EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT
AGREEMENT (this “Agreement”), dated as of the 3
rd day of March, 2005, is between OrthoLogic Corp.,
a Delaware corporation (the “Corporation”) located at
1275 West Washington, Tempe, Arizona 85281, and James M. Pusey
(“Executive”).
The
Corporation desires to employ Executive, and Executive desires to
accept such employment on the terms and subject to the conditions
hereinafter set forth.
NOW, THEREFORE, in
consideration of the premises and of the mutual covenants and
obligations hereinafter set forth, the parties hereto agree as
follows:
1.
Employment; Effectiveness of Agreement . Not later than
March 18, 2005, or such earlier date as may be specified by
Executive (such date, the “Commencement Date,” for all
purposes hereof), the Corporation shall employ the Executive and
the Executive shall accept employment by the Corporation, upon the
terms and conditions hereinafter set forth.
2. Term
of Service . The employment of the Executive hereunder shall
commence on the Commencement Date and continue until terminated
pursuant to the terms of this Agreement. The period of
Executive’s employment is hereinafter referred to as the
“Employment Period.”
3.
Duties . During the Employment Period, Executive shall serve
as the Chief Executive Officer (“CEO”) of the
Corporation and shall serve the Corporation faithfully and to the
best of his ability. Subject to the approval of the shareholders,
Executive will serve as a Director on the Board of Directors.
Subject to Executive’s continued employment, the Corporation
will nominate Executive for election, and re-election, as a
Director on the Board of Directors at each annual meeting of the
shareholders beginning in 2006. Executive shall devote his full
time, attention, skill and efforts to the performance of such
duties as are normal and customary to the position of CEO as
required by or reasonably requested by the Corporation’s
Board of Directors. Subject to paragraph 6(a)(ii),
Executive’s responsibilities, title, working conditions,
duties and/or any other aspect of Executive’s employment may
be changed, added to or eliminated during the Employment Period at
the sole discretion of the Corporation. Prior to serving on any
outside board of directors, Executive shall obtain the written
consent of the Board of Directors, provided however that no consent
shall be required to serve on the boards of directors, or boards of
trustees, for not-for-profit organizations provided such service
does not, in the good faith judgment of the Company’s Board
of Directors, impair Executive’s performance of his duties
hereunder.
4.
Compensation; Bonus; Benefits; Reimbursement .
(a)
Base Salary . During the Employment Period, the Corporation
shall pay to Executive an annual base salary of $350,000 which
shall be subject to review and, at the option of the Compensation
Committee of the Corporation, subject to increase, but not
decrease, (such salary, as the same may be increased from time to
time as aforesaid, being referred to herein as the “Base
Salary”). The Base Salary shall be payable in such
installments (but not less
frequently than monthly) as is
the policy of the Corporation with respect to senior executives of
the Corporation.
(b)
Special Bonuses . Executive shall be entitled to a signing
bonus of $125,000 payable on the Commencement Date, and an
additional bonus of $125,000 payable (i) upon the completion
of one year of service with the Corporation or, (ii) if
Executive’s employment is terminated by the Company without
Cause prior to the completion of one year of service, upon such
termination.
(c)
Bonuses . Executive shall be entitled to participate in a
discretionary bonus plan established for Executive from time to
time by the Compensation Committee with reasonable consultation
with the Executive. Executive’s target bonus will be 50% of
Base Salary upon the achievement of individual and corporate
performance objectives established jointly from time to time by the
Compensation Committee and the Executive. Such cash bonus, if
earned, will be payable to the Executive annually on or before the
first day of March immediately following the end of the calendar
year for which it is earned. Any bonus will be paid in such manner
so that it is not subject to the provisions of Section 409A of
the Internal Revenue Code of 1986, as amended, and shall be
interpreted in a manner consistent with that intention.
(d)
Equity Compensation .
(i)
Stock Options . On the date hereof, the Corporation shall
grant to Executive options to purchase 425,000 shares of the
Corporation’s common stock at an exercise price equal to the
closing price of the Corporation’s common stock on the date
hereof, as reported by the Nasdaq Stock Market, and the Corporation
shall grant to Executive on the Commencement Date an option to
purchase an additional 75,000 shares of the Corporation’s
common stock at an exercise price equal to the closing price of the
Corporation’s common stock on the Commencement Date, as
reported by the Nasdaq Stock Market (collectively, the
“Initial Option Grant”). The grant shall be evidenced
by one or more grant agreements (collectively, the “Stock
Option Agreement”) which shall provide for immediate vesting
as to 10% and monthly vesting of the remainder in equal amounts
over 48 months, subject to continued employment. To the extent
permitted by law and the Corporation’s 1997 Stock Option Plan
(“Plan”), the options will be qualified incentive stock
options as defined under Section 422 of the Internal Revenue
Code of 1986; the remainder of the options will be nonqualified
stock options. During the Employment Period, the Executive shall be
entitled to participate in additional equity compensation plans and
programs as may be determined from time to time in the discretion
of the Compensation Committee.
(ii)
Restricted Stock . On the date hereof, the Corporation shall
grant to Executive 200,000 shares of restricted stock. Such grant
shall be evidenced by a Letter of Restricted Stock Grant which
shall provide that such restricted stock shall be subject to
restrictions on, among other things, transferability, and that upon
termination of employment all such restricted stock that is at that
time subject to restrictions shall be forfeited and reacquired by
the Corporation. The Letter of Restricted Stock Grant shall provide
that the forfeiture provisions shall lapse as to 50% of the shares
upon the acceptance by the FDA for filing of a New Drug Application
for Chrysalin for fresh fracture indications and that the
forfeiture provisions shall
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lapse as to the other 50% of the
shares, upon the attainment of separate milestones to be
established within 90 days after the Commencement Date in good
faith consultation between Executive and the Compensation Committee
and which are expected (or required) to be achieved prior to the
initial New Drug Application filing.
(iii) The
Corporation shall use its reasonable best efforts to register with
the United States Securities and Exchange Commission within ninety
(90) days of the date hereof and maintain in effect at all
times thereafter a registration statement under the Securities Act
of 1933, as amended (“Securities Act”), covering
(A) all shares issuable upon exercise of the Initial Option
Grant and (B) all shares of restricted stock granted to
Executive as described in Section 4(d)(ii) above; provided
that this covenant shall not apply on or after the date on which
Executive is entitled to sell such shares pursuant to Rule 144(k)
under the Securities Act.
(e)
Future Adjustments . On or before March 3 of each calendar
year during the term of this Agreement following the calendar year
in which this Agreement commenced, the Compensation Committee will
review the Executive’s Base Salary and other compensation,
including Executive’s entitlement to participate in
additional equity compensation plans, and may make adjustments in
its absolute discretion to such base salary and determine such
bonus or additional equity compensation based upon, among other
factors: (i) Executive’s performance, (ii) the
Corporation’s performance, (iii) changes in costs of
living, (iv) changes in Executive’s responsibilities,
and (v) the benefit to the Corporation of Executive’s
efforts on its behalf; provided that Executive’s Base Salary
shall not be less than $350,000 per year during the term of this
Agreement.
(f)
Benefits . During the Employment Period, Executive shall
receive such medical, dental and other fringe benefits as may be
provided from time to time by the Corporation to senior management
generally.
(g)
Vacation . During the Employment Period, Executive shall be
entitled to four weeks paid vacation during each 12-month period
worked.
(h)
Reimbursement of Expenses .
(i)
Business Expenses . During the Employment Period, the
Corporation shall reimburse Executive, in accordance with the
policies and practices of the Corporation in effect from time to
time with respect to other members of senior management of the
Corporation, for all reasonable and necessary traveling expenses
and other disbursements incurred by him for or on behalf of the
Corporation in connection with the performance of his duties
hereunder upon presentation by the Executive to the Corporation of
appropriate documentation therefor.
(ii)
Relocation Expense . The Corporation shall reimburse
Executive for the following expenses relating to relocation to the
Phoenix area:
(1) $15,000
for temporary housing expenses, and/or for the expense of
temporarily maintaining two homes if the Executive purchases a home
in the Phoenix area prior to the sale of Executive’s Boston
residence;
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(2) $60,000
for the purchase of a home in the Phoenix area;
(3) reasonable
costs of moving Executive’s household goods to the Phoenix
area, in an amount to be determined by mutual agreement;
(4) the
amount, if any, by which the gross sales price (without deduction
for sales commissions or other expenses of sale) of
Executive’s Boston condominium is less than $724,000, but
such reimbursement shall not exceed $50,000.
(iii) Special
Travel Expenses. The Corporation shall reimburse Executive for up
to $30,000 per year in airfare expenses for travel by Executive to
Pennsylvania to visit family for so long as Executive’s
immediate family maintains their primary residence is in
Pennsylvania.
(iv) The
Corporation shall reimburse Executive for up to $5,000 in legal
fees incurred in connection with the negotiation and execution of
this agreement.
(i)
Deductions . The Corporation shall deduct from any payments
to be made by it to the Executive under this Section 4 or
Section 6 any amounts required to be withheld in respect of
any federal, state or local income or other taxes.
5.
Termination and At-Will Employment .
(a) Executive
understands and acknowledges that the Employment Period with the
Corporation is for an unspecified duration and constitutes
“at-will” employment. Executive acknowledges that this
employment relationship may be terminated at any time, with or
without cause, at the option either of the Corporation or
Executive, and with or without notice.
(b) For
convenience of reference, the date upon which any termination of
the employment of the Executive pursuant to this Section 5
hereof shall be effective is hereinafter referred to as the
“Termination Date.” If Executive dies during the
Employment Period, the Termination Date shall be deemed to be the
date of Executive’s death.
6. Effect
of Termination of Employment .
(a) As
used herein, the following defined terms shall have the following
meanings:
(i) “Cause”
shall mean Executive’s (i) conviction or entry of a plea
of nolo contendere for a crime or offense involving
misappropriation of monies or other property, or any felony offense
(including Foreign Corrupt Practices Act of 1977) for any crime of
moral turpitude, or his commission of fraud or embezzlement;
(ii) breach, other than an immaterial breach, by Executive of
his fiduciary duties to the Corporation, as determined under the
laws of the State of Delaware; (iii) gross insubordination or
willful failure to discharge any of his duties or obligations under
this Agreement, which failure, if curable, is not cured within
thirty (30) days after receipt of written notice of such
breach (the “Cure Period”), provided, however, that
successive material failures involving the same conduct by
Executive shall be deemed incapable of being cured; (iv) willful or
knowing violation of any law, rule, or regulation of any
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governmental agency with
jurisdiction over the Corporation which could reasonably be
expected to impair the Corporation’s ability to conduct its
business in its usual manner or could reasonably be expected to
subject the Corporation to public disrespect, scandal or
