EMPLOYMENT AGREEMENT
This Agreement is to be effective, as of December 1, 1996, by and
between OrthoLogic Corp., a Delaware corporation (the "Company"), and Xxxxx X.
Xxxxxxx ("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 and Duties. 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. Initially, Employee's title shall be Vice
President and Chief Financial Officer, with general responsibility for Finance
and Operations. Such title and duties may be changed from time to time by the
Board of Directors (the "Board"). Employee will report to the Company's
President and CEO.
2. Term. The term of this Agreement shall be for 13 months beginning on
the effective date. Thereafter this Agreement shall renew automatically for
additional terms of one- year each unless it is terminated pursuant to Section
7.
3. Compensation.
(a) Salary. From the effective date of this Agreement through
December 31, 1996, the Company shall pay Employee a minimum base annual salary,
before deducting all applicable withholdings, of $116,000 per year, payable at
the times and in the manner dictated by the Company's standard payroll policies.
Effective January 1, 1997, and annually thereafter, the minimum base annual
salary shall be reviewed by the Compensation Committee of the Board.
(b) Bonus. Employee shall be eligible to participate in such
bonus and incentive programs as determined from time to time by the Board. Any
bonuses shall be based upon the achievement of individual goals and Company
performance. Beginning January 1,
1997, the Company shall implement a bonus plan providing a target bonus of 40%
of Employee's base salary for achievement of the Board-approved plan.
(c) Stock Options. Employee currently may have options to
purchase shares of the Company's Common Stock. From time to time, the Company
will consider granting to Employee options, or additional options, to purchase
shares of the Company's common stock at the fair market value of such stock on
the date of grant. Any such grant shall have terms that are substantially
consistent with the terms of other grants generally being made to executive
officers of the Company at the time of such grant.
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.
5. Vacation. 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.
6. 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.
7. Termination.
(a) For Cause. The Company may terminate Employee's employment
for cause upon written notice to Employee stating the facts constituting such
cause, provided that Employee shall have 30 days following such notice to cure
any conduct or act, if curable, alleged to provide grounds for termination for
cause hereunder. In the event of termination for cause, the Company shall be
obligated to pay Employee only the minimum base salary due him through the date
of termination. The written notice shall state the cause for termination. Except
for a termination after a Severance Event as provided in Section 8, cause shall
include neglect of duties, willful failure to abide by instructions or policies
from or set by the Board of Directors, commission of a felony or serious
misdemeanor offense or pleading guilty or nolo contendere to same, Employee's
breach of this Agreement or Employee's breach of any other material obligation
to the Company.
(b) 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 terminates Employee without cause and Section 8 does
not apply, it shall continue to pay to Employee his minimum base salary in
effect at the time of termination for a period of one
2
year following the date of termination, at the time and in the manner dictated
by the Company's standard payroll policies. If the Company terminates Employee's
employment and Section 8 applies, Employee shall be entitled to receive the
amount described in Section III of Exhibit A.
(c) 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 this Agreement without further
obligation hereunder except as otherwise provided in disability plans generally
applicable to executive employees.
(d) 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 through the last day
of the calendar month in which his death shall have occurred and any other death
benefits generally applicable to executive employees.
8. Termination or Resignation After a Change in Control.
(a) Application of Section 8. The provisions of this Section 8
shall apply if a Change in Control of the Company occurs, and within the
"Transitional Period," as described in Exhibit A to this Agreement, a Severance
Event," also as described in Exhibit A occurs. For purposes of this Agreement,
your Transitional Period shall be a period of 12 months. Exhibit A, also
contains additional terms and conditions governing the rights and duties of
Employee after the occurrence of a Severance Event within the Transitional
Period.
(b) "Change in Control". For purposes of this Agreement
(except to the extent governed or affected by Section 280G of the Internal
Revenue Code of 1986, as amended [the "Code"]), a "Change in Control" shall be
deemed to have occurred if (i) any "person" (as such term is used in Paragraphs
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended [the
"Exchange Act"]), 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 one-third or more of the
total voting power represented by the Company's then outstanding Common Stock,
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 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 Common Stock of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into
3
Common Stock of the surviving entity) at least two-thirds of the total voting
power represented by the Common Stock 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 of (in one transaction or a
series of transactions) all or substantially all the Company's assets.
9. Limitations on Transitional Compensation and Benefits. If the
Transitional Compensation and Benefits payable to Employee under Section 8 plus
any other severance benefits ("Severance Benefits") or any other payments or
benefits received or to be received by Employee from the Company (whether
payable pursuant to the terms of this Agreement or pursuant to any other plan,
agreement or arrangement with the Company or any corporation ["Affiliate"]
affiliated with the Company within the meaning of Section 1504 of the Code, in
the opinion of tax counsel selected by the Company and acceptable to Employee,
constitute "parachute payments" within the meaning of Section 280G(b)(2) of the
Code, and the present value of such "parachute payments" equals or exceeds three
times the average of the annual compensation payable to Employee by the Company
(or an Affiliate) and includable in Employee's gross income for federal income
tax purposes for the five calendar years preceding the year in which a change in
ownership or control of the Company occurred ("Base Amount"), if, but only if
Employee so elects in writing, such Severance Benefits shall be reduced to an
amount the present value of which (when combined with the present value of any
other payments or benefits otherwise received or to be received by Employee from
the Company [or an Affiliate] that are deemed "parachute payments") is equal to
2.99 times the Base Amount, notwithstanding any other provision to the contrary
in this Agreement. However, the Severance Benefits shall not be reduced if in
the opinion of such tax counsel, the Severance Benefits (in their full amount or
as partially reduced, as the case may be) plus all other payments or benefits
which constitute "parachute payments" within the meaning of Section 280G(b)(2)
of the Code are reasonable compensation for services actually rendered, within
the meaning of Section 280G (b)(4) of the code, and such payments are deductible
by the Company. The Base Amount shall include every type and form of
compensation includable in Employee's gross income in respect of his employment
by the Company (or an Affiliate), except to the extent otherwise provided in
temporary or final regulations promulgated under Section 280G (b) of the Code.
For purposes of this Section 9, a "change in ownership or control" shall have
the meaning set forth in Section 280G(b) of the Code and any temporary or final
regulations promulgated thereunder. The present value of any non-cash benefit or
any deferred cash payment shall be determined by the Company's independent
auditors in accordance with the principles of Sections 280G (d)(3) and (4) of
the Code.
Employee shall have the right to request that the Company obtain a
ruling from the Internal Revenue Service ("Service") as to whether any or all
payments or benefits determined by such tax counsel are, in the view of the
Service, "parachute payments" under Section 280G. If a ruling is sought pursuant
to executive's request, no Severance Benefits payable under this Agreement shall
be made to Employee to the extent they would exceed 2.99 times the Base Amount
until after 15 days from the date of such ruling. For purposes of this Section
9, Employee and the Company agree to be bound by the Service's ruling as to
whether payments
4
constitute "parachute payments" under Section 280G. If the Service declines, for
any reason, to provide the ruling requested, the tax counsel's opinion provided
with respect to what payments or benefits constitute "parachute payments" shall
control, and the period during which the excessive portion of the Severance
Benefits may be deferred shall be extended to a date 15 days from the date of
the Service's notice indicating that no ruling would be forthcoming.
If Section 280G, or any successor statute, is repealed, this Section 9
shall cease to be effective on the effective date of such repeal. The parties to
this Agreement recognize that final regulations under Section 280G of the Code
may affect the amounts that may be paid under this Agreement and agree that,
upon issuance of such final regulations this Agreement may be modified as in
good faith deemed necessary in light of the provisions of such regulations to
achieve the purposes of this Agreement, and that consent to such modifications
shall not be unreasonably withheld.
10. 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. This
Agreement shall be assigned automatically to any entity merging with or
acquiring the Company.
11. 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.
12. 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.
13. 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.
14. 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,
5
(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.
0000 Xxxxx 00xx Xxxxxx, Xxxxx 00
Xxxxxxx, XX 00000
Attention: Chief Executive Officer
To Employee: Xxxxx X. Xxxxxxx
0000 X. Xxxx Xxxxxx
Xxxxxxx, XX 00000
15. Entire Agreement. This Agreement constitutes 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 is a complete and
exclusive statement of those terms. It supersedes all understandings and
negotiations concerning the matters specified herein. Any representations,
promises, warranties or statements made by either party that differ in any way
from the terms of this written Agreement 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 this Agreement shall be binding upon any party
unless made in writing and signed by all parties.
16. 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.
17. 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.
18. 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.
19. 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
6
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."
20. Headings. Headings in this Agreement are for informational purposes
only and shall not be used to construe the intent of this Agreement.
21. 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.
22. 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.
This Agreement has been executed by the parties as of December 1, 1996.
ORTHOLOGIC CORP.
("Company")
By: /s/ Xxxxx X. Xxxxxxxxx
-------------------------------------
Xxxxx X. Xxxxxxxxx
Chief Executive Officer
XXXXX X. XXXXXXX
("Employee")
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------------
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OrthoLogic Corp.
Employment Agreement
Exhibit A
Transitional Compensation
EXHIBIT "A"
TRANSITIONAL COMPENSATION
I. DEFINITIONS
Except as otherwise defined in either this Exhibit A or the Agreement
to which this Exhibit A is attached, capitalized terms used in this Exhibit A
shall have the meanings set forth below.
A. "Affiliate," means an entity affiliated with the Company.
B. "Agreement," means the Employment Agreement to which this Exhibit A
is attached.
C. "Change in Control." A "Change in Control" shall be deemed to have
occurred if (i) any "person" (as such term is used in Paragraphs 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended [the "Exchange Act"]), 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 one-third or more of the total voting power represented
by the Company's then outstanding Common Stock, 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 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 Common Stock of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Common Stock of the surviving
entity) at least two-thirds of the total voting power represented by the Common
Stock 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 of (in one transaction or a series of transactions) all or
substantially all the Company's assets.
8
OrthoLogic Corp.
Employment Agreement
Exhibit A
Transitional Compensation
D. "Change in Control Date" means the effective date of a Change in
Control.
E. "Company" or "the Company," shall mean OrthoLogic Corp., a Delaware
corporation.
F. "Severance Event."
A Severance Event occurs if the Company or an Affiliate
terminates Employee's employment for any reason during
Employee's Transitional Period, except for a termination due
to a felony conviction or Employee's continued and willful
failure to be present and perform Employee's duties or a
termination resulting from the expiration, without renewal, of
Employee's term of employment at the end of the initial term
or any subsequent term.
A Severance Event also occurs if Employee resigns or retires
at a time which is during Employee's Transitional Period and
within 90 days after the Company and its Affiliates have done
any of the following:
1. fail to maintain Employee's base salary at a level
that is equal to the higher of the level in effect
immediately prior to the Change in Control, or the
level to which it has been increased after the Change
of Control; or
2. fail to provide for Employee's participation in (a)
the Company or an Affiliate's annual bonus plan;
stock option or other equity incentive programs; or
group medical, dental, life, disability, retirement,
profit sharing, thrift, nonqualified and deferred
compensation plans, in each case on a basis
comparable to that enjoyed by other employees of the
Company or any of its Affiliates with duties
comparable to those of Employee; or
3. fail to provide vacation and perquisites
substantially equivalent to those provided by the
Company or any of its Affiliates to employees with
comparable duties, and at least as favorable as those
provided immediately before the Change in Control
Date; or
4. change Employee's duties and responsibilities so that
they are not at least commensurate with those
immediately prior to the Change in Control Date; or
9
OrthoLogic Corp.
Employment Agreement
Exhibit A
Transitional Compensation
5. change Employee's primary place of employment by more
than 25 miles from Employee's current office location
or more than 10 additional miles from Employee's
primary residence.
G. "Transitional Compensation and Benefits," shall mean the special
compensation and benefits payable upon a Severance Event as provided in Section
III of this Exhibit A.
H. "Transitional Period," means the time period beginning on the Change
in Control Date and ending the number of calendar months thereafter stated in
Section 8 of the Agreement.
II. ELIGIBILITY
Notwithstanding the occurrence of a Severance Event during Employee's
Transitional Period, Employee shall be entitled to the Transitional Compensation
and Benefits only from and after the time Employee executes a Release and
Severance Agreement substantially in the standard form then used by the Company.
III. TRANSITIONAL COMPENSATION AND BENEFITS
A. Transitional Compensation. Employee will receive the greater of (i)
one month of Transitional Compensation for every month (full or partial) from
the date of Employee's Severance Event through the last day of Employee's
Transitional Period; or (ii) the amount described in Section 7(b) of the
Agreement. One month of Transitional Compensation is equal to Employee's base
monthly salary determined as of Employee's Severance Event. This will be the
greater of Employee's annual salary as of the Severance Event, or as of the
Change in Control Date, divided by 12. Solely for purposes of determining the
amount payable upon the occurrence of a Severance Event, the base salary under
Section 7(b) of the Agreement shall be the greater of Employee's annual salary
as of the Severance Event, or as of the Change in Control Date.
Employee's Transitional Compensation will not be subject to reduction
for any earnings Employee may have from other employment following Employee's
Severance Event. However, Transitional Compensation is subject to all applicable
federal and state deductions and withholding.
10
OrthoLogic Corp.
Employment Agreement
Exhibit A
Transitional Compensation
B. When Transitional Compensation and Benefits are Paid
1. Monthly Payments
----------------
Transitional Compensation shall be paid in monthly
installments beginning on the last day of the month
in which the seven-day revocation period following
the date Employee executes Employee's Release and
Severance Agreement has expired.
2. Lump Sum Death Benefit
----------------------
If Employee dies before all of Employee's
Transitional Compensation payments have been made,
the Company will pay a lump sum death benefit equal
to the discounted present value (based on the prime
rate reported in The Wall Street Journal) of unpaid
Transitional Compensation to Employee's designated
beneficiary within 30 days from Employee's date of
death.
C. Other Benefits
1. Salary and Vacation
-------------------
Any earned but unpaid salary or vacation for which
Employee is eligible at the time of Employee's
Severance Event will be paid in a lump sum at the
time of termination of employment, subject to
applicable federal and state withholding.
2. Bonuses
-------
Employee will also receive a pro rata bonus or other
incentive compensation payment for the period in
which Employee's Severance Event occurred. Employee's
bonus will be based on the payout made to comparable
employees and the number of months of employment
Employee have completed in the period. Employee's
bonus payment will be made when bonus payouts are
made under the Company bonus or incentive plan.
11
OrthoLogic Corp.
Employment Agreement
Exhibit A
Transitional Compensation
3. Continuation of Employee Benefits and Stock Options
---------------------------------------------------
Employee's medical, dental, life and disability
benefits (and if applicable, benefits for Employee's
dependents) will continue through Employee's
Transitional Period as if Employee remained actively
employed. Solely for purposes of determining the date
on which options shall expire and become
non-exercisable under applicable option plans,
Employee's employment will be considered to extend
through the Transitional Period; any incentive stock
options shall become nonqualified options to the
extent they remain unexercised more than three months
after the Severance Event.
4. Out-Placement Assistance
------------------------
Upon Employee's Severance Event, the Company will
provide Employee with outplacement counseling and
assistance. Counseling is available from the date of
Employee's Severance Event until Employee is first
employed or providing compensated services; provided,
however, that the Company is not obligated to pay
more than $10,000 for such counseling and assistance.
IV. WHEN TRANSITIONAL COMPENSATION BENEFITS WILL NOT BE PAID
No Transitional Compensation Benefits under the Plan will be
paid if Employee:
1. is a party to an employment or severance agreement
with the Company or an Affiliate, other than the
Agreement, that provides payments or other benefits
as a result of termination of employment; or
2. retires or resigns, other than for reasons that
constitute a Severance Event; or
3. takes a leave of absence; or
4. is offered and refuses or refuses to transfer to
another comparably compensated position with the
Company, an Affiliate, or a successor company (other
than in a circumstance that constitutes a Severance
Event); or
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OrthoLogic Corp.
Employment Agreement
Exhibit A
Transitional Compensation
5. refuses to sign a Release and Severance Agreement; or
6. dies prior to a Severance Event.
V. OTHER IMPORTANT INFORMATION
A. How the Coverage Is Provided
----------------------------
Any payment made under the Plan will come from the general
assets of the Company or an Affiliate. No separate fund will
be established.
B. Limited Alienation of Benefits
------------------------------
Employee's benefits in this Plan cannot be claimed by any
person to whom Employee owes a debt and neither Employee nor
Employee's beneficiary may transfer rights to these benefits
to anyone.
13
