INDEMNIFICATION AGREEMENT
Exhibit 10.1
This Indemnification Agreement (the “Agreement”), which shall be effective as of April 15,
2005, is by and between OrthoLogic Corp., a Delaware corporation (the “Company”), and Xxxxx X.
Xxxxx (the “Indemnitee”).
RECITALS
A. Management of the Company believes that it is essential for the Company to be able to
retain and attract as directors and officers the most capable persons available.
B. Indemnitee currently is an Officer of the Company.
C. Both the Company and Indemnitee recognize the increased risk of litigation and other claims
being asserted against directors and officers, and former directors and officers, of public
companies in today’s environment.
D. In recognition of Indemnitee’s need for substantial protection against personal liability
in order to enhance Indemnitee’s continued service to the Company in an effective manner and in
part to provide Indemnitee with specific contractual assurance that the indemnification protection
provided by the Certificate of Incorporation and Bylaws of the Company will be available to
Indemnitee (regardless of, among other things, any amendment to or revocation of such Certificate
of Incorporation and Bylaws or any change in the composition of the Company’s Board of Directors or
any acquisition transaction relating to the Company), and in order to induce Indemnitee to continue
to provide services to the Company, the Company wishes to provide in this Agreement for the
indemnification of and the advancing of expenses to Indemnitee to the fullest extent (whether
partial or complete) permitted by law and as set forth in this Agreement, and, to the extent
insurance is maintained, for the continued coverage of Indemnitee under the Company’s directors’
and officers’ liability insurance policies.
COVENANTS
In consideration of the promises in this Agreement, and intending to be legally bound hereby,
the parties agree as follows:
1. Certain Definitions.
(a) Change in Control: shall be deemed to have occurred if (i) any “person” (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other
than a trustee or other fiduciary holding securities under an employee benefit plan of the Company
or a corporation owned directly or indirectly by the stockholders of the Company in substantially
the same proportions as their ownership of stock of the Company, is or becomes the “beneficial
owner” (as defined in Rule 13d-3 under said Act), directly or indirectly of securities of the
Company representing 20% or more of the total voting power represented by the Company’s then
outstanding Voting Securities, or (ii) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board of Directors of the Company and any new
director whose election by the Board of Directors or nomination for
election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved, cease for any reason to
constitute a majority thereof, or (iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or consolidation which
would result in the Voting Securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted into Voting
Securities of the surviving entity) at least 80% of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding immediately after such merger
or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company (in one transaction or a series
of transactions) of all or substantially all the Company’s assets.
(b) Claim: any threatened, pending or completed action, suit, proceeding or alternate
dispute resolution mechanism, or any inquiry, hearing or investigation, whether conducted by the
Company or any other party, that Indemnitee in good faith believes might lead to the institution of
any such action, suit, proceeding or alternate dispute resolution mechanism, whether civil,
criminal, administrative, investigative or other.
(c) Expenses: include attorneys’ fees and all other costs, travel expenses, fees of
experts, transcript costs, filing fees, witness fees, telephone charges, postage, delivery service
fees, expenses and obligations of any nature whatsoever paid or incurred in connection with
investigating, defending, being a witness in or participating in (including on appeal), or
preparing to defend, be a witness in or participate in any Claim relating to any Indemnifiable
Event.
(d) Indemnifiable Event: any event or occurrence that takes place either prior to or
after the execution of this Agreement related to the fact that Indemnitee is or was a director,
officer, employee, agent or fiduciary of the Company, or is or was serving at the request of the
Company as a director, officer, employee, trustee, agent or fiduciary of another corporation,
partnership, joint venture, employee benefit plan, trust or other enterprise, or by reason of
anything done or not done by Indemnitee in any such capacity.
(e) Potential Change in Control: shall be deemed to have occurred if (i) the Company
enters into an agreement or arrangement, the consummation of which would result in the occurrence
of a Change in Control; (ii) any person (including the Company) publicly announces an intention to
take or to consider taking actions which if consummated would constitute a Change in Control; (iii)
any person, other than a trustee or other fiduciary holding securities under an employee benefit
plan of the Company acting in such capacity or a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their ownership of stock of
the Company, who is or becomes the beneficial owner, directly or indirectly, of securities of the
Company representing 10% or more of the combined voting power of the Company’s then outstanding
Voting Securities, increases his beneficial ownership of such securities by 5% or more over the
percentage so owned by such person on the date hereof; or (iv) the Board adopts a resolution to the
effect that, for purposes of this Agreement, a Potential Change in Control has occurred.
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(f) Reviewing Party: any appropriate person or body consisting of a member or members
of the Company’s Board of Directors or any other person or body appointed by the Board who is not a
party to the particular Claim for which Indemnitee is seeking indemnification, or Independent Legal
Counsel.
(g) Independent Legal Counsel: Independent Legal Counsel shall refer to an attorney,
selected in accordance with the provisions of Section 3 hereof, who shall not have otherwise
performed services for the Company or Indemnitee within the last five years (other than in
connection with seeking indemnification under this Agreement). Independent Legal Counsel shall not
be any person who, under the applicable standards of professional conduct then prevailing, would
have a conflict of interest in representing either the Company or Indemnitee in an action to
determine Indemnitee’s rights under this Agreement, nor shall Independent Legal Counsel be any
person who has been sanctioned or censured for ethical violations of applicable standards of
professional conduct.
(h) Voting Securities: any securities of the Company which vote generally in the
election of directors.
2. Basic Indemnification Arrangement.
(a) If Indemnitee was, is or becomes a party to or witness or other participant in, or is
threatened to be made a party to or witness or other participant in, a Claim by reasons of (or
arising in part from) an Indemnifiable Event, the Company shall indemnify Indemnitee to the fullest
extent permitted by law as soon as practicable but in any event no later than thirty days after
written demand is presented to the Company, against any and all Expenses, judgments, fines,
penalties and amounts paid in settlement (including all interest, assessments and other charges
paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties or
amounts paid in settlement) of such Claim and any federal, state, local or foreign taxes imposed on
the Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement
(including the creation of the trust referred to in Section 4 hereof). If so requested by
Indemnitee, the Company shall advance (within five business days of such request) any and all
Expenses to Indemnitee (an “Expense Advance”). Notwithstanding anything in this Agreement to the
contrary and except as provided in Section 5, prior to a Change in Control, Indemnitee shall not be
entitled to indemnification pursuant to this Agreement in connection with any Claim initiated by
Indemnitee against the Company or any director or officer of the Company unless the Company has
joined in or consented to the initiation of such Claim.
(b) Notwithstanding the foregoing, (i) the obligations of the Company under Section 2(a) shall
be subject to the condition that the Reviewing Party shall not have determined (in a written
opinion, in any case in which the Independent Legal Counsel referred to in Section 3 hereof is
involved) that Indemnitee would not be permitted to be indemnified under applicable law, and (ii)
the obligation of the Company to make an Expense Advance pursuant to Section 2(a) shall be subject
to the condition that, if, when and to the extent that the Reviewing Party determines that
Indemnitee would not be permitted to be so indemnified under applicable law, the Company shall be
entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all such
amounts theretofore paid; provided, however, that if Indemnitee has commenced legal proceedings in
a court of competent jurisdiction to secure a determination that
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Indemnitee should be indemnified under applicable law, any determination made by the Reviewing
Party that Indemnitee would not be permitted to be indemnified under applicable law shall not be
binding and Indemnitee shall not be required to reimburse the Company for any Expense Advance until
a final judicial determination is made with respect thereto (as to which all rights of appeal
therefrom have been exhausted or lapsed). Indemnitee’s obligation to reimburse the Company for
Expense Advances shall be unsecured and no interest shall be charged thereon. If there has not
been a Change in Control, the Reviewing Party shall be selected by the Board of Directors, and if
there has been such a Change in Control, (other than a Change in Control which has been approved by
a majority of the Company’s Board of Directors who were directors immediately prior to such Change
in Control) the Reviewing Party shall be the Independent Legal Counsel referred to in Section 3
hereof. If there has been no determination by the Reviewing Party or if the Reviewing Party
determines that Indemnitee substantively would not be permitted to be indemnified in whole or in
part under applicable law, Indemnitee shall have the right to commence litigation in any court in
the States of Arizona or Delaware having subject matter jurisdiction thereof and in which venue is
proper seeking an initial determination by the court or challenging any such determination by the
Reviewing Party or any aspect thereof, or the legal or factual bases therefor and the Company
hereby consents to service of process and to appear in any such proceeding. Any determination by
the Reviewing Party otherwise shall be conclusive and binding on the Company and Indemnitee.
3. Change in Control. The Company agrees that if there is a Change in Control of the
Company (other than a Change in Control which has been approved by a majority of the Company’s
Board of Directors who were directors immediately prior to such Change in Control) then Independent
Legal Counsel shall be selected by Indemnitee and approved by the Company (which approval shall not
be unreasonably withheld) and such Independent Legal Counsel shall determine whether the officer or
director is entitled to indemnity payments and Expense Advances under this Agreement or any other
agreement or Certificate of Incorporation or Bylaws of the Company now or hereafter in effect
relating to Claims for Indemnifiable Events. Such Independent Legal Counsel, among other things,
shall render its written opinion to the Company and Indemnitee as to whether and to what extent the
Indemnitee will be permitted to be indemnified. The Company agrees to pay the reasonable fees of
the Independent Legal Counsel and to indemnify fully such Independent Legal Counsel against any and
all expenses (including attorneys’ fees), claims, liabilities and damages arising from or relating
to this Agreement or the engagement of Independent Legal Counsel pursuant hereto.
4. Establishment of Trust. In the event of a Potential Change in Control, the Company
shall, upon written request by Indemnitee, create a trust for the benefit of Indemnitee and from
time to time upon written request of Indemnitee shall fund such trust in an amount sufficient to
satisfy any and all Expenses reasonably anticipated at the time of each such request to be incurred
in connection with investigating, preparing for and defending any Claim relating to an
Indemnifiable Event, and any and all judgments, fines, penalties and settlement amounts of any and
all Claims relating to an Indemnifiable Event from time to time actually paid or claimed,
reasonably anticipated or proposed to be paid. The amount or amounts to be deposited in the trust
pursuant to the foregoing funding obligation shall be determined by the Reviewing Party, in any
case in which the Independent Legal Counsel referred to above is involved. The terms of the trust
shall provide that upon a Change in Control (i) the trust shall not be revoked or the principal
thereof invaded, without the written consent of Indemnitee, (ii) the trustee shall advance, within
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five business days of a request by Indemnitee, any and all Expenses to Indemnitee (and
Indemnitee hereby agrees to reimburse the trust under the circumstances under which Indemnitee
would be required to reimburse the Company under Section 2(b) of this Agreement), (iii) the trust
shall continue to be funded by the Company in accordance with the funding obligation set forth
above, (iv) the trustee shall promptly pay to Indemnitee all amounts for which Indemnitee shall be
entitled to indemnification pursuant to this Agreement or otherwise, and (v) all unexpended funds
in such trust shall revert to the Company upon a final determination by the Reviewing Party or a
court of competent jurisdiction, as the case may be, that Indemnitee has been fully indemnified
under the terms of this Agreement. The trustee shall be chosen by Indemnitee. Nothing in this
Section 4 shall relieve the Company of any of its obligations under this Agreement. All income
earned on the assets held in the trust shall be reported as income by the Company for federal,
state, local and foreign tax purposes.
5. Indemnification for Additional Expenses. The Company shall indemnify Indemnitee
against any and all expenses (including attorneys’ fees) and, if requested by Indemnitee, shall
(within five business days of such request) advance such expenses to Indemnitee, which are incurred
by Indemnitee in connection with any claim asserted against or in connection with any action
brought by Indemnitee for (i) indemnification or advance payment of Expenses by the Company under
this Agreement or any other agreement or Certificate of Incorporation or Bylaws of the Company now
or hereafter in effect relating to Claims for Indemnifiable Events and/or (ii) recovery under any
directors’ and officers’ liability insurance policies maintained by the Company, regardless of
whether Indemnitee ultimately is determined to be entitled to such indemnification, advance expense
payment or insurance recovery, as the case may be.
6. Partial Indemnity, Etc. If Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for some or a portion of the Expenses, judgment, fines,
penalties and amounts paid in settlement of a Claim but not, however, for all of the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which
Indemnitee is entitled. Moreover, notwithstanding any other provision of this Agreement, to the
extent that Indemnitee has been successful on the merits or otherwise in defense of any or all
Claims relating in whole or in part to an Indemnifiable Event or in defense of any issue or matter
therein, including dismissal without prejudice, Indemnitee shall be indemnified against all
Expenses incurred in connection therewith.
7. Defense to Indemnification, Burden of Proof and Presumptions. It shall be a
defense to any action brought by the Indemnitee against the Company to enforce this Agreement
(other than an action brought to enforce a claim for expenses incurred in defending a Claim
relating to an Indemnifiable Event in advance of its final disposition where the required
undertaking has been tendered to the Company) that the Indemnitee has not met the standards of
conduct that make it permissible under the Delaware General Corporation Law for the Company to
indemnify the Indemnitee for the amount claimed. In connection with any determination by the
Reviewing Party or otherwise as to whether the Indemnitee is entitled to be indemnified hereunder,
the burden of proving such a defense shall be on the Company. Neither the failure of the Company
(including its Board of Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action by the Indemnitee that indemnification of
the claimant is proper under the circumstances because he or she has met the
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applicable standard of conduct set forth in the Delaware General Corporation Law, nor an
actual determination by the Company (including its Board of Directors, independent legal counsel,
or its stockholders) that the Indemnitee had not met such applicable standard of conduct, shall be
a defense to the action or create a presumption that the Indemnitee has not met the applicable
standard of conduct. For purposes of this Agreement, the termination of any claim, action, suit or
proceeding, by judgment, order, settlement (whether with or without court approval) or conviction,
or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that
Indemnitee did not meet any particular standard of conduct or have any particular belief or that a
court has determined that indemnification is not permitted by applicable law.
8. Non-exclusivity, Etc. The rights of Indemnitee hereunder shall be in addition to
any other rights Indemnitee may have under the Certificate of Incorporation or Bylaws of the
Company or the Delaware General Corporation Law or otherwise. To the extent that a change in the
Delaware General Corporation Law (whether by statute or judicial decision) permits greater
indemnification by agreement than would be afforded currently under the Certificate of
Incorporation and Bylaws of the Company and this Agreement, it is the intent of the parties hereto
that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change.
9. No Construction as Employment Agreement. Nothing contained herein shall be
construed as giving Indemnitee any right to be retained in the employ of the Company or any of its
subsidiaries or to remain as an officer of the Company.
10. Liability Insurance. To the extent the Company maintains an insurance policy or
policies providing directors’ and officers’ liability insurance, Indemnitee shall be covered by
such policy or policies, in accordance with its or their terms, to the maximum extent of the
coverage available for any Company director or officer.
11. Period of Limitations. No legal action shall be brought and no cause of action
shall be asserted by or in the right of the Company or any affiliate of the Company against
Indemnitee, Indemnitee’s spouse, heirs, executors, administrators or personal or legal
representatives after the expiration of two years from the date of accrual of such cause of action,
and any claim or cause of action of the Company or its affiliate shall be extinguished and deemed
released unless asserted by the timely filing of a legal action within such two-year period;
provided, however, that if any shorter period of limitations is otherwise applicable to any such
cause of action such shorter period shall govern.
12. Amendments, Etc. No supplement, modification or amendment of this Agreement shall
be binding unless executed in writing by both of the parties hereto. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions
hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.
13. Subrogation. In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall
execute all papers required and shall do everything that may be necessary to secure such
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rights, including the execution of such documents necessary to enable the Company effectively
to bring suit to enforce such rights.
14. No Duplication of Payments. The Company shall not be liable under this Agreement
to make any payment in connection with any claim made against Indemnitee to the extent Indemnitee
has otherwise actually received payment (under any insurance policy, Certificate of Incorporation
or Bylaws of the Company or otherwise) of the amounts otherwise indemnifiable hereunder.
15. Binding Effect, Etc. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective successors, assigns,
including any direct or indirect successor by purchase, merger, consolidation or otherwise to all
or substantially all of the business and/or assets of the Company, spouses, heirs, and personal and
legal representatives. The Company shall require and cause any successor (whether direct or
indirect by purchase, merger, consolidation or otherwise) to all, substantially all, or a
substantial part, of the business and/or assets of the Company, by written agreement in form and
substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to perform if no such
succession had taken place. This Agreement shall continue in effect regardless of whether
Indemnitee continues to serve as a director and/or officer of the Company or of any other
enterprise at the Company’s request.
16. Severability. The provisions of this Agreement shall be severable if any of the
provisions hereof (including any provision within a single section, paragraph or sentence) are held
by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and the
remaining provisions shall remain enforceable to the fullest extent permitted by law. Furthermore,
to the fullest extent possible, the provisions of this Agreement (including, without limitation,
each portion of this Agreement containing any provision held to be invalid, void or otherwise
unenforceable, that is not itself invalid, void or unenforceable) shall be construed so as to give
effect to the intent manifested by the provision held invalid, illegal or unenforceable.
17. Governing Law. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware applicable to contracts made and to be performed
in such state without giving effect to the principles of conflicts of laws.
[Signature page follows]
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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement as of
the 15th day of April, 2005.
| ORTHOLOGIC CORP. |
||||
| By: | /s/ Xxxx X. Xxxxxxxx, III | |||
| Xxxx X. Xxxxxxxx, III | ||||
| Chairman | ||||
| INDEMNITEE |
||||
| /s/ Xxxxx X. Xxxxx, M.D. | ||||
| Xxxxx X. Xxxxx, M.D. | ||||
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