**Exhibit 10.3**
**THIRD AMENDED AND RESTATED EMPLOYMENT AGREEMENT**
     This Agreement is to be effective as of November 8, 2004, by and betweenOrthoLogic Corp., a Delaware corporation (the “Company”), and Sherry A. Sturman(“Employee”), and supersedes in its entirety the Second Amended and RestatedEmployment Agreement, dated March 2, 2004, between the Company and Employee.
RECITALS:
     A. The parties wish to set forth in this Agreement the terms andconditions of employment.
AGREEMENT:
     In consideration of the mutual covenants and agreements set forth herein,the parties agree as follows:
     1. EMPLOYMENT AND DUTIES.
          (a) DEFINITION OF “ELECTION.” Within the limitations described inSections 7 and 8 of this Agreement, either party may give the other notice thatshe or it has elected to begin a two-year transition leading to the terminationof Employee’s employment by the Company. Such a notice is referred to in thisAgreement as an “Election.” The “Election Effective Date” shall be the date ofthe Election, in the case of an Election by the Company pursuant to Section 7hereof, or 30 days after the date of the Election, in the case of an Electionby Employee pursuant to Section 8 hereof.
          (b) DUTIES BEFORE AN ELECTION. Subject to the terms and conditions ofthis Agreement, prior to the Election Effective Date, the Company employsEmployee to serve in the capacity of Senior Vice President / Chief FinancialOfficer and Employee accepts such employment and agrees to perform suchreasonable responsibilities and duties as may be assigned to her from time totime by the Company’s Chief Executive Officer (“CEO”). Employee’s title shallbe Senior Vice President / Chief Financial Officer with general responsibilityfor all administrative functions. Such title and duties may be changed fromtime to time by the CEO. Employee will report directly to the CEO.
          (c) DUTIES AFTER AN ELECTION. Effective upon the Election Effective Date,Employee will report to the CEO. Employee shall not have an official title orany set work hours. While various projects assigned to Employee may requiremore or less time within any given month, it is contemplated that, without herconsent, Employee will not be asked to work on Company matters: (i) for morethan 4 days (or the equivalent thereof) per quarter during the periodcommencing on the Election Effective Date and ending on the first anniversaryof the Election Effective Date; and (ii) for more than 2 days (or theequivalent thereof) per quarter during the 12 months following the perioddescribed in the foregoing clause (i). It is understood that Employee may havelimited availability during normal business hours. Employee agrees to use herreasonable best efforts to be available during normal business hours whennecessary to accomplish a specific assigned project. Employee understands thatfrom and after the Election
 

 

Effective Date, and until the end of the term of this Agreement, theCompany will not provide her with an office, but will provide reasonablesecretarial and other staff support and will provide ancillary office equipmentsuch as dictating equipment and a desk-top computer that Employee may continueto use until the end of the term at another location selected by her. Afterthe Election Effective Date, Employee shall not be entitled to use any Companyowned or supported laptop computers or cell phones except to the extentrequired by specific projects assigned to Employee.
     2. TERM. Before an Election, Employee’s employment shall have anindefinite term and shall continue until terminated as provided in thisAgreement. Upon an Election, the term of Employee’s employment by the Companyshall convert automatically to a term beginning on the Election Effective Dateand ending on the two year anniversary of the Election Effective Date (the“Election Term”). After the Election, any extension or renewal of such termshall require the written consent of both parties.
     3. COMPENSATION.
          (a) SALARY. (i) Before the Election Effective Date, the Company shall payEmployee a minimum base annual salary, before deducting all applicablewithholdings, of $200,000 per year, payable at the times and in the mannerdictated by the Company’s standard payroll policies; (ii) during the periodcommencing on the Election Effective Date and ending on the first anniversaryof the Election Effective Date, Employee’s base annual salary shall remain atthe same level as it was on the Election Effective Date; and (iii) during the12 months following the period described in the foregoing clause (ii),Employee’s base annual salary shall be $50,000, regardless of the level of baseannual salary being paid to Employee prior to the Election Effective Date.
          (b) BONUS. (i) Before the Election Effective Date, Employee shall beeligible to participate in such bonus and incentive programs as determined fromtime to time by the Board. Any bonuses shall be based upon the achievement ofindividual goals and Company performance. Employee’s bonus, if any, will becalculated using $200,000 as Employee’s annual base salary, pro rated asnecessary to reflect the number of months worked by Employee prior to theElection Effective Date; (ii) Employee shall not be entitled to accrue anyadditional bonus amount after the Election Effective Date, but any bonusesfully earned prior to the Election Effective Date shall remain due inaccordance with their terms.
          (c) STOCK OPTIONS. From time to time, as determined by the CompensationCommittee of the Company’s Board of Directors in its discretion, the Companyshall grant to Employee options to purchase shares of the Company’s commonstock, with an exercise price equal to the fair market value of the stock onthe effective date of the grant.
     4. FRINGE BENEFITS. Both before and after the Election Effective Date, inaddition to the compensation, bonus and options described in Section 3, and anyother employee benefit plans (including without limitation pension, savings anddisability plans) generally available to employees, the Company shall includeEmployee in any group health insurance plan and, if eligible, any groupretirement plan instituted by the Company. The manner of implementation of suchbenefits with respect to such items as procedures and amounts are
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discretionary with the Company. Upon Employee’s acceptance of employmentwith another employer in connection with which Employee works, or is expectedto work, 1,000 hours or more per year, Employee shall no longer be entitled toparticipate in any health, dental, retirement or other employee benefit plansof the Company. During the term of Employee’s employment under this Agreement,Employee shall be considered as an employee for the purposes of any Companystock option plans.
     5. VACATION. Employee shall be entitled to vacation with pay inaccordance with the Company’s vacation policy as in effect from time to time.In addition, Employee shall be entitled to such holidays as the Company mayapprove from time to time.
     6. TERMINATION.
          (a) FOR CAUSE. The Company may terminate this Agreement for cause uponwritten notice to Employee stating the facts constituting such cause, providedthat Employee shall have 30 days following such notice to cure any conduct oract, if curable, alleged to provide grounds for termination for causehereunder. In the event of termination for cause, the Company shall beobligated to pay Employee only the minimum base salary due her through the dateof termination. The written notice shall state the cause for termination.Cause shall include neglect of duties, willful failure to abide by instructionsor policies from or set by the Board of Directors, commission of a felony orserious misdemeanor offense or pleading guilty or *nolo contendere*to same,Employee’s breach of this Agreement or Employee’s breach of any other materialobligation to the Company.
          (b) DISABILITY. If during the term of this Agreement, Employee fails toperform her duties hereunder on account of illness or other incapacity for aperiod of 45 consecutive days, or for 60 days during any six-month period, theCompany shall have the right to terminate this Agreement without furtherobligation hereunder except as otherwise provided in disability plans generallyapplicable to employees.
          (c) DEATH. If Employee dies during the term of this Agreement, thisAgreement shall terminate immediately, and Employee’s legal representativesshall be entitled to receive the base salary due Employee through the last dayof the calendar month in which her death shall have occurred and any otherdeath benefits generally applicable to executive employees.
          (d) RESIGNATION. Employee may resign her employment by giving the Companywritten notice. In the event of such a resignation, the Company shall beobligated to pay Employee only the minimum base salary due her through theeffective date of the resignation.
     7. ELECTION BY THE COMPANY. The Company may make an Election at any timewith or without cause.
     8. ELECTION BY EMPLOYEE. Employee may make an Election on or at any timeafter June 30, 2005, with or without cause.
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     9. CONFIDENTIAL INFORMATION. Employee acknowledges that Employee mayreceive, or contribute to the production of, Confidential Information. Forpurposes of this Agreement, Employee agrees that “Confidential Information”shall mean any and all information or material proprietary to the Company ordesignated as Confidential Information by the Company and not generally knownby non-Company personnel, which Employee develops or of or to which Employeemay obtain knowledge or access through or as a result of Employee’srelationship with the Company (including information conceived, originated,discovered or developed in whole or in part by Employee). ConfidentialInformation includes, but is not limited to, the following types of informationand 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, marketingor 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. ConfidentialInformation also includes any information described above which the Companyobtains from another party and which the Company treats as proprietary ordesignates as Confidential Information, whether or not owned by or developed bythe Company, including Confidential Information acquired by the Company fromany of its affiliates. Employee acknowledges that the Confidential Informationderives independent economic value, actual or potential, from not beinggenerally 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 generallyemployed by the trade at or after the time Employee first learns of suchinformation, or generic information or knowledge which Employee would havelearned in the course of similar employment or work elsewhere in the trade,shall not be deemed part of the Confidential Information. Employee furtheragrees:
          (a) To furnish the Company on demand, at any time during or afteremployment, a complete list of the names and addresses of all present, formerand potential suppliers, financing sources, clients, customers and othercontacts 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 andrecords in any way incorporating or reflecting any Confidential Informationshall belong exclusively to the Company, and Employee agrees to turn over allcopies of such materials in Employee’s control to the Company upon request orupon termination of Employee’s employment with the Company.
          (c) That while employed by the Company and thereafter, Employee will holdin confidence and not directly or indirectly reveal, report, publish, discloseor transfer any of the Confidential Information to any person or entity, orutilize any of the Confidential Information for any purpose, except in thecourse of Employee’s work for the Company.
          (d) That any idea in whole or in part conceived of or made by Employeeduring the term of her employment, consulting, or similar relationship with theCompany which relates directly or indirectly to the Company’s current orplanned lines of business and is made through the use of any of theConfidential Information of the Company or any of the Company’s
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equipment, facilities, trade secrets or time, or which results from anywork performed by Employee for the Company, shall belong exclusively to theCompany and shall be deemed a part of the Confidential Information for purposesof this Agreement. Employee hereby assigns and agrees to assign to the Companyall rights in and to such Confidential Information whether for purposes ofobtaining patent or copyright protection or otherwise. Employee shallacknowledge and deliver to the Company, without charge to the Company (but atits expense) such written instruments and do such other acts, including givingtestimony in support of Employee’s authorship or inventorship, as the case maybe, necessary in the opinion of the Company to obtain patents or copyrights orto otherwise protect or vest in the Company the entire right and title in andto the Confidential Information.
     10. LOYALTY DURING EMPLOYMENT TERM. Employee agrees that during the termof Employee’s employment by the Company, Employee will devote substantially allof Employee’s business time and effort to and give undivided loyalty to theCompany, and will not engage in any way whatsoever, directly or indirectly, inany business that is competitive with the Company or its affiliates, norsolicit, or in any other manner work for or assist any business which iscompetitive with the Company or its affiliates. During the term of Employee’semployment by the Company, Employee will undertake no planning for ororganization of any business activity competitive with the Company or itsaffiliates, and Employee will not combine or conspire with any other employeeof the Company or any other person for the purpose of organizing any suchcompetitive business activity.
     11. NON-COMPETITION; NON-SOLICITATION. The parties acknowledge thatEmployee will acquire much knowledge and information concerning the business ofthe Company and its affiliates as the result of Employee’s employment. Theparties further acknowledge that the scope of business in which the Company isengaged as of the date of execution of this Agreement is world-wide and verycompetitive and one in which few companies can successfully compete. Certainactivities by Employee after this Agreement is terminated would severely injurethe Company. Accordingly, until one year after this Agreement is terminated orEmployee leaves the employment of the Company for any reason, Employee willnot:
          (a) Engage in any work activity for or in conjunction with any business orentity that is in competition with or is preparing to compete with the Company;
          (b) Persuade or attempt to persuade any potential customer or client towhich the Company or any of its affiliates has made a proposal or sale, or withwhich the Company or any of its affiliates has been having discussions, not totransact business with the Company or such affiliate, or instead to transactbusiness with another person or organization;
          (c) Solicit the business of any customers, financing sources, clients,suppliers, or business patrons of the Company or any of its predecessors oraffiliates which were customers, financing sources, clients, suppliers, orbusiness patrons of the Company at any time during Employee’s employment by theCompany, or within three years prior to the effective date of Employee’semployment, provided, however, that if Employee becomes employed by orrepresents a business that exclusively sells products that do not compete withproducts then marketed or intended to be marketed by the Company, such contactshall be permissible; or
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          (d) Solicit, endeavor to entice away from the Company or any of itsaffiliates, or otherwise interfere with the relationship of the Company or anyof its affiliates with, any person who is employed by or otherwise engaged toperform services for the Company or any of its affiliates, whether forEmployee’s account or for the account of any other person or organization.
     12. INJUNCTIVE RELIEF. It is agreed that the restrictions contained inSections 9, 10 and 11 of this Agreement are reasonable, but it is recognizedthat damages in the event of the breach of any of those restrictions will bedifficult or impossible to ascertain; and, therefore, Employee agrees that, inaddition to and without limiting any other right or remedy the Company mayhave, the Company shall have the right to an injunction against Employee issuedby a court of competent jurisdiction enjoining any such breach without showingor proving any actual damage to the Company. This paragraph shall survive thetermination of Employee’s employment.
     13. PART OF CONSIDERATION. Employee also agrees, acknowledges, covenants,represents and warrants that she is fully and completely aware that, andfurther understands that, the restrictive covenants contained in Sections 9,10, and 11 of this Agreement are an essential part of the consideration for theCompany entering into this Agreement and that the Company is entering into thisAgreement in full reliance on these acknowledgments, covenants, representationsand warranties.
     14. TIME AND TERRITORY REDUCTION. If any of the periods of time and/orterritories described in Sections 9, 10 and 11 of this Agreement are held to bein any respect an unreasonable restriction, it is agreed that the court soholding may reduce the territory to which the restriction pertains or theperiod of time in which it operates or may reduce both such territory and suchperiod, to the minimum extent necessary to render such provision enforceable.
     15. SURVIVAL. The obligations described in Sections 9 and 11 of thisAgreement shall survive any termination of this Agreement or any termination ofthe employment relationship created hereunder.
     16. NONDELEGABILITY OF EMPLOYEE’S RIGHTS AND COMPANY ASSIGNMENT RIGHTS.The obligations, rights and benefits of Employee hereunder are personal and maynot be delegated, assigned or transferred in any manner whatsoever, nor aresuch obligations, rights or benefits subject to involuntary alienation,assignment or transfer. Upon mutual agreement of the parties, the Company, uponreasonable notice to Employee, may transfer Employee to an affiliate of theCompany, which affiliate shall assume the obligations of the Company under thisAgreement. This Agreement shall be assigned automatically to any entity mergingwith or acquiring the Company.
     17. GOVERNING LAW. This Agreement shall be governed by and construed andenforced in accordance with the internal laws of the State of Arizona,exclusive of the conflict of law provisions thereof, and the parties agree thatany litigation pertaining to this Agreement shall be in courts located inMaricopa County, Arizona.
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     18. ATTORNEYS’ FEES. If any party finds it necessary to employ legalcounsel or to bring an action at law or other proceeding against the otherparty to enforce any of the terms hereof, the party prevailing in any suchaction or other proceeding shall be paid by the other party its reasonableattorneys’ fees as well as court costs all as determined by the court and not ajury.
     19. NOTICES. All notices, demands, instructions, or requests relating tothis 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 courierservice from and to locations within the Continental United States, (iii) fivedays after posting when sent by United States registered or certified mail,with return receipt requested and postage paid, or (iv) on the date oftransmission when sent by facsimile with a hard-copy confirmation; if directedto the person or entity to which notice is to be given at her or its addressset forth in this Agreement or at any other address such person or entity hasdesignated by notice.      To the Company: ORTHOLOGIC CORP.   1275 West Washington Street   Tempe, AZ 85281   Attention: Chief Executive Officer      To Employee: Sherry A. Sturman   1275 W. Washington St.   Tempe, AZ 85281
     20. ENTIRE AGREEMENT. This Agreement, the Invention, ConfidentialInformation and Non-Competition Agreement dated February 3, 1999, and documentsregarding the grant of stock options constitute the final written expression ofall of the agreements between the parties and are a complete and exclusivestatement of those terms. They supersede all understandings and negotiationsconcerning the matters specified herein. Any representations, promises,warranties or statements made by either party that differ in any way from theterms of this written Agreement shall be given no force or effect. The partiesspecifically represent, each to the other, that there are no additional orsupplemental agreements between them related in any way to the matters hereincontained unless specifically included or referred to herein. No addition to ormodification of any provision of this Agreement shall be binding upon any partyunless made in writing and signed by all parties. To the extent that there isany conflict between this Agreement and the Invention, Confidential Informationand Non-Competition Agreement, the provisions of this Agreement shall govern.
     21. WAIVER. The waiver by either party of the breach of any covenant orprovision in this Agreement shall not operate or be construed as a waiver ofany subsequent breach by either party.
     22. INVALIDITY OF ANY PROVISION. The provisions of this Agreement areseverable, it being the intention of the parties hereto that should anyprovisions hereof be invalid or unenforceable, such invalidity orunenforceability of any provision shall not affect the
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remaining provisions hereof, but the same shall remain in full force andeffect as if such invalid or unenforceable provisions were omitted.
     23. ATTACHMENTS. All attachments or exhibits to this Agreement areincorporated herein by this reference as though fully set forth herein. In theevent of any conflict, contradiction or ambiguity between the terms andconditions in this Agreement and any of its attachments, the terms of thisAgreement shall prevail.
     24. INTERPRETATION OF AGREEMENT. When a reference is made in thisAgreement to an article or section, such reference shall be to an article orsection of this Agreement unless otherwise indicated. The headings contained inthis Agreement are for reference purposes only and shall not affect in any waythe meaning or interpretation of this Agreement. Whenever the words “include,”“includes,” or “including” are used in this Agreement, they shall be deemed tobe followed by the words “without limitation.”
     25. COUNTERPARTS. This Agreement may be executed simultaneously in anynumber of counterparts, each of which shall be deemed an original but all ofwhich together shall constitute one and the same agreement.
     26. BINDING EFFECT; BENEFITS. This Agreement shall be binding upon andshall inure to the benefit of the parties hereto and their respective heirs,successors, executors, administrators and assigns. Notwithstanding anythingcontained in this Agreement to the contrary, nothing in this Agreement,expressed or implied, is intended to confer on any person other than theparties hereto or their respective heirs, successors, executors, administratorsand assigns any rights, remedies, obligations or liabilities under or by reasonof this Agreement.
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     This Agreement has been executed by the parties as the date first writtenabove.         ORTHOLOGIC CORP.  (“Company”)         By: /s/ Thomas R. Trotter          Name: Thomas R. Trotter    Title: President/Chief Executive Officer         /s/ Sherry A. Sturman      Sherry A. Sturman
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