exv10w1



 




Exhibit 10.1




AMENDED AND RESTATED

EMPLOYMENT AGREEMENT




                    This Amended and Restated Employment Agreement (the “Agreement”) shall be
effective, as of July 15, 2002, by and between OrthoLogic Corp., a Delaware
corporation (the “Company”), and Thomas R. Trotter (“Employee”).




RECITALS:




          A.     Employee has been employed by the Company in the position of
President/CEO, pursuant to an Employment Agreement that was effective as of
October 20, 1997 (the “1997 Employment Agreement”).




          B.     The parties now wish to amend the 1997 Employment Agreement by
replacing it with this Agreement for all purposes.




AGREEMENTS:




          The parties hereby agree as follows:




          1.     Replacement of 1997 Employment Agreement. Effective immediately, the
1997 Employment Agreement shall be replaced by this Agreement for all purposes.
The consideration for such amendment and replacement is solely as stated in
this Agreement and neither party shall have any further rights or duties under
the 1997 Employment Agreement.




          2.     Definitions. Capitalized terms used in this Agreement and not
otherwise defined herein shall have the meanings assigned to them in Exhibit A.




          3.     Employment and Duties.




                    (a)     Definition of “Election.” Within the limitations described in
Sections 9 and 10 of this Agreement, either party may give the other notice
that he or it has elected to begin a two-year transition leading to the
termination of Employee’s employment by the Company. Such a notice is referred
to in this Agreement as an “Election.”




                    (b)     Duties Before an Election. Subject to the terms and conditions of
this Agreement, prior to an Election, the Company employs Employee to serve in
a managerial capacity and as a member of its Board of Directors (the “Board”)
and Employee accepts such employment and agrees to perform such reasonable
responsibilities and duties as may be assigned to him from time to time by the
Board. Employee’s title shall be President/CEO of the Company, with general
responsibility for Company operations. Employee will report to the Board.
Prior to an Election, the Company shall use its best efforts to maintain
Employee as a member of the Board.




                    (c)     Duties After an Election. Effective immediately upon an Election,
Employee will report to the Company’s President and CEO or to the Board as
determined by the Board. Employee shall not have an official title or any set
work hours. While various projects assigned to Employee may require more or
less time within any given month, it is contemplated that, without his consent,
Employee will not be asked to work on Company matters for more than





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7.5 days per quarter. Effective upon an Election, Employee hereby resigns
from the Board and as an officer of the Company. Employee understands that
from and after the Election, and until the end of the term of this Agreement,
the Company will not provide him with an office, but will provide reasonable
secretarial and other staff support and will provide ancillary office equipment
such as a fax machine, dictating equipment and a desk-top computer that
Employee may continue to use until the end of the term at another location
selected by him. After an Election, Employee shall not be entitled to use any
Company owned or supported laptop computers or cell phones except to the extent
required by specific projects assigned to Employee.




          4.     Term. Before an Election, Employee’s employment shall have an
indefinite term and shall continue until terminated as provided in this
Agreement. Upon an Election, the term of Employee’s employment by the Company
shall convert automatically to a two-year term beginning on the date of such
Election. After the Election, any extension or renewal of such term shall
require the written consent of both parties.




          5.     Compensation.




                    (a)     Salary.   (i) Before an Election, the Company shall pay Employee a
minimum base annual salary, before deducting all applicable withholdings, of
$330,000 per year, payable at the times and in the manner dictated by the
Company’s standard payroll policies. The minimum base annual salary shall be
reviewed annually, at the end of the Company’s fiscal year, by the Compensation
Committee of the Board and may be increased, but shall not be decreased; (ii)
during the first 12-month period immediately following an Election, Employee’s
base annual salary shall remain at the same level as it was at the time the
Election was made; (iii) during the second 12 months after an Election,
Employee’s base annual salary shall be $330,000 regardless of the level of base
annual salary being paid to Employee prior to the Election.




                    (b)     Bonuses.   (i) Before an Election, Employee shall be eligible to
participate in an incentive bonus program as developed and adopted, and as
revised from time to time, by the Board. Such program shall be based upon the
achievement of individual goals by Employee and upon Company performance. The
program shall provide for a target bonus of 50% of Employee’s base salary for
achievement of a Board-approved plan. (ii) Additionally, Employee shall be
entitled to receive a special bonus upon the first to occur of a Change in
Control or a Sale of the Bone-Stimulation Business. Either such special bonus
shall be calculated as provided in Exhibit B. (iii) Employee shall not be
entitled to accrue any additional bonus amounts after an Election occurs, but
any bonuses fully earned prior to the Election shall remain due in accordance
with their terms, and any bonuses accruing prior to an Election pursuant to an
incentive bonus program shall be paid on a pro rata basis depending on the
percentage of the bonus measurement period that has elapsed at the time of the
Election.




                    (c)     Stock Options.   From time to time, as determined by the Board in its
discretion, the Company shall grant to Employee options to purchase shares of
the Company’s common stock, with an exercise price equal to the fair market
value of the stock on the effective date of the grant.




          6.     Fringe Benefits. Both before and after an Election, Employee shall be
entitled to participate in all employee benefit plans (including without
limitation pension, savings, medical,





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dental and disability plans) generally available to employees. The manner
of implementation of such benefits with respect to such items as procedures and
amounts are discretionary with the Company but shall be commensurate with
Employee’s executive capacity. The Company agrees to maintain term life
insurance during the term of Employee’s employment under this Agreement in an
amount equal to two times Employee’s base salary, as it may be adjusted from
time to time, with the beneficiary to be designated by Employee. Until an
Election occurs, the Company will also provide Employee with an automobile
expense allowance of $450 per month.




          7.     Expenses. In addition to the compensation and benefits provided above,
the Company shall, upon receipt of appropriate documentation, reimburse
Employee each month for his reasonable travel, lodging, entertainment,
promotion and other ordinary and necessary business expenses consistent with
Company policies.




          8.     Termination.




                    (a)     For Cause. The Company may terminate Employee’s employment for Cause
upon written notice to Employee stating the facts constituting such Cause,
provided that Employee shall have 30 days following such notice to cure any
conduct or act, if curable, alleged to provide grounds for termination for
Cause hereunder. In the event of termination for Cause, the Company shall be
obligated to pay Employee only the minimum base salary due him through the date
of termination. The written notice shall state the Cause for termination.
“Cause” shall include gross or willful neglect of duty, willful failure to
abide by instructions or policies from or set by the Board of Directors, or
conviction of a felony or misdemeanor punishable by at least one year in
prison, or pleading guilty or nolo contendere to same; provided that the fact
that the Company does not request services from Employee with respect to any
period or periods of time after an Election shall not constitute Cause.




                    (b)     Without Cause. The Company may not terminate Employee’s employment at
any time without Cause.




                    (c)     Disability. Prior to an Election, but not afterward, if Employee
fails to perform his duties hereunder on account of illness or other incapacity
for a period of 60 consecutive days, or for 90 days during any six-month
period, the Company shall have the right to terminate this Agreement without
further obligation hereunder except as otherwise provided in disability plans
generally applicable to executive employees.




                    (d)     Death. Prior to an Election, if Employee dies, this Agreement shall
terminate immediately, and Employee’s legal representatives shall be entitled
to receive the base salary due Employee through the last day of the calendar
month in which his death shall have occurred and any other death benefits
generally applicable to executive employees. If Employee dies after an
Election, Employee’s legal representatives shall be entitled to receive only
the proceeds of any appropriate life insurance policies and the base salary due
Employee through the end of the term at a time and in a manner similar to when
it would have been paid to Employee if he had survived, except for any change
in withholding justified by the change in circumstances.




                    (e)     Resignation. Employee may resign his employment by giving notice to
the Company, which shall also include his resignations as an officer and as a
director of the





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Company. In the event of such a resignation, the Company shall be
obligated to pay Employee only the minimum base salary due him through the
effective date of the resignation (any vested options will remain vested, and
will expire as provided in the Company’s Stock Option Plan and Employee’s
Letter of Grant).




          9.     Elections by the Company. The Company may make an Election at any time
with or without Cause.




          10.     Elections by Employee.




                    (a)     After a Change in Control or Sale. Employee may make an Election at
any time after the closing of either a Change in Control or a Sale of the
Bone-Stimulation Business, with or without Good Reason.




                    (b)     Before a Change in Control or Sale. Employee shall be entitled to
make an Election before the closing of a Change in Control or a Sale of the
Bone-Stimulation Business only if “Good Reason” exists. Good Reason shall
exist if the Company has done any of the following:




	(1)	 	failed to maintain Employee’s base salary at the
level required by Section 5(a);





	(2)	 	failed to provide for Employee’s participation in
the Company’s or an Affiliate’s annual bonus plan; stock
option plan or other equity incentive programs; or group
medical, dental, life, disability, retirement, profit sharing,
thrift, nonqualified and deferred compensation plans, in each
case on a basis comparable to that enjoyed by other executive
employees of the Company or any of its Affiliates;





	(3)	 	failed to provide vacation and perquisites
substantially equivalent to those provided by the Company or
any of its Affiliates to executive employees;





	(4)	 	changed Employee’s duties and responsibilities so
that they are not at least commensurate with those described
in Section 3(b);





	(5)	 	changed Employee’s primary place of employment by
more than 25 miles from Employee’s current office location or
more than 10 additional miles from Employee’s primary
residence; or





	(6)	 	terminated or attempted to terminate this
Agreement for Cause if it is thereafter determined that Cause
did not exist under this Agreement with respect to such
termination.





          11.     Limitations on Transitional Compensation and Benefits.




                    (a)     General Rules. The Code places significant tax consequences on
Executive and Company if the total payments made to Executive due, or deemed
due, to a Change in Control exceed prescribed limits. For example, if
Executive’s “Base Period Income”





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(as defined below) is $100,000 and Executive’s “Total Payments” exceed
299% of such Base Period Income (the “Cap”), Executive will be subject to an
excise tax under Section 4999 of the Code of 20% of all amounts paid to him in
excess of $100,000. In other words, if Executive’s Cap is $299,999, he will
not be subject to an excise tax if he receives exactly $299,999. If Executive
receives $300,000, he will be subject to an excise tax of $40,000 (20% of
$200,000). If an excise tax is imposed on Executive as a result of the
application of Sections 280G and 4999 of the Code, for any reason, due to this
Agreement or otherwise, Company shall pay to Executive a “gross-up allowance”
equal in amount to the sum of (i) the excise tax liability of Executive on the
Total Payments, and (ii) all the total excise, income, and payroll tax
liability of Executive on the “gross-up allowance,” further increased by all
additional excise, income, and payroll tax liability thereon, which increase
shall be part of the “gross-up allowance” for purpose of computing the
“gross-up allowance.” Company shall indemnify and hold Executive harmless from
such additional tax liability for the income and payroll tax arising from the
“gross-up allowance” and all excise tax arising with respect to compensation
and other payments made to Executive under this Agreement and excise, income,
and payroll tax on the “gross-up allowance,” and all penalties and interest
thereon. The purpose and effect of the gross-up allowance is to cause
Executive to have the same net compensation after income, excise, and payroll
taxes that Executive would have if there was no tax under Code § 4999.




                    (b)     Special Definitions. For purposes of this Section, the following
specialized terms will have the following meanings:




                    (1)     “Base Period Income.” “Base Period Income” is an amount equal to
Executive’s “annualized includable compensation” for the “base period” as
defined in Sections 280G(d)(1) and (2) of the Internal Revenue Code of 1986, as
amended (the “Code”) and the regulations adopted thereunder. Generally,
Executive’s “annualized includable compensation” is the average of his annual
taxable income from the Company for the “base period,” which is the five
calendar years prior to the year in which the Change of Control occurs.




                    (2)     “Cap” or “280G Cap.” “Cap” or “280G Cap” shall mean an amount equal
to 2.99 times Executive’s “Base Period Income.” This is the maximum amount
which he may receive without becoming subject to the excise tax imposed by
Section 4999 of the Code or which Company may pay without loss of deduction
under Section 280G of the Code.




                    (3)     “Total Payments.” The “Total Payments” include any “payments in the
nature of compensation” (as defined in Section 280G of the Code and the
regulations adopted thereunder), made pursuant to this Agreement or otherwise,
to or for Executive’s benefit, the receipt of which is contingent or deemed
contingent on a Change of Control and to which Section 280G of the Code
applies.




                    (c)     Inclusion of Successor Sections. For purposes of this Section 11, any
reference to any Section of the Code shall also be deemed a reference to any
Code Section resulting from the modification, amendment, renumbering or
replacement of such Code Section.




                    (d)     Effect of Repeal. If the provisions of Sections 280G and 4999 of the
Code are repealed without succession, this Section 11 shall be of no further
force or effect.





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          12.     Confidential Information. Employee acknowledges that Employee may
receive, or contribute to the production of, Confidential Information. For
purposes of this Agreement, Employee agrees that “Confidential Information”
shall mean any and all information or material proprietary to the Company or
designated as Confidential Information by the Company and not generally known
by non-Company personnel, which Employee develops or of or to which Employee
may obtain knowledge or access through or as a result of Employee’s
relationship with the Company (including information conceived, originated,
discovered or developed in whole or in part by Employee). Confidential
Information includes the following types of information and other information
of a similar nature (whether or not reduced to writing) related to the
Company’s business: discoveries, inventions, ideas, concepts, research,
development, processes, procedures, “know-how,” formulae, marketing or
manufacturing techniques and materials, marketing and development plans,
business plans, customer names and other information related to customers,
price lists, pricing policies, methods of operation, financial information,
employee compensation, and computer programs and systems. Confidential
Information also includes any information described above which the Company
obtains from another party and which the Company treats as proprietary or
designates as Confidential Information, whether or not owned by or developed by
the Company, including Confidential Information acquired by the Company from
any of its Affiliates. Employee acknowledges that the Confidential Information
derives independent economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by,
other persons who can obtain economic value from its disclosure or use.
Information publicly known without breach of this Agreement that is generally
employed by the trade at or after the time Employee first learns of such
information, or generic information or knowledge which Employee would have
learned in the course of similar employment or work elsewhere in the trade,
shall not be deemed part of the Confidential Information. Employee further
agrees:




                    (a)     To furnish the Company on demand, at any time during or after
employment, a complete list of the names and addresses of all present, former
and potential suppliers, financing sources, clients, customers and other
contacts gained while an employee of the Company in Employee’s possession,
whether or not in the possession or within the knowledge of the Company.




                    (b)     That all notes, memoranda, electronic storage, documentation and
records in any way incorporating or reflecting any Confidential Information
shall belong exclusively to the Company, and Employee agrees to turn over all
copies of such materials in Employee’s control to the Company upon request or
upon termination of Employee’s employment with the Company.




                    (c)     That while employed by the Company and thereafter Employee will hold
in confidence and not directly or indirectly reveal, report, publish, disclose
or transfer any of the Confidential Information to any person or entity, or
utilize any of the Confidential Information for any purpose, except in the
course of Employee’s work for the Company.




                    (d)     That any idea in whole or in part conceived of or made by Employee
during the term of his employment, consulting, or similar relationship with the
Company which relates directly or indirectly to the Company’s current or
planned lines of business and is made through the use of any of the
Confidential Information of the Company or any of the Company’s





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equipment, facilities, trade secrets or time, or which results from any
work performed by Employee for the Company, shall belong exclusively to the
Company and shall be deemed a part of the Confidential Information for purposes
of this Agreement. Employee hereby assigns and agrees to assign to the Company
all rights in and to such Confidential Information whether for purposes of
obtaining patent or copyright protection or otherwise. Employee shall
acknowledge and deliver to the Company, without charge to the Company (but at
its expense) such written instruments and do such other acts, including giving
testimony in support of Employee’s authorship or inventorship, as the case may
be, necessary in the opinion of the Company to obtain patents or copyrights or
to otherwise protect or vest in the Company the entire right and title in and
to the Confidential Information.




          13.     Loyalty During Employment Term. The provisions of this Section shall
be applicable only during Employee’s term of employment hereunder. Employee
agrees that prior to an Election, Employee will devote substantially all of
Employee’s business time and effort to and give undivided loyalty to the
Company. Both before and after an Election, Employee will not engage in any
way whatsoever, directly or indirectly, in any business that is competitive
with the Company or its affiliates, nor solicit, or in any other manner work
for or assist any business which is competitive with the Company or its
affiliates, except that, after an Election, Employee may work for or assist a
division or affiliate of an entity which competes with the Company through one
or more separately managed divisions or affiliates so long as Employee has no
business responsibilities, relationship or communication with the competing
division or affiliate. Both before and after an Election, Employee will
undertake no planning for or organization of any business activity competitive
with the Company or its affiliates, and Employee will not combine or conspire
with any other employee of the Company or any other person for the purpose of
organizing any such competitive business activity. However, Employee shall be
entitled to make a passive investment in a publicly traded stock of a
competitor of the Company so long as he does not at any time own more than 5%
of the total outstanding stock of such competitor.




          14.     Non-competition; Non-solicitation. The parties acknowledge that
Employee will acquire much knowledge and information concerning the business of
the Company and its affiliates as the result of Employee’s employment. The
parties further acknowledge that the scope of business in which the Company is
engaged as of the date of execution of this Agreement is world-wide and very
competitive and one in which few companies can successfully compete. Certain
activities by Employee after this Agreement is terminated would severely injure
the Company. Accordingly, until one year after Employee resigns pursuant to
Section 8(e) or Employee’s employment is terminated for Cause as contemplated
by Section 8(a), Employee will not:




                    (a)     Engage in any work activity for or in conjunction with any business or
entity that is in competition with or is preparing to compete with the Company;




                    (b)     Persuade or attempt to persuade any potential customer or client to
which the Company or any of its Affiliates has made a proposal or sale, or with
which the Company or any of its Affiliates has been having discussions, not to
transact business with the Company or such Affiliate, or instead to transact
business with another person or organization;





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                    (c)     Solicit the business of any customers, financing sources, clients,
suppliers, or business patrons of the Company or any of its predecessors or
affiliates which were customers, financing sources, clients, suppliers, or
business patrons of the Company at any time during Employee’s employment by the
Company, or within three years prior to the commencement of Employee’s
employment by the Company, provided, however, that if Employee becomes employed
by or represents a business that exclusively sells products that do not compete
with products then marketed or intended to be marketed by the Company, such
contact shall be permissible; or




                    (d)     Solicit, endeavor to entice away from the Company or any of its
Affiliates, or otherwise interfere with the relationship of the Company or any
of its Affiliates with, any person who is employed by or otherwise engaged to
perform services for the Company or any of its Affiliates, whether for
Employee’s account or for the account of any other person or organization.




          15.     Injunctive Relief. It is agreed that the restrictions contained in
Sections 12, 13 and 14 of this Agreement are reasonable, but it is recognized
that damages in the event of the breach of any of those restrictions will be
difficult or impossible to ascertain; and, therefore, Employee agrees that, in
addition to and without limiting any other right or remedy the Company may
have, the Company shall have the right to an injunction against Employee issued
by a court of competent jurisdiction enjoining any such breach without showing
or proving any actual damage to the Company. This Section shall survive the
termination of Employee’s employment.




          16.     Part of Consideration. Employee also agrees, acknowledges, covenants,
represents and warrants that he is fully and completely aware that, and further
understands that, the restrictive covenants contained in Sections 12, 13 and 14
of this Agreement are an essential part of the consideration for the Company
entering into this Agreement and that the Company is entering into this
Agreement in full reliance on these acknowledgments, covenants, representations
and warranties.




          17.     Time and Territory Reduction. If any of the periods of time and/or
territories described in Sections 12, 13 and 14 of this Agreement are held to
be in any respect an unreasonable restriction, it is agreed that the court so
holding may reduce the territory to which the restriction pertains or the
period of time in which it operates or may reduce both such territory and such
period, to the minimum extent necessary to render such provision enforceable.




          18.     Survival. The obligations described in Sections 12 and 14 of this
Agreement shall survive any termination of this Agreement or any termination of
the employment relationship created hereunder.




          19.     Nondelegability of Employee’s Rights and Company Assignment Rights.
Except as otherwise provided in this Agreement, the obligations, rights and
benefits of Employee hereunder are personal and may not be delegated, assigned
or transferred in any manner whatsoever, nor are such obligations, rights or
benefits subject to involuntary alienation, assignment or transfer. Upon
mutual agreement of the parties, the Company upon reasonable notice to Employee
may transfer Employee to an Affiliate of the Company, which Affiliate shall





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assume the obligations of the Company under this Agreement. This
Agreement shall be assigned automatically to any entity merging with or
acquiring the Company.




          20.     Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of Arizona,
exclusive of the conflict of law provisions thereof, and the parties agree that
any litigation pertaining to this Agreement shall be in courts located in
Maricopa County, Arizona.




          21.     Attorneys’ Fees. If any party finds it necessary to employ legal
counsel or to bring an action at law or other proceeding against the other
party to enforce any of the terms hereof, the party prevailing in any such
action or other proceeding shall be paid by the other party its reasonable
attorneys’ fees as well as court costs all as determined by the court and not a
jury.




          22.     Notices. All notices, demands, instructions, or requests relating to
this Agreement shall be in writing and, except as otherwise provided herein,
shall be deemed to have been given for all purposes (i) upon personal delivery,
(ii) one day after being sent, when sent by professional overnight courier
service from and to locations within the Continental United States, (iii) five
days after posting when sent by United States registered or certified mail,
with return receipt requested and postage paid, or (iv) on the date of
transmission when sent by facsimile with a hard-copy confirmation; if directed
to the person or entity to which notice is to be given at his or its address
set forth in this Agreement or at any other address such person or entity has
designated by notice.




	 	 	 	 	 
	 	 	
To the Company:
	 	OrthoLogic Corp.
	 	 	 	 	1275 W. Washington St.
	 	 	 	 	Tempe, AZ 85281
	 	 	 	 	Attention: Chairman of the Board
	 	 	 	 	 
	 	 	
To Employee:
	 	Thomas R. Trotter
	 	 	 	 	1275 W. Washington St.
	 	 	 	 	Tempe, AZ 85281






          23.     Entire Agreement. This Agreement and the Invention, Confidential
Information and Non-Competition Agreement executed in October 1997 constitute
the final written expression of all of the agreements between the parties
(except those relating to Employee’s service as a director of the Company), and
are a complete and exclusive statement of those terms. They supersede all
understandings and negotiations concerning the matters specified herein. Any
representations, promises, warranties or statements made by either party that
differ in any way from the terms of these two written Agreements shall be given
no force or effect. The parties specifically represent, each to the other,
that there are no additional or supplemental agreements between them related in
any way to the matters herein contained unless specifically included or
referred to herein. No addition to or modification of any provision of either
of such Agreements shall be binding upon any party unless made in writing and
signed by all parties. To the extent that there is any conflict between this
Agreement and the Invention, Confidential Information and Non-Competition
Agreement, the provisions of this Agreement shall govern.





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          24.     Exhibits. All Exhibits to this Agreement are incorporated herein by
this reference as though fully set forth herein. In the event of any conflict,
contradiction or ambiguity between the terms and conditions in this Agreement
and any of its Exhibits, schedules or attachments, the terms of this Agreement
shall prevail.




          25.     Construction. The language in all parts of this Agreement shall in
all cases be construed as a whole according to its fair meaning and not
strictly for or against either party. The Section headings contained in this
Agreement are for reference purposes only and will not affect the meaning or
interpretation of this Agreement in any way. All terms used in one number or
gender shall be construed to include any other number or gender as the context
may require. The parties agree that each party has reviewed this Agreement and
has had the opportunity to have counsel review the same and that any rule of
construction to the effect that ambiguities are to be resolved against the
drafting party shall not apply in the interpretation of this Agreement or any
amendment or any exhibits thereto. Whenever the words “include,” “includes,”
or “including” are used in the Agreement, they shall be deemed to be followed
by the words “without limitation.




          26.     Waiver. The waiver by either party of the breach of any covenant or
provision in this Agreement shall not operate or be construed as a waiver of
any subsequent breach by either party.




          27.     Invalidity of Any Provision. The provisions of this Agreement are
severable, it being the intention of the parties hereto that should any
provisions hereof be invalid or unenforceable, such invalidity or
unenforceability of any provision shall not affect the remaining provisions
hereof, but the same shall remain in full force and effect as if such invalid
or unenforceable provisions were omitted.




          28.     Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same agreement.




          29.     Binding Effect; Benefits. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
successors, executors, administrators and assigns. Notwithstanding anything
contained in this Agreement to the contrary, nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the
parties hereto or their respective heirs, successors, executors, administrators
and assigns any rights, remedies, obligations or liabilities under or by reason
of this Agreement.





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          This Agreement has been executed by the parties as of July 15, 2002.




	 	 	 	 	 
	 	 	ORTHOLOGIC CORP
	 	 	(the “Company”)
	 	 	 	 	 
	 	 	 	 	 
	 	 	
By:
	 	/s/ John M. Holliman, III
	 	 	 	 	

	 	 	 	 	John M. Holliman, III
	 	 	 	 	Chairman of the Board
	 	 	 	 	 
	 	 	 	 	 
	 	 	THOMAS R. TROTTER
	 	 	 	 	 
	 	 	 	 	 
	 	 	
By:
	 	/s/ Thomas R. Trotter
	 	 	 	 	

	 	 	 	 	“Employee”







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EXHIBIT “A”




DEFINITIONS




I.        DEFINITIONS




          Capitalized terms used in this Exhibit A and not otherwise defined herein
shall have the meanings assigned to them in the Agreement to which this Exhibit
A is attached (the “Agreement”). Additionally, the following terms shall have
the meanings set forth below.




          “Affiliate,” means an entity affiliated with the Company.




          “Change in Control”. For purposes of this Agreement, a “Change in
Control” means any one or more of the following events (except for a Sale of
the Bone-Stimulation Business):




          (1)     When the individuals who, at the beginning of any period of two years
or less, constituted the Board cease, for any reason, to constitute at least a
majority thereof unless the election or nomination for election of each new
director was approved by the vote of at least two thirds of the directors then
still in office who were directors at the beginning of such period;




          (2)     A change of control of the Company through a transaction or series of
transactions, such that any person (as that term is used in Section 13 and
14(d)(2) of the Securities Exchange Act of 1934 [“1934 Act”]), excluding
Affiliates of the Company as of the Effective Date, is or becomes the
beneficial owner (as that term is used in Section 13[d] of the 1934 Act)
directly or indirectly, of securities of the Company representing 20% or more
of the combined voting power of the Company’s then outstanding securities;




          (3)     Any merger, consolidation or liquidation of the Company in which the
Company is not the continuing or surviving company or pursuant to which stock
would be converted into cash, securities or other property, other than a merger
of the Company in which the holders of the shares of stock immediately before
the merger have the same proportionate ownership of common stock of the
surviving company immediately after the merger;




          (4)     The shareholders of the Company approve any plan or proposal for the
liquidation or dissolution of the Company; or




          Substantially all of the assets of the Company are sold or otherwise
transferred to parties that are not within a “controlled group of corporations”
(as defined in Section 1563 of the Internal Revenue Code of 1986, as amended
(the “Code”) in which Parent is a member prior to such sale or transfer.




          (5)     “Code,” means the Internal Revenue Code of 1986, as amended.




          (6)     “Sale of the Bone-Stimulation Business.” For purposes of this Agreement, a
“Sale of the Bone-Stimulation Business” shall be deemed to have occurred if the
Company sells or disposes of (in one transaction or a series of transactions)
all or substantially all of the long-bone and spinal stimulation businesses
presently conducted by the Company.





 








 



EXHIBIT B




CALCULATION OF SPECIAL BONUSES




I.       BONUS AFTER A CHANGE IN CONTROL




          Upon the closing of a Change in Control while he is still an employee of
the Company, Employee shall be entitled to receive, as a lump sum, a special
bonus payment according to the following schedule:




          *****




          If the net per share price falls between targets listed above, a
straight-line interpolation of the lump sum bonus amount shall occur.




II.      BONUS AFTER A SALE OF THE BONE-STIMULATION BUSINESS




          Upon the closing of a Sale of the Bone-Stimulation Business while he is
still an employee of the Company, Employee shall be entitled to receive, as a
lump sum, a special bonus payment equal to one-half of 1% of the selling price.








**Text has been omitted pursuant to a confidentiality request. Omitted text
has been filed with the Securities & Exchange Commission.