-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MWrQmroUuB/+AByAmncg1+bQD55hbKKA0uzOGELhb5/Ud/8HHC4j9t0D9dtk7ciO o/ILvX2Ol+tMKJueeWzx7w== 0001096906-10-000861.txt : 20100708 0001096906-10-000861.hdr.sgml : 20100708 20100708134004 ACCESSION NUMBER: 0001096906-10-000861 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20100701 ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20100708 DATE AS OF CHANGE: 20100708 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DYNATRONICS CORP CENTRAL INDEX KEY: 0000720875 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 870398434 STATE OF INCORPORATION: UT FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-12697 FILM NUMBER: 10943789 BUSINESS ADDRESS: STREET 1: 7030 PARK CENTRE DRIVE STREET 2: BLDG D CITY: SALT LAKE CITY STATE: UT ZIP: 84121 BUSINESS PHONE: 8015687000 MAIL ADDRESS: STREET 1: 7030 PARK CENTER DR CITY: SALT LAKE CITY STATE: UT ZIP: 84121 FORMER COMPANY: FORMER CONFORMED NAME: DYNATRONICS LASER CORP DATE OF NAME CHANGE: 19920703 8-K 1 dynatronics8k7110.txt DYNATRONICS CORPORATION FORM 8-K JULY 1, 2010 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------ FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of Earliest Event Reported): July 1, 2010 DYNATRONICS CORPORATION (Exact name of registrant as specified in its charter) Utah 0-12697 87-0398434 - ------------------------------ ----------------- ----------------------- (State or Other Jurisdiction Commission File (IRS Employer of Incorporation) Number Identification Number) 7030 Park Centre Dr., Salt Lake City, Utah 84121 ------------------------------------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (801) 568-7000 Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 8.01 Other Events On July 1, 2010, the registrant entered into agreements with two of its in-house distributors for the redemption of shares of the Common Stock of registrant currently beneficially owned by such distributors. The distributors involved in these transactions are John Rajala and Tony Trolio. Under the terms of these agreements, each of these individuals were granted the right to require the registrant to redeem shares of the registrant's Common Stock in an aggregate amount of $300,000 over a three-year period, or $100,000 in the first year, $200,000 (less amounts received in the first year) in the second year, and $300,000 (less amounts received in the first and second years) in the third year. The redemption price for the shares will be determined by reference to the closing bid price of the registrant's Common Stock on the date the distributor gives notice of redemption to the registrant. Copies of these redemption agreements are included with this report as exhibits. The shares that are subject to the redemption agreements were issued to these distributors in connection with the acquisition of their respective distribution businesses by the registrant in 2007. The registrant also entered into employment agreements with both of these distributors. Under these agreements, the registrant is obligated to provide commissions and other payments for a period of three years. Copies of these employment agreements are included with this report as exhibits. Item 9.01 Financial Statements and Exhibits (d) Exhibits. Exhibit No. Description - ------------------- ----------------------------------------------------------- 10.1 Redemption Agreement (John Rajala) 10.2 Employment Agreement (John Rajala) 10.3 Redemption Agreement (Tony Trolio) 10.4 Employment Agreement (Tony Trolio) 10.5 Addendum SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. DYNATRONICS CORPORATION By: /s/ Kelvyn H. Cullimore, Jr. ---------------------------- Kelvyn H. Cullimore, Jr. Chairman and President Date: July 8, 2010 - -------------------------------------------------------------------------------- EX-10.1 2 dynatronics8k7110exh101.txt REDEMPTION AGREEMENT (JOHN RAJALA) ================================================================================ Exhibit 10.1 - ------------ AGREEMENT THIS AGREEMENT entered into as of the 1st day of JULY, 2010 (this "Agreement"), by and between JOHN RAJALA ("Rajala"), and DYNATRONICS CORPORATION, a corporation organized and existing under the laws of the State of Utah (the "Company"). WHEREAS, Rajala is an employee and shareholder of the Company; and WHEREAS, Rajala desires to sell back to the Company and the Company desires to redeem certain shares of Common Stock of the Company issued to and held by Rajala; and WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Company shall purchase, from time to time as provided herein, and Rajala shall sell, up to Three Hundred Thousand Dollars ($300,000) of Common Stock (as defined below). NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I CERTAIN DEFINITIONS Section 1.1 Defined Terms. As used in this Agreement, the following terms shall have the following meanings specified or indicated (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Agreement" shall have the meaning specified in the preamble hereof. "Articles" shall mean the Articles of Incorporation of the Company, as amended to date. "Bylaws" shall mean the bylaws of the Company, as amended to date. "Closing" shall mean one of the closings of a Redemption pursuant to Section 2.3. "Closing Bid Price" shall mean the closing bid price as reported by the Principal Market. "Common Stock" shall mean the Company's common stock, no par value per share, and any shares of any other class of common stock whether now or hereafter authorized, having the right to participate in the distribution of dividends (as and when declared) and assets (upon liquidation of the Company). "Company" shall have the meaning specified in the preamble to this Agreement. "Exchange Act" shall mean the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder. "FINRA" shall mean the Financial Industry Regulatory Authority, Inc. "Market Price" shall mean the Closing Bid Price on the trading day immediately preceding the Redemption Date. "Material Adverse Effect" shall mean any effect on the business, operations, properties, or financial condition of the Company that is material and adverse to the Company and/or any condition, circumstance, or situation that would prohibit or otherwise materially interfere with the ability of the Company to enter into and perform its obligations under this Agreement. 1 "Maximum Redemption Amount" shall mean, with respect to all Redemptions permitted under this Agreement, shares having an aggregate Purchase Price of Three Hundred Thousand Dollars ($300,000). "Principal Market" shall mean the Nasdaq Stock Market, or other principal exchange which is at the time the principal trading exchange or market for the Common Stock. "Purchase Price" shall mean the Market Price on such date on which the Purchase Price is calculated in accordance with the terms and conditions of this Agreement. "Redemption" shall mean the right of Rajala to require the Company to purchase shares of Common Stock, subject to the terms and conditions of this Agreement, for proceeds of up to $100,000 in any twelve-month period commencing July 1, 2010, 2011, or 2012, and up to $300,000 in the aggregate. "Redemption Date" shall mean any Trading Day that a Redemption Notice is deemed delivered pursuant to Section 2.2(b). "Redemption Notice" shall mean a written notice to the Company setting forth the Redemption amount with respect to which Rajala intends to require the Company to purchase shares of Common Stock pursuant to the terms of this Agreement. "Redemption Shares" shall mean all shares of Common Stock redeemable pursuant to a Redemption that has been exercised or may be exercised in accordance with the terms and conditions of this Agreement. "Regulation D" shall mean Regulation D promulgated under the Securities Act. "SEC" shall mean the Securities and Exchange Commission. "Securities Act" shall have the meaning specified in the recitals of this Agreement. "SEC Documents" shall mean, as of a particular date, all reports and other documents file by the Company pursuant to Section 13(a) or 15(d) of the Exchange Act since the beginning of the Company's then most recently completed fiscal year as of the time in question (provided that if the datein question is within ninety days of the beginning of the Company's fiscal year, the term shall include all documents filed since the beginning of the second preceding fiscal year). "Short Sales" shall mean all "short sales" as defined in Rule 200 of Regulation SHO under the Exchange Act. "Trading Day" shall mean a day on which the Principal Market shall be open for business. ARTICLE II PURCHASE AND SALE OF COMMON STOCK Section 2.1 Redemptions. (a) Upon the terms and conditions set forth herein, at any time during the term of this Agreement, subject to the provisions of Section 2.2(a), below, Rajala may require the Company to purchase shares of Common Stock then held by Rajala (up to the Maximum Redemption Amount), which shares were acquired by Rajala in connection with the sale of his distribution business to the Company in 2007, by the delivery of a Redemption Notice. The Redemption Notice shall specify the dollar value of the Redemption Shares (the "Redemption Amount") Rajala desires to sell and the Company is required to purchase pursuant to this Agreement. The number of Redemption Shares that the Company shall purchase pursuant to such Redemption shall be determined by dividing the Redemption Amount specified in the Redemption Notice by the Purchase Price with respect to such Redemption Notice. 2 (b) Rajala may redeem shares with an aggregate Purchase Price of $100,000 in the first year of this Agreement, up to $200,000 in the second year (less any amount purchased in the first year), and up to $300,000 in the third year (less any amount purchased in the first two years), until the Maximum Redemption Amount has been redeemed. Section 2.2 Mechanics. (a) Redemption Notice. At any time and from time to time during the first five (5) business days of a fiscal quarter of the Company, Rajala may deliver a Redemption Notice to the Company, which shall not exceed the amounts indicated in Section 2.1(b). (b) Date of Delivery of Redemption Notice. A Redemption Notice shall be deemed delivered on (i)the Trading Day it is received by facsimile or otherwise by the Company if such notice is received on or prior to 12:00 noon Utah time, or (ii) the immediately succeeding Trading Day if it is received by facsimile or otherwise after 12:00 noon Utah time on a Trading Day or at anytime on a day which is not a Trading Day. Section 2.3 Closings. On or prior to each Closing Date for any Redemption, (a) Rajala shall deliver to the Company one or more certificates representing the Redemption Shares purchased by the Company pursuant to Section 2.1 herein, registered in the name of Rajala and (b) the Company shall deliver the Redemption Amount specified in the Redemption Notice by check or wire transfer of immediately available funds to an account designated by Rajala within ten (10) days of receipt of the Redemption Shares. In addition, on or prior to such Closing Date, each of the Company and Rajala shall deliver to each other all documents, instruments and writings required to be delivered by either of them pursuant to this Agreement in order to implement and effect the transactions contemplated herein. ARTICLE III REPRESENTATIONS AND WARRANTIES OF RAJALA Rajala represents and warrants to the Company that: Section 3.1 No Legal Advice from the Company. Rajala acknowledges that he has had the opportunity to review this Agreement and the transactions contemplated by this Agreement with his own legal counsel and investment and tax advisors. Rajala is relying solely on such counsel and advisors and not on any statements or representations of the Company or any of its representatives or agents for legal, tax or investment advice with respect to this investment, the transactions contemplated by this Agreement or the securities laws of any jurisdiction. Section 3.2 Sophisticated Investor. Rajala is a sophisticated investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited investor (as defined in Rule 501 of Regulation D), and Rajala has such experience in business and financial matters that he is capable of evaluating the merits and risks of an investment in the Common Stock. Rajala acknowledges that an investment in the Common Stock is speculative and involves a high degree of risk. 3 Section 3.3 Authority. (a) Rajala has the requisite power and authority to enter into and perform his obligations under this Agreement and the transactions contemplated hereby in accordance with its terms; (b) The execution and delivery of this Agreement and the consummation by Rajala of the transactions contemplated hereby and thereby have been duly authorized by all necessary action and no further consent or authorization is required; and (c) This Agreement has been duly authorized and validly executed and delivered by Rajala and constitutes a valid and binding obligation of Rajala enforceable against him in accordance with its terms, subject to applicable bankruptcy, insolvency, or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application. Section 3.4 Not an Affiliate. Rajala is not an officer, director or "affiliate" (as that term is defined in Rule 405 of the Securities Act) of the Company. Section 3.5 Absence of Conflicts. The execution and delivery of this Agreement and any other document or instrument contemplated hereby, and the consummation of the transactions contemplated hereby and thereby, and compliance with the requirements hereof and thereof, will not: (a) violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on Rajala, (b) violate any provision of any indenture, instrument or agreement to which Rajala is a party or is subject, or by which Rajala or any of his assets is bound, or conflict with or constitute a material default thereunder, (c) result in the creation or imposition of any lien pursuant to the terms of any such indenture, instrument or agreement, or constitute a breach of any fiduciary duty owed by Rajala to any third party, or (d) require the approval of any third-party (that has not been obtained) pursuant to any material contract, instrument, agreement, relationship or legal obligation to which Rajala is subject or to which any of his assets, operations or management may be subject. Section 3.6 Disclosure and Access to Information. Rajala has had an opportunity to review copies of the SEC Documents filed on behalf of the Company and has had access to all publicly available information with respect to the Company. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Rajala that, except as disclosed in the SEC Documents: 4 Section 4.1 Organization. The Company is a corporation duly organized and validly existing and in good standing under the laws of the State of Utah and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. The Company is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, other than those in which the failure so to qualify would not have a Material Adverse Effect. Section 4.2 Authority. (a) The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement; (b) The execution and delivery of this Agreement by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action and no further consent or authorization of the Company or its Board of Directors or stockholders is required; and (c) This Agreement has been duly executed and delivered by the Company and constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application. Section 4.3 Common Stock. The Company has registered the Common Stock pursuant to Section 12(b) or 12(g) of the Exchange Act and is in full compliance with all reporting requirements of the Exchange Act, and the Company has maintained all requirements for the continued listing or quotation of the Common Stock, and such Common Stock is currently listed or quoted on the Principal Market. The Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the SEC is contemplating terminating such registration. Section 4.4 SEC Documents. The Company may make available to Rajala true and complete copies of the SEC Documents (including, without limitation, proxy information and solicitation materials). To the Company's knowledge, the Company has not provided to Rajala any information that, according to applicable law, rule or regulation, should have been disclosed publicly prior to the date hereof by the Company, but which has not been so disclosed. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and other federal, state and local laws, rules and regulations applicable to such SEC Documents, and none of the SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Documents comply as to form and substance in all material respects with applicable accounting requirements and the published rules and regulations of the SEC or other applicable rules and regulations with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except (a) as may be otherwise indicated in such financial statements or the notes thereto or (b) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). 5 Section 4.5 No Conflicts. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby, do not and will not (a) result in a violation of the Articles or Bylaws, or (b) conflict with, or constitute a material default (or an event that with notice or lapse of time or both would become a material default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, indenture, instrument or any "lock-up" or similar provision of any underwriting or similar agreement to which the Company is a party, or (c) result in a violation of any federal, state or local law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or by which any property or asset of the Company is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect) nor is the Company otherwise in violation of, conflict with or in default under any of the foregoing. The business of the Company is not being conducted in violation of any law, ordinance or regulation of any governmental entity, except for possible violations that either singly or in the aggregate do not and will not have a Material Adverse Effect. The Company is not required under federal, state or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement; provided that, for purposes of the representation made in this sentence, the Company is assuming and relying upon the accuracy of the relevant representations and agreements of Rajala herein. Section 4.6 No Material Adverse Change. Since June 30, 2009 no event has occurred that would have a Material Adverse Effect on the Company, except as disclosed in the SEC Documents. Section 4.7 No Undisclosed Liabilities. The Company has no liabilities or obligations that are material, individually or in the aggregate, and that are not disclosed in the SEC Documents or otherwise publicly announced, other than those incurred in the ordinary course of the Company's businesses since June 30, 2009 and which, individually or in the aggregate, do not or would not have a Material Adverse Effect on the Company. Section 4.8 No Undisclosed Events or Circumstances. Since June 30, 2009, no event or circumstance has occurred or exists with respect to the Company or its businesses, properties, operations or financial condition, that, under applicable law, rule or regulation, requires public disclosure or announcement prior to the date hereof by the Company but which has not been so publicly announced or disclosed in the SEC Documents. Section 4.9 Litigation and Other Proceedings. Except as may be set forth in the SEC Documents, there are no lawsuits or proceedings pending or to the knowledge of the Company threatened, against the Company, nor has the Company received any written or oral notice of any such action, suit, proceeding or investigation, which would have a Material Adverse Effect. Except as set forth in the SEC Documents, no judgment, order, writ, injunction or decree or award has been issued by or, so far as is known by the Company, requested of any court, arbitrator or governmental agency which would have a Material Adverse Effect. 6 Section 4.10 Material Non-Public Information. The Company is not in possession of, nor has the Company or its agents disclosed to Rajala, any material non-public information that (a) if disclosed, would reasonably be expected to have a materially adverse effect on the price of the Common Stock or (b) according to applicable law, rule or regulation, should have been disclosed publicly by the Company prior to the date hereof but which has not been so disclosed. ARTICLE V COVENANTS OF RAJALA Section 5.1 Compliance with Law; Trading in Securities. Rajala's trading activities with respect to shares of the Common Stock will be in compliance with all applicable state and federal securities laws, rules and regulations and the rules and regulations of FINRA and the Principal Market on which the Common Stock is listed or quoted. Section 5.2 Short Sales and Confidentiality. Neither Rajala nor any affiliate of Rajala acting on its behalf or pursuant to any understanding with it will execute any Short Sales during the period from the date hereof to the final redemption hereunder. Other than to other persons party to this Agreement, Rajala has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction). ARTICLE VI COVENANTS OF THE COMPANY Section 6.1 Notice of Certain Events Affecting Securities; Suspension of Right to Make a Redemption. The Company shall promptly notify Rajala upon the occurrence of any of the following events in respect of a Redemption which has not otherwise been publicly disclosed by the Company through a press release or any filing made by the Company under the Exchange Act: (a) receipt of any request by the SEC or any other federal or state governmental authority; (b) the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the trading of the Company's securities or the initiation of any proceedings for that purpose; (c) receipt of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Company's securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; or (d) the happening of any event that makes any statement made in the Company's SEC Documents or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in the SEC Documents so that they will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the related prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. 7 ARTICLE VII NOTICES Section 7.1 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (a) personally served, (b) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (c) delivered by reputable air courier service with charges prepaid, or (d) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice given in accordance herewith. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (i) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (ii) on the second business day following the date of mailing by express courier service or on the fifth business day after deposited in the mail, in each case, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: If to the Company: Dynatronics Corporation 7030 Park Centre Drive Salt Lake City, Utah 84121 Attn: Robert Cardon Tel: (801) 568-7000 Fax: (801) 568-7711 With a copy (which shall not constitute notice) to: Durham Jones & Pinegar, P.C. Attention: Kevin R. Pinegar 111 East Broadway, Suite 900 Tel: (801) 415-3000 Fax: (801) 415-3500 If to Rajala: John Rajala 12 Red Maple Place Danville, CA 94506 Tel: (925) 640-8515 8 Either party hereto may from time to time change its address or facsimile number for notices under this Section 7.1 by giving at least ten (10) days' prior written notice of such changed address or facsimile number to the other party hereto. ARTICLE VIII MISCELLANEOUS Section 8.1 Governing Law; Jurisdiction. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Utah without regard to the principles of conflicts of law. Each of the Company and Rajala hereby submit to the exclusive jurisdiction of the United States Federal and state courts located in Salt Lake County, Utah with respect to any dispute arising under this Agreement, the agreements entered into in connection herewith or the transactions contemplated hereby or thereby. Section 8.2 Jury Trial Waiver. The Company and Rajala hereby waive a trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other in respect of any matter arising out of or in connection with this Agreement. Section 8.3 Assignment. This Agreement shall be binding upon and inure to the benefit of the Company and Rajala and their respective successors and permitted assigns. Neither this Agreement nor any rights of Rajala or the Company hereunder may be assigned by either party to any other person without the prior written consent of the other party, which shall not be unreasonably withheld. Section 8.4 No Third Party Beneficiaries. This Agreement is intended for the benefit of the Company and Rajala and their respective successors and permitted assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person. Section 8.5 Termination. Rajala may terminate this Agreement at any time by written notice to the Company. Additionally, this Agreement shall terminate on June 30, 2013 or such earlier date as the Maximum Redemption Amount ($300,000) has been purchased by the Company, or as otherwise provided herein (unless extended by the agreement of the Company and Rajala). Section 8.6 Entire Agreement, Amendment, No Waiver. This Agreement and the instruments referenced herein contain the entire understanding of the Company and Rajala with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor Rajala makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the party to be charged with enforcement. Section 8.7 Fees and Expenses. Each of the Company and Rajala agrees to pay its own expenses in connection with the preparation of this Agreement and performance of its obligations hereunder. Section 8.8 Counterparts. This Agreement may be executed in multiple counterparts, each of which may be executed by less than all of the Parties and shall be deemed to be an original instrument which shall be enforceable against the parties actually executing such counterparts and all of which together shall constitute one and the same instrument. This Agreement may be delivered to the other parties hereto by facsimile transmission of a copy of this Agreement bearing the signature of the parties so delivering this Agreement. 9 Section 8.9 Severability. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided that such severability shall be ineffective if it materially changes the economic benefit of this Agreement to any party. Section 8.10 No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. Section 8.11 Title and Subtitles. The titles and subtitles used in this Agreement are used for the convenience of reference and are not to be considered in construing or interpreting this Agreement. Section 8.12 Reporting Entity for the Common Stock. The reporting entity relied upon for the determination of the Closing Bid Price of the Common Stock on any given Trading Day for the purposes of this Agreement shall be the Principal Market or any successor thereto. The written mutual consent of Rajala and the Company shall be required to employ any other reporting entity. Section 8.13 Publicity. The Company and Rajala shall consult with each other in issuing any press releases or otherwise making public statements with respect to the transactions contemplated hereby and no party shall issue any such press release or otherwise make any such public statement without the prior written consent of the other parties, which consent shall not be unreasonably withheld or delayed, except that no prior consent shall be required if such disclosure is required by law, in which such case the disclosing party shall provide the other parties with prior notice of such public statement. Rajala acknowledges that this Agreement and all or part of the Transaction Documents may be deemed to be "material contracts" as that term is defined by Item 601(b)(10) of Regulation S-K, and that the Company may therefore be required to file such documents as exhibits to reports or registration statements filed under the Securities Act or the Exchange Act. Rajala further agrees that the status of such documents and materials as material contracts shall be determined solely by the Company, in consultation with its counsel. [SIGNATURES ON FOLLOWING PAGE] 10 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by the undersigned, thereunto duly authorized, as of the date first set forth above. /s/ John Rajala ---------------------------------- John Rajala Dynatronics Corporation By: /s/ Kelvyn Cullimore, Jr. ------------------------------- Its: President and CEO ------------------------------ 11 - -------------------------------------------------------------------------------- EX-10.2 3 dynatronics8k7110exh102.txt EMPLOYMENT AGREEMENT (JOHN RAJALA) ================================================================================ Exhibit 10.2 - ------------ EMPLOYMENT AGREEMENT -------------------- THIS EMPLOYMENT AGREEMENT (this "Agreement") executed and effective the 1st day of July, 2010 (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 John Rajala, a resident of California ("Employee"). RECITALS A. The Company desires to retain the services of Employee, and Employee desires to render such services, upon the terms and conditions contained herein. B. Employee desires to provide the services to the Company on the terms and subject to the conditions contained in this Agreement. AGREEMENT 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 Employee, and Employee hereby accepts employment, as a Direct Sales Representative and Territory Manager upon the terms and conditions contained herein. Employee shall devote his best efforts to the duties of representing Dynatronics within the assigned territory. Employee shall be prohibited from selling product lines for other companies unless expressly approved in writing by the Company. Any secondary employment must also be approved in writing by an officer of the Company. 1.02 Territory. You will be permitted to sell all lines of Dynatronics products within your designated Territory. The Company reserves certain accounts as national accounts or special accounts. In such cases, you will be informed of the commission participation, if any, on those accounts. From time to time a territory boundary may be amended due to product lines, other sales representatives or other considerations, in the Company's sole discretion. Your Territory is specifically defined in the attached Exhibit A and shown on the map attached to Exhibit A. 1.03 Other Duties. During the Contract Term, Employee agrees to assist the Company relative to product sourcing, vendor relations and sales management. Travel outside the Territory to provide such assistance shall be limited to 10 days per fiscal year. Any request by Company for additional out of Territory assistance shall be compensated at a rate mutually agreed upon by the parties. All expenses associated with out of Territory meetings shall be paid by the Company. 1 ARTICLE II TERM OF AGREEMENT The term of this Agreement shall commence on the Effective Date and shall remain in effect for three years terminating on June 30, 2013 (the "Contract Term") unless terminated sooner as provided for in this Agreement. If the Employee continues to be employed by Company following termination of the Agreement such continued employment shall be as an at-will employee. ARTICLE III COMPENSATION During the Contract Term, the Company shall pay, or cause to be paid to Employee in cash in accordance with the normal payroll practices of the Company (including deductions, withholdings and collections as required by law), the following: 3.01 Sales Commissions. Employee agrees to be compensated according to Dynatronics commission policy as that policy may from time to time be amended. Commissions are paid on sales made by Employee to customers in the Territory (with the exception of sales to national accounts or other special circumstances which will be communicated to Employee in advance). Commissions are calculated by multiplying the gross profit on a sale (which is defined as gross sales price less cost of goods sold) times the applicable commission rate. Presently, the Company has two commission rates. For all of the Company's own manufactured products, modalities, tables, supplies, etc., commissions are 24% of the gross profit. For all distributed (non-manufactured) products commissions are 40% of the gross profit. Occasionally, the Company may have a product which does not fit into the above categories for which a special commission rate will be established. As previously mentioned, commissions on sales within the Territory to a "national account" may or may not be commissionable. These arrangements will be fully disclosed. Any sale by Employee outside the Territory will not be eligible for commission unless written approval is given by the Company in advance of the sale. 3.02 Earned Commission. Commissions are not actually earned or owed on eligible sales made by Employee until payment in full is received by the Company on those sales. Nevertheless, the Company will pay a draw against commissions and will advance the balance of the estimated commission to you as provided in this Agreement. Such draws and advances must be repaid to the Company to the extent all or part of the advanced commissions do not become eared due to a customer's return of the product or their failure to pay. That repayment is typically achieved through an adjustment to the estimated future commission payments according to Company policy. Employee specifically consents to such adjustments for unearned commissions. 2 3.03 Payment of Commissions. Commissions are calculated at the end of each month based on actual invoiced sales made in the Territory during the month. A monthly draw of $2000 will be paid at the end of each month. The Company reserves the right to adjust the amount of the monthly draw based on actual commissions earned. Typically, the draw will not exceed 50% of the six month average of monthly commissions paid. On the 15th of each month, Employee will be advanced the balance of the calculated commissions for the prior month (i.e., the calculated commissions for the prior month less the draw previously paid for that month). Because commissions are not considered earned until the customer has paid its account in full, reimbursement of advanced commissions will be required when products are returned, a customer fails to pay or other account adjustments are required. The Company may provide a reconciliation report periodically reflecting the amount of commissions that must be reimbursed by Employee. Reimbursement will be offset against future commissions. By your signature below, Employee authorizes the Company to offset against future commission advances the amounts owed in reimbursement of commissions for returned product, account adjustments, and uncollected or delinquent sales according to Company policy. Employee will be provided with a monthly commission report. A final reconciliation between earned and advanced commissions will occur upon termination. ARTICLE IV OTHER BENEFITS 4.01 Employee Benefits. During the Contract Term: (a) Employee shall be entitled to participate in the Company's 401(k) program, including the Company's annual matching contribution (currently up to $500), (b) Employee shall receive health insurance equivalent to the coverage provided to Employee during the 12 months prior to the date of this Agreement. Specifically this means coverage for John and Mary Jo Rajala. This benefit will extend only through December 31, 2010 by which point Employee is expected to opt out of the Company provided insurance unless the parties mutually agree to extend the date for opting out. Upon opting out of the Company provided insurance, the Company will reimburse employee up to $500 per month toward the actual out of pocket costs for Employee under their selected optional insurance, (c) Employee shall be eligible for any other employee benefit program that is generally offered to all employees of the Company except that any stock options must be specifically approved by the Company's Board of Directors. 4.02 Expense Reimbursement. (a) Employee shall receive a monthly expense allowance of one thousand dollars ($1,000). Employee may elect within the first 30 days of this Agreement to have the monthly reimbursement paid based on receipts provided or advanced as additional 1099 income without obligation to provide receipts. Eligible expenses for reimbursement shall include (i) receipted expenditures for vehicle operation, including fuel, maintenance and repairs, monthly vehicle payments, licensing, taxes and insurance, (ii) cellular phone usage, (iii) home computer use, (iv) work related local entertainment and local travel expenses within assigned Territory, and (v) any other job related expenses approved by the Company. 3 (c) In addition to the expense allowance and reimbursement provided elsewhere in this Agreement, Employee shall be entitled to receive prompt reimbursement for all reasonable, non-local employment-related expenses incurred by Employee, including regional or overnight travel, attending trade shows, meetings at the Company's headquarters, and other non-local business-related travel requested by the Company. Employee shall be reimbursed upon the Company's receipt of documentation in accordance with practices, policies and procedures of the Company. ARTICLE V RESTRICTIVE COVENANTS 5.01 Trade Secrets; Confidential and Proprietary Business Information. (a) The Company has advised Employee and Employee has acknowledged that it is the policy of the Company to maintain as secret and confidential all Protected Information (as defined below), and that Protected Information has been and will be developed at substantial cost and effort to the Company. For purposes of this Agreement,"Protected Information" means trade secrets, confidential and proprietary business information of the Company, any information of the Company other than information which has entered the public domain (unless such information entered the public domain through effects of or on account of Employee), and all valuable and unique information and techniques acquired, developed or used by the Company relating to its business, operations, employees, customers and suppliers, which give the Company a competitive advantage over those who do not know the information and techniques and which are protected by the Company from unauthorized disclosure, including but not limited to, customer lists (including potential customers), sources of supply, processes, plans, materials, pricing information, internal memoranda, marketing plans, internal policies, and products and services which may be developed from time to time by the Company and its agent or employees. (b) Employee acknowledges that Employee has through prior employment and will through continued employment acquire Protected Information with respect to the Company and its successors in interest, which information is a valuable, special and unique asset of the Company's business and operations and that disclosure of such Protected Information would cause irreparable damage to the Company. (c) During the term of this Agreement and for a period of two (2) years following termination of employment by the Company, Employee shall not, directly or indirectly, divulge, furnish or make accessible to any person, firm, corporation, association or other entity (otherwise than as may be required in the regular course of Employee's employment) nor use in any manner, any Protected Information, or cause any such information of the Company to enter the public domain. 4 (d) From the date hereof until two (2) years after Employee's termination of employment with the Company, Employee, and any person or entity directly or indirectly controlling, controlled by or under common control with Employee, shall not, directly or indirectly (a) encourage any employee, supplier, or customer of the Company, its affiliates, or its successors in interest to leave his or her employment with the Company, its affiliates, or its successors in interest, (b) employ, hire, solicit or cause to be employed, hired or solicited (other than by the Company, its affiliates, or its successors in interest), or encourage others to employ or hire any person who within one (1) year prior thereto was employed by the Company, its affiliates, or its successors in interest, or (c) establish a business with, or encourage others to establish a business with, any person who within one (1) year prior thereto was an employee, supplier, or customer of the Company, its affiliates, or its successors in interest. 5.02 Survival of Undertakings and Injunctive Relief. (a) The provisions of Section 5.01 shall survive the termination of Employee's employment with the Company irrespective of the reasons therefor. (b) Employee acknowledges and agrees that the restrictions imposed upon Employee by Section 5.01 and the purpose of such restrictions are reasonable and are designed to protect the Protected Information and the continued success of the Company without unduly restricting Employee's future employment by others. Furthermore, Employee acknowledges that, in view of the Protected Information which Employee has or will acquire or has or will have access to and in view of the necessity of the restrictions contained in Section 5.01, any violation of any provision of Section 5.01 hereof would cause irreparable injury to the Company and its successors in interest with respect to the resulting disruption in their operations. By reason of the foregoing, Employee consents and agrees that if Employee violates any of the provisions of Section 5.01 of this Agreement, the Company and its successors in interest, as the case may be, shall be entitled, in addition to any other remedies that they may have, including money damages, to an injunction to be issued by a court of competent jurisdiction, restraining Employee from committing or continuing any violation of such Sections of this Agreement. In the event of any such violation of Section 5.01 of this Agreement, Employee further agrees that the time periods set forth in such Sections shall be extended by the period of such violation. ARTICLE VI TERMINATION 6.01 Termination of Employment. Employee's employment may be terminated (i) at any time during the Contract Term by mutual agreement of the parties, or (ii) as otherwise provided in this Article. 6.02 Termination by Company without Cause/Termination by Employee for Good Reason. The Company may terminate Employee's employment without Cause (as defined below), and the Employee may terminate Employee's employment for Good Reason (as defined below), in either case by giving the other party hereto seven (7) days prior written notice of such termination. In the event Employee's employment is terminated by the Company without Cause or Employee terminates Employee's employment for Good Reason, during the first one half (1/2) of Employee's Contract Term, Employee shall be entitled to receive an amount 5 equivalent to the average monthly commission earned for the prior twelve month period or paid salary as the case may be, multiplied times nine payable within thirty (30) days of the notice of termination, and no other benefits. In the event Employee's employment is terminated by the Company without Cause or Employee terminates Employee's employment for Good Reason, during the last one half (1/2) of Employee's Contract Term, Employee shall be entitled to receive an amount equal to the average monthly commission earned for the twelve months prior to the termination date multiplied by the number of months remaining on the contract, payable on the 15th of each month for the prior month as patterned by commission payments under this Agreement, and all benefits that Employee would have been entitled to receive under paragraph 4.01(b), during the remainder of the Contract Term. (a) For purposes of this Agreement, "Good Reason" shall mean: (i) A diminution in the compensation of the Employee (which diminution was not mutually agreed upon or not for "Cause" (as defined below) or the result of the Employee's disability); (ii) The Company's transfer or assignment of the Employee, without the Employee's prior express written consent, to any location or position requiring the Employee to relocate from Employee's current residence, except for required travel on Company business to an extent that does not constitute a substantial abrupt departure from the Employee's normal business travel obligations; or (iii) The failure by the Company to continue in effect any material benefit or compensation plan, health and medical benefit plan, or any other benefit plan in which the Employee is a participant, or the taking of any action by the Company that would adversely affect the Employee's right to participate in, or materially reduce the Employee's benefits under, any of such plans or benefits, or deprive the Employee of any material fringe benefit enjoyed by the Employee except as such elimination of benefit may be applicable to all employees of the Company. 6.03 Death or Disability. In the event Employee, during the Contract Term, dies or becomes permanently disabled or incapacitated such that he is unable to perform his duties under this Agreement, the Company shall pay Employee or Employee's surviving spouse, but not Employee's estate, pursuant to Section 6.02 as if Employee had been terminated without Cause. 6.04 Termination for Cause. The Company may terminate Employee's employment for Cause by giving Employee seven (7) days prior written notice of such termination. For purposes of this Agreement, "Cause" for termination shall mean: (i) the willful failure or refusal to carry out the reasonable directions of the Board, the Chief Executive Officer, or the President, which directions are consistent with Employee's duties as set forth under this Agreement and have been given to Employee in writing but which directions Employee has materially failed to follow or reasonably implement within fifteen (15) days after said written notice, other than a failure resulting from Employee's complete or partial incapacity due to physical or mental illness or impairment; 6 (ii) material failure to follow Company policy or specific instructions from Employee's superior(s), which failures continue after fifteen (15) days after written notice thereof by the Company; however, no warning shall be required in the case of significant insubordination causing financial harm to the Company or significant harm to the reputation of the Company; (iii) a conviction for a violation of a state or federal criminal law involving the commission of a felony or a misdemeanor or other crime involving moral turpitude; (iv) a willful act by Employee that constitutes gross negligence in the performance of Employee's duties under this Agreement and which materially injures the Company. No act, or failure to act, by Employee shall be considered "willful" unless committed without good faith and without a reasonable belief that the act or omission was in the Company's best interest; (v) a material breach by Employee of the terms of this Agreement, which breach has not been cured by Employee within fifteen (15) days of written notice of said breach by the Company; (vi) repeated material unethical business practices by Employee in connection with the Company's business, which unethical business practices continue after fifteen (15) days after written notice thereof by the Company; (vii) habitual use of alcohol or drugs by Employee; (viii) intentional misuse of or damage to material Company property; (ix) theft or willful destruction of property, money or goods belonging to the Company or its employees; (x) falsification of Company records; (xi) gambling while on Company property or while engaged in Company activities; (xii) excessive absenteeism or failure to report to work without proper excuse; or (xiii) violation of the Company's sexual harassment policies. 7 Upon termination for Cause, Employee shall not be entitled to payment of any compensation other than commission and benefits under this Agreement earned up to the date of such termination. Notwithstanding any provision to the contrary in any option or equity award agreement between the Company and Employee, in the event Employee's employment shall terminate on account of Termination for Cause, Employee shall forfeit and shall not be entitled to exercise any unexercised options, warrants, or similar rights to equity of the Company, whether or not vested or unvested, as of the date of termination. ARTICLE VII MISCELLANEOUS 7.01 Assignment, Successors. This Agreement may not be assigned by either party hereto without the prior written consent of the other party; provided, however, that the merger or sale of the Company or the sale of substantially all of its assets shall not be deemed an assignment of this Agreement for purposes of this Section 7.01. This Agreement shall be binding upon and inure to the benefit of Employee and Employee's estate and the Company and any assignee of or successor to the Company. 7.02 Nonalienation of Benefits. Benefits payable under this Agreement shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution or levy of any kind, either voluntary or involuntary, prior to actually being received by Employee, and any such attempt to dispose of any right to benefits payable hereunder shall be void. 7.03 Severability. If all or any part of this Agreement is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not serve to invalidate any portion of this Agreement not declared to be unlawful or invalid. Any paragraph or part of a paragraph so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such paragraph or part of a paragraph to the fullest extent possible while remaining lawful and valid. 7.04 Amendment and Waiver. This Agreement shall not be altered, amended or modified except by written instrument executed by the Company and Employee. A waiver of any term, covenant, agreement or condition contained in this Agreement shall not be deemed a waiver of any other term, covenant, agreement or condition and any waiver of any other term, covenant, agreement or condition, and any waiver of any default in any such term, covenant, agreement or condition shall not be deemed a waiver of any later default thereof or of any other term, covenant, agreement or condition. 7.05 Notices. All notices and other communications hereunder shall be in writing and delivered by hand or by first class registered or certified mail, return receipt requested, postage prepaid, addressed as follows: 8 If to the Company: Dynatronics Corporation 7030 Park Centre Drive Salt Lake City, Utah 84121 With a copy to: DURHAM JONES & PINEGAR Attn: Kevin Pinegar, Esq. 111 East Broadway, Suite 900 P.O. Box 4050 Salt Lake City, Utah 84110 If to Employee: John Rajala 12 Red Maple Place Danville, CA 94506 Either party may from time to time designate a new address by notice given in accordance with this Section. Notice and communications shall be effective when actually received by the addressee. 7.06 Counterpart Originals. This Agreement may be executed in counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 7.07 Entire Agreement. This Agreement forms the entire agreement between the parties hereto with respect to any severance payment and with respect to the subject matter contained in the Agreement. 7.08 Applicable Law. The provisions of this Agreement shall be interpreted and construed in accordance with the laws of the state of Utah, without regard to its choice of law principles. 7.10 Effect on Other Agreements. This Agreement shall supersede entirely all prior agreements (including, without limitation, any existing employment agreement), promises and representations regarding employment by the Company and severance or other payments contingent upon termination of employment not referenced by this agreement. 7.11 Extension or Renegotiation. The parties hereto agree that at any time prior to the expiration of this Agreement, they may extend or renegotiate this Agreement upon mutually agreeable terms and conditions. 7.12 Attorneys' Fees. If any legal action or other proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default, or misrepresentation in connection with any of the provisions of this Agreement, the successful or prevailing party shall be entitled to recover reasonable attorneys' fees, and any other fees and costs incurred in the action or proceeding, in addition to any other relief to which such party may be entitled. Without limiting the generality of the foregoing, any reasonable costs and expenses, including without limitation reasonable attorneys' fees, incurred in enforcing any judgment or arbitration award shall be recoverable by the prevailing party as a separate item of recovery, and this provision is intended to be severable from the other provisions of this Agreement and shall survive any judgment or arbitration award and shall not be deemed to be merged into the judgment or award. 9 IN WITNESS WHEREOF the parties have executed this Employment Agreement on the date first written above. Dynatronics Corporation, a Utah corporation By: /s/ Kelvyn H. Cullimore, Jr. --------------------------------- Name: Kelvyn H. Cullimore, Jr. ------------------------------- Title: President and CEO ------------------------------ John Rajala, an individual /s/ John Rajala ------------------------------------ John Rajala 10 EXHIBIT A Title: Territory Sales Manager Report to: Region 1 Sales Manager Responsibilities: Manager shall have duties and responsibilities commensurate with representing the Company in soliciting sales within the defined territory. Employee also agrees to provide assistance as provided in section 1.03. Territory shall include the following cities in Contra Costa and Alameda Counties, California Graphic Eliminated California please ask DynaPacific, or Regional Sales Manager Pete Rajala Tehama Pleasanton Lafayette San Ramon Pacheco Danville Castro Valley Alamo Clayton Walnut Creek Pleasant Hill Livermore Sunol Diablo Concord Martinez Pittsburg Antioch Bay Point Benicia Orinda Moraga 11 - -------------------------------------------------------------------------------- EX-10.3 4 dynatronics8k7110exh103.txt REDEMPTION AGREEMENT (TONY TROLIO) ================================================================================ Exhibit 10.3 - ------------ AGREEMENT THIS AGREEMENT entered into as of the 1st day of JULY, 2010 (this "Agreement"), by and between ANTHONY D. TROLIO ("Trolio"), and DYNATRONICS CORPORATION, a corporation organized and existing under the laws of the State of Utah (the "Company"). WHEREAS, Trolio is an employee and shareholder of the Company; and WHEREAS, Trolio desires to sell back to the Company and the Company desires to redeem certain shares of Common Stock of the Company issued to and held by Trolio; and WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Company shall purchase, from time to time as provided herein, and Trolio shall sell, up to Three Hundred Thousand Dollars ($300,000) of Common Stock (as defined below). NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I CERTAIN DEFINITIONS Section 1.1 Defined Terms. As used in this Agreement, the following terms shall have the following meanings specified or indicated (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Agreement" shall have the meaning specified in the preamble hereof. "Articles" shall mean the Articles of Incorporation of the Company, as amended to date. "Bylaws" shall mean the bylaws of the Company, as amended to date. "Closing" shall mean one of the closings of a Redemption pursuant to Section 2.3. "Closing Bid Price" shall mean the closing bid price as reported by the Principal Market. "Common Stock" shall mean the Company's common stock, no par value per share, and any shares of any other class of common stock whether now or hereafter authorized, having the right to participate in the distribution of dividends (as and when declared) and assets (upon liquidation of the Company). "Company" shall have the meaning specified in the preamble to this Agreement. "Exchange Act" shall mean the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder. "FINRA" shall mean the Financial Industry Regulatory Authority, Inc. "Market Price" shall mean the Closing Bid Price on the trading day immediately preceding the Redemption Date. "Material Adverse Effect" shall mean any effect on the business, operations, properties, or financial condition of the Company that is material and adverse to the Company and/or any condition, circumstance, or situation that would prohibit or otherwise materially interfere with the ability of the Company to enter into and perform its obligations under this Agreement. 1 "Maximum Redemption Amount" shall mean, with respect to all Redemptions permitted under this Agreement, shares having an aggregate Purchase Price of Three Hundred Thousand Dollars ($300,000). "Principal Market" shall mean the Nasdaq Stock Market, or other principal exchange which is at the time the principal trading exchange or market for the Common Stock. "Purchase Price" shall mean the Market Price on such date on which the Purchase Price is calculated in accordance with the terms and conditions of this Agreement. "Redemption" shall mean the right of Trolio to require the Company to purchase shares of Common Stock, subject to the terms and conditions of this Agreement, for proceeds of up to $100,000 in any twelve-month period commencing July 1, 2010, 2011, or 2012, and up to $300,000 in the aggregate. "Redemption Date" shall mean any Trading Day that a Redemption Notice is deemed delivered pursuant to Section 2.2(b). "Redemption Notice" shall mean a written notice to the Company setting forth the Redemption amount with respect to which Trolio intends to require the Company to purchase shares of Common Stock pursuant to the terms of this Agreement. "Redemption Shares" shall mean all shares of Common Stock redeemable pursuant to a Redemption that has been exercised or may be exercised in accordance with the terms and conditions of this Agreement. "Regulation D" shall mean Regulation D promulgated under the Securities Act. "SEC" shall mean the Securities and Exchange Commission. "Securities Act" shall have the meaning specified in the recitals of this Agreement. "SEC Documents" shall mean, as of a particular date, all reports and other documents file by the Company pursuant to Section 13(a) or 15(d) of the Exchange Act since the beginning of the Company's then most recently completed fiscal year as of the time in question (provided that if the datein question is within ninety days of the beginning of the Company's fiscal year, the term shall include all documents filed since the beginning of the second preceding fiscal year). "Short Sales" shall mean all "short sales" as defined in Rule 200 of Regulation SHO under the Exchange Act. "Trading Day" shall mean a day on which the Principal Market shall be open for business. ARTICLE II PURCHASE AND SALE OF COMMON STOCK Section 2.1 Redemptions. (a) Upon the terms and conditions set forth herein, at any time during the term of this Agreement, subject to the provisions of Section 2.2(a), below, Trolio may require the Company to purchase shares of Common Stock then held by Trolio (up to the Maximum Redemption Amount), which shares were acquired by Trolio in connection with the sale of his distribution business to the Company in 2007, by the delivery of a Redemption Notice. The Redemption Notice shall specify the dollar value of the Redemption Shares (the "Redemption Amount") Trolio desires to sell and the Company is required to purchase pursuant to this Agreement. The number of Redemption Shares that the Company shall purchase pursuant to such Redemption shall be determined by dividing the Redemption Amount specified in the Redemption Notice by the Purchase Price with respect to such Redemption Notice. 2 (b) Trolio may redeem shares with an aggregate Purchase Price of $100,000 in the first year of this Agreement, up to $200,000 in the second year (less any amount purchased in the first year), and up to $300,000 in the third year (less any amount purchased in the first two years), until the Maximum Redemption Amount has been redeemed. Section 2.2 Mechanics. (a) Redemption Notice. At any time and from time to time during the first five (5) business days of a fiscal quarter of the Company, Trolio may deliver a Redemption Notice to the Company, which shall not exceed the amounts indicated in Section 2.1(b). (b) Date of Delivery of Redemption Notice. A Redemption Notice shall be deemed delivered on (i)the Trading Day it is received by facsimile or otherwise by the Company if such notice is received on or prior to 12:00 noon Utah time, or (ii) the immediately succeeding Trading Day if it is received by facsimile or otherwise after 12:00 noon Utah time on a Trading Day or at anytime on a day which is not a Trading Day. Section 2.3 Closings. On or prior to each Closing Date for any Redemption, (a) Trolio shall deliver to the Company one or more certificates representing the Redemption Shares purchased by the Company pursuant to Section 2.1 herein, registered in the name of Trolio and (b) the Company shall deliver the Redemption Amount specified in the Redemption Notice by check or wire transfer of immediately available funds to an account designated by Trolio within ten (10) days of receipt of the Redemption Shares. In addition, on or prior to such Closing Date, each of the Company and Trolio shall deliver to each other all documents, instruments and writings required to be delivered by either of them pursuant to this Agreement in order to implement and effect the transactions contemplated herein. ARTICLE III REPRESENTATIONS AND WARRANTIES OF TROLIO Trolio represents and warrants to the Company that: Section 3.1 No Legal Advice from the Company. Trolio acknowledges that he has had the opportunity to review this Agreement and the transactions contemplated by this Agreement with his own legal counsel and investment and tax advisors. Trolio is relying solely on such counsel and advisors and not on any statements or representations of the Company or any of its representatives or agents for legal, tax or investment advice with respect to this investment, the transactions contemplated by this Agreement or the securities laws of any jurisdiction. Section 3.2 Sophisticated Investor. Trolio is a sophisticated investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited investor (as defined in Rule 501 of Regulation D), and Trolio has such experience in business and financial matters that he is capable of evaluating the merits and risks of an investment in the Common Stock. Trolio acknowledges that an investment in the Common Stock is speculative and involves a high degree of risk. 3 Section 3.3 Authority. (a) Trolio has the requisite power and authority to enter into and perform his obligations under this Agreement and the transactions contemplated hereby in accordance with its terms; (b) The execution and delivery of this Agreement and the consummation by Trolio of the transactions contemplated hereby and thereby have been duly authorized by all necessary action and no further consent or authorization is required; and (c) This Agreement has been duly authorized and validly executed and delivered by Trolio and constitutes a valid and binding obligation of Trolio enforceable against him in accordance with its terms, subject to applicable bankruptcy, insolvency, or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application. Section 3.4 Not an Affiliate. Trolio is not an officer, director or "affiliate" (as that term is defined in Rule 405 of the Securities Act) of the Company. Section 3.5 Absence of Conflicts. The execution and delivery of this Agreement and any other document or instrument contemplated hereby, and the consummation of the transactions contemplated hereby and thereby, and compliance with the requirements hereof and thereof, will not: (a) violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on Trolio, (b) violate any provision of any indenture, instrument or agreement to which Trolio is a party or is subject, or by which Trolio or any of his assets is bound, or conflict with or constitute a material default thereunder, (c) result in the creation or imposition of any lien pursuant to the terms of any such indenture, instrument or agreement, or constitute a breach of any fiduciary duty owed by Trolio to any third party, or (d) require the approval of any third-party (that has not been obtained) pursuant to any material contract, instrument, agreement, relationship or legal obligation to which Trolio is subject or to which any of his assets, operations or management may be subject. Section 3.6 Disclosure and Access to Information. Trolio has had an opportunity to review copies of the SEC Documents filed on behalf of the Company and has had access to all publicly available information with respect to the Company. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Trolio that, except as disclosed in the SEC Documents: 4 Section 4.1 Organization. The Company is a corporation duly organized and validly existing and in good standing under the laws of the State of Utah and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. The Company is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, other than those in which the failure so to qualify would not have a Material Adverse Effect. Section 4.2 Authority. (a) The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement; (b) The execution and delivery of this Agreement by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action and no further consent or authorization of the Company or its Board of Directors or stockholders is required; and (c) This Agreement has been duly executed and delivered by the Company and constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application. Section 4.3 Common Stock. The Company has registered the Common Stock pursuant to Section 12(b) or 12(g) of the Exchange Act and is in full compliance with all reporting requirements of the Exchange Act, and the Company has maintained all requirements for the continued listing or quotation of the Common Stock, and such Common Stock is currently listed or quoted on the Principal Market. The Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the SEC is contemplating terminating such registration. Section 4.4 SEC Documents. The Company may make available to Trolio true and complete copies of the SEC Documents (including, without limitation, proxy information and solicitation materials). To the Company's knowledge, the Company has not provided to Trolio any information that, according to applicable law, rule or regulation, should have been disclosed publicly prior to the date hereof by the Company, but which has not been so disclosed. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and other federal, state and local laws, rules and regulations applicable to such SEC Documents, and none of the SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Documents comply as to form and substance in all material respects with applicable accounting requirements and the published rules and regulations of the SEC or other applicable rules and regulations with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except (a) as may be otherwise indicated in such financial statements or the notes thereto or (b) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). 5 Section 4.5 No Conflicts. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby, do not and will not (a) result in a violation of the Articles or Bylaws, or (b) conflict with, or constitute a material default (or an event that with notice or lapse of time or both would become a material default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, indenture, instrument or any "lock-up" or similar provision of any underwriting or similar agreement to which the Company is a party, or (c) result in a violation of any federal, state or local law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or by which any property or asset of the Company is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect) nor is the Company otherwise in violation of, conflict with or in default under any of the foregoing. The business of the Company is not being conducted in violation of any law, ordinance or regulation of any governmental entity, except for possible violations that either singly or in the aggregate do not and will not have a Material Adverse Effect. The Company is not required under federal, state or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement; provided that, for purposes of the representation made in this sentence, the Company is assuming and relying upon the accuracy of the relevant representations and agreements of Trolio herein. Section 4.6 No Material Adverse Change. Since June 30, 2009 no event has occurred that would have a Material Adverse Effect on the Company, except as disclosed in the SEC Documents. Section 4.7 No Undisclosed Liabilities. The Company has no liabilities or obligations that are material, individually or in the aggregate, and that are not disclosed in the SEC Documents or otherwise publicly announced, other than those incurred in the ordinary course of the Company's businesses since June 30, 2009 and which, individually or in the aggregate, do not or would not have a Material Adverse Effect on the Company. Section 4.8 No Undisclosed Events or Circumstances. Since June 30, 2009, no event or circumstance has occurred or exists with respect to the Company or its businesses, properties, operations or financial condition, that, under applicable law, rule or regulation, requires public disclosure or announcement prior to the date hereof by the Company but which has not been so publicly announced or disclosed in the SEC Documents. Section 4.9 Litigation and Other Proceedings. Except as may be set forth in the SEC Documents, there are no lawsuits or proceedings pending or to the knowledge of the Company threatened, against the Company, nor has the Company received any written or oral notice of any such action, suit, proceeding or investigation, which would have a Material Adverse Effect. Except as set forth in the SEC Documents, no judgment, order, writ, injunction or decree or award has been issued by or, so far as is known by the Company, requested of any court, arbitrator or governmental agency which would have a Material Adverse Effect. 6 Section 4.10 Material Non-Public Information. The Company is not in possession of, nor has the Company or its agents disclosed to Trolio, any material non-public information that (a) if disclosed, would reasonably be expected to have a materially adverse effect on the price of the Common Stock or (b) according to applicable law, rule or regulation, should have been disclosed publicly by the Company prior to the date hereof but which has not been so disclosed. ARTICLE V COVENANTS OF TROLIO Section 5.1 Compliance with Law; Trading in Securities. Trolio's trading activities with respect to shares of the Common Stock will be in compliance with all applicable state and federal securities laws, rules and regulations and the rules and regulations of FINRA and the Principal Market on which the Common Stock is listed or quoted. Section 5.2 Short Sales and Confidentiality. Neither Trolio nor any affiliate of Trolio acting on its behalf or pursuant to any understanding with it will execute any Short Sales during the period from the date hereof to the final redemption hereunder. Other than to other persons party to this Agreement, Trolio has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction). ARTICLE VI COVENANTS OF THE COMPANY Section 6.1 Notice of Certain Events Affecting Securities; Suspension of Right to Make a Redemption. The Company shall promptly notify Trolio upon the occurrence of any of the following events in respect of a Redemption which has not otherwise been publicly disclosed by the Company through a press release or any filing made by the Company under the Exchange Act: (a) receipt of any request by the SEC or any other federal or state governmental authority; (b) the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the trading of the Company's securities or the initiation of any proceedings for that purpose; (c) receipt of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Company's securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; or (d) the happening of any event that makes any statement made in the Company's SEC Documents or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in the SEC Documents so that they will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the related prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. ARTICLE VII NOTICES Section 7.1 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (a) personally served, (b) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (c) delivered by reputable air courier service with charges prepaid, or (d) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice given in accordance herewith. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (i) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (ii) on the second business day following the date of mailing by express courier service or on the fifth business day after deposited in the mail, in each case, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: If to the Company: Dynatronics Corporation 7030 Park Centre Drive Salt Lake City, Utah 84121 Attn: Robert Cardon Tel: (801) 568-7000 Fax: (801) 568-7711 With a copy (which shall not constitute notice) to: Durham Jones & Pinegar, P.C. Attention: Kevin R. Pinegar 111 East Broadway, Suite 900 Tel: (801) 415-3000 Fax: (801) 415-3500 If to Trolio: Anthony D. Trolio 445 Fifth Avenue Hubbard, OH 44425 Tel: (330) 719-8130 8 Either party hereto may from time to time change its address or facsimile number for notices under this Section 7.1 by giving at least ten (10) days' prior written notice of such changed address or facsimile number to the other party hereto. ARTICLE VIII MISCELLANEOUS Section 8.1 Governing Law; Jurisdiction. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Utah without regard to the principles of conflicts of law. Each of the Company and Trolio hereby submit to the exclusive jurisdiction of the United States Federal and state courts located in Salt Lake County, Utah with respect to any dispute arising under this Agreement, the agreements entered into in connection herewith or the transactions contemplated hereby or thereby. Section 8.2 Jury Trial Waiver. The Company and Trolio hereby waive a trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other in respect of any matter arising out of or in connection with this Agreement. Section 8.3 Assignment. This Agreement shall be binding upon and inure to the benefit of the Company and Trolio and their respective successors and permitted assigns. Neither this Agreement nor any rights of Trolio or the Company hereunder may be assigned by either party to any other person without the prior written consent of the other party, which shall not be unreasonably withheld. Section 8.4 No Third Party Beneficiaries. This Agreement is intended for the benefit of the Company and Trolio and their respective successors and permitted assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person. Section 8.5 Termination. Trolio may terminate this Agreement at any time by written notice to the Company. Additionally, this Agreement shall terminate on June 30, 2013 or such earlier date as the Maximum Redemption Amount ($300,000) has been purchased by the Company, or as otherwise provided herein (unless extended by the agreement of the Company and Trolio). Section 8.6 Entire Agreement, Amendment, No Waiver. This Agreement and the instruments referenced herein contain the entire understanding of the Company and Trolio with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor Trolio makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the party to be charged with enforcement. Section 8.7 Fees and Expenses. Each of the Company and Trolio agrees to pay its own expenses in connection with the preparation of this Agreement and performance of its obligations hereunder. Section 8.8 Counterparts. This Agreement may be executed in multiple counterparts, each of which may be executed by less than all of the Parties and shall be deemed to be an original instrument which shall be enforceable against the parties actually executing such counterparts and all of which together shall constitute one and the same instrument. This Agreement may be delivered to the other parties hereto by facsimile transmission of a copy of this Agreement bearing the signature of the parties so delivering this Agreement. 9 Section 8.9 Severability. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided that such severability shall be ineffective if it materially changes the economic benefit of this Agreement to any party. Section 8.10 No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. Section 8.11 Title and Subtitles. The titles and subtitles used in this Agreement are used for the convenience of reference and are not to be considered in construing or interpreting this Agreement. Section 8.12 Reporting Entity for the Common Stock. The reporting entity relied upon for the determination of the Closing Bid Price of the Common Stock on any given Trading Day for the purposes of this Agreement shall be the Principal Market or any successor thereto. The written mutual consent of Trolio and the Company shall be required to employ any other reporting entity. Section 8.13 Publicity. The Company and Trolio shall consult with each other in issuing any press releases or otherwise making public statements with respect to the transactions contemplated hereby and no party shall issue any such press release or otherwise make any such public statement without the prior written consent of the other parties, which consent shall not be unreasonably withheld or delayed, except that no prior consent shall be required if such disclosure is required by law, in which such case the disclosing party shall provide the other parties with prior notice of such public statement. Trolio acknowledges that this Agreement and all or part of the Transaction Documents may be deemed to be "material contracts" as that term is defined by Item 601(b)(10) of Regulation S-K, and that the Company may therefore be required to file such documents as exhibits to reports or registration statements filed under the Securities Act or the Exchange Act. Trolio further agrees that the status of such documents and materials as material contracts shall be determined solely by the Company, in consultation with its counsel. [SIGNATURES ON FOLLOWING PAGE] 10 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by the undersigned, thereunto duly authorized, as of the date first set forth above. /s/ Tony Trolio ------------------------------------ Anthony D. Trolio Dynatronics Corporation By: /s/ Kelvyn H. Cullimore, Jr. --------------------------------- Its: President and CEO -------------------------------- 11 - -------------------------------------------------------------------------------- EX-10.4 5 dynatronics8k7110exh104.txt EMPLOYMENT AGREEMENT (TONY TROLIO) ================================================================================ Exhibit 10.4 - ------------ EMPLOYMENT AGREEMENT -------------------- THIS EMPLOYMENT AGREEMENT (this "Agreement") executed and effective the 1st day of July, 2010 (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 Anthony D. Trolio, a resident of Ohio ("Employee"). RECITALS A. The Company desires to retain the services of Employee, and Employee desires to render such services, upon the terms and conditions contained herein. B. The Board of Directors of the Company (the "Board"), by appropriate resolutions, authorized the employment of Employee as provided for in this Agreement. AGREEMENT 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 Employee, and Employee hereby accepts employment, as Nutritional Products Manager, upon the terms and conditions contained herein. As Nutritional Products Manager, Employee shall have broad responsibility to promote the sale of nutritional products carried by the company, identify the best vendors from whom to purchase the products and approve the best formulations for the Company to offer. Employee shall also be responsible for advising Company regarding compliance and governmental regulations for the sale of nutritional supplements to the best of Employee's ability. Employee shall work with Company's regulatory legal counsel in regards to these issues. 1.02 Other Duties. During the Contract Term, Employee agrees to be a resource in assisting sales representatives in Region 5 (Ohio and Pennsylvania), monitoring business activities at the Company's operations in Girard, OH, and generally providing marketing assistance to the Company as requested. At the request of Employee, the parties will mutually agree to a more specific definition of such duties including a limit to the number of meetings outside of Ohio the Employee may be required to attend. 1.03 Place of Operations and Time Commitment. Employee may perform his duties from any location provided that he sufficiently monitors business operations at the Company's Girard, OH, facility as mutually agreed with Company. Employee will devote the time necessary to adequately perform the duties described in this Agreement. 1 ARTICLE II TERM OF AGREEMENT The term of this Agreement shall commence on the Effective Date and shall remain in effect for a period of three (3) years (the "Contract Term") unless sooner terminated hereunder. Upon mutual agreement of the parties, this Agreement may be renewed for two additional one year extensions upon 30 days notice prior to the termination of the Agreement. ARTICLE III COMPENSATION During the Contract Term, the Company shall pay, or cause to be paid to Employee in cash in accordance with the normal payroll practices of the Company (including deductions, withholdings and collections as required by law), the following: 3.01 Annual Base Salary. Employee's annual base salary ("Annual Base Salary") will be Eighteen Thousand Dollars ($18,000.00) as of the Effective Date. 3.02 Bonus. Employee will be paid a bonus of 5% of gross sales of non-Nutura brand nutritional supplement sales that exceed $45,000 per quarter. No bonus will be paid on the first $45,000 of sales each fiscal quarter. In the event Employee's employment is terminated for any reason, for the quarter in which such termination occurs, Employee shall be paid a pro rated portion of the bonus compensation provided for herein through the date of termination. ARTICLE IV OTHER BENEFITS 4.01 Employee Benefits. During the Contract Term: (a) Employee shall be entitled to participate in the Company's 401(k) program, including the Company's annual matching contribution (currently up to $500), (b) Employee shall be entitled to receive health and dental insurance as it is provided to all employees of Region 5 except that Employee will be exempt from any employee requirement to share in the cost of the premiums. This coverage shall extend to Employee, Employee's spouse and any eligible dependents. If at any time insurance benefits are terminated for employees of Region 5, Employee's health insurance benefits will be replaced with alternative coverage approximately equivalent in benefits and cost. 2 (c) Employee shall be eligible for any other employee benefit program that is generally offered to all employees of the Company except that any stock options must be specifically approved by the Company's Board of Directors. 4.02 Expense Reimbursement. (a) Employee shall receive a monthly expense allowance of five-hundred dollars ($500) beginning with the Effective Date of this Agreement. Eligible expenses for reimbursement shall include (i) receipted expenditures for vehicle operation, including fuel, maintenance and repairs, monthly vehicle payments, licensing, taxes and insurance, (ii) cellular phone usage, (iii) home computer use, (iv) work related local entertainment and local travel expenses within assigned Territory, and (v) any other job related expenses approved by the Company. (b) In addition to the expense reimbursement provided in Section 4.02(a), Employee shall be entitled to receive prompt reimbursement for all reasonable, non-local employment-related expenses incurred by Employee, including regional or overnight travel, attending trade shows, meetings at the Company's headquarters, attending continuing education seminars related to nutrition, and other non-local business-related travel requested by the Company. Employee shall be reimbursed upon the Company's receipt of documentation in accordance with practices, policies and procedures of the Company. (c) Employee shall have the right to arrange for, schedule and book all business related travel and to charge same to his personal credit card, to be reimbursed to him pursuant to 4.02(b) above. 4.03 Nutrition Products. Employee shall be entitled to purchase Nutura nutrition products for his personal use and the personal use of his immediate family members, from Company at Company's cost. ARTICLE V RESTRICTIVE COVENANTS 5.01 Trade Secrets; Confidential and Proprietary Business Information. (a) The Company has advised Employee and Employee has acknowledged that it is the policy of the Company to maintain as secret and confidential all Protected Information (as defined below), and that Protected Information has been and will be developed at substantial cost and effort to the Company. "Protected Information" means trade secrets, confidential and proprietary business information of the Company, any information of the Company other than information which has entered the public domain (unless such information entered the public domain through effects of or on account of Employee), and all valuable and unique information and techniques acquired, developed or used by the Company relating to its business, operations, employees, customers and suppliers, which give the Company a competitive advantage over those who do not know the information and techniques and which are protected by the Company from unauthorized disclosure, including but not limited to, customer lists (including potential customers), sources of supply, processes, plans, materials, pricing information, internal memoranda, marketing plans, internal policies, and products and services which may be developed from time to time by the Company and its agent or employees. 3 (b) Employee acknowledges that Employee will acquire Protected Information with respect to the Company and its successors in interest, which information is a valuable, special and unique asset of the Company's business and operations and that disclosure of such Protected Information would cause irreparable damage to the Company. (c) Either during or for a period of two (2) years following termination of employment by the Company, Employee shall not, directly or indirectly, divulge, furnish or make accessible to any person, firm, corporation, association or other entity (otherwise than as may be required in the regular course of Employee's employment) nor use in any manner, any Protected Information, or cause any such information of the Company to enter the public domain. 5.02 Non-Competition (a) Employee agrees that Employee shall not during Employee's employment with the Company, and, for a period of two (2) years after the termination of this Agreement, directly or indirectly, in any capacity, engage or participate in, or become employed by or render advisory or consulting or other services in connection with any Prohibited Business as defined in Section 5.02(c). (b) Employee agrees that Employee shall not during Employee's employment with the Company, and, for a period of two (2) years after the termination of this Agreement, make any financial investment, whether in the form of equity or debt, or own any interest, directly or indirectly, in any Prohibited Business. Nothing in this Section 5.02(b) shall, however, restrict Employee from making any investment in any company whose stock is listed on a national securities exchange; provided that (i) such investment does not give Employee the right or ability to control or influence the policy decisions of any Prohibited Business, and (ii) such investment does not create a conflict of interest between Employee's duties hereunder and Employee's interest in such investment. (c) For purposes of this Section 5.02, "Prohibited Business" shall be defined as any business and any branch, office or operation thereof, which is a competitor of the Company and which has established or seeks to establish contact, in whatever form (including, but not limited to solicitation of sales, or the receipt or submission of bids), with any entity who is at any time a client, customer or supplier of the Company (including but not limited to all subdivisions of the federal government.) 4 5.03 Non-Solicitation. From the date hereof until two (2) years after Employee's termination of employment with the Company, Employee, and any person or entity directly or indirectly controlling, controlled by or under common control with Employee, shall not, directly or indirectly (a) encourage any employee, supplier, or customer of the Company, its affiliates, or its successors in interest to leave his or her employment with the Company, its affiliates, or its successors in interest, (b) employ, hire, solicit or cause to be employed, hired or solicited (other than by the Company, its affiliates, or its successors in interest), or encourage others to employ or hire any person who within one (1) year prior thereto was employed by the Company, its affiliates, or its successors in interest, or (c) establish a business with, or encourage others to establish a business with, any person who within one (1) year prior thereto was an employee, supplier, or customer of the Company, its affiliates, or its successors in interest. 5.04 Survival of Undertakings and Injunctive Relief. (a) The provisions of Sections 5.01, 5.02 and 5.03 shall survive the termination of Employee's employment with the Company irrespective of the reasons therefor. (b) Employee acknowledges and agrees that the restrictions imposed upon Employee by Sections 5.01, 5.02 and 5.03 and the purpose of such restrictions are reasonable and are designed to protect the Protected Information and the continued success of the Company without unduly restricting Employee's future employment by others. Furthermore, Employee acknowledges that, in view of the Protected Information which Employee has or will acquire or has or will have access to and in view of the necessity of the restrictions contained in Sections 5.01, 5.02 and 5.03, any violation of any provision of Sections 5.01, 5.02 and 5.03 hereof would cause irreparable injury to the Company and its successors in interest with respect to the resulting disruption in their operations. By reason of the foregoing, Employee consents and agrees that if Employee violates any of the provisions of Sections 5.01, 5.02 or 5.03 of this Agreement, the Company and its successors in interest, as the case may be, shall be entitled, in addition to any other remedies that they may have, including money damages, to an injunction to be issued by a court of competent jurisdiction, restraining Employee from committing or continuing any violation of such Sections of this Agreement. In the event of any such violation of Sections 5.01, 5.02 or 5.03 of this Agreement, Employee further agrees that the time periods set forth in such Sections shall be extended by the period of such violation. ARTICLE VI TERMINATION 6.01 Termination of Employment. Employee's employment may be terminated (i) at any time during the Contract Term by mutual agreement of the parties, or (ii) as otherwise provided in this Article. 5 6.02 Termination without Cause. The Company may terminate Employee's employment without cause by giving Employee seven (7) days prior written notice of such termination. In the event Employee's employment is terminated without cause during the first one half (1/2) of Employee's Contract Term, Employee shall be entitled to receive eighteen months of salary, payable within thirty (30) days of the notice of termination which would include the average bonus estimated for an 18 month period as mutually agreed and based on the prior bonuses earned pursuant to this Agreement. Employee shall also be entitled to a continuation of their Health Insurance benefits as provided for in the Agreement. If COBRA or other laws prevent the Company from providing the Health Insurance benefits as defined in this Agreement after termination without cause, the Company shall pay to Employee an equivalent of the monthly health insurance costs incurred by the Company in the month immediately prior multiplied times the remaining months left under the Agreement. Other than the items of Salary and Health Insurance described, no other benefits will be provided. In the event Employee's employment is terminated without cause during the last one half (1/2) of Employee's Contract Term, Employee shall be entitled to receive the balance of Employee's Annual Base Salary, payable on the Company's standard payroll days, the average bonus estimated to have been paid for the period as mutually agreed and based on the prior bonuses earned pursuant to this Agreement, and all health and dental insurance benefits that Employee, his spouse and child, would have been entitled to receive, during the remainder of the Contract Term, which benefits shall be provided at Company's expense. In the event Employee's employment is terminated without cause hereunder, the restrictive covenants contained in Sections 5.02 and 5.03 shall not apply. 6.03 Death or Disability. In the event Employee, during the Contract Term, dies or becomes permanently disabled or incapacitated such that he is unable to perform his duties under this Agreement, the Company shall pay Employee, in the event of disability, or Employee's surviving spouse, if any, in the event of death, but shall not otherwise pay Employee's estate, pursuant to Section 6.02 as if Employee had been terminated without cause. 6.04 Termination for Cause. The Company may terminate Employee's employment for Cause by giving Employee seven (7) days prior written notice of such termination. For purposes of this Agreement, "Cause" for termination shall mean: (i) the willful failure or refusal to carry out the reasonable directions of the Board, the Chief Executive Officer, or the President, which directions are consistent with Employee's duties as set forth under this Agreement and have been given to Employee in writing but which directions Employee has failed to follow or implement within fifteen (15) days after said written notice, other than a failure resulting from Employee's complete or partial incapacity due to physical or mental illness or impairment; (ii) failure to follow Company policy or specific instructions from Employee's superior(s), which failures continue after fifteen (15) days after written notice thereof by the Company; however, no warning shall be required in the case of significant insubordination causing financial harm to the Company or significant harm to the reputation of the Company; 6 (iii) a conviction for a violation of a state or federal criminal law involving the commission of a felony; (iv) a willful act by Employee that constitutes gross negligence in the performance of Employee's duties under this Agreement and which materially injures the Company. No act, or failure to act, by Employee shall be considered "willful" unless committed without good faith and without a reasonable belief that the act or omission was in the Company's best interest; (v) a material breach by Employee of the terms of this Agreement, which breach has not been cured by Employee within fifteen (15) days of written notice of said breach by the Company; (vi) repeated unethical business practices by Employee in connection with the Company's business, which unethical business practices continue after fifteen (15) days after written notice thereof by the Company; (vii) habitual abuse of alcohol or drugs by Employee; (viii) intentional misuse of or damage to Company property; (ix) theft or destruction of property, money or goods belonging to the Company or its employees; (x) falsification of Company records; (xi) gambling while on Company property or while engaged in Company activities; provided, however, that Employee may gamble when not on Company business or Company time, while attending trade shows for Company located in a gambling venue (e.g. Las Vegas); (xii) excessive absenteeism or failure to report to work without proper excuse pursuant to the assigned duties as defined in this Agreement; or (xiii) violation of the Company's sexual harassment policies. Upon termination for Cause, Employee shall not be entitled to payment of any compensation other than salary and benefits under this Agreement earned up to the date of such termination. Notwithstanding any provision to the contrary in any option or equity award agreement between the Company and Employee, in the event Employee's employment shall terminate on account of Termination for Cause, Employee shall forfeit and shall not be entitled to exercise any unexercised options, warrants, or similar rights to equity of the Company, whether or not vested or unvested, as of the date of termination. Notwithstanding the forgoing, Employee shall not forfeit any rights relative to the shares of stock in Company that Employee acquired as a result of the merger of the Therapy and Health Care Products, Inc. and Dynatronics Distribution Company, LLC. 7 ARTICLE VII MISCELLANEOUS 7.01 Assignment, Successors. This Agreement may not be assigned by either party hereto without the prior written consent of the other party. This Agreement shall be binding upon and inure to the benefit of Employee and Employee's estate and the Company and any assignee of or successor to the Company. 7.02 Nonalienation of Benefits. Benefits payable under this Agreement shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution or levy of any kind, either voluntary or involuntary, prior to actually being received by Employee, and any such attempt to dispose of any right to benefits payable hereunder shall be void. 7.03 Severability. If all or any part of this Agreement is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not serve to invalidate any portion of this Agreement not declared to be unlawful or invalid. Any paragraph or part of a paragraph so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such paragraph or part of a paragraph to the fullest extent possible while remaining lawful and valid. 7.04 Amendment and Waiver. This Agreement shall not be altered, amended or modified except by written instrument executed by the Company and Employee. A waiver of any term, covenant, agreement or condition contained in this Agreement shall not be deemed a waiver of any other term, covenant, agreement or condition and any waiver of any other term, covenant, agreement or condition, and any waiver of any default in any such term, covenant, agreement or condition shall not be deemed a waiver of any later default thereof or of any other term, covenant, agreement or condition. 7.05 Notices. All notices and other communications hereunder shall be in writing and delivered by hand or by first class registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Company: Dynatronics Corporation 7030 Park Centre Drive Salt Lake City, Utah 84121 8 With a copy to: DURHAM JONES & PINEGAR Attn: Wayne D. Swan, Esq. 111 East Broadway, Suite 900 P.O. Box 4050 Salt Lake City, Utah 84110 If to Employee: Anthony D. Trolio 445 Fifth Avenue Hubbard, OH 44425 Either party may from time to time designate a new address by notice given in accordance with this Section. Notice and communications shall be effective when actually received by the addressee. 7.06 Counterpart Originals. This Agreement may be executed in counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 7.07 Entire Agreement. This Agreement forms the entire agreement between the parties hereto with respect to any severance payment and with respect to the subject matter contained in the Agreement. 7.08 Applicable Law. The provisions of this Agreement shall be interpreted and construed in accordance with the laws of the state of Utah, without regard to its choice of law principles. 7.10 Effect on Other Agreements. This Agreement shall supersede entirely all prior agreements (including, without limitation, any existing employment agreement), promises and representations regarding employment by the Company and severance or other payments contingent upon termination of employment not referenced by this agreement. 7.11 Extension or Renegotiation. The parties hereto agree that at any time prior to the expiration of this Agreement, they may extend or renegotiate this Agreement upon mutually agreeable terms and conditions. The parties acknowledge that Employee is also the Landlord for the Company's operations in Girard, OH. If at anytime, or for any reason, it becomes necessary for Company to leave the demised premises, it will trigger an increase of compensation under paragraph 3.01 from $18,000 per year to $42,000 per year only for the duration of the Agreement. 7.12 Attorneys' Fees. If any legal action or other proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default, or misrepresentation in connection with any of the provisions of this Agreement, the successful or prevailing party shall be entitled to recover reasonable attorneys' fees, and any other fees and costs incurred in the action or proceeding, in addition to any other relief to which such party may be entitled. Without limiting the generality of the foregoing, any reasonable costs 9 and expenses, including without limitation reasonable attorneys' fees, incurred in enforcing any judgment or arbitration award shall be recoverable by the prevailing party as a separate item of recovery, and this provision is intended to be severable from the other provisions of this Agreement and shall survive any judgment or arbitration award and shall not be deemed to be merged into the judgment or award. IN WITNESS WHEREOF the parties have executed this Employment Agreement on the date first written above. Dynatronics Corporation, a Utah corporation By: /s/ Kelvyn H. Cullimore, Jr. ------------------------------- Name: Kelvyn H. Cullimore, Jr. ------------------------------ Title: President and CEO ----------------------------- Anthony D. Trolio, an individual /s/ Tony Trolio ----------------------------------- Anthony D. Trolio 10 - -------------------------------------------------------------------------------- EX-10.5 6 dynatronics8k7110exh105.txt ADDENDUM ================================================================================ Exhibit 10.5 - ------------ ADDENDUM This Addendum is executed to supplement and clarify that certain Redemption Agreement of June 30, 2010 executed by John Rajala and Dynatronics Corporation (the "Redemption Agreement." This Addendum is attached to and forms a part of the Redemption Agreement. The undersigned acknowledge and agree that the Redemption Shares covered by the Redemption Agreement are held in brokerage accounts for the benefit of the [NAME OF TRUST] (the "Trust") and that Rajala is the Trustee of such Trust. The parties agree, further, that Rajala has executed the Redemption Agreement on behalf of and in his capacity as Trustee of the Trust, and that the Trust is the true party in interest under the Redemption Agreement. References to "Rajala" in the Redemption Agreement shall, as the context requires, also refer to the Trust and the Trust is and shall be bound by the terms and provisions of the Redemption Agreement as a party to such agreement. IN WITNESS WHEREOF, the parties hereto have caused this Addendum to the Redemption Agreement, each thereunto duly authorized, as of June 30, 2010. [NAME OF TRUST] /s/ John Rajala ------------------------------------------- John Rajala, Individually and as Trustee of The [NAME OF TRUST] Dynatronics Corporation By: /s/ Kelvyn H. Cullimore, Jr. --------------------------------------- Its: President and CEO --------------------------------------- - -------------------------------------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----