EMPLOYMENT
AGREEMENT
THIS EMPLOYMENT AGREEMENT
(this " Agreement ") executed
and effective the 1st day of March 2009 (the " Effective
Date "), by and between DYNATRONICS CORPORATION, a Utah
corporation having its principal place of business in Salt Lake
City, Utah (the " Company "), and LARRY K. BEARDALL, a
resident of Utah (the “ Executive ”).
R E C I T A L S:
A.
The Company desires to retain
the services of the Executive, presently a shareholder, officer and
director of the Company, and the Executive desires to render such
services, upon the terms and conditions contained
herein.
B.
The Compensation Committee of the
Board of Directors of the Company (the " Board " or “
Board of Directors ”), by appropriate resolutions,
authorized the employment of the Executive as provided for in this
Agreement. Reference to the “ Compensation
Committee ” in this Agreement shall mean the Compensation
Committee of the Board as the same may from time to time be
constituted or, if such committee shall for any reason cease to
function then the Board or any other committee of the Board filling
the role of the Compensation Committee.
C.
The Parties acknowledge that
this Agreement is intended as an interim arrangement. The Parties
intend to negotiate and enter into a long-term agreement for
Executive’s continuing employment to be effective on or
before January 1, 2010.
A G R E E M E N T:
NOW, THEREFORE, in consideration of the
covenants contained herein, the above recitals and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DUTIES
1.01
Duties . The Company hereby employs the
Executive, and the Executive hereby accepts employment, as the
Company's Executive Vice President Sales & Marketing upon the
terms and conditions contained herein. The Executive will exercise
the authority and assume the responsibilities: (i) specified in the
Company's Bylaws; (ii) of an Executive Vice President of a
corporation of the size and nature of the Company; and (iii)
prescribed by the Board from time to time, with the current
description set forth in Exhibit A, attached hereto and by
reference made a part hereof. During the Contract Term of this
Agreement, the Board shall continue to nominate Executive for
re-election to the Board of Directors of the
Company. The Board shall use its reasonable best efforts
to cause the Executive to remain as a Director during the entire
Contract Term as defined under Article II. Executive shall not
receive compensation for his service as a director except as
provided by this Agreement.
1.02
Other Business . During the Contract Term, and
excluding any periods of vacation, sick leave or disability to
which the Executive is entitled, the Executive agrees to devote his
full attention and time to the business and affairs of the Company
and, to the extent necessary to discharge the duties assigned to
him hereunder, to use his best efforts to perform faithfully and
efficiently such duties. Notwithstanding the foregoing, but subject
to (i) the advance approval of the Board of Directors, and (ii) the
provisions of Article VI hereof, the Executive shall be entitled to
serve on the board of directors of up to two (2) public
companies other than the Company and a reasonable number of
privately held companies including companies operated or controlled
by the Executive or a relative or family member of the
Executive.
ARTICLE II
TERM OF AGREEMENT
The initial term of this Agreement shall
commence on the Effective Date and shall terminate at 11:59 p.m.
Mountain Standard Time on December 31, 2009 (the " Initial
Contract Term ") unless sooner terminated
hereunder. Thereafter, the term of this Agreement shall
be automatically renewed for successive one-year terms (each a
“ Renewal Contract Term ”) without action by
either party; provided, however, that either party may terminate
its obligations hereunder at the end of any Renewal Contract Term
by giving the other party written notice of termination at least 60
days and no more than 180 days before the end of said Renewal
Contract Term. The Initial Contract Term and any Renewal
Contract Terms are hereinafter collectively referred to as the
“ Contract Term .”
ARTICLE III
COMPENSATION
During the Contract Term, the Company shall pay,
or cause to be paid to the Executive in cash in accordance with the
normal payroll practices of the Company for senior executive
officers (including deductions, withholdings and collections as
required by law), the following:
3.01
Annual Base Salary . At the Effective Date,
Executive’s annual base salary (" Annual Base Salary
") is equal to One Hundred and Fifty-two Thousand Dollars
($152,000). During the Contract Term, the Compensation
Committee will set Executive’s salary in the Compensation
Committee’s sole discretion. Notwithstanding the
foregoing, in the event of a Change of Control (as defined in
Article V, below), Executive’s Annual Base Salary shall be
increased annually on July 1 of each remaining year in the Contract
Term at an amount equal to the greater of five percent (5%) of the
Annual Base Salary in the preceding year or an amount determined by
the Compensation Committee.
3.02
Quarterly Bonus . A cash bonus (the “ Quarterly
Bonus ”) shall be paid quarterly to Executive in an
amount determined by the Compensation Committee based on and from
the Pre-Tax Operating Profits of the Company. For
purposes of this Agreement, “ Pre-Tax Operating
Profits ” shall mean the income of the Company before
taxes and shall exclude extraordinary items such as the gain on the
sale of assets or the recognition of gains or losses not associated
with operations. For purposes of this Agreement, the Compensation
Committee shall have sole discretion in determining whether an
amount in question shall be included in calculating operating
profit. Notwithstanding anything set forth above, the
Compensation Committee may make adjustments in its absolute
discretion to the structure of the Quarterly Bonus program from
time to time and such adjustments shall be binding upon
Executive. The Committee and Executive may mutually
agree to suspend or delay payments of the Quarterly Bonus from time
to time if they deem it to be in the best interests of the Company
to do so. At the Effective Date, the Quarterly Bonus
payable to Executive shall be an amount equal to four percent (4%)
of Pre-Tax Operating Profits. Bonuses under this Section
3.02 shall be calculated and paid to Executive within 45 days from
the end of each fiscal quarter except for the quarter ending June
30, for which any accrued bonus shall be paid within 60
days. Notwithstanding the foregoing, in the event of a
Change in Control (as defined in Article V, below), the Quarterly
Bonus will be an amount equal to four percent (or such greater
amount as the Compensation Committee may determine) of the
Company’s Pre-Tax Operating Profits, prior to payment of any
other bonuses based on Pre-Tax Operating Profits.
ARTICLE IV
OTHER BENEFITS
4.01
Incentive Savings and Retirement Plans . The Executive shall
be entitled to participate, during the Contract Term, in all
incentive (including annual and long-term incentive) savings and
retirement plans, practices, policies and programs generally
available to other senior executives of the Company.
4.02
Welfare Benefits . Immediately upon the Effective Date and
throughout the Contract Term, the Executive and/or the Executive's
family, as the case may be, shall be entitled to participate in,
and shall receive all benefits under, all welfare benefit plans,
practices, policies and programs generally provided by the Company
(including without limitation, medical, prescription, dental,
disability, employee life, group life, dependent life, accidental
death and travel accident insurance plans and programs) at a level
that is equal to other senior executives of the Company.
4.03
Fringe Benefits . Immediately upon the Effective
Date and throughout the Contract Term, the Executive shall be
entitled to participate in all fringe benefit programs generally
provided by the Company to its senior executives. As of
the Effective Date, those fringe benefits include (i) use of a
luxury class Company vehicle or a corresponding automobile
allowance, including the payment of gas, oil, maintenance and
insurance in connection with such vehicle or allowance, as the case
may be, (ii) life insurance benefit with a minimum face value of
$100,000, with premiums paid by the Company, (iii) additional
disability insurance benefits paid by the Company at levels not
less than currently provided by group and individual policies in
effect as of the Effective Date, and (iv) a term life insurance
policy in the face amount of $750,000 with Executive as owner of
the policy and beneficiaries as designated by
Executive. Executive acknowledges that the payment of
benefits under this Section 4.03 may be subject in part or full to
withholding and payment of income and other taxes for which
Executive shall be responsible.
4.04
Expenses . During the Contract Term, the
Executive shall be entitled to receive prompt reimbursement for all
reasonable employment-related expenses which are incurred by the
Executive. The Executive shall be reimbursed upon the
Company's receipt of accountings in accordance with practices,
policies and procedures applicable to senior executives of the
Company.
4.05
Office and Support Staff . During the Contract
Term, the Executive shall be entitled to an office, furnishings,
and other appointments, commensurate with the position occupied by
Executive, all of which shall be adequate for the performance of
the Executive's duties. Executive may hire staff to
assist Executive in his duties.
4.06
Vacation . The Executive shall be entitled to up
to five (5) weeks paid vacation per calendar year commencing with
the Effective Date. Such paid vacation days shall accrue without
cancellation, expiration or forfeiture, subject however to the
policy of the Company that no vacation days may be carried over
from any prior year.
4.07
Stock Options . Executive holds fully-vested
options (the “Options”) to purchase 25,000 shares of
the Company's common stock par value $.001 per share (the
“Common Stock”) at $1.42 per share with an expiration
date of November 22, 2015 and 40,000 shares of Common Stock at
$1.72 per share with an expiration date of May 24, 2015. Subject to
(i) the terms of the Company’s 1992 Amended and Restated
Stock Option Plan, (ii) the terms of the Company’s 2005
Equity Incentive Plan or any successor plan thereto (the “
Stock Plans ”) and (ii) Section 422 of the Internal
Revenue Code of 1986, as amended (the “Code”), the
Options shall be deemed qualified Incentive Stock Options under
Section 422 of the Code.
ARTICLE V
CHANGE OF CONTROL
5.01
Definitions. The following terms shall have the meaning set
forth below:
(a) The
term “ Company Acquisition ” shall mean an
acquisition of another corporation, limited liability company,
limited partnership, partnership or similar entity by the Company
by any means, including, without limitation, by means of a merger,
acquisition of assets or acquisition of ownership
interests.
(b) The
term " Continuing Directors " shall mean those members of
the Board at any relevant time (i) who were directors on the
Effective Date or (ii) who subsequently were approved for
nomination, election or appointment to the Board by at least
two-thirds of the Continuing Directors on the Board at the time of
such approval (the directors described in subsection (ii) are
referred to herein as the " Approved Directors
"). “Approved Directors” shall not include
those appointed to the Board as a term of a negotiated merger or
acquisition or similar Change in Control transaction.
(c) The
term “ Change in Control ” shall mean a change
in control of beneficial ownership of the Company's voting
securities of a nature that would be required to be reported
pursuant to Item 6(e) of Schedule 14A of Regulation 14A under the
Securities Exchange Act of 1934, as amended (the " Exchange
Act ") or any similar item on a successor or revised form;
provided, however, that a Change in Control shall be deemed to have
occurred when:
(i) Any
"person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities representing fifty percent (50%) or more of the combined
voting power of the Company's then outstanding voting securities;
or
(ii) During
any period of three (3) consecutive years, the individuals who at
the beginning of such period constituted the Board, together with
any Approved Directors elected during such period, cease for any
reason to constitute at least a majority of the Board;
or
(iii) The
shareholders of the Company approve an agreement for the sale or
disposition by the Company of all or substantially all of the
Company’s assets.
(d) The
term " Good Reason ,” in connection with the
termination by the Executive of his employment with the Company
subsequent to a Change in Control or Company Acquisition, shall
mean:
(i) A
diminution in the responsibilities, title or office of the
Executive such that he does not serve as Executive Vice President
of the Company (which diminution was not for Cause (as defined
below) or the result of the Executive's disability), or the
assignment (without the Executive's express written consent) by the
Company to the Executive of any significant duties that are
inconsistent with the Executive's position, duties,
responsibilities and status as Executive Vice President of the
Company;
(ii) The
Company's transfer or assignment of the Executive, without the
Executive's prior express written consent, to any location other
than the Company's principal place of business in Salt Lake County,
Utah, except for required travel on Company business to an extent
that does not constitute a substantial abrupt departure from the
Executive's normal business travel obligations;
(iii) The
failure by the Company to continue in effect any material benefit
or compensation plan, life insurance plan, health and medical
benefit plan, disability plan or any other benefit plan in which
the Executive is a participant, or the taking of any action by the
Company that would adversely affect the Executive's right to
participate in, or materially reduce the Executive's benefits
under, any of such plans or benefits, or deprive the Executive of
any material fringe benefit enjoyed by the Executive (except where
such failure to continue in effect or taking of such
action affects all senior executives of the Company who
participate in the applicable plan or receive the applicable
benefits); or
(iv) The
removal of the Executive from the Board of Directors or the failure
of the Board to nominate him for re-election as a direc
