SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended September 30, 1995
___ Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from _____ to _____
Commission file number 0-18785
OXBORO MEDICAL INTERNATIONAL, INC.
(Name of small business issuer in its charter)
Minnesota 41-1391803
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13828 Lincoln Street N.E.
Ham Lake, Minnesota 55304
(Address of principal executive offices) (Zip Code)
(612) 755-9516
(Issuer's Telephone Number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, par value $.Ol per share
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes [x] No[ ]
Check if no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10KSB. ____
State issuer's revenues for its most recent fiscal year. $3,877,167.
Based upon the closing price of the issuer's Common Stock as reported
by The Nasdaq Small-Cap Market, the aggregate market value of such Common Stock
held by nonaffiliates of the issuer as of December 15, 1995, was approximately
$2,239,617.
As of December 15, 1995 there were 2,672,278 shares of the issuer's
Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Information required under Part II, Item 8 and Part III, Items 9-12 is
incorporated by reference from the Registrant's Proxy Statement to be mailed to
shareholders in connection with the 1996 Annual Meeting (the "Proxy Statement").
PART I
Item 1. Description of Business
(a) General Development of Business.
The Company ("Oxboro") develops, assembles, and markets medical and
surgical devices and, through its wholly-owned subsidiary, Oxboro Outdoors, Inc.
("Outdoors"), develops, assembles and markets products for the outdoor
recreational market. The Company entered into the business of recreational
products in fiscal 1993.
(b) Narrative Description of Business.
Principal Products. Principal products produced and sold by Oxboro
include silicone loops, silicone and fabric clamp covers, instrument guards, BP
cuff protectors, suture aid booties, identification sheets and roll tape,
disposable scalpels, bulldog vascular clamps, and various holders and organizers
for instruments used in the operating room.
Oxboro has developed and is conducting market analysis as to the
feasibility of introducing the following products:
1. Instrument usage indicator for endoscopic and orthopedic
instruments and tools;
2. Open cell foam instrument guards and tray liners;
3. Additional types and styles of instrument guards for protection
of instruments during storage, handling and sterilization; and
4. Home care accessory products, which include easy-to-use holders
attached to wheelchairs and walkers, allowing convenient access
to necessary items.
Oxboro uses a clean room facility to assemble, package, inspect, and
box its products. Raw materials for the products are produced to Oxboro's
specifications by various manufacturers. The assembled products that are sold
sterile are sent to an independent contract sterilizer. After the sterilization
process, test samples are sent to an independent testing facility, and the
product is then held in quarantine for fourteen days awaiting the test results.
Outdoors has developed a line of products for the fishing, hunting and
related outdoors recreational market using certain common vendors and materials
currently used in production by Oxboro. The main features of a number of these
products include: durable, non-toxic closed-cell polyethylene foam fabrication,
self-adhesion (requiring no tools for installation), simple installation,
weather resistance, and functional design.
Outdoors' basic products generally fall into one of the following
groups: holders and other storage systems, including fishing rod holders, net
holders and drink holders; accessory hangs for lures and other items, utility
straps, fishing lures and other accessories, and a variety of products useful
for fishing or hunting. During fiscal 1995, Outdoors acquired the assets of
three fishing tackle companies and, accordingly, significantly expanded its
selection of fishing lures and other fishing related products.
Outdoors intends to continue product development and introduction.
Product Distribution. Medical products are marketed through Oxboro's
telemarketing department directly to hospitals throughout the United States and
Canada and through dealers and kit packaging companies. International sales of
medical products are made through dealers secured by Oxboro. Such sales
accounted for approximately 6.4% and 6.1% of medical product net sales during
fiscal 1995 and 1994, respectively.
Outdoors products are sold to retailers using field salespersons and
telemarketers. Outdoors has developed television advertising, an infomercial, a
video product catalog, and printed catalogs to market directly to the consumer,
providing a toll-free number for response.
Sources of Supply. The raw materials used for the extruding, molding,
and weaving of the Company's various products are readily available from local
sources.
Patents, Trademarks, Licenses. Many of the products currently being
marketed by the Company are not unique, and, therefore, the Company believes
that the effect of patents, licenses, franchises, or other intellectual or
intangible property concessions on other than a few select products would be
negligible.
In the event the Company substantially develops and tests any new
unique products, patent protection could be important. Such protection may not
be available, and in any event, the Company is likely to incur substantial costs
in any attempts to secure such patents.
The Company has filed for patent pending status on the following
medical products: arm secure, DUO guards and syringe stand/recap device and the
following recreational products: dock pole rod holder, lure hang, hook sheath,
whistle blade, and chameleon lure. No assurance can be given that patents will
be issued for any of these products or, if issued, will provide a competitive
advantage.
Competition. Both the surgical and medical products market and the
outdoor recreational market are extremely competitive. The Company believes that
among its direct competitors are firms with substantially greater assets,
marketing capability, and experience than the Company. In addition, such
competitors are often able to offer lower prices than the Company and thus can
limit the Company's penetration and share of the market.
Research and Development Expenditures. In the fiscal years ended
September 30, 1995 and 1994, the Company spent $30,372 and $87,269,
respectively, for research and development, exclusive of personnel costs. In
fiscal 1995, $23,785 was spent for development of medical products, and $6,587
was spent for development of recreational products. In fiscal 1994, the major
portion of research and development expenditures, $86,921, was for development
of recreational products.
Government Regulation. Because Oxboro manufactures and sells medical
products, both the products and the manufacturing procedures are subject to
regulation by the federal Food and Drug Administration. As a result, Oxboro is
subject to extensive rules and regulations, compliance with which may require
expenditure of material amounts. In addition, should Oxboro fail to comply with
such regulations it would be subject to administrative and criminal actions,
which could have a material adverse effect on the Company's business.
Employees. As of December 15, 1995, the Company employed 51 persons on
a full-time basis, including two in management, 14 in sales, 24 in production
and shipping, and 13 in general and administration. The Company also employed 7
persons on a part-time basis in production.
Item 2. Description of Property
The Company's office, manufacturing, and warehouse facilities are
located in a 14,000 square foot building on 2.41 acres in Ham Lake, a suburb of
Minneapolis, Minnesota. The Company will be adding approximately 14,000 square
feet during fiscal 1996 (anticipated completion in February 1996). Oxboro
Outdoors rents an additional 3,000 square feet in Ham Lake and 3,800 square feet
in Hermantown, Minnesota.
Item 3. Legal Proceedings
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of the fiscal year ended September 30, 1995,
no matter was submitted to a vote of security holders.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
The Company's Common Stock is traded on The Nasdaq Small-Cap Market.
The following table sets forth the quarterly high and low bid prices for the
Company's Common Stock for each quarter of the past two fiscal years as reported
by Nasdaq. Such quotations represent inter-dealer prices, without retail
mark-up, mark-down, or commission, and do not necessarily represent actual
transactions.
HIGH LOW
FISCAL 1995
First Quarter 1 5/8 1 3/8
Second Quarter 1 5/8 1 1/2
Third Quarter 1 5/8 1 1/4
Fourth Quarter 1 11/16 1 1/4
FISCAL 1994
First Quarter 2 1 1/2
Second Quarter 2 1/4 1 3/8
Third Quarter 1 3/4 1 1/2
Fourth Quarter 1 9/16 1 1/8
There were approximately 630 holders of record as of December 15, 1995. The
Company has paid no cash dividends on Common Stock.
Item 6. Management's Discussion and Analysis or Plan of Operation
GENERAL
Until 1993, Oxboro Medical International, Inc.'s only business
operation was as a supplier of single-use supplies to hospital operating rooms
and central supply departments. Approximately 70% of the Company's sales volume
has been from direct sales (telemarketing sales) to approximately 3500 hospitals
nationwide and in Canada, with 6% from international distributors and the
remaining sales divided equally between dealers and kit packaging/OEM customers.
In 1993, Oxboro Outdoors was established as a wholly-owned subsidiary to
develop, manufacture and market outdoor recreational products. Management
realized that there might be opportunities to apply certain medical and surgical
technologies in developing and marketing new products in the outdoor and
recreational markets. It became apparent that the Company's expertise in
durable, non-toxic closed-cell polyethylene foam fabrication with self-adhesion
capability could be extended to include products for anglers and outdoor
enthusiasts. Oxboro Outdoors sales began in January 1994, with the introduction
of 60 products designed for fishing, hunting and related outdoors activities.
With the acquisition of three tackle companies during the past fiscal
year, there are now approximately 3,000 Oxboro Outdoor products. Two additional
full-time sales personnel were hired during the past fiscal year, for a total of
four sales personnel, to set up channels of distribution and build a dealer
network for Oxboro Outdoors. The initial geographic market included Minnesota. A
direct marketing campaign was initiated to sell directly to consumers and
dealers via telemarketing. The Company developed product sales sheets to support
channels of distribution and attended several sports shows. The Company also
developed an "informercial" with an 800 number for consumers to purchase
products directly from the Company. The second phase of the marketing strategy
was to gain retail distribution in the upper Midwest, including Minnesota,
Wisconsin, Iowa, Illinois, the Dakotas and Michigan. Additionally, the Company
has increased its TV advertising both as to the amount of time and number of
markets in which it will be shown.
In Fiscal 1995, Oxboro Medical introduced additional colors, lengths
and widths of its Instrument Color Coding Sheet Identification Tape.
Additionally, new Identification Label and Specialty Instrument Guards were
introduced. The Company has developed, and is conducting market analysis as to
the feasibility of introducing an Instrument Usage Indicator (to be able to
determine how many times an Instrument has been used), Open-Cell Foam Instrument
Guards and Tray Liners, additional colors and styles of Instrument Color Coding
Tape, a wider range of Instrument Guards and products for the Home Care Market
to increase functionality of wheelchairs or walkers.
The Company continues to commit itself to developing additional medical
and surgical products for introduction during next year and beyond, as part of
our strategy to increase penetration of existing markets and to increase sales.
RESULTS OF OPERATIONS
Net sales for the Company increased from $3,332,519 in fiscal 1993 by
4% to $3,464,536 in fiscal 1994 and by 12% to $3,877,167 in fiscal 1995. The
Company performed well in the medical and surgical products market, and Outdoor
sales continue to grow. Sales for the medical and surgical products for the year
ended September 30, 1995, were $3,775,285, compared to $3,422,404 at September
30, 1994, which represents an increase of 10% or $352,881 over the previous
year. The largest dollar ($191,000) and percent sales increase (93%) was from
sales to domestic dealers/distributors. Direct hospital sales increased by 4%
and accounted for increased sales of $107,000. In light of competition and
extensive downward pressure on pricing, as a result of the health care industry
coming under tight scrutiny to control cost, management is pleased with these
results.
Oxboro Outdoor sales for the year ended September 30, 1995 were
$101,882 versus $42,132 in the previous year. Increased revenue resulted in part
from an increased number of retail outlets handling Oxboro Outdoors products,
increased sales to existing retail outlets and the addition of tackle products
to the product line as a result of the acquisition of TMI, Fritzie and HELCO
tackle companies. (See note G to the Consolidated Financial Statements for
comparison of 1995 versus 1994).
Gross margin was 77% in fiscal 1994 and 75% in fiscal 1995. The
reduction in gross margin can be attributed to increased sales of medical
products at discounted prices to match competitive pricing and manufacturing
inefficiencies encountered during fiscal 1995.
During fiscal 1995, selling, general and administrative ("SG&A")
expenses increased 23% or $492,185, from $2,137,751 in fiscal 1994 to $2,629,936
in fiscal 1995. For fiscal year 1995, selling, general and administrative
expenses increased approximately 6% as a percentage of sales. Increased expenses
for Oxboro Medical resulted from an increase of $23,440 in research and
development for development and introduction of 10 products for the new Oxboro
Medical Home Medical product line (R&D expenses are exclusive of personnel
time), printing increases of $17,292 for sales literature, increased convention
expenses of $14,461, also included in SG&A expenses is an increase of $76,854
in legal related to compliance with SEC reporting requirements and initial
development of various employee agreements. Management bonus' decreased by
$58,350 in 1995 as compared to 1994.
The increases in Oxboro Outdoors expenses for fiscal 1995 were mainly
due to increases in legal expenses of $21,711, due to the acquisition of the
three tackle companies, an increase of $28,795 in selling expenses (auto, travel
and sales samples), advertising expenses increases of $82,494 for creation of
advertisements for outdoor magazines, printing increases of $40,816, additional
sales related personnel costs of $40,952 and approximately $30,000 for updating
packaging of the recently acquired tackle lines. Research and development and
photography expenses decreased $59,734 and $42,519, respectively, because of the
emphasis on market penetration in 1995 versus product introduction. Wages and
related expenses account for the majority of the remaining increase in selling,
general and administrative expenses.
In fiscal 1995 earnings before income taxes were $324,039, as compared
with $542,971 in fiscal 1994, a decrease of 40%. The decrease in fiscal 1995 is
mainly due to selling, general and administrative expenses and the reduction in
gross margin previously discussed.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1995 the Company had working capital of $2,748,418
and no long-term debt and cash and cash equivalents were approximately $689,420.
Cash used in operating activities was $179,533 in fiscal 1995 compared to cash
generated from operating activities of $150,865 in fiscal 1994, primarily as a
result of the investment in Oxboro Outdoors, Inc. During fiscal 1996, the
Company expects continued investment in Oxboro Outdoors to create market
awareness and continue the development of distribution channels. Consequently,
Oxboro Outdoors will continue to have a negative impact on consolidated
operations and require continued investments for its operations.
The Company may need to seek outside funding during fiscal 1996 for the
following activities: (1) the approximately 14,000 square foot addition to the
current facility which will cost approximately $385,000 and require additional
office and material handling equipment of approximately $25,000; (2) increased
inventory levels to maintain the Company's excellent customer service
reputation; and (3) approximately $300,000 for updating Oxboro Outdoors tackle
packaging of the recently acquired tackle companies.
Item 7. Financial Statements
Page
Reports of Independent Certified Public Accountants...........
Consolidated Balance Sheet, September 30, 1995................
For the years ended September 30, 1995 and 1994:
Consolidated Statements of Earnings..................
Consolidated Statements of Shareholders'
Equity.............................................
Consolidated Statements of Cash Flows................
Notes to Consolidated Financial Statements....................
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Shareholders and Board of Directors
Oxboro Medical International, Inc.
We have audited the accompanying consolidated balance sheet of Oxboro
Medical International, Inc. as of September 30, 1995, and the related
consolidated statements of earnings, shareholders' equity and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1995 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of Oxboro
Medical International, Inc. as of September 30, 1995, and the results of its
operations and its cash flows for the year then ended, in conformity with
generally accepted accounting principles.
GRANT THORNTON LLP
Minneapolis, Minnesota
December 8, 1995
Report of Independent Accountants
To the Board of Directors and
Shareholders of Oxboro Medical International, Inc.
In our opinion, the accompanying consolidated statement of earnings and the
related consolidated statements of shareholders' equity and of cash flows
present fairly, in all material respects, the results of operations and cash
flows of Oxboro Medical International, Inc. and its subsidiary for the year
ended September 30, 1994 in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for the opinion expressed
above.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Minneapolis, Minnesota
December 2, 1994
OXBORO MEDICAL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1995
ASSETS
CURRENT ASSETS
Cash and cash equivalents (note A2) $ 689,420
Receivables (note A3)
Trade, net of allowance of $17,547 577,296
Interest receivable 15,134
-----------
592,430
Inventories (note A4) 1,807,666
Deferred income taxes (notes A7 and E) 74,000
Other current assets 122,710
-----------
Total current assets 3,286,226
PROPERTY, PLANT AND EQUIPMENT --
AT COST (note A5)
Land 57,211
Building 472,020
Furniture and equipment 728,802
-----------
1,258,033
Less accumulated depreciation 484,412
-----------
773,621
Construction in process 196,727
-----------
970,348
INVESTMENTS (note B) 323,847
OTHER ASSETS (note A6) 206,978
-----------
$ 4,787,399
===========
LIABILITIES AND
SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 164,972
Accrued salaries, wages and payroll taxes 310,643
Other accrued expenses 62,193
-----------
Total current liabilities 537,808
DEFERRED INCOME TAXES (notes A7 and E) 121,000
COMMITMENTS AND CONTINGENCIES (notes F and H) --
SHAREHOLDERS' EQUITY
Undesignated shares, $.01 par value;
5,000,000 shares authorized;
no shares issued or outstanding --
Common stock, $.01 par value;
5,000,000 shares authorized;
2,672,278 shares issued and outstanding 26,722
Additional paid-in capital 2,276,111
Retained earnings 2,981,814
-----------
5,284,647
Less receivable from employee stock
ownership plan (note D) (108,806)
Less stock subscription receivable (note F) (80,000)
Less stock in escrow related to research
and development arrangement (note C) (967,250)
---------
4,128,591
---------
$4,787,399
=========
The accompanying notes are an integral part of these statements.
OXBORO MEDICAL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED SEPTEMBER 30,
1995 1994
------ ------
Net sales (note G) $ 3,877,167 $ 3,464,536
Cost of goods sold 956,819 796,013
----------- -----------
Gross margin 2,920,348 2,668,523
Selling, general and administrative expenses 2,629,936 2,137,751
----------- -----------
Operating income 290,412 530,772
Other (income) expense
Loss from limited partnership 13,104 14,118
Loss on sale of short-term investment -- 37,534
Other (46,731) (63,851)
----------- -----------
Earnings before income taxes 324,039 542,971
Income tax expense (note E) 111,000 211,072
----------- -----------
NET EARNINGS $ 213,039 $ 331,899
=========== ===========
Net earnings per common share (note A8) $ 0.08 $ .13
=========== ===========
Weighted average common shares outstanding 2,672,278 2,619,780
=========== ===========
The accompanying notes are an integral part of these statements.
OXBORO MEDICAL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Common stock Additional
------------ paid-in
Shares Amount capital
------ ------ -------
Balance at October 1, 1993 2,366,952 $ 23,669 $ 1,937,682
Payment on ESOP receivable -- -- --
Options exercised with
related tax benefit 387,000 3,870 468,189
Common stock retired (81,674) (817) (129,760)
Net earnings -- -- --
----------- ----------- -----------
Balance at September 30, 1994 2,672,278 26,722 2,276,111
Payment on ESOP receivable -- -- --
Payment on stock
subscription receivable -- -- --
Net earnings -- -- --
----------- ----------- -----------
Balance at September 30, 1995 2,672,278 $ 26,722 $ 2,276,111
=========== =========== ===========
The following is the continuation of the previous table.
OXBORO MEDICAL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Receivable Stock in
from escrow related
employee Stock to research and
Retained stock subscription development
earnings ownership plan receivable arrangement Total
-------- -------------- ---------- ----------- -----
$ 2,436,876 $ (123,806) $ -- $ (967,250) $ 3,307,171
-- 7,500 -- -- 7,500
-- -- (160,000) -- 312,059
-- -- -- -- (130,577)
331,899 -- -- -- 331,899
- ----------- ----------- ----------- ----------- -----------
2,768,775 (116,306) (160,000) (967,250) 3,828,052
-- 7,500 -- -- 7,500
-- -- 80,000 -- 80,000
213,039 -- -- -- 213,039
- ----------- ----------- ----------- ----------- -----------
$ 2,981,814 $ (108,806) $ (80,000) $ (967,250) $ 4,128,591
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of these statements.
OXBORO MEDICAL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
1995 1994
------ -----
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 213,039 $ 331,899
Adjustments to reconcile net earnings to net cash provided
by (used in) operating activities:
Depreciation and amortization 152,331 101,635
Loss from limited partnership 13,104 14,118
Loss on sale of short-term investments -- 37,534
Deferred income taxes 47,000 --
Change in operating assets and liabilities
Trade accounts receivable (115,690) (35,459)
Inventories (499,182) (179,899)
Other current assets (24,615) (66,361)
Accounts payable 66,327 43,976
Income taxes payable -- (137,928)
Accrued liabilities (31,847) 41,350
----------- -----------
Net cash provided by (used in)
operating activities (179,533) 150,865
Cash flows from investing activities:
Sale of short-term investments -- 1,027,756
Purchase of property, plant and equipment (195,613) (128,595)
Additions to other assets (180,876) (147,266)
----------- -----------
Net cash provided by (used in)
investing activities (376,489) 751,895
Cash flows from financing activities:
Proceeds from ESOP receivable 7,500 7,500
Proceeds from stock subscription receivable 80,000 --
Proceeds from exercise of stock options -- 115,400
----------- -----------
Net cash provided by financing activities 87,500 122,900
----------- -----------
Net increase (decrease) in cash and cash equivalents (468,522) 1,025,660
Cash and cash equivalents at beginning of year 1,157,942 132,282
----------- -----------
Cash and cash equivalents at end of year $ 689,420 $ 1,157,942
=========== ===========
Supplemental disclosure of cash flow information: Cash paid during the year for:
Interest $ 13,026 $ 12,492
Income taxes 94,375 349,000
Supplemental disclosure of noncash investing and financing activities:
During 1994, the company received a note receivable in the amount of $160,000
in conjunction with the exercise of stock options. During 1994, stock options
were exercised through a reduction of a bonus payable in the amount of
$8,750.
</TABLE>
OXBORO MEDICAL INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Oxboro Medical International, Inc. ("the Company") develops, assembles and
markets disposable medical products for use in general and cardiovascular
surgery. The Company also has a wholly-owned subsidiary, Oxboro Outdoors, Inc.,
which develops and markets products for outdoor recreational use.
1. Consolidation Policy
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary, Oxboro Outdoors, Inc. All significant intercompany
transactions and accounts have been eliminated in consolidation.
2. Cash and Cash Equivalents
The Company considers all highly liquid temporary investments with original
maturities of three months or less to be cash equivalents. At September 30,
1995, substantially all of the Company's cash and cash equivalents are invested
in a money market fund.
3. Accounts Receivable
The Company grants credit to customers in the normal course of business, but
generally does not require collateral or any other security to support amounts
due. The Company's customers are located principally throughout the United
States.
4. Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market. Inventories consist of the following at September 30, 1995:
Raw materials $ 863,694
Finished good 943,972
----------
$1,807,666
==========
5. Depreciation
Depreciation is provided in amounts sufficient to charge the cost of depreciable
assets to operations over their estimated service lives, principally on
straight-line methods for financial reporting purposes and on straight-line and
accelerated methods for income tax reporting purposes. Estimated service lives
for financial reporting purposes are as follows:
Number of years
---------------
Building 30
Furniture and equipment 7
6. Other Assets
Other assets as of September 30, 1995 are summarized as follows:
Advanced royalty payments $127,500
Patents 30,781
Package development costs 44,500
Goodwill 38,500
Other 27,534
------
268,815
Less amortization 61,837
-------
$206,978
========
Advanced royalty payments are capitalized when paid and amortized over the
period in which the related products are sold.
Costs incurred to register patents are capitalized as incurred. Amortization
commences when the related patent is granted. Costs are amortized over the
estimated useful lives of the patents which range from four to seventeen years.
Certain package design costs are capitalized as incurred and are amortized over
their estimated useful life of five years.
Goodwill resulted from certain purchase acquisition transactions. Goodwill is
amortized to operations over five years.
7. Income Taxes
The Company implemented Financial Accounting Standards Board Statement of
Financial Standards No. 109, "Accounting for Income Taxes" during 1994. Deferred
income taxes are accounted for using the liability method, which provides that
deferred tax assets and liabilities are recorded based on the difference between
the tax bases of assets and liabilities and their carrying amounts for financial
reporting purposes.
8. Net Earnings Per Common Share
Net earnings per common share is based upon the weighted average number of
outstanding common shares.
NOTE B - INVESTMENTS
Investments consist of the following at September 30, 1995:
Investment in limited partnership (note C) $ 61,526
Cash surrender value of life insurance 262,321
--------
$323,847
========
NOTE C - INVESTMENT IN LIMITED PARTNERSHIP
The Company has a 30% limited partnership interest in a partnership formed to
develop processes or devices for inhibiting rejection in connection with organ
transplant procedures. This investment includes cost in excess of the net assets
acquired (goodwill), which is being amortized over a five-year life. The general
partner of the limited partnership is a corporation owned by a significant
shareholder of the Company (note F).
In connection with this investment, the Board of Directors authorized the
Company to enter into an agreement ("Stock Award Agreement") to issue 200,000
shares, and subsequently by amendment, 183,500 shares of common stock to the
general partner in October 1990 and July 1991, respectively, with a total fair
market value at the dates of issuance of $967,250. These shares have been placed
in escrow and will be released to the general partner on the attainment of
specific project development milestones. Upon attainment of these milestones,
shares released from escrow will be charged to research and development expense
based on their fair market value at the date the milestones are achieved. The
agreement was to expire on October 31, 1995. As of September 30, 1995, none of
the milestones had been met and all 383,500 shares remain in escrow. These
shares can be voted by the general partner while in escrow; however, any cash
dividends paid would be placed in escrow until the shares are released.
Effective October 31, 1995, the Company extended the Stock Award Agreement to
October 31, 1998.
NOTE D - SHAREHOLDERS' EQUITY
Employee Stock Ownership Plan
In October 1988, the Board of Directors adopted an Employee Stock Ownership Plan
(ESOP). In December 1988, the Company advanced $150,000 to the ESOP for the
purchase of 225,000 shares of newly issued common stock at $.67 a share. The
loan to the ESOP bears interest at 9% per annum and is to be repaid over 20
years in annual payments of $7,500 plus interest. Repayment by the ESOP will be
made from future annual contributions by the Company. The ESOP contributions
charged to operations were approximately $20,000 for each of the years ended
September 30, 1995 and 1994.
Stock Options
The Company has granted nonqualified stock options to key employees and other
individuals providing services to the Company at an exercise price not less than
market price as of the date of grant. Each grant awarded specifies the period
for which the options are exercisable and provides that the options shall expire
at the end of such period.
Option transactions for the two years ended September 30, 1995 are summarized as
follows:
Number Option
of shares price range
--------- -----------
Outstanding at October 1, 1993 487,000 $.67 - $2.75
Exercised (387,000) .67 - 1.88
--------
Outstanding at September 30, 1994 100,000 2.50 - 2.75
Granted 120,364 1.50 - 1.63
-------
Outstanding at September 30, 1995 220,364 $1.50 - $2.75
=======
Options to purchase 185,364 shares were exercisable at September 30, 1995.
NOTE E - INCOME TAXES
Deferred income tax assets and liabilities consist of the following at September
30, 1995:
Deferred tax assets
Accrued liabilities $ 6,000
Allowance for doubtful accounts 7,000
Inventories 51,000
Capital loss carryforward 13,000
Charitable contribution carryforward 8,000
Other 2,000
---------
87,000
Valuation allowance (13,000)
-------
$ 74,000
=========
Deferred tax liabilities
Property and equipment $ 106,000
Capitalized catalog costs 15,000
---------
$ 121,000
=========
Income tax expense consists of the following:
Years ended
September 30,
1995 1994
---- ----
Currently payable
Federal $ 56,000 $192,361
State 8,000 18,711
-------- --------
64,000 211,072
Deferred
Federal 43,000 --
State 4,000 --
-------- --------
47,000 --
-------- --------
$111,000 $211,072
======== ========
A reconciliation of income taxes at the statutory rate to the actual income
taxes provided is as follows:
Years ended
September 30,
-------------
1995 1994
---- ----
Federal tax, at statutory rate 34.0% 34.0%
State income taxes, net of federal tax benefit 2.0 2.3
Permanent differences 5.0 .2
Capital loss carried forward -- 2.4
Income tax credits (6.2) --
Other (.5) --
---- ----
Effective rate 34.3% 38.9%
==== ====
The Company has a capital loss carryforward of approximately $35,000 available
to offset future capital gains and a charitable contribution carryforward of
approximately $23,000 which may be carried forward for up to five years.
Benefits of these carryforwards will be recognized as they become deductible for
tax purposes.
NOTE F - RELATED PARTY TRANSACTIONS
Significant Shareholder
The Company has entered into several transactions with a significant shareholder
and Chief Financial Officer of the Company as described below.
The shareholder entered into an employment agreement with the Company in April
1993. Prior to that date, services were provided under a consulting arrangement.
Total compensation paid under these arrangements was approximately $277,000 and
$319,000 in 1995 and 1994, respectively. The employment agreement provides for a
five-year term (through April 1998) and includes a non-compete covenant for two
years from the date of termination and a provision for severance compensation on
termination of employment under certain circumstances during the term of the
agreement. A similar employment agreement exists with the Company's president.
Under an exclusive license agreement with the shareholder for specified products
developed by the individual, royalties of 4% of the net sales price of the
products sold by the Company are to be paid. Royalties earned by the shareholder
were $21,455 and $16,447 during the years ended September 30, 1995 and 1994,
respectively.
Under an exclusive license agreement with the shareholder for specified Oxboro
Outdoors, Inc. products invented or developed, royalties ranging from 8% to 9%
of the net sales price of the products sold are to be paid. Advance royalties
are paid on products accepted for production. Royalties paid to the shareholder
(which only consisted of advance royalties) approximated $52,500 for the year
ended September 30, 1994. No royalties were paid for the year ended September
30, 1995. The shareholder is not entitled to further royalties on such products
until net sales of all products eligible for royalties multiplied by the
applicable royalty percentage exceeds the sum of all paid royalty advances.
The shareholder is the sole trustee of, and votes the unallocated shares held in
the Company's Employee Stock Ownership Plan, and is the sole shareholder of the
general partner described in note C.
Other
A director of the Company received approximately $60,000 during each of the
fiscal years ended September 30, 1995 and 1994 for general business consulting
and for development and enhancement of the Company's computer capabilities.
Another director received approximately $10,000 in commissions from the sale of
insurance policies to the Company during each of the years ended September 30,
1995 and 1994. This director also received $30,000 in consulting fees related to
Oxboro Outdoors, Inc. during each of the years ended September 30, 1995 and
1994.
Each director of the Company who is not an employee receives a fee for services
provided in the amount of $300 - $600 per month. The aggregate fees paid to
nonmanagement directors for services rendered for the years ended September 30,
1995 and 1994 were approximately $20,000 and $18,000, respectively. The
directors also received bonuses ranging from $3,600 to $5,000 in each of the
years ended September 30, 1995 and 1994.
During 1994 the President of the Company issued a promissory note to the Company
in the amount of $160,000 in conjunction with the exercise of stock options. The
note bears interest at the stated Applicable Federal Rate (effective rate of
6.38% at September 30, 1995) and is due in annual installments through January
25, 1999; $80,000 remained outstanding under this note at September 30, 1995.
Additionally, under a product development incentive agreement, this officer will
receive royalties of 4% of net sales of products he developed for the Company.
Royalty payments under this agreement do not accrue and will not commence until
the officer retires. This officer, and the Chief Financial Officer, participate
in a royalty sharing agreement related to certain products jointly developed for
the Company and its subsidiary. Provisions of this agreement may affect payment
terms of other royalty and license agreements described above.
NOTE G - SEGMENT INFORMATION
Oxboro Medical International, Inc. operates in two industry segments: medical
supplies ("Medical") and outdoor recreational supplies ("Outdoors"). Financial
information by industry segment as of and for the years ended September 30, 1995
and 1994 is summarized as follows:
Medical Outdoors Consolidated
------- -------- ------------
1995
- ----
Net sales $ 3,775,285 $ 101,882 $ 3,877,167
Direct contribution
operating income (loss)
1,638,707 (537,710) 1,100,997
Allocation of corporate expense (667,193) (143,392) (810,585)
----------- ----------- -----------
Operating income (loss) $ 971,514 $ (681,102) $ 290,412
=========== =========== ===========
Identifiable assets $ 4,008,019 $ 779,380 $ 4,787,399
1994
- ----
Net sales $ 3,422,404 $ 42,132 $ 3,464,536
Direct contribution
operating income (loss) 1,814,686 (464,462) 1,350,224
Allocation of corporate expense (674,516) (144,936) (819,452)
----------- ----------- -----------
Operating income (loss) $ 1,140,170 $ (609,398) $ 530,772
=========== =========== ===========
Identifiable assets $ 3,997,439 $ 413,746 $ 4,411,185
Direct contribution operating income (loss) represents segment revenues less
directly related operating expenditures of the Company's segments. Management
believes this is the most meaningful measurement of each segment's results as it
excludes consideration of corporate expenses which are common to both business
segments.
Corporate expenses are comprised principally of senior management's compensation
and facility costs of the Company's administrative and distribution
headquarters. These costs generally would not be subject to significant
reduction upon the discontinuance or disposal of one of the segments.
NOTE H - COMMITMENTS
Leases
The Company has entered into various operating lease agreements for warehouse
space and equipment rental. These agreements may be canceled at any time by the
Company. Rent expense was $16,750 and $6,021 for fiscal years ended September
30, 1995 and 1994, respectively.
At September 30, 1995, the future aggregate minimum annual lease payments due
under these operating leases for the years ending September 30 are as follows:
1996 $22,837
1997 1,887
1998 1,730
-------
$26,454
=======
Building Construction
At September 30, 1995, the Company has committed approximately $385,000 to the
construction of additional warehouse space.
Consulting Agreements
In October 1994, Oxboro Outdoors, Inc. entered into a six year consulting
agreement with an individual which provides for annual payments of approximately
$25,000.
On November 1, 1995, the Company entered into consulting agreements with the
President and Chief Financial Officer which provide that upon reaching age 55
and retiring from the Company, each will receive $150,000 per year for a minimum
of five years. These agreements require the officers to be available to the
Company for a certain number of hours per month and prohibit them from competing
with the Company during the terms of the agreements.
NOTE I - FUTURE EFFECT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards (SFAS) 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of, which establishes
guidance for when to recognize and how to measure impairment losses of
long-lived assets and certain identifiable intangibles, and how to value
long-lived assets to be disposed of. SFAS 121 is effective for fiscal years
beginning after December 15, 1995. Management has not determined when it will
adopt this Statement, but believes such adoption will not have a material effect
on the Company's financial position or results of operations.
Additionally, the FASB has issued SFAS 123, Accounting for Stock-Based
Compensation, which establishes financial accounting and reporting standards for
stock-based employee compensation plans. SFAS 123 is effective for fiscal years
beginning after December 15, 1995. Management has not determined when it will
adopt this Statement, but believes the adoption of this Statement will not have
a material effect on the Company's financial position or results of operations.
NOTE J - LEGAL PROCEEDINGS
The Company is subject to various legal proceedings in the normal course of
business. Management believes that these proceedings will not have a material
adverse effect on the consolidated financial statements.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
The information required by this item is contained in the Proxy
Statement under "Relationship with Independent Accountants."
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act
Information required by Item 9 is contained in the Proxy Statement
under "Election of Directors."
Item 10. Executive Compensation
Information required by Item 10 is contained in the Proxy Statement
under "Election of Directors" and "Executive Compensation."
Item 11. Security Ownership of Certain Beneficial Owners and Management
Information required by Item 11 is contained in the Proxy Statement
under "Common Stock Ownership."
Item 12. Certain Relationships and Related Transactions
Information required by Item 12 is contained in the Proxy Statement
under "Executive Compensation" and "Certain Relationships and Related
Transactions."
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits.
See "Exhibit Index" for list of Exhibits filed with this report.
(b) Reports on Form 8-K.
During the quarter ended September 30, 1995, the Registrant filed a
report on Form 8-K dated August 1, 1995, reporting under Item 4 the
engagement of Grant Thornton LLP as its principal independent
accountant.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
OXBORO MEDICAL INTERNATIONAL, INC.
Dated: December 29, 1995 By /s/ Harley Haase
--- ----------------
Harley Haase, President
Dated: December 29, 1995 By /s/ Larry A. Rasmusson
--- ----------------------
Larry A. Rasmusson, Chief
Financial Officer
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the Registrant and in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
<S> <C> <C>
/s/ Harley Haase President, principal December 29, 1995
- ----------------------- ---
Harley Haase executive officer,
director
/s/ Larry A. Rasmusson Chairman of the Board December 29, 1995
- ----------------------- ---
Larry A. Rasmusson and principal financial
and accounting officer
/s/ Keith A. Olson Director December 29, 1995
- ----------------------- ---
Keith A. Olson
/s/ Dennis L. Mikkelson Director December 29, 1995
- ----------------------- ---
Dennis L. Mikkelson
/s/ John R. Walter Director December 29, 1995
- ----------------------- ---
John R. Walter
</TABLE>
* Denotes management contract or compensatory plan or arrangement.
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT DESCRIPTION PAGE
<S> <C>
3.1 Articles of Incorporation as restated effective July 27, 1994
3.2 Amended and Restated Bylaws effective February 23, 1995
10.1 Limited Partnership Agreement for Project Heart was
filed as Exhibit 10.2 to the Registrant's Annual Report
on Form 10-K for the year ended September 30, 1990 (the
"1990 10-K") incorporated herein by reference
*10.2(a) Stock Award Agreement dated October 1, 1990 between the
Registrant and Larry Rasmusson was filed as Exhibit
10.3 to the 1990 10-K and is incorporated herein by
reference
*10.2(b) Amendment No. 1 to Stock Award Agreement, effective June 19, 1991, was
filed as Exhibit 10.1 to Report on Form 8-K dated June 19, 1991 ("Form
8-K"), and is incorporated herein by reference
*10.2(c) Amendment No. 2 to Stock Award Agreement, effective October 31, 1995
*10.3(a) Exclusive License Agreement between the Registrant and Larry Rasmusson
dated April 1, 1990 was filed as Exhibit 10.6 to the 1990 10-K and is
incorporated herein by reference
*10.3(b) First Amendment to Exclusive License Agreement, effective November 8, 1995
*10.4(a)
Employment Agreement between the Registrant and Larry
A. Rasmusson dated April 1, 1993 was filed as Exhibit
10.6 to the Registrant's Annual Report on Form 10-KSB
for the year ended September 30, 1993 (the "1993
10-KSB") and is incorporated herein by reference
*10.4(b) First Amendment to Employment Agreement, effective December 21, 1993
Exclusive License and Royalty Agreement between Oxboro Outdoors, Inc. and
*10.5(a) Larry Rasmusson dated April 17, 1993 was filed as Exhibit 10.7 to the 1993
10-KSB and is incorporated herein by reference
*10.5(b) First Amendment to Exclusive License and Royalty Agreement, effective
December 21, 1993
*10.5(c) Second Amendment to Exclusive License and Royalty Agreement, effective
November 8, 1995
*10.6 Consulting Agreement, effective November 1, 1995, by and between the
Registrant and Larry Rasmusson
*10.7 Stock Option Agreement, effective August 17, 1995, by and between the
Registrant and Larry Rasmusson
*10.8(a) Employment Agreement between the Registrant and Harley
Haase dated April 1, 1993 was filed as Exhibit 10.9 to
the 1993 10-KSB and is incorporated
herein by reference
*10.8(b) First Amendment to Employment Agreement, effective December 21, 1993
*10.9(a) Stock Option Exercise and Loan Agreement dated January
25, 1994 by and between the Registrant and Harley Haase
was filed as Exhibit 10.9(a) to the Registrant's Report
on Form 10-KSB for the year ended September 30, 1994
(the "1994 10-KSB") and is incorporated herein by
reference
*10.9(b) $160,000 Secured Promissory Note dated January 25, 1994
from Harley Haase to the Registrant was filed as
Exhibit 10.9(b) to the 1994 10-KSB and is
incorporated herein by reference
*10.9(c) Instruments Security Agreement dated February 21, 1994
by and between Harley Haase and the Registrant was
filed as Exhibit 10.9(c) to the 1994 10-KSB and is
incorporated herein by reference
*10.10 Consulting Agreement, effective November 1, 1995, by and between the
Registrant and Harley Haase
*10.11 Product Development and Incentive Agreement, effective
November 8, 1995, by and between the Registrant and
Harley Haase
*10.12 Royalty Sharing Agreement, effective November 21, 1995, by and between the
Registrant, Oxboro Outdoors, Inc., Larry Rasmusson and Harley Haase
*10.13 Bonus Programs for Harley Haase, Keith Olson, and Larry Rasmusson adopted
May 30, 1990 were filed as Exhibit 10.11 to the
Registrant's Annual Report on Form 10-K for the year
ended September 30, 1991 and are incorporated herein by
reference
11 Calculation of primary earnings per share
16 Letter from Price Waterhouse LLP was filed as Exhibit
16 to Report on Form 8-K dated June 9, 1995 and is
incorporated herein by reference
21 The Registrant has two subsidiaries, Oxboro Medical,
Inc., and Oxboro Outdoors, Inc., both of which are
incorporated in the State of Minnesota.
27 Financial Data Schedule
</TABLE>
* Denotes management contract or compensatory plan or arrangement.
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
OXBORO MEDICAL INTERNATIONAL, INC.
The undersigned, Harley Haase and Dennis L. Mikkelson, being of full age,
do hereby certify that they are the president and secretary, respectively, of
Oxboro Medical International, Inc., that Oxboro Medical International, Inc., is
organized under the Minnesota Business Corporation Act, Minnesota Statutes,
Chapter 302A; and that, in accordance with Chapter 302A, at a regular meeting of
the Board of Directors of Oxboro Medical International, Inc. held on March 3,
1994, the majority of the directors adopted the following amendment, and that
the amendment correctly sets forth without change the corresponding provisions
of the Articles of Incorporation as previously amended:
ARTICLE I
The name of this corporation shall be Oxboro Medical International, Inc.
ARTICLE II
This corporation has been formed for general business purposes.
ARTICLE III
The corporation shall have all of the powers granted or available under the
laws of the State of Minnesota and laws amendatory thereof and supplementary
thereto, including but not limited to the following:
1. The power to establish and operate life centers for the control of
smoking and for weight loss.
2. The power to acquire, own, pledge, dispose of and deal in real and
personal property, tangible and intangible, shares of capital stock,
rights, bonds, debentures, notes, trust receipts and other securities,
obligations, choses in action and evidences of indebtedness or interest
issued or created by any corporations (including this corporation),
associations, firms, trusts or persons, public or private, or by the
government of the United States of America, or by any foreign government or
by any state, territory, province, municipality or other political
subdivision or by any governmental agency, domestic or foreign, and as
owner thereof to possess and exercise all the rights, powers and privileges
of ownership, including the right whenever applicable, to execute consents
and vote thereon, and to do any and all acts and things necessary or
advisable for the preservation, protection, improvement and enhancement in
value thereof.
3. The power to aid in any manner any corporation, association, firm
or individual, any of whose securities, evidences of indebtedness,
obligations or stock are held by the corporation directly or indirectly, or
in which, or in the welfare of which, the corporation shall have any
interest, and to guarantee securities, evidences of indebtedness and
obligations of other persons, firms, associations and corporations.
4. The power to carry out all or any part of the purposes of this
corporation as a principal or agent, or in conjunction, or as a partner or
member of a partnership, syndicate or joint venture or otherwise, and in
any part of the world to the same extent as fully as natural persons might
or could do.
ARTICLE IV
The duration of this corporation shall be perpetual.
ARTICLE V
The location and post office address of this corporation's registered
office in this state shall be 13828 Lincoln Street, N. E., Ham Lake, Minnesota
55304.
ARTICLE VI
The minimum amount of stated capital with which this corporation will begin
business shall not be less than One Thousand and no/100 Dollars ($1,000.00).
ARTICLE VII
The aggregate number of shares this corporation has authority to issue
shall be 10,000,000 shares, which shall consist of 5,000,000 shares of Common
Stock, with a par value of $.Ol per share, and 5,000,000 undesignated shares,
with a par value of $.Ol per share. The Board of Directors is authorized to
establish from the undesignated shares, by resolution adopted and filed in the
manner provided by law, one or more classes or series and to set forth the
designation of each such class or series and fix the relative rights and
preferences of each such class or series, including, but not limited to, fixing
the relative voting rights, if any, of each such class or series to the full
extent permitted by law. The Board shall be authorized to issue shares of Common
Stock to holders of Common Stock and to holders of any class or series of
undesignated shares and to issue shares of any class or series of undesignated
shares to holders of Common Stock and to holders of any class or series of
undesignated shares, in any case, for any purpose.
All shares of Common Stock shall be equal in every respect. At all meetings
of the shareholders, each shareholder of record entitled to vote thereat shall
be entitled to one (1) vote for each share (and a fractional vote for and equal
to each fractional share) of Common Stock standing in his name and entitled to
vote at such meetings. Shareholders shall have no rights of cumulative voting.
Shareholders shall not be entitled as a matter of right, preemptive or
otherwise, to subscribe or apply for a purchase or receive any part of any
unissued stock or other securities of this corporation, or of any stock or other
securities issued and thereafter acquired by this corporation.
ARTICLE VIII
The name and post office address of the incorporator of this corporation
are as follows:
Steven R. Hedges
2850 Metro Drive, Suite 800
Minneapolis, MN 55420
ARTICLE IX
The business and affairs of this corporation shall be managed by or under
the direction of a Board of Directors consisting of not less than two persons,
who need not be shareholders. The number of directors may be increased by the
shareholders or by a 2/3 vote of the entire Board of Directors or decreased by
the shareholders to not less than three; provided, however, that any change in
the number of directors on the Board of Directors (including, without
limitation, changes at annual meetings of shareholders) shall be approved by the
affirmative vote of not less than 75% of the voting power of this corporation's
shares outstanding and entitled to vote, voting together as a single class,
unless such change shall have been approved by a majority of the entire Board of
Directors. If such change shall not have been so approved, the number of
directors shall remain the. same. For purposes of this Article IX, the shares of
this corporation entitled to vote shall be those Shares of this corporation's
capital stock entitled to vote generally in the election of directors of this
corporation.
The directors shall be divided into three classes, designated Class I,
Class II, and Class III, except as otherwise provided pursuant to this Article
IX. Each class shall consist, as nearly as may be possible, of one-third of the
total number of directors constituting the entire Board of Directors. At the
1990 annual meeting of shareholders, two directors shall be elected, one of whom
shall be a Class I director elected for a one"-year term and one of whom shall
be a Class III director elected for a three-year term. Any Class II director
elected by the shareholders or appointed by the Board of Directors prior to the
1992 annual meeting of shareholders shall serve until the 1992 annual meeting of
shareholders. At each succeeding annual meeting of shareholders beginning in
1991, successors to the class of directors whose term expires at that annual
meeting shall be elected for a three-year term. If the number of directors is
changed, any increase or decrease shall be apportioned among the classes so as
to maintain the number of directors in each class as nearly equal as possible,
and any additional director of any class elected or appointed to fill a vacancy
resulting from an increase in such class shall hold office initially for a term
that shall coincide with the remaining term of that class. In no case will a
decrease in the number of directors shorten the term of any incumbent director.
A director shall hold office until the annual meeting for the year in which the
director's term expires and until a successor shall be elected and qualify,
subject, however, to prior death, resignation, retirement, disqualification or
removal from office. Removal of a director from office by the shareholders, with
or without cause, shall require the affirmative vote of the greater of (1) a
majority of the voting power of this corporation's shares outstanding and
entitled to vote, voting together as a single class, or (2) at least 75% of the
voting power of this corporation's shares present and entitled to vote, voting
as a single class. Any vacancy on the Board of Directors that results from an
increase in the number of directors shall be filled by a majority of the entire
Board of Directors then in office, and any other vacancy occurring in the Board
of Directors shall be filled by a majority of the directors then in office,
although less than a quorum, or by a sole remaining director. Any director
elected or appointed to fill a vacancy not resulting from an increase in the
number of directors shall have the same remaining term as such director's
predecessor. In addition to the authority of the shareholders to remove
directors as described above, any director appointed by the Board of Directors
to fill a vacancy, however created, may be removed prior to such director's
initial election by the shareholders, with or without cause, by the vote of a
majority of the other members of the Board of Directors then in office.
Notwithstanding the foregoing, whenever the holders of any one or more
classes of capital stock (other than common stock) issued by this corporation
shall have the right, voting separately by class or series, to elect directors
at an annual or special meeting of shareholders, the election, term of office,
filling of vacancies and other features of such directorships shall be governed
by or pursuant to the applicable terms of the certificate of designation or
other instrument creating such class or series of capital stock, and such
directors so elected shall not be divided into classes pursuant to this Article
IX unless expressly provided by such terms.
Only persons who are nominated in accordance with the procedures set forth
in this Article IX shall be eligible for election as Directors. Nominations of
persons for election to the Board of Directors of this corporation may be made
at a meeting of shareholders (a) by or at the direction of the Board of
Directors or (b) by any shareholder of this corporation entitled to vote for the
election of Directors at the meeting who complies with the notice procedures set
forth in this Article IX. Nominations by shareholders shall be made pursuant to
timely notice in writing to the Secretary of this corporation. To be timely, a
shareholder's notice shall be delivered to or mailed and received at the
principal executive offices of this corporation not less than 50 days prior to
the meeting; provided, however, that in the event that less than 60 days' notice
or prior public disclosure of the date of the meeting is given or made to
shareholders, notice by the shareholder to be timely must be so received not
later than the close of business on the 10th day following the day on which such
notice of the date of the meeting was mailed or such public disclosure was made.
Such shareholder's notice shall set forth (a) as to each person whom the
shareholder proposes to nominate for election or reelection as a director, all
information relating to such person that is required (or would be required if
this corporation were subject to Regulation 14A under the Securities Exchange
Act of 1934, as amended) to be disclosed in solicitations of proxies or
otherwise pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); and (b) as to
the shareholder giving the notice (i) the name and address, as they appear on
the corporation's books, of such shareholder and (ii) the class and number of
shares of this corporation which are beneficially owned by such shareholder. At
the request of the Board of Directors any person nominated by the Board of
Directors for election as a director shall furnish to the Secretary of this
corporation that information required to be set forth in a shareholder's notice
of nomination which pertains to the nominee. No person shall be eligible for
election as a director of this corporation unless nominated in accordance with
the procedures set forth in this Article IX. The Chairman of the meeting shall,
if the facts warrant, determine that a nomination was not made in accordance
with the procedures prescribed in this Article IX and, if he should so
determine, he shall so declare to the meeting and the defective nomination shall
be disregarded.
At any regular or special meeting of the shareholders, only such business
shall be conducted as shall have been brought before the meeting (a) by or at
the direction of the Board of Directors or (b) by any shareholder of this
corporation who complies with the notice procedures set forth in this Article
IX. For business to be properly brought before any regular or special meeting by
a shareholder, the shareholder must have given timely notice thereof in writing
to the Secretary of this corporation. To be timely, a shareholder's notice must
be delivered to or mailed and received at the principal executive offices of the
corporation not less than 50 days prior to the meeting, provided, however, that
in the event that less than 60 days' notice or prior public disclosure of the
date of the meeting is given or made to the shareholders, notice by the
shareholder to be timely must be received not later than the close of business
on the 10th day following the day on which such notice of the date of the
regular or special meeting was mailed or such public disclosure was made. A
shareholder's notice to the Secretary shall set forth as to each matter the
shareholder proposes to bring before the regular or special meeting (a) a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting, (b) the name and address,
as they appear on this corporation's books, of the shareholder proposing such
business, (c) the class and number of shares of this corporation which are
beneficially owned by the shareholder and (d) any material interest of the
shareholder in such business. Notwithstanding anything in this corporation's
Bylaws to the contrary, no business shall be conducted at any regular or special
meeting except in accordance with the procedures set forth in this Article IX.
The Chairman of the meeting shall, if the facts warrant, determine that business
was not properly brought before the meeting in accordance with the provisions of
this Article IX and, if he should so determine, he shall so declare to the
meeting and any such business not properly brought before the meeting shall not
be transacted.
Notwithstanding any other provisions of these Articles of Incorporation
(and notwithstanding the fact that a lesser percentage or separate class vote
may be specified by law or these Articles of Incorporation), the affirmative
vote of the holders of the greater of (1) a majority of the voting power of this
corporation's shares outstanding and entitled to vote or (2) at least 75% of the
voting power of this corporation's shares present and entitled to vote, in each
case voting together as a single class, shall be required to amend or repeal, or
adopt any provisions inconsistent with, this Article IX.
ARTICLE X
The authority to make and alter the By-Laws of this corporation is hereby
vested in the Board of Directors of this corporation to the full extent
permitted by law, subject, however, to the power of the shareholders of this
corporation to repeal or alter such By-Laws.
Authority is hereby conferred upon and vested in the Board of Directors of
this corporation to accept or reject subscriptions for shares of its capital
stock, whether such subscriptions be made before or after its incorporation. The
Board of Directors shall have the authority to issue shares of stock and
securities of this corporation to the full amount authorized by these Articles
of Incorporation, and shall have the authority to grant and issue rights to
convert securities of the corporation into shares of stock of the corporation,
options to purchase shares or securities convertible into shares, warrants, and
other such rights or options, and to fix the terms, provisions and conditions of
such rights, options and warrants, including the option price or prices at which
shares may be purchased or subscribed for and the conversion basis or bases of
such rights, options and warrants.
ARTICLE XI
The shareholders of this corporation may, by a majority vote of all shares
issued, outstanding and entitled to vote:
1. Authorize the Board of Directors to sell, lease, exchange or
otherwise dispose of all, or substantially all, of its property and assets,
including its goodwill, upon such terms and conditions and for such
consideration, which may be money, shares, bonds, or other instruments for
the payment of money or other property, as the Board of Directors deems
expedient and in the best interests of the corporation;
2. Amend the Articles of Incorporation of this corporation for any
reason or lawful purpose, and in the event that any such amendment
adversely affects the rights of holders of shares of different classes, the
affirmative vote of a majority of each such class shall be sufficient to
adopt the amendment; and
3. Adopt and approve an agreement of merger Of consolidation presented
to them by the Board of Directors.
ARTICLE XII
The corporation shall be subject to and governed by Section 302A.673 of
Minnesota Statutes, as currently in effect and as may be amended from time to
time.
ARTICLE XIII
To the fullest extent permitted by the Minnesota Business Corporation Act
as the same exists or may hereafter be amended, a director of this corporation
shall not be liable to this corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director.
IN WITNESS WHEREOF, the undersigned have hereunto affixed their signatures
this 15 day of April, 1994.
/s/ Harley Haase
Harley Haase, President
/s/ Dennis L. Mikkelson
Dennis L. Mikkelson, Secretary
AMENDED AND RESTATED BYLAWS
OF
OXBORO MEDICAL INTERNATIONAL, INC.
TABLE OF CONTENTS
Page
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ARTICLE I: OFFICES; CORPORATE SEAL................................ 1
Section 1.1. Registered Office....................... 1
Section 1.2. Corporate Seal.......................... 1
ARTICLE II: MEETINGS OF SHAREHOLDERS.............................. 1
Section 2.1. Place of Meeting........................ 1
Section 2.2. Annual Meeting.......................... 1
Section 2.3. Special Meetings........................ 1
Section 2.4. Meetings Held upon Shareholder Demand... 2
Section 2.5. Notice of Meetings...................... 2
Section 2.6. Waiver of Notice........................ 3
Section 2.7. Quorum; Adjourned Meetings.............. 3
Section 2.8. Vote Required........................... 3
Section 2.9. Voting Rights........................... 4
Section 2.10. Proxies................................. 4
Section 2.11. Action Without a Meeting................ 4
Section 2.12. Record Date............................. 5
ARTICLE III: DIRECTORS .......................................... 5
Section 3.1 General Powers.......................... 5
Section 3.2 Number; Term of Office; Qualifications.. 5
Section 3.3 Meetings; Place and Notice.............. 5
Section 3.4 Electronic Communications............... 6
Section 3.5 Waiver of Notice........................ 6
Section 3.6 Quorum; Acts of Board................... 6
Section 3.7 Vacancies............................... 6
Section 3.8 Removal................................. 6
Section 3.9 Resignation............................. 6
Section 3.10 Committees.............................. 7
Section 3.11 Special Litigation Committee............ 7
Section 3.12 Absent Directors........................ 7
Section 3.13 Presumption of Assent................... 7
Section 3.14 Action Without a Meeting................ 8
Section 3.15 Compensation of Directors............... 8
Section 3.16 Limitation of Directors' Liabilities.... 8
ARTICLE IV: OFFICERS ............................................. 8
Section 4.1 Number and Designation.................. 8
Section 4.2 Chief Executive Officer................. 9
Section 4.3 Chief Financial Officer................. 9
Section 4.4 Chairman of the Board................... 9
Section 4.5 President............................... 10
Section 4.6 Vice Presidents......................... 10
Section 4.7 Secretary............................... 10
Section 4.8 Treasurer............................... 10
Section 4.9 Treasurer's Bond........................ 10
Section 4.10 Authority and Duties.................... 10
Section 4.11 Term; Resignation; Removal; Vacancies... 11
Section 4.12 Salaries................................ 11
ARTICLE V: SHARES AND THEIR TRANSFER ............................. 11
Section 5.1 Certificates for Shares................. 11
Section 5.2 Uncertificated Shares................... 12
Section 5.3 Transfer of Shares...................... 12
Section 5.4 Lost, Destroyed, or Stolen Certificates. 12
Section 5.5 Transfer Agent and Registrar............ 12
Section 5.6 Facsimile Signature..................... 13
Section 5.7 Closing of Transfer Books; Record Date.. 13
Section 5.8 Registered Shareholders................. 13
ARTICLE VI: INDEMNIFICATION ...................................... 13
Section 6.1 Indemnification......................... 13
Section 6.2 Insurance............................... 14
ARTICLE VII: GENERAL CORPORATE MATTERS ........................... 14
Section 7.1 Distributions........................... 14
Section 7.2 Reserves................................ 14
Section 7.3 Deposits................................ 14
Section 7.4 Loans................................... 14
Section 7.5 Advances................................ 15
ARTICLE VIII: BOOKS OF RECORD; AUDIT; FISCAL YEAR ................ 15
Section 8.1 Share Register.......................... 15
Section 8.2 Books, Records, and Other Documents..... 15
Section 8.3 Financial Statements.................... 16
Section 8.4 Audit................................... 16
Section 8.5 Fiscal Year............................. 16
ARTICLE IX: AMENDMENTS ........................................... 16
Section 9.1. Amendments.............................. 16
AMENDED AND RESTATED BYLAWS
OF
OXBORO MEDICAL INTERNATIONAL, INC.
ARTICLE I
OFFICES; CORPORATE SEAL
Section 1.1. Registered Office. The registered office of the Corporation in
Minnesota shall be that set forth in the Articles of Incorporation or in the
most recent amendment of the Articles of Incorporation or in a statement of the
Board of Directors filed with the Secretary of State of the State of Minnesota
changing the registered office in the manner prescribed by law. The Corporation
may have such other offices, within or without the State of Minnesota, as the
Board of Directors shall, from time to time, determine.
Section 1.2. Corporate Seal. If so directed by the Board of Directors, the
Corporation may use a corporate seal. The failure to use such seal, however,
shall not affect the validity of any documents executed on behalf of the
Corporation. The seal need only include the word "seal," but it may also
include, at the discretion of the Board, such additional wording as is permitted
by law.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 2.1. Place of Meeting. Each meeting of the shareholders shall be
held at the principal executive office of the Corporation or such other place as
may be designated by the Board of Directors or the chief executive officer;
provided, however, that any meeting called by or at the demand of a shareholder
or shareholders shall be held in the county where the principal executive office
of the Corporation is located.
Section 2.2. Annual Meeting. An annual meeting of the shareholders shall be
held at such date and at such place as shall be determined by the Board of
Directors. At such meeting the shareholders shall conduct such business of the
Corporation as may properly come before the meeting.
Section 2.3. Special Meetings. A special meeting of the shareholders may be
called for any purpose or purposes at any time by the chief executive officer or
the chief financial officer, by the Board of Directors, or any two or more
members thereof, or by one or more shareholders holding not less than ten
percent (10%) of the voting power of all shares of the Corporation entitled to
vote as provided in Section 2.4(b) hereof, except that a special meeting for the
purpose of considering any action to directly or indirectly facilitate or effect
a business combination, including any action to change or otherwise affect the
composition of the Board of Directors for that purpose, must be called by
twenty-five percent (25%) or more of the voting power of all shares entitled to
vote. The chief executive officer or the Board of Directors shall be authorized
to fix the time and date of any special meeting of the shareholders. Notice of
any special meeting shall state the purpose for which the meeting has been
called, and the business transacted at any special meeting shall be limited to
the purpose stated in the notice, unless all of the shareholders are present in
person or by proxy and none of them objects to the consideration of additional
business.
Section 2.4. Meetings Held upon Shareholder Demand. Annual or special
meetings of the shareholders may be demanded by a shareholder under the
following circumstances:
(a) If an annual meeting of shareholders has not been held during the
immediately preceding fifteen (15) months, a shareholder or shareholders
holding three percent (3%) or more of all voting shares may demand an
annual meeting of shareholders by written notice of demand given to the
chief executive officer or chief financial officer of the Corporation. If
the Board fails to cause an annual meeting to be called and held as
required by law, the shareholder or shareholders making the demand may call
the meeting by giving notice as required by law, all at the expense of the
Corporation.
(b) To demand a special meeting of the shareholders, a shareholder or
shareholders shall give written notice to the chief executive officer or
the chief financial officer of the Corporation specifying the purposes of
such meeting. Upon receipt by the chief executive officer or chief
financial officer of the Corporation of a demand for a special meeting of
shareholders from any shareholder or shareholders entitled to call such a
meeting, the Board of Directors shall cause such meeting to be called and
held in compliance with the timing requirements of Minnesota Statutes
302A.433, Subd. 2, as amended from time to time.
Section 2.5. Notice of Meetings.
(a) Notice of all meetings of shareholders shall be given to every
shareholder entitled to vote, except where the meeting is an adjourned
meeting and the date, time, and place of the meeting were announced at the
time of adjournment. The notice shall be given at least ten (10) days but
not more than sixty (60) days prior to the meeting; provided, however, that
at least fourteen (14) days' notice must be given of a meeting at which the
adoption of an agreement of merger or plan of exchange is to be considered.
(b) Notice of meetings shall be given to each shareholder entitled
thereto by oral communication, by mailing a copy thereof to such
shareholder at the address he has designated or to the last known address
of such shareholder, by handing a copy thereof to such shareholder, or by
any other delivery that conforms to law. Notice by mail shall be deemed
given when deposited in the United States mail with sufficient postage
affixed.
Section 2.6. Waiver of Notice. A shareholder may waive notice of any
meeting of shareholders. A waiver of notice by a shareholder entitled to notice
is effective whether given before, at, or after the meeting and whether given in
writing, orally, or by attendance. Attendance by a shareholder at a meeting
shall constitute waiver of notice of that meeting, except where the shareholder
objects at the beginning of the meeting to the transaction of business because
the meeting is not lawfully called or convened or objects before a vote on an
item of business because the item may not lawfully be considered at the meeting
and the shareholder does not participate in consideration of the item at the
meeting.
Section 2.7. Quorum; Adjourned Meetings. The presence either in person or
by proxy of the holders of a majority of the voting power of the shares entitled
to vote at the meeting shall constitute a quorum for the transaction of
business. If, however, a quorum shall not be present in person or by proxy at
any meeting of the shareholders, those present shall have the power to adjourn
the meeting from time to time, without notice other than by announcement at the
meeting of the date, time, and location of the reconvening of the adjourned
meeting, until the requisite number of voting shares shall be represented. At
any such adjourned meeting at which the required number of voting shares shall
be represented, any business may be transacted which might have been transacted
at the meeting as originally noticed. If a quorum is present when a duly called
or held meeting is convened, the shareholders may continue to transact business
until adjournment even though the withdrawal of shareholders originally present
leaves less than the proportion or number otherwise required for a quorum.
Section 2.8. Vote Required. The shareholders shall take action by the
affirmative vote of the holders of the greater of (a) a majority of the voting
power of the shares present and entitled to vote on that item of business or (b)
a majority of the voting power of the minimum number of the shares entitled to
vote that would constitute a quorum for the transaction of business at the
meeting, except where a larger proportion or number is required by statute or
the Articles of Incorporation. If the Articles of Incorporation require a larger
proportion or number than is required by statute for a particular action, the
Articles of Incorporation shall control.
Section 2.9. Voting Rights.
(a) At each meeting of the shareholders, every shareholder having the
right to vote shall be entitled to vote either in person or by proxy.
Unless otherwise provided by the Articles of Incorporation or resolution of
the Board of Directors filed with the Secretary of State, each shareholder
shall have one vote for each share held. Shares owned by two or more
shareholders may be voted by any one of them unless the Corporation
receives written notice, addressed to the Board of Directors at the address
of the registered office, from any one of them denying the authority of any
other person or persons to vote those shares. Upon demand of any
shareholder, the vote upon any question before the meeting shall be by
ballot.
(b) There shall be no cumulative voting for the election of
directors.
Section 2.10. Proxies. At any meeting of the shareholders, any shareholder
may be represented and vote by a proxy or proxies appointed by an instrument in
writing and filed with an officer of the Corporation at or before the meeting.
An appointment of a proxy or proxies for shares held jointly by two or more
shareholders is valid if signed by any one of them, unless and until the
Corporation receives from any one of those shareholders written notice denying
the authority of such other person or persons to appoint a proxy or proxies or
appointing a different proxy or proxies, in which case no proxy shall be
appointed unless all joint owners sign the appointment. In the event that any
instrument shall designate two or more persons to act as proxies, a majority of
such persons present at the meeting, or if only one shall be present then that
one, shall have and may exercise all of the proxies so designated unless the
instrument shall otherwise provide. If the proxies present at the meeting are
equally divided on an issue, the shares represented by such proxies shall not be
voted on such issue. No proxy shall be valid after the expiration of eleven (11)
months from the date of its execution unless coupled with an interest or unless
the person executing it specifies therein the length of time for which it is to
continue in force, which in no case shall exceed three (3) years from the date
of its execution. Subject to the above, any duly executed proxy shall continue
in full force and effect and shall not be revoked unless written notice of its
revocation or a duly executed proxy bearing a later date is filed with an
officer of the Corporation.
Section 2.11. Action Without a Meeting. Any action required or permitted to
be taken at a meeting of the shareholders may be taken without a meeting, if
authorized in writing or writings signed by all shareholders who would be
entitled to vote on that action. The written action is effective when it has
been signed by all such shareholders, unless a different effective date is
provided in the written action.
Section 2.12. Record Date. The Board of Directors may fix a date, not
exceeding sixty (60) days preceding the date of any meeting of shareholders, as
a record date for the determination of the shareholders entitled to notice of
and to vote at such meeting, and in such case only shareholders of record on the
date so fixed, or their legal representatives, shall be entitled to notice of
and to vote at such meeting, notwithstanding any transfer of any shares on the
books of the Corporation after any record date so fixed. The Board of Directors
may close the books of the Corporation against transfer of shares during the
whole or any part of such period. If the Board of Directors fails to fix a
record date for determination of the shareholders entitled to notice of and to
vote at any meeting of shareholders, the record date shall be the twentieth
(20th) day preceding the date of such meeting.
ARTICLE III
DIRECTORS
Section 3.1. General Powers. The property, affairs, and business of the
Corporation shall be managed by the Board of Directors. The Board of Directors
may exercise all powers of the Corporation and do all lawful acts not required
by the Articles of Incorporation, these Bylaws, or law to be done by the
shareholders.
Section 3.2. Number; Term of Office; Qualifications. The number of
directors which shall constitute the whole Board of Directors and the term of
office of each director shall be fixed in the manner provided in the Articles of
Incorporation of the Corporation. Directors need not be shareholders of the
Corporation.
Section 3.3. Meetings; Place and Notice. Meetings of the Board of Directors
may be held from time to time at any place within or without the State of
Minnesota that the Board of Directors may designate. In the absence of
designation by the Board of Directors, Board meetings shall be held at the
principal executive office of the Corporation, except as may be otherwise
unanimously agreed orally or in writing or by attendance. Board meetings may be
called by the chairman of the Board, the chief executive officer, or any
director on three (3) days notice to each director. Every such notice shall
state the date, time, and place of the meeting. Notice of a meeting called by a
director other than a director who is the chairman of the board or chief
executive officer shall state the purpose of the meeting. Notice may be given by
mail, telephone, telegram, or in person. If a meeting schedule is adopted by the
Board, or if the date and time of a Board meeting has been announced at a
previous meeting, no notice is required.
Section 3.4. Electronic Communications. A conference among directors by any
means of communication through which the directors may simultaneously hear one
another during the conference constitutes a Board meeting if the notice required
by Section 3.3 of these Bylaws is given of the conference and if the number of
directors participating in the conference would be sufficient to constitute a
quorum. Participation in a meeting by such means constitutes presence in person
at the meeting.
Section 3.5. Waiver of Notice. A director may waive notice of a meeting of
the Board. Waiver of notice is effective, whether given before, at, or after the
meeting and whether given in writing, orally, or by attendance. Attendance by a
director at a meeting constitutes waiver of notice for that meeting, except
where the director objects at the beginning of the meeting to the transaction of
business because the meeting is not lawfully called or convened and does not
participate thereafter in the meeting.
Section 3.6. Quorum; Acts of Board. A majority of the directors currently
holding office shall be a quorum for the transaction of business; provided,
however, that if any vacancies exist by reason of death, resignation, or
otherwise, a majority of the remaining directors (provided such majority
consists of not less than two directors) shall constitute a quorum. In the
absence of a quorum, a majority of the directors present may adjourn the meeting
from time to time until a quorum is present. If a quorum is present when a duly
called or held meeting is convened, the directors present may continue to
transact business until adjournment, even though the withdrawal of a number of
directors originally present leaves less than the proportion or number otherwise
required for a quorum. Except as otherwise required by law or the Articles of
Incorporation or these Bylaws, the acts of a majority of the directors present
at a meeting at which a quorum is present shall be the acts of the Board of
Directors.
Section 3.7. Vacancies. Vacancies on the Board shall be filled as provided
in the Articles of Incorporation of the Corporation.
Section 3.8. Removal. Except as otherwise provided by law, removal of a
director from office shall be governed by the Articles of Incorporation of the
Corporation.
Section 3.9. Resignation. Any director may resign at any time by giving
written notice to the Corporation. Such resignation shall take effect on the
date of the Corporation's receipt of such notice or at any later date or time
specified therein, and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make the resignation effective.
Section 3.10. Committees.
(a) A resolution approved by the affirmative vote of a majority of the
Board may establish committees having the authority of the Board in the
management of the business of the Corporation to the extent provided in the
resolution. Except for any special litigation committee established under
Section 3.11 hereof, committees shall be subject at all times to the
direction and control of the Board.
(b) A committee shall consist of one or more natural persons, who need
not be directors, appointed by the affirmative vote of a majority of the
directors present at a duly held meeting of the Board.
(c) Minutes, if any, of committee meetings shall be made available
upon request to members of the committee and to any director.
Section 3.11. Special Litigation Committee. Pursuant to the procedure set
forth in Section 3.10, the Board may establish a committee composed of one or
more independent directors or other independent persons to consider legal rights
or remedies of the Corporation and whether those rights or remedies should be
pursued.
Section 3.12. Absent Directors. A director may give written consent or
opposition to a proposal to be acted on at a Board meeting by giving a written
statement to the chairman of the board or acting chairman of the board setting
forth a summary of the proposal to be voted on and containing a statement from
the director on how he votes on such proposal. If the director is not present at
the meeting, consent or opposition to a proposal does not constitute presence
for purposes of determining the existence of a quorum, but consent or opposition
shall be counted as a vote in favor of, or against, the proposal and shall be
entered in the minutes or other record of action of the meeting if the proposal
acted on at the meeting is substantially the same or has substantially the same
effect as the proposal to which the director has consented or objected.
Section 3.13. Presumption of Assent. A director who is present at a meeting
of the Board when an action is approved by the affirmative vote of a majority of
the directors present is presumed to have assented to the action approved,
unless the director:
(a) objects at the beginning of the meeting to the transaction of the
business because the meeting is not lawfully called or convened and does
not participate thereafter in the meeting, in which case the director shall
not be considered to be present at the meeting for any purpose; and
(b) votes against the action at the meeting; or
(c) is prohibited by law from voting on the action.
Section 3.14. Action Without a Meeting. Any action required or permitted to
be taken at a Board meeting may be taken by written consent of the number of
directors that would be required to take the same action at a meeting of the
Board of Directors at which all directors were present, provided that the
proposed action need not be approved by the shareholders and that the Articles
of Incorporation so provide. The written action is effective when signed by the
necessary number of directors unless a different effective date is stated in the
written action.
Section 3.15. Compensation of Directors. By resolution of the Board of
Directors, each director may be paid his or her expenses, if any, of attendance
at each Board meeting and may be paid a stated amount as a director or a fixed
sum for attendance at each Board meeting, or both. No such payment shall
preclude a director from serving the Corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.
Section 3.16. Limitation of Directors' Liabilities. A director shall not be
liable to the Corporation or its shareholders for dividends illegally declared,
distributions illegally made to shareholders, or any other action taken in good
faith reliance upon financial statements of the Corporation represented to him
to be correct by the chief executive officer of the Corporation or the officer
having charge of its books of account or certified by an independent or
certified public accountant to fairly reflect the financial condition of the
Corporation; nor shall any director be liable if in good faith in determining
the amount available for dividends or distribution the Board values the assets
in a manner allowable under applicable law.
ARTICLE IV
OFFICERS
Section 4.1. Number and Designation. The officers of the Corporation shall
be elected or appointed by the Board of Directors. The Corporation shall have
one or more natural persons exercising the functions of the offices of chief
executive officer and chief financial officer. The Board of Directors may elect
or appoint such other officers or agents as it deems necessary for the operation
and management of the Corporation, with such powers, rights, duties, and
responsibilities as may be determined by the Board, including, without
limitation, a chairman of the Board (who shall be a director), a president, a
secretary, and a treasurer, each of whom shall have the powers, rights, duties,
and responsibilities set forth in these Bylaws, unless otherwise determined by
the Board. Any of the offices or functions of those offices may be held or
performed by the same person.
Section 4.2. Chief Executive Officer. Unless provided otherwise by a
resolution adopted by the Board of Directors, the chief executive officer (a)
shall be responsible for the general active management of the business of the
Corporation; (b) shall, when present, preside at all meetings of the
shareholders; (c) shall be responsible for implementing all orders and
resolutions of the Board; (d) shall sign and deliver in the name of the
Corporation any deeds, mortgages, bonds, contracts, or other instruments
pertaining to the business of the Corporation, except where authority to sign
and deliver is required or permitted by law to be exercised by another person
and except where such authority is expressly delegated by these Bylaws or by the
Board to some other officer or agent of the Corporation; (e) may maintain
records of and certify proceedings of the Board and shareholders; and (f) shall
perform such other duties as may from time to time be assigned by the Board.
Section 4.3. Chief Financial Officer. Unless provided otherwise by a
resolution adopted by the Board of Directors, the chief financial officer (a)
shall keep accurate financial records for the Corporation; (b) shall deposit all
monies, drafts, and checks in the name of and to the credit of the Corporation
in such banks and depositories as the Board of Directors shall designate from
time to time; (c) shall endorse for deposit all notes, checks, and drafts
received by the Corporation as ordered by the Board, making proper vouchers
therefor; (d) shall disburse the funds of the Corporation as may be ordered by
the Board of Directors or the chief executive officer, making proper vouchers
therefor; (e) shall render to the chief executive officer and the Board of
Directors, whenever requested, an account of all of his transactions as chief
financial officer and of the financial condition of the Corporation; and (f)
shall perform such other duties as may be assigned by the Board of Directors or
the chief executive officer from time to time.
Section 4.4. Chairman of the Board. The chairman of the Board of the
Corporation shall preside at all meetings of the Board of Directors and shall
perform such other functions as may be determined from time to time by the
Board.
Section 4.5. President. Unless otherwise determined by the Board of
Directors, the president shall be the chief executive officer of the
Corporation. If an officer other than the president is designated chief
executive officer, the president shall perform such duties as may from time to
time be assigned to him by the Board or, if authorized by the Board, such duties
as are assigned to him by the chief executive officer.
Section 4.6. Vice Presidents. Any one or more vice presidents, if any, may
be appointed by the Board of Directors. During the absence or disability of the
president, it shall be the duty of the highest ranking vice president to perform
the duties of the president. The determination of who is the highest ranking of
two or more persons holding the same office shall, in the absence of specific
designation of order or rank by the Board of Directors, be made on the basis of
the earliest date of appointment or election, or, in the event of simultaneous
appointment or election, on the basis of the longest continuous employment by
the Corporation.
Section 4.7. Secretary. The secretary, unless otherwise determined by the
Board, shall attend all meetings of the shareholders and all meetings of the
Board of Directors, shall record or cause to be recorded all proceedings thereof
in a book to be kept for that purpose, and may certify such proceedings. Except
as otherwise required or permitted by law or by these Bylaws, the secretary
shall give or cause to be given notice of all meetings of the shareholders and
all meetings of the Board of Directors.
Section 4.8. Treasurer. Unless otherwise determined by the Board, the
treasurer shall be the chief financial officer of the Corporation. If an officer
other than the treasurer is designated chief financial officer, the treasurer
shall perform such duties as may from time to time be assigned to him by the
Board.
Section 4.9. Treasurer's Bond. If required by the Board of Directors, the
person or persons performing the duties of the chief financial officer or
treasurer shall each give the Corporation a bond in such sum and with such
surety or sureties as shall be satisfactory to the Board of Directors for the
faithful performance of the duties of his office and for the restoration to the
Corporation, in case of his death, resignation, retirement, or removal from
office, of all books, papers, vouchers, money, and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 4.10. Authority and Duties. In addition to the foregoing authority
and duties, all officers of the Corporation shall respectively have such
authority and perform such duties in the management of the business of the
Corporation as may be designated from time to time by the Board of Directors.
Unless prohibited by a resolution approved by the affirmative vote of a majority
of the directors present, an officer elected or appointed by the Board may,
without the approval of the Board, delegate some or all of the duties and powers
of an office to other persons.
Section 4.11. Term; Resignation; Removal; Vacancies.
(a) All officers of the Corporation shall hold office until their
respective successors are chosen and have qualified or until their earlier
death, resignation, or removal.
(b) An officer may resign at any time by giving written notice to the
Corporation. The resignation is effective without acceptance when the
notice is given to the Corporation, unless a later effective date is
specified in the notice.
(c) An officer may be removed at any time, with or without cause, by a
resolution approved by an affirmative vote of the majority of the directors
present at a duly held Board meeting.
(d) A vacancy in an office because of death, resignation, removal,
disqualification, or other cause may, or in the case of a vacancy in the
office of chief executive officer or chief financial officer shall, be
filled by the Board.
Section 4.12. Salaries. The salaries of all officers of the Corporation
shall be fixed by the Board of Directors or by the chief executive officer, if
authorized by the Board.
ARTICLE V
SHARES AND THEIR TRANSFER
Section 5.1. Certificates for Shares.
(a) Certificates of shares, if any, of the Corporation shall be in
such form as shall be prescribed by law and adopted by the Board of
Directors, certifying the number of shares of the Corporation owned by each
shareholder. The certificates shall be numbered in the order in which they
are issued and shall be signed, in the name of the Corporation, by the
chief executive officer or the chief financial officer or secretary or by
such officers as the Board of Directors may designate. Such signatures may
be by facsimile if authorized by the Board of Directors or these Bylaws.
Such certificates shall also have such legends as may be required by any
shareholder agreement or other agreement.
(b) A certificate representing shares issued by the Corporation shall,
if the Corporation is authorized to issue shares of more than one class or
series, set forth upon the face or back of the certificate, or shall state
that the Corporation will furnish to any shareholder upon request and
without charge, a full statement of the designations, preferences,
limitations, and relative rights of the shares of each class or series
authorized to be issued, so far as they have been determined, and the
authority of the Board to determine the relative rights and preferences of
subsequent classes or series.
Section 5.2. Uncertificated Shares. Some or all of any or all classes and
series of the shares of stock of this Corporation, upon a resolution approved by
the Board of Directors, may be uncertificated shares. Within twenty (20)
calendar days after the issuance or transfer of uncertificated shares, the chief
executive officer shall send to the shareholder such notice as may be required
by law.
Section 5.3. Transfer of Shares. Transfer of certificated shares on the
books of the Corporation may be authorized only by the shareholder named in the
certificate, or the shareholder's legal representative, or the shareholder's
duly authorized attorney-in-fact, and upon surrender of the certificate or the
certificates for such shares therefor properly endorsed. The Corporation may
treat, as the absolute owner of shares of the Corporation, the person or persons
in whose name or names the shares are registered on the books of the
Corporation. The transfer of uncertificated shares, if any, shall be made by the
means determined by the Board of Directors. Every certificate surrendered to the
Corporation for exchange or transfer shall be cancelled, and no new certificate
or certificates shall be issued in exchange for any existing certificate until
such existing certificate shall have been so cancelled.
Section 5.4. Lost, Destroyed, or Stolen Certificates. Any shareholder
claiming that a certificate for shares has been lost, destroyed, or stolen shall
make an affidavit of that fact in such form as the Board of Directors may
require and shall, if the Board of Directors so requires, give the Corporation a
sufficient indemnity bond, in form, in an amount, and with one or more sureties
satisfactory to the Board of Directors, to indemnify the Corporation against any
claims that may be made against it on account of the reissue of such
certificate. A replacement certificate shall then be issued for the same number
of shares as represented by the certificate alleged to have been lost,
destroyed, or stolen.
Section 5.5. Transfer Agent and Registrar. The Board of Directors may
appoint one or more transfer agents or transfer clerks and one or more
registrars and may require all certificates for shares to bear the signature or
signatures of any of them.
Section 5.6. Facsimile Signature. Where any certificate is manually signed
by a transfer agent, a transfer clerk, or a registrar appointed by the Board of
Directors to perform such duties, a facsimile or engraved signature of the chief
executive officer or other proper officer of the Corporation authorized by the
Board of Directors may be inscribed on the certificate in lieu of the actual
signature of the officer. The fact that a certificate bears the facsimile
signature of an officer who no longer holds office shall not affect the validity
of the certificate, and such certificate, if otherwise validly issued, shall
have the same effect as if the former officer held that office at the date the
certificate was issued.
Section 5.7. Closing of Transfer Books; Record Date. The Board of Directors
may close the stock transfer books of the Corporation for a period not exceeding
sixty (60) days preceding the date of any meeting of shareholders, the date for
payment of any dividend or distribution, or the date any change, conversion, or
exchange of capital stock shall become effective. In lieu of closing the stock
transfer books, the Board of Directors may fix in advance a date, not exceeding
sixty (60) days preceding the date for payment of any dividend or distribution,
or the date any change, conversion, or exchange of capital stock shall become
effective, as a record date for the determination of the shareholders entitled
to receive payment of any such dividend or distribution, or to exercise the
rights in respect of any such change, conversion, or exchange of capital stock,
and in such case such shareholders and only such shareholders shall be
shareholders of record on the date so fixed and shall be entitled to receive
payment of such dividend or distribution, or to exercise such rights,
notwithstanding any transfer of any stock on the books of the Corporation after
any such record date. If the Board of Directors fails to fix such a record date
the record date shall be the twentieth (20th) day preceding the date of payment
or the date the change, conversion, or exchange becomes effective.
Section 5.8. Registered Shareholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends and to vote as such owner, and shall be entitled
to hold liable for calls and assessments a person so registered on its books as
the owner of shares, and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by applicable law.
ARTICLE VI
INDEMNIFICATION
Section 6.1. Indemnification. The Corporation shall indemnify such persons,
for such expenses and liabilities, in such manner, under such circumstances, and
to such extent, as required or permitted by Minn. Stat. ss. 302A.521, as amended
from time to time, or as required or permitted by other provisions of law.
Section 6.2. Insurance. The Corporation may purchase and maintain insurance
on behalf of any person in such person's official capacity against any liability
asserted against and incurred by such person in or arising from that capacity,
whether or not the Corporation would otherwise be required to indemnify the
person against the liability.
ARTICLE VII
GENERAL CORPORATE MATTERS
Section 7.1. Distributions. Subject to the Articles of Incorporation and
these Bylaws, the Board of Directors may declare dividends payable in either
cash, property, or shares, acquire or exchange shares, or make other
distributions with respect to shares of the Corporation whenever and in such
amounts as, in its opinion, the condition and affairs of the Corporation shall
render advisable.
Section 7.2. Reserves. Before payment of any dividend, the Board of
Directors may set aside out of any funds of the Corporation available for
dividends such sum or sums as the Board of Directors from time to time deems
proper as a reserve or reserves to meet contingencies, for equalizing dividends,
for repairing or maintaining any property of the Corporation, or for such other
purposes as the Board of Directors deems conducive to the interest of the
Corporation, and the Board of Directors may modify or abolish any such reserve.
Section 7.3. Deposits. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies, or other depositories as the Board of Directors may
select.
Section 7.4. Loans. The Corporation shall not lend money to, guarantee the
o ligation of, become a surety for, or otherwise financially assist any person
unless the transaction, or class of transactions to which the transaction
belongs, has been approved by the affirmative vote of a majority of directors
present and:
(a) is in the usual and regular course of business of the Corporation;
(b) is with, or for the benefit of, a related corporation, an
organization in which the Corporation has a financial interest, an
organization with which the Corporation has a business relationship, or an
organization to which the Corporation has the power to make donations;
(c) is with, or for the benefit of, an officer or other employee of
the Corporation or a subsidiary, including an officer or employee who is a
director of the Corporation or a subsidiary, and may reasonably be
expected, in the judgment of the Board of Directors, to benefit the
Corporation; or
(d) has been approved by the affirmative vote of the holders of
two-thirds of the outstanding shares, including both voting and nonvoting
shares.
Section 7.5. Advances. The Corporation may, without a vote of the
directors, advance money to its diorectors, officers, or employees to cover
expenses that can reasonably be anticipated to be incurred by them in the
performance of their duties and for which they would be entitled to
reimbursement in the absence of an advance.
ARTICLE VIII
BOOKS OF RECORD; AUDIT; FISCAL YEAR
Section 8.1. Share Register. The Board of Directors of the Corporation
shall cause to be kept at its principal executive office, or such other place or
places within the United States as determined by the Board, a share register not
more than one year old, containing the names and addresses of the shareholders
and the number and classes of the shares held, and the dates on which the
certificates therefor were issued.
Section 8.2. Books, Records, and Other Documents. The Board of Directors
shall cause to be kept at its principal executive office, originals or copies
of:
(a) records of all proceedings of the shareholders and directors for
the last three years;
(b) Articles of Incorporation of the Corporation and all amendments
thereto currently in effect;
(c) Bylaws of the Corporation and all amendments thereto currently in
effect;
(d) financial statements as described in Section 8.3 hereof, if such
statements have been prepared by or for the Corporation;
(e) reports made to shareholders generally within the immediately
preceding three years;
(f) a statement of the names and usual business addresses of the
directors and principal officers of the Corporation;
(g) voting trust agreements, if any; and
(h) shareholder control agreements, if any.
Section 8.3. Financial Statements. To the extent that they have been
prepared by or for the Corporation, the financial statements required to be kept
at the principal executive or registered office of the Corporation pursuant to
Section 8.2(d). hereof are as follows:
(a) annual financial statements, including at least a balance sheet as
of the end of, and a statement of income for, each fiscal year; and
(b) financial statements for the most recent interim period prepared
in the course of the operations of the Corporation for distribution to the
shareholders or submission to a governmental agency as a matter of public
record.
Section 8.4. Audit. The Board of Directors may cause the records and books
of account of the Corporation to be audited each fiscal year.
Section 8.5. Fiscal Year. The fiscal year of the Corporation shall be
determined by the Board of Directors.
ARTICLE IX
AMENDMENTS
Section 9.1. Amendments. Except as limited by the Articles of
Incorporation, these Bylaws may be altered, amended, or repealed by the
affirmative vote of a majority of the members of the Board of Directors. This
authority of the Board of Directors is subject to the power of the shareholders
to change or repeal such Bylaws, and the Board of Directors shall not make or
alter any Bylaws fixing a quorum for meetings of shareholders, prescribing
procedures for removing directors or filling vacancies on the Board, or fixing
the number of directors or their classifications, qualifications, or terms of
office.
THE UNDERSIGNED, CHIEF EXECUTIVE OFFICER of Oxboro Medical International,
Inc., a Minnesota corporation, does hereby certify that the foregoing Amended
and Restated Bylaws were duly adopted as the Bylaws of the Corporation by its
Board of Directors effective February 23, 1995.
/s/ Harley Haase
Harley Haase,
Chief Executive Officer
AMENDMENT NO. 2 TO STOCK AWARD AGREEMENT
This Amendment No. 2 ("Amendment") to Stock Award Agreement ("Agreement")
dated October 31, 1990, by and between Oxboro Medical International, Inc., a
Minnesota corporation (the "Company"), and Larry A. Rasmusson ("Rasmusson"),
effective the 31st day of October, 1995.
RECITALS:
WHEREAS, pursuant to the Agreement, the term of the Agreement expires at
midnight, October 31, 1995; and
WHEREAS, the Company and Rasmusson desire to extend the termination date of
said Agreement to midnight, October 31, 1998 on the terms and conditions set
forth below;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
and conditions contained in this Amendment, the parties hereto agree to make the
following amendments to the Agreement:
1. Consideration. In consideration of the Company agreeing to
extend the termination date of the Agreement from midnight
October 31, 1995 to October 31, 1998, Rasmusson, on his own
behalf and on behalf of Lexten, Inc. a Minnesota corporation,
of which Rasmusson is the sole shareholder, officer and
director, the general partner of the Project Heart Limited
Partnership, hereby waives right to receive any cash
distribution from said limited partnership, with the intent
and understanding that all distributions by said limited
partnership shall be made proportionately as if the remaining
limited partners were the only limited partners.
2. Term of Agreement. The termination date of this Agreement
is hereby extended from midnight, October 31, 1995 to
midnight, October 31, 1998.
All other provisions of the Stock Award Agreement, subject to the
provisions of Amendment No. 1 and this Amendment No. 2, shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
October 31st, 1995.
OXBORO MEDICAL INTERNATIONAL, INC.
By /s/ Harley Haase
Harley Haase
Its President
/s/ Larry A. Rasmusson
Larry A. Rasmusson,
Individually
Consented and agreed to
this 31st day of October,
1995 by:
LEXTEN, INC.
By: /s/ Larry A. Rasmusson
Larry A. Rasmusson
Its President
FIRST AMENDMENT TO EXCLUSIVE LICENSE AGREEMENT
This First Amendment made and entered into effective this 8th day of
November, 1995, by and between Larry Rasmusson ("Rasmusson") and Oxboro Medical
International, Inc., a Minnesota corporation ("Company").
WITNEESSETH:
WHEREAS, Rasmusson and the Company entered into an exclusive license
agreement effective as of the first day of April, 1990 (the "License
Agreement"); and
WHEREAS, Rasmusson and Harley Haase ("Haase") have entered into a Royalty
Sharing Agreement regarding the sharing of royalties for a jointly developed
products, some of which products may be deemed to be Products under the term of
this Agreement or may, in the future, be deemed to be Additional Products
pursuant to this Agreement, as amended;
WHEREAS, the Company desires to encourage Rasmusson and Haase to work
together to jointly develop Products or Additional Products for the marketing
and sale by and benefit of the Company; and
WHEREAS, the Royalty Sharing Agreement between and among Rasmusson, Haase
and the Company contemplates that upon Haase's termination of employment from
the Company that the royalty to be paid under the Agreement shall be increased
from four percent to six percent;
NOWTHEREFORE, the parties hereto, in consideration of the above recitals
and in further consideration of the terms and conditions set forth below, agree
as follows:
1. Article IV of the Agreement entitled "Payment" shall be amended by
the addition of the following subparagraph:
4.4 LICENSEE shall pay LICENSOR royalties in the amount of Four
Percent (4%) of this NET SALES PRICE of all PRODUCTS sold by
LICENSEE listed on Exhibits A and B attached hereto and made a
part hereof. Upon the termination of employment of Haase from
LICENSEE, LICENSEE shall pay LICENSOR royalties in the amount of
Three Percent (3%) and shall pay Haase royalties in the amount of
Three Percent (3%) of the NET SALES PRICE of all PRODUCTS sold by
LICENSEE listed on the attached Exhibits A and B. Such Royalty
shall continue for the life of said PRODUCTS.
Except as hereby amended or as otherwise amended and signed by the parties
to such Agreement, the Exclusive License Agreement remains in full force and
effect.
IN WITNESS WHEREOF, the parties have executed this First Amendment to
the Exclusive License Agreement as of the day and year first above written.
OXBORO MEDICAL INTERNATIONAL, INC.
By /s/ Harley Haase
Its President
/s/ Larry Rasmusson
Larry Rasmusson
FIRST AMENDMENT TO
EMPLOYMENT AGREEMENT
This First Amendment, made and entered into effective the 21st day of
December, 1993, by and between Oxboro Medical International, Inc., a Minnesota
corporation (the "Company"), and LARRY A. RASMUSSON (the "Executive").
W I T E S S E T H:
WHEREAS, the Executive and the Company entered into an Employment Agreement
effective April 1, 1993 (the "Employment Agreement"); and
WHEREAS, references are made throughout the Employment Agreement to a
"Deferred Compensation Agreement" by and between the Executive and the Company
effective as of April 1, 1993 (the "Deferred Compensation Agreement"); and
WHEREAS, the Deferred Compensation Agreement was never executed by the
Executive and the Company and is of no force or effect; and
WHEREAS, the Executive and the Company now desire to amend the Employment
Agreement by deleting all references to the Deferred Compensation Agreement;
WHEREAS, the parties also desire to identify and list the "Products" that
are referenced at Section V(f)(i) of the Employment Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter contained, the parties hereto agree as follows:
1. All references to the Deferred Compensation Agreement (as
identified at Section V(b)(ii)(B) of the Employment Agreement)
are hereby deleted from the Employment Agreement, effective as
of April 1, 1993, and all references in the Employment
Agreement to the Deferred Compensation Agreement shall be null
and void and of no force or effect.
2. The products listed on the attached Exhibit A, which is hereby
incorporated by reference herein and made a part hereof,
constitute all of the items included under the term "PRODUCTS"
as set forth in Section V(f)(i) of the Employment Agreement.
Exhibit A contains no items that constitute "Additional
Products" as defined in Section V(f)(ii) of the Employment
Agreement.
3. Except as hereby amended, the Employment Agreement
between the parties remains in full force and effect.
IN WITNESS WHEREOF, the parties have executed this First Amendment to the
Employment Agreement on the day and year first above written.
OXBORO MEDICAL INTERNATIONAL, INC.
By: /s/ Dennis L. Mikkelson
Director
By: /s/ John R. Walter
Director
EXECUTIVE
/s/ Larry A. Rasmusson
Larry A. Rasmusson
EXHIBIT A
FIRST AMENDMENT TO
EXCLUSIVE LICENSE AND ROYALTY AGREEMENT
1. Dockpole Rod Holder
2. Lure Hang (Deluxe)
3. Tray Liner
4. Net Holder
5. Accessory Pad (single)
6. Utility Straps
7. Hook Sheath
8. Action Sheath
9. Rattlin Rig
10. Lure Hang (Supreme)
11. Accessory Pad (double)
12. Weedless Rig
13. Colored Hooks
14. Action Hooks
15. Tackle Box Towel
16. Cork Screw Swivel
17. Scent Sleeve
18. Rod Tip Protector
19. Tackle Knife
20. Hook Protectors
21. Rattlin Rig (Deluxe)
22. Sun Shield
23. Catch and Release Swivel
24. Catch and Release Swivel No. II (no add-on)
25. Bait Container Holder
26. Mini Rod Holders (no add-on)
27. Stor All
28. Shore Track (Jet Ski Lift)
29. Leech Hook
30. Walk Way
31. Snowmobile Sled Mover
32. Dock Steps
33. Snell Stor
34. Tray Liner (Deluxe) (no add-on)
35. Hawg Pad
36. Hook Holder (Rod Strap)
37. Worm Blower
38. Hook/Swivel
39. Duck Decoy Raft
40. Accessory Holder (add-on -- like shot shell holder)
41. Marker Buoy Holder
42. Dock Bumper Bracket
FIRST AMENDMENT TO
EXCLUSIVE LICENSE AND ROYALTY AGREEMENT
This First Amendment, made and entered into effective the 21st day of
December, 1993, by and between OXBORO OUTDOORS, INC., a Minnesota corporation
(the "Company"), and LARRY A. RASMUSSON ("Rasmusson"):
W I T N E S S E T H:
WHEREAS, Rasmusson and the Company entered into an Exclusive License
and Royalty Agreement effective as of April 17, 1993 (the "Royalty Agreement");
and
WHEREAS, references are made throughout the Royalty Agreement to a
"Deferred Compensation Agreement" effective as of April 1, 1993 (the "Deferred
Compensation Agreement"), by and between Rasmusson and Oxboro Medical
International, Inc., the parent company of the Company; and
WHEREAS, the Deferred Compensation Agreement was never executed by the
parties and therefore is of no force and effect; and
WHEREAS, Rasmusson and the Company desire to amend the Royalty
Agreement to clarify and delete all references to the Deferred Compensation
Agreement contained in the Royalty Agreement; and
WHEREAS, the parties desire to identify and list the PRODUCTS that are
currently covered by the Royalty Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
promises hereinafter contained, the parties hereto agree as follows:
1. All references to the Deferred Compensation Agreement, as
identified in Section 6 of the Royalty Agreement, are hereby
deleted in their entirety, effective as of April 17, 1993, and
all references to the Deferred Compensation Agreement
contained in the Royalty Agreement are null and void and of no
force or effect.
2. The Products listed on the attached Exhibit A, which is hereby
incorporated by reference herein and made a part hereof,
constitute all of the "PRODUCTS" identified in Section 1.1 of
the Royalty Agreement and all of the Products subject to the
Royalty Agreement as of the date of this First Amendment and
shall supersede and replace all prior lists. Exhibit A
contains no products that constitute "Additional Products" as
defined in Section 3.2 of the Royalty Agreement.
3. Except as hereby amended, the Royalty Agreement remains in
full force and effect.
IN WITNESS WHEREOF, the parties have executed this First Amendment to
the Exclusive License and Royalty Agreement as of the day and year first above
written.
OXBORO OUTDOORS, INC.
By: Larry Rasmusson
Its President
EXECUTIVE
/s/ Larry A. Rasmusson
Larry A. Rasmusson
EXHIBIT A
FIRST AMENDMENT TO
EXCLUSIVE LICENSE AND ROYALTY AGREEMENT
1. Dockpole Rod Holder
2. Lure Hang (Deluxe)
3. Tray Liner
4. Net Holder
5. Accessory Pad (single)
6. Utility Straps
7. Hook Sheath
8. Action Sheath
9. Rattlin Rig
10. Lure Hang (Supreme)
11. Accessory Pad (double)
12. Weedless Rig
13. Colored Hooks
14. Action Hooks
15. Tackle Box Towel
16. Cork Screw Swivel
17. Scent Sleeve
18. Rod Tip Protector
19. Tackle Knife
20. Hook Protectors
21. Rattlin Rig (Deluxe)
22. Sun Shield
23. Catch and Release Swivel
24. Catch and Release Swivel No. II (no add-on)
25. Bait Container Holder
26. Mini Rod Holders (no add-on)
27. Stor All
28. Shore Track (Jet Ski Lift)
29. Leech Hook
30. Walk Way
31. Snowmobile Sled Mover
32. Dock Steps
33. Snell Stor
34. Tray Liner (Deluxe) (no add-on)
35. Hawg Pad
36. Hook Holder (Rod Strap)
37. Worm Blower
38. Hook/Swivel
39. Duck Decoy Raft
40. Accessory Holder (add-on -- like shot shell holder)
41. Marker Buoy Holder
42. Dock Bumper Bracket
SECOND AMENDMENT
TO
EXCLUSIVE LICENSE AND ROYALTY AGREEMENT
THIS SECOND AMENDMENT ("Amendment") to the Exclusive License and Royalty
Agreement ("Agreement") dated as of April 17, 1993, by and between LARRY A.
RASMUSSON, residing at 1485 - 139th Lane N.W., Andover, Minnesota (hereinafter
referred to as "Rasmusson"), and OXBORO OUTDOORS, INC., a Minnesota corporation,
having its principal place of business at 13828 Lincoln Street, Ham Lake,
Minnesota 55304 (hereinafter referred to as the "Company"), is made effective
this 8th day of November, 1995.
WHEREAS, the Company desires to invest funds to engage in a major promotion
of the PRODUCTS (as defined in the Agreement) utilizing Rasmusson's name and
picture if licensed to do so by Rasmusson upon the terms and conditions of this
Addendum; and
WHEREAS, Rasmusson desires to encourage Company to invest its funds in said
major promotion of the PRODUCTS which may result in increased sales of the
PRODUCTS and increased Royalties to Rasmusson pursuant to the Agreement; and
WHEREAS, the Company desires to obtain, and Rasmusson is willing to grant,
a perpetual, exclusive, worldwide and royalty-free license to the Company to use
the name "Larry A. Rasmusson" and the picture of Rasmusson in connection with
the advertising, merchandising, promotion, manufacture, sale, and distribution
of the PRODUCTS and ADDITIONAL PRODUCTS upon the terms and conditions hereafter
set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants hereinafter set forth, Company and Rasmusson do hereby respectively
agree to amend the Agreement to grant, covenant, and agree as follows:
1. Grant of License. Rasmusson grants to the Company a perpetual,
exclusive, worldwide and royalty-free license, with the right to grant
sublicenses to the Company's distributors, to use the name "Larry A.
Rasmusson" and the picture of Rasmusson in connection with the
advertising, merchandising, promotion, manufacture, sale, and
distribution of the PRODUCTS and ADDITIONAL PRODUCTS (as both are
defined in the Agreement) until the expiration or cancellation of the
Agreement. Upon written notice to Rasmusson, and subject to the
provisions of Paragraph 6 hereof, the Company shall have the right to
extend the terms of the Agreement, as amended by this Addendum, to any
other outdoor products, not developed by Rasmusson, owned by or
licensed to the Company (hereinafter "NEW PRODUCTS").
2. Promotional Efforts by Company. Company will immediately proceed to
register the name "Larry A. Rasmusson" and the picture of Rasmusson as
trademarks (the "MARKS") for the PRODUCTS, ADDITIONAL PRODUCTS and/or
NEW PRODUCTS (collectively "ALL PRODUCTS") and will immediately cause
said MARKS to be utilized on the packaging of and in connection with
the marketing of the PRODUCTS. At least three hundred thousand
(300,000) pieces of advertising and/or packaging bearing the MARKS
will be purchased and utilized by the Company in connection with the
distribution and sale of ALL PRODUCTS.
3. No Additional Royalties. Rasmusson expressly agrees that the
promotional efforts agreed to by Company, pursuant to Paragraph 2 of
this Addendum, constitutes sufficient consideration for this Addendum
to the Agreement and that the royalties provided by the Agreement will
remain unchanged with no additional royalties being required for
license of the name "Larry A. Rasmusson" and picture of Rasmusson and
the other amendments to the Agreement provided by this Addendum,
except that Subsection 4.1(b) and Section 4.2 shall be deleted in
their entirety and restated as follows, and said Agreement shall be
interpreted and effected as if the following restated provisions had
been present since April 17, 1993;
4.1 (b) The Company will pay Rasmusson percentage royalties (the
"Percentage Royalties"), as set forth in the following
table, on the cumulative NET SALES PRICE OF PRODUCTS AND
ADDITIONAL PRODUCTS sold by the Company:
Cumulative
NET SALES PRICE OF ALL PRODUCTS Royalty Percentage
$0 to $1,000,000 8%
Over $1,000,000 9%
4.2 Within fifteen (15) days after the close of each fiscal
quarter from and after July 1, 1993, the Company will pay
Rasmusson the Royalties due on all PRODUCTS and ADDITIONAL
PRODUCTS sold during the preceding quarter. For purposes of
calculating the Royalties due to Rasmusson, any Advance
Royalties paid to Rasmusson will be deducted from the
Percentage Royalties payable to Rasmusson. No Percentage
Royalties shall be paid to Rasmusson until the product of
the Net Sales Price of all PRODUCTS and ADDITIONAL PRODUCTS
(sold) times the (applicable) Royalty Percentage exceeds the
sum of all paid Royalty Advances.
4. Licenses for ADDITIONAL PRODUCTS. During the term of the Agreement, as
amended by this Addendum, Rasmusson agrees not to enter into any
licensing agreements authorizing the use of the name "Larry A.
Rasmusson" or the picture of Rasmusson with respect to any outdoor
recreational products manufactured, distributed or sold by any other
business, person or entity, which products are within the same
category as or similar to ALL PRODUCTS the Company has acquired under
the Agreement. If additional outdoor PRODUCTS, concepts and ideas are
developed by Rasmusson, which are not already subject to the
Agreement, he shall first offer the exclusive rights to the sale or
disposition of such PRODUCTS, concepts and ideas to the Company
pursuant to Paragraph 3.2 of the Agreement. In clarification of the
Agreement, the Company shall have thirty (30) days to accept or reject
the offer. If the Company accepts such outdoor recreational PRODUCTS
as ADDITIONAL PRODUCTS (as defined by the Agreement), pursuant to
Paragraph 3.2 of the Agreement, such ADDITIONAL PRODUCTS shall be
subject to all of the provisions of the Agreement, and Company shall
be able to use the name "Larry A. Rasmusson" and the picture of
Rasmusson in connection with such ADDITIONAL PRODUCTS. If the Company
rejects or fails to accept the offer within said thirty (30) day
period, then Rasmusson shall be entitled to enter into an agreement
regarding said ADDITIONAL PRODUCTS with any third party on any terms;
however, if the Company responds to the offer with a counter-offer
which is rejected by Rasmusson, then Rasmusson shall not enter into an
agreement regarding said ADDITIONAL PRODUCTS with any third party on
terms more favorable to such third party or Rasmusson than the terms
counter-offered by the Company for such ADDITIONAL PRODUCTS.
5. Licenses for Other PRODUCTS. If PRODUCTS, concepts and ideas are
developed by Rasmusson during the terms of this Agreement which are
outside of the scope of "the same category as or similar to the
PRODUCTS, ADDITIONAL PRODUCTS or NEW PRODUCTS of the Company" ("Other
PRODUCTS"), then Rasmusson shall first offer the exclusive rights to
the sale or disposition of such Other PRODUCTS to the Company in
writing, which offer shall include "arms length market (royalty or
license) rate" terms, and which terms shall be outside of Article 4 of
the Agreement. The Company shall have thirty (30) days to accept or
reject the offer in writing according to its stated terms. If the
Company rejects or fails to accept the offer within said thirty (30)
day period, then Rasmusson shall be entitled to enter into an
agreement regarding said Other PRODUCTS with any third party on any
terms; however, if the Company responds to the offer with a
counter-offer which is rejected by Rasmusson, then Rasmusson shall not
enter into an agreement regarding said Other PRODUCTS with any third
party on terms more favorable to such third party or Rasmusson than
the terms counter-offered by the Company for such Other PRODUCTS.
6. Promotional Activities by Rasmusson. Rasmusson will cooperate in all
advertising, promotion, and publicity of the PRODUCTS, ADDITIONAL
PRODUCTS, NEW PRODUCTS and the MARKS, will permit the use of the name
"Larry A. Rasmusson," will furnish a recording of and permit the use
of Rasmusson's voice, and will furnish and permit the use of
photographs, cuts, drawings and slides of Rasmusson and a specimen or
reproduction of Rasmusson's signature for use in connection with the
foregoing and also for use with endorsements and testimonials by
Rasmusson, exclusively for the Company with respect to the
advertising, merchandising, promotion, sale, or distribution of the
PRODUCTS, ADDITIONAL PRODUCTS and NEW PRODUCTS, subject to the
Agreement, as amended by this Addendum. Rasmusson will cooperate in
sales, merchandising, promotional advertising, and publicity campaigns
related to the PRODUCTS, ADDITIONAL PRODUCTS and NEW PRODUCTS. During
the time that Rasmusson is employed by Company or its parent, Oxboro
Medical International, Inc., all of the foregoing duties and
obligations shall be done by Rasmusson at no additional cost to
Company, except that during such employment and after termination of
such employment all actual costs reasonably incurred by Rasmusson in
performing said duties and obligations hereunder shall be reimbursed
to Rasmusson by the Company. After termination of such employment, the
reasonable traveling, food, and lodging expenses incurred by Rasmusson
for himself and one assistant selected by Rasmusson shall be deemed to
be costs reasonably incurred by Rasmusson. Rasmusson shall not be
required to spend more than sixteen (16) hours per week in performing
such duties and obligations during such employment. Rasmusson shall
comply with the reasonable requirements established by the Company for
verification and reimbursement of costs and expenses. Rasmusson
expressly authorizes the Company to send out sales and promotion
literature and advertisements under the name of "Larry A. Rasmusson"
and to use a Minnesota or other return address and to receive any and
all mail in response thereto. After the termination of Rasmusson's
employment relationship with the Company and subject to services to be
performed under the Consulting Agreement between Rasmussen and Oxboro
Medical International, Inc.which shall be deemed to take priority over
availability of Rasmusson under this Agreement, Rasmusson shall
receive compensation on a per diem basis of $1,750 per day for the
first five days and $2,500 per day for any days in excess of five days
during each year of this Agreement following the termination of
Rasmusson's employment with the Company (or its parent, Oxboro Medical
International, Inc.) for any services performed by Rasmusson pursuant
to this Paragraph 6. Rasmusson shall not be deemed to be in default
under this Agreement if he is unavailable due to services he is
providing to or through Oxboro Medical International, Inc. under said
Consulting Agreement. Rasmusson, if requested by the Company, shall
provide a minimum of fifteen (15) days per such year, including
traveling time, and shall be entitled to at least five (5) days prior
notice for providing services hereunder. A "day" shall be defined,
under the terms of this Agreement, as eight hours. The minimum pro
rata allocation for services shall be one-half (1/2) of a day.
7. Approval by Rasmusson. All PRODUCTS, ADDITIONAL PRODUCTS, and NEW
PRODUCTS to be associated by Company with Rasmusson's name and image
as well as any advertising and promotional materials utilizing
Rasmusson's name and image, which may be used by the Company
including, but not by way of limitation, all product "tie-in"
advertising and promotional campaigns, shall be submitted by the
Company to Rasmusson for Rasmusson's approval prior to any release
thereof by the Company. All pictures and illustrations of Rasmusson or
reproductions of Rasmusson's voice or direct quotations attributed to
Rasmusson shall likewise be subject to approval of Rasmusson. If
disapproval is not received by the Company within thirty (30) days
after receipt of such PRODUCTS, materials or matters by Rasmusson,
such right of approval shall be deemed waived and such PRODUCTS,
materials or matters shall be considered approved. Such approvals by
Rasmusson shall not be unreasonably withheld, and once such approvals
have been obtained further approval need not be obtained for future or
repeat use. No promotion or advertising copy shall be unflattering or
detrimental to Rasmusson. If the parties hereto disagree regarding
whether a promotion or advertising copy is unflattering or detrimental
to Rasmusson or disagree as to whether a right of approval for such
PRODUCTS, materials or matters should be granted, the promotion or
advertising or the PRODUCTS, materials or matters subject to approval
shall not be used or distributed until the issue is decided by a court
of competent jurisdiction or in some other manner mutually agreeable
to the parties.
8. Control by the Company of Business. Subject to the provisions of
Paragraph 7 above, the Company shall have the sole authority to
determine the mode and method of advertising, merchandising,
promoting, manufacturing, selling, and distributing of all PRODUCTS,
ADDITIONAL PRODUCTS and NEW PRODUCTS subject to the Agreement, as
amended by this Addendum, and the sole authority to fix the prices,
discounts, and terms of sale to all purchasers, whether consumers,
dealers or distributors. The Company, in its discretion, can decide at
any time to discontinue the use of the name "Larry A. Rasmusson" and
the picture of Rasmusson in connection with the PRODUCTS, ADDITIONAL
PRODUCTS and NEW PRODUCTS and, in its discretion, can decide to cease
the advertising, merchandising, promoting, manufacturing, selling and
distributing of some or all of the PRODUCTS, ADDITIONAL PRODUCTS and
NEW PRODUCTS entirely, without violation of the Agreement, as amended
by this Addendum; provided, however, that (a) if the Company elects to
replace any PRODUCTS, ADDITIONAL PRODUCTS and/or NEW PRODUCTS bearing
the name "Larry A. Rasmusson" and the picture of Rasmusson with a
competitive product which does not provide royalties to Rasmusson or
(b) if the Company elects to discontinue the sale of PRODUCTS,
ADDITIONAL PRODUCTS and/or NEW PRODUCTS which in the aggregate
represented in royalties to Rasmusson pursuant to the Agreement of
more than 25% of the total amount of royalties paid to Rasmusson
pursuant to the Agreement during the preceding calendar year, without
the express permission of Rasmusson, all rights with respect to such
PRODUCTS, and ADDITIONAL PRODUCTS and/or rights pertaining to the use
of Rasmusson's name and picture with respect to NEW PRODUCTS shall be
thereupon terminated and shall revert to Rasmusson subject to the
rights set forth in Paragraph 10 hereof. If the Company decides to
discontinue the use of the name and picture of Rasmusson with respect
to PRODUCTS, ADDITIONAL PRODUCTS, and NEW PRODUCTS without the express
permission of Rasmusson, all rights to use said name and picture and
the rights and obligations under this Addendum with respect to said
name and picture shall revert to Rasmusson subject to the rights set
forth in Paragraph 10 of this Addendum. If the parties disagree
whether permission has been unreasonably withheld, all rights to use
said name and the rights and obligations of this Addendum shall cease,
subject to the provisions of Paragraph 10 hereof, until the issue is
decided by a court of competent jurisdiction.
9. During the term of the Agreement, as amended by this Addendum, and for
a period of twelve (12) months following the termination of the
Agreement and Addendum, Rasmusson shall not compete, either directly
or indirectly, by using or allowing or licensing the use of his name
and/or face, with the Company in the manufacturing, marketing,
promotion or sale of PRODUCTS or products which compete with the
Company's products.
10. Cancellation of License. This Addendum and/or the Agreement shall not
be cancelable by either the Company or Rasmusson, except as expressly
provided by Paragraph 8 of the Agreement and Paragraph 8 of this
Addendum.
11. The Company's Right on Termination. For up to twelve months after the
termination of the Agreement and/or this Addendum, the Company and the
Company's distributors or dealers shall continue to have the right to
sell or otherwise dispose of their inventory of PRODUCTS, ADDITIONAL
PRODUCTS and NEW PRODUCTS, bearing the name of "Larry A. Rasmusson"
and/or the picture of Rasmusson, subject to the terms of the
Agreement, including the obligation to continue to pay Rasmusson
royalties as provided by the Agreement based on sales of the PRODUCTS,
ADDITIONAL PRODUCTS and NEW PRODUCTS.
12. Disability or Death of Rasmusson. Upon the disability or death of
Rasmusson, the provisions of the Agreement, as amended by this
Addendum, related to any personal services to be performed by
Rasmusson shall be terminated. Upon the death of Rasmusson, if the
Company elects in writing to continue to use the name "Larry A.
Rasmusson" and the picture of Rasmusson on PRODUCTS, ADDITIONAL
PRODUCTS and NEW PRODUCTS within ninety (90) days of notice of
Rasmusson's death, the rights of Rasmusson pursuant to the Agreement,
as amended by this Addendum, shall be transferred and assigned to the
Estate of Rasmusson and his heirs and assigns. If the Company fails to
give notice of its election not to continue the use of the name and
image of Rasmusson within said ninety day period, the Company shall be
deemed to have agreed to continue the Agreement, as amended by this
Addendum with respect to Rasmusson's name and picture, and Rasmusson's
rights thereto shall be transferred and assigned to his Estate and his
heirs and assigns. In either event, all of Rasmusson's rights to
Royalties as set forth in the Agreement and in this Addendum shall
continue pursuant to their terms.
13. Assignment. The Company shall have no right to assign the rights and
obligations of Rasmusson created under the Agreement or this Addendum
unless the assignee agrees to pay Rasmusson minimum royalties from the
sale of PRODUCTS, ADDITIONAL PRODUCTS and NEW PRODUCTS pursuant to the
Agreement in an aggregate amount of not less than $35,000 per calendar
year after the date of the Assignment or royalties from the sale of
PRODUCTS, ADDITIONAL PRODUCTS and NEW PRODUCTS, whichever amount is
greater.
14. Notices. Any notice required to be given hereunder shall be deemed
given if sent to the addresses provided by Paragraph 9 of the
Agreement, unless a change of address shall have previously been
designated in writing.
15. Construction. This Addendum shall be governed and construed in all
respects by the laws of the State of Minnesota.
16. Amendment. This Addendum and the Agreement may be changed only by a
written document signed by both parties.
IN WITNESS WHEREOF, Rasmusson and the Company have caused this Addendum to
the Agreement to be signed in their respective names, all as of the day and year
first above written.
COMPANY: RASMUSSON:
OXBORO OUTDOORS, INC.
By: /s/ Harley Haase /s/ Larry A. Rasmusson
Its: Director Larry A. Rasmusson
By: /s/ John Walter
Its: Director
CONSULTING AGREEMENT
THIS AGREEMENT is made and entered into as of this 1st day of November,
1995, by and between Oxboro Medical International, Inc., a Minnesota corporation
(the "Company"), and Larry A. Rasmusson (the "Consultant").
WHEREAS, the Company is engaged in the business of developing, assembling,
and marketing medical products and through its wholly owned subsidiary, Oxboro
Outdoors, Inc., developing, assembling and marketing outdoor recreational
products (collectively the "Business"); and
WHEREAS, Consultant was previously a consultant to the Company for 11 years
and has been an executive officer of the Company for 2 1/2 years and has
developed unique knowledge, information, and expertise concerning the Business
in connection therewith; and
WHEREAS, Consultant has indicated his intention to retire as an employee
and officer of the Company within the next five years; [for accounting
treatment, may need to provide more specific retirement date] and
WHEREAS, the Company desires that Consultant, following his retirement,
continue to provide consulting services to the Company and refrain from engaging
in competing business activities as set forth herein;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
promises and covenants herein contained and intending to be legally bound
hereby, the parties agree as follows:
1. Consulting Services. Consultant agrees that commencing on the date of
his retirement from his duties as an officer and employee of the
Company, he will hold himself available, unless disabled from doing so
as a result of illness or other incapacity, to advise and consult from
time to time, by telephone, in person at the Company's offices, or in
such other manner and at such other place or places as may from time
to time be mutually agreeable to Consultant and the Company, with the
officers, directors, employees, and other representatives of the
Company when and to the extent reasonably requested to do so by the
Company's officers and/or directors, relative to the Business of the
Company and to give to the Company, through such officers, directors,
employees, and other representatives, the benefit of his experience
and knowledge of the Business and of his judgment on the financial,
merchandising, personnel, and other management aspects, problems, and
policies of the Business. Consultant shall not be required to provide
consulting services for more than five days per month (or sixty days
per year); however, Consultant may, at his own discretion, devote two
of said five days a month to the review of operations, manufacturing,
marketing/sales, product development and finances/accounting, with
full access to the Company's books and records, information and sales
and accounting data and systems, with assistance from company staff,
as reasonably requested by Rasmusson. In no event shall Consultant be
required to provide more than ten (10) days in any given calendar
month.
2. Relationship. It is the intent of the parties to this Agreement that
Consultant is and shall remain at all times an independent contractor
in the performance of this Agreement and nothing herein contained
shall be construed as inconsistent with that status. The Consultant
shall not be considered the employee, agent, or servant of the Company
at any time, under any circumstances, or for any purpose whatsoever.
The payments to Consultant pursuant to this Agreement are not to be
construed to be salary, wages, or payroll. The Consultant understands,
acknowledges, and agrees that the Company will not withhold state or
federal income tax from the compensation that it will pay to
Consultant, will not withhold or make contributions to social
security, and with the exception of medical benefits and insurance to
the extent Company provides such benefits and insurance to its
employees and split-dollar life insurance benefits in force as of the
date of and following termination of employment, will not provide
unemployment compensation, worker's compensation, or any other kind of
taxes, benefits, or insurance. Consultant shall not be entitled to
paid vacations, paid sick leave, or any other fringe benefits.
Consultant understands and agrees that he has no authority to and will
not enter into contracts or commitments in the name or on behalf of
the Company, that he shall in no event represent that he is acting as
an agent or representative of the Company, and that he shall not
otherwise attempt to bind the Company in any respect whatsoever,
unless authorized to do so in writing by the Company. The Consultant
shall not make any representations, warranties, or commitments binding
upon the Company.
3. Commencement. This Agreement shall only commence upon Consultant's
retirement from his employment with the Company if Consultant is at
least fifty-five years of age. If Consultant voluntarily terminates
his employment with the Company then this Agreement shall not be
binding upon the Company prior to age fifty-five and shall be of no
further force and effect. However, if the Company does not renew
Consultant's Employment Agreement on April 1, 1998, for reasons other
than good cause, as defined in said Employment Agreement, attributable
to Consultant, then this Agreement shall commence on such date.
4. Compensation. For the services rendered by Consultant pursuant to this
Agreement, the Company shall pay the Consultant annually the sum of
One Hundred Fifty Thousand Dollars ($150,000) in twelve (12) equal
monthly installment payments in the amount of Twelve Thousand Five
Hundred Dollars ($12,500) each. It is understood that Consultant shall
be paid the compensation set forth above whether or not the Company
requests him to provide consulting services.
Any amounts otherwise payable to the Consultant pursuant to this paragraph
4 shall be paid before or after his death in accordance with written directions
delivered to Company by Consultant or his duly appointed personal
representative(s) from time to time or, in the absence of such a direction,
shall be paid to Consultant during his life and to his estate after his death.
The Company shall also reimburse the Consultant for any reasonable travel
or other out-of-pocket expenses incurred by Consultant in performing consulting
services requested hereunder by the Company, provided that the Company shall
have approved such expenditures in advance if over $500.00 per month.
If Consultant is required to provide consulting services exceeding the
limit set forth in paragraph 1 hereof, the Company shall pay for such services
at the rate of $2,500 per day; however, during the first year of this Agreement,
the sum of the amounts paid to Consultant by Company pursuant to this Agreement
(consisting of the base consulting fee ($150,000) plus the per diem amount(s))
and the total of the annual direct compensation paid to Consultant's
replacement, shall not exceed the amount of the direct compensation paid to
Consultant during the twelve months preceding the Consultant's
retirement/termination date. A "day," pursuant to the terms of this Agreement,
shall be defined as eight hours.
In the event that the Company, in good faith, has determined Consultant is
in breach of any of his covenants, agreements, or obligations arising under this
Agreement, the Company shall have the right to withhold payments to Consultant
until Consultant has cured any such existing breaches. If Consultant fails to
cure such breach within thirty (30) days written notice thereof, Company may
discontinue making such payments. If Consultant cures such default within thirty
(30) days, then withheld payment shall be released and payments to Consultant
shall continue as set forth herein.
5. Confidential Information. Consultant acknowledges that Consultant may
receive, have access to, or contribute to the production of
Confidential Information. For purposes of this Agreement, Consultant
agrees that "Confidential Information" shall mean information or
material proprietary to the Company or its Affiliates (as hereinafter
defined) or designated as "Confidential Information" by the Company or
an Affiliate and not generally known by non-Company personnel that
Consultant develops or that Consultant may obtain knowledge of or have
access to as a result of Consultant's relationship with the Company or
any Affiliate prior to or during the term of this Agreement (including
information conceived, originated, discovered, or developed in whole
or in part by Consultant). "Confidential Information" shall include,
but not be limited to, the following types of information and other
information of a similar nature in whatever form (including written or
electronic media): discoveries, ideas, concepts, software in various
stages of development, designs, secrets, drawings, specifications,
techniques, models, data, source codes, object codes, documentation,
diagrams, flow charts, research, development, processes, procedures,
"know-how," marketing techniques and materials, marketing and
development plans, customer names and other information related to
customers, price lists, pricing policies, and financial information.
"Confidential Information" also includes any information of the same
general nature as that described above that the Company or an
Affiliate obtains from another party and that the Company or an
Affiliate treats as proprietary or designates as "Confidential
Information," whether or not owned or developed by the Company or the
Affiliate. Consultant further agrees:
(a) that he will, to the best of his ability, furnish the Company on
demand, at any time during or after the term of this Agreement, a
complete list of the names and addresses of all persons that
Consultant knows have dealt with, are dealing with, or propose to
deal with the Company or any Affiliate, whether or not such
information is in the possession or within the knowledge of the
Company or any Affiliate. Such information may be disclosed by
periodic reports to the Company during the term of this
Agreement;
(b) that all notes, data, reference materials, sketches, drawings,
memoranda, documentation, and records in any form and in any way
incorporating or reflecting any Confidential Information belong
exclusively to the Company, and Consultant will turn over all
copies of such materials in Consultant's control to the Company
upon request or upon termination of this Agreement;
(c) that during the term of this Agreement and thereafter, the
Consultant will hold in confidence and not directly or indirectly
reveal, report, publish, disclose, or transfer any of the
Confidential Information to any person or for any purpose, except
in the course of Consultant's work for the Company;
(d) that any inventions or ideas in whole or in part conceived of or
made by Consultant during or after the term of Consultant's
relationship with the Company or any Affiliate shall be as set
forth in the Exclusive License and Royalty Agreement between
Consultant and Oxboro Outdoors, Inc. dated April 17, 1993, as
amended ("Royalty Agreement") and in the Exclusive License
Agreement between Consultant and Company dated April 1, 1990, as
amended (the "License Agreement"); and
(e) that Consultant has been given a copy and has reviewed Chapter
325C of Minnesota Statutes, known as the Minnesota Uniform Trade
Secrets Act (the "Act"), and acknowledges that violation of the
Act or of Consultant's agreements, covenants, and representations
contained in this Agreement may give rise to a cause of action in
favor of the Company against Consultant for general and specific
damages, exemplary damages, injunctive relief, and attorney's
fees.
6. Covenant Not To Compete. Except as set forth in the Royalty Agreement
and the License Agreement, during the term of this Agreement, and so
long as Consultant is receiving payments hereunder, Consultant shall
not, directly or indirectly, on Consultant's own behalf or as a
partner, officer, employee, consultant, agent, shareholder, director,
or trustee of any person, firm, corporation, or other entity, engage
or participate in the business activities of or render services to any
Conflicting Organization (as defined in Section 8(e) hereof) in
connection with the development, manufacture, marketing, licensing,
servicing, or promotion of any Conflicting Product (as defined in
Section 8(d) hereof), or solicit or call upon any accounts that have
been serviced by, or that have purchased products from, the Company or
any Affiliate within the preceding two-year period, or permit
Consultant's name to be used in connection with any such business or
solicitation, unless otherwise agreed to in writing by Company and
Consultant.
7. Injunctive Relief, Attorneys' Fees. In recognition of the irreparable
harm that a violation by Consultant of any of the covenants of
paragraphs 5 or 6 would cause the Company, the Consultant agrees that
in addition to any other remedies or relief afforded by law, an
injunction against an actual or threatened violation or violations may
be issued against him and every other person concerned thereby, it
being the understanding of the parties that both damages and an
injunction shall be proper modes of relief and are not to be
considered alternative remedies. In the event of such an action or
legal proceeding, the prevailing party shall be entitled to be
reimbursed for its costs, expenses and reasonable attorneys' fees
incurred in such proceeding or action by the other party.
8. Definitions. For purposes of this Agreement, it is agreed that the
following terms shall have the meanings set forth below:
(a) "Affiliate" shall mean any corporation, partnership, or other
business entity in which the Company has a financial interest, or
which the Company directly or indirectly, through one or more
intermediaries, officers, or employees, controls, or is
controlled by, or is under common control with, including any
Subsidiary.
(b) "Subsidiary" shall mean any corporation, partnership, or other
business entity in which the Company has a significant financial
interest, or which the Company, directly or indirectly, through
one or more intermediaries, officers, or employees, controls, or
is controlled by, or is under common control with, including as
of the date of this Agreement, Oxboro Outdoors, Inc., and Oxboro
Medical, Inc., both Minnesota corporations and both wholly owned
by the Company.
(c) "Successor" includes any entity or person who acquires or
succeeds to all or a substantial portion of the business or
assets of the Company.
(d) "Conflicting Product" means any product, system, or service of a
Conflicting Organization that is the same as or similar to, or
competes with, or has a usage allied to, a product, process,
system, or service provided by the Company.
(e) "Conflicting Organization" means any person or organization
engaged or about to become engaged in research on or development,
production, marketing, leasing, licensing, selling, or servicing
of a Conflicting Product.
(f) "Cause" shall mean (i) the conviction of Consultant by a court of
competent jurisdiction of or the written confession by Consultant
to any felony committed by Consultant prior to or during the term
of this Agreement, (ii) the conviction of or written confession
by Consultant to the embezzlement or misappropriation of funds of
the Company committed by Consultant prior to or during the term
of this Agreement, (iii) failure or refusal of Consultant to
perform the services to be provided pursuant to this Agreement
for a period of more than thirty (30) days after receipt of
written notice from Company, or (iv) violation of Consultant of
the provisions of Section 4 or 5 of this Agreement; or
(g) "Permanent Disability" means a physical or mental condition of
Consultant resulting from bodily injury, disease, or mental
disorder that renders him incapable of performing the substantial
and material duties required of him under this Agreement. For
purposes of determining whether Consultant is "permanently
disabled" or has a "permanent disability" under this Agreement, a
written medical report prepared by Consultant's personal
physician stating that Consultant either is permanently disabled
or has a permanent disability shall be conclusive evidence on the
parties hereto.
9. Termination. This Agreement may be terminated:
(a) by Consultant without cause, for any reason or for no reason, at
any time upon thirty days' written notice to the Company;
(b) by the Company immediately for Cause (as defined in Section 7(f))
without prior notice to Consultant;
(c) upon the death or Permanent Disability (as defined in Section
7(g)) of Consultant,
(d) upon its fifth anniversary if Company does not renew this
Agreement and the non-compete shall also terminate on that date;
however, this Agreement may be renewed on the fifth anniversary
of the commencement date hereof and on each fifth year
anniversary thereafter, with a Consumer Price Index adjustment to
the $150,000 annual consulting fee from the beginning of the
preceding five-year period to the renewal date, and the
non-compete shall continue in force for each such renewal period;
or
(e) if Company is in default hereunder and such default is not cured
within thirty (30) days of written notice thereof, then
Consultant can terminate this Agreement and the non-compete
provision hereof is of no further force and effect.
10. Entire Agreement. This Agreement contains the entire agreement of the
parties hereto with regard to the subject matter hereof and supersedes
all prior or contemporaneous agreements and understandings, oral or
written, between the parties hereto with respect to the subject matter
hereof.
11. Other Agreements/Benefits. Notwithstanding anything in this Agreement
to the contrary, this Agreement is independent of and has no effect on
other agreements between the Company and the Consultant regarding
Consultant's employment or rights to royalties or other compensation.
Nothing contained in this Agreement shall be construed to alter,
abridge, or in any manner affect the rights and privileges of
Consultant to participate in any pension or profit sharing plan or
other qualified retirement plan that the Company may now or hereafter
provide, including the Company's employee stock ownership plan.
12. Amendment. No amendment or waiver of any provision of this Agreement
shall be effective unless the same shall be in writing and signed by
all the parties and then such waiver shall only be effective in the
specific instance and for the specific purpose for which it was given.
13. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefits of the parties hereto and their respective heirs,
personal representatives, successors, and permitted assigns, including
the successors or assigns of the Company or any Subsidiary or
Affiliate of the Company, but nothing in this Agreement is to be
construed as an authorization or right of either party to assign its
rights or delegate its duties under this Agreement without the consent
of the other party hereto. A successor or assign of the Company shall
include, but shall not be limited to, any entity acquiring all or
substantially all of the assets, business or stock of the Company. The
term "substantially" shall mean a transfer of more than twenty percent
(20%) of the assets (with respect to book value) or business (with
respect to revenues) or more than fifty percent (50%) of the stock of
the Company.
14. Governing Law. This Agreement shall be construed, governed by, and
enforced in accordance with the laws of the State of Minnesota.
15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same agreement.
16. Headings. The headings of the paragraphs of this Agreement are
intended for the convenience of the parties only and shall in no way
be held to explain, modify, amplify, or aid in the interpretation of
the provisions hereof.
17. Severability. The provisions of this Agreement shall be deemed
severable and if any portion hereof shall be held invalid, illegal, or
unenforceable for any reason, the remainder shall not thereby be
invalidated but shall remain in full force and effect.
18. Waiver. The waiver by either party of the breach of any provision of
this Agreement by the other party shall not operate or be construed as
a waiver of any subsequent breach of that provision or any other
provision. None of the terms of this Agreement shall be deemed to have
been waived by either party unless such waiver is in writing and
signed by or on behalf of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day, month, and year first above written.
COMPANY:
Oxboro Medical International, Inc.
By /s/ Harley Haase
Its President/CEO
CONSULTANT:
/s/ Larry A. Rasmusson
Larry A. Rasmusson
OXBORO MEDICAL INTERNATIONAL, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
August 17, 1995
Dear Mr. Rasmusson:
You are hereby notified that you have been granted a Stock Option
("Option") by the Board of Directors of Oxboro Medical International, Inc. (the
"Company") effective August 17, 1995.
The Option granted to you is to purchase 80,364 shares of Common Stock
("Stock") of the Company at a price of $1.50 per share. The date of grant of
this Option is the date of this letter, and it is the determination of the Board
that on this date the fair market value of the Stock does not exceed $1.50 per
share.
You are not required to exercise this Option. This Option must be exercised
if at all and to the extent exercised, on or before August 17, 2000.
The terms of your Option are as follows:
a. Your Option is immediately exercisable in full;
b. The purchase price of any shares of Stock purchased pursuant to
exercise of this Option may be paid in cash, by certified or cashier's
check, or, with the prior approval of the Board, by transfer to the
Company of shares of Stock already owned by you and having a fair
market value, as of the date of your exercise of the Option, which is
not less than the purchase price of the Stock being acquired pursuant
to your Option, provided that such shares of stock were acquired and
full consideration paid therefor at lease six months prior to such
delivery, or any combination thereof, or by any other method
authorized by the Board;
c. Your Option may be exercised by you, but only by you, at any time
prior to the termination of the Option;
d. In the event of your death, your Option may be exercised at any
time within one year after your death by your estate or by a person
who acquired the right to exercise the Option by will or by the laws
of descent and distribution, to the extent the Option was exercisable
by you at the time of your death;
e. You may not transfer, sell, pledge, assign, or otherwise dispose of
your Option, other than at death by will or the laws of descent and
distribution, and your Option during your lifetime is exercisable only
by you;
f. The shares of Stock you acquire upon exercise of your Option may be
subject to restrictions against transfer;
g. Unless a registration statement under the Securities Act of 1933
(and applicable state securities laws) is in effect with respect to
this Option or Stock to be purchased pursuant to this Option, you
agree with, and represent to, the Company that you are acquiring the
Option and Stock for the purpose of investment and not with a view to
transfer, sell, or otherwise dispose of the Option or Stock, except as
may be permitted under the Plan. The Company may require an opinion of
counsel satisfactory to it prior to the transfer of any Stock to you
to assure at all times that it will be in compliance with applicable
federal and state securities laws; and
h. This Option is not intended to be an "Incentive Stock Option" as
defined in the Internal Revenue Code of 1986, as amended from time to
time.
As a condition to the issuance of shares of Stock under this Option, you
agree to authorize the Company to withhold in accordance with applicable law
from any regular cash compensation payable to you or, in the alternative, to
remit to the Company at the time of any exercise of this Option any taxes
required to be withheld by the Company under federal, state, or local law as a
result of your exercise of this Option. Further, you agree that you are
responsible for the payment of any taxes due that are not subject to
withholding.
OXBORO MEDICAL INTERNATIONAL, INC.
By /s/ Harley Haase
Its President
ACCEPTANCE
I hereby accept the terms and provisions of the above Stock Option
Agreement and agree to be bound by its terms. I also agree to accept as binding,
conclusive, and final all decisions or interpretations of the Board upon any
questions arising under the Option. Dated effective August 17 , 1995.
/s/ Larry A. Rasmusson
Larry A. Rasmusson
OXBORO MEDICAL INTERNATIONAL, INC.
NOTICE OF EXERCISE OF STOCK OPTION
AND RECORD OF STOCK TRANSFER
I hereby exercise my Stock Option granted by Oxboro Medical International,
Inc. subject on August 17, 1995, to all terms and provisions thereof and notify
you of my desire to purchase ________ shares of Common Stock of the Company (the
"Shares"), offered to me pursuant to said Option. Enclosed is my check in the
sum of $__________ in full payment for the Shares.
I hereby represent that the Shares are being acquired by me as an
investment and not with a view to, or for resale in connection with, the
distribution of any shares of the Company. I understand that the Shares are not
registered under the Securities Act of 1933, as amended (the "Act"), or
applicable state securities laws, that the Shares may not be sold or otherwise
transferred except pursuant to an effective registration statement under the Act
and said laws, unless the Company has received an opinion of counsel
satisfactory to it that such transfer or disposition does not require
registration under the Act or said laws and, for any sales under Rule 144 of the
Act, such evidence as it shall request for compliance with that rule or
applicable state securities laws, and that the certificate representing the
Shares may contain a legend referring to such restrictions.
I further agree to pay any taxes for which I may be liable as a result of
the exercise of the Option.
Dated:______________________, 1995.
__________________________________
Optionee's Signature
RECEIPT is hereby acknowledged of the delivery to me by OXBORO MEDICAL
INTERNATIONAL, INC. on __________, , of stock certificate no. _____ for
_____ shares of Common Stock purchased by me pursuant to the terms and
conditions of the Stock Option referred to above.
__________________________________
Optionee
FIRST AMENDMENT TO
EMPLOYMENT AGREEMENT
This First Amendment, made and entered into effective the 21st day of
December, 1993, by and between Oxboro Medical International, Inc., a Minnesota
corporation (the"Company"), and HARLEY HAASE (the "Executive").
W I T E S S E T H:
WHEREAS, the Executive and the Company entered into an Employment Agreement
effective April 1, 1993 (the "Employment Agreement"); and
WHEREAS, references are made throughout the Employment Agreement to a
"Deferred Compensation Agreement" by and between the Executive and the Company,
effective as of April 1, 1993 (the "Deferred Compensation Agreement"); and
WHEREAS, the Deferred Compensation Agreement was never executed by the
Executive and the Company and is of no force or effect; and
WHEREAS, the Executive and the Company now desire to amend the Employment
Agreement by deleting all references to the Deferred Compensation Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter contained, the parties hereto agree as follows:
1. All references to the Deferred Compensation Agreement (as identified
at Section 8(b) of the Employment Agreement) are hereby deleted from
the Employment Agreement, effective as of April 1, 1993, and all
references in the Employment Agreement to the Deferred Compensation
Agreement shall be null and void and of no force or effect.
2. Except as hereby amended, the Employment Agreement between the parties
remains in full force and effect.
IN WITNESS WHEREOF, the parties have executed this First Amendment to the
Employment Agreement on the day and year first above written.
OXBORO MEDICAL INTERNATIONAL, INC.
By: /s/ Larry Rasmusson
Director
By: /s/ Dennis L. Mikkelson
Director
EXECUTIVE
/s/ Harley Haase
Harley Haase
CONSULTING AGREEMENT
THIS AGREEMENT is made and entered into as of this 1st day of November,
1995, by and between Oxboro Medical International, Inc., a Minnesota corporation
(the "Company"), and Harley Haase (the "Consultant").
WHEREAS, the Company is engaged in the business of developing, assembling,
and marketing medical products and through its wholly owned subsidiary, Oxboro
Outdoors, Inc., developing, assembling and marketing outdoor recreational
products (collectively the "Business"); and
WHEREAS, Consultant has been an executive officer of the Company for 8 1/2
years and has developed unique knowledge, information, and expertise concerning
the Business in connection therewith; and
WHEREAS, Consultant has indicated his intention to retire as an employee
and officer of the Company within the next five years; [for accounting
treatment, may need to provide more specific retirement date] and
WHEREAS, the Company desires that Consultant, following his retirement,
continue to provide consulting services to the Company and refrain from engaging
in competing business activities as set forth herein;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
promises and covenants herein contained and intending to be legally bound
hereby, the parties agree as follows:
1. Consulting Services. Consultant agrees that commencing on the date of
his retirement from his duties as an officer and employee of the
Company, he will hold himself available, unless disabled from doing so
as a result of illness or other incapacity, to advise and consult from
time to time, by telephone, in person at the Company's offices, or in
such other manner and at such other place or places as may from time
to time be mutually agreeable to Consultant and the Company, with the
officers, directors, employees, and other representatives of the
Company when and to the extent reasonably requested to do so by the
Company's officers and/or directors, relative to the Business of the
Company and to give to the Company, through such officers, directors,
employees, and other representatives, the benefit of his experience
and knowledge of the Business and of his judgment on the financial,
merchandising, personnel, and other management aspects, problems, and
policies of the Business. Consultant shall not be required to provide
consulting services for more than five days per month (or sixty days
per year); however Consultant may, at his own discretion, devote two
of said five days a month to the review of operations, manufacturing,
marketing/sales, product development and finances/accounting, with
full access to the Company's books and records, information and sales
and accounting data and systems, with assistance from company staff,
as reasonably requested by Rasmusson. In no event shall Consultant be
required to provide more than ten (10) days in any given calendar
month.
2. Relationship. It is the intent of the parties to this Agreement that
Consultant is and shall remain at all times an independent contractor
in the performance of this Agreement and nothing herein contained
shall be construed as inconsistent with that status. The Consultant
shall not be considered the employee, agent, or servant of the Company
at any time, under any circumstances, or for any purpose whatsoever.
The payments to Consultant pursuant to this Agreement are not to be
construed to be salary, wages, or payroll. The Consultant understands,
acknowledges, and agrees that the Company will not withhold state or
federal income tax from the compensation that it will pay to
Consultant, will not withhold or make contributions to social
security, and with the exception of medical benefits and insurance to
the extent Company provides such benefits and insurance to its
employees and split-dollar life insurance benefits in force as of the
date of and following termination of employment, will not provide
unemployment compensation, worker's compensation, or any other kind of
taxes, benefits, or insurance. Consultant shall not be entitled to
paid vacations, paid sick leave, or any other fringe benefits.
Consultant understands and agrees that he has no authority to and will
not enter into contracts or commitments in the name or on behalf of
the Company, that he shall in no event represent that he is acting as
an agent or representative of the Company, and that he shall not
otherwise attempt to bind the Company in any respect whatsoever,
unless authorized to do so in writing by the Company. The Consultant
shall not make any representations, warranties, or commitments binding
upon the Company.
3. Commencement. This Agreement shall only commence upon Consultant's
retirement from his employment with the Company if Consultant is at
least fifty-five years of age. If Consultant voluntarily terminates
his employment with the Company prior to age 55 then this Agreement
shall not be binding upon the Company and shall be of no further force
and effect. However, if the Company does not renew Consultant's
Employment Agreement on April 1, 1998, for reasons other than good
cause, as defined in said Employment Agreement, attributable to
Consultant, then this Agreement shall commence on such date.
4. Compensation. For the services rendered by Consultant pursuant to this
Agreement, the Company shall pay the Consultant annually the sum of
One Hundred Fifty Thousand Dollars ($150,000) in twelve (12) equal
monthly installment payments in the amount of Twelve Thousand Five
Hundred Dollars ($12,500) each. It is understood that Consultant shall
be paid the compensation set forth above whether or not the Company
requests him to provide consulting services.
Any amounts otherwise payable to the Consultant pursuant to this paragraph
4 shall be paid before or after his death in accordance with written directions
delivered to Company by Consultant or his duly appointed personal
representative(s) from time to time or, in the absence of such a direction,
shall be paid to Consultant during his life and to his estate after his death.
The Company shall also reimburse the Consultant for any reasonable travel
or other out-of-pocket expenses incurred by Consultant in performing consulting
services requested hereunder by the Company, provided that the Company shall
have approved such expenditures in advance if over $500.00 per month.
If Consultant is required to provide consulting services exceeding the
limit set forth in paragraph 1 hereof, the Company shall pay for such services
at the rate of $2,500 per day; however, during the first year of this Agreement,
the sum of the amounts paid to Consultant by Company pursuant to this Agreement
(consisting of the base consulting fee ($150,000) plus the per diem amount(s))
and the total of the annual direct compensation paid to Consultant's
replacement, shall not exceed the amount of the direct compensation paid to
Consultant during the twelve months preceding the Consultant's
retirement/termination date. A "day," pursuant to the terms of this Agreement,
shall be defined as eight hours.
In the event that the Company, in good faith, has determined Consultant is
in breach of any of his covenants, agreements, or obligations arising under this
Agreement, the Company shall have the right to withhold payments to Consultant
until Consultant has cured any such existing breaches. If Consultant fails to
cure such breach within thirty (30) days written notice thereof, Company may
discontinue making such payments. If Consultant cures such default within thirty
(30) days, then withheld payment shall be released and payments to Consultant
shall continue as set forth herein.
5. Confidential Information. Consultant acknowledges that Consultant may
receive, have access to, or contribute to the production of
Confidential Information. For purposes of this Agreement, Consultant
agrees that "Confidential Information" shall mean information or
material proprietary to the Company or its Affiliates (as hereinafter
defined) or designated as "Confidential Information" by the Company or
an Affiliate and not generally known by non-Company personnel that
Consultant develops or that Consultant may obtain knowledge of or have
access to as a result of Consultant's relationship with the Company or
any Affiliate prior to or during the term of this Agreement (including
information conceived, originated, discovered, or developed in whole
or in part by Consultant). "Confidential Information" shall include,
but not be limited to, the following types of information and other
information of a similar nature in whatever form (including written or
electronic media): discoveries, ideas, concepts, software in various
stages of development, designs, secrets, drawings, specifications,
techniques, models, data, source codes, object codes, documentation,
diagrams, flow charts, research, development, processes, procedures,
"know-how," marketing techniques and materials, marketing and
development plans, customer names and other information related to
customers, price lists, pricing policies, and financial information.
"Confidential Information" also includes any information of the same
general nature as that described above that the Company or an
Affiliate obtains from another party and that the Company or an
Affiliate treats as proprietary or designates as "Confidential
Information," whether or not owned or developed by the Company or the
Affiliate. Consultant further agrees:
(a) that he will, to the best of his ability, furnish the Company on
demand, at any time during or after the term of this Agreement, a
complete list of the names and addresses of all persons that
Consultant knows have dealt with, are dealing with, or propose to
deal with the Company or any Affiliate, whether or not such
information is in the possession or within the knowledge of the
Company or any Affiliate. Such information may be disclosed by
periodic reports to the Company during the term of this
Agreement;
(b) that all notes, data, reference materials, sketches, drawings,
memoranda, documentation, and records in any form and in any way
incorporating or reflecting any Confidential Information belong
exclusively to the Company, and Consultant will turn over all
copies of such materials in Consultant's control to the Company
upon request or upon termination of this Agreement;
(c) that during the term of this Agreement and thereafter, the
Consultant will hold in confidence and not directly or indirectly
reveal, report, publish, disclose, or transfer any of the
Confidential Information to any person or for any purpose, except
in the course of Consultant's work for the Company;
(d) that any inventions or ideas in whole or in part conceived of or
made by Consultant during or after the term of Consultant's
relationship with the Company or any Affiliate shall be as set
forth in the Product Development Incentive Agreement between
Consultant and Company dated November , 1995 as amended (the
"Incentive Agreement"); and
(e) that Consultant has been given a copy and has reviewed Chapter
325C of Minnesota Statutes, known as the Minnesota Uniform Trade
Secrets Act (the "Act"), and acknowledges that violation of the
Act or of Consultant's agreements, covenants, and represen-
tations contained in this Agreement may give rise to a cause of
action in favor of the Company against Consultant for general and
specific damages, exemplary damages, injunctive relief, and
attorney's fees.
6. Covenant Not To Compete. Except as set forth in the Royalty Agreement
and the License Agreement, during the term of this Agreement, and so
long as Consultant is receiving payments hereunder, Consultant shall
not, directly or indirectly, on Consultant's own behalf or as a
partner, officer, employee, consultant, agent, shareholder, director,
or trustee of any person, firm, corporation, or other entity, engage
or participate in the business activities of or render services to any
Conflicting Organization (as defined in Section 7(e) hereof) in
connection with the development, manufacture, marketing, licensing,
servicing, or promotion of any Conflicting Product (as defined in
Section 7(d) hereof), or solicit or call upon any accounts that have
been serviced by, or that have purchased products from, the Company or
any Affiliate within the preceding two-year period, or permit
Consultant's name to be used in connection with any such business or
solicitation, unless otherwise agreed to in writing by Company and
Consultant.
7. Injunctive Relief, Attorneys' Fees. In recognition of the irreparable
harm that a violation by Consultant of any of the covenants of
paragraphs 5 or 6 would cause the Company, the Consultant agrees that
in addition to any other remedies or relief afforded by law, an
injunction against an actual or threatened violation or violations may
be issued against him and every other person concerned thereby, it
being the understanding of the parties that both damages and an
injunction shall be proper modes of relief and are not to be
considered alternative remedies. In the event of such an action or
legal proceeding, the prevailing party shall be entitled to be
reimbursed for its costs, expenses and reasonable attorneys' fees
incurred in such proceeding or action by the other party.
8. Definitions. For purposes of this Agreement, it is agreed that the
following terms shall have the meanings set forth below:
(a) "Affiliate" shall mean any corporation, partnership, or other
business entity in which the Company has a financial interest, or
which the Company directly or indirectly, through one or more
intermediaries, officers, or employees, controls, or is
controlled by, or is under common control with, including any
Subsidiary.
(b) "Subsidiary" shall mean any corporation, partnership, or other
business entity in which the Company has a significant financial
interest, or which the Company, directly or indirectly, through
one or more intermediaries, officers, or employees, controls, or
is controlled by, or is under common control with, including as
of the date of this Agreement, Oxboro Outdoors, Inc., and Oxboro
Medical, Inc., both Minnesota corporations and both wholly owned
by the Company.
(c) "Successor" includes any entity or person who acquires or
succeeds to all or a substantial portion of the business or
assets of the Company.
(d) "Conflicting Product" means any product, system, or service of a
Conflicting Organization that is the same as or similar to, or
competes with, or has a usage allied to, a product, process,
system, or service provided by the Company.
(e) "Conflicting Organization" means any person or organization
engaged or about to become engaged in research on or development,
production, marketing, leasing, licensing, selling, or servicing
of a Conflicting Product.
(f) "Cause" shall mean (i) the conviction of Consultant by a court of
competent jurisdiction of or the written confession by Consultant
to any felony committed by Consultant prior to or during the term
of this Agreement, (ii) the conviction of or written confession
by Consultant to the embezzlement or misappropriation of funds of
the Company committed by Consultant prior to or during the term
of this Agreement, (iii) failure or refusal of Consultant to
perform the services to be provided pursuant to this Agreement
for a period of more than thirty (30) days after receipt of
written notice from Company, or (iv) violation of Consultant of
the provisions of Section 4 or 5 of this Agreement; or
(g) "Permanent Disability" means a physical or mental condition of
Consultant resulting from bodily injury, disease, or mental
disorder that renders him incapable of performing the substantial
and material duties required of him under this Agreement. For
purposes of determining whether Consultant is "permanently
disabled" or has a "permanent disability" under this Agreement, a
written medical report prepared by Consultant's personal
physician stating that Consultant either is permanently disabled
or has a permanent disability shall be conclusive evidence on the
parties hereto.
9. Termination. This Agreement may be terminated:
(a) by Consultant without cause, for any reason or for no reason, at
any time upon thirty days' written notice to the Company;
(b) by the Company immediately for Cause (as defined in Section 7(f))
without prior notice to Consultant;
(c) upon the death or Permanent Disability (as defined in Section
7(g)) of Consultant,
(d) upon the fifth anniversary if Company does not renew this
Agreement and the non-compete shall also terminate; however, this
Agreement may be renewed on the fifth anniversary of the
commencement date hereof and on each fifth year anniversary
thereafter, with a Consumer Price Index adjustment to the
$150,000 annual consulting fee from the beginning of the
preceding five year period to the renewal date, and the
non-compete shall continue in force for each such renewal period;
or
(e) if Company is in default hereunder and such default is not cured
within thirty (30) days of written notice thereof, then
Consultant can terminate this Agreement and the non-compete
provision hereof is of no further force and effect.
10. Entire Agreement. This Agreement contains the entire agreement of the
parties hereto with regard to the subject matter hereof and supersedes
all prior or contemporaneous agreements and understandings, oral or
written, between the parties hereto with respect to the subject matter
hereof.
11. Other Agreements/Benefits. Notwithstanding anything in this Agreement
to the contrary, this Agreement is independent of and has no effect on
other agreements between the Company and the Consultant regarding
Consultant's employment or rights to royalties or other compensation.
Nothing contained in this Agreement shall be construed to alter,
abridge, or in any manner affect the rights and privileges of
Consultant to participate in any pension or profit sharing plan or
other qualified retirement plan that the Company may now or hereafter
provide, including the Company's employee stock ownership plan.
12. Amendment. No amendment or waiver of any provision of this Agreement
shall be effective unless the same shall be in writing and signed by
all the parties and then such waiver shall only be effective in the
specific instance and for the specific purpose for which it was given.
13. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefits of the parties hereto and their respective heirs,
personal representatives, successors, and permitted assigns, including
the successors or assigns of the Company or any Subsidiary or
Affiliate of the Company, but nothing in this Agreement is to be
construed as an authorization or right of either party to assign its
rights or delegate its duties under this Agreement without the consent
of the other party hereto. A successor or assign of the Company shall
include, but shall not be limited to, any entity acquiring all or
substantially all of the assets, business or stock of the Company. The
term "substantially" shall mean a transfer of more than twenty percent
(20%) of the assets (with respect to book value) or business (with
respect to revenues) or more than fifty percent (50%) of the stock of
the Company.
14. Governing Law. This Agreement shall be construed, governed by, and
enforced in accordance with the laws of the State of Minnesota.
15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same agreement.
16. Headings. The headings of the paragraphs of this Agreement are
intended for the convenience of the parties only and shall in no way
be held to explain, modify, amplify, or aid in the interpretation of
the provisions hereof.
17. Severability. The provisions of this Agreement shall be deemed
severable and if any portion hereof shall be held invalid, illegal, or
unenforceable for any reason, the remainder shall not thereby be
invalidated but shall remain in full force and effect.
18. Waiver. The waiver by either party of the breach of any provision of
this Agreement by the other party shall not operate or be construed as
a waiver of any subsequent breach of that provision or any other
provision. None of the terms of this Agreement shall be deemed to have
been waived by either party unless such waiver is in writing and
signed by or on behalf of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day, month, and year first above written.
COMPANY:
Oxboro Medical International, Inc.
By /s/ Larry Rasmusson
Its Chief Financial Officer
CONSULTANT:
/s/ Harley Haase
Harley Haase
PRODUCT DEVELOPMENT INCENTIVE AGREEMENT
THIS AGREEMENT (this "Contract"), made and entered into effective as of the
8th day of November, 1995 by and between OXBORO MEDICAL INTERNATIONAL, INC., a
Minnesota corporation ("COMPANY"), and HARLEY HAASE ("HAASE");
WITNESSETH:
WHEREAS, HAASE has developed and/or contributed to the development of
various PRODUCTS (as defined below); and
WHEREAS, COMPANY desires to obtain from HAASE, and HAASE desires to grant
to COMPANY, an exclusive license for making, using and selling the PRODUCTS, on
the terms and subject to the conditions set forth below; and
WHEREAS, COMPANY desires to receive information and assistance from HAASE
to enable COMPANY to use HAASE's KNOW-HOW (as defined below) to make or have
made, use and sell the PRODUCTS, on the terms and subject to the conditions set
forth below;
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter contained, the parties hereto agree as follows:
1. Definitions. Whenever used in this Contract, the following capitalized
terms will have the meanings set forth below:
1.1 The term "PRODUCTS" shall include only the items set forth on the
attached Exhibit 1.1 (HH).
Further items may be added to the foregoing list of PRODUCTS by
mutual agreement between HAASE and the Board of Directors of
Company, which PRODUCTS are made in whole or in part using the
KNOW-HOW supplied by HAASE and shall be deemed to be "ADDITIONAL
PRODUCTS" as defined below.
1.2 The term "NET SALES PRICE" means the gross invoice or billing
price of the PRODUCTS or ADDITIONAL PRODUCTS (as defined below),
sold by COMPANY with no deductions except for: (a) freight
charges; (b) trade, quantity and cash discounts; (c) any sales
tax applicable to the sale of the PRODUCTS or ADDITIONAL
PRODUCTS; and (d) such credits or allowances, if any, given or
made because of the rejection or return of any PRODUCTS or
ADDITIONAL PRODUCTS previously delivered to a customer by
COMPANY.
1.3 The term "KNOW-HOW" means accumulated knowledge, technical
information, methods of use, and the like, concerning the
PRODUCTS or the ADDITIONAL PRODUCTS which HAASE has in his
possession or acquires during the term of this Contract and which
HAASE is free to disclose to COMPANY.
2. Grant of PRODUCT License.
2.1 HAASE hereby grants to COMPANY an exclusive world-wide license to
make, to have made, to use and to sell the PRODUCTS, together
with an exclusive world-wide license to use the KNOW-HOW to make,
to have made, to use and to sell the PRODUCTS. For the purposes
of this Contract, the term "exclusive" means that HAASE will not
supply, provide or grant to any person or entity other than
COMPANY or its affiliates rights to make, have made, use, sell,
or utilize the PRODUCTS, the ADDITIONAL PRODUCTS or the KNOW-HOW
without the prior written consent of COMPANY.
2.2 HAASE hereby grants to COMPANY the right to grant to purchasers
of the PRODUCTS a non-exclusive license to use the purchased
PRODUCTS and ADDITIONAL PRODUCTS and any related KNOW-HOW
necessary for the use of the PRODUCTS and ADDITIONAL PRODUCTS
purchased.
3. Supplying of KNOW-HOW; Rights to ADDITIONAL PRODUCTS.
3.1 HAASE has, contemporaneously with the execution of this Contract,
furnished to COMPANY all KNOW-HOW concerning the PRODUCTS in
existence as of the date hereof. HAASE further agrees to promptly
provide COMPANY with any additional KNOW-HOW developed or
acquired by HAASE during the term of this Contract and useful or
necessary to enable COMPANY to make, to have made, to use and to
sell the PRODUCTS or any ADDITIONAL PRODUCTS.
3.2 HAASE agrees to offer to COMPANY all products, concepts, and
ideas that he may develop after the date of this Contract and for
a period of two years following the expiration or termination of
this Contract and that are within the same category as or similar
to the products COMPANY is marketing at the time of such
development. COMPANY shall determine, within a reasonable time,
whether it is interested in obtaining the rights to and
developing and marketing such product, concept, or idea. The
Company shall have thirty (30) days to accept or reject the
offer. If the Company accepts such additional products, such
products shall be defined as "ADDITIONAL PRODUCTS", and such
ADDITIONAL PRODUCTS shall be subject to all of the provisions of
the Agreement. If the Company rejects or fails to accept the
additional products within said thirty (30) day period, then
HAASE shall be entitled to enter into an agreement regarding said
products with any third party on any terms; however, if the
Company responds to the offer with a counter-offer which is
rejected by HAASE, then HAASE shall be entitled to enter into an
agreement regarding said products with any third party on terms
no more favorable to such third party than the terms
counter-offered by the Company for such products.
4. Incentive Payment.
4.1 Commencing on the date of HAASE'S termination of employment with
the COMPANY ("Termination Date"), COMPANY will pay to HAASE an
INCENTIVE PAYMENT in the amounts of Four Percent (4%) on the NET
SALES PRICE of all PRODUCTS and ADDITIONAL PRODUCTS sold by
COMPANY. Except as expressly provided in this Contract, COMPANY
will continue to pay an INCENTIVE PAYMENT to HAASE for the life
of the PRODUCTS and ADDITIONAL PRODUCTS.
4.2 Within fifteen (15) days after the close of each month from and
after HAASE'S Termination Date, COMPANY will pay HAASE the
INCENTIVE PAYMENT due on PRODUCTS and ADDITIONAL PRODUCTS sold
during the preceding month.
4.3 COMPANY will have the option at any time to cease paying the
INCENTIVE PAYMENT to HAASE with respect to any individual item
included in the PRODUCTS by giving all rights to such item back
to HAASE. COMPANY will also have the right to maintain its
exclusive license to an individual item included in the PRODUCTS
and ADDITIONAL PRODUCTS, even if such item is defined as no
longer sold by COMPANY, by paying to HAASE an amount equal to
Four Percent (4%) times the average annual NET SALES PRICE for
the item over the COMPANY's three (3) preceding fiscal years,
which amount shall be paid to HAASE each year that the COMPANY
wishes to maintain its exclusive license.
5. COMPANY's Development Obligations. COMPANY will have the
responsibility, at its sole expense: (a) to complete the development
of the PRODUCTS and ADDITIONAL PRODUCTS; (b) to carry all PRODUCT and
Additional Product concepts through to production; (c) to manufacture
or produce the PRODUCTS and the ADDITIONAL PRODUCTS; (d) to prepare,
file and prosecute all necessary and desirable patent, trademark and
copyright applications and Federal Drug Administration registrations
relating to the PRODUCTS or ADDITIONAL PRODUCTS; (e) to advertise,
market, promote and distribute the PRODUCTS and the ADDITIONAL
PRODUCTS; and, (f) with respect to (a) through (e) above, any
expenditure(s) in excess of $15,000.00, cumulative or otherwise, must
be approved by the Board of Directors.
6. Records; Audit Rights. COMPANY agrees to keep true and detailed
records containing all information required for the computation and
verification of INCENTIVE PAYMENT to be paid by COMPANY under this
Contract. Upon written notice from HAASE, COMPANY will make all
records containing information required for the computation of
INCENTIVE PAYMENT available to HAASE or his designee for review and
audit. If the audit by HAASE reveals any deficiency in INCENTIVE
PAYMENT paid to HAASE, COMPANY will reimburse HAASE for the cost of
the audit, and will pay the INCENTIVE PAYMENT deficiency to HAASE
within five (5) business days of completion of the audit. If an audit
reveals any payments which exceed the amount of Incentive Payments to
HAASE as determined pursuant to the terms hereof, HAASE will
immediately reimburse the Company the amounts of such overpayments and
the cost of such audit if such audit is or was requested by HAASE. If
payments are accurate, then the party requesting the audit shall pay
the cost of the audit.
7. Duration and Termination. This Contract may be terminated by either
party in the event of a breach under or default in the performance of
any material provision, term or condition of this Contract and the
giving of written notice specifying the alleged breach or default, if
the party in breach or default fails to cure the alleged breach or
default within thirty (30) days of receipt of notice, or fails or
commence actions to cure the breach or default within such thirty (30)
day period and thereafter diligently prosecute such cure to
completion. Upon the termination of this Contract: (a) COMPANY will
immediately lose all rights to manufacture and produce the PRODUCTS
and the ADDITIONAL PRODUCTS, which rights shall immediately revert to
HAASE; (b) COMPANY will immediately lose all rights to sell or
distribute the PRODUCTS and the ADDITIONAL PRODUCTS, which rights
shall immediately revert to HAASE; provided however that COMPANY will
have the right to sell its inventory of any completed PRODUCTS and
ADDITIONAL PRODUCTS manufactured or produced as of the date of
termination; (c) COMPANY will immediately lose all rights to use the
KNOW-HOW, will cease using the KNOW-HOW in all respects, and will
transfer all rights pertaining to the KNOW-HOW back to HAASE; (d)
COMPANY will continue to pay the INCENTIVE PAYMENT as provided in this
Contract based on the NET SALES PRICE of PRODUCTS sold by COMPANY
following the termination of this Contract; (e) COMPANY will assign to
HAASE all patents, trademark and Federal Drug Administration
registrations, copyrights and similar intellectual property rights, as
well as all applications therefor, which relate to or are derived from
the PRODUCTS, the ADDITIONAL PRODUCTS or the KNOW-HOW; and (f) HAASE
will have the right to utilize the KNOW-HOW and to manufacture and
sell the PRODUCTS and the ADDITIONAL PRODUCTS, either on his own
account or through such other persons or entities as he may select.
8. Notices. All notices given hereunder shall be in writing and shall be
personally served or sent by registered or certified mail, return
receipt requested. Notices to COMPANY shall be given to COMPANY at its
corporate headquarters, which as of the date of this Contract is 13828
Lincoln Street N.E., Ham Lake, Minnesota 55304. Notices to HAASE shall
be addressed to HAASE at HAASE's residence address as the same appears
on the records of COMPANY. Notices to COMPANY or HAASE shall be sent
to such other address as COMPANY or HAASE shall specify in writing to
the other.
9. General Provisions.
9.1 This Contract is the entire contract between the parties
concerning the subject matter hereof and supersedes and replaces
any existing contract between the parties hereto relating to the
subject matter hereof, and COMPANY and HAASE hereby acknowledge
that there are no agreements or understandings of any nature,
oral or written, regarding HAASE's relationship with COMPANY
relating to the subject matter hereof, apart from this Contract.
9.2 No provisions of this Contract may be modified, waived, or
discharged unless such modification, waiver, or discharge is
agreed to in a writing signed by HAASE and COMPANY. No waiver by
or noncompliance with, any condition or provision of this
Contract to be performed by the other party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the
same or any prior or subsequent time.
9.3 No failure on the part of either party to exercise, and no delay
in exercising any right hereunder, for up to six (6) months of
the date such right arises, shall operate as a waiver thereof,
nor shall any single or partial exercise of any right hereunder
within such six (6) month period by either party preclude any
other or further exercise thereof or the exercise of any other
right. Any right hereunder must be exercised within six (6)
months of the date such right arises, or such right shall be
deemed to be waived.
9.4 It is further agreed and understood by the parties hereto that if
any part, term, or provision of this Contract is held
unenforceable in the jurisdiction in which either party seeks
enforcement of the Contract, this Contract shall be construed as
if not containing the invalid provision or provisions. Invalidity
or unenforceability of any portion or provision of this Contract
shall not affect the validity or enforceability of the remaining
provisions of this Contract, which shall remain in full force and
effect and shall govern the rights and obligations of the parties
hereto.
9.5 Any controversy or claim arising out of, or relating to, this
Contract or its breach shall be settled by arbitration in
accordance with the governing rules of the American Arbitration
Association then in effect. Judgment upon the award rendered
shall be binding upon the parties hereto and may be entered in
any court of competent jurisdiction. Costs and attorneys' fees
shall be paid as the arbitrators' award shall specify. As the
sole exception to arbitration, each party shall have the right to
obtain injunctive relief, only, from any court having
jurisdiction so as to preserve that party's rights for resolution
in any pending or imminent arbitration proceedings, but no such
injunction shall prohibit such arbitration proceedings and the
injunctions may be modified or vacated as a result of the
arbitration award.
9.6 This Contract shall be construed and enforced in accordance with
the laws of the State of Minnesota. By executing this Contract,
the parties do hereby agree and submit to personal jurisdiction
in the State of Minnesota for the purposes of any suit or
proceeding brought to enforce the terms and conditions of this
Contract and agree that any such suit or proceeding shall be
venued in Anoka County, Minnesota.
9.7 With the exception of: (a) HAASE's right to assign or bequeath,
upon notice to COMPANY but without COMPANY's prior written
consent, his rights to receive payments pursuant to this
Contract; and (b) COMPANY's right, without HAASE's prior written
consent, to subcontract for the manufacture, production,
advertising, marketing, sale or distribution of the PRODUCTS or
the ADDITIONAL PRODUCTS, the rights and obligations of COMPANY
and HAASE under Contract cannot be assigned by either COMPANY or
HAASE without the prior written consent of the other party, which
consent will not be unreasonably withheld. The terms, conditions,
and covenants herein shall be binding upon the heirs and personal
representatives of HAASE and the successors or assigns of COMPANY
or any Subsidiary or Affiliate of COMPANY.
9.8 This Contract may be executed in one or more counterparts, each
of which shall be deemed to be an original, but all of which
together shall constitute one and the same contract.
9.9 Except as may be otherwise determined pursuant to Article 9.5, in
the event that any legal action must be taken by either party to
enforce this Contract, all costs and expenses of the prevailing
party in connection with any such action, including, but not
limited to, reasonable attorneys' fees and legal expenses shall
be paid on demand and presentation of appropriate evidence by the
nonprevailing party.
IN WITNESS WHEREOF, the parties have caused this Contract to be executed
effective as of the date and year first above written.
HAASE
/s/ Harley Haase
Harley Haase
OXBORO MEDICAL INTERNATIONAL, INC.
By /s/ Larry Rasmusson
Its Chief Financial Officer
EXHIBIT 1.1 (HH)
TO
PRODUCT DEVELOPMENT INCENTIVE AGREEMENT
1. Sheet Tape/Write-on Labels
2. Foam Scope Organizer
3. Foam Endoscope Guard
4. Endoscope Holder
5. Tubing "Pig" Holder
6. I.V. Tube/Wire Holder
7. Armsecure(TM)
8. Footsecure(TM)
9. Mayo Stand Instrument Holder
10. Instrument ID Tape Remover
11. Instrument Basin Strainer
12. Instrument Guard-Foam
13. Instrument Usage Organizer
14. Foam Tray Liners
15. Pocket Holder (single/double)
16. Poly Bags - Large/Wheelchairs
17. Poly Bags - Large/Walkers
18. Cloth Bags - Large/Wheelchairs & Walkers
19. Cautery Tip Cleaners
20. Patient Positioners - Foam
21. I.V. Cover/Banded Bag
ROYALTY SHARING AGREEMENT
THIS AGREEMENT (the "Agreement"), made and entered into effective the 21st
day of November, 1995, by and among OXBORO MEDICAL INTERNATIONAL, INC., a
Minnesota corporation ("MEDICAL"), OXBORO OUTDOORS, INC., a Minnesota
corporation (the "OUTDOORS"), (collectively referred to as the "COMPANY") LARRY
A. RASMUSSON ("RASMUSSON"), and HARLEY HAASE ("HAASE").
WHEREAS, OUTDOORS and RASMUSSON have entered into an Exclusive License and
Royalty Agreement effective April 17, 1993, as subsequently amended, (the
"Royalty Agreement"), with respect to compensation to be paid to RASMUSSON for
the development and/or contribution to the development of various Products (as
defined in the Royalty Agreement), and
WHEREAS, MEDICAL and RASMUSSON have entered into an Exclusive License
Agreement effective April 1, 1990, as subsequently amended (the "License
Agreement"), with respect to compensation to be paid to RASMUSSON for the
development and/or contribution to the development of various Products (as
defined in the License Agreement), and
WHEREAS, MEDICAL and HAASE have entered into a Product Development
Incentive Agreement effective 11/8 , 1995, (the "Incentive Agreement"), with
respect to compensation to be paid to HAASE for the development and/or
contribution to the development of various Products (as defined in the Incentive
Agreement), and
WHEREAS, HAASE has contributed considerable time and effort to the
marketing of the products and the support services provided in connection with
the development, manufacture, and marketing of the Products; and
WHEREAS, the COMPANY and RASMUSSON desire that HAASE continue to render
such services, believing such services are essential to the ultimate success of
the COMPANY and the Products; and
WHEREAS, in order to reward HAASE for his efforts in connection with the
production and promotion of the Products, RASMUSSON has agreed to forfeit his
right to a portion of the compensation payable to him under the Royalty
Agreement as set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter contained, the parties hereto agree as follows:
1. Definitions. Whenever used in this Agreement, the following terms
shall have the meanings set forth below:
1.01 The term "Products" shall include all items for which RASMUSSON
has been paid an advance royalty or a percentage royalty under
the Royalty Agreement and/or License Agreement, all such products
to be set forth in one or more attachments to the Royalty
Agreement and License Agreement, which attachments are hereby
incorporated herein by reference. The term Products as used
herein shall include "Additional Products" as defined in Section
3.2 of the Royalty Agreement and in Section 1.1 of the License
Agreement.
1.02 The term "Annual Sales" shall mean, for any fiscal year, the
gross invoice or billing price for all Products sold by the
COMPANY during such fiscal year, with no deductions except for
(i) freight charges, (ii) trade, quantity, and cash discounts,
(iii) any sales tax applicable to the sale of the Products, and
(iv) such credits or allowances, if any, given or made because of
the rejection or return of any Products previously delivered to a
customer by the COMPANY.
1.03 The term "Royalty" or "Royalties" shall refer to the compensation
to be paid to HAASE and RASMUSSON hereunder, which shall be based
upon the Percentage Royalties payable to RASMUSSON pursuant to
the Royalty Agreement, as defined in Section 4.1(b) thereof and
pursuant to Section 4.1 of the License Agreement and upon the
Incentive Payments payable to HAASE pursuant to the Incentive
Agreement.
1.04 The Royalties to be paid to Rasmusson for Products hereunder
shall not be subject to the three (3) Product limitation relative
to his Royalty Agreement, License Agreement, and/or Employment
Agreement, all as amended.
2. Payment of Royalties.
2.01 No Royalties shall accrue or shall be paid to HAASE under the
terms of this Agreement until and after the date of HAASE's
termination of employment with the COMPANY unless such
termination is voluntary by HAASE and occurs within five (5)
years of the date hereof, then such Royalties shall commence
accruing and shall be paid on the fifth (5th) anniversary of this
Agreement.
2.02 With respect to Products which are jointly developed by HAASE and
RASMUSSON from OUTDOORS, which products are to be sold through
MEDICAL and its successors and are identified on Exhibit A
attached hereto and made a part hereof, and which Exhibit may be
amended from time to time upon mutual agreement of the Board of
Directors of the COMPANY, HAASE and RASMUSSON, to the extent that
Royalties are earned on such Products under the Royalty
Agreement:
(1) Prior to HAASE's termination of employment from MEDICAL,
RASMUSSON shall receive all Royalties (4% or one-half of the
applicable Royalty as provided in the License Agreement,
whichever is greater), and HAASE shall receive no Royalties
paid with respect to all such Products listed on Exhibit A;
and
(2) Upon HAASE's termination of employment from MEDICAL, and
from and after such termination date, HAASE shall receive
one-half of all Royalties (3% or one-half of the applicable
Royalty as provided in the License Agreement, whichever is
greater), and RASMUSSON shall receive one-half of such
Royalties (3% or one-half of the applicable Royalty as
provided in the License Agreement, whichever is greater),
paid with respect to all such Products listed on Exhibit A.
2.03 With respect to Products which are jointly developed by HAASE and
RASMUSSON from MEDICAL, which Products are to be sold through
MEDICAL and its successors are identified on Exhibit B attached
hereto and made a part hereof, and which Exhibit may be amended
from time to time upon mutual agreement of the Board of Directors
of the COMPANY, HAASE and RASMUSSON, to the extent that Royalties
are earned on such Products under the License Agreement:
(1) Prior to HAASE's termination of employment from MEDICAL,
RASMUSSON shall receive all Royalties (4% or the applicable
Royalty as provided in the License Agreement, whichever is
greater) with respect to Products described as Duo
Instrument Guards, MIS Instrument Guards and Specialty
Instrument Guards and all Royalties paid on all other
Products to be added to Exhibit B and HAASE shall receive no
Royalties; and
(2) Upon HAASE'S termination of employment from MEDICAL, and
from and after such termination date, HAASE shall receive
one-half of all Royalties (3% or one-half of the applicable
Royalty as provided in the License Agreement, whichever is
greater) and RASMUSSON shall receive one-half of such
Royalties (3% or one-half of the applicable Royalty as
provided in the License Agreement, whichever is greater)
paid with respect to all such Products listed on Exhibit B.
2.04 With respect to Products which are medical Products jointly
developed by HAASE and RASMUSSON from MEDICAL, which Products are
to be sold through OUTDOORS and its successors and are identified
on Exhibit C attached hereto and made a part hereof, and which
Exhibit may be amended from time to time upon mutual agreement of
the Board of Directors of the COMPANY, HAASE and RASMUSSON to the
extent that Royalties are earned on such Products under the
Royalty Agreement;
(1) Prior to HAASE's termination of employment and prior to
RASMUSSON'S retirement from employment from MEDICAL,
RASMUSSON shall receive a royalty of 4 1/2% and HAASE shall
receive no Royalties paid with respect to all Products
listed on Exhibit C; and
(2) If, on April 1, 1998 or thereafter, RASMUSSON'S Consulting
Agreement commences and HAASE'S employment with the Company
continues, then RASMUSSON shall receive all Royalties (9%)
and HAASE shall receive no Royalties paid with respect to
all products listed on Exhibit C; and
(3) When both HAASE'S and RASMUSSON'S Consulting Agreements are
in effect, then HAASE shall receive one-half (4 1/2%) of all
Royalties and RASMUSSON shall receive one-half (4 1/2%) of
such Royalties paid with respect to all such Products listed
on Exhibit C.
2.05 Except as set forth above, Royalties under the License Agreement
and Royalty Agreement shall be paid according to their terms.
3. Records; Audit Rights. The COMPANY agrees to keep true and detailed
records containing all information required for the computation and
verification of Royalties to be paid by the COMPANY under this
Agreement. The Company shall furnish monthly, along with the Royalty
payment(s), copies of sales documentation and workpapers calculating
the Royalties. Upon written notice from either RASMUSSON or HAASE, the
COMPANY will make all records containing information required for the
computation of Royalties available to RASMUSSON and/or HAASE or a
designated agent of either for review and verification. If any party
hereto requests an audit and if such audit reveals any deficiency in
Royalties paid under this Agreement, then the COMPANY will pay the
costs and expenses of the audit and will pay any Royalty deficiency
within five (5) business days of completion of the audit. If such
audit reveals any overpayment in Royalties paid under this Agreement,
then the person requesting the audit will pay the costs and expenses
of the audit, and HAASE and/or RASMUSSON will reimburse the COMPANY
for any overpayments each or either has received within fifteen (15)
business days of the completion of the audit. If the audit reveals
that the Royalty payments were correct, then the party requesting the
audit will pay the costs and expenses of the audit.
4. Default. This Agreement may be terminated by any party hereto in the
event of a breach or a default in the performance of any material
provision, term, or condition of this Agreement and the giving of
written notice specifying the alleged breach or default, if the party
in breach or default fails to cure the alleged breach or default
within thirty (30) days of receipt of notice or fails to commence good
faith efforts to cure the breach or default within such thirty (30)
day period and thereafter diligently pursues such cure to completion.
In the event of such termination or in the event of termination under
paragraph 6 below, then Royalties shall be paid according to the terms
of the License Agreement and Royalty Agreement without regard to this
Agreement and Products listed on Exhibits A and B, as amended, shall
be deemed to be Additional Products under the License Agreement and
Products listed on Exhibit C, as amended, shall be deemed to be
Additional Products under the Royalty Agreement.
5. Term of Royalty Payments. Except as otherwise provided herein,
Royalties shall be paid hereunder for the life of the Products.
6. Actions in Bad Faith. This Agreement shall be terminated if at any
time HAASE or his successors or assigns or legal representatives take
any action to challenge the Agreement or its terms and provisions, and
such action is determined by an arbitrator or a court of competent
jurisdiction to have been taken in bad faith.
7. Notices. All notices given hereunder shall be in writing and shall be
personally served or sent by registered or certified mail, return
receipt requested. Notice to the COMPANY shall be given to the COMPANY
at its corporate headquarters, which as of the date of this Agreement
is 13828 Lincoln Street Northeast, Ham Lake, Minnesota 55304. Notices
to HAASE or RASMUSSON shall be addressed to their respective residence
addresses as the same appear from time to time on the records of the
COMPANY. Notices to any party under this Agreement shall be sent to
such other address as such party shall specify in writing to the
others in accordance with this Agreement.
8. No Effect on Other Agreements. Except for the provisions regarding the
allocation of Royalties to HAASE and RASMUSSON under the terms of this
Agreement, this Agreement shall have no effect on the terms and
provisions of the Royalty Agreement, License Agreement or Incentive
Agreement.
9. Miscellaneous.
9.01 This Agreement is the entire contract between the parties
concerning the subject matter hereof and supersedes and replaces
any existing contract agreement between the parties hereto
relating to the subject matter hereof, except with regard to the
Royalty Agreement, the License Agreement, and the Incentive
Agreement.
9.02 No provision of this contract may be modified, waived, or
discharged unless such modification, waiver, or discharge is
agreed to in writing signed by the party against whom such
provision is to be enforced. No waiver by or noncompliance with
any condition or provision of this Agreement to be performed by
any party shall be deemed a waiver of a similar or dissimilar
provision or condition at the same or any prior or subsequent
time.
9.03 No failure by any party hereto to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof
nor shall any single or partial exercise of any right hereunder
by any party preclude any other or further exercise thereof, or
the exercise of any other right.
9.04 It is agreed and understood by the parties hereto that if any
part, term, or provision of this Agreement is held unenforceable
in any jurisdiction in which a party seeks enforcement of the
Agreement, this Agreement shall be construed as if not containing
the invalid provision or provisions. The invalidity or
unenforceability of any portion or provision of this Agreement
shall not affect the validity or enforceability of the remaining
provisions of this Agreement, which shall remain in full force
and effect and shall govern the rights and obligations of the
parties hereto.
9.05 Any controversy or claim arising out of, or relating to, this
Agreement or its breach shall be settled by arbitration in
accordance with the governing rules of the American Arbitration
Association then in effect. Judgment upon the award rendered
shall be binding upon the parties hereto and may be entered in
any court of competent jurisdiction. Costs and attorney's fees
shall be paid as the arbitrator's award shall specify. As the
sole exception to arbitration, each party shall have the right to
obtain injunctive relief, only, from any court having
jurisdiction so as to preserve such party's right for resolution
in any pending or imminent arbitration proceedings, but no such
injunction shall prohibit such arbitration proceedings and any
injunction may be modified or vacated as a result of the
arbitration award.
9.06 This Agreement shall be construed and enforced in accordance with
the laws of the State of Minnesota, and the parties hereby agree
and submit to personal jurisdiction in the State of Minnesota for
the purposes of any suit or proceeding brought to enforce the
terms and conditions of this Agreement and agree that any such
suit or proceeding shall be venued in Hennepin County, Minnesota.
9.07 The rights and obligations of the parties hereto cannot be
assigned without the prior written consent of each of the other
parties, which consent shall not be unreasonably withheld. The
terms, conditions, and covenants of this Agreement shall be
binding upon the heirs and personal representatives of HAASE and
RASMUSSON and the successors or assigns of the COMPANY or any
subsidiary or affiliate of the COMPANY.
9.08 This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original, but all of which
together shall constitute one and the same contract.
9.09 Except as may be otherwise determined pursuant to Section 9.05
hereof, in the event that any legal action must be taken by any
party to enforce this Agreement, all costs and expenses of the
prevailing party in connection with any such action, including,
but not limited to, reasonable attorney's fees and legal
expenses, shall be paid on demand and presentation of appropriate
evidence by the nonprevailing party.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
effective as of the date and year first above written.
OXBORO MEDICAL INTERNATIONAL, INC. OXBORO OUTDOORS, INC.
By: /s/ Keith Olson By: Oxboro Medical International,
Its: Director Its: Sole Shareholder
By: /s/ Dennis Mikkelson By: /s/ John R. Walter
Its: Director
/s/ Larry Rasmusson Director /s/ Dennis Mikkelson
Larry Rasmusson
/s/ Harley Haase
Harley Haase
ROYALTY SHARING AGREEMENT
EXHIBIT A
OXBORO OUTDOORS, INC. SHARED PRODUCTS
1. Handheld Shower Holder
2. Small Item Hanger
3. Large Item Hanger
4. Beverage Holder
5. Universal Holder
ROYALTY SHARING AGREEMENT
EXHIBIT B
OXBORO MEDICAL INTERNATIONAL, INC.
SHARED PRODUCTS
1. DUO Instrument Guards
2. MIS Instrument Guards
3. Specialty Instrument Guards
ROYALTY SHARING AGREEMENT
EXHIBIT C
OXBORO MEDICAL INTERNATIONAL, INC.
SHARED PRODUCTS
1. Endoscopic Instrument Holder
2. I.V. Tube/Wire Holder
3. Small Pocket Holder
4. Poly Bags w/Adhesive
5. Poly Bags w/o Adhesive
6. Cloth Bags Large
7. Double Pocket Holder
8. Disposable Towel
9. Universal Holder
Exhibit 11
<TABLE>
<CAPTION>
OXBORO MEDICAL INTERNATIONAL, INC. AND
SUBSIDIARIES PER SHARE EARNINGS COMPUTATION
FOR THE YEARS ENDED SEPTEMBER 30, 1995 and 1994
1995 1994
---- ----
Primary EPS: (1):
<S> <C> <C>
Total shares outstanding 2,672,278 2,570,162
Common stock equivalent due
to assumed exercise
of options -0- 49,618
--------- ---------
Weighted average number of 2,672,278 2,619,780
========= =========
common shares outstanding
Net Earnings $ 213,039 $ 331,899
========= ==========
Earnings per share $ .08 $ .13
========= ==========
</TABLE>
(1) Fully dilutive earnings per share computation is not shown as it is the
same as the above computation for primary earnings per share.
Exhibit 21
OXBORO MEDICAL INTERNATIONAL, INC.
SUBSIDIARIES OF REGISTRANT
Name of Subsidiaries State of Incorporation DBA
- -------------------- ---------------------- ---
Oxboro Outdoors, Inc. Minnesota Same
Oxboro Medical, Inc. Minnesota Same
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 689,420
<SECURITIES> 0
<RECEIVABLES> 594,843
<ALLOWANCES> 17,547
<INVENTORY> 1,807,666
<CURRENT-ASSETS> 3,286,226
<PP&E> 1,454,760
<DEPRECIATION> 484,412
<TOTAL-ASSETS> 4,787,399
<CURRENT-LIABILITIES> 537,808
<BONDS> 0
0
0
<COMMON> 26,722
<OTHER-SE> 4,101,869
<TOTAL-LIABILITY-AND-EQUITY> 4,787,399
<SALES> 3,877,167
<TOTAL-REVENUES> 3,877,167
<CGS> 956,819
<TOTAL-COSTS> 956,819
<OTHER-EXPENSES> 2,629,936
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 324,039
<INCOME-TAX> 111,000
<INCOME-CONTINUING> 213,039
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 213,039
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
