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Exhibit 10.2
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EMPLOYMENT AGREEMENT
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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.
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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.
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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.
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(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.
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(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
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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;
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(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.
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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:
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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.
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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.
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Name: Kelvyn H. Cullimore, Jr.
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Title: President and CEO
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John Rajala,
an individual
/s/ John Rajala
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John Rajala
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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
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