SEC Form DEF 14A filed by Electromed Inc.

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

Filed by the Registrant þ

Filed by a Party other than the Registrant ☐

Check the appropriate box:

ELECTROMED, INC.

(Name of Registrant as Specified in Its Charter)

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

Payment of Filing Fee (Check all boxes that apply):

ELECTROMED, INC. 500 SIXTH AVE NW I NEW PRAGUE, MN 56071 I 952.758.9299     NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON FRIDAY, NOVEMBER 15, 2024

TO OUR SHAREHOLDERS:

 

The 2024 Annual Meeting of Shareholders (the “Annual Meeting”) of Electromed, Inc. (the “Company”) will be held on Friday, November 15, 2024 at 8:00 a.m. Central Time. 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 a live webcast by visiting www.virtualshareholdermeeting.com/ ELMD2024. Prior to the Annual Meeting, you will be able to vote at www.proxyvote.com for the purpose of considering and voting upon:

 

1. Election of the directors named in the accompanying proxy statement, thereby setting the number of directors at eight;

 

2. Ratification of the appointment of RSM US LLP as our independent registered public accounting firm for our fiscal year ending June 30, 2025;

 

3. Approval, on a non-binding and advisory basis, of our executive compensation set forth in the accompanying proxy statement; and

 

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 18, 2024, 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,

 

Kathleen S. Skarvan Chair 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, 2024 The Notice and Proxy Statement, Annual Report on Form 10-K, and Shareholder Letter are available at

https://investors.smartvest.com/overview/default.aspx

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 2024 Annual Meeting of Shareholders of the Company to be held on Friday, November 15, 2024 at 8:00 a.m. Central Time (the “Annual Meeting”), and at any adjournment or postponement thereof. This year’s Annual Meeting will be held as a completely “virtual meeting” of shareholders. You will be able to attend the Annual Meeting virtually and vote and submit your questions during the Annual Meeting, via a live webcast by visiting www.virtualshareholdermeeting.com/ELMD2024.

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 October 1, 2024.

Date and Time	Location	Record Date	Mail Date
November 15, 2024 8:00a CST	Virtual www.virtualshareholdermeeting.com/ ELMD2024	Sep 18, 2024	Oct 1, 2024

QUESTIONS AND ANSWERS ABOUT THE ANNUAL
MEETING AND VOTING

Q: Why did I receive this proxy statement?

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 18, 2024, the record date for the meeting, and are therefore entitled to vote at the Annual Meeting.

Q: What is a proxy?

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 James L. Cunniff and Bradley M. Nagel, 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 directions 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: When and where is the Annual Meeting?

A: The Annual Meeting will be held on Friday, November 15, 2024. This year’s Annual Meeting will be held as a completely “virtual meeting” of shareholders. You will be able to attend the Annual Meeting virtually, and vote and submit your questions during the Annual Meeting, via a live webcast by visiting www.virtualshareholdermeeting.com/ELMD2024. The Annual Meeting will commence at 8:00 a.m. Central Time.

Q: Why hold a virtual Annual Meeting?

A: Consistent with recent years, this Annual Meeting will be held as a completely “virtual meeting” of shareholders. We believe that a virtual meeting continues to provide greater access to those who may want to attend our Annual Meeting. We ensure that at our virtual meetings, 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: You are voting on the following matters:

Q: What does the Board recommend?

A: The Board recommends a vote:

Q: How many votes do I have?

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 18, 2024.

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

A: At the close of business on the record date, there were 8,404,845 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?

A: Transaction of business may occur at the Annual Meeting only if a quorum is present. 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 (including electronically) or by proxy at the Annual Meeting. Based on the number of shares outstanding as of the record date, the presence of 4,202,423 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 electronically during the 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 to determine a quorum, as discussed below.

Q: What vote is required to approve each of the proposals?

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

Q. What is the effect of abstentions and withhold votes?

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.

Q: What is the effect of broker non-votes?

A: Shares that are held by a “street name holder” (a stockbroker, bank, trust, or other nominee as a custodian) may be voted by the street name holder 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 stockbroker must obtain shareholder direction. When the street name holder does not obtain direction to vote the shares, the stockbroker’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 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 proposals 1 and 3, they will have no effect on the outcome of the vote on such matters.

Q: How do I vote my shares?

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.

You are a “street name” holder rather than a “shareholder of record” if your shares are held in the name of a stockbroker, 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 electronically 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 electronically during the Annual Meeting.

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

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:

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

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.

Q: Who can attend and participate in the Annual Meeting?

A: All shareholders as of the close of business on the record date, or their duly appointed proxies, may attend the virtual Annual Meeting as well as vote and submit questions during the webcast of the meeting by visiting www.virtualshareholdermeeting.com/ELMD2024. To participate in the Annual Meeting, you will need 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/ ELMD2024 at least 15 minutes prior to the start of the Annual Meeting to 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.

Q: Who will count the votes?

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

Q: Who is paying for this proxy solicitation?

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

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, 2026 (the “Fiscal 2026 Annual Meeting”), which the Company currently anticipates will be held in November 2025, 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: What is a shareholder proposal?

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 2026 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 regarding any proposal that does not comply with these and other applicable requirements.

Q: When are shareholder proposals and director nominations due for the next annual meeting of shareholders?

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 June 3, 2025. The Company suggests that proposals for the next annual meeting of shareholders to be held in 2025 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 next annual meeting of shareholders without including such proposal in the Company’s proxy materials must provide the Company notice of such proposal no later than August 17, 2025 (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 regarding any proposal that does not comply with these and other applicable requirements.

Shareholders who intend to present a director nomination at the next annual meeting of shareholders must provide the Company notice of such nomination no later than August 17, 2025 (90 days prior to the one-year anniversary of the Annual Meeting) and no earlier than July 18, 2025 (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.

In addition to satisfying the foregoing requirements, to comply with the universal proxy rules, shareholders who intend to solicit proxies in support of director nominees for election at the next annual meeting of shareholders, other than the Company’s nominees, must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act by September 16, 2025 (60 days prior to the one-year anniversary of the Annual Meeting).

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

ELECTION OF DIRECTORS

(PROPOSAL 1)

The Board is currently composed of eight directors, all of whom have been nominated for re-election at the Annual Meeting. If elected, each director will hold office until the next annual meeting of shareholders 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.

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 eight. The Board believes that eight directors provide diversity of viewpoints and expertise while allowing each director to influence the strategic direction of the Company. If each of the eight director nominees named in this proxy statement are elected at the Annual Meeting, their election will be deemed shareholder approval of setting the number of directors at eight.

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:

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 eight. The election of each nominee requires the affirmative vote of a plurality of the voting power of the shareholders present, whether electronically 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 eight nominees identified above.

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 2025. 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.

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, 2024, or “fiscal 2024,” and the fiscal year ended June 30, 2023, or “fiscal 2023.”

RSM provided no other services to the Company in fiscal 2024 or fiscal 2023 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 could 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 2024 and fiscal 2023, 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 for fiscal 2025. Approval of the proposal requires the affirmative vote of a majority of the voting power of the shareholders present, whether electronically during the Annual Meeting or by proxy, and entitled to vote at the Annual Meeting, provided that a quorum is present.

ADVISORY APPROVAL OF EXECUTIVE COMPENSATION 

(PROPOSAL 3) 

Pursuant to Section 14A of the Exchange Act, 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 2023, our executive compensation program was approved on an advisory basis, with approximately 98% 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 2023.

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 electronically 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.

CORPORATE GOVERNANCE

DIRECTOR INDEPENDENCE

Our Board has determined that each of Mr. Erickson, Mr. Fluet, Mr. Galatowitsch, Mr. Summers, Ms. Tune and Ms. Walsh are “independent directors” as defined in the rules of the NYSE American Stock Exchange. None of our directors are related to any other director, director nominee or executive officer of the Company.

In determining director independence, the Board evaluated Ms. Walsh’s employment with HealthPartners because HealthPartners and certain of its affiliates have been customers of our company. Ms. Walsh was not involved in arranging any transactions with our company, the transactions were on arms-length terms, she had no material interest in such transactions and the amounts involved are significantly 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 our company and, if she is elected, would not interfere with Ms. Walsh’s ability to exercise independent judgment in 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 then current directors were present for the annual meeting of shareholders held on November 10, 2023.

BOARD LEADERSHIP STRUCTURE

Chair of the Board: Ms. Skarvan 

Elected July 1, 2023 

We have separate individuals serving as Chair 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 Chair 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.

Lead Independent Director: Ms. Tune 

Elected November 10, 2023

The independent directors appointed Ms. Tune to serve as lead independent director, primarily because of the current Board Chair’s recent service as an executive officer of the Company. As lead independent director, Ms. Tune presides over executive sessions among the independent directors and serves as a liaison between the independent directors and management.

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.

COMPENSATION RECOUPMENT POLICY

The Board believes that it is in the best interests of our company and its shareholders to maintain a culture that emphasizes integrity and accountability and that reinforces our pay-for-performance compensation philosophy. Accordingly, we adopted a compensation recoupment policy in compliance with Rule 10D-1 of the Securities and Exchange Act of 1934, as amended, the SEC regulations promulgated thereunder, and the NYSE American rules. Under the policy, our company is required to recover from covered executive officers on a reasonably prompt basis the amount of any erroneously awarded incentive-based compensation resulting from an accounting restatement due to the material noncompliance of our company with any financial reporting requirement under the securities laws. The policy applies to incentive-based compensation received by covered executive officers on or after October 2, 2023.

INSIDER TRADING POLICY

We have adopted an insider trading policy that governs the purchase, sale, and other dispositions and transactions in our securities by our directors, officers and employees, which is reasonably designed to promote compliance with insider trading laws, rules, and regulations, as well as applicable listing standards.

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 otherwise pledging Company securities; (b) short sales of Company securities (selling securities not owned at the time of sale); (c) buying or selling put or call options or other derivative securities based 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; and (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 2024, the Board held five 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 the Board and any committee on which they served during the most recently completed fiscal year.

COMMITTEE MEMBERSHIP

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

DIRECTOR	Audit	Nominating and Governance	Personnel and Compensation	Finance and Strategy	Independent Director
James L. Cunniff
Stan K. Erickson					✓
Gregory J. Fluet					✓
Joseph L. Galatowitsch					✓
Kathleen S. Skarvan
Andrew J. Summers					✓
Kathleen A. Tune					✓
Andrea M. Walsh					✓

Member

Chair

Vice Chair

Our Board has evaluated independence for the members of each applicable 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 applicable 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 internal control systems. 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 2025. The Audit Committee held five 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.

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:

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, 2024, for filing with the SEC.

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 his 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 three 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 www.smartvest.com. The Nominating and Governance Committee held three meetings during the most recently completed fiscal year.

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 Chair 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 the Bylaws and must be accompanied by a written 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:

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 or inconsistent with the goals of the Company’s Code of Ethics and Business Conduct.

Finance and Strategy Committee

The Finance and Strategy Committee was established in accordance with the terms of the Cooperation Agreement described under the heading “Certain Relationships and Related-Party Transactions” below. The Board has authorized the Finance and Strategy Committee to, among other things, review the Company’s financial plans and objectives and advise the Board with respect to the Company’s strategic direction and business development activities to enhance shareholder value. This includes, but is not limited to, strategic growth plans, long-term business plans, shareholder engagement, capital allocation, and buy-side or sell-side mergers or acquisitions. The Finance and Strategy Committee acts pursuant to a written charter approved by the Board.

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. 

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 18, 2024 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 8,404,845 shares of common stock outstanding as of the close of business on September 18, 2024.

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 18, 2024. 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.

EXECUTIVE COMPENSATION

The following discussion describes the compensation awarded to the following executive officers of the Company during fiscal 2024 (collectively, our “named executive officers”):

EXECUTIVE COMPENSATION COMPONENTS FOR FISCAL 2024

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, performance stock units, or stock options.

Base Salary

Salaries for our executive officers are determined and paid on a fiscal-year basis and, for fiscal 2024, were established by our Personnel and Compensation Committee in accordance with the terms of each executive officer’s employment agreement with the Company. For fiscal 2024, Mr. Cunniff had a base annual salary of $500,000 and Mr. Nagel had a base annual salary of $280,300. 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 officers. The Personnel and Compensation Committee uses a subjective process to set base salaries and does not specifically weigh any factors. Based upon the information reviewed, the Personnel and Compensation Committee makes a recommendation with respect to compensation for the Company’s executive officers. The Board sets 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 his compensation.

Cash Incentive Compensation

The Personnel and Compensation Committee established a Fiscal Year 2024 Officer Bonus Plan (the “2024 Bonus Plan”) for officers of the Company, including our named executive officers. The 2024 Bonus Plan was effective for fiscal 2024 and provided an opportunity for each participant to earn an annual cash bonus based on Company revenue growth and earnings before taxes (“EBT”) versus the fiscal year ended June 30, 2023. Under the 2024 Bonus Plan, the Personnel and Compensation Committee established minimum revenue growth of 9.0% and target revenue growth of 15% for fiscal 2024. The Personnel and Compensation Committee established minimum EBT growth of 10% and target EBT growth of 35% for fiscal 2024. Target payouts based on percentages of base salaries were set at 50.0% for our Chief Executive Officer and 30.0% for our Chief Financial Officer. The following summarizes the potential payment scenarios that were available under the 2024 Bonus Plan:

Bonus payout under the 2024 Bonus Plan for fiscal 2024 was 116% as the Board, upon recommendation of its Personnel and Compensation Committee, determined that the revenue growth and EBT targets were exceeded, amounting to payment to Mr. Cunniff of $290,000, and payment to Mr. Nagel of $97,544, under the 2024 Bonus Plan.

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 is eligible to receive equity compensation awards pursuant to our 2023 Equity Incentive Plan (“2023 Plan”).

During fiscal 2024, we granted a combination of performance stock units and options to purchase shares of common stock to Mr. Cunniff and a combination of restricted shares of common stock and options to purchase additional shares of common stock to Mr. Nagel, and all awards were granted pursuant to the 2017 Plan or pursuant to inducement awards containing terms substantially similar to the 2017 Plan.

On July 1, 2023, Mr. Cunniff received 175,000 performance stock units and an option to purchase up to 175,000 shares of common stock, both of which were granted as inducement awards in reliance on the employment inducement award exemption under the NYSE American LLC Company Guide Section 711(a). The options have an exercise price of $10.71 per share, which represented the “fair market value” of our common stock as of the date of grant, and are scheduled to expire after 10 years. The performance stock units are eligible to vest and settle into shares of our common stock on a 1-for-1 basis with respect to 87,500 shares upon achieving a total shareholder return of 50% and the remaining 87,500 shares upon a total shareholder return of 100%, in each case within four years of the date of grant. Total shareholder return is evaluated from the initial grant date through the end of each subsequent fiscal quarter using the three-month volume-weighted average closing prices in accordance with the underlying award agreement. The options were scheduled to vest 25% on a one-year cliff and 1/16th quarterly thereafter.

On July 1, 2023, Mr. Nagel received 6,600 restricted shares of common stock and an option to purchase up to 7,900 shares of common stock. The foregoing options had an exercise price of $10.71 per share, which 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 were scheduled to vest in substantially equal increments on June 30 in each of 2024, 2025 and 2026. On November 10, 2023, Mr. Nagel received an option to purchase up to 6,500 shares of common stock with an exercise price of $10.25 per share, which represents the “fair market value” of our common stock as of the date of grant and were scheduled to expire after 10 years. The November 2023 options were scheduled to vest in substantially equal increments on June 30 in each of 2024, 2025, and 2026.

The 2017 Plan and the 2023 Plan generally provide for “double trigger” acceleration of awards in connection with a change in control (as defined in the applicable plan), whereupon the vesting of awards will accelerate if such awards are assumed or replaced with an equivalent award by the resulting entity and the participant incurs an involuntary termination other than for cause within 12 months following a change in control. With respect to awards that are not assumed or replaced by the successor entity, all awards will become fully vested and exercisable upon the change in control of the Company, all awards will become fully vested and exercisable; however, under Mr. Cunniff’s performance stock unit agreement, the performance period will end upon the change in control and the number of performance stock units will vest based on actual performance over the shortened performance period.

Perquisites and Other Benefits

Our named executive officers are eligible to participate in the same benefit plans generally available to all of our full-time employees, which include group health, disability and life insurance plans and matching contributions of up to 4% of employee deferrals to our 401(k) plan.

In addition, Mr. Nagel’s employment agreement provides for a monthly automobile allowance. We believe that providing this perquisite to our Chief Financial Officer is beneficial because it improves our ability to retain qualified leaders and is consistent with the practice of similarly sized companies in our industry.

Compensation Actions for Fiscal 2024

Effective July 1, 2023, Mr. Cunniff commenced services as our President and Chief Executive Officer. In June 2023, the Personnel and Compensation Committee increased the base salary of our Chief Financial Officer from $250,000 to $280,300 for fiscal 2024.

Employment Agreements

In fiscal year 2024, we were party to employment agreements with both our named executive officers.

James L. Cunniff

On July 1, 2023, the Company entered into an employment agreement with Mr. Cunniff to serve as the Company’s Chief Executive Officer and President, as well as a member of the Board. Mr. Cunniff’s employment agreement is effective for a period of two years ending in July 2025, subject to automatic one-year extensions on the anniversary of the effective date of the agreement unless terminated in advance in accordance with 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 employment agreement).

Pursuant to his employment agreement, Mr. Cunniff is entitled to an initial annual base salary of $500,000 and is eligible for a merit-based increase on or about each successive July 1, subject to final approval by our Board. The employment agreement also provides that Mr. Cunniff is eligible to earn an annualized cash bonus as determined by our Board, based on a target amount of 50% of his annualized base salary for the fiscal year ending June 30, 2024. Future annual cash bonus opportunities will be determined by the Board in its discretion. Pursuant to a relocation letter agreement dated May 22, 2023, relocation assistance of up to $30,000 was also provided to Mr. Cunniff, which is required to be repaid if his employment is termination by us for cause or by him without good reason within 12 months after his start date.

Mr. Cunniff’s employment agreement provides for an initial grant of (a) 175,000 performance-based restricted stock units and (b) options to purchase 175,000 shares of common stock, each pursuant to our then-current stock incentive plan or on substantially similar terms in the form of inducement awards to be granted as soon as practicable on or after his first day of employment.

If Mr. Cunniff’s employment is terminated by us for any reason other than for “cause” or death or disability, or is terminated by him for “good reason” (each as defined in Mr. Cunniff’s employment agreement) (a “qualifying termination”), and in either case the termination of employment occurs before a change of control, then he will be eligible to (A) receive an amount equal to one times his annualized base salary as of the termination date, payable in substantially equal installments over a period of 12 months, (B) receive an amount equal to his target annual bonus based on the Company’s performance for the fiscal year in which the termination date occurs, prorated based on the portion of the applicable fiscal year that had elapsed prior to the termination date and payable within 75 days of the termination date, and (C) continue to participate in the Company’s group health plan at the same cost to Mr. Cunniff as if he remained employed for up to 12 months.

If a qualifying termination occurs within 12 months after a change of control, then Mr. Cunniff will instead be eligible to (A) receive an amount equal to the sum of (i) one times his annualized base salary as of the termination date, plus (ii) 100% of his target annual bonus for the fiscal year in which the termination date occurs based on Mr. Cunniff’s individual performance, payable in a lump sum within 75 days of the termination date, and (B) continue to participate in the Company’s group health plan at the same cost to Mr. Cunniff as if he remained employed for up to 12 months.

All of the severance benefits described above are contingent on Mr. Cunniff signing and not revoking a release of claims and remaining in strict compliance with the terms of his employment agreement and his non-competition, non-solicitation, and confidentiality agreement with the Company and any other written agreement between him and the Company. In addition to the specific terms summarized above, Mr. Cunniff is eligible to participate in the other compensation and benefits programs generally available to Company employees.

Bradley M. Nagel

On November 14, 2022, the Company entered into an employment agreement with Mr. Nagel to serve as the Company’s Chief Financial Officer. Mr. Nagel’s employment agreement is effective for a period of two years ending in November 2024, subject to automatic one-year extensions on the anniversaries of the effective date of the agreement unless terminated in advance in accordance with 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).

Pursuant to his employment agreement, Mr. Nagel is entitled to an annual base salary of $250,000 ($280,300 in fiscal year 2024) and is eligible for a merit-based increase on or about each successive July 1, subject to final approval by our Board. The employment agreement also provides that Mr. Nagel is eligible to earn an annualized cash bonus as determined by our Board, based on a target amount of 30% of his annualized base salary for the fiscal year ending June 30, 2024. Future annual cash bonus opportunities will be determined by the Board in its discretion. In addition, Mr. Nagel receives an automobile allowance of $600 per month.

If Mr. Nagel’s employment agreement is terminated by us for any reason other than for “cause” or due to death or disability, or is terminated by him for “good reason” (each as defined in Mr. Nagel’s employment agreement) (a “qualifying termination”), and in either case the termination of employment occurs before a change of control, then he will be eligible to (A) receive an amount equal to the sum of (i) one times his annualized base salary as of the termination date, plus (ii) 100% of his target annual bonus based on his individual performance 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 Company’s performance and based on the portion of the applicable fiscal year that had elapsed prior to the termination date, payable in substantially equal installments over a period of 12 months, and (B) continue to participate in the Company’s group health plan at the same cost to Mr. Nagel as if he remained employed for up to 12 months.

If a qualifying termination occurs within 12 months after a change of control, then Mr. Nagel will instead be eligible to (A) receive an amount equal to (i) 1.5 times his annualized base salary as of the termination date, plus (ii) 150% of his target annual bonus based on his individual performance 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 Company’s performance and based on the portion of the fiscal year that had then elapsed prior to the termination date, payable in a lump sum with 75 days after the termination date, (B) continue to participate in the Company’s group health plan at the same cost to Mr. Nagel as if he remained employed for up to 18 months, and (C) to receive accelerated vesting of all time-based equity awards that are outstanding on the date of termination and all performance-based equity awards will remain outstanding and eligible to vest in accordance with their terms.

All of the severance benefits described above are contingent on Mr. Nagel signing and not revoking a release of claims and remaining in strict compliance with the terms of his employment agreement and his existing non-competition, non-solicitation, and confidentiality agreement with the Company and any other written agreement between him and the Company. In addition to the specific terms summarized above, Mr. Nagel is eligible to participate in the other compensation and benefits programs generally available to Company employees.

Compensation Actions for Fiscal 2025

In August 2024, our Board, upon the recommendation of Personnel and Compensation Committee increased the base salary of the Chief Executive Officer to $520,000 for fiscal 2025. The Committee and the Board also increased the base salary of the Chief Financial Officer to $325,000 and the target bonus percentage to 40% for fiscal 2025.

Summary Compensation Table

The following table provides information regarding the compensation earned during fiscal 2024 and fiscal 2023 by our named executive officers:

Outstanding Equity Awards at June 30, 2024 

The following table sets forth certain information regarding equity awards granted to our named executive officers and outstanding as of June 30, 2024:

Pay Versus Performance Table

The following table sets forth additional compensation information of our principal executive officers (“PEO”) and averaged compensation information for our other named executive officers (“Other NEOs”) along with total shareholder return (“TSR”) and net income for fiscal 2024, 2023 and 2022.

Relationship between Pay and Performance

The charts shown below present a graphical comparison of CAP to our PEO and the average CAP to our other NEOs set forth in the Pay versus Performance Table above, as compared against the following performance measures: our (1) total shareholder returns and (2) net income.

DIRECTOR COMPENSATION

The fiscal 2024 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 2024.

The Personnel and Compensation Committee conducts periodic reviews of the compensation of non-employee directors. For fiscal 2024, 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 compensation arrangements for directors, which became effective as of the quarter ended December 31, 2023:

The following table provides information regarding compensation paid to and earned by non-employee directors during fiscal 2024:

EQUITY COMPENSATION PLAN INFORMATION

The following table provides information concerning equity compensation arrangements as of June 30, 2024:

CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS

The following is a summary of transactions since July 1, 2022 to which Electromed has been a party and in which the amount involved exceeded $120,000, and in which any of our directors, executive officers, or beneficial owners of more than 5% of our capital stock had or will have a direct or indirect material interest, other than the compensation arrangements that are described under the heading “Executive Compensation: Employment Agreements” above.

Vendor Arrangement

The Company uses a parts supplier whose founder and president was a director of the Company through November 12, 2021. The former director has remained a beneficial owner of greater than 5% of the Company’s outstanding common stock through June 30, 2024. The Company made payments to the supplier of $2,051,000 and $1,857,000 during fiscal year 2024 and 2023, respectively. Amounts due to the supplier were $18,000 and $247,000 on June 30, 2024 and June 30 2023 respectively, which were included in accounts payable and other accrued liabilities on the Balance Sheets.

Cooperation Agreement

As previously reported, on July 25, 2022 the Company entered into a Cooperation Agreement (the “Cooperation Agreement”) with Summers Value Partners LLC and certain of its affiliates signatory thereto (collectively, “Summers Value”). As of that date, Summers Value beneficially owned approximately 6.1% of the outstanding shares of our common stock. In connection with the Cooperation Agreement, the Company agreed to elect Mr. Summers to the Board effective as of July 25, 2022, and agreed to nominate him for election to the Board at our annual meeting of shareholders that was held on November 11, 2022. In addition, the Cooperation Agreement provided for director replacement rights during the standstill period described below, provided that Summers Value maintained beneficial ownership of at least 3.0% of the Company’s then-outstanding common stock. Mr. Summers was also required to resign his directorship if Summers Value’s beneficial ownership fell below that threshold during the same period. The Cooperation Agreement also included, among other provisions, certain standstill commitments by Summers Value, including but not limited to restrictions on Summers Value’s ability to (i) engage in any solicitation of proxies or consents, (ii) encourage any person to submit nominees in furtherance of a contested solicitation for the election or removal of directors, (iii) submit any proposal for consideration by shareholders of the Company at any annual or special meeting of shareholders or (iv) seek further representation on the Board. These restrictions applied during a standstill period that terminated on July 14, 2023. The Cooperation Agreement further provided that during the standstill period Summers Value would vote, subject to certain exceptions, (i) for all directors nominated by the Board for election at any annual or special meeting and (ii) in accordance with the recommendation of the Board on any other proposals or other business (other than certain extraordinary transactions) that came before any annual or special meeting.

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:

Our Board, through its Audit Committee, maintains a written Related Person Transaction Approval Policy. The policy provides that the Audit Committee will analyze the following factors, in addition to any other factors the Committee deems appropriate, in determining whether to approve a related person transaction: (i) whether the transaction is material to the Company; (ii) the nature of the related person’s interest in the transaction including any role the related person played in arranging 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; and (iv) whether the terms are fair to the Company. A related person transaction will only be approved by the Audit Committee if it determines that the transaction is beneficial to the Company and the terms of the related person transaction are fair to the Company. 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 other than those set forth in this Proxy Statement. If any other business is presented at the Annual Meeting on which a vote may properly be taken, the proxy holders will vote on such business 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 contact Broadridge Financial Solutions, Inc. by calling (866) 540-7095 or by writing to Broadridge Householding Department, 51 Mercedes Way, Edgewood, New York 1171. If you currently participate in householding and would prefer to receive separate copies of materials for fiscal 2024 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 2024, as filed with the SEC, is available on the SEC’s website, www.sec.gov, and our corporate website, www.smartvest.com, under “Investor Relations.” A copy of the annual 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 by 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 report on Form 10-K may be obtained upon payment to us of the reasonable expense incurred in providing such exhibits.

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

The Annual Report on Form 10-K and Notice and Proxy Statement and Shareholder Letter are available at

www.proxyvote.com.