DYNATRONICS CORP
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed
by the Registrant
☑
Filed
by a Party other than the Registrant
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Check
the appropriate box:
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☐
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Preliminary
Proxy Statement
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☐
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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☑
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Definitive
Proxy Statement
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☐
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Definitive
Additional Materials
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Soliciting
Material Pursuant to § 240.14a-12
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DYNATRONICS CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if Other Than the
Registrant)
Payment
of Filing Fee (Check the appropriate box)
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No fee
required.
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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1.
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Title
of each class of securities to which transaction
applies:
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2.
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Aggregate
number of securities to which transaction applies:
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3.
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Per
unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was
determined):
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4.
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Proposed
maximum aggregate value of transaction:
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5.
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Total
fee paid:
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☐
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Fee
paid previously with preliminary materials.
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
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6.
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Amount
Previously Paid:
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7.
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Form,
Schedule or Registration Statement No:
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8.
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Filing
Party:
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9.
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Date
Filed:
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DYNATRONICS CORPORATION
7030 Park Centre Dr.
Cottonwood Heights, Utah 84121
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held On December 3, 2018
Dear
Shareholder:
You are
cordially invited to attend the Annual Meeting of Shareholders of
Dynatronics Corporation, a Utah corporation. The meeting will be
held on Monday, December 3, 2018 at 8:00 a.m. local time at the
offices of Dynatronics Corporation located at 7030 Park Centre Dr.,
Cottonwood Heights, Utah 84121 for the following
purposes:
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1
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To
elect the Board’s four nominees for director to serve until
the next annual meeting of shareholders and until their successors
are duly elected and qualified.
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2
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To
ratify the selection by our Audit Committee of Tanner LLC as our
independent registered public accounting firm for the year ending
June 30, 2019.
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3
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To
approve the Dynatronics Corporation 2018 Equity Incentive
Plan.
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4
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To
conduct any other business properly brought before the
meeting.
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These
items of business are more fully described in the Proxy Statement
accompanying this Notice.
The
record date for the Annual Meeting is October 4, 2018. Only
shareholders of record at the close of business on that date may
vote at the meeting or any adjournment thereof.
By
Order of the Board of Directors
/s/
David A. Wirthlin
David
A. Wirthlin
Chief Financial Officer and Secretary
Cottonwood Heights,
Utah
October
10, 2018
We are primarily providing access to our proxy materials over the
internet pursuant to the Securities and Exchange Commission’s
notice and access rules. On or about October 11, 2018, we expect to
mail to our shareholders a Notice of Internet Availability of Proxy
Materials that will indicate how to access our 2018 Proxy Statement
and Fiscal Year 2018 Annual Report on Form 10-K on the internet and
will include instructions on how you can receive a paper copy of
the annual meeting materials, including the notice of Annual
Meeting, Proxy Statement and proxy card.
Whether or not you expect to attend the meeting in person, please
submit voting instructions for your shares promptly using the
directions on your Notice, or, if you elected to receive printed
proxy materials by mail, your proxy card, to vote by one of the
following methods: (1) over the internet at
www.proxyvote.com
, (2) by telephone by
calling the toll-free number 1 (800) 690-6903, or (3) if you
elected to receive printed proxy materials by mail, by marking,
dating and signing your proxy card and returning it in the
accompanying postage-paid envelope. Even if you have voted by
proxy, you may still vote in person if you attend the meeting.
Please note, however, that if your shares are held of record by a
broker, bank or other nominee and you wish to vote at the meeting,
you must obtain a proxy issued in your name from that record
holder.
TABLE OF CONTENTS
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Page
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QUESTIONS AND
ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING
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1
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Who is
Dynatronics?
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1
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Why did
I receive a Notice of Internet Availability of Proxy
Materials?
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1
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Will I
receive any other proxy materials?
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2
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How do
I attend the Annual Meeting?
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2
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Who can
vote at the Annual Meeting?
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2
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What am
I voting on?
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3
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What if
another matter is properly brought before the meeting?
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3
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How do
I vote?
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3
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What
happens if I do not vote?
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4
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What if
I return a proxy card or otherwise vote but do not make specific
choices?
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4
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Who is
paying for this proxy solicitation?
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4
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What
does it mean if I receive more than one Notice?
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4
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Can I
change my vote after submitting my proxy?
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4
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How are
votes counted?
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5
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What
are “broker non-votes”?
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5
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How
many votes are needed to approve each proposal?
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5
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What is
the quorum requirement?
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5
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How can
I find out the results of the voting at the Annual
Meeting?
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5
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When
are shareholder proposals and director nominations due for the 2019
annual meeting?
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6
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
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6
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What am
I voting on?
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6
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Vote
required
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6
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Nominees for
Director
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6
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Business Experience
and Qualifications of Nominees
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7
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Recommendation of
the Board
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8
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INFORMATION
REGARDING THE BOARD OF DIRECTORS AND CORPORATE
GOVERNANCE
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9
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General
Information
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9
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Preferred
Directors
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9
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Family
Relationships
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10
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Independence of the
Board of Directors
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10
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Board
Leadership Structure
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11
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Role of
the Board in Risk Oversight
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11
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Meetings of The
Board of Directors
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12
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Information
Regarding Committees of the Board of Directors
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12
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Audit
Committee
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12
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Report
of the Audit Committee of the Board of Directors
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13
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Compensation
Committee
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13
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Nominating and
Governance Committee
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14
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Shareholder
Communications with the Board of Directors
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15
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Code of
Ethics
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15
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Corporate
Governance Guidelines
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15
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PROPOSAL NO. 2
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
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16
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What am
I voting on?
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16
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Vote
required
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16
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Independence
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16
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Principal
Accountant Fees and Services
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16
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Pre-Approval
Policies and Procedures
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17
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Recommendation of
the Board
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17
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EXECUTIVE
OFFICERS
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17
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SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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18
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SECTION
16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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21
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EXECUTIVE
COMPENSATION
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22
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Summary
Compensation Table
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22
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Outstanding Equity
Awards at June 30, 2018
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23
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Employment
Agreements
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23
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Retirement
Benefits
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24
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DIRECTOR
COMPENSATION
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25
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Director
Compensation Table
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25
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PROPOSAL
NO. 3 APPROVAL OF DYNATRONICS CORPORATION 2018 EQUITY INCENTIVE
PLAN
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25
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Purpose
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26
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Significant
Historical Award Information
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26
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Recommendation of
the Board
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26
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Summary
of the 2018 Plan
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27
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EQUITY
COMPENSATION PLANS AT JUNE 30, 2018
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30
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Equity
Compensation Plans
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30
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Equity
Compensation Plan Information
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31
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RELATED-PARTY
TRANSACTIONS POLICY AND PROCEDURES
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31
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SHAREHOLDER
PROPOSALS FOR 2019 ANNUAL MEETING OF SHAREHOLDERS
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31
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HOUSEHOLDING
OF PROXY MATERIALS
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32
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OTHER
MATTERS
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32
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APPENDIX
A – DYNATRONICS CORPORATION 2018 EQUITY INCENTIVE
PLAN
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33
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DYNATRONICS CORPORATION
7030 Park Centre Dr.
Cottonwood Heights, Utah 84121
PROXY STATEMENT
FOR THE 2018 ANNUAL MEETING OF SHAREHOLDERS
December 3, 2018
QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND
VOTING
Who is Dynatronics?
We were
founded as “Dynatronics Laser Corporation” in Utah on
April 29, 1983. Our predecessor company, Dynatronics Research
Company, was formed in 1979 as a Utah corporation. Our principal
executive offices are located at 7030 Park Centre Drive, Cottonwood
Heights, Utah 84121, and our telephone number is (801)
568-7000.
Dynatronics
Corporation designs, manufactures, markets, and distributes
orthopedic soft goods, medical supplies, and physical therapy and
rehabilitation equipment. Through our various distribution
channels, we market and sell to orthopedists, physical therapists,
chiropractors, athletic trainers, sports medicine practitioners,
clinics, and hospitals.
Our
corporate headquarters and principal executive offices are located
in Cottonwood Heights, Utah, in the Salt Lake City metropolitan
area. Our subsidiary locations operate out of Northvale, New Jersey
(Hausmann Enterprises) and Minneapolis, Minnesota (Bird &
Cronin). We also have manufacturing operations in Chattanooga,
Tennessee.
We were
founded originally on a technology platform to treat patients
non-invasively using microprocessor-based therapeutic devices. For
more than 35 years, we have grown our business and product
offerings by building upon these therapeutic technologies,
acquiring businesses in related medical fields, and developing
products and distribution to further meet the needs of our target
customers. During the past year, we created a new Therapy Products
Division consisting of our legacy Utah and Tennessee operations.
During the fourth fiscal quarter of 2017, we significantly
increased our business reach with the acquisition of Hausmann
Industries, Inc. (“HII”). During the second fiscal
quarter of 2018, we acquired the business of Bird & Cronin,
Inc. (“B&C”).
Now
operated as our Hausmann Enterprises Division, HII was founded as a
privately held New Jersey corporation in 1955, manufacturing
medical, therapy, and athletic training equipment. We acquired HII
in April 2017 to expand our physical therapy and rehabilitation
product offerings and manufacturing capacity.
In
October 2017, we acquired B&C, a closely-held Minnesota
corporation, founded in 1968. Now operating as our Bird &
Cronin Division, this unit designs and manufactures orthopedic soft
goods and medical supplies sold and distributed in the United
States and internationally under Bird & Cronin brands and under
private-label manufacturing agreements. This transaction expanded
our brand offerings and distribution channels.
Why did I receive a Notice of Internet Availability of Proxy
Materials?
Pursuant to rules
adopted by the Securities and Exchange Commission, or the SEC, we
have elected to provide access to our proxy materials over the
Internet. Accordingly, we have sent you a Notice of Internet
Availability of Proxy Materials, or the Notice, because the Board
of Directors, or Board, of Dynatronics Corporation is soliciting
your proxy to vote at the 2018 Annual Meeting of Shareholders, or
the Annual Meeting, including at any adjournments or postponements
of the meeting. All shareholders will have the ability to access
the proxy materials on the website referred to in the Notice or
request to receive a printed set of the proxy materials.
Instructions on how to access the proxy materials over the internet
or to request a printed copy may be found in the
Notice.
We
intend to mail the Notice on or about October 11, 2018, to all
shareholders of record entitled to vote at the Annual
Meeting.
1
Will I receive any other proxy materials by mail?
No, you
will not receive any other proxy materials by mail unless you
request a paper copy of proxy materials. To request that a full set
of the proxy materials be sent to your specified postal address,
please go to
www.proxyvote.com
or call 1 (800)
690-6903. Please have your proxy card in hand when you access the
website or call and follow the instructions provided.
How do I attend the Annual Meeting?
The
meeting will be held on Monday, December 3, 2018 at 8:00 a.m. local
time, at our offices located at 7030 Park Centre Dr., Cottonwood
Heights, Utah 84121. Directions to the Annual Meeting may be found
on the Investors section of our website at
www.dynatronics.com
.
Information on how to vote in
person at the Annual Meeting is discussed below.
Who can vote at the Annual Meeting?
Only
shareholders of record of our voting securities at the close of
business on October 4, 2018 (the “Record Date”) will be
entitled to vote at the Annual Meeting.
Holders
of record of shares of common stock are entitled to one vote for
each share of common stock owned by them as of the Record
Date.
Holders
of record of shares of Series A Preferred and Series B Preferred
vote on an as-converted basis, one vote for each share of common
stock issuable upon an assumed conversion of the preferred stock;
provided
,
however
, that the voting rights of some
holders of the Series A Preferred and Series B Preferred are
subject to limitations pursuant to a rule of The NASDAQ Stock
Market (“NASDAQ”) referred to as a “Voting
Cutback.” The
Voting Cutback limits the number of
“as-if-converted common shares” that may be voted by
the shareholder to the number of shares of common stock issuable
upon conversion of the preferred stock held by such holder that
exceeds the quotient of (x) the aggregate purchase price paid by
such holder of preferred stock for its preferred stock, divided by
(y) the greater of (i) $2.50 and (ii) the market price of the
common stock on the trading day immediately prior to the date of
issuance of such holder’s preferred stock.
The
total number of shares of issued and outstanding common stock
(including as-converted Series A Preferred and Series B Preferred)
as of the Record Date entitled to vote at the Annual Meeting is
11,189,028 shares (after taking into consideration the Voting
Cutback). This number includes 8,226,523 shares of common stock,
2,000,000 shares of Series A Preferred (1,636,133 voting power
after applicable Voting Cutback), and 1,459,000 shares of Series B
Preferred (1,326,372 voting power after applicable Voting Cutback).
The Series C Non-Voting Convertible Preferred Stock (Series C
Preferred) is non-voting stock and holders of the Series C
Preferred are not entitled to vote such shares at the Annual
Meeting.
Shareholder of Record:
Shares Registered in Your Name
–
If on October 4, 2018, your
shares were registered directly in your name with our transfer
agent, Interwest Transfer Co, Inc., then you are a shareholder of
record. As a shareholder of record, you may vote in person at the
meeting or vote by proxy. Whether or not you plan to attend the
meeting, we urge you to fill out and return the enclosed proxy card
or to vote in one of the ways indicated in the Notice to ensure
your vote is counted.
Beneficial Owner: Shares
Registered in the Name of a Broker or Bank
–
If on October 4,
2018,
your shares were
held, not in your name, but rather in an account at a brokerage
firm, bank, dealer or other similar organization, then you are the
beneficial owner of shares held in “street name” and
the Notice is
being
forwarded to you by that organization. The organization holding
your account is considered to be the shareholder of record for
purposes of voting at the Annual Meeting. As a beneficial owner,
you have the right to direct your broker or other agent regarding
how to vote the shares in your account. You are also invited to
attend the Annual Meeting. However, since you are not the
shareholder of record, you may not vote your shares in person at
the meeting unless you request and obtain a valid proxy from your
broker or other agent.
2
What am I voting on?
There are three matters scheduled for a vote:
●
Proposal
No. 1 – To elect four directors to hold office until the next
annual meeting of shareholders and until their successors are duly
elected and qualified.
●
Proposal
No. 2 – To ratify the selection by our Audit Committee of
Tanner LLC as our independent registered public accounting firm for
the year ending June 30, 2019.
●
Proposal
No. 3 – To approve the Dynatronics Corporation 2018 Equity
Incentive Plan.
What if another matter is properly brought before the
meeting?
The
Board of Directors knows of no other matters that will be presented
for consideration at the Annual Meeting. If any other matters are
properly brought before the meeting, it is the intention of the
persons named in the accompanying proxy to vote on those matters in
accordance with their best judgment.
How do I vote?
You may
either vote “For” the nominees to the Board of
Directors or you may “Withhold” your vote for any
nominee you specify. For all other proposals you may vote
“For” or “Against” or “Abstain”
from voting. The procedures for voting are fairly simple and are
summarized in the following paragraphs.
Shareholder of Record:
Shares Registered in Your Name –
If you are a
shareholder of record, you may vote in person at the Annual
Meeting, vote by proxy or vote by proxy through the internet or
vote by proxy using a proxy card that you may request or that we
may elect to deliver at a later time. Whether or not you plan to
attend the meeting, we urge you to vote by proxy to ensure your
vote is counted. You may still attend the meeting and vote in
person even if you have already voted by proxy.
●
To vote
in person, come to the Annual Meeting and we will give you a ballot
when you arrive.
●
To vote
using the proxy card, simply complete, sign and date the proxy card
that may be delivered and return it promptly in the envelope
provided. If you return your signed proxy card to us before the
Annual Meeting, we will vote your shares as you
direct.
●
To vote
over the telephone, dial toll-free 1 (800) 690-6903 using a
touch-tone phone and follow the recorded instructions. You will be
asked to provide the company number and control number from the
Notice. Your telephone vote must be received by 11:59 p.m., Eastern
Time on December 2, 2018 to be counted.
●
To vote
through the internet, go to
www.proxyvote.com
to complete an
electronic proxy card. You will be asked to provide the company
number and control number from the Notice. Your internet vote must
be received by 11:59 p.m., Eastern Time on December 2, 2018 to be
counted.
Beneficial Owner: Shares
Registered in the Name of Broker or Bank –
If you are
a beneficial owner of shares registered in the name of your broker,
bank, or other agent, you should have received a
Notice containing voting
instructions
from that
organization rather than from us. Simply follow the voting
instructions in the Notice
to ensure that your vote is
counted. To vote in person at the Annual Meeting, you must obtain a
valid proxy from your broker, bank or other agent. Follow the
instructions from your broker or bank included with these proxy
materials, or contact your broker or bank to request a proxy
form.
Internet proxy voting may be provided to allow you to vote your
shares online, with procedures designed to ensure the authenticity
and correctness of your proxy vote instructions. However, please be
aware that you must bear any costs associated with your internet
access, such as usage charges from internet access providers and
telephone companies.
3
What happens if I do not vote?
Shareholder of Record:
Shares Registered in Your Name –
If you are a
shareholder of record and do not vote by completing your proxy
card, through the internet
or in person at the Annual
Meeting, your shares will not be voted.
Beneficial Owner: Shares
Registered in the Name of Broker or Bank –
If you are
a beneficial owner and do not instruct your broker, bank, or other
agent how to vote your shares, the question of whether your broker
or nominee will still be able to vote your shares depends on
whether NASDAQ, deems the particular proposal to be a
“routine” matter. Brokers and nominees can use their
discretion to vote “uninstructed” shares with respect
to matters that are considered to be “routine,” but not
with respect to “non-routine” matters. Under NASDAQ
rules and interpretations of the NASDAQ rules,
“non-routine” matters are matters that may
substantially affect the rights or privileges of shareholders, such
as mergers, shareholder proposals, elections of directors (even if
not contested), executive compensation (including any advisory
shareholder votes on executive compensation and on the frequency of
shareholder votes on executive compensation), and certain corporate
governance proposals, even if management-supported. Accordingly,
your broker or nominee may not vote your shares on Proposal No. 1
or Proposal No. 3 without your instructions, but may vote your
shares on Proposal No. 2 even in the absence of your
instruction.
What if I return a proxy card or otherwise vote but do not make
specific choices?
If you
return a signed and dated proxy card or otherwise vote without
marking voting selections, your shares will be voted, as
applicable:
●
“
For
” the election of the four nominees for director;
and
●
“
For
” the ratification of the selection of Tanner LLC as our
independent registered public accounting firm for the year ending
June 30, 2019.
●
“
For
” the approval of the Dynatronics Corporation 2018 Equity
Incentive Plan.
If any
other matter is properly presented at the meeting, your proxyholder
(one of the individuals named on your proxy card) will vote your
shares using his best judgment.
Who is paying for this proxy solicitation?
We will
pay for the entire cost of soliciting proxies. In addition to these
proxy materials, our directors and employees may also solicit
proxies in person, or by other means of communication. Directors
and employees will not be paid any additional compensation for
soliciting proxies. We may also reimburse brokerage firms, banks
and other agents for the cost of forwarding proxy materials to
beneficial owners.
What does it mean if I receive more than one Notice?
If you
receive more than one Notice, your shares may be registered in more
than one name or in different accounts. Please follow the voting
instructions on the Notices to ensure that all of your shares are
voted.
Can I change my vote after submitting my proxy?
Shareholder of Record:
Shares Registered in Your Name –
You can revoke your
proxy at any time before the final vote at the meeting. If you are
the record holder of your shares, you may revoke your proxy in any
one of the following ways:
●
You may
submit another properly completed proxy card with a later
date.
●
You may
grant a subsequent proxy by telephone or through the
internet.
●
You may
send a timely written notice that you are revoking your proxy to
our Secretary at 7030 Park Centre Dr., Cottonwood Heights, Utah
84121.
●
You may
attend the Annual Meeting and vote in person. Simply attending the
Annual Meeting will not, by itself, revoke your proxy.
4
Your
most current proxy card or internet proxy is the one that is
counted.
Beneficial Owner: Shares
Registered in the Name of Broker or Bank –
If your
shares are held by your broker or bank as a nominee or agent, you
should follow the instructions provided by your broker or
bank.
How are votes counted?
Votes
will be counted by the inspector of election appointed for the
meeting, who will separately count, (a) for the proposal to elect
directors, votes “For,” “Withhold” and
broker non-votes, and (b) with respect to other proposal, votes
“For” and “Against,” abstentions and, if
applicable, broker non-votes.
Abstentions will be
counted towards the vote total for Proposal No. 2, and will have
the same effect as “Against” votes. Broker non-votes
have no effect and will not be counted towards the vote total for
any proposal.
What are “broker non-votes”?
As
discussed above, when a beneficial owner of shares held in
“street name” does not give instructions to the broker
or nominee holding the shares as to how to vote on matters deemed
by NASDAQ to be “non-routine,” the broker or nominee
cannot vote the shares. These unvoted shares are counted as
“broker non-votes.”
How many votes are needed to approve each proposal?
●
Proposal
No. 1 – For the election of directors, the nominees receiving
the most “For” votes from the holders of shares present
in person or represented by proxy and entitled to vote on the
election of directors will be elected.
●
Proposals
No. 2 and No. 3 – To ratify the selection of Tanner LLC as
our independent registered public accounting firm for the year
ending June 30, 2019 and to approve the adoption of the Dynatronics
Corporation 2018 Equity Incentive Plan, each proposal must receive
“For” votes from the holders of a majority of shares
present in person or represented by proxy and entitled to vote on
the matter. If you“Abstain” from voting, it will have
the same effect as an “Against” vote. Broker non-votes
will have no effect.
What is the quorum requirement?
A
quorum of shareholders is generally required to hold a valid
meeting of shareholders. A quorum is present if shareholders
holding
at least a
majority of the outstanding shares entitled to vote are present at
a meeting in person or represented by proxy. The presence at the
Annual Meeting, in person or by proxy, of the holders of at least
5,594,514 shares of common stock (including the Series A Preferred
and Series B Preferred on an as-converted basis, subject, as the
case may be, to the Voting Cutback) entitled to vote at the
meeting will constitute a quorum. Your shares will be counted
towards the quorum only if you submit a valid proxy (or one is
submitted on your behalf by your broker, bank or other nominee) or
if you vote in person at the meeting. Abstentions and broker
non-votes will be counted towards the quorum
requirement.
How can I find out the results of the voting at the Annual
Meeting?
Preliminary voting
results will be announced at the Annual Meeting. In addition, final
voting results will be published in a current report on Form 8-K
that we expect to file within four business days after the Annual
Meeting. If final voting results are not available to us in time to
file a Form 8-K within four business days after the meeting, we
intend to file a Form 8-K to publish preliminary results and,
within four business days after the final results are known to us,
file an additional Form 8-K to publish the final
results.
5
When are shareholder proposals and director nominations due for the
2019 annual meeting?
To be
considered for inclusion in next year’s proxy materials, your
proposal (including a director nomination) must be timely submitted
in writing to our Secretary at Dynatronics Corporation 7030 Park
Centre Dr., Cottonwood Heights, Utah 84121. To be timely, your
proposal must be delivered to the Secretary, at the address above,
not less than 90 days prior to the date of the annual meeting of
shareholders. However, in the event that less than 100 days’
notice or prior public announcement of the date of the meeting is
given or made to shareholders, then a proposal shall be received no
later than the close of business on the tenth day following the
date on which notice of the date of the meeting was mailed or a
public announcement was made,
provided, however
, that if our 2019
annual meeting of shareholders is not held within 30 calendar days
of the one year anniversary of this Annual Meeting, then you must
deliver the proposal a reasonable amount of time prior to the date
we begin to print and mail our proxy statement for the 2019 annual
meeting of shareholders. You are also advised to review our Bylaws,
which contain a description of the information required to be
submitted as well as additional requirements about advance notice
of shareholder proposals and director nominations.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
What am I voting on?
Electing the four
director nominees identified below to hold office until the 2019
annual meeting of shareholders and until his or her successor is
elected or appointed.
Vote required
Directors are
elected if they receive more
“FOR”
votes than
“WITHHOLD”
votes.
Nominees for Director
Our
Board of Directors is comprised of seven members. Four of these
directors are standing for re-election. All of our directors have
one-year terms. Three of the members of our Board are appointed by
the holders of our Series A Preferred and are referred to as
Preferred Directors. As discussed below, they are not elected at
the Annual Meeting.
Nominees to be
considered for election at the Annual Meeting include two
independent directors, as defined by the rules and regulations of
NASDAQ, one of our executive officers, Dr. Christopher von Jako,
who serves as our Chief Executive Officer, and one non-employee
director, Kelvyn H. Cullimore, Jr., who is our former Chief
Executive Officer. All four nominees listed below are currently
members of our Board of Directors.
If elected at the Annual Meeting,
these nominees would serve until the 2019 annual meeting of
shareholders and until a successor has been duly elected and
qualified, or, if sooner, until the director’s death,
resignation or removal. Our policy is to encourage directors and
nominees for director to attend the Annual Meeting.
Vacancies on the
Board of Directors may be filled only by persons elected by a
majority of the remaining directors. A director elected by the
Board of Directors to fill a vacancy, including vacancies created
by an increase in the number of directors, serve for the remainder
of the full term and until the director’s successor is duly
elected and qualified.
Directors are
elected by a plurality of the votes of the holders of shares
present in person or represented by proxy and entitled to vote on
the election of directors. Accordingly, the nominee receiving the
highest number of affirmative votes will be elected.
Shares represented by executed
proxies will be voted, if authority to do so is not withheld, for
the election of the nominee named below. If the nominee becomes
unavailable for election as a result of an unexpected occurrence,
shares that would have been voted for that nominee instead will be
voted for the election of a substitute nominee that we may propose.
Each person nominated for election has agreed to serve if elected.
We have no reason to believe that any nominee will be unable to
serve.
6
Business Experience and Qualifications of Nominees
|
Kelvyn H. Cullimore, Jr.
Director
Age 62
Director since 1983
|
Mr.
Cullimore works as a business and government consultant. From
January 2005 until February 2018, he was our Chairman; he also
served as our Chief Executive Officer from 1992 until June 2018. He
was Secretary/Treasurer of the Company from 1983 to 1992 and
Administrative Vice President from 1988 to 1992. Mr. Cullimore was
Executive Vice President and a member of the Board of Directors of
our former parent company and also served on the Boards of
Directors of several other companies, including a printing company,
lumber company, theater and restaurant company, and travel agency.
From 2005 to 2018, he was the first Mayor of Cottonwood Heights,
Utah in 2005, a suburb of Salt Lake City, where our principal
executive offices are located. Mr. Cullimore graduated cum laude
from Brigham Young University in 1980 with a Bachelor’s
degree in Financial and Estate Planning. Based on his experience in
management and his long association with and effective leadership
of the Company, the Nominating and Governance Committee believes
Mr. Cullimore is well qualified to serve on our Board of
Directors.
|
|
Scott A. Klosterman
Director
Age 60
Director since 2016
|
Mr.
Klosterman is Chief Financial Officer at HNI Healthcare since May
2017, where he previously served as Executive Vice President of
Financial Operations (2016-2017). From 2010 to 2015, he was Vice
President and General Manager, Post-Operative Products and Services
at Hanger, Inc., a leading provider of prosthetic, orthotic, and
therapeutic solutions. From 2009 to 2010, he was an executive
consultant, providing consulting services to healthcare businesses,
advising on product development and new product launches. He was
Division President of Chattanooga Group from 2003 to 2008, where he
previously served as Chief Operating Officer (1997-2003) and Chief
Financial Officer, Secretary, and Treasurer (1994 -1997). He was a
licensed certified public accountant in Pennsylvania from 1982
until 1994 and has an M.B.A. degree from Baylor University and a
B.S. degree in Accounting (with highest honors) from the University
of Delaware. Based on Mr. Klosterman’s extensive experience
in the medical industry and as a finance executive, the Nominating
and Governance Committee believes that he is well qualified to
serve on our Board of Directors.
|
7
|
Christopher R. von Jako, Ph.D.
Director, Chief Executive Officer
Age 49
Director since 2018
|
Dr. von
Jako became a director and our Chief Executive Officer in June
2018. He previously served as President and CEO of NinePoint
Medical, Inc. from November 2014 to June 2018. NinePoint Medical is
a privately-held medical device company that designs, manufactures,
and sells an Optical Coherence Tomography (OCT) imaging platform
for clinical use in gastroenterology, pulmonology, urology,
gynecology, and ENT, for the evaluation of human tissue
microstructure. He successfully secured a significant strategic
investment and long-term partnership with Merit Medical Systems,
Inc. in April 2018. From May 2013 to November 2014, he was the
President and CEO of NeuroTherm, Inc., a medical device company
that develops, manufactures, and markets state-of-the-art
image-guided solutions for pain management until its acquisition by
St. Jude Medical Corporation (now Abbott). Prior to joining
NeuroTherm, from 2010 to 2013, he served as President of ActiViews,
Inc., a privately held medical device company which developed and
marketed minimally invasive tools for Interventional Radiology. In
his nearly 25 years in the medical device industry, he also has
worked in senior management positions at Radionics, a division of
Covidien plc (now Medtronic plc), which he later sold to Integra
LifeSciences Holdings Corporation, and Medtronic plc. Dr. von Jako
holds a Ph.D. degree in Biomedical Sciences from the University of
Pécs Medical School (Pécs, Hungary), a M.S. degree in
Radiological Sciences and Technology from the department of Nuclear
Engineering at the Massachusetts Institute of Technology
(Cambridge, MA), and a double B.S. degree in Physics and
Mathematics from Bates College (Lewiston, ME). Our Nominating and
Governance Committee believes his extensive industry experience
qualifies Dr. von Jako to serve as a member of the
Board.
|
|
R. Scott Ward, Ph.D.
Director
Age 62
Director since 2013
|
Dr.
Ward serves as the chairman of the Department of Physical Therapy
at the University of Utah. He is the past president of the American
Physical Therapy Association, a position he held from 2006 to 2012.
In addition, Dr. Ward served as chair of the rehabilitation
committee of the American Burn Association. He has published
extensive research studies related to wound care and burn
rehabilitation. Dr. Ward received a B.A. degree in Physical Therapy
and a Ph.D. degree in Physiology from the University of Utah. Based
on Dr. Ward’s prominence in his field, and his extensive
experience and expertise in physical therapy, the Nominating and
Governance Committee believes that Dr. Ward is well qualified to
serve as a member of our Board of Directors.
|
Recommendation of the Board
The
Board of Directors recommends a vote
FOR
each of the named
nominees.
8
INFORMATION REGARDING THE BOARD OF DIRECTORS
AND CORPORATE GOVERNANCE
General Information
Directors elected
at the annual meeting of shareholders serve until the earlier of
their resignation or removal, or until their successors are elected
and qualified. Three members of the Board are Preferred Directors
appointed under the provisions of the Certificate of Designations,
Preferences and Rights of the Series A 8% Convertible Preferred
Stock (the “Series A Certificate of Designations”) as
discussed in the following section of this Proxy Statement.
Directors are encouraged to attend the annual meeting if their
schedules permit. One of our directors attended the 2017 Annual
Meeting of Shareholders.
Preferred Directors
Under
our Bylaws, the Board of Directors can include up to seven members.
The Series A Certificate of Designations grants to the holders of
our Series A Preferred certain rights, referred to as Director
Rights, to appoint up to three members of the Board (the Preferred
Directors) for as long as the original Series A Preferred investors
own or would beneficially own at least 28.6% of our common stock
either directly or indirectly (the “Threshold Ownership
Percentage”). This period of ownership is known as the
Director Rights Period. Excluded from the calculation of the
Threshold Ownership Percentage, however, are any shares of common
stock issuable upon the exercise of the warrants held by these
investors. In compliance with NASDAQ Rule 5640, the number of
Preferred Directors will be reduced pro rata with any reduction in
ownership by the preferred investors below the Threshold Ownership
Percentage, so that the number of Preferred Directors is
approximately proportionate to the preferred investors’
direct or indirect ownership of our common stock. By agreement
among the Company and the Series A Preferred shareholders, the
Director Rights may be exercised at the discretion of certain
affiliates of Prettybrook Partners, LLC, a private investment firm
(collectively referred to as Prettybrook) for as long as
Prettybrook owns at least 50% of the outstanding Series A
Preferred.
The
Director Rights are not exercisable unless the preferred investors
are the beneficial owners of at least 10% of our common stock,
including shares issuable upon conversion of the Series A
Preferred, but excluding shares issuable upon exercise of any
warrants to purchase common stock. Common stock has no voting,
nomination, election or other rights with respect to the Preferred
Directors. Each Preferred Director serves as a member of the Board
during the Director Rights Period or until his or her successor is
appointed by the holders of the Series A Preferred (or Prettybrook,
exercising such rights, as discussed above) during the Director
Rights Period.
The
Preferred Directors are Erin S. Enright, who is also the
Chairperson of our Board of Directors, David B. Holtz and Brian M.
Larkin. Their business experience and other qualifications are as
follows:
Erin S.
Enright
. Ms. Enright, 57, currently serves as a Managing
Member of Prettybrook Partners LLC, a family office dedicated to
investing in healthcare companies. Prettybrook has approximately 20
active investments in a variety of companies, typically as a
co-investor with institutional private equity. She serves as the
Chairman of the Board, Chair of the Nominating and Governance
Committee and member of the Audit and Compensation Committees of
the Company, and as a member of the Board of Directors and Audit
and Investment Committees of Medical Facilities Corporation (TSX:
DR). She is a general partner and member of the Board of Directors
of Tigerlabs, a Princeton-based business accelerator. Previously,
she served on the Board of Directors and the Audit Committee of
Biolase, Inc. (NASDAQ: BIOL) during 2013, and from 2010 to 2015
served on the Board of Directors of Ceelite Technologies, LLC. She
was the President of Lee Medical, a medical device manufacturer
based in Plainsboro, New Jersey, from 2004-13. She was Chief
Financial Officer of InfuSystem, Inc. (NASDAQ:INFU) from 2005 to
2007. From 1993 to 2003, Ms. Enright was with Citigroup, most
recently as a Managing Director in its Equity Capital Markets
group. While at Citigroup, Ms. Enright was Chairperson of the
firm's Institutional Investors' Committee, responsible for
screening and approving the firm's participation in equity
underwritings and a member of the Citigroup Global Equity
Commitment Committee, responsible for reviewing and approving the
firm's underwritings. From 1989 until 1993, Ms. Enright was an
attorney with Wachtell, Lipton, Rosen & Katz in the firm's New
York office. Ms. Enright received her A.B. degree from the Woodrow
Wilson School of Public and International Affairs at Princeton
University and J.D. degree from the University of Chicago Law
School.
9
David B.
Holtz
. Mr. Holtz, 52, since 2012, has been a principal of
Provco Group Ltd. (“Provco”). Provco became a preferred
shareholder of Dynatronics in 2015. He serves as part of
Provco’s executive management group responsible for managing
investment portfolios and the accounting function. From 2011 to
2012, Mr. Holtz was executive manager of Grey Street Holdings, a
property investment holding company. From 2008 to 2010, he served
as Chief Financial Officer and then Interim President of Nucryst
Pharmaceuticals Corp. From 1993 to 2006, Mr. Holtz worked at
Integra LifeSciences in various capacities including Vice
President, Finance and Treasurer, and Senior Vice President,
Finance and Treasurer. Before joining Integra, Mr. Holtz was an
associate with Coopers & Lybrand, L.L.P. in Philadelphia and
Cono Leasing Corporation, a private leasing company. He received a
BS degree in Business Administration from Susquehanna University
and was a certified public accountant in Pennsylvania until
1998.
Brian M.
Larkin
.
Mr. Larkin, 49, is
President and CEO of SP Industries, Inc., a privately held provider
of laboratory equipment, supplies and specialty glassware and
aseptic processing drug manufacturing solutions headquartered in
Pennsylvania. From May 2017 to February 2018, we served as the Vice
President and General Manager of the Diabetes Care business at
Becton Dickinson (NYSE:BDX). From May 2015 to May 2017, he served
as Senior Vice President and General Manager for the LifeCell
Regenerative Medicine business at Acelity L.P., Inc. Prior to
joining Acelity, Mr. Larkin was Corporate Vice President of Integra
Lifesciences Holdings Corporation, where he served as President of
the Global Spine and Orthobiologics businesses, and Head of
Strategic Development. His responsibilities included executive
oversight and leadership of Integra’s worldwide Spine and
Orthobiologics businesses, in addition to executive oversight of
several of Integra’s corporate functions, including corporate
marketing and strategic planning. Mr. Larkin joined Integra in
January 2000, as a Regional Sales Manager. He was promoted to
National Sales Manager in 2003, Vice President, North American
Sales in 2005, and President of Integra’s Neurosurgery
business in 2007. In 2010, he was appointed President, Global Spine
& Orthobiologics, and Head of Strategic Development. Mr. Larkin
has over 25 years of sales, marketing, and executive management
experience in the medical technology industry. Prior to joining
Integra, he was the National Sales Manager for Connell
Neurosurgical. Mr. Larkin received a B.S. degree in Chemistry from
the University of Richmond and completed the Advanced Management
Program at Harvard Business School.
In
addition to the Director Rights, the holders of the Series A
Preferred have the right to appoint one observer (who is not a
Preferred Director) who may attend any meetings of the Board of
Directors and participate in discussions among the Board members,
but who does not have any voting rights on any matters. So long as
Prettybrook owns at least 50% of the outstanding Series A
Preferred, Prettybrook has the right to choose this observer.
Prettybrook has appointed Stuart M. Essig as the observer to the
Board. Mr. Essig is a significant shareholder of the Company and is
the husband of Ms. Enright, our Chairperson. Mr. Essig and Ms.
Enright are managers of Prettybrook.
Family Relationships
There
are no family relationships among the members of the Board of
Directors and our executive officers.
Independence of the Board of Directors
The
Board of Directors has determined that a majority of the members of
the Board should consist of “independent directors,”
determined in accordance with the applicable NASDAQ listing
standards as in effect from time to time. Directors who are also
our employees are not considered to be independent for this
purpose. Our Board of Directors determines the independence of our
directors by applying the rules, regulations and listing standards
of NASDAQ and the rules and regulations of the SEC. The applicable
rules, regulations and listing standards of NASDAQ provide that a
director is independent only if the Board affirmatively determines
that the director does not have a relationship with us which would
interfere with the exercise of his or her independent judgment in
carrying out the responsibilities of a director. They also specify
certain relationships that preclude a determination of director
independence, including certain business, professional and personal
relationships.
10
Our
Board annually reviews the independence of our directors according
to these standards, taking into account all relevant facts and
circumstances. In its most recent review of information collected
from our directors, the Board determined that the non-employee
members of our Board other than Kelvyn H. Cullimore, Jr. are
“independent directors” under the NASDAQ standards and
the SEC’s rules, due to Mr. Cullimore’s prior service
as our Chief Executive Officer. The Board has determined that such
independent directors have no relationship with the Company that
would interfere with the exercise of their independent judgment in
carrying out the responsibilities of a director. In addition, none
of our directors is a party to any agreement or arrangement that
would require disclosure pursuant to NASDAQ Rule
5250(b)(3).
The
Board has also determined that all members of the Compensation
Committee are independent and meet the additional independence
criteria required under NASDAQ Listing Rule 5605(a)(2), and that
each member of the Audit Committee: (i) is independent, (ii) meets
the financial literacy requirements of the NASDAQ Rules, and (iii)
meets the enhanced independence standards under Section 10A(m)(3)
of the Securities Exchange Act of 1934, as amended (“Exchange
Act”). In making this determination, the Board found that
none of the nominees for director had a material or other
disqualifying relationship with us.
Board Leadership Structure
In
February 2018, our Board of Directors voted to separate the
role of Chairman of the Board from the role of Chief Executive
Officer. Erin Enright was appointed Chairperson at that time. The
Board believes that separating these roles allows us to efficiently
develop and implement corporate strategy that is consistent with
the Board’s oversight role, while facilitating strong
day-to-day leadership. Our former Chief Executive Officer, Kelvyn
H. Cullimore, Jr., who served both as Chief Executive Officer and
Chairman of the Board of Directors until February 2018, stepped
down as Chairman in February and continued in his position as Chief
Executive Officer and director until the appointment of a new Chief
Executive Officer in June 2018. Mr. Cullimore remains a member of
the Board and is a nominee for re-election at the Annual Meeting.
Our current Chief Executive Officer, Christopher R. von Jako, Ph.D.
is a member of Board and reports directly to our new Chairperson,
Erin Enright. As an employee of the Company, Dr. von Jako is not
independent.
In
making the decision to separate the roles of Chief Executive
Officer and Chairman of the Board, the Board cited the demands of
and differences between each role. The Chief Executive Officer is
responsible for setting the strategic direction for the Company,
with guidance from the Board. The Chief Executive Officer is
responsible for leadership and for the over-all performance of the
Company pursuant to the policies of the Board, while providing
guidance to the Chief Executive Officer, and setting the agenda for
Board meetings, and presiding over meetings of the
Board.
Ms.
Enright brings considerable skills and experience to the role of
Chairperson. In this capacity, she has significant
responsibilities, among other things, to call and preside over
Board meetings, including meetings of the independent directors, to
set meeting agendas and to determine materials to be distributed to
the Board. Accordingly, as Chairperson, she has substantial ability
to shape the work of the Board of Directors. We believe that having
an independent Chairperson creates an environment that is more
conducive to objective evaluation and oversight of
management’s performance, increases management accountability
and improves the ability of the Board of Directors to monitor
whether management’s actions are in our best interests those
of our shareholders. As a result, we believe that having an
independent chairman can enhance the effectiveness of the Board of
Directors as a whole. The active involvement of our independent
directors, combined with the qualifications and significant
responsibilities of our Chairperson, provide balance on the Board
and promote strong, independent oversight of our management and
affairs.
Role of the Board in Risk Oversight
The
Board of Directors has an active role, as a whole and also at the
committee level, in overseeing management of our risks. The Board
regularly reviews information regarding our credit, liquidity and
operations, as well as the risks associated with each. The Audit
Committee’s charter mandates it to review and discuss with
management and our independent registered public accounting firm,
as appropriate, our major financial risk exposures and the steps
taken by management to monitor and control these exposures. The
Compensation Committee is responsible for overseeing the management
of risks relating to our executive compensation plans and
arrangements. The Nominating and Governance Committee manages risks
associated with the independence of the Board of Directors and
potential conflicts of interest. While each committee is
responsible for evaluating certain risks and overseeing the
management of such risks, the entire Board of Directors is
regularly informed through committee reports about such
risks.
11
Meetings of the Board of Directors
Our
Board of Directors met six times during fiscal year 2018. Each
member of the Board attended 75% or more of the meetings of the
Board of Directors and of the committees on which he or
she
served, held during
the portion of fiscal 2018 for which he or she
was a director or committee
member.
As
required under applicable NASDAQ listing standards, in fiscal 2018,
the independent directors met four times in regularly scheduled
executive sessions at which only independent directors were
present. Ms. Enright presided over the executive
sessions.
Information Regarding Committees of the Board of
Directors
The
Board of Directors has
an Audit Committee, a Compensation
Committee and a Nominating and Governance Committee. The Board has
adopted a written charter for each committee that is available to
shareholders
on the
Investors section of our website at
www.dynatronics.com
.
The
following table provides membership and meeting information for
fiscal 2018 for each of the committees of the Board:
|
Name
|
|
Audit |
|
Compensation |
|
Nominating and
Governance
|
|
Kelvyn
H. Cullimore
(1)
|
|
|
|
|
|
|
|
Erin S.
Enright
|
|
X
|
|
X
|
|
⁕
|
|
David
B. Holtz
|
|
⁕
|
|
|
|
X
|
|
Scott
A. Klosterman
|
|
X
|
|
⁕
|
|
X
|
|
Brian
M. Larkin
|
|
|
|
X
|
|
X
|
|
Christopher R. von
Jako, Ph.D.
(2)
|
|
|
|
|
|
|
|
R.
Scott Ward, Ph.D.
|
|
|
|
X
|
|
|
*
Committee
Chairperson
(1)
Resigned as
Chairman in February 2018. Terminated as Chief Executive Officer in
June 2018; continues as Director.
(2)
Appointed to the
Board upon his hiring as Chief Executive Officer in June
2018.
Below
is a description of the Audit Committee, Compensation Committee and
Nominating and Governance Committee. Each of the committees has
authority to engage legal counsel or other experts or consultants,
as it deems appropriate to carry out its
responsibilities.
Audit Committee
The
Audit Committee, which has been established in accordance with
requirements of Section 3(a)(58)(A) of the Exchange Act, is
comprised of the following independent directors: David B. Holtz
(Chair), Erin S. Enright, and Scott A. Klosterman. The NASDAQ
corporate governance listing standards require that at least one
member of our Audit Committee must have past employment experience
in finance or accounting, requisite professional certification in
accounting, or comparable experience or background which results in
the individual’s “financial sophistication.” This
financial sophistication may derive from the person being or having
been a chief executive officer, chief financial officer or other
senior officer with financial oversight responsibilities. Our Board
believes that Ms. Enright and Messrs. Holtz and Klosterman, are
audit committee financial experts (“Audit Committee Financial
Experts”) and also meet the NASDAQ requirements for financial
sophistication. Our Board further believes that each of them is an
independent director as the term is defined in the NASDAQ Stock
Market corporate listing standards. Under the SEC’s rules, an
Audit Committee Financial Expert is defined as a person who has all
of the following attributes:
●
Understanding of
accounting principles generally accepted in the United States of
America, or GAAP, and financial statements.
12
●
Ability to assess
the general application of GAAP in connection with accounting for
estimates, accruals and reserves.
●
Experience in
preparing, auditing, analyzing or evaluating financial statements
that present a breadth and level of complexity of accounting issues
that are generally comparable to the breadth and complexity of
issues that can reasonably be expected to be raised by our
financial statements, or experience actively supervising one or
more persons engaged in such activities.
●
Understanding of
internal control over financial reporting.
●
Understanding of
audit committee functions.
The
Audit Committee is concerned primarily with the integrity of our
financial statements, the independence, qualifications and
performance of our independent registered public accounting firm,
and our compliance with legal requirements. The Audit Committee
charter approved by the Board of Directors reflects the standards
and requirements adopted by the SEC and NASDAQ. The Audit Committee
Charter is posted on our website,
www.dynatronics.com
, under
“Investors, Investor Relations, Corporate Governance,
Governance Documents.” The Audit Committee held four meetings
during fiscal year 2018. Each member of the Audit Committee
attended at least 75% of the Audit Committee’s
meetings.
Report of the Audit Committee of the Board of
Directors
The
Audit Committee reviewed and discussed the audited financial
statements for the fiscal year ended June 30, 2018 with Dynatronics
Corporation’s management. The Audit Committee discussed with
Dynatronics Corporation’s independent registered public
accounting firm, Tanner LLC, the matters required to be discussed
by Auditing Standard No. 1301,
Communications with Audit Committees,
as adopted by the Public Company Accounting Oversight Board, or
PCAOB. The Audit Committee also received the written disclosures
and the letter from Tanner LLC required by applicable requirements
of the PCAOB regarding Tanner LLC’s communications with the
Audit Committee concerning independence, and has discussed with
Tanner LLC the independent registered public accounting
firm’s independence. Based on the foregoing, the Audit
Committee recommended to the Board of Directors that the audited
financial statements be included in Company’s Annual Report
on Form 10-K for the fiscal year ended June 30, 2018.
David
B. Holtz, Chairman
Erin S.
Enright
Scott
A. Klosterman
The material in this Report of the Audit Committee is not
“soliciting material,” is not deemed
“filed” with the SEC and is not to be incorporated by
reference in any filing of Dynatronics Corporation under the
Securities Act of 1933, as amended (the Securities Act) or the
Exchange Act, whether made before or after the date hereof and
irrespective of any general incorporation language in any such
filing.
Compensation Committee
The
Compensation Committee is
responsible
for reviewing and approving, where required, the compensation, as
well as evaluating the performance, of our principal executive
officer and other executive officers, and advising and assisting
management in developing our overall compensation strategy to
assure that it promotes shareholder interests, supports our
strategic and tactical objectives, and provides for appropriate
rewards and incentives for our management and employees. Each
member of the Compensation Committee is an “independent
director” as defined by the federal securities laws and in
Rule 5605(a)(2) of the NASDAQ Marketplace
Rules.
The
Compensation Committee is empowered to advise management and make
recommendations to the Board of Directors with respect to the
compensation and other employment benefits of executive officers
and key employees of the Company. In exercising its
responsibilities, the Compensation Committee establishes and
monitors policies governing the compensation of executive officers,
reviews the performance of and determines salaries and incentive
compensation for executive officers, and makes option or other
equity-based awards to those individuals. Additionally, the
Compensation Committee administers our stock plans.
13
The
Compensation Committee meets as often as it deems necessary,
without the presence of any executive officer whose compensation it
is then approving. Neither the Compensation Committee nor the
Company engaged or received advice from any compensation consultant
during fiscal year 2018. As of the date of this Proxy Statement,
the following independent directors are members of the Compensation
Committee: Scott A. Klosterman, (Chair), Erin S. Enright, Brian M.
Larkin and R. Scott Ward. The Compensation Committee
held three meetings during fiscal year 2018. All committee
members attended at least 75% of these meetings.
The
charter of the Compensation Committee grants the Compensation
Committee full access to all books, records, facilities and
personnel of the Company. In addition, under the charter, the
Compensation Committee has the authority to obtain, at the expense
of the Company, advice and assistance from compensation consultants
and internal and external legal, accounting or other advisors and
other external resources that the Compensation Committee considers
necessary or appropriate in the performance of its duties. The
Compensation Committee has direct responsibility for the oversight
of the work of any consultants or advisers engaged for the purpose
of advising the Committee. In particular, the Compensation
Committee has the sole authority to retain, in its sole discretion,
compensation consultants to assist in its evaluation of
executive
and director compensation,
including the authority to approve the consultant’s
reasonable fees and other retention terms. Under the charter, the
Compensation Committee may select, or receive advice from, a
compensation consultant, legal counsel or other adviser to the
compensation committee, other than in-house legal counsel and
certain other types of advisers, only after taking into
consideration six factors, prescribed by the SEC and NASDAQ, that
bear upon the adviser’s independence; however, there is no
requirement that any adviser be independent.
Nominating and Governance Committee
The Nominating and Governance Committee is
responsible for overseeing, reviewing and making periodic
recommendations concerning our corporate governance policies, and
for recommending to the full Board of Directors candidates for
election to the Board of Directors. The committee is comprised of
the following directors: Erin S. Enright (Chair), David B. Holtz,
Brian M. Larkin and Scott A. Klosterman. Each member of this
committee is an independent director under applicable NASDAQ
listing standards. The Nominating and Governance Committee members
individually discussed Committee topics during the year. The
committee met twice
during fiscal year 2018.
All committee members attended at least 75% of
these meetings.
Nominees
for the Board of Directors should be committed to enhancing
long-term shareholder value and must possess a high level of
personal and professional ethics, sound business judgment and
integrity. The Board of Directors encourages selection of directors
who will contribute to our corporate governance, including:
responsibility to its shareholders, technology leadership,
effective execution, high customer satisfaction and superior
employee working environment. The Nominating and Governance
Committee from time to time reviews the appropriate skills and
characteristics required of Board members, including factors that
it seeks in Board members such as diversity of business experience,
viewpoints and personal background, and diversity of skills in
technology, finance, marketing, international business, financial
reporting and other areas that are expected to contribute to an
effective Board of Directors. In evaluating potential candidates
for the Board of Directors, the Nominating and Governance Committee
considers these factors in light of the specific needs of the Board
of Directors at that time. The brief biographical description of
each nominee set forth in the “Business Experience and
Qualifications of Nominees” above includes the primary
individual experience, qualifications, attributes and skills of
each of our directors nominated for election at this Annual Meeting
that led to the conclusion that each director should serve as a
member of the Board of Directors.
Shareholders
may recommend a director nominee to the Nominating and Governance
Committee. In recommending candidates for election to the Board of
Directors, the committee considers nominees recommended by
directors, officers, employees, shareholders and others, using the
same criteria to evaluate all candidates. The Nominating and
Governance Committee reviews each candidate’s qualifications,
including whether a candidate possesses any of the specific
qualities and skills desirable in certain members of the Board of
Directors. Evaluations of candidates generally involve a review of
background materials, internal discussions and interviews with
selected candidates as appropriate. Upon selection of a qualified
candidate, the committee would recommend the candidate for
consideration by the full Board of Directors. The Nominating and
Governance Committee may engage consultants or third-party search
firms to assist in identifying and evaluating potential
nominees.
14
To
recommend a prospective nominee for the Nominating and Governance
Committee’s consideration, submit the candidate’s name
and qualifications to us in writing to the following address:
Dynatronics Corporation, Attn: Jim Ogilvie, Vice President of
Corporate Development, 7030 Park Centre Drive, Cottonwood Heights,
Utah 84121. When submitting candidates for nomination to be elected
at our annual meeting of shareholders, shareholders must also
follow the notice procedures and provide the information required
by our bylaws. In particular, for the Nominating and Governance
Committee to consider a candidate recommended by a shareholder for
nomination at the 2019 Annual Meeting of Shareholders, the
recommendation must be delivered or mailed to and received by us as
indicated above between July 2, 2019 and August 1, 2019 (or, if the
2019 Annual Meeting is not held within 30 calendar days of the
anniversary of the date of the 2018 Annual Meeting, within 10
calendar days after our public announcement of the date of the 2019
Annual Meeting). The recommendation must include the same
information as is specified in our bylaws for shareholder nominees
to be considered at an annual meeting, including the
following:
●
The
shareholder’s name and address and the beneficial owner, if
any, on whose behalf the nomination is proposed;
●
The
shareholder’s reason for making the nomination at the annual
meeting, and the signed consent of the nominee to serve if
elected;
●
The
number of shares owned by, and any material interest of, the record
owner and the beneficial owner, if any, on whose behalf the record
owner is proposing the nominee;
●
A
description of any arrangements or understandings between the
shareholder, the nominee and any other person regarding the
nomination; and
●
Information
regarding the nominee that would be required to be included in our
proxy statement by the Commission’s rules, including the
nominee’s age, business experience for the past five years
and any directorships held by the nominee, including directorships
held during the past five years.
Shareholder Communications with the Board of Directors
Shareholders may
communicate directly with our Board of Directors by writing to them
at “Board of Directors, c/o Jim Ogilvie, Vice President of
Corporate Development, Dynatronics Corporation, 7030 Park Centre
Drive, Cottonwood Heights, Utah 84121.” All communications
received in this manner will be opened for the sole purpose of
determining whether the contents represent a message to our
directors, after which they will be forwarded to the director or
directors to whom addressed, except for communications that are (1)
advertisements, promotions of a product or service, patently
offensive material or matters deemed inappropriate for the Board of
Directors, (2) solely related to complaints with respect to
ordinary course of business, customer service and satisfaction
issues, or (3) clearly unrelated to our business, industry,
management, Board of Directors, or related committee
matters.
Code of Ethics
We have
adopted a Code of Business Ethics that applies to all officers,
directors and employees. The Code of Business Ethics is available
on the Investors section of our website at
www.dynatronics.com
.
If we make any substantive
amendments to the Code of Business Ethics or grants any waiver from
a provision of the Code to any executive officer or director, we
will promptly disclose the nature of the amendment or waiver on our
website.
Corporate Governance Guidelines
The
Board of Directors has not adopted formal written corporate
governance guidelines. Given the experience and qualifications our
directors contribute to the Board of Directors’ activities,
we have implemented a number of practices designed to encourage
effective corporate governance. These practices
include:
●
the requirement
that at least a majority of the directors meet the standards of
independence applicable to the Company;
●
holding regular
executive sessions of the independent members of the Board of
Directors;
15
●
holding committee
meetings which include individual sessions with representatives of
the Company’s independent registered public accounting firm,
as well as the CFO and CEO; and
●
completion of
“360” performance evaluations of each Board member by
the other members of the Board of Directors.
Our
Board of Directors is actively involved in the oversight and
management of the material risks that could affect the Company. The
Board of Directors carries out its risk oversight and management
responsibilities by monitoring risk directly as a full board and,
where appropriate, through its committees. Effective risk oversight
is a priority of the Board of Directors. These duties are carried
out through the effective use of Board committees that function
under written charters adopted by the Board.
PROPOSAL NO. 2
RATIFICATION OF SELECTION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
What am I voting on?
Ratification of the
selection of Tanner LLC as our independent registered public
accounting firm for the fiscal year ending June 30,
2019.
Vote required
: A majority of the shares present or
represented by proxy.
Effect of abstentions
: Same as a vote “
AGAINST
”.
Effect of broker non-votes
: None (because this is a routine
proposal, there are no broker non-votes).
The
Audit Committee of the Board of Directors has selected Tanner LLC
as our independent registered public accounting firm for the fiscal
year ending June 30, 2019 and has further directed that management
submit the selection of our independent registered public
accounting firm for ratification by the shareholders at the Annual
Meeting. Our lead audit partner at Tanner LLC serves no more than
five consecutive years in that role. Representatives of
Tanner LLC are expected to be
present at the Annual Meeting. They will have an opportunity to
make a statement if they so desire and will be available to respond
to appropriate questions.
Neither
our Bylaws nor other governing documents or law require shareholder
ratification of the selection of Tanner LLC as our independent
registered public accounting firm. However, the Audit Committee is
submitting the selection of Tanner LLC to the shareholders for
ratification as a matter of good corporate practice. If the
shareholders fail to ratify the selection, the Audit Committee will
reconsider whether or not to retain that firm. Even if the
selection is ratified, the Audit Committee in its discretion may
direct the appointment of different independent auditors at any
time during the year if they determine that such a change would be
in our best interests and in the best interests of our
shareholders.
The
affirmative vote of the holders of a majority of the shares present
in person or represented by proxy and entitled to vote on the
matter at the Annual Meeting will be required to ratify the
selection of Tanner LLC.
Independence
Tanner
LLC has advised us that it has no direct or indirect financial
interest in us or in any of our subsidiaries and that during 2018,
it had no connection with us or any of our subsidiaries, other than
as our independent registered public accounting firm or in
connection with certain other services, as described
below.
Principal Accountant Fees and Services
During
fiscal year 2018, we entered into an engagement agreement with
Tanner LLC, which set forth the terms by which Tanner LLC agreed to
perform audit services for us. Those services consisted of the
audit of our annual consolidated financial statements, and the
effectiveness of our internal control over financial reporting,
review of the quarterly financial statements, stand-alone audits of
subsidiaries, and accounting consultations, consents, and other
services related to our SEC filings. Tanner LLC did not perform any
financial information systems design and implementation services
for us in our fiscal year 2018.
16
During
fiscal year 2017, Tanner LLC performed services consisting of the
audit of our annual consolidated financial statements, and the
effectiveness of our internal control over financial reporting,
review of the quarterly financial statements, and accounting
consultations, consents, and other services related to our SEC
filings. Tanner LLC did not perform any financial information
systems design and implementation services for us in fiscal year
2017.
The
following table summarizes the fees paid by us to Tanner LLC during
fiscal years 2017 and 2018.
|
Type of Service and Fee
|
2017
|
2018
|
|
Audit
Fees
|
$
160,000
|
$
202,000
|
|
Audit
Related Fees
|
5,000
|
7,000
|
|
Tax
Fees
|
-
|
-
|
|
All
Other Fees
|
120,000
|
20,000
|
|
Total
Fees
|
$
285,000
|
$
229,000
|
Pre-approval Policies and Procedures
The
Audit Committee has established a policy that all audit and
permissible non-audit services provided by the independent
registered public accounting firm will be pre-approved by the Audit
Committee. These services may include audit services, audit-related
services, tax services and other services. The Audit Committee
considers whether the provision of each non-audit service is
compatible with maintaining the independence of the independent
registered public accounting firm. Pre-approval is detailed as to
the particular service or category of services and is generally
subject to a specific budget. The independent registered public
accounting firm and our management are required to periodically
report to the Audit Committee regarding the extent of services
provided in accordance with this pre-approval, and the fees for the
services performed to date.
The
Audit Committee has determined that the rendering of services other
than audit services by Tanner LLC is compatible with maintaining
the principal accountant’s independence.
Recommendation of the Board
The
Board of Directors recommends a vote
FOR
Proposal No. 2 ratifying the
selection of Tanner LLC as our independent registered public
accounting firm for the year ending June 30, 2019.
EXECUTIVE OFFICERS
The
following table sets forth certain information with respect to our
executive officers as of October 4, 2018.
|
Name
|
|
Age
|
|
Position
|
|
Christopher R. von
Jako, Ph.D.
|
|
49
|
|
Chief
Executive Officer and Director
|
|
David
A. Wirthlin
|
|
57
|
|
Chief
Financial Officer and Secretary
|
|
James
N. Ogilvie
|
|
32
|
|
Vice
President Corporate Development
|
|
Daryl
Connell
|
|
46
|
|
Chief
Information Officer
|
|
Skyler
Black
|
|
35
|
|
Corporate
Controller
|
Dr. von Jako’s
biographical information and work
experience and other credentials are summarized in the section of
this Proxy Statement that discusses Proposal No. 1, Election of
Directors. Information regarding the other executive officers in
the table above is provided below.
17
David A.
Wirthlin
joined us and was
appointed Chief Financial Officer in October 2016 and Corporate
Secretary in March 2017. He previously worked with ArmorWorks
Enterprises, LLC, a privately-held military armor technology
company located in Arizona, where he served in several capacities:
Chief Financial Officer from June 2004 until January 2016, and
consultant on a contract basis to ArmorWorks from January 2016
until October 2016. Mr. Wirthlin served as Chief Financial Officer
for Integrated Information Systems, Inc. and SkyMall, Inc., where
he led the initial public offering process for each company and
subsequently was directly responsible for all SEC-related
functions. He is a CPA in the State of Utah (inactive status) and
worked in public accounting and consulting for seven years at
Arthur Andersen LLP. Mr. Wirthlin holds an MBA degree from the
University of Chicago and a B.S. degree in Accounting from the
University of Utah.
James N.
Ogilvie
was appointed Vice
President of Corporate Development in December of 2016; he joined
us in August 2015, initially as Director of Business Development.
Mr. Ogilvie worked previously at Evolent Health, Inc. (NYSE:EVH)
where he developed strategic business cases for hospital
systems. He started his career in the investment banking
division of Robert W. Baird, where he provided analytical support
on equity offerings, mergers and acquisitions, and other financial
advisory services. Mr. Ogilvie graduated from Brigham Young
University, School of Accountancy, receiving an M.S. degree and
B.S. degree in Accounting. He is also a CPA, licensed in
Wisconsin.
Daryl Connell
joined us in February 2018 as Chief
Information Officer. He previously was with Conklin Company Inc., a
privately-held chemical manufacturer located in Minnesota, where he
served as Director of Information Technology from October 2015
until February 2018. Mr. Connell also previously served as Director
of Information Technology for Ablenet, Inc., Llewellyn Worldwide
Ltd, and Wirth Companies Inc. Mr. Connell received his education in
M.I.S. at Brown College in Minnesota and the University of
Minnesota.
Skyler Black
joined us as Corporate Controller in
January 2018. He was previously with PricewaterhouseCoopers, LLP
where he spent 12 years in their assurance practice. He is a CPA in
the state of Nevada and holds a B.S. degree in Accounting from
Brigham Young University – Idaho.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information regarding the
ownership of our common stock and voting securities as of October
4, 2018, by (1) each person known by us to be the beneficial owner
of more than 5% of the issued and outstanding common stock, based
upon their most recent filings or correspondence with the SEC, (2)
our Named Executive Officers and the directors individually, and
(3) the Named Executive Officers and directors as a group. Except
as indicated in the notes below the table, each of the persons
listed below is believed to exercise sole voting and investment
power over the shares of stock that are listed for such individual
or entity in the table. Under SEC rules, “Named Executive
Officers” include (i) all individuals serving as our
principal executive officer or acting in a similar capacity during
the last completed fiscal year, regardless of compensation level;
(ii) our two most highly compensated executive officers other than
the principal executive officer who were serving as executive
officers at the end of the last completed fiscal year; and (iii) up
to two additional individuals for whom disclosure would have been
provided pursuant to the rule but for the fact that the individual
was not serving as an executive officer of the Company at the end
of the last completed fiscal year. We have identified Kelvyn H.
Cullimore, Jr., who served as our Chief Executive Officer until
June 2018, and Dr. Christopher von Jako, Ph.D., as our principal
executive officers and therefore as Named Executive Officers for
these purposes. In addition, we have identified Jeff Gephart and
David Wirthlin who were our two most highly compensated executive
officers other than our principal executive officer during the
fiscal year ended June 30, 2018, although Mr. Gephart was no longer
employed by us at the end of the fiscal year. Unless otherwise
indicated in the notes below the table, the address of each
beneficial owner listed in the table below is c/o Dynatronics
Corporation, 7030 Park Centre Dr., Cottonwood Heights, Utah
84121.
The
table assumes 8,226,523 shares of common stock issued and
outstanding as of October 4, 2018. For purposes of the table, we
determined the number of shares of common stock beneficially owned
by each person under Rule 13d-3(d)(1) of the Exchange Act. Under
this rule, shares of common stock not outstanding that are subject
to issuance pursuant to options, warrants, rights or conversion
privileges exercisable by a person within 60 days of the date
indicated (October 4, 2018) are deemed outstanding for the purpose
of calculating the number and percentage beneficially owned by such
person but are not deemed outstanding for the purpose of
calculating the number or percentage beneficially owned by each any
other person listed in the table. Except where otherwise noted, we
believe that each individual or entity named has sole investment
and voting power with respect to the shares of indicated as
beneficially owned by such person, subject to community property
laws, where applicable. Beneficial ownership representing less than
one percent is denoted with an asterisk (*).
18
|
|
Beneficial
Ownership
|
Percent
of
|
|
|
Name/Address of
Beneficial Owner
|
Shares
|
%
|
Voting
Power
|
|
Greater than 5% Shareholders:
|
|
|
|
|
Stuart M. Essig
(1)
|
3,970,361
|
35.2
%
|
16.4
%
|
|
|
|
|
|
|
Stuart M. Essig
2007 Family Trust
(2)
|
668,837
|
7.3
%
|
2.7
%
|
|
|
|
|
|
|
Provco Ventures I,
LP
(3)
|
2,499,779
|
24.8
%
|
10.9
%
|
|
|
|
|
|
|
David H.
Hausmann
(4)
|
442,379
|
5.2
%
|
2.3
%
|
|
|
|
|
|
|
Armistice Capital,
LLC
(5)
|
1,790,985
|
16.9
%
|
8.9
%
|
|
|
|
|
|
|
Nancy K. Cronin
(6)
|
978,161
|
12.0
%
|
8.8
%
|
|
Named Executive Officers and Directors
|
|
|
|
|
Kelvyn H.
Cullimore, Jr. (CEO/Director)
(7)
|
169,685
|
2.1
%
|
1.2
%
|
|
|
|
|
|
|
Christopher R. von
Jako, Ph.D. (CEO/Director)
(8)
|
275,824
|
3.3
%
|
*
|
|
|
|
|
|
|
T. Jeff
Gephart
(9)
|
19,534
|
*
|
*
|
|
|
|
|
|
|
David A.
Wirthlin
(10)
|
16,487
|
*
|
*
|
|
|
|
|
|
|
Erin S. Enright
(Director)
(11)
|
4,639,198
|
39.2
%
|
19.2
%
|
|
|
|
|
|
|
David B. Holtz
(Director)
(12)
|
14,684
|
*
|
*
|
|
|
|
|
|
|
Scott A. Klosterman
(Director)
(13)
|
14,684
|
*
|
*
|
|
|
|
|
|
|
Brian M. Larkin
(Director)
(14)
|
285,535
|
3.4
%
|
1.4
%
|
|
|
|
|
|
|
R. Scott Ward
(Director)
(15)
|
14,991
|
*
|
*
|
|
|
|
|
|
|
All Named Executive
Officers and directors as a group (nine persons)
|
5,434,211
|
44.0
%
|
23.0
%
|
__________________
|
(1)
|
Mr.
Essig is an observer to our Board of Directors and the husband of
Erin Enright, a Preferred Director and the Chairperson of the
Board. The amount indicated includes: (a)
921,356 shares of common stock owned
of record; (b) 880,000 shares of common stock issuable upon
conversion of Series A Preferred; (c) 260,000 shares of common
stock issuable upon conversion of Series B Preferred; and (d)
1,909,005 shares of common stock issuable upon the exercise of
warrants. Mr. Essig has sole voting and dispositive power over the
shares of stock indicated. He has no voting or dispositive power
over securities that are beneficially owned of record by the Essig
Trust (see Note (2), below) or by Ms. Enright (see Note (14),
below). The address for this beneficial owner is 512 West MLK Jr.
Blvd #320, Austin, Texas 78701.
|
|
(2)
|
Mr.
Essig is the Settlor/Grantor of The Stuart M. Essig 2007 Family
Trust (“Essig Trust”). His wife, Ms. Enright, is
Trustee of the Essig Trust. Shares include: (a)
71,381 shares of common stock owned
of record; (b) 188,800 shares of common stock issuable upon
conversion of Series A Preferred; (c) 40,000 shares of common stock
issuable upon conversion of Series B Preferred; and (d) 343,200
shares of common stock issuable upon exercise of warrants. Ms.
Enright and the Essig Trust have shared voting and dispositive
power over the shares of stock owned of record by the Essig Trust.
Amount indicated also includes 25,456 shares of common stock owned
of record by Ms. Enright personally, over which Ms.
Enright has sole voting and
dispositive power. (See Note 14, below.) The address for this
beneficial owner is 512 West MLK Jr. Blvd #320, Austin, Texas
78701.
|
19
|
(3)
|
The
address of this beneficial owner is 795 E. Lancaster Ave. Suite
200, Villanova, PA 19085. The general partner of this shareholder
is Provco, LLC. The sole member of Provco, LLC is Richard E.
Caruso, Ph.D. The amount indicated includes: (a)
639,779 shares of common stock owned
of record; (b) 484,000 shares of common stock issuable upon
conversion of Series A Preferred; (c) 200,000 shares of common
stock issuable upon conversion of Series B Preferred; and (d)
1,176,000 shares of common stock issuable upon the exercise of
warrants.
|
|
(4)
|
Amount
indicated includes 177,379 shares of common stock owned of record,
90,000 shares of common stock issuable upon conversion of Series B
Preferred, and 175,000 shares of common stock issuable upon the
exercise of warrants. Mr. Hausmann is the President of our Hausmann
Enterprises Division. The address for this beneficial owner is 71
Briarwood Avenue, Norwood, NJ 07648.
|
|
(5)
|
Amount
indicated includes: (a) 540,985 shares of common stock owned of
record; (b) 500,000 shares of common stock issuable upon conversion
of Series B Preferred; (c) 760,000 shares of common stock issuable
upon conversion of Series C Preferred; and (d) 1,130,000 shares of
common stock issuable upon the exercise of warrants. The preferred
stock and the warrants include provisions that limit the exercise
or conversion thereof, as applicable, to the extent such exercise
would cause the holder, together with its affiliates and any other
person acting together with it and its affiliates, to beneficially
own a number of shares of common stock which would exceed 9.99% of
our then outstanding common stock following such exercise or
conversion, excluding for purposes of such determination shares of
common stock issuable upon the exercise of the warrant or
conversion of the preferred stock which have not been exercised or
converted. The shareholder may increase or decrease its beneficial
ownership limitation upon giving notice to us, which such increase
or decrease will not be effective until the 61st day after the
notice is delivered to us. The address for this beneficial owner is
c/o Steven Boyd, 510 Madison Ave, 22nd Floor, New York, New York
10022.
|
|
(6)
|
Ms.
Cronin received these shares upon conversion of shares of Series D
Preferred issued in connection with our acquisition of B&C, of
which she was a majority beneficial owner. The address for this
beneficial owner is 6101 Mt. Normandale Dr., Bloomington, Minnesota
55438.
|
|
(7)
|
Amount
indicated includes 159,685 shares of common stock owned of record
by Mr.
Cullimore and
10,000 shares of common stock owned of record by Mr.
Cullimore’s wife.
|
|
(8)
|
Amount
indicated includes: (a) 40,824 shares of common stock owned of
record; (b)
48,000 shares
of common stock issuable upon conversion of shares of Series A
Preferred; (c) 111,000 shares of common stock issuable upon
exercise of warrants; and (d)
26,000 shares of common stock
issuable upon conversion of shares of Series B Preferred owned of
record.
|
|
(9)
|
Mr.
Gephart is included as a Named Executive Officer due to his
compensation paid to him as Senior Vice President of Sales from
July 1, 2017 until April 26, 2018. The amount indicated includes:
(a) 5,534 shares of common stock owned of record; (b) 5,600 shares
of common stock issuable upon conversion of Series A Preferred; and
(c) 8,400 shares underlying warrants.
|
|
(10)
|
Mr.
Wirthlin is included as a Named Executive Officer due to his
compensation paid to him as Chief Financial Officer. The amount
indicated includes: (a) 487 shares of common stock owned of record;
(b) 4,000 shares of common stock issuable upon conversion of shares
of Series A Preferred; (c) 6,000 shares of common stock issuable
upon exercise of warrants; and (d) 6,000 shares of common stock
issuable upon exercise of options held by Mr.
Wirthlin.
|
20
|
(11)
|
The
amount indicated includes: (a) 25,456 shares of common stock owned
of record; (b) 3,970,361 shares of common stock beneficially owned
by her husband, Stuart Essig (see Note (1), above); and (c) 643,381
shares of common stock beneficially owned by the Essig Trust (see
Note (2), above). Ms. Enright has no voting and dispositive power
over the shares beneficially owned by her husband and she has
shared voting and dispositive power as Trustee over the shares
beneficially owned by the Essig Trust.
|
|
(12)
|
Mr.
Holtz is an executive officer of Provco, LLC, the general partner
of Provco Ventures I LP.
|
|
(13)
|
All
amounts indicated are shares of common stock owned of record by Mr.
Klosterman.
|
|
(14)
|
The
amount indicated includes: (a) 95,535 shares of common stock owned
of record; 48,000 shares issuable upon conversion of shares of
Series A Preferred; (b) 20,000 shares issuable upon conversion of
Series B Preferred; and (c)
122,000 shares issuable upon the
exercise of warrants.
|
|
(15)
|
All
amounts indicated are shares of common stock owned of record by Dr.
Ward.
|
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section
16(a) of the Exchange Act requires the directors and executive
officers, and persons who own more than ten percent of a registered
class of our equity securities, to file with the SEC initial
reports of ownership and reports of changes in ownership of our
common stock and other equity securities. Officers, directors and
greater than ten percent shareholders are required by SEC
regulation to furnish us with copies of all Section 16(a) forms
they file.
To our
knowledge, based solely on a review of copies of such reports
furnished to us and written representations that no other reports
were required, during the fiscal year ended June 30, 2018, our
officers, directors and greater than ten percent beneficial owners
filed all applicable reports under Section 16(a).
21
EXECUTIVE COMPENSATION
The
following table summarizes information concerning the compensation
awarded to, earned by or paid to, the Named Executive Officers for
the periods indicated (columns (g) and (h) have been intentionally
omitted):
Summary Compensation Table
|
Name and
principal position
(a)
|
|
Year
(b)
|
Salary($)
(c)
|
Bonus($)
(d)
|
Stock
awards($)
(e)
|
Option
awards($)
(f)
|
All other
compensation($)
(i)
|
Total($)
(j)
|
|
Kelvyn H. Cullimore,
Jr.
|
|
2017
|
$
200,000
|
-
|
-
|
-
|
$
31,202
|
$
231,202
|
|
Chief Executive Officer
(1)
|
|
2018
|
$
200,000
|
-
|
$
192,931
|
-
|
$
764,412
|
$
1,157,343
|
|
Christopher R. von
Jako
|
|
2017
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Chief Executive Officer
(2)
|
|
2018
|
$
4,230
|
-
|
$
147,500
|
$
56,881
|
-
|
$
208,611
|
|
T. Jeff Gephart
(3)
|
|
2017
|
$
175,512
|
$
19,732
|
-
|
-
|
$
3,678
|
$
198,922
|
|
Sr. VP Sales
|
|
2018
|
$
142,789
|
-
|
$
12,400
|
-
|
$
43,596
|
$
198,785
|
|
David A.
Wirthlin
|
|
2017
|
$
117,308
|
-
|
-
|
-
|
10,146
|
$
127,454
|
|
Chief Financial
Officer
|
|
2018
|
$
175,000
|
-
|
-
|
-
|
$
15,136
|
$
190,136
|
__________________
(1)
Mr.
Cullimore’s service as Chief Executive Officer was terminated
in June 2018. Amounts in column (e) for fiscal year 2018 include
the value of restricted stock awards, the vesting of which was
accelerated upon termination of Mr. Cullimore’s employment
pursuant to the terms of his employment agreement. Amount in column
(i) for fiscal year 2018 includes amounts paid or accrued for
payment as severance to Mr. Cullimore pursuant to the terms of his
employment agreement, including (i) $0 as salary continuation,
(ii)
$0 in the form of
continued medical benefits, (iii) $700,000 as future severance
payments in cash following termination, (iv) $31,512 as the fair
market value of a vehicle transferred to Mr. Cullimore, and (v)
$87,283 fair market value of shares withheld to reimburse us for
payment of the withholding tax in connection with the restricted
shares delivered as reported in column (e). Amounts in column (i)
also include amounts paid for Mr. Cullimore’s medical
benefits.
(2)
Dr. von Jako became
Chief Executive Officer in June 2018.
(3)
Mr. Gephart’s
employment was terminated in April of 2018. Amount in column (i)
for fiscal year 2018 includes $41,250 paid as
severance.
22
Outstanding Equity Awards at June 30, 2018
The
following table presents, for each of the Named Executive Officers,
information regarding outstanding equity awards held as of June 30,
2018.
|
|
Option
awards
|
Stock
awards
|
||||
|
Name
|
Number
of securities underlying unexercised options (#)
exercisable
|
Number
of securities underlying unexercised options (#)
unexercis-able
|
Option
exercise price ($)
|
Option
expiration date
|
Number
of shares or units of stock that have not vested
(#)
|
Market
value of shares of units of stock that have not vested
($)
|
|
(a)
|
(b)
|
(c)
|
(e)
|
(f)
|
(g)
|
(h)
|
|
Kelvyn H.
Cullimore.
|
20,000
|
20,000
|
$
3.34
|
11/20/2023
|
-
|
$
-
|
|
Christopher von
Jako
|
-
|
50,000
|
$
2.95
|
6/26/2024
|
50,000
|
$
142,500
|
|
Jeff
Gephart
|
7,500
|
7,500
|
$
2.87
|
3/1/2024
|
-
|
$
-
|
|
David
Wirthlin
|
6,000
|
18,000
|
$
2.65
|
10/31/2024
|
-
|
$
-
|
Employment Agreements
We
entered into an employment agreement with our Chief Executive
Officer, Dr. von Jako on May 24, 2018, which became effective upon
its approval by the Board on June 26, 2018. The employment
agreement provides for the following: (1) an annual base salary of
$275,000; (2) a target annual cash bonus up to a maximum of 30% of
base salary (provided that quantitative and qualitative objectives
established by the Compensation Committee of the Board have been
met); (3) a grant of a stock option for the purchase of 50,000
shares of common stock at a purchase price of $2.95 per share,
which was the market price of the common stock on the date of
grant; (4) a grant of 50,000 shares of restricted stock, with the
stock option and the restricted stock each vesting in four annual
installments at a rate of 25% per annum, commencing on the first
anniversary date of the date of grant; and (5) annual grants of
stock options and restricted stock awards having an aggregate fair
market value on date of grant of between $150,000 and $200,000 at
the discretion of the Compensation Committee, with such fair market
values determined with reference to a Black-Scholes model as to the
options and the trading prices of our common stock as of the grant
date as to the restricted stock awards. Fifty percent of the new
hire stock option grant and restricted stock award will vest in the
event we terminate Dr. von Jako’s employment without cause
during the first twelve months of his employment. In the event of a
termination of his employment upon a change of control, 100% of
previously issued equity grants held by Dr. von Jako at the time of
termination will vest in full, notwithstanding the terms of any
equity incentive plan or applicable award agreements. Acceleration
of vesting in any event will be subject to the execution of a
general release of known and unknown claims in a form satisfactory
to us.
Dr. von
Jako also executed our standard form of indemnification agreement
for executives and directors and an agreement titled
“Agreement Regarding Confidential Information, Ownership of
Inventions, Non-Competition, Customer Non-Solicitation and Employee
Non-Solicitation Covenants, and Acknowledgment of At-Will
Employment,” which are part of his employment agreement.
Among other things, these agreements impose certain restrictions on
Dr. von Jako, including compliance with post-employment covenants
to (i) protect our confidential information; (ii) not accept
employment with or provide services to a competitor for one year
after termination; (iii) not solicit our employees or customers for
two years after termination; and (iv) not disparage or otherwise
impair our reputation or goodwill.
23
Payments upon Termination
Under
his employment agreement dated May 1, 2015, Kelvyn H. Cullimore,
Jr., who was employed as our Chief Executive Officer, Mr. Cullimore
was entitled to severance payments in the event of termination of
his employment under certain circumstances. In June 2018, we
terminated Mr. Cullimore’s service as Chief Executive Officer
to facilitate a change in management, triggering his rights to the
severance payments under his employment agreement. Mr. Cullimore
executed a Separation and Release Agreement, or Separation
Agreement, that includes a customary release of claims against us
in consideration for which we paid Mr. Cullimore the following: (1)
a severance payment equal to $200,000, which represents 12 months
of base salary in effect as of the Separation Date, paid 50% on the
30th day following the Separation Date and 50% in equal
installments over the following six months; (2) additional
severance consideration in the total amount of $500,000, to be paid
in quarterly installments over a two-year period following the
Separation Date, (iii) full acceleration of vesting of previously
granted and unvested restricted stock awards totaling 72,000
shares, (iv) earned but unpaid bonuses, if any, with respect to
fiscal year 2018, (v) the transfer of a vehicle, and (vi) accrued
and unpaid salary through the last day of employment. (See the
“Summary Compensation Table” above.)
Retirement Benefits
We do
not provide pension arrangements or post-retirement health coverage
for executive officers or employees. Our executive officers and
other eligible employees may participate in one of our 401(k)
defined contribution plans. In fiscal year 2018, we maintained
three separate 401(k) plans for our employees: (1) the Dynatronics
Corporation Plan (the “Dynatronics Plan”); (2) the
Hausmann Enterprises, LLC Plan (the “Hausmann Plan”);
and (3) the Bird & Cronin, LLC Plan (the “Bird &
Cronin Plan”). Additional information on these three plans is
provided in this part of the Proxy Statement, below.
Dynatronics Plan
. Under the Dynatronics
Plan, employees who are 20 years of age or older and have completed
at least one month of service with Dynatronics Corporation are
eligible to participate. Eligible employees may contribute to the
Dynatronics Plan in the form of salary deferrals of up to $18,500,
the maximum allowable for calendar year 2018. Eligible employees
who are over 50 years old may contribute an additional $6,000 in
catchup contributions during calendar year 2018. We match annual
employee contributions at 25% of employee contributions, up to a
maximum of $500 per employee per year. Participants in the
Dynatronics Plan are fully vested in their salary deferral
contributions, and employer matching contributions vest at 20% per
year after two years of service (100% vested after six
years).
Hausmann Plan
. We acquired the Hausmann
Plan as part of our acquisition of HII. Under the Hausmann Plan,
employees who are 21 years of age or older and have completed a
year of service with 1,000 hours worked with Hausmann are eligible
to participate. Eligible employees may contribute to the Hausmann
Plan in the form of salary deferrals of up to 60% of their salary
or $18,500 (whichever is less) if under 50 years of age, the
maximum allowable for calendar year 2018. Eligible employees who
are over 50 years old may contribute up to 100% of their salary or
$24,500 which includes $6,000 in catchup contributions during
calendar year 2018. We match employee contributions at 50%, up to
the first 6% of employee compensation. Participants in the Hausmann
Plan are fully vested in their salary deferral contributions, and
employer matching contributions vest 10% after year one, 10% after
year two, and 20% each year thereafter (100% vested after six
years).
Bird & Cronin Plan
. We acquired
this plan with the acquisition of B&C. Under the Bird &
Cronin Plan, employees who are 21 years of age or older and have
completed six months of service with more than 500 hours of service
with Bird & Cronin are eligible to participate. Eligible
employees may contribute to the Bird & Cronin Plan in the form
of salary deferrals of up to $18,500, the maximum allowable for
calendar year 2018. Eligible employees who are over 50 years old
may contribute an additional $6,000 in catchup contributions during
calendar year 2018. We match employee contributions at 100% of up
to the first 5% of employee compensation. Participants in the Bird
& Cronin Plan are fully vested in their salary deferral
contributions, and employer matching contributions vest 20% per
year after two years of service with more than 1,000 hours of
service (100% vested after six years with more than 1,000 hours of
service).
24
DIRECTOR COMPENSATION
In
fiscal year 2018, we paid our non-employee directors an annual cash
retainer of $15,000 and an equity retainer of 10,000 shares of
restricted stock. Committee chairs received an additional retainer
of $10,000 for the year. Retainers were pro-rated for the portion
of the year served if service began after the start of the fiscal
year. Directors who are also employees are not paid additional
compensation for their service as members of the Board of
Directors.
The
following table summarizes the total compensation paid to the
non-employee directors during the fiscal year ended June 30,
2018.
Director Compensation Table
(1)
|
Name
(a)
|
Fees earned or paid in cash
($)
(b)
|
Stock awards
($)
(c)
|
Total
($)
(h)
|
|
Kelvyn H. Cullimore, Jr.
(2)
|
-
|
-
|
-
|
|
Erin
S. Enright
|
25,000
|
26,500
|
51,500
|
|
David
B. Holtz
|
25,000
|
26,500
|
51,500
|
|
Scott
A. Klosterman
|
25,000
|
26,500
|
51,500
|
|
Brian
M. Larkin
|
15,000
|
26,500
|
41,500
|
|
R.
Scott Ward, Ph.D.
|
15,000
|
26,500
|
41,500
|
_________________
(1)
Columns (d) through
(g) are omitted from this table as no items of compensation
referenced in those columns were paid to the directors during the
period covered by the table. Total compensation paid to Dr. von
Jako, our Chief Executive Officer, who also became a director on
June 26, 2018, is detailed in the Summary Compensation Table under
"Executive Compensation" on page 22 of this Proxy Statement.
Executive officers serving as directors received no additional
compensation for service as directors during fiscal year
2018.
(2)
Mr. Cullimore was
also Chief Executive Officer until June 26, 2018. After that date
and to the present, he has been serving as a non-employee
director.
PROPOSAL NO. 3
APPROVAL OF THE DYNATRONICS CORPORATION 2018 EQUITY INCENTIVE
PLAN
On
September 10, 2018, the Board adopted, subject to approval of our
shareholders, the Dynatronics Corporation 2018 Equity Incentive
Plan, or the 2018 Plan, which would allow us to grant awards for
the issuance of up to 600,000 shares of our common stock. The Board
believes that adopting a new plan, rather than amending our plan
adopted by the Board and approved by our shareholders in June 2015
(the “2015 Plan”) will provide for a new framework that
is aligned with the current tax law and current status and outlook
of our management and Board. Although we are adopting the new 2018
Plan, the Board has also determined to keep our 2015 Plan in
operation and to grant awards under that plan as prescribed by its
terms until the remaining shares allocated under the 2015 Plan have
been used. Under the 2015 Plan we were authorized to grant
awards in the form of options, restricted stock, restricted stock
units and other stock-based awards for the issuance of up to
500,000 shares of common stock. The 2015 Plan has approximately
220,000 shares of common stock available for issuance.
Under
our current forecasts, based on current stock prices and the number
of shares available for grant under the 2015 Plan, in order to
provide for sufficient equity components for executive and director
compensation over the next three or more years, and to provide
equity compensation flexibility for employees and consultants, the
Board of Directors determined it was advisable to adopt the 2018
Plan. This assumes that we continue to grant awards consistent with
current practices, as reflected in our burn rate discussed below,
and noting that future circumstances may require us to change our
current equity grant practices.
25
In an
effort to attract, retain and motivate individuals who make
important contributions to our business, we desire to have the
ability to issue securities to our officers, directors, employees
and consultants, as well as officers of our subsidiaries under the
new 2018 Plan. The principal reason for the 2018 Plan is to
increase the number of shares of common stock approved for issuance
to provide our Board of Directors, the Compensation Committee, and
our management with greater flexibility to provide grants of
stock-based awards. If the 2018 Plan is not approved by the
shareholders, we could continue to grant awards under the 2015 Plan
until the allocated shares are exhausted, which we estimate would
at current rates take approximately one year. Furthermore, if the
2018 Plan is not approved, we would have fewer shares to use for
awards to employees and directors. Accordingly, the Board
recommends that the shareholders approve the 2018
Plan.
Purpose
The
Board of Directors believes that the 2018 Plan is necessary for us
to attract, retain, reward and motivate our employees, directors,
and consultants through the grant of stock options, stock
appreciation rights, restricted stock and restricted stock units.
We believe the 2018 Plan is best designed to provide the proper
incentives for our employees, directors and consultants, ensures
our ability to make performance-based awards, and meets the
requirements of applicable law.
The
Board of Directors believes that approval of the 2018 Plan will
enable us to continue to grant equity-based awards in a manner that
is consistent with market practices, which is important to allow us
to competitively attract, retain, reward and motivate our
employees, directors and consultants, who are critical to achieving
our business goals.
The
2018 Plan will be effective upon shareholder approval and after
that date will apply to all awards made under the 2018 Plan on or
after that date. No awards have been made under the 2018 Plan prior
to the date of this Proxy Statement and no awards are contemplated
to be made at this time prior to approval by the shareholders. We
intend to register the shares authorized under the 2018 Plan under
the Securities Act following approval by the shareholders. If our
shareholders do not approve the 2018 Plan, we will not issue awards
under the 2018 Plan. It is our intention to use the shares
authorized under the 2015 Plan before making awards under the 2018
Plan, to the extent that is feasible or advisable, although that is
not necessary.
Significant Historical Award Information
Common
measures of a stock plan’s cost include
“dilution” and “overhang.” Dilution
measures the degree to which the shareholders’ ownership has
been diluted by stock-based compensation awarded under equity
plans; dilution that includes shares that may be awarded under
equity plans in the future is commonly referred to as overhang.
These metrics as applied to our plans can be measured approximately
as indicated in the table below for each of the past three fiscal
years:
|
Key Equity
Metrics
|
2018
|
2017
|
2016
|
|
Overhang
(1)
|
5.0
%
|
11.7
%
|
21.6
%
|
|
Dilution
(2)
|
3.0
%
|
5.3
%
|
7.2
%
|
———————
(1)
Overhang is
calculated by dividing (a) the sum of (x) the number of shares
subject to equity awards outstanding at the end of the year and (y)
the number of shares available for future grants, by (b) the number
of shares outstanding at the end of the year.
(2)
Dilution is
calculated by dividing (a) the number of shares subject to equity
awards outstanding at the end of the fiscal year by (b) the number
of shares outstanding at the end of the fiscal year.
Recommendation of the Board
The
Board of Directors recommends a vote
FOR
approval of the 2018
Plan.
26
Summary of the 2018 Plan
The
following summary is subject to the specific provisions contained
in the full text of the 2018 Plan, which is attached as
Appendix A
to this
Proxy Statement.
Administration
The
Compensation Committee has full power to select, from among the
individuals eligible for awards, the individuals to whom awards
will be granted, to make any combination of awards to participants,
and to determine the specific terms and conditions of each award,
subject to the provisions of the 2018 Plan. The Compensation
Committee may delegate to our Chief Executive Officer or any other
executive officers the authority to grant awards at fair market
value to employees who are not subject to the reporting and other
provisions of Section 16 of the Exchange Act.
Limitation on Awards and Shares Available
The
maximum number of shares of stock reserved and available for
issuance under the 2018 Plan is 600,000 shares, plus the number of
shares of stock reserved and available for issuance under the 2015
Plan as of the date of shareholder approval of the 2018 Plan. For
purposes of this limitation, the shares of stock underlying any
awards that are forfeited, are canceled, expire or are terminated
(other than by exercise) under (i) the 2018 Plan or (ii) from and
after shareholder approval of the 2018 Plan, the 2015 Plan shall be
added to the shares of stock available for issuance under the 2018
Plan. Shares tendered or held back upon exercise of an option or
settlement of an award to cover the exercise price or tax
withholding shall not be available for future issuance under the
2018 Plan.
Eligibility
Persons
eligible to participate in the 2018 Plan will be those full or
part-time officers, employees, non-employee directors, and other
key persons (including consultants and prospective employees) of
the Company and its subsidiaries as selected from time to time by
the Compensation Committee. As of October 4, 2018, approximately
335 individuals were eligible to participate in the 2018 Plan,
including seven directors, and five executive
officers.
Awards
The
2018 Plan provides for the grant of various types of awards,
including, for example: (i) incentive stock options; (ii)
nonqualified stock options; (iii) stock appreciation rights; (iv)
restricted stock awards; (v) deferred stock awards; and (vi) other
stock-based and cash-based awards to eligible individuals. The
terms of the awards will be set forth in an award agreement,
consistent with the terms of the 2018 Plan.
Stock Options
. The 2018 Plan permits
the granting of (1) options to purchase common stock intended to
qualify as incentive stock options under Section 422 of the Code
and (2) options that do not so qualify. Options granted under the
2018 Plan will be non-qualified options if they fail to qualify as
incentive options or exceed the annual limit on incentive stock
options. Non-qualified options may be granted to any persons
eligible to receive incentive options and to non-employee directors
and key persons. The option exercise price of each option will be
determined by the Compensation Committee but may not be less than
100% of the fair market value of the common stock on the date of
grant. The 2018 Plan provides for 600,000 shares that can be
granted in the form of incentive stock options. No dividends or
dividend equivalents shall be paid on stock options.
The
term of each option will be fixed by the Compensation Committee and
may not exceed 10 years (or for 10% or greater shareholders
receiving an incentive stock option, five years) from the date of
grant. The Compensation Committee will determine at what time or
times each option may be exercised. Options may be made exercisable
in installments and the exercisability of options may be
accelerated by the Compensation Committee. Options may be exercised
in whole or in part with written notice to us.
27
Upon
exercise of options, the option exercise price must be paid in full
(1) in cash, by certified or bank check, or other instrument
acceptable to the Compensation Committee, (2) by delivery (or
attestation to the ownership) of shares of common stock that are
beneficially owned by the optionee, (3) subject to applicable law,
by a broker pursuant to irrevocable instructions to the broker from
the optionee, or (4) by net exercise.
To
qualify as incentive options, options must meet additional federal
tax requirements, including a $100,000 limit on the value of shares
subject to incentive options that first become exercisable by a
participant in any one calendar year.
Stock Appreciation Rights
. The
Compensation Committee may award a stock appreciation right either
as a freestanding award or in tandem with a stock option. The
Compensation Committee may award stock appreciation rights subject
to such conditions and restrictions as the Compensation Committee
may determine, provided that (1) upon exercise of a stock
appreciation right granted in tandem with an option, the applicable
portion of any related option shall be surrendered, and (2) stock
appreciation rights granted in tandem with options are exercisable
at such time or times and to the extent that the related stock
options are exercisable. The grant price of a stock appreciation
right will be determined by the Compensation Committee and
specified in the award agreement; however, the grant price must be
at least equal to 100% of the fair market value of a share on the
date of grant. Stock appreciation rights may be exercised upon such
terms and conditions as are imposed by the Compensation Committee
and as set forth in the stock appreciation right award
agreement.
Restricted Stock
Awards
. The Compensation Committee may
award shares of common stock to participants subject to such
conditions and restrictions as the Compensation Committee may
determine. These conditions and restrictions may include the
achievement of certain performance goals and/or continued
employment with the Company through a specified restricted period.
Cash dividends and stock dividends, if any, with respect to
restricted stock may be withheld by the Company for the
grantee’s account, and be subject to forfeiture to the same
degree as the shares of restricted stock to which such dividends
relate. Except as otherwise determined by the Committee, no
interest will accrue or be paid on the amount of any cash dividends
withheld.
Deferred Stock Awards
. The Compensation
Committee may award phantom stock units as deferred stock awards to
participants. Deferred stock awards are ultimately payable in the
form of shares of common stock and may be subject to such
conditions and restrictions as the Compensation Committee may
determine. These conditions and restrictions may include the
achievement of certain performance goals and/or continued
employment with the Company through a specified vesting period. In
the Compensation Committee’s sole discretion and subject to
the participant’s compliance with the procedures established
by the Compensation Committee and requirements of Section 409A of
the Code, it may permit a participant to make an advance election
to receive a portion of his or her future cash compensation
otherwise due in the form of a deferred stock award. During the
deferral period, a grantee shall have no rights as a shareholder;
provided, however, that the grantee may be credited with dividend
equivalent rights with respect to the phantom stock units
underlying his deferred stock award, subject to such terms and
conditions as the Committee may determine, but shall not be
entitled to dividends, if any, or dividend equivalents prior to
settlement.
Other Awards
. The Compensation
Committee may recommend grants of other types of equity-based or
equity-related awards not otherwise described by the terms of the
2018 Plan, in such amounts and subject to such terms and
conditions, as the Compensation Committee shall recommend. Such
awards may be based upon attainment of performance goals
established by the Compensation Committee and may involve the
transfer of actual shares to participants, or payment in cash or
otherwise of amounts based on the value of shares.
Detrimental Activity
The
Compensation Committee may cancel, rescind, suspend, or otherwise
limit any award to a participant if the participant engages in
detrimental activities, including rendering services to a
competitor, disclosing confidential information without permission,
refusing to assign inventions to us, soliciting our employees or
customers, engaging in an activity that results in a termination
for cause, materially violating any of our internal policies, or
being convicted of, or pleading guilty to, a crime.
28
Amendment and Termination
The
Board of Directors may amend the 2018 Plan at any time, subject to
shareholder approval to the extent required by applicable law or
regulation or the listing standards of NASDAQ or any other market
or stock exchange on which the common stock is at the time
primarily traded. Additionally, shareholder approval will be
specifically required to (i) increase the number of shares
available for issuance under the 2018 Plan, or (ii) decrease the
exercise price of any outstanding option or stock appreciation
right granted under the 2018 Plan.
Our
Board of Directors may terminate the 2018 Plan at any time. Unless
sooner terminated by the Board, the Plan will terminate on the
close of business on September 10, 2028.
Adjustment for Change in Capitalization
In the
event that the Compensation Committee shall determine that any
dividend or other distribution (whether in the form of cash, common
stock, or other property), recapitalization, common stock split,
reverse common stock split, reorganization, merger, consolidation,
spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event has occurred, then the
Compensation Committee shall make such equitable changes or
adjustments as it deems necessary or appropriate to any or all of
(1) the number and kind of shares of common stock that may
thereafter be issued in connection with awards, (2) the number and
kind of shares of common stock, securities or other property
(including cash) issued or issuable in respect of outstanding
awards, (3) the exercise price, grant price or purchase price
relating to any award, and (4) the maximum number of shares subject
to awards which may be awarded to any employee during any tax year;
provided that, with respect to incentive stock options, any such
adjustment shall be made in accordance with Section 424 of the
Code; and provided further that, no such adjustment shall cause any
award hereunder that is or could be subject to Section 409A of the
Code to fail to comply with the requirements of such
section.
Tax Withholding
Participants in the
2018 Plan are responsible for the payment of any federal, state, or
local taxes that we are required by law to withhold upon any option
exercise or vesting of other awards. Subject to approval by the
Compensation Committee, depending on the withholding method, a
grantee may elect to have such grantee’s tax withholding
obligation satisfied at the minimum or other applicable withholding
rate in the grantee’s applicable jurisdiction, including
maximum applicable rates that may be utilized without creating
adverse accounting treatment under Financial Accounting Standards
Board Accounting Standards Codification Topic 718 (or any successor
pronouncement thereto) and permitted under applicable withholding
rules promulgated by the Internal Revenue Service or another
applicable governmental entity, in whole or in part, by (i)
authorizing the Company to withhold from shares of stock to be
issued pursuant to any award a number of shares with an aggregate
fair market value (as of the date the withholding is effected) that
would satisfy such withholding amount, or (ii) transferring to the
Company shares of stock owned by the grantee with an aggregate fair
market value (as of the date the withholding is effected) that
would satisfy such withholding amount.
Effect of Change in Control
Unless
otherwise provided in an award agreement, notwithstanding any
provision of the 2018 Plan to the contrary:
(a) In
the event of a participant’s termination of without cause or
for good reason (as defined in the 2018 Plan) during the 12-month
period following a change in control, notwithstanding any provision
of the 2018 Plan or any applicable award agreement to the contrary,
the award shall become immediately exercisable with respect to 100%
of the shares subject to such award, and/or the applicable
restricted period shall expire immediately with respect to 100% of
the outstanding shares of restricted stock or restricted stock
units as of the date of the termination.
29
(b) With
respect to performance-based awards, in the event of a change in
control, all incomplete performance periods in respect of such
awards in effect on the date the change in control occurs shall end
on the date of such change and the Committee shall (i) determine
the extent to which performance goals with respect to each such
performance period have been met based upon such audited or
unaudited financial information then available as it deems relevant
and (ii) cause to be paid to the applicable participant partial or
full awards with respect to performance goals for each such
performance period based upon the Committee’s determination
of the degree of attainment of performance goals or, if not
determinable, assuming that the applicable “target”
levels of performance have been attained, or on such other basis
determined by the Committee.
Under
the Plan, “Change in Control” is deemed to have
occurred if the event set forth in any one of the following
paragraphs shall have occurred:
(a) One
person (or more than one person acting as a group) acquires
ownership of stock of the Company that, together with the stock
held by such person or group, constitutes more than 50% of the
total fair market value or total voting power of the stock of the
Company;
provided,
that
, a Change in Control shall not occur if any person (or
more than one person acting as a group) owns more than 50% of the
total fair market value or total voting power of the
Company’s stock and acquires additional stock;
(b) One
person (or more than one person acting as a group) acquires (or has
acquired during the twelve-month period ending on the date of the
most recent acquisition) ownership of the Company’s stock
possessing 30% or more of the total voting power of the stock of
such corporation;
(c) A
majority of the members of the Board are replaced during any
twelve-month period by directors whose appointment or election is
not endorsed by a majority of the Board before the date of
appointment or election; or
(d) One
person (or more than one person acting as a group), acquires (or
has acquired during the twelve-month period ending on the date of
the most recent acquisition) assets from the Company that have a
total gross fair market value equal to or more than 40% of the
total gross fair market value of all of the assets of the Company
immediately before such acquisition.
Miscellaneous
The
2018 Plan also contains provisions with respect to payment of
exercise prices, vesting and expiration of awards, treatment of
awards upon the sale of Dynatronics Corporation, transferability of
awards, and tax withholding requirements. Various other terms,
conditions, and limitations apply, as further described in the 2018
Plan.
New Plan Benefits
It is
not possible to state the persons who will receive options or
awards under the 2018 Plan in the future or the amount of options
or awards that will be granted under the 2018
Plan.
EQUITY COMPENSATION PLANS AT JUNE 30, 2018
Equity Compensation Plans
As
of June 30, 2018, we had equity awards outstanding under two plans:
the 2005 Dynatronics Equity Incentive Award Plan (the “2005
Plan”) and the 2015 Plan. Outstanding awards under these
plans expire (if not exercised) on the expiration date indicated in
the respective awards, or, if no expiration date is indicated in
such award, on the tenth anniversary of the grant date of the
award. Nonqualified and incentive stock options and other awards
have been granted under these two plans to our employees, officers,
directors and consultants. The Compensation Committee administers
these plans.
The
following table sets forth information as of June 30, 2018, about
these plans and any equity compensation plans that have not been
approved by our shareholders under which our equity securities may
be issued.
30
Equity Compensation Plan Information
|
Plan Category
|
Number of
securities to
be issued upon exercise of outstanding
options,
warrants and
rights
(a)
|
Weighted-
average
exercise
price
of outstanding
options,
warrants
and rights
(b)
|
Number of
securities
remaining
available for
future
issuance under
equity
compensation
plans (excluding securities
reflected in
column
(a))
(c)
|
|
Equity compensation plans approved by security holders
|
|
|
|
|
2005 Equity
Incentive Plan (1)
|
17,296
|
$
3.81
|
-
|
|
2015 Equity
Incentive Plan (2)
|
174,500
|
$
2.97
|
162,361
|
|
Equity compensation plans not approved by security
holders
|
-
|
-
|
600,000
|
|
Total
|
191,796
|
|
762,361
|
(1)
No further awards
will be granted under the 2005 Plan.
(2)
Upon the adoption
of the 2018 Plan, shares remaining available under the 2015 Plan
will become eligible for use under the 2018 Plan or may be used for
additional awards under the 2015 Plan prior to the granting of
awards under the 2018 Plan, at the discretion of the Compensation
Committee.
RELATED-PARTY TRANSACTIONS POLICY AND PROCEDURES
We have
adopted a policy that any transactions with directors, executive
officers or entities of which they are also officers or directors
or in which they have a financial interest, will only be on terms
consistent with industry standards and approved by a majority of
the disinterested members of our Board of Directors. In addition,
interested directors may be counted in determining the presence of
a quorum at a meeting of our Board of Directors or a committee
thereof that approves such transactions. If there are no
disinterested directors, we shall obtain a majority vote of the
shareholders approving the transaction.
SHAREHOLDER PROPOSALS FOR 2019 ANNUAL MEETING OF
SHAREHOLDERS
Shareholders
may submit proposals on matters appropriate for shareholder action
at meetings of our shareholders in accordance with Rule 14a-8
promulgated under the Exchange Act. For such proposals to be
included in our proxy materials relating to our 2019 Annual Meeting
of Shareholders, all applicable requirements of Rule 14a-8 must be
satisfied and such proposals must be received by us no later than
June 2, 2019. Such proposals should be delivered to Dynatronics
Corporation, 7030 Park Centre Drive, Cottonwood Heights, Utah
84121, Attention: Jim Ogilvie, Vice President of Corporate
Development, telephone (801) 727-1755.
31
Our
bylaws provide that, except in the case of proposals made in
accordance with Rule 14a-8, for shareholder nominations to the
Board of Directors or other proposals to be considered at an annual
meeting of shareholders, the shareholder must have given timely
notice thereof in writing to our Corporate Secretary not less than
60 nor more than 90 calendar days prior to the anniversary of the
date on which we first mailed our proxy materials for our
immediately preceding annual meeting of shareholders (as specified
in the proxy materials for the immediately preceding annual meeting
of shareholders). To be timely for the 2019 Annual Meeting of
Shareholders, a shareholder’s notice must be delivered or
mailed to and received by our Corporate Secretary at our principal
executive offices between July 2, 2019 and August 1, 2019. However,
in the event that the 2019 Annual Meeting is called for a date that
is not within 30 calendar days of the anniversary of date that the
2018 Annual Meeting was called, to be timely, notice by the
shareholder must be received by us not later than the close of
business on the tenth calendar day following the date on which
public announcement of the date of the 2019 Annual Meeting is first
made. In no event will the public announcement of an adjournment of
an annual meeting of shareholders commence a new time period for
the giving of a shareholder’s notice as provided above. A
shareholder’s notice to our Corporate Secretary must set
forth the information required by the bylaws with respect to each
matter the shareholder proposes to bring before the annual
meeting.
In
addition, the proxy solicited by the Board of Directors for the
2019 Annual Meeting of Shareholders will confer discretionary
authority to vote on (i) any proposal presented by a shareholder at
that meeting for which we have not been provided with notice on or
prior to August 1, 2019, and (ii) any proposal made in accordance
with the bylaw provisions, if the 2019 proxy statement briefly
describes the matter and how management’s proxy holders
intend to vote on it, if the shareholder does not comply with the
requirements of Rule 14a-4(c)(2) under the Exchange
Act.
HOUSEHOLDING OF PROXY MATERIALS
The SEC
has adopted rules that permit companies and intermediaries (e.g.,
brokers) to satisfy the delivery requirements for Notices of
Internet Availability of Proxy Materials or other Annual Meeting
materials with respect to two or more shareholders sharing the same
address by delivering a single Notice of Internet Availability of
Proxy Materials or other Annual Meeting materials addressed to
those shareholders. This process, which is commonly referred to as
“householding,” potentially means extra convenience for
shareholders and cost savings for companies.
This
year, a number of brokers with account holders who are Dynatronics
shareholders will be “householding” our proxy
materials. A single Notice of Internet Availability of Proxy
Materials will be delivered to multiple shareholders sharing an
address unless contrary instructions have been received from the
affected shareholders. Once you have received notice from your
broker that they will be “householding” communications
to your address, “householding” will continue until you
are notified otherwise or until you revoke your consent. If, at any
time, you no longer wish to participate in
“householding” and would prefer to receive a separate
Notice of Internet Availability of Proxy Materials, please notify
your broker. Shareholders who currently receive multiple copies of
the Notices of Internet Availability of Proxy Materials at their
addresses and would like to request “householding” of
their communications should contact their brokers.
OTHER MATTERS
The
Board of Directors knows of no other matters that will be presented
for consideration at the Annual Meeting. If any other matters are
properly brought before the meeting, it is the intention of the
persons named in the accompanying proxy to vote on such matters in
accordance with their best judgment.
By
Order of the Board of Directors
/s/
David Wirthlin
David
Wirthlin
Chief
Financial Officer and Corporate Secretary
October
10, 2018
A copy of Dynatronics Corporation’s Annual Report on Form
10-K for the fiscal year ended June 30, 2018, is available without
charge upon written request to: Secretary, Dynatronics Corporation,
7030 Park Centre Dr., Cottonwood Heights, Utah 84121.
32
|
APPENDIX
A
|
______________________________________________________________________________
_____________________________________________________________
DYNATRONICS CORPORATION
2018 EQUITY INCENTIVE PLAN
_____________________________________________________________
______________________________________________________________________________
DYNATRONICS CORPORATION
2018 EQUITY INCENTIVE PLAN
1
Purpose;
Eligibility
.
1.1
General
Purpose
. The name of this plan
is the Dynatronics Corporation 2018 Equity Incentive Plan (the
“
Plan
”).
The purposes of the Plan are to (a) enable Dynatronics Corporation,
a Utah corporation (the “Company”), and any Affiliate
to attract and retain the types of Employees, Consultants and
Directors who will contribute to the Company’s long range
success; (b) provide incentives that align the interests of
Employees, Consultants and Directors with those of the shareholders
of the Company; and (c) promote the success of the Company’s
business.
1.2
Eligible
Award Recipients
. The persons
eligible to receive Awards are the Employees, Consultants and
Directors of the Company and its Affiliates and such other
individuals designated by the Committee who are reasonably expected
to become Employees, Consultants and Directors after the receipt of
Awards.
1.3
Available
Awards
. Awards that may be
granted under the Plan include: (a) Incentive Stock Options, (b)
Non-qualified Stock Options, (c) Stock Appreciation Rights, (d)
Restricted Awards, (e) Performance Share Awards, (f) Cash Awards,
and (g) Other Equity-Based Awards.
2
Definitions
.
“
Affiliate
”
means a corporation or other entity that, directly or through one
or more intermediaries, controls, is controlled by or is under
common control with, the Company.
“
Applicable
Laws
” means the
requirements related to or implicated by the administration of the
Plan under applicable state corporate law, United States federal
and state securities laws, the Code, any stock exchange or
quotation system on which the shares of Common Stock are listed or
quoted, and the applicable laws of any foreign country or
jurisdiction where Awards are granted under the
Plan.
“
Award
”
means any right granted under the Plan, including an Incentive
Stock Option, a Non-qualified Stock Option, a Stock Appreciation
Right, a Restricted Award, a Performance Share Award, a Cash Award,
or an Other Equity-Based Award.
“
Award
Agreement
” means a
written agreement, contract, certificate or other instrument or
document evidencing the terms and conditions of an individual Award
granted under the Plan which may, in the discretion of the Company,
be transmitted electronically to any Participant. Each Award
Agreement shall be subject to the terms and conditions of the
Plan.
“
Board
”
means the Board of Directors of the Company, as constituted at any
time.
“
Cash
Award
” means an Award
denominated in cash that is granted under
Section 7.4
of the Plan.
“
Cause
”
means
(a)
With
respect to any Employee or Consultant, unless the applicable Award
Agreement states otherwise:
(i)
If
the Employee or Consultant is a party to an employment or service
agreement with the Company or its Affiliates and such agreement
provides for a definition of Cause, the definition contained
therein; or
(ii)
If
no such agreement exists, or if such agreement does not define
Cause: (1) the commission of, or plea of guilty or no contest to, a
felony or a crime involving moral turpitude or the commission of
any other act involving willful malfeasance or material fiduciary
breach with respect to the Company or an Affiliate; (2) conduct
that results in or is reasonably likely to result in harm to the
reputation or business of the Company or any of its Affiliates; (3)
gross negligence or willful misconduct with respect to the Company
or an Affiliate; or (4) material violation of state or federal
securities laws.
(b)
With
respect to any Director, unless the applicable Award Agreement
states otherwise, a determination by a majority of the
disinterested Board members that the Director has engaged in any of
the following:
A-1
(i)
malfeasance
in office;
(ii)
gross
misconduct or neglect;
(iii)
false
or fraudulent misrepresentation inducing the director’s
appointment;
(iv)
willful
conversion of corporate funds; or
(v)
repeated
failure to participate in Board meetings on a regular basis despite
having received proper notice of the meetings in
advance.
The Committee, in its absolute discretion, shall determine the
effect of all matters and questions relating to whether a
Participant has been discharged for Cause.
“
Change in
Control
”
(a)
One
Person (or more than one Person acting as a group) acquires
ownership of stock of the Company that, together with the stock
held by such person or group, constitutes more than 50% of the
total fair market value or total voting power of the stock of the
Company;
provided,
that
, a Change in Control shall
not occur if any Person (or more than one Person acting as a group)
owns more than 50% of the total fair market value or total voting
power of the Company’s stock and acquires additional
stock;
(b)
One
Person (or more than one Person acting as a group) acquires (or has
acquired during the twelve-month period ending on the date of the
most recent acquisition) ownership of the Company’s stock
possessing 30% or more of the total voting power of the stock of
such corporation;
(c)
A
majority of the members of the Board are replaced during any
twelve-month period by directors whose appointment or election is
not endorsed by a majority of the Board before the date of
appointment or election; or
(d)
One
Person (or more than one Person acting as a group), acquires (or
has acquired during the twelve-month period ending on the date of
the most recent acquisition) assets from the Company that have a
total gross fair market value equal to or more than 40% of the
total gross fair market value of all of the assets of the Company
immediately before such acquisition.
“
Code
”
means the Internal Revenue Code of 1986, as it may be amended from
time to time. Any reference to a section of the Code shall be
deemed to include a reference to any regulations promulgated
thereunder.
“
Committee
”
means a committee of one or more members of the Board appointed by
the Board to administer the Plan in accordance with
Section
3.3
and
Section
3.4
.
“
Common
Stock
” means the common
stock, no par value per share, of the Company, or such other
securities of the Company as may be designated by the Committee
from time to time in substitution thereof.
“
Company
”
means Dynatronics Corporation a Utah corporation, and any successor
thereto.
“
Consultant
”
means any individual or entity which performs bona fide services to
the Company or an Affiliate, other than as an Employee or Director,
and who may be offered securities registerable pursuant to a
registration statement on Form S-8 under the Securities
Act.
“
Continuous
Service
” means that the
Participant’s service with the Company or an Affiliate,
whether as an Employee, Consultant or Director, is not interrupted
or terminated. The Participant’s Continuous Service shall not
be deemed to have terminated merely because of a change in the
capacity in which the Participant renders service to the Company or
an Affiliate as an Employee, Consultant or Director or a change in
the entity for which the Participant renders such service,
provided
that
there is no interruption
or termination of the Participant’s Continuous
Service;
provided further that
if any Award is subject to Section
409A of the Code, this sentence shall only be given effect to the
extent consistent with Section 409A of the Code. For example, a
change in status from an Employee of the Company to a Director of
an Affiliate will not constitute an interruption of Continuous
Service. The Committee or its delegate, in its sole discretion, may
determine whether Continuous Service shall be considered
interrupted in the case of any leave of absence approved by that
party, including sick leave, military leave or any other personal
or family leave of absence. The Committee or its delegate, in its
sole discretion, may determine whether a Company transaction, such
as a sale or spin-off of a division or subsidiary that employs a
Participant, shall be deemed to result in a termination of
Continuous Service for purposes of affected Awards, and such
decision shall be final, conclusive and
binding.
A-2
“
Deferred Stock
Units
(
DSUs
)”
has the meaning set forth in
Section 7.2
hereof.
“
Director
”
means a member of the Board.
“
Disability
”
means, unless the applicable Award Agreement says otherwise, that
the Participant is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment;
provided, however,
for purposes of determining the term
of an Incentive Stock Option pursuant to
Section 6.10
hereof, the term Disability shall have
the meaning ascribed to it under Section 22(e)(3) of the Code. The
determination of whether an individual has a Disability shall be
determined under procedures established by the Committee. Except in
situations where the Committee is determining Disability for
purposes of the term of an Incentive Stock Option pursuant
to
Section 6.10
hereof within the meaning of Section
22(e)(3) of the Code, the Committee may rely on any determination
that a Participant is disabled for purposes of benefits under any
long-term disability plan maintained by the Company or any
Affiliate in which a Participant participates.
“
Disqualifying
Disposition
” has the
meaning set forth in
Section
14.12
.
“
Effective
Date
” shall mean the date
that the Company’s shareholders approve this Plan if such
shareholder approval occurs before the first anniversary of the
date the Plan is adopted by the Board.
“
Employee
”
means any person, including an Officer or Director, employed by the
Company or an Affiliate;
provided, that,
for purposes of determining
eligibility to receive Incentive Stock Options, an Employee shall
mean an employee of the Company or a parent or subsidiary
corporation within the meaning of Section 424 of the Code. Mere
service as a Director or payment of a director’s fee by the
Company or an Affiliate shall not be sufficient to constitute
“employment” by the Company or an
Affiliate.
“
Exchange
Act
” means the Securities
Exchange Act of 1934, as amended.
“
Fair Market
Value
” means, as of any
date, the value of the Common Stock as determined below. If the
Common Stock is listed on any established stock exchange or a
national market system, including without limitation, the New York
Stock Exchange or the NASDAQ Stock Market, the Fair Market Value
shall be the closing price of a share of Common Stock (or if no
sales were reported the closing price on the date immediately
preceding such date) as quoted on such exchange or system on the
day of determination, as reported in the
Wall Street
Journal
. In the absence of an
established market for the Common Stock, the Fair Market Value
shall be determined in good faith by the Committee and such
determination shall be conclusive and binding on all
persons.
“
Fiscal
Year
” means the
Company’s fiscal year, ending June 30.
“
Free Standing
Rights
” has the meaning
set forth in
Section
7.1(a)
.
“
Good
Reason
” means, unless the
applicable Award Agreement states otherwise:
(a)
If
an Employee or Consultant is a party to an employment or service
agreement with the Company or its Affiliates and such agreement
provides for a definition of Good Reason, the definition contained
therein; or
(b)
If
no such agreement exists or if such agreement does not define Good
Reason, the occurrence of one or more of the following without the
Participant’s express written consent, which circumstances
are not remedied by the Company within thirty (30) days of its
receipt of a written notice from the Participant describing the
applicable circumstances (which notice must be provided by the
Participant within ninety (90) days of the Participant’s
knowledge of the applicable circumstances): (i) any material,
adverse change in the Participant’s duties, responsibilities,
authority, title, status or reporting structure; (ii) a material
reduction in the Participant’s base salary or bonus
opportunity; or (iii) a geographical relocation of the
Participant’s principal office location by more than fifty
(50) miles.
“
Grant
Date
” means the date on
which the Committee adopts a resolution, or takes other appropriate
action, expressly granting an Award to a Participant that specifies
the key terms and conditions of the Award or, if a later date is
set forth in such resolution, then such date as is set forth in
such resolution.
“
Incentive Stock
Option
” means an Option
that is designated by the Committee as an incentive stock option
within the meaning of Section 422 of the Code and that meets the
requirements set out in the Plan.
“
Non-Employee
Director
” means a
Director who is a “non-employee director” within the
meaning of Rule 16b-3.
A-3
“
Non-qualified Stock
Option
” means an Option
that by its terms does not qualify or is not intended to qualify as
an Incentive Stock Option.
“
Officer
”
means a person who is an officer of the Company within the meaning
of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
“
Option
”
means an Incentive Stock Option or a Non-qualified Stock Option
granted pursuant to the Plan.
“
Optionholder
”
means a person to whom an Option is granted pursuant to the Plan
or, if applicable, such other person who holds an outstanding
Option.
“
Option Exercise
Price
” means the price at
which a share of Common Stock may be purchased upon the exercise of
an Option.
“
Other Equity-Based
Award
” means an Award
that is not an Option, Stock Appreciation Right, Restricted Stock,
Restricted Stock Unit, or Performance Share Award that is granted
under
Section 7.4
and is payable by delivery of Common
Stock and/or which is measured by reference to the value of Common
Stock.
“
Participant
”
means an eligible person to whom an Award is granted pursuant to
the Plan or, if applicable, such other person who holds an
outstanding Award.
“
Performance
Goals
” means, for a
Performance Period, the one or more goals established by the
Committee for the Performance Period based upon business criteria
or other performance measures determined by the Committee in its
discretion.
“
Performance
Period
” means the one or
more periods of time, as the Committee may select, over which the
attainment of one or more Performance Goals will be measured for
the purpose of determining a Participant’s right to and the
payment of a Performance Share Award or a Cash
Award.
“
Performance Share
Award
” means any Award
granted pursuant to
Section 7.3
hereof.
“
Performance
Share
” means the grant of
a right to receive a number of actual shares of Common Stock or
share units based upon the performance of the Company during a
Performance Period, as determined by the
Committee.
“
Permitted
Transferee
” means: (a) a
member of the Optionholder’s immediate family (child,
stepchild, grandchild, parent, stepparent, grandparent, spouse,
former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive relationships), any person
sharing the Optionholder’s household (other than a tenant or
employee), a trust in which these persons have more than 50% of the
beneficial interest, a foundation in which these persons (or the
Optionholder) control the management of assets, and any other
entity in which these persons (or the Optionholder) own more than
50% of the voting interests; (b) third parties designated by the
Committee in connection with a program established and approved by
the Committee pursuant to which Participants may receive a cash
payment or other consideration in consideration for the transfer of
a Non-qualified Stock Option; and (c) such other transferees as may
be permitted by the Committee in its sole
discretion.
“
Person
”
means a person as defined in Section 13(d)(3) of the Exchange
Act.
“
Plan
”
means this Dynatronics Corporation 2019 Equity Incentive Plan, as
amended and/or amended and restated from time to
time.
“
Related
Rights
” has the meaning
set forth in
Section
7.1(a)
.
“
Restricted
Award
” means any Award
granted pursuant to
Section
7.2(a)
.
“
Restricted
Period
” has the meaning
set forth in
Section
7.2(a)
.
“
Rule
16b-3
” means Rule 16b-3
promulgated under the Exchange Act or any successor to Rule 16b-3,
as in effect from time to time.
“
Securities
Act
” means the Securities
Act of 1933, as amended.
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“
Stock Appreciation
Right
” means the right
pursuant to an Award granted under
Section 7.1
to receive, upon exercise, an amount
payable in cash or shares equal to the number of shares subject to
the Stock Appreciation Right that is being exercised multiplied by
the excess of (a) the Fair Market Value of a share of Common Stock
on the date the Award is exercised, over (b) the exercise price
specified in the Stock Appreciation Right Award
Agreement.
“
Stock for Stock
Exchange
” has the meaning
set forth in
Section
6.4
.
“
Substitute
Award
” has the meaning
set forth in
Section
4.6
.
“
Ten Percent
Shareholder
” means a
person who owns (or is deemed to own pursuant to Section 424(d) of
the Code) stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or of any of
its Affiliates.
“
Total Share
Reserve
” has the meaning
set forth in
Section
4.1
.
3
Administration
.
3.1
Authority
of Committee
. The Plan shall be
administered by the Committee or, in the Board’s sole
discretion, by the Board. Subject to the terms of the Plan, the
Committee’s charter and Applicable Laws, and in addition to
other express powers and authorization conferred by the Plan, the
Committee shall have the authority:
(a)
to
construe and interpret the Plan and apply its
provisions;
(b)
to
promulgate, amend, and rescind rules and regulations relating to
the administration of the Plan;
(c)
to
authorize any person to execute, on behalf of the Company, any
instrument required to carry out the purposes of the
Plan;
(d)
to
delegate its authority to one or more Officers of the Company with
respect to Awards that do not involve “insiders” within
the meaning of Section 16 of the Exchange Act;
(e)
to
determine when Awards are to be granted under the Plan and the
applicable Grant Date;
(f)
from
time to time to select, subject to the limitations set forth in
this Plan, those eligible Award recipients to whom Awards shall be
granted;
(g)
to
determine the number of shares of Common Stock to be made subject
to each Award;
(h)
to
determine whether each Option is to be an Incentive Stock Option or
a Non-qualified Stock Option;
(i)
to
prescribe the terms and conditions of each Award, including,
without limitation, the exercise price and medium of payment and
vesting provisions, and to specify the provisions of the Award
Agreement relating to such grant;
(j)
to
determine the target number of Performance Shares to be granted
pursuant to a Performance Share Award, the performance measures
that will be used to establish the Performance Goals, the
Performance Period(s) and the number of Performance Shares earned
by a Participant;
(k)
to
amend any outstanding Awards, including for the purpose of
modifying the time or manner of vesting, or the term of any
outstanding Award;
provided,
however
, that if any such
amendment impairs a Participant’s rights or increases a
Participant’s obligations under his or her Award or creates
or increases a Participant’s federal income tax liability
with respect to an Award, such amendment shall also be subject to
the Participant’s consent;
(l)
to
determine the duration and purpose of leaves of absences which may
be granted to a Participant without constituting termination of
their employment for purposes of the Plan, which periods shall be
no shorter than the periods generally applicable to Employees under
the Company’s employment policies;
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(m)
to
make decisions with respect to outstanding Awards that may become
necessary upon a change in corporate control or an event that
triggers anti-dilution adjustments;
(n)
to
interpret, administer, reconcile any inconsistency in, correct any
defect in and/or supply any omission in the Plan and any instrument
or agreement relating to, or Award granted under, the Plan;
and
(o)
to
exercise discretion to make any and all other determinations which
it determines to be necessary or advisable for the administration
of the Plan.
The Committee also may modify the purchase price or the exercise
price of any outstanding Award,
provided that
if the modification effects a
repricing, shareholder approval shall be required before the
repricing is effective.
3.2
Committee
Decisions Final
. All decisions
made by the Committee pursuant to the provisions of the Plan shall
be final and binding on the Company and the Participants, unless
such decisions are determined by a court having jurisdiction to be
arbitrary and capricious.
3.3
Delegation
.
The Committee or, if no Committee has been appointed, the Board may
delegate administration of the Plan to a committee or committees of
one or more members of the Board, and the term
“
Committee
”
shall apply to any person or persons to whom such authority has
been delegated. The Committee shall have the power to delegate to a
subcommittee any of the administrative powers the Committee is
authorized to exercise (and references in this Plan to the Board or
the Committee shall thereafter be to the committee or
subcommittee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted
from time to time by the Board. The Board may abolish the Committee
at any time and revest in the Board the administration of the Plan.
The members of the Committee shall be appointed by and serve at the
pleasure of the Board. From time to time, the Board may increase or
decrease the size of the Committee, add additional members to,
remove members (with or without cause) from, appoint new members in
substitution therefor, and fill vacancies, however caused, in the
Committee. The Committee shall act pursuant to a vote of the
majority of its members or, in the case of a Committee comprised of
only two members, the unanimous consent of its members, whether
present or not, or by the written consent of the majority of its
members and minutes shall be kept of all of its meetings and copies
thereof shall be provided to the Board. Subject to the limitations
prescribed by the Plan and the Board, the Committee may establish
and follow such rules and regulations for the conduct of its
business as it may determine to be advisable.
3.4
Committee
Composition
. Except as
otherwise determined by the Board, the Committee shall consist
solely of two or more Non-Employee Directors. The Board shall have
discretion to determine whether or not it intends to comply with
the exemption requirements of Rule 16b-3. However, if the Board
intends to satisfy such exemption requirements, with respect to any
insider subject to Section 16 of the Exchange Act, the Committee
shall be a compensation committee of the Board that at all times
consists solely of two or more Non-Employee Directors. Within the
scope of such authority, the Board or the Committee may delegate to
a committee of one or more members of the Board who are not
Non-Employee Directors the authority to grant Awards to eligible
persons who are not then subject to Section 16 of the Exchange Act.
Nothing herein shall create an inference that an Award is not
validly granted under the Plan in the event Awards are granted
under the Plan by a compensation committee of the Board that does
not at all times consist solely of two or more Non-Employee
Directors.
3.5
Indemnification
.
In addition to such other rights of indemnification as they may
have as Directors or members of the Committee, and to the extent
allowed by Applicable Laws, the Committee shall be indemnified by
the Company against the reasonable expenses, including
attorney’s fees, actually incurred in connection with any
action, suit or proceeding or in connection with any appeal
therein, to which the Committee may be party by reason of any
action taken or failure to act under or in connection with the Plan
or any Award granted under the Plan, and against all amounts paid
by the Committee in settlement thereof (
provided,
however
, that the settlement
has been approved by the Company, which approval shall not be
unreasonably withheld) or paid by the Committee in satisfaction of
a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such
action, suit or proceeding that such Committee did not act in good
faith and in a manner which such person reasonably believed to be
in the best interests of the Company, or in the case of a criminal
proceeding, had no reason to believe that the conduct complained of
was unlawful;
provided,
however
, that within 60 days
after the institution of any such action, suit or proceeding, such
Committee shall, in writing, offer the Company the opportunity at
its own expense to handle and defend such action, suit or
proceeding.
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4
Shares
Subject to the Plan
.
4.1
Total
Share Reserve
. Subject to
adjustment in accordance with
Section
11
, no more than Six Hundred
Thousand (600,000) shares of Common Stock plus the number of shares
of Common Stock underlying any award granted under the Dynatronics
Corporation 2015 Equity Incentive Award Plan (the
“
Prior
Plan
”) that expires,
terminates or is canceled or forfeited under the terms of the Prior
Plan shall be available for the grant of Awards under the Plan (the
“
Total Share
Reserve
”). Any shares of
Common Stock granted in connection with Options and Stock
Appreciation Rights shall be counted against this limit as one (1)
share for every one (1) Option or Stock Appreciation Right awarded.
Any shares of Common Stock granted in connection with Awards other
than Options and Stock Appreciation Rights shall be counted against
this limit as one (1) share of Common Stock for every one (1) share
of Common Stock granted in connection with such Award. During the
terms of the Awards, the Company shall keep available at all times
the number of shares of Common Stock required to satisfy such
Awards.
4.2
Shares
Available for Distribution
.
Shares of Common Stock available for distribution under the Plan
may consist, in whole or in part, of authorized and unissued
shares, treasury shares or shares reacquired by the Company in any
manner.
4.3
Incentive
Stock Option Share Limit
.
Subject to adjustment in accordance with
Section
11
, no more than Six Hundred
Thousand (600,000) shares of Common Stock may be issued in the
aggregate pursuant to the exercise of Incentive Stock Options (the
“
ISO
Limit
”).
4.4
Single
Fiscal Year Share Limit
. The
maximum number of shares of Common Stock subject to Awards granted
during a single Fiscal Year to any Director, together with any cash
fees paid to such Director during the Fiscal Year shall not exceed
a total value of $300,000 (calculating the value of any Awards
based on the grant date fair value for financial reporting
purposes).
4.5
Treatment
of Canceled, Forfeited, or Terminated Award
Shares
. Any shares of Common
Stock subject to an Award that expires or is canceled, forfeited,
or terminated without issuance of the full number of shares of
Common Stock to which the Award related will again be available for
issuance under the Plan. Any shares of Common Stock that again
become available for future grants pursuant to this
Section
4.5
shall be added back as one
(1) share if such shares were subject to Options or Stock
Appreciation Rights and as one (1) share if such shares were
subject to other Awards. Notwithstanding anything to the contrary
contained herein: shares subject to an Award under the Plan shall
not again be made available for issuance or delivery under the Plan
if such shares are (a) shares tendered in payment of an Option, (b)
shares delivered or withheld by the Company to satisfy any tax
withholding obligation, or (c) shares covered by a stock-settled
Stock Appreciation Right or other Awards that were not issued upon
the settlement of the Award.
4.6
Substitute
Awards
. Awards may, in the sole
discretion of the Committee, be granted under the Plan in
assumption of, or in substitution for, outstanding awards
previously granted by an entity acquired by the Company or with
which the Company combines (“
Substitute
Awards
”). Substitute
Awards shall not be counted against the Total Share Reserve;
provided,
that
, Substitute Awards issued
in connection with the assumption of, or in substitution for,
outstanding options intended to qualify as Incentive Stock Options
shall be counted against the ISO Limit. Subject to applicable stock
exchange requirements, available shares under a
shareholder-approved plan of an entity directly or indirectly
acquired by the Company or with which the Company combines (as
appropriately adjusted to reflect such acquisition or transaction)
may be used for Awards under the Plan and shall not count toward
the Total Share Limit.
5
Eligibility
.
5.1
Eligibility
for Specific Awards
. Incentive
Stock Options may be granted only to Employees. Awards other than
Incentive Stock Options may be granted to Employees, Consultants
and Directors and those individuals whom the Committee determines
are reasonably expected to become Employees, Consultants and
Directors following the Grant Date.
5.2
Ten
Percent Shareholders
. A Ten
Percent Shareholder shall not be granted an Incentive Stock Option
unless the Option Exercise Price is at least 110% of the Fair
Market Value of the Common Stock on the Grant Date and the Option
is not exercisable after the expiration of five years from the
Grant Date.
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2
Option
Provisions
. Each Option granted
under the Plan shall be evidenced by an Award Agreement. Each
Option so granted shall be subject to the conditions set forth in
this
Section
6
, and to such other conditions
not inconsistent with the Plan as may be reflected in the
applicable Award Agreement. All Options shall be separately
designated Incentive Stock Options or Non-qualified Stock Options
at the time of grant, and, if certificates are issued, a separate
certificate or certificates will be issued for shares of Common
Stock purchased on exercise of each type of Option. Notwithstanding
the foregoing, the Company shall have no liability to any
Participant or any other person if an Option designated as an
Incentive Stock Option fails to qualify as such at any time or if
an Option is determined to constitute “nonqualified deferred
compensation” within the meaning of Section 409A of the Code
and the terms of such Option do not satisfy the requirements of
Section 409A of the Code. The provisions of separate Options need
not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or
otherwise) the substance of each of the following
provisions:
6.1
Term
.
Subject to the provisions of
Section 5.2
regarding Ten Percent Shareholders, no
Incentive Stock Option shall be exercisable after the expiration of
10 years from the Grant Date. The term of a Non-qualified Stock
Option granted under the Plan shall be determined by the
Committee;
provided,
however
, no Non-qualified Stock
Option shall be exercisable after the expiration of 10 years from
the Grant Date.
6.2
Exercise
Price of an Incentive Stock Option
. Subject to the provisions of
Section 5.2
regarding Ten Percent Shareholders,
the Option Exercise Price of each Incentive Stock Option shall be
not less than 100% of the Fair Market Value of the Common Stock
subject to the Option on the Grant Date. Notwithstanding the
foregoing, an Incentive Stock Option may be granted with an Option
Exercise Price lower than that set forth in the preceding sentence
if such Option is granted pursuant to an assumption or substitution
for another option in a manner satisfying the provisions of Section
424(a) of the Code.
6.3
Exercise
Price of a Non-qualified Stock Option
. The Option Exercise Price of each Non-qualified
Stock Option shall be not less than 100% of the Fair Market Value
of the Common Stock subject to the Option on the Grant Date.
Notwithstanding the foregoing, a Non-qualified Stock Option may be
granted with an Option Exercise Price lower than that set forth in
the preceding sentence if such Option is granted pursuant to an
assumption or substitution for another option in a manner
satisfying the provisions of Section 409A of the
Code.
6.4
Consideration
.
The Option Exercise Price of Common Stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable
statutes and regulations, either (a) in cash or by certified or
bank check at the time the Option is exercised or (b) in the
discretion of the Committee, upon such terms as the Committee shall
approve, the Option Exercise Price may be paid: (i) by delivery to
the Company of other Common Stock, duly endorsed for transfer to
the Company, with a Fair Market Value on the date of delivery equal
to the Option Exercise Price (or portion thereof) due for the
number of shares being acquired, or by means of attestation whereby
the Participant identifies for delivery specific shares of Common
Stock that have an aggregate Fair Market Value on the date of
attestation equal to the Option Exercise Price (or portion thereof)
and receives a number of shares of Common Stock equal to the
difference between the number of shares thereby purchased and the
number of identified attestation shares of Common Stock (a
“
Stock for Stock
Exchange
”); (ii) a
“cashless” exercise program established with a broker;
(iii) by reduction in the number of shares of Common Stock
otherwise deliverable upon exercise of such Option with a Fair
Market Value equal to the aggregate Option Exercise Price at the
time of exercise; (iv) by any combination of the foregoing methods;
or (v) in any other form of legal consideration that may be
acceptable to the Committee. Unless otherwise specifically provided
in the Option, the exercise price of Common Stock acquired pursuant
to an Option that is paid by delivery (or attestation) to the
Company of other Common Stock acquired, directly or indirectly from
the Company, shall be paid only by shares of the Common Stock of
the Company that have been held for more than six months (or such
longer or shorter period of time required to avoid a charge to
earnings for financial accounting purposes). Notwithstanding the
foregoing, during any period for which the Common Stock is publicly
traded (i.e., the Common Stock is listed on any established stock
exchange or a national market system) an exercise by a Director or
Officer that involves or may involve a direct or indirect extension
of credit or arrangement of an extension of credit by the Company,
directly or indirectly, in violation of Section 402(a) of the
Sarbanes-Oxley Act of 2002 shall be prohibited with respect to any
Award under this Plan.
6.5
Transferability
of an Incentive Stock Option
.
An Incentive Stock Option shall not be transferable except by will
or by the laws of descent and distribution and shall be exercisable
during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing, the Optionholder may, by delivering
written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of
the Optionholder, shall thereafter be entitled to exercise the
Option.
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6.6
Transferability
of a Non-qualified Stock Option
. A Non-qualified Stock Option may, in the sole
discretion of the Committee, be transferable to a Permitted
Transferee, upon written approval by the Committee to the extent
provided in the Award Agreement. If the Non-qualified Stock Option
does not provide for transferability, then the Non-qualified Stock
Option shall not be transferable except by will or by the laws of
descent and distribution and shall be exercisable during the
lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing, the Optionholder may, by delivering
written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of
the Optionholder, shall thereafter be entitled to exercise the
Option.
6.7
Vesting
of Options
. Each Option may,
but need not, vest and therefore become exercisable in periodic
installments that may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times
when it may be exercised (which may be based on performance or
other criteria) as the Committee may deem appropriate. The vesting
provisions of individual Options may vary. No Option may be
exercised for a fraction of a share of Common Stock. The Committee
may, but shall not be required to, provide for an acceleration of
vesting and exercisability in the terms of any Award Agreement upon
the occurrence of a specified event.
6.8
Termination
of Continuous Service
. Unless
otherwise provided in an Award Agreement or in an employment
agreement the terms of which have been approved by the Committee,
in the event an Optionholder’s Continuous Service terminates
(other than upon the Optionholder’s death or Disability), the
Optionholder may exercise his or her Option (to the extent that the
Optionholder was entitled to exercise such Option as of the date of
termination) but only within such period of time ending on the
earlier of (a) the date three months following the termination of
the Optionholder’s Continuous Service or (b) the expiration
of the term of the Option as set forth in the Award
Agreement;
provided
that
, if the termination of
Continuous Service is by the Company for Cause, all outstanding
Options (whether or not vested) shall immediately terminate and
cease to be exercisable. If, after termination, the Optionholder
does not exercise his or her Option within the time specified in
the Award Agreement, the Option shall
terminate.
6.9
Extension
of Termination Date
. An
Optionholder’s Award Agreement may also provide that if the
exercise of the Option following the termination of the
Optionholder’s Continuous Service for any reason would be
prohibited at any time because the issuance of shares of Common
Stock would violate the registration requirements under the
Securities Act or any other state or federal securities law or the
rules of any securities exchange or interdealer quotation system,
then the Option shall terminate on the earlier of (a) the
expiration of the term of the Option in accordance with
Section
6.1
or (b) the expiration of a
period after termination of the Participant’s Continuous
Service that is three months after the end of the period during
which the exercise of the Option would be in violation of such
registration or other securities law
requirements.
6.10
Disability
of Optionholder
. Unless
otherwise provided in an Award Agreement, in the event that an
Optionholder’s Continuous Service terminates as a result of
the Optionholder’s Disability, the Optionholder may exercise
his or her Option (to the extent that the Optionholder was entitled
to exercise such Option as of the date of termination), but only
within such period of time ending on the earlier of (a) the date 12
months following such termination or (b) the expiration of the term
of the Option as set forth in the Award Agreement. If, after
termination, the Optionholder does not exercise his or her Option
within the time specified herein or in the Award Agreement, the
Option shall terminate.
6.11
Death
of Optionholder
. Unless
otherwise provided in an Award Agreement, in the event an
Optionholder’s Continuous Service terminates as a result of
the Optionholder’s death, then the Option may be exercised
(to the extent the Optionholder was entitled to exercise such
Option as of the date of death) by the Optionholder’s estate,
by a person who acquired the right to exercise the Option by
bequest or inheritance or by a person designated to exercise the
Option upon the Optionholder’s death, but only within the
period ending on the earlier of (a) the date 12 months following
the date of death or (b) the expiration of the term of such Option
as set forth in the Award Agreement. If, after the
Optionholder’s death, the Option is not exercised within the
time specified herein or in the Award Agreement, the Option shall
terminate.
6.12
Incentive
Stock Option $100,000 Limitation
. To the extent that the aggregate Fair Market
Value (determined at the time of grant) of Common Stock with
respect to which Incentive Stock Options are exercisable for the
first time by any Optionholder during any calendar year (under all
plans of the Company and its Affiliates) exceeds $100,000, the
Options or portions thereof which exceed such limit (according to
the order in which they were granted) shall be treated as
Non-qualified Stock Options.
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3
Provisions
of Awards Other Than Options
.
7.1
Stock
Appreciation Rights
.
(a)
General
.
Each Stock Appreciation Right granted
under the Plan shall be evidenced by an Award Agreement. Each Stock
Appreciation Right so granted shall be subject to the conditions
set forth in this
Section
7.1
, and to such other
conditions not inconsistent with the Plan as may be reflected in
the applicable Award Agreement. Stock Appreciation Rights may be
granted alone (“
Free Standing
Rights
”) or in tandem
with an Option granted under the Plan (“
Related
Rights
”).
(b)
Grant
Requirements
.
Any Related Right that relates to a
Non-qualified Stock Option may be granted at the same time the
Option is granted or at any time thereafter but before the exercise
or expiration of the Option. Any Related Right that relates to an
Incentive Stock Option must be granted at the same time the
Incentive Stock Option is granted.
(c)
Term
of Stock Appreciation Rights
.
The term of
a Stock Appreciation Right granted under the Plan shall be
determined by the Committee;
provided,
however
, no Stock Appreciation
Right shall be exercisable later than the tenth anniversary of the
Grant Date.
(d)
Vesting
of Stock Appreciation Rights
.
Each Stock
Appreciation Right may, but need not, vest and therefore become
exercisable in periodic installments that may, but need not, be
equal. The Stock Appreciation Right may be subject to such other
terms and conditions on the time or times when it may be exercised
as the Committee may deem appropriate. The vesting provisions of
individual Stock Appreciation Rights may vary. No Stock
Appreciation Right may be exercised for a fraction of a share of
Common Stock. The Committee may, but shall not be required to,
provide for an acceleration of vesting and exercisability in the
terms of any Stock Appreciation Right upon the occurrence of a
specified event.
(e)
Exercise
and Payment
.
Upon exercise of a Stock Appreciation
Right, the holder shall be entitled to receive from the Company an
amount equal to the number of shares of Common Stock subject to the
Stock Appreciation Right that is being exercised multiplied by the
excess of (i) the Fair Market Value of a share of Common Stock on
the date the Award is exercised, over (ii) the exercise price
specified in the Stock Appreciation Right or related Option.
Payment with respect to the exercise of a Stock Appreciation Right
shall be made on the date of exercise. Payment shall be made in the
form of shares of Common Stock (with or without restrictions as to
substantial risk of forfeiture and transferability, as determined
by the Committee in its sole discretion), cash or a combination
thereof, as determined by the Committee.
(f)
Exercise
Price
.
The exercise price of a Free Standing Right shall
be determined by the Committee, but shall not be less than 100% of
the Fair Market Value of one share of Common Stock on the Grant
Date of such Stock Appreciation Right. A Related Right granted
simultaneously with or subsequent to the grant of an Option and in
conjunction therewith or in the alternative thereto shall have the
same exercise price as the related Option, shall be transferable
only upon the same terms and conditions as the related Option, and
shall be exercisable only to the same extent as the related
Option;
provided,
however
, that a Stock
Appreciation Right, by its terms, shall be exercisable only when
the Fair Market Value per share of Common Stock subject to the
Stock Appreciation Right and related Option exceeds the exercise
price per share thereof and no Stock Appreciation Rights may be
granted in tandem with an Option unless the Committee determines
that the requirements of
Section 7.1(b)
are satisfied.
(g)
Reduction
in the Underlying Option Shares
.
Upon any
exercise of a Related Right, the number of shares of Common Stock
for which any related Option shall be exercisable shall be reduced
by the number of shares for which the Stock Appreciation Right has
been exercised. The number of shares of Common Stock for which a
Related Right shall be exercisable shall be reduced upon any
exercise of any related Option by the number of shares of Common
Stock for which such Option has been exercised.
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7.2
Restricted
Awards
.
(a)
General
.
A Restricted Award is an Award of
actual shares of Common Stock (“
Restricted
Stock
”) or hypothetical
Common Stock units (“
Restricted Stock
Units
”) having a value
equal to the Fair Market Value of an identical number of shares of
Common Stock, which may, but need not, provide that such Restricted
Award may not be sold, assigned, transferred or otherwise disposed
of, pledged or hypothecated as collateral for a loan or as security
for the performance of any obligation or for any other purpose for
such period (the “
Restricted
Period
”) as the Committee
shall determine. Each Restricted Award granted under the Plan shall
be evidenced by an Award Agreement. Each Restricted Award so
granted shall be subject to the conditions set forth in this
Section
7.2
, and to such other
conditions not inconsistent with the Plan as may be reflected in
the applicable Award Agreement.
(b)
Restricted
Stock and Restricted Stock Units
.
(i)
Each
Participant granted Restricted Stock shall execute and deliver to
the Company an Award Agreement with respect to the Restricted Stock
setting forth the restrictions and other terms and conditions
applicable to such Restricted Stock. If the Committee determines
that the Restricted Stock shall be held by the Company or in escrow
rather than delivered to the Participant pending the release of the
applicable restrictions, the Committee may require the Participant
to additionally execute and deliver to the Company (A) an escrow
agreement satisfactory to the Committee, if applicable and (B) the
appropriate blank stock power with respect to the Restricted Stock
covered by such agreement. If a Participant fails to execute an
agreement evidencing an Award of Restricted Stock and, if
applicable, an escrow agreement and stock power, the Award shall be
null and void. Subject to the restrictions set forth in the Award,
the Participant generally shall have the rights and privileges of a
shareholder as to such Restricted Stock, including the right to
vote such Restricted Stock and the right to receive
dividends;
provided
that
, any cash dividends and
stock dividends with respect to the Restricted Stock shall be
withheld by the Company for the Participant’s account, and
interest may be credited on the amount of the cash dividends
withheld at a rate and subject to such terms as determined by the
Committee. The cash dividends or stock dividends so withheld by the
Committee and attributable to any particular share of Restricted
Stock (and earnings thereon, if applicable) shall be distributed to
the Participant in cash or, at the discretion of the Committee, in
shares of Common Stock having a Fair Market Value equal to the
amount of such dividends, if applicable, upon the release of
restrictions on such share and, if such share is forfeited, the
Participant shall have no right to such
dividends.
(ii)
The
terms and conditions of a grant of Restricted Stock Units shall be
reflected in an Award Agreement. No shares of Common Stock shall be
issued at the time a Restricted Stock Unit is granted, and the
Company will not be required to set aside funds for the payment of
any such Award. A Participant shall have no voting rights with
respect to any Restricted Stock Units granted hereunder. The
Committee may also grant Restricted Stock Units with a deferral
feature, whereby settlement is deferred beyond the vesting date
until the occurrence of a future payment date or event set forth in
an Award Agreement (“
Deferred Stock
Units
”). At the
discretion of the Committee, each Restricted Stock Unit or Deferred
Stock Unit (representing one share of Common Stock) may be credited
with an amount equal to the cash and stock dividends paid by the
Company in respect of one share of Common Stock
(“
Dividend
Equivalents
”). Dividend
Equivalents shall be withheld by the Company and credited to the
Participant’s account, and interest may be credited on the
amount of cash Dividend Equivalents credited to the
Participant’s account at a rate and subject to such terms as
determined by the Committee. Dividend Equivalents credited to a
Participant’s account and attributable to any particular
Restricted Stock Unit or Deferred Stock Unit (and earnings thereon,
if applicable) shall be distributed in cash or, at the discretion
of the Committee, in shares of Common Stock having a Fair Market
Value equal to the amount of such Dividend Equivalents and
earnings, if applicable, to the Participant upon settlement of such
Restricted Stock Unit or Deferred Stock Unit and, if such
Restricted Stock Unit or Deferred Stock Unit is forfeited, the
Participant shall have no right to such Dividend
Equivalents.
(c)
Restrictions
.
(i)
Restricted
Stock awarded to a Participant shall be subject to the following
restrictions until the expiration of the Restricted Period, and to
such other terms and conditions as may be set forth in the
applicable Award Agreement: (A) if an escrow arrangement is used,
the Participant shall not be entitled to delivery of the stock
certificate; (B) the shares shall be subject to the restrictions on
transferability set forth in the Award Agreement; (C) the shares
shall be subject to forfeiture to the extent provided in the
applicable Award Agreement; and (D) to the extent such shares are
forfeited, the stock certificates shall be returned to the Company,
and all rights of the Participant to such shares and as a
shareholder with respect to such shares shall terminate without
further obligation on the part of the Company.
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(ii)
Restricted
Stock Units and Deferred Stock Units awarded to any Participant
shall be subject to (A) forfeiture until the expiration of the
Restricted Period, and satisfaction of any applicable Performance
Goals during such period, to the extent provided in the applicable
Award Agreement, and to the extent such Restricted Stock Units or
Deferred Stock Units are forfeited, all rights of the Participant
to such Restricted Stock Units or Deferred Stock Units shall
terminate without further obligation on the part of the Company and
(B) such other terms and conditions as may be set forth in the
applicable Award Agreement.
(iii)
The
Committee shall have the authority to remove any or all of the
restrictions on the Restricted Stock, Restricted Stock Units and
Deferred Stock Units whenever it may determine that, by reason of
changes in Applicable Laws or other changes in circumstances
arising after the date the Restricted Stock or Restricted Stock
Units or Deferred Stock Units are granted, such action is
appropriate.
(d)
Restricted
Period
.
With respect to Restricted Awards, the Restricted
Period shall commence on the Grant Date and end at the time or
times set forth on a schedule established by the Committee in the
applicable Award Agreement.
No
Restricted Award may be granted or settled for a fraction of a
share of Common Stock. The Committee may, but shall not be required
to, provide for an acceleration of vesting in the terms of any
Award Agreement upon the occurrence of a specified
event.
(e)
Delivery
of Restricted Stock and Settlement of Restricted Stock
Units
.
Upon the expiration of the Restricted Period with
respect to any shares of Restricted Stock, the restrictions set
forth in
Section 7.2(c)
and the applicable Award Agreement
shall be of no further force or effect with respect to such shares,
except as set forth in the applicable Award Agreement. If an escrow
arrangement is used, upon such expiration, the Company shall
deliver to the Participant, or his or her beneficiary, without
charge, the stock certificate evidencing the shares of Restricted
Stock which have not then been forfeited and with respect to which
the Restricted Period has expired (to the nearest full share) and
any cash dividends or stock dividends credited to the
Participant’s account with respect to such Restricted Stock
and the interest thereon, if any. Upon the expiration of the
Restricted Period with respect to any outstanding Restricted Stock
Units, or at the expiration of the deferral period with respect to
any outstanding Deferred Stock Units, the Company shall deliver to
the Participant, or his or her beneficiary, without charge, one
share of Common Stock for each such outstanding vested Restricted
Stock Unit or Deferred Stock Unit (“
Vested
Unit
”) and cash equal to
any Dividend Equivalents credited with respect to each such Vested
Unit in accordance with
Section
7.2(b)(ii)
hereof and the
interest thereon or, at the discretion of the Committee, in shares
of Common Stock having a Fair Market Value equal to such Dividend
Equivalents and the interest thereon, if any;
provided,
however
, that, if explicitly
provided in the applicable Award Agreement, the Committee may, in
its sole discretion, elect to pay cash or part cash and part Common
Stock in lieu of delivering only shares of Common Stock for Vested
Units. If a cash payment is made in lieu of delivering shares of
Common Stock, the amount of such payment shall be equal to the Fair
Market Value of the Common Stock as of the date on which the
Restricted Period lapsed in the case of Restricted Stock Units, or
the delivery date in the case of Deferred Stock Units, with respect
to each Vested Unit.
(f)
Stock
Restrictions
.
Each certificate representing
Restricted Stock awarded under the Plan shall bear a legend in such
form as the Company deems appropriate.
7.3
Performance
Share Awards
.
(a)
Grant
of Performance Share Awards
.
Each
Performance Share Award granted under the Plan shall be evidenced
by an Award Agreement. Each Performance Share Award so granted
shall be subject to the conditions set forth in this
Section
7.3
, and to such other
conditions not inconsistent with the Plan as may be reflected in
the applicable Award Agreement. The Committee shall have the
discretion to determine: (i) the number of shares of Common Stock
or stock-denominated units subject to a Performance Share Award
granted to any Participant; (ii) the Performance Period applicable
to any Award; (iii) the conditions that must be satisfied for a
Participant to earn an Award; and (iv) the other terms, conditions
and restrictions of the Award.
(b)
Earning
Performance Share Awards
.
The number
of Performance Shares earned by a Participant will depend on the
extent to which the performance goals established by the Committee
are attained within the applicable Performance Period, as
determined by the Committee.
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7.4
Other
Equity-Based Awards and Cash Awards
. The Committee may grant Other Equity-Based
Awards, either alone or in tandem with other Awards, in such
amounts and subject to such conditions as the Committee shall
determine in its sole discretion. Each Equity-Based Award shall be
evidenced by an Award Agreement and shall be subject to such
conditions, not inconsistent with the Plan, as may be reflected in
the applicable Award Agreement. The Committee may grant Cash Awards
in such amounts and subject to such Performance Goals, other
vesting conditions, and such other terms as the Committee
determines in its discretion. Cash Awards shall be evidenced in
such form as the Committee may determine.
4
Securities
Law Compliance
. Each Award
Agreement shall provide that no shares of Common Stock shall be
purchased or sold thereunder unless and until (a) any then
applicable requirements of state or federal laws and regulatory
agencies have been fully complied with to the satisfaction of the
Company and its counsel, and (b) if required to do so by the
Company, the Participant has executed and delivered to the Company
a letter of investment intent in such form and containing such
provisions as the Committee may require. The Company shall use
reasonable efforts to seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such
authority as may be required to grant Awards and to issue and sell
shares of Common Stock upon exercise of the Awards;
provided,
however
, that this undertaking
shall not require the Company to register under the Securities Act
the Plan, any Award or any Common Stock issued or issuable pursuant
to any such Award. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the
lawful issuance and sale of Common Stock under the Plan, the
Company shall be relieved from any liability for failure to issue
and sell Common Stock upon exercise of such Awards unless and until
such authority is obtained.
5
Use
of Proceeds from Stock
.
Proceeds from the sale of Common Stock pursuant to Awards, or upon
exercise thereof, shall constitute general funds of the
Company.
6
Miscellaneous
.
10.1
Acceleration
of Exercisability and Vesting
.
The Committee shall have the power to accelerate the time at which
an Award may first be exercised or the time during which an Award
or any part thereof will vest in accordance with the Plan,
notwithstanding the provisions in the Award stating the time at
which it may first be exercised or the time during which it will
vest.
10.2
Shareholder
Rights
. Except as provided in
the Plan or an Award Agreement, no Participant shall be deemed to
be the holder of, or to have any of the rights of a holder with
respect to, any shares of Common Stock subject to such Award unless
and until such Participant has satisfied all requirements for
exercise of the Award pursuant to its terms and no adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions of other rights for
which the record date is prior to the date such Common Stock
certificate is issued, except as provided in
Section 11
hereof.
10.3
No
Employment or Other Service Rights
. Nothing in the Plan or any instrument executed
or Award granted pursuant thereto shall confer upon any Participant
any right to continue to serve the Company or an Affiliate in the
capacity in effect at the time the Award was granted or shall
affect the right of the Company or an Affiliate to terminate (a)
the employment of an Employee with or without notice and with or
without Cause or (b) the service of a Director pursuant to the
Bylaws of the Company or an Affiliate, and any applicable
provisions of the corporate law of the state in which the Company
or the Affiliate is incorporated, as the case may
be.
10.4
Transfer;
Approved Leave of Absence
. For
purposes of the Plan, no termination of employment by an Employee
shall be deemed to result from either (a) a transfer of employment
to the Company from an Affiliate or from the Company to an
Affiliate, or from one Affiliate to another, or (b) an approved
leave of absence for military service or sickness, or for any other
purpose approved by the Company, if the Employee’s right to
reemployment is guaranteed either by a statute or by contract or
under the policy pursuant to which the leave of absence was granted
or if the Committee otherwise so provides in writing, in either
case, except to the extent inconsistent with Section 409A of the
Code if the applicable Award is subject
thereto.
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10.5
Withholding
Obligations
. To the extent
provided by the terms of an Award Agreement and subject to the
discretion of the Committee, the Participant may satisfy any
federal, state or local tax withholding obligation relating to the
exercise or acquisition of Common Stock under an Award by any of
the following means (in addition to the Company’s right to
withhold from any compensation paid to the Participant by the
Company) or by a combination of such means: (a) tendering a cash
payment; (b) authorizing the Company to withhold shares of Common
Stock from the shares of Common Stock otherwise issuable to the
Participant as a result of the exercise or acquisition of Common
Stock under the Award,
provided,
however
, that no shares of
Common Stock are withheld with a value exceeding the maximum amount
of tax required to be withheld by law; or (c) delivering to the
Company previously owned and unencumbered shares of Common Stock of
the Company.
7
Adjustments
Upon Changes in Stock
. In the
event of changes in the outstanding Common Stock or in the capital
structure of the Company by reason of any stock or extraordinary
cash dividend, stock split, reverse stock split, an extraordinary
corporate transaction such as any recapitalization, reorganization,
merger, consolidation, combination, exchange, or other relevant
change in capitalization occurring after the Grant Date of any
Award, Awards granted under the Plan and any Award Agreements, the
exercise price of Options and Stock Appreciation Rights, the
Performance Goals to which Performance Share Awards and Cash Awards
are subject, the maximum number of shares of Common Stock subject
to all Awards stated in
Section 4
will be equitably adjusted or
substituted, as to the number, price or kind of a share of Common
Stock or other consideration subject to such Awards to the extent
necessary to preserve the economic intent of such Award. In the
case of adjustments made pursuant to this
Section
11
, unless the Committee
specifically determines that such adjustment is in the best
interests of the Company or its Affiliates, the Committee shall, in
the case of Incentive Stock Options, ensure that any adjustments
under this
Section 11
will not constitute a modification,
extension or renewal of the Incentive Stock Options within the
meaning of Section 424(h)(3) of the Code and in the case of
Non-qualified Stock Options, ensure that any adjustments under
this
Section 11
will not constitute a modification of
such Non-qualified Stock Options within the meaning of Section 409A
of the Code. Any adjustments made under this
Section 11
shall be made in a manner which does
not adversely affect the exemption provided pursuant to Rule 16b-3
under the Exchange Act. The Company shall give each Participant
notice of an adjustment hereunder and, upon notice, such adjustment
shall be conclusive and binding for all
purposes.
8
Effect
of Change in Control
.
12.1
Unless
otherwise provided in an Award Agreement, notwithstanding any
provision of the Plan to the contrary:
(a)
In
the event of a Participant’s termination of Continuous
Service without Cause or for Good Reason during the 12-month period
following a Change in Control, notwithstanding any provision of the
Plan or any applicable Award Agreement to the contrary, all
outstanding Options and Stock Appreciation Rights shall become
immediately exercisable with respect to 100% of the shares subject
to such Options or Stock Appreciation Rights, and/or the Restricted
Period shall expire immediately with respect to 100% of the
outstanding shares of Restricted Stock or Restricted Stock Units as
of the date of the Participant’s termination of Continuous
Service.
(b)
With
respect to Performance Share Awards and Cash Awards, in the event
of a Change in Control, all incomplete Performance Periods in
respect of such Awards in effect on the date the Change in Control
occurs shall end on the date of such change and the Committee shall
(i) determine the extent to which Performance Goals with respect to
each such Performance Period have been met based upon such audited
or unaudited financial information then available as it deems
relevant and (ii) cause to be paid to the applicable Participant
partial or full Awards with respect to Performance Goals for each
such Performance Period based upon the Committee’s
determination of the degree of attainment of Performance Goals or,
if not determinable, assuming that the applicable
“target” levels of performance have been attained, or
on such other basis determined by the Committee.
To the extent practicable, any actions taken by the Committee under
the immediately preceding clauses (a) and (b) shall occur in a
manner and at a time which allows affected Participants the ability
to participate in the Change in Control with respect to the shares
of Common Stock subject to their Awards.
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12.2
In
addition, in the event of a Change in Control, the Committee may in
its discretion and upon at least 10 days’ advance notice to
the affected persons, cancel any outstanding Awards and pay to the
holders thereof, in cash or stock, or any combination thereof, the
value of such Awards based upon the price per share of Common Stock
received or to be received by other shareholders of the Company in
the event. In the case of any Option or Stock Appreciation Right
with an exercise price (or SAR Exercise Price in the case of a
Stock Appreciation Right) that equals or exceeds the price paid for
a share of Common Stock in connection with the Change in Control,
the Committee may cancel the Option or Stock Appreciation Right
without the payment of consideration therefor.
12.3
The
obligations of the Company under the Plan shall be binding upon any
successor corporation or organization resulting from the merger,
consolidation or other reorganization of the Company, or upon any
successor corporation or organization succeeding to all or
substantially all of the assets and business of the Company and its
Affiliates, taken as a whole.
9
Amendment
of the Plan and Awards
.
13.1
Amendment
of Plan
. The Board at any time,
and from time to time, may amend or terminate the Plan. However,
except as provided in
Section 11
relating to adjustments upon changes
in Common Stock and
Section
13.3
, no amendment shall be
effective unless approved by the shareholders of the Company to the
extent shareholder approval is necessary to satisfy any Applicable
Laws and the rules of any stock exchange upon which the
Company’s Common Stock may then be listed. At the time of
such amendment, the Board shall determine, upon advice from
counsel, whether such amendment will be contingent on shareholder
approval.
13.2
Shareholder
Approval
. The Board may, in its
sole discretion, submit any other amendment to the Plan for
shareholder approval.
13.3
Contemplated
Amendments
. It is expressly
contemplated that the Board may amend the Plan in any respect the
Board deems necessary or advisable to provide eligible Employees,
Consultants and Directors with the maximum benefits provided or to
be provided under the provisions of the Code and the regulations
promulgated thereunder relating to Incentive Stock Options or to
the nonqualified deferred compensation provisions of Section 409A
of the Code and/or to bring the Plan and/or Awards granted under it
into compliance therewith.
13.4
No
Impairment of Rights
. Rights
under any Award granted before amendment of the Plan shall not be
impaired by any amendment of the Plan unless (a) the Company
requests the consent of the Participant and (b) the Participant
consents in writing.
13.5
Amendment
of Awards
. The Committee at any
time, and from time to time, may amend the terms of any one or more
Awards;
provided,
however
, that the Committee may
not affect any amendment which would otherwise constitute an
impairment of the rights under any Award unless (a) the Company
requests the consent of the Participant and (b) the Participant
consents in writing.
10
General
Provisions
.
14.1
Forfeiture
Events
. The Committee may
specify in an Award Agreement that the Participant’s rights,
payments and benefits with respect to an Award shall be subject to
reduction, cancellation, forfeiture or recoupment upon the
occurrence of certain events, in addition to applicable vesting
conditions of an Award. Such events may include, without
limitation, breach of non-competition, non-solicitation,
confidentiality, or other restrictive covenants that are contained
in the Award Agreement or otherwise applicable to the Participant,
a termination of the Participant’s Continuous Service for
Cause, or other conduct by the Participant that is detrimental to
the business or reputation of the Company and/or its
Affiliates.
14.2
Clawback
.
Notwithstanding any other provisions in this Plan, the Company may
cancel any Award, require reimbursement of any Award by a
Participant, and effect any other right of recoupment of equity or
other compensation provided under the Plan in accordance with any
Company policies that may be adopted and/or modified from time to
time (“
Clawback
Policy
”). In addition, a
Participant may be required to repay to the Company previously paid
compensation, whether provided pursuant to the Plan or an Award
Agreement, in accordance with the Clawback Policy. By accepting an
Award, the Participant is agreeing to be bound by the Clawback
Policy, as in effect or as may be adopted and/or modified from time
to time by the Company in its discretion (including, without
limitation, to comply with applicable law or stock exchange listing
requirements).
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14.3
Other
Compensation Arrangements
.
Nothing contained in this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to
shareholder approval if such approval is required; and such
arrangements may be either generally applicable or applicable only
in specific cases.
14.4
Deferral
of Awards
. The Committee may
establish one or more programs under the Plan to permit selected
Participants the opportunity to elect to defer receipt of
consideration upon exercise of an Award, satisfaction of
performance criteria, or other event that absent the election would
entitle the Participant to payment or receipt of shares of Common
Stock or other consideration under an Award. The Committee may
establish the election procedures, the timing of such elections,
the mechanisms for payments of, and accrual of interest or other
earnings, if any, on amounts, shares or other consideration so
deferred, and such other terms, conditions, rules and procedures
that the Committee deems advisable for the administration of any
such deferral program.
14.5
Unfunded
Plan
. The Plan shall be
unfunded. Neither the Company, the Board nor the Committee shall be
required to establish any special or separate fund or to segregate
any assets to assure the performance of its obligations under the
Plan.
14.6
Recapitalizations
.
Each Award Agreement shall contain provisions required to reflect
the provisions of
Section
11
.
14.7
Delivery
.
Upon exercise of a right granted under this Plan, the Company shall
issue Common Stock or pay any amounts due within a reasonable
period of time thereafter. Subject to any statutory or regulatory
obligations the Company may otherwise have, for purposes of this
Plan, 30 days shall be considered a reasonable period of
time.
14.8
No
Fractional Shares
. No
fractional shares of Common Stock shall be issued or delivered
pursuant to the Plan. The Committee shall determine whether cash,
additional Awards or other securities or property shall be issued
or paid in lieu of fractional shares of Common Stock or whether any
fractional shares should be rounded, forfeited or otherwise
eliminated.
14.9
Other
Provisions
. The Award
Agreements authorized under the Plan may contain such other
provisions not inconsistent with this Plan, including, without
limitation, restrictions upon the exercise of Awards, as the
Committee may deem advisable.
14.10
Section
409A
. The Plan is intended to
comply with Section 409A of the Code to the extent subject thereto,
and, accordingly, to the maximum extent permitted, the Plan shall
be interpreted and administered to be in compliance therewith. Any
payments described in the Plan that are due within the
“short-term deferral period” as defined in Section 409A
of the Code shall not be treated as deferred compensation unless
Applicable Laws require otherwise. Notwithstanding anything to the
contrary in the Plan, to the extent required to avoid accelerated
taxation and tax penalties under Section 409A of the Code, amounts
that would otherwise be payable and benefits that would otherwise
be provided pursuant to the Plan during the six (6) month period
immediately following the Participant’s termination of
Continuous Service shall instead be paid on the first payroll date
after the six-month anniversary of the Participant’s
separation from service (or the Participant’s death, if
earlier). Notwithstanding the foregoing, neither the Company nor
the Committee shall have any obligation to take any action to
prevent the assessment of any additional tax or penalty on any
Participant under Section 409A of the Code and neither the Company
nor the Committee will have any liability to any Participant for
such tax or penalty.
14.11
Disqualifying
Dispositions
. Any Participant
who shall make a “disposition” (as defined in Section
424 of the Code) of all or any portion of shares of Common Stock
acquired upon exercise of an Incentive Stock Option within two
years from the Grant Date of such Incentive Stock Option or within
one year after the issuance of the shares of Common Stock acquired
upon exercise of such Incentive Stock Option (a
“
Disqualifying
Disposition
”) shall be
required to immediately advise the Company in writing as to the
occurrence of the sale and the price realized upon the sale of such
shares of Common Stock.
14.12
Section
16
. It is the intent of the
Company that the Plan satisfy, and be interpreted in a manner that
satisfies, the applicable requirements of Rule 16b-3 as promulgated
under Section 16 of the Exchange Act so that Participants will be
entitled to the benefit of Rule 16b-3, or any other rule
promulgated under Section 16 of the Exchange Act, and will not be
subject to short-swing liability under Section 16 of the Exchange
Act. Accordingly, if the operation of any provision of the Plan
would conflict with the intent expressed in this
Section
14.12
, such provision to the
extent possible shall be interpreted and/or deemed amended so as to
avoid such conflict.
A-16
14.13
Beneficiary
Designation
. Each Participant
under the Plan may from time to time name any beneficiary or
beneficiaries by whom any right under the Plan is to be exercised
in case of such Participant’s death. Each designation will
revoke all prior designations by the same Participant, shall be in
a form reasonably prescribed by the Committee and shall be
effective only when filed by the Participant in writing with the
Company during the Participant’s
lifetime.
14.14
Expenses
.
The costs of administering the Plan shall be paid by the
Company.
14.15
Severability
.
If any of the provisions of the Plan or any Award Agreement is held
to be invalid, illegal or unenforceable, whether in whole or in
part, such provision shall be deemed modified to the extent, but
only to the extent, of such invalidity, illegality or
unenforceability and the remaining provisions shall not be affected
thereby.
14.16
Plan
Headings
. The headings in the
Plan are for purposes of convenience only and are not intended to
define or limit the construction of the provisions
hereof.
14.17
Non-Uniform
Treatment
. The
Committee’s determinations under the Plan need not be uniform
and may be made by it selectively among persons who are eligible to
receive, or actually receive, Awards. Without limiting the
generality of the foregoing, the Committee shall be entitled to
make non-uniform and selective determinations, amendments and
adjustments, and to enter into non-uniform and selective Award
Agreements.
11
Effective
Date of Plan
. The Plan shall
become effective as of the Effective Date, but no Award shall be
exercised (or, in the case of a stock Award, shall be granted)
unless and until the Plan has been approved by the shareholders of
the Company, which approval shall be within twelve (12) months
before or after the date the Plan is adopted by the
Board.
12
Termination
or Suspension of the Plan
. The
Plan shall terminate automatically on September 10, 2028. No Award
shall be granted pursuant to the Plan after such date, but Awards
theretofore granted may extend beyond that date. The Board may
suspend or terminate the Plan at any earlier date pursuant
to
Section 13.1
hereof. No Awards may be granted under
the Plan while the Plan is suspended or after it is
terminated.
13
Choice
of Law
. The law of the State of
Utah shall govern all questions concerning the construction,
validity and interpretation of this Plan, without regard to such
state’s conflict of law rules.
As
adopted by the Board of Directors of Dynatronics Corporation on
September 10, 2018.
As
approved by the shareholders of Dynatronics Corporation on
___________________.
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TABLE OF CONTENTS