August 22, 2019 Brian Baker Hand-delivered Re: Employment Agreement with Dynatronics Corporation Dear Brian,
Exhibit 10.2
August
22, 2019
Xxxxx
Xxxxx
Hand-delivered
Re:
Employment Agreement with Dynatronics Corporation
Dear
Xxxxx,
This
letter (this “Agreement”) sets forth
the terms of your employment as Chief Executive Officer of
Dynatronics Corporation, a Utah corporation (the
“Company”).
Your employment under this Agreement is conditioned on your
satisfactory completion of certain requirements, as more fully
explained below.
Agreement:
Subject
to the following terms and conditions, it is agreed as
follows:
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Duties:
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In your capacity as Chief Executive Officer, you will perform
duties and responsibilities that are commensurate with this
position as the Company’s principal executive officer, as
well as such other duties as may be assigned to you from time to
time. You will report directly to the Chairman of the
Board of Directors of the Company (the
“Board”). You will also serve as a member of the
Board, for no additional compensation. You will have direct
supervisory responsibility for and receive reports from the
Company’s executive officers. You agree to devote your full
business time, attention and best efforts to the performance of
your duties and to the furtherance of the Company’s
interests. Notwithstanding the foregoing, nothing in this letter
shall preclude you, from devoting reasonable periods of time to
charitable and community activities, and managing personal
investment assets, provided that none of these activities
interferes with the performance of your duties hereunder or creates
a conflict of interest in the judgment of the Board. The policy of
the Company is that all outside board of director service, including charitable
and community activities, be pre-approved by the Board. The
Board’s approval of this Agreement will include its consent
for your service on the boards
of directors of the corporations, if any, indicated in the
attached Schedule
I, “Approved Directorships”.
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Location:
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The
Company’s principal executive offices are currently located
in Salt Lake City, Utah. However, your office will be located in
Eagan, Minnesota. Your duties will require you to be onsite
regularly at our Eagan, Minnesota office and to travel periodically
to our other facilities, including Salt Lake City. The Company will
not provide for an office or administrative staff except at one of
its existing locations.
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Start
Date:
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Subject
to satisfaction of all of the conditions described in this
Agreement, your employment as Chief Executive Officer by the
Company will commence on August 26, 2019 (the “Start
Date”).
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Base
Salary:
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In
consideration of your services, you will be paid an annual base
salary of $275,000 per year, payable in accordance with the
standard payroll practices of the Company and subject to all
withholdings and deductions as required by law.
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1
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Annual
Bonus:
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During
your employment, you will be eligible to receive an annual bonus,
payable at such times and in such amounts, as determined by the
Compensation Committee of the Board (“Compensation
Committee”), with a maximum payout opportunity of $100,000.
Actual payments will be determined based on a combination of
Company results and individual performance against the applicable
quantitative and qualitative performance goals established by the
Compensation Committee. Any annual bonus with respect to a
particular fiscal year will be paid the earlier of the date on
which such bonuses are paid to other executives of the Company for
the same fiscal period or a date which is within three (3) months
following the end of the fiscal year for which the bonus is earned.
You must remain continuously employed through the bonus payment
date to be eligible to receive an annual bonus payment for a
particular fiscal year. Your first annual bonus will be payable
after the completion of the fiscal year ending June 30,
2020.
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Equity
Grants:
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At the
next regularly scheduled meeting of the Compensation Committee
following your Start Date, the Compensation Committee will consider
a grant to you of an equity award in the form of (1) restricted
stock units (“RSUs”) for 50,000 shares, and (2) a stock
option for the purchase of 50,000 shares of common stock. The value
of the RSUs will be based on the market price of the
Company’s common stock on the date of grant. The value of the
stock options will be based on a grant date fair value generally
estimated using a Black-Scholes or similar model; the exercise
price of the options will be based on the market price of the
Company’s common stock on the date of grant. The initial
equity award above shall vest in equal amounts of twenty-five
percent (25%) each on the first, second, third and fourth
anniversaries of the date of grant of such award. In addition, for
each full fiscal year of employment, you will be eligible to
receive annual equity awards, as determined by the Compensation
Committee, in the form of RSUs, valued at $100,000, with such
grants to vest fifty percent (50%) on the date of grant and fifty
percent (50%) on the first anniversary of the date of grant. The
actual number of shares included in any future equity awards
hereunder and all other terms and conditions applicable to each
such award shall be determined by the Compensation Committee. The
value of such equity awards will be determined based on the market
price of the Company’s common stock on the date of grant of
such awards. Equity awards will be subject to the terms and
conditions of the Company’s 2015 Equity Incentive Award Plan,
the 2018 Equity Incentive Plan, or any successor plan adopted by
the Company pursuant to which such awards may be made, and the
applicable award agreement.
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Benefits
and Perquisites:
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You
will be eligible to participate in the employee benefit plans and
programs generally available to the Company’s senior
executives, as outlined in the current “Dynatronics Benefits
Guide” which is attached as Exhibit A and incorporated herein
by reference, subject to the terms and conditions of such plans and
programs. You will also be entitled to the fringe benefits and
perquisites that may be made available from time to time to other
top executives of the Company at the discretion of the Compensation
Committee, in accordance with and subject to the eligibility and
provisions of such plans and programs. The Company reserves the
right to amend, modify or terminate any of its benefit plans or
programs at any time and for any reason.
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Tax
Withholdings:
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All
forms of compensation paid to you as an employee of the Company
shall be less all applicable withholdings.
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Expenses:
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You
will be entitled to reimbursement for reasonable and necessary
out-of-pocket business and travel expenses (including economy
airfare, and reasonable hotel accommodations while travelling away
from your principal residence, which (within three (3) months of
this letter) is expected to be in Minnesota) incurred by you in
connection with the performance of your duties in accordance with
the Company’s expense reimbursement policies and
procedures.
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Relocation
Expenses:
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You
will be entitled to reimbursement of your actual, documented
reasonable relocation expenses related to your move from your
residence in Utah to your new residence in or around Eagan,
Minnesota in an amount up to $25,000.
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Term;
At Will Employee:
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Your
employment will be for no specific period of time. Rather, your
employment will be at-will, meaning that you or the Company may
terminate the employment relationship at any time, with or without
Cause (as defined below), and with or without notice and for any
reason or no particular reason. Although your compensation and
benefits may change from time to time, the at-will nature of your
employment may only be changed by an express written agreement
signed by an authorized officer of the Company.
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Insurance;
Indemnification:
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You
will be covered under the Company’s Directors and Officers
Liability policy. In addition, Utah corporation law and the
Company’s articles of incorporation and bylaws, each as
amended, provide certain indemnification rights and limitation of
liability for officers and directors of the Company performing
their duties in good faith. In addition, the Company has entered
into indemnification agreements with its Board and certain of its
executive officers.
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Securities
and Exchange Commission Regulations:
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As an
executive officer of a public company, you will be subject to rules
and regulations of the Securities and Exchange Commission
(“SEC”) and the Nasdaq Stock Exchange
(“NASDAQ”), including requirements that you report your
beneficial ownership of and trading activity involving the
Company’s equity securities and file reports with the SEC. We
will provide training on these requirements and assist you in
complying with all regulations. These regulations limit when you
may trade our securities. In addition, we are required to include
information regarding you and your education and professional
background to the SEC and NASDAQ. You will be required to comply
with these regulations. A copy of the Company’s Xxxxxxx
Xxxxxxx Policy is attached hereto as Exhibit B. This Agreement, and
your employment hereunder, are conditioned, among other things,
upon your representation and warranty that you are not under any
disciplinary bar or restriction from the SEC, NASDAQ or any other
regulatory agency from serving as an executive officer of a public
company.
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Representations;
Prior Restrictions and Covenants:
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Upon
execution of this Agreement you represent that you have read and
understood, and that you accept all of the terms of employment as
provided in this Agreement, that you have not relied on any
agreements or representations, express or implied, that are not set
forth expressly in this Agreement, and that this Agreement
supersedes all prior and contemporaneous understandings,
agreements, representations and warranties, both written and oral,
with respect to the subject matter of this Agreement.
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2
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Confidentiality
and Non-Competition Agreement:
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As a
condition of employment, you will be required to sign an agreement
that will: (i) restrict your ability to be employed by a competitor
of the Company during and for one year following termination of
your employment, and (ii) prohibit your solicitation of the
Company’s customers and employees during your employment and
for a period of two years following termination of your employment.
The form of such agreement, an “Agreement Regarding
Confidential Information, Ownership of Inventions, Non-Competition,
Customer Non-Solicitation, and Employee Non-Solicitation Covenants
and Acknowledgment of At-Will Employment”
(“Confidentiality Agreement”) is attached hereto as
Exhibit C and by this reference incorporated in and made a part
hereof.
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Termination
Without Cause:
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Notwithstanding
that your employment with the Company is “at will”, if
we terminate your employment during the first twelve (12) months
for any reason other than for Cause, you will be entitled to cash
severance in an amount equal to ninety (90) days of your
then-current annual base salary. In addition, fifty percent (50%)
of the initial equity grant previously made to you will vest
immediately upon your termination, subject to your execution, and
non-revocation, of a release of claims in a form provided by the
Company. “Cause” shall mean: (i) failure to perform
(other than any such failure resulting from incapacity due to
physical or mental illness) to the reasonable satisfaction of the
Company your duties and responsibilities assigned by the Board
which failure continues, in the reasonable judgment of the Board,
for more than fifteen (15) days following written notice of such
failure; (ii) failure to comply with any valid and legal directive
of the Board, which failure is not cured within fifteen (15) days
of notice thereof; (iii) engagement in dishonesty, illegal conduct,
or gross misconduct, which is, in each case, injurious to the
Company or its affiliates; (iv) embezzlement, misappropriation, or
fraud, whether or not related to your employment with the Company;
(v) conviction of or plea of guilty or nolo contendere to a crime
that constitutes a felony (or state law equivalent) or a crime that
constitutes a misdemeanor involving moral turpitude; (vi) breach of
the Confidentiality Agreement to be entered into by you, unless
such breach is cured pursuant to the terms of such agreement; (vii)
material breach of any material obligation under this or any other
written agreement between you and the Company which continues
without cure for a period of fifteen (15) days following notice
thereof; or (viii) any material failure to comply with the
Company’s policies or rules, as they may be in effect from
time to time during the term of your employment through your
willful misconduct or negligence.
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Change
in Control:
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Upon a
Change in Control following the Start Date, the provisions of the
Change in Control Addendum (“Change in Control
Addendum”), attached as Exhibit D and by this reference
incorporated herein, shall apply.
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Section
409A and Section 280G:
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Payments
in event of termination, including in the event of a Change in
Control, shall be subject to applicable tax law and regulations,
including, without limitation, Section 409A and Section 280G of the
Internal Revenue Code, as amended, as provided in the release
agreement to be executed at the time of termination, provided, that
we mutually agree to cooperate to minimize the amount of tax
payable by both you and the Company in connection with such
payments.
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Clawback:
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Any
incentive-based or other compensation, paid to you under this
Agreement or any other agreement or arrangement with the Company
which is subject to recovery under any law, government regulation,
or stock exchange listing requirement, will be subject to such
deductions and clawback as may be required to be made pursuant to
such law, government regulation, or stock exchange listing
requirement (whether currently in existence or later adopted) or
any policy established by the Company pursuant to any such law,
government regulation or stock exchange listing
requirement.
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Governing
Law, Severability, Modification, Execution:
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This
Agreement shall be governed by the laws of the State of Utah,
without regard to conflict of law principles. In the event any of
the provisions hereof (including any portion thereof) are held by a
court of competent jurisdiction to be invalid, illegal, void or
otherwise unenforceable, the remaining provisions shall remain
enforceable to the fullest extent permitted by law. No supplement,
modification or amendment shall be binding unless executed in
writing by both you and the Company. No waiver of any provision
shall be binding unless in writing signed by the party against whom
enforcement of the waiver is sought, and no such waiver shall
operate as a waiver of any other provisions hereof (whether or not
similar), nor shall such waiver constitute a continuing
waiver.
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Your
employment under this Agreement is contingent upon the following
conditions precedent, each of which must be completed to the
satisfaction of the Company if not expressly waived in advance by
the Company in writing:
3
1. Supplementation, as
necessary, of applicable U.S. right to work documentation on file
with the Company (including, for example, Form I-9 and referenced
documentation verifying your identity and work
authorization).
2. Continued
compliance with Company employment testing including drug screening
and, if reasonably required, satisfactory completion of a
background investigation, for which the required notice and consent
forms will be provided to you.
3. Your execution of
the Company’s (A) Agreement Regarding Confidential
Information, Ownership of Inventions, Non-Competition, Customer
Non-Solicitation, and Employee Non-Solicitation Covenants and
Acknowledgment of At-Will Employment, (B) Xxxxxxx Xxxxxxx Policy
Acknowledgement, (C) Officer/Director Questionnaire, (D) Change of
Control Addendum, and (E) Indemnification Agreement.
4. Final approval of
the Board of all terms and conditions of your employment
hereunder.
5. Your execution of
this Agreement before the close of business on August 26,
2019.
Please
sign below and return a copy of this Agreement to me.
DYNATRONICS CORPORATION
Xxxx X.
Xxxxxxx,
Chairman of the Board of Directors
Accepted and Agreed
__________________________________________
Xxxxx
Xxxxx
Date:
August 22, 2019
Exhibits to Employment Agreement
Exhibit A
–
Dynatronics
Benefits Guide 2018
Exhibit B
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Dynatronics Xxxxxxx
Xxxxxxx Policy and Acknowledgement (to be executed by
Executive)
Exhibit C
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Form of Agreement
Regarding Confidential Information, Ownership of Inventions,
Non-Competition, Customer Non-Solicitation, and Employee
Non-Solicitation Covenants and Acknowledgment of At-Will Employment
(to be executed by Executive)
Exhibit D
–
Form of Change in
Control Addendum (to be executed by Executive)
Exhibit E
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Form of
Indemnification Agreement (to be executed by
Executive)
Exhibit F
–
2019 Dynatronics
Corporation Officer and Director Questionnaire (to be completed by
Executive)
Schedule I to Employment Agreement
Approved Directorships
