Exhibit 10.1
INDEMNIFICATION AGREEMENT
     This Indemnification Agreement (the “Agreement”), which shall be effective
as of April 15, 2005, is by and between OrthoLogic Corp., a Delaware corporation
(the “Company”), and James M. Pusey (the “Indemnitee”).
RECITALS
     A. Management of the Company believes that it is essential for the Company
to be able to retain and attract as directors and officers the most capable
persons available.
     B. Indemnitee currently is an Officer of the Company.
     C. Both the Company and Indemnitee recognize the increased risk of
litigation and other claims being asserted against directors and officers, and
former directors and officers, of public companies in today’s environment.
     D. In recognition of Indemnitee’s need for substantial protection against
personal liability in order to enhance Indemnitee’s continued service to the
Company in an effective manner and in part to provide Indemnitee with specific
contractual assurance that the indemnification protection provided by the
Certificate of Incorporation and Bylaws of the Company will be available to
Indemnitee (regardless of, among other things, any amendment to or revocation of
such Certificate of Incorporation and Bylaws or any change in the composition of
the Company’s Board of Directors or any acquisition transaction relating to the
Company), and in order to induce Indemnitee to continue to provide services to
the Company, the Company wishes to provide in this Agreement for the
indemnification of and the advancing of expenses to Indemnitee to the fullest
extent (whether partial or complete) permitted by law and as set forth in this
Agreement, and, to the extent insurance is maintained, for the continued
coverage of Indemnitee under the Company’s directors’ and officers’ liability
insurance policies.
COVENANTS
     In consideration of the promises in this Agreement, and intending to be
legally bound hereby, the parties agree as follows:
     1. Certain Definitions.
          (a) Change in Control: shall be deemed to have occurred if (i) any
“person” (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended), other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or a
corporation owned directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company,
is or becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act),
directly or indirectly of securities of the Company representing 20% or more of
the total voting power represented by the Company’s then outstanding Voting
Securities, or (ii) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board of Directors of the Company
and any new director whose election by the Board of Directors or nomination for

 

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election by the Company’s stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority thereof,
or (iii) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or consolidation
which would result in the Voting Securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into Voting Securities of the surviving
entity) at least 80% of the total voting power represented by the Voting
Securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation, or the stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company (in one transaction or a series of transactions) of
all or substantially all the Company’s assets.
          (b) Claim: any threatened, pending or completed action, suit,
proceeding or alternate dispute resolution mechanism, or any inquiry, hearing or
investigation, whether conducted by the Company or any other party, that
Indemnitee in good faith believes might lead to the institution of any such
action, suit, proceeding or alternate dispute resolution mechanism, whether
civil, criminal, administrative, investigative or other.
          (c) Expenses: include attorneys’ fees and all other costs, travel
expenses, fees of experts, transcript costs, filing fees, witness fees,
telephone charges, postage, delivery service fees, expenses and obligations of
any nature whatsoever paid or incurred in connection with investigating,
defending, being a witness in or participating in (including on appeal), or
preparing to defend, be a witness in or participate in any Claim relating to any
Indemnifiable Event.
          (d) Indemnifiable Event: any event or occurrence that takes place
either prior to or after the execution of this Agreement related to the fact
that Indemnitee is or was a director, officer, employee, agent or fiduciary of
the Company, or is or was serving at the request of the Company as a director,
officer, employee, trustee, agent or fiduciary of another corporation,
partnership, joint venture, employee benefit plan, trust or other enterprise, or
by reason of anything done or not done by Indemnitee in any such capacity.
          (e) Potential Change in Control: shall be deemed to have occurred if
(i) the Company enters into an agreement or arrangement, the consummation of
which would result in the occurrence of a Change in Control; (ii) any person
(including the Company) publicly announces an intention to take or to consider
taking actions which if consummated would constitute a Change in Control; (iii)
any person, other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company acting in such capacity or a corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company,
who is or becomes the beneficial owner, directly or indirectly, of securities of
the Company representing 10% or more of the combined voting power of the
Company’s then outstanding Voting Securities, increases his beneficial ownership
of such securities by 5% or more over the percentage so owned by such person on
the date hereof; or (iv) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has occurred.

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          (f) Reviewing Party: any appropriate person or body consisting of a
member or members of the Company’s Board of Directors or any other person or
body appointed by the Board who is not a party to the particular Claim for which
Indemnitee is seeking indemnification, or Independent Legal Counsel.
          (g) Independent Legal Counsel: Independent Legal Counsel shall refer
to an attorney, selected in accordance with the provisions of Section 3 hereof,
who shall not have otherwise performed services for the Company or Indemnitee
within the last five years (other than in connection with seeking
indemnification under this Agreement). Independent Legal Counsel shall not be
any person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the Company
or Indemnitee in an action to determine Indemnitee’s rights under this
Agreement, nor shall Independent Legal Counsel be any person who has been
sanctioned or censured for ethical violations of applicable standards of
professional conduct.
          (h) Voting Securities: any securities of the Company which vote
generally in the election of directors.
     2. Basic Indemnification Arrangement.
          (a) If Indemnitee was, is or becomes a party to or witness or other
participant in, or is threatened to be made a party to or witness or other
participant in, a Claim by reasons of (or arising in part from) an Indemnifiable
Event, the Company shall indemnify Indemnitee to the fullest extent permitted by
law as soon as practicable but in any event no later than thirty days after
written demand is presented to the Company, against any and all Expenses,
judgments, fines, penalties and amounts paid in settlement (including all
interest, assessments and other charges paid or payable in connection with or in
respect of such Expenses, judgments, fines, penalties or amounts paid in
settlement) of such Claim and any federal, state, local or foreign taxes imposed
on the Indemnitee as a result of the actual or deemed receipt of any payments
under this Agreement (including the creation of the trust referred to in
Section 4 hereof). If so requested by Indemnitee, the Company shall advance
(within five business days of such request) any and all Expenses to Indemnitee
(an “Expense Advance”). Notwithstanding anything in this Agreement to the
contrary and except as provided in Section 5, prior to a Change in Control,
Indemnitee shall not be entitled to indemnification pursuant to this Agreement
in connection with any Claim initiated by Indemnitee against the Company or any
director or officer of the Company unless the Company has joined in or consented
to the initiation of such Claim.
          (b) Notwithstanding the foregoing, (i) the obligations of the Company
under Section 2(a) shall be subject to the condition that the Reviewing Party
shall not have determined (in a written opinion, in any case in which the
Independent Legal Counsel referred to in Section 3 hereof is involved) that
Indemnitee would not be permitted to be indemnified under applicable law, and
(ii) the obligation of the Company to make an Expense Advance pursuant to
Section 2(a) shall be subject to the condition that, if, when and to the extent
that the Reviewing Party determines that Indemnitee would not be permitted to be
so indemnified under applicable law, the Company shall be entitled to be
reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all
such amounts theretofore paid; provided, however, that if Indemnitee has
commenced legal proceedings in a court of competent jurisdiction to secure a
determination that

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Indemnitee should be indemnified under applicable law, any determination made by
the Reviewing Party that Indemnitee would not be permitted to be indemnified
under applicable law shall not be binding and Indemnitee shall not be required
to reimburse the Company for any Expense Advance until a final judicial
determination is made with respect thereto (as to which all rights of appeal
therefrom have been exhausted or lapsed). Indemnitee’s obligation to reimburse
the Company for Expense Advances shall be unsecured and no interest shall be
charged thereon. If there has not been a Change in Control, the Reviewing Party
shall be selected by the Board of Directors, and if there has been such a Change
in Control, (other than a Change in Control which has been approved by a
majority of the Company’s Board of Directors who were directors immediately
prior to such Change in Control) the Reviewing Party shall be the Independent
Legal Counsel referred to in Section 3 hereof. If there has been no
determination by the Reviewing Party or if the Reviewing Party determines that
Indemnitee substantively would not be permitted to be indemnified in whole or in
part under applicable law, Indemnitee shall have the right to commence
litigation in any court in the States of Arizona or Delaware having subject
matter jurisdiction thereof and in which venue is proper seeking an initial
determination by the court or challenging any such determination by the
Reviewing Party or any aspect thereof, or the legal or factual bases therefor
and the Company hereby consents to service of process and to appear in any such
proceeding. Any determination by the Reviewing Party otherwise shall be
conclusive and binding on the Company and Indemnitee.
     3. Change in Control. The Company agrees that if there is a Change in
Control of the Company (other than a Change in Control which has been approved
by a majority of the Company’s Board of Directors who were directors immediately
prior to such Change in Control) then Independent Legal Counsel shall be
selected by Indemnitee and approved by the Company (which approval shall not be
unreasonably withheld) and such Independent Legal Counsel shall determine
whether the officer or director is entitled to indemnity payments and Expense
Advances under this Agreement or any other agreement or Certificate of
Incorporation or Bylaws of the Company now or hereafter in effect relating to
Claims for Indemnifiable Events. Such Independent Legal Counsel, among other
things, shall render its written opinion to the Company and Indemnitee as to
whether and to what extent the Indemnitee will be permitted to be indemnified.
The Company agrees to pay the reasonable fees of the Independent Legal Counsel
and to indemnify fully such Independent Legal Counsel against any and all
expenses (including attorneys’ fees), claims, liabilities and damages arising
from or relating to this Agreement or the engagement of Independent Legal
Counsel pursuant hereto.
     4. Establishment of Trust. In the event of a Potential Change in Control,
the Company shall, upon written request by Indemnitee, create a trust for the
benefit of Indemnitee and from time to time upon written request of Indemnitee
shall fund such trust in an amount sufficient to satisfy any and all Expenses
reasonably anticipated at the time of each such request to be incurred in
connection with investigating, preparing for and defending any Claim relating to
an Indemnifiable Event, and any and all judgments, fines, penalties and
settlement amounts of any and all Claims relating to an Indemnifiable Event from
time to time actually paid or claimed, reasonably anticipated or proposed to be
paid. The amount or amounts to be deposited in the trust pursuant to the
foregoing funding obligation shall be determined by the Reviewing Party, in any
case in which the Independent Legal Counsel referred to above is involved. The
terms of the trust shall provide that upon a Change in Control (i) the trust
shall not be revoked or the principal thereof invaded, without the written
consent of Indemnitee, (ii) the trustee shall advance, within

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five business days of a request by Indemnitee, any and all Expenses to
Indemnitee (and Indemnitee hereby agrees to reimburse the trust under the
circumstances under which Indemnitee would be required to reimburse the Company
under Section 2(b) of this Agreement), (iii) the trust shall continue to be
funded by the Company in accordance with the funding obligation set forth above,
(iv) the trustee shall promptly pay to Indemnitee all amounts for which
Indemnitee shall be entitled to indemnification pursuant to this Agreement or
otherwise, and (v) all unexpended funds in such trust shall revert to the
Company upon a final determination by the Reviewing Party or a court of
competent jurisdiction, as the case may be, that Indemnitee has been fully
indemnified under the terms of this Agreement. The trustee shall be chosen by
Indemnitee. Nothing in this Section 4 shall relieve the Company of any of its
obligations under this Agreement. All income earned on the assets held in the
trust shall be reported as income by the Company for federal, state, local and
foreign tax purposes.
     5. Indemnification for Additional Expenses. The Company shall indemnify
Indemnitee against any and all expenses (including attorneys’ fees) and, if
requested by Indemnitee, shall (within five business days of such request)
advance such expenses to Indemnitee, which are incurred by Indemnitee in
connection with any claim asserted against or in connection with any action
brought by Indemnitee for (i) indemnification or advance payment of Expenses by
the Company under this Agreement or any other agreement or Certificate of
Incorporation or Bylaws of the Company now or hereafter in effect relating to
Claims for Indemnifiable Events and/or (ii) recovery under any directors’ and
officers’ liability insurance policies maintained by the Company, regardless of
whether Indemnitee ultimately is determined to be entitled to such
indemnification, advance expense payment or insurance recovery, as the case may
be.
     6. Partial Indemnity, Etc. If Indemnitee is entitled under any provision of
this Agreement to indemnification by the Company for some or a portion of the
Expenses, judgment, fines, penalties and amounts paid in settlement of a Claim
but not, however, for all of the total amount thereof, the Company shall
nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is
entitled. Moreover, notwithstanding any other provision of this Agreement, to
the extent that Indemnitee has been successful on the merits or otherwise in
defense of any or all Claims relating in whole or in part to an Indemnifiable
Event or in defense of any issue or matter therein, including dismissal without
prejudice, Indemnitee shall be indemnified against all Expenses incurred in
connection therewith.
     7. Defense to Indemnification, Burden of Proof and Presumptions. It shall
be a defense to any action brought by the Indemnitee against the Company to
enforce this Agreement (other than an action brought to enforce a claim for
expenses incurred in defending a Claim relating to an Indemnifiable Event in
advance of its final disposition where the required undertaking has been
tendered to the Company) that the Indemnitee has not met the standards of
conduct that make it permissible under the Delaware General Corporation Law for
the Company to indemnify the Indemnitee for the amount claimed. In connection
with any determination by the Reviewing Party or otherwise as to whether the
Indemnitee is entitled to be indemnified hereunder, the burden of proving such a
defense shall be on the Company. Neither the failure of the Company (including
its Board of Directors, independent legal counsel, or its stockholders) to have
made a determination prior to the commencement of such action by the Indemnitee
that indemnification of the claimant is proper under the circumstances because
he or she has met the

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applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Company (including its Board of
Directors, independent legal counsel, or its stockholders) that the Indemnitee
had not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that the Indemnitee has not met the applicable
standard of conduct. For purposes of this Agreement, the termination of any
claim, action, suit or proceeding, by judgment, order, settlement (whether with
or without court approval) or conviction, or upon a plea of nolo contendere, or
its equivalent, shall not create a presumption that Indemnitee did not meet any
particular standard of conduct or have any particular belief or that a court has
determined that indemnification is not permitted by applicable law.
     8. Non-exclusivity, Etc. The rights of Indemnitee hereunder shall be in
addition to any other rights Indemnitee may have under the Certificate of
Incorporation or Bylaws of the Company or the Delaware General Corporation Law
or otherwise. To the extent that a change in the Delaware General Corporation
Law (whether by statute or judicial decision) permits greater indemnification by
agreement than would be afforded currently under the Certificate of
Incorporation and Bylaws of the Company and this Agreement, it is the intent of
the parties hereto that Indemnitee shall enjoy by this Agreement the greater
benefits so afforded by such change.
     9. No Construction as Employment Agreement. Nothing contained herein shall
be construed as giving Indemnitee any right to be retained in the employ of the
Company or any of its subsidiaries or to remain as an officer of the Company.
     10. Liability Insurance. To the extent the Company maintains an insurance
policy or policies providing directors’ and officers’ liability insurance,
Indemnitee shall be covered by such policy or policies, in accordance with its
or their terms, to the maximum extent of the coverage available for any Company
director or officer.
     11. Period of Limitations. No legal action shall be brought and no cause of
action shall be asserted by or in the right of the Company or any affiliate of
the Company against Indemnitee, Indemnitee’s spouse, heirs, executors,
administrators or personal or legal representatives after the expiration of two
years from the date of accrual of such cause of action, and any claim or cause
of action of the Company or its affiliate shall be extinguished and deemed
released unless asserted by the timely filing of a legal action within such
two-year period; provided, however, that if any shorter period of limitations is
otherwise applicable to any such cause of action such shorter period shall
govern.
     12. Amendments, Etc. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by both of the parties
hereto. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provisions hereof (whether or not
similar) nor shall such waiver constitute a continuing waiver.
     13. Subrogation. In the event of payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such

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rights, including the execution of such documents necessary to enable the
Company effectively to bring suit to enforce such rights.
     14. No Duplication of Payments. The Company shall not be liable under this
Agreement to make any payment in connection with any claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, Certificate of Incorporation or Bylaws of the
Company or otherwise) of the amounts otherwise indemnifiable hereunder.
     15. Binding Effect, Etc. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto and their respective
successors, assigns, including any direct or indirect successor by purchase,
merger, consolidation or otherwise to all or substantially all of the business
and/or assets of the Company, spouses, heirs, and personal and legal
representatives. The Company shall require and cause any successor (whether
direct or indirect by purchase, merger, consolidation or otherwise) to all,
substantially all, or a substantial part, of the business and/or assets of the
Company, by written agreement in form and substance satisfactory to Indemnitee,
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform if no such
succession had taken place. This Agreement shall continue in effect regardless
of whether Indemnitee continues to serve as a director and/or officer of the
Company or of any other enterprise at the Company’s request.
     16. Severability. The provisions of this Agreement shall be severable if
any of the provisions hereof (including any provision within a single section,
paragraph or sentence) are held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable, and the remaining provisions shall
remain enforceable to the fullest extent permitted by law. Furthermore, to the
fullest extent possible, the provisions of this Agreement (including, without
limitation, each portion of this Agreement containing any provision held to be
invalid, void or otherwise unenforceable, that is not itself invalid, void or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
     17. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in such state without giving effect to the
principles of conflicts of laws.
[Signature page follows]

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     IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the 15th day of April, 2005.

            ORTHOLOGIC CORP.
      By:   /s/ John M. Holliman, III         John M. Holliman, III       
Chairman     

            INDEMNITEE
         /s/ James M. Pusey, M.D.         James M. Pusey, M.D.           

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