THIRD AMENDMENT TO
EXCLUSIVE LICENSE AND ROYALTY AGREEMENT
THIS THIRD AMENDMENT ("Amendment") to the Exclusive License and Royalty
Agreement ("Agreement") dated as of April 17, 1993, by and between XXXXX X.
XXXXXXXXX, residing at 0000 - 000xx Xxxx Xxxxxxxxx, Xxxxxxx, Xxxxxxxxx
(hereinafter referred to as "Xxxxxxxxx") and OXBORO OUTDOORS, INC., a Minnesota
corporation having its principal place of business at 00000 Xxxxxxx Xxxxxx, Xxx
Xxxx, Xxxxxxxxx 00000 (hereinafter referred to as the "Company"), is made
effective this 25th day of February, 1998.
RECITALS
WHEREAS, the Company is currently obligated to pay Xxxxxxxxx Royalties of
up to nine (9%) percent on all Products, as defined and as provided in the
Agreement;
WHEREAS, in order to relieve the Company of a portion of the Royalties
expense for a period of time, thereby improving the Company's profit margin and
hopefully allowing the Company to contribute to the earnings per share of its
parent company, Oxboro Medical International, Inc. (the "Parent");
WHEREAS, the Company and Xxxxxxxxx have agreed that during the start-up
period of the Company that a reduction in the Royalties and allowing the Company
to improve its profit margins and, hopefully, earnings is in the best interest
of the Company and the Parent;
WHEREAS, the Company, Xxxxxxxxx and Parent have agreed that, in
consideration of Xxxxxxxxx'x agreement to reduce the Royalties for a period of
time as set forth herein, Parent will issue on behalf of the Company shares of
stock of the Parent pursuant to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the recitals set forth above and in
further consideration of the terms and conditions set forth below, Xxxxxxxxx,
Company and Parent agree to amend the Agreement as follows:
1. TEMPORARY REDUCTION OF ROYALTIES. For a period of four (4) years
beginning on the effective date of this Agreement and ending on the fourth
(4th) anniversary of the effective date of this Agreement, the Royalties
paid under the Agreement, as specifically set forth in Section 4 thereof
entitled "Payment of Royalties," shall be reduced from nine (9%) percent to
four and one-half (4 1/2%) percent. Upon expiration of the term, the
Royalties shall immediately be increased to the nine (9%) percent level.
All other terms of the Agreement, as amended, shall remain unchanged,
except as specifically provided herein or in a subsequent amendment signed
by the parties hereto. The temporary reduction in royalties shall apply to
all Products, Additional Products and Other Products, as defined in the
Agreement, as amended.
2. ISSUANCE OF SHARES OF PARENT. In consideration of the temporary
reduction of the royalties as provided in Paragraph 1, above, the Company
through its Parent, shall issue to Xxxxxxxxx in escrow 150,000 shares of
the Parent's Common Stock ("Shares") to be held in escrow, released and/or
returned, all as provided herein.
3. CONDITIONS OF ESCROW. On execution of this Agreement, Xxxxxxxxx,
the Company and, if required, the Parent shall enter into an Escrow
Agreement with Norwest Bank, as Escrow Agent, or with such other entity as
the parties may agree to act as Escrow Agent, regarding the Shares issued
pursuant to the terms of this Agreement, which Escrow Agreement shall be in
the form attached hereto as Exhibit A which is hereby incorporated by
reference and made a part of this Agreement.
4. TERM OF ESCROW. Except as otherwise provided herein, the term
during which the Shares may be released to Xxxxxxxxx hereunder, or his
estate, as the case may be, shall commence on the date hereof and shall
expire on midnight, February 15, 2002. The death of Xxxxxxxxx during the
term of the Escrow shall not terminate the Escrow. Any Share Release
Criteria (as defined in Paragraph 5) attained after Xxxxxxxxx'x death and
any Shares released pursuant thereto shall inure to the benefit of
Xxxxxxxxx'x heirs, legal representatives, devisees, successors and assigns.
5. SHARE RELEASE CRITERIA. With respect to the Shares issued to
Xxxxxxxxx in escrow, such Shares shall be released to Xxxxxxxxx as
Royalties in lieu of the payment of cash with respect to one-half (or
4 1/2%) of the Royalties earned by Xxxxxxxxx on the sale of All Products
during the term of the escrow. As Royalties are earned by Xxxxxxxxx on the
sale of All Products, one-half of such Royalties shall be paid in cash
pursuant to the terms of the Agreement and one-half of such Royalties shall
be paid by the release of an "equivalent value" represented by the Shares.
The Shares shall be valued at $2.00 per share as of the date of this
Agreement. The "equivalent value" shall be determined by dividing cash
amount of the Royalties payable to Xxxxxxxxx under this Amendment by $2.00,
rounded to the nearest whole number, which shall be the number of Shares to
be released to Xxxxxxxxx hereunder following the end of each fiscal
quarter. If, at the end of the term of the escrow there are Shares which
have not been earned and released hereunder, such remaining shares shall be
cancelled and returned to the Parent. If the Shares earned exceed the
number of Shares specified in Paragraph 2, above, then the escrow term
shall be deemed to have terminated, no more Shares shall be earned under
this Amendment than the number of Shares specified in Paragraph 2 above,
and Xxxxxxxxx'x Royalties shall remain at 4 1/2% until the fourth
anniversary of the date of this Amendment, on which date Xxxxxxxxx'x
Royalties shall be restored to 9% from and after such date.
For purposes of this Agreement, an achievement of Net Sales as of a
date earlier than the calendar year end would entitle Xxxxxxxxx to receive
the specified number of Shares as provided above prior to the release date
at Xxxxxxxxx'x option. Except as otherwise provided herein, Shares not
acquired prior to the termination of the Escrow, shall be canceled and
returned to the Company.
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6. RISK OF FORFEITURE. The Shares to be received by Xxxxxxxxx under
the terms of this Agreement are conditioned upon the achievement of the Net
Sales of All Products as set forth above during the term of the Escrow. If
Net Sales volume is not reached in any given calendar year, then the Shares
allocated to that year shall be cancelled and shall revert to the Company.
7. DEFERRAL OF SHARE RELEASE. Prior to the end of each fiscal year
during the term of the escrow, Xxxxxxxxx may elect in writing to the Escrow
Agent to defer the receipt of said Shares until (a) the termination of this
Escrow or (b) twelve (12) months from the attainment of the specified Net
Sales.
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 the end of a fiscal year in which the Net Sales occur.
8. RIGHTS WITH RESPECT TO VOTING AND DISTRIBUTIONS. Xxxxxxxxx shall
be entitled to vote the escrowed Shares held by the Escrow Agent hereunder,
including all Shares which (a) have not yet been released to Xxxxxxxxx
because said Share Release Criteria described in Paragraph 5 above have not
been attained or (b) have been deferred by Xxxxxxxxx under Paragraph 7
above.
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.
9. RELEASE OF SHARES. The Escrow Agent shall only release Shares
held by it under this Agreement upon receiving written notice from the
Board of Directors of the Company that the Net Sales requirements described
in Paragraph 5 have been satisfied. In the event the Board of Directors of
the Company fails to provide written notice to the Escrow Agent directing
it to release shares within thirty (30) days following the end of any
fiscal quarter during the term of the escrow or within ten (10) days after
the Company's receipt of written notice from Xxxxxxxxx of its failure to
provide written notice to the Escrow Agent following such thirty (30) day
period, then Xxxxxxxxx may provide written notice to the Escrow Agent, in
the form of a sworn affidavit, that the Company has failed to provide
written notice as required under this Amendment, the amount of Net All
Product Sales for the most recently ended quarter and the number of Shares
to be released. 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
the Net Sales requirements described in Paragraph 5 have been attained, the
parties agree that said dispute shall be resolved pursuant to the terms and
conditions of Paragraph 15 hereafter.
10. SCOPE OF AGREEMENT. This Agreement shall be binding upon and
inure to the obligations of (a) the Company and the Parent and their
respective 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 Parent. 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 Parent, the number of shares reserved for
awarding to Xxxxxxxxx under this Agreement shall be adjusted to reflect
such change. The award of Shares pursuant to this Agreement shall not
limit in anyway the right or power of the Parent to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge or consolidate or to dissolve, liquidate, sell or
transfer all or any part of its business or assets or to issue additional
shares of its Common Stock for any purpose.
12. INVESTMENT PURPOSE IN ACQUIRING THE SHARES. Xxxxxxxxx and the
Parent 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 Parent 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 of the prevailing party shall be paid by the
non-prevailing party.
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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 Parent: The Board of Directors
Oxboro Medical International, Inc.
00000 Xxxxxxx Xxxxxx XX
Xxx Xxxx, Xxxxxxxxx 00000
If to Company: Oxboro Outdoors, Inc.
c/o 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 and the
Parent 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 subject to this Agreement. Xxxxxxxxx and the Company
and the Parent, 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 OUTDOORS, INC.
By /s/ Xxxxx Xxxxxxxxx /s/ Xxxxx X. Xxxxxxxxx
--------------------------------- ---------------------------------
Its President Xxxxx X. Xxxxxxxxx
------------------------------
PARENT:
Consented and Agreed to this 25th day of February, 1998.
---- --------
OXBORO MEDICAL INTERNATIONAL, INC.
By /s/ Xxxxxx X. Xxxxxxxxx
----------------------------
Its Secretary and Director
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