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Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive
Proxy Statement
☐
Definitive
Additional Materials
☐
Soliciting
Material Pursuant to 240.14a-12
ELECTROMED,
INC.
(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 all boxes that apply):
No
fee required.
☐
Fee
paid previously with preliminary materials.
☐
Fee
computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1)
and 0-11.
ELECTROMED,
INC.
500
SIXTH AVE NW
I
NEW
PRAGUE, MN 56071
I
952.758.9299
NOTICE
OF
ANNUAL
MEETING
OF
SHAREHOLDERS
TO
BE HELD ON FRIDAY, NOVEMBER 15, 2024
TO
OUR SHAREHOLDERS:
The
2024 Annual Meeting of Shareholders (the Annual Meeting) of Electromed, Inc. (the Company) will be
held on Friday, November 15, 2024 at 8:00 a.m. Central Time. This years Annual Meeting will be held as a completely virtual
meeting of shareholders. We believe that a virtual Annual Meeting provides greater access to those who may want to attend
and, therefore, have chosen this over an in-person meeting. You will be able to attend the Annual Meeting virtually, and vote
and submit your questions during the Annual Meeting, via a live webcast by visiting
www.virtualshareholdermeeting.com/ ELMD2024
.
Prior to the Annual Meeting, you will be able to vote at www.proxyvote.com for the purpose of considering and voting upon:
1.
Election of the directors named in the accompanying proxy statement, thereby setting the number of directors at eight;
2.
Ratification of the appointment of RSM US LLP as our independent registered public accounting firm for our fiscal year ending
June 30, 2025;
3.
Approval, on a non-binding and advisory basis, of our executive compensation set forth in the accompanying proxy statement; and
Transaction
of any other business properly brought before the meeting or any adjournment thereof.
The
Board of Directors of the Company has fixed the close of business on September 18, 2024, as the record date for determining the
shareholders entitled to notice of and to vote at the Annual Meeting and any adjournments thereof. The stock transfer books of
the Company will not be closed.
By
order of the Board of Directors,
Kathleen
S. Skarvan
Chair
of the Board
THE
PROMPT SUBMISSION OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM. YOU
MAY VOTE BY MAIL, ONLINE OR BY PHONE IN ACCORDANCE WITH THE INSTRUCTIONS SET FORTH IN THE PROXY CARD, NOTICE OF INTERNET AVAILABILITY
OR OTHER INSTRUCTIONS FROM THE HOLDER OF RECORD.
Important
Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be held on November 15, 2024 The Notice and Proxy
Statement, Annual Report on Form 10-K, and Shareholder Letter are available at
This
proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors (the Board)
of Electromed, Inc., a Minnesota corporation (the Company), for use at the 2024 Annual Meeting of Shareholders of
the Company to be held on Friday, November 15, 2024 at 8:00 a.m. Central Time (the Annual Meeting), and at any adjournment
or postponement thereof. This years Annual Meeting will be held as a completely virtual meeting of shareholders.
You will be able to attend the Annual Meeting virtually and vote and submit your questions during the Annual Meeting, via a live
webcast by visiting
www.virtualshareholdermeeting.com/ELMD2024
.
This
solicitation is being made by mail; however, the Company also may use its officers, directors, and employees (without providing
them with additional compensation) to solicit proxies from shareholders in person or by telephone, facsimile, email, or letter.
Distribution of this proxy statement and the proxy card, or a notice of internet availability, is expected to begin on or about
October 1, 2024.
QUESTIONS
AND ANSWERS ABOUT THE ANNUAL
MEETING AND VOTING
Q:
Why did I receive this proxy statement?
A
:
The Company is soliciting your proxy vote at the Annual Meeting because you were the owner of record of one or more shares of
common stock of the Company at the close of business on September 18, 2024, the record date for the meeting, and are therefore
entitled to vote at the Annual Meeting.
Q:
What is a proxy?
A
:
A proxy is your legal designation of another person or persons (the proxy or proxies, respectively)
to vote on your behalf. By giving your proxy, you are authorizing James L. Cunniff and Bradley M. Nagel, the designated proxies,
the authority to vote your shares of common stock at the Annual Meeting in the manner you indicate on your proxy card. If you
authorize the proxies but do not give directions with respect to any nominee or other proposal, the proxies will vote your shares
as recommended by the Board. The proxies are authorized to vote in their discretion (except as otherwise provided below) if other
matters are properly submitted at the Annual Meeting, or any adjournments or postponements thereof.
Q:
When and where is the Annual Meeting?
A
:
The Annual Meeting will be held on Friday, November 15, 2024. This years Annual Meeting will be held as a completely virtual
meeting of shareholders. You will be able to attend the Annual Meeting virtually, and vote and submit your questions during
the Annual Meeting, via a live webcast by visiting
www.virtualshareholdermeeting.com/ELMD2024
. The Annual Meeting will
commence at 8:00 a.m. Central Time.
Q:
Why hold a virtual Annual Meeting?
A
:
Consistent with recent years, this Annual Meeting will be held as a completely virtual meeting of shareholders.
We believe that a virtual meeting continues to provide greater access to those who may want to attend our Annual Meeting. We ensure
that at our virtual meetings, all attendees are afforded the same rights and opportunities to participate as they would at an
in-person meeting. These procedures include the ability for shareholders to ask questions during the course of the meeting, post
appropriate questions received during the meeting for review by other participants, review our corresponding answers to such questions
on our Investor Relations section of our website at www.smartvest.com as soon as possible after the Annual Meeting
and access technical support staff during the meeting in the event of difficulties arising from the use of the virtual meeting
platform. We evaluate annually the method of holding our Annual Meeting, taking into consideration the above factors as well as
business and market conditions and the proposed agenda items. We believe that holding our Annual Meeting virtually over the internet
is the right approach for our company, as it enables more of our diverse base of shareholders to participate in our Annual Meeting.
3
Q:
What am I voting on?
A
:
You are voting on the following matters:
Proposal
1:
To
elect the directors named in this proxy statement, thereby setting the number of directors
at eight;
Proposal
2:
To
ratify the appointment of RSM US LLP as our independent registered public accounting
firm for our fiscal year ending June 30, 2025 (fiscal 2025); and
Proposal
3:
To
approve, on a non-binding and advisory basis, our executive compensation as set forth
in this proxy statement.
Q:
What does the Board recommend?
A
:
The Board recommends a vote:
FOR
the election of all the directors named in this proxy statement, thereby setting
the number of directors at eight (see Proposal 1);
FOR
the ratification of the appointment of RSM US LLP as our independent registered public
accounting firm for fiscal 2025 (see Proposal 2); and
FOR
the approval, by a non-binding and advisory vote, of our executive compensation as
set forth in this proxy statement (see Proposal 3).
Q:
How many votes do I have?
A
:
On any matter which may properly come before the Annual Meeting, each shareholder entitled to vote thereon will have one vote
for each share of common stock owned of record by such shareholder as of the close of business on September 18, 2024.
Q:
How many shares of common stock may vote at the Annual Meeting?
A
:
At the close of business on the record date, there were 8,404,845 outstanding shares of common stock, each of which is eligible
to cast one vote on matters presented at the Annual Meeting.
Q:
What constitutes a quorum?
A
:
Transaction of business may occur at the Annual Meeting only if a quorum is present. To achieve a quorum, shareholders holding
at least a majority of the Companys issued and outstanding shares of common stock entitled to vote as of the record date
must be present (including electronically) or by proxy at the Annual Meeting. Based on the number of shares outstanding as of
the record date, the presence of 4,202,423 shares will constitute a quorum for the transaction of business on all proposals properly
brought before the Annual Meeting. If you submit a proxy or vote electronically during the Annual Meeting, your shares will be
counted in determining whether a quorum is present at the Annual Meeting. Broker non-votes and abstentions are also counted to
determine a quorum, as discussed below.
4
Q:
What vote is required to approve each of the proposals?
A
:
Provided a quorum is established at the Annual Meeting, each proposal will be subject to the following requirements:
Proposal
1:
Election
of Directors
The nominees receiving the greatest number of votes relative to the votes cast for the
other nominees will be elected, regardless of whether an individual nominee receives
votes from a majority of the quorum of shares represented at the Annual Meeting (whether
electronically in person or by proxy). Election of the eight directors named in this
proxy statement will be deemed shareholder approval of setting the number of directors
at eight. Shareholders are not entitled to cumulate their votes for the election of directors.
Proposal
2:
Ratification
of the Appointment of RSM US LLP as the Companys Independent Registered Public
Accounting Firm for Fiscal 2025
The affirmative vote of the holders of a majority of the shares of common stock
present at the Annual Meeting (whether electronically in person or by proxy) will result
in approval of the proposal to ratify the appointment of RSM US LLP as the Companys
independent registered public accounting firm for fiscal 2025.
Proposal
3:
Advisory
Approval of Executive Compensation
The affirmative vote of the holders of a majority of the shares of common stock
represented at the Annual Meeting (whether electronically in person or by proxy) and
entitled to vote on the proposal will result in the advisory approval of our executive
compensation set forth in this proxy statement. However, this is a non-binding and advisory
vote, which means the votes result is not binding on the Company, our Board or
its Personnel and Compensation Committee. To the extent there is any significant vote
against approval of our executive compensation as disclosed in this proxy statement,
the Personnel and Compensation Committee will evaluate whether any actions are necessary
to address the concerns of shareholders.
Q.
What is the effect of abstentions and withhold votes?
A
:
You may either vote FOR or WITHHOLD authority to vote for each nominee for the Board. If you WITHHOLD authority to vote on any
or all nominees, your vote will have no effect on the outcome of the election.
You
may vote FOR, AGAINST or ABSTAIN on proposals 2 and 3. If you ABSTAIN from voting on proposals 2 or 3, your shares will be deemed
present but will not be deemed to have voted in favor of the proposal, which will have the same effect as a vote AGAINST the proposal.
Q:
What is the effect of broker non-votes?
A
:
Shares that are held by a street name holder (a stockbroker, bank, trust, or other nominee as a custodian) may be
voted by the street name holder on routine matters, such as the number of directors and ratification the appointment
of our independent registered public accounting firm. To vote on non-routine matters, the stockbroker must obtain
shareholder direction. When the street name holder does not obtain direction to vote the shares, the stockbrokers abstention
is referred to as a broker non-vote. Brokers do not have discretion to vote shares for the election of directors,
the advisory vote to approve executive compensation or for any other non-routine matters that may be brought before the meeting.
Accordingly,
if your shares are held in street name and you do not submit voting instructions to your broker,
your shares will not be counted in determining the outcome of these proposals. Brokers will have discretion to vote on the ratification
of the appointment of our independent registered public accounting firm if you do not provide voting instructions.
5
Broker
non-votes will be considered present for quorum purposes at the Annual Meeting. Broker non-votes in connection with the election
of directors are not deemed votes cast, and, since directors are elected by a plurality, will have no effect on
the election. Because broker non-votes are not entitled to vote on non-routine business matters, such as proposals 1 and 3, they
will have no effect on the outcome of the vote on such matters.
Q:
How do I vote my shares?
A
:
If you are a shareholder of record, you may vote your shares at the Annual Meeting using one of the mail, phone or internet methods
described on your notice of internet availability, proxy card or other voting instructions from the holder of record.
Proxy
card
. If you receive a full set of proxy materials, the proxy card is a means by
which you may authorize the voting of your shares of common stock at the Annual Meeting.
The shares of common stock represented by each properly executed proxy card will be voted
at the Annual Meeting in accordance with such shareholders directions. The Company
urges you to specify your choices by marking the appropriate boxes on the proxy card.
After you have marked your choices, please sign and date the proxy card and mail the
proxy card in accordance with the instructions that accompanied it. If you sign and return
the proxy card without specifying your choices, your shares will be voted
FOR
each of the director nominees,
FOR
the ratification of the appointment of our
independent registered public accounting firm for fiscal 2025, and
FOR
the advisory
approval of our executive compensation.
Multiple
proxy cards.
If you receive more than one notice of internet availability, proxy
card or voting instruction card, it likely means that you have multiple accounts with
one or more holders of record. Please be sure to vote all of the shares by following
the instructions on each notice and/or card.
Electronically
during the Annual Meeting.
All shareholders of record as of the record date may vote
electronically during the Annual Meeting. Even if you plan to attend the Annual Meeting
electronically, the Company requests that you vote ahead of time using one of the methods
above.
You
are a street name holder rather than a shareholder of record if your shares are held in the name of
a stockbroker, bank, trust or other nominee as a custodian, and this proxy statement was forwarded to you by that organization.
If you are a street name holder, you must instruct your nominee as to your voting preferences. Please contact your
nominee/custodian to do so. Because a beneficial owner is not the shareholder of record, you may not vote your shares electronically
during the Annual Meeting unless you obtain a legal proxy from the broker, bank, trustee or nominee that holds your shares, giving
you the right to vote the shares electronically during the Annual Meeting.
Q:
Can I change my vote after I have mailed in my proxy card?
A
:
Proxies solicited by the Board may be revoked at any time prior to the Annual Meeting. No specific form of revocation is required.
You may revoke your proxy by:
Voting
electronically during the Annual Meeting;
6
Returning
a later-dated signed proxy card; or
Giving
personal or written notice of the revocation to the inspector of election at the commencement
of the Annual Meeting.
If
your shares are held in street name through a broker or other nominee, you will need to contact that nominee if you wish to change
your voting instructions.
Q:
How will my shares be voted if I do not specify how they should be voted?
A
:
If you are a record holder and authorize the proxies to vote on your behalf, but do not mark choices for a particular proposal,
then the proxies solicited by the Board will be voted in accordance with the Boards recommendation for that proposal, as
set forth in this proxy statement.
Q:
Who can attend and participate in the Annual Meeting?
A:
All shareholders as of the close of business on the record date, or their duly appointed proxies, may attend the virtual Annual
Meeting as well as vote and submit questions during the webcast of the meeting by visiting
www.virtualshareholdermeeting.com/ELMD2024
.
To participate in the Annual Meeting, you will need to provide the 16-digit control number included on your proxy card. If you
do wish to participate in the Annual Meeting, please log on to
www.virtualshareholdermeeting.com/ ELMD2024
at least 15
minutes prior to the start of the Annual Meeting to provide time to register, download the required software, if necessary, and
test your internet connectivity. If you access the Annual Meeting but do not enter your control number, you will be able to listen
to the proceedings, but you will not be able to vote or otherwise participate.
Q:
Who will count the votes?
A
:
All proxies submitted to the Company and all electronic votes cast during the Annual Meeting will be tabulated by Broadridge Financial
Solutions.
Q:
Who is paying for this proxy solicitation?
A
:
The entire cost of this proxy solicitation will be borne by the Company. The cost will include the cost of supplying necessary
additional copies of the solicitation materials for beneficial owners of shares held of record by brokers, dealers, banks and
voting trustees and their nominees and, upon request, the reasonable expenses of such record holders for completing the mailing
of such materials to such beneficial owners.
Q:
How do I nominate a candidate for election as a director at next years annual meeting?
A
:
Nominations for directors are made by the Board upon recommendation by its Nominating and Governance Committee, which is composed
of independent directors. Shareholders may nominate a candidate for director to stand for election at the annual meeting of shareholders
to be held in the fiscal year ending June 30, 2026 (the Fiscal 2026 Annual Meeting), which the Company currently
anticipates will be held in November 2025, by following the procedures explained below in this proxy statement under CORPORATE
GOVERNANCENominating and Governance CommitteeDirector Nominations and contained in the rules and regulations
of the Securities and Exchange Commission (the SEC).
7
Q:
What is a shareholder proposal?
A:
A shareholder proposal is a proposal submitted by a shareholder that, if approved, would recommend or require that the Company
and/or the Board take the proposed action. If you intend to submit a shareholder proposal, the proposal should state as clearly
as possible the course of action that you believe the Company should follow. If your proposal is included in the Companys
proxy statement, then the Company must also provide the means for shareholders to vote on the matter. The deadlines and procedures
for submitting shareholder proposals for the Fiscal 2026 Annual Meeting are explained in the following question and answer. The
Company reserves the right to reject, rule out of order, or take appropriate action regarding any proposal that does not comply
with these and other applicable requirements.
Q:
When are shareholder proposals and director nominations due for the next annual meeting of shareholders?
A
:
In order to be considered for inclusion in the Companys proxy materials, shareholder proposals must be submitted in writing
to the Company no later than June 3, 2025. The Company suggests that proposals for the next annual meeting of shareholders to
be held in 2025 be submitted by certified mail, return receipt requested. The proposal must be in accordance with the provisions
of Rule 14a-8 promulgated by the SEC under the Securities Exchange Act of 1934, as amended (the Exchange Act).
Shareholders
who intend to present a shareholder proposal at the next annual meeting of shareholders without including such proposal in the
Companys proxy materials must provide the Company notice of such proposal no later than August 17, 2025 (90 days prior
to the one-year anniversary of the Annual Meeting). The Company reserves the right to reject, rule out of order, or take appropriate
action regarding any proposal that does not comply with these and other applicable requirements.
Shareholders
who intend to present a director nomination at the next annual meeting of shareholders must provide the Company notice of such
nomination no later than August 17, 2025 (90 days prior to the one-year anniversary of the Annual Meeting) and no earlier than
July 18, 2025 (120 days prior to the one-year anniversary of the Annual Meeting). The Company reserves the right to reject, rule
out of order, or take appropriate action with respect to any nomination that does not comply with these and other applicable requirements.
In
addition to satisfying the foregoing requirements, to comply with the universal proxy rules, shareholders who intend to solicit
proxies in support of director nominees for election at the next annual meeting of shareholders, other than the Companys
nominees, must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act by September 16,
2025 (60 days prior to the one-year anniversary of the Annual Meeting).
If
the Company does not receive notice of a shareholder proposal or director nomination intended to be submitted to the next annual
meeting of shareholders by the dates set forth above, the authorized proxies for such annual meeting may vote on any such proposal
in their discretion without notice of such proposal appearing in such proxy statement.
8
ELECTION
OF
DIRECTORS
(PROPOSAL 1)
The Board is currently composed of eight
directors, all of whom have been nominated for re-election at the Annual Meeting. If elected, each director will hold office
until the next annual meeting of shareholders and until his or her successor is elected and qualified, or until his or her
earlier death, resignation, disqualification or removal. Each of the director nominees has consented to be named in this
proxy statement and to serve, if elected. The Company has no reason to believe that any of the director nominees named below
will be unable or unwilling to serve as director if elected. If for any reason any nominee withdraws or is unable to serve as
director (neither of which is expected at this time), the shares represented by all valid proxies will be voted for the
election of a substitute nominee recommended by the Board or, alternatively, not voted for any nominee.
The Bylaws of the Company, as amended (the Bylaws),
provide that the number of directors shall be determined by the shareholders annually. The Board has recommended that the number
of directors be set at eight. The Board believes that eight directors provide diversity of viewpoints and expertise while allowing
each director to influence the strategic direction of the Company. If each of the eight director nominees named in this proxy statement
are elected at the Annual Meeting, their election will be deemed shareholder approval of setting the number of directors at eight.
Nominees for Election as Directors at the Annual Meeting
The Board has nominated each of the following persons
for election to serve as directors and recommends that shareholders vote
FOR
the election of each such nominee:
Mr. Cunniff is a seasoned executive in the healthcare space with
a direct knowledge of Electromeds business and operations as he currently serves as President and Chief Executive Officer
of Electromed, Inc. Prior to joining Electromed in July of 2023, he served as President and Chief Executive Officer of Provista,
Inc. (2017-2022) and of Denver Solutions, LLC (2015-2017). He has demonstrated success in general management, international, manufacturing,
sales and marketing, finance, human resources, operations, compliance, mergers and acquisitions, and change management. His service
as our current principal executive officer uniquely qualifies him to serve as a member of our Board.
Experience
:
●
President and CEO, Board Member, Electromed, Inc.
●
President and CEO, Provista, Inc.
●
President and CEO, Board Member, Denver Solutions LLC
(d/b/a Leiters Health)
●
Senior Vice President, Americas, Acelity L.P. Inc.
●
President of Multiple Divisions, Stryker Corporation
Education
: BA, Advertising and Business, University
of Illinois Urbana-Champaign; Advanced Management Program, Harvard Business School
9
Mr. Erickson provides a strong perspective
on financing, investment, acquisition and operating strategies, public company regulatory compliance issues, and investor relations.
Mr. Erickson currently serves as President and Chief Executive Officer of Liberty Capital, Inc., which he co-founded in September
2013 to provide capital and advisory services to both pre- and post-commercialization organizations in various industries, including
medical device and technology. Over his 32-year career at Ziegler, he was responsible for developing and executing strategies
to achieve growth through market share gains and acquisitions. Mr. Ericksons significant experience as a board member in
both the public and private sector, and in business operations, financial reporting, and MA activity, qualifies him to serve
as a member of our Board and as the Audit Committee Financial Expert.
Experience
:
●
President and CEO, Liberty Capital, Inc.
●
President and COO, Ziegler, Inc.
●
United States Marine Corps Veteran
●
Auditor and Tax Professional, Baker Tilly US LLP
Education
: BS, Business Administration, University
of Minnesota
Other Credentials
: Certified Public Accountant (Inactive)
Mr. Fluet currently serves as Chief
Operating Officer for Ferring Microbiome Inc. (fka Rebiotix, Inc.), a Ferring Pharmaceuticals company focused on
revolutionizing the treatment of debilitating diseases through microbiome-based research. Since 2016, he has worked at
Rebiotix in both contract and permanent roles, including serving as Chief Business Officer from April 2017 until the
companys acquisition by Ferring Pharmaceuticals in April 2018. Prior to this role at Rebiotix, Mr. Fluet served as
Chief Executive Officer of Urologix, Inc., then a public company and developer of minimally invasive office-based Benign
Prostatic Hyperplasia (BPH) therapies. Mr. Fluets background as a healthcare investor and medical device executive,
including experience in MA transactions, public and private financing, investor relations, business development,
commercial operations, manufacturing operations and financial reporting, qualify him to serve as a member of our Board.
Experience
:
●
COO, Rebiotix, Inc.
●
CEO, Urologix, Inc.
●
Interim CFO, Urologix, Inc.
●
Executive VP and COO, Urologix, Inc.
●
Associate, Sapient Capital Management LLC
Education
: BS, Mechanical Engineering, Stanford University
10
Mr.
Galatowitsch most recently served as a Partner and Medtech practice leader at Guidehouse Consulting, a leading global
provider of consulting services to the public and commercial markets with broad capabilities in management, technology, and
risk consulting. He also co-founded and served as President of Dymedex Consulting, LLC from January 2008 through August 2016
when it was acquired by Navigant up until his retirement in September 2020. He pioneered and provided new-to-the-world
conceptual frameworks for assessing opportunities and driving clinical adoption of disruptive new medical technologies. At
Medtronic, he led and coordinated global market development efforts in Medtronics cardiac rhythm management division.
Mr. Galatowitschs extensive experience in the medical technology management, commercial execution, global market
development, marketing and business strategy, management, strategic planning, consulting, and sales, qualify him to serve as
a member of our Board.
Experience
:
●
Partner, Guidehouse Consulting
●
Co-Founder, President, Dymedex Consulting LLC
●
Senior Director of Strategic Marketing, Medtronic, PLC
●
Marketing and Business Management, 3M Company
Education
: BS, Biomedical Engineering,
Marquette University MBA, Marketing, St. Thomas Opus College of Business
Ms. Skarvan served as our President
and Chief Executive Officer from 2012 until her retirement on June 30, 2023. Prior to Electromed, Ms. Skarvan served as Vice
President of Operations at OEM Fabricators, a leading custom metal fabrication company specializing in building components
(Sep 2011-Oct 2012). In addition, Ms. Skarvan held several positions of increasing responsibility over her 29-year career at
Hutchinson Technology, Inc. and was responsible for a division with annual revenues in excess of $300 million, managing 3,500
employees across RD, marketing, sales, and technical support in five countries. Ms. Skarvans experience as our
former principal executive officer and as a leader of high growth companies, extensive operations and marketing experience,
and track record of identifying strategic priorities and driving the execution of strategies, uniquely qualify her to serve
as member of our Board.
Experience
:
●
President and CEO, Electromed, Inc.
●
VP of Operations, OEM Fabricators
●
SVP and President of the Disk Drive Components Division, Hutchinson Technology,
Inc.
Education
: BA, Mass Communications, St. Cloud
State University
11
Mr. Summers currently serves as the Managing Member of Summers
Value Partners LLC (Summers Value Partners), an alternative investment management firm with a focus on small and
micro-cap companies in the global healthcare sector since March 2018. Prior to that, Mr. Summers was an investment professional
and equity analyst at Janus Henderson Investors, a leading global active asset manager, from 2008 to February 2018, where he specialized
in investing across the global healthcare sector. From 2004 to 2008, Mr. Summers served as the Managing Member of Silvergate Capital
Management LLC, a long/ short healthcare hedge fund that he founded. Mr. Summers began his investment career in 1998 at INVESCO
Funds Group, Inc. Mr. Summers perspective as a significant shareholder of the Company, together with his financial and industry
knowledge, leadership experience in capital and growth equity investing, investment capital markets, and investor relations qualify
him to serve as a member of our Board.
Experience
:
●
Managing Partner, Summers Value Partners LLC
●
Investment and Equity Analyst, Janus Henderson Investors
●
Founder and Portfolio Manager, Silvergate Capital Management LLC
●
Co-Portfolio Manager, INVESCO Funds Group, Inc.
Education
: BS, Business
Administration, University of Wisconsin-Whitewater; MS, Finance, University of Wisconsin-Madison
Other Credentials
:
Chartered Financial Analyst
Ms. Tune currently serves as Managing Partner with Capita3,
an early-stage venture capital fund focused on women-led healthcare startup founders, since January 2019. Ms. Tune was the CFO/COO
for Marani Health, Inc., a leading development stage maternal and fetal health company, from 2020 through February 2024 and is
a former Partner at Thomas, McNerney Partners, where she led and managed an investment portfolio with a primary focus in
healthcare technologies from 2003 to December 2019. Ms. Tunes leadership experience in venture and growth equity investing,
corporate strategy, business development, investment and capital markets, investor relations and finance, sales, marketing and
reimbursement strategies, qualify her to serve as a member of our Board.
Experience
:
●
Managing Partner, Capita3
●
CFO/COO, Marani Health, Inc.
●
Partner, Thomas, McNerney Partners
●
Equity Analyst, Piper Sandler
●
Program Manager, Pfizer
Education
: BS, Biochemistry
and Microbiology, Minnesota State University; MS, Veterinary Microbiology, University of Minnesota MBA, Finance, University
of Minnesota Carlson School of Management
12
Ms. Walsh
currently serves as President and Chief Executive Officer of HealthPartners, an $8.5 billion Minnesota-based non-profit
integrated health system that provides care, health support, insurance coverage, research and education programs. She has
held this position since 2017. Over her 30-year career with HealthPartners, Ms. Walsh held other positions, including as
Executive Vice President and Chief Marketing Officer, from April 2002 to May 2017 and as Senior Vice President and Corporate
Counsel from 1994 to 1999. In her role as President and Chief Executive Officer, Ms. Walsh is responsible for developing the
organizations vision and strategy. She leads a team of approximately 28,000 people, including a multi-specialty group
practice with over 1,800 physicians and 900 advanced practice clinicians, which collectively serve more than 1.3 million
patients in Minnesota and Wisconsin, and 1.7 million members across the country through its health plan, network and
services. Ms. Walshs experience as the top executive at a large healthcare organization in a highly regulated
marketplace, and her extensive knowledge of the healthcare and insurance industry, qualify her to serve as a member of our
Board.
Experience
:
●
President CEO, HealthPartners, Inc.
●
Executive VP CMO, HealthPartners, Inc.
●
SVP Corporate Counsel, HealthPartners, Inc.
Education
: BA, Business Administration
English, University of Kansas; JD, University of Minnesota Law School
REQUIRED VOTE AND BOARD RECOMMENDATION
The Board recommends that you vote
FOR
each
of the nominees to the Board, thereby setting the number of directors at eight. The election of each nominee requires the affirmative
vote of a plurality of the voting power of the shareholders present, whether electronically during the Annual Meeting or by proxy,
and entitled to vote at the Annual Meeting, provided that a quorum is present. Except as otherwise directed, the proxies will vote
all valid proxies for the eight nominees identified above.
13
RATIFICATION
OF THE APPOINTMENT
OF THE COMPANYS
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(PROPOSAL
2)
The
Board, acting on the recommendation of its Audit Committee, has selected RSM US LLP (RSM) as the Companys
independent registered public accounting firm for fiscal 2025. RSM was the Companys independent registered public accounting
firm for the most recently completed fiscal year.
Notwithstanding
its selection of RSM, the Audit Committee, in its discretion, may appoint another independent registered public accounting firm
at any time during the year if the Audit Committee believes that such a change would be in the best interests of the Company and
its shareholders. If the appointment of RSM is not ratified by our shareholders, the Audit Committee may reconsider whether it
should appoint another independent registered public accounting firm.
A
representative of RSM is expected to be present at the Annual Meeting, will have an opportunity to make a statement if he or she
desires to do so, and will be available to respond to appropriate questions.
AUDIT
FEES
The
following table presents fees billed by RSM to the Company for the audit of the Companys annual financial statements, the
review of the Companys interim financial statements, and various other audit and non-audit services provided in connection
with the Companys fiscal year ended June 30, 2024, or fiscal 2024, and the fiscal year ended June 30, 2023,
or fiscal 2023.
CATEGORY
Year
Ended Jun 30,
2024
2023
Audit
Fees
(a)
$248,147
$259,398
Other
Fees
(b)
$33,900
$68,250
Total
$282,047
$327,648
(a)
Includes
the annual audits and quarterly reviews of the Companys financial statements.
(b)
Includes
the Provider Relief Fund audit during fiscal 2023 and review of a registration statement
on Form S-8 relating to the 2023 Plan and filed with the SEC during 2024.
RSM
provided no other services to the Company in fiscal 2024 or fiscal 2023 that are not included above.
AUDIT
COMMITTEE PRE-APPROVAL
Pursuant
to its written charter, the Audit Committee is responsible for pre-approving all audit and permitted non-audit services to be
performed for the Company by its independent registered public accounting firm or any other auditing or accounting firm. During
the year, circumstances may arise that could require the engagement of the independent registered public accounting firm for additional
services not contemplated in the original pre-approval. In those instances, we will obtain pre-approval of the Audit Committee
before engaging the independent registered public accounting firm.
All
audit services and audit-related services incurred during fiscal 2024 and fiscal 2023, as applicable, were pre-approved by our
Audit Committee.
14
REQUIRED
VOTE AND BOARD RECOMMENDATION
The
Board recommends that you vote
FOR
the ratification of the appointment of RSM as the Companys independent
registered public accounting firm for fiscal 2025. Approval of the proposal requires the affirmative vote of a majority of the
voting power of the shareholders present, whether electronically during the Annual Meeting or by proxy, and entitled to vote at
the Annual Meeting, provided that a quorum is present.
ADVISORY
APPROVAL OF EXECUTIVE COMPENSATION
(PROPOSAL
3)
Pursuant
to Section 14A of the Exchange Act, we are seeking a vote of shareholders to approve, on a non-binding, advisory basis, the compensation
of our named executive officers as disclosed in this proxy statement.
We
seek to closely align the interests of our named executive officers with the interests of our shareholders. We designed our compensation
program to reward our named executive officers for their individual performance and contributions to our overall business objectives,
and for achieving and surpassing the financial goals set by our Board upon recommendation of its Personnel and Compensation Committee.
At
our annual meeting of shareholders held in 2023, our executive compensation program was approved on an advisory basis, with approximately
98% of the votes cast in favor of the corresponding proposal. Our Board and its Personnel and Compensation Committee believe that
this vote reflected our shareholders support for the decisions made with respect to the compensation of our named executive
officers for fiscal 2023.
The
vote on this resolution is not intended to address any specific element of compensation. Instead, the vote relates to the overall
compensation of our named executive officers, as described in this proxy statement in accordance with the compensation disclosure
rules of the SEC.
Accordingly,
we ask our shareholders to vote on the following resolution at the Annual Meeting:
RESOLVED,
that the Companys shareholders approve, on a non-binding, advisory basis, the compensation of the named executive officers,
as disclosed in this proxy statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission,
including the summary compensation table and the other related tables and disclosure.
While
the Board and especially the Personnel and Compensation Committee intend to carefully consider the results of the voting on this
proposal when making future decisions regarding executive compensation, the vote is not binding on the Company, the Personnel
and Compensation Committee or the Board and is advisory in nature. To the extent there is any significant vote against this Proposal
3, the Personnel and Compensation Committee will evaluate what actions may be necessary to address our shareholders concerns.
15
REQUIRED
VOTE AND BOARD RECOMMENDATION
The
Board recommends that you vote
FOR
the approval, on a non-binding and advisory basis, of the compensation
of the named executive officers. Approval of the proposal requires the affirmative vote of a majority of the voting power of the
shareholders present, whether electronically during the Annual Meeting or by proxy, and entitled to vote at the Annual Meeting,
provided that a quorum is present. This vote is advisory and is not binding on the Company, the Board or the Personnel and Compensation
Committee.
CORPORATE
GOVERNANCE
DIRECTOR
INDEPENDENCE
Our
Board has determined that each of Mr. Erickson, Mr. Fluet, Mr. Galatowitsch, Mr. Summers, Ms. Tune and Ms. Walsh are independent
directors as defined in the rules of the NYSE American Stock Exchange. None of our directors are related to any other director,
director nominee or executive officer of the Company.
In
determining director independence, the Board evaluated Ms. Walshs employment with HealthPartners because HealthPartners
and certain of its affiliates have been customers of our company. Ms. Walsh was not involved in arranging any transactions with
our company, the transactions were on arms-length terms, she had no material interest in such transactions and the amounts involved
are significantly less than 1% of both our companys and HealthPartners annual revenues. Accordingly, the Board concluded
the transactions with HealthPartners are both beneficial and fair to our company and, if she is elected, would not interfere with
Ms. Walshs ability to exercise independent judgment in carrying out her responsibilities as a member of the Board.
DIRECTOR
ATTENDANCE AT ANNUAL MEETINGS
Directors
attendance at annual meetings can provide shareholders with an opportunity to communicate directly with members of the Board about
matters concerning the Company. The Company encourages all directors to attend the Companys annual meetings (including
by electronic means when available), but it does not have a formal attendance policy. All the Companys then current directors
were present for the annual meeting of shareholders held on November 10, 2023.
BOARD
LEADERSHIP STRUCTURE
Chair
of the Board: Ms. Skarvan
Elected
July 1, 2023
We
have separate individuals serving as Chair of the Board and as Chief Executive Officer because we believe independent directors
and management have different perspectives and roles in strategy development. The Chief Executive Officer is responsible for
setting the strategic direction of the Company and managing the day-to-day leadership and performance of the Company, while
the Chair provides guidance to the Chief Executive Officer, sets the agenda for meetings of the Board and presides over meetings
of the full Board. We believe this structure promotes active participation of the independent directors and strengthens the
role of the Board in fulfilling its oversight responsibility and fiduciary duties to our shareholders while recognizing the
day-to-day management direction of the Company by the Chief Executive Officer.
16
Lead
Independent Director: Ms. Tune
Elected
November 10, 2023
The
independent directors appointed Ms. Tune to serve as lead independent director, primarily because of the current Board Chairs
recent service as an executive officer of the Company. As lead independent director, Ms. Tune presides over executive sessions
among the independent directors and serves as a liaison between the independent directors and management.
RISK
OVERSIGHT
It
is managements responsibility to manage risk and bring to the Boards attention the most material risks to the Company.
The Board has oversight responsibility of the processes established to report and monitor systems for material risks applicable
to the Company. The Audit Committee provides oversight of management with respect to enterprise-wide risk management, which focuses
primarily on risks relating to the Companys ability to maintain appropriate levels of credit and insurance coverage, financial
and accounting risks, and legal and compliance risks, including oversight of internal controls over financial reporting. In addition,
the Personnel and Compensation Committee considers risks related to the attraction and retention of talent and risks relating
to the design of compensation programs and arrangements. The Nominating and Governance Committee considers risks and best practices
relating to corporate governance policies and procedures. The full Board considers strategic risks and opportunities and regularly
receives detailed reports from management and the committees, with respect to their areas of responsibility for risk oversight.
COMPENSATION
RECOUPMENT POLICY
The
Board believes that it is in the best interests of our company and its shareholders to maintain a culture that emphasizes integrity
and accountability and that reinforces our pay-for-performance compensation philosophy. Accordingly, we adopted a compensation
recoupment policy in compliance with Rule 10D-1 of the Securities and Exchange Act of 1934, as amended, the SEC regulations promulgated
thereunder, and the NYSE American rules. Under the policy, our company is required to recover from covered executive officers
on a reasonably prompt basis the amount of any erroneously awarded incentive-based compensation resulting from an accounting restatement
due to the material noncompliance of our company with any financial reporting requirement under the securities laws. The policy
applies to incentive-based compensation received by covered executive officers on or after October 2, 2023.
INSIDER
TRADING POLICY
We
have adopted an insider trading policy that governs the purchase, sale, and other dispositions and transactions in our securities
by our directors, officers and employees, which is reasonably designed to promote compliance with insider trading laws, rules,
and regulations, as well as applicable listing standards.
POLICIES
AS TO HEDGING AND COMPANY SECURITIES
Our
insider trading policy provides that company directors, officers and other employees (and their designees) are prohibited from,
among other things: (a) purchasing Company securities on margin, or otherwise pledging Company securities; (b) short sales of
Company securities (selling securities not owned at the time of sale); (c) buying or selling put or call options or other derivative
securitiesbased on Company securities; (d) purchasing any financial instruments (including prepaid variable forward contracts,
equity swaps, collars and exchange funds) or otherwise engaging in transactions that are designed to or have the effect of hedging
or offsetting any decrease in the market value of equity securities (i) granted to the individual by the Company as part of the
compensation of the individual or (ii) held, directly or indirectly, by the individual; and (e) engaging in limit orders or other
pre-arranged transactions that execute automatically, except for same-day limit orders and approved 10b5-1 plans.
Certain family and household members and other persons or entities whose decisions are directed, influenced or controlled by a
covered person are also subject to the prohibition.
17
BOARD
AND COMMITTEE MEETINGS
During
fiscal 2024, the Board held five meetings. In addition, directors frequently communicate with each other informally and, when
appropriate, take action by written consent of all directors, or in the case of an action that does not require shareholder approval,
the number of directors required to take the action at a meeting, as permitted by the Minnesota Business Corporation Act and the
Companys Articles of Incorporation, as amended. Each director attended at least 75% of the meetings of the Board and any
committee on which they served during the most recently completed fiscal year.
COMMITTEE
MEMBERSHIP
The
Board has four standing committees: the Audit Committee, the Personnel and Compensation Committee, the Nominating and Governance
Committee, and the Finance and Strategy Committee. The following table sets forth the current membership of each of the Companys
standing committees:
DIRECTOR
Audit
Nominating
and
Governance
Personnel
and
Compensation
Finance
and
Strategy
Independent
Director
James
L. Cunniff
Stan
K. Erickson
✓
Gregory
J. Fluet
✓
Joseph
L. Galatowitsch
✓
Kathleen
S. Skarvan
Andrew
J. Summers
✓
Kathleen
A. Tune
✓
Andrea
M. Walsh
✓
Member
Chair
Vice Chair
Our
Board has evaluated independence for the members of each applicable committee in accordance with NYSE American rules and, with
respect to the members of the Audit Committee, Rule 10A-3 of the Exchange Act. The membership and responsibilities of each applicable
committee complies with the listing requirements of the NYSE American.
AUDIT
COMMITTEE
Under
its charter, the Audit Committee must consist of at least three independent directors and its composition must otherwise satisfy
NYSE American and SEC requirements applicable to audit committees. The principal functions of the Audit Committee are to evaluate
and review the Companys financial reporting process and internal control systems. The Audit Committee evaluates the independence
of the Companys independent registered public accounting firm, recommends selection of the Companys independent
registered public accounting firm to the Board, approves fees to be paid to our independent registered public accounting firm,
and reviews the Companys financial statements with management and the independent registered public accounting firm. The
Audit Committee has recommended to the Board the appointment of RSM US LLP to serve as the Companys independent registered
public accounting firm for fiscal 2025. The Audit Committee held five meetings during the most recently completed fiscal year.
18
Our
Board has affirmatively determined that each of the members of the committee satisfy the additional independence requirements
for audit committee members pursuant to the NYSE American LLC Company Guide and the rules and regulations promulgated by the SEC.
The Board has further determined that Mr. Erickson qualifies as an audit committee financial expert as defined by
Item 407(d)(5) of Regulation S-K under the Securities Act of 1933, as amended.
Report
of the Audit Committee
In
accordance with its written charter adopted by the Board, as amended, the Audit Committee assists the Board with fulfilling its
oversight responsibility regarding the quality and integrity of the accounting, auditing and financial reporting practices of
the Company. A copy of the Audit Committee charter, which has been adopted by the Board and further describes the role and responsibilities
of the Audit Committee, is available online in the Investor Relations section of our website at
www.smartvest.com
.
In
discharging its duties, the Audit Committee:
1.
reviewed
and discussed the audited financial statements included in the annual report on Form
10-K for fiscal 2024 with management;
2.
discussed
with the independent auditors the matters required to be discussed by the applicable
requirements of the Public Company Accounting Oversight Board (PCAOB) and
the SEC; and
3.
received
the written disclosures and the letter from the independent accountant required by applicable
requirements of the PCAOB regarding the independent accountants communications
with the Audit Committee concerning independence and discussed with the independent accountant
matters relating to their independence.
Based
upon the review and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements
be included in the Companys annual report on Form 10-K for the fiscal year ended June 30, 2024, for filing with the SEC.
Audit
Committee
Stan
K. Erickson (Chair)
Gregory
J. Fluet
Kathleen
A. Tune
19
PERSONNEL
AND COMPENSATION COMMITTEE
Our
Board has affirmatively determined that each of the members of the committee satisfy the additional independence requirements
for compensation committee members pursuant to the NYSE American LLC Company Guide.
The
Board has authorized the Personnel and Compensation Committee to, among other duties, develop the Companys compensation
strategy, review compensation policies and plans for the Companys executive officers, and administer the Companys
compensation plans. Neither the Personnel and Compensation Committee nor the Board engages compensation consultants to assist
in determining or recommending the amount or form of compensation for executive officers or directors. The Chief Executive Officer
may give the committee input in regard to the compensation of the Chief Financial Officer, but the Chief Executive Officer is
not present during voting or deliberations relating to his own compensation. The committee operates under a written charter approved
by the Board, a copy of which is available in the Investor Relations section of our website at
www.smartvest.com
.
The Personnel and Compensation Committee held three meetings during the most recently completed fiscal year.
NOMINATING
AND GOVERNANCE COMMITTEE
Our
Nominating and Governance Committee is responsible for oversight of our corporate governance policies and procedures, our codes
of conduct and other corporate governance matters. In addition, our Nominating and Governance Committee makes recommendations
to our Board regarding candidates for directorships and the size and composition of our Board and its committees. The Nominating
and Governance Committee acts pursuant to a written charter approved by the Board, a copy of which is available in the Investor
Relations section of our website at
www.smartvest.com
. The Nominating and Governance Committee held three meetings
during the most recently completed fiscal year.
Director
Nominations
The
Nominating and Governance Committee is responsible for identifying and recommending director nominees for nomination by the full
Board. Shareholders may recommend a nominee to be considered by the Nominating and Governance Committee by submitting a written
proposal to the Chair of the Board, at 500 Sixth Avenue Northwest, New Prague, Minnesota 56071. Any notice of a shareholder nomination
must satisfy the timing and content requirements of the Bylaws and must be accompanied by a written statement from the proposed
nominee consenting to being named as a nominee and to serve as a director if elected.
When
selecting candidates for recommendation to the Board, the Nominating and Governance Committee considers the attributes of the
candidates and the needs of the Board and reviews all candidates in the same manner, regardless of the source of the recommendation.
In evaluating director nominees, the Nominating and Governance Committee seeks to confirm that candidates meet certain minimum
qualifications, including being able to read and understand basic financial statements, being familiar with our business and industry,
having high moral character and mature judgment, and possessing the ability to work collegially with others. In addition, factors
such as the following are also considered:
ability
to exercise his or her best business judgment in the interest of all shareholders;
20
willingness
to adhere to the Companys Code of Ethics and Business Conduct;
ability
to devote sufficient time to the business of the Board and the Boards standing
committees;
knowledge,
skills and experience in general areas of business, finance, management and public service;
experience
in domestic and international business matters;
familiarity
with legal and regulatory requirements;
needs
of the Board with respect to particular talent and experience;
appropriate
size and diversity of the Board in experience, skill, background, fields of expertise
and viewpoint;
familiarity
with accounting rules and practices; and
the
desire to balance the benefit of continuity with the periodic integration of a fresh
perspective provided by a new member.
The
Nominating and Governance Committee does not have a formal diversity policy at this time. However, as summarized above, the Nominating
and Governance Committee seeks to nominate candidates with a diverse range of knowledge, experience, skills, expertise, and other
qualities that will contribute to the overall effectiveness of the Board. Moreover, potential nominees are not discriminated against
on the basis of sex, religion, national origin, sexual orientation, disability or other basis proscribed by law or inconsistent
with the goals of the Companys Code of Ethics and Business Conduct.
Finance
and Strategy Committee
The
Finance and Strategy Committee was established in accordance with the terms of the Cooperation Agreement described under the heading
Certain Relationships and Related-Party Transactions below. The Board has authorized the Finance and Strategy Committee
to, among other things, review the Companys financial plans and objectives and advise the Board with respect to the Companys
strategic direction and business development activities to enhance shareholder value. This includes, but is not limited to, strategic
growth plans, long-term business plans, shareholder engagement, capital allocation, and buy-side or sell-side mergers or acquisitions.
The Finance and Strategy Committee acts pursuant to a written charter approved by the Board.
SECURITY
HOLDER
COMMUNICATIONS TO THE BOARD OF DIRECTORS
Any
shareholder wishing to communicate with the Board should send the communication, in written form, to the President and Chief Executive
Officer of the Company at the Companys principal place of business at 500 Sixth Avenue Northwest, New Prague, Minnesota
56071. The President and Chief Executive Officer will promptly send the communication to each member of the Board identified on
the communication.
21
SECURITY
OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information with respect to the beneficial ownership of our outstanding common stock as of
September 18, 2024 by (i) each of our named executive officers; (ii) each of our directors; (iii) all of our executive officers,
directors and director nominees as a group; and (iv) each beneficial owner of 5% or more of our outstanding common stock. Ownership
percentages are based on 8,404,845 shares of common stock outstanding as of the close of business on September 18, 2024.
Beneficial
ownership is determined in accordance with the rules of the SEC. To our knowledge and subject to applicable community property
laws, each of the holders of common stock listed below has sole voting and investment power as to the common stock owned unless
otherwise noted. The table below includes the number of shares of common stock underlying options that are exercisable within
60 days from September 18, 2024. Except as otherwise noted below, the address for each director or officer listed in the table
is c/o Electromed, Inc., 500 Sixth Avenue Northwest, New Prague, Minnesota 56071.
NAME
Amount
and Nature of
Percentage
of
Beneficial
Ownership
Outstanding
Shares
Executive
Officers and Directors
James
L. Cunniff
80,588
(a)
*
Bradley
M. Nagel
21,900
(b)
*
Stan
K. Erickson
34,317
(c)
*
Gregory
J. Fluet
15,000
*
Joseph
L. Galatowitsch
9,000
*
Kathleen
S. Skarvan
482,083
(d)
5.5%
Andrew
J. Summers
556,490
(e)
6.6%
Kathleen
A. Tune
9,000
*
Andrea
M. Walsh
12,000
*
Current
executive officers, directors, and nominees as a group (9 persons)
1,220,378
(f)
14.0%
Other
Beneficial Owners
The
Radoff Family Foundation Bradley L. Radoff
2727 Kirby Dr, Unit 29L; Houston, TX 77098
786,944
(g)
9.4%
Stephen
H. Craney
25340 Sandpiper Lane; Winona,
MN 55987
587,901
(h)
7.0%
Summers
Value Partners LLC
90
Madison St, Suite 303; Denver, CO 80206
556,490
(e)
6.6%
GJ
Winn Family LLLP Dr. George H. Winn
27541
Country Hollows Ln; New Prague, MN 56071
552,408
(i)
6.6%
*
Less
than 1%
a.
Includes
10,000 shares of common stock held directly by Mr. Cunniff, 15,900 restricted stock units
scheduled to vest in three equal annual installments on each of the first business days
of September 2025, 2026, and 2027, and options to purchase 54,688 shares of common stock.
b.
Includes
7,200 shares of common stock held directly by Mr. Nagel, 4,400 restricted stock units
scheduled to vest in three equal annual installments
starting
on June 30, 2024, 5,500 restricted stock units scheduled to vest in three equal annual installments on each of the first business
days of September 2025, 2026 and 2027, and options to purchase 4,801 shares of common stock exercisable on June 30, 2024.
22
c.
Includes
32,817 shares of common stock held directly by Mr. Erickson and 1,500 shares of common
stock held by Liberty Capital, LP, of which Mr. Erickson is the founder, President and
Chief Executive Officer.
d.
Includes
145,449 shares of common stock held directly by Ms. Skarvan, options to purchase 250,700
shares of common stock, and 85,934 shares of common stock held by a trust, of which Ms.
Skarvan is a co-trustee and beneficiary.
e.
Summers
Value Partners LLC and Mr. Summers share voting and dispositive power for 550,490 shares.
Of those shares Summers Value Fund LP and its general partner, Summers Value Partners
GP LLC, share voting and dispositive power for 351,921 shares. SVP Deal Fund 1 LP and
its general partner, SVP Deal Fund 1 GP LLC, share voting and dispositive power for 198,569
shares. Summers Value Partners LLC is the investment firm and Mr. Summers is the managing
member for each of the foregoing funds.
f.
Includes
options to purchase 310,189 shares of common stock.
g.
Based
on Schedule 13G filed with the SEC on February 13, 2024, reporting holdings as of December
31, 2023. Includes 621,944 shares of common stock owned directly by Bradley L. Radoff
and 165,000 shares of common stock owned by The Radoff Family Foundation, of which Mr.
Radoff serves as a director.
h.
Based
on Form 4 filed with the SEC on May 19, 2021, reporting holdings as of May 14, 2021.
i.
Based
on Schedule 13G/A filed with the SEC on February 14, 2024, reporting holdings as of December
31, 2023. Includes 106,105 shares of common stock held directly by Dr. George H. Winn
and 446,303 shares of common stock owned by GJ Winn Family LLLP, of which George
H. Winn and his spouse, Joan C. Winn, are general partners and share voting and dispositive
power.
EXECUTIVE
COMPENSATION
The
following discussion describes the compensation awarded to the following executive officers of the Company during fiscal 2024
(collectively, our named executive officers):
James
L. Cunniff, President and Chief Executive Officer, and
Bradley
M. Nagel, Chief Financial Officer
EXECUTIVE
COMPENSATION COMPONENTS FOR FISCAL 2024
We
provide a compensation package to our executive officers, including base salary, cash incentive compensation, certain perquisites
and participation in benefit arrangements that are generally available to all salaried employees, such as health and retirement
plans. We have also periodically awarded our executive officers with long-term equity incentive grants in the form of restricted
shares of common stock, performance stock units, or stock options.
Base
Salary
Salaries
for our executive officers are determined and paid on a fiscal-year basis and, for fiscal 2024, were established by our Personnel
and Compensation Committee in accordance with the terms of each executive officers employment agreement with the Company.
For fiscal 2024, Mr. Cunniff had a base annual salary of $500,000 and Mr. Nagel had a base annual salary of $280,300. To provide
its recommendations regarding base salaries, the Personnel and Compensation Committee reviews individual performance and our operating
results and considers compensation data for medical device manufacturing companies located in the Midwest. The Personnel and Compensation
Committee also considers the Chief Executive Officers recommendations as to compensation for the Companys other
executive officers. The Personnel and Compensation Committee uses a subjective process to set base salaries and does not specifically
weigh any factors. Based upon the information reviewed, the Personnel and Compensation Committee makes a recommendation with respect
to compensation for the Companys executive officers. The Board sets compensation for each executive officer based on the
recommendation of the committee. The Chief Executive Officer is not present during the committees deliberations or voting
on his compensation.
23
Cash
Incentive Compensation
The
Personnel and Compensation Committee established a Fiscal Year 2024 Officer Bonus Plan (the 2024 Bonus Plan) for
officers of the Company, including our named executive officers. The 2024 Bonus Plan was effective for fiscal 2024 and provided
an opportunity for each participant to earn an annual cash bonus based on Company revenue growth and earnings before taxes (EBT)
versus the fiscal year ended June 30, 2023. Under the 2024 Bonus Plan, the Personnel and Compensation Committee established minimum
revenue growth of 9.0% and target revenue growth of 15% for fiscal 2024. The Personnel and Compensation Committee established
minimum EBT growth of 10% and target EBT growth of 35% for fiscal 2024. Target payouts based on percentages of base salaries were
set at 50.0% for our Chief Executive Officer and 30.0% for our Chief Financial Officer. The following summarizes the potential
payment scenarios that were available under the 2024 Bonus Plan:
Company
revenue or EBT growth below minimum performance would not have resulted in any payouts
under the 2024 Bonus Plan. Revenue growth will be weighted at 67% and EBT growth weighted
at 33%.
Company
revenue and EBT growth between minimum and target performance would have resulted in
a potential bonus payout starting at 43% and increasing up to a total of 100% of the
participants respective target payout depending on the growth mix between revenue
and EBT.
Company
revenue and EBT growth above target performance resulted in a bonus payout equal to 100%
or more of the participants respective target payout up to 250% of target payout.
Bonus
payout under the 2024 Bonus Plan for fiscal 2024 was 116% as the Board, upon recommendation of its Personnel and Compensation
Committee, determined that the revenue growth and EBT targets were exceeded, amounting to payment to Mr. Cunniff of $290,000,
and payment to Mr. Nagel of $97,544, under the 2024 Bonus Plan.
Equity
Compensation
Our
Board and its Personnel and Compensation Committee believe that stock-based compensation promotes the creation of long-term shareholder
value and aligns the interests of our management with the interests of our shareholders by ensuring that a portion of their total
compensation is at risk and changes in value with the value of our securities. As employees of our company, each of our applicable
named executive officers is eligible to receive equity compensation awards pursuant to our 2023 Equity Incentive Plan (2023
Plan).
During
fiscal 2024, we granted a combination of performance stock units and options to purchase shares of common stock to Mr. Cunniff
and a combination of restricted shares of common stock and options to purchase additional shares of common stock to Mr. Nagel,
and all awards were granted pursuant to the 2017 Plan or pursuant to inducement awards containing terms substantially similar
to the 2017 Plan.
On
July 1, 2023, Mr. Cunniff received 175,000 performance stock units and an option to purchase up to 175,000 shares of common stock,
both of which were granted as inducement awards in reliance on the employment inducement award exemption under the NYSE American
LLC Company Guide Section 711(a). The options have an exercise price of $10.71 per share, which represented the fair market
value of our common stock as of the date of grant, and are scheduled to expire after 10 years. The performance stock units
are eligible to vest and settle into shares of our common stock on a 1-for-1 basis with respect to 87,500 shares upon achieving
a total shareholder return of 50% and the remaining 87,500 shares upon a total shareholder return of 100%, in each case within
four years of the date of grant. Total shareholder return is evaluated from the initial grant date through the end of each subsequent
fiscal quarter using the three-month volume-weighted average closing prices in accordance with the underlying award agreement.
The options were scheduled to vest 25% on a one-year cliff and 1/16th quarterly thereafter.
24
On
July 1, 2023, Mr. Nagel received 6,600 restricted shares of common stock and an option to purchase up to 7,900 shares of common
stock. The foregoing options had an exercise price of $10.71 per share, which represents the fair market value of
our common stock as of the date of grant and were scheduled to expire after 10 years. The options and shares of restricted stock
were scheduled to vest in substantially equal increments on June 30 in each of 2024, 2025 and 2026. On November 10, 2023, Mr.
Nagel received an option to purchase up to 6,500 shares of common stock with an exercise price of $10.25 per share, which represents
the fair market value of our common stock as of the date of grant and were scheduled to expire after 10 years. The
November 2023 options were scheduled to vest in substantially equal increments on June 30 in each of 2024, 2025, and 2026.
The
2017 Plan and the 2023 Plan generally provide for double trigger acceleration of awards in connection with a change
in control (as defined in the applicable plan), whereupon the vesting of awards will accelerate if such awards are assumed or
replaced with an equivalent award by the resulting entity and the participant incurs an involuntary termination other than for
cause within 12 months following a change in control. With respect to awards that are not assumed or replaced by the successor
entity, all awards will become fully vested and exercisable upon the change in control of the Company, all awards will become
fully vested and exercisable; however, under Mr. Cunniffs performance stock unit agreement, the performance period will
end upon the change in control and the number of performance stock units will vest based on actual performance over the shortened
performance period.
Perquisites
and Other Benefits
Our
named executive officers are eligible to participate in the same benefit plans generally available to all of our full-time employees,
which include group health, disability and life insurance plans and matching contributions of up to 4% of employee deferrals to
our 401(k) plan.
In
addition, Mr. Nagels employment agreement provides for a monthly automobile allowance. We believe that providing this perquisite
to our Chief Financial Officer is beneficial because it improves our ability to retain qualified leaders and is consistent with
the practice of similarly sized companies in our industry.
Compensation
Actions for Fiscal 2024
Effective
July 1, 2023, Mr. Cunniff commenced services as our President and Chief Executive Officer. In June 2023, the Personnel and Compensation
Committee increased the base salary of our Chief Financial Officer from $250,000 to $280,300 for fiscal 2024.
Employment
Agreements
In
fiscal year 2024, we were party to employment agreements with both our named executive officers.
James
L. Cunniff
On
July 1, 2023, the Company entered into an employment agreement with Mr. Cunniff to serve as the Companys Chief Executive
Officer and President, as well as a member of the Board. Mr. Cunniffs employment agreement is effective for a period of
two years ending in July 2025, subject to automatic one-year extensions on the anniversary of the effective date of the agreement
unless terminated in advance in accordance with its terms. Notwithstanding the foregoing, the applicable term will automatically
expire on the one-year anniversary of a change of control (as defined in the employment agreement).
25
Pursuant
to his employment agreement, Mr. Cunniff is entitled to an initial annual base salary of $500,000 and is eligible for a merit-based
increase on or about each successive July 1, subject to final approval by our Board. The employment agreement also provides that
Mr. Cunniff is eligible to earn an annualized cash bonus as determined by our Board, based on a target amount of 50% of his annualized
base salary for the fiscal year ending June 30, 2024. Future annual cash bonus opportunities will be determined by the Board in
its discretion. Pursuant to a relocation letter agreement dated May 22, 2023, relocation assistance of up to $30,000 was also
provided to Mr. Cunniff, which is required to be repaid if his employment is termination by us for cause or by him without good
reason within 12 months after his start date.
Mr.
Cunniffs employment agreement provides for an initial grant of (a) 175,000 performance-based restricted stock units and
(b) options to purchase 175,000 shares of common stock, each pursuant to our then-current stock incentive plan or on substantially
similar terms in the form of inducement awards to be granted as soon as practicable on or after his first day of employment.
If
Mr. Cunniffs employment is terminated by us for any reason other than for cause or death or disability, or
is terminated by him for good reason (each as defined in Mr. Cunniffs employment agreement) (a qualifying
termination), and in either case the termination of employment occurs before a change of control, then he will be eligible
to (A) receive an amount equal to one times his annualized base salary as of the termination date, payable in substantially equal
installments over a period of 12 months, (B) receive an amount equal to his target annual bonus based on the Companys performance
for the fiscal year in which the termination date occurs, prorated based on the portion of the applicable fiscal year that had
elapsed prior to the termination date and payable within 75 days of the termination date, and (C) continue to participate in the
Companys group health plan at the same cost to Mr. Cunniff as if he remained employed for up to 12 months.
If
a qualifying termination occurs within 12 months after a change of control, then Mr. Cunniff will instead be eligible to (A) receive
an amount equal to the sum of (i) one times his annualized base salary as of the termination date, plus (ii) 100% of his target
annual bonus for the fiscal year in which the termination date occurs based on Mr. Cunniffs individual performance, payable
in a lump sum within 75 days of the termination date, and (B) continue to participate in the Companys group health plan
at the same cost to Mr. Cunniff as if he remained employed for up to 12 months.
All
of the severance benefits described above are contingent on Mr. Cunniff signing and not revoking a release of claims and remaining
in strict compliance with the terms of his employment agreement and his non-competition, non-solicitation, and confidentiality
agreement with the Company and any other written agreement between him and the Company. In addition to the specific terms summarized
above, Mr. Cunniff is eligible to participate in the other compensation and benefits programs generally available to Company employees.
Bradley
M. Nagel
On
November 14, 2022, the Company entered into an employment agreement with Mr. Nagel to serve as the Companys Chief Financial
Officer. Mr. Nagels employment agreement is effective for a period of two years ending in November 2024, subject to automatic
one-year extensions on the anniversaries of the effective date of the agreement unless terminated in advance in accordance with
its terms. Notwithstanding the foregoing, the applicable term will automatically expire on the one-year anniversary of a change
of control (as defined in the applicable employment agreement).
26
Pursuant
to his employment agreement, Mr. Nagel is entitled to an annual base salary of $250,000 ($280,300 in fiscal year 2024) and is
eligible for a merit-based increase on or about each successive July 1, subject to final approval by our Board. The employment
agreement also provides that Mr. Nagel is eligible to earn an annualized cash bonus as determined by our Board, based on a target
amount of 30% of his annualized base salary for the fiscal year ending June 30, 2024. Future annual cash bonus opportunities will
be determined by the Board in its discretion. In addition, Mr. Nagel receives an automobile allowance of $600 per month.
If
Mr. Nagels employment agreement is terminated by us for any reason other than for cause or due to death or
disability, or is terminated by him for good reason (each as defined in Mr. Nagels employment agreement)
(a qualifying termination), and in either case the termination of employment occurs before a change of control,
then he will be eligible to (A) receive an amount equal to the sum of (i) one times his annualized base salary as of the termination
date, plus (ii) 100% of his target annual bonus based on his individual performance for the fiscal year in which the termination
date occurs, plus (iii) a pro rata portion of the same target annual bonus amount based on the Companys performance and
based on the portion of the applicable fiscal year that had elapsed prior to the termination date, payable in substantially equal
installments over a period of 12 months, and (B) continue to participate in the Companys group health plan at the same
cost to Mr. Nagel as if he remained employed for up to 12 months.
If
a qualifying termination occurs within 12 months after a change of control, then Mr. Nagel will instead be eligible to (A) receive
an amount equal to (i) 1.5 times his annualized base salary as of the termination date, plus (ii) 150% of his target annual bonus
based on his individual performance for the fiscal year in which the termination date occurs, plus (iii) a pro rata portion of
the same target annual bonus amount based on the Companys performance and based on the portion of the fiscal year that
had then elapsed prior to the termination date, payable in a lump sum with 75 days after the termination date, (B) continue to
participate in the Companys group health plan at the same cost to Mr. Nagel as if he remained employed for up to 18 months,
and (C) to receive accelerated vesting of all time-based equity awards that are outstanding on the date of termination and all
performance-based equity awards will remain outstanding and eligible to vest in accordance with their terms.
All
of the severance benefits described above are contingent on Mr. Nagel signing and not revoking a release of claims and remaining
in strict compliance with the terms of his employment agreement and his existing non-competition, non-solicitation, and confidentiality
agreement with the Company and any other written agreement between him and the Company. In addition to the specific terms summarized
above, Mr. Nagel is eligible to participate in the other compensation and benefits programs generally available to Company employees.
Compensation
Actions for Fiscal 2025
In
August 2024, our Board, upon the recommendation of Personnel and Compensation Committee increased the base salary of the Chief
Executive Officer to $520,000 for fiscal 2025. The Committee and the Board also increased the base salary of the Chief Financial
Officer to $325,000 and the target bonus percentage to 40% for fiscal 2025.
27
Summary
Compensation Table
The
following table provides information regarding the compensation earned during fiscal 2024 and fiscal 2023 by our named executive
officers:
Name
and principal
position
Fiscal
Year
Salary
($)
(a)
Stock
Awards
($)
(b)
Option
Awards
($)
(c)
Non-equity
incentive plan
compensation
($)
(d)
All
other
compensation
($)
(e)
Total
($)
James
L. Cunniff
President and Chief
Executive Officer
(f)
2024
500,000
1,151,500
(g)
1,012,645
290,000
48,462
3,002,607
Bradley
M. Nagel
Chief Financial Officer
2024
280,300
70,686
82,220
97,544
22,153
552,903
2023
144,231
50,250
-
50,000
9,832
254,313
a.
Amounts
shown are not reduced to reflect the named executive officers elections, if any,
to contribute portions of their salaries to 401(k) plans.
b.
Amounts
represent grant date fair value of awards granted during the fiscal year, as computed
in accordance with Financial Accounting Standards Board (FASB) Accounting
Standards Codification (ASC) Topic 718 (ASC 718). The assumptions
used to determine the value of the awards are discussed in Note 8 to our consolidated
financial statements, included in the Companys annual report on Form 10-K for
fiscal 2024, filed with the SEC on August 27, 2024.
c.
Amounts
represent grant date fair value of awards granted during the fiscal year, as computed
in accordance with Financial Accounting Standards Board (FASB) Accounting
Standards Codification (ASC) Topic 718 (ASC 718). The assumptions
used to determine the value of the awards are discussed in Note 8 to our consolidated
financial statements, included in the Companys annual report on Form 10-K for
fiscal 2024, filed with the SEC on August 27, 2024.
d.
Represents
payments made under the 2024 Bonus Plan. See the discussion under Executive Compensation
Components for Fiscal 2024 Cash Incentive Compensation above with respect
to the 2024 Bonus Plan.
e.
For
fiscal year 2024, this column includes Company matches to 401(k) plans of $18,462 for
Mr. Cunniff and $13,453 for Mr. Nagel with respect to fiscal 2024; and $5,540 for Mr.
Nagel with respect to fiscal 2023. The differences in these amounts and the sum of the
other compensation elements included in this table reflect the amount of relocation assistance
paid to Mr. Cunniff, of auto allowances paid for Mr. Nagel, as well as employer HSA match
paid to Mr. Nagel
f.
Mr.
Cunniff commenced service as President and Chief Executive Officer on July 1, 2023
g.
Performance-based
restricted stock units eligible to vest and settle into shares of common stock on a 1-for-1
basis with respect to 87,500 shares upon achieving a total shareholder return in excess
of 50% and 100%, in each case measured from the initial grant date of July 1, 2023. See
Executive Compensation Components for Fiscal 2024Equity Compensation
above for additional detail regarding vesting conditions.
Outstanding
Equity Awards at June 30, 2024
The
following table sets forth certain information regarding equity awards granted to our named executive officers and outstanding
as of June 30, 2024:
Option
Awards
Stock
Awards (RSA/PSU)
Name
Grant
Date
Number
of
securities
underlying
unexercised
options (#)
Exercisable
Number
of
securities
underlying
unexercised
options (#)
Unexercisable
Option
exercise
price ($)
Option
expiration
date
Number
of
shares or
units of stock
that had not
vested (#)
Market
value
of shares or
units of stock
that had not
vested
(a)
($)
James
L. Cunniff
07/01/2023
175,000
(b,c)
10.71
07/01/2033
07/01/2023
175,000
(c,d)
2,630,250
Bradley
M. Nagel
07/01/2023
4,400
(e)
66,132
07/01/2023
2,634
5,266
(e)
10.71
07/01/2033
11/10/2023
2,167
4,333
(e)
10.25
11/10/2033
a.
Equals
the number of unvested restricted shares of common stock or unvested shares of performance
stock units multiplied by $15.03, the fair market value of our common stock on June 28,
2024, the last trading day of fiscal 2024, as reported by the NYSE American.
b.
Scheduled
to vest 25% on July 1, 2024 and 1/16th every quarter thereafter. See Executive
Compensation Components for Fiscal 2024Equity Compensation above for additional
detail regarding vesting conditions.
c.
Granted
as an inducement award in reliance on the employment inducement award exemption under
the NYSE American LLC Company Guide Section 711(a).
d.
Vesting
is tied to the achievement of total shareholder return, refer to Note 8 of Form 10-K
for further details.
e.
Scheduled
to vest in substantially equal parts on June 30, 2025 and June 30, 2026.
28
Pay
Versus Performance Table
The
following table sets forth additional compensation information of our principal executive officers (PEO) and averaged
compensation information for our other named executive officers (Other NEOs) along with total shareholder return
(TSR) and net income for fiscal 2024, 2023 and 2022.
Fiscal
Year
Summary
Compensation
Table Total for PEOs
(a)
($)
Compensation
Actually
Paid to PEOs
(b)
($)
Average
Summary
Compensation
Table Total for
Other NEOs
(a)
($)
Average
Compensation
Actually Paid
to Other
NEOs
(b)
($)
Value
of Initial
Fixed $100
Investment
Based on TSR
(c)
($)
Net
Income ($
in thousands)
James
L.
Cunniff
(PEO 1)
Kathleen
S.
Skarvan
(PEO 2)
James
L.
Cunniff
(PEO 1)
Kathleen
S. Skarvan
(PEO
2)
2024
$3,002,607
-
$4,396,790
-
$552,903
$607,362
$133.13
$5,150
2023
-
$1,076,956
-
$857,968
$394,344
$291,508
$97.43
$3,166
2022
-
$958,145
-
$612,997
$331,071
$269,064
$85.39
$2,305
a.
James
L. Cunniff (PEO 1) served as President and Chief Executive Office for fiscal 2024 and
Kathleen S. Skarvan (PEO 2) served as President and Chief Executive Officer of the Company
for fiscal 2023 and fiscal 2022. The Other NEOs consisted of Bradley M. Nagel for fiscal
2024, Christopher G.
Holland and Bradley M. Nagel for fiscal 2023, and Christopher G. Holland, Michael J. MacCourt, and Michelle C. Wirtz for fiscal
2022.
b.
None
of our named executive officers participate in a pension plan; therefore, no adjustment
from the Summary Compensation Table (SCT) total related to pension value
was made. A reconciliation of Total Compensation from the SCT to Compensation Actually
Paid to our PEO and our Other NEOs (as an average) is shown below:
2024
Adjustments
PEO
1
($)
PEO
2
($)
Average
of
Other NEOs
($)
Total
Compensation from SCT
3,002,607
-
552,903
(Subtraction):
SCT amounts of Stock and Option awards
(2,164,145)
-
(152,906)
Addition:
Fair value as of the end of the covered fiscal year of all awards granted during the covered fiscal year that are outstanding
and unvested as of the end of the covered fiscal year
3,558,328
-
153,512
Addition
(Subtraction): Amount equal to the difference in fair value from the end of the prior fiscal year to the end of the covered
fiscal year of any awards granted in any prior fiscal year that are outstanding and unvested as of the end of the covered
fiscal year
-
-
-
Addition:
Fair value as of the vesting date, for awards that are granted and vest in the same year
-
-
54,803
Addition
(Subtraction): Amount equal to the difference in fair value from the end of the prior fiscal year to the vesting date of any
awards granted in any prior fiscal year for which all applicable vesting conditions were satisfied at the end of or during
the covered fiscal year
-
-
(950)
(Subtraction):
Amount equal to the fair value at the end of the prior fiscal year for any awards granted in any prior fiscal year that fail
to meet the applicable vesting conditions during the covered fiscal year
-
-
-
Addition:
Dividends or other earnings paid on stock or option awards in the covered year prior to vesting if not otherwise included
in the total compensation for the covered year
-
-
-
Compensation
Actually Paid (as calculated)
4,396,790
-
607,362
c.
TSR
as calculated based on a fixed investment of one hundred dollars measured from the market
close on June 30, 2021 (the last trading day of fiscal 2021) through and including the
end of the fiscal year for each year reported in the table.
29
Relationship
between Pay and Performance
The
charts shown below present a graphical comparison of CAP to our PEO and the average CAP to our other NEOs set forth in the Pay
versus Performance Table above, as compared against the following performance measures: our (1) total shareholder returns and
(2) net income.
1.
Total
shareholder return in the above chart reflects the cumulative return of $100 as if invested on June 30, 2021, including reinvestment
of any dividends.
30
DIRECTOR
COMPENSATION
The
fiscal 2024 director compensation program provided non-employee directors with a combination of cash and shares of restricted
stock for each such director, depending on committee service and leadership roles held during fiscal 2024.
The
Personnel and Compensation Committee conducts periodic reviews of the compensation of non-employee directors. For fiscal 2024,
an analysis of both total director compensation and the mix of cash and equity compensation was provided by management of the
Company based on available market data. In light of the data presented, the committee recommended, and the Board approved, the
following compensation arrangements for directors, which became effective as of the quarter ended December 31, 2023:
Director
Compensation Element
Amount
Payable
Annual
Cash Retainer(s)
(a)
Board Member
$35,000
Board Chair
$30,000
Lead Independent Director
$22,500
Audit Committee Chair
$15,000
Personnel and Compensation Committee Chair
$10,000
Nominating and Governance Committee Chair
$7,000
Finance and Strategy Committee Chair
$7,000
Audit Committee Member
$5,000
Personnel and Compensation Committee Member
$5,000
Nominating and Governance Committee Member
$2,000
Finance and Strategy Committee Member
$2,000
Annual
Equity Award
(b)
3,000
Shares
a.
All
amounts paid in quarterly installments each representing 25% of the total annual retainer
and may be pro-rated for any partial service as a director or in any committee or leadership
role.
b.
To
be issued on or about the date of the applicable years annual meeting of shareholders
or as soon as practicable thereafter in the form of shares of restricted stock schedule
to vest in full on the six-month anniversary of the date of grant.
31
The
following table provides information regarding compensation paid to and earned by non-employee directors during fiscal 2024:
Non-Employee
Director
Stock
Awards ($)
(a)
Fees
Earned or
Paid in Cash ($)
Total
($)
Stan
K. Erickson
$31,320
$52,000
$83,320
Gregory
J. Fluet
$31,320
$49,000
$80,320
Joseph
L. Galatowitsch
$31,320
$42,000
$73,320
Kathleen
S. Skarvan
$31,320
$65,000
$96,320
Andrew
J. Summers
$31,320
$42,333
$73,653
Kathleen
A. Tune
$31,320
$65,333
$96,653
Andrea
M. Walsh
$31,320
$47,000
$78,320
Lee
A. Jones
(b)
-
$31,375
$31,375
a.
Amounts
represent grant-date fair value of 3,000 shares of restricted stock awarded on December
1, 2023 and computed in accordance with FASB ASC 718. See Note 8, Share-Based Payments,
to our audited consolidated financial statements included in our annual report on Form
10-K for fiscal 2024 for a description of our accounting for these awards and the assumptions
used in valuing the awards. All shares vested six months after the date of grant.
b.
Ms.
Jones ceased to serve as a director upon the expiration of her term expired on November
10, 2023. She was paid $31,375 throughout fiscal 2024 for her services.
EQUITY
COMPENSATION PLAN INFORMATION
The
following table provides information concerning equity compensation arrangements as of June 30, 2024:
Plan
Category
Number
of securities
to be issued
upon exercise of
outstanding options,
warrants and rights
Weighted-average
exercise price of
outstanding options,
warrants and rights
Number
of securities remaining
available for future issuance
under equity compensation
plans
Equity
compensation plans
approved by security holders
460,073
(a)
$7.65
per share
1,031,734
(b)
Equity
compensation plans not
approved by security holders
175,000
(c)
$10.71
per share
N/A
Total
635,073
$8.49
per share
1,031,734
a.
Consisted
of 458,973 share underlying options granted and outstanding under the 2017 Plan and prior
plans and 1,100 shares underlying options granted under the 2023 Plan.
b.
Consisted
of shares of our common stock available for future awards under the 2023 Plan. No further
awards are authorized for grant under the 2017, 2014 or 2012 Plans.
c.
Consisted
of 175,000 shares underlying options outstanding pursuant to inducement grants during
fiscal 2024.
32
CERTAIN
RELATIONSHIPS
AND RELATED-PARTY TRANSACTIONS
The
following is a summary of transactions since July 1, 2022 to which Electromed has been a party and in which the amount involved
exceeded $120,000, and in which any of our directors, executive officers, or beneficial owners of more than 5% of our capital
stock had or will have a direct or indirect material interest, other than the compensation arrangements that are described under
the heading Executive Compensation: Employment Agreements above.
Vendor
Arrangement
The
Company uses a parts supplier whose founder and president was a director of the Company through November 12, 2021. The former
director has remained a beneficial owner of greater than 5% of the Companys outstanding common stock through June 30, 2024.
The Company made payments to the supplier of $2,051,000 and $1,857,000 during fiscal year 2024 and 2023, respectively. Amounts
due to the supplier were $18,000 and $247,000 on June 30, 2024 and June 30 2023 respectively, which were included in accounts
payable and other accrued liabilities on the Balance Sheets.
Cooperation
Agreement
As
previously reported, on July 25, 2022 the Company entered into a Cooperation Agreement (the Cooperation Agreement)
with Summers Value Partners LLC and certain of its affiliates signatory thereto (collectively, Summers Value). As
of that date, Summers Value beneficially owned approximately 6.1% of the outstanding shares of our common stock. In connection
with the Cooperation Agreement, the Company agreed to elect Mr. Summers to the Board effective as of July 25, 2022, and agreed
to nominate him for election to the Board at our annual meeting of shareholders that was held on November 11, 2022. In addition,
the Cooperation Agreement provided for director replacement rights during the standstill period described below, provided that
Summers Value maintained beneficial ownership of at least 3.0% of the Companys then-outstanding common stock. Mr. Summers
was also required to resign his directorship if Summers Values beneficial ownership fell below that threshold during the
same period. The Cooperation Agreement also included, among other provisions, certain standstill commitments by Summers Value,
including but not limited to restrictions on Summers Values ability to (i) engage in any solicitation of proxies or consents,
(ii) encourage any person to submit nominees in furtherance of a contested solicitation for the election or removal of directors,
(iii) submit any proposal for consideration by shareholders of the Company at any annual or special meeting of shareholders or
(iv) seek further representation on the Board. These restrictions applied during a standstill period that terminated on July 14,
2023. The Cooperation Agreement further provided that during the standstill period Summers Value would vote, subject to certain
exceptions, (i) for all directors nominated by the Board for election at any annual or special meeting and (ii) in accordance
with the recommendation of the Board on any other proposals or other business (other than certain extraordinary transactions)
that came before any annual or special meeting.
33
Related
Person Transaction Approval Policy
Pursuant
to its charter, our Audit Committee is responsible for reviewing and approving in advance any related party transaction, which
consists of any transaction or series of transactions that occur during a fiscal year for which:
the
amounts involved exceeded the lesser of $120,000 or one percent of the average of our
total assets at the end of the last two completed fiscal years; and
a
director, nominee for director, executive officer, beneficial owner of more than 5% of
any class of our voting securities or any member of their immediate families had or will
have a direct or indirect material interest.
Our
Board, through its Audit Committee, maintains a written Related Person Transaction Approval Policy. The policy provides that the
Audit Committee will analyze the following factors, in addition to any other factors the Committee deems appropriate, in determining
whether to approve a related person transaction: (i) whether the transaction is material to the Company; (ii) the nature of the
related persons interest in the transaction including any role the related person played in arranging the transaction;
(iii) whether the transaction would impair the judgment of a director or executive officer to act in the best interests of the
Company and our shareholders; and (iv) whether the terms are fair to the Company. A related person transaction will only be approved
by the Audit Committee if it determines that the transaction is beneficial to the Company and the terms of the related person
transaction are fair to the Company. If a member of the Audit Committee is a related party with respect to a transaction under
review, he or she is required to abstain from voting on the approval of the transaction.
OTHER
MATTERS
The
Board knows of no other matters which may be brought before the Annual Meeting other than those set forth in this Proxy Statement.
If any other business is presented at the Annual Meeting on which a vote may properly be taken, the proxy holders will vote on
such business in accordance with their best judgment.
HOUSEHOLDING
We
have adopted a procedure approved by the SEC called householding, by which certain shareholders who do not participate
in electronic delivery of proxy materials but who have the same address and appear to be members of the same family receive only
one copy of our annual report, proxy statement and shareholder letter. Each shareholder participating in householding continues
to receive a separate proxy card. Householding reduces both the environmental impact of our annual meetings and our mailing and
printing expenses.
If
you or another shareholder with whom you share an address currently receive multiple copies of our annual report, proxy
statement, and/or shareholder letter, or if you hold shares in more than one account, but would like to receive only a single
copy of materials for your household, then please contact Broadridge Financial Solutions, Inc. by calling (866) 540-7095 or
by writing to Broadridge Householding Department, 51 Mercedes Way, Edgewood, New York 1171. If you currently participate in
householding and would prefer to receive separate copies of materials for fiscal 2024 and the Annual Meeting, then please
contact us in the manner described above and you will receive additional copies, free of charge and promptly upon receipt of
your request.
34
ADDITIONAL
INFORMATION
Our
annual report on Form 10-K for fiscal 2024, as filed with the SEC, is available on the SECs website, www.sec.gov, and our
corporate website, www.smartvest.com, under Investor Relations. A copy of the annual report on Form 10-K will be
sent to any shareholder without charge upon written request addressed to the attention of our President and Chief Executive Officer
at 500 Sixth Avenue Northwest, New Prague, Minnesota 56071. Additional copies of the annual report on Form 10-K, this proxy statement
and the accompanying form of proxy may be obtained by sending a written request to the attention of our President and Chief Executive
Officer, at the Companys address noted above. Copies of exhibits to the annual report on Form 10-K may be obtained upon
payment to us of the reasonable expense incurred in providing such exhibits.
35
ELECTROMED,
INC.
500
SIXTH AVENUE NW
NEW
PRAGUE, MN 56071
VOTE
BY INTERNET
Before
The Meeting
- Go to
www.proxyvote.com
or scan the QR Barcode above
Use
the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 p.m. Eastern
Time on November 14, 2024. Have your proxy card in hand when you access the web site and follow the instructions to obtain
your records and to create an electronic voting instruction form.
During
The Meeting
- Go to
www.virtualshareholdermeeting.com/ELMD2024
You
may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked
by the arrow available and follow the instructions.
VOTE
BY PHONE - 1-800-690-6903
Use
any touch-tone telephone to transmit your voting instructions. Vote by 11:59 p.m. Eastern Time on November 14, 2024. Have
your proxy card in hand when you call and then follow the instructions.
VOTE
BY MAIL
Mark,
sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing,
c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE
OR BLACK INK AS FOLLOWS:
V57111-P18401
KEEP
THIS PORTION FOR YOUR RECORDS
STYLE="text-align: center; padding-top: 5pt; padding-bottom: 5pt">
THIS
PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
DETACH AND RETURN THIS
PORTION ONLY
ELECTROMED, INC.
For
All
Withhold
All
For All
Except
To withhold
authority to vote for any individual nominee(s), mark For All Except and write the number(s) of the nominee(s) on the line
below.
The
Board of Directors recommends you vote FOR the following nominees:
1.
Election
of Directors, thereby setting the number of directors at eight.
☐
☐
☐
Nominees:
01)James L. Cunniff
05)Kathleen
S. Skarvan
02)Stan K. Erickson
06)Andrew
J. Summers
03)Gregory J. Fluet
07)Kathleen
A. Tune
04)Joseph
L. Galatowitsch
08)Andrea
M. Walsh
The Board of Directors recommends
you vote FOR proposals 2 and 3.
For
Against
Abstain
2.
To ratify
appointment of RSM US LLP as our independent registered public accounting firm.
☐
☐
☐
3.
To approve, on a non-binding and advisory
basis, our executive compensation.
☐
☐
☐
NOTE:
At their discretion, the proxies are authorized to vote on any other business properly brought before the meeting or any adjournment thereof.
Please
sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please
give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership,
please sign in full corporate or partnership name by authorized officer.
Signature [PLEASE SIGN WITHIN BOX]
Date
Signature (Joint Owners)
Date
Important Notice
Regarding the Availability of Proxy Materials for the Annual Meeting:
The
Annual Report on Form 10-K and Notice and Proxy Statement and Shareholder Letter are available at
www.proxyvote.com.
V57112-P18401
ELECTROMED,
INC.
Annual
Meeting of Shareholders
November
15, 2024 8:00 AM, CST
This
proxy is solicited on behalf of the Board of Directors
The
shareholder(s) hereby appoint(s) James L. Cunniff and Bradley M. Nagel, or either of
them, as proxies, each with the power to appoint her substitute, and hereby authorize(s)
them to represent and to vote, as designated on the reverse side of this ballot, all
of the shares of Common Stock that the shareholder(s) is/are entitled to vote at the
Annual Meeting of Shareholders to be held on November 15, 2024 virtually at www.virtualshareholdermeeting.com/ELMD2024,
and any adjournment or postponement thereof. This proxy, when properly executed, will
be voted as directed. But if no direction is given, it will be voted FOR all nominees
and proposals set forth in Items 1, 2, and 3.
The
proxies cannot vote these shares unless you vote by Internet or telephone or you sign
this card on the reverse side and return it.
Continued
and to be signed on reverse side
TABLE OF CONTENTS
No information found
* THE VALUE IS THE MARKET VALUE AS OF THE LAST DAY OF THE QUARTER FOR
WHICH
THE 13F WAS FILED.
FUND
NUMBER OF SHARES
VALUE ($)
PUT OR CALL
Directors of Electromed, Inc. - as per the
latest proxy Beta
Insider Ownership of Electromed, Inc.
company Beta
Owner
Position
Direct Shares
Indirect Shares
AI Insights
Summary Financials of Electromed, Inc.
Beta
(We are using algorithms to extract and display detailed data. This is a hard problem and we are working continuously to classify data in an accurate and useful manner.)
