EMPLOYMENT AGREEMENT


         This Agreement,  which shall be effective as of October 17, 1997, is by
and between OrthoLogic Corp., a Delaware corporation (the "Company"),  and Frank
P. Magee ("Employee").

RECITALS:
---------

         A. Employee is presently  employed by the Company and both parties wish
to continue and redefine the nature of the employment relationship.

         B. The  parties  wish to set  forth in this  Agreement  the  terms  and
conditions of such continuing employment.

AGREEMENT:
----------

         In  consideration  of the mutual  covenants  and  agreements  set forth
herein, the parties agree as follows:

         1. Employment.

                  (a) Duties and Title.  Subject to the terms and  conditions of
this Agreement,  the Company employs Employee to serve in a managerial  capacity
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
Company's  Board of  Directors  (the  "Board") or Chief  Executive  Officer (the
"CEO").  Initially,  Employee's  title shall be Executive Vice  President.  Such
title and  duties may be  changed  from time to time by the Board of  Directors.
Employee will report to the Company's CEO. Unless and until an Election  occurs,
as defined in the next paragraph, Employee agrees to devote substantially all of
this business time and efforts to the business of the Company.

                  (b) At  the  election  of  either  Employee  or  the  CEO  (an
"Election"), Employee's title shall be changed to a title mutually acceptable to
CEO and  Employee  and,  thereafter,  he will be involved  in specific  projects
relating to the  Company's  technology,  clinical or regulatory  affairs  and/or
sales and  marketing  as may be assigned  to him from time to time,  by the CEO.
After an Election, Employee shall not have set work hours.

         2. Term. Unless an Election is made, the term of Employee's  employment
pursuant to this Agreement shall be for 24 months beginning on October 20, 1997.
However,  upon an Election  as  described  in Section 1, the term of  employment
shall be extended to the date 24 months after such  Election is made.  After the
expiration  of the term of this  Agreement,  it may be  extended  only by mutual
written agreement of the parties.
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         3. Compensation.

                  (a) Salary.  During  Employee's  employment  term, the Company
shall pay Employee a minimum base annual salary, before deducting all applicable
withholdings,  of  $187,000  per year,  payable  at the times and in the  manner
dictated by the Company's standard payroll policies.

                  (b) Bonus. Employee shall be eligible to receive discretionary
bonuses based on his  accomplishments  and success,  as determined  from time to
time by the  Board.  Any such  bonuses  shall be based upon the  achievement  of
individual  goals and  Company  performance  and shall be granted  solely in the
discretion of the Board.

                  (c) Stock Options.  Employee currently has options to purchase
shares of the  Company's  Common Stock.  On October 17, 1997,  the Company shall
grant to  Employee,  from the  Company's  1987  Stock  Option  Plan,  options to
purchase  50,000  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,
with such value as  determined  as specified  in the 1987 Stock Option Plan.  So
long as Employee is still employed by the Company at the time of vesting, 25,000
options from such 50,000-share  grant shall vest on December 31, 1997 and 25,000
options  from such grant  shall vest on January 1, 1998.  All  unvested  options
including  options from such  50,000-share  grant shall vest  immediately upon a
termination of Employee's employment for any reason.

         4. Fringe Benefits. In addition to the compensation,  bonus and options
described in Section 3, and any other employee benefit plans (including  without
limitation  pension,  savings  and  disability  plans)  generally  available  to
employees, the Company shall include Employee in any group health insurance plan
and, if eligible,  any group  retirement  plan  instituted  by the Company.  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 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. Employee shall be entitled to vacation
with pay in accordance 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
may approve from time to time.

         5.   Expenses.   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.

         6. Termination.

                  (a)  Without  Cause.  The  Company  may  terminate  Employee's
employment at any time,  immediately and without cause, by giving written notice
to Employee. If the Company
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<PAGE>
terminates  Employee without cause, so long as Employee continues to comply with
the  requirements  of this  Agreement,  including  Sections  7 and 9,  it  shall
continue  to pay to Employee  his  minimum  base salary in effect at the time of
termination through the end of the term of the Agreement, as provided in Section
2, at the time and in the manner  dictated  by the  Company's  standard  payroll
policies.

                  (b) Disability. If during the term of this Agreement, Employee
fails to perform his duties  hereunder on account of illness or other incapacity
for a period of 45 consecutive days, or for 60 days during any six-month period,
the Company  shall have the right to terminate  Employee's  employment by giving
notice to Employee.  If the Company terminates Employee for disability,  so long
as  Employee  continues  to  comply  with the  requirements  of this  Agreement,
including  Sections 7 and 9, it shall  continue to pay to  Employee  his minimum
base salary in effect at the time of termination  through the end of the term of
the Agreement,  as provided in Section 2, at the time and in the manner dictated
by the Company's standard payroll policies.

                  (c) Death. If Employee dies during the term of this Agreement,
this Agreement shall terminate immediately, and Employee's legal representatives
shall be entitled to receive  the base salary due  Employee,  at a time and in a
manner  similar to when it would have been paid to Employee if he had  survived,
through the end of the term of the  Agreement,  as provided in Section 2, at the
time and in the manner  dictated by the  Company's  standard  payroll  policies,
except for any change in withholding justified by the change in circumstances.

         7. 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-the 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,
but is not limited to, 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
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<PAGE>
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  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.

         8. Loyalty During Employment Term. Employee agrees that during the term
of Employee's  employment by the Company,  before an Election is made,  Employee
will devote  substantially  all of  Employee's  business  time and effort to the
Company.  Throughout  the  period of  employment,  he will  also give  undivided
loyalty to the Company,  and 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
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<PAGE>
competitive  with the Company or its  affiliates.  During the term of Employee's
employment  by  the  Company,   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.

         9.  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,  after the termination of Employee's employment and so
long as he is  receiving  any payments  from the Company  pursuant to Section 6,
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;

                  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 Effective Date of
Employee's employment,  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.

         10. Injunctive Relief. It is agreed that the restrictions  contained in
Sections 7, 8, and 9 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,
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<PAGE>
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  paragraph  shall  survive the
termination of Employee's employment.

         11.  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 7,
8, and 9 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.

         12. Time and Territory Reduction.  If any of the periods of time and/or
territories  described in Sections 7, 8, and 9 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.

         13.  Survival.  The  obligations  described in Sections 7 and 9 of this
Agreement  shall survive any termination of this Agreement or any termination of
the employment relationship created hereunder.

         14.  Indemnification.  The  Company  will  provide  indemnification  to
Employee in accordance  with the current  Certificate and Bylaws of the Company.
These obligations shall survive the termination of Employee's employment.

         15.  Testimony.  If  Employee  has  knowledge  of or is alleged to have
knowledge  of any matters  which are the subject of any pending,  threatened  or
future  litigation  involving  the  Company  (or any  subsidiary),  he will make
himself  available  to  testify  if and as  necessary.  Employee  will also make
himself  available to the attorneys  representing the Company in connection with
any such  litigation or dispute for such purposes as they may deem  necessary or
appropriate, including but not limited to the review of documents, discussion of
the case and  preparation  for any  legal  proceedings.  This  Agreement  is not
intended to and shall not be  construed  so as to in any way limit or affect the
testimony  which  Employee  gives  in  any  such  proceedings.  Further,  it  is
understood and agreed that Employee will at all times testify fully,  truthfully
and accurately, whether in deposition, hearing, trial or otherwise.

         16. Nondelegability of Employee's Rights and Company Assignment Rights.
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 assume the obligations of the Company under this Agreement.
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<PAGE>
This  Agreement  shall be assigned  automatically  to any entity merging with or
acquiring the Company.

         17.  Amendment.  Except  for  documents  regarding  the  grant of stock
options  and  an  Invention,   Confidential   Information  and   Non-Competition
Agreement,  this  Agreement  contains,  and its  terms  constitute,  the  entire
agreement of the parties and  supersedes  any prior  agreements,  including  any
Employment  Agreements,  and it may be amended only by a written document signed
by both parties to this Agreement.

         18.  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.

         19.  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.

         20. 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.
                                     2850 South 36th Street, Suite 16
                                     Phoenix, AZ 85034
                                     Attention:  Chief Executive Officer

               To Employee:          Frank P. Magee
                                     602 Woodriver Drive
                                     Ketchum, ID  83340

         21. Entire Agreement.  This Agreement, and the Invention,  Confidential
information  and  Non-Competition  Agreement  previously  executed  by  Employee
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
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<PAGE>
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.

         22. 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.

         23.  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.

         24.  Attachments.  All  attachments  or 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  attachments,  the  terms of this
Agreement shall prevail.

         25.  Interpretation  of  Agreement.  When a  reference  is made in this
Agreement  to an article or section,  such  reference  shall be to an article or
section of this Agreement unless otherwise indicated.  The headings contained in
this  Agreement are for reference  purposes only and shall not affect in any way
the meaning or interpretation  of this Agreement.  Whenever the words "include,"
"includes," or "including" are used in this  Agreement,  they shall be deemed to
be followed by the words "without limitation."

         26. Headings. Headings in this Agreement are for informational purposes
only and shall not be used to construe the intent of this Agreement.

         27. 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.

         28. 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 October 20, 1997.

                           ORTHOLOGIC CORP.
                           ("Company")

                           By:  /s/ John M. Holliman, III
                                Chairman of Board


                           FRANK P. MAGEE
                           ("Employee")

                           By:  /s/ Frank P. Magee
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