Item
5.02 Departure of Directors or Certain Officers;
Election of Directors; Appointment of Certain Officers;
Compensatory Arrangements of Certain Officers.
Departure of
Principal Executive Officer and Director
On August 26, 2019, Dr. Christopher
R. von Jako stepped down as Dynatronics Corporation’s (the
“Company”) Chief Executive
Officer. In connection with his departure, Dr. von Jako resigned
from the Board of Directors of the Company (the “Board”) effective August
26, 2019. Dr. von Jako’s departure is not the result of any
disagreement with the Company on any matter relating to the
Company’s operations, policies or
practices.
Pursuant to his employment
agreement with the Company, for the fiscal year ended June 30,
2019, Dr. von Jako was granted (i) a restricted stock award of
30,000 shares of common stock in lieu of a cash bonus for the
fiscal year; (ii) an immediately vested grant of 50,000 restricted
stock units; and (iii) a grant of an immediately vested
non-qualified stock option for the purchase of 75,000 shares of
common stock exercisable for 90 days. All of the equity grants to
Dr. von Jako were made under the Company’s 2018 Equity
Incentive Plan (the “2018
Plan”).
The Company has entered into a
Separation and Release Agreement with Dr. von Jako, dated August
26, 2019 (the “Severance Agreement”),
pursuant to which Dr. von Jako will receive a cash payment (less
applicable withholding taxes) equal to three months of base salary
(excluding bonus or any pro ration thereof). The foregoing benefits
are subject to the terms and conditions of the Severance Agreement,
including Dr. von Jako’s release of claims against the
Company. The Severance Agreement is filed as Exhibit 10.1 to this
Current Report.
Appointment of
New Principal Executive Officer and Director
On August 28, 2019, prior to the
opening of trading, the Company announced that its Board had
appointed Brian D. Baker as its Chief Executive Officer, effective
as of August 26, 2019. Mr. Baker succeeds Dr. von Jako, who
resigned as Chief Executive Officer and director effective August
26, 2019. The Board also appointed Mr. Baker to fill the vacancy on
the Board created by Dr. von Jako’s resignation. Mr. Baker
will stand for re-election at the Company’s next annual
meeting.
Mr. Baker has served as the
Company’s Chief Operating Officer since May 2019. From
February 2018 to May 2019, Mr. Baker served as the President of the
Company’s Therapy Products Division. Prior to joining the
Company, he was Vice President of Global Operations of Seaspine
Holdings Corporation from July 2015 to January 2018, where he also
worked as Vice President of Operations of the SeaSpine business
within Integra LifeSciences Corporation from March 2015 to July
2015. From November 2013 until March 2015, he was an industry
consultant providing mergers and acquisitions and business process
optimization services. He is 52 years old.
No family relationships exist
between Mr. Baker and any of the Company’s directors or other
executive officers. There are no arrangements between Mr. Baker and
any other person pursuant to which Mr. Baker was selected as an
officer or director, nor are there any transactions to which the
Company is or was a participant and in which Mr. Baker has a
material interest subject to disclosure under Item 404(a) of
Regulation S-K.
The Company has entered into an
employment agreement with Mr. Baker, dated effective as of August
26, 2019, in connection with Mr. Baker’s appointment as Chief
Executive Officer. Mr. Baker’s salary will be $275,000 per
year and he is eligible for an annual bonus targeted at a maximum
payout of $100,000, which amount will be determined by the
Compensation Committee of the Board of Directors based on results
of operations and Mr. Baker’s performance against goals
established by the Compensation Committee. Mr. Baker will also
receive annual equity grants as determined by the Compensation
Committee of restricted stock units valued at a maximum of
$100,000, vesting 50% upon the date of grant and 50% on the first
anniversary of the date of grant. Upon his hire date, Mr. Baker
received a grant of 50,000 restricted stock units under the
Company’s 2018 Plan, vesting in four equal annual
installments commencing on the first anniversary of the grant date.
Upon vesting, Mr. Baker will receive a number of shares of common
stock equal to the number of restricted stock units that have
vested. Also upon his hire date, Mr. Baker received a grant of a
stock option to purchase 50,000 shares of common stock in
accordance with the terms of the 2018 Plan, exercisable at a price
per share equal to the closing price of one share of the
Company’s common stock on the date of grant. The option also
vests in four equal annual installments, commencing on the first
anniversary of the date of grant. Mr. Baker will operate from the
Company’s Eagan, Minnesota location and the Company will pay
certain relocation expenses for Mr. Baker, not to exceed
$25,000.
The employment agreement continues
until terminated by the Company or by Mr. Baker in accordance with
the terms of the agreement. If the Company terminates Mr.
Baker’s employment during the first 12 months without cause
as defined under the agreement, the Company must pay Mr. Baker an
amount equal to three months base salary. In addition, in such
event, one-half of the initial equity compensation awards granted
to him at the time of his appointment as CEO will automatically
vest, subject to his execution of a release of all claims against
the Company. In the event that the Company is involved in a change
in control transaction, which generally means the transfer of
ownership of more than 50% of the voting control of the Company,
subject to the execution of a general release satisfactory to the
Company, all unvested equity awards held by Mr. Baker at such date
shall become fully vested and exercisable for the remainder of
their full term. Mr. Baker is also subject to a non-solicitation,
non-competition and confidentiality agreement with post-termination
restrictive covenants. The Company has also entered into an
indemnification agreement with Mr. Baker on the same terms as it
has with its other directors and executive
officers.
This summary description is
qualified in its entirety by reference to the employment agreement
and its ancillary agreements between the Company and Mr. Baker,
filed as Exhibits 10.2, 10.3, 10.4 and 10.5 to this Current Report
on Form 8-K incorporated herein by reference.