<PAGE>
DYNATRONICS CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
November 17, 1998
TO THE SHAREHOLDERS OF DYNATRONICS CORPORATION:
Please take notice that the Annual Meeting of Shareholders of
Dynatronics Corporation, a Utah corporation (the "Company"), will be
held at 7030 Park Centre Drive, Salt Lake City, Utah, 84121, as provided
by the bylaws of the Company, as amended, on Tuesday, November 17, 1998,
at 4:00 p.m., Mountain Standard Time, for the following purposes:
1. To elect a Board of seven directors to hold office until the
next Annual Meeting of Shareholders or until their respective
successors have been elected or appointed;
2. To consider and act upon a proposal that the shareholders
ratify the appointment of KPMG Peat Marwick as the Company's
independent public accountants for the 1999 fiscal year.
3. To consider and act upon a proposal to amend the Company's 1992
Amended and Restated Stock Option Plan to increase the number
of shares available under such plan from 1,000,000 to
2,500,000.
4. To transact such other business as may properly be brought
before the meeting or any adjournment thereof.
Nominees for directors are set forth in the enclosed Proxy
Statement.
Only shareholders of record at the close of business on Friday,
October 12, 1998 will be entitled to vote at this meeting. A list of
shareholders entitled to vote will be available for inspection at the
office of the Company for ten days prior to the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/S/ Bob Cardon
----------------------------------
Bob Cardon, Corporate Secretary
Salt Lake City, Utah
October 21, 1998
IMPORTANT
Whether or not you expect to attend the Annual Meeting in person,
to assure that your shares will be represented, please complete, date,
sign and return the enclosed proxy without delay in the enclosed
envelope. Your proxy will not be used if you are present at the meeting
and desire to vote your shares personally.
<PAGE>
PROXY STATEMENT
DYNATRONICS CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 17, 1998
This Proxy Statement is furnished pursuant to Regulation 14A under
the Securities Exchange Act of 1934 in connection with the Annual
Meeting of Shareholders of Dynatronics Corporation ("Dynatronics" or the
"Company") to be held at 7030 Park Centre Drive, Salt Lake City, Utah
84121 at 4:00 p.m. (local time) on November 17, 1998, and at any and all
adjournments or postponements thereof. This Proxy Statement, the Notice
of Annual Meeting, and a copy of the Company's Annual Report will be
provided to shareholders of record as of October 12, 1998 and will be
mailed on or about October 23, 1998. The cost of disseminating this
information will be paid by the Company.
ANY SHAREHOLDER WHO EXECUTES A PROXY MAY REVOKE IT AT ANYTIME
BEFORE IT IS EXERCISED BY GIVING ANOTHER PROXY OR BY LETTER OR TELEGRAM
DIRECTED TO THE COMPANY.
THE SOLICITATION OF PROXIES TO WHICH THIS PROXY STATEMENT RELATES
IS BEING MADE ON BEHALF OF THE COMPANY BY ITS BOARD OF DIRECTORS.
The matters to be considered and voted upon at the Annual Meeting
will be:
1. Election of seven directors to serve until the next Annual Meeting of
Shareholders or until their successors are elected and qualified;
2. Ratification of the selection of KPMG Peat Marwick as the independent
public accountants of the Company; and
3. Approval of an amendment to the Company's 1992 Amended and Restated
Stock Option Plan to increase the number of options available under
the plan from 1,000,000 to 2,500,000.
4. Transaction of such other business as may properly come before the
meeting.
It is important that proxies be returned promptly. Stockholders
are requested to vote, sign, date and return the proxy in the enclosed
self-addressed envelope.
The Board of Directors recommends that the stockholders vote FOR
the election of its nominees for directors, and FOR the proposal to
ratify the selection of KPMG Peat Marwick as independent public
accountants, and FOR the proposal to amend the 1992 Amended and Restated
Stock Option Plan.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
As of the close of business on the record date (October 12, 1998),
the date for determining shareholders entitled to notice of and to vote
at the meeting, Dynatronics had issued and outstanding 8,665,314 shares
of common stock, no par value, all of which are entitled to vote and be
voted at the meeting. Each share is entitled to one vote and only
<PAGE>
shareholders of record of the Company's common stock as of the close of
business on the record date shall be entitled to vote their shares.
Shareholders will not be allowed to cumulate their shares. Holders of a
majority of such shares must be represented at the Annual Meeting to
constitute a quorum for purposes of conducting any business.
Each of the proposed actions to be considered requires the
affirmative approval of a majority of the votes cast at the Annual
Meeting where holders of a majority of the shares issued and outstanding
are present in person or by proxy.
The following table sets forth, as of October 12, 1998, the number
of shares of common stock, no par value, of the Company owned
beneficially by all the persons known to be holders of more than five
percent (5%) of the Company's voting securities:
Amount and
Nature of
Name and Address of Title of Beneficial Percent of
Beneficial Owner Class Ownership Class (10)
- --------------------------------------------------------------------------
Kelvyn H. Cullimore, Jr. Common 753,743 (1) 8.7%
7030 Park Centre Drive Stock
Salt Lake City, UT 84121
The following table sets forth, as of October 12, 1998, the number
of shares of common stock, no par value, of the Company owned
beneficially by (a) directors and executive officers and (b) all
executive officers and directors of the Company as a group:
Amount and
Nature of
Title of Beneficial Percent of
Name of Beneficial Owner Class Ownership Class (10)
- --------------------------------------------------------------------------
Kelvyn H. Cullimore, Jr. Common 753,743 (1) 8.7%
President, CEO, Director stock
Kelvyn H. Cullimore " 163,441 (2) 1.9%
Chairman
E. Keith Hansen, M.D. " 334,650 (3) 3.9%
Director
Larry K. Beardall " 99,963 (4) 1.2%
Exec. V.P., Director
V. LeRoy Hansen " 95,300 (5) 1.1%
Director
Howard L. Edwards " 42,000 (6) *
Director
Joseph H. Barton " 18,000 (7) *
Director
<PAGE>
Amount and
Nature of
Title of Beneficial Percent of
Name of Beneficial Owner Class Ownership Class (10)
- -----------------------------------------------------------------------------
John S. Ramey " 37,500 (8) *
Sr. V.P. Operations
John L. Hales " 27,800 (9) *
Chief Financial Officer
All executive officers and 1,572,397 (10)(11) 17.9%
directors as a group
(9 persons)
* Less than 1 percent
(1) Includes 647,623 shares owned directly, 51,120 shares owned by Mr.
Cullimore's wife and minor children, 30,000 shares owned by a family
corporation of which Mr. Cullimore, Jr. is Vice President, and
exercisable options for the purchase of 25,000 shares.
(2) Includes 126,191 shares owned directly, 7,250 shares owned by Mr.
Cullimore's wife, 30,000 shares owned by a family corporation of
which Mr. Cullimore is President, and exercisable options for the
purchase of 10,000 shares.
(3) Includes 248,650 shares owned directly, 80,000 shares owned by a
pension plan as to which Dr. Hansen is a beneficiary and exercisable
options for the purchase of 6,000 shares.
(4) Includes 64,263 shares owned directly, 15,700 shares owned by Mr.
Beardall's children and exercisable options for the purchase of
20,000 shares.
(5) Includes 89,300 shares owned directly and exercisable options for
the purchase of 6,000 shares.
(6) Includes 27,000 shares owned directly and exercisable options for
the purchase of 15,000 shares.
(7) Includes exercisable options for the purchase of 18,000 shares.
(8) Includes 22,500 shares owned by a retirement plan as to which Mr.
Ramey is beneficiary and exercisable options for the purchase of
15,000 shares.
(9) Includes 11,500 shares owned directly, 1,000 shares owned by Mr.
Hales' children and exercisable options for the purchase of 15,300
shares.
(10) The "Percent of Class" calculation is based on shares and options
beneficially owned divided by - 8,665,314 the number of shares
outstanding as of October 12, 1998 plus non-issued securities which
are subject to exercisable options by the particular beneficial
owners identified in the table.
(11) The calculation of beneficially owned shares of all executive
officers and directors as a group eliminates the duplicate entries of
shares owned by a family corporation which are reflected in the
beneficial ownership of both Kelvyn H. Cullimore and Kelvyn H.
Cullimore, Jr.
<PAGE>
PROPOSAL 1 - ELECTION OF DIRECTORS
At the Annual Meeting of Shareholders, seven (7) directors will be
elected. The Board of Directors has no reason to believe that any
nominee named herein will be unable or unwilling to serve. Each person
identified as a nominee has consented to be named as such.
Directors of the Company hold office until the next annual meeting
of the Company's shareholders and until their successors have been
elected or appointed and duly qualified. Executive officers are elected
by the Board of Directors of the Company at the first meeting after each
Annual Meeting of Shareholders and hold office until their successors
are elected or appointed and duly qualified. Vacancies on the board
which are created by the retirement, resignation or removal of a
director may be filled by the vote of the remaining members of the
Board, with such new director serving the remainder of the term or until
his successor shall be elected and qualify.
There were six regular meetings of the Board of Directors held
during the fiscal year ended June 30, 1998. No director attended fewer
than 75% of the meetings. The Company had no formal nominating
committee during the fiscal year ended June 30, 1998. The Company has a
Compensation Committee composed of the outside directors of the board
which reviews and approves compensation matters for executive officers
of the Company. Members of this Committee are: Dr. E. Keith Hansen, V.
LeRoy Hansen, Joseph H. Barton and Howard L. Edwards. There were nine
meetings of the Compensation Committee of the Board of Directors held
during the year ended June 30, 1998. During fiscal year 1998, the
Company formed an Audit Committee comprising the outside directors of
the board which will review audit findings with the Company's
independent auditors. There were no meetings of the Audit Committee
during fiscal year 1998.
There are no material legal proceedings to which any director or
executive officer is a party adverse to the Company.
The directors and executive officers of the Company at
October 12, 1998 were:
Director
or Officer Position
Name Age Since with Company
- --------------------------------------------------------------------------
Kelvyn H. Cullimore* 63 1983 Chairman of the Board
Kelvyn H. Cullimore, Jr.* 42 1983 President, CEO and Director
Larry K. Beardall* 42 1986 Executive Vice President of
Sales and Marketing and
Director
E. Keith Hansen, M.D.* (+) 53 1983 Director
V. LeRoy Hansen* (+) 60 1987 Director
Joseph H. Barton* (+) 70 1995 Director
Howard L. Edwards* (+) 67 1997 Director
<PAGE>
Director
or Officer Position
Name Age Since with Company
- -----------------------------------------------------------------------------
John S. Ramey 47 1992 Sr. Vice President of
Operations and Research
and Development
John L. Hales 54 1997 Chief Financial Officer and
Treasurer
* Nominated for re-election to Board.
(+) Member Compensation Committee and Audit Committee
Kelvyn H. Cullimore is the father of Kelvyn H. Cullimore, Jr. V.
LeRoy Hansen and E. Keith Hansen are cousins.
Kelvyn H. Cullimore has served as Chairman of the Board of the
Company since its incorporation in April, 1983. From 1983 until 1992,
Mr. Cullimore served as President of the Company. Mr. Cullimore
received a B.S. in Marketing from Brigham Young University in 1957, and
following graduation, worked for a number of years as a partner in a
family-owned home furnishings business in Oklahoma City, Oklahoma. Mr.
Cullimore has participated in the organization and management of various
enterprises, becoming the president or general partner in several
business entities, including real estate, motion picture, and equipment
partnerships. From 1979 until 1992, Mr. Cullimore served as Chairman of
the Board of American Consolidated Industries (ACI), the former parent
company of Dynatronics. Since 1986, Mr. Cullimore has served as
President of ITEC Attractions and from 1986 to 1997, he served as ITEC's
Chairman, President and CEO. Presently, Mr. Cullimore serves as
President/CEO of ITEC.
Kelvyn H. Cullimore, Jr. was elected President and Chief Executive
Officer of the Company in December of 1992. He has been a Director
since the incorporation of the Company. He served as
Secretary/Treasurer of the Company from 1983 until 1992 and
Administrative Vice President from 1988 until 1992. Mr. Cullimore
graduated from Brigham Young University with a degree in Financial and
Estate Planning in 1980. Mr. Cullimore has served on the Board of
Directors of several businesses, including Dynatronics Marketing Company
and ACI. He currently serves on the Board of ITEC Attractions. In
addition, he was Secretary/Treasurer of ACI and Dynatronics Marketing
Company. From 1983 until 1992 Mr. Cullimore served as Executive Vice
President and Chief Operating Officer of ACI.
Larry K. Beardall was elected Executive Vice President of the
Company in December of 1992. He has served as a Director and the Vice
President of Sales and Marketing for the Company since July of 1986.
Mr. Beardall joined Dynatronics in February of 1986 as Director of
Marketing. He graduated from Brigham Young University with a degree in
Finance in 1979. Prior to his employment with Dynatronics, Mr. Beardall
worked with GTE Corporation in Durham, North Carolina as the Manager of
Mergers and Acquisitions and then with Donzis Protective Equipment in
Houston, Texas as National Sales Manager. He also served on the Board
of Directors of Nielsen & Nielsen, Inc., the marketing arm for Donzis, a
supplier of protective sports equipment.
E. Keith Hansen, M.D. has been a Director of the Company since
1983. Dr. Hansen obtained a Bachelor of Arts degree from the University
of Utah in 1966 and an M.D. degree from Temple University in 1972. He
has been in private practice in Sandy, Utah since 1976. Dr. Hansen was
also a Director of ACI until 1992 and a Director of Mountain Resources
Corporation from 1980 to 1988. Currently, Dr. Hansen serves as a
Director of Accent Publishers, a privately held company, based in Salt
Lake City, Utah.
<PAGE>
V. LeRoy Hansen has been a Director of the Company since 1987. Mr.
Hansen received a Bachelor of Science degree in Economics from the
University of Utah in 1965. From 1960-1980, Mr. Hansen was employed by
AT&T in numerous management positions. From 1976-1978, he served at
AT&T headquarters in Market Management Concept Development and
Implementation as well as Long Range Financial Planning. From 1980 to
1988, he co-founded Mountain Resources Corporation, an energy
development company and served as vice president. From 1988 to 1993,
Mr. Hansen founded and served as president of Associated Enterprises,
Inc., a corporation providing management and business development
consulting services. In May of 1992, Mr. Hansen founded Silver Summit,
L.C., a real estate development company. He is presently the president
of Silver Summit L.C.
Joseph H. Barton was elected a Director in November 1995, and began
serving in January 1996. Mr. Barton received a Civil Engineering degree
from the University of California at Berkeley and has held various
executive positions including President of J.H. Barton Construction
Company, Senior Vice President of Beverly Enterprises, and President of
KB Industries, a building and land development company. Most recently,
Mr. Barton served as Senior Vice President of GranCare, Inc. from 1989
to 1994 and currently is a consultant for Covenant Care, a company which
owns and manages long-term care facilities throughout the United States.
Howard L. Edwards was elected a Director in January 1997. From
1968 to 1995 Mr. Edwards served in various capacities at Atlantic
Richfield Company (ARCO) and its predecessor, the Anaconda Company,
including corporate secretary, vice president, treasurer and general
attorney. In addition, Mr. Edwards was a partner in the law firm of
VanCott, Bagley, Cornwall and McCarthy, based in Salt Lake City, Utah.
He graduated from the George Washington University School of Law in 1959
and received a bachelor's degree in Finance and Banking from Brigham
Young University in 1955.
John S. Ramey joined the Company in December 1992 as Vice President
of Research and Development and currently serves as Senior Vice
President of Operations. Prior to joining the Company, Mr. Ramey worked
for 16 years with Phillips Semi-conductors--Signetics, an integrated
circuit manufacturing company as Manager of Product Engineering. From
1983 to 1989 Mr. Ramey also served as President of Enertronix, a small
public corporation. Since 1989 Mr. Ramey has served as Vice President
of JRH Technology, a private engineering firm. Mr. Ramey earned his MBA
degree in 1991 from the University of Phoenix (in Salt Lake City, Utah)
and a BS degree in electronics in 1977 from Brigham Young University.
John L. Hales joined the Company and was elected Chief Financial
Officer and Treasurer in November 1996. Prior to joining the Company,
Mr. Hales worked as an independent management consultant from 1994 until
1996. From 1993 to 1994, he served as Chief Financial Officer of the
Covey Leadership Center. From 1980 to 1992, he was employed by the
Hill-Rom Company, a subsidiary of Hillenbrand Industries, and served as
Vice President of Finance and Administration for nine years. Mr. Hales
received his B.S. degree in Finance from Brigham Young University in
1968 and his MBA from Utah State University in 1970.
Certain Relationships and Related Transactions
In April 1998, the Company concluded its services agreement with
ITEC Attractions and no longer provides administrative services to ITEC
which included secretarial, administrative, and accounting functions.
During fiscal 1997 and 1998 the Company charged ITEC $72,000 and $61,500
respectively for services provided by the Company. In fiscal 1997, the
Company received approximately $89,000 pursuant to ITEC's Plan of
Reorganization payout to creditors. The Company retains a nominal
(approximately 3%) ownership in ITEC. The Company's Chairman, Kelvyn H.
Cullimore, is also the President and CEO of ITEC. The Company's
<PAGE>
President and CEO, Kelvyn H. Cullimore, Jr., is also a director of ITEC.
For more information, see the Company's Annual Report on Form 10-
KSB for the year ended June 30, 1997.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten
percent of a registered class of the Company's equity securities, to
file reports of ownership and changes in ownership on Forms 3, 4 and 5
with the Securities and Exchange Commission ("SEC"). Officers,
directors and greater than ten-percent shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms
which they file.
Based solely on the Company's review of the copies of such forms
furnished to the Company, the Company believes that during its 1998
fiscal year all Section 16(a) filings applicable to its officers,
directors and greater than ten-percent beneficial owners were filed in a
timely manner.
Executive Compensation
The following table sets forth the compensation of the Company's
chief executive officer and all executive officers whose total annual
salary and bonus exceeded $100,000 during the fiscal year ended June 30,
1998.
Summary Compensation Table
[CAPTION]
<TABLE>
Long Term Compensation
-----------------------------
Annual Compensation Awards Payouts
----------------------------------------------------------------------------
Name Other Restricted
and Annual Stock LTIP All Other
Principal Compen- Award(s) Options/ Payouts Compen-
Position Year Salary($) Bonus($) sation(1) ($) SAR(#) ($) sation($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kelvyn H. Cullimore, Jr. 1998 $106,956 $37,773 $9,720 $-0- 100,000 $-0- $-0-
President/CEO 1997 $101,124 $12,837 $9,590 $-0- 25,000 $-0- $-0-
1996 $95,400 $15,277 $8,279 $-0- -0- $-0- $-0-
1995 $90,000 $12,973 $7,195 $-0- -0- $-0- $-0-
Larry K. Beardall* 1998 $97,429 $50,365 $9,414 $-0- 100,000 $-0- $-0-
Executive Vice President 1997 $93,135 $17,117 $9,461 $-0- 20,000 $-0- $-0-
1996 $86,920 $20,369 $9,237 $-0- -0- $-0- $-0-
</TABLE>
*During fiscal year 1995, Mr. Beardall's salary and bonus did not
exceed $100,000.
(1) The Company provides automobiles for certain executive officers and
pays all vehicle operating expenses. The Company also provides life
insurance for its officers. The amount of this column includes the
approximate value of these benefits to the named officer.
During the last completed year, the Company made no awards under
any long-term incentive plan and no stock appreciation rights were
granted.
Employment Contracts
The Company has entered into written employment contracts with two
executive officers, Kelvyn H. Cullimore, Jr., President and Chief
Executive Officer, and Larry K. Beardall, Executive Vice President.
These contracts are for initial terms of five years (i.e., through the
end of the Company's fiscal year in 2003). Both contracts may be
renewed automatically, subject to the right of either party to terminate
<PAGE>
the agreements upon 90 days notice made prior to the last day of the
initial term or any renewal term. The contract extensions would carry
each contract out for an additional ten years (five renewal terms of two
years each). The compensation package under each contract includes an
auto allowance, an annual bonus based on pre-tax operating profit of the
Company (at rates established by the Compensation Committee), and stock
options granted under the Company's 1992 Stock Option Plan, as amended
and restated. Each officer also participates in the salary continuation
plan and receives other welfare and employee benefits that are standard
in such agreements, including, by way of example, health insurance and
disability coverage, paid vacation and Company-paid life insurance. The
contracts also contain a provision granting the executives certain
rights and protections in the event of a change in control of the
Company. Among other things, the change of control provision of the
contracts provide for severance payments to the executives, if their
employment is discontinued as a result of the change of control of the
Company. The complete contracts were filed as exhibits to the Company's
Report on Form 10-KSB for the year ended June 30, 1998.
Bonus Plan
The Company maintains a discretionary incentive bonus plan
administered by the Compensation Committee. Pursuant to the plan, the
Compensation Committee granted incentive bonuses to certain officers and
employees of the Company during the year. The total amount of bonuses
paid for fiscal 1998 was $223,385 of which $155,028 was for officers.
Amounts paid to these named officers are included under the "Bonus"
heading in the compensation table above.
Salary Continuation Plan
During fiscal year 1988, the Company's Board of Directors adopted
a Salary Continuation Agreement (Agreement) for certain Officers of the
Company. The Agreement provides for a pre-retirement benefit to the
employee's designated beneficiary in the event that the employee dies
before reaching age 65 and a retirement benefit upon reaching age 65.
The pre-retirement benefit provides for payment of 50 percent of the
employee's compensation at the time of death up to $75,000 annually for
a period of 15 years or until the employee would have reached age 65,
whichever is longer. The retirement benefit provides the employee
$75,000 annually for a period of 15 years. Presently, Kelvyn H.
Cullimore, Kelvyn H. Cullimore, Jr. and Larry K. Beardall are covered
under this plan.
Funding for obligations arising in connection with the Agreement
is provided by life insurance policies on participating employees, of
which the Company is the owner and beneficiary. The face amounts of the
policies have been determined so that sufficient cash values and death
benefits will be provided to meet the obligations as they occur. In
fiscal year 1998, the Company expensed $50,797 relating to salary
continuation obligations. No benefits have been paid under this salary
continuation plan.
Profit-Sharing and 401(k) Plan
The Company has adopted a Profit-Sharing and 401(k) Plan (the
"Plan") which consists of a profit-sharing plan and a salary reduction
arrangement. Employees who are age 20 and have completed at least six
months of service with the Company are eligible to participate in the
Plan.
Eligible employees may make contributions to the Plan in the form
of salary deferrals up to 15% of total compensation, not to exceed
$9,500, the maximum allowable amount of salary deferrals for calendar
1997. The Company matches annual employee contributions at 25% of
employee contributions, up to a maximum of $500 per employee per year.
<PAGE>
Participants under the Plan are 100% vested in their salary
deferral contributions and vest 20% per year after 2 years of
participation in Company matching contributions. Amounts deferred by
employees under the Plan are included under "Salary" in the compensation
table for applicable executives above. Amounts contributed by the
Company for each applicable individual are included in the "Other
Compensation" column in the table above.
Stock Options Outstanding
During fiscal year 1996, options to purchase 166,026 shares were
granted under the 1992 Stock Option Plan as follows: Kelvyn H.
Cullimore, Jr., 25,000 shares; to all executive officers as a group,
65,000 shares (exclusive of Kelvyn H. Cullimore, Jr.); and to others,
76,026. Options are to purchase shares of the common stock, no par
value, of the Company and are exercisable one year (minimum) from the
date of grant. The per share exercise price of these options ranges
from $1.08 to $1.28.
During fiscal year 1997, options to purchase 246,426 shares were
canceled and options to purchase 256,206 shares were granted under the
1992 Stock Option Plan as follows: Kelvyn H. Cullimore, Jr., 25,000
shares; to all executive officers as a group, 97,300 shares (exclusive
of Kelvyn H. Cullimore, Jr.,); and to others, 133,906 shares. Options
are to purchase common stock of the Company and are exercisable one year
(minimum) from the date of grant. The weighted average per share
exercise price of these options was $1.04.
During fiscal year 1998, options to purchase 404,037 shares were
granted under the 1992 Stock Option Plan as follows: Kelvyn H.
Cullimore, Jr., 100,000 shares; to all executive officers as a group,
125,000 shares (exclusive of Kelvyn H. Cullimore, Jr.); and to others,
179,037 shares. Options are to purchase common stock of the Company and
are exercisable one year (minimum) from the date of grant. The weighted
average per share exercise price of these options was $1.00.
The following table sets forth options granted to named executive
officers whose total compensation exceeded $100,000 during fiscal 1998.
The Company has not granted any SAR's to employees or directors.
Options/SAR Grants in Last Fiscal Year
[CAPTION]
<TABLE>
Potential
Realized Value at
Assumed Annual Alternative
Rates of Stock Price to (f) and (g):
Individual Appreciation Grant Date
Grants for Option Term Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
% of
Number of Total
Securities Options/
Underlying SARs
Options/ Granted to Exercise Grant
SARs Employees or Base Date
Granted in Fiscal Price Expiration Present
Name (#) Year ($/Sh) Date 5% ($) 10% ($) Value $
- --------------------------------------------------------------------------------------------------------------------
Kelvyn H. Cullimore, Jr. 100,000/0 25%/0% $1.00 3/2/03 $28,000 $61,000 0
President and CEO
Larry K. Beardall 100,000/0 25%/0% $1.00 3/2/03 $28,000 $61,000 0
Executive Vice President
</TABLE>
(1) The exercise price in each case is equal to the fair market value of
the Company's common stock on the date the option was granted.
<PAGE>
The following table sets forth the information, including the
fiscal year-end value of unexercised stock options held by to the
Company's chief executive officer and all other executive officers whose
total compensation exceeded $100,000 during fiscal 1998.
Aggregated Option/SAR Exercises In Last Fiscal Year
and Fiscal Year-End Option/SAR Values
[CAPTION]
<TABLE>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
June 30, 1998 June 30, 1998
Shares
Acquired on Exercisable/ Exercisable/
Name Exercise Value Realized ($) Unexercisable Unexercisable
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kelvyn H. Cullimore, Jr. 52,000 130,000 25,000/100,000 $60,750/$240,000
President/CEO
Larry K. Beardall 31,000 77,500 20,000/100,000 $48,600/$240,000
</TABLE>
Remuneration of Directors
Directors who receive remuneration as officers of the Company are
paid $100 per meeting for attendance at regular and special director's
meetings. Outside directors are paid an annual director's fee of
$3,600. In addition, the Company pays all expenses incurred by
directors in connection with attendance at board meetings.
Each outside director also participates in an annual bonus
program. The full annual bonus per director is one percent of the
Company's pre-tax profits. A total of $45,916 was paid to the outside
directors under this plan for the fiscal year 1998.
PROPOSAL 2 - RATIFICATION OF SELECTION OF AUDITORS
The firm of KPMG Peat Marwick served as independent public
accountants for the Company for the fiscal year ended June 30, 1998.
The Board of Directors desires the firm to continue in this capacity for
the current fiscal year. Accordingly, a resolution will be presented at
the meeting to ratify the selection of KPMG Peat Marwick by the Board of
Directors as independent public accountants to audit the accounts and
records of the Company for the fiscal year ending June 30, 1999, and to
perform other appropriate services. The Board recommends that the
shareholders vote FOR Proposal 2, ratifying the selection of KPMG Peat
Marwick as auditors for the Company for fiscal year 1999. If the
stockholders fail to ratify the selection, the Board of Directors will
reconsider its decision.
Representatives of KPMG Peat Marwick are expected to be present at
the Annual Meeting of Shareholders of the Company, will have the
opportunity to make a statement if they desire and may be available to
respond to appropriate questions. During the two most recent fiscal
years, there has been no resignation or dismissal of the independent
public accountants engaged by the Company.
<PAGE>
PROPOSAL - 3 AMENDMENT TO 1992 STOCK OPTION PLAN
The Board of Directors proposes to amend the Company's 1992 Amended
and Restated Stock Option Plan (the "Plan") to increase the number of
options available under the Plan to 2,500,000 to allow for options to be
available for new and existing employees, officers and directors. Over
the past six years, the Company has utilized stock options to provide
incentives to its employees, officers and directors. With the
anticipated growth of the Company, the Board of Directors believes the
availability of additional shares under the Plan will be an important
tool in attracting highly qualified personnel to work for the Company
and maintaining key employees of the Company.
The 1992 Amended and Restated Stock Option Plan was ratified by
shareholders of the Company at the Annual Meeting of Shareholders held
on November 28, 1995. The proposed amendment to the Plan must be
approved by the stockholders of the Company within 12 months of its
adoption by the Board. The Plan provides for the grant of options to
purchase up to an aggregate of 2,500,000 authorized but unissued shares
of common stock of the Company or shares which have been reacquired by
the Company. Shares that are subject to options under the Plan that
terminate or expire unexercised will return to the pool of such shares
available for grant under the Plan. The number of shares issuable under
the Plan is subject to adjustment to take account of recapitalizations,
reorganizations or similar corporate events. There are currently 20,072
shares available for grants under the Plan. If the Amendment is
adopted, there will be 1,520,072 shares available to be issued under the
Plan.
Options under the Plan may be granted to employees, officers and
directors of the Company as determined by the Committee appointed by the
Board (the "Committee"), or, if there is none, the Board itself, which
administers the Plan. Options granted under the Plan may be either
incentive stock options ("ISOs") intended to qualify under Section 422A
of the Internal Revenue Code of 1986, as amended (the "Code"), or
options that do not qualify as ISOs ("nonqualified options"). The
exercise price of shares subject to any ISO cannot be less than the fair
market value of the shares of the Company's common stock at the time the
ISO is granted. The exercise price in the case of any nonqualified
option granted under the Plan will be such price as is determined by the
Committee. Any person holding capital stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company
is not eligible to receive ISOs under the 1992 Plan unless the exercise
price per share is at least 110% of the "fair market value" of the
Company's shares as defined by the Plan on the date the ISO is granted.
The Committee has the authority to determine the rate at which
options under the Plan will vest. Subject to vesting, any options
granted under the Plan may be exercised at any time after the date of
grant and before the expiration of ten years from the date of the grant;
provided, however, an ISO granted to a 10% shareholder may not have a
term exceeding five years from the date of the grant. Under the Plan,
the full exercise price is payable in cash or in mature shares of stock
equivalent in value to the exercise price. All options granted under
the Plan are non-transferable by the participant, other than by will or
the laws of descent and distribution.
Members of the Committee do not participate in the Plan. They do
receive an annual grant of options pursuant to a formula as permitted by
Section 16b of the Securities Exchange Act of 1934. Under this formula,
a Committee member who is also a first-time director of the Company
receives a one-time grant of an option to acquire 15,000 shares. Each
year thereafter, a member of the Committee receives an annual grant of
an option to acquire 3,000 shares.
The Committee may amend the Plan without further approval of the
stockholders, except for amendments which would increase the number of
shares subject to the Plan (except for adjustments described above), or
would extend the period during which an award may be granted or
exercised, or extend the term of the Plan.
<PAGE>
The Board recommends that the shareholders vote FOR Proposal 3,
amending the Company's 1992 Amended and Restated Stock Option Plan.
GENERAL
Expenses which are incurred in connection with the solicitation of
proxies for use at the Annual Meeting will be borne by the Company.
While there is no formal agreement to do so, the Company will reimburse
banks, brokerage houses and other custodians, nominees and fiduciaries
for their reasonable expenses in forwarding annual meeting materials to
their principals.
SHAREHOLDER PROPOSALS
Regulations adopted by the Securities and Exchange Commission
require that shareholder proposals must be furnished to the Company a
reasonable time in advance of the meeting at which the action is
proposed to be taken. Shareholder proposals intended to be presented at
the 1999 Annual Meeting of the Company's Shareholders must be received
by the Company at its corporate headquarters on or before July 31, 1999,
in order to be included in the Proxy Statement and Form of Proxy
relating to that meeting. Receipt of a shareholder proposal does not
necessarily guarantee that the proposal will be included in the proxy.
OTHER MATTERS
The Board of Directors of the Company knows of no other matters to
be presented at the Annual Meeting of Shareholders to which this Proxy
Statement relates.
AVAILABILITY OF INFORMATION
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, TO EACH SHAREHOLDER TO
WHOM THIS PROXY STATEMENT IS DELIVERED, UPON WRITTEN OR ORAL REQUEST, A
COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED
JUNE 30, 1998, INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES THERETO,
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. SUCH DOCUMENT
SHALL BE SENT BY FIRST CLASS MAIL OR OTHER EQUALLY PROMPT MEANS.
WRITTEN OR ORAL REQUESTS FOR SUCH INFORMATION SHOULD BE DIRECTED TO MR.
BOB CARDON, CORPORATE SECRETARY, DYNATRONICS CORPORATION, 7030 PARK
CENTRE DRIVE, SALT LAKE CITY, UT 84121.
DYNATRONICS CORPORATION
By order of the Board of Directors
/s/ Bob Cardon
______________________________________
Bob Cardon, Corporate Secretary
