UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

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Filed by a Party other than the Registrant ☐

 

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Preliminary Proxy Statement

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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

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Definitive Proxy Statement

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Definitive Additional Materials

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Soliciting Material Pursuant to §240.14a-12

 

Electromed, Inc.

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

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No fee required.

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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

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ELECTROMED, INC.
500 Sixth Avenue Northwest
New Prague, MN 56071
(952) 758-9299

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FRIDAY, NOVEMBER 15, 201913, 2020

 

To our Shareholders:

 

The Fiscal 20202021 Annual Meeting of Shareholders (the “Annual Meeting”) of Electromed, Inc. (the “Company”) will be held at the Company’s offices at 500 Sixth Avenue Northwest, New Prague, Minnesota 56071 on Friday, November 15, 201913, 2020 at 10:9:00 a.m. Central Time,Time. Due to the public health impact of the ongoing COVID-19 pandemic, this year’s Annual Meeting will be held as a completely “virtual meeting” of shareholders. We believe that a virtual Annual Meeting provides greater access to those who may want to attend and, therefore, have chosen this over an in-person meeting. You will be able to attend the Annual Meeting virtually, and vote and submit your questions during the Annual Meeting, via live webcast by visiting www.virtualshareholdermeeting.com/ELMD2020. Prior to the Annual Meeting, you will be able to vote at www.proxyvote.com for the following purposes:purpose of considering and voting upon:

 

1.

Election of the directors named in the accompanying proxy statement, thereby setting the number of directors at seven;

 

2.

Ratification of the appointment of RSM US LLP as our independent registered public accounting firm;

firm for our fiscal year ending June 30, 2021;

 

3.

Approval, on a non-binding and advisory basis, of our executive compensation;

compensation set forth in the accompanying proxy statement; and

 

4.

To recommend, on a non-binding advisory basis, whether executive compensation votes should occur every year, every two years or every three years; and

5.

Transaction of any other business properly brought before the meeting or any adjournment thereof.

 

The Board of Directors of the Company has fixed the close of business on September 16, 20192020 as the record date for determining the shareholders entitled to notice of and to vote at the Annual Meeting and any adjournments thereof. The stock transfer books of the Company will not be closed.

 

By order of the Board of Directors,

image

 

Stephen H. Craney

Chairman of the Board

 

THE PROMPT SUBMISSION OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM. YOU MAY VOTE BY MAIL, ONLINE OR BY PHONE IN ACCORDANCE WITH THE INSTRUCTIONS SET FORTH IN THE PROXY CARD, NOTICE OF INTERNET AVAILABILITY OR OTHER INSTRUCTIONS FROM THE HOLDER OF RECORD.

 

Important Notice Regarding the Availability of Proxy Materials
for the Annual Meeting to be held on November 15, 201913, 2020
The Notice and Proxy Statement, Annual Report on Form 10-K, and Shareholder Letter are available at

http://investors.smartvest.com/annual-meeting.

 

 

TABLE OF CONTENTS

 

Page

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING

2

PROPOSAL 1 : ELECTION OF DIRECTORS

8

PROPOSAL 2 : RATIFICATION OF THE APPOINTMENT OF THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

11

PROPOSAL 3 : ADVISORY APPROVAL OF EXECUTIVE COMPENSATION

12

PROPOSAL 4 : ADVISORY RECOMMENDATION REGARDING FREQUENCY OF EXECUTIVE COMPENSATION VOTES

13

CORPORATE GOVERNANCE

14

13

SECURITY HOLDER COMMUNICATIONS TO THE BOARD OF DIRECTORS

17

16

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

17

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT17
EXECUTIVE COMPENSATION18

EXECUTIVE COMPENSATION

19

DIRECTOR COMPENSATION

24

23

EQUITY COMPENSATION PLAN INFORMATION

25

24

RELATED PERSON TRANSACTION APPROVAL POLICY

26

25

OTHER MATTERS

26

25

HOUSEHOLDING

26

25

ADDITIONAL INFORMATION

26

25

 

 i

 

ELECTROMED, INC.
Proxy Statement
Fiscal 20202021 Annual Meeting of Shareholders
Friday, November 15, 201913, 2020
10:9:00 a.m. Central Time

 

This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors (the “Board”) of Electromed, Inc., a Minnesota corporation (the “Company”), for use at the Fiscal 20202021 Annual Meeting of Shareholders of the Company to be held on Friday, November 15, 201913, 2020 at 9:00 a.m. Central Time (the “Annual Meeting”), and at any adjournment or postponement thereof. TheDue to the public health impact of the ongoing COVID-19 pandemic, this year’s Annual Meeting will be held at the Company’s offices at 500 Sixth Avenue Northwest, New Prague, Minnesota 56071. Registration foras a completely “virtual meeting” of shareholders. You will be able to attend the Annual Meeting will begin at approximately 9:45 a.m. Central Timevirtually, and vote and submit your questions during the Annual Meeting, will commence at 10:00 a.m. Central Time. via live webcast by visiting www.virtualshareholdermeeting.com/ELMD2020.

This solicitation is being made by mail; however, the Company also may use its officers, directors, and employees (without providing them with additional compensation) to solicit proxies from shareholders in person or by telephone, facsimile, email or letter. Distribution of this proxy statement and the proxy card, or a notice of internet availability, is expected to begin on or about September 27, 2019.29, 2020.

 

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING

 

Q:

Q:

Why did I receive this proxy statement?

 

A:

A:

The Company is soliciting your proxy vote at the Annual Meeting because you were the owner of record of one or more shares of common stock of the Company at the close of business on September 16, 2019,2020, the record date for the meeting, and are therefore entitled to vote at the Annual Meeting.

 

Q:

Q:

What is a proxy?

 

A:

A:

A proxy is your legal designation of another person or persons (the “proxy” or “proxies,” respectively) to vote on your behalf. By giving your proxy, you are authorizing Stephen H. Craney and Kathleen S. Skarvan, the designated proxies, the authority to vote your shares of common stock at the Annual Meeting in the manner you indicate on your proxy card. If you authorize the proxies but do not give direction with respect to any nominee or other proposal, the proxies will vote your shares as recommended by the Board. The proxies are authorized to vote in their discretion (except as otherwise provided below) if other matters are properly submitted at the Annual Meeting, or any adjournments or postponements thereof.

 

Q:

Q:

When and where is the Annual Meeting?

 

A:

A:

The Annual Meeting will be held on Friday, November 15, 2019, at13, 2020. This year’s Annual Meeting will be held as a completely “virtual meeting” of shareholders. You will be able to attend the Company’s building located at 500 Sixth Avenue Northwest, New Prague, Minnesota 56071. Registration forAnnual Meeting virtually, and vote and submit your questions during the meeting will begin at approximately 9:45 a.m. Central Time.Annual Meeting, via live webcast by visiting www.virtualshareholdermeeting.com/ELMD2020. The Annual Meeting will commence at 10:9:00 a.m. Central Time.


Q:Why hold a virtual Annual Meeting?

 

Q:

A:Due to the public health impact of the ongoing COVID-19 pandemic, this year’s Annual Meeting will be held as a completely “virtual meeting” of shareholders. We believe that a virtual meeting provides greater access to those who may want to attend our Annual Meeting and, therefore, have chosen this over an in-person meeting. We ensure that at our virtual meeting, all attendees are afforded the same rights and opportunities to participate as they would at an in-person meeting. These procedures include the ability for shareholders to ask questions during the course of the meeting, post appropriate questions received during the meeting for review by other participants, review our corresponding answers to such questions on our “Investor Relations” section of our website at www.smartvest.com as soon as possible after the Annual Meeting and access technical support staff during the meeting in the event of difficulties arising from the use of the virtual meeting platform. We evaluate annually the method of holding our Annual Meeting, taking into consideration the above factors as well as business and market conditions and the proposed agenda items. We believe that holding our Annual Meeting virtually over the internet is the right approach for our company, as it enables more of our diverse base of shareholders to participate in our Annual Meeting.

Q:What am I voting on?

 

A:

A:

You are voting on the following matters:

 

●

Proposal 1 — To elect the directors named in this proxy statement, thereby setting the number of directors at seven;

 

●

Proposal 2 — To ratify the appointment of RSM US LLP as our independent registered public accounting firm;

firm for our fiscal year ending June 30, 2021 (“fiscal 2021”); and

 

●

Proposal 3— To approve, on a non-binding and advisory basis, our executive compensation; and

2 

●

Proposal 4  —   

To recommend, on a non-binding advisory basis, whether executive compensation votes should occur every year, every two years or every three years.

as set forth in this proxy statement.

 

Q:

Q:

What does the Board recommend?

 

A:

A:

The Board recommends a vote:

 

●FORthe election of all of the directors named in this proxy statement, thereby setting the number of directors at seven (see Proposal 1);

 

●FORthe ratification of the appointment of RSM US LLP as the Company’sour independent registered public accounting firm for fiscal 2021 (see Proposal 2); and

 

●FORthe approval, by a non-binding and advisory vote, of our executive compensation as set forth in this proxy statement (see Proposal 3); and.

 

●Q:1 YEAR for the frequency of executive compensation votes (see Proposal 4).

Q:

How many votes do I have?

 

A:

A:

On any matter which may properly come before the Annual Meeting, each shareholder entitled to vote thereon will have one vote for each share of common stock owned of record by such shareholder as of the close of business on September 16, 2019.

2020.

 

Q:

Q:

How many shares of common stock may vote at the Annual Meeting?

 

A:

A:

At the close of business on the record date, there were 8,445,8518,601,234 outstanding shares of common stock, each of which is eligible to cast one vote on matters presented at the Annual Meeting.


Q:What constitutes a quorum?

 

Q:

What constitutes a quorum?

A:

Transaction of business may occur at the Annual Meeting only if a quorum is present. In order to achieve a quorum, shareholders holding at least a majority of the Company’s issued and outstanding shares of common stock entitled to vote as of the record date must be present in person(including electronically) or by proxy at the Annual Meeting. Based on the number of shares outstanding as of the record date, the presence of 4,222,9264,300,618 shares will constitute a quorum for the transaction of business on all proposals properly brought before the Annual Meeting. If you submit a proxy or vote in person atelectronically during the meeting,Annual Meeting, your shares will be counted in determining whether a quorum is present at the Annual Meeting. Broker non-votes and abstentions are also counted for the purpose of determining a quorum, as discussed below.

 

Q:

Q:

What vote is required to approve each of the Proposals?

proposals?

 

A:

A:

Provided a quorum is established at the Annual Meeting, each proposal will be subject to the following requirements:

 

Proposal 1 – Election of Directors — The nominees receiving the greatest number of votes relative to the votes cast for the other nominees will be elected, regardless of whether an individual nominee receives votes from a majority of the quorum of shares represented at the Annual Meeting (in(whether electronically in person or by proxy). Election of the seven directors named in this proxy statement will be deemed to be shareholder approval of setting the number of directors at seven. Shareholders are not entitled to cumulate their votes for the election of directors.

 

3 

Proposal 2 – Ratification of the Appointment of RSM US LLP as the Company’s Independent Registered Public Accounting Firm for Fiscal 2021 — The affirmative vote of the holders of a majority of the shares of common stock present at the Annual Meeting (whether electronically in person or by proxy) will result in approval of the proposal to ratify the appointment of RSM US LLP as the Company’s independent registered public accounting firm for the Company’s fiscal year ending June 30, 2020 (“fiscal 2020”).2021.

 

Proposal 3 – Advisory Approval of Executive Compensation — The affirmative vote of the holders of a majority of the shares of common stock represented at the Annual Meeting (whether electronically in person or by proxy) and entitled to vote on the proposal will result in the advisory approval of our executive compensation.compensation set forth in this proxy statement. However, this is a non-binding and advisory vote, which means that the result of the vote is not binding on the Company, our Board or its Personnel and Compensation Committee. To the extent there is any significant vote against approval of our executive compensation as disclosed in this proxy statement, the Personnel and Compensation Committee will evaluate whether any actions are necessary to address the concerns of shareholders.

 

Proposal 4 – Advisory Recommendation Regarding Frequency of Executive Compensation Votes — The alternative receiving the greatest number of votes will be deemed the alternative recommended by the shareholders. However, this is an advisory vote, which means that the result of the vote is not binding on the Company, our Board or its Personnel and Compensation Committee. The Board and its Personnel and Compensation Committee will take into account the outcome of the vote, however, when considering the frequency of future advisory votes on executive compensation.

Q.

Q.

What is the effect of abstentions and withhold votes?

 

A:

A:

You may either vote FOR or WITHHOLD authority to vote for each nominee for the Board. If you WITHHOLD authority to vote on any or all nominees, your vote will have no effect on the outcome of the election.

 

You may vote FOR, AGAINST or ABSTAIN on proposals 2 and 3. If you ABSTAIN from voting on proposals 2 or 3, your shares will be deemed present but will not be deemed to have voted in favor of the proposal, which will have the same effect as a vote AGAINST the proposal.

 

You may vote for 1 YEAR, 2 YEARS, 3 YEARS or ABSTAIN on Proposal 4. If you ABSTAIN from voting on Proposal 4, your vote will have no effect on the outcome of the Proposal.

Q:

Q:

What is the effect of broker non-votes?

 

A:

A:

Shares that are held by stock brokers in “street name” may be voted by the stock broker on “routine” matters, such as the number of directors and ratification the appointment of our independent registered public accounting firm. To vote on “non-routine” matters, the stock broker must obtain shareholder direction. When the stock broker does not obtain direction to vote the shares, the stock broker’s abstention is referred to as a “broker non-vote.”

 


Brokers do not have discretion to vote shares for the election of directors, the advisory vote to approve executive compensation the advisory vote regarding the frequency of executive compensation votes, or for any other non-routine matters that may be brought before the meeting. Accordingly, if your shares are held in street name and you do not submit voting instructions to your broker, your shares will not be counted in determining the outcome of these proposals. Brokers will have discretion to vote on the ratification of the appointment of our independent registered public accounting firm if you do not provide voting instructions.

 

Broker non-votes will be considered present for quorum purposes at the Annual Meeting. Broker non-votes in connection with the election of directors are not deemed “votes cast,” and, since directors are elected by a plurality, will have no effect on the election. Because broker non-votes are not entitled to vote on non-routine business matters, such as Proposalsproposal 3, and 4, they will have no effect on the outcome of the vote on such matters.

 

4 

Q:

Q:

How do I vote my shares?

 

A:

A:

If you are a shareholder of record, you may vote your shares at the Annual Meeting using one of the mail, phone or internet methods described on your notice of internet availability, proxy card or other voting instructions from the holder of record.

 

●Proxy card. If you received a full set of proxy materials, the proxy card is a means by which you may authorize the voting of your shares of common stock at the Annual Meeting. The shares of common stock represented by each properly executed proxy card will be voted at the Annual Meeting in accordance with such shareholder’s directions. The Company urges you to specify your choices by marking the appropriate boxes on the proxy card. After you have marked your choices, please sign and date the proxy card and mail the proxy card in accordance with the instructions that accompanied it. If you sign and return the proxy card without specifying your choices, your shares will be voted FOR each of the Board’sdirector nominees, FOR the ratification of the appointment of our independent registered public accounting firm for fiscal 2021, and FOR the advisory approval of our executive compensation and for 1 YEAR for the frequency of executive compensation votes.compensation.

 

●Multiple proxy cards. If you receive more than one notice of internet availability, proxy card or voting instruction card, it likely means that you have multiple accounts with one or more holders of record. Please be sure to vote all of the shares by following the instructions on each such notice and/or card.

 

●In person atElectronically during the Annual Meeting. All shareholders of record as of the record date may vote in person atelectronically during the Annual Meeting. Even if you plan to attend the Annual Meeting electronically, the Company requests that you vote ahead of time using one of the methods above.

 

You are a “street name” holder rather than a “shareholder of record” if your shares are held in the name of a stock broker, bank, trust or other nominee as a custodian, and this proxy statement was forwarded to you by that organization. If you are a “street name” holder, you must instruct your nominee as to your voting preferences. Please contact your nominee/custodian to do so. Because a beneficial owner is not the shareholder of record, you may not vote your shares in person atelectronically during the Annual Meeting unless you obtain a legal proxy from the broker, bank, trustee or nominee that holds your shares, giving you the right to vote the shares atelectronically during the Annual Meeting.

 

Q:

Q:

Can I change my vote after I have mailed in my proxy card?

 

A:

A:

Proxies solicited by the Board may be revoked at any time prior to the Annual Meeting. No specific form of revocation is required. You may revoke your proxy by:

 

●Voting in person atelectronically during the Annual Meeting;

 


●Returning a later-dated signed proxy card; or

 

●Giving personal or written notice of the revocation to the inspector of election at the commencement of the Annual Meeting.

 

If your shares are held in street name through a broker or other nominee, you will need to contact that nominee if you wish to change your voting instructions.

 

Q:

Q:

How will my shares be voted if I do not specify how they should be voted?

 

A:

A:

If you are a record holder and authorize the proxies to vote on your behalf, but do not mark choices for a particular proposal, then the proxies solicited by the Board will be voted in accordance with the Board’s recommendation for that proposal, as set forth in this proxy statement.

 

5 

If you are a street name holder and do not submit specific voting instructions to your broker, the organization that holds your shares is permitted to vote your shares with respect to “routine” items, but not with respect to “non-routine” items. On non-routine items for which you do not submit specific voting instructions to your broker, the shares will be treated as “broker non-votes.” Broker non-votes will be counted for purposes of determining whether a quorum is present, but will not be considered shares entitled to vote on the proposal and therefore will not be treated as affirmative or opposing votes. The proposal to ratify the appointment of RSM US LLP as our independent registered public accounting firm for fiscal 2021 is considered routine and therefore may be voted upon by your broker if you do not give instructions to your broker. The other proposals set forth on the Notice of Annual Meeting are non-routine matters.

 

Q:

Q:

Who can attend and participate in the Annual Meeting?

 

A:

A:

All shareholders of record as of the close of business on the record date, or their duly appointed proxies, may attend the virtual Annual Meeting. WeMeeting as well as vote and submit questions during the webcast of the meeting by visiting www.virtualshareholdermeeting.com/ELMD2020. To participate in the Annual Meeting, you will request a current, government-issued formneed to provide the 16-digit control number included on your proxy card. If you do wish to participate in the Annual Meeting, please log on to www.virtualshareholdermeeting.com/ELMD2020 at least 15 minutes prior to the start of identification in orderthe Annual Meeting to ensure an orderly meeting.

provide time to register, download the required software, if necessary, and test your Internet connectivity. If you access the Annual Meeting but do not enter your control number, you will be able to listen to the proceedings, but you will not be able to vote or otherwise participate.

 

If you are not a shareholder of record but hold shares through a broker, bank, trustee, or other nominee as custodian (i.e., in street name), you may also be requested to present evidence of your beneficial ownership as of the record date, such as an account statement, a copy of the voting instruction card provided by your custodian, a legal proxy provided by your custodian, or other similar evidence of ownership. Please see “How do I vote my shares?” above for additional requirements, including obtaining a legal proxy from the broker, bank, trustee or nominee that holds your shares if you intend to both attend and vote your shares in person.

Q:

Q:

What is the record date for the Annual Meeting?

 

A:

A:

The Board has fixed September 16, 2019,2020, as the record date for the Annual Meeting.

 

Q:

Q:

Who will count the votes?

 

A:

A:

All proxies submitted to the Company and all electronic votes cast atduring the Annual Meeting will be tabulated by Broadridge Financial Solutions.

 

Q:

Q:

Who is paying for this proxy solicitation?

 

A:

A:

The entire cost of this proxy solicitation will be borne by the Company. The cost will include the cost of supplying necessary additional copies of the solicitation materials for beneficial owners of shares held of record by brokers, dealers, banks and voting trustees and their nominees and, upon request, the reasonable expenses of such record holders for completing the mailing of such materials to such beneficial owners.

 


Q:

Q:

How do I nominate a candidate for election as a director at next year’s annual meeting?

 

A:

A:

Nominations for directors are made by the Board upon recommendation by its Nominating and Governance Committee, which is composed of independent directors. Shareholders may nominate a candidate for director to stand for election at the annual meeting of shareholders to be held in the fiscal year ending June 30, 20212022 (the “Fiscal 20212022 Annual Meeting”), which the Company currently anticipates will be held in November 2020,2021, by following the procedures explained below in this proxy statement under “CORPORATE GOVERNANCE–Nominating and Governance Committee–Director Nominations” and contained in the rules and regulations of the Securities and Exchange Commission (the “SEC”).

 

Q:

Q:

What is a shareholder proposal?

 

A:

A:

A shareholder proposal is a proposal submitted by a shareholder that, if approved, would recommend or require that the Company and/or the Board take the proposed action. If you intend to submit a shareholder proposal, the proposal should state as clearly as possible the course of action that you believe the Company should follow. If your proposal is included in the Company’s proxy statement, then the Company must also provide the means for shareholders to vote on the matter. The deadlines and procedures for submitting shareholder proposals for the Fiscal 20212022 Annual Meeting are explained in the following question and answer. The Company reserves the right to reject, rule out of order, or take appropriate action with respect to any proposal that does not comply with these and other applicable requirements.

 

6 

Q:

Q:

When are shareholder proposals and director nominations due for the Fiscal 20212022 Annual Meeting?

 

A:

A:

In order to be considered for inclusion in the Company’s proxy materials, shareholder proposals must be submitted in writing to the Company no later than May 30, 2020June 1, 2021 (120 days prior to the one-year anniversary of the mailing of this proxy statement). The Company suggests that proposals for the Fiscal 20212022 Annual Meeting be submitted by certified mail, return receipt requested. The proposal must be in accordance with the provisions of Rule 14a-8 promulgated by the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

Shareholders who intend to present a shareholder proposal at the Fiscal 20212022 Annual Meeting without including such proposal in the Company’s proxy materials must provide the Company notice of such proposal no later than August 17, 202015, 2021 (90 days prior to the one-year anniversary of the Annual Meeting). The Company reserves the right to reject, rule out of order, or take appropriate action with respect to any proposal that does not comply with these and other applicable requirements.

 

Shareholders who intend to present a director nomination at the Fiscal 20212022 Annual Meeting must provide the Company notice of such nomination no later than August 17, 202015, 2021 (90 days prior to the one-year anniversary of the Annual Meeting) and no earlier than July 18, 202016, 2021 (120 days prior to the one-year anniversary of the Annual Meeting). The Company reserves the right to reject, rule out of order, or take appropriate action with respect to any nomination that does not comply with these and other applicable requirements.

 

If the Company does not receive notice of a shareholder proposal or director nomination intended to be submitted to the Fiscal 20212022 Annual Meeting by the dates set forth above, the authorized proxies for next year’ssuch annual meeting may vote on any such proposal in their discretion without notice of such proposal appearing in such proxy statement.

7 


ELECTION OF DIRECTORS
(Proposal 1)

 

The Board is currently composed of eightsix directors. Seven individuals, allsix of whom are current directors, have been nominated for re-election at the Annual Meeting. John L. ErbAndrea Walsh is standing for election to serve as a director of the Company for the first time at this year’s Annual Meeting. Ms. Walsh was first identified as a potential director candidate by a shareholder and Gregory J. Fluet was first identified by a non-managementnon- management director. EachMs. Walsh was then evaluated by the Nominating and Governance Committee in advance of its recommendation of their initial recommendationfor her nomination for service as a director.director and subsequently nominated by the Board.

 

If elected, each director will hold office until the Fiscal 20212022 Annual Meeting and until his or her successor is elected and qualified, or until his or her earlier death, resignation, disqualification or removal. Each of the director nominees has consented to be named in this proxy statement and to serve, if elected. The Company has no reason to believe that any of the director nominees named below will be unable or unwilling to serve as director if elected. If for any reason any nominee withdraws or is unable to serve as director (neither of which is expected at this time), the shares represented by all valid proxies will be voted for the election of a substitute nominee recommended by the Board or, alternatively, not voted for any nominee. William V. Eckles, a current director of the Company, is not standing for election and his term will expire as of the Fiscal 2020 Annual Meeting.

 

The Bylaws of the Company, as amended (the “Bylaws”), provide that the number of directors shall be determined by the shareholders annually. The Board has recommended that the number of directors be set at seven. The Board believes that seven directors strikes an optimal balance between providing diversity of viewpoints and expertise while allowing each director to influence the strategic direction of the Company. If each of the seven directorsdirector nominees named in this proxy statement are elected at the Annual Meeting, then their election will be deemed to be shareholder approval of setting the number of directors at seven.

 

Nominees for Election as Directors at the Annual Meeting

 

The Board has nominated each of the following persons for election to serve as directors and recommends that shareholders vote “FOR” the election of each such nominee:

 

Name

 

Age

 

Director
Since

 Age Director Since

Stephen H. Craney

 

75

 

2010

 76 2010

John L. Erb

 

70

 

2019

Stan K. Erickson

 

69

 

2014

 70 2014

Gregory J. Fluet

 

50

 

2019

 51 2019

Lee A. Jones

 

62

 

2014

 63 2014

Kathleen S. Skarvan

 

63

 

2013

 64 2013
Andrea M. Walsh 57 —

George H. Winn

 

82

 

2005

 83 2005

 

Biographical information relating to each of the director nominees is set forth below:

 

Stephen H. Craney

 

Mr. Craney has served as Chairman of the Board since May 2012. Since 1984, Mr. Craney has founded and operated a number of successful companies, including RiverSide Electronics, Ltd., RiverBend Electronics, Ltd., RiverStar, Inc., Custom Control Systems, Inc., RiverStyks, LLC, and JMW Enterprises, Inc. Before becoming an entrepreneur, Mr. Craney worked as an engineer, having earned an electrical engineering degree from the University of Wisconsin-Madison. Mr. Craney is also an active member of a number of community groups, such as the Winona Historical Society. In addition, he has provided support and advice to startup companies for more than 20 years through a local entrepreneur network. Our Board believes that Mr. Craney’s experience developing companies with a strong record of growth, his technical knowledge in the electronics field, his research and development experience and his connections within the business community make him uniquely qualified to serve as a director.

 

8 


John L. Erb

Mr. Erb has served as chief executive officer and president of CHF Solutions, Inc. (Nasdaq: CHFS) since 2015, and as a member of its board of directors and chairman since 2012. He has also served as chief executive officer and chairman of NeuroMedic, Inc., a private company he co-founded, since 2014. Previously, Mr. Erb served as chief executive officer, from 2007 to 2018, of NuAx, Inc. (formerly Cardia Access, Inc.), a private medical device company involved in developing new devices for the treatment of heart disease. Mr. Erb’s prior board experience includes service as a director of SenoRx, Inc., then a Nasdaq-listed company, from 2001 until its acquisition in 2010; and as chairman of the board of Vascular Solutions, Inc., then a Nasdaq-listed company, until its acquisition in 2017. Mr. Erb currently serves as chairman of the board of Osprey Medical, Inc. (ASX:OSP) and as a director of MiroMatrix, a private biotechnology company, since 2017. Mr. Erb has a Bachelor of Arts, Business Administration, concentration in finance from California State University.  Our Board believes that Mr. Erb’s experience as an executive officer of early stage and mature medical device companies, his marketing and operations experience, his board experience and his connections within the medical device community make him uniquely qualified to serve as a director.

Stan K. Erickson

 

Mr. Erickson has served on the Board since November 2014. Mr. Erickson is currently President and Chief Executive Officer of Liberty Capital, Inc., a company he co-founded in September 2013 to provide capital and advisory services. In November 2012, he retired from a 32-year career at ZieglerCat, Inc., one of the largest Caterpillar dealers in the U.S. where he most recently served as President and Chief Operating Officer. Mr. Erickson is a veteran of the United States Marine Corps, earned a business degree from the University of Minnesota, a CPA Certification and began his business career as an auditor and tax professional. Mr. Erickson serves on the board of directors of Titan Machinery, Inc. (Nasdaq) and several private company boards, advisory committees and associations. Our Board believes that Mr. Erickson has been and will continue to be an asset to the Board due to Mr. Erickson’s extensive experience in finance and management.

 

Gregory J. Fluet

 

Mr. Fluet has served asis currently Chief Operating Officer for Rebiotix, a consultant with Ferring Pharmaceuticals Inc. focused on microbiome commercialization and partnering since April 2018.  He served as chief business officercompany. Since November 2016 he has worked at Rebiotix Inc.,in both contract and permanent roles including serving as Chief Business Officer from April 2017 until itsthe company's acquisition by Ferring Pharmaceuticals in April 2018. Prior to that he startedhad a strategic consulting practice working with variousstartup life science companies, including Rebiotix. Previously, hecompanies. He had previously served as chief executive officer at Urologix, Inc., then a public company, from 2012 to January 2016. He also served as its interim chief financial officer from August 2014 to May 2015 and as its executive vice president and chief operating officer from 2008 to 2012. From 2002 to 2008, he was employed as an associate at Sapient Capital Management, LLC, a healthcare focused venture capital fund. Mr. Fluet earnedHe received a Bachelor of Science DegreeBS in Mechanical Engineering from Stanford University. Our Board believes that Mr. Fluet’s experience as an executive officer of medical device companies, sales operations and operations and manufacturing experience and his healthcare related financial and investment experience make him uniquely qualified to serve as a director.

 

Lee A. Jones

 

Ms. Jones has served as the President and Chief Executive Officer of Rebiotix, Inc., a biotechnology company that develops and commercializes medical therapies, since 2011. She has more than 30 years of healthcare and medical device industry experience. She served on the boards of directors of Algos Preclinical Services, Inc. from [open]2010 to 2013 and Uroplasty, Inc. from 2006 through June 2014. From 2010 to 2011, she was a CEO-in-Residence at the University of Minnesota Venture Center and from 2009 to 2010, Ms. Jones was the Chief Administrative Officer of the Schulze Diabetes Institute of the University of Minnesota. Ms. Jones has a Bachelor of Science degree from the University of Minnesota. Our boardBoard believes that Ms. Jones’ experience operating a company in the medical device industry, her experience as an executive officer of a medical products company, her previous board experience and connections within the medical device community make her uniquely qualified to serve as a director.

 

9 

Kathleen S. Skarvan

 

Ms. Skarvan joined the Company in 2012 as Chief Executive Officer, became a director in 2013 and was appointed to the additional position of President in August 2015. Ms. Skarvan served as Vice President of Operations at OEM Fabricators from 2011 to 2012. Previously, Ms. Skarvan served in various roles at Hutchinson Technology Incorporated, most recently as the President of the Disk Drive Components Division from April 2007 until March 2011. As President of the Disk Drive Components Division, Ms. Skarvan managed a public company division with annual revenues in excess of $300 million. Ms. Skarvan also served as a Senior Vice President of Hutchinson Technology Incorporated from December 2010 to March 2011, and as Vice President of Sales & Marketing of the Disk Drive Components Division from October 2003 until April 2007. She has served on the Board of Trustees of the St. Cloud State University Foundation since June 2015 and in November 2018 joined the board of directors of Citizens Community Federal National Association, a wholly-owned subsidiary of Citizens Community Bancorp, Inc. Ms. Skarvan has a bachelor’s degree from St. Cloud State University. Among other attributes, skills, experiences and qualifications, our Board believes that, as the President and Chief Executive Officer of the Company, Ms. Skarvan is the person most familiar with the Company’s day to day operations and most capable of effectively identifying strategic priorities and leading the execution of strategy.

 


Andrea M. Walsh

Ms. Walsh is a nominee for election to the Board. Since 2017 she has served as President and CEO of HealthPartners, a Minnesota-based non-profit integrated health system caring for 1.2 million patients and providing health insurance and well-being support to 1.8 million health plan members. Previously, she served as its Executive Vice President and Chief Marketing Officer from 2002 to May 2017 and as its Senior Vice President and Corporate Counsel from 1994 to 1999. Ms. Walsh holds Business Administration and English degrees from the University of Kansas and a Juris Doctorate from the University of Minnesota Law School. She currently serves on the boards of directors of Constellation (a medical professional liability mutual insurance company), YMCA of the North, and the Amherst H. Wilder Foundation. Our Board believes that Ms. Walsh’s experience as the top executive at one of the nation’s largest health care organizations will provide new and enhanced insight into a key aspect of our company’s business in addition to valuable leadership experience.

Dr. George H. Winn, D.D.S.

 

Dr. Winn is retired and served as the Board’s Vice Chairman from May 2012 through November 2014. He practiced dentistry for over 50 years with an emphasis in orthodontics and facial pain management in New Prague, Minnesota. He holds a Bachelor of Arts from Mankato State College, a Bachelor of Science from the University of Minnesota and a D.D.S. from the University of Minnesota School of Dentistry. He has served as an associate clinical professor in the Department of Operative Dentistry and participates in a medical ethics program of the American College of Dentists at the University of Minnesota School of Dentistry. Dr. Winn previously served on the University of Minnesota Foundation Board of Trustees, which included service on its executive and finance committees, from 2007 through 2016. Our Board believes that, in addition to the vast industry relationships that Dr. Winn has developed, his education and experience give him insight into the medical device industry that is valuable in his role as a director.

 

Required Vote and Board Recommendation

 

The Board recommends that you vote “FOR” each of the nominees to the Board, thereby setting the number of directors at seven. The election of each nominee requires the affirmative vote of a plurality of the voting power of the shareholders present, whether in personelectronically during the Annual Meeting or by proxy, and entitled to vote at the Annual Meeting, provided that a quorum is present. Except as otherwise directed, the proxies will vote all valid proxies for the seven nominees identified above.


 

10 

RATIFICATION OF THE APPOINTMENT OF THE COMPANY’S
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(Proposal 2)

 

The Board, acting on the recommendation of its Audit Committee, has selected RSM US LLP (“RSM”) as the Company’s independent registered public accounting firm for fiscal 2020.2021. RSM was the Company’s independent registered public accounting firm for the most recently completed fiscal year.

 

Notwithstanding its selection of RSM, the Audit Committee, in its discretion, may appoint another independent registered public accounting firm at any time during the year if the Audit Committee believes that such a change would be in the best interests of the Company and its shareholders. If the appointment of RSM is not ratified by our shareholders, the Audit Committee may reconsider whether it should appoint another independent registered public accounting firm.

 

A representative of RSM is expected to be present at the Annual Meeting, will have an opportunity to make a statement if he or she desires to do so, and will be available to respond to appropriate questions regarding preparation of the Company’s financial statements.

 

Audit Fees

 

The following table presents fees billed by RSM to the Company for the audit of the Company’s annual financial statements, the review of the Company’s interim financial statements, and various other audit and non-audit services provided in connection with the Company’s fiscal year ended June 30, 2020, or “fiscal 2020,” and the fiscal year ended June 30, 2019, or “fiscal 2019,” and the fiscal year ended June 30, 2018, or “fiscal 2018.2019.”

 

 Year Ended June 30,  Year Ended June 30, 
Category 2019  2018  2020  2019 
Audit Fees(a) $156,525  $140,850  $146,978  $156,525 

 

 

(a)

Includes the annual audits and quarterly reviews of the Company’s financial statements.

  

RSM provided no other services to the Company in fiscal 20192020 or fiscal 20182019 that are not included above.

 

Audit Committee Pre-Approval

 

Pursuant to its written charter, the Audit Committee is responsible for pre-approving all audit and permitted non-audit services to be performed for the Company by its independent registered public accounting firm or any other auditing or accounting firm. During the year, circumstances may arise that willcould require the engagement of the independent registered public accounting firm for additional services not contemplated in the original pre-approval. In those instances, we will obtain pre-approval of the Audit Committee before engaging the independent registered public accounting firm.

 

All audit services and audit-related services incurred during fiscal 20192020 and fiscal 20182019, as applicable, were pre-approved by our Audit Committee.

 

Required Vote and Board Recommendation

 

The Board recommends that you vote “FOR” the ratification of the appointment of RSM as the Company’s independent registered public accounting firm. Approval of the proposal requires the affirmative vote of a majority of the voting power of the shareholders present, whether in personelectronically during the Annual Meeting or by proxy, and entitled to vote at the Annual Meeting, provided that a quorum is present.

 

11

 

ADVISORY APPROVAL OF EXECUTIVE COMPENSATION
(Proposal 3)

 

We are seeking a vote of shareholders to approve, on a non-binding, advisory basis, the compensation of our named executive officers as disclosed in this proxy statement.

 

We seek to closely align the interests of our named executive officers with the interests of our shareholders. We designed our compensation program to reward our named executive officers for their individual performance and contributions to our overall business objectives, and for achieving and surpassing the financial goals set by our Board upon recommendation of its Personnel and Compensation Committee.

 

At our annual meeting of shareholders held in 2018,2019, our executive compensation program was approved on an advisory basis, with approximately 85%78% of the votes cast in favor of the corresponding proposal. Our Board and its Personnel and Compensation Committee believe that this vote reflected our shareholders’ support for the decisions made with respect to the compensation of our named executive officers for fiscal 2018.2019.

 

The vote on this resolution is not intended to address any specific element of compensation. Instead, the vote relates to the overall compensation of our named executive officers, as described in this proxy statement in accordance with the compensation disclosure rules of the SEC.

 

Accordingly, we ask our shareholders to vote on the following resolution at the Annual Meeting:

 

RESOLVED, that the Company’s shareholders approve, on a non-binding, advisory basis, the compensation of the named executive officers, as disclosed in this proxy statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the summary compensation table and the other related tables and disclosure.

 

While the Board and especially the Personnel and Compensation Committee intend to carefully consider the results of the voting on this proposal when making future decisions regarding executive compensation, the vote is not binding on the Company, the Personnel and Compensation Committee or the Board and is advisory in nature. To the extent there is any significant vote against this Proposal 3, the Personnel and Compensation Committee will evaluate what actions may be necessary to address our shareholders’ concerns.

 

Required Vote and Board Recommendation

 

The Board recommends that you vote “FOR” the approval, on a non-binding and advisory basis, of the compensation of the named executive officers. Approval of the proposal requires the affirmative vote of a majority of the voting power of the shareholders present, whether in personelectronically during the Annual Meeting or by proxy, and entitled to vote at the Annual Meeting, provided that a quorum is present. This vote is advisory and is not binding on the Company, the Board or the Personnel and Compensation Committee.

12 

ADVISORY RECOMMENDATION REGARDING FREQUENCY OF EXECUTIVE COMPENSATION VOTES
(Proposal 4)

As required under the Dodd-Frank Act and SEC rules, shareholders have an opportunity at annual meetings of shareholders to cast a non-binding advisory vote on how frequently future executive compensation votes should be conducted by the Company. Shareholders may indicate whether they prefer a vote on executive compensation every one, two or three years, or abstain on the question. The Company is required to solicit shareholder votes on the frequency of future executive compensation votes at least once every six years, although we may seek shareholder input more frequently.

The Board recommends that the shareholders select a frequency of 1 YEAR for future executive compensation votes. The Board has determined that continuing to solicit a vote each year is preferable because it provides the most consistent opportunity for feedback on our compensation programs, policies and decisions.

Effect of Vote

The frequency selected by the shareholders for future executive compensation votes is not binding on the Board or its Personnel and Compensation Committee. However, the Board will give the frequency selected by the shareholders due consideration in determining the frequency of future votes on executive compensation.

At the annual meeting held in 2013, shareholders expressed a preference for holding an advisory, non-binding vote to approve executive compensation on an annual basis. In light of that preference, the Board determined that it would solicit a nonbinding advisory vote to approve the compensation of our executive officers every year until the next required advisory vote regarding the frequency of executive compensation votes.

Required Vote and Board Recommendation

The Board recommends that you vote “1 YEAR” for the frequency executive compensation votes. If a quorum is present, the alternative receiving the greatest number of votes relative to the votes cast for the other alternatives will be deemed the alternative recommended by the shareholders.

13 

CORPORATE GOVERNANCE

 

Director Independence

 

Our Board has determined that each of Mr. Craney, Mr. Erb, Mr. Erickson, Mr. Fluet, Ms. Jones and Mr. Winn are “independent directors” as defined in the rules of the NYSE American Stock Exchange. It has also determined that, if elected, Ms. Walsh would also qualify as an “independent director” under the same definition. None of our directors are related to any other director, director nominee or executive officer of the Company.

 

In determining director independence, the independenceBoard evaluated Ms. Walsh’s employment with HealthPartners because HealthPartners and certain of its affiliates have been customers of our directors,company. Ms. Walsh had no involvement in arranging any transactions with our Board considered that,company, the transactions were on arms-length terms, she had no material interest in fiscal 2019, the Company purchased approximately $52,000 in telecommunications services from Blue Earth Valley Communications, Inc., of which Mr. Eckles is a significant shareholder. The purchases were made on terms believed to be consistent with what could be obtained in an arm’s length transaction with an independent third partysuch transactions and the amounts involved are believedsignificantly less than 1% of both our company’s and HealthPartners’ annual revenues. Accordingly, the Board concluded the transactions with HealthPartners are both beneficial and fair to be immaterialour company and, if she is elected, would not interfere with Ms. Walsh’s ability to exercise independent judgment in amount for all parties involved. carrying out her responsibilities as a member of the Board.

 

Director Attendance at Annual Meetings

 

Directors’ attendance at annual meetings can provide shareholders with an opportunity to communicate directly with members of the Board about matters concerning the Company. The Company encourages all directors to attend the Company’s annual meetings (including by electronic means when available), but it does not have a formal attendance policy. All the Company’s current directors attended the Fiscal 20192020 Annual Meeting of Shareholders, with the exception of Mr. Erb and Mr. Fluet, who were elected to the Board in August 2019.Shareholders.

 

Board Leadership Structure

 

We have separate individuals serving as Chairman of the Board and as Chief Executive Officer because we believe independent directors and management have different perspectives and roles in strategy development. The Chief Executive Officer is responsible for setting the strategic direction of the Company and managing the day-to-day leadership and performance of the Company, while the Chairman provides guidance to the Chief Executive Officer, sets the agenda for meetings of the Board and presides over meetings of the full Board. We believe this structure promotes active participation of the independent directors and strengthens the role of the Board in fulfilling its oversight responsibility and fiduciary duties to our shareholders while recognizing the day-to-day management direction of the Company by the Chief Executive Officer.

 

Risk Oversight

 

It is management’s responsibility to manage risk and bring to the Board’s attention the most material risks to the Company. The Board has oversight responsibility of the processes established to report and monitor systems for material risks applicable to the Company. The Audit Committee provides oversight of management with respect to enterprise-wide risk management, which focuses primarily on risks relating to the Company’s ability to maintain appropriate levels of credit and insurance coverage, financial and accounting risks, and legal and compliance risks, including oversight of internal controls over financial reporting. In addition, the Personnel and Compensation Committee considers risks related to the attraction and retention of talent and risks relating to the design of compensation programs and arrangements. The Nominating and Governance Committee considers risks and best practices relating to corporate governance policies and procedures. The full Board considers strategic risks and opportunities and regularly receives detailed reports from management and the committees, with respect to their areas of responsibility for risk oversight.

 


Policies as to Hedging and Company Securities

Our insider trading policy provides that company directors, officers and other employees (and their designees) are prohibited from, among other things: (a) purchasing company securities on margin or pledging company securities; (b) short selling company securities; (c) buying or selling put or call options on company securities; (d) purchasing any financial instruments (including prepaid variable forward contracts, equity swaps, collars and exchange funds) or otherwise engaging in transactions that are designed to or have the effect of hedging or offsetting any decrease in the market value of equity securities (i) granted to the individual by the company as part of the compensation of the individual or (ii) held, directly or indirectly, by the individual; or (e) engaging in limit orders or other pre-arranged transactions that execute automatically, except for “same-day” limit orders and approved 10b5-1 plans. Certain family and household members and other persons or entities whose decisions are directed, influenced or controlled by a covered person are also subject to the prohibition.

Board and Committee Meetings

 

During fiscal 2019,2020, the Board held fiveten meetings. In addition, directors frequently communicate with each other informally and, when appropriate, take action by written consent of all directors, or in the case of an action that does not require shareholder approval, the number of directors required to take the action at a meeting, as permitted by the Minnesota Business Corporation Act and the Company’s Articles of Incorporation, as amended. Each director attended at least 75% of the meetings of Board and any committee on which they serve during the most recently completed fiscal year, with the exception of Mr. Erb and Mr. Fluet, who were elected to the Board in August 2019.year.

 

14 

Committee Membership

 

The Board has three standing committees: the Audit Committee, the Personnel and Compensation Committee, and the Nominating and Governance Committee. The following table sets forth the current membership of each of the Company’s standing committees:

 

Director

Board Committee

Independent Director

Audit

Nominating and Governance

Personnel and Compensation

Stephen H. Craney

Member

Chair

✓

William V. Eckles

Member

Chair

✓

John L. Erb

Member

✓

Stan K. Erickson

Chair

Member

✓

Gregory J. Fluet

Member

Chair

✓

Lee A. Jones

Member

Member

✓

Kathleen S. Skarvan

Andrea M. Walsh

✓
George H. Winn

Member

✓

 

Our Board has evaluated independence for the members of each committee in accordance with NYSE American rules and, with respect to the members of the Audit Committee, Rule 10A-3 of the Exchange Act. The membership and responsibilities of each committee complies with the listing requirements of the NYSE American.

 

Audit Committee

 

Under its charter, the Audit Committee must consist of at least three independent directors and its composition must otherwise satisfy NYSE American and SEC requirements applicable to audit committees. The principal functions of the Audit Committee are to evaluate and review the Company’s financial reporting process and systems of internal controls. The Audit Committee evaluates the independence of the Company’s independent registered public accounting firm, recommends selection of the Company’s independent registered public accounting firm to the Board, approves fees to be paid to our independent registered public accounting firm, and reviews the Company’s financial statements with management and the independent registered public accounting firm. The Audit Committee has recommended to the Board the appointment of RSM US LLP to serve as the Company’s independent registered public accounting firm for fiscal 2020. The Audit Committee operates under a written charter approved by the Board, a copy of which is available in the “Investor Relations” section of the Company’s website at www.smartvest.com.2021. The Audit Committee held fourfive meetings during the most recently completed fiscal year.

 


Our Board has affirmatively determined that each of the members of the committee satisfy the additional independence requirements for audit committee members pursuant to the NYSE American LLC Company Guide and the rules and regulations promulgated by the SEC. The Board has further determined that Mr. Erickson qualifies as an “audit committee financial expert” as defined by Item 407(d)(5) of Regulation S-K under the Securities Act of 1933, as amended.

 

15 

Report of the Audit Committee

 

In accordance with its written charter adopted by the Board, as amended, the Audit Committee assists the Board with fulfilling its oversight responsibility regarding the quality and integrity of the accounting, auditing and financial reporting practices of the Company. A copy of the Audit Committee charter, which has been adopted by the Board and further describes the role and responsibilities of the Audit Committee, is available online in the “Investor Relations” section of our website at www.smartvest.com.

 

In discharging its duties, the Audit Committee:

 

(1)

reviewed and discussed the audited financial statements included in the annual report on Form 10-K for the fiscal year ended June 30, 20192020 with management;

 

(2)

discussed with the independent auditors the matters required to be discussed by the applicable Public Company Accounting Oversight Board standards;(“PCAOB”) standards and

the SEC; and

 

(3)

received the written disclosures and the letter from the independent accountant required by applicable requirements of the Public Company Accounting Oversight BoardPCAOB regarding the independent accountant’s communications with the Audit Committee concerning independence, and discussed with the independent accountant matters relating to their independence.

 

Based upon the review and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements be included in the Company’s annual report on Form 10-K for the fiscal year ended June 30, 2019,2020, for filing with the Securities and Exchange Commission.SEC.

 

 

Audit Committee

 

 

 

Stephen H. Craney

William V. Eckles

 

Stan K. Erickson (Chair)

 

Gregory J. Fluet

  

Personnel and Compensation Committee

 

Our Board has affirmatively determined that each of the members of the committee satisfy the additional independence requirements for compensation committee members pursuant to the NYSE American LLC Company Guide.

 

The Board has authorized the Personnel and Compensation Committee to, among other duties, develop the Company’s compensation strategy, review compensation policies and plans for the Company’s executive officers, and administer the Company’s compensation plans. Neither the Personnel and Compensation Committee nor the Board engages compensation consultants to assist in determining or recommending the amount or form of compensation for executive officers or directors. The Chief Executive Officer may give the committee input in regard to the compensation of the Chief Financial Officer, but the Chief Executive Officer is not present during voting or deliberations relating to her own compensation. The committee operates under a written charter approved by the Board, a copy of which is available in the “Investor Relations” section of our website at www.smartvest.com. The Personnel and Compensation Committee held four meetings during the most recently completed fiscal year.

 


Nominating and Governance Committee

 

Our Nominating and Governance Committee is responsible for oversight of our corporate governance policies and procedures, our codes of conduct and other corporate governance matters. In addition, our Nominating and Governance Committee makes recommendations to our Board regarding candidates for directorships and the size and composition of our Board and its committees. The Nominating and Governance Committee acts pursuant to a written charter approved by the Board, a copy of which is available in the “Investor Relations” section of our website at http://investors.smartvest.com/governance-documents.www.smartvest.com. The Nominating and Governance Committee held one meetingfive meetings during the most recently completed fiscal year.

 

16 

Director Nominations

 

The Nominating and Governance Committee is responsible for identifying and recommending director nominees for nomination by the full Board. Shareholders may recommend a nominee to be considered by the Nominating and Governance Committee by submitting a written proposal to the Chairman of the Board, at 500 Sixth Avenue Northwest, New Prague, Minnesota 56071. Any notice of a shareholder nomination must satisfy the timing and content requirements of our Bylaws and must be accompanied by a writingwritten statement from the proposed nominee consenting to being named as a nominee and to serve as a director if elected.

 

When selecting candidates for recommendation to the Board, the Nominating and Governance Committee considers the attributes of the candidates and the needs of the Board and reviews all candidates in the same manner, regardless of the source of the recommendation. In evaluating director nominees, the Nominating and Governance Committee seeks to confirm that candidates meet certain minimum qualifications, including being able to read and understand basic financial statements, being familiar with our business and industry, having high moral character and mature judgment, and possessing the ability to work collegially with others. In addition, factors such as the following are also considered:

 

●

appropriate size and diversity of the Board;

 

●

needs of the Board with respect to particular talent and experience;

 

●

knowledge, skills and experience of a nominee;

 

●

experience in domestic and international business matters;

 

●

familiarity with legal and regulatory requirements;

 

●

familiarity with accounting rules and practices; and

 

●

the desire to balance the benefit of continuity with the periodic injection of the fresh perspective provided by a new member.

 

The Nominating and Governance Committee does not have a formal diversity policy at this time. However, as summarized above, the Nominating and Governance Committee seeks to nominate candidates with a diverse range of knowledge, experience, skills, expertise, and other qualities that will contribute to the overall effectiveness of the Board. Moreover, potential nominees are not discriminated against on the basis of sex, religion, national origin, sexual orientation, disability or other basis proscribed by law.

 

SECURITY HOLDER COMMUNICATIONS TO THE BOARD OF DIRECTORS

 

Any shareholder wishing to communicate with the Board should send the communication, in written form, to the President and Chief Executive Officer of the Company at the Company’s principal place of business at 500 Sixth Avenue Northwest, New Prague, Minnesota 56071. The President and Chief Executive Officer will promptly send the communication to each member of the Board identified on the communication.

 

17 DELINQUENT SECTION 16(a) REPORTS

 

Section 16(a) of the Exchange Act requires that our directors and executive officers file initial reports of ownership and reports of changes in ownership with the SEC. Directors and executive officers are required to furnish us with copies of all Section 16(a) forms they file. Based solely on a review of the copies of such forms furnished to us and written representations from our directors and executive officers, all Section 16(a) filing requirements were met for fiscal 2020, except that one Form 4 filed by Mr. Craney on March 18, 2020 was delinquent with respect to one transaction due to an administrative error.


SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth certain information with respect to the beneficial ownership of our outstanding common stock as of September 16, 20192020 by (i) each of our named executive officers; (ii) each of our directors; (iii) all of our executive officers, directors and director nominees as a group; and (iv) each beneficial owner of 5% or more of our outstanding common stock. Ownership percentages are based on 8,445,8518,601,234 shares of common stock outstanding as of the close of business on September 16, 2019.2020.

 

Beneficial ownership is determined in accordance with the rules of the SEC. To our knowledge and subject to applicable community property laws, each of the holders of common stock listed below has sole voting and investment power as to the common stock owned unless otherwise noted. The table below includes the number of shares of common stock underlying options that are exercisable within 60 days from September 16, 2019.2020. Except as otherwise noted below, the address for each director or officer listed in the table is c/o Electromed, Inc., 500 Sixth Avenue Northwest, New Prague, Minnesota 56071.

 

Name

 

Amount and Nature of
Beneficial Ownership

 

Percentage of
Outstanding Shares

 Amount and Nature of
Beneficial Ownership		 Percentage of
Outstanding Shares
Executive Officers and Directors            
Kathleen S. Skarvan 333,990(a) 3.9% 392,079(a) 4.4%
Michael J. MacCourt 15,000  * 
Jeremy T. Brock 190,501(b) 2.2% 132,071(b) 1.5%
Stephen H. Craney 561,901  6.7% 574,901  6.7%
John L. Erb —  — 
William V. Eckles 194,994  2.3%
Stan K. Erickson 19,317  

*

  22,317  * 
Gregory J. Fluet —  —  3,000  * 
Lee A. Jones 15,183  

*

  18,183  * 
Andrea M. Walsh —  — 
George H. Winn 607,891(c) 7.2% 579,391(c) 6.7%
            
Executive officers and directors as a group (9 persons) 1,923,777(d) 21.9%
      
Zenith Sterling Advisers LLC
9075 Deer Ridge Drive
Bloomington, IL 61705
 489,700(e) 5.8%
Executive officers, directors and nominees as a group (9 persons) 1,736,942(d) 19.6%
            
Tocqueville Asset Management L.P.
40 West 57th Street, 19th Floor
New York, NY 10019		 439,700(f) 5.2% 432,000(e) 5.0%

 

*Less than 1%

*

Less than 1%

(a)

Includes options to purchase 205,001 shares.

244,834 shares of common stock.

(b)

(b)

Includes options to purchase 138,001 shares.

18,933 shares of common stock.

(c)

(c)

Includes 446,303 shares of common stock owned by G&J Winn Family LLLP, of which Dr. Winn and his spouse are general partners.

(d)

(d)

Includes options to purchase 343,002 shares.

263,767 shares of common stock.

(e)

Based on Schedule 13D filed with the SEC on June 13, 2019.  This statement was being filed by (i) Zenith Sterling Advisers LLC, a Delaware limited liability company (“Zenith”), and (ii) Joshua J. Peters, the sole managing member of Zenith (“Peters”).  Zenith is an investment adviser that holds discretionary voting control and dispositive power over the securities in its client accounts and as such may be deemed to indirectly beneficially own such securities. Peters is the sole managing member of Zenith and as a result may be deemed to be an indirect beneficial owner of shares held in the client accounts managed by Zenith.

(f)

(e)

Based on Schedule 13G filed with the SEC on January 31, 2019,20, 2020, reporting holdings as of December 31, 2018.

2019.


 

18 

EXECUTIVE COMPENSATION

 

The following discussion describes the compensation awarded to our twothe following three executive officers of the Company during Fiscal 2020 (collectively, our “named executive officers”), namely: Kathleen S. Skarvan, President and Chief Executive Officer, Michael J. MacCourt, current Chief Financial Officer, and Jeremy T. Brock, former Chief Financial Officer. Michael J. MacCourt commenced employment with the Company as Chief Financial Officer on May 26, 2020. Jeremy T. Brock, the Company’s former Chief Financial Officer, resigned from his positions with the Company on May 26, 2020 and terminated his employment with the Company effective as of July 1, 2020.

 

Executive Compensation Components for Fiscal 20192020

 

We provide a compensation package to our executive officers, including base salary, cash incentive compensation, certain perquisites and participation in benefit arrangements that are generally available to all salaried employees, such as health and retirement plans. We have also periodically awarded our executive officers with long-term equity incentive grants in the form of restricted shares of common stock or stock options. Pursuant to their employment agreements, our executives are eligible to participate in any employee benefit plan that provides opportunities to earn equity incentive compensation. Accordingly, our executives are eligible to participate in our equity incentive plans and the Board may grant equity awards to the executives thereunder.

 

Base Salary

 

For fiscal 2019, our Chief Executive Officer and Chief Financial Officer had base salaries of $396,750 and $250,000, respectively. Base salariesSalaries for our executive officers are determined and paid on a fiscal-year basis and, for fiscal 2019,2020, were established by our Personnel and Compensation Committee in accordance with the terms of each executive officer’s existing employment agreement.agreement with the Company. For fiscal 2020, Ms. Skarvan was paid a base salary of $410,000. During the portion of fiscal 2020 during which Mr. MacCourt served as an employee, Mr. MacCourt was paid $25,667 in base salary, which reflects his annualized base salary of $260,000. Prior to his departure from the Company, Mr. Brock’s base salary paid during fiscal 2020 was $290,000.

 

In order to provide its recommendations regarding base salaries, the Personnel and Compensation Committee reviews individual performance and our operating results and considers compensation data for medical device manufacturing companies located in the Midwest. The Personnel and Compensation Committee also considers the Chief Executive Officer’s recommendations as to compensation for the Company’s other executive officer.officers. The Personnel and Compensation Committee uses a subjective process to set base salaries and does not specifically weight any factors. Based upon the information reviewed, the Personnel and Compensation Committee makes a recommendation with respect to compensation for the Company’s executive officer.officers. The Board sets the compensation for each executive officer based on the recommendation of the committee. The Chief Executive Officer is not present during the committee’s deliberations or voting on her compensation.

 

Cash Incentive Compensation

 

The Personnel and Compensation Committee established a Fiscal Year 20192020 Officer Bonus Plan (the “2019“2020 Bonus Plan”) for officers of the Company, including our named executive officers. The 20192020 Bonus Plan was effective for fiscal 20192020 and provided an opportunity for each participant to earn an annual cash bonus based on Company revenue growth versus the prior fiscal year (subject to achievement of threshold earnings before interest and taxes (“EBIT”)). Under the 20192020 Bonus Plan, the committee established minimum revenue growth of 10% and target revenue growth of 12% for fiscal 20192020 and set target payouts of 50.0% and 30.0% of annual base salary for our Chief Executive Officer and Chief Financial Officer, respectively. The following summarizes the potential payment scenarios that were available under the 20192020 Bonus Plan:

 

●

Company revenue growth below minimum performance would not have resulted in any payouts under the 20192020 Bonus Plan.

 


●

Company revenue growth between minimum and target performance of resulted in a potential bonus payout starting at 50.0% and increasing in increments of 25.0% of the participant’s respective target payout for every whole percent of revenue growth in excess of minimum performance.

 

●

Company revenue growth equal to target performance would have resulted in a potential bonus payout equal to 100.0% of the participant’s respective target payout.

 

19 

●

Company revenue growth above target performance would have resulted in a potential bonus payout equal to 100.0% of the participant’s respective target payout, plus an additional increment of 8.0% of their target payout for every whole percent of revenue growth in excess of target performance.

 

Notwithstanding the foregoing, Company revenue growth also would not have resulted in any payout unless EBIT also exceeded an established threshold amount. Company revenue growth above target performance was only able to increase the resulting payout as a percent of target if EBIT also exceeded an amount equal to the threshold EBIT amount plus an additional increment of 30.0% of threshold EBIT for every whole percent of revenue growth in excess of target performance.

 

As a result of actual CompanyNo bonuses were paid out to any participant under the 2020 Bonus Plan for fiscal 2020 as revenue growth of approximately 10.6% and EBIT in excess of the threshold amount for fiscal 2019, Ms. Skarvan and Mr. Brock received cash payments equal to 50.0% of their target payouts, amounting to payments of $99,188 and $37,500, respectively, under the 2019 Bonus Plan.targets were not obtained.

 

In August 2019, the Committee awarded a one-time discretionary cash bonus of $30,000 to Ms. Skarvan that was separate from her bonus opportunity under the 2019 Bonus Plan. The bonus was awarded primarily in recognition of her exceptional contributions to the Company while the position of Vice President of Sales was vacant during a portion of fiscal 2019.

Equity Compensation

 

Our Board and its Personnel and Compensation Committee believe that stock-based compensation promotes the creation of long-term shareholder value and aligns the interests of our management with the interests of our shareholders by ensuring that a portion of their total compensation is at risk and changes in value with the value of our securities. As employees of our company, each of our applicable named executive officers was previously eligible to receive equity compensation pursuant to our 2012 Stock Incentive Plan (the “2012 Plan”) and our 2014 Stock Incentive Plan (“2014 Plan”), and each current named executive officer is eligible to receive equity compensation pursuant to our 2017 Omnibus Incentive Plan (“2017 Plan”). Upon the ratification by our shareholders of the 2014 Plan in November 2014 and the 2017 Plan in November 2017, we ceased making awards under the 2012 Plan and the 2014 Plan, respectively.

 

During fiscal 2019,2020, we granted a combination of shares of common stock and options to purchase additional shares of common stock to each of our Chief Executive OfficerMs. Skarvan and Chief Financial Officer.Mr. Brock. On July 1, 2018,2019, Ms. Skarvan received 20,000 restricted shares of common stock and an option to purchase up to 40,00039,500 shares of common stock. On the same date, Mr. Brock received 10,00012,500 restricted shares of common stock and an option to purchase up to 20,00016,800 shares of common stock. All of the awards were granted pursuant to the 2017 Plan. Each of theThe foregoing options havehad an exercise price of $5.42$5.29 per share, representingwhich represents the “fair market value” of our common stock as of the date of grant, and were scheduled to expire after 10 years. The options and shares of restricted stock awardswere scheduled to vest in substantially equal increments on June 30 in each of 2019, 2020, 2021 and 2022.

On May 26, 2020, Mr. MacCourt received 2,500 restricted shares of common stock in connection with the commencement of his employment as Chief Financial Officer of the Company. Such shares of restricted stock are scheduled to vest on May 25, 2021.

 

All of the foregoing awards were granted pursuant to the 2017 Plan.

Perquisites and Other Benefits

 

We believe that providing perquisites to our executive officers is beneficial because it improves our ability to retain qualified leaders and is consistent with the practice of similarly-sized companies in our industry. Our executive officers are eligible to participate in our group health, disability and life insurance plans and receive matching contributions to a 401(k) plan, which are benefits that are generally available to all of our full-time employees. The goal of these programs is to promote health and welfare benefits. In addition, the employment agreements with our Chief Executive Officer and our current Chief Financial Officer provide for monthly automobile allowances for each officer, and our employment agreement with our Chief Executive Officer provides for a monthly housing allowance. The employment agreement with our former Chief Financial Officer also provided for a monthly automobile allowance.

 

20 


Compensation Actions for Fiscal 20202021

 

In July 2019,2020, the Personnel and Compensation Committee evaluated the base salaries of our President and Chief Executive Officer and our current Chief Financial Officer were increasedand determined not to make any changes for fiscal 2020 to2021, resulting in continued annual base salaries of $410,000 and $290,000,$260,000, respectively. Both base salaries reflect cost of living-based increasesThe equity compensation awards to our President and theChief Executive Officer and our current Chief Financial Officer’s base salary reflects a supplemental adjustment based on a review of broad-based third-party survey data. The composition of the equity compensation to our named executive officersOfficer for fiscal 2020 was2021 were granted on July 1, 2019,2020, resulting in the issuance of 20,0008,256 restricted shares of common stock and an option to purchase up to 39,50013,800 shares of common stock for our President and Chief Executive Officer and 12,500 restricted shares of common stock and an option to purchase up to 16,8005,300 shares of common stock for our current Chief Financial Officer. The foregoing options have an exercise price of $14.91 per share, which represents the “fair market value” of our common stock as of the date of grant, and expire after 10 years. The foregoing options and shares of restricted stock are scheduled to vest in substantially equal increments on June 30 in each of 2021, 2022 and 2023. On August 21, 2020, an award consisting of 10,000 shares of restricted stock was granted to Ms. Skarvan, which shares are scheduled to vest in equal increments on the first and second anniversaries of the date of grant.

 

InAlso in August 2019,2020, our Board approved, upon recommendation from its Personnel and Compensation Committee, the final terms of the Fiscal Year 20202021 Officer Bonus Plan (the “2020“2021 Bonus Plan”) for officers of our company, including our named executive officers.Ms. Skarvan and Mr. MacCourt. The 20202021 Bonus Plan is effective for fiscal 20202021 and provides opportunities similar to the 20192020 Bonus Plan for each participant to earn an annual cash bonus based on performance versus minimum and target levels of Company revenue growth for fiscal 20202021 (subject to achievement of threshold EBIT for fiscal 2020)2021). The target payout amounts for fiscal 2021 were maintainedset at 50.0% and 30.0% of annual base salary for Ms. Skarvan and Mr. Brock,MacCourt, respectively.

 During fiscal 2021, we engaged a third-party consultant to evaluate executive and director compensation.

 

Employment Agreements

 

We are party to amended and restated employment agreements with certain key employees, including botheach of our named executive officers.Ms. Skarvan and Mr. MacCourt. The amended and restated employment agreement with Ms. Skarvan and the employment agreement with Mr. Brock wereMacCourt are each initially effective for a period of two years ending in 2019,2021 and 2022, respectively, subject to an automatic one-year extension every Septemberon the anniversary of the effective date of such agreement unless terminated in advance in accordance its terms. Notwithstanding the foregoing, the applicable term will automatically expire on the one-year anniversary of a “change of control” (as defined in the applicable employment agreement).

 

Under their respective employment agreements, Ms. Skarvan and Mr. Brock wereMacCourt are each initially entitled to minimum annualized base salaries and are eligible for a merit-based increase on or about each successive July 1, subject to final approval by our board of directors.Board. The employment agreements also provide that Ms. Skarvan and Mr. BrockMacCourt are each eligible to earn an annualized cash bonus as determined by the board of directors,our Board, based on minimum targetstarget amounts of 50% and 30%, respectively, of their annualized base salaries.

 

Also under the employment agreements, if the executive’sapplicable executive officer’s employment is terminated by us for any reason other than for “cause” (as defined in the applicable employment agreement) or is terminated by them for “good reason” (as defined in the applicable employment agreement), and in either case the termination of employment occurs before a change of control, then the executive will be eligible to (A) receive an amount equal to (i) one times their annualized base salary as of the termination date, plus (ii) 100% of their target annual bonus for the fiscal year in which the termination date occurs, plus (iii) a pro rata portion of the same target annual bonus amount based on the portion of the applicable fiscal year that had elapsed prior to the termination date, and (B) have us continue to pay the Company portion of COBRA premiums for up to 12 months. If any such termination occurs within twelve months after a change of control, then the Executiveapplicable executive officer will instead be eligible to (A) receive an amount equal to (i) 1.5 times their annualized base salary as of the termination date, plus (ii) 150% of their target annual bonus for the fiscal year in which the termination date occurs, plus (iii) a pro rata portion of the same target annual bonus amount based on the portion of the fiscal year that had then elapsed prior to the termination date, and (B) have us continue to pay the Company portion of COBRA premiums for up to 18 months. All of the above severance benefits are contingent on theeach executive officer signing and not revoking a release of claims and thesuch executive officer remaining in strict compliance with the terms of their employment agreement and their existing non-competition, non-solicitation, and confidentiality agreement with the Company and any other written agreement between thesuch executive officer and the Company. Each executive remains a party to their existing non-competition, non-solicitation, and confidentiality agreement with the Company notwithstanding the amendment and restatement of their employment agreement. In addition to the specific terms summarized above, each Executiveexecutive officer remains eligible to participate in the other compensation and benefits programs generally available to Company employees.

21 


Summary Compensation Table

 

The following table provides information regarding the compensation earned during fiscal 20192020 and fiscal 20182019 by our named executive officers:

 

Name and principal position

 

Fiscal
Year

 

Salary
($)(a)

 

Bonus
($)(b)

 

Stock
awards
($)(c)

 

Option
awards
($)(d)

 

Non-equity
incentive
plan
compensation
($)(e)

 

All other
compensation
($)(f)

 

Total
($)

Kathleen S. Skarvan
President and Chief Executive Officer

 

2019

 

396,750

 

30,000

 

108,400

 

211,600

 

99,188

 

21,635

 

867,573

 

2018

 

345,000

 

—

 

110,600

 

195,200

 

51,750

 

21,598

 

724,148

Jeremy T. Brock
Chief Financial Officer

 

2019

 

250,000

 

—

 

54,200

 

105,800

 

37,500

 

15,820

 

463,320

 

2018

 

230,000

 

—

 

55,300

 

97,600

 

20,700

 

15,992

 

419,592

Name and principal position Fiscal Year Salary
($)(a)		 Bonus
($)(b)		 Stock awards
($)(c)		 Option awards
($)(d)		 Non-equity incentive plan compensation ($)(e) All other compensation
($)(f)		 Total
($)

Kathleen S. Skarvan

 2020 410,000 — 105,800 208,955 — 23,513 748,268
President and Chief Executive Officer 2019 396,750 30,000 108,400 211,600 99,188 21,635 867,573
Michael J. MacCourt(g) 2020 25,667 — 32,500 — — 1,057 59,224
Chief Financial Officer 2019 — — — — — — —
Jeremy T. Brock(h) 2020 290,000 — 66,125 88,872 — 19,248 464,245
Former Chief Financial Officer 2019 250,000 — 54,200 105,800 37,500 15,820 463,320

 

(a)

Amounts shown are not reduced to reflect the named executive officers’ elections, if any, to contribute portions of their salaries to 401(k) plans.

(b)

Amounts represent discretionary bonus earned for reported fiscal year’s performance but paid in the following fiscal year.

(c)

Amounts represent fair value of awards granted during fiscal year, determined by multiplying number of shares of restricted stock by the closing price of our common stock as of the date of grant, as reported by the NYSE American.

(d)

Amounts represent fair value of awards granted during the fiscal year, as computed in accordance with FASB Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718 (“ASC 718.718”). The assumptions used to determine the value of the  awards are discussed in Note 8 to our consolidated financial statements, included in the Company’s annual report on Form 10-K for fiscal 2019,2020, filed with the SEC on August 27, 2019.

25, 2020.

(e)

Represents payments made under the Fiscal 2019 Officer Bonus Plan. See the discussion under “Executive Compensation Components for Fiscal 20192020 – Cash Incentive Compensation” above.

above with respect to the Fiscal 2020 Officer Bonus Plan.

(f)

Includes Company matches to 401(k) plans of $11,513 for Ms. Skarvan, $457 for Mr. MacCourt, and $12,048 for Mr. Brock with respect to fiscal 2020, and $12,035 for Ms. Skarvan and $11,020 for Mr. Brock with respect to fiscal 2019 and $11,998 for Ms. Skarvan and $11,192 for 2019.

(g)Mr. MacCourt commenced employment with our company on May 26, 2020.
(h)Mr. Brock resigned from all positions with respect to fiscal 2018.

our company on May 26, 2020 and his employment with the Company terminated on July 1, 2020.

22 


Outstanding Equity Awards at June 30, 20192020

 

The following table sets forth certain information regarding equity awards granted to our named executive officers and outstanding as of June 30, 2019:2020:

 

 

 

 

 

Option Awards

 

Stock Awards

Name

 

Grant Date

 

Number of
securities
underlying
unexercised
options (#)
Exercisable

 

Number of
securities
underlying
unexercised
options (#)
Unexercisable

 

Option
exercise price
($)

 

Option
expiration
date

 

Number of
shares of stock
that have not
vested (#)

 

Market value of
shares of stock
that have not
vested(a) ($)

Kathleen S. Skarvan

 

 

 

12/03/2012

 

20,000

 

—

 

1.75

 

12/02/2022

 

 

 

 

 

07/01/2013

 

15,000

 

—

 

1.31

 

06/30/2023

 

 

 

 

 

07/01/2014

 

50,000

 

—

 

1.40

 

06/30/2024

 

 

 

 

 

07/01/2015

 

40,000

 

—

 

1.80

 

06/30/2025

 

 

 

 

 

07/01/2016

 

40,000

 

—

 

3.82

 

06/30/2026

 

 

 

 

 

07/01/2017

 

26,667

 

13,333(b)

 

5.53

 

06/30/2027

 

 

 

 

 

07/01/2017

 

 

 

 

 

 

 

 

 

6,666(c)

 

36,330

 

07/01/2018

 

13,334

 

26,666(d)

 

5.42

 

06/30/2028

 

 

 

 

 

07/01/2018

 

 

 

 

 

 

 

 

 

13,333(e)

 

72,665

Jeremy T. Brock

 

 

 

05/30/2012

 

18,000

 

—

 

2.53

 

05/29/2022

 

 

 

 

 

11/15/2012

 

20,000

 

—

 

1.59

 

11/14/2022

 

 

 

 

 

07/01/2013

 

10,000

 

—

 

1.31

 

06/30/2023

 

 

 

 

 

07/01/2014

 

30,000

 

—

 

1.40

 

06/30/2024

 

 

 

 

 

07/01/2015

 

20,000

 

—

 

1.80

 

06/30/2025

 

 

 

 

 

07/01/2016

 

20,000

 

—

 

3.82

 

06/30/2026

 

 

 

 

 

07/01/2017

 

13,334

 

6,666(f)

 

5.53

 

06/30/2027

 

 

 

 

 

07/01/2017

 

 

 

 

 

 

 

 

 

3,333(g)

 

18,165

 

07/01/2018

 

6,667

 

13,333(h)

 

5.42

 

06/30/2028

 

 

 

 

 

07/01/2018

 

 

 

 

 

 

 

 

 

6,666(i)

 

36,330

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Option Awards Stock Awards
Name Grant Date Number of securities underlying unexercised
options (#) Exercisable		 Number of securities underlying unexercised options (#) Unexercisable Option exercise price
($)		 Option expiration date Number of shares of stock that have not vested (#) Market value of shares of stock that have not vested(a) ($)

Kathleen S. Skarvan

 

 12/03/2012 20,000 — 1.75 12/02/2022    
 07/01/2013 15,000 — 1.31 06/30/2023    
 07/01/2014 50,000 — 1.40 06/30/2024    
 07/01/2015 40,000 — 1.80 06/30/2025    
 07/01/2016 40,000 — 3.82 06/30/2026    
 07/01/2017 40,000 — 5.53 06/30/2027    
 07/01/2018 26,667 13,333(b) 5.42 06/30/2028    
 07/01/2018         6,666(c) 102,590
  07/01/2019 13,167 26,333(d) 5.29 06/30/2029    
  07/01/2019         13,333(e) 205,195
               
Michael J. MacCourt 05/26/2020         2,500(f) 38,475
              
Jeremy T. Brock 07/01/2017 6,666 — 5.53 06/30/2027    
  07/01/2018 6,667 6,666 5.42 06/30/2028    
  07/01/2018         3,333(g) 51,295
  07/01/2019 5,600 11,200 5.29 06/30/2029    
  07/01/2019         8,333(h) 128,245

 

(a)

Equals the number of unvested restricted shares of restrictedcommon stock multiplied by $5.45,$15.39, the fair market value of our common stock on June 28, 2019,30, 2020, the last trading day of our fiscal year,2020, as reported by the NYSE American.

(b)

Remaining scheduled to vest on June 30, 2020.

(c)

Restricted stock scheduled to vest on June 30, 2020.

(d)

Scheduled to vest with respect to 13,333 shares on each of June 30, 2020 and June 30, 2021.

(e)

(c)

Restricted stock scheduled to vest on June 30, 2021.

(d)Scheduled to vest with respect to 13,167 and 13,166 shares on June 30, 2021 and 2022, respectively.
(e)Restricted stock scheduled to vest with respect to 6,667 shares on June 30, 20202021 and 6,666 shares on June 30, 2021.

2022.

(f)

RemainderRestricted stock scheduled to vest on June 30, 2020.

May 25, 2021.

(g)

Restricted stock scheduled to vest on June 30, 2020.

2021. Shares were forfeited on July 1, 2020 upon departure from the Company.

(h)

Scheduled to vest with respect to 6,667 shares on June 30, 2020 and 6,666 shares on June 30, 2021.S

(i)

Restricted stock scheduled to vest with respect to 3,3334,167 shares on each of June 30, 20202021 and 4,166 shares on June 30, 2021.

2022. Shares were forfeited on July 1, 2020 upon departure from the Company.

  

2322 

 

DIRECTOR COMPENSATION

 

The fiscal 20192020 director compensation program provided non-employee directors with a combination of cash and shares of restricted stock for each such director, depending on committee service and leadership roles held during fiscal 2019.2020.

 

The Personnel and Compensation Committee conducts periodic reviews of the compensation of non-employee directors. For fiscal 2019,2020, an analysis of both total director compensation and the mix of cash and equity compensation was provided by management of the Company based on available market data. In light of the data presented, the committee recommended, and the Board approved, the following revised compensation arrangements for directors, which were in effect forbecame effective as of the entirety of fiscalquarter ended December 31, 2019:

 

Director Compensation Element

Amount Payable

Annual Cash Retainer(s)(a)

 

●      Board Member

$10,000

20,000		(b)
●      Board Chair$15,000 

●      BoardAudit Committee Chair

$15,000

10,000		 

●      Audit Committee Chair

$10,000

●      Personnel and Compensation Committee Chair

$7,000

 

●      Nominating and Corporate Governance Committee Chair

$3,500

 

●      Audit Committee Member

$2,500

 

●      Personnel and Compensation Committee Member

$2,200

 

●      Nominating and Corporate Governance Committee Member

$1,000

 

Annual Equity Award(b)(c)

2,000

3,000		 shares(d)

 

(a)

All amounts paid in quarterly installments each representing 25% of the total annual retainer and may be pro-rated for any partial service as a director or in any committee or leadership role.

(b)

Previously $10,000 annually.

(c)To be issued on or about the date of the applicable year’s annual meeting of shareholders or as soon as practicable thereafter in the form of shares of restricted stock schedule to vest in full on the six-month anniversary of the date of grant.

(d)Previously 2,000 shares.

 

The following table provides information regarding compensation paid to and earned by non-employee directors during fiscal 2019:2020:

 

Non-Employee Director

 

Stock Awards
($)(a)

 

Fees Earned or
Paid in Cash
($)

 

Total
($)

 Stock Awards
($)(a)		 Fees Earned or Paid in Cash
($)		 Total
($)

Stephen H. Craney

 

11,400

 

34,500

 

45,900

 29,220 39,500 68,720

William V. Eckles

 

11,400

 

16,000

 

27,400

 29,220 8,000 37,220
John L. Erb(b) 29,220 5,500 34,720

Stan K. Erickson

 

11,400

 

21,000

 

32,400

 29,220 26,000 55,220
Gregory J. Fluet 29,220 19,250 48,470

Lee A. Jones

 

11,400

 

13,200

 

24,600

 29,220 18,200 47,420

George H. Winn

 

11,400

 

12,200

 

23,600

 29,220 17,200 46,420

 

(a)

Amounts represent grant-date fair value of 2,0003,000 shares of restricted stock awarded on December 1, 20182019 and computed in accordance with FASB ASC Topic 718. See Note 7,8, Share-Based Payments, to our audited consolidated financial statements included in our annual report on Form 10-K for fiscal 20192020 for a description of our accounting for these awards and the assumptions used in valuing the awards. All shares vested six months after the date of grant.

(b)Mr. Erb resigned from the Board, including all applicable committees thereof, on December 9, 2019. Accordingly, his restricted stock award did not vest and was forfeited in its entirety upon his departure. The amount shown in the “Fees Earned or Paid in Cash” column reflects pro rata compensation for his services as a director during fiscal 2020.

 

24 


EQUITY COMPENSATION PLAN INFORMATION

 

The following table provides information concerning equity compensation arrangements as of June 30, 2019:2020:

 

Plan Category

Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights

Weighted-average
exercise price of outstanding
options, warrants and rights

Number of securities
remaining available for
future issuance under equity
compensation plans

Equity compensation plans approved by security holders

683,000590,780(a)

$3.844.34 per share

660,500505,800(b)

 

(a)

Consists(a)

Consisted of 163,000, 335,00085,000, 231,249 and 185,000274,531 shares of our common stock underlying outstanding equity awards issued pursuant to the 2012, 2014 and 2017 Plans, respectively.

(b)

Consists(b)

Consisted of shares of our common stock available for future awards under the 2017 Plan. No further awards are authorized for grant under the 2014 or 2012 Plans.

 

2524 

 

RELATED PERSON TRANSACTION APPROVAL POLICY

 

Pursuant to its charter, our Audit Committee is responsible for reviewing and approving in advance any related party transaction, which consists of any transaction or series of transactions that occur during a fiscal year for which:

 

●

the amounts involved exceeded the lesser of $120,000 or one percent of the average of our total assets at the end of the last two completed fiscal years; and

 

●

a director, executive officer, beneficial owner of more than 5% of any class of our voting securities or any member of their immediate family had or will have a direct or indirect material interest.

 

In determining whether to approve or ratify a related party transaction, the Audit Committee considers all of the relevant facts and circumstances available to it, including, among any other factors it deems appropriate: (i) the benefits to the Company of the transaction; (ii) the nature of the related party’s interest in the transaction; (iii) whether the transaction would impair the judgment of a director or executive officer to act in the best interests of the Company and our shareholders; (iv) the potential impact of the transaction on a director’s independence; and (v) whether the transaction is on terms no less favorable than terms generally available to an unrelated third party under the same or similar circumstances. If a member of the Audit Committee is a related party with respect to a transaction under review, he or she is required to abstain from voting on the approval of the transaction.

 

OTHER MATTERS

 

The Board knows of no other matters which may be brought before the Annual Meeting. If any other matters are presented at the meetingAnnual Meeting on which a vote may properly be taken, the persons named as proxy holders will vote thereon in accordance with their best judgment.

 

HOUSEHOLDING

 

We have adopted a procedure approved by the SEC called “householding,” by which certain shareholders who do not participate in electronic delivery of proxy materials but who have the same address and appear to be members of the same family receive only one copy of our annual report, proxy statement and shareholder letter. Each shareholder participating in householding continues to receive a separate proxy card. Householding reduces both the environmental impact of our annual meetings and our mailing and printing expenses.

 

If you or another shareholder with whom you share an address currently receive multiple copies of our annual report, proxy statement, and/or shareholder letter, or if you hold shares in more than one account, but would like to receive only a single copy of materials for your household, then please send a written request addressed to the attention of our President and Chief Executive Officer at 500 Sixth Avenue Northwest, New Prague, Minnesota 56071.56071, or call 952-758-9299. If you currently participate in householding and would prefer to receive separate copies of materials for fiscal 20192021 and the Annual Meeting, then please contact us in the manner described above and you will receive additional copies, free of charge and promptly upon receipt of your request.

 

ADDITIONAL INFORMATION

 

Our annual report on Form 10-K for fiscal 2019,2020, as filed with the SEC, is available on the SEC’s Internet site,website, www.sec.gov, and our corporate website, www.smartvest.com, under “Investor Relations.” A copy of the Annual Reportannual report on Form 10-K will be sent to any shareholder without charge upon written request addressed to the attention of our President and Chief Executive Officer at 500 Sixth Avenue Northwest, New Prague, Minnesota 56071. Additional copies of the annual report on Form 10-K, this proxy statement and the accompanying form of proxy may be obtained fromby sending a written request to the attention of our President and Chief Executive Officer, at the Company’s address noted above. Copies of exhibits to the annual reportAnnual Report on Form 10-K may be obtained upon payment to us of the reasonable expense incurred in providing such exhibits.


25 

  

 

(COOPERTIRES LOGO)(COOPERTIRES LOGO)

ELECTROMED, INC.
500 SIXTH AVENUE NW
NEW PRAGUE, MN 56071

 

VOTE BY INTERNET

Before The Meeting - Go to www.proxyvote.com

Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 p.m. Eastern Time on November 14, 2019.12, 2020. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.

 

During The Meeting- Go to ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALSwww.virtualshareholdermeeting.com/ELMD2020

If you would like to reduce

You may attend the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronicallymeeting via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and when prompted, indicatevote during the meeting. Have the information that you agree to receive or access proxy materials electronicallyis printed in future years. the box marked by the arrow available and follow the instructions.

 

VOTE BY PHONE - 1-800-690-6903 

Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 p.m. Eastern Time on November 14, 2019.12, 2020. Have your proxy card in hand when you call and then follow the instructions. 

 

VOTE BY MAIL 

Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. 





   
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: 
 E85035-P28870D23407-P44332KEEP THIS PORTION FOR YOUR RECORDS
 THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.DETACH AND RETURN THIS PORTION ONLY
                
 ELECTROMED, INC.For
All		Withhold
All		For All
Except		 To withhold authority to vote for any individual nominee(s), mark "For All Except" and write the number(s) of the nominee(s) on the line below.     
  The Board of Directors recommends you vote FOR all of the following nominees:       

 

 
            
  1.Election of Directors, thereby setting the number of directors at seven. ☐☐ ☐        
               
   Nominees:           
               
   01)     Stephen H. Craney06)     Lee A. Jones
02)     John L. Erb07)05)     Kathleen S. Skarvan         
   03)02)     Stan K. Erickson08)06)     Andrea M. Walsh
03)     Gregory J. Fluet07)     George H. Winn         
   04)     Gregory J. FluetLee A. Jones         
               
               
  The Board of Directors recommends you vote FOR proposals 2 and 3.   ForAgainstAbstain 
         
  2.To ratify appointment of RSM US LLP as our independent registered public accounting firm. ☐☐☐ 
         
  3.To approve, on a non-binding and advisory basis, our executive compensation. ☐☐☐ 
         
  The Board of Directors recommends you vote 1 YEAR on the following proposal:1 Year2 Years3 YearsAbstain
4.To recommend, on a non-binding and advisory basis, whether executive compensation votes should occur every year, every two years or every three years.☐☐☐☐
       
  NOTE:At their discretion, the proxies are authorized to vote on any other business properly brought before the meeting or any adjournment thereof.     
               
               
               
               
               
               
  Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.      
                
     

 

 

          
  Signature [PLEASE SIGN WITHIN BOX]Date    Signature (Joint Owners)Date    
                

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IF YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU MUST FOLLOW THE

REQUIREMENTS FOR ADMISSION AT THE MEETING DESCRIBED IN THE PROXY STATEMENT.

YOU ARE STRONGLY ENCOURAGED TO VOTE BY PROXY IN ADVANCE OF THE MEETING EVEN IF

YOU PLAN TO ATTEND.

 

 

 

 

 

 

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:

 The Annual Report on Form 10-K, Notice and Proxy Statement, and Shareholder Letter are available at
www.proxyvote.com.

 

 

 

 

 

 

 

 

 

E85036-P28870D23408-P44332

        

 

 

 

 

ELECTROMED, INC.

Annual Meeting of Shareholders

November 15, 2019 10:13, 2020 9:00 AM, CST

This proxy is solicited on behalf of the Board of Directors

 
     
 

The shareholder(s) hereby appoint(s) Stephen H. Craney and Kathleen S. Skarvan, or either of them, as proxies, each with the power to appoint (his/her) substitute, and hereby authorize(s) them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of Common Stock that the shareholder(s) is/are entitled to vote at the Annual Meeting of Shareholders to be held at 10:9:00 AM, CST on November 15, 201913, 2020 virtually at 500 Sixth Avenue Northwest, New Prague, MN 56071,www.virtualshareholdermeeting.com/ELMD2020, and any adjournment or postponement thereof.

 
   
   
 

This proxy, when properly executed, will be voted as directed. But if no direction is given, it will be voted "FOR" all nominees and proposals set forth in Items 1, 2 and 3 and "1 YEAR" on proposal 4.3. The proxies cannot vote these shares unless you vote by Internet or telephone or you sign this card on the reverse side and return it.

 
   
   
     
     
  Continued and to be signed on reverse side