FORM OF] DYNATRONICS CORPORATION INCENTIVE STOCK OPTION AGREEMENT
Exhibit 4.3
[FORM OF]
DYNATRONICS CORPORATION
This Incentive Stock Option Agreement (this
“Agreement”)
is made and entered into as of [DATE] by and between Dynatronics
Corporation, a Utah corporation (the “Company”)
and [EMPLOYEE NAME] (the “Participant”).
Grant Date: [DATE OF GRANT]
Exercise Price per Share: [EXERCISE PRICE PER SHARE]
Number of Option Shares: [NUMBER OF SHARES]
Expiration Date: [EXPIRATION DATE]
1.1 Grant;
Type of Option. The Company
hereby grants to the Participant an option (the
“Option”)
to purchase the total number of shares of Common Stock of the
Company equal to the number of Option Shares set forth above, at
the Exercise Price set forth above. The Option is being granted
pursuant to the terms of the Company’s 2018 Equity Incentive
Plan (the “2018
Plan”). The Option is
intended to be an Incentive Stock Option within the meaning of
Section 422 of the Code, although the Company makes no
representation or guarantee that the Option will qualify as an
Incentive Stock Option. To the extent that the aggregate Fair
Market Value (determined on the Grant Date) of the shares of Common
Stock with respect to which Incentive Stock Options are exercisable
for the first time by the Participant during any calendar year
(under all plans of the Company and its Affiliates) exceeds
$100,000, the Options or portions thereof which exceed such limit
(according to the order in which they were granted) shall be
treated as Non-Qualified Stock Options.
1.2 Consideration;
Subject to Plan. The grant of
the Option is made in consideration of the services to be rendered
by the Participant to the Company and is subject to the terms and
conditions of the Plan. Capitalized terms used but not defined
herein will have the meaning ascribed to them in the
Plan.
2. Exercise
Period; Vesting.
2.1 Vesting
Schedule. The Option will
become vested and exercisable with respect to [NUMBER] shares on
[VESTING SCHEDULE] until the Option is 100% vested. The unvested
portion of the Option will not be exercisable on or after the
Participant’s termination of Continuous
Service.
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2.2 Expiration.
The Option will expire on the Expiration Date set forth above, or
earlier as provided in this Agreement or the
Plan.
3. Termination
of Continuous Service.
3.1 Termination
for Reasons Other Than Cause, Death, Disability. If the Participant’s Continuous Service is
terminated for any reason other than Cause, death or Disability,
the Participant may exercise the vested portion of the Option, but
only within such period of time ending on the earlier of: (a) the
date three months following the termination of the
Participant’s Continuous Service or (b) the Expiration
Date.
3.2 Termination
for Cause. If the
Participant’s Continuous Service is terminated for Cause, the
Option (whether vested or unvested) shall immediately terminate and
cease to be exercisable.
3.3 Termination
due to Disability. If the
Participant’s Continuous Service terminates as a result of
the Participant’s Disability, the Participant may exercise
the vested portion of the Option, but only within such period of
time ending on the earlier of: (a) the date 12 months following the
Participant’s termination of Continuous Service or (b) the
Expiration Date.
3.4 Termination
due to Death. If the
Participant’s Continuous Service terminates as a result of
the Participant’s death, the vested portion of the Option may
be exercised by the Participant’s estate, by a person who
acquired the right to exercise the Option by bequest or inheritance
or by the person designated to exercise the Option upon the
Participant’s death, but only within the time period ending
on the earlier of: (a) the date 12 months following the
Participant’s termination of Continuous Service or (b) the
Expiration Date.
4. Manner
of Exercise.
4.1 Election
to Exercise. To exercise the
Option, the Participant (or in the case of exercise after the
Participant’s death or incapacity, the Participant’s
executor, administrator, heir or legatee, as the case may be) must
deliver to the Company a notice of intent to exercise in the manner
designated by the Committee. If someone
other than the Participant exercises the Option, then such person
must submit documentation reasonably acceptable to the Company
verifying that such person has the legal right to exercise the
Option.
4.2 Payment
of Exercise Price. The entire
Exercise Price of the Option shall be payable in full at the time
of exercise in the manner designated by the
Committee.
4.3 Withholding.
If the Company, in its discretion, determines that it is obligated
to withhold any tax in connection with the exercise of the Option,
the Participant must make arrangements satisfactory to the Company
to pay or provide for any applicable federal, state and local
withholding obligations of the Company. The Participant may satisfy
any federal, state or local tax withholding obligation relating to
the exercise of the Option by any of the following
means:
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(a) tendering
a cash payment;
(b) authorizing
the Company to withhold shares of Common Stock from the shares of
Common Stock otherwise issuable to the Participant as a result of
the exercise of the Option; provided, however, that no shares of
Common Stock are withheld with a value exceeding the maximum amount
of tax required to be withheld by law; or
(c) delivering
to the Company previously owned and unencumbered shares of Common
Stock.
The
Company has the right to withhold from any compensation paid to a
Participant.
4.4 Issuance
of Shares. Provided that the
exercise notice and payment are in form and substance satisfactory
to the Company, the Company shall issue the shares of Common Stock
registered in the name of the Participant, the Participant’s
authorized assignee, or the Participant’s legal
representative which shall be evidenced by stock certificates
representing the shares with the appropriate legends affixed
thereto, appropriate entry on the books of the Company or of a duly
authorized transfer agent, or other appropriate means as determined
by the Company.
5. No
Right to Continued Employment; No Rights as
Shareholder. Neither the Plan
nor this Agreement shall confer upon the Participant any right to
be retained in any position, as an Employee, Consultant or Director
of the Company. Further, nothing in the Plan or this Agreement
shall be construed to limit the discretion of the Company to
terminate the Participant’s Continuous Service at any time,
with or without Cause. The Participant shall not have any rights as
a shareholder with respect to any shares of Common Stock subject to
the Option unless and until certificates representing the shares
have been issued by the Company to the holder of such shares, or
the shares have otherwise been recorded on the books of the Company
or of a duly authorized transfer agent as owned by such
holder.
6. Transferability.
The Option is not transferable by the Participant other than to a
designated beneficiary upon the Participant’s death or by
will or the laws of descent and distribution, and is exercisable
during the Participant’s lifetime only by him or her. No
assignment or transfer of the Option, or the rights represented
thereby, whether voluntary or involuntary, by operation of law or
otherwise (except to a designated beneficiary, upon death, by will
or the laws of descent or distribution) will vest in the assignee
or transferee any interest or right herein whatsoever, but
immediately upon such assignment or transfer the Option will
terminate and become of no further effect.
7. Change
in Control.
7.1 Acceleration
of Vesting. Unless otherwise determined by the Committee at
the time of a Change in Control, a Change in Control shall have no
effect on the Option.
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7.2 Cash-out.
In the event of a Change in Control, the Committee may, in its
discretion and upon at least ten (10) days’ advance notice to
the Participant, cancel the Option and pay to the Participant the
value of the Option based upon the price per share of Common Stock
received or to be received by other shareholders of the Company in
the event. Notwithstanding the foregoing, if at the time of a
Change in Control the Exercise Price of the Option equals or
exceeds the price paid for a share of Common Stock in connection
with the Change in Control, the Committee may cancel the Option
without the payment of consideration therefor.
8. Adjustments.
The shares of Common Stock subject to the Option may be adjusted or
terminated in any manner as contemplated by Article 11 of the
Plan.
9. Tax
Liability and Withholding.
Notwithstanding any action the Company takes with respect to any or
all income tax, social insurance, payroll tax, or other tax-related
withholding (“Tax-Related
Items”), the ultimate
liability for all Tax-Related Items is and remains the
Participant’s responsibility and the Company (a) makes no
representation or undertakings regarding the treatment of any
Tax-Related Items in connection with the grant, vesting, or
exercise of the Option or the subsequent sale of any shares
acquired on exercise; and (b) does not commit to structure the
Option to reduce or eliminate the Participant’s liability for
Tax-Related Items.
10. Qualification
as an Incentive Stock Option.
It is understood that this Option is intended to qualify as an
incentive stock option as defined in Section 422 of the Code to the
extent permitted under Applicable Law. Accordingly, the Participant
understands that in order to obtain the benefits of an incentive
stock option, no sale or other disposition may be made of shares
for which incentive stock option treatment is desired within one
(1) year following the date of exercise of the Option or within two
(2) years from the Grant Date. The Participant understands and
agrees that the Company shall not be liable or responsible for any
additional tax liability the Participant incurs in the event that
the Internal Revenue Service for any reason determines that this
Option does not qualify as an incentive stock option within the
meaning of the Code.
11. Disqualifying
Disposition. If the Participant
disposes of the shares of Common Stock prior to the expiration of
either two (2) years from the Grant Date or one (1) year from the
date the shares are transferred to the Participant pursuant to the
exercise of the Option (a “Disqualifying
Disposition”), the
Participant shall notify the Company in writing within thirty (30)
days after such disposition of the date and terms of such
disposition. The Participant also agrees to provide the Company
with any information concerning any such dispositions as the
Company requires for tax purposes.
12. Compliance
with Law. The exercise of the
Option and the issuance and transfer of shares of Common Stock
shall be subject to compliance by the Company and the Participant
with all applicable requirements of federal and state securities
laws and with all applicable requirements of any stock exchange on
which the Company’s shares of Common Stock may be listed. No
shares of Common Stock shall be issued pursuant to this Option
unless and until any then applicable requirements of state or
federal laws and regulatory agencies have been fully complied with
to the satisfaction of the Company and its counsel. The Participant
understands that the Company is under no obligation to register the
shares with the Securities and Exchange Commission, any state
securities commission or any stock exchange to effect such
compliance.
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13. Notices.
Any notice required to be delivered to the Company under this
Agreement shall be in writing and addressed to the Secretary of the
Company at the Company’s principal corporate offices. Any
notice required to be delivered to the Participant under this
Agreement shall be in writing and addressed to the Participant at
the Participant’s address as shown in the records of the
Company. Either party may designate another address in writing (or
by such other method approved by the Company) from time to
time.
14. Governing
Law. This Agreement will be
construed and interpreted in accordance with the laws of the State
of Utah without regard to conflict of law
principles.
15. Interpretation.
Any dispute regarding the interpretation of this Agreement shall be
submitted by the Participant or the Company to the Committee for
review. The resolution of such dispute by the Committee shall be
final and binding on the Participant and the
Company.
16. Options
Subject to Plan. This Agreement
is subject to the Plan as approved by the Company’s
shareholders. The terms and provisions of the Plan as it may be
amended from time to time are hereby incorporated herein by
reference. In the event of a conflict between any term or provision
contained herein and a term or provision of the Plan, the
applicable terms and provisions of the Plan will govern and
prevail.
17. Successors
and Assigns. The Company may
assign any of its rights under this Agreement. This Agreement will
be binding upon and inure to the benefit of the successors and
assigns of the Company. Subject to the restrictions on transfer set
forth herein, this Agreement will be binding upon the Participant
and the Participant’s beneficiaries, executors,
administrators and the person(s) to whom this Agreement may be
transferred by will or the laws of descent or
distribution.
18. Severability.
The invalidity or unenforceability of any provision of the Plan or
this Agreement shall not affect the validity or enforceability of
any other provision of the Plan or this Agreement, and each
provision of the Plan and this Agreement shall be severable and
enforceable to the extent permitted by law.
19. Discretionary
Nature of Plan. The Plan is
discretionary and may be amended, cancelled or terminated by the
Company at any time, in its discretion. The grant of the Option in
this Agreement does not create any contractual right or other right
to receive any Options or other Awards in the future. Future
Awards, if any, will be at the sole discretion of the Company. Any
amendment, modification, or termination of the Plan shall not
constitute a change or impairment of the terms and conditions of
the Participant’s employment with the
Company.
20. Amendment.
The Committee has the right to amend, alter, suspend, discontinue
or cancel the Option, prospectively or retroactively; provided,
that, no such amendment shall adversely affect the
Participant’s material rights under this Agreement without
the Participant’s consent.
21. No
Impact on Other Benefits. The
value of the Participant’s Option is not part of his or her
normal or expected compensation for purposes of calculating any
severance, retirement, welfare, insurance or similar employee
benefit.
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22. Counterparts.
This Agreement may be executed in counterparts, each of which shall
be deemed an original but all of which together will constitute one
and the same instrument. Counterpart signature pages to this
Agreement transmitted by facsimile transmission, by electronic mail
in portable document format (.pdf), or by any other electronic
means intended to preserve the original graphic and pictorial
appearance of a document, will have the same effect as physical
delivery of the paper document bearing an original
signature.
23. Acceptance.
The Participant hereby acknowledges receipt of a copy of the Plan
and this Agreement. The Participant has read and understands the
terms and provisions thereof, and accepts the Option subject to all
of the terms and conditions of the Plan and this Agreement. The
Participant acknowledges that there may be adverse tax consequences
upon exercise of the Option or disposition of the underlying shares
and that the Participant should consult a tax advisor prior to such
exercise or disposition.
[SIGNATURE PAGE FOLLOWS]
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IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
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DYNATRONICS CORPORATION
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By_____________________________________
Name:__________________________________
Title:___________________________________
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[EMPLOYEE NAME]
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By_____________________________________
Name:__________________________________
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