenant of the
Property and the use by Buyer of hazardous materials, except for
asbestos used as a building material for the Property and except for an
underground fuel oil tank located north of 2101 Kennedy and an
underground waste oil tank at 659 Cleveland, to the best of Seller's
knowledge, Seller has not generated, manufactured, buried, spilled,
leaked, discharged, emitted, stored, disposed of, used or released any
Hazardous Substance (as hereafter defined) about the Property, except as
may have occurred as a result of operating the Property and in any such
event such activities were at all times in compliance with Environmental
Laws (as hereinafter defined), and has not knowingly permitted any other
party to do any of the same. Except for and to the extent of the
matters specifically described in said Exhibit C and Exhibit D, except
for acts of Buyer, as a possible tenant of the Property and the use by
Buyer of hazardous materials, except for asbestos used as a building for
the Property and except for an underground fuel oil tank located north
of 2101 Kennedy and an underground waste oil tank at 659 Cleveland,
Seller has received no notice of and has no actual knowledge, without
inquiry (a) that any Hazardous Substance are or have ever been
generated, manufactured, buried, spilled, leaked, discharged,
emitted, stored, disposed of, used or released about the Property,
except as hereinabove provided, or (b) of any, requests, notices,
investigations, demands, administrative proceedings, hearings,
litigation or other action proposed, threatened or pending relating
to any of the Property and alleging non-compliance with or liability
under any Environmental Law, or (c) that any above-ground or
underground storage tanks or other containment facilities of any kind
containing any Hazardous Substance are or have ever been located
about the Property, or (d) that Seller's operations on the Property
have been in compliance with all federal, state and local
environmental laws, ordinances, rules and regulations, relating to
the handling, storage and disposal of the Hazardous Material. For
purposes hereof, Hazardous Substance means asbestos, urea
formaldehyde, polychlorinated biphenyls, nuclear fuel or materials,
radioactive materials, explosives, known carcinogens, petroleum
products and by-products (including crude oil or any fraction
thereof), and any pollutant, contaminant, chemical, material or
substance defined as hazardous or as a pollutant or a contaminant in,
or the use, manufacture, generation, storage, treatment,
transportation, release or disposal of which is regulated by, any
Environmental Law. For purposes hereof, Environmental Law means any
federal, state, county, municipal, local or other statute, ordinance
or regulation which relates to or deals with the protection of the
environmental and/or human health and safety, including all
regulations promulgated by a regulatory body pursuant to any such
statute, ordinance, or regulation, including, the Comprehensive
Environmental Response and Liability Act of 1980 ("CERCLA"), as
amended, 42 U.S.C. Section 9601 et. seq., the Resource Conservation and
Recovery Act ("RCRA"), as amended, 42 U.S.C. Section 6901 et. seq., the
Federal Water Pollution Control Act, as amended, 33 U.S.C. Section 1251
et. seq., the Clean Air Act, as amended, 42 U.S.C. Section 7401 et. seq.,
and Minnesota Statutes Section 115B.01 et seq.
(i) To the best of Seller's knowledge, no unrecorded condition,
restriction, obligation or agreement not previously disclosed to Buyer
pursuant to Section IV hereof shall exist which affect the Property or
Buyer's ability to use the Property for the Current Uses.
(j) To the best of Seller's knowledge, no portion of the Property
is located within an area designated as a "flood plain" or "flood prone
area" under any statute, regulation, or ordinance.
(k) To the best of Seller's knowledge, the Property is free from
any use or occupancy restrictions, except those imposed by zoning laws
and regulations, and no part is dedicated or has been used as a cemetery
or burial ground.
(l) To the best of Seller's knowledge, except for the anticipated
vacation of Summer and Cleveland Street, no fact or condition exists
which would result in the termination of the current access to the
Property from any presently existing streets and roads adjoining or
situated on the Property or to any existing sewer or other utility
facilities servicing, adjoining or situated on the Property. To the
best of Seller's knowledge, all utilities needed for Current Uses are
available to the Property.
(m) There is no litigation at law or in equity, and no action,
litigation, investigation or proceedings of any kind, including, but not
limited to, administrative or regulatory authority, pending or
threatened against the Property, or the Seller, or affecting the ability
of Seller to consummate the transaction contemplated herein and Seller
knows of no facts which could give rise to any such action, litigation,
investigation or proceeding with respect to the Property or the Seller.
(n) To the best of Seller's knowledge, there are no outstanding
citations or notices of violations of any statutes, ordinances or
regulations of any kind, with respect to the Property and to the best of
Seller's knowledge, there are no structural defects in the Buildings
including the roof, but the foregoing shall not be construed as a
warranty for the roof of the Buildings.
(o) To the best of Seller's knowledge, (i) the Property is zoned
for the Current Uses without being in violation of any zoning
classification, land use classification, environmental requirement, or
any other use classification or building classification or requirement
established by any entity or authority having legal jurisdiction or
authority thereover, (ii) the Property contains no wells, and (iii) the
Property does not contain any septic systems.
(p) To the best of Seller's knowledge, except for the rights of
existing tenants, if any, as tenants only, no other party has any right,
title or interest in and to the Property, including the right to
purchase the Property, except as set forth as a Permitted Encumbrance.
(q) Except for requirements imposed by the City of Minneapolis
relating solely to Buyer's anticipated improvements to the Property and
not to preexisting conditions, Seller shall cure any violations of law
or municipal ordinance, orders or requirements for which Seller had
received a notice of violation prior to the closing which would affect
the Buyer's use of the Property and which would be binding upon the
Property or Buyer after the closing, it being understood that the
Property is to be renovated upon its purchase and no such violation need
be cured if as a result of the renovation the violation becomes moot.
(r) Seller will use its best efforts to obtain tenant estoppel
certificates from all tenants as provided in Section IV(e).
(s) To the extent commercially reasonable after any condemnation
and/or casualty to the Property, Owner will continue to operate,
maintain and repair the Property as it is being currently operated,
maintained and repaired.
(t) Seller will maintain fire and extended coverage insurance
for at least $8,000,000.00 on the 2101 Kennedy Building and
$350,000.00 on the 659 Cleveland Building to the extent it can be
economically purchased. It is assumed that any aggregate increases
of less than one hundred percent (100%) of the current cost shall be
economical.
(u) Seller will not hereafter knowingly lease the Property to
tenants who engage in the business of generation and/or storage of
hazardous materials and will insert in all new leases hereafter
entered into a prohibition of such business of generation and/or
storage of hazardous materials but the foregoing shall not be
breached if any tenant, without Seller's consent or knowledge engages
in such activities. Seller will take appropriate action to terminate
the rights of any tenant who violates such prohibition.
(v) Seller, when it purchased the Property, was provided
original Tenant Estoppel Certificates for the five tenants ("Five
Tenants") in Suites 212 (Dwyer Sales), 309 (Sarah Ruplin), 312
(Schaffer Fine Art Services, Inc.), 319 (David Walter) and Suites 204
& 15 (Jeff Rabkin) indicating no renewal options existed despite
lease language that may indicate otherwise. Seller has provided
Buyer with copies of such Tenant Estoppel Certificates. Seller will
not hereafter enter into any new leases or enter into any new
renewals of any leases, which do not contain provisions allowing the
landlord the right to terminate such lease upon three months notice
in the event of a sale of the Property. Except for the Five Tenants
and subject to the availability by the remaining tenants of
bankruptcy laws or other laws that may delay the enforcement of
landlord's remedies, Seller will use its best efforts to terminate
existing leases prior to July 1, 2002 if with notice of Buyer's
execution of this Purchase Agreement, Buyer agrees in writing to
close on July 1, 2002 and not before.
(w) Seller will continue through closing to maintain insurance
coverages on the Property as required by the Option Agreement.
(x) If not already done, the Seller, at its sole cost and
expense, shall proceed immediately after the date of this Purchase
Agreement to complete prior to the closing date the subdivision of
the various parcels that will become the MT-BN Lot to be conveyed
hereunder.
None of the foregoing warranties shall be construed as a warranty as
to the sufficiency of parking, it being understood that parking
requirements are dependent on the usage of the Property by the Buyer.
Except for the foregoing warranties, Buyer acknowledges that it is
purchasing the Property in its "as is" condition relying solely on its
inspection of the quantity and quality of the Property including the
floor, the structural portions of the Property and the roof. The
foregoing warranties will survive the closing until December 31, 2002
("Final Action Date"). The parties agree that all actions commenced by
Buyer against Seller based on such representations and warranties shall
be deemed time barred unless such actions have been commenced prior to
the Final Action Date or such claims are based on fraud, it being
understood that except for claims based on fraud, Buyer shall be deemed
to have released Seller for any claims based on such representations and
warranties unless an action based thereon is commenced prior to Final
Action Date.
Seller covenants that, at any time prior to the closing, it has not
and will not knowingly take(n) any affirmative action that would
purposely cause the representations and warranties contained herein
to be materially breached. The sole and exclusive remedy for Buyer
under any theory of law for a breach by Seller of this covenant shall
be the termination of this Agreement and the return of the Deposit
pursuant to Section III(c), if Buyer chooses not to close. If Buyer
chooses to close with knowledge of such breach by Seller, Buyer shall
be deemed to have waived such breach.
SECTION X
CLOSING
The closing of this transaction shall take place in the office of Title in
Minneapolis, Minnesota on or before July 1, 2002, notwithstanding any other
provision hereof to the contrary. Possession of the Property shall be deemed to
have been given by Seller to Buyer coincident with the closing. The following
procedure shall govern the closing:
(a) Prior to closing, Seller shall deliver to Buyer and Title a
copy of the proposed general Warranty Deed (the "Deed") which shall be
in recordable form and shall convey good and marketable record title to
the Property (using the legal descriptions set forth on the Title
Commitment and the Survey) to Buyer, subject only to the Permitted
Encumbrances and other matters approved by Buyer. If the form of the
Deed does not comply with the provisions set forth above, the Seller
shall promptly correct the same upon notice from either Buyer or the
Title Company.
(b) On or before the closing Seller shall deliver to the Title
Company or Buyer the following:
(i) the Deed, properly executed and acknowledged along with
a standard form Seller's Affidavit;
(ii) current real estate tax statements;
(iii) any applicable owner's duplicate certificate(s) of
title to the Property;
(iv) intentionally deleted;
(v) a warranty bill of sale properly executed for all
Personal Property;
(vi) properly executed assignments of all Seller's interest
in and to the Leases and Other Agreements and which shall provide
that Seller will indemnify and hold Buyer harmless from all claims
under the foregoing which accrued on or prior to closing and Buyer
shall agree to indemnify and hold Seller harmless from all claims
under the foregoing which accrue after the closing;
(vii) a well certificate as may be required by applicable law
or in the event it is not required, a certification in the deed
that there are no wells on the Property;
(viii) an assignment of the Warranties and any other
documents required by this Purchase Agreement;
(ix) any other documentation reasonably requested by the
Title Company in order to confirm the authority of the Seller to
consummate this transaction or to permit the Title Company to
issue to Buyer, upon completion of the closing, its Owner's Title
Insurance Policy in an amount equal to the Purchase Price, subject
only to those matters shown on the Commitment which were approved
by Buyer (the "Title Policy"); Provided, however, that the
foregoing shall not be construed to obligate Seller to provide any
indemnity or to pay any sums not otherwise required to be paid by
Seller hereunder;
(x) such funds as may be required by Seller to pay closing
costs or charges properly allocable to Seller.
(c) On or before the closing, Buyer shall deliver to Title or
Seller the following:
(i) the balance of the cash due at closing, less any
amounts for which Buyer is to receive a credit;
(ii) such additional funds as may be required of Buyer to
pay closing costs or charges properly allocable to Buyer.
(d) After Title has received all of the items to be deposited
with it, and when it is in a position to issue the Title Policy
reflected by the approved Commitment, Title shall:
(i) record the Deed;
(ii) record any other instruments executed by the parties,
or either of them, which are contemplated by this Purchase
Agreement to be placed of record, instructing the Recorder's
Office to return the same to the beneficiary thereof;
(iii) issue to Buyer its Title Policy and deliver to Buyer
all other documents to be herein delivered by Seller to the Title
Company pursuant to this Purchase Agreement;
(iv) charge Buyer for the recording cost of the Deed and
one-half of the closing fee and any escrow fees, and the cost of
any purchased title policy;
(v) charge Seller for one-half of the closing fee and any
escrow fees, recording any documents clearing title to the
Property, any abstracting costs, and the cost of the title
insurance commitment for Buyer;
(vi) charge Seller for the full cost of any deed transfer,
revenue or similar tax with respect to the sale of the Property;
(vii) real estate taxes and installments of special
assessments due and payable in the year of closing shall be
prorated between the parties based on a calendar year and the date
of closing. Seller shall pay all real estate taxes and
installments of special assessments due in the year prior to the
year of closing and earlier years including as provided in Section
IX(e) hereof; Buyer shall pay all real estate taxes and
installments of special assessments due and payable in the year
subsequent to the year of closing and subsequent years;
(viii) all bills for services, labor, materials, capital
improvements or other charges of any kind or nature rendered to
Seller or the Property prior to the closing date shall be borne by
and paid by Seller;
(ix) prepare closing statements for Seller and Buyer,
respectively, indicating deposits, credits and charges (including
allocation of current real property taxes) and deliver the same,
together with a disbursement of funds, to any appropriate party.
(x) credit Buyer with any applicable security deposits and
prorate between the parties as of the date of closing all rents
and other amounts due under the Leases and operating expenses for
the Property.
Any supplemental closing instructions given by any party shall also be
followed by the Title Company provided the same do not conflict with any
instructions set forth herein.
SECTION XI
DEFAULT BY BUYER
In the event the transactions contemplated hereby fail to close as a result
of a material default by Buyer of any of the terms of this Purchase Agreement,
and such failure to close continues for a period of five (5) days after Seller
notifies Buyer of such event, Seller may, at its option, elect as its exclusive
remedy one of the following:
(a) To terminate this Purchase Agreement as provided for by law
and retain the Deposit as provided in Section III hereof; or
(b) To enforce specific performance of Buyer's obligations herein
to purchase the Property provided such action is commenced within one
hundred eighty (180) days from such failure to close.
SECTION XII
DEFAULT BY SELLER
If Seller refuses to perform any of its obligations as set forth herein or
is in material breach of any of its representations and warranties herein
provided and such failure to perform or breach continues for a period of five
(5) days after Buyer notifies Seller of such event, Buyer may, at its option,
elect one of the following remedies:
(a) To terminate this Purchase Agreement by notice to Seller, in
which event neither party shall have any further rights or obligations
hereunder except that the Deposit exclusive of any interest thereon
shall be returned to Buyer as provided in Section III hereof; or
(b) To enforce specific performance of Seller's obligations
hereunder, including specifically the conveyance of the Property in the
condition required hereby provided such action is commenced within one
hundred eighty (180) days from such failure to close.
Notwithstanding the foregoing, should Seller fail to terminate all leases (other
than the leases with the Five Tenants) prior to July 1, 2002 after having
received Buyer's notice with the execution of this Purchase Agreement that
Buyer agrees to close on July 1, 2002 and not before then, Buyer may terminate
this Purchase Agreement and upon such termination, Buyer shall be entitled to
receive one hundred percent (100%) of the Deposit plus accrued interest therein
as provided for in Section III(c) hereof.
SECTION XIII
EXPENSE OF ENFORCEMENT
If either party brings an action at law or in equity to enforce or
interpret this Purchase Agreement, the prevailing party in such action shall be
entitled to recover reasonable attorneys' fees and court costs in addition to
any other remedy granted.
SECTION XIV
BROKERS
Seller warrants to Buyer that in connection with this transaction Seller
has not taken any action which would result in any real estate broker's fee
being due or payable to any party. Buyer warrants to Seller that in connection
with this transaction Buyer has not taken any action which would result in any
real estate broker's fee, finder's fee or other fee being due or payable to any
party. Seller and Buyer respectively agree to indemnify, defend and hold
harmless the other from and against any and all other claims, fees, commissions
and suits of any real estate broker or agent with respect to services claimed to
have been rendered for or on behalf of such party in connection with the
execution of this Purchase Agreement or the transaction set forth herein.
SECTION XV
NOTICE
All notices, demands and requests required or permitted to be given under
this Purchase Agreement must be in writing and shall be deemed to have been
properly given or served either by personal delivery or by the expiration of
two (2) days after depositing the same in the United States mail, addressed
to Seller or to Buyer, as the case may be, prepaid and registered or certified
mail, return receipt requested, at the following addresses:
To Seller: Hillcrest Development
2424 Kennedy Street NE
Minneapolis, Minnesota 55413
Attention: Scott M. Tankenoff
With Copy to: Maun & Simon, PLC
2000 Midwest Plaza Building West
801 Nicollet Mall
Minneapolis, Minnesota 55402
Attention: Charles Bans
To Buyer: R & D Systems, Inc.
614 McKinley Place
Minneapolis, MN 55413
Attention: Tom Oland, CEO
With Copy to: Fredrikson & Byron, P.A.
900 Second Ave. S
Suite 1100
Minneapolis, MN 55402
Attention: Chuck Diessner
Rejection or refusal to accept or the inability to deliver notice hereunder
because of changed address of which no notice was given shall be deemed to be
receipt of the notice, demand or request. Any party shall have the right from
time to time and at any time upon at least ten (10) days' written notice
thereof, to change their respective addresses, and each shall have the right
to specify as its address any other address within the United States of
America.
SECTION XVI
CONDEMNATION
In the event any portion of the Property is condemned or access thereto
shall be taken, or in either case threatened, prior to the closing, and the
taking renders the Property remaining unsuitable for the Buyer's anticipated use
of the Property and Buyer notifies Seller in writing that it wishes to terminate
this Purchase Agreement within thirty (30) days after written notice to Buyer of
such condemnation action, then this Purchase Agreement shall terminate, neither
party to this Agreement shall have any further liability to the other (except
for Buyer's indemnity in Sections IV(a) and V(A) hereof) and Buyer shall be
entitled to a partial refund of the Deposit as described in Section III(b)
hereof.
If the Purchase Agreement is not terminated pursuant to the preceding
sentence, the Purchase Price of the Property shall not be affected, it being
agreed that if the award is paid prior to the closing of this transaction, such
amount, insofar as it pertains to the Property, shall be held in escrow
and delivered to Buyer at the time of closing; and if the award has not been
paid prior to the closing of this transaction, then at the closing Seller
shall assign to Buyer all of its right, title and interest with respect to
such award and shall further execute any other instrument requested by Buyer
to assure that such award is paid to Buyer. If Buyer fails to timely close
the transaction and this agreement is terminated by Seller, any escrowed
condemnation proceeds will be paid to Seller.
If Buyer does not terminate this Purchase Agreement, it shall have the
right to contest the condemnation and/or the award resulting therefrom but such
right shall terminate if Seller terminates this Purchase Agreement as a result
of Buyer's default hereunder. If this Purchase Agreement is not terminated, the
parties shall cooperate in defending any such taking and/or maximizing the
amount of the award. Neither party will take any action relating to the taking,
without the other party's written consent prior to closing.
SECTION XVII
DAMAGE OCCURRING PRIOR TO CLOSING
If, prior to the closing date, all or any part of the Property is
substantially damaged by fire, casualty, the elements or any other cause, Seller
shall immediately give notice to Buyer of such fact and at Buyer's option (to be
exercised with thirty (30) days after Seller's notice), this Purchase Agreement
shall terminate, in which event neither party will have any further obligations
under this Purchase Agreement (except for Buyer's indemnity under Sections IV(a)
and V(A) hereof) and Buyer shall be entitled to a partial refund of the Deposit
as described in Section III(b) hereof. If Buyer fails to elect to terminate
despite such damage, Seller whether the damage is substantial or not to the
extent reasonably possible shall promptly commence to repair such damage or
destruction to the Property's prior condition and to mitigate further damages
using the qualities of materials and workmanship existing prior to the date of
the casualty. If such damage shall be completely repaired prior to the closing
date, then there shall be no reduction in the Purchase Price and Seller shall
retain the proceeds of all insurance related to such damage. If such damage
shall not be completely repaired prior to the closing date at Buyer's election
(i) Seller shall assign to Buyer all right to receive the proceeds of all
insurance related to such damage, less costs incurred by Seller in mitigating
damage or making repairs that are reimbursable by insurance then in force, and
the Purchase Price shall remain the same or (ii) the closing shall be postponed
pending complete restoration of the damage by Seller. For purposes of this
Section, the words "substantially damaged" means damage that would cost
$2,000,000.00 or more to repair.
SECTION XVIII
INTENTIONALLY DELETED
SECTION XIX
MERGER/BINDING AGREEMENT
All previous negotiations and understandings between Seller and Buyer or
their respective agents and employees with respect to the transactions set forth
herein are merged in this Purchase Agreement which alone fully and completely
express the parties' rights, duties and obligations. This Purchase Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors, assigns, heirs and personal representatives.
SECTION XX
INTENTIONALLY DELETED
SECTION XXI
GOVERNING LAW
This Purchase Agreement shall be deemed to be a contract made under the
laws of the State of Minnesota and for all purposes shall be governed and
construed in accordance with the laws of said State.
SECTION XXII
ASSIGNMENT
Buyer shall have the right to assign at closing its interest in this
Purchase Agreement, provided that the assignee also becomes personally
responsible for Buyer's obligations herein.
IN WITNESS WHEREOF, the parties hereto have executed these presents
intending to be bound by the provisions herein contained.
SELLER: BUYER:
Hillcrest Development R & D Systems, Inc.
By:___________________________ By:____________________________
Its: General Partner Its:
ACKNOWLEDGMENT BY TITLE
Title hereby agrees to act as escrow agent pursuant to the foregoing terms,
it being understood that Title shall not be liable to either party if it acts in
good faith in the performance of its duties herein.
First American Title Insurance Company
By:
Its:
EXHIBIT A
LEGAL DESCRIPTION
EXHIBIT B
PERMITTED ENCUMBRANCES
(a) Building and zoning laws, ordinances, state and federal regulations.
(b) Reservation of any mineral or mineral rights to the State of Minnesota.
(c) Real estate taxes and installments of special assessments due and payable
in the year of closing and subsequent years.
(d) All rights of existing tenants of the Property as provided in Section
IX(v) of the Purchase Agreement.
(e) All matters that would be disclosed by a survey.
(f) Common driveway easement recorded as Document No. 1178824.
(g) Parking easement dated _________________, 1999 between Seller, as
Grantor, and Buyer, as Grantee.
(h) Covenants and restrictions contained in quitclaim deed dated
December 15, 1998 in favor of Seller relating to the MT-BN parking lot.
(i) Possible rights of UCare Minnesota as a tenant or a future tenant of the
Property pursuant to a lease agreement originally covering a portion of
2001 Kennedy.
(j) Sanitary sewer easement recorded as Document No. 1546011.
EXHIBIT C
ENVIRONMENTAL REPORTS
EXHIBIT D
WARRANTS
FIRST AMENDMENT TO PHASE I OPTION AGREEMENT
(2101 Kennedy Option)
THIS FIRST AMENDMENT TO PHASE I OPTION AGREEMENT is dated this 10th day of
April, 1999, by and between Hillcrest Development ("Owner") and R & D Systems,
Inc. ("Buyer").
RECITALS:
1. Owner and Buyer entered into a Phase I Option Agreement dated
February 10, 1999 with respect to property commonly known as 2101 Kennedy and
659 Cleveland together with surface parking parcels (the "Option Agreement").
2. The parties wish to amend the Option Agreement on the terms and
conditions hereafter set forth.
NOW, THEREFORE, in consideration of the foregoing, the parties agree as
follows:
1. Paragraph 4(d) of the Option Agreement is restated to read as follows:
(d) Owner will use its best efforts to see that all tenants of
the Property who generate, store, or dispose hazardous materials do
so in accordance with applicable law. Owner will not hereafter
knowingly lease the Property to tenants who engage in the business of
generation and/or storage of hazardous materials and will insert in
all new leases hereinafter entered into a prohibition of such
business of generation and/or storage of hazardous materials but the
foregoing shall not be breached if any tenant, without Owner's
consent or knowledge, engages in such activities. Owner will take
appropriate action to terminate the rights of any tenant who violates
such prohibition or who generates, stores or disposes of hazardous
materials in violation of applicable law to the extent such leases
permit such action.
2. Paragraph 4 of the Option Agreement is amended to include the following
subparagraph:
(w) Seller will cause all underground storage tanks to be
registered in accordance with Environmental Law.
3. A new Section IX(y) to the Purchase Agreement attached as Exhibit B to
the Option Agreement is hereby added as follows:
(y) Seller will on or about April 1, 1999 institute and maintain
an operations and maintenance program for asbestos containing
building materials in compliance with all applicable laws.
4. Section IX(u) to the Purchase Agreement attached as Exhibit B to the
Option Agreement is hereby amended as follows:
(u) Seller will use its best efforts to see that all tenants of
the Property who generate, store, or dispose hazardous materials do
so in accordance with applicable law. Seller will not hereafter
knowingly lease the Property to tenants who engage in the business of
generation and/or storage of hazardous materials and will insert in
all new leases hereinafter entered into a prohibition of such
business of generation and/or storage of hazardous materials but the
foregoing shall not be breached if any tenant, without Seller's
consent or knowledge, engages in such activities. Seller will take
appropriate action to terminate the rights of any tenant who violates
such prohibition or who generates, stores or disposes of hazardous
materials in violation of applicable law to the extent such leases
permit such action.
5. Section X(b) to the Purchase Agreement attached as Exhibit B to the
Option Agreement is hereby amended by including the following subparagraphs:
(xi) Operations and Maintenance Plan for asbestos containing
building materials present at the Property.
(xii) Evidence that the underground storage tanks located on the
Property have been registered in accordance with Environmental Law.
6. Except as provided for above, all the terms and conditions of the
Option Agreement shall remain in full force and effect.
OWNER: BUYER:
Hillcrest Development R & D Systems, Inc.
By: /s/ Scott Tankenoff By: /s/ Thomas E. Oland
Its: General Partner Its: President
PHASE II OPTION AGREEMENT
(2001 Kennedy Option)
THIS AGREEMENT, made and entered into this 10th day of February, 1999, by
and between Hillcrest Development, a Minnesota limited partnership hereinafter
called "Owner," and R&D Systems, Inc., a Minnesota corporation, or its only
permitted assignee, Techne Corporation, hereinafter called "Buyer";
WITNESSETH:
WHEREAS, Owner is a purchaser under a purchase agreement dated August 14,
1998 ("Phase II Purchase Agreement") to purchase the fee simple title to the
real property improved with a building commonly known as 2001 Kennedy and is the
current fee simple owner of real property to be used for a surface parking lot
commonly known as the "2020 Broadway Lot," all of which are located in the City
of Minneapolis, County of Hennepin, State of Minnesota, and legally described in
Exhibit A hereto attached ("Parcels"); and
WHEREAS, Buyer and Seller have prior to the execution of this Option
Agreement entered into a Purchase Agreement for the purchase and sale of real
property which includes properties commonly known as 614 McKinley, 640 McKinley
and 2201 Kennedy ("Purchase Agreement") and simultaneously with the execution of
this Option Agreement entered into an additional option agreement with respect
to 2101 Kennedy and 659 Cleveland and certain real property to be used for
parking purposes ("2101 Kennedy Option"); and
WHEREAS, Buyer desires to obtain an option to purchase the Parcels, all
personal property items owned by Owner and exclusively used by Owner in the
maintenance and operation of the Parcels and chosen to be purchased by Buyer
("Personal Property"), all guarantees and warranties in effect regarding
improvements to the Parcels ("Warranties") and all contracts and permits
affecting the Parcels selected by Buyer ("Contracts") (hereafter the Parcels,
Personal Property, Warranties, and Contracts are collectively referred to as the
"Property"); and
WHEREAS, Owner is willing to grant such an option on the terms and
provisions hereinafter contained.
NOW, THEREFORE, in consideration of One Thousand and no/100 Dollars
($1,000.00) and other good and valuable consideration herewith paid by Buyer to
Owner, the receipt and sufficiency of which is hereby acknowledged by Owner, and
in further consideration of the mutual covenants and agreements herein
contained, it is agreed by and between the parties hereto as follows:
1. Option. Owner hereby grants to Buyer, for the period beginning on
December 1, 1999 and ending at 11:59 o'clock p.m., on January 1, 2005 (the
"Option Termination Date"), the exclusive right and option to purchase the
Property upon the terms and conditions herein contained.
2. Exercise of Option. The option herein granted shall be deemed fully
exercised as to the Property if (i) prior to the earlier of (x) January 15, 2002
or (y) sixty (60) days after the date Buyer exercises its option under the 2101
Kennedy Option, the Option Fee, as hereafter defined, is paid to Title, as
defined in the Purchase Agreement attached hereto as Exhibit B ("Exhibit B
Purchase Agreement"), as Escrow Agent for both parties; and (ii) the Buyer gives
to the Owner, before the Option Termination Date, a written notice of election
to purchase the Property. Service of such notice shall be sufficient if served
personally or if timely deposited in the United States mail addressed to Owner
as hereinafter provided and received by Owner on or prior to the Option
Termination Date. Failure to timely provide such notice or timely pay the
Option Fee to Title shall automatically terminate the option herein granted to
Buyer and Title shall remit the Option Fee in its possession to Owner and any
accrued interest thereon to Buyer. Upon receipt by Title of the Option Fee and
the receipt by Owner of the notice, the parties shall execute the Exhibit B
Purchase Agreement. The Option Fee shall consist of nonrefundable cash except
as hereinafter provided, in the amount of $1,999,000.00. Notwithstanding the
foregoing or any other provision of this Option Agreement to the contrary,
the option granted hereunder shall not be exercisable and shall be deemed null
and void in the event (i) Buyer or Techne Corporation has not yet acquired
from Owner the real property covered by the Purchase Agreement, (ii) in the
event Buyer or Techne Corporation fails to pay Owner the Option Fee and/or
fails to close its purchase of 2101 Kennedy pursuant to the 2101 Kennedy
Option prior to the actual exercise of the option herein granted to Buyer, or
(iii) if Owner fails to acquire fee simple title to 2001 Kennedy pursuant to
the Phase II Purchase Agreement by November 30, 1999. Upon execution of the
Exhibit B Purchase Agreement by both parties, the Option Fee shall be deemed
the "Deposit" as defined in the Exhibit B Purchase Agreement. Notwithstanding
the foregoing or any other provision of this Option Agreement, if Buyer
terminates its rights to purchase 2101 Kennedy pursuant to Exhibit B to the
2101 Kennedy Option and is entitled to a refund of one hundred percent (100%)
of the Deposit pursuant to Section III(c) therein, then in such event Title
shall return to Buyer the Option Fee paid hereunder and this Option Agreement
shall be deemed null and void except for the indemnification of Buyer
contained in paragraph 5 of this Option Agreement.
3. Purchase Price. The purchase price for the Property shall be Seven
Million and 00/100ths Dollars ($7,000,000.00) payable in cash to Owner at the
closing plus the "Capital Improvement Cost" as defined in the Exhibit B Purchase
Agreement. Buyer shall receive at closing as a credit against the purchase
price for the Option Fee and the $1,000.00 previously paid. The purchase price
shall be allocated between the following portions of the Property upon execution
of the Exhibit B Purchase Agreement: $___________________ to 2001 Kennedy and
$________________ to 2020 Broadway Lot.
4. Representations and Warranties by Owner. Owner represents and
warrants to Buyer:
(a) If Buyer duly exercises the option herein granted, Owner shall,
subject to performance by Buyer of the covenants and agreements to be
performed by it under the Exhibit B Purchase Agreement, execute and
deliver to Buyer, at closing, as defined in the Exhibit B Purchase
Agreement, a warranty deed ("Deed") conveying good and marketable
title to the Property subject only to the exceptions ("Permitted
Encumbrances") noted on Exhibit C hereto attached. Owner will not
place of record or cause to be incurred any additional liens or
encumbrances against the Property until the Memorandum, as hereafter
defined, is placed of record provided that such Memorandum is
recorded within thirty (30) days of its date of execution.
(b) To the extent commercially reasonable after any condemnation and/or
casualty, Owner will upon its acquisition of Title to the Property
operate, maintain and repair the Property in a commercially
reasonable fashion.
(c) Upon Owner's acquisition of Title to the Property, Owner will
maintain casualty insurance for at least $9,000,000.00 on the 2001
Kennedy Building to the extent it can be economically purchased. It
is assumed that any aggregate increases of less than one hundred
percent (100%) of the current cost shall be economical.
(d) Upon Owner's acquisition of Title to the Property, Owner will not
thereafter knowingly lease the Property to tenants who engage in the
business of the generation and/or storage of hazardous materials but
the foregoing shall be breached if any tenant, without Owner's
consent or knowledge, engages in such activities. Owner will take
appropriate action to terminate the rights of any tenant who violates
such prohibition.
(e) Upon Owner's acquisition of title to the Property, Owner will have
marketable and insurable record title to the Property as of closing,
subject only to the Permitted Encumbrances.
(f) To the best of Owner's knowledge, the information supplied to Buyer
with respect to the Property including copies of leases, materials
described in Exhibit C to the Purchase Agreement but excluding the
materials described in Exhibit D to the Purchase Agreement is complete
and materially correct.
(g) At closing, Owner shall assign to the extent they are assignable, all
of Owner's interest in the "Other Agreements" and "Leases" as defined
in the Exhibit B Purchase Agreement.
(h) Owner has not received any notice nor are they aware of any pending or
threatened action to take by eminent domain or by deed in lieu thereof
all or any portion of the Property.
(i) Owner shall be solely responsible for and shall pay on the date of
closing any deferred tax or assessment, including, but not limited to,
those referred to in Minnesota Statutes Section 273.11 (the so-called
"Green Acres recapture"), catch-up or adjustment in future taxes due
as a result of the Property having been classified under any
designation authorized by law to obtain a special low ad valorem tax
rate or receive either an abatement or deferment of ad valorem taxes.
(j) Owner is not a "foreign person" as contemplated by Section 1445 of the
Internal Revenue Code, and that at the closing Owner will deliver to
Buyer a certificate so stating, in a form complying with the Federal
tax law.
(k) This Option Agreement has been duly and validly authorized, executed
and delivered by Owner and the obligations of Owner hereunder and
thereunder are valid and legally binding, and this Option Agreement
upon Owner's acquisition of title to the Property is enforceable
against Owner in accordance with its terms.
(l) Except as shown by the materials described in Exhibit C and Exhibit D
of the Purchase Agreement, except for acts of Buyer as possible tenant
of the Property and the use by Buyer of hazardous materials, except for
asbestos used as a building material for the Property and except for a
fuel oil tank located at the south end of 2001 Kennedy, to the best of
Owner's knowledge, Owner has not generated, manufactured, buried,
spilled, leaked, discharged, emitted, stored, disposed of, used or
released any Hazardous Substance (as hereafter defined) about the
Property, except as may have occurred as a result of operating the
Property and in any such event such activities were at all times in
compliance with Environmental Laws as hereinafter defined and has not
knowingly permitted any other party to do any of the same. Except for
and to the extent of the matters specifically described in Exhibit C
and Exhibit D of the Purchase Agreement, except for acts of Buyer as
possible tenant of the Property and the use by Buyer of hazardous
materials, except for asbestos used as a building material for the
Property and except for a fuel oil tank located at the south end of
2001 Kennedy, Owner has received no notice of and has no actual
knowledge, without inquiry (a) that any Hazardous Substance are or
have ever been generated, manufactured, buried, spilled, leaked,
discharged, emitted, stored, disposed of, used or released about the
Property, except as hereinbefore provided, or (b) of any, requests,
notices, investigations, demands, administrative proceedings, hearings,
litigation or other action proposed, threatened or pending relating
to any of the Property and alleging non-compliance with or liability
under any Environmental Law, or (c) that any above-ground or
underground storage tanks or other containment facilities of any kind
containing any Hazardous Substance are or have ever been located
about the Property, or (d) that Owner's operations on the Property
have been in compliance with all federal, state and local
environmental laws, ordinances, rules and regulations, relating to
the handling, storage and disposal of the Hazardous Materials. For
purposes hereof, Hazardous Substance means asbestos, urea
formaldehyde, polychlorinated biphenyls, nuclear fuel or materials,
radioactive materials, explosives, known carcinogens, petroleum
products and by-products (including crude oil or any fraction
thereof), and any pollutant, contaminant, chemical, material or
substance defined as hazardous or as a pollutant or a contaminant in,
or the use, manufacture, generation, storage, treatment,
transportation, release or disposal of which is regulated by, any
Environmental Law. For purposes hereof, Environmental Law means any
federal, state, county, municipal, local or other statute, ordinance
or regulation which relates to or deals with the protection of the
environmental and/or human health and safety, including all
regulations promulgated by a regulatory body pursuant to any such
statute, ordinance, or regulation, including, the Comprehensive
Environmental Response and Liability Act of 1980 ("CERCLA"), as
amended, 42 U.S.C. Section 9601 et. seq., the Resource Conservation
and Recovery Act ("RCRA"), as amended, 42 U.S.C. Section 6901 et.
seq., the Federal Water Pollution Control Act, as amended, 33 U.S.C.
Section 1251 et. seq., the Clean Air Act, as amended, 42 U.S.C.
Section 7401 et. seq., and Minnesota Statutes Section 115B.01 et seq.
(m) To the best of Owner's knowledge, no unrecorded condition, restriction,
obligation or agreement not previously disclosed to Buyer exists which
affect the Property or Buyer's ability to use the Property for the
Current Uses.
(n) To the best of Owner's knowledge, no portion of the Property is located
within an area designated as a "flood plain" or "flood prone area"
under any statute, regulation, or ordinance.
(o) To the best of Owner's knowledge, the Property is free from any use
or occupancy restrictions, except those imposed by zoning laws and
regulations, and no part is dedicated or has been used as a cemetery or
burial ground.
(p) To the best of Owner's knowledge, no fact or condition exists which
would result in the termination of the current access to the Property
from any presently existing streets (except the parties' proposed
vacation of the easterly portion of Arthur Street and the proposed
vacation of part of Summer Street and the proposed vacation of
Cleveland Street (north of Kennedy Street and south of Summer Street))
and roads adjoining or situated on the Property or to any existing
sewer or other utility facilities servicing, adjoining or situated on
the Property. To the best of Owner's knowledge, all utilities needed
for Current Uses are available to the Property.
(q) There is no litigation at law or in equity, and no action, litigation,
investigation or proceedings of any kind, including, but not limited
to, administrative or regulatory authority, pending or threatened
against the Property, or the Owner, or affecting the ability of Owner
to consummate the transaction contemplated herein and Owner knows of no
facts which could give rise to any such action, litigation,
investigation or proceeding with respect to the Property or the Owner.
(r) To the best of Owner's knowledge, there are no outstanding citations
or notices of violations of any statutes, ordinances or regulations
of any kind, with respect to the Property and to the best of Owner's
knowledge, there are no structural defects in the Buildings including
the roof, but the foregoing shall not be construed as a warranty for
the roof of the Buildings.
(s) To the best of Owner's knowledge, (i) the Property is zoned for the
Current Uses, (ii) the Property contains no wells, and (iii) the
Property does not contain any septic systems.
(t) To the best of Owner's knowledge, except for a right that may be
granted by Owner to RREEF Venture Capital Fund L.P., or any of its
affiliates (hereinafter "RREEF"), to purchase the Property which
right shall be contingent on the termination of this Option Agreement,
no other party has any right, title or interest in and to the Property,
including the right to purchase the Property, except as set forth as
a Permitted Encumbrance and except for the rights of tenants, as
tenants only. Owner represents and warrants that in the event it enters
into a purchase agreement with RREEF for the sale of the Property
contingent upon the termination of this Option Agreement, such purchase
agreement will be entered into only if RREEF executes a quitclaim deed
in favor of Owner as to the Property to be placed in escrow with Title
and to be delivered upon Buyer's closing its purchase of the Property
under the Purchase Agreement.
(u) Upon Owner's acquisition of title to the Property, Owner shall cure
any violations of law or municipal ordinance, orders or requirements
for which Owner had received a notice of violation prior to the
closing which would affect the Buyer's use of the Property and which
would be binding upon the Property or Buyer after the closing, it
being understood that the Property is to be renovated upon its
purchase and no such violation need be cured if as a result of the
renovations the violation becomes moot.
None of the foregoing warranties shall be construed as a warranty as
to the sufficiency of parking, it being understood that parking
requirements are dependent on the usage of the Property by the Buyer.
Except for the foregoing warranties, Buyer acknowledges that it is
purchasing the Property in its "as is" condition relying solely on
its inspection and knowledge of the Property.
Owner covenants that prior to the termination of this Option
Agreement, it will not knowingly take any affirmative action that
would purposely cause any of the representations and warranties
contained herein to be materially breached. The sole and exclusive
remedy for Buyer under any theory of law for a breach by Owner of
this covenant shall be the return of the cash portion of the Option
Fee, if Buyer chooses not to exercise the option. If Buyer exercises
the Option with knowledge of such breach by Owner, Buyer shall be
deemed to have waived such breach.
5. Right to Enter; Soil Tests; Surveys. After Owner has acquired fee
title to the Property but prior to Buyer's exercise of its options herein
granted and subject to the rights of tenants, Buyer and its agents shall have
the right to enter upon the Property for purposes of making soil tests, surveys,
and engineering and architectural studies and tests. Owner agrees to give Buyer
written notice of such acquisition date within three (3) business days of such
acquisition. Buyer hereby agrees to indemnify and hold harmless Owner from all
liabilities, expenses and attorneys' fees incurred by Owner and arising out of
such entry, or the taking of such tests, surveys, analysis, studies and tests
upon the Property. This indemnification and hold harmless agreement shall
survive termination or expiration of this Agreement and of the option granted
under this Agreement, exercise of the option, and/or consummation of the
transaction herein contemplated. All results of surveys, topographies and tests
will be forwarded to Owner and Buyer hereby consents to Owner utilizing the
same, and if Buyer fails to exercise its option, all the originals of such
materials will be deemed the property of Owner and Buyer agrees to promptly
furnish such originals at Owner's request.
6. No Commissions. Each party represents and warrants to the other that
they have not incurred any real estate brokerage fees, finder's fees, or any
other fees or commissions of any kind or nature due or owing to any third party
as a result of the execution of this Option Agreement or as a result of the sale
of any of the Property. Owner and Buyer each hereby indemnify the other against
and shall hold the other harmless from any and all claims, damages, costs or
expenses of or for such fees or commissions that have been incurred by their
actions.
7. Leases. During the term of this Option Agreement, Owner, subject
to Buyer's rights hereafter set forth, shall be free to execute leases with
third party tenant(s) for a term or period to expire no later than
(i) December 31, 2011 with respect to space on the first and/or lower level
located north of column 8 as shown on Exhibit D hereto attached; and (ii) July
1, 2005 with respect to space on the first and/or lower level located south of
column 8 as shown on Exhibit D hereto attached. Owner shall not lease any of
the Property to tenants whose primary business involves the storing and/or
manufacturing of hazardous materials and will insert in all new leases
hereafter entered into a prohibition of such business of generation and/or
storage of hazardous materials. Before Owner enters into any third party
leases, including leases falling within subparagraphs (i) and (ii), Owner
shall submit in writing to Buyer written notice of a proposal of the terms and
conditions of the proposed third party lease in outline form containing
length of lease, rent, estimated operating expenses, scope and responsibility
for payment of Tenant Improvements and any tenant inducements. Owner agrees
not to enter into such third party lease if within three (3) business days
after receipt of the proposal the Buyer either:
(a) Exercise its purchase option at that time; or
(b) Agrees in writing to enter into a lease of the space from Owner under
the same basic terms and conditions as the Third Party.
If Buyer fails to exercise its rights in subparagraphs (a) or (b) above, Owner
may enter into such third party lease containing substantially similar terms as
set forth in the proposal. Notwithstanding the foregoing, this entire paragraph
7 shall not apply to a lease with UCare Minnesota which is consented to by
Buyer.
8. Notices. Any notice or election herein required or permitted to be
given or served by either party hereto upon the other shall be deemed given or
served in accordance with the provisions of this Agreement, if served personally
or if mailed by United States registered or certified mail, postage prepaid,
properly addressed as follows:
If to Owner: Hillcrest Development
2424 Kennedy Street NE
Minneapolis, MN 55413
Attention: Scott M. Tankenoff
with a copy to: Maun & Simon, PLC
2000 Midwest Plaza Building West
801 Nicollet Mall
Minneapolis, MN 55402
Attention: Charles Bans, Esq.
If to Buyer: R & D Systems, Inc.
614 McKinley Place
Minneapolis, MN 55413
Attention: Tom Oland, CEO
with a copy to: Fredrikson & Byron, P.A.
900 Second Avenue South, Suite 1100
Minneapolis, MN 55402
Attention: Chuck Diessner
Each mailed notice of communication shall be deemed to have been given when
served upon, the party to which addressed or if mailed on the date the same is
actually received by the addressee. The addresses to which notices are to be
mailed to either party hereto may be changed by such party by giving written
notice thereof to the other party in the manner above provided.
9. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto, and their respective successors and
assigns. It is expressly agreed that this Agreement shall be assignable by
Buyer; provided, however, that no such assignment shall be valid unless written
notice thereof has been first provided to Owner.
10. Recording. The parties agree to execute at the closing of the
Purchase Agreement a recordable memorandum of Option Agreement in the form of
Exhibit E hereto attached ("Memorandum") for purposes of memorializing of record
this Agreement. Buyer shall deposit in escrow with Title a quitclaim deed to
the Property in the event Buyer fails to consummate its purchase from Owner of
the Property but Title shall not release the quitclaim deed from escrow and/or
record the deed until after Title has provided Buyer with at least five (5) days
prior written notice.
11. Condemnation. If any portion of the Property but not the whole is
condemned prior to the exercise of the option herein granted, any proceeds
received by Owner shall first be applied by Owner to restore the Property to the
extent commercially reasonable and/or to the extent required by any applicable
leases and the balance, if any, be applied against the Purchase Price if the
option is exercised and Buyer consummates its purchase of the Property pursuant
to the Exhibit B Purchase Agreement. If the entire Property is condemned prior
to the exercise of the option, this option shall be null and void and fifty
percent (50%) of any cash portion of the Option Fee previously paid by Buyer to
Owner shall be refunded to Buyer.
12. Casualty. If any "major" damage to the 2001 Kennedy Building occurs
prior to the exercise of the option granted herein, Buyer shall elect within ten
(10) days of notice from Owner as to the amount of insurance proceeds to be
received by Owner whether Buyer (i) wishes to terminate its rights under this
Option Agreement, or (ii) wishes to then exercise its option and close pursuant
to the Exhibit B Purchase Agreement (without regard to the provisions therein as
to casualty and damage) with a credit against the Purchase Price equal to the
actual insurance proceeds received by Owner but in no event shall such credit
exceed the excess of Purchase Price over one-half of the Option Fee. If any
"minor" damage to the 2001 Kennedy Building occurs prior to the exercise of the
option granted herein, Owner must use the available insurance proceeds to
restore such building unless within thirty (30) days of notice from Owner as
to the amount of insurance proceeds to be received by Owner, Buyer elects to
exercise its option and close pursuant to the Exhibit B Purchase Agreement
(without regard to the provisions therein as to casualty and damage) with Buyer
receiving a credit against the Purchase Price equal to the actual insurance
proceeds received by Owner but in no event shall such credit exceed the excess
of the Purchase Price over one-half of the Option Fee.
For purposes of this paragraph, a "major" damage is defined as damage more
than twenty-five percent (25%) of the value of the 2001 Kennedy Building and a
"minor" damage is defined as damage to such building in an amount less than or
equal to twenty-five percent (25%) of the value of such building.
13. Proposed Vacation of Summer Street and Arthur Street. It is
contemplated by the parties that part of Summer Street lying between 2001
Kennedy and 2020 Broadway parking lot and the easterly portion of Arthur Street
between Summer and Kennedy Streets, will be vacated by Owner and the parties
agree that upon such vacation that all of such vacated street shall accrue to
2001 Kennedy and the parties shall execute and deliver such deeds as are
necessary to accomplish the same.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
OWNER: BUYER:
Hillcrest Development R & D Systems, Inc.
By: /s/ Scott Tankenoff By: /s/ Thomas E. Oland
Its: General Partner Its: President
ACKNOWLEDGMENT BY TITLE
The undersigned acknowledges receipt of a copy of the foregoing and agrees
to act as Escrow Agent for the parties and to invest the cash portion of the
Option Fee in an interest-bearing federally insured bank account.
First American Title Insurance Company
By: /s/ Rodney D. Ives
Its: Assistant Vice President
EXHIBIT B
PURCHASE AGREEMENT
(2001 Kennedy Option)
THIS AGREEMENT is entered into this _____ day of _______, ______, by and
between Hillcrest Development, a Minnesota limited partnership
(hereafter referred to as the "Seller"), and R & D Systems, Inc., a Minnesota
corporation, (the "Buyer"), upon the basis of the following facts,
understandings and intentions of Seller and Buyer.
RECITALS:
1. Seller is the fee simple owner of the real property ("Land") improved
with a building ("Building") commonly known as 2001 Kennedy and is the current
fee simple owner of real property ("Parking Land") to be used for surface
parking lot commonly known as the "2020 Broadway Lot," all of which are located
in the City of Minneapolis, County of Hennepin, State of Minnesota, and legally
described in Exhibit A hereto attached.
2. Buyer has pursuant to an Option Agreement ("Option Agreement") duly
exercised an option granted by Seller to purchase the Land, the Building, the
Parking Land, and all licenses, permits, equipment, fixtures and furnishings and
all other personal property, tangible or intangible, owned by Seller and
currently located on the Land and solely used in the operation and maintenance
of the foregoing (hereafter said licenses, permits, equipment, fixtures and
furnishings and other included personal property shall be referred to in the
aggregate as "Personal Property," and hereafter the Land, the Building, the
Parking Land, and Personal Property is sometimes referred to in the aggregate as
the "Property") in accordance with the terms and conditions hereinafter set
forth.
3. Seller is willing to grant and extend to Buyer such purchase right as
the terms hereafter set forth.
NOW, THEREFORE, in consideration of the agreements hereinafter provided
and other good and valuable consideration, Seller agrees to sell and Buyer
agrees to purchase from Seller the Property, together with and including all
hereditaments, appurtenances, easements and rights of way thereunto belonging or
in any way appertaining and also the right, title and interest (if any) of
Seller in and to the bounding and abutting streets, alleys and highways, subject
to and upon the following terms and conditions:
SECTION I
PURCHASE PRICE
It is hereby agreed that the Purchase Price of the Property shall be Seven
Million and 00/100 Dollars ($7,000,000.00) plus Capital Improvement Cost
identified in Section VIII hereof (the "Purchase Price"), which shall be paid by
Buyer to Seller as follows:
(i) $1,999,000.00 has already been paid into escrow as provided for in
Section II below.
(ii) The remainder of the Purchase Price will be payable at closing in
immediately available funds.
The Purchase Price shall be allocated as follows:
$_________________ to 2001 Kennedy;
$_________________ to Parking Land.
SECTION II
EARNEST MONEY DEPOSIT
Buyer has already deposited in escrow with First American Title Insurance
Company (the "Escrow Agent" and sometimes hereafter "Title") the sum of
$1,999,000.00, (this sum plus all accrued interest thereon shall be referred to
as the "Deposit") which shall be retained by the Escrow Agent for the benefit of
Seller and Buyer in accordance with the provisions of this Purchase Agreement.
The parties hereby agree to execute such documentation, if any, reasonably
required by the Escrow Agent in connection with the disbursement of the Deposit
and establishment of said earnest money escrow referenced above.
SECTION III
INVESTMENT AND DISBURSEMENT OF DEPOSIT
The Escrow Agent is hereby directed to invest the Deposit represented by
cash in a segregated U.S. Treasury-backed money market account with U.S. Bancorp
in Minneapolis, Minnesota.
The Deposit shall be disbursed by the Escrow Agent as follows:
(a) Except as provided for in (b) or (c) below, the Deposit shall
be deemed nonrefundable and shall be delivered to Seller either upon the
termination of this Purchase Agreement or upon the closing of the sale
of the Property as partial payment of the Purchase Price.
(b) Fifty percent (50%) of the Deposit shall be delivered to
Buyer in the event: (i) Buyer terminates this Purchase Agreement
pursuant to Sections IV, V, VI or XII (in the event Buyer terminates
this Purchase Agreement because Seller is in material breach of its
representations and warranties other than pursuant to the last paragraph
of Section IX) hereof; (ii) Buyer terminates this Purchase Agreement
pursuant to Section XVI hereof; (iii) Buyer terminates this Purchase
Agreement pursuant to Section XVII hereof.
(c) One hundred percent (100%) of the Deposit shall be delivered
to Buyer in the event Buyer chooses to terminate this Purchase Agreement
pursuant to the last paragraph of Section IX, or as a result of Seller
refusing to perform any of its obligations set forth herein pursuant to
Section XII other than a breach of its representations and warranties.
(d) Interest in the Deposit shall inure to the benefit of Buyer,
in all events.
SECTION IV
BUYER'S CONDITIONS PRECEDENT
Seller agrees that this Purchase Agreement shall be conditioned upon Buyer
satisfying itself, in its sole and absolute judgment, that the following
conditions precedent with respect to the Property are met:
(a) Buyer's inspection and approval of the Land, the Building,
the Parking Land, Personal Property, the Other Agreements (as
hereinafter defined) and all other information required herein to be
provided to Buyer by Seller, all during regular weekday business hours.
Seller agrees to allow Buyer and its agents the right of any ingress or
egress over and through the Property for the purpose of inspecting the
same and making other observations as Buyer deems reasonably necessary.
Buyer agrees to indemnify and hold Seller harmless from all injury,
death or property damage or claims of any kind whatsoever including
mechanic's liens arising out of or in any way incidental to Buyer's
presence on the Property for the purposes aforesaid. This indemnity
shall survive the termination of this Purchase Agreement, regardless of
which party elects to terminate this Purchase Agreement. To the extent
Seller has not already done so, Seller agrees to provide to Buyer or
allow Buyer access to the following items within ten (10) days from the
execution of this Purchase Agreement:
(i) copies of Plans and Specifications, blueprints,
operating manuals, surveys and licenses, if any, in Seller's
possession, used to operate the Building and the remainder of the
Property;
(ii) complete copies of all contracts ("Other Agreements")
and leases ("Leases") currently affecting the Property;
(iii) copies of all permits or authorizations, if any, in
Seller's possession, required to be issued by any governmental
body having jurisdiction in connection with any state of facts or
activity presently existing or being carried on with respect to
the Property;
(iv) copies of all warranties and guaranties, if any, which
are still effective and which pertain to the Property or any
portion thereof ("Warranties");
(v) inventory of the Personal Property owned by the Seller
and located on the Land and used in connection with the operation
of the Property;
(b) Buyer may use the Property for its existing uses and it uses
of the property located at 2201 Kennedy, 614 McKinley and 640 McKinley
as of February, 1999 ("Current Uses") without being in violation of any
zoning classification, land use classification, environmental
requirement, or any other use classification or building classification
or requirement established by any entity or authority having legal
jurisdiction or authority thereover.
(c) All utilities, including but not limited to electricity, gas,
water (fire and domestic) storm and sanitary sewer, are available on
site, through valid and adequate public or private easements for Current
Uses; provided that in the case of private easements, they are
appurtenant to the Property, or on the Property's side of abutting
streets of size and capacity sufficient to serve the Current Uses.
(d) Buyer approving, as provided in Section V(A) hereof, any
environmental audits for the Property.
(e) Within thirty (30) days of the date of this Purchase
Agreement, Seller shall provide Buyer with original estoppel
certificates from all tenants of the Property in form reasonably
acceptable to Buyer to the extent Seller is able to obtain the same by
exercising its best effort.
This Purchase Agreement shall be deemed terminated and neither party liable
to the other herein unless Buyer affirmatively accepts or waives in writing to
Seller the foregoing conditions by January 15, 2005. Upon any such termination
of this Purchase Agreement by Buyer failing to waive or accept all of the
foregoing conditions or as provided in the last sentence of this Section, all
parties hereto shall be released from all duties and obligations to each other
contained herein (except for Buyer's Indemnity under Sections IV(a) and V(A)
hereof) and upon such termination Buyer shall be entitled to a partial or full
refund as described in Sections III(b) or III(c) hereof. Notwithstanding the
foregoing, Buyer may elect to terminate this Purchase Agreement between
January 15, 2005 and the date of closing in the event (i) environmental testing
done between such dates pursuant to Section V hereof reveal a contamination
previously unknown on January 15, 2005, or (ii) a change in any item referred to
in (b) above occurs between January 15, 2005 and the date of closing so as to
prohibit the use of the Property for Current Uses.
SECTION V
ENVIRONMENTAL AUDITS AND SURVEY
A. Environmental Audits. Seller has provided to Buyer prior to
January 6, 1999 environmental reports ("Environmental Reports") for the Property
at no cost or expense to Buyer which are described in Exhibit C hereto attached
and that except for the "Exhibit D" information described in paragraph 4(l) of
the Option Agreement, to the best of Seller's knowledge, such materials
constitute all of the environmental reports in Seller's possession or control.
Buyer shall have the right to do additional environmental audits and/or soil
tests subject to the reasonable prior written approval of Seller regardless of
the cost as long as Buyer pays for all of such costs; provided, however, no such
additional testing shall be done beyond January 15, 2005 unless the testing is
based on new information not previously known to Buyer. If such additional
tests reveal the presence of any material amounts of hazardous materials not
disclosed in the Environmental Reports, and not otherwise "known" to Buyer as
of July 1, 1999, Buyer may terminate this Purchase Agreement by giving Seller
notice of the same prior to (i) January 15, 2005 for the discovery of such
materials prior thereto or (ii) the closing date for the discovery of such
materials after January 15, 2005 and prior to the closing date and upon such
termination Buyer shall be entitled to a partial or full refund as described
in Section III(b) or III(c) hereof. Buyer shall be deemed to have "known" of
any hazardous materials if Buyer had in its possession copies of materials
describing such hazardous materials as of July 1, 1999. Buyer agrees to
indemnify and hold Seller harmless from all mechanic's liens liability and
other costs and expenses arising from Buyer's doing such additional
environmental audits and/or soil tests. The foregoing indemnity shall
survive the termination of this Purchase Agreement.
B. Survey. Seller has provided Buyer with a survey ("Survey") of the
Property.
C. Copies of Documents. To the extent not already done, Seller shall
promptly deliver to Buyer or make available to Buyer copies of all soil tests,
environmental audits, surveys and other documents relating to the physical
properties of the Property which are within Seller's control and Buyer agrees to
promptly deliver to Seller copies of all of such items which are within Buyer's
control.
SECTION VI
TITLE EVIDENCE
A. Seller will, at Seller's expense, provide Buyer within thirty (30)
days after the date hereof with a commitment(s) (the "Commitment") for an
Owner's Policy of Title Insurance for the Property issued by Title along with
updated Surveys certified to Title, Buyer, Techne Corporation and Buyer's
lender. Buyer shall pay at closing the premium for the actual title insurance
policy, if any, to be purchased by Buyer. The Commitment shall include waiver
of standard exceptions, a zoning and comprehensive endorsements and a
contiguity endorsement as to the Land and each separate parcel comprising the
Parking Land and shall include legible copies of all documents, maps, or plats
set forth therein as affecting the Property and shall be issued through Title
in its capacity as a title insurance company by its local office or by its
local agent (the "Title Company") situated in the county where the Property
is located. The Commitment shall be issued in the name of Buyer, Techne
Corporation and Buyer's lender.
B. Within thirty (30) days after receiving the Commitment and the
updated Surveys, but no later than the closing date, as hereafter defined, Buyer
shall deliver to Seller a written statement containing any objection Buyer has
to the state of title, including Survey objections but excluding objections to
Permitted Encumbrances and excluding matters disclosed by surveys provided to
Buyer prior to February 26, 1999. If such statement of objection is not
delivered by such date, title shall be deemed approved by Buyer except for
Schedule B, Section 1 requirements of the commitment ("Requirements") which
Seller agrees to satisfy at closing. If any objection other than the
Requirements is not cured or removed by the closing date, Buyer, at its option,
may, prior to the closing date, either (i) accept title as it is, subject to
Seller's obligations to satisfy the Requirements; or (ii) terminate this
Purchase Agreement. Seller shall have no obligations to cure any Permitted
Encumbrances. Upon any such termination all parties shall be released from all
duties or obligations contained herein (except for Buyer's Indemnity under
Section IV(a) or V(A) hereof) and Buyer shall be entitled to a partial or full
refund of the Deposit as described in Sections III(b) or III(c) hereof.
SECTION VII
1031 EXCHANGE
At either party's request, the other party agrees to cooperate with the
requesting party in a deferred or simultaneous Section 1031 like kind
exchange(s) of all or any portion of the Property for which the Purchase Price
has been separately allocated herein as long as the other party is not required
to take title to any other property or to incur any further cost, expense,
liability or delay. The Deposit of $1,999,000.00 in the event of any such
exchange(s) shall be allocated to 2001 Kennedy.
SECTION VIII
ADDITIONAL PURCHASE PRICE
As additional Purchase Price, Buyer shall pay the amount as hereafter set
forth of Seller's expenditures for capital improvements on the Property made
after June 1, 1999 together with up to a ten percent (10%) fee for Seller's
profit and overhead if Seller or its affiliates is the general contractor
("Capital Improvement Cost") provided that such capital expenditures are for
the improvements described in Exhibit D hereto attached. Any such capital
improvement shall be amortized over two hundred four (204) months at the
lowest Applicable Federal Interest Rates (AFR) as published as of the
completion date of the improvement by the Internal Revenue Service commencing
as of the date the improvement has been completed. The Capital Improvement
Cost for each such capital improvement shall be equal to the monthly amortized
amount multiplied by a number equal to 204 less the number of months
(including fractions thereof) between the completion date of such improvement
and the closing hereof.
SECTION IX
WARRANTIES
Seller warrants and represents to Buyer that the following statements are
as of February 26, 1999, the date hereof, at closing and after closing to the
extent hereinafter provided, will be true and accurate, except for such material
changes (other than changes resulting from the affirmative and purposeful acts
of Seller contemplated by the last paragraph of this Section IX), that Seller
has notified Buyer in writing at the time of Seller's execution of this Purchase
Agreement:
(a) Seller will have marketable and insurable record title to the
Property as of closing, subject only to the Permitted Encumbrances
listed on Exhibit B attached hereto and made a part hereof.
(b) To the best of Seller's knowledge, the information supplied
to Buyer pursuant to Section IV(a) hereof is complete and correct except
for the materials described in the Option Agreement as "Exhibit D to the
Purchase Agreement" and has been duly supplemented including, but not
limited to, any new Other Agreements.
(c) At closing, Seller shall (i) convey to Buyer by Warranty Deed
the Property and convey by Warranty Bill of Sale the Personal Property
to Buyer free of all encumbrances on the Property or any portion thereof
except for the Permitted Encumbrances and other matters approved by
Buyer pursuant to Section VI or as otherwise provided herein; and (ii)
shall assign to the extent they are assignable, all of Seller's interest
in the "Other Agreements" and the Leases, if any.
(d) Seller has not received any notice nor are they aware of any
pending or threatened action to take by eminent domain or by deed in
lieu thereof all or any portion of the Property.
(e) Seller shall be solely responsible for and shall pay on the
date of closing any deferred tax or assessment, including, but not
limited to, those referred to in Minnesota Statutes Section 273.11 (the
so-called "Green Acres recapture"), catch-up or adjustment in future
taxes due as a result of the Property having been classified under any
designation authorized by law to obtain a special low ad valorem tax
rate or receive either an abatement or deferment of ad valorem taxes.
(f) Seller is not a "foreign person" as contemplated by Section
1445 of the Internal Revenue Code, and that at the closing Seller will
deliver to Buyer a certificate so stating, in a form complying with the
Federal tax law.
(g) This Purchase Agreement and the documents, instruments and
agreements to be executed by Seller pursuant to this Purchase Agreement
have been, or will be on or before the date of closing, duly and validly
authorized, executed and delivered by Seller and the obligations of
Seller hereunder and thereunder are or will be valid and legally
binding, and this Purchase Agreement and the documents, instruments and
agreements to be executed and delivered by Seller pursuant to this
Purchase Agreement are or will be upon such execution and delivery
enforceable against Seller in accordance with their respective terms.
(h) Except as shown by the materials described in Exhibit C and
Exhibit D to the Purchase Agreement (as defined in the Option
Agreement), except for acts of Buyer, as a possible tenant of the
Property and the use by Buyer of hazardous materials, except for
asbestos used as a building material for the Property and except for a
fuel oil tank located at the south end of 2001 Kennedy, to the best of
Seller's knowledge, Seller has not generated, manufactured, buried,
spilled, leaked, discharged, emitted, stored, disposed of, used or
released any Hazardous Substance (as hereafter defined) about the
Property, except as may have occurred as a result of operating the
Property and in any such event such activities were at all times in
compliance with Environmental Laws as hereinafter defined and has not
knowingly permitted any other party to do any of the same. Except for
and to the extent of the matters specifically described in said Exhibit
C and Exhibit D, except for acts of Buyer, as a possible tenant of the
Property and the use by Buyer of hazardous materials, except for
asbestos used as a building material for the Property and except for a
fuel oil tank located at the south end of 2001 Kennedy, Seller has
received no notice of and has no actual knowledge, without inquiry
(a) that any Hazardous Substance are or have ever been generated,
manufactured, buried, spilled, leaked, discharged, emitted, stored,
disposed of, used or released about the Property, except as
hereinabove provided, or (b) of any, requests, notices,
investigations, demands, administrative proceedings, hearings,
litigation or other action proposed, threatened or pending relating
to any of the Property and alleging non-compliance with or liability
under any Environmental Law, or (c) that any above-ground or
underground storage tanks or other containment facilities of any kind
containing any Hazardous Substance are or have ever been located
about the Property, or (d) that Seller's operations on the Property
have been in compliance with all federal, state and local
environmental laws, ordinances, rules and regulations, relating to
the handling, storage and disposal of the Hazardous Materials. For
purposes hereof, Hazardous Substance means asbestos, urea
formaldehyde, polychlorinated biphenyls, nuclear fuel or materials,
radioactive materials, explosives, known carcinogens, petroleum
products and by-products (including crude oil or any fraction
thereof), and any pollutant, contaminant, chemical, material or
substance defined as hazardous or as a pollutant or a contaminant in,
or the use, manufacture, generation, storage, treatment,
transportation, release or disposal of which is regulated by, any
Environmental Law. For purposes hereof, Environmental Law means any
federal, state, county, municipal, local or other statute, ordinance
or regulation which relates to or deals with the protection of the
environmental and/or human health and safety, including all
regulations promulgated by a regulatory body pursuant to any such
statute, ordinance, or regulation, including, the Comprehensive
Environmental Response and Liability Act of 1980 ("CERCLA"), as
amended, 42 U.S.C. Section 9601 et. seq., the Resource Conservation and
Recovery Act ("RCRA"), as amended, 42 U.S.C. Section 6901 et. seq., the
Federal Water Pollution Control Act, as amended, 33 U.S.C. Section 1251
et. seq., the Clean Air Act, as amended, 42 U.S.C. Section 7401 et. seq.,
and Minnesota Statutes Section 115B.01 et seq.
(i) To the best of Seller's knowledge, no unrecorded condition,
restriction, obligation or agreement not previously disclosed to Buyer
pursuant to Section IV shall exist which affect the Property or Buyer's
ability to use the Property for the Current Uses.
(j) To the best of Seller's knowledge, no portion of the Property
is located within an area designated as a "flood plain" or "flood prone
area" under any statute, regulation, or ordinance.
(k) To the best of Seller's knowledge, the Property is free from
any use or occupancy restrictions, except those imposed by zoning laws
and regulations, and no part is dedicated or has been used as a cemetery
or burial ground.
(l) To the best of Seller's knowledge, no fact or condition
exists which would result in the termination of the current access to
the Property from any presently existing streets (except the parties'
proposed vacation of Summer Street, Cleveland Street and Arthur Street)
and roads adjoining or situated on the Property or to any existing sewer
or other utility facilities servicing, adjoining or situated on the
Property. To the best of Seller's knowledge, all utilities needed for
Current Uses are available to the Property.
(m) There is no litigation at law or in equity, and no action,
litigation, investigation or proceedings of any kind, including, but not
limited to, administrative or regulatory authority, pending or
threatened against the Property, or the Seller, or affecting the ability
of Seller to consummate the transaction contemplated herein and Seller
knows of no facts which could give rise to any such action, litigation,
investigation or proceeding with respect to the Property or the Seller.
(n) To the best of Seller's knowledge, there are no outstanding
citations or notices of violations of any statutes, ordinances or
regulations of any kind, with respect to the Property and to the best of
Seller's knowledge, there are no structural defects in the Buildings
including the roof, but the foregoing shall not be construed as a
warranty for the roof of the Buildings.
(o) To the best of Seller's knowledge, (i) the Property is zoned
for the Current Uses without being in violation of any zoning
classification, land use classification, environmental requirement, or
any other use classification or building classification or requirement
established by any entity or authority having legal jurisdiction or
authority thereover, (ii) the Property contains no wells, and (iii) the
Property does not contain any septic systems.
(p) To the best of Seller's knowledge, except for the rights of
existing tenants, if any, as tenants only, no other party has any right,
title or interest in and to the Property, including the right to
purchase the Property, except as set forth as a Permitted Encumbrance.
(q) Except for requirements imposed by the City of Minneapolis
relating solely to Buyer's anticipated improvements to the Property and
not to preexisting conditions, Seller shall cure any violations of law
or municipal ordinance, orders or requirements for which Seller had
received a notice of violation prior to the closing which would affect
the Buyer's use of the Property and which would be binding upon the
Property or Buyer after the closing, it being understood that the
Property is to be renovated upon its purchase and no such violation need
be cured if as a result of the renovation the violation becomes moot.
(r) Seller has not leased the Property to tenants in violation of
paragraph 7 of the Option Agreement.
(s) Seller will use its best efforts to obtain tenant estoppel
certificates from all tenants as provided in Section IV(e).
(t) Seller will continue through closing to maintain insurance
coverages on the Property as required by the Option Agreement.
(u) To the extent commercially reasonable after any
condemnation and/or casualty, Seller will upon its acquisition of
Title to the Property operate, maintain and repair the Property in a
commercially reasonable fashion.
(v) Upon Seller's acquisition of Title to the Property, Seller
will maintain casualty insurance for at least $9,000,000.00 on the
2001 Kennedy Building to the extent it can be economically purchased.
It is assumed that any aggregate increases of less than one hundred
percent (100%) of the current cost shall be economical.
(w) Upon Seller's acquisition of Title to the Property, Seller
will not thereafter knowingly lease the Property to tenants who
engage in the business of the generation and/or storage of hazardous
materials and will insert in all new leases hereafter entered into a
prohibition of such business of generation and/or storage of
hazardous materials but the foregoing shall be breached if any
tenant, without Seller's consent or knowledge, engages in such
activities. Seller will take appropriate action to terminate the
rights of any tenant who violates such prohibition.
None of the foregoing warranties shall be construed as a warranty as
to the sufficiency of parking, it being understood that parking
requirements are dependent on the usage of the Property by the Buyer.
Except for the foregoing warranties, Buyer acknowledges that it is
purchasing the Property in its "as is" condition relying solely on its
inspection of the quantity and quality of the Property including the
floor, the structural portions of the Property and the roof. The
foregoing representations and warranties will survive until December 31,
2005 ("Final Action Date"). The parties agree that all actions
commenced by Buyer against Seller based on such representations and
warranties shall be deemed time barred unless such actions have been
commenced prior to the Final Action Date or such claims are based on
fraud, it being understood that except for claims based on fraud, Buyer
shall be deemed to have released Seller for any claims based on such
representations and warranties unless an action based thereon is
commenced prior to Final Action Date.
Seller covenants that, at any time prior to the closing, it has not
and will not knowingly take(n) any affirmative action that would
purposely cause the representations and warranties contained herein
to be materially breached. The sole and exclusive remedy for Buyer
under any theory of law for a breach by Seller of this covenant shall
be the termination of this Agreement and the return of the Deposit
pursuant to Section III(c), if Buyer chooses not to close. If Buyer
chooses to close with knowledge of such breach by Seller, Buyer shall
be deemed to have waived such breach.
SECTION X
CLOSING
The closing of this transaction shall take place in the office of Title in
Minneapolis, Minnesota on or before July 1, 2005, notwithstanding any other
provision hereof to the contrary. Possession of the Property shall be deemed to
have been given by Seller to Buyer coincident with the closing. The following
procedure shall govern the closing:
(a) Prior to closing, Seller shall deliver to Buyer and Title a
copy of the proposed general Warranty Deed (the "Deed") which shall be
in recordable form and shall convey good and marketable record title to
the Property (using the legal descriptions set forth on the Title
Commitment and the Survey) to Buyer, subject only to the Permitted
Encumbrances and other matters approved by Buyer. If the form of the
Deed does not comply with the provisions set forth above, the Seller
shall promptly correct the same upon notice from either Buyer or the
Title Company.
(b) On or before the closing Seller shall deliver to the Title
Company or Buyer the following:
(i) the Deed, properly executed and acknowledged along with
a standard form Seller's Affidavit;
(ii) current real estate tax statements;
(iii) any applicable owner's duplicate certificate(s) of
title to the Property;
(iv) any applicable abstracts of title in Seller's
possession;
(v) a warranty bill of sale properly executed for all
Personal Property;
(vi) properly executed assignments of all Seller's interest
in and to the Leases and Other Agreements and which shall provide
that Seller will indemnify and hold Buyer harmless from all claims
under the foregoing which accrued on or prior to closing and Buyer
shall agree to indemnify and hold Seller harmless from all claims
under the foregoing which accrue after the closing;
(vii) a well certificate as may be required by applicable law
or in the event it is not required, a certification in the deed
that there are no wells on the Property;
(viii) an assignment of the Warranties and any other
documents required by this Purchase Agreement;
(ix) any other documentation reasonably requested by the
Title Company in order to confirm the authority of the Seller to
consummate this transaction or to permit the Title Company to
issue to Buyer, upon completion of the closing, its Owner's Title
Insurance Policy in an amount equal to the Purchase Price, subject
only to those matters shown on the Commitment which were approved
by Buyer (the "Title Policy"); Provided, however, that the
foregoing shall not be construed to obligate Seller to provide any
indemnity or to pay any sums not otherwise required to be paid by
Seller hereunder;
(x) such funds as may be required by Seller to pay closing
costs or charges properly allocable to Seller.
(c) On or before the closing, Buyer shall deliver to Title or
Seller the following:
(i) the balance of the Purchase Price, including the
Additional Purchase Price as provided for in Section VIII in cash,
at closing, less any amounts for which Buyer is to receive a
credit;
(ii) such additional funds as may be required of Buyer to
pay closing costs or charges properly allocable to Buyer.
(d) After Title has received all of the items to be deposited
with it, and when it is in a position to issue the Title Policy
reflected by the approved Commitment, Title shall:
(i) record the Deed;
(ii) record any other instruments executed by the parties,
or either of them, which are contemplated by this Purchase
Agreement to be placed of record, instructing the Recorder's
Office to return the same to the beneficiary thereof;
(iii) issue to Buyer its Title Policy and deliver to Buyer
all other documents to be herein delivered by Seller to the Title
Company pursuant to this Purchase Agreement;
(iv) charge Buyer for the recording cost of the Deed and
one-half of the closing fee and any escrow fees, and the cost of
any purchased title policy;
(v) charge Seller for one-half of the closing fee and any
escrow fees, recording any documents clearing title to the
Property, any abstracting costs and the cost of the title
insurance commitment for Buyer;
(vi) charge Seller for the full cost of any deed transfer,
revenue or similar tax with respect to the sale of the Property;
(vii) real estate taxes and installments of special
assessments due and payable in the year of closing shall be
prorated between the parties based on a calendar year and the date
of closing. Seller shall pay all real estate taxes and
installments of special assessments due in the year prior to the
year of closing and earlier years including as provided in Section
IX(e) hereof; Buyer shall pay all real estate taxes and
installments of special assessments due and payable in the year
subsequent to the year of closing and subsequent years;
(viii) all bills for services, labor, materials, capital
improvements or other charges of any kind or nature rendered to
Seller or the Property prior to the closing date shall be borne by
and paid by Seller;
(ix) prepare closing statements for Seller and Buyer,
respectively, indicating deposits, credits and charges (including
allocation of current real property taxes) and deliver the same,
together with a disbursement of funds, to any appropriate party;
(x) credit Buyer with any applicable security deposits and
prorate between the parties as of the date of closing all rents
and other amounts due under the Leases and operating expenses for
the Property.
Any supplemental closing instructions given by any party shall also be
followed by the Title Company provided the same do not conflict with any
instructions set forth herein.
SECTION XI
DEFAULT BY BUYER
In the event the transactions contemplated hereby fail to close as a result
of a material default by Buyer of any of the terms of this Purchase Agreement,
and such failure to close continues for a period of five (5) days after Seller
notifies Buyer of such event, Seller may, at its option, elect as its exclusive
remedy one of the following:
(a) To terminate this Purchase Agreement as provided for by law
and retain the Deposit as provided in Section III hereof; or
(b) To enforce specific performance of Buyer's obligations herein
to purchase the Property provided such action is commenced within one
hundred eighty (180) days from such failure to close.
SECTION XII
DEFAULT BY SELLER
If Seller refuses to perform any of its obligations as set forth herein or
is in material breach of any of its representations and warranties herein
provided and such failure to perform or breach continues for a period of five
(5) days after Buyer notifies Seller of such event, Buyer may, at its option,
elect one of the following remedies:
(a) To terminate this Purchase Agreement by notice to Seller, in
which event neither party shall have any further rights or obligations
hereunder except that the Deposit exclusive of any interest thereon
shall be returned to Buyer as provided in Section III hereof; or
(b) To enforce specific performance of Seller's obligations
hereunder, including specifically the conveyance of the Property in the
condition required hereby provided such action is commenced within one
hundred eighty (180) days from such failure to close.
SECTION XIII
EXPENSE OF ENFORCEMENT
If either party brings an action at law or in equity to enforce or
interpret this Purchase Agreement, the prevailing party in such action shall be
entitled to recover reasonable attorneys' fees and court costs in addition to
any other remedy granted.
SECTION XIV
BROKERS
Seller warrants to Buyer that in connection with this transaction Seller
has not taken any action which would result in any real estate broker's fee
being due or payable to any party. Buyer warrants to Seller that in connection
with this transaction Buyer has not taken any action which would result in any
real estate broker's fee, finder's fee or other fee being due or payable to any
party. Seller and Buyer respectively agree to indemnify, defend and hold
harmless the other from and against any and all other claims, fees, commissions
and suits of any real estate broker or agent with respect to services claimed to
have been rendered for or on behalf of such party in connection with the
execution of this Purchase Agreement or the transaction set forth herein.
SECTION XV
NOTICE
All notices, demands and requests required or permitted to be given under
this Purchase Agreement must be in writing and shall be deemed to have been
properly given or served either by personal delivery or by the expiration of two
(2) days after depositing the same in the United States mail, addressed to
Seller or to Buyer, as the case may be, prepaid and registered or certified
mail, return receipt requested, at the following addresses:
To Seller: Hillcrest Development
2424 Kennedy Street NE
Minneapolis, Minnesota 55413
Attention: Scott M. Tankenoff
With Copy to: Maun & Simon, PLC
2000 Midwest Plaza Building West
801 Nicollet Mall
Minneapolis, Minnesota 55402
Attention: Charles Bans
To Buyer: R & D Systems, Inc.
614 McKinley Place
Minneapolis, MN 55413
Attention: Tom Oland, CEO
With Copy to: Fredrikson & Byron, P.A.
900 Second Ave. S
Suite 1100
Minneapolis, MN 55402
Attention: Chuck Diessner
Rejection or refusal to accept or the inability to deliver notice hereunder
because of changed address of which no notice was given shall be deemed to be
receipt of the notice, demand or request. Any party shall have the right from
time to time and at any time upon at least ten (10) days' written notice
thereof, to change their respective addresses, and each shall have the right
to specify as its address any other address within the United States of
America.
SECTION XVI
CONDEMNATION
In the event any portion of the Property is condemned or access thereto
shall be taken, or in either case threatened, prior to the closing, and the
taking renders the Property remaining unsuitable for the Buyer's anticipated use
of the Property and Buyer notifies Seller in writing that it wishes to terminate
this Purchase Agreement within thirty (30) days after written notice to Buyer of
such condemnation action, then this Purchase Agreement shall terminate, neither
party to this Agreement shall have any further liability to the other (except
for Buyer's indemnity in Sections IV(a) and V(A) hereof) and Buyer shall be
entitled to a partial refund of the Deposit as described in Section III(b)
hereof.
If the Purchase Agreement is not terminated pursuant to the preceding
sentence, the Purchase Price of the Property shall not be affected, it being
agreed that if the award is paid prior to the closing of this transaction, such
amount, insofar as it pertains to the Property, shall be held in escrow and
delivered to Buyer at the time of closing; and if the award has not been paid
prior to the closing of this transaction, then at the closing Seller shall
assign to Buyer all of its right, title and interest with respect to such award
and shall further execute any other instrument requested by Buyer to assure that
such award is paid to Buyer. If Buyer fails to timely close the transaction and
this agreement is terminated by Seller, any escrowed condemnation proceeds will
be paid to Seller.
If Buyer does not terminate this Purchase Agreement, it shall have the
right to contest the condemnation and/or the award resulting therefrom but such
right shall terminate if Seller terminates this Purchase Agreement as a result
of Buyer's default hereunder. If this Purchase Agreement is not terminated, the
parties shall cooperate in defending any such taking and/or maximizing the
amount of the award. Neither party will take any action relating to the taking,
without the other party's written consent prior to closing.
SECTION XVII
DAMAGE OCCURRING PRIOR TO CLOSING
If, prior to the closing date, all or any part of the Property is
substantially damaged by fire, casualty, the elements or any other cause, Seller
shall immediately give notice to Buyer of such fact and at Buyer's option (to be
exercised with thirty (30) days after Seller's notice), this Purchase Agreement
shall terminate, in which event neither party will have any further obligations
under this Purchase Agreement (except for Buyer's Indemnity under Sections IV(a)
and V(A) hereof) and Buyer shall be entitled to a partial refund of the Deposit
as described in Section III(b) hereof. If Buyer fails to elect to terminate
despite such damage, Seller whether the damage is substantial or not to the
extent reasonably possible shall promptly commence to repair such damage or
destruction to the Property's prior condition and to mitigate further damages
using the qualities of materials and workmanship existing prior to the date of
the casualty. If such damage shall be completely repaired prior to the closing
date, then there shall be no reduction in the Purchase Price and Seller shall
retain the proceeds of all insurance related to such damage. If such damage
shall not be completely repaired prior to the closing date at Buyer's election
(i) Seller shall assign to Buyer all right to receive the proceeds of all
insurance related to such damage, less costs incurred by Seller in mitigating
damage or making repairs that are reimbursable by insurance then in force, and
the Purchase Price shall remain the same or (ii) the closing shall be postponed
pending complete restoration of the damage by Seller. For purposes of this
Section, the words "substantially damaged" means damage that would cost
$2,000,000.00 or more to repair.
SECTION XVIII
VACATION OF SUMMER STREET
If at the date of execution of this Purchase Agreement that part of Summer
Street lying between 2001 Kennedy and 2020 Broadway parking lot and the easterly
portion of Arthur Street lying between Kennedy Street and Summer Street has
been or is in the process of being vacated, it is agreed that all of such
vacated street shall accrue to 2001 Kennedy and the parties shall execute and
deliver such deeds as are necessary to accomplish the same. Seller shall pay
the expenses of such vacation except that neither the Seller nor the Buyer
shall have any obligation to pay any sums attributable to the value of any
vacated street which the City may attempt to impose.
SECTION XIX
MERGER/BINDING AGREEMENT
All previous negotiations and understandings between Seller and Buyer or
their respective agents and employees with respect to the transactions set forth
herein are merged in this Purchase Agreement which alone fully and completely
express the parties' rights, duties and obligations. This Purchase Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors, assigns, heirs and personal representatives.
SECTION XX
INTENTIONALLY DELETED
SECTION XXI
GOVERNING LAW
This Purchase Agreement shall be deemed to be a contract made under the
laws of the State of Minnesota and for all purposes shall be governed and
construed in accordance with the laws of said State.
SECTION XXII
ASSIGNMENT
Buyer shall have the right to assign at closing its interest in this
Purchase Agreement, provided that assignee also becomes personally responsible
for Buyer's obligations herein.
IN WITNESS WHEREOF, the parties hereto have executed these presents
intending to be bound by the provisions herein contained.
SELLER: BUYER:
Hillcrest Development R & D Systems, Inc.
By:___________________________ By:_____________________________
Its: General Partner Its: President
ACKNOWLEDGMENT BY TITLE
Title hereby agrees to act as escrow agent pursuant to the foregoing terms,
it being understood that Title shall not be liable to either party if it acts in
good faith in the performance of its duties herein.
First American Title Insurance Company
By:
Its:
EXHIBIT A
LEGAL DESCRIPTION
EXHIBIT B
PERMITTED ENCUMBRANCES
(a) Building and zoning laws, ordinances, state and federal regulations.
(b) Reservation of any mineral or mineral rights to the State of
Minnesota.
(c) Real estate taxes and installments of special assessments due and
payable in the year of closing and subsequent years.
(d) All rights of existing tenants of the Property leased pursuant to
paragraph 7 of the Option.
(e) All matters that would be disclosed by a survey.
(f) Sanitary sewer easement to County of Hennepin recorded as Document No.
1546011.
(g) Declaration of restrictions regarding use of real property where
response actions have been taken pursuant to Minnesota Statutes Sections
115B.01 to 115B.18 recorded as Document No. 2489354.
(h) Affidavit concerning real property contaminated with hazardous
substances recorded as Document No. 2489355.
EXHIBIT C
LIST ENVIRONMENTAL REPORTS
EXHIBIT D
CAPITAL IMPROVEMENTS
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 11,258,651
<SECURITIES> 14,495,879
<RECEIVABLES> 13,909,737
<ALLOWANCES> 266,000
<INVENTORY> 7,189,577
<CURRENT-ASSETS> 48,994,666
<PP&E> 26,155,015
<DEPRECIATION> 12,685,197
<TOTAL-ASSETS> 120,450,713
<CURRENT-LIABILITIES> 12,369,488
<BONDS> 0
0
0
<COMMON> 201,961
<OTHER-SE> 93,533,864
<TOTAL-LIABILITY-AND-EQUITY> 120,450,713
<SALES> 66,588,506
<TOTAL-REVENUES> 66,588,506
<CGS> 20,012,235
<TOTAL-COSTS> 20,012,235
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 18,196,694
<INCOME-TAX> 6,548,000
<INCOME-CONTINUING> 11,648,694
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,648,694
<EPS-PRIMARY> .58
<EPS-DILUTED> .56
</TABLE>
