THIRD AMENDMENT
TO EMPLOYMENT AGREEMENT
THIS AGREEMENT (this "Agreement") is made and entered into effective as of
the 25th day of February, 1998, by and between Oxboro Medical International,
Inc., a Minnesota corporation (the "Company"), and Xxxxx X. Xxxxxxxxx
("Xxxxxxxxx").
RECITALS
WHEREAS, the Company and Xxxxxxxxx have entered into an Employment
Agreement as of April 1, 1993 and, subsequently, entered into a First Amendment
to Employment Agreement as of December 21, 1993, and Employment Agreement as of
January 4, 1996, and a Second Amendment to Employment Agreement as of October 1,
1997 (the "Employment Agreement");
WHEREAS, the Employment Agreement provides at Section V(b)(iii) that, in
the event there is a Change in Control of the Company and in the further event
that Xxxxxxxxx terminates the Employment Agreement for Good Reason, as defined
in the Employment Agreement, the Company shall have to pay severance pay
compensation to Xxxxxxxxx in a lump sum, in cash, on the fifth day following the
Date of Termination, in an amount equal to two and one-half (2 1/2) times
Xxxxxxxxx'x "annualized includable compensation for the base period" (as defined
in Section 280G(d) of the Internal Revenue Code of 1986, as amended);
WHEREAS, the severance obligation represents a substantial economic burden
to the Company and, if triggered, would test, if not threaten, the ability of
the business to continue in the ordinary course;
WHEREAS, the Company and Xxxxxxxxx desire to amend the Employment Agreement
to eliminate the severance pay obligation pursuant to the terms and conditions
set forth below:
TERMS AND CONDITIONS
NOW, THEREFORE, in consideration of the mutual promises hereinafter
contained, the parties hereto agree as follows:
1. ISSUANCE OF SHARES IN CONSIDERATION OF ELIMINATION OF SEVERANCE
COMPENSATION OBLIGATIONS. Subject to the terms and conditions hereinafter
set forth and in consideration of the deletion of Section V(b)(iii) of the
Employment Agreement entitled "Severance Compensation Upon Termination of
Contract," the Company hereby issues to Xxxxxxxxx a total of 360,000 shares
of Common Stock of the Company ("Shares"). The Company concurrently
herewith has deposited with Norwest Bank, Minnesota, as its Escrow Agent,
all of the Shares issued hereunder, duly endorsed for transfer in
compliance with the terms of this Agreement, pursuant to the Escrow
Agreement attached hereto and made a part hereof. For purposes of this
Agreement,
"Escrow Agent" shall mean Norwest Bank, or such other person or entity as
may be designated by the Company and Xxxxxxxxx to act as its escrow agent
under the terms of this Agreement.
2. TERM OF ESCROW. Except as otherwise provided herein, the term
during which the Shares may be released to Xxxxxxxxx hereunder, or to his
estate as the case may be, shall commence on the date hereof and shall
expire on midnight, February 1, 2002. The death of Xxxxxxxxx during the
term of the escrow shall not terminate the Escrow. Any Share Release
Criteria (as defined in paragraph 3) attained after Xxxxxxxxx'x death and
the Shares released pursuant thereto shall inure to the benefit of
Xxxxxxxxx'x heirs, legal representatives, devisees, successors and assigns.
3. SHARE RELEASE CRITERIA. In consideration of the achievement of
certain performance criteria by Xxxxxxxxx, the Escrow Agent shall be
instructed and authorized to deliver said Shares to Xxxxxxxxx (or to his
estate, as the case may be) as set forth below:
Release No. of Shares
Performance Criteria Date to be Released
----------------------------------- ------------ --------------
a. Oxboro Outdoors, Inc. Net Sales Feb. 1, 1999 90,000
increase of 50% compared to 1997
FYE Net Sales and 1998 FYE EPS
for the Company of at least $0.10
or 1998 FYE closing market value
of $3.00/share
b. Oxboro Outdoors, Inc. Net Sales Feb. 1, 2000 90,000
increase of 50% compared to 1998
FYE Net Sales and 1999 FYE EPS for
the Company of at least $0.20 or
1999 FYE closing market value of
$3.50/share
c. Oxboro Outdoors, Inc. Net Sales Feb. 1, 2001 90,000
increase of 50% compared to 1999
FYE Net Sales and 2000 FYE EPS for
the Company of at least $0.30 or
2000 FYE closing market value of
$4.00/share
d. Oxboro Outdoors, Inc. Net Sales Feb. 1, 2002 90,000
increase of 50% compared to 2000
FYE Net Sales and 2001 FYE EPS for
the Company of at least $0.40 or
2001 FYE closing market value of
$5.00/share
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For purposes of this Agreement, an achievement of the Share Release
Criteria as of a certain date would entitle Xxxxxxxxx to receive the
specified number of Shares as provided above. Except as otherwise provided
herein, Shares not acquired prior to the termination of the Escrow shall be
released to Xxxxxxxxx on the first business day following the termination
of the Escrow Agreement.
4. EXTRAORDINARY EVENTS. The Company and Xxxxxxxxx agree that there
may be extraordinary events in the course of the Company's business which
could reduce the earnings per share and/or market value set forth above.
Such events may result from steps voluntarily undertaken by the Company
and/or Xxxxxxxxx in the best interest of the shareholders, either short
term or long term, but may prevent the Company from achieving the earnings
per share set forth in Paragraph 3, above, and/or may not be perceived, at
least on an immediate basis, as adding value to the shares, such as the
investments by the Company in Oxboro Outdoors, Inc., a wholly owned
subsidiary of the Company, in prior years. Such events could include, but
are not limited to, further investment in Oxboro Outdoors, Inc. or another
subsidiary or business activity, an acquisition requiring shares and/or
capital of the Company, the acquisition of a product or product lines for
either the Company or Oxboro Outdoors, Inc., a material business venture,
and/or issuing additional shares for extraordinary purposes which would
dilute or lower the earnings per share of the Company, and similar kinds of
events. The parties hereto agree that such events will be considered to be
extraordinary and the performance criteria set forth in Paragraph 3, above,
will be adjusted to account for the extraordinary financial impact such
events would otherwise have had on the performance criteria.
5. RISK OF FORFEITURE. The Shares to be released to Xxxxxxxxx under
the terms of this Agreement are conditioned upon the performance of
services and the attainment of certain designated criteria during the term
of the Escrow. If Xxxxxxxxx terminates his employment for other than good
reason attributable to the Company, then all unreleased Shares shall be
forfeited by Xxxxxxxxx and shall revert to the Company.
6. DEFERRAL OF SHARE RELEASE. Prior to each fiscal year end during
the escrow term, Xxxxxxxxx may elect to defer the receipt of the Shares
until (a) the termination of this Escrow or (b) twelve (12) months from the
attainment of the specified Share Release Criteria, whichever option
Xxxxxxxxx elects to choose.
The election to defer the receipt of said Shares must be made in
writing by Xxxxxxxxx and delivered to the Company and to the Escrow Agent
prior to each fiscal year end.
7. RIGHTS WITH RESPECT TO VOTING AND DISTRIBUTIONS. Xxxxxxxxx shall
be entitled to vote the Shares held by the Escrow Agent hereunder,
including all Shares which (a) have not yet been awarded to Xxxxxxxxx
because said Share Release Criteria described in Paragraph 3 above have not
been attained, or (b) the receipt of which has been deferred by Xxxxxxxxx
under Paragraph 6 above.
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During the term of this Agreement, any cash dividends paid with
respect to the escrowed Shares held hereunder shall be paid to the Escrow
Agent and shall only be released by the Escrow Agent to Xxxxxxxxx when the
Shares to which the cash dividends relate are, in fact, received by
Xxxxxxxxx under the terms of this Agreement.
8. ACCELERATION OF RELEASE OF SHARES. In the event the Company
sells all or substantially all of its assets, in the event of a tender
offer for more than 30% of the Company's outstanding shares of Common
Stock, in the event of a change in control of the Company's Board of
Directors, as defined in the Employment Agreement, in the event of the
termination of the Employment Agreement by the Company without good cause
or in the event of termination of the Employment Agreement by Xxxxxxxxx for
good cause attributable to the Company, prior to the expiration of the
terms of the Escrow, then the Company shall instruct the Escrow Agent to
deliver to Xxxxxxxxx all Shares of Common Stock of the Company subject to
this Agreement, including (a) all Shares previously deferred by Xxxxxxxxx
under Paragraph 6 and (b) all unreleased Shares.
9. DELIVERY OF SHARES. The Escrow Agent shall only deliver Shares
held by it under this Agreement upon (a) receiving written notice from the
Board of Directors of the Company that either (i) the requirements for the
specific Share Release Criteria have been satisfied or (ii) an event
described in Paragraph 8, above, has occurred, or (b), if the Board of
Directors fails to provide written notice by the end of the fiscal quarter
following the quarter in which the release criteria or the event has
occurred, then upon receiving a copy of (i) the Company's Form 10-KSB with
respect to the achievement of Share Release Criteria for the fiscal year
just ended or (ii) the Company's Form 8-KSB with respect to an event
described in Paragraph 8, above, or (c) the term of the Escrow has expired.
Said written notice must specify the number of Shares to be delivered to
Xxxxxxxxx and that the Escrow Agent is authorized to transfer such Shares
to Xxxxxxxxx. In the event of a dispute as to whether one or more of the
Share Release Criteria described in Paragraph 3 been attained, the parties
agree that said dispute shall be resolved pursuant to the terms and
conditions of Paragraph 15 hereafter. In the event that the Company and
Xxxxxxxxx engage in arbitration regarding the Company's failure to provide
notice or the Company's contest with respect to the release of Shares and
the arbitrator finds in favor of Xxxxxxxxx with respect to such failure or
contest, then all Shares shall be released to Xxxxxxxxx within five (5)
business days of such finding upon the Escrow Agent's receipt of a
certified copy of such finding.
10. SCOPE OF AGREEMENT. This Agreement shall be binding upon and
inure to the benefit of (a) the Company and its successors in interest,
whether by sale, merger, consolidation, liquidation, or otherwise, and (b)
Xxxxxxxxx and his heirs, successors, legal representatives, devisees and
assigns.
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11. RECAPITALIZATION. Subject to the risk of forfeiture under this
Agreement, the Shares held by the Escrow Agent hereunder are duly
authorized and issued shares of Common Stock of the Company. In the event
of an increase or decrease in the number of Shares resulting from a
subdivision or consolidation of shares or the payment of a stock dividend
or any other increase or decrease in the number of Shares affected without
receipt of consideration by the Company, the number of shares reserved for
awarding to Xxxxxxxxx under this Agreement shall be adjusted to reflect
such change.
12. INVESTMENT PURPOSE IN ACQUIRING THE SHARES. Xxxxxxxxx and the
Company acknowledge that the Shares have not been registered under the
Securities Act of 1933, as amended (the "Act"), or the securities laws of
any state or foreign jurisdiction and will be issued to Xxxxxxxxx in
reliance on exemptions from the registration requirements of the Act and of
applicable state securities law. Xxxxxxxxx is acquiring the Shares for his
own account for investment purposes only and not with a view to their
resale or distribution.
13. COMPLIANCE WITH SECURITIES ACT. Xxxxxxxxx agrees that if the
Shares awarded under this Agreement or any part thereof are sold or
distributed in the future, Xxxxxxxxx shall sell or distribute them pursuant
to the requirements of the Act and of appropriate state securities laws.
14. RESTRICTIVE LEGEND. Xxxxxxxxx agrees that the Company may place
on the certificates representing the Shares a restrictive legend containing
substantially the following language:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended,
have not been registered under the securities laws of any
state or foreign jurisdiction, and are subject to an
investment letter. They may not be sold, offered for sale
or transferred in the absence of either an effective
registration under the Securities Act of 1933, as amended,
and under the applicable state securities laws, or an
opinion of counsel for the Company that such transaction
does not require registration under the Act or applicable
state securities laws.
15. ARBITRATION. Any controversy or dispute arising under the terms
of this Agreement shall be determined by arbitration in Minneapolis,
Minnesota, according to the then current Rules and Regulations of the
American Arbitration Association and the decision of the arbitrator or
arbitrators shall be final and binding upon all parties and may be entered
as a final judgment in any court of competent jurisdiction. The costs and
arbitrators fees shall be divided equally between the Company and
Xxxxxxxxx.
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16. NOTICES. All notices required under this Agreement shall be
given in writing and shall be sufficiently given if delivered to the
addressee in person or, if mailed, by certified mail, return receipt
requested, and addressed as follows:
If to Company: The Board of Directors
Oxboro Medical International, Inc.
00000 Xxxxxxx Xxxxxx XX
Xxx Xxxx, Xxxxxxxxx 00000
If to Xxxxxxxxx: Xxxxx X. Xxxxxxxxx
0000 - 000xx Xxxx X.X.
Xxxxxxx, XX 00000
If to Escrow Agent:
----------------------------
Norwest Bank
----------------------------
----------------------------
Any notice shall be deemed effective (i) when delivered if delivered
personally and (ii) five (5) days after deposit in the mail, return receipt
requested.
17. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Minnesota.
18. RELEASE OF ESCROW AGENT. Xxxxxxxxx and the Company agree that
the Escrow Agent assumes no liability for and is expressly released from
any claim or claims in connection with, but not limited to, its reception,
retention or delivery (or redelivery, as the case may be) of any Shares of
the Company subject to this Agreement. Xxxxxxxxx and the Company, jointly
and severally, agree to indemnify and hold harmless the Escrow Agent from
any and all claims that arise in connection with this Agreement including,
but not limited to, its reception, retention, or delivery (or redelivery,
as the case may be) of any Shares subject to this Agreement.
19. ENTIRE AGREEMENT. This Agreement, together with the exhibits
attached hereto, sets forth all (and is intended by all parties to be an
integration of all) of the agreements, conditions and understandings among
the parties hereto with regard to all matters set forth herein, and there
are no promises, agreements or understandings, oral or written, express or
implied, between them other than as set forth or incorporated herein.
All other terms and conditions of the Employment Agreement, as amended,
shall remain unchanged, subject to future amendment by written agreement of the
parties hereto.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
COMPANY: XXXXXXXXX:
OXBORO MEDICAL
INTERNATIONAL, INC.
/s/ Xxxxx X. Xxxxxxxxx
------------------------------
By /s/ Xxxxxx X. Xxxxxxxxx Xxxxx X. Xxxxxxxxx
---------------------------------
Its Secretary and Director
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