SECURITIES PURCHASE AGREEMENT BY AND AMONG DYNATRONICS CORPORATION AND EACH PURCHASER IDENTIFIED ON THE SIGNATURE PAGES HERETO December 28, 2016

Exhibit 10.1

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BY AND AMONG

DYNATRONICS CORPORATION

AND

EACH PURCHASER IDENTIFIED ON THE SIGNATURE PAGES HERETO

December 28, 2016

TABLE OF CONTENTS

 

 

 

This Securities Purchase Agreement (this "Agreement") is dated as of December 28, 2016, between Dynatronics Corporation, a Utah corporation (the "Company"), and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a "Purchaser" and collectively, the "Purchasers").

WHEREAS, in June 2015, the Company issued and sold to those investors listed on the attached Exhibit A (the "Initial Holders"), those securities of the Company in the amounts indicated opposite the Initial Holders' respective names on said Exhibit, pursuant to the terms and conditions set forth in that certain Securities Purchase Agreement dated as of May 1, 2015 (the "2015 Purchase Agreement").

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the "Securities Act"), and Rule 506 promulgated thereunder, the Company desires to issue and sell to each Purchaser (who shall also be an Initial Holder, as defined above), and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as more fully described in this Agreement, except as otherwise permitted by this Agreement, to be allocated pro rata among the Purchasers based on their ownership of the securities purchased pursuant to the 2015 Purchase Agreement as indicated on Exhibit A.

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:

 

"Acquiring Person" shall have the meaning ascribed to such term in Section 4.7.

"Action" shall have the meaning ascribed to such term in Section 3.1(j).

"Affiliate" means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.

"A-Warrant" means the A-Warrants issued by the Company pursuant to this Agreement in the form of Exhibit B hereto, which A-Warrant shall be exercisable for cash only.

"Board of Directors" means the board of directors of the Company.

"Business Day" means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

"B-Warrant" means the B-Warrants issued by the Company pursuant to this Agreement in the form of Exhibit C hereto, which B-Warrants may be exercised by means of alternative forms of "cashless exercise," in the sole discretion of the B Warrant holders, as provided therein.

"Closing" means the closing of the purchase and sale of the Securities pursuant to Section 2.1.

"Commission" means the United States Securities and Exchange Commission.

"Common Stock" means the common stock of the Company, no par value per share, and any other class of securities into which such securities may hereafter be reclassified or changed.

"Common Stock Equivalents" means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

"Company Counsel" means Durham ▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C., with offices located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇.

"Company Accounting Firm" means ▇▇▇▇▇▇ LLC, with offices located at ▇▇ ▇▇▇▇▇ ▇▇ #▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇.

"Conversion Price" shall have the meaning ascribed to such term in the Designation of Rights.

"Conversion Shares" shall have the meaning ascribed to such term in the Designation of Rights.

"Designation of Rights" means the Articles of Amendment to the Articles of Incorporation of the Company Designating the Preferences, Rights, and Limitations of Series A Convertible Preferred Stock of the Company, as amended, previously filed by the Company with the Division of Corporations of the State of Utah, in the form of Exhibit D attached hereto.

"Director Rights" shall have the meaning ascribed to such term in Section 4.12.

"Disclosure Schedules" shall have the meaning ascribed to such term in Section 3.1.

"Effective Date" means the earliest of the date that (a) the initial Registration Statement has been declared effective by the Commission, (b) all of the Underlying Shares have been sold pursuant to Rule 144 or may be sold pursuant to Rule 144 without the requirement for the Company to be in compliance with the current public information required under Rule 144 and without volume or manner-of-sale restrictions or (c) following the one-year anniversary of the Closing Date provided that a holder of Underlying Shares is not an Affiliate of the Company, all of the Underlying Shares may be sold pursuant to an exemption from registration under Section 4(1) of the Securities Act without volume or manner-of-sale restrictions and Company counsel has delivered to such holders a standing written unqualified opinion that resales may then be made by such holders of the Underlying Shares pursuant to such exemption which opinion shall be in form and substance reasonably acceptable to such holders.

"Evaluation Date" shall have the meaning ascribed to such term in Section 3.1(r).

"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

"Exempt Issuance" means the issuance of (a) shares of Common Stock or options to employees, officers or directors of the Company pursuant to any stock or option plan duly adopted for such purpose, by a majority of the non-employee members of the Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose, (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities, and (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, provided that any such issuance shall only be to a Person (or to the equity holders of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Company and shall provide to the Company additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.

"FCPA" means the Foreign Corrupt Practices Act of 1977, as amended.

"FDA" shall have the meaning ascribed to such term in Section 3.1(jj).

"FDCA" shall have the meaning ascribed to such term in Section 3.1(jj).

"GAAP" shall have the meaning ascribed to such term in Section 3.1(h).

"Indebtedness" shall have the meaning ascribed to such term in Section 3.1(z).

"Intellectual Property Rights" shall have the meaning ascribed to such term in Section 3.1(o).

"Legend Removal Date" shall have the meaning ascribed to such term in Section 4.1(c).

"Liens" means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

"Material Adverse Effect" shall have the meaning assigned to such term in Section 3.1(b).

"Material Permits" shall have the meaning ascribed to such term in Section 3.1(m).

"Maximum Rate" shall have the meaning ascribed to such term in Section 5.17.

"Person" means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

"Preferred Stock" means up to two million (2,000,000) shares of the Company's Series A 8% Convertible Preferred Stock having the rights, preferences and privileges set forth in the Designation of Rights.

"Proceeding" means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.

"Public Information Failure" shall have the meaning ascribed to such term in Section 4.3(b).

"Public Information Failure Payments" shall have the meaning ascribed to such term in Section 4.3(b).

"Purchaser Party" shall have the meaning ascribed to such term in Section 4.10.

"Registration Rights Agreement" means that certain Registration Rights Agreement, dated as of June 30, 2015, among the Company and the Initial Holders, a copy of which is attached hereto as Exhibit E.

"Registration Statement" means that certain registration statement filed by the Company on Form S-3 (SEC File No. 333-205934), effective August 13, 2015, pursuant to the Registration Rights Agreement, including the amendment required to be filed pursuant to Section 4.15 of this Agreement covering the resale of the Underlying Shares by each Purchaser.

"Required Approvals" shall have the meaning ascribed to such term in Section 3.1(e).

"Required Minimum" means, as of any date, the maximum aggregate number of shares of Common Stock then issued or potentially issuable in the future pursuant to the Transaction Documents, including any Underlying Shares issuable upon exercise in full of all Warrants or conversion in full of all shares of Preferred Stock, ignoring any conversion or exercise limits set forth therein, and assuming that any previously unconverted shares of Preferred Stock are held until the third anniversary of the Closing Date and all dividends are paid in shares of Common Stock until such third anniversary.

"Rule 144" means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

"Rule 424" means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

"SEC Reports" shall have the meaning ascribed to such term in Section 3.1(h).

"Securities" means the Preferred Stock, the Warrants, the Warrant Shares and the Underlying Shares.

"Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

"Short Sales" means all "short sales" as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include the location and/or reservation of borrowable shares of Common Stock).

"Stated Value" means $2.50 per share of Preferred Stock.

"Subscription Amount" shall mean, as to each Purchaser, the aggregate amount to be paid for the Preferred Stock purchased hereunder as specified below such Purchaser's name on the signature page of this Agreement and next to the heading "Subscription Amount," in United States dollars and in immediately available funds.

"Subsidiary" means any subsidiary of the Company as set forth on Schedule 3.1(a) and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.

"Termination Date" means that date which is eight (8) months from the date of execution of this Agreement.

"Trading Day" means a day on which the principal Trading Market is open for trading.

"Trading Market" means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).

"Transaction Documents" means this Agreement, the Warrants, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.

"Transfer Agent" means Interwest Transfer Company, the current transfer agent of the Company, with a mailing address of ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ and a phone number of ▇▇▇-▇▇▇-▇▇▇▇, and any successor transfer agent of the Company.

"Underlying Shares" means the shares of Common Stock issued and issuable upon conversion of the Preferred Stock and upon exercise of the Warrants and issued and issuable in lieu of the cash payment of dividends on the Preferred Stock in accordance with the terms of the Designation of Rights.

"Variable Rate Transaction" shall have the meaning ascribed to such term in Section 4.13(b).

"VWAP" means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board, (c) if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the "Pink Sheets" published by Pink OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

"Warrants" means, collectively, the A-Warrants and the B-Warrants delivered to the Purchasers at the Closing in accordance with Section 2.2(a) hereof.

"Warrant Shares" means the shares of Common Stock issuable upon exercise of the Warrants.

(i)	this Agreement duly executed by the Company;

(ii)	a certificate evidencing a number of shares of Preferred Stock equal to such Purchaser's Subscription Amount divided by the Stated Value, registered in the name of such Purchaser (such stock certificate may be delivered within three (3) Trading Days of the Closing Date);

(iii)

an A-Warrant registered in the name of such Purchaser to purchase up to a number of shares of Common Stock equal to 75% of such Purchaser's aggregate Subscription Amount divided by the initial Conversion Price, with an exercise price equal to $2.75, subject to adjustment therein (such Warrant certificate may be delivered within three (3) Trading Days of the Closing Date); and

(iv)

a B-Warrant registered in the name of such Purchaser to purchase up to a number of shares of Common Stock equal to 75% of such Purchaser's aggregate Subscription Amount divided by the initial Conversion Price, with an exercise price equal to $2.75, subject to adjustment therein (such Warrant certificate may be delivered within three (3) Trading Days of the Closing Date).

(i)	this Agreement duly executed by such Purchaser; and

(v)	such Purchaser's Subscription Amount by wire transfer to the bank account specified by the Company by notice to the Purchasers prior to the Closing.

(ii)	the accuracy in all material respects on the Closing Date of the representations and warranties of the Purchasers contained herein (unless as of a specific date therein in which case they shall be accurate as of such date);

(iii)

all obligations, covenants and agreements of each Purchaser required to be performed at or prior to the Closing Date shall have been performed;

(ii)	the delivery by each Purchaser of the items set forth in Section 2.2(b) of this Agreement; and

(iv)	as to each Purchaser, the deposit with the Company of the full subscription amount for such Purchaser's Securities to be purchased hereunder.

(i)	the accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Company contained herein (unless as of a specific date therein);

(v)	all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed;

(vi)	the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;

(ii)	an additional listing application covering the Securities shall have been filed with and reviewed by The Nasdaq Stock Market (or any successor entity) as provided in Section 4.11(c) of this Agreement;

(vii)

there shall have been no Material Adverse Effect with respect to the Company since the date hereof;

(viii)

from the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended by the Commission or the Company's principal Trading Market and, at any time prior to the Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of such Purchaser, makes it impracticable or inadvisable to purchase the Securities at the Closing.

REPRESENTATIONS AND WARRANTIES

The Company acknowledges and agrees that the representations contained in Section 3.2 shall not modify, amend or affect Purchaser's right to rely on the Company's representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transaction contemplated hereby.

OTHER AGREEMENTS OF THE PARTIES

[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE] [CONVERTIBLE]] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY [AND THE SECURITIES ISSUABLE UPON [EXERCISE] [CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

The Company acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an "accredited investor" as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement and the Registration Rights Agreement and, if required under the terms of such arrangement, Purchaser may transfer pledged or secured Securities to the pledgees or secured parties.  Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith.  Further, no notice shall be required of such pledge.  At the appropriate Purchaser's expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities, including, if the Securities are subject to registration pursuant to the Registration Rights Agreement, the preparation and filing of any required prospectus supplement under Rule 424(b)(3) under the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of Selling Stockholders (as defined in the Registration Rights Agreement) thereunder.  Purchasers shall be added to the list of Selling Stockholders in the Registration Statement under the Registration Rights Agreement as provided in Section 4.15.

(Signature Page for the Company Follows)

 

IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

Fax:  ▇▇▇-▇▇▇-▇▇▇▇

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGES FOR PURCHASERS FOLLOW]

 

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

Name of Purchaser: ____________________________________________________

 

Signature of Authorized Signatory of Purchaser: __________________________

 

Name of Authorized Signatory: ____________________________________

 

Title of Authorized Signatory: _____________________________________

 

Email Address of Authorized Signatory: ___________________________________________

 

Facsimile Number of Authorized Signatory: _________________________________________

Address for Notice to Purchaser:

Address for Delivery of Securities to Purchaser (if not same as address for notice):

Subscription Amount:____________

Shares of Preferred Stock: ________

Warrant Shares: _________

EIN Number: ____________________

 

INVESTOR SCHEDULE

A-WARRANT

B-WARRANT

DESIGNATION OF RIGHTS

REGISTRATION RIGHTS AGREEMENT

DIRECTOR RIGHTS

 

From Securities Purchase Agreement dated May 1, 2015 (capitalized terms not defined herein shall have the meaning given them in said agreement):

Additional Important Disclosures Relating to Redemption Rights under Section 9(b) of the Designation of Rights of the Preferred Stock.

Prior to the Company receiving Shareholder Approval in connection therewith, and pursuant to Nasdaq Rule 5635(c), the Purchasers of the Preferred Shares in connection with the Offering who are insiders of the Company (i.e., officers, directors, employees or consultants) shall not be entitled to receive shares of Common Stock valued at less than market value, in payment of the Triggering Redemption Amount, in connection with any redemptions made by the Company pursuant to Section 9(b)(B) of the Designation.