3. Compensation and Benefits.          3.1 Salary. The Company shall pay the Employee, in periodic installments inaccordance with the Company’s customary payroll practices, an annual base salary of $370,000. Such**s**alary may be subject to cost of living or other increases thereafter as determined by the Board.          3.2 Fringe Benefits. The Employee shall be entitled to participate in all bonus andbenefit programs that the Company establishes and makes available to its employees, if any, to theextent that Employee’s position, tenure, salary, age, health and other qualifications make himeligible to participate, including, but not limited to, a car allowance not to exceed $750 permonth. The monthly car allowance shall be paid in equal installments on each payroll date duringthe month in accordance with the Company’s customary payroll practices. The Employee shall beentitled to four (4) weeks paid vacation per year, to be taken at such times as may be approved bythe Board or its designee.          3.3 Reimbursement of Expenses. The Company shall reimburse the Employee for allreasonable travel, entertainment and other expenses incurred or paid by the Employee in connectionwith, or related to, the performance of his duties, responsibilities or services under thisAgreement, in accordance with policies and procedures, and subject to limitations, adopted by theCompany or the Board from time to time. The Employee must submit to the Company receipts and otherdetails of each such expense, in the form required by the Company, within sixty (60) days after thelater of (i) the Employee’s incurrence of such expense or (ii) the Employee’s receipt of theinvoice for such expense. If such expense qualifies for reimbursement, then the Company willreimburse the Employee the expense within thirty (30) days thereafter. In no event will suchexpense be reimbursed after the close of the calendar year following the calendar year in whichthat expense is incurred. The amount of reimbursements to which the Employee may become entitledin any one calendar year shall not affect the amount of expenses eligible for reimbursementhereunder in any other calendar year. The Employee’s right to reimbursement cannot be liquidatedor exchanged for any other benefit or payment.          3.4 Bonuses; Incentive Compensation.          (a) The Employee shall be eligible to receive, at the sole discretion of the Board, an annualbonus (the “MIP Bonus”) up to a maximum amount equal to 50% of the Employee’s annual base salaryupon the achievement of certain milestones as set forth in an annual Management Incentive Plan, tobe mutually agreed upon (the “Management Incentive Plan”). Additional milestones may beestablished to increase the MIP Bonus to a maximum amount equal to 100% of the Employee’s annualbase salary. The specific annual milestones will be set each year by the Board followingconsultation with the Employee. Notwithstanding the foregoing, unless otherwise waived by theBoard, the Employee shall not be eligible to receive the MIP Bonus if the Company has not achievedpre-tax earnings for that applicable fiscal year. Any MIP Bonus awarded to the Employee shall bepaid by the 15th day of the third month following the close of the calendar year for which suchbonus is earned or as soon as administratively practicable thereafter, but in no event shall suchpayment be made prior to the
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first business day in January in the calendar year immediately following the calendar year forwhich that bonus is earned or after April 30 of that calendar year.          (b) In addition to Section 3.4(a) above, upon the execution of this Agreement, the Employeeshall be entitled to receive an equity bonus in the form of restricted stock units covering 40,000shares of the Company’s common stock (the “RSU Award”), which will be awarded as of March 4, 2009,pursuant to the Company’s 2002 Stock Incentive Plan, as amended and restated from time to time (the“Plan”). The RSU Award will vest as to 13,333 shares on March 1, 2010, 13,333 shares on March 1,2011 and 13,334 shares on March 1, 2012. Notwithstanding the foregoing vesting schedule, theshares of Common Stock underlying the RSU Award will not be issued to the Employee until theearlier of: (i) the Employee’s Cessation of Service (as defined in the Plan) with the Company; or(ii) a Change of Control (as defined in the Plan); or (iii) seven years from the date of the award.Any future equity awards during the Employment Period may be awarded by the Company’s CompensationCommittee in its sole discretion to be reviewed on an annual basis. The remaining terms of the RSUAward, including the share issuance schedule and the payment of withholding taxes, shall be as setforth in the Company’s form Restricted Stock Unit Award Agreement.          (c) The number of shares of the Company’s common stock to which the Employee may becomeentitled pursuant to Paragraph 3(b) shall be appropriately adjusted in the event of any stocksplit, stock dividend, combination or exchange of shares, recapitalization or other similartransaction affecting the outstanding shares of the Company’s common stock without the Company’sreceipt of consideration.          3.5 Withholding. All salary, bonus and other compensation payable to the Employeeshall be subject to applicable withholding taxes.     4. Termination of Employment Period. The employment of the Employee by the Companypursuant to this Agreement shall terminate upon the occurrence of any of the following:          4.1 Expiration of the Employment Period;          4.2 At the election of the Company, for Cause (as defined below), immediately upon writtennotice by the Company to the Employee, which notice shall identify the Cause upon which thetermination is based. For the purposes of this Section 4.2, “Cause” shall mean (a) a good faithfinding by the Company that (i) the Employee has repeatedly failed to perform his assigned dutiesfor the Company, or (ii) the Employee has engaged in dishonesty, gross negligence or misconduct, or(b) the conviction of the Employee of, or the entry of a pleading of guilty or nolo contendere bythe Employee to, any crime involving moral turpitude or any felony;          4.3 At the election of the Employee, for Good Reason (as defined below), immediately uponwritten notice by the Employee to the Company, which notice shall identify the Good Reason uponwhich the termination is based. For the purposes of this Section 4.3, “Good Reason” fortermination shall mean (i) a material adverse change in the Employee’s authority, duties orcompensation without the prior written consent of the Employee (provided
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that neither the hiring of a chief operating officer nor the hiring of a chief financialofficer by the Company and the relinquishment of such title and associated duties by the Employeeshall constitute Good Reason hereunder), (ii) a material breach by the Company of the terms of thisAgreement, which breach is not remedied by the Company within 10 days following written notice fromthe Employee to the Company notifying it of such breach or (iii) the relocation of the Employee’splace of work more than 50 miles from the Company’s current executive offices.          4.4 Upon the death or disability of the Employee. As used in this Agreement, the term“disability” shall mean the inability of the Employee, due to a physical or mental disability, fora period of 90 days, whether or not consecutive, during any 360-day period, to perform the servicescontemplated under this Agreement, with or without reasonable accommodation as that term is definedunder state or federal law. A determination of disability shall be made by a physiciansatisfactory to both the Employee and the Company; provided, that, if the Employeeand the Company do not agree on a physician, the Employee and the Company shall each select aphysician and these two together shall select a third physician, whose determination as todisability shall be binding on all parties;          4.5 At the election of either party, upon not less than 180 days’ prior written notice oftermination.     5. Effect of Termination.          5.1 At-Will Employment. If the Employment Period expires pursuant to Section 1hereof, then, unless the Company notifies the Employee to the contrary, the Employee shall continuehis employment on an at-will basis following the expiration of the Employment Period. Such at-willemployment relationship may be terminated by either party at any time and shall not be governed bythe terms of this Agreement.          5.2 Payments Upon Termination.          (a) In the event the Employee’s employment is terminated pursuant to Section 4.1, Section 4.2,Section 4.4 or by the Employee pursuant to Section 4.5, the Company shall pay to the Employee thecompensation and benefits otherwise payable to him under Section 3 through the last day of hisactual employment by the Company.          (b) In the event the Employee’s employment is terminated by the Employee pursuant to Section4.3 or by the Company pursuant to Section 4.5, then the following provisions shall apply, providedthe Employee executes a mutual general release and waiver in a form reasonably satisfactory to theBoard (the “Release”) within 21 days (or 45 days if such longer period is required under law) andsuch Release becomes effective and enforceable in accordance with applicable law after theexpiration of any applicable revocation period.               (i) The Company shall continue to pay to the Employee his salary as in effect on the date oftermination for a period of six (6) months. Such salary continuation payments shall be made atperiodic intervals in accordance with the Company’s customary payroll practices for salariedemployees, beginning within the 60-day period following the Employee’s Separation from Serviceprovided the requisite Release is effective following the
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expiration of any applicable revocation period, but in no event will the first such payment bemade later than the last day of such 60-day period on which the Release is so effective.               (ii) The Company shall pay, in a series of six (6) equal monthly installments, beginningwithin the 60-day period following the Employee’s Separation from Service due to such terminationprovided the requisite Release is effective following the expiration of any applicable revocationperiod but in no event later than the last day of such 60-day period on which the Release is soeffective, an amount equal in the aggregate to the annual bonus paid to him for the fiscal yearimmediately prior to the fiscal year in which his termination date occurs.               (iii) Should the Employee elect under Code Section 4980B to continue health care coverageunder the Company’s group health plan for himself, his spouse and his eligible dependents followingsuch termination date, then the Company shall provide such continued health care coverage at theCompany’s expense until the earlier of (i) the expiration of the 120-day period measuredfrom the date of such termination or (ii) the first date the Employee is covered under anotheremployer’s heath benefit program which provides substantially the same level of benefits withoutexclusion for pre-existing medical conditions. Should the Company’s provision of such continuedhealth care coverage result in the recognition of taxable income (whether for federal, state orlocal income tax purposes) by the Employee, then the Company shall report such taxable income astaxable W-2 wages and collect the applicable withholding taxes, and the Employee shall beresponsible for the payment of any additional income and employment tax liability resulting fromsuch coverage. To the extent the health care coverage under this Section 5.2(b)(iii) is to beprovided through a self-funded program maintained by the Company, the Employee shall directly payfor the costs to obtain such health care coverage and shall, within 30 days after each periodicpayment for a reimbursable health care coverage expense under this Section 5.2(b)(iii), submitappropriate evidence of such payment to the Company for reimbursement, and the Company shall paysuch reimbursement on the 30th day following receipt of the submission. During the period suchhealth care coverage remains in effect hereunder, the following provisions shall govern thearrangement: (a) the amount of the health care costs eligible for reimbursement in any one calendaryear of such coverage shall not affect the amount of such costs eligible for reimbursement in anyother calendar year for which such reimbursement is to be provided hereunder; (ii) no costs shallbe reimbursed after the close of the calendar year following the calendar year in which those costswere incurred; and (iii) the Employee’s right to the reimbursement of such costs cannot beliquidated or exchanged for any other benefit. In the event the reimbursement of health carecoverage results in the recognition of taxable income (whether for federal, state or local incometax purposes) by the Employee, then the Company shall make an additional payment (the “Health CareGross-Up Payment”) to the Employee in a dollar amount to fully cover all taxes payable by theEmployee on the income recognized with respect to the reimbursed health care coverage, includingtaxes imposed upon the Health Care Gross-Up Payment. The Health Care Gross-Up Payment shall bepaid to the Employee at the time the related taxes are remitted to the tax authorities.               (iv) The Company shall make a lump sum cash payment, not to exceed $7,500, to cover the costof any other benefits to which the Employee would have been entitled under Section 3.2 of thisAgreement had he continued in employment for an additional six (6) months following suchtermination date. Such payment shall be made to the Employee within
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the 60-day period following the Employee’s Separation from Service provided the requisiteRelease is effective following any applicable revocation period but in no event later than the lastday of such 60-day period on which the Release is effective.          The payment to the Employee of the amounts payable under this Section 5.2(b) shall constitutethe sole remedy of the Employee in the event of a termination of the Employee’s employment in thecircumstances set forth in this Section 5.2(b).          5.3 Section 409A. Certain payments contemplated by this Agreement may be “deferredcompensation” for purposes of Section 409A of the Code. Accordingly, the following provisionsshall be in effect for purposes of avoiding or mitigating any adverse tax consequences to theEmployee under Code Section 409A.          (a) It is the intent of the parties that the provisions of this Agreement comply with allapplicable requirements of Code Section 409A. Accordingly, all provisions of this Agreement shallbe interpreted and applied in a manner that does not result in a violation of the applicablerequirements or limitations of Code Section 409A and the applicable Treasury Regulations thereunderand such provisions shall be deemed amended to comply with Code Section 409A and the applicableTreasury Regulations thereunder.          (b) Notwithstanding any provision to the contrary in this Agreement, no payments or benefitsto which the Employee may become entitled under Section 4 of this Agreement shall be made orprovided to him prior to the ***earlier***of (i) the expiration of the six (6)-month period measuredfrom the date of his Separation from Service with the Company or (ii) the date of his death, if theEmployee is deemed, pursuant to the procedures established by the Compensation Committee inaccordance with the applicable standards of Code Section 409A and the Treasury Regulationsthereunder and applied on a consistent basis for all non-qualified deferred compensation plans ofthe Employer Group subject to Code Section 409A, to be a “specified employee” at the time of suchSeparation from Service and such delayed commencement is otherwise required in order to avoid aprohibited distribution under Code Section 409A(a)(2). Upon the expiration of the applicable CodeSection 409A(a)(2) deferral period, all payments and benefits deferred pursuant to this Section 4.3(whether they would have otherwise been payable in a single sum or in installments in the absenceof such deferral) shall be paid or reimbursed to the Employee in a lump sum, and any remainingpayments and benefits due under this Agreement shall be paid or provided in accordance with thenormal payment dates specified for them herein. The specified employees subject to such a delayedcommencement date shall be identified on December 31 of each calendar year. If the Employee is soidentified on any such December 31, he shall have specified employee status for the twelve(12)-month period beginning on April 1 of the following calendar year. For purposes of thisAgreement, including (without limitation) this Section 5.3(b), “**Separation from Service**” shall meana separation from service as defined under Treasury Regulation Section 1.409A-1(h).          5.4 Survival. The provisions of Sections 5.2(b), 5.3, 6, 7.2, 8.3, 8.5 and 8.9 shallsurvive the termination of this Agreement.     6. Non-Competition and Non-Solicitation. The Employee affirms that the form ofInvention Assignment and Confidential Information Agreement and form of Non-Competition
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and Non-Solicitation Agreement, substantially in the form attached hereto as Exhibit Aand Exhibit B, respectively, remain in full force and effect as of the dated hereof.     7. Other Agreements.          7.1 Prior Agreements. The Employee represents that his performance of all the termsof this Agreement and the performance of his duties as an employee of the Company do not and willnot breach any agreement with any prior employer or other party to which the Employee is a party(including without limitation any nondisclosure or non-competition agreement). Any agreement towhich the Employee is a party relating to nondisclosure, non-competition or non-solicitation ofemployees or customers is listed on Schedule A attached hereto.          7.2 Executive Retention Agreement. Upon execution of this Agreement, the Company andthe Employee shall enter into the Amended and Restated Executive Retention Agreement attachedhereto as Exhibit C; provided, however, that if the Employee is terminatedfor any reason, and such termination triggers a payment (including benefits) to the Employeepursuant to the Amended and Restated Executive Retention Agreement, then the Employee shall receivepayments (including benefits) solely pursuant to the Amended and Restated Executive RetentionAgreement and not pursuant to this Agreement.     8. Miscellaneous.          8.1 Notices. Any notices delivered under this Agreement shall be deemed dulydelivered four business days after it is sent by registered or certified mail, return receiptrequested, postage prepaid, or one business day after it is sent for next-business day delivery viaa reputable nationwide overnight courier service, in each case to the address of the recipient setforth in the introductory paragraph hereto. Either party may change the address to which noticesare to be delivered by giving notice of such change to the other party in the manner set forth inthis Section 8.1.          8.2 Pronouns. Whenever the context may require, any pronouns used in this Agreementshall include the corresponding masculine, feminine or neuter forms, and the singular forms ofnouns and pronouns shall include the plural, and vice versa.          8.3 Entire Agreement. This Agreement constitutes the entire agreement between theparties and supersedes all prior agreements and understandings, whether written or oral, relatingto the subject matter of this Agreement (including, without limitation, the Prior EmploymentAgreement).          8.4 Amendment. This Agreement may be amended or modified only by a written instrumentexecuted by both the Company and the Employee.          8.5 Governing Law. This Agreement shall be governed by and construed in accordancewith the laws of the Commonwealth of Pennsylvania (without reference to the conflicts of lawsprovisions thereof). Any action, suit or other legal proceeding arising under or relating to anyprovision of this Agreement shall be commenced only in a court of the Commonwealth of Pennsylvania(or, if appropriate, a federal court located within Pennsylvania),
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and the Company and the Employee each consents to the jurisdiction of such a court. TheCompany and the Employee each hereby irrevocably waive any right to a trial by jury in any action,suit or other legal proceeding arising under or relating to any provision of this Agreement.          8.6 Successors and Assigns. This Agreement shall be binding upon and inure to thebenefit of both parties and their respective successors and assigns, including any corporation withwhich, or into which, the Company may be merged or which may succeed to the Company’s assets orbusiness; provided, however, that the obligations of the Employee are personal andshall not be assigned by him. Notwithstanding the foregoing, if the Company is merged with or intoa third party which is engaged in multiple lines of business, or if a third party engaged inmultiple lines of business succeeds to the Company’s assets or business, then for purposes of thisAgreement, the term “Company” shall mean and refer to the business of the Company as it existedimmediately prior to such event and as it subsequently develops and not to the third party’s otherbusinesses.          8.7 Waivers. No delay or omission by the Company in exercising any right under thisAgreement shall operate as a waiver of that or any other right. A waiver or consent given by theCompany on any one occasion shall be effective only in that instance and shall not be construed asa bar or waiver of any right on any other occasion.          8.8 Captions. The captions of the sections of this Agreement are for convenience ofreference only and in no way define, limit or affect the scope or substance of any section of thisAgreement.          8.9 Severability. In case any provision of this Agreement shall be invalid, illegalor otherwise unenforceable, the validity, legality and enforceability of the remaining provisionsshall in no way be affected or impaired thereby.
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     THE EMPLOYEE ACKNOWLEDGES THAT HE HAS CAREFULLY READ THIS AGREEMENT, HAS HAD A FULLOPPORTUNITY TO REVIEW THIS AGREEMENT AND CONSULT WITH COUNSEL AND UNDERSTANDS AND AGREES TO ALL OFTHE PROVISIONS IN THIS AGREEMENT.     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year setforth above.      BIO-IMAGING TECHNOLOGIES, INC.